Reliance Case study 1 PDF

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By- Group 01

Akshay Kawde - 08 Amandeep Bhatia - 10 Pratik Tiwari - 53 Ram Agrawal - 57 Sayali Bangale - 67 Vivek Kadam - 88

Group 01

/11/20

CCA-2 and TEA

COMPANY OVERVIEW

Reliance Industries Limited(RIL) is an Indianmultinational conglomerateheadquartered inMumbai,Maharashtra,India. Reliance owns businesses across India engaged in energy, petrochemicals, textiles, natural resources, retail, and telecommunications. Reliance is one of the most profitable companies in India,the largestpublicly traded companyin India bymarket capitalization,and the largest company in India as measured by revenue after recently surpassing the government-controlledIndian Oil CorporationOn 22 June 2020, Reliance Industries became the first Indian company to exceed US$150 billion in market capitalization after its market capitalization hit ₹11,43,667croreon theBSE. The company is ranked 96th on theFortune global 500,list of the world's biggest corporations as of 2020.It is ranked 8th among the Top 250 Global Energy Companies byPlatts as of 2016. Reliance continues to be India's largest exporter, accounting for 8% of India's total merchandise exports with a value of ₹1,47,755 crore and access to markets in 108 countries. Reliance is responsible for almost 5% of the government of India's total revenues from customs and excise duty. It is also the highest income tax payer in the private sector in India.

USP( Unique Selling Preposition)

1.Reliance Jio Lower prices and availability of free tools has always been the USP of Reliance JIO services. It was a surprising move for the entire nation when Reliance JIO offered free 4G services for almost two years. That became the major reason why so many people converted their mobile networks into Reliance JIO. Reliance JIO comes up with free packages exclusively available for JIO users. Like current collaboration of jio fibre with prime video which allowed users to access prime for free. Its continuously expanding its network to rural areas which provides an edge over other telecom services. The continuous investments from foreign companies shows that it has a long way ahead.

2.Reliance Retail Reliance retail stores provide their customers unlimited choice, outstanding value proposition, superior quality and unmatched experience across all its stores. reliance Retail’s initiative “bettering the lives” has brought millions of farmers and small producers to the forefront of the retail revolution by partnering with them for growth, which simultaneously expands horizon of reliance. Reliance Retail has emerged as the partner of choice for International brands and has established exclusive partnerships with many popular international brands.

Shareholding Pattern Holder’s Name Promoters FII’s NBanks Mutual Funds Central Govt. Others General Public Financial Institutions GDR

% Share Holding 49.14 24.53 4.98 0.19 2.06 8.58 7.85 2.66

As we can see promoters hold 49.14% of total shares of Reliance Industries Ltd. Amongst 49.14%, approximately 46.32% is with Ambani Family. Ambani ranked as the sixth richest billionaire in the world with the total net worth of $78.3 billion USD. Credibility of reliance promoters is never a doubt as ambani family is the major promoter.

Track Record with Historical holding of share of reliance industry by Promoters.

Financial Health

Interpretation: The table Depicts the financial performance comparison of Q2 with Q1 as the Stocks soared High after the 2nd Quarter Result were out.  Reliance being Capital Intensive industry, Investors highly focus on EBITDA before taking Investment decision the above table depicts a growth of 7.9% which really attracts Investors.  The Finance Cost has Reduced by -9.7% Which is again in favor of the Investor’s as they will now have a greater Chunk of profit Share as fixed obligation has reduced.

Consolidated Revenue Analysis for Q2 2021: Consolidated revenue Jumped 27.2% Q-o-Q.  Stronger recovery in Retail Operation, Revenue Jumped 30%QoQ  Jio sustained subscribers Addition with improvement in ARPU  ARPU RS 145 from Rs 140.in Q1 FY21, JIO Revenue up 7.2% Q-o-Q

Consolidated EBITDA Analysis Q2 2021: Consolidated EBITDA Increased by 7.9% Q-o-Q  Retail EBITDA at Rs 2,009 Cr up 85.5% Q-o-Q  Quarterly EBITDA for JIO RS 8,345 Cr up by 7% Q-o-Q

The above Table Depicts How Reliance can be a Debt Free Company •

On 31st March 2020 the company balance sheet depicted a Total Debt of 3,36,294 Cr Which reduced Subsequently to 2,79,251 Cr as per Data available on September 2020.

•

On September 2020 Company has a Probable Fund of (1,85,711+ 30,210 + 73,586) =Rs 289507 & the total debts of Company were Rs 2,79,251 Cr.

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If the Company would Utilize the Funds to pay off its Debts than Literally it would get Debt free with Surplus Remaining of Rs 10,256 Cr.

Response to Stock Market

Reliance industry was soaring high because of its two sectors which is Digital services and Retail sectors but currently the stock of reliance is trading flat with negative bias. The main reason behind this current trend of reliance is the deal between Reliance Retail and Future group which resulted into the acquisition of INR30000 cr worth of business assets to reliance which includes 1800 retail stores which will add 26000 cr of additional sales and this acquisition has benefitted reliance to become 7 times larger in terms of revenue than its closest rival Avenue Supermart. As the current market scenario depicts that Amazon has filed a suit against Future group and claiming the deal between Reliance and Future group to be invalid which resulted into the fall in share price of Reliance. Market sentiments are hit because of this news and stocks of reliance which were soaring high is now flat and negative. As we also saw that Reliance stock is overvalued and overvalued stocks are generally hit harder with such news.

Reasons

Reliance JIO. 

The share price of reliance was hit by Covid-19 as it hit its 52 weeks low of INR 867.82 on March 23rd as Indian government announced first 21day complete Lockdown in the country.

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At same time as the Indian population was confined to their houses the demand for telecom services and data operators increased dramatically.

 This came as an opportunity at the right time for Reliance Jio which was well established with a customer base of over 400 Million in the country and was ranked India’s second largest subscriber-based telecom operator in the country. 

At this time Reliance started getting investment from tech giants as well as other companies from all around the globe.

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Reliance raised $20 billion in just eight weeks, selling close to 33% stake, as valuation of Jio Platforms climbed to $60 billion, giving it the best funding round ever for any technology company.

Reliance Retail. 

After acquiring the second largest retail chain in India i.e. Future Retail group, that has brought in Rs 26,000 crore in additional sales to create a Rs1.89 lakh crore ($26 billion) retail empire spanning about 14,000 brick-and-mortar stores and the combine entity that is seven times bigger in terms of revenues than its nearest rival Avenue Supermarts, that runs D'Mart.

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After the deal, Reliance Retail also announced its online retail store ‘Jio Mart’ to be offered by its Jio platforms entity.

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The strategic investments done in the reliance Jio by global tech giants have sighted that Reliance is set to bridge the gap that restricted it to tackle the competition from competitors in the now growing online retail market.

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These have played a major role as a catalyst that helped Reliance retail to raise investments by global investors.

ROAD AHEAD

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Reliance has recently invested in making many platform for its huge customer base but the existing digital platform of competitors such as big basket, groffers, Netflix, amazon prime, etc. have better market penetration than reliance. Reliance needs to improve its digital existence.

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Reliance needs to implement the technological prowess gained from its strategic alliances to improve its services to the customers and use the technology for competitive advantage.

Recommendation

We recommend the solution to improve the digital existence of reliance to increase its revenue by gaining more market share through better market penetration. The idea behind this solution it to increase the revenue for reliance and will help to support other problems like gaining technological advancement. Increase in the revenue will also help to improve the market sentiments and the share prices will also soar high.

 The above data Depicts that Reliance Stock price on FY 2016 had EV/EBITDA Ratio of 8.89x Which is a perfect Scale to make investment.  On FY 2017 the Ratio become Greater than 10x So we can say the Stocks are Still perfect or Relatively Perfect for Investment as it has a high Growth potential.  On FY 2019 and FY 2020 the ratio was greater than 10x and the Shares are said to be Fairly Valued.

 The trend Depicts that sooner the Reliance Share will cross the 20X factor and be categorized as Over Valued Stock. But, increase in revenue will increase the EBITDA for reliance will ultimately decrease the EV/EBITDA ratio which is currently pacing fast and it can be said that sooner or later reliance stock will get overvalued and to overcome this situation we have came up with the solution to increase revenue....