ART - RELIANCE INDUSTRIES FY14
Reliance Industries Ltd's (RIL) annual report analysis for FY14
highlights INR15.3b (5.3% of FY14 PBT) directly adjusted through
reserves due to various schemes of amalgamation/arrangement.
Adjusted book value of the company is lower by INR65/sh at INR611/
sh at FY14-end on account of revaluation of assets done previously.
Hence, adjusted RoE is higher by 140bp to 13.2%.
Adjustment of INR15b through reserves:
RIL had undertaken
realignment and consolidation of various subsidiaries of its
retail business. It also merged other subsidiaries based on the
High Court approval in FY14. The effect of the above schemes
resulted in FY14 net worth being lower by INR15.3b (5.3% of
PBT; 0.8% of net worth).
Adjusted BV lower, adjusted RoEs higher by 140bp:
RIL carried
out two major revaluations of fixed assets - INR225b in FY06 and
INR129b in FY09, with consequent increase in the revaluation
reserve. Further, the company has cumulatively adjusted
INR198.2b (INR191.2b in FY06 and INR7b in FY09) through the
revaluation reserve on account of demerger of certain ventures
in FY06. This resulted in the revaluation reserve being exhausted
in standalone books in FY14 and incremental depreciation on
revalued assets of ~INR8b being routed through general reserve.
Our calculation suggests revalued assets in excess of INR190b
(~10% of reported net worth) to be depreciated through general
reserve in the coming years.
DTA on carried forward loss of subsidiaries of INR12.1b during
FY14:
Extrapolating the DTA on carried forward loss (assuming
Indian corporate tax rate of 34%), these DTAs would point to
losses worth INR35.6b in subsidiaries business during FY14.
However, as per the subsidiaries details given in the annual
report, cumulative loss made by all subsidiaries adds up to only
INR11b in FY14 (FY13 INR11.1b). We believe partly this could be
on account of exchange rate fluctuations during the year and
different tax rates of foreign subsidiaries.
Largest capex in company's history:
RIL is making investments
of ~INR1.8t over three years across all its businesses, which will
be spent for its petrochemicals, telecom and retail segments.
Of this, INR700b (~39%) is proposed to be spent in its telecom
business. Company spent INR601b in FY14 for its capex
requirements (FY13 INR307b) for polyster expansion, petcoke
gasification project and investments for shale gas and
telecommunication business. Of the fixed assets (net) of INR2.3t
as at FY14-end, INR915b (~40%) is still under construction and
not yet capitalized. On capitalization of these projects,
depreciation is likely to increase in the coming years.
the
ART
of annual report analysis
Amalgamation of
subsidiaries leads to
reserves being lower
by INR15.3b (5.3% of
PBT) in FY14
Adjusted BV (adjusted for revalued assets)
lower by INR65/sh. Adjusted RoE to
increase by 140bp to 13.2%
Capex of ~INR600b during FY14; CWIP at
~40% of net fixed assets to result in higher
depreciation in coming years
A
NNUAL
R
EPORT
T
HREADBARE
24 June 2014
Stock Info
Bloomberg
CMP (INR)
Equity Shares (m)
52-Week Range (INR)
M.Cap. (INR b)/(USD b)
1,6,12 Rel. Perf. (%)
RIL IN
1,067
3,229.4
939/765
3,446/57.5
10/-2/1
Financial summary (INR b)
Y/E Mar
2014
2015E
2016E
Sales
3,901
3,757
3,727
EBITDA
309
346
364
Adj. PAT
220
246
257
Adj. EPS (INR)
75.2
84.1
87.8
EPS Gr. (%)
4.7
12.1
4.4
BV/Sh.(INR)
674
744
818
RoE (%)
11.7
11.9
11.2
RoCE (%)
11.1
11.4
10.9
Payout (%)
16.4
16.5
16.3
E: MOSL Estimates (Analyst estimates)
Shareholding pattern (%)
As on
Promoter
Domestic Inst
Foreign
Others
Mar-14
45.4
11.1
22.7
20.8
Dec-13
45.4
11.4
22.4
20.8
Mar-13
45.4
10.9
22.0
21.7
Stock performance (1 year)
ART
will present a threadbare portrait of annual reports - statistical, strategic and structured. We believe
ART's
wide canvas - from accounting and auditing issues to
operating performance to management insights to governance matters - will help readers paint a clearer picture of the stock's investment worthiness.
Ashish Gupta
(Ashish.Gupta@MotilalOswal.com); +91 22 3982 5544
Investors are advised to refer through disclosures made at the end of the Research Report.
1

ART|
Reliance Industries FY14
ART #1
ACCOUNTING / AUDITING OBSERVATIONS
Amalgamation of subsidiaries leads to reserves being lower by INR
INR15.3b
Realignment and
consolidation of its retail
business and merger of
other subsidiaries
RIL had undertaken realignment and consolidation of various formats of its retail
business under Reliance Retail Ltd to enhance operational flexibility, efficiencies
and optimal utilization of resources during FY13.
The restructuring was also undertaken to enable better cash management and
operational efficiency by reduction in costs and elimination of duplication of
various activities.
During FY13, RIL also amalgamated its various service arms with Reliance
Financial Distribution and Advisory Services (94.4% subsidiary) w.e.f. April 1,
2012, in accordance with the scheme of arrangement.
High Court approval for both these schemes was received during FY14.
Further, two of RIL’s subsidiaries – Reliance Universal Ventures (94.45% holding)
and Reliance Polymers (India) (100% holding) were merged with another
subsidiary, Reliance Industrial Investments and Holdings (100% holding).
The effect of the above scheme of amalgamation and arrangement approved by
the High Court resulted in reserves for FY14 being lower by INR15.3b (5.3% of
FY14 PBT and 0.8% of FY14 net worth). No further details are available on the
nature of these amalgamation adjustments.
Direct adjustment through
reserves of INR15.3b (5.3%
of PBT) due to various
arrangement schemes
Amalgamation adjustment, dep. on revalued assets lowered net worth by INR35b (INR b)
Particulars
Opening Net Worth (incl. revaluation reserve)
Profit for the year
Dividend (including tax)
Adjustments
On amalgamation of subsidiaries
Depreciation on revalued assets
Others (forex fluctuation reserve, buy-back, etc)
Closing Net Worth (incl. revaluation reserve)
-
-27
-7
1,541
-
-24
10
-
-22
-31
-15
-20
9
FY11
1,410
193
-28
FY12
1,541
197
-29
FY13
1,694
209
-31
FY14
1,820
225
-33
1,694
1,820
1,987
Source: Company Annual Report, MOSL
Revaluation adjustment to lower BV by INR65/sh to INR611/sh; adjusted
RoE to inch up by 140bp
Cumulative amount of
revaluation of fixed assets
undertaken in FY06 and
FY09 cumulatively was
INR354b
RIL has carried out two major revaluations of fixed assets - INR225b in FY06 and
INR129b in FY09, with consequent increase in the revaluation reserve. Company
adjusts the incremental depreciation charge on revalued assets through the
revaluation reserve in line with the conventional accounting norms. Hence, at
the asset’s end of life, revaluation reserve should be nil.
However, RIL had cumulatively adjusted INR198.2b (INR191.2b in FY06 and
INR7b in FY09) through the revaluation reserve on account of demerger of coal-
based, gas-based, financial service undertaking and telecommunications venture
in FY06. This resulted in the revaluation reserve being nil in standalone financial
statements and incremental depreciation on revalued assets being routed
through the general reserve in FY14.
24 June 2014
2

ART|
Reliance Industries FY14
INR198.2b adjusted through
revaluation reserve in FY06
on demerger of various
undertakings
Consequently revalued
fixed assets for which
depreciation is to be
provided through general
reserve in coming years
stands at ~INR190b
Accordingly, RIL adjusted INR7.9b during FY14 through the general reserve as
depreciation on revalued assets. Our calculation suggests that the company
further has ~INR190b (9.6% of FY14 net worth) on account of depreciation of
revalued assets to be adjusted through the general reserve.
In our view, the net worth should be adjusted for these revalued assets of
INR190b. If the consolidated net worth is adjusted for the impact of revaluation
reserve adjustment, book value per share would be lower by INR65/sh to
INR611/sh at end FY14.
Thus, adjusted RoE would improve to 13.2% on average basis, a 140bp increase
from the reported RoE of 11.8%.
Standalone financial statements - movement of revaluation reserve; becomes nil in FY14 (INR b)
Particulars
Opening revaluation reserve balance
Add: Revaluation of assets
Less: Depreciation on revalued amt
Less: Utilized on demerger
Add/(Less): Others adjustments
Closing revaluation reserve balance
FY06
27.3
225.0
14.5
191.2
-0.0
46.5
FY07
46.5
-
20.0
-
-0.0
26.5
FY08
26.5
-
17.8
-
-
8.7
FY09
8.7
129.0
19.9
-
-
117.8
FY10
117.8
-
29.8
-
-
88.0
FY11
88.0
-
26.3
7.0
-
FY12
54.7
-
23.4
-
-
FY13
31.3
-
20.7
-
-
FY14
10.6
-
10.6
-
-
54.7
31.3
10.6
-
Source: Company Annual Report, MOSL
Consolidated financial statements - movement of revaluation reserve (INR b)
Particulars
Opening revaluation reserve balance
Add: Revaluation of assets
Less: Depreciation on revalued amount
Less: Utilized on demerger
Add/(Less): Others adjustments
Closing revaluation reserve balance
FY06
27.3
225.0
14.5
187.9
-0.0
49.8
FY07
49.8
-
20.0
-
-0.0
29.8
FY08
29.8
-
17.8
-
-
12.0
FY09
12.0
130.6
19.9
-
-0.4
122.3
FY10
122.3
2.3
29.9
-
-0.5
94.1
FY11
94.1
0.1
26.3
7.0
-0.0
FY12
60.9
0.1
23.6
-
0.0
FY13
37.4
-
20.8
-
0.0
FY14
16.6
3.5
10.8
-
-0.8
60.9
37.4
16.6
8.5
Source: Company Annual Report, MOSL
Book value falls to INR611/sh if revaluation reserve is adjusted from net worth (INRb)
Particulars
Reported net worth (A)
Reported book value (INR/sh)
Reported RoE (Avg, %)
Revaluation reserve adjustment (B)
Adjusted net worth (A - B)
Adjusted book value (INR/sh)
Adjusted RoE (Avg, %)
198
1,343
450
FY11
1,541
517
FY12
1,694
569
12.2
198
1,496
502
FY13
1,820
620
11.9
198
1,622
552
FY14
1,987
676
11.8
190
1,796
611
13.9
13.4
13.2
Source: Company Annual Report, MOSL
Deferred tax assets worth INR13b created primarily due to carried forward
loss in subsidiaries
RIL has deferred tax liability (DTL) (net) of INR119.3b in FY14 (FY13 INR115.9b).
Of this, INR41.5b in FY14 pertains to deferred tax assets (DTA) created on
carried forward losses of subsidiaries, which has increased from INR29.5b in
FY13.
3
24 June 2014

ART|
Reliance Industries FY14
Deferred tax assets of
INR12.1b created due to
carried forward losses in
subsidiaries but aggregate
loss of all subsidiaries adds
to INR11b only
This implies that the company has created DTA of INR12.1b during FY14 (FY13
INR3.2b) on account of losses in subsidiaries, which has been carried forward to
be set off in future years.
Extrapolating this assuming Indian corporate tax rate of 34%, these DTAs would
point to losses worth INR35.6b in the subsidiaries business during FY14.
However, as per the subsidiary details given in the annual report, loss made by
all subsidiaries cumulatively adds up to only INR11b in FY14 (FY13 INR11.1b).
We believe part of this difference could be on account of exchange rate
fluctuations during the years and different tax rates in foreign countries.
DTA created during the year exceeds the cumulative losses made by subsidiaries (INR b)
Particulars
DTA on account of c/fd loss of subsidiaries at year end
Incremental DTA created during the year
Extrapolating the DTA created to cumulative losses in
subsidiaries (assuming corporate tax rate @ 34%) (A)
Cumulative loss in subsidiaries as per annual report (B)
Difference (A-B)
FY12
26.3
17.3
50.9
12.8
FY13
29.5
3.2
9.3
11.1
FY14
41.5
12.1
35.5
11.0
38.1
-1.8
24.5
Source: Company Annual Report, MOSL
Cumulative losses of all subsidiaries add to INR11b (INR b)
Particulars
Reliance Holdings USA, Inc.
Reliance Marcellus LLC
Recron (Malaysia) Sdn Bhd
Reliance Marcellus II LLC
Reliance Exploration & Production DMCC
Reliance Dairy Foods Limited
Reliance Fresh Limited
Other small loss-making subsidiaries
Total
FY12
1.6
0.4
-
0.1
3.8
0.2
2.7
4.0
FY13
3.0
1.5
1.2
0.5
0.3
0.2
0.5
3.7
FY14
2.9
2.8
1.6
1.0
0.6
0.3
-
1.8
12.8
11.1
11.0
Source: Company Annual Report, MOSL
24 June 2014
4

ART|
Reliance Industries FY14
ART #2
KEY FINANCIAL INSIGHTS
Largest capex expenditure in company’s history of INR1.8t over three years;
higher FY14 capex leads to negative cash flows
“We are implementing
several projects both in the
manufacturing domain and
services sector to continue
the tradition of creating
significant shareholders
value” –
Mukesh Ambani,
Chairman and Managing
Director
RIL is making investments of INR1.8t over three years across all its business,
which is one of the largest capital expenditure cycles in the company’s history.
Capex will be spent primarily for its petrochemicals, telecom and retail
segments.
Of this, INR700b (~39%) is proposed to be spent in its telecom business. 2015
would see a phased launch of Reliance Jio platform.
Company has increased its capital expenditure significantly in FY14 to INR601b,
nearly double the previous year’s figure of INR307b.
The increase in capex at standalone level is primarily due to polyster expansion,
petcoke gasification project and off-gases cracker. At the subsidiary level, capital
investments were made for shale gas and as outlay for its Telecommunication
business.
Capex of INR600b in FY14 is the highest-ever by the company
Particulars
Cash flow from
operations
Capital expenditure
Free cash flows
333
-124
209
270
-80
190
330
-159
171
422
-325
97
1
-215
-214
-25
-84
-109
39
-148
-109
11
-276
-265
333
-339
245
-164
369
-307
433
-601
Standalone
FY11
FY12
FY13
FY14
FY11
Subsidiary (Derived)
FY12
FY13
FY14
FY11
Consolidated
FY12
FY13
FY14
-5
81
62
-168
Source: Company Annual Report, MOSL
Of the net fixed assets of INR2.3t as at FY14-end, INR915b (~40%) is still under
construction and not yet fully commissioned. On capitalization of these projects,
depreciation of the company is likely to increase.
Considerable assets in CWIP to result in higher depreciation in future years (INR b)
Intangible assets under development
Capital work-in-progress
Total CWIP
915
500
282
254
228
FY11
53
189
FY12
65
328
172
428
486
FY13
FY14
Source: Company Annual Report, MOSL
A break-up of assets in CWIP shows that almost half of the CWIP is in the form
of intangibles mostly in the subsidiary business. Intangible assets not capitalized
seem to be on account of the telecom segment relating to its licences and shale
gas investments.
24 June 2014
5

ART|
Reliance Industries FY14
CWIP in the standalone business witnessed a steep rise from INR135b in FY13 to
INR327b in FY14 on account of projects undertaken for increasing capacity in
petchem segment and petcoke gasification project. CWIP at the subsidiary level
also increased from INR37b in FY13 to INR160b in FY14.
Shale gas and telecom are major contributors (INR b)
Standalone
Subsidiary (derived)
Intangible assets under development
328
228
327
134
95
FY14
FY11
189
272
148
41
FY12
56
FY13
90
FY14
338
CWIP in standalone increased ~2.4x in FY14 (INR b)
Standalone
Subsidiary (derived)
Capital work-in progress
486
160
172
53
26
28
FY11
65
28
37
FY12
37
135
FY13
428
Source: Company Annual Report, MOSL
Source: Company Annual Report, MOSL
Investments in EIH Ltd of INR14.3b has market value of INR7.7b at FY14-
end; diminution in value considered temporary
Book value of EIH
investments at INR135/sh;
market value lower at
INR73/sh on March 31,
2014
RIL, through its subsidiary Reliance Industries Investment & Holding, holds
18.53% in EIH Ltd, a listed company which owns and operates hotels under the
Oberoi Group.
These investments have been classified as long term and are carried at cost of
INR14.3b. However, market value of these investments on March 31, 2014 is
only INR7.7b.
Since the investments are long term in nature and the company believes the
decline in share price to be temporary, it has not provided for any diminution in
the value of investments.
Market price of EIH stands at INR73/sh v/s carrying value of INR135/sh (INR m)
Particulars
Investment in EIH Ltd (INR m)
Carrying value of invt (INR/share) (A)
Market price as at year end (INR/share) (B)
Difference (C = A- B) (INR/share)
Number of shares held at year-end (in m) (D)
Excess of carrying value over mkt value (C*D) (INR m)
FY11
12,410
147
81
66
85
FY12
14,330
135
84
51
106
FY13
14,330
135
55
80
106
FY14
14,330
135
73
62
106
5,575
5,407
8,473
6,615
Source: Company Annual Report, BSE, MOSL
Net debt increases to INR663b at FY14-end; majority of debt is long term in
nature
RIL had raised debt of INR315b (net of repayments) during FY14 and the gross
debt increased to INR1.4t at FY14-end (FY13 INR1.1t).
The change in debt has been even more pronounced with decreased liquid
investments (FY14 INR724b v/s FY13 INR793b) contributing to a net debt of
INR663b at FY14-end, more than twice the FY13 level of INR279b.
24 June 2014
6

ART|
Reliance Industries FY14
Most of the debt is long term in nature. Accordingly, only INR50b of the long
term borrowing is repayable in FY15.
Net debt increases due to higher capex in FY14 (INR b)
Particulars
Long-term borrowings
Short-term borrowings
Current maturities of long-term borrowings
Gross debt
Less: Current investments
Less: Cash & bank balances
Net debt
FY11
662
138
42
842
147
301
393
FY12
FY13
FY14
654
710
1,010
173
184
328
98
179
50
924
1,072
1,388
272
289
345
407
505
380
245
279
663
Source: Company Annual Report, MOSL
Electricity, power, fuel and water expenses increase from 1.1% of revenue
in FY11 to 2.5% of revenue in FY14
Petcoke gasification project
is expected to address the
energy costs issue
Electricity, power, fuel and water expenses jumped from INR80b in FY13 to
~INR109b in FY14 (an increase of 35% YoY). The increase in expenditure is on
account of higher cost of imported LNG used for refinery operations.
Even as a percentage of revenue, power and fuel costs have increased from
1.1% of FY11 revenue to 2.5% of FY14 revenue. This is despite potential savings
of INR4.5b due to various energy conservation initiatives during the year.
Electricity, fuel and water expenses increased to 2.5% of revenue in FY14
Electric power, fuel and water (INR b)
Power, fuel and water (as % of revenue) (%)
2.5
2.0
1.1
1.3
28
FY11
47
FY12
80
FY13
109
FY14
Source: Company Annual Report, MOSL
RIL’s petcoke gasification project is expected to address energy costs issue to a
larger extent, and as per management, this will put RIL’s energy and hydrogen
costs at par or better than the refineries in the US.
Also, other energy saving measures, as enumerated in the annual report, are
likely to have cost benefits of INR2b in forthcoming years.
Forex difference arising on
long term foreign liabilities
are capitalized; to result in
higher depreciation in
future years
Forex difference of ~INR107b capitalized as fixed assets
As per the company’s accounting policy, any foreign long term liabilities related
to the acquisition of fixed assets are adjusted to the carrying cost of such assets.
Additions to fixed assets (tangible + intangible) stood at INR231b in FY14 (FY13
~INR90b). Also, the company has a net increase of INR415b (FY13 INR246b) in
capital WIP during FY14.
24 June 2014
7

ART|
Reliance Industries FY14
The above amounts include INR107b (37% of FY14 PBT) capitalized in FY14 on
account of foreign exchange differences arising on long term foreign currency
loan (FY13 INR60b; 23% of FY13 PBT) in line with its accounting policy.
This will result in higher depreciation in the coming years.
th
Forex differences account for 1/6 of total fixed asset additions in FY14
Forex diff capitalized (INR b)
33
Forex diff / (Gross additions + net inc. in CWIP) (%)
18
17
79
FY12
60
FY13
107
FY14
Source: Company Annual Report, MOSL
Deposits, loans and advances to related parties at INR20b; related parties
account for 18% of operating & admin expenses
Related party transactions
with associates continue to
form significant part of the
operating & admin
expenses
Run-rate for deposits and loans to associates stable; financial guarantees rise (INR b)
FY11
21.6
18.6
12.1
13.2
20.7
22.1
FY12
FY13
FY14
RIL had given deposits of INR20b to associates, which is outstanding at FY14-end
(FY13 INR20b). In addition to deposits, company has advanced loans of INR2b to
its associates.
Company also has given financial guarantees on behalf of associates of INR13.2b
at FY14-end (FY13-end INR12.1b).
11.4
7.2
Deposits & loans to associates
Financial Guarantees
Source: Company Annual Report, MOSL
Related parties also account for a considerable proportion of the operating &
administration expenses. Related party expenses stood at INR57b for FY14, as
compared to INR51b in FY13.
Of the total related party expenses during FY14, ~50% of the payments are
selling & distribution expenses paid to Reliance Ports and Terminals (FY14
INR29b; FY13 INR28b).
24 June 2014
8

ART|
Reliance Industries FY14
S&D expenses form bulk of the related party expense (INR m)
Particulars
Electric power, fuel and water
Hire charges
Sales & distribution expenses
Professional fees
General expenses
Donations
Total related party expenses
As % of operating & admin expenses (%)
FY11
9.2
7.9
25.7
0.2
0.1
0.3
43.3
22
FY12
FY13
FY14
11.4
13.3
14.7
4.1
4.2
5.2
23.8
28.5
28.9
0.4
0.6
0.6
-
2.8
2.7
2.1
2.2
5.3
41.8
51.4
57.3
19
19
18
Source: Company Annual Report, MOSL
Revenue growth moderates to 10%; EBIT margins stable
Revenue from refining business increased 9% YoY to INR4t in FY14 (FY13
INR3.7t). EBIT margins for the segment remained stable at 3%.
Oil & gas segment recorded de-growth during FY14, with revenue at INR107b in
FY14 (FY13 INR110b). EBIT margins in the oil & gas segment have dropped
sharply in the last two years, while other businesses are showing positive EBIT
since FY13.
Revenues from other businesses, including retail, have increased to above
INR200b for the first time in FY14.
Refining margins stable for FY14 (%)
Others
203
107
Petrochemicals
39
39
Refining
33
26
4,021
4
-1
FY11
15
11
3
-1
FY12
3
2
FY13
3
FY14
8
9
6
Oil & Gas
Others
Revenue growth at 10% in FY14 (INR b)
Petrochemicals
100
141
3,220
Refining
Oil & Gas
143
110
3,689
66
173
2,292
632
FY11
811
FY12
874
FY13
965
FY14
Source: Company Annual Report, MOSL
Source: Company Annual Report, MOSL
Unhedged forex exposure worth INR656b at FY14-end; currency hedges of
INR1.3t by way of derivative contracts
Outstanding currency derivative exposure stood at ~INR1.3t as at FY14-end
(FY13 INR1.2t). The increased amount of hedging has reduced the unhedged
exposure to INR656b at FY14-end v/s INR799b in FY13.
Company believes that unhedged exposures are naturally hedged by future
foreign currency earnings and earnings linked to foreign currency.
Sizeable increase in forward contracts in last two years (INR b)
Particulars
Forward Contracts
Currency Swaps
Interest Rate Swaps
Option
FY11
316
46
343
282
FY12
FY13
FY14
250
896
767
42
44
28
322
332
337
251
23
24
Source: Company Annual Report, MOSL
24 June 2014
9

ART|
Reliance Industries FY14
Commodity hedges (in Kbbl)
FY11
Petroleum
product
sales
Forward swaps
Futures
Spreads
Option
Margin hedges
14,757
2,194
33,768
-
79,308
Crude Oil
purchases
21,420
9,453
51,227
-
-
FY12
Petroleum
product
sales
16,722
2,309
25,193
2,720
81,869
Crude Oil
purchases
18,842
5,879
81,337
8,875
-
FY13
Petroleum
product
sales
7,334
6,259
44,900
-
85,168
Crude Oil
purchases
FY14
Petroleum
product
sales
Crude Oil
purchases
16,575
16,944
21,321
5,488
6,737
7,066
50,366
35,456
86,016
23,895
-
36,550
-
105,627
-
Source: Company Annual Report, MOSL
Analysis of key subsidiaries
Organized retail turns PAT positive
After turning EBITDA positive in FY13, RIL has now turned PAT positive in FY14.
RIL’s retail business reported revenue of INR145b (+34% YoY), EBITDA of
INR3.6b and PAT of INR1.8b.
RIL Reliance Retail: Revenue break up
FY11
1
3
8
7
42
61
INR b
FY12
FY13
1
2
5
8
11
16
12
21
46
61
76
108
FY14
3
13
19
30
80
145
FY11
1.6%
4.9%
13.1%
11.5%
68.9%
100.0%
% contribution
FY12
FY13
FY14
1.6%
1.9%
2.0%
6.9%
7.4%
9.0%
14.8%
14.8%
13.0%
16.1%
19.4%
21.0%
60.7%
56.5%
55.0%
100.0% 100.0% 100.0%
Source: Company, MOSL
Brands
Jewellery
Fashion and Lifestyle
Digital
Value and others
Total Revenue
Summary of other key subsidiaries (INRb)
Source: Company, MOSL
Update on US shale gas business
Shale gas FY14 revenues and EBITDA stand at USD893m (+45% YoY) and
USD659b (+37% YoY) respectively. Cumulative capex stands at USD7.1b.
24 June 2014
10

ART|
Reliance Industries FY14
RIL’s shale gas EBITDA share stood at USD659m v/s total capital employed of USD7.1b
Source: Company, MOSL
Update on telecom business
RIL’s capital employed in telecom business stands at INR42b as on March 2014.
RIL’ telecom arm now employs more than 3,000 employees now.
In FY14, RIL’s telecom subsidiary, Reliance Jio Infocomm Ltd. (RJIL) acquired
1,800 MHz band spectrum in 14 key circles across India. RJIL will use this
spectrum in conjunction with its pan India 2,300 MHz spectrum acquired earlier
to provide seamless 4G services using FDD-LTE on 1,800 MHz and TDD-LTE on
2,300 MHz through an integrated ecosystem.
Product experience pilots underway
RJIL is conducting extensive field tests in Navi Mumbai, Jamnagar and other
locations on integration of devices with its network, platform and services.
RJIL has finalised or is in the process of finalising agreements with OEMs and
ODMs for LTE devices (at affordable prices) and is working with its partners on
certification, validation and quality assurance.
RJIL launched free Wi-Fi hot spots in 8 locations at Ahmedabad and 9 locations
at Baroda and Surat. High speed internet trials have been provided to over
55,000 unique devices since the launch.
RIL’s telecom business total assets rises to INR42b in FY14 (INRm)
42,119
13,403
15,116
18,761
FY11
FY12
FY13
FY14
*Summation of total assets of Reliance Jio
Source: Company, MOSL
24 June 2014
11

ART|
Reliance Industries FY14
Investment in subsidiaries increases primarily due to RJIL (INR b)
Particulars
Subsidiaries - Equity shares
Reliance Jio Infocomm
Reliance Industrial Investments and Holding
Reliance Ventures
Reliance Retail Ventures
Other subsidiaries
Sub-total (A)
Subsidiaries - Preference shares (B)
Subsidiaries - Debentures
Reliance Industrial Investments and Holding (C)
Associates (D)
Total (A+B+C+D)
FY13 end During the year
48
1
24
57
0
130
32
179
-
-
-
0
179
(25)
FY14 end
227
1
24
57
0
309
8
7
-
7
21
-
21
191
154
345
Source: Company Annual Report, MOSL
Other financial highlights
Share application money
has increased from INR9.6b
in FY13 to INR25.7b in FY14
which appears to be on
account of investments in
Network 18 and TV18
Broadcast
Share application money
forming part of ‘Other Current Assets’ has increased
from INR9.6b in FY13 to INR25.7b in FY14. The increase, we believe, is due to
investments in Media and Entertainment companies - Network 18 Media and
Investments and TV18 Broadcast.
Other current liabilities have more than doubled
to INR121b in FY14 (FY13
INR57.6b), likely
on account of increase in creditors for capital expenditure,
due to the higher capex incurred by the company during the year. Incremental
capex is also reflected in the level of capital advances which stand at ~INR100b
at FY14-end, an increase of 4x from FY13 figure of ~INR25b.
As per the provisions of new Companies Act, 2013, from FY15, companies have
to form a Corporate Social Responsibility (CSR) Committee and may spend at
least 2% of the last three years’ average profits on
CSR activities.
RIL has
spent
INR7.1b (3.2% of FY14 PAT)
on such activities during FY14.
Due to the loss in FY14, the telecom subsidiary,
RJIL, has not created Debenture
Redemption Reserve worth INR3.5b (FY13 INR2.5b),
which will be created out
of future profits when it arises.
Company has paid INR310m as Voluntary Separation Scheme expenses for the
employees of its Silvassa manufacturing division. The amount forms a part of
the employee benefit expenses in P&L statement.
The
Government of India has proposed to disallow the recovery of certain
costs,
which the company is entitled to as per the Production Sharing Contract,
for a particular gas block KG-DWN-98/3. RIL has referred the matter to
arbitration. This may impact its profitability if the verdict is not in favor.
24 June 2014
12

ART|
Reliance Industries FY14
ART #3
“RIL has always prided itself
in investing and
contributing to India’s
economic growth” –
Mukesh Ambani
MANAGEMENT SPEAK/KEY PLANS
New developments
Polyester Filament Yarn (PFY) plant at Silvassa was commissioned in FY14 which
produces three products - Partially Oriented Yarn (POY), Fully Drawn Yarn (FDY)
and Polyester Textured Yarn (PTY).
In May 2013, RIL made a significant gas and condensate discovery (MJ-1) in the
KG-D6 block and is expected to add to the resources in this block.
In August 2013, RIL also announced a new gas condensate discovery in the
Cauvery basin and is the second gas discovery in the block.
Reliance Retail has become India’s largest retailer by revenues with INR145b
and EBITDA of INR3.6b.
“Petcoke gasification
project will provide
competitive energy costs
for our integrated refining
complex at Jamnagar and
improve profitability”
Refining business
RIL indicated that despite difficult business environment it was able to report
good performanve in the refining business.
This was helped by (a) weaker rupee (INR/USD), (b) flexibility and capability of
RIL in terms of feedstock run, (c) product alteration flexibility, (d) efficient
product placement along with world class logistics infrastructure.
Petchem business: Polymers
FY14 domestic polymer demand grew by 3% YoY, led by 5% growth in PP, 2% in
PVC and 1% in PE demand.
RIL’s market share in domestic polymer industry stood at 40%, with 60% in PP
(v/s 64% in FY13), 29% in PVC (v/s 28% in FY13) and 29% in PE (v/s 28% in FY13).
Within PE, its market share stood at 18% in HDPE, 39% in LLDPE and 43% in
LDPE.
PVC domestic demand is estimated to grow at 6.7% CAGR during 2013-18, while
PE demand is expected to grow at 6-8% annually.
Petchem business: Polyesters
“Commissioned our new
PFY facility at Silvassa – One
of the most automated and
environment-friendly plant
globally”
FY14 domestic polyester demand grew by 6%, led by 7% in PFY, 6% in PET and
2% in PSF.
RIL’s domestic market share stood at 20% in PFY, 67% in PSF and 41% in PET. On
the intermediate front, its market share stood at 59% in PX, 47% in PTA and 37%
in MEG.
2013 domestic all fibre textile mill consumption is estimated at 9mmt (+7% YoY)
and is expected to reach ~13mmt by 2020 (5.4% CAGR) and 17.5mmt by 2030
(4% CAGR).
E&P business
RIL relinquished 4 exploration blocks in FY14 - KG-DWN-2004/4, MN-DWN-
2004/1, MN-DWN-2004/2 and KG-DWN-2005/2.
Domestic Gas Pricing:
With the continued delay in notifying new gas pricing, RIL
indicated that the restriction on charging the revised gas price is not in line with
the PSC and the Contractor reserves its rights and remedies to claim the revised
gas price from April 1, 2014.
24 June 2014
13

ART|
Reliance Industries FY14
“Production from KG-D6
block continued to decline
during FY14”
KG-D6
Arbitration
and other legal issues:
In its arbitration case against the
Government’s decision to disallow recovery of costs, recently Supreme Court
has appointed a third arbitrator.
Separately, other court case currently being heard by Supreme Court is Public
Interest Litigations (PIL) filed by Gurudas Dasgupta and an NGO called Common
Cause. The PILs primarily seek quashing of the decisions of the Government to
revise the gas price and action against the Contractor for failure to relinquish
area and for hoarding gas.
Telecom business
“Reliance Jio Infocomm
received Unified Licenses
for all 22 service areas
across India thus becoming
the first telecom operator
to get a pan India license”
In addition to connectivity, RJIL plans to enable end-to-end solutions that
address the entire value chain across various digital services in key domains like
education, healthcare, security, financial services, government-citizen interfaces
and entertainment.
The Unified License acquired in October 2013 allows it to offer all telecom
services including voice telephony under a single license.
RJIL plans to provide seamless 4G services using FDD-LTE on 1800 MHz and TDD-
LTE on 2300 MHz through an integrated ecosystem.
RJIL plans to use LTE (Long Term Evolution) technology for its country-wide next
generation network deployment to provide connectivity and related digital
services to its customers. In addition to LTE and its future versions, it will
continue to evaluate and deploy other technologies, both wireless and wire-line,
to offer comprehensive broadband solutions to consumers, small businesses,
enterprises, government and other entities.
RJIL is looking to provide advanced 4G voice calling using VoLTE (Voice over LTE)
as a technology to offer high quality voice calls over its 4G network.
In addition to high speed data, the 4G network will provide voice services from
and to non-RJIL networks.
In addition to 4G wireless services, RJIL is rolling-out high speed internet services
via FTTx (High speed broadband over Fibre) in over 900 cities/towns.
RJIL has also completed the detailed planning for the pan India implementation
of the infrastructure needed for the project.
24 June 2014
14

ART|
Reliance Industries FY14
ART #4
GOVERNANCE MATTERS
Ms. Nita Ambani inducted in the Board of Directors at AGM
Ms Nita Ambani (women
director) inducted in the
Board of Directors in
accordance with the
Companies Act, 2013
As per the requirements of the new Companies Act, every company has to
appoint at least one woman director to the Board.
Accordingly, the company has appointed Ms. Nita Ambani to the Board of
Directors at the AGM.
Six Board meetings were held during the year
Six Board meetings were held during FY14 as against the minimum requirement
of four in the Companies Act.
Attendance of Directors at Board meetings
Name of the Director
Mukesh D. Ambani
Nikhil R. Meswani
Hital R. Meswani
P.M.S. Prasad
Pawan Kumar Kapil
Ramniklal H. Ambani
Mansingh L. Bhakta
Yogendra P. Trivedi
Dr. Dharam Vir Kapur
Mahesh P. Modi
Prof. Ashok Misra
Prof. Dipak C. Jain
Dr. Raghunath A. Mashelkar
Adil Zainulbhai *
•
Attendance at meetings during 2013-14
Board Meetings
AGM (2013)
6
Yes
6
Yes
6
Yes
6
Yes
5
Yes
5
Yes
5
Yes
6
Yes
6
Yes
5
Yes
6
Yes
6
Yes
6
Yes
3
N.A.
Appointed as director w.e.f. December 20, 2013. 3 meetings were held during his tenure
Source: Company Annual Report, MOSL
24 June 2014
15

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ART|
Reliance Industries FY14
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