SUBMITTED TO:

DR. P.JANAKI RAMADU

SUBMITTED BY:
GROUP 4
FINANCE B

GROUP 4
ANKITA PANDEY (10SBCM
PRIYANKA LAL (10SBCM
SARIM RAHBAR (10SBCM
SAURABH 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

Gross Profit of RIL

16
14
12
10
gross profit
8
6
4
2
0
2006 2007 2008 2009 2010

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 2010

11.13 10.64 14.45 10.65 8.35

Net Profit of RIL %

16

14

12

10
net profit %
8

0
2006 2007 2008 2009 2010

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

ROCE of RIL
20
18
16
14
12
roce
10
8
6
4
2
0
2006 2007 2008 2009 2010

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 2010

9.6 10.65 10.57 12.92 8.29

INVENTORY TURNOVER RATIO OF RIL

14

12

10

8 INVENTORY TURNOVER

0
2006 2007 2008 2009 2010

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

ASSET TURNOVER RATIO OF RIL

1.4
1.2
1
ASSET TURNOVER
0.8
0.6
0.4
0.2
0
2006 2007 2008 2009 2010
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 2006

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

1.8

1.6

1.4

1.2

1
RIL
0.8 Industry

0.6

0.4

0.2

0
2010 2009 2008 2007 2006

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
0.8182 0.4992 0.3301 0.5022 0.5502 0.3319 0.3314 0.6649 0.3003
company

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

0.9

0.8

0.7

0.6

0.5
Quick Ratio of company
Quick Ratio of industry
0.4

0.3

0.2

0.1

0
2009 2008 2007 2006 2005 2004 2003 2002 2001

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
 0.8

0.7

0.6

0.5

Cash Ratio of company

0.4
Cash Ratio of industry

0.3

0.2

0.1

0
2009 2008 2007 2006 2005 2004 2003 2002 2001

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 RATIO
year 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

1.2

0.8

ril
0.6 bpcl
hpcl
iocl
0.4

0.2

0
2006 2007 2008 2009 2010

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

25

20

15
RIL
BPCL
HPCL
10 IOCL

0
2006 2007 2008 2009 2010

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

120

100

80

RIL
60 BPCL
HPCL
IOCL
40

20

0
2006 2007 2008 2009 2010

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 4915
2007 11943 1806 1571 7499
2008 19458 1581 1135 6963
2009 15309 736 575 2950
2010 16236 1538 1301 10221
 25000

20000

15000
RIL
BPCL
HPCL
10000 IOCL

5000

0
2006 2007 2008 2009 2010

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%

0.9

0.8

0.7

0.6

0.5
RIL
0.4 Industry

0.3

0.2

0.1

0
2010 2009 2008 2007 2006

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%
4

3.5
RIL’s
fixed
3
asset

2.5 turnover
ratio is
2 RIL
Industry
1.5

0.5

0
2010 2009 2008 2007 2006

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.

DIVIDEND PAYOUT RATIO

YEAR 2006 2007 2008 2009 2010
Dividend Payout 17.52 13.75 9.8 14.49 14.97
Ratio
 Dividend Payout Ratio
20
18
16
14
12
Dividend Payout Ratio
10
8
6
4
2
0
2006 2007 2008 2009 2010

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 IOCL

2006 110958 12781 10957 68229
2007 190680 10927 8371 46673
2008 329179 14868 8655 53132
2009 239721 13617 9112 46186
2010 351450 18680 10783 72049

400000

350000

300000

250000
RIL
200000 BPCL
HPCL
150000 IOCL

100000

50000

0
2006 2007 2008 2009 2010

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 2010
RIL 0.12 0.13 0.16 0.08 0.09
HPCL 0.07 0.15 0.1 0.11 0.13

0.18

0.16

0.14

0.12

0.1
RIL
0.08 HPCL

0.06

0.04

0.02

0
2006 2007 2008 2009 2010

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 2010
RIL 0.12 0.13 0.16 0.08 0.09
BPCL 0.08 0.2 0.16 0.13 0.13

0.25

0.2

0.15

RIL
BPCL
0.1

0.05

0
2006 2007 2008 2009 2010

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 2010
RIL 0.12 0.13 0.16 0.08 0.09
IOC 0.17 0.24 0.19 0.12 0.2

0.3

0.25

0.2

0.15 RIL
IOC

0.1

0.05

0
2006 2007 2008 2009 2010

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 2010
RIL 0.96 1 0.9 0.6 0.8
HPCL 2.1 1.3 2.41 1.54 1.6

2.5

1.5 RIL
HPCL

0.5

0
2006 2007 2008 2009 2010

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 2010
RIL 0.96 1 0.9 0.6 0.8
BPCL 2.31 2.58 2.13 2.03 1.4

2.5

1.5 RIL
BPCL

0.5

0
2006 2007 2008 2009 2010

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 2010
RIL 0.96 1 0.9 0.6 0.8
IOC 3.14 3.5 2.22 3.45 2.83

3.5

2.5

2 RIL
IOC
1.5

0.5

0
2006 2007 2008 2009 2010

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 2010
RIL 0.04 0.05 0.1 0.05 0.08
HPCL 0.11 0.15 0.19 0.08 0.07

0.2

0.18

0.16

0.14

0.12

0.1 RIL
HPCL
0.08

0.06

0.04

0.02

0
2006 2007 2008 2009 2010

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 2010
RIL 0.04 0.05 0.1 0.05 0.08
BPCL 0.15 0.09 0.17 0.08 0.2

0.25

0.2

0.15

RIL
BPCL
0.1

0.05

0
2006 2007 2008 2009 2010

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 2010
RIL 0.04 0.05 0.1 0.05 0.08
IOC 0.12 0.07 0.17 0.04 0.1

0.18

0.16

0.14

0.12

0.1
RIL
0.08 IOC

0.06

0.04

0.02

0
2006 2007 2008 2009 2010

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 2010
RETAINED .61 .65 .66 .56 .63
EARNINGS/TOTAL
ASSETS

RETAINED EARNINGS/TOTAL ASSETS

0.68

0.66

0.64

0.62
RETAINED EARNINGS/TOTAL
0.6 ASSETS
0.58

0.56

0.54

0.52

0.5
2006 2007 2008 2009 2010
 MARKET VALUE OF EQUITY/TOTAL LIABILITIES
YEAR 2006 2007 2008 2009 2010
RETAINED .005 .007 .01 .003 .005
EARNINGS/TOTAL
ASSETS

MARKET VALUE OF EQUITY/TOTAL LIABILITIES

0.01

0.01

0.01
MARKET VALUE OF EQUITY/TOTAL
LIABILITIES
0.01

0
2006 2007 2008 2009 2010

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

RIL
12000

10000

8000
RIL
6000

4000

2000

0
2010 2009 2008 2007 2006
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 2006
RIL 34393 20109 19126 13456 11245

RIL
40000

35000

30000

25000
RIL
20000

15000

10000

5000

0
2010 2009 2008 2007 2006

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.