SUBMITTED TO:DR. P.JANAKI RAMADU

SUBMITTED BY: GROUP 4

FINANCE B

GROUP 4ANKITA PANDEY (10SBCMPRIYANKA LAL (10SBCMSARIM RAHBAR (10SBCMSAURABH RATHI (10SBCM0534)SUKESH BHATT (10SBCM

ACKNOWLEDGEMENT

The satisfaction and euphoria that accompanies the successfull completion of

any task would be incomplete without mentioning the names of the people who

made it possible, whose continuous guidance and support crown all efforts with

success.

It is a matter of great satisfaction and pleasure to present this presentation on

“FINANCIAL ANALYSIS OF RELIANCE INDUSTRY LIMITED” of

refinery industry.

I would like to thank Dr. P. Janaki Ramudu for his continuous support and

guidance for creating a conducive environment in the institute for purposeful

education.

EXECUTIVE SUMMARY

The project assigned to us was to study the financial analysis of any organization in the

country.

We decided to choose India’s largest company Reliance Industries Limited, by market

capitalization, in a sector that has rapidly grown in last few years.

Through this report, we try to analyse the financial environment in which RIL is operating.

Through a thorough financial analysis, we have tried to evaluate the ratios to the company

growth and performance in last five years.

The financial statement of last five years are identified, studied and interpreted in light of

company’s performance, critical decisions of distributing dividends, issue of bonus

debentures and other current news are analysed and their impact of bottom line of the

company is assessed.

Finally we study ratio analysis, fund flow analysis and cash flow analysis of the company to

analyse the financial position of the company in last 5 years.

RELIANCE INDUSTRIES

LIMITED OVERVIEW

FINANCIAL ANALYSIS

RATIO ANALYSIS

Profitability Ratios

Gross Profit Ratio

2006 2007 2008 2009 2010

13.67 13.95 13.14 13.35 10.13

2006 2007 2008 2009 20100

2

4

6

8

10

12

14

16

Gross Profit of RIL

gross profit

Gross Profit ratio indicates the efficiency of production and pricing strategies applied by a company. In

simple terms, it measures the margin left after meeting all the manufacturing expenses including labour,

material and other manufacturing costs i.e. the costs which are directly related to the business. Going by

this definition it can be assumed that service industry players will normally have higher gross margins as

compared to players in manufacturing industries. This is primarily because they have lower

manufacturing costs. Moreover, range of gross margin varies across industries. The ratio is calculated as

follows:

Gross Profit Ratio = Net Sales - Cost of Goods Sold / Net Sales

Trend of the gross margins over a period of time provides a better meaningful insight into the business

strength rather than a single year's gross margin figure. A company earning a consistently high gross

margin over couple of years is in a better position to face the downturn in business cycles. However, a

company earning lower but a consistent gross margin over time is considered to be more stable compared

to a company boasting higher but a volatile gross margin. Significant fluctuations in the gross margin

figure can be a potential sign of fraud or accounting irregularities.

After the world starting recovering from the economic slowdown the demand of the crude-oil and other

related products soar up heavily which led to great demand of these products and hence the sales of the

RIL grew heavily. Also most of the refinery products of RIL is exported and the petrochemical(polyester)

products is consumed heavily in India itself with heavy market share of 84% in Polyester industry. So

RIL gross profit ratio is stable from 2006-2009 and it was decreased due to increase in net sales which is

good sign for the company.

Net Profit Ratio(%)

2006 2007 2008 2009 201011.13 10.64 14.45 10.65 8.35

2006 2007 2008 2009 20100

2

4

6

8

10

12

14

16

Net Profit of RIL %

net profit %

Net profit margin measures the profit available for distribution amongst shareholders (both equity and

preference) after meeting all the expenses during the given period of time. It indicates the efficiency of all

business activities conducted during the given period, such as production, administration, selling,

financing, pricing, and tax management. It is calculated as follows:

Net Profit Ratio = Net Profit / Net Sales

Analysis of profit margins along with the study of a company's cost structure enables the analyst to

identify the sources of business efficiency.

In Reliance Industries the Gross Profit has increased by Rs.2114.21 crores whereas the Net Profit has

risen by Rs. 926.35 crores only; this is mainly due to the increase in current taxes that is to be paid,

though the provision for deferred taxes has been reduced considerably.

Return on Capital Employed (ROCE) (%)

2006 2007 2008 2009 2010

17.37 18 15.68 10.96 11.35

2006 2007 2008 2009 20100

2

4

6

8

10

12

14

16

18

20

ROCE of RIL

roce

Return on capital employed shows the relationship between profit & investment. Its purpose is to measure the overall profitability from the total funds made available by the owner & lenders. The return on capital employed of 11.35% indicate that net return of Rs. 11.35 is earned on a capital employed of Rs.100. this amount of Rs. 11.35 is available to take care of interest, tax,& appropriation.

The return on capital employed is show-mixed trend, i.e. it increased in 2007 and finally decrease in 2008,then increased in 2010.The highest is in 2007 i.e. 18% This indicates a very high profitability on each rupee of investment & has a great scope to attract large amount of fresh fund.

ASSET MANAGEMENT RATIO

Inventory Turnover Ratio

2006 2007 2008 2009 20109.6 10.65 10.57 12.92 8.29

2006 2007 2008 2009 20100

2

4

6

8

10

12

14

INVENTORY TURNOVER RATIO OF RIL

INVENTORY TURNOVER

If we analyse the above graph the inventory turnover ratio of RIL was high in 2007-2008 but significantly

reduced in 2010 which is not so good sign. As low turnover ratio indicates the decrease in cost of goods

sold and the increase of average inventory. The inventory has increased up to Rs. 12,144.90 from sales of

Rs. 159.01 of inventories.

ASSET TURNOVER RATIO

2006 2007 2008 2009 2010

0.96 1.13 1.29 1.01 0.94

2006 2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

1.4

ASSET TURNOVER RATIO OF RIL

ASSET TURNOVER

This ratio is useful to determine the amount of sales that are generated from each dollar of

assets. As noted above, companies with low profit margins tend to have high asset turnover,

those with high profit margins have low asset turnover. Reliance Industries Limited asset

turnover seems to be relatively low, meaning that it makes a high profit margin on its

products. For companies in the retail industry you would expect a very high turnover ratio -

mainly because of cutthroat and competitive pricing.

Liquidity Ratios

Current ratio

Current ratio may be defined as the relationship between current assets and current

liabilities. This ratio is also known as "working capital ratio". It is a measure of general

liquidity and is most widely used to make the analysis for short term financial position or

liquidity of a firm. It is calculated by dividing the total of the current assets by total of the

current liabilities.

Formula:

Following formula is used to calculate current ratio:

Current Ratio = Current Assets / Current Liabilities

This ratio is a general and quick measure of liquidity of a firm. It represents the margin of

safety or cushion available to the creditors. It is an index of the firm’s financial stability. It is

also an index of technical solvency and an index of the strength of working capital.

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay

its current obligations in time and when they become due. On the other hand, a relatively low

current ratio represents that the liquidity position of the firm is not good and the firm shall not

be able to pay its current liabilities in time without facing difficulties. An increase in the

current ratio represents improvement in the liquidity position of the firm while a decrease in

the current ratio represents that there has been deterioration in the liquidity position of the

firm.

Current ratio: RIL vs. Industry

Year 2010 2009 2008 2007 2006RIL 1.54 1.06 0.98 0.90 1.03YOY 45% 8% 9% 12.6% -6.3%Industry 0.94 0.86 0.89 0.87 0.93YOY 9.3% -3.3% 2.3% 6.4% -2%

2010 2009 2008 2007 20060

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

RILIndustry

In managing its short term obligations RIL has an edge over the average of the industry over

the last 5 years .RIL does not have a very good current ratio, but it has a relatively better

current ratio as compared to that of the industry. RIL’s current ratio has steadily increased

since 2007, but there was a huge increase in the year 2010, when the growth was of 45%. RIL

has a high current ratio as compared with the average of the industry which implies that it has

the ability to pay its current obligations in time and when they become due.

QUICK RATIO

Quick Ratio = (Cash + Accounts Receivable + Short-Term or Marketable Securities) / (Current Liabilities)

Year 2009 2008 2007 2006 2005 2004 2003 2002 2001

Quick Ratio of company

0.8182 0.4992 0.3301 0.5022 0.5502 0.3319 0.3314 0.6649 0.3003

Quick Ratio of industry 0.4497 0.3071 0.2953 0.3523 0.3675 0.3004 0.3006 0.3828 0.2847

2009 2008 2007 2006 2005 2004 2003 2002 20010

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Quick Ratio of companyQuick Ratio of industry

INTERPRETATION:

For quick ratio the rule of thumb is higher is better and the ideal ratio is considered 1:1. All the current ratio value of industry and company is below 1 and all the values are positive. The cash position of industry and company is increasing year by year but the performance is quite satisfactory in case of company not industry. As the quick ratio of company is increasing from the year 2007 which indicate that the company is improving their performance. Quick ratio of company is more than quick ratio of industry.

CASH RATIO

Cash Ratio = (Cash + Short-Term or Marketable Securities) / (Current Liabilities)

Year 2009 2008 2007 2006 2005 2004 2003 2002 2001

Cash Ratio of company 0.6783 0.2033 0.1088 0.1708 0.2634 0.0218 0.0155 0.2611 0.0244

Cash Ratio of industry 0.2725 0.0852 0.3344 0.0754 0.1013 0.1863 0.0610 0.0961 0.04572

2009 2008 2007 2006 2005 2004 2003 2002 20010

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Cash Ratio of companyCash Ratio of industry

INTERPRETATION:

For the cash ratio the rule of thumb is also higher the better and the ideal ratio is 0.5:1. Cash ratio of industry and company shows fluctuation trend and shows positive values. In the year 2009 the cash ratio is above 0.5 which shows that the company has earn sufficient of cash. But the cash ratio of industry is below 0.5 which means the industry is not having enough cash.

INTER COMPANY ANALYSIS

INTER-COMPANY ANALYSIS

CURRENT RATIOyear RIL BPCL HPCL IOCL

2006 1.03 0.81 0.94 0.88

2007 0.9 0.73 0.88 0.85

2008 0.98 0.7 0.94 0.84

2009 1.06 0.6 0.98 0.76

2010 1.07 0.6 0.86 0.76

2006 2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

rilbpclhpcliocl

Current ratio is defined as an indicator of short-term debt paying ability of a company. It is

determined by dividing current assets by current liabilities. The higher the ratio, it is believed

that, the more liquid the company .Here we observe that the current ratio OF RIL which is

increasing year on year except during recession period ,in 2010 it has current ratio of 1.07

which is commendable and it shows company ability   of paying its obligations. While a

competitor of RIL i.e. BPCL, IOCL and HPCL has current ratio under 1 which suggests that

the company would be unable to pay off its obligations if they came due at that point. So by

analysing the current ratio we can observe that RIL has better position than its competitors.

Return on Net Worth (%)

year RIL BPCL HPCL IOCL

2006 21.9 3.77 4.72 17.78

2007 22.45 18.66 17.14 19.35

2008 21.64 14.4 12.61 18.34

2009 15.69 8.41 5.4 8.36

2010 13.37 12.2 11.68 21.62

2006 2007 2008 2009 20100

5

10

15

20

25

RILBPCLHPCLIOCL

The ratio of net income after taxes to total end of the year net-worth of the company is called

the RONW for that company. This ratio indicates the return on stockholder's total equity that

is invested in the business

EARNINGS PER SHARE

Year RIL BPCL HPCL IOCL

2006 65.1 8.04 11.97 21.04

2007 82.2 49.94 46.35 31.45

2008 105.3 43.72 33.48 29.2

2009 49.7 20.35 16.98 12.15

2010 49.7 42.53 38.43 42.1

2006 2007 2008 2009 20100

20

40

60

80

100

120

RILBPCLHPCLIOCL

Earnings per share, as it is called, are a company's profit after tax (PAT) divided by its number of Outstanding (equity) shares. It is therefore measured as the portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. As we can see in graph RIL EPS is much higher than its competitors indicating that RIL is in better position than its competitors.

PAT (Rs. CRORE)year ril bpcl hpcl iocl

2006 9069 292 405 49152007 11943 1806 1571 74992008 19458 1581 1135 69632009 15309 736 575 29502010 16236 1538 1301 10221

2006 2007 2008 2009 20100

5000

10000

15000

20000

25000

RILBPCLHPCLIOCL

It the net profit earned by the company after deducting all expenses like interest, depreciation

and tax. PAT can be fully retained by a company to be used in the business. However

dividend is paid to the shareholders. From this residue by analysing the above graph we can

see that PAT of RIL is much higher than its competitors from 2006-2010 which shows that

profit gain by RIL is much higher of its competitors. This clearly indicates that RIL is in good

position.

Debt-equity ratio: RIL vs. Industry

Year 2010 2009 2008 2007 2006

RIL 0.46 0.63 0.45 0.44 0.44

YOY -27% 40% 2.27% 0% -4.35%

Industry 0.7 0.84 0.72 0.69 0.67

YOY 17% 16.7% 4.35% 3% 10%

2010 2009 2008 2007 2006

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

RILIndustry

It's often used as an indicator of the amount of risk inherent in the shares of a particular

corporation .From the graph one can imply that the RIL’s debt –equity ratio is not that good

as compared to the industry as its debt equity ratio is lower throughout the last 5 years. This

shows that the company is not enjoying good run in the industry. The industry’s average is

good as it is more than 0.7 in the last 3 years. But RIL has even lower ratio than the industry,

which shows that RIL is not using much of debt as compared to equity.

Fixed Asset Turnover ratio

Fixed Asset Turnover Ratio : RIL vs. Industry

Year 2010 2009 2008 2007 2006

RIL 1.16 1.21 1.39 1.34 1.34

YOY -4% 8.6% 3.7% 0% -6%

Industry 3.44 3.60 3.46 3.41 3.34

YOY 4.5% 4% 1.5% 2% 7.5%

RIL’s fixed asset turnover ratio is relatively worse than the industry constantly in the last 5

years. It shows that the company is not been able to utilize its fixed assets as efficiently as the

other firms in the industry. In the last 5 years the RIL’s average fixed asset turnover ratio is

of 1.3 as compar4ed to industry’s 3.4.

2010 2009 2008 2007 20060

0.5

1

1.5

2

2.5

3

3.5

4

RILIndustry

DIVIDEND PAYOUT RATIO

YEAR 2006 2007 2008 2009 2010Dividend Payout Ratio

17.52 13.75 9.8 14.49 14.97

2006 2007 2008 2009 20100

2

4

6

8

10

12

14

16

18

20

Dividend Payout Ratio

Dividend Payout Ratio

The dividend pay-out ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher pay-out ratio.

A reduction in dividends paid is looked poorly upon by investors, and the stock price usually depreciates as investors seek other dividend paying stocks.

A stable dividend payout ratio indicates a solid dividend policy by the company's board of directors.

In the above figure, dividend payout ratio of RIL sharply decreased in 2007 and it reached its lowest point in 2008 because RIL reduced the dividend due to financial crisis that hit across the world.

FOREIGN EXCHANGE RESERVES

The company doesn’t holds any foreign exchange reserves for the last 5 years.

MARKET CAPITALISATION

Year RIL BPCL HPCL IOCL2006 110958 12781 10957 682292007 190680 10927 8371 466732008 329179 14868 8655 531322009 239721 13617 9112 461862010 351450 18680 10783 72049

2006 2007 2008 2009 20100

50000

100000

150000

200000

250000

300000

350000

400000

RILBPCLHPCLIOCL

The market capitalization of the company is defined as the market value of the number of equity shares being traded in the market at that point of time .Across companies too, the market capitalization has shown a net increase representing a good growth component in the sector and the confidence of the buyers who continue to buy the stocks of such companies.

Z – SCORE

EBIT/TA

YEAR 2006 2007 2008 2009 2010RIL 0.12 0.13 0.16 0.08 0.09

HPCL 0.07 0.15 0.1 0.11 0.13

2006 2007 2008 2009 20100

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

RILHPCL

One of the methods to find the Z-score is the ratio of earnings before interest and tax and total

assets. The standard value of this ratio is 2.3. In the above figure, this ratio is fluctuating year

after year for both RIL and HPCL. In 2008, RIL witnessed its highest value at 0.16, but in

2009, ratio of RIL declined drastically and HPCL surpassed RIL in 2010.

EBIT/TA

YEAR 2006 2007 2008 2009 2010RIL 0.12 0.13 0.16 0.08 0.09

BPCL 0.08 0.2 0.16 0.13 0.13

2006 2007 2008 2009 20100

0.05

0.1

0.15

0.2

0.25

RILBPCL

As shown in the above figure, RIL is consistently underperforming as compared to BPCL for

the last five years. BPCL reached its highest point of 0.2 in 2007 while RIL reached its peak

value of 0.16 in 2008.

EBIT/TA

YEAR 2006 2007 2008 2009 2010RIL 0.12 0.13 0.16 0.08 0.09IOC 0.17 0.24 0.19 0.12 0.2

2006 2007 2008 2009 20100

0.05

0.1

0.15

0.2

0.25

0.3

RILIOC

As shown in above figure, IOC is performing reasonably well compared to RIL in the last

five years. IOC reached its highest value of 0.24 in 2007 while RIL reached its highest value

of 0.16 in 2008. Despite being PSU, IOC performing well enough as compared to privately

owned RIL.

SALES/TA

YEAR 2006 2007 2008 2009 2010RIL 0.96 1 0.9 0.6 0.8

HPCL 2.1 1.3 2.41 1.54 1.6

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

RILHPCL

Another method of calculating Z-score is the ratio of sales and total assets. The standard

value of this ratio is 1. The value of this ratio for HPCL is always exceeded 1 for the last five

years indicating that its total sales exceeded its total assets every year. On the other hand, the

value of this ratio for RIL is consistently below 1 indicating that RIL has heavily invested its

money on the assets.

SALES/TA

YEAR 2006 2007 2008 2009 2010RIL 0.96 1 0.9 0.6 0.8

BPCL 2.31 2.58 2.13 2.03 1.4

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

RILBPCL

The value of this ratio for HPCL is always exceeded 1 for the last five years indicating that its

total sales exceeded its total assets every year. On the other hand, the value of this ratio for

RIL is consistently below 1 indicating that RIL has heavily invested its money on the assets.

But BPCL is gradually reducing its investments in fixed assets as shown in the figure.

SALES/TA

YEAR 2006 2007 2008 2009 2010RIL 0.96 1 0.9 0.6 0.8IOC 3.14 3.5 2.22 3.45 2.83

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

3.5

4

RILIOC

As shown in the above figure, for IOC, total sales was more than double the total assets in the

last five years where as RIL has invested heavily in assets either by acquiring smaller

companies or by purchasing fixed assets.

WORKING CAPITAL/TA

YEAR 2006 2007 2008 2009 2010RIL 0.04 0.05 0.1 0.05 0.08

HPCL 0.11 0.15 0.19 0.08 0.07

2006 2007 2008 2009 20100

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

RILHPCL

Another method of calculating Z-score is the ratio of working capital and total assets.

Working capital is a measure of both a company's efficiency and its short-term financial

health. The standard value of this ratio is 1.2. In the above figure, this ratio’s value for RIL is

lesser compared to that of HPCL. But in 2010, RIL surpassed HPCL by 0.01.

WORKING CAPITAL/TA

YEAR 2006 2007 2008 2009 2010RIL 0.04 0.05 0.1 0.05 0.08

BPCL 0.15 0.09 0.17 0.08 0.2

2006 2007 2008 2009 20100

0.05

0.1

0.15

0.2

0.25

RILBPCL

Positive working capital means that the company is able to pay off its short-term

liabilities. Negative working capital means that a company currently is unable to meet its

short-term liabilities with its current assets. In the above chart, the value of this ratio for

BPCL is almost two times that of RIL since the last five years.

WORKING CAPITAL/TA

YEAR 2006 2007 2008 2009 2010RIL 0.04 0.05 0.1 0.05 0.08IOC 0.12 0.07 0.17 0.04 0.1

2006 2007 2008 2009 20100

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

RILIOC

Working capital also gives investors an idea of the company's underlying operational

efficiency.  If a company is not operating in the most efficient manner (slow collection), it

will show up as an increase in the working capital. In the above figure, in 2008 IOC and RIL

have witnessed their highest value of 0.17 and 0.1 respectively, but in 2009 there was drastic

decrease in the values of both the companies.

RETAINED EARNINGS/TOTAL ASSETS

YEAR 2006 2007 2008 2009 2010RETAINED EARNINGS/TOTAL ASSETS

.61 .65 .66 .56 .63

2006 2007 2008 2009 20100.5

0.52

0.54

0.56

0.58

0.6

0.62

0.64

0.66

0.68

RETAINED EARNINGS/TOTAL ASSETS

RETAINED EARNINGS/TOTAL ASSETS

MARKET VALUE OF EQUITY/TOTAL LIABILITIES

YEAR 2006 2007 2008 2009 2010RETAINED EARNINGS/TOTAL ASSETS

.005 .007 .01 .003 .005

2006 2007 2008 2009 20100

0.002

0.004

0.006

0.008

0.01

0.012

MARKET VALUE OF EQUITY/TOTAL LIABILITIES

MARKET VALUE OF EQUITY/TOTAL LIABILITIES

Z – Score for RIL in 2010:

T1 = Working Capital / Total Assets = 0.08

T2 = Retained Earnings / Total Assets = 0.63

T3 = Earnings before Interest and Taxes / Total Assets = 0.17

T4 = Market Value of Equity / Total Liabilities = 0.005

T5 = Sales/ Total Assets = 0.96

Zones of Discrimination:

Z > 2.99 -“Safe” Zones

1.8 < Z < 2.99 -“Grey” Zones

Z < 1.80 -“Distress” Zones

Z-Score Bankruptcy Model:

Z = 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + .999T5

= (1.2*0.08) + (1.4*0.63) + (3.3*0.17) + (0.6*0.005) + (0.999*0.96)

= 2.5

Since the value of Z – score for RIL is 2.5; it is in grey zone i.e. RIL is performing

moderately for the last five years

SHARE PRICE MOVEMENT IN LAST 10 YEARS

The company Reliance Industries Limited has been giving dividend in every year for the last

10 years. The company issued bonus shares in the year 2009 and hence after that the share

prices of the company has been range bounded between Rs. 965- Rs. 1237. The company

share prices have been on a high during the boom period of2007-08 after which the economic

slowdown affected the share price of the company drastically and hence there is a dip in the

graph during the year 2008 to early 2009. The company during the period of 2008-09 also

merged its group company Reliance Petroleum Limited into itself by issuing 1 share for every

16 shares of RPL shareholders. The market has a strong sentiments value added to the share

price of the company. The share price of the company has a weightage of 12.14 % on the

index of National Stock Exchange (NSE) as per its market capitalization. The company also

made an all-time high of Rs. 2299.40 before the company issued the bonus shares in 2009.

Depreciation

Depreciation on fixed assets is provided to the extent of depreciable amount on written down

value method (WDV) at the rates and in the manner prescribed in Schedule XIV to the

Companies Act, 1956 over their useful life except, on fixed assets pertaining to refining

segment and SEZ units, depreciation is provided on Straight Line method (SLM) over their

useful life; on fixed bed catalyst with a life of 2 years or more, depreciation is provided over

its useful life; on fixed bed catalysts having life of less than 2 years, 100% depreciation is

provided in the year of

addition; on additions or extensions forming an integral part of existing plants, including

incremental cost arising on account of translation of foreign currency liabilities for

acquisition of fixed assets and insurance spares, depreciation is provided as aforesaid over the

residual life of the respective plants; on development rights and producing properties,

depreciation is provided in proportion of oil and gas production achieved vis-a-vis the proved

reserves (net of reserves to be retained to cover abandonment costs as per the production

sharing contract and the Government .

Year 2010 2009 2008 2007 2006

RIL 10497 5195 4847 4815 3401

2010 2009 2008 2007 20060

2000

4000

6000

8000

10000

12000

RIL

RIL

The depreciation has increased drastically from 5195 crores in 2009 to 10497 crores in 2010

due to the huge investment in the Plant & Machinery. Plant & Machinery at the end of 2009

stood at 124600 crores, but at the end of 2010 it went up to 186950 crores. With such a huge

investment in the Plant & Machinery the depreciation on Plant & Machinery is bound to

increase .From 2006 to 2009, depreciation has steadily increased from 3401 crores to 5195

crores as per the steady increase in the fixed assets.

Inventory

Year 2010 2009 2008 2007 2006RIL 34393 20109 19126 13456 11245

2010 2009 2008 2007 20060

5000

10000

15000

20000

25000

30000

35000

40000

RIL

RIL

Items of inventories are measured at lower of cost and net realizable value after providing for obsolescence, if any. Cost of inventories comprises of cost of purchase, cost of conversion and other costs incurred in bringing them to their respective present location and condition. Cost of raw materials, process chemicals, stores and spares, packing materials, trading and other products are determined on weighted average basis. By-products are valued at net realizable value. Cost of work-in-progress and finished stock is determined on absorption costing method.There was a huge jump of 70% in the value of inventory in 2010 over 2009. This is mainly because of the huge increase in the value of raw materials and finished goods inventories. In 2009, the value of raw material was 6000 crores ant it went up to 15000 crores. In 2009, the value of finished goods was 4700 crores and it went up to 9655 crores. Because of this there was a huge increase in the inventory. From 2006 to 2009, there was a relative increase in the inventory value.

LOOKING BEYOND NUMBERS

NEWS ABOUT DEAL WITH BP

With Rs 63,000 crore cash in hand, Mukesh Ambani can buy anything on earth - and even look for

the skies. The recently signed deal with British Petroleum (BP) has given Reliance Industries Ltd (RIL)

humongous financial muscle power. According to analysts this would enable India's biggest company

to easily diversify into several emerging businesses and scale them up quickly. As on December 31,

2010, RIL had Rs 31,000 crore of cash reserves in its balance sheet and the BP deal would make it

richer by a further $7.2 billion (Rs 32,000 crore) shortly. Putting together, RIL will have a war chest

of a minimum Rs 63,000 crore without factoring in the cash profits to be generated from the

December-March quarter. According to some group officials, the BP deal awaits government's

approval and the money should come in by the April-June quarter of 2011-12.

Analysts feel that much of the cash reserves would go into the existing exploration business and

capacity expansion of the petrochemicals arm. The RIL spokesperson declined to comment as to

what the firm would do with so much money. "RIL has decided to go big in shale gas in the US and

aggressively buy blocks. Most of the funds may go there. Apart from this, RIL has identified 4G

(fourth generation) telecom as a growth area and could pump in funds for this business," said a

research head of a foreign brokerage who asked not to be named. Mukesh Ambani has already

outlined plans to foray into power, broadband, education and hospitality businesses, and the market

has been agog with speculation since many months that he may buy out Reliance Communications

(RCom) from younger brother Anil Ambani. This could not be independently verified, though.

The BP deal and recent statements by Mukesh Ambani indicate that RIL is adopting an asset light

strategy. And if this is true, the Reliance Communications deal may not happen. But nothing can be

ruled out if a good asset is available cheap, analysts felt.

Reliance Industries Buys 95% Stake In Infotel Broadband

Reliance Industries has bought 95% stake in Infotel Broadband Services for Rs.4,800 Cr.

Infotel will issue fresh equity shares to RIL. Infotel Broadband Services has won pan India

Broadband Wireless Access spectrum license for 22 circles for around Rs 12,848 crore ($2.7

billion). The company has been promoted by Anant Nahata, son of Mahendra

Nahata of Himachal Futuristic that makes optical cables and fibres. So the company is

indirectly entering into the Telecom industry by entering into the Broadband Wireless

Auction and taking a call on the future technology that will rule the upcoming generations.

RIL bets big on power and telecom

Addressing the 36th AGM of Reliance Industries Ltd, Mukesh Ambani chalked out the major

plans of the company going forward. He divulged details of his aggressive and mega plans in

the oil & gas, power and telecom sectors. He opened the speech by his comment on his

company's estranged relationship with Anil-Ambani-led ADAG group. He said that his

company will have a constructive relationship with ADAG and will provide gas to ADAG

projects when they are ready. He said the company was conscious of government's stake in

gas operations. The senior Ambani remained concerned about the global uncertainties,

which he said, will have its impact on businesses. Slower than anticipated economic growth,

he feared, will give further rise to protectionism. Mukesh, however, lauded the Indian

government's efforts in sustaining growth. India is set to become the fastest growing

economy in coming years and Reliance Industries is well placed to take a lead position in

nation-building, he said. Elaborating further, Ambani said that the company has cash

equivalent of Rs 21,874 crore, which will give space for inorganic growth. He said that the

company is planning significant capacity in the polyester segment and to unleash new

petrochemical projects. For the same, the company is setting up a 2.3 mt PTA 5.4 lakh tonne

capacity.

On Oil and Gas sector

RIL is planning to set up coke gasification unit and will also start producing kerosene at

Jamnagar refining facility. He has informed that the company has already supplied 510

billion cubic metre of gas from D6 Block.