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Reliance Industries Limited First Half Results 2000-01 October 31, 2000

Reliance Industries Limited First Half Results 2000-01 October 31, 2000. Index. Reliance - India’s No. 1 Group Management Philosophy and Strengths Financial Performance Business Outlook Future Growth Plans Shareholder Value Enhancement Summary. India’s No. 1 Group.

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Reliance Industries Limited First Half Results 2000-01 October 31, 2000

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  1. Reliance Industries Limited First Half Results 2000-01 October 31, 2000

  2. Index Reliance - India’s No. 1 Group Management Philosophy and Strengths Financial Performance Business Outlook Future Growth Plans Shareholder Value Enhancement Summary

  3. India’s No. 1 Group

  4. Reliance - India’s No. 1 Group Rs. Crs. $ bn Rank Sales 55,000 12.0 1 Cash Flow 7,000 1.5 1 Net Profit 4,800 1.1 1 Market Cap 62,000 13.5 1 Financial numbers based on consensus analyst estimates Reliance is India’s largest, and fastest growing group First generation enterprise - built on organic growth RIL’s ROE is the highest amongst Asian chemicals companies, and ranks amongst the top 1 percentile for global chemicals companies Reliance Industries Ltd.

  5. Key Role in Indian Economic Growth Reliance has leveraged global scale and competitiveness in its operations to build leadership in the vast Indian markets • Reliance generates over 3% of India’s GDP • Reliance contributes over 5% of the government’s total tax revenues - the largest by any business house • India’s largest, and the amongst the world’s largest, shareholder families - over 5 million retail investors • Reliance is now playing a leadership role in creation of a world class infocom infrastructure in India Reliance Industries Ltd.

  6. Reliance Industries Ltd. Presence in All Major Growth Sectors Fully integrated player capturing value across the entire energy chain India’s largest private E&P operator, with acreage > 100,000 sq. kms. E&P World’s largest grassroots refinery with 25% share of Indian market R&M Integrated, globally ranked producer, with leading market shares in India Petrochemicals

  7. Presence in All Major Growth Sectors Telecom Power Existing basic and cellular circles covering 380 million people, and 1/3rd of India’s geography India’s largest captive power facilities, IPPs, and generation and distribution infrastructure New economy and services sector initiatives will sustain high growth rates in the future Building state-of-the-art, world class, infocom infrastructure to capture growth opportunities across the entire digital value chain Infocom Reliance Industries Ltd.

  8. Consistent Track Record of Growth Compounded Annual Rate of Growth (%) Since 1977*10 Year5 Year Sales 28 27 24 Net Profit 39 39 18 Cash Profit 37 31 22 Assets 37 28 21 MarketCap 42 42 23 EPS 19 19 14 * Date of first IPO Only Indian group to report consistent sales and profit growth for 42 consecutive quarters in a row, over the last more than 10 years Reliance Industries Ltd.

  9. RIL Group Structure Oil & Gas Petrochemicals - polyester and polymers Textiles 47% 64% 26% 27% Upto 50% Reliance Petroleum Reliance Capital Reliance Telecom Reliance Infocom BSES Nationwide broadband network Basic (existing) Refining Power generation Financial Services Value added services T & D Marketing Cellular (existing) Voice, data and image Reliance Industries Ltd.

  10. Leadership in India’s Capital Markets RIL RPL Group Weightage in BSE Sensex12% 11% 23% NIFTY10% 9% 19% MSCI - India9% - 9% MSCI - Asia Pacific0.7% - 0.7% The Reliance Group’s leadership is reflected in the significant weightages in benchmarks related to India Reliance Industries Ltd.

  11. Management Philosophy and Strengths

  12. Management Philosophy Reliance is the leading Indian group to think, and act, truly world scale and world class • World scale operations • Leading edge, state-of-the-art, technologies • Global best practices • Global competitiveness • Integration • Market leadership • Financial conservatism • Shareholder value enhancement Reliance Industries Ltd.

  13. Organisational Attributes Reliance’s mantra is innovation in thinking, and efficiency in execution - turning dreams into reality • Young committed team - over 20,000 people, with an average age of just 35 years • Entrepreneurial, new ideas driven approach • Speed in thought and action • Agility in responding to an ever changing environment • Commitment to excellence • Informal work culture • A pure meritocracy - performance brings rewards Reliance Industries Ltd.

  14. Core Competencies Reliance’s core competence lies in its ability to conceptualise and implement multi-billion dollar projects • Largest in-house pool of intellectual capital • Attracting and retaining the best people, and nurturing the ‘intrapreneurial’ spirit • Unique financial engineering capabilities • Demonstrated ability to implement complex, multi-billion dollar projects in record time frames • Ability to create world class assets at 30%+ capital cost advantage compared to peer group • Absorption of diverse and complex technologies and optimal operation of plants Reliance Industries Ltd.

  15. Recent Achievements Unique combination of resource mobilisation and project management skill-sets - rare even in the global context • Investment of over Rs. 35,000 crores (US$ 9 bn) in new refinery and petrochemicals complexes completed in the last 5 years • World’s largest 27 mn tpa grassroots refinery completed in world record time of 36 months • Implemented India’s largest port project in 18 months - capacity of over 50 mn tpa • Implemented India’s largest rail/ road loading and despatch terminal with capacity of 10 mn tpa • Implemented India’s largest 500 MW captive power plant in less than 12 months • Implementation of large projects in 12-18 months less than the time taken by peer group Reliance Industries Ltd.

  16. Reliance Industries Ltd. Global Competitiveness • 30% + capital cost advantage over global peer group, in creation of new assets • Capacity expansion through debottlenecking, providing further capital cost advantage over new capacity creation • Personnel, and SG&A, costs amongst the lowest in the universe of global chemicals companies • Globally competitive power costs - all manufacturing complexes run on 100% captive power facilities • Competitive financing, from the domestic and international markets Reliance’s sustainable competitive strengths translate into superior returns and profitability ratios for the company

  17. Reliance Industries Ltd. Differentiation Strategy Market reputation and customer relationships are key long term advantages Reliance’s differentiation strategy is built around: • World class quality of products • Widest range of product grades • Reliability of supplies at competitive prices • Extensive nation-wide distribution network • Just in time deliveries for even the smallest customer - significant savings in inventory costs • Technology and product development support

  18. Current Financial Performance

  19. Reliance Industries Ltd. Financial Highlights - H1 2000-01 SalesRs. 15,009 crs. (US $ 3,258 mn) Operating ProfitRs. 2,643 crs. (US $ 574 mn) Net Interest CostRs. 477 crs. (US $ 104 mn) Cash ProfitRs. 2,012 crs. (US $ 437 mn) Net ProfitRs. 1,347 crs. (US $ 292 mn) Annualised CEPSRs. 38.1 (US $ 0.83) Annualised EPSRs. 25.5 (US $ 0.55) Strong performance despite sharp rise in feedstock costs

  20. Income Statement Reliance Industries Ltd. H1 1999-00 H1 2000-01 % Change $ mn. Rs. crs. Rs. crs. $ mn. Total Sales 8,673 1,989 15,009 3,258 +73 Sales(excl. RPL 8,673 1,989 12,856 2,791 +48 exports) EBITDA 1,992 457 2,643 574 +33 Interest 423 97 631 137 Depreciation 447 103 665 144 Tax - - - - Net Profit 1,112 257 1,347 292 +20 Cash Profit 1,569 360 2,012 437 +28 Profit under US GAAP is Rs. 1,114crs. ($ 242mn), which is 19% lower primarily due to the impact of foreign exchange fluctuations

  21. Reliance Industries Ltd. Growth in Production and Sales Composition of 48 % Sales Revenue Growth Impact of volume growth 25 % Impact of price increases 23 % Production volumes increased 35 % to 5.3 million tonnes

  22. Reliance Industries Ltd. Sharp Increase in Feedstock Costs Avg. H1 2000-01 over Avg. H1 1999-2000 International prices of key raw materials : higher by 25% - 40% Domestic selling prices of major products : higher by 1% - 30% Naphtha prices did not fully track the increase in crude oil prices - impact also partly neutralised by higher product selling prices

  23. Reliance Industries Ltd. Profitability Ratios RIL has maintained its healthy profitability ratios

  24. Reliance Industries Ltd. Liquidity Ratios Conservative liquidity ratios reflect inherent financial strength

  25. Reliance Industries Ltd. Growth in Exports Selective export opportunities contribute to diversification of markets, and optimal utilisation of installed facilities • Primary thrust on domestic markets, with 87% of revenues coming from sales within India • Focus of exports on the quality conscious markets of Europe and the US, with an emphasis on speciality grades • Manufactured exports up 300% to Rs. 1,684 crores (US$ 366 mn) • Total exports, including RPL’s products, at Rs. 3,837 crores (US$ 833 mn) • RPL will now directly export its products, to take advantage of the new risk management policy announced by the government

  26. Business Performance and Outlook

  27. Reliance Industries Ltd. Business Mix Break-down of total revenues Exports of RPL’s products in the first half accounted for 14% of the total revenues

  28. Reliance Industries Ltd. Business Mix Break-down of RIL’s sales - excluding exports of RPL’s products Contribution of the oil and gas division to RIL’s revenues and profitability is steadily increasing

  29. Reliance Industries Ltd. Oil and Gas - Plans and Outlook Reliance is generating attractive dollar denominated revenues from its growing oil and gas business • RIL is India’s No.1 private sector E&P player with 100,000 sq. kms in exploration acreage • Oil and Gas production from existing fields is growing at 5%-10% per year • Potential to increase gas production by 3 times • 14 exploration blocks recently awarded under attractive new policy regime, with fiscal and other benefits • Results from initial studies of the new exploration blocks are encouraging

  30. Reliance Industries Ltd. Polyester (PFY, PSF and PET) • Reliance is the world’s 3rd largest polyester producer • Compounded domestic demand growth in double digits - RIL’s production increased 15% in the first half • India’s 1.4 mn tonnes polyester market is still less than 1/3rd the size of the Chinese market • Specialities, with premium pricing of 10%, now account for 25%-60% of RIL’s total production • Industry consolidation is leading to improved pricing power, expanded product range, and higher product integration Reliance is the only polyester producer, making investments to participate in future demand growth in India

  31. Reliance Industries Ltd. Polyester (PFY, PSF and PET) Per capita consumption of polyester in India remains amongst the lowest in the world • Polyester margins improving • Industry operating at peak capacity utilisation • No capacity additions over the last 2-3 years, owing to then prevailing weak industry conditions • No new capacity in the pipeline • Reliance will benefit significantly, owing to the scale of its operations and integration

  32. Reliance Industries Ltd. Polymers (PP, PE and PVC) • Domestic demand for RIL’s plastics growing at compounded rate of 10%-15% per year • Demand for polypropylene, which accounts for nearly 2/3rd of RIL’s plastics production, is growing at over 20% per annum • Huge domestic demand potential - India’s 2.7 mn tonnes plastics market compares with China’s consumption of 12.6 mn tonnes • Diverse applications in fast growing sectors, such as telecom, food and beverages, FMCG, automobiles, etc. Reliance is the most globally competitive player, operating in perhaps the world’s fastest growing plastics market

  33. Reliance Industries Ltd. Polymers (PP, PE and PVC) RIL’s market leadership and global competitiveness will minimisethe impact of regional oversupplies • New capacity additions in Middle and Far East may pressure industry margins in the short term • Reliance’s overall competitiveness, and leadership in rapidly growing home markets, will cushion the impact on the company • Import duties close to WTO resting points - limited room for further reduction in the short term • Rupee depreciation enhances pricing flexibility • Improved outlook from 2002, owing to limited capacity additions beyond 2001

  34. Reliance Industries Ltd. Reliance Petroleum • RPL operates the largest, and most complex, refinery in India, with over 25% of total domestic capacity • World’s largest grassroots refinery, with capacity of 27 mn tpa - the 7th largest refinery in the world at any single location • 30% + capital cost advantage, over global peer group • Flawless start-up, and quick synchronisation of entire refinery complex within a world record timeframe of 3 months • Capacity utilisation of 101% achieved in the second quarter of operations - a unique achievement even in the global context RPL and RIL are now India’s top 2 private sector companies

  35. Reliance Industries Ltd. RPL’s Financial Highlights - H1 2000-01 SalesRs. 14,308 crs. ($ 3,106 mn) Operating ProfitRs. 1,479 crs. ($ 321 mn) Interest CostRs. 456 crs. ($ 99 mn) Cash ProfitRs. 1,023 crs. ($ 222 mn) Net ProfitRs. 726 crs. ($ 158 mn) Annualised CEPSRs. 4.76 ($ 0.10 ) Annualised EPSRs. 3.38 ($ 0.07 ) Record performance in the very first half year of operations

  36. Reliance Industries Ltd. Highest Profitability in the Indian Refining Sector RPL’s unique configuration, and high complexity, have contributed to the highest levels of value addition, and enhanced GRMs • RPL’s Gross Refining Margin (GRM) of over US$ 6 per barrel, is the highest in the Indian refining sector • RPL’s ability to optimise the feedstock and product mix on a dynamic basis, provides a competitive edge vis-à-vis other refineries • Processing of heavier crude oils has enabled RPL to take advantage of differential pricing trends, contributing to higher GRMs • A unique achievement, as many international refineries have taken 3 to 5 years before processing heavier crude oils

  37. Reliance Industries Ltd. RPL - India’s Largest Manufacturer Exporter RPL achieved peak operating rates despite the slowdown in domestic demand, owing to acceptability of its products in export markets • Exports of RPL’s products were Rs. 2,138 crores (US$ 464 million) in the first half • Products exported to the US, Europe and the Far East (including Japan) • Significant exports reflect superior quality of products, meeting the most stringent international environment specifications • Exports facilitated by dedicated port and logistics infrastructure • RPL will now be India’s largest manufacturer exporter

  38. Reliance Industries Ltd. RPL - Regulatory Environment • RPL is required to sell 5 controlled products (gasoline, diesel, kerosene, LPG, ATF) to oil PSUs • Market determined import parity prices received for controlled products • Payments received directly from oil PSUs normally within 10 days - not linked to the OCC pool mechanism • All other products marketed directly by RPL - 20%-30% output consumed by group companies • Complete flexibility in sourcing of crude oil, and determining product mix RPL’s margins are determined by international market related prices, even under the current regulatory environment

  39. Reliance Industries Ltd. Reliance Petroleum - Benefits to RIL RIL’s investment in RPL has rapidly created significant shareholder value, in a business regarded as having long gestation • RPL will pay a dividend this year - contributing to RIL’s cash flows • RIL will consolidate RPL’s financials, from the year 2001-02, fully reflecting the benefits of its investments in the company • The value of RIL’s stake in RPL translates into a value of nearly Rs. 180 per RIL share • RIL’s unrealised capital gains on this account are nearly Rs. 12,500 crores (over US$ 2.7 bn) • RPL will deploy its cash flows to enter into retail marketing from the year 2002 • RPL also has the ability to significantly enhance capacity at marginal incremental cost, to capture future demand growth

  40. Reliance Industries Ltd. Reliance Telecom - Cellular Operations • Rapid growth in coverage and subscriber base, currently over 125,000 subscribers in 45 cities • Subscriber growth in first six months at 62%, far surpassing industry growth rate of 39% • Average revenue per user (ARPU) of over Rs. 1,000 per month - in line with trend in metros • Coverage being extended to nearly 100 cities by 2001 • Reliance’s licensed area covers 13 states, 1/3rd of India’s geographical area, and 380 mn population India’s largest network, and the growing presence in large contiguous areas, fits in perfectly with the group’s infocom plans

  41. Future Growth Plans

  42. Reliance Industries Ltd. Reliance Value Creation Philosophy Huge domestic market Deregulation Project execution Growth Opportunity Superior returns on investments Cash flows Reliance Brand equity Shareholder value enhancement Reliance is India’s leading business house, consistently pursuing growth opportunities to maximise shareholder value

  43. Reliance Industries Ltd. Growing Cash Flows RIL’s cash flows have consistently grown over the last 5 years - the reinvestment needs in existing business are small in comparison 2000-01 : Consensus analyst estimates

  44. Reliance Industries Ltd. Capturing New Opportunities • Maintain, and enhance, market leadership in existing E&P, R&M, petrochemicals, and power businesses • Deploy significant free cash flows from existing businesses to capture attractive growth opportunities in New Economy and services sectors • Reliance’s strategy for the new infocom businesses leverages its demonstrated project management capabilities, financial engineering skills and brand equity • Investments in existing and new businesses will surpass hurdle return targets, and enhance shareholder value Reliance’s leadership in Indian markets will be further strengthened with its new infocom initiatives

  45. Reliance Industries Ltd. Huge Market Opportunity Infocom currently represents the largest market opportunity in India in the services sector • India is the only remaining telecom market opportunity in the world, with enormous growth potential • Inadequate existing infrastructure • Extremely low penetration rates: India China Fixed Lines (mn) 30 140 Cellular (mn) 3 70 Internet (mn) 4 19 (Analyst forecasts for CY 2000) • Recently announced deregulation measures open up vast markets for growth

  46. Reliance Industries Ltd. Fast Paced Market Deregulation • Path-breaking telecom reforms have been announced, opening up all markets to the private sector: Basic telephony (including WLL*) International Long Distance by 2002 National Long Distance (NLD) International gateways Cellular - new operators in all circles Subsea/ submarine connectivity and landing stations 3G services - nationwide* Internet service providers (ISPs) already allowed • Attractive low entry fee, and/or revenue sharing model * under consideration Telecom reforms have opened up rapidly growing, multi-billion dollar voice, data and image markets in India

  47. Reliance Industries Ltd. Global Trends in Convergence Strategies • Paradigm shift in the profile of the telecom industry - traditional circuit switched to router based IP networks • Move towards vertically integrated, convergent offerings in voice, data and value-added services, with end-user/application focus, not limited to bandwidth plays • Traditional telcos modifying core strategies to provide seamless, end-to-end connectivity, and the full range of applications/solutions • Data-centric players acquiring incumbent telcos, to enhance customer access, and range of offerings • Shift away from a regional focus to global reach Deregulation has provided the opportunity for creation of a world class infocom business in India

  48. Reliance Industries Ltd. Reliance’s Infocom Initiatives Reliance’s low-cost communications infrastructure, and integrated approach, will provide a lasting competitive edge • Reliance is building a nationwide, terabit bandwidth, broadband network connecting India’s top 115 cities - representing over 50% of the country’s GDP • All optic, facilities based, intelligent IP networks - robust and scaleable • Reliance will leverage its bandwidth and related infrastructure to capture value across the entire digital chain • A complete bouquet of services, and high quality end-to-end connectivity, will enable it to offer a superior value proposition to customers

  49. Reliance Industries Ltd. Nationwide Broadband Network Connecting Top 115 Cities in India Largest broadband network of its kind, covering around 60,000 route kilometers, with significant future scaleability • Work already in progress

  50. Reliance Industries Ltd. Voice Offerings Reliance will provide all voice services on a nationwide basis, thereby delivering superior service to a largecustomer base • Reliance to offer the complete range of services covering voice, data, and image, and value added services/ applications • Voice services to provide end-to-end connectivity, to customers on a nationwide basis • Leading presence targeted in all segments of the voice market - present size approximately Rs. 35,000 crores (US$ 8 billion): - Local - National Long Distance - International Long Distance - Mobile

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