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Reliance Industries Ltd. - Company Analysis (Part-6)

Continued...



6) Oil and Gas Exploration & Production

Source Reliance Industries Ltd. Annual Report 2019-20

Financials

The company saw a drop in revenue of 35.8% from 5005 in FY 2018-19 to 3211 in FY 2019-20. The company saw a drop in EBITDA of 78.5% from 1642 in FY 2018-19 to 353 in FY 2019-20. This drop in revenue and EBITDA were as volumes from domestic upstream fields and US shale was lower because of natural decline and slowdown of in development activity. For the year, domestic production (RIL share) was at 38.8 BCFe, down 34.1% y-o-y and in US Shale, the business was 80.4 BCFe, down 14.9% y-o-y basis.

RIL(Reliance Industries Ltd.)

History

Dhirubhai Ambani, Father of current Chairman Mukesh Ambani, returns to India in 1957 after a stint with A. Besse & Co., Aden, Yemen. He starts a yarn trading business from a small 500 sq. ft. office in Masjid Bunder, Mumbai, but dreams of establishing India’s largest company. In 1977 Reliance Textile Industries went public with its IPO being 7 times oversubscribed. In 2000, RIL commissioned World's largest refinery in Jamnagar in record 36 months. In 2002, Reliance enters the Infocomm business and brings about a revolution in mobile telephony in India. In 2005, Reliance makes a strategic decision to reorganize its businesses through a demerger. Power generation and distribution, financial services, and telecommunication services are demerged into separate entities. In 2004, Reliance became the first and only private Indian organization to be listed in the Fortune Global 500 list. Reliance is also the first private sector company to be rated by international credit rating agencies - including Moody's, Standard and Poor's (S&P). On 5 September 2016 Reliance's JIO revolutionized Telecom Industry with its launch. In 2019, Reliance becomes the first Indian company to cross ₹10 trillion market capitalization. Chairman and Managing Director Mr. Mukesh Ambani says, “In just four decades, Reliance has grown from a small startup to one of the largest, most admired companies in the world." In 2020, Reliance ranks as the 48th highest valued company in the world and ranks 96th on the Fortune Global 500 list.

Financials

Quarterly Results

Annual Result

Reliance revenues in 2009 were ₹151,101 cr., and on Dec.18, June 19 & in Dec. 19 revenues for the following quarters were ₹156,898; ₹157,980 cr. and ₹153,179cr. which says that in around 10 years the revenues which the company uses to generate annually now the company generates such revenues annually. RIL in the March quarter generated an all-time high revenue of ₹595,887cr. The company works with around 15% - 20% margins currently. Company in FY 2019-20 generated profit of ₹39,394cr. The company's sales and profits have compounded at 11% and 10% in 10 years. Its stock price has compounded at 12% in 10 years. On the Balance Sheet company debt of ₹255,241cr., the company has total assets of ₹1,226,649cr. The company has cash equivalents of ₹15,874cr.

Valuation

Reliance is having a Market Capitalisation of ₹1,306,643cr. Reliance is having a dividend yield of 0.33%. Its Book Value is ₹968, EPS is ₹65.6. Stock is currently trading at a P/E of 32.0.

When we calculate it in Intrinsic Value we get its price of ₹963.35. This seems a bit expensive for me so at the current valuation I would not invest in RIL at this valuation.

Management Analysis

We have Mr. Mukesh Amabani as Chairman and Managing Director(M.D) in Reliance Industries Ltd., Mrs. Nita Ambani as Non - Executive, Non-Independent Director. 

Hital R. Meswani - Executive Director

Nikhil R. Meswani - Executive Director 

P.M.S. Prasad - Executive Director 

P.K. Kapil - Executive Director 

R.A. Mashelkar - Independent Director 

Adil Zainulbhai - Independent Director 

Dipak C. Jain - Independent Director 

Yogendra P. Trivedi - Independent Director 

Raminder S. Gujral - Independent Director 

Shumeet Banerji - Independent Director 

Arundhati Bhattacharya - Independent Director 

K. V. Chowdary - Non-Executive Director

Conclusion

Investment in RIL can be a good option but at the current valuation I feel that it is not a good option to invest in RIL we can wait for some time as some huge crash can bring RIL around our desired valuation at that time we can think of investing in RIL. As the company is under the guidance and leadership of Mr. Mukesh Ambani a feel that there is a lot of upside in RIL in upcoming years.


Read More:

Reliance Industries Ltd. - Company Analysis (Part-1)

Reliance Industries Ltd. - Company Analysis (Part-2)

Reliance Industries Ltd. - Company Analysis (Part-3)

Reliance Industries Ltd. - Company Analysis (Part-4)

Reliance Industries Ltd. - Company Analysis (Part-5)

Reliance Industries Ltd. - Company Analysis (Part-6)

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