Reliance Industries (RIL) share price has given a strong return in the recent past, as is evident from the chart below. Reliance Jio (telecom), Reliance Infocomm, Reliance Petroleum, Reliance Retail are not listed as separate entities yet and hence no separate share prices are available for these entities, but the value is captured in the parent company’s price itself.
Delivering superior performance in today’s volatile and global environment requires sound strategy and disciplined execution. Reliance Industries achieved a number of milestones and performance records – underpinned by solid segment earnings growth, led by volume and margin expansion. Reliance has generated record cash profit of US$8.6 billion (Rs. 56,034 crore, up 31% over FY17) for the year FY18. Additionally, Reliance became the first Indian Company to record PBDIT of US$11.4 billion (Rs. 74,184 crore, up 34% over FY17) for FY18, with strong contribution from Energy and Materials business and the Consumer-facing business.
Reliance achieved consolidated revenue of Rs. 4,30,731 crore (US$66.1 billion), an increase of 30.5%, against Rs. 3,30,180 crore in the previous year. The robust performance for the year also reflects strong underlying fundamentals of Reliance’s refining and petrochemicals business. The Company’s hydrocarbon and consumer business demonstrated completion of its largest ever capital expenditure cycle, with all major project commissioned during the year, including Cracker, Paraxylene facilities, Ethane project and Wireless services. The structural strength in energy & materials business environment augurs well for Reliance’s new capacities that have come on stream this year.
Overview & Outlook Of Broad Segments Of Reliance Industries:
1. Refining and Marketing (R&M)
Refinery Configuration: RIL’s refinery at Jamnagar is among the largest and most complex refining assets globally, with a design capacity for processing 1.24 million barrels of crude per day (MMBPD) and Nelson Complexity Index, (a metric for quantifying and ranking the complexity of refineries) of 12.7. The complexity level of Jamnagar site is expected to improve significantly by several notches with the commissioning of J3 projects. The refinery’s complexity provides the ability to take advantage of opportunities arising out of market volatility to procure and process different qualities of crude, while meeting stringent product specifications. Additionally, RIL has significant flexibility to alter the product mix, to capture higher net backs with changing product supply demand dynamics. The commissioning of Refinery Off Gas Cracker(ROGC) and downstream units has provided further integration with petrochemical, enabling higher value addition.
Crude Selection and Sourcing: RIL’s refinery configuration and logistics infrastructure availability allows crude portfolio optimisation. With inherent design flexibility, RIL optimises the crude diet through a mix of term and spot supply contacts, sourcing the most advantageous crude globally. Eight new crude grades were processed in FY 18, including new North American crude.
Operational excellence with continuous innovation: RIL continuously focuses on de-bottlenecking, capacity enhancement, energy conservation, and product quality improvement to enhance its competitive strengths. In FY 2017-18, these efforts included: • Implementation of energy conservation initiatives to minimise fuel consumption • Upgradation of logistics facility to export high value Tertiary amyl Methylene Ether (TAME)
Logistics and supply-chain: Jamnagar has a unique locational advantage with proximity to key sources of crude supply and large product markets. RIL has state-of-the art logistics infrastructure to support the largest refining hub at Jamnagar. It includes marine facilities, rail and road loading facilities and pipeline connectivity for cost-efficient product evacuation. Marine facility comprising all-weather port and dedicated pipeline infrastructure, enables berthing of wide range of ships from Very Large Crude Carriers (VLCC) to small chemical carriers. It also supports coastal movement of products to the domestic market. RIL optimises freight costs through opportunistic use of time charters.
Market access and responsiveness: RIL continued to expand its global market reach by finding new sinks for gasoline in Latin America and Australia and gasoline to Brazil. RIL’s global outreach, including trading offices at key locations like Houston, London, Singapore and Mumbai, gives it a broad coverage for crude supplies and product sinks. Tankages at Rotterdam, Ashkelon and Singapore locations allow RIL to move its selling point closer to consumption hubs and improve responsiveness to market needs.
With commissioning of ROGC and final phase of Paraxylene complex expansion, the petrochemical intensity of the Jamnagar refinery has increased, improving value addition to refinery streams. With ROGC start-up, ethane and ethylene from refinery fuel gas is further value added to MEG, LDPE and LLDPE.
Major Products & Brands
• Propylene - Feedstock for polypropylene
• LPG - Domestic, commercial and industrial fuel
• Naphtha - Feedstock for petrochemicals such as ethylene, propylene & fertilisers etc. as fuel in power plants
• Gasoline - Transport fuel
• Alkylate - High Octane blend stock for gasoline
• Superior Kerosene Oil - Domestic fuel
• High Speed Diesel - Transport fuel
• Sulphur - Feedstock for fertilisers and pharmaceuticals
• Petroleum Coke - Fuel for power plants, cement plants and feed for gasification
FY18 Financial Performance
Revenue from the Refining and Marketing segment increased by 22.0% y-o-y to Rs. 3,06,095 crore (US$47.0 billion) including inter segments transfers, primarily on account of higher crude prices during the year. Segment EBIT increased by 3.2% to a record level of Rs. 25,869 crore (US$4.0 billion), supported by higher Gross Refining Margins (GRM). GRM for the year was at a 9-year high of US$11.6/bbl , against US$11.0/bbl in the previous year. RIL’s GRM outperformed Singapore complex margins by US$4.4/bbl, above its 5-year average outperformance. This reflects the robust operational performance, superior configuration and consistent high utilisation of refineries at Jamnagar complex. As at the end of the year. RIL’s superior retail proposition reflects in the higher offtake, with a 42% increase in MS and HSD volumes.
We expect refining margins to rise steadily as middle distillate margins rise with declining global product inventories. We estimate about one-quarter of slippages in start up of 6 of the remaining 10 gasifiers that have not yet ramped up.
The Jamnagar Pet-coke Gasification is one of largest ‘Clean Fuel’ projects in the world. Pet-coke gasification upgrades pet-coke, a low value refinery residue, into clean syngas, to substitute high cost LNG imports. This will help in reducing the impact of LNG price volatility. The pet-coke gasification project shall transform Jamnagar into a unique “bottomless” refinery. Syngas, from pet-coke gasification, shall be captively consumed for Hydrogen (H2), co-gen fuel and heater fuel, at the Jamnagar complex. H2 shall be used in hydro-processing units to generate clean fuels of gasoline and diesel. Syngas, as co-gen fuel, shall minimise the utility cost of the Jamnagar complex, exploiting LNG and pet-coke price arbitrage. Syngas as heater fuel, via Synthetic Natural Gas (SNG), shall unlock the ethane and ethylene potential in the refinery off-gas for maximum value addition to petrochemicals, via the ROGC. Pet-coke gasification enables indirect “Petcoke-to-Ethylene”, for cost-competitive, “Make-in-India” petrochemicals. DTA Gasification has been started and currently, under stabilization and optimization. SEZ Gasification is under commissioning. The Jamnagar pet-coke gasification is projected to have a major impact on the Jamnagar complex operations in FY 2018-19.
A few key points from the management commentary:
• RIL de-bottlenecked capacity of diesel producing units (DHDS) and has started using US crudes, which should lower impact from disruption from Iranian and Venezuelan supply. RIL highlighted that it still continues to receive Venezuelan crude
• Due to the de-bottlenecking of the refinery, utilisation rate was lowered to 107%, which we estimate should normalise to 115%+
• RIL can use 15-20% coal instead of petcoke in its gasifiers, if the Indian government were to ban imports of petcoke. RIL will require 25% of its petcoke requirements once gasifiers are fully ramped up. However, the company does not see a ban on imports for gasifiers and cement kilns.
Major Products & Brands
• Brand Repol - Polypropylene (PP) for Woven sacks, leno bags, TQ & BOPP films, films and containers, components for automobile and consumer durables, moulded furniture
• Brand Relene - Polyethylene (HDPE, LLDPE & LDPE) for Woven sacks, raschel bags, containers, industrial crates & containers, carrier bags, housewares, ropes & twines, pipes
• Brand Reon - Polyvinyl Chloride (PVC) Pipes & fittings for door & window profiles, insulation & sheathing for wire & cables, footwear, flooring, partitions, roofing
• Brand Relpipe - Poly-Olefin HDPE and PPR pipes for Irrigation, water supply projects, sewerage and drainage, mines, coal fields, industrial water/fluids/effluents transportation, gas distribution network, telecom cable ducts and micro ducts for FTTx, plumbing & construction
• Relflex™ Elastomers - Synthetic Rubbers for Tyres, Footwear soles & heels, belts & hoses
• Relflex™ Cisamer PBR Polybutadiene Rubber (PBR) for Automotive Tyres, Tyre treads, Conveyor & V-Belts, Sports Goods & Dock Fenders
• Relflex™ Stylamer - SBR Styrene Butadiene Rubber (SBR) for Tyres, Footwear, Conveyor belts, Hoses & Mechanical rubber goods
• RelWood™ A superior wood substitute that looks & feels like wood but, is much stronger. It is made from a unique Composite of Natural Fibres, Polymers & Specialised Blends of additives, using patented German Technology. RelWood™ can be moulded to make flowing construction, installations and furniture for indoor as well as outdoor usage
• RelX Composites for Windmill Blades, Rotor Blades, Modular Buildings, GRP piping systems
Major Products & Brands
• Relab Linear - Alkyl Benzene (LAB) for Detergents
• Polyester & Fibre Intermediates
• Paraxylene (PX) - Raw material for PTA P
• Purified Terephthalic Acid (PTA) - Raw material for polyester
• Mono Ethylene Glycol (MEG) Raw material for polyester
• R|Elan™ - Portfolio of Speciality new-age Fabrics for Apparels
• Recron® Polyester Staple Fibres, Polyester Filament Yarns, Speciality Polyesters for Apparel, Home textiles, Technical textiles & Non-wovens
• Major Products & Brands – Petroleum Retail
• Reliance Gas - Liquefied Petroleum Gas (LPG for Domestic commercial and industrial fuel)
• Reliance Petroleum Retail -Transportation fuels / Retail distribution of fuels
• Reliance Aviation Jet / Aviation Turbine Fuel
• Auto LPG - Auto fuel outlet
• Trans Connect - Fleet Management Services & Solutions
• A1 Plaza - Highway Hospitality Services, Highway food plaza
• Qwik Mart - Shopping of beverages, snacks, gifts on highways
• Refresh Foods - Passengers amenities/food court on highways
• Relstar Lubricants
Revenue from the Petrochemicals segment increased by 35.5% y-o-y to Rs. 1,25,299 crore (US$19.2 billion), including inter segments transfers, primarily due to higher volumes from new Paraxylene, ROGC and its downstream units (PE and MEG). Petrochemicals segment EBIT increased sharply by 63% to its highest ever level of Rs. 21,179 crore (US$3.2 billion). Earning was supported by favourable product deltas across integrated polyester chain, PP and PVC along with volume growth. EBIT margin was higher by nearly 300bps to 16.9%, reflecting RIL’s strengthened cost positions across product chains and unmatched feedstock flexibility
Petrochemical Segment performed exceptionally well for the year, even though the global petrochemicals industry continues to face a highly uncertain business environment. Consolidating its leadership position, Reliance progressed rapidly on initiatives to enhance petrochemical capacities, strengthen integration, improve feedstock security and bolster sustainability.
Capex and Growth Plan
ROGC Project: RIL successfully commissioned and achieved design throughput of the World’s largest Refinery Off-Gas Cracker (ROGC) complex of 1.5 MMTPA ethylene capacity at Jamnagar. The ROGC complex is built on Reliance’s core philosophy of deep feedstock integration to establish industry leading cost and efficiency benchmarks. This innovative approach of integration with refineries provides a sustainable cost advantage, making ROGC competitive, with respect to the crackers in the Middle East and North America, which have feedstock cost advantage. The integrated with downstream facilities of LDPE, LLDPE and MEG. The ROGC will help RIL to achieve scale and significantly boost product stewardship and market offerings. This complex marks a paradigm shift in the profitability and sustainability of RIL’s petrochemicals business.
Ethane project: RIL successfully completed the world scale ethane import project last year. All the six VLECs are operating at full capacity and delivering cargoes to Dahej. Ethane cracking at Dahej and Hazira have been streamlined and both the plants achieved the highest ever ethylene production. Modification of feedstock flexibility at Nagothane is also completed and the complex is ready to receive ethane for cracking. complex is also
Going ahead, RIL will shift more of its olefin capacity to gas feedstock by next quarter at its Nagothane cracker. PX margins should rise from cash cost levels and PTA margins should be sustained at high levels. The potential weakness in PE prices should be negated by a decline in US ethane prices. We expect a higher utilization rate for the existing facility, which RIL continues to invest in and debottleneck. Downstream integration into butyls and carbon composites is another positive.
Margins for the polyester value chain (PTA/PET) are recovering faster than expected. Demand growth from recycled plastics, supply consolidation, and rising marginal industry costs are driving a V-shaped recovery in 2018. Polyester margins have risen to above mid-cycle levels, which we believe could be a new norm until 2020. PET margins have more than doubled YTD in Asia (~35% above mid-cycle levels), PTA margins are up 31% YTD (near midcycle levels).
RIL’s Ethane import project is now being supported by a fully operational fleet of 6 Very Large Ethane Carriers (VLEC) and crackers have started receiving shipments of Ethane from USA. The installation of Refinery Off Gas Cracker (ROGC) and downstream projects at Jamnagar have been completed successfully during the year and plants are operating at designed capacities. FY 2018-19 will reflect full impact of all new initiatives and organic expansions are poised to drive sustainable earnings growth.
Continuing to augment its customer centricity and consumer orientation, Petrochemicals business has progressed further on the expression of ‘Chemistry for Smiles’. Reliance has created R|Elan™ – a portfolio of specialty fabrics, a perfect blend of ‘art’ and ‘smart’. Reliance is developing new lines of business in the Advanced Materials & Composites and the capabilities to design and print a wide range of products using 3D Printing technology. To minimise any impact on environment, Reliance deploys world-class technologies across all sites to reduce fresh water consumption per unit of production, by maximising waste water recycle and minimising external discharge.
3. Oil & Gas Exploration & Production
Reliance’s upstream business encompasses the complete chain of activities from acquisition to exploration, development and production of hydrocarbons in both conventional and unconventional areas. Reliance has an advantageous position in offshore (deep-water) capabilities, coupled with the knowledge of operations in unconventional areas such as CBM and Shale Gas.
Major Products & Brands
• Crude Oil and Natural Gas Refining, power, fertilisers, petrochemicals and other industries
FY18 Financial Performance
Revenue from the Oil and Gas segment increased by 0.3% y-o-y to Rs. 5,204 crore (US$0.8 billion), including inter segments transfers. The marginal rise in revenue is due to ramp-up in CBM operations and better price realisations in US shale operations. Volumes from conventional fields and US shale were lower on account of natural decline and slowdown in development activity. Segment EBIT was at Rs. (1,536) crore as against Rs. (1,584) crore in the previous year. For the year, domestic production (RIL share) was at 78.9 BCFe, down 16.9% y-o-y and in US Shale (RIL share) business was 139.7 BCFe, down 19.7% y-o-y basis
Capex and Growth Plan
KG D6: Reliance announced plans to embark on the next wave of projects to develop existing hydrocarbon discoveries in KG D6 Block. The three planned projects - R-Cluster, Satellite Cluster and D55 (MJ) fields, are expected to bring onstream additional 30-35 million cubic metres (~1 billion cubic feet) of gas per day, in phases, over 2020-22. With these projects Reliance will venture into ultra-deepwater and High Pressure, High Temperature areas - a first in India. Reliance has rich project execution experience including knowledge in deep-water oil & gas projects. Additionally, it expects to leverage its partnership with BP, existing infrastructure in the Krishna-Godavari Basin and current downturn in the capital equipment & service provider market. Production from these projects is expected to reduce India’s import dependence and amount to over 10% of the projected gas demand in 2022, benefitting India and domestic consumers at large. RIL along with its JV partner plans to invest Rs. 40,000 crore (~US$6 Bn) to develop the discovered deepwater resources in the KG D6 Block. For R-Cluster development, all major contracts have been awarded. Engineering & fabrication activities have commenced. In FY 2018-19, Reliance plans to commence drilling & completion for development wells and its first offshore installation campaign. Management Committee (MC) has approved the Field Development Plans for MJ fields, Satellite fields and Other Satellite fields in February, 2018. Reliance has initiated contracting long lead items for wells and facilities for these projects. Simultaneous development of the three projects will enhance overall capital efficiency and build on project synergies.
CBM: To sustain plateau production, further CBM development is being undertaken. Development activities of block SP (West)–CBM–2001/1 Phase II and SP (East)–CBM–2001/1 block is currently underway. Phase II includes drilling and completion of more than 180 wells along with an additional gas gathering station and associated water gathering stations for collection and processing of CBM Gas and water respective
2017 was a turbulent year for the global oil & gas industry driven by changing demand-supply equations coupled with geo-political issues resulting in steady increase in crude prices. Brent prices ranged from US$45/bbl in June to ~US$64/bbl by the end of the year. Average West Texas Intermediate (WTI) crude oil prices for 2017 was also higher 18% y-o-y averaging at US$50.95/bbl, US Natural Gas prices remained strong and Henry Hub (HH) Gas price stayed close to or above US$3/MMBTU for most of the year. Encouraging demand from LNG and Mexican exports coupled with subdued supplies supported higher gas prices. With respect to Shale Gas operations, WTI and HH prices were higher y-o-y, with WTI oil prices 18% higher at US$50.95/bbl in CY 2017 and HH Gas prices 26% higher at US$3.11/MMBTU. Also, gas and condensate benchmark differentials improved.
Upstream capital spending is expected to grow in 2018. Major project FIDs are expected to come in unconventional and deep-water areas (Brazil and GOM), with Operators taking advantage of oversupply in the service sector to lock in at lower costs.
2017 was a turbulent year for the global oil & gas industry driven by changing demand-supply equations coupled with geo-political issues resulting in steady increase in crude prices. Brent prices ranged from US$45/bbl in June to ~US$64/bbl by the end of the year. Average West Texas Intermediate (WTI) crude oil prices for 2017 was also higher 18% y-o-y averaging at US$50.95/bbl, US Natural Gas prices remained strong and Henry Hub (HH) Gas price stayed close to or above US$3/MMBTU for most of the year. Encouraging demand from LNG and Mexican exports coupled with subdued supplies supported higher gas prices. With respect to Shale Gas operations, WTI and HH prices were higher y-o-y, with WTI oil prices 18% higher at US$50.95/bbl in CY 2017 and HH Gas prices 26% higher at US$3.11/MMBTU. Also, gas and condensate benchmark differentials improved. Upstream capital spending is expected to grow in 2018. Major project FIDs are expected to come in unconventional and deep-water areas (Brazil and GOM), with Operators taking advantage of oversupply in the service sector to lock in at lower costs.
4. Organised Retail
Reliance Retail has developed and strategically positioned wide array of stores with a mind-set to serve customers and achieve leadership within its category. The strategy has worked well as Reliance Retail has achieved leadership in key consumption baskets and has emerged as India’s largest retailer.
Reliance Retail is the retail initiative of Reliance Industries and an epicentre of its consumer facing businesses. It has adopted a multi-retail concept strategy and operates a wide array of store concepts which caters to diverse needs of the customers across core consumption baskets of Grocery, Consumer Electronics, Connectivity, Fashion & Lifestyle and Petro Retail.
Major Products & Brands - Owned
• Ajio - Online fashion store offering apparels, accessories, footwear and much more
• Jio Stores - Speciality Store for mobility & communication offering latest assortment of mobiles, tablets, laptops, accessories
• Project Eve - Apparel speciality store catering to entire fashion & lifestyle needs of women
• Reliance Digital Electronics - speciality store offering wide range of consumer electronics, home appliances, entertainment, gaming merchandise
• Reliance Footprint Footwear - Speciality stores dealing in footwear, handbags and accessories
• Reliance Fresh - Dealing in fresh fruits & vegetables, food, grocery and items of daily use
• Reliance Jewels - Fine jewellery with offerings across gold, silver, diamond, precious stones and other precious metals Reliance
• Market Wholesale - cash & carry store dealing in grocery, clothing, footwear, electronics and general merchandise
• Reliance Resq Consumer electronics providing after sales service for consumer electronic products
• Reliance Smart - Supermarket dealing in fresh fruits & vegetables, food, clothing, footwear, electronics and general merchandise
• Reliance Smart.in - Online grocery store dealing in fresh fruits & vegetables, food and general merchandise
• Reliance Trends - Apparel speciality store offering wide range of apparel, handbags, footwear and accessories
• Reliance Trends Woman - Offers curated collections of Indian women wear and accessories
Major Products & Brands – In Store and Exclusive Brand Partnerships
• Avaasa - Ethnic Indianwear inspired by Indian ethos and art forms (Apparel for Woman)
• DNMX - Denim inspired casuals for men, women and children
• Netplay Smart casuals for the free spirited
• Performax - Apparel and footwear for men, women and children
• Point Cove - Smart casuals for kids inspired by California
• Teamspirit Sport Inspired Casualwear
• LYF - 4G Mobile Handsets and Connectivity Devices
• Reconnect - Electronic gadgets and accessories
• Enzo Matic - Detergent Powder
• Best Farms - Premium Grade Farm Produce brand
• Good Life Clean, Hygienic and Wholesome food products
• Armani Exchange - Unisex casual wear brand from the Armani house
• Bottega Veneta - Luxury bags, Shoes, Accessories
• Brooks Brothers - American iconic brand for Apparel and accessories for men
• Canali Tailor - Men’s formal wear
• Other Exclusive Partnership Brands: Cherokee, Coach, DC, Diesel, Dune, Emporio Armani, Ermenegildo Zegna, Flormar, Furla, Giorgio Armani, GAS, G Star Raw, Hamleys, Hugo Boss, Hunkemoller, ICONIX, Istore, Jimmy Choo, Kate Spade, Marks & Spencer, Michael Kors, MUJI, Paul & Shark, Paul Smith, Payless, Thomas Pink, Quiksilver, Roxy, Scotch & Soda, Steve Madden, Superdry, TUMI, Villeroy & Boch, Vision Express etc.
Textiles Major Products & Brands – Owned
• Only Vimal - Suitings, Shirtings, Readymade Garments
• MarcoMancini Suitings, Shirtings
• Protector Anti-dust, Anti-Microbial, Quick Stain Release & Anti-Pollen Fabric Finish Technology for Fabrics and Apparel
• Only Vimal Sarees - Sarees and Dress Material for Women
• Vimal Gifting Ready-to-stitch, take away fabric in gift packs
• D-Creased - Smooth and Wrinkle-Free Fabric Finish Technology
• Nice - Cool Moisture-Absorb Fabric Finish Technology
• V2 - Ready-to-stitch, Take away fabric
• DEO2 - Anti-Microbial Fabric Finish Technology
FY18 Financial Performance:
Revenue from the Organised Retail business grew by 104.9% y-o-y to Rs. 69,198 crore from Rs. 33,765 crore in the previous year. Reliance Retail has become the first retailer in India to cross the US$10 billion revenue milestone. Retail business PBDIT grew sharply by 114.5% to Rs. 2,529 crore for the year. Retail segment EBIT increased by 163.3% to Rs. 2,064 for the year. EBIT margins for segment expanded by 70 bps to 3.0% during the year
Reliance Retail has been one of the catalysts in the growth of modern retail in India. With its Pan-India presence, Reliance Retail has attained a leadership position in the industry that is capable of delivering unmatched customer experience at a scale comparable to none. With 7,573 Retail stores, 495 Owned Petro Retail Outlets and 4,400+ Cities presence, Reliance Retail is India’s Largest Retailer. The performance is a reflection of strong business fundamentals and focussed execution by a highly trained and capable team. Reliance Retail is leveraging RIL’s ecosystem and group strengths to fuel the next stage of growth. Reliance Retail continues to deliver its promise of trust to all its customers, suppliers and employees.
Over the past decade, Reliance Retail has built India’s largest retail infrastructure with 7,573 brick and mortar stores across 4,400+ cities, 5.6 million+ sq. ft. of warehousing facility, a captive fleet of over 1,300 dedicated trucks, state of the art IT systems to manage entire retail operations and e-commerce presence serving more than 12,000 pin codes. This investment has helped Reliance Retail achieve an unprecedented growth in India’s organised retail market. Keeping pace with the market growth and evolving consumer shopping habits, Reliance Retail has a planned roadmap to capture a significant share of the organised retail. With aggressive expansion plans, Reliance Retail is getting future ready and set to further strengthen and consolidate its leadership position in organised retail.
This expansion will be achieved through the following key pillars:
a) Augmenting geographical reach across all consumption baskets: “Bettering the Lives of Indians” every day has been the core focus of Reliance Retail since inception. Reliance Retail has the ambition of reaching the hinterlands of the country and is putting together a framework of expanding each store concepts across tier 2, tier 3 cities and beyond to achieve market leadership. It will leverage and interplay strengths with Reliance Jio to execute this.
b) Innovating newer store concepts and channels to meet customer expectations: During the year, Reliance Retail rolled out and expanded newer store concepts like Project Eve and Trends Woman. These newer concepts are already resonating with target customers. In order to cater to growing and diverse customer needs, Reliance Retail will continue to innovate and partner with revered international brands to bring world-class products and services to Indian consumers.
c) Enhancing customer experience across all concepts and channels: Convergence of Online and Offline retailing is being followed by all retailers to offer seamless experience to their customers. As part of 2.0 initiatives, Reliance Retail is operating a connected store concept providing anytime, anywhere, any device seamless customer experience. This provides an omni-commerce, omnipresence reach to Reliance Retail. In order to enhance this reach and augment customer experience, more initiatives are being planned, which will be rolled out in a phased manner.
d) Leveraging technology, data and insights across the value chain for agility and transformation: Today, the Indian consumers, especially the millennial, are becoming connected, digital-savvy, brand conscious and quality oriented. Global retailers are leveraging disruptive advanced technologies such as artificial intelligence, automation, virtual/augmented reality, robotics, big data analytics and internet of things to offer experience & lifestyle-driven opportunities to customers. Reliance Retail will be adopting next generation technologies that is robust to handle ever increasing volumes, flexible to meet diverse customer expectations and automation to improve productivity, efficiency and agility.
Going ahead, we expect earnings to double in 2 years (after more than doubling in F18) we continued margin expansion, through new store openings and retail pump station expansion. Q1FY19 showed sustained momentum in new store additions and higher EBITDA per square feet of retail space, which rose 40% QoQ with EBITDA margin rising 130bps, to 4.7% QoQ. This drove a 45% QoQ increase in retail EBITDA.
5. Digital Services
The Group’s digital communications and services initiatives under Jio umbrella brand have captured unprecedented adoption and recognition not only in India, but also world over. The flagship digital communications and services company Reliance Jio Infocomm Limited (‘RJIL’ or ‘Jio’ or ‘Reliance Jio’) is ranked 17th amongst the Top 50 Most Innovative Companies in the world & is India’s Top Most Innovative Company by Fast Company. Jio is one of the largest network operators in the country where the coverage is at par with 2G coverage of existing operators. By far, Jio has the largest LTE coverage in India and is targeting 99% coverage of the country’s population.
Jio is world’s 2nd largest telecommunications market 1.191 billion subscribers. 70% of population lives in non-metro, non-urban areas and not fully data enabled. Increasing consumption of data and media on mobile networks
• Jio - Jio is an ecosystem - of best-in-class devices, applications and networks
• MyJio - An Omni app for - everything from signing up and paying bills to topping up and managing account
• JioTV Live and Catch Up TV on the move (Watch 580+ LIVE TV Channels on smartphones and tablets)
• JioCinema - A vast library of Movies, TV Shows, Originals, music videos & content across 10+ languages and genres on phone, tablet, TV and website.
• JioMusic - Anytime, Anywhere Stream & download unlimited Ad-free HD Music from one of the largest library of songs across various languages and genres
• JioMags - Rich library of premium magazines to provide an experience of reading a real magazine
• JioXpressNews - Stay updated with latest news from 500+ sources in 10+ Indian languages
• JioChat - Free Chat, SMS, Voice & Video Call (An OTT app with Interface in 10 Indian languages)
• JioCloud - Store online securely all photos, videos, docs, songs organised at one place
• Jio4GVoice - A telco-grade smartphone app enables customers to enjoy Jio’s latest services like HD Voice, Video calls, SMS
• JioMoney Experience - Digitising everyday consumer transactions – simple smart, and secure payments
• JioSecurity - Power against threats to digital life. Protects device 24x7 proactively against risk apps and virus attacks
• JioNewsPaper Digital Newspapers from 100s of cities Daily
• JioNet Gateway to India’s largest Wi-Fi network
• JioHealthHub – Easy and Secure way to digitally store categorise, manage and share Health Data
• Jioswitch - Secure File Transfer & Share Easy to use data transfer application. Supports a wide range of file types to transfer from one smartphone to another
• JioGST GST Service Provider Easy and safe GST compliance (create, manage, and reconcile GST-related financial / compliance documents)
FY18 Financial Performance
In its very first year of commercial operations, Digital Services business recorded revenues of Rs. 23,916 crore, with year-end subscribers base at 186.6 million. Reliance Jio reported strong financial performance for the year despite competitive pressures. Segment EBIT was at Rs. 3,174 crore for the year, with EBIT margin of 13.3%. This is strong financial performance within the very first year of commercial operations, demonstrating strong fundamental and operating leverage of the business.
The Group’s digital communications and services initiatives under Jio umbrella brand have captured unprecedented adoption and recognition not only in India, but also world over. The flagship digital communications and services company Reliance Jio Infocomm Limited (‘RJIL’ or ‘Jio’ or ‘Reliance Jio’) is ranked 17th amongst the Top 50 Most Innovative Companies in the world & is India’s Top Most Innovative Company by Fast Company.
Since starting operations in September, 2016, Reliance Jio has been redefining benchmarks, setting new milestones, inspiring unprecedented adoption, usage and service metrics that are better than the best globally, while ushering in a truly converged digital services ecosystem.
Reliance Jio is the largest mobile network in the world in terms of mobile data traffic with total mobile data consumption of over 5 Exabyte in the financial quarter ending March 2018.
Reliance Jio has been not only pioneering but also has been a key catalyst in the creation and growth of wireless broadband data market in India. With its Pan-India presence, Reliance Jio has attained wireless data leadership position in the industry that is capable of delivering unmatched customer experience at a scale comparable to none. Jio continues to co-create digital eco-system and expand its network with a coverage target of 99% of India’s population. Jio reiterates its promise to shape the future of India through transformative, quality and affordable access of end-to-end digital services for every Indian and making digital India vision a reality
Jio will continue to evaluate and deploy various technologies, both wireless and wire line, to offer comprehensive broadband solutions to consumers, small businesses, enterprises, government and other entities, while building and innovating on a full suite of digital services and applications.
While Jio continues to march on its promise to shape the future of India through transformative, quality and affordable access of end-to-end digital services for every Indian and making digital India vision a reality, Jio reiterates its vision and ultimate goal of a full digital life style solution provider to every Indian and making a meaningful social economic impact.
6. Media and Entertainment
RIL’s flagship media property Network18 is a media and entertainment powerhouse with a robust foothold in television broadcasting, movie production and distribution, digital content and commerce, print magazines, mobile content and allied media services businesses. • One in every two Indians consume Network18’s content. Its TV channels reach nearly 70 crore Indians, representing 90% of the TV universe in the country. • Network18 operates India’s broadest news network with unmatched coverage through 20 channels spanning 15 languages and 26 states. (No. 1 News network by reach, No. 2 News network by viewership) • Network18 also owns the fastest growing entertainment network in the country, with leadership channels in Hindi, English, Kids and Music genres. (No. 3 Entertainment network by viewership, in the non-sports space) • Its digital properties are used by over 80 million people; and one in every five internet user in India is on Network18 websites or apps.
• CNBC TV18 - English Business News Channel
• CNBC Awaaz - Hindi News Channel
• CNBC Bajar - Gujarati News Channel
• CNBC TV18 Prime HD English Business News
• CNN News18
• News18 India
• Colors Infinity
• Comedy Central
• History TV18
• Vacom18 Motion - Acquisition, production, syndication, marketing and distribution of full length feature films within India and distribution of Indian films in several international markets
• Content Asset Monetisation
• IndiaCast Multi-platform ‘Content Asset Monetisation’ entity (International Channel distribution, advertising sales on international Channels and content Syndication)
• Digital Content
• Moneycontrol - Finance portal
• News18.com General News portal
• Firstpost - Digital newsroom focusing on opinions, powered by expert writer-editors
• VOOT OTT Video Entertainment
• Digital Commerce
• HomeShop18 - Retail platform Integrated virtual shopping on Internet, Television and Mobile
• BookmyShow - Online ticket booking platform Online ticket booking for movies, plays, sporting events and shows
• Forbes India - Magazine for Business/Financial News & Analysis
• Better Photography - Magazine for photography enthusiasts
• Better Interiors - Magazine for interiors ideas and design
• Overdrive - Auto Publication
FY18 Financial Performance
Network18 consolidated its operations and continued to enhance its prominence in the M&E sector during a challenging year for the industry. The M&E segment witnessed a short-term pull-back in advertising spends on account of structural reforms like implementation of Goods and Services Tax (GST). This influenced advertising revenue early in the year, but the impact waned off by the end of the fiscal, triggering a sharp revival. Telecom Regulatory Authority of India’s (TRAI) tariff order on a-la-carte selling of channels remained sub-judice, which added to the pressures of FTA channels and Digital platforms on the TV subscription business. However, macro tailwinds like a recovering economy, growing TV consumption and cable digitisation remain intact. In such an industry landscape, despite competitive pressures Network18 reported revenues worth Rs. 1,839 crore (rising by 23.3% over FY17) and EBIT of Rs. (25) crore on a consolidated basis, as compared to EBIT of Rs. (201) crores on YoY basis.
1. Recovery in economic growth, reforms, and resultant socio-economic upliftment: Advertising contributes to the bulk of M&E sector revenues in India. It is largely influenced by the broader economic cycle, and a revival post two years of weak ad-spends led by macro-events.
2. TV viewership continues to grow at a fast clip, despite the advent of digital: India’s TV content consumption is on a rise, led by demographic/socio-economic tailwinds (as measured by BARC), despite the advent of Digital content. Thus, the conclusion is that Digital is complementary and not cannibalistic to TV’s content in India today. Moreover, TV penetration in India reached 64%, taking the total number of TV viewing household to 183 million in 2017 (recording a 3.5% growth over the previous year).
3. Segmentation of market from a genre, geography and pricing perspective: Content providers are creating new channels across genres. They are incubating segmented offerings for catering to a certain demographic, and digging deeper into attracting regional eyeballs through vernacular content; thereby expanding the market itself.
4. Digital as a new medium of personalized and untethered content consumption: The rapid advancement in telecom technology, especially 4G services, coupled with slashed data costs due to competition has created a completely new channel of content consumption through handheld devices.
5. Free-To-Air (FTA) channels as a low-cost entry point for a vast multitude of Indians: FTA channels resonate with a large Indian population who do not have the capacity to pay for content. FTA channels have grown rapidly over the last couple of years led by BARC measuring rural content consumption and creating an untapped advertising market.
6. Regional content consumption gaining strength: Data from BARC indicates that growth in content consumption in languages like Punjabi, Oriya, Bhojpuri, Assamese and Gujarati is almost twice the rate of growth of languages like Hindi, Tamil, Telugu and others.
7. Digitisation – ‘See your customer’: With the introduction of digitisation, the revenue dynamics of content distribution have changed. Due to enhanced transparency at the local cable operator level, multisystem operators (distributor aggregators) and broadcasters have gained.
Other Allied Business
• Topper Learning - Educational content for K-12 students
• Colosceum - Content producers specialising in TV and filmed entertainment
• Capital 18 - Investment arm of Network18
• Mumbai Indians Leading IPL cricket team
• Indian Super League India’s Premier Football Event
• Reliance Foundation - CSR arm of Reliance group
• Sir H. N. Reliance Foundation Hospital
• Reliance Foundation Youth
• Reliance Foundation Young Champs Scholarship
• Reliance Foundation Jr. NBA India’s largest grassroots Basketball Initiative Mass participation Sports initiative
Note: This is a overview of RIL (Reliance Industries) and not a recommendation. For stock recommendations, kindly refer the Member Zone.