FINANCIAL MANAGEMENT RELIANCE INFASTRUCTURE LIMITED

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Objective: The objective of our project is to apply the various tools we have learned in the course of Financial Management II on the financial reports of Reliance Infrastructure and analyze the company statistics.

Methodology: In this project we have tried and used the various tools learned like Ratio analysis, Fund Flow, Cash flow analysis, Capital structure and its implication.

Background:
Reliance Infrastructure
Reliance Infrastructure Ltd is one of the India’s largest private sector enterprises in power utility. In the power sector it is involved in generation, transmission, distribution and trading of electricity and constructing power plants as EPC partners. In the infrastructure space the company is focused on roads, urban infrastructure which includes MRTS, Sea link and Airports, Specialty Real Estate which includes business districts, trade towers, convention centre and SEZ which includes IT & ITES SEZ and non IT SEZ as well as free trade zones.

Anjana Khanduri

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Business Overview

Power Business Generation Transmission Distribution Trading

EPC Business Power sector Road sector

Infrastructure business Roads Metros Airport Real Estate /SEZs

Competitor analysis
Top infrastructure companies of India
1. HCC Infrastructure: HCC Infrastructure Ltd. is a wholly owned subsidiary of HCC Ltd with infrastructure projects in the transportation (viz, roads, bridges, ports, airports). Mainly operating through the public-private partnership route, this player has huge scope. Over US $250 billion needs to be imbibed through varied investments in the infrastructure sector in the next five years (Rs in Lakhs) Particulars Total Income from operations Net Profit Quarter ended 30 Sep, 2009 86,220.82 551.49 Quarter ended 30 Sep, 2008 69,771.12 1994.35

2. Maytas Infra Limited: This leading player in the infrastructure segment has more than 20 years of experience in infrastructure development, construction and project management. (Rs in Crores) 3

Particulars Turnover Net Profit/Loss

Year ended 31 Mar, 2009 1335 (-) 489.79

Year ended 31 Mar, 2008 1637 99.64

3. Patel Engineering: This Indian infrastructure company has handled building bridges to dams to highways and varied other infrastructure projects. (Rs in Crores) Particulars Net Sales/ Income from operations Net Profit Quarter ended 30 June, Quarter ended 30 June, 2009 2008 643.00 36.34 558.39 29.12

4. Reliance Infrastructure: It is India's largest private sector power utility enterprise and has been the pioneer in the Indian infrastructure sector. (Rs in Crores) Particulars Total operating income Profit after tax Year ended 31 Mar, 2009 Year ended 31 Mar, 2008 9868.61 6448.42 1138.88 1084.63

5. Punj Lloyd: This Company is a diversified conglomerate, which has forayed into aviation, defense, real estate and marine. With integrated design, and management services for infrastructure projects like roads, highways, flyovers, bridges, elevated railroads, metro rail, underground tunnels, seaports and airport terminals, this company has stood up the test of time. (Rs in Crores) Quarter ended 30 Sep, 2009 Income from operations 3769.92 Profit after tax 110.60 Particulars Quarter ended 30 Sep, 2008 3120.11 172.15

6. GMR Infrastructure: With interests in the Airports, Energy, Highways and Urban infrastructure (including SEZ) sector, GMR Group has been the pioneer in the core infrastructure areas. (Rs in Lakhs) Quarter ended 30 June, 2009 Revenue from operations 1748 Particulars Net Profit 356 Quarter ended 30 June, 2008 5544 4189 4

CAPITAL STRUCTURE and DIVIDEND POLICY Mar '05 Equity Share Capital debt interest paid interest rate Reserves total 185.61 3,738.67 134.82 0.036060952 4,834.10 8,758.38 Mar '06 212.36 4,266.93 191.88 0.044969 6,820.51 11,299.80 Mar '07 228.57 5,858.32 250.32 0.042729 8,412.74 14,499.63 Mar '08 235.62 5,009.0 4 308.76 0.06164 1 10,024. 16 15,268. 82 Mar '09 226.07 7,332.18 330.5 0.045075 10,308.14 17,866.39

Data Covariance of BSE and Reliance variance Beta of stock market return monthly annual return Risk free return require rate of return weighted cost of capital

Values 0.027066864 0.008824014 3.067409387 0.015419002 0.185028029 0.07 0.422838056 0.280176117

As per the above table its clear that if the company would employ equity as a cost of fund only if it is sure to earn more than 42%. The cost of debt in case of reliance is only 4.2%.
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The cost of equity and debt explains two things.
1) CAPITAL STRUCTURE

2) DIVIDEND POLICY

Capital Structure

Figure 1: EQUITY DEBT IN RELIANCE INFRASTRCTURE

Mar '05 TIME Equity Share Capital(crore s) Total Debt(Crores)

Mar '06

Mar '07

Mar '08

Mar '09

185.61 212.36 228.57 235.62 226.07

3,738.67

4,266. 93

5,858. 32

5,009. 04

7,332. 18

Over a period of time the total debt of reliance infrastructure has risen considerably as compared to equity share capital. The rise in debt in 2009 has been almost 47% as compared to the previous year. The substantial rise in debt increases the leverage and risk for the company. But the substantial rise in debt could be attributed to the cost of debt as compared to equity. The increase in substantial debt over a period of time has also increased the cost of debt for the company from 4.2% to 6.2 % due to more leverage. This could be explained by Walter and Gordon model of capital structure model

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Dividend paid by reliance infrastructure: Date 15-Sep04 5-Sep-05 21-Mar07 4-Jun-08 13-Aug09 DIVIDEND PAID $ 3.20 Cash $ 3.20 Cash $ 3.50 Cash $ 3.50 Cash $ 3.50 Cash Price one day before
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Price after dividend announcement 224 386 378
975

258 357
806

1101

1024

DIVIDEND POLICY :

The dividend pay out by the company is almost on a constant basis and has increased in the period of 2007 and constant till 2009. The constant dividends pay out shows that the company does not want to retain equity as it cost them more than Debt. The dividend payout on respective days also displays how investors react to the dividend pay out of a company. As the company has announced the dividends the day on which dividends were given shows a tremendous price gain as compared to the prices of the previous day. In a market investors have there own estimation of the prices and as a company announces dividend the price of share price get adjusted as per speculations of investors. A jump in price shows that the dividends announced were as per investor’s expectation. In most of the cases the share prices of Reliance Infrastructure has gone up except in the year 2009 were the share prices dropped.
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Financial ratios

Investment valuation Ratios Face Value Dividend Per Share 10 4.7 10 5 35.99 186.7 292.31 3.8 10 5.3 21.75 251.72 339.74 3.53 10 6.3 22.82 268.76 371.2 3.43 10 7 19.22 426.42 396.55 3.57

Operating Profit Per Share (Rs) 36.24 Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) Return On Capital Employed(%) Return On Net Worth(%) Adjusted Return on Net Worth 16.18 4.32 19.01 22.36 17.9 11.64 7.18 5.41 9.31 6.39 223.99 227.62 4.35

19.27 7.66 25.52 23.63 23.83 14.39 14.58 7.91 9.13 9.37

8.64 3.98 15.18 16.15 12.71 12.43 8.99 6.56 9.27 6.71

8.49 4.45 4.96 11.41 11.41 15.34 15.34 6.56 10.57 5.69

4.5 1.78 1.96 8.93 8.93 10.73 10.73 6.22 10.81 6.67 8

(%)

Return on Assets Excluding Revaluations Return on Assets Including Revaluations

4.24 4.51

4.45 4.69

4.34 4.51

5.32 5.5

4.55 4.66

Return on Long Term Funds (%) Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio

5.85

9.04

9.45

9.67

9.66

3.58 3.75 0.74 0.72

2.09 4.07 0.61 0.42

1.51 3.82 0.68 0.16

1.06 2.37 0.49 0.06

0.75 1.45 0.7 0.14

3.75 0.74 7.3 8.41

5.44 0.61 6.88 6.57

4.47 0.68 4.76 5.16

3.41 0.49 4.13 5.23

3.65 0.7 4.25 5.19

11.48 5.95 31.27 1.85 0.45 0.8

11.4 3.92 19.6 1.86 0.35 0.73

18.77 5.35 32.87 2.56 0.4 0.98

40.26 5.26 40.26 0.99 0.4 0.99

55.96 6.71 55.96 1.4 0.52 1.4

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EARNINGS RATIOS
Earnings per share ratio (EPS Ratio) It is a small variation of return on equity capital ratio and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity shares. Formula of Earnings Per Share Ratio: [Earnings per share (EPS) Ratio = (Net profit after tax − Preference dividend) / No. of equity shares (common shares)] Significance: The earnings per share is a good measure of profitability and when compared with EPS of similar companies, it gives a view of the comparative earnings or earnings power of the firm. EPS ratio calculated for a number of years indicates whether or not the earning power of the company has increased. Analysis: Going by the EPS ratio of the various companies and comparing it with the industry average we find that Reliance has been profitable since 2005 and displays a high earning power as compared to other companies. Dividends per Share: DPS The DPS ratio is very similar to the EPS: EPS shows what shareholders earned by way of profit for a period whereas DPS shows how much the shareholders were actually paid by way of dividends. The DPS formula is:

Dividends paid to equity shareholders/Average Dividends per share = number of issued equity shares

,Significance : Increase in the dividend are taken to be a sign that the management is confident that the new level can be maintained or improved on. Analysis: As from the DPS of Reliance an increasing trend can be observed which shows the confidence of the firm in its operations which it believes can
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be maintained and even improved on. Moreover the value is more than the other companies in the industry sector which shows its potential to lure more investors as compared to other companies.

SOLVENCY OR LEVERAGE RATIOS
The solvency or leverage ratios throws light on the long term solvency of a firm reflecting it’s ability to assure the long term creditors with regard to periodic payment of interest during the period and loan repayment of principal on maturity or in predetermined instalments at due dates. There are thus two aspects of the long-term solvency of a firm. a. Ability to repay the principal amount when due b. Regular payment of the interest. The ratio is based on the relationship between borrowed funds and owner’s capital it is computed from the balance sheet, the second type are calculated from the profit and loss a/c. Cash Debt Coverage Ratio

The cash debt coverage ratio shows the percent of debt that current cash flow can retire. Formula to calculate cash debt coverage ratio: Cash Debt Coverage = (cash flow from operations - dividends) / total debt. Significance: A cash debt coverage ratio of 1:1 (100%) or greater shows that the company can repay all debt within one year. Analysis: Reliance has consistently maintained a cash debt ratio of more than 1 since 2005. Company wise analysis shows that it is less than the industry sector average. Fixed-Charge Coverage Ratio
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A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. Formula of Fixed-Charge Coverage Ratio Fixed-Charge Coverage Ratio = EBIT +Fixed charges / Fixed charges+ Int(tax adjusted) Significance: since leases are a fixed charge, the calculation determining a company's ability leases would be (EBIT + Lease Expenses) / (Lease Expenses + Interest). Analysis: Reliance has maintained a double digit fixed charge ratio which determines that it has that much times cash to cover its fixed charges. The industry average has increased because of Reliance’s high ratio which is twice as much as other companies in the infrastructure sector.

Owners fund as Percentage of total source The ratio of equity and capital employed represents the amount of equity funding in the total capit employed. Formula Owners fund as Percentage of total source= equity/capital employed Analysis Reliance has around 65% of its capital employed through equity. Fixed assets turnover ratio IT is the ratio of sales to fixed assets. This ratio indicates the extent that the investment in total assets results in sales. Formula

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Fixed assets turnover = sales/fixed assets Analysis

ompanies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover - it indicates pricing strategy. This ratio is more useful for growth companies to check if in fact they are growing revenue in proportion to sales

We see the result of 1.2 for 2005 this means that turnover is 1.2 times bigger than total assets. Another way of saying that is that the Reliance infrastructure was able to generate sales of Rs.1.56 for every Rs.1 of assets it owned and used for the year ended 31 March 2006. For the year ended 25 March 2006, it was at 0.95 times.Currently it has a ratio of 1.01. Long term debt Equity ratio It indicates the proportion of the company’s assets that financed with longterm debt. Formula Long term debt Equity ratio = long term debt / total assets Analysis A high Long term debt Equity ratio is unfavourable because it indicates possible difficulty in meeting long term debt obligations .Reliance Infrastructure has a current ratio of 0.59 which has increased from 0.36.It is more than the industry average of 0.5424.

PROFITABILITY RATIOS
They compare components of income with sales. They give us an idea of what makes up a company’s income and are usually expressed as a portion of each rupee of sales. Gross profit Margin It is the ratio of gross income or profits to sales.This ratio indicates how much of every rupee of sales is left after costs of goods sold
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Formula Gross Profit Margin = (Gross income / Sales) * 100 Analysis Reliance enjoys a gross profit of 13.35% which means that for every rupee of sales it earns 13.35 rupees apart from its cost on goods sold. Gross profit is the profit we earn before we take off any administration costs, selling costs and so on. So we should have a much higher gross profit margin than net profit margin. Operating margin ratio It is the ratio of operating profit (EBIT,Operating income) to sales. Formula Operating margin ratio = EBIT / Sales Analysis It indicates how much of each rupee of sales is left over after operating expenses. Reliance enjoys an operating margin of 17.01.whereas the industry average is of 31.16. Net profit margin It indicates how much of each rupee of sales is left over after all expenses. Formula Net Net Profit Margin Profit before Interest and * 100

Profit * Taxation = = Turnov 100 Turnover er

Net Profit = Gross Profit – Expenses Analysis The net profit margin ratio tells us the amount of net profit per £1 of turnover a business has earned. That is, after taking account of the cost of sales, the administration costs, the selling and distributions costs and all other costs,
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the net profit is the profit that is left, out of which they will pay interest, tax, dividends and so on. Reliance has a net profit margin of 10.65 as compared to 21.78 of industry average.thus its profitability as compared to other companies is less.

PROFITABILITY IN RELATION TO INVESTMENTS
Return on net worth Return on Net Worth (RONW) is used in finance as a measure of a company’s profitability. It reveals how much profit a company generates with the money that the equity shareholders have invested. Therefore, it is also called ‘Return on Equity’ (ROE).This ratio is useful for comparing the profitability of a company to that of other firms in the same industry . Formula Net Income RONW = ------------------------------------------Shareholder’s Equity X 100

Analysis The numerator is equal to a fiscal year’s net income (after payment of preference share dividends but before payment of equity share dividends).The denominator excludes preference shares and considers only the equity shareholding. RONW measures how much return the company management can generate for its equity shareholders . Reliance has a RONW of 13.76 which is more than the industry average of 11.29. Return on capital employed ratio The Return on Capital Employed ratio (ROCE) tells us how much profit we earn from the investments the shareholders have made in their company. Think of it this way: if we had a savings account with a bank and we'd been paid, say, £25 interest at the end of a year; and we had saved £500, we
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could work out the rate of interest we had earned: Formula Interest Rate of interest earned = Amount saved Analysis This ratio establishes the relationship between net profit and the gross capital employed. The term gross capital employed refers to the total investment made in business. The conventional approach is to divide Earnings After Tax (EAT) by gross capital employed. Reliance Infrastructure has an ROCE of 11.34 as compared to the industry average of 13.1375. * 100

LIQUIDITY RATIOS
It measures the ability of the firm to meet its short-term obligations, that is capacity of the firm to pay its current liabilities as and when they fall due. Thus these ratios reflect the short-term financial solvency of a firm. A firm should ensure that it does not suffer from lack of liquidity. The failure to meet obligations on due time may result in bad credit image, loss of creditors confidence, and even in legal proceedings against the firm on the other hand very high degree of liquidity is also not desirable since it would imply that funds are idle and earn nothing. So therefore it is necessary to strike a proper balance between liquidity and lack of liquidity.

The various ratios that explains about the liquidity of the firm are 1. Current Ratio 2. Acid Test Ratio / quick ratio CURRENT RATIO The current ratio measures the short-term solvency of the firm. It establishes the relationship between current assets and current liabilities. It is calculated by dividing current assets by current liabilities.

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Current Ratio = Current Asset Current Liabilities Current assets include cash and bank balances, marketable securities, inventory, and debtors, excluding provisions for bad debts and doubtful debtors, bills receivables and prepaid expenses. Current liabilities includes sundry creditors, bills payable, short- term loans, income-tax liability, accrued expenses and dividends payable. Analysis Reliance has a current ratio of 1.23 as compared to the industry average of 29.755.It has 1.23 times assets to cover its liabilities. ACID TEST RATIO / QUICK RATIO It has been an important indicator of the firm’s liquidity position and is used as a complementary ratio to the current ratio. It establishes the relationship between quick assets and current liabilities. It is calculated by dividing quick assets by the current liabilities. Acid Test Ratio = Quick Assets Current liabilities Quick assets are those current assets, which can be converted into cash immediately or within reasonable short time without a loss of value. These include cash and bank balances, sundry debtors, bill’s receivables and shortterm marketable securities. Analysis Reliance has a quick ratio of 0.9 as compared to 29.75 industry average.Thus comparatively Reliance can not convert its assets into cash immediately in comparison with the industry companies. INVENTORY TURNOVER RATIO This ratio indicates the number of times the inventory has been converted into sales during the period. Thus it evaluates the efficiency of the firm in managing its inventory. It is calculated by dividing the cost of goods sold by average inventory.
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Inventory Turnover Ratio = Cost of goods sold Average Inventory

The average inventory is simple average of the opening and closing balances of inventory. (Opening + Closing balances / 2). In certain circumstances opening balance of the inventory may not be known then closing balance of inventory may be considered as average inventory.

Analysis Reliance has an inventory turnover ratio of 12.92 which is 3 times the industry average of 4.23.This depicts the efficiency of the firm in managing its inventory and the speed with which it travels within the company to produce sales.

INDEX ANALYSIS Years Total Share Capital Mar '05 100 Mar '05 114.411 Mar '07 123.145 Mar '08 126.94 Mar '09 121.7984 18

9 Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Gross Block (-) Accumulated Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 120.455 8 105.753 8 114.746 1 97.6449 6 113.247 3 171.316 5 101.847 7 117.383 1 100 100 0 100 100 100 100 100 114.411 9 15.5349 4 0 141.091 6 100 124.186 4 244.561 8 79.4645 3

3 123.145 3 0 0 174.029 1 92.7888 6 147.309 2 182.802 5 149.756 7

36 126.94 36 137.93 6 0 207.36 35 85.577 73 184.34 01 143.31 21 131.49 88 121.7984 137.936 0 213.238 78.40515 187.8178 235.4561 185.6622

150.791 114.022 7 125.669 7 103.520 1 150.106 7 360.788 3 88.2741 4 113.473 2

165.65 86 123.64 54 135.70 17 112.77 37 296.01 96 1100.8 53 77.167 6 145.16 31

190.8965 133.8243 146.0554 122.795 293.6781 1744.721 113.2446 163.63

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Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent liabilities Book Value (Rs)

100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 0.00 100.00 100.00 100.00

0.32241 5 29.9545 6 262.358 5 239.585 8 121.822 5 0 103.039 4 157.010 3 113.096 5 124.787 1 0 120.455 8 113.079 9 122.454 7

30.4755 8 50.3836 6 711.840 7 44.6425 5 148.232 3 0 141.853 1 178.369 7 148.657 7 148.087 7 0 150.791 341.968 6 139.789 3

2.3476 72 34.690 75 563.01 86 0.0424 72 104.68 0 162.15 91 190.04 17 167.35 48 83.386 63 0 165.65 86 555.65 78 161.00 18

6.772621 44.18249 518.7179 0.044171 103.5097 0 280.5769 187.0682 263.1522 49.27226 0 190.8965 675.3265 172.2625

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The index analysis of the company shows some important results Both total assets and liabilities have increased substantially over a period of five years. The increase in capital WIP shows the money which is blocked for the company and could be related to unsecured loan which might be taken for managing the working capital. 20

• •

• •

The total liabilities have increased almost double of 2005 whereas the total current assets have become less than 50% of the The loans and advances in 2009 the company has increased to almost 500% of the year 2005. On the other hand the companies’ contingent liabilities have also increased substantially by 600% in 2009 as compared to 100 in 2005. The total share capital has seen a minor rise of 21% over 5 years in 2009 to 121 as compared to 100 in 2005 Companies total assets have decreased almost 50% and bank balance hardly 6% in 2009 as compared to 2009. Over the period of time a fall in the current asset and specially bank balance shows a a threat of liquidity crunch in the company.

COMMON SIZE ANALYSIS Year Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans 1.841632 5.635825 0 47.96419 7.46307 62.90472 7.788811 Mar '05 1.841632 Mar '06 1.74922 8 1.74922 8 0.72684 1 0 56.1811 5 6.19569 2 64.8529 1 15.8136 5 Mar '07 1.50399 1 1.5039 91 0 0 55.3558 6 4.59238 2 61.4522 3 9.44230 5 Mar '08 1.411236 Mar '09 1.175023

1.411236 4.692681 0 60.03929 3.855355 69.99856 6.738141

1.17502 3 4.07227 4 0 53.5776 7 3.06523 7 61.8902 9.60689 5 21

Unsecured Loans Total Debt Total Liabilities Gross Block (-) Accumulated Depreciation Net Block Year

29.30647 37.09528 100 51.32648 24.33731 26.98917 Mar 05

19.3334 4 35.1470 9 100 45.0619 1 23.1837 21.8782 Mar 06

29.1054 6 38.5477 7 100 38.8112 3 20.2828 18.5284 3 Mar 07

23.2633 30.00144 100 38.30942 19.93627 18.37314 Mar 08

28.5029 38.1098 100 35.9814 3 18.6205 3 17.3608 9 Mar 09

Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit

1.906919 6.907931 3.861067 9.237034 36.6212 49.71931 12.92556 23.36127 86.00614 0

1.79280 3 9.82470 6 3.26460 6 9.00140 9 0.09802 1 12.3640 4 28.1524 8 46.4654 2 86.9819 4 0

1.89826 5 16.5281 8 2.26029 7 6.95105 7.40132 16.6126 7 61.0178 2 6.91624 2 84.5467 3 0

3.407523 45.90537 1.798575 8.094214 0.518987 10.41178 43.92968 0.005989 54.34745 0

2.93363 4 63.1358 6 2.29048 2 7.91767 2 1.29924 6 11.5074 35.1222 6 0.00540 6 46.6350 7 0

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Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent liabilities

17.74599 4.064172 21.81016 64.19598 0 100 5.781084

15.1801 3 5.29752 20.4776 5 66.5042 9 0 100 5.42708 9

16.6941 3 4.80748 2 21.5016 1 63.0451 2 0 100 13.1105 3

17.37111 4.662374 22.03348 32.31397 0 100 19.39111

26.0827 9 3.98266 7 30.0654 6 16.5696 1 0 100 20.4515

Common size analysis: from the above table the company picture can be presented as followers

The company has increased its investment over a period of time in its total assets. The investment has increased from 1.9 in 2005 of total assets to 63 percent of total assets The cash in the company in bank has decreased substantially from 36% of total assets to 1.2 %. The decrease in cash may give rise to liquidity issues in the company. The total current asset are still important part of total assets for the company but have decreased from 80% to half in 2009. The reserves held by company are almost 50% of the total liabilities. The investment increase and constant holding of reserves indicate that the company might be looking forward to profitable projects in future. The next major junk of total liabilities after reserves is taken by total debt most of which is contributed by unsecured loans. The unsecured loans means that company would be
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paying high rate of interest on these loans as they are not backed by as much securities as bond.

References: Moneycontrol.com data retrieved on 30th December 2009 2. Yahoo finance : data retrieved on 30th December 2009 3. Financial Management : R.P. Rustagi, ratio analysis 4. http://www.rinfra.com/ data retrieved as on 5th Jan 2010
1.

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ANEXXURE: Calculation of beta and Returns
month/ye ar 12/1/200 5 1/2/2006 2/1/2006 3/1/2006 4/3/2006 5/2/2006 BSE 9397.93 9919.89 10370.24 11279.96 11851.93 10398.61 0.05553989 0.04539868 9 0.08772410 3 0.05070674 0.12262306 6 0.02025655 4 0.01268987 0.08890363 6 0.06456678 1 0.04074698 0.05665913 2 0.00661492 0.02205062 6 RETURNS ON BSE RELIANCE INFRASTRCUTURE 293.8 495.25 437.75 392 557.8 662.5 0.685670524 -0.116102978 -0.104511708 0.422959184 0.187701685 RETURNS ON RELIANCE

6/1/2006 7/3/2006 8/1/2006 9/1/2006 10/3/200 6 11/1/200 6 12/1/200 6 1/2/2007 2/1/2007

10609.25 10743.88 11699.05 12454.42 12961.9 13696.31 13786.91 14090.92 12938.09

484.15 403.9 461.8 522.5 518.1 579.45 528.7 545.4 448.1

-0.269207547 -0.165754415 0.143352315 0.131442183 -0.008421053 0.118413434 -0.087583053 0.031586911 -0.178401173 25

0.08181367 9 3/1/2007 4/2/2007 5/3/2007 6/1/2007 7/2/2007 8/1/2007 13072.1 13872.37 14544.46 14650.51 15550.99 15318.6 0.01035778 9 0.06121969 7 0.04844810 2 0.00729143 6 0.06146407 2 0.01494374 3 0.12876503 1 0.14729485 1 0.02393387 6 0.04770908 1 0.13004787 8 0.00396572 9 0.11003531 5 0.10501302 7 394.6 468.6 482.25 469.7 532.9 478.6 -0.119392993 0.187531678 0.029129321 -0.026023847 0.134553971 -0.10189529

9/3/2007 10/1/200 7 11/1/200 7 12/3/200 7 1/2/2008

17291.1 19837.99 19363.19

1394.55 2910.55 1889.3

1.913811116 1.087089025 -0.3508787

20286.99 17648.71

2188.75 1644.6

0.158497856 -0.248612222

2/1/2008

17578.72

1367

-0.168794844

3/3/2008

15644.44

917

-0.329188003

4/1/2008

17287.31

1550.75

0.691112323

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5/2/2008

16415.57

0.05042658 5 -0.17994928 0.06642226 8 0.01454330 1 0.11700343 2 0.23890103 2 0.07103961 4 0.06099275 0.02312250 8 0.05651702 4 0.09187200 1 0.17456352 7 0.28255102 7 0.00898514 6

1174

-0.242946961

6/2/2008 7/1/2008 8/1/2008 9/1/2008

13461.6 14355.75 14564.53 12860.43

807 930.3 913.45 599.8

-0.312606474 0.152788104 -0.018112437 -0.343368548

10/1/200 8 11/3/200 8 12/1/200 8 1/2/2009

9788.06

334

-0.443147716

9092.72

310.7

-0.069760479

9647.31 9424.24

368.75 312.7

0.186836176 -0.152

2/2/2009

8891.61

280.55

-0.102814199

3/2/2009 4/1/2009 5/4/2009 6/1/2009

9708.5 11403.25 14625.25 14493.84

289.8 725.6 1119.6 984.7

0.03297095 1.503795721 0.542998897 -0.120489461

27

7/1/2009 8/3/2009

15670.31 15666.64

0.08117034 5 0.00023420 1 0.09320441 4 0.07184979 8 0.06479125 9 0.01607269 7

1022.4 1107.9

0.038285772 0.083626761

9/1/2009 10/1/200 9 11/3/200 9 12/1/200 9

17126.84 15896.28

1094.15 859.95

-0.012410867 -0.214047434

16926.22 17198.27

918 939.95

0.067503925 0.023910675

debt Interest coverage ratio PBIT Interest expenses in crores rate of debt

3,738. 67 3.75 4.32 1.152 0.0003 08

4,266.9 3 5.44 7.66 1.40808 8 0.00033

5,858.3 2 4.47 3.98 0.89038 0.00015 2

5,009.0 4 3.41 4.45 1.30498 5 0.00026 1

7,332. 18 3.65 1.78 0.4876 71 0.0002 43

1.Covariance of BSE and Reliance 2.variance 3.Beta of stock [beta= covariance/variance](1/2) b 4.market return monthly(average return from BSE) Rm 5.annual return

0.027067 0.008824 3.067409 0.015419 0.185028 28

6.Risk free return ( Return from Government securities) Rf 7.require rate of return [Ri=Rf+(Rm-Rf)*b]

0.07 0.422838

29

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