09 AUG 2016 Annual Report Analysis

RELIANCE INDUSTRIES BUY

OIL & GAS Target Price: Rs 1,370

FY16 Annual Report analysis

In FY16, RIL’s focus was on its extant refining/ petchem businesses and CMP : Rs 1,030
Potential Upside : 33%
rollout of telecom business – these accounted for 77% of Rs 1.1 tn total
capex. This was funded through healthy operating cash flow (Rs 407
bn, up 12% YoY), supplier’s credit (Rs 340 bn) and debt (Rs 280 bn). MARKET DATA
Consolidated net debt rose to Rs 1,120 bn vs. Rs 861 bn in FY15. No. of Shares : 3,242 mn
Free Float : 53%
Eventful year ahead: RIL aims to complete all downstream projects in Market Cap : Rs 3,339 bn
H2FY17 and start commercial operations of its telecom business in 52-week High / Low : Rs 1,090 / Rs 819
“coming months”. While telecom roll-out will reduce the valuation Avg. Daily vol. (6mth) : 3.6 mn shares
overhang, start-up of downstream projects will improve earnings. Bloomberg Code : RIL IB Equity

Effective crude sourcing (Iraqi Basrah crude share at ~20%) and strong Promoters Holding : 47%
FII / DII : 20% / 13%
domestic demand growth will support cyclical margins. Maintain BUY.

Key takeaways from annual report

♦ RJio’s launch in “coming months”: Extensive beta-testing reveals smooth operations across network (including voice
calls across network/technologies). RJio aims to cover entire digital value chain across education, healthcare,
security, communication, financial services, government-citizen interfaces and entertainment
♦ Fuel retailing: RIL would expand its retail network beyond 1,400 outlets in FY17. Currently, it has commissioned
1,000+ outlets with sales per outlet at ~230 KLPM#. RIL had earlier indicated its plans to open all outlets by Sep’16
♦ Cyclical sectors - outlook: RIL plans to place all of its incremental petchem output (post expansion) in domestic
market. Also, global oil demand growth of 2.7 mbpd over CY16-17 will support refining margin
♦ Refinancing debt: In FY16, RIL tied up for USD 6.3 bn of FX borrowing and re-financed debt instruments to reduce
interest cost. RIL’s net interest cost declined 18 bps to ~2%, and other income yield rose 12 bps to ~10%
♦ Asset sale: (a) EFS midstream assets in US sold at USD 1 bn in Jul’15; (b) RIL has agreed to sell its entire stake of
76% in GAPCO (African downstream player) to Total SA in May’16, subject to regulatory approvals

Financial summary (Consolidated) Key drivers

Y/E March FY15 FY16 FY17E FY18E (USD/bl) FY16 FY17E FY18E
Sales (Rs bn) 3,754 2,765 2,768 3,133 GRM 10.8 10.0 9.5
Adj PAT (Rs bn) 236 276 284 353 Refining utilization (%) 112% 113% 113%
Con. EPS* (Rs.) - - 92.4 106.0 RoGC benefit - - 2.0
EPS (Rs) 72.7 85.3 87.7 108.8 INR:USD 65.4 67.3 67.3
Change YOY (%) 4.8 17.2 2.9 24.1
P/E (x) 14.2 12.1 11.7 9.5
Price performance
RoE (%) 11.3 12.0 11.0 12.2
120
Sensex Reliance Industries
RoCE (%) 9.1 9.2 8.5 9.4
100
EV/E (x) 11.2 10.1 9.9 7.7
DPS (Rs) 9.1 9.6 13.2 16.3 80

Source: *Consensus broker estimates, Company, Axis Capital # KLPM: Kilo litres per month
60
Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Prashant Tarwadi VP - Energy, Agriculture & Chemicals

prashant.tarwadi@axiscap.in 91 22 4325 1113

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Capex at Rs 1.1tn dominated by telecom, petchem

expansion projects
Exhibit 1: FY16 capex dominated by R-Jio and value add projects (RoGC and Petchem expansion)
C u m u l at i ve
(Rs b n ) FY 1 1 FY 1 2 FY 1 3 FY 1 4 FY 1 5 FY 1 6 (FY 1 1 - 1 6 ) Re m ar ks
P e t r och e m i cal s 5 .5 2 2 .0 8 1 .3 8 6 .9 8 0 .6 4 5 .1 3 2 1 .3 Petrochemical expansion
projects. PTA/PET plant
commissioned.
Re fi n i n g 1 3 .3 2 7 .5 3 7 .8 1 7 5 .7 3 1 3 .2 3 9 6 .3 9 6 3 .7
- RoGC + Petcoke - - - 135.7 273.2 381.3 790.2 We believe RIL is clubbing
- Debottlenecking - 12.5 22.8 25.0 25.0 - 85.2 RoGC/ petcoke gasification
capex under refining
- Maintenance 13.3 15.0 15.0 15.0 15.0 15.0 88.3
E&P 1 0 5 .9 1 5 8 .6 1 3 7 .4 1 7 9 .5 1 5 8 .1 9 7 .0 8 3 6 .5
- Domestic 37.5 62.6 26.0 98.1 86.5 54.5 365.0 CBM (Ph-1) development;
side-track & substitute well
in D1/D3; workover & well
development in PMT
- US Shale 68.4 96.0 111.4 81.5 71.6 42.5 471.5 Significant slowdown in
investment across JVs. Focus
on conserving cash and
maintain optionality to
ramp-up volumes when
prices improve
Ot h e r s 1 3 5 .9 3 1 .0 5 8 .4 2 3 6 .3 3 9 7 .1 5 1 0 .9 1 ,3 6 9 .6
- Telecom 128.0 10.0 52.0 135.0 360.3 484.0 1,169.3 Cumulative capex at Rs 1.2
tn as on Mar '16 and Rs
1.35 tn as on June '16
- Retail 7.9 21.0 6.4 101.3 36.8 26.9 200.3 Store addition of 624 and
harnessing distribution
channel (supply chain and
service centers)
U n - al l ocab l e 8 .2 6 .7 8 .1 1 2 .3 5 3 .6 8 0 .6 1 6 9 .4
Tot al 269 246 323 691 1 ,0 0 2 1 ,1 3 0 3 ,6 6 1
Source: Company, Axis Capital

Telecom investment at Rs 1.2 tn as of Mar ’16; Rs1.35 tn as of June ‘16

♦ RIL has invested Rs 1.2 tn in its telecom venture as of Mar ’16. The investment
has been funded through mix of equity share capital (Rs 450 bn), debt
(Rs 332 bn), supplier’s credit (Rs 260 bn) and deferred payment towards
spectrum acquisition (~Rs 130 bn)
♦ After Mar ’16, RJio also raised Rs 150 bn from rights issues to its existing
equity shareholders, which will strengthen RJio’s capital structure
♦ In Q1FY17 analyst meet, the management indicated additional capex of
Rs 130 bn in Q1FY17, taking the investment to ~Rs 1.35 tn as of
June ’16. RIL’s total investment at Rs 1.35 tn include (a) spectrum acquisition
and related interest capitalized at ~Rs 500 bn, (b) fiber network and towers at
Rs 340 bn, (c) active infrastructure (network equipment) at ~Rs 350 bn, and
(d) other capitalized pre-operating expenses at ~Rs 140 bn

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Exhibit 2: RJio – Source of funding (as of Mar ’16) Exhibit 3: RJio – Utilization of funding (as of Jun ’16)
Sou r ce Rs b n Area Rs b n
Equity share capital 450 Spectrum acquisition and related interest capitalized 500
Debt capital 332 Fiber network and towers 340
Supplier's credit 260 Active infrastructure (network equipment) 350
Deferred payment towards spectrum acquisition 130 Other capitalized pre-operating expenses 140
Tot al 1 ,1 7 2 Tot al 1 ,3 3 0
Source: Company, Axis Capital Source: Company, Axis Capital

RIL’s capex largely funded through internal accrual and supplier’s credit
♦ Internal accrual: RIL’s operating cash flow rose 12% YoY on the back of strong
profitability of cyclical businesses. We estimate EBITDA of refining and
petrochemical business rose 40% and 23% YoY respectively in FY16
♦ Supplier’s credit: Large part of RIL’s cash inflow came from reduction in working
capital. This was predominantly due to other current liabilities, which rose
sharply in FY16 on account of higher supplier’s credit of Rs 490 bn (vs. Rs 150
bn in FY15)

Exhibit 4: RIL has maintained its cash war chest

(Rs b n ) FY 1 1 FY 1 2 FY 1 3 FY 1 4 FY 1 5 FY 1 6 Re m ar ks
Op e r at i n g cash fl ow 3 4 7 .0 3 2 9 .0 3 2 1 .2 3 3 9 .8 3 6 2 .9 4 0 7 .4
PAT 202.1 200.3 208.8 224.9 235.7 276.3 High internal accruals supported by strong
Depreciation 141.2 124.0 112.3 112.0 115.5 129.2 Profitability from refining business
Deferred tax 3.7 4.7 0.0 2.9 11.8 1.9
C h an ge i n WC 2 1 .4 (1 8 4 .1 ) 5 7 .8 1 4 1 .7 2 8 2 .0 4 6 8 .7 Largely due to increase in supplier's credit
towards new projects (downstream and RJio)
De b t r ai se d 1 9 5 .0 8 7 .5 1 4 8 .8 3 1 8 .2 3 0 4 .0 2 6 8 .8 RIL raised Rs 280 bn of fresh loans in FY16
C l awb ack/ (i n cr e ase ) (2
i n 4e7xi.3
st)i n g cash
6 1 .5 (1 3 9 .8 ) (6 0 .1 ) 1 0 3 .1 8 .7 RIL preserving its cash war-chest
Ot h e r i t e m s (1 9 .4 ) (1 8 .6 ) (3 4 .4 ) (1 6 .2 ) (1 4 .0 ) 1 3 .5
Tot al fu n ds sou r ce d 2 9 6 .7 2 7 5 .3 3 5 3 .7 7 2 3 .4 1 ,0 3 8 .1 1 ,1 6 7 .0
C ap e x 2 6 8 .8 2 4 5 .7 3 2 2 .9 6 9 0 .8 1 ,0 0 2 .5 1 ,1 3 0 .0
Di v. p ai d (i n cl t ax) 2 7 .9 2 9 .6 3 0 .7 3 2 .7 3 5 .6 3 7 .0
Tot al fu n d u t i l i z e d 2 9 6 .7 2 7 5 .3 3 5 3 .7 7 2 3 .4 1 ,0 3 8 .1 1 ,1 6 7 .0
Source: Company, Axis Capital Note: Above cash flow is derived from P&L and Balance Sheet, and may not match with reported Cash Flow Statement

Exhibit 5: Other current liabilities increased sharply due to supplier’s credit

(Rs bn) FY15 FY16 Change
Standalone
Other current
Other current liabilities 190.6 548.4 357.8
Less: Current maturity of long-term debt 84.5 147.5 63.0
liabilities at
Other current liabilities (net) 106.1 401.0 294.8 Rs 839 bn includes
Consolidated supplier’s credit of
Other current liabilities 457.9 990.3 532.4 Rs 490 bn (RJio –
Less: Current maturity of long-term debt 121.1 151.1 30.1 Rs 260 bn;
Other current liabilities (net) 336.8 839.1 502.3
standalone
Source: Company, Axis Capital
Rs 230 bn)

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Comparison of consolidated and standalone

financial statements
Exhibit 6: Comparison of consolidated and standalone balance sheets
(Rs b n ) St an dal on e C on sol i dat e d Di ffe r e n ce Re m ar ks

A sse t s
Current Assets 643 937 294 Largely due to high inventories at subsidiaries (Retail,
GAPCO). Typically, large stock-in-trade inventories
lead to higher current assets at consol level. This should
normalize in FY17 post GAPCO's sale to total

- of which CCE 69 112 43

Investments 1,521 769 (751) Implies larger investment at subsidiary level
Net fixed assets 1,314 1,698 384
CWIP 1,099 2,605 1,505 Consol CWIP is higher due to telecom (FY16 capex at
Rs 484 bn), US shale gas (FY16 capex at Rs 43 bn)
and Retail (FY16 capex at Rs 27 bn)
Goodwill 53 53
Tot al A sse t s 4 ,5 7 7 6 ,0 6 2 1 ,4 8 5
Li ab i l i t i e s
Current Liabilities 946 1,452 505 Other current liability rose sharply at consol and
standalone levels due to increase in supplier's credit
towards expansion capex (downstream & RJio)
- of which Other current Liabilities 401 839 438
Provisions 27 35 8
Borrowings 1,071 1,968 897 Higher debt at consol level to finance telecom
expansion plans and refinance existing high-cost debt.
Net debt rose by Rs 259 bn, as RIL raised Rs 280 bn of
fresh loans in FY16
Deferred tax liability 132 138 7
Net worth 2,402 2,469 67
Tot al Li ab i l i t i e s 4 ,5 7 7 6 ,0 6 2 1 ,4 8 5

Source: Company, Axis Capital

Exhibit 7: Huge debt on subsidiary level due to telecom and shale gas capex
Chg
(Rs bn) FY13 FY14 FY15 FY16
(FY16 vs. FY15)
Consolidated
Long-term debt 894 1,068 1,420 1,729 309
Short-term debt 184 328 280 240 (40)
Total debt 1,077 1,396 1,700 1,968 269
Less: Cash & cash equivalent 505 380 125 112 (13) Net debt increased
Less: Marketable investments 384 565 713 736 24
in FY16, as RIL
Net debt 189 451 861 1,120 259
borrowed
Standalone
Long-term debt 609 676 847 926 79
Rs 280 bn to fund
Short-term debt 115 228 129 145 16 new projects
Total debt 724 904 976 1,071 95
Less: Cash & cash equivalent 495 366 116 69 (47)
Less: Investments 284 334 505 394 (111)
Net debt (55) 204 355 608 253
Source: Company, Axis Capital

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Other highlights

GAPCO expands profits; but sold to Total SA

♦ Gulf Africa Petroleum Corp’s (GAPCO) revenue decreased due to weak
commodity prices. However, PAT increased, as GAPCO sold 3.7 mn KL (up
32% YoY) during CY15. GAPCO’s (Kenya + Tanzania) PAT rose 52% YoY to
Rs 1.2 bn in FY16
♦ In May 2016, RIL executed an agreement with Total SA of France for the sale
of its entire 76% stake in GAPCO subject to regulatory approvals

Exhibit 8: PAT of key subsidiaries

(Rs mn) Gapco Kenya Gapco Tanzania Recron Malaysia
FY16 546 661 (549)
FY15 444 349 (2,700)
FY14 36 562 (1,600)
FY13 9 31 604
FY12 819 754 604
FY11 211 261 1,780
Source: Company, Axis Capital

Domestic reserves hiked to include MJ1 and CBM reserves

In FY16, RIL hiked its Proved reserves (1P) to recognize MJ1 field and CBM
reserves. However, Proved Developed (PD) reserves have not been restated Reserve accretion
upwards, as MJ1 will still require few years for development. RIL has submitted of 1 tcf from MJ1
commercial viability report to the management committee, leading to reserve discovery
accretion of 1 tcf from MJ1 discovery.

Exhibit 9: RIL – Domestic Proved reserves (1P)

(tcf) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
1P reserves (Net to RIL)
Beginning of the year 7.84 7.84 7.78 7.46 6.56 3.67 3.43 3.04 2.32
Reduction on transfer of participating interest 0.00 0.00 0.00 0.00 (2.00) 0.00 0.00 0.00 0.00
Revision of estimates 0.06 0.01 0.19 (0.20) (0.44) 0.00 (0.25) (0.60) 0.32
Production (0.06) (0.07) (0.52) (0.69) (0.45) (0.24) (0.14) (0.12) (0.11)
Closing balance for the year 7.84 7.78 7.46 6.56 3.67 3.43 3.04 2.32 2.53
Gross 1P reserves (for all blocks)
Beginning of the year 8.71 8.71 8.65 8.28 7.29 6.12 5.72 5.07 3.87
Revision of estimates 0.07 0.01 0.21 (0.23) (0.58) 0.00 (0.42) (1.00) 0.53
Production (0.07) (0.07) (0.57) (0.77) (0.59) (0.40) (0.23) (0.20) (0.18)
Closing balance for the year 8.71 8.65 8.28 7.29 6.12 5.72 5.07 3.87 4.22

Source: Company, Axis Capital

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Exhibit 10: RIL – Domestic Proved Developed (PD) reserves

(tcf) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
PD reserves (Net to RIL)
Beginning of the year 0.59 0.59 4.73 4.62 3.79 0.89 0.65 0.55 0.66
Reduction on transfer of participating interest - - - - (1.08) - - - -
Revision of estimates 0.06 4.20 0.41 (0.14) (1.37) 0.00 0.03 0.24 (0.04)
Production (0.06) (0.07) (0.52) (0.69) (0.45) (0.24) (0.14) (0.12) (0.11)
Closing balance for the year 0.59 4.73 4.62 3.79 0.89 0.65 0.55 0.66 0.51
Gross PD reserves (for all blocks)
Beginning of the year 0.66 0.66 5.25 5.13 4.21 1.48 1.09 0.91 1.11
Revision of estimates 0.07 4.67 0.45 (0.15) (2.14) 0.00 0.05 0.40 (0.07)
Production (0.07) (0.07) (0.57) (0.77) (0.59) (0.40) (0.23) (0.20) (0.18)
Closing balance for the year 0.66 5.25 5.13 4.21 1.48 1.09 0.91 1.11 0.86

Source: Company, Axis Capital

Exhibit 11: RIL – Other income yield (%) Exhibit 12: RIL – Effective interest cost
10.6% 4.0%

10.4%
3.5%
10.2%

10.0% 3.0%

9.8% 2.5%
9.6%
2.0%
9.4%

9.2% 1.5%
FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16

Source: Company, Axis Capital Source: Company, Axis Capital

Exhibit 13: Share of Iraqi Basrah crude in RIL's crude sourcing Exhibit 14: RIL’s crude slate
Iraq volume Iraq (% in total) Others Latam Middle East Africa
300 25%
(mbpd) 100% 4% 3%
250 11% 15% 15% 13% 11% 9%
20%
80%
200
15% 43% 39%
60% 42% 49% 53% 65% 70% 55%
150
10%
100 40%
50 5% 45%
20% 45% 41% 35% 36% 30% 35%
25%
0 0%
0%
May-16
Feb-16
Jan-16
Dec-15
2007

2010

2011

2012

2013

2014

2015
2008

2009

June-16

2013 2014 2015 Dec-15 Jan-16 Feb-16 May-16 June-16

Source: Axis Capital, Industry

Source: Axis Capital, Industry

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Telecom: FY16 AR outlines huge digital market by

2020 and RJio’s 4 strategic pillars

RIL’s FY16 annual report highlights huge latent demand for mobile data citing Cisco
VNI’s forecast of a 12-fold increase in mobile data traffic in India over CY15-CY20
(implied CAGR: 63%). Rapid emergence of video as the new voice, enhanced
consumer experience, and effective digital governance will be the structural drivers
of India’s emergence as a leading digital economy. RJio is expected to play a
significant role in raising India’s global ranking in internet penetration from 155
currently to top 10.

RJio’s 4 strategic pillars include coverage, data, quality, and affordability. Sub-1
GHz spectrum, quality network, rich content etc provide it a competitive advantage.
Currently, its network is being tested and optimized. Most of the business platforms
have been rolled out and are being used to run applications. 1.5 mn customers are
on-board on the network. This test program will be progressively upgraded to
commercial operations in the coming months. Voice products including VoLTE are
working seamlessly. RJio has entered into inter-connect agreements with all other
telecom operators. Interconnection of voice calling across networks and across
technologies is working smoothly.

RIL has invested in equity shares of Reliance Jio Infocomm amounting to Rs 447.5
bn as of 31 March 2016 (vs. Rs 297.5 bn in March 2015). RIL has also invested
Rs 1.25 bn via preference shares.

RJio’s 4 strategic pillars

RJio has outlined 4 areas of strategic focus

♦ Coverage: At launch, Jio will have population coverage of 70%, which would
rise to 90% in the next one year. It is currently present across 29 states – 18K+
towns, and 150K+ villages
♦ Data: Data consumption per consumer in India is estimated to be 0.15 GB per
month mainly due to supply-side constraints. RJio’s network is engineered to
provide 10 GB+ data per month for every Indian on the back of 846.1 MHz
spectrum across 800 MHz, 1800 MHz, and 2300 MHz bands, 250K+ km
largest fibre network, ~500K sq ft integrated data centres. The network can be
upgraded to 5G with minimal additional capex. Current usage is in excess of
26 GB and over 355 voice minutes
♦ Quality: Through investment in superior Long Term Evolution (LTE) based
networks backed by world class customer service quality, RJio plans to offer
speed which is multiple times faster than the average speed offered in the
market. RJio has one of the most comprehensive and powerful video network in
the world
♦ Affordability: RJio will make its services accessible and affordable to all. It has
developed its network at an extremely efficient cost base coupled with
significant operating efficiencies. These efficiencies will enable it to offer
services at a substantially lower cost than others

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RJio has laid a strong foundation for growth

♦ Extensive network in place for pan-India rollout

 With proposed capex of more than Rs 1.5 tn, RJio is rolling out the largest
greenfield LTE deployment in the world
 The network will comprise over 92,000 eNodeB and over 100,000 small
cells with ~250,000 route km of fibre optic at launch. Last mile connectivity
is being rolled out to address the fibre to the home potential. Network has
advanced features such as Software Defined Networking (SDN) and
Network Functions Virtualisation (NFV)
 RJio is present in all the 29 states of India with direct physical presence in
more than 18,000 urban and rural towns and over 150,000 villages.
Currently, it has over 1.5 mn users on network
 It holds 846.1 MHz of liberalized spectrum across 800 MHz,
1800 MHz, and 2300 MHz band. Agreement with RCOM provides
spectrum allotment in the 800 MHz band across 13 circles and sharing of
spectrum in the 800 MHz band across 21 circles (4 circles awaiting
regulatory approval). RJio is the only operator in the country using sub-GHz
spectrum band for LTE services
 It has built nearly half-a-million square feet of cloud data centres and a multi-
terabit capacity international network. Along with partners, it launched state-
of-the-art 8,100 km cable system – the Bay of Bengal Gateway (BBG) –
which provides connectivity to South East Asia and the Middle East
 In addition to the network, RJio customers will have access to a large suite of
digital services. These span the areas of news, music, video, broadcast,
communication, financial services, healthcare and education. These digital
applications are being tested extensively as part of the trial launch program
♦ It is ready for future evolution of technology including transition to 5G with
minimal additional capex in the network

Comprehensive offering including solution for non-VoLTE handsets

♦ JioJoin, a smartphone app, enables customers to enjoy RJio’s latest
communication services like HD Voice, Video calls, SMS on non-VoLTE devices
♦ RJio will offer end-to-end solutions encompassing the entire digital value chain
across domains such as education, healthcare, security, communication,
financial services, government-citizen interfaces and entertainment
♦ RJio has also entered into agreements with various state and local authorities to
provide wi-fi services. In addition, RJio is looking to partner with colleges and
institutions across India to provide wi-fi facilities

Building strong distribution network

♦ For sales and distribution, RJio will have 0.5 mn activation outlets and ~1 mn
recharge outlets at launch. This will be in addition to digital channels that RJio is
promoting for seamless activation and recharge facilities for customers
♦ All outlets will have real time access to 1,072 RJio offices set up across the
country. RJio has on-boarded most of these outlets and provided them merchant
devices and/or solutions to cater to their business and payment requirements. It
has also tied up with 120K distributors for devices

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Robust demand
♦ Huge demand potential
 Broadband coverage in India is 15% (vs. 75% in USA). Broadband
penetration in India is the lowest in the world. Internet speed in India is the
slowest compared to most other countries.
 Highest proportion of young population (predominant internet users today),
increasing per capita income, and rising middle class present huge
opportunity for digital services in India. As per Cisco VNI, mobile data
traffic in India is estimated to grow 12x over CY15-20 at a CAGR of 63%
 LTE has been the fastest growing mobile technology ever. LTE-enabled
handsets with multi-band, multi-mode support are becoming default offering
in India. India still has only ~219 mn smartphones (62 mn are LTE-enabled).
It is expected that almost all the smartphones in the coming months will be
LTE-enabled. RJio has launched LTE-based LYF brand of devices to tap this
opportunity
 3G and 4G subscribers are likely to constitute 40% of total wireless internet
subscriber base. Content viewing has already moved beyond television to
mobile phones. This trend is going to only increase with 4G. RJio is well-
integrated and has rich content to ride this wave
♦ New regime on the cards with video calling, real-time streaming, digital
governance, remote medical access, financial inclusion etc.

Exhibit 15: Infrastructure and spectrum assets

Source: Company *RJIL: RJio Infocomm Limited

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Exhibit 16: RJio’s digital services

Business/brand Product /service Brand logo Service
DIGITAL SERVICES
Allows everything from signing up and paying bills to topping up and managing
MyJio Gateway to Jio apps
all accounts
Instant access to TV With JioPlay watch LIVE TV (including HD) on smartphones and tablets, set
JioPlay
programs reminders and even catch up with missed programs
Entertainment at your HD content across various languages and genres with adaptive streaming
JioOnDemand
fingertips anytime anywhere
Music for you.
JioBeats Extensive library and built-in intelligence to enhance music listening experience
Anytime anywhere
There is always more Library of premium magazines with ability to listen to articles, highlight,
JioMags
to read underline, and bookmark. Podcasts and videos to go with your articles
Stay updated. Stay Customized news with user selected preferences such as language, publications,
JioXpressNews
ahead and categories of news
A OTT app that has unique features like multi-party video conferencing, audio
An efficient way to
JioChat and video notes, large-size group (500 members), regional stickers, and
stay connected
interface in 10 Indian languages, doodles, and file-sharing
You files are one
JioDrive Store online securely all your photos, videos, docs, songs organized at one place
touch away
Make any phone
JioJoin The app enables HD Voice, video calls, SMS on non-VoLTE devices
VoLTE ready
Experience cash free
JioMoney Digitizing everyday transactions to make smart, simple and secure payments
living
Protect your phone,
JioSecurity Award-winning app advisor and anti-virus that protects your device
secure your data
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Source: Company

Exhibit 17: RIL – SoTP

Valuation base Multiple (x) Enterprise Value
Matrix Value Multiple Value (x) (Rs bn) (Rs/sh)
Cyclical businesses
Refining EBITDA (Rs mn) 312,779 EV/EBITDA 6.5 2,033 627
Petchem EBITDA (Rs mn) 233,264 EV/EBITDA 6.5 1,516 468
Total (a) 3,549 1,095
E&P - producing fields
Domestic fields EBITDA (Rs mn) 24,579 EV/EBITDA 4.0 98 30
Shale gas (US) Investment (Rs mn) 565,320 EV/Investment 40% 226 70
Total (b) 324 100
E&P - future
Satellites fields* Reserves (tcf) 2.20 EV/boe ($/boe) 3.0 18 6
R-Series (D34) Reserves (tcf) 1.61 EV/boe ($/boe) 3.0 13 4
NEC-25 Reserves (tcf) 1.02 EV/boe ($/boe) 3.0 8 3
CBM Reserves (tcf) 1.39 EV/boe ($/boe) 3.0 11 4
Total ( c) 51 16
Investments
Treasury stock Number of shares (mn) 286 Market Price/BV 1,097 313 97
Retail EBITDA (Rs mn) 12,407 EV/EBITDA 12.0 149 46
Telecom Investment (Rs mn) 1,350,000 EV/Investment 1.0 1,350 417
SEZ Investment (Rs mn) 28,000 EV/Investment 1.0 28 9
Total (d) 1,840 568
Enterprise Value (a+b+c+d) 5,765 1,779
Net Debt 1,322 408
Equity value 4,443 1,371
Source: Company, Axis Capital

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Financial summary (Consolidated)

Profit & loss (Rs bn) Cash flow (Rs bn)
Y/E March FY15 FY16 FY17E FY18E Y/E March FY15 FY16 FY17E FY18E
Net sales 3,754 2,765 2,768 3,133 Profit before tax 311 360 370 459
Other operating income - - - - Depreciation & Amortisation (115) (129) (146) (183)
Total operating income 3,754 2,765 2,768 3,133 Chg in working capital 282 469 (23) (86)
Cost of goods sold (2,940) (1,891) (1,836) (2,040) Cash flow from operations 644 883 409 451
Gross profit 814 875 932 1,094 Capital expenditure (1,034) (1,137) (609) (304)
Gross margin (%) 21.7 31.6 33.7 34.9 Cash flow from investing (1,034) (1,137) (609) (304)
Total operating expenses (440) (432) (462) (509) Equity raised/ (repaid) 3 3 - -
EBITDA 374 443 470 585 Debt raised/ (repaid) 304 269 300 -
EBITDA margin (%) 10.0 16.0 17.0 18.7 Dividend paid (36) (37) (50) (62)
Depreciation (115) (129) (146) (183) Cash flow from financing 291 236 250 (62)
EBIT 258 313 324 402 Net chg in cash (99) (18) 49 85
Net interest (33) (36) (42) (45)
Other income 86 82 88 102 Key ratios
Profit before tax 311 360 370 459 Y/E March FY15 FY16 FY17E FY18E
Total taxation (75) (83) (85) (106) OPERATIONAL
Tax rate (%) 24.0 23.0 23.0 23.0 FDEPS (Rs) 72.7 85.3 87.7 108.8
Profit after tax 236 277 285 354 CEPS (Rs) 108.4 125.1 132.8 165.3
Minorities (1) (1) (1) (1) DPS (Rs) 9.1 9.6 13.2 16.3
Profit/ Loss associate co(s) - - - - Dividend payout ratio (%) 12.5 11.2 15.0 15.0
Adjusted net profit 236 276 284 353 GROWTH
Adj. PAT margin (%) 6.3 10.0 10.3 11.3 Net sales (%) (13.6) (26.3) 0.1 13.2
Net non-recurring items - - - - EBITDA (%) 7.4 18.4 6.2 24.4
Reported net profit 236 276 284 353 Adj net profit (%) 4.8 17.2 2.9 24.1
FDEPS (%) 4.8 17.2 2.9 24.1
Balance sheet (Rs bn) PERFORMANCE
Y/E March FY15 FY16 FY17E FY18E RoE (%) 11.3 12.0 11.0 12.2
Paid-up capital 29 29 29 29 RoCE (%) 9.1 9.2 8.5 9.4
Reserves & surplus 2,156 2,407 2,690 3,042 EFFICIENCY
Net worth 2,185 2,437 2,720 3,072 Asset turnover (x) 1.4 0.8 0.7 0.7
Borrowing 1,700 1,968 2,268 2,268 Sales/ total assets (x) 0.8 0.5 0.4 0.5
Other non-current liabilities 130 138 138 138 Working capital/ sales (x) - (0.2) (0.2) (0.2)
Total liabilities 5,045 6,062 6,648 7,027 Receivable days 5.2 6.5 6.5 6.5
Gross fixed assets 2,889 3,205 6,119 6,423 Inventory days 57.5 73.8 75.9 77.5
Less: Depreciation (1,324) (1,454) (1,600) (1,784) Payable days 64.1 96.2 95.9 96.0
Net fixed assets 1,565 1,751 4,519 4,639 FINANCIAL STABILITY
Add: Capital WIP 1,782 2,605 300 300 Total debt/ equity (x) 0.8 0.8 0.9 0.8
Total fixed assets 3,347 4,355 4,819 4,939 Net debt/ equity (x) 0.4 0.5 0.5 0.4
Other Investment - - - - Current ratio (x) 1.6 1.1 1.2 1.4
Inventory 532 470 478 541 Interest cover (x) 7.8 8.7 7.8 9.0
Debtors 53 49 49 56 VALUATION
Cash & bank 838 848 947 1,093 PE (x) 14.2 12.1 11.7 9.5
Loans & advances 189 249 254 288 EV/ EBITDA (x) 11.2 10.1 9.9 7.7
Current liabilities 1,000 1,487 1,488 1,514 EV/ Net sales (x) 1.1 1.6 1.7 1.4
Net current assets 646 187 308 540 PB (x) 1.5 1.4 1.2 1.1
Other non-current assets - - - - Dividend yield (%) 0.9 0.9 1.3 1.6
Total assets 5,045 6,062 6,648 7,027 Free cash flow yield (%) (11.7) (7.6) (6.0) 4.4
Source: Company, Axis Capital Source: Company, Axis Capital
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Reliance Industries (RELI.BO, RIL IN) Price and Recommendation History

Source: Axis Capital

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