Reliance Industries Limited_ver4.0

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Reliance Industries Limited

“Growth is Life”

Salil Sane – 126

Darshak Shah – 129

Roopesh Shah - 134

Saurin Shah – 135

Kewal Sharma – 137

Milind Shinde - 140



Agenda

Introduction to the Reliance GroupOrganizational StructureVision & Mission StatementCore Values & Commitment

Internal & External EnvironmentPorter‘s 5 Forces Mckinsey‘s Model

Strategic PlansM&AsCore & distinctive CompetenceOur Critical Evaluation & Analysis



Intro: Milestones achieved

Founded by Late Shri Dhirubhai Ambani as RelianceCommercial Corporation in 1966

RIL IPO was out in 1977 pioneering an equity cult

Maintained a CAGR of 20-25% in Turnover, net profit,

cash profit since 1977Reliance Petroleum Limited public issue - India's largestpublic offering in 1993

For setting an outstanding example of leadership,

Dhirubhai Ambani was awarded the Dean's Medal by theWharton School, University of Pennsylvania, USA, in1998



Intro contd…..

Major Group Companies are Reliance Industries Limited (including mainsubsidiary Reliance Retail Limited) and Reliance Industrial InfrastructureLimitedRIL launched Infocomm in 2002 which brought a major revolution in themobile tariff ratesReliance Infocomm acquired FLAG Telecom in 2003 which was the world‘slargest private undersea fiber optic cable system running 65,000 Kms

spanning 4 continentsRIL was the only Indian company to be in the Fortune 500 in 2004Reliance Retail entered the organized retail market in India with the launchof its convenience store format under the brand name of ‗Reliance Fresh‘

RIL is rated as 15th most innovative company in the world in 2008-9RIL is ranked 75th in 2009, in the FT Global 500 (up from previous year's

80th rank)Jamnagar Manufacturing Division bagged the 'Refinery of the Year Awardfor 2008', for second successive year from 'Petroleum Federation of India'



Org Structure - RIL

•Shri Dhirubhai H. Ambani Founder Chairman Reliance GroupDecember 28, 1932 - July 6, 2002

•Shri Mukesh D. Ambani

•Chairman & Managing Director

Mukesh Ambani

Shri. NikhilMeswaniExecutiveDirector

Shri. HitalMeswaniExecutiveDirector

Shri. H.S.KohliExecutiveDirector

Shri. PMS PrasadExecutiveDirector



Business Divisions

Petrochemicals : The world's largest producers of polymers. Polymerproduction in 2008-09 (Polypropylene, Polyethylene and PolyvinylChloride) is 3,076 kilo tonnes.

Exploration & Production : Enhancing India's energy landscape. KG-

D6 will result in a quantum leap towards achieving India's energysecurity as it will account for 40% of the Country's current hydrocarbonproduction.

Petroleum Refining and Marketing :RIL has 1.24 million barrels perday (MBPD) of crude processing capacity, the largest at any singlelocation in the world

Retail : Based on its core growth strategy of backward integration, RRLhas made rapid progress towards building an entire value chain startingfrom the farmers to the end consumers.

Textile : RIL‘s flagship brand ―VIMAL‖ is one of the most trusted brands

of premium textiles in the country



MISSION :

“In the light of anticipated robust growth in the Indian economy, and our

earnings growth forecast, we will endeavour to double the value of Reliance inthe next five years. We plan to achieve this goal through focused growth,capital efficiency and a single minded emphasis on shareholder value”

Vision & Mission

VISION :

"Our dreams have to be bigger. Our ambition higher. Our commitment deeper. And our efforts greater. This is my dream for Reliance and for India." - Dhirubhai Ambani

"Growth has no limit at Reliance. I keep revising my vision.

Only when you dream it you can do it .“ - Dhirubhai Ambani



Core Values

•Reliance believes that any business conduct can be ethicalonly when it rests on the nine core values

Honesty

Integrity

Respect

Fairness

Purposefulness

Trust

Responsibility

Citizenship

Caring



Commitment

Reliance is committed to holistic growth by concentrating onfollowing aspects

Quality

Research &Development

Health,Safety &

Environment

HumanResource

Development

EnergyConservation

CorporateCitizenship



Ideologies

"Dreams and Vision are the most potent fuels in the world."

"Impossible is an inspiring word"

"Hands on thinking, hands off execution."

"First time it is learning. Second time it is a mistake."

"Sense of urgency"

"Think. Anticipate. Be prepared." "Measuring success differently.”

“Asking the right questions."



Internal Environment

Internal:Clear objectives of org. from Top Management

Skilled Managers with higher level of decision powerKey Positions held by close family members Family Feud arising out of ownership issues post DHA era



External Environment

Liberalization of Indian economyIncrease in per capita spending capacity & changingconsumer habitChange in the government policiesFavorable environment for Telecom and IT



IndustryRivalry (Asdemandexceeds

supply, nointense rivalry)

Potential Entrants

• Barriers Due to high inputcost

• Economies of scale

• Political Influence on Govt.Reg.

Bargaining power ofsuppliers

• Monopolistic Market • No alternative for their inputs

Threat of Substitutes

• No alternative to plastic invarious applications

• No alternative to petroleumproducts

Bargaining power ofBuyer

• Few suppliers of crude • No alternative to crude• Suppliers threat of forwardintegration.

Porter‘s 5 Force

Analysis



McKinsey‘s 7‗S‘ model

SharedValues• ShareholderInterest

• People Care• Consumer Focus• Excellence inExecution

•Team Work• ProactiveInnovation

Staff• Young, dynamic,motivated

• Best, WellQualified

• Trained.

Strategy• CustomerFocused

• Innovation

• Execution withSpeed• Empowerment &Entrepreneurship

Structure• Dynamic• Derives mutualsynergies

Systems• Leadershipdevelopment

• Meritocracy

• EntrepreneurialEnvironment• Competitivecompensation

Skills• Excellence inQuality

• Stakeholdervalue creation

• Responsive toExternalEnvironment

• Hold core valuesof group

• Developworkforce‘s skills

Style• Action andResult Oriented

• Employees first

• AggressiveMarket player



Strategic Plans

• Expansion through Integration :

This is a classic example where backward integration was used as a method ofexpansion.



Strategic Plans

• Expansion through Diversification:

– Reliance‘s diversification has occurred in the

1990‘s when the company turned

aggressively towards Petrochemicals andTelecommunications, Petroleum Marketing,Retail Finance.

– Forayed into Retail Space by forming 27 newcompanies under Reliance Retail, e.g.Reliance Fresh, Reliance Trends



Strategic Plans

• Changing according to Economy& consumer habits

– Economic condition of the country andbuying power of the customers were quicklyidentified and Reliance forayed into businesswith high margins.

– Considering changing consumer habits re-launched Vimal as premium Brand.

– Forayed into IPL, Reliance Jewels, Education



Strategic Plans

• Generation of Finance: – Cheap sources of capital saved from high interest

rates from bank and other financial institutions.

– Manipulation by single individual and institution is notpossible.

– Prudent working capital & financial management

• Mergers & Acquisitions – Derive synergies,

– Expand markets

– Organic growth



Mergers & Acquisitions

– Key Mergers

• Reliance Industries And Reliance Petroleum – 2002 & 2009

– Key Acquisitions

• Polyester manufacturer 'Trevira' -2004

• IPCL -2002

• BSES- 2003

• FLAG Telecom- 2003• NOCIL – 2004



RIL-RPL Merger in 2002

External Environment faced

• Petrochemical prices were soft and the economy was down, leading to demand contraction

Internal Environment faced

• Difficult period in its then main business of petrochemicals for about 2 quarters in FY 2001-02

Strategy adopted

• RIL announced the merger of RPL with itself backdated from April 1,2001

Benefits gained

• Back-dating helped RIL to mask their under-performance by combining the cash-rich RPLbusiness with itself

• The merger of the original RPL in 2002 benefited RIL in terms of a large depreciation cover alongwith other tax benefits as RPL supplied a couple of products to RIL

• The Share Exchange Ratio was in favor of RIL‘s share holders (1:11)

• Merger placed RIL biggest refinery in world at single location, Largest in India .



RIL-RPL Merger in 2009

External Environment faced

• There were potential losses facing the company in crude futures market positions, currencyexposure and in the foray into retailing

Internal Environment faced

• The last couple of quarters of this fiscal (FY 2008-9) had been difficult ones for RIL

• Earnings actually declined in the third quarter ended December 2008 — the first such decline in12 quarters

Strategy adopted

• RIL announced the merger of RPL with itself

Benefits gained

• Mask their under-performance by combining the cash-rich RPL business with itself

• In the present instance, the merged RIL will benefit tremendously from the tax benefits that theNew RPL enjoys by virtue of its location in a special economic zone (SEZ)

• The Share Exchange Ratio was in favor of RIL‘s share holders (1:16) • RIL added a new, state-of-the-art refinery asset to its balance-sheet with just a tiny equity

expansion (worth few hundreds of crores vis a vis a 27,000 crore refinery project)



Acquisition of Trevira - 2004

• Benefits: – Reliance became the largest polyester fiber and yarns

producer in the world.

– Addition of a well known brand amongst customersand producers of synthetic fabrics.

– Addition of valuable patents and technologiestogether with strong R&D setup

– Synergy will provide comprehensive and innovativesolutions for apparel and industrial applications ofpolyester to customers worldwide.



Acquisition of IPCL - 2002

• Strategy:

• By acquiring IPCL, Reliance has effectively denied IOC theopportunity to get foothold in the domestic petrochemical industry.

• Benefits:

– Dominant player in the domestic petrochemical industry with amarket share exceeding 70% across most of the productcategories or near monopoly for few products.

– Immense synergies in feedstock sourcing and transportationbecause complexes of both the companies are located in same

region



Core & distinctive Competence

• Project implementation skills

• Capability to raise cheap finance

• Capability to manage the environment

• Vertical integration

• Operating at high productivity with innovativesolutions.

• Adopting cutting edge technology

• Identifying high growth opportunities • Business Continuity Planning in all critical areas of

business



Core & distinctive Competence



Critical Evaluation

• Reliance has demonstrated business acumen which has made them one ofthe most admired business conglomerates in world.

• Economies of scale. Biggest and best in every field.

• Adaptation to changing environment.

• RIL‘s indebtedness witnessed a phenomenal increase during the fiscal year

2007. The total debt of the company increased at a rate of 23% fromINR218,660 million (approximately $4,845.5 million) in the fiscal year ending2006 to INR269,520 million (approximately $5,972.5 million) in the fiscalyear ending 2007.

• Aggressive diversification, may lead to problems

• Foray in Petroleum marketing was unsuccessful due to government policies

• Viewed with skepticism & as market manipulator among certain sections ofcommunity.



Thank You !

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