ril - result update

Please refer to important disclosures at the end of this report 1

Y/E March (Rs cr) 1QFY2011 4QFY2010 % chg (qoq)

1QFY2010 % chg (yoy)

Net Operating Income 58,228 57,570 1.1 31,187 86.7

EBITDA 9,342 9,136 2.3 6,384 46.3

EBITDA Margin (%) 16.0 15.9 0.2 20.5 (4.4)

Adj. PAT 4,851 4,710 3.0 3,666 32.3

Source: Company, Angel Research

For 1QFY2011 Reliance Industries (RIL) declared lower-than-expected set of numbers on the EBIDTA front. However, the results were in line with our estimates on the bottom-line front. EBITDA came in lower than our estimate primarily on account of the lower-than-expected petrochemical sales volumes. Other income exceeded our estimate. We maintain a Buy on the stock.

Topline and EBITDA below estimates: For 1QFY2011, RIL reported 86.7% yoy increase in top-line to Rs58,228cr (Rs31,187cr) primarily on the back of the 106.8% yoy growth in refining revenues to Rs50,531cr (Rs24,434cr). Top-line was however below our expectation of Rs60,126cr on account of lower-than-expected product realisation and feedstock cost coupled with lower production of petrochemical products during the quarter. Petrochemical production during the quarter was lower at 4.9MT (5.3MT). EBDITA grew 46.3% yoy to Rs9,342cr (Rs6,384cr), which was lower than our estimate by 3.5% on account of the lower-than-expected petrochemical volumes and refining margins.

Outlook and Valuation: On account of strong growth in profitability over the next couple of years, improvement in refining margins, positive news flow from the E&P segment and resolution of uncertainties and concerns associated with redeployment of cash flows, we remain positive on RIL. Given its valuation of 1.8x FY2012E P/BV, we believe that the company is relatively undervalued at current levels. We maintain a Buy on RIL, with a Target Price of Rs1,260, translating into an upside of 23.4% from current levels.

Key Financials (Consolidated)

Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E

Net sales 151,224 203,740 234,754 243,596 % chg 10.3 34.7 15.2 3.8 Net Profit 14,969 15,897 22,718 28,530 % chg (23.3) 6.2 42.9 25.6 EPS (Rs) 45.8 48.6 69.5 87.2 EBITDA Margin (%) 15.5 15.2 17.4 20.0 P/E (x) 22.3 13.6 14.7 11.7 RoE (%) 14.5 12.1 15.0 16.4 RoCE (%) 8.4 7.9 11.1 13.7 P/BV (x) 2.8 2.4 2.1 1.8 EV/ Sales (x) 2.6 1.9 1.6 1.4 EV/ EBITDA (x) 16.5 12.4 9.0 7.0


BUY CMP Rs1,021 Target Price Rs1,260

Investment Period 12 Months Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 44.8

MF / Banks / Indian Fls 15.7

FII / NRIs / OCBs 21.6

Indian Public / Others 17.9

Abs. (%) 3m 1yr 3yr

Sensex 3.3 17.1 17.9

RIL 0.4 6.9 9.4

10

17,957

5,398

RELI.BO

RIL@IN

3,33,899

1.1

1184/841

997886

Oil & Gas

Avg. Daily Volume

Market Cap (Rs cr)

Beta

52 Week High / Low

Face Value (Rs)

BSE Sensex

Nifty

Reuters Code

Deepak Pareek Tel: 022 - 4040 3800 Ext: 340

[email protected]

Amit Vora Tel: 022 - 4040 3800 Ext: 322

[email protected]

Reliance Industries Performance Highlights

1QFY2011 Result Update | Oil & Gas

July 28, 2010

Reliance Industries |1QFY2011 Result Update

July 28, 2010 2

Exhibit 1: 1QFY2011 Performance (Standalone) Y/E March (Rs cr) 1QFY2011 4QFY2010 % chg (qoq) 1QFY2010 % chg (yoy) FY2010 FY2009 % chg (yoy)

Net Operating Income 58,228 57,570 1.1 31,187 86.7 192,461 141,847 35.7

COGS 44,212 43,304 2.1 21,559 105.1 143,971 101,860 41.3

Total operating expenditure 48,886 48,434 0.9 24,803 97.1 161,880 118,164 37.0

EBITDA 9,342 9,136 2.3 6,384 46.3 30,581 23,683 29.1

EBITDA Margin (%) 16.0 15.9

20.5

15.9 16.7

Other Income 722 615 17.4 709 1.8 2,460 2,060 19.4

Depreciation 3,485 3,392 2.7 1,878 85.6 10,497 5,195 102.1

Interest 541 525 3.0 460 17.6 1,997 1,745 14.4

Extraordinary Items - -

-

- (370)

PBT 6,038 5,834 3.5 4,755 27.0 20,547 18,433 11.5

PBT Margin (%) 10.4 10.1

15.2

10.7 13.0

Total Tax 1,187 1,124 5.6 1,089 9.0 4,311 3,124 38.0

% of PBT 19.7 19.3

22.9

21.0 16.9

PAT 4,851 4,710 3.0 3,666 32.3 16,236 15,309 6.1

Exceptional items - -

-

- (328)

Adj. PAT 4,851 4,710 3.0 3,666 32.3 16,236 15,637 3.8

PAT Margin (%) 8.3 8.2

11.8

8.4 11.0


Exhibit 2: Segmental break-up (Standalone) Y/E March (Rs cr) 1QFY2011 4QFY2010 % chg (qoq) 1QFY2010 % chg (yoy) FY2010 FY2009 % chg (yoy)

Revenues

Petrochemicals 13,903 15,448 (10.0) 11,707 18.8 55,251 52,758 4.7

Refining & Marketing 50,531 51,250 (1.4) 24,434 106.8 163,249 107,994 51.2

Oil & Gas 4,665 4,318 8.0 1,864 150.3 12,649 3,489 262.5

Others 107 128 (16.4) 83 28.9 398 560 (28.9)

Gross Revenue 69,206 71,144 (2.7) 38,088 81.7 231,547 164,801 40.5

EBIT

Petrochemicals 2,053 2,222 (7.6) 2,109 (2.7) 8,581 6,848 25.3

Refining & Marketing 2,035 1,986 2.5 1,299 56.7 6,011 9,790 (38.6)

Oil & Gas 1,921 1,702 12.9 1,008 90.6 5,413 2,224 143.4

Others 7 12 (41.7) 9 (22.2) 43 38 13.2

Total EBIT 6,016 5,922 1.6 4,425 36.0 20,048 18,900 6.1

EBIT Margin (%)

Petrochemicals 14.8 14.4

18.0

15.5 13.0

Refining & Marketing 4.0 3.9

5.3

3.7 9.1

Oil & Gas 41.2 39.4

54.1

42.8 63.7

Others 6.5 9.4

10.8

10.8 6.8

Blended 8.7 8.3 11.6

8.7 11.5



July 28, 2010 3

Exhibit 3: 1QFY2011 Actual v/s Estimates (Rs cr) Estimates Actual Variation (%)

Net Operating Income 60,126 58,228 (3.2)

EBITDA 9,680 9,342 (3.5)

EBITDA Margin %) 16.1 16.0 0.1

PBT 6,206 6,038 (2.7)

Adj. PAT 4,872 4,851 (0.4)


Topline and EBITDA below estimates: RIL reported lower-than expected 1QFY2011 numbers on the top-line and EBITDA front. Top-line increased 86.7% yoy to Rs58,228cr (Rs31,187cr) primarily on the back of the 106.8% yoy growth in refining revenues to Rs50,531cr (Rs24,434cr) and a whopping 150.3% yoy increase in oil & gas revenues to Rs4,665cr (Rs1,864cr). Growth in the refining segment was driven by the increase in refining throughput during the quarter coupled with the increase in crude oil prices. Crude oil processed during the quarter was higher by 40.7% yoy to 16.9mn tonnes (12.0mn tonnes) following ramp up of the SEZ refinery. KG-D6 gas production was subdued on qoq basis with average production at 60mmscmd.

Exhibit 4: Sales growth trend


Margins subdued on qoq basis: During the quarter, RIL reported GRMs of US $7.3/bbl (US $6.8/bbl) as against our expectation of US $8.0/bbl. Benchmark complex Singapore margins, during the quarter, stood at around US $3.7/bbl. Thus, RIL managed to earn a spread of US $3.6/bbl, which was higher than 4QFY2010. Oil & gas EBIT margins increased by 180bp qoq to 41.2% (39.4%) due to higher contribution of oil in segmental revenues. Petrochemical deltas were stable on sequential basis as strength in the polypropylene and polyester segments off-set the weakness in the ethylene segment. Overall, operating profit grew by 46.3% yoy to Rs9,342cr (Rs6,384cr), which was lower than our estimate by 3.5% on account of the lower-than-expected petrochemical volumes and refining margins.

19.6

50.2

21.4

1.3 1.1 -

10.0

20.0

30.0

40.0

50.0

60.0

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1QFY10 2QFY10 3QFY10 4QFY10 1QFY11

(%)

(Rs c

r)

Operating Revenues Operating Revenues growth (RHS)


July 28, 2010 4

Exhibit 5: EBIT break-up


Exhibit 6: Operating performance trend


Other income surprises: Depreciation during the quarter exceeded our estimate spiking 85.6% yoy on account of the additional depreciation of the SEZ refinery and KG-basin gas facility. Interest expenditure was largely flat qoq at Rs525cr. Other income at Rs722cr increased by 17.4% qoq and came in higher than our estimate of Rs500cr.

PAT grew 32.3%: PAT grew 32.3% yoy to Rs4,851cr (Rs3,666cr), which was in line with our expectation of Rs4,872cr. Thus, despite the lower-than-estimated operating profits, higher other income and lower tax rate resulted in bottom-line being in line with our estimates.

Exhibit 7: PAT growth trend


0%

20%

40%

60%

80%

100%

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

2QFY

10

3QFY

10

4QFY

10

1QFY

11

Petrochemicals Refining Oil and gas Others

20.5

15.4 13.8

15.9 16.0

-

4.0

8.0

12.0

16.0

20.0

24.0

-

2,000

4,000

6,000

8,000

10,000


(%)

(Rs

cr)

Operating Profit Operating Margins (RHS)

(7.3)

5.1 4.0

17.5

3.0

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

-

1,000

2,000

3,000

4,000

5,000

6,000


(%)

(Rs

cr)

PAT PAT growth (RHS)


July 28, 2010 5

Segment-wise Performance

Refining and Marketing (R&M): Crude processing stood at 16.9mn tonnes (12.0mn tonnes), up 40.7% yoy, with the refinery reporting capacity utilisation of 109%. Crude processing was higher on account of ramp up in RIL’s SEZ refinery. Increase in crude throughput and higher crude oil prices led to 106.8% yoy increase in R&M revenues to Rs50,531cr (Rs24,434cr). On the margins front, RIL reported lower-than-expected GRMs of US $7.3/bbl (US $6.8/bbl) as against our expectation of US $8.0/bbl. Singapore margins during the quarter averaged at US $3.7/bbl. Thus, RIL managed to earn a spread of US $3.6/bbl over the same, which was higher than 4QFY2010. The benchmark refining margins in RIL’s target markets, viz. North America (US Gulf Coast Margins) was also lower at US $3.6/bbl. Thus, the R&M segment registered muted performance during the quarter on account of the lower-than-expected refining margins.

Exhibit 8: RIL v/s Benchmark Singapore GRMs


Exhibit 9: Capacity utilisation trend


-2.0 4.0 6.0 8.0

10.0 12.0 14.0 16.0 18.0

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

2QFY

10

3QFY

10

4QFY

10

1QFY

11

(US

$/bb

l)

RIL GRMs Singapore GRMs

7.0

9.0

11.0

13.0

15.0

17.0

20.0

40.0

60.0

80.0

100.0

120.0

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

2QFY

10

3QFY

10

4QFY

10

1QFY

11

(mn

tonn

es)

(%)

Capacity Utilisation Crude Processing (RHS)


July 28, 2010 6

Petrochemicals: The Petrochemical segment revenues grew 18.8% yoy to Rs13,903cr (Rs11,707cr) due to higher crude and product prices yoy. Petrochemical volumes were flat on the yoy basis, however the same were lower on sequential basis at 4.9MT (5.3MT). Blended product deltas were stable on yoy basis on account of strength in PP margins and polyester margins offsetting the decline in the ethylene margins. EBIT margins of the segment increased by 40bp qoq to 14.8% (14.4%). PP delta, which stood at US $30/MT during 4QFY2010 increased to an average US $100/MT in 1QFY2011. However, margins were weak in HDPE-Naphtha and PVC-EDC deltas. HDPE-Naphtha declined to US $546/MT as against US $604/MT during 4QFY2010. Similarly, PVC-EDC deltas declined to US $399/MT in 1QFY2011 from US $446/MT in 4QFY2010. Polyester margins improved qoq following the improvement in POY-PTA-MEG delta and PSF-PTA-MEG deltas. The POY-PTA-MEG delta improved to US $330/MT from US$149/MT in 4QFY2010. Similarly, PSF-PTA-MEG deltas improved to US$220/MT from US$39/MT in 4QFY2010.

Oil & Gas: Oil and gas EBIT registered qoq growth of 12.9% to Rs1,921cr (Rs1,702cr) on account of increase in the oil production. Crude oil production from the KG basin increased to 26,700bpd from around 13,286bpd in 4QFY2010. RIL’s KG-D6 gas production during the quarter averaged at 60mmscmd and was largely flat on qoq basis. EBIT margins in the segment registered an improvement on account of increased contribution of oil in segmental revenues.

Investment Arguments

Refining margins to improve going ahead: Refining margins have been under pressure over the last eight quarters due to decline in demand and addition of the new refining capacity. However, we believe lower margins scenario is unsustainable as the average operating cost of refineries stands close to US $3.5-4.0/bbl. We expect the benchmark Singapore margins to average around US $4.5-5.0/bbl during the next fiscal driven by increase in product demand. This, coupled with the improvement in light-heavy crude differential would improve the spreads for complex refiners such as RIL. Thus, the worst in terms of refining margins is behind us. Moreover, improvement in demand in transportation fuels in North America and Europe is likely to further aid margin expansion of complex refineries such as RIL.

Cash redeployment concerns easing: Certain section of the market voiced its concerns about sustenance of RIL’s profitability growth beyond FY2012 on account of limited growth opportunities and significant cash likely to be generated by the company. However, we believe that RIL has already made significant investments in new businesses like shale gas and telecoms, and is likely to crystallise its plan to foray into the power segment. Thus, on account of the same, the cash redeployment concerns have been addressed to a large extent. Moreover, the proposed plans to increase capacity of the petrochemical segment and addition of the coker in the refining segment are likely to further consolidate the company’s position in its existing businesses.


July 28, 2010 7

Outlook and Valuation

RIL reported muted performance during 1QFY2011 on account of subdued refining and petrochemical margins. However, as the global economy recovers from the recession, demand for petroleum and petrochemical products are bound to improve. Thus, we expect the GRM’s to improve from current levels, in turn leading to an improvement in RIL’s profitability.

On the petrochemical front, margins are likely to be maintained despite the addition of new capacities in the Middle East and China due to the integrated nature of RIL’s business. Moreover, increase in gas production is also expected to aid bottom-line growth going ahead. This, coupled with the company’s foray in to newer business ventures is likely to keep RIL in strong growth trajectory.

Petrochemical Segment

In spite of the slowdown in the global petrochemical market, the Indian market has been fairly resistant to the slowdown as is evident from the fact that capacity utilisation continued to be on the higher end. On the margins front, we expect margins to be maintained in the current quarter. Going ahead, we do not anticipate further significant fall in margins as they are already lower than their 5-year average. According to RIL, due to weak polymer margins, around 3.2MT (2.4% of the global ethylene capacity) of the facilities have been shut down and another 4.3MT (3.2% of the global ethylene capacity) could close down. Similarly, around 13.4MT (10.0% of the global ethylene capacity) of ethylene capacity is sub-scale capacity requiring higher margins to operate. According to RIL, industry trends suggest bottoming out of global operating rates in 2010 followed by a steep increase in operating rates due to better demand prospects and further delays in capacity ramp up. This could lead to a better-than-anticipated demand-supply balance. Thus, margins are bound to improve from current levels on improved operating rate going ahead in the next fiscal.

In the polyester segment, the company maintained its margins due to the integrated nature of its operations and strong domestic demand. Going ahead, we believe the trend could continue as RIL is likely to retain its fully-integrated business model, high operating rates and focus on specialty products.

Refining segment

1QFY2011 was challenging for the global refining industry following the decline in demand for petroleum products. However, things seem to be looking up in the current quarter with improvement in the benchmark Singapore margins on account of improvement in the product cracks of petrol and diesel. Thus, we expect margins to improve significantly from current levels driven by improving demand outlook. Moreover, we do not see any downside to margins from current levels. We had earlier pointed that a lower margins scenario was largely an unsustainable phenomenon as the average operating cost of refinery stands close to US $3.5-4.0/bbl. We expect the benchmark Singapore margins to average around US $4.5-5.0/bbl during the next fiscal driven by increase in product demand. This, coupled with the improvement in light heavy crude differential is likely to improve the spreads for complex refiners such as RIL. Thus, the worst in terms of refining margins is behind us. Moreover, improvement in demand in


July 28, 2010 8

transportation fuels in North America and Europe is likely to further aid margin expansion of complex refineries such as RIL.

E&P Segment

We expect the E&P segment to be the key driver of RILs’ profitability growth in FY2012. RIL started gas production from KG-D6 during the year and its current gas flow rate is close to 60mmscmd. However, full ramp up of the same will happen in FY2012. RIL is currently undertaking a long-term sustainability study of the KG-D6 reservoir to assess the potential and methodology to increase the reserve life. RIL has also started pre-development plans for the D6 satellite fields and development plans for the same is likely to be submitted over the next couple of quarters. This is likely to keep volumes stagnant over the next few quarters. Nonetheless, the same would be ramped up during the next fiscal. RIL has also increased oil production at KG-D6 at a fast pace from 10,000bpd levels in 3QFY2010 to an average of 26,700bpd during 1QFY2011. We expect oil production to further increase to 40,000bpd over the next couple of quarters. Thus, increased oil production coupled with higher oil prices could result in improved performance in the ensuing quarters.

Moreover, we expect news flow associated with the E&P segment to be positive catalysts for the stock. RIL has planned E&P activities in the prospective Cauvery, Mahanadi and Kerala Konkan basins. Any new discoveries from these blocks will lend a fillip to RIL’s valuations. During the quarter, RIL further consolidated its presence in the unconventional gas space as it entered into a JV with Pioneer Natural Resources to develop 2,63,000 acres in the Eagle Ford Shale acreage. We expect the recent JV with Atlas Energy and Pioneer Natural Resources to open new growth vistas for the company. Overall, the E&P segment is likely to be one of the key growth areas for RIL going ahead.

Conclusion

Overall, RIL has successfully executed its two mega ventures, viz. KG basin gas and the SEZ refinery with minimal execution problems as is evident from the strong ramp up in production at both the KG-D6 and SEZ refineries. These ventures speak about RIL’s successful execution capability as KG-D6 has been one of the fastest deepwater developments across the globe, while the SEZ refinery is one of the most complex refineries. We expect these ventures to be likely key drivers of profitability over the next couple of years. We expect RIL’s profitability to register 34% CAGR over FY2010-12E. Ramp up of gas production and higher oil production would likely increase the share of E&P in the profit matrix in turn reducing exposure to cyclical segments. Thus, we remain positive on RIL’s future growth prospects.

With the Supreme Court passing its verdict on the KG-basin gas and the dispute getting resolved amicably, RIL will now continue to focus on redeployment of cash flow. RIL has already made significant investments in new businesses, like shale gas and telecoms and likely to crystallise its plans to foray into the power segment. We maintain a Buy on RIL, with a Target Price of Rs1,260, translating into an upside of 23.4% from current levels.


July 28, 2010 9

Exhibit 10: Key Assumptions Particulars FY2011E FY2012E

Exchange rate (Rs/USD) 46.5 45.5

Refining capacity (MMT) 62.0 62.0

Production (MMT) 66.5 67.0

Capacity Utilisation (%) 107.3 108.1

Blended GRMs (US $/bbl) 8.6 10.5

KG -D6 Gas production (mmscmd) 60.0 76.0

KG -D6 Gas realisations (US$/mmbtu) 4.2 4.2

Oil Production (kbpd) 35.0 40.0


Exhibit 11: Angel EPS forecast v/s consensus Angel Forecast Bloomberg Consensus Variation (%)

FY2011E 69.5 67.1 3.7

FY2012E 87.3 79.8 9.4


Exhibit 12: Recommendation Summary

Company Reco CMP (Rs)

Target Price (Rs)

Upside (%)

Mkt Cap (Rs cr)

FY2012E P/BV (x)

FY2012E P/E (x)

FY09-12E CAGR in

EPS (%)

FY2012E RoCE (%)

FY2012E RoE (%)

Cairn India NEUTRAL 329 - (4.2) 62,403 1.6 7.1 121.7 25.4 22.6

GAIL BUY 446 580 30.1 56,561 2.5 12.7 16.8 22.4 20.9

GSPL BUY 102 120 17.5 5,742 2.5 12.1 56.7 19.9 22.9

Gujarat Gas NEUTRAL 302 - 1.2 3,878 3.5 14.8 17.7 28.0 25.8

IGL ACCUMULATE 292 317 8.5 4,088 3.4 13.2 21.4 32.6 28.3

ONGC ACCUMULATE 1,256 1,356 8.0 268,642 2.0 10.2 10.0 23.3 20.8

Petronet LNG NEUTRAL 85 - 1.9 6,405 2.2 11.3 3.1 15.0 20.6

RIL BUY 1,021 1,260 23.4 333,899 1.8 11.7 24.0 13.8 16.1

Shivvani Oil UNDER REVIEW 440 - - 2,041 1.2 6.9 13.2 14.4 18.9



July 28, 2010 10

Exhibit 13: One-year forward P/E band


Exhibit 14: Premium/Discount in RIL (P/E) v/s Sensex (P/E)


0 200 400 600 800

1,000 1,200 1,400 1,600 1,800

Apr-

04

Sep-

04

Feb-

05

Jul-0

5

Dec

-05

May

-06

Oct

-06

Mar

-07

Aug-

07

Jan-

08

Jun-

08

Nov

-08

Apr-

09

Sep-

09

Feb-

10

Jul-1

0

Shar

e pr

ice

(Rs)

Share Price 7x 10x 13x 16x 19x

-60

-40

-20

0

20

40

60

Apr-0

4

Sep-

04

Feb-

05

Jul-0

5

Dec

-05

May

-06

Oct

-06

Mar

-07

Aug-

07

Jan-

08

Jun-

08

Nov

-08

Apr-0

9

Sep-

09

Feb-

10

Jul-1

0

(%)

Prem/Disc to Sensex Historic Avg Disc


July 28, 2010 11

Profit & Loss (Consolidated) Y/E March (Rs cr) FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E

Total operating income 113,770 137,147 151,224 203,740 234,754 243,596

% chg 37.0 20.5 10.3 34.7 15.2 3.8

Total Expenditure 93,642 114,002 127,802 172,846 193,937 194,844

Net Raw Materials 77,072 89,912 105,224 147,065 163,419 160,984

Purchases of finished goods 1,945 9,851 7,202 7,538 7,747 8,039

Personnel 2,591 2,738 3,018 2,791 4,460 5,116

Other 12,034 11,501 12,358 15,452 18,311 20,706

EBITDA 20,128 23,145 23,422 30,894 40,817 48,752

% chg 40.3 15.0 1.2 31.9 32.1 19.4

(% of Net Sales) 17.7 16.9 15.5 15.2 17.4 20.0

Depreciation& Amortisation 4,899 5,004 5,651 10,946 12,046 12,952

EBIT 15,228 18,140 17,771 19,948 28,771 35,800

% chg 40.3 19.1 (2.0) 12.2 44.2 24.4

(% of Net Sales) 13.4 13.2 11.8 9.8 12.3 14.7

Interest & other Charges 1,232 1,087 1,816 2,060 2,790 2,090

Other Income 651 1,223 1,914 2,185 2,779 2,419

(% of PBT) 4.4 5.3 10.7 7.6 9.7 6.7

Recurring PBT 14,647 18,277 17,869 20,074 28,760 36,129

% chg 31.7 24.8 (2.2) 12.3 43.3 25.6

Extraordinary Income/Exp - 4,734 - 8,606 - -

PBT (reported) 14,647 23,011 17,869 28,680 28,760 36,129

Tax 2,572 3,488 2,919 4,256 6,097 7,659

(% of PBT) 0.2 0.2 0.2 0.2 0.3 0.3

PAT (reported) 12,075 19,523 14,950 24,424 22,663 28,470

Minority interest (MI) 0.1 (1.9) 18.4 79.6 55.0 60.0

PAT after MI (reported) 12,075 19,521 14,969 24,503 22,718 28,530

ADJ. PAT(core) 12,075 14,788 14,969 15,897 22,718 28,530

% chg 27.1 22.5 1.2 6.2 42.9 25.6

(% of Net Sales) 10.6 10.8 9.9 7.8 9.7 11.7

Basic EPS (Rs) 36.9 45.2 45.8 48.6 69.5 87.2

Fully Diluted EPS (Rs) 36.9 45.2 45.8 48.6 69.5 87.2

% chg 27.1 22.5 1.2 6.2 42.9 25.6


July 28, 2010 12

Balance Sheet (Consolidated) Y/E March (Rs cr) FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E

SOURCES OF FUNDS Equity Share Capital 1,453 3,136 1,444 2,978 2,978 2,978

Reserves& Surplus 66,766 82,375 119,813 138,025 157,955 183,280

Shareholders Funds 68,219 85,510 121,257 141,003 160,933 186,258

Minority Interest 3,422 4,089 139 574 629 689

Total Loans 33,651 50,696 76,257 64,606 44,606 24,606

Deferred Tax Liability 6,991 7,798 9,551 10,678 10,678 10,678

Total Liabilities 112,283 148,093 207,203 216,860 216,845 222,229

APPLICATION OF FUNDS

Gross Block 103,303 109,180 157,182 224,125 249,209 264,659

Less: Acc. Depreciation 38,480 45,119 50,138 63,934 75,980 88,932

Net Block 64,823 64,061 107,044 160,191 173,229 175,727 Capital Work-in-Progress 29,324 49,884 73,846 17,034 6,450 7,500

Goodwill - - - - - -

Investments 5,268 9,523 6,436 13,112 13,112 13,112

Current Assets 33,116 51,489 58,746 69,106 65,054 66,767

Cash 1,937 4,474 22,742 13,891 13,010 14,790

Loans & Advances 14,888 21,748 11,002 10,647 10,647 10,647

Other 16,291 25,267 25,002 44,568 41,397 41,330 Current liabilities and provisions 20,252 26,867 38,872 42,586 41,003 40,880

Net Current Assets 12,864 24,622 19,874 26,520 24,051 25,887

Mis. Exp. not written off 5 3 4 2 2 2

Total Assets 112,283 148,093 207,203 216,860 216,845 222,229


July 28, 2010 13

Exhibit 15: Cash Flow Statement (Consolidated) Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E

Profit before tax 14,647 23,011 17,869 28,680 28,760 36,129

Depreciation 6,896 6,785 7,713 14,001 12,046 12,952 Change in Working Capital (1,514) (4,565) (5,771) (5,939) 1,595 (56)

Less: Other income (582) (5,827) (1,330) (1,786) (2,779) (2,419)

Direct taxes paid (1,936) (2,475) (1,926) (3,140) (6,097) (7,659) Cash Flow from Operations 17,512 16,929 16,555 31,815 33,525 38,947

(Inc.)/ Dec. in Fixed Assets (27,946) (26,640) (27,732) (23,017) (14,500) (16,500)

(Inc.)/ Dec. in Investments 2,431 4,335 3,366 2,645 - - (Inc.)/ Dec. in loans and advances (4,239) (8,623) (102) (19) - -

Other income 508 503 1,364 2,160 2,834 2,479

Cash Flow from Investing (29,245) (30,426) (23,103) (18,231) (11,666) (14,021)

Issue of Equity 5,262 1,682 15,165 513 (0) -

Inc./(Dec.) in loans 10,545 17,652 16,514 (5,822) (20,000) (20,000)

Dividend Paid (Incl. Tax) (3,274) - (1,908) (2,219) (2,431) (2,787)

Others (1,479) (3,301) (4,954) (14,907) (309) (358)

Cash Flow from Financing 11,054 16,033 24,817 (22,436) (22,740) (23,146)

Inc./(Dec.) in Cash (679) 2,537 18,268 (8,851) (881) 1,780

Opening Cash balances 2,616 1,937 4,474 22,742 13,891 13,010

Closing Cash balances 1,937 4,474 22,742 13,891 13,010 14,790


July 28, 2010 14

Key Ratios Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E

Valuation Ratio (x) P/E (on FDEPS) 27.6 17.1 22.3 13.6 14.7 11.7

P/CEPS 19.7 13.6 16.2 9.4 9.6 8.0

P/BV 4.9 3.9 2.8 2.4 2.1 1.8

Dividend yield (%) 0.5 0.5 0.6 0.7 0.8 0.9

EV/Sales 3.2 2.8 2.6 1.9 1.6 1.4

EV/EBITDA 18.2 16.4 16.5 12.4 9.0 7.0

EV/Total Assets 2.8 2.2 1.6 1.5 1.4 1.3

Per Share Data (Rs) EPS (Basic) 36.9 45.2 45.8 48.6 69.5 87.2

EPS (fully diluted) 36.9 45.2 45.8 48.6 69.5 87.2

Cash EPS 51.9 75.0 63.1 108.4 106.3 126.9

DPS 4.8 5.5 6.4 7.0 8.0 9.2

Book Value 209 261 371 431 492 570

Returns (%) ROCE (Pre-tax) 13.3 11.8 8.4 7.9 11.1 13.7

Angel ROIC (Pre-tax) 16.3 16.4 13.2 10.6 12.3 14.9

ROE 20.3 19.9 14.5 12.1 15.0 16.4

Turnover ratios (x) Asset Turnover (Gross Block) 1.2 1.3 1.1 1.1 1.0 0.9

Inventory / Sales (days) 36.6 42.0 47.4 48.8 50.7 45.9

Receivables (days) 13.1 13.2 13.2 13.4 15.9 15.9

Payables (days) 60.5 66.6 84.5 78.8 71.1 68.3

Wkg. cap cycle (ex-cash)(days) 26.1 41.4 20.9 8.7 18.4 16.6

Solvency ratios (x) Net debt to equity 0.2 0.2 0.2 0.2 0.2 0.1

Net debt to EBITDA 1.3 1.7 2.1 1.7 1.0 0.4

Interest Coverage (EBIT/Interest) 12.4 16.7 9.8 9.7 10.3 17.1


July 28, 2010 15

Disclosure of Interest Statement RIL 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock Yes 3. Angel and its Group companies' Directors ownership of the stock Yes 4. Broking relationship with company covered No Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors. Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%)

Research Team Tel: 022 - 4040 3800 E-mail: [email protected] Website: www.angeltrade.com DISCLAIMER

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