A Project

On

Financial Statement of Reliance Industries Limited

Of

Entreprenuership Management

Submitted to

UNIVERSITY OF MUMBAI

Submitted By

MANDAR A. BHOIR

Roll No. 63

MASTERS IN COMMERCE - MANAGEMENT (Sem IV)

UNDER THE GUIDANCE OF:

Prof.

RIZVI COLLEGE OF ARTS, SCIENCE, COMMERCE

Bandra (West), Mumbai

Academic Year

2014-2015

DECLARATION

Myself, Bhoir Mandar Ashok of Rizvi College of Arts, Science & Commerce studying

M.COM-Sem-IV hereby declare that I have completed this project on ‘Financial Statement of

Reliance Industries Limited’ in Academic Year 2014- 2015.

The information submitted in this project is true & original to the best of my knowledge.

Date-

Place-MUMBAI

(BHOIR MANDAR ASHOK)

CERTIFICATE

This is to certify that MANDAR BHOIR student of M.Com-IV class, Roll No. 63 of the

academic year 2014-15 studying at Rizvi College of Arts, Science & Commerce, has successful

completed the project entitled ‘Financial Statement of Reliance Industries Limited’

____________________ ______________________

Prof. Prof. Qamar Sir

(M.Com Co-ordinator)

___________________ ______________________

External Examiner Dr. Farooqui M.Z

(Principal)

ACKNOWLEDGMENT

I owe a great many thanks to a great many people who helped and supported me during

this project.

My deepest thanks to the Guide of this project Professor , for guiding and

correcting various documents of mine with attention and care. He has taken pain to go through

the project and make necessary correction as and when needed.

I would also thank my Institution and my faculty members without whom this project would have been a distant reality. I also extend my heartfelt thanks to my family and well-wishers.

Executive Summary

The project assigned to me was to study the financial health of any organization in the

country. I decided to choose one of India’s largest companies in a sector that has rapidly grown

over the last few years and a company where leaders like Mr. Dhirubhai Ambani, or rather, a

company that has been made Mr. Dhirubhai Ambani.

Through this report, I try and analyze the financial environment in which Reliance

Industry Limited is operating.

Through a thorough financial analysis, my aim to understand the financial factors is

influencing the company and its decision making. Later, I try and evaluate the various ratios to

appreciate their impact on company’s performance over the last four years

The financial statements of last four years are identified, studied and interpreted in light

of company’s performance. Critical decisions of distributing dividends, Issue of bonus

Debentures and other current news are analyzed and their impact on the bottom line of the

company is assessed.

Finally, I study ratio analysis, fund flow analysis and cash flow analysis of the company

to analyzing the financial position of the company in last four years.

Introduction

The study of financial statement is prepared for the purpose of presenting a periodical

review or report by the management of and deal with the state of investment in business and

result achieved during the period under review. They reflect the financial position and operating

strengths or weaknesses of the concern by properly establishing relationship between the items

of the balance sheet and remove statements.

Financial statement analysis can be under taken either by the management of the firm or

by the outside parties. The nature of analysis defers depending upon the purpose of the analysis.

The analyst is able to say how well the firm could utilize the resource of the society in generating

goods and services. Turnover ratios are the best tools in deciding these aspects.

Hence it is overall responsibility of the management to see that the resource of the firm is

used most efficiently and effectively and that the firm’s financial position is good. Financial

statement analysis does indicate what can be expected in future from the firm.

Company Profile

The Reliance group, founded by Dhirubhai H Ambani (1932-2002), is India’s largest private

sector enterprise, with businesses in the energy and material value chain. The flagship company,

Reliance Industries Limited, is a Fortune Global 500 company and is the largest private sector

company in India. The chairman of the company is Mukesh Ambani.

The company is India’s largest petrochemical firm and among the country’s largest companies

(along with the likes of Indian Oil and Tata Group). Oil refining and the manufacture of

polyfines account for nearly all of Reliance’s sales. It also makes textiles and explores for oil and

gas, though those businesses are relatively small. In 2009 the company merged with its oil and

gas refining subsidiary (Reliance Petroleum) in order to boost the operational and financial

synergies of Reliance as a major refining company.

Reliance Industries Limited (NSE: RELIANCE) is India's largest private sector conglomerate

(by market value) , with an annual turnover of US $ 35.9 billion and profit of US$ 4.85 billion

for the fiscal year ending in March 2008 making it one of India's private sector Fortune Global

500 companies, being ranked at 206th position (2008). It was founded by the Indian industrialist

Dhirubhai Ambani in 1966. Ambani has been a pioneer in introducing financial instruments like

fully convertible debentures to the Indian stock markets. Ambani was one of the first

entrepreneurs to draw retail investors to the stock markets. Critics allege that the rise of Reliance

Industries to the top slot in terms of market capitalization is largely due to Dhirubhai's ability to

manipulate the levers of a controlled economy to his advantage. Though the company's oil-

related operations form the core of its business, it has diversified its operations in recent years.

After severe differences between the founder's two sons, Mukesh Ambani and Anil Ambani, the

group was divided between them in 2006. In September 2008, Reliance Industries was the only

Indian firm featured in the Forbes's list of "world's 100 most respected companies

Stock

According to the company website "1 out of every 4 investors in India is a Reliance

shareholder.”. Reliance has more than 3 million shareholders, making it one of the world's most

widely held stocks. Reliance Industries Ltd, subsequent to its split in January 2006 has continued

to grow. Reliance companies have been among the best performing in the Indian stock market.

Products

Reliance Industries Limited has a wide range of products from petroleum products,

petrochemicals, to garments (under the brand name of Vimal), Reliance Retail has entered into

the fresh foods market as Reliance Fresh and launched a new chain called Delight Reliance

Retail and NOVA Chemicals have signed a letter of intent to make energy-efficient structures.

The primary business of the company is petroleum refining and petrochemicals. It operates a 33

million tone refinery at Jamnagar in the Indian state of Gujarat. Reliance has also completed a

second refinery of 29 million tons at the same site which started operations in December 2008.

The company is also involved in oil & gas exploration and production. In 2002, it struck a major

find on India's eastern coast in the Krishna Godavari basin. Gas production from this find was

started on April 2, 2009. As of the end of 3rd quarter of 2009-2010, gas production from the KG

D6 ramped up to 60 MMSCMD.

Subsidiaries

Major Subsidiaries & Associates

Reliance Petroleum Limited (RPL) was a subsidiary of Reliance Industries Limited

(RIL) and was created to exploit the emerging opportunities, creating value in the

refining sector worldwide. Currently, RPL stands amalgamated with RIL.

Reliance Life Sciences is a research-driven, biotechnology-led, life sciences organization

that participates in medical, plant and industrial biotechnology opportunities.

Specifically, these relate to Biopharmaceuticals, Pharmaceuticals, Clinical Research

Services, Regenerative Medicine, Molecular Medicine, Novel Therapeutics, Bio-fuels,

Plant Biotechnology and Industrial Biotechnology.

Reliance Industrial Infrastructure Limited (RIIL) is engaged in the business of setting

up / operating Industrial Infrastructure that also involves leasing and providing services

connected with computer software and data processing.

Reliance Institute of Life Sciences (Rils) established by Dhirubhai Ambani Foundation,

is an institution of higher education in various fields of life sciences and related

technologies.

Reliance Logistics (P) Limited is a single window solutions provider for transportation,

distribution, warehousing, logistics, and supply chain needs, supported by in house state

of art telemetric and telemetry solutions.

Reliance Clinical Research Services (RCRS), a contract research organization (CRO)

and wholly owned subsidiary of Reliance Life Sciences, has been set up to provide

clinical research services to pharmaceutical, biotechnology and medical device

companies.

Reliance Solar, The solar energy initiative of Reliance aims to bring solar energy systems

and solutions primarily to remote and rural areas and bring about a transformation in the

quality of life.

Relicord is the first and one of the most dependable stem-cell banking services of South

East Asia offered by Mukesh Ambani controlled Reliance Industries.

Reliance's Oil & Gas find

Andhra Pradesh near Vishakhapatnam. It was the largest discovery of natural gas in world in

financial year 2002-2003. On 2 April 2009, Reliance Industries (RIL) commenced natural gas

production from its D-6 block in the Krishna-Godavari (KG)

The gas reserve is 7 trillion cubic feet in size. Equivalent to 1.2 billion barrels (165 mil in 2002,

Reliance found natural gas in the Krishna Godavari basin off the coast of lion tonnes) of crude

oil, but only 5 trillion cubic feet are extractable.

On 2008 Oct 8, Anil Ambani's Reliance Natural Resources took Reliance Industries to the Bombay High

Court to uphold a memorandum of understanding that said RIL will supply the natural gas at $2.34 per

million British thermal units to Anil Ambani.

Meaning of Financial Statement

Financial statements refer to such statements which contains financial information about

an enterprise. They report profitability and the financial position of the business at the end of

accounting period. The team financial statement includes at least two statements which the

accountant prepares at the end of an accounting period. The two statements are: -

The Balance Sheet

Profit And Loss Account

They provide some extremely useful information to the extent that balance Sheet mirrors

the financial position on a particular date in terms of the structure of assets, liabilities and owners

equity, and so on and the Profit and Loss account shows the results of operations during a certain

period of time in terms of the revenues obtained and the cost incurred during the year. Thus the

financial statement provides a summarized view of financial position and operations of a firm

Meaning of Financial Analysis

The first task of financial analysis is to select the information relevant to the decision

under consideration to the total information contained in the financial statement. The second step

is to arrange the information in a way to highlight significant relationship. The final step is

interpretation and drawing of inference and conclusions. Financial statement is the process of

selection, relation and evaluation.

Features of Financial Analysis

To present a complex data contained in the financial statement in simple and

understandable form.

To classify the items contained in the financial statement inconvenient and rational

groups.

To make comparison between various groups to draw various

conclusions.

Purpose of Analysis of financial statements

To know the earning capacity or profitability.

To know the solvency.

To know the financial strengths.

To know the capability of payment of interest & dividends.

To make comparative study with other firms.

To know the trend of business.

To know the efficiency of mgt.

To provide useful information to mgt

Procedure of Financial Statement Analysis

The following procedure is adopted for the analysis and interpretation of financial

statements:-

The analyst should acquaint himself with principles and postulated of accounting. He

should know the plans and policies of the managements that he may be able to find out

whether these plans are properly executed or not.

The extent of analysis should be determined so that the sphere of work may be decided.

If the aim is find out. Earning capacity of the enterprise then analysis of income statement

will be undertaken. On the other hand, if financial position is to be studied then balance

sheet analysis will be necessary.

The financial data be given in statement should be recognized and rearranged. It will

involve the grouping similar data under same heads. Breaking down of individual

components of statement according to nature. The data is reduced to a standard form. A

relationship is established among financial statements with the help of tools & techniques

of analysis such as ratios, trends, common size, fund flow etc.

The information is interpreted in a simple and understandable way. The significance and

utility of financial data is explained for help indecision making.

The conclusions drawn from interpretation are presented to the management in the form

of reports.

Tools of Financial Statement Analysis

Various tools are used to evaluate the significance of financial statement data. Three commonly

used tools are these:

Ratio Analysis

Funds Flow Analysis

Cash Flow Analysis

Ratio Analysis :

Fundamental Analysis has a very broad scope. One aspect looks at the general

(qualitative) factors of a company. The other side considers tangible and measurable

factors (quantitative). This means crunching and analyzing numbers from the financial

statements. If used in conjunction with other methods, quantitative analysis can produce

excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income

statement, and cash flow statement. It's comparing the number against previous years,

other companies, the industry, or even the economy in general. Ratios look at the

relationships between individual values and relate them to how a company has performed

in the past, and might perform in the future.

Fund Flow Analysis:

Fund may be interpreted in various ways as

(a) Cash,

(b) Total current assets,

(c) Net working capital,

(d) Net current assets.

For the purpose of fund flow statement the term means net working capital. The flow of

fund will occur in a business, when a transaction results in a change i.e., increase or decrease in

the amount of fund.

According to Robert Anthony the funds flow statement describes the sources from which

additional funds were derived and the uses to which these funds were put.

In short, it is a technical device designed to highlight the changes in the financial

condition of a business enterprise between two balance sheets.

Different names of Fund-Flow Statement

A Funds Statement

A statement of sources and uses of fund

A statement of sources and application of fund

Where got and where gone statement

Inflow and outflow of fund statement

Cash Flow Statement:

Cash is a life blood of business. It is an important tool of cash planning and control. A

firm receives cash from various sources like sales, debtors, sale of assets investments etc.

Likewise, the firm needs cash to make payment to salaries, rent dividend, interest etc.

Cash flow statement reveals that inflow and outflow of cash during a particular period. It

is prepared on the basis of historical data showing the inflow and outflow of cash.

Reliance Industries Balance Sheet

Reliance Industries Balance Sheets from 2012 to 2015

in Rs. Cr.

Mar '12 Mar '13 Mar '14 Mar '15

12 months 12 months 12 months 12 months

Sources Of Funds

Total Share Capital 1,393.17 1,393.21 1,453.39 1,573.53

Equity Share Capital 1,393.17 1,393.21 1,453.39 1,573.53

Share Application Money 0.00 60.14 1,682.40 69.25

Preference Share Capital 0.00 0.00 0.00 0.00

Reserves 43,760.90 59,861.81 77,441.55 112,945.44

Revaluation Reserves 4,650.19 2,651.97 871.26 11,784.75

Net worth 49,804.26 63,967.13 81,448.60 126,372.97

Secured Loans 7,664.90 9,569.12 6,600.17 10,697.92

Unsecured Loans 14,200.71 18,256.61 29,879.51 63,206.56

Total Debt 21,865.61 27,825.73 36,479.68 73,904.48

Total Liabilities 71,669.87 91,792.86 117,928.28 200,277.45

Application Of Funds

Gross Block 84,970.13 99,532.77 104,229.10 149,628.70

Less: Accum. Depreciation 29,253.38 35,872.31 42,345.47 49,285.64

Net Block 55,716.75 63,660.46 61,883.63 100,343.06

Capital Work in Progress 6,957.79 7,528.13 23,005.84 69,043.83

Investments 5,846.18 16,251.34 20,516.11 20,268.18

Inventories 10,119.82 12,136.51 14,247.54 14,836.72

Sundry Debtors 4,163.62 3,732.42 6,227.58 4,571.38

Cash and Bank Balance 239.31 308.35 217.79 500.13

Total Current Assets 14,522.75 16,177.28 20,692.91 19,908.23

Loans and Advances 8,266.55 12,506.71 18,441.20 13,375.15

Fixed Deposits 1,906.85 1,527.00 5,609.75 23,014.71

Total Current Assets, Loans &

Advances 24,696.15 30,210.99 44,743.86 56,298.09

Differed Credit 0.00 0.00 0.00 0.00

Current Liabilities 17,656.02 24,145.19 29,228.54 42,664.81

Provisions 3,890.98 1,712.87 2,992.62 3,010.90

Total Current Liabilities &

Provisions 21,547.00 25,858.06 32,221.16 45,675.71

Net Current Assets 3,149.15 4,352.93 12,522.70 10,622.38

Miscellaneous Expenses 0.00 0.00 0.00 0.00

Total Assets 71,669.87 91,792.86 117,928.28 200,277.45

Contingent Liabilities 24,897.66 46,767.18 37,157.61 36,432.69

Book Value (Rs) 324.03 439.57 542.74 727.66

Reliance Industries Profit and Loss Account

Reliance Industries Profit & Loss Accounts from 2012 to 2015

in Rs. Cr.

Mar '12 Mar '13 Mar '14 Mar '15

12 months 12 months 12 months 12 months

Income

Sales Turnover 89,124.46 118,353.71 139,269.46 146,328.07

Excise Duty 8,246.67 6,654.68 5,463.68 4,369.07

Net Sales 80,877.79 111,699.03 133,805.78 141,959.00

Other Income 546.96 236.89 6,595.66 1,264.03

Stock Adjustments 2,131.19 654.60 -1,867.16 427.56

Total Income 83,555.94 112,590.52 138,534.28 143,650.59

Expenditure

Raw Materials 59,739.29 80,791.65 98,832.14 109,284.34

Power & Fuel Cost 1,146.26 2,261.69 2,052.84 3,355.98

Employee Cost 978.45 2,094.09 2,119.33 2,397.50

Other Manufacturing Exp. 668.31 1,112.17 715.19 1,162.98

Selling and Admin Exp. 5,872.33 5,478.10 5,549.40 4,736.60

Miscellaneous Expenses 300.74 321.23 412.66 562.42

Preoperative Exp. Capitalised -155.14 -111.21 -175.46 -3,265.65

Total Expenses 68,550.24 91,947.72 109,506.10 118,234.17

Operating Profit 3,400.91 4,815.15 4,847.14 5,195.29

PBDIT 0.00 0.00 0.00 0.00

Interest 10,711.18 14,528.75 23,018.14 18,446.66

PBDT 0.88 0.51 48.10 0.00

Depreciation 10,712.06 14,529.26 23,066.24 18,446.66

Other Written Off 1,642.72 2,585.35 3,559.85 3,137.34

Profit Before Tax 9,069.34 11,943.40 19,458.29 15,309.32

Extra-ordinary items 3,400.91 4,815.15 4,847.14 5,195.29

Tax 10,711.18 14,528.75 23,018.14 18,446.66

Reported Net Profit 0.88 0.51 48.10 0.00

Total Value Addition 8,810.95 11,156.07 10,673.96 8,949.83

Preference Dividend 0.00 0.00 0.00 0.00

Equity Dividend 1,393.51 1,440.44 1,631.24 1,897.05

Suggestion & Recommendation

1. Liquidity refers to the ability of the concern to meet its current obligations as and when these

become due. The company should improve its liquidity position.

2. The company should make the balance between liquidity and solvency position of the

company.

3. The profit ratio is decreased in current year so the company should pay attention to this

because profit making is the prime objective o every business.

4. The cost of goods sold is high in every year so the company should do efforts to control it.

5. The long term financial position of the company is very good but it should pay a little

attention to short term solvency of the company.

Conclusion

The company’s overall position is at a very good position. The company achieves

sufficient profit in past four years. The long term solvency position of the company is very good.

The company maintains low liquidity to achieve the high profitability. The company distributes

dividends every year to its share holders. The profit of the company decreased in the last year

due to maintaining the comparatively high liquidity. The net working capital of the company is

maximum in the last year shows the maximum liquidity.

Bibliography

ANAUAL REPORTS OF RELIANCE INDUSTRIES LIMITED

2011-2012

2012-2013

2013-2014

2014-2015

Website:

www.ril.com

www.wikipedia.com