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Submitted to (ANAND INSTITUTE OF MANAGEMENT)
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ASMINISTRATION
In Gujarat Technological University
UNDER THE GUIDANCE OF JAY JOSHI (ASSISTANCE PROFESSOR, AIM) Submitted by MEHMOOD DAGIA PRASHANT KOTIYA BALAJI NAGARGOJE DILIP PRAJAPATI [Enrollment No.:107020592026] [Enrollment No.:107020592027] [Enrollment No.:107020592033] [Enrollment No.:107020592034]
MBA SEMESTER - IV [Batch: 2010-12]
(ANAND INSTITUTE OF MANAGEMENT) MBA PROGRAMME Affiliated to Gujarat Technological University Ahmedabad 2010-12
261 crore (US$ 3. Reliance Industries Limited (RIL) is India's largest private sector company on all major financial parameters with a turnover of Rs.to be fully integrated along the materials and energy value chain. petroleum refining and marketing. The flagship company. with businesses in the energy and materials value chain. Reliance pursued a strategy of backward vertical integration .7 billion).269 crore (US$ 34. RIL is amongst the 30 fastest climbers 2 . Ambani (1932-2002).3 billion) as of March 31. 39. retail. textiles. fibre intermediates. 2008. Starting with textiles in the late seventies. is a Fortune Global 500 company and is the largest private sector company in India. cash profit of Rs. petrochemicals (polyester. including its subsidiaries and Reliance Industrial Infrastructure Limited. petrochemicals. Group's annual revenues are in excess of US$ 58 billion. The Group's activities span exploration and production of oil and gas.3 billion). Major Group Companies are Reliance Industries Limited.449 crore (US$ 20. plastics and chemicals). 1. infotel and special economic zones. Reliance enjoys global leadership in its businesses. plastics. Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. 81. fibre intermediates.INTRODUCTON OF RELIANCE INDUSTRY LTD The Reliance Group. 15. founded by Dhirubhai H.in polyester.8 billion) and net worth of Rs. RIL is the first private sector company from India to feature in the Fortune Global 500 list of 'World's Largest Corporations' and ranks 103rd amongst the world's Top 200 companies in terms of profits. 25. Reliance Industries Limited. being the largest polyester yarn and fibre producer in the world and among the top five to ten producers in the world in major petrochemical products. net profit (excluding exceptional income) of Rs.205 crore (US$ 6. is India's largest private sector enterprise. petroleum refining and oil and gas exploration and production .
net gearing at 22% 3 .ranked by Fortune. RIL features in the Forbes Global list of the world's 400 best big companies and in the FT Global 500 list of the world's largest companies. Global rankings in most key businesses – integrated energy company in Refining and Petrochemicals poised for large gains in the E&P sector Large part of Indian business and capital markets. driven by organic growth India‟s largest private sector and only Fortune 500 company Annual exports in excess of US$ 6 billion to over 100 countries Committed to large investments in key businesses – refining and petrochemicals – US$ 8-9 Billion in next 4-5 years Conservative balance sheet – annual cash flow at US$ 2.8 Billion. RIL ranks amongst the 'Worlds 25 Most Innovative Companies' as per a list compiled by the US financial publication-Business Week in collaboration with the Boston Consulting Group.
completed in a record time of 36 months Higher complexity: Nelson Complexity Index of 14. RPL is subsidiary of RIL. and has interests in the downstream oil business. RPL is setting up a Greenfield petroleum refinery & polypropylene plant in a Special Economic Zone at Jamnagar in Gujarat.INTRODUCTON OF RELIANCE PETROLEUM LTD Reliance Petroleum Limited was set up by Reliance Industries Limited (RIL). Lowest US$/complexity-barrel cost among recently built refinery projects.000 barrels/day. one of India's largest private sector companies based in Mumbai. which currently holds a 5% equity stake in the Company . Crude refining commenced on 25th Dec „08 and first parcel of product exported in Jan „09 4 .80. RPL also benefits from a strategic alliance with Chevron India Holdings Pte Limited. Singapore. a wholly owned subsidiary of Chevron Corporation USA (Chevron).000 barrel capacity per stream day(BPSD). W ith an annual crude processing capacity of 5. RPL will be the sixth largest refinery in the world. RPL : HIGHLIGHT Crude processing capacity of 580. Currently.0 Among the top 5% refineries globally with capability process ultra heavy crude (Average API of 24) Built to supply ultra-clean fuels to meet the world‟s evolving needs Focus on high growth transportation fuel segment.
6 million tons of crude with revenue of Rs. During the year. RPL has also declared its first un-audited quarterly results today.678 crore (US$ 725 million) and the net profit of Rs. 84 crore (US$ 17 million). Reliance Petroleum Limited (RPL) started crude processing on 25th December 2008 and achieved successful production of various products. RPL dispatched its first parcel of refinery products in January 2009. 5 . 3. RPL processed 3.World class refinery with minimal project risk. ready to deliver superior returns.
Our expertise is extensively offered to help develop products and markets from 'concept to fruition' and beyond. Our core Reliance belief is to nurture our customers and help them grow. We at Reliance are inspired by a sole objective: to help you build a better business . In pursuit of our above goals. Largest inhouse pool of intellectual capital. It's our people what sets us apart. We invite you to build an alliance and gain access to our vast pool of resourcesdedicated professionals with a proven track record and grow with us. where the emphasis is on addressing the diverse needs of its customers and facilitating value added performance. product and market development. multi-billion dollar projects in record time frames.one committed to excellence.CORE COMPETENCIES RELIANCE INDUSTRIES LTD Reliance‟s core competence lies in its ability to conceptualize and implement multi-billion dollar projects. to its existing customers and potential entrepreneurs as well. At its core is the Polymer Research and Technology Centre (PRTC). raw material selection and testing beside a host of 'industry specific' solutions. Unique financial engineering capabilities. These include project identification. Reliance. 6 . We provide them comprehensive solutions backed by world class and proven services at every stage and round the clock. and nurturing the „entrepreneurial‟ spirit. over a period of time has painstakingly built a highly specialized and dedicated team of technical and commercial experts who provide round the clock support. The knowledge and core competency that Reliance has acquired and developed over the years in the Polymer business has made it a major force globally. Demonstrated ability to implement complex. Attracting and retaining the best people. new product design. Ability to create world class assets at 30%+ capital cost advantage compared to peer group.
This petroleum retailing initiative presents a unique opportunity to Reliance to get close to the final consumer across the length and breadth of India.over 5 million retail investors Reliance is now playing a leadership role in creation of a world class infocom infrastructure in India Largest in-house pool of intellectual capital Attracting and retaining the best people. shareholder families . and nurturing the „intrapreneurial‟ spirit Unique financial engineering capabilities Demonstrated ability to implement complex. Reliance generates over 3% of India‟s GDP Reliance contributes over 5% of the government‟s total tax revenues .800 retail outlets for marketing of transportation fuels across India and aims to establish these outlets by March 31.the largest by any business house India‟s largest. Reliance will seek to win and retain consumers by delivering clean and unadulterated fuels to correct quantities. and the amongst the world‟s largest. multi-billion dollar projects in record time frames Ability to create world class assets at 30%+ capital cost advantage compared to peer group Absorption of diverse and complex technologies and optimal operation of plants RELIANCE PETROLEUM LTD Reliance has received government approvals for establishing about 5. 7 . 2004.
through forward integration from refining into marketing.Thus. combined with a world-class differentiated retail customer experience. RPL operates the largest. with over 25% of total domestic capacity World‟s largest grassroots refinery. refinery in India. and quick synchronization of entire refinery complex within a world record timeframe of 3 months Capacity utilisation of 101% achieved in the second quarter of operations . with capacity of 27 mn tpa .a unique achievement even in the global context 8 .the 7th largest refinery in the world at any single location 30% + capital cost advantage. Reliance will further enhance long-term shareholder value. and most complex. over global peer group Flawless start-up.
Focusing on prudent financial management. Improving its technology. Implementing vertical integration. Investing in businesses that can scale rapidly and generate returns over an extendable period of time. Achieving economies of scale. investing in pipeline distribution infrastructure and accessing global markets. Identifying new businesses with high growth potential. which it believes will result in RIL gaining "dominant market leadership". It has the ability to increase production beyond the rated capacity through debottlenecking of operations at marginal costs. The 9 . enhancing global competitiveness. The company has also announced that it proposes to increase production from existing refining assets. This increased production from existing assets will contribute to increased profitability.STRATEGY RELIANCE INDUSTRIES LTD Building and sustaining leadership position across its product categories in the domestic markets. entering the business of retail marketing of petroleum products in India. and Aspire to be the lowest cost manufacturer/service provider. RELIANCE PETROLEUM LTD Reliance Petroleum (RPL) has outlined a growth strategy which will focus on leveraging its competitive strengths to secure leadership position in refining and marketing of petroleum products and enhance long-term shareholder value. Pursuing attractive export opportunities. and Investing in high growth opportunities. The major elements of RPL's growth strategy for the future will be maximising production from existing assets.
encompassing potential joint ventures and alliances. RPL's memorandum of understanding with Indian Oil Corporation for the formation of a joint venture for marketing and the company's participation in the process of disinvestment of IBP reflects this strategy.it already announced that it will be sponsoring international offers of GDRs against the existing equity shares held by Reliance Industries and all other categories of shareholders. 10 . RPL is the first Indian company to offer an opportunity to all shareholders for participating in an international offering of its shares . The company proposes to enter retail marketing of controlled products and is now evaluating a multi-pronged strategy. and/or development of its own distribution and marketing infrastructure.278 a tonne.500 crores). The competitive advantage of low per tonne capital cost will be further enhanced when the capacity is increased through debottlenecking. This is lower by 30 per cent as compared to the capital costs for refineries set up recently. acquisitions of marketing and distribution assets.project cost is Rs.250 crores which is Rs. RPL has obtained approval for India's largest ever syndicated foreign currency term loan facility for $750 million (Rs. Also. 5. 3. The other agreements are expected to be finalised shortly. RPL has announced that the average capacity utilisation for the first two months of the current quarter was a record 107 per cent. 14. Agreements for $500 million have already been signed.
enhanced flexibility and reduced volatility in the earnings stream. refining and marketing. These would result in strong financials. power and textiles. All these factors will enhance shareholder value. productivity gains. the merger has created a firm foundation for Reliance to compete with other global energy majors.REASONS FOR MERGER Reliance Petroleum Limited (RPL) merged into Reliance Industries Limited (RIL) In a physical sense. Above all. In a competitive sense. supported by a robust balance sheet and strong operational synergies.ranging from oil and gas exploration and production. this has enabled Reliance to complete the integration across the energy and materials value chain . The merger will bring about operational synergies. logistics advantages. 11 . the merger places Reliance in the reckoning for a place in the Fortune Global 500 list of the world's largest corporations. rationalization of business processes and optimization of fiscal incentives. The merger of Reliance Industries Limited and Reliance Petroleum Limited seeks to consolidate businesses across the value chain. cost efficiencies. petrochemicals. This is consistent with global industry trends.
RIL said it would issue one share for every 16 held in the unit. 6. as per the scheme of merger. Accordingly. Shareholders as they participate in the integrated energy chain of RIL. giving it direct control of the world‟s largest refinery complex. The merger enhances value for shareholders of both Companies. BENEFIT OF RIL-RPL MERGER: India‟s most valuable company (by market capitalization) – Mukesh Ambanicontrolled Reliance Industries Limited (RIL) has decided to absorb its Reliance Petroleum Limited (RPL) unit through a share swap arrangement. as per the approval granted by the Hon High Courts of Mumbai and Gujarat.92 crore new equity shares of RIL have been allotted to the shareholders of RPL. 12 . Below is the analysis from top brokerage houses across the country on the deal and who stands to benefit in the scheme of arrangement. Through this merger. complex refinery that complements its‟ existing refining assets. Shareholders of RPL received 1 share of RIL in lieu of every 16 shares of RPL held by them. The merger is expected to reduce the earnings volatility for RPL. Assets and liabilities of RPL have been transferred to RIL with effect from 1st April 2008.The merger of Reliance Petroleum Limited (RPL) with Reliance Industries Limited (RIL) has enabled seamless integration of operational scale and financial synergies That existed between the two Companies. RIL will additionally gain from reduced operating costs arising out of the combined operations. RIL consolidates a worldclass. The merger creates a platform for reinforcing the Company's position as an integrated energy company on a global scale.
RIL will additionally gain from reduced operating costs arising out of the combined operations. as per the scheme of merger. largest at any single location in the world Owning 25% of the world's most complex refining capacity Emerging as the 4th largest producer of polypropylene globally Becoming the world's largest producer of ultra-clean fuels at a single location 13 . The merger enhances value for shareholders of both Companies. Assets and liabilities of RPL have been transferred to RIL with effect from 1st April 2008. The merger is EPS accretive and results in the Company: Operating two of the world's largest and most complex refineries Owning 1. The merger of Reliance Petroleum Limited (RPL) with Reliance Industries Limited (RIL) has enabled seamless integration of operational scale and financial synergies That existed between the two Companies. as per the approval granted by the Hon.24 million barrels per day (MBPD) of crude processing capacity.92 crore new equity shares of RIL have been allotted to the shareholders of RPL. 6. Shareholders of RPL received 1 share of RIL in lieu of every 16 shares of RPL held by them. High Courts of Mumbai and Gujarat.RPL merger with RIL: Value creation through scale and synergies. Through this merger. complex refinery that complements its‟ existing refining assets. RIL consolidates a worldclass. The merger is expected to reduce the earnings volatility for RPL shareholders as they participate in the integrated energy chain of RIL. The merger creates a platform for reinforcing the Company's position as an integrated energy company on a global scale. Accordingly.
” Merger is India‟s largest ever RPL shareholders to receive 1 (one) share of RIL for every 16 (sixteen) shares of RPL RIL‟s holding in RPL to be cancelled.RPL MERGER HIGHLIGHT MUMBAI. No fresh treasury stock created RIL to be a top 10 private sector refining company globally RIL to become the world‟s largest producer of Ultra Clean Fuels at single location Merger to unlock greater efficiency from scale and synergies Merger to be EPS accretive RIL to have 3. thereby increasing its equity capital to Rs 1. It is a significant step in our goal to be among the largest global corporations.92 crore new shares. 2 March 2009: The Boards of Directors of Reliance Industries Limited (RIL) and Reliance Petroleum Limited (RPL) today unanimously approved RPL‟s merger with RIL.643 crore. Mukesh Ambani. Reliance Industries Ltd said: “This merger follows Reliance Industries‟ philosophy of creating enduring value for all our stakeholders. The exchange ratio recommended by both boards is 1 (one) share of RIL for every 16 (sixteen) shares of RPL. Commenting on the merger. Chairman and Managing Director. RIL will issue 6.RIL. subject to necessary approvals.7 million shareholders 14 .
Based on the recommended merger ratio.TENDER OFFER Under the terms of the proposed merger.227. RIL will issue 6.0% to 47. The appointed date of merger of RPL with RIL is 1st April 2008.4% increase in equity base from Rs 1.46 for one share of RIL 15 . the promoter holding in RIL will reduce from 49.0% Offer price was Rs. RPL shareholders will receive 1 (one) share of RIL for every 16 (sixteen) RPL shares held by them. RIL will cancel its holding in RPL.92 crore new equity shares to the existing shareholders of RPL.643 crore.574 crore to Rs 1. Consequently. This will result in a 4.
EPS (Earning Per Share) = = = = = = = = = = = = PAT/ No.98 11986045.VALUATION: The financial details of Tata Chemicals before merger and after merger are given as follows: (All amounts are in Rs.65 BEFORE MERGER 1.05 MPS / EPS 326. of Ordinary Pre-Merger 15309.32 1897.32/ 15737.05 / 15737.28 3. DPS (Dividend Per Share) 3.98 97.67 32703.28 Rs. Dividend / No. of Ordinary Shares 761. In Crores) Particulars PAT Dividend No.67 2084.12.98 Post-Merger 16235. 2. of Ordinary Shares 1897.36 times MPS* No.05 15737. Market Value 16 .60* 15737.568 Crore Rs.74 Shares Market Per Share 761.85 / 97. of Ordinary Shares 15309. P/E (Price-Earnings) Ratio 4.60 1074.98 Rs.
74 6.AFTER MERGER 1. to 49. of Ordinary Shares 16235.64 Rs. Market Value INTERPRETATION: From the above valuation it can be stated that after the merger the Earning per Share has reduced from 97.37 Rs. 2.65* 32703.74 49.64 21.74 35145074. of Ordinary Shares 2084. because of this reason. the P/E Multiples has also increased after the merger.65/49. After the merger the share price of Reliance Industries Ltd has increased. the market capitalization also increased. 17 . And hence.191 Crore Rs.67/ 32703. Dividend / No. Thus.65 times MPS* No. of Ordinary Shares 1074. MPS / EPS 1074. as the market price of the share goes up. DPS (Dividend Per Share) 3. Market Capitalization increased also because of the increase in the rise of the number of the ordinary shares.67/ 32703. EPS (Earning Per Share) = = = = = = = = = = = = PAT/ No. because of the increase in the number of shares and in the profit after tax And also the DPS (Dividend per Share) been reduced as the dividend amount also increased but not upto that extent increased in the number of shares . P/E (Price-Earnings) Ratio 4.64 Rs.28RS.
complex refinery with minimal residual project risk.CONCLUSIONS: We believe the deal is a win-win situation for both companies. the merger is expected to reduce Earnings volatility and allows them to participate in RIL's full energy value chain. while complementing RIL‟s product range. stronger Balance Sheet and lower cost of capital post merger. It creates a platform for value-enhancing growth and reinforces RIL‟s position as an integrated global energy company. The merger will enhance value for shareholders of both companies. The merger is EPS accretive for RIL. as RIL will have improved Cash-flow. For RPL shareholders. There will be further gains from reduced operating costs arising from synergies of a combined operation. Both the companies have lots of benefit and synergy between each other. 18 . RIL consolidates a world-class. The merger will unlock significant operational and financial synergies that exist between RIL and RPL. Through this merger.
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