Reliance Industries Debt surged on 15.9% in 2015 and EBITDA increased on 7.3%

17-04-2015 • About Reliance Industries ($RELIANCE) • By InTwits

Reliance Industries reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Reliance Industries has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.2%. At the same time it's a lot of higher than industry average of 18.1%.
CAPEX is quite volatile: 633,640 in FY2015, 600,870 in FY2014, 307,260 in FY2013, 163,810 in FY2012, 338,650 in FY2011
The company has potentially unprofitable business model: ROIC is at 7.0%
It operates with medium-size leverage: Net Debt/EBITDA is 3.9x while industry average is 3.3x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Reliance Industries ($RELIANCE) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	2,658,106	3,585,010	3,970,620	4,344,600	3,754,350	-13.6%
EBITDA	377,955	347,630	329,880	350,300	376,010	7.3%
Net Income	192,937	197,240	208,790	224,930	235,660	4.8%
Balance Sheet
Cash	155,280	338,400	372,670	379,090	125,200	-67.0%
Short Term Debt	179,160	270,950	362,590	377,420	400,860	6.2%
Long Term Debt	662,360	653,520	709,600	1,010,160	1,207,770	19.6%
Cash flow
Capex	338,650	163,810	307,260	600,870	633,640	5.5%
Ratios
Revenue growth	30.5%	34.9%	10.8%	9.4%	-13.6%
EBITDA growth	25.3%	-8.0%	-5.1%	6.2%	7.3%
EBITDA Margin	14.2%	9.7%	8.3%	8.1%	10.0%	2.0%
Net Income Margin	7.3%	5.5%	5.3%	5.2%	6.3%	1.1%
CAPEX, % of revenue	12.7%	4.6%	7.7%	13.8%	16.9%	3.0%
ROIC	10.1%	8.5%	7.6%	7.3%	7.0%	-0.3%
ROE	13.1%	12.2%	11.9%	11.8%	11.3%	-0.5%
Net Debt/EBITDA	1.8x	1.7x	2.1x	2.9x	3.9x	1.1x

Revenue and profitability

Reliance Industries's Revenue dropped on 13.6% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 2.0 pp from 8.1% to 10.0% in FY2015.

Net Income marign increased slightly on 1.1 pp from 5.2% to 6.3% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 16.9% in FY2015. The company's CAPEX/Revenue surged on 12.3 pp from 4.6% in FY2012 to 16.9% in FY2015. It's average level of CAPEX/Revenue for the last three years was 12.8%.The company has spent a lot to CAPEX (169% of EBITDA) which didn't stop revenue from falling.

Return on investment

The company operates at low ROIC (6.99%) and ROE (11.30%). ROIC showed almost no change in FY2015. ROE decreased slightly on 0.52 pp from 11.8% to 11.3% in FY2015.

Leverage (Debt)

Debt level is 3.9x Net Debt / EBITDA and 4.3x Debt / EBITDA. Net Debt / EBITDA jumped on 1.1x from 2.9x to 3.9x in FY2015. Debt jumped on 15.9% in FY2015 while cash dropped on 67.0% in FY2015.

Appendix 1: Peers in Integrated Oil & Gas

Below you can find Reliance Industries benchmarking vs. other companies in Integrated Oil & Gas industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Deep Industries ($DEEPIND)	-56.2%	22.5%	8.0%	39.1%
Essar Oil ($ESSAROIL)	28.9%	24.0%	51.8%	11.3%
Median (2 companies)	-13.7%	23.2%	29.9%	25.2%
Reliance Industries ($RELIANCE)		34.9%	10.8%	9.4%	-13.6%

Top companies by EBITDA margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Deep Industries ($DEEPIND)	52.6%	47.6%	55.5%	57.8%
Essar Oil ($ESSAROIL)	5.3%	4.0%	4.2%	5.1%
Median (2 companies)	29.0%	25.8%	29.8%	31.5%
Reliance Industries ($RELIANCE)	14.2%	9.7%	8.3%	8.1%	10.0%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Deep Industries ($DEEPIND)	46.1%	164.0%	27.8%	66.1%
Essar Oil ($ESSAROIL)	9.3%	4.8%	2.5%	1.4%
Median (2 companies)	27.7%	84.4%	15.1%	33.7%
Reliance Industries ($RELIANCE)	12.7%	4.6%	7.7%	13.8%	16.9%

Top companies by ROIC, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Essar Oil ($ESSAROIL)	10.1%	7.8%	9.9%	14.6%
Deep Industries ($DEEPIND)	11.6%	9.6%	9.5%	13.1%
Median (2 companies)	10.8%	8.7%	9.7%	13.9%
Reliance Industries ($RELIANCE)	10.1%	8.5%	7.6%	7.3%	7.0%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Essar Oil ($ESSAROIL)	5.2x	7.4x	6.6x	3.9x
Deep Industries ($DEEPIND)	1.5x	3.5x	2.4x	2.1x
Median (2 companies)	3.4x	5.5x	4.5x	3.0x
Reliance Industries ($RELIANCE)	1.8x	1.7x	2.1x	2.9x	3.9x

Reliance Industries stock price chart

Reliance Industries financials

mln.	FY2010	FY2011	FY2012

Revenue	2,037,397	2,658,106	3,585,010
EBITDA	301,683	377,955	347,630
Net income	245,031	192,937	197,240
CAPEX	232,781	338,650	163,810
Debt	646,055	841,520	924,470
Cash	138,908	155,280	338,400

About Reliance Industries

Reliance Industries Limited, together with its subsidiaries, is engaged in the exploration, development, and production of crude oil and natural gas in India and internationally. It operates through three segments: Petrochemicals, Refining, and Oil and Gas. The Petrochemicals segment produces and markets petrochemical products, such as high and low density polyethylene, polypropylene, polyvinyl chloride, poly butadiene rubber, polyester yarn, polyester fibre, purified terephthalic acid, paraxylene, ethylene glycol, olefins, aromatics, linear alkyl benzene, butadiene, acrylonitrile, caustic soda, and polyethylene terephthalate. The Refining segment is involved in the production and marketing of petroleum products. The Oil and Gas segment is engaged in the exploration, development, and production of crude oil and natural gas. The company also offers textile products, including suitings, shirtings, jackets, trousers, and readymade garments; and ready-to-stitch and take away fabrics. In addition, it operates retail outlets comprising Reliance retail, food and grocery specialty stores, hypermarkets, and wholesale stores; electronic, digital technology, jewelry, apparel, footwear, toys, and optical specialty stores; furniture, furnishing, and homeware specialty stores; and automotive services and products specialty stores. Further, the company is engaged in the retail of transportation fuels, auto LPG, petroleum, and lubricant products, as well as offers fleet management services and highway hospitality services. The company is also involved in SEZ development and telecom/broadband businesses. The company was formerly known as Reliance Textile Industries Limited and changed its name to Reliance Industries Limited in June 1985. Reliance Industries Limited was incorporated in 1973 and is based in Mumbai, India.