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IPO Note
Issue Detail Company Overview
Type 100% Book Building Music Broadcast is first private FM broadcaster in India which operates 91.9 FM as "Radio City"
Issue Size Rs.500 Crore brand name. Radio station has presence in 29 cities like Bengaluru, Delhi, Mumbai, Chennai, Pune,
Offer Price *Rs (324 - 333)/Equity Share Hyderbad, Ahmedabad, Nagpur, Surat etc in india till Nov 2016 and reached out to over 49.60
million listerners in 23 cities. All Phase II Radio City stations are migrated to the phase III Policy.
Min App Size 45 Shares
Company also operates 31 web radio stations on their web portal www.planetradiocity.com in six
Issue Open 6-Mar-17 languages and reached out to 12.20 million listener as of Sept 2016.
Issue Close 8-Mar-17
Shares Offer 1.48Cr Radio Station contains RJ show and film music. Famous shows of the FM station are "Love Guru" ,
Face Value Rs 10 "Kal Bhi Aaj bhi", Babber Sher Joke Studio, Radio City Super Singer etc. Company has hired 82
ICICI Securities Limited RJs, including two online web radio RJs, to conduct their shows . The studios use IP based studio
Lead Mgrs
equipment and consoles which are free from noise pick-ups & customised software to control the
Listing NSE sound quality.
Registrar Karvy Computershare Pvt Ltd In 2015, JPL(Jagran Publication Ltd) acquired a majority shareholding of the company through its
Market Cap direct holding in Spectrum and indirect holding in Crystal. In 2016, pursuant to the Scheme of
1906.0 Arrangement the radio business of SPML was demerged and subsequently transferred and
(Post Issue)
Spectrum and Crystal were merged with JPL.
No of shares ( Post & Pre Issue) Company Strategies
No of Shares (Pre Issue) 45,042,767 > Radio City has strong leadership position in market in term of popularity. Total number of lister
reached to 49.6mn across top 23 cities (AZ Research report ). Company is holds top rank in
Offer for Sale 2,658,518
Mumbai and Bengaluru and holds 2nd in Delhi.
Fresh Issue made 12195122 > Radio City is witnessing ~19% CAGR in revenue and ~54% CAGR in PAT over FY13-16 . Company
has positive cash flow from operation in last five year which indicates healtly financial
No of Shares (Post Issue) 57237889
performance .
> The advertising volume in 14 of its markets covered by AirCheck has increased at a CAGR of 15%
Bid allocation pattern between Fiscal 2014 and Fiscal 2016 . The total number of seconds advertised in top 14 cities was
QIB 50% 63.72 million . Radio Citys advertising volumes have witnessed higher growth than the industry
Non-Institutional 15% (CAGR of 10.4% over the same period) due to its higher listenership.
Retail 35%
> Company is focusing to expand and explore new market . The expansion strategy under the
Phase III Policy was driven by identifying markets after taking into consideration advertising
potential, population density, per capita income and number of existing players.
Recommendation
Music Broadcast runs 39 FM radio stations in 6 languages to 50mn listeners in 37 cities. The company has successfully migrated all its Phase II
Radio City Stations to the Phase III Policy and now enjoys an extended license period of 15 years.
High NPM of the company keeps Return ratios increasing over the long term though high capex intensity in the industry keeps the Asset
turnover depressed. As regards valuations, the company is being offered at 3.5times P/B and 33 times Price to Earnings post IPO at ROE of
10.5% which is better than its listed Peer ENIL. We recommend SUBSCRIBE
Competitive Risks
> Company's majority of sound recordings are licensed by third parties. Company pay royalties/license
fees to these third parties for the right to broadcast these sound recordings. The licensing agreements
are typically on a non-transferable and non-exclusive basis and with limited license to communicate to
public".
> Company is involved in various litigations pursuant to the Copyright Boards order dated August 25, 2010
granting compulsory licenses for broadcast of sound recordings by radio companies. If any of proceedings in
which company may be involved in is decided against them, it might lead to termination of the Compulsory
License.
> Company is substantially dependent on Government policies. There is often significant initial uncertainty
concerning the scope and impact of many liberalization and deregulation measures introduced by the
Government .
1431
1452
1226
1750
1454
1530
1307
1754
1443
1417
200
0 0
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
5.0%
0.0%
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Narnolia Securities Ltd 6
Rs,Cr
Financials 2013 2014 2015 2016 2017E
Sales 40352 50133 53319 62441 66812
Net Profit 9429 10656 12372 13678 14362
ROE 24.8% 23.9% 24.4% 23.7% 21.5%
P/B 4.4 4.2 5.0 4.8 3.3
BINEETA KUMARI Div Yield 1.5% 1.9% 2.0% 2.0% 2.5%
bineeta.kumari@narnolia.com
Narnolia Securities Ltd 8
Please refer to the Disclaimers at the end of this Report
INFY
Investment Arguments
The Management has lowered its revenue growth guidance for FY2017. The company has issued 8.4%-8.8% CC growth v/s
8%-9% QoQ CC growth guidance earlier. This implies 4QFY2017, CC revenue growth of 0.3-1.8% QoQ. In 2QFY2017, the guidance was
reduced to factor the impact of ramp-down in RBS, softness/uncertainty in some other clients, and slower growth than anticipated in
some service lines.
The company expects to lead industry growth and reach a milestone of achieving sales of US$20bn by FY2020. The Management
believes the traditional IT services model is dying and a structural change is taking place in the industry. Pricing pressure is being
witnessed in commoditized services, thus necessitating the company to pursue newer growth avenues, including acquisitions in areas
like automation. The outsourcing services provider is therefore looking to
ramp up its productivity through automation and is looking for acquisitions to boost growth.
As part of its Vision 2020 (target to have US$20bn revenues at 30% operating margins and US$80,000 per employee revenue
productivity by CY2020), the Management expects acceleration in revenue growth and margin improvement to reflect ahead of the
increase in revenue productivity.
The company plans to utilize cash properly through increased dividends and acquisitions, so that it can increase its capital
efficiency.
Result Update L&T reported its Q3FY17 result in line with our estimates. Consolidated
CMP 1470 revenue grew by 1.4% YoY to Rs. 26287 Cr as compared to Rs. 25928 Cr in
Target Price 1780 same period previous year on the back of strong growth of 13% in
Previous Target Price hydrocarbon vertical. Standalone business remained flat YoY to Rs. 15946
Cr as against Rs. 15868 Cr in previous year. However EBITDA margin on
Upside 21%
consolidated basis has improved by 140 bps YoY to 9.6% as against 8.5%
Change from Previous
on account of margin improvement in Heavy Engineering and Hydrocarbon
business. Consolidated Order Inflow during the quarter was Rs. 34900 Cr,
Market Data down by 9% YoY. Unannounced Orders were Rs. 22300 Cr. Mgt. has cut
BSE Code 500510 down the order intake guidance for FY17 to 10% plus from 15%. Reduced
NSE Symbol LT order intake guidance due to deferment in finalization of orders.
52wk Range H/L 1615/1055
Mkt Capital (Rs Cr) 120,708
Av. Volume 92026 Muted Revenue growth, Strong Operating Margin:-
Nifty 8880 Revenue growth remained muted due to demonization, however the
operating margin has improved by 140 bps on a back of improved
Stock Performance performance of Heavy Engineering, Hydrocarbon business and Infra
1Month 3 Month 1Year business. Heavy Engineering has reported EBITDA margin of 20.3% as
compared to 1.6% a year back led by operational efficiency. Close out of
Absolute 1.4 7.3 32.4
legacy orders, Operational efficiency and improved project execution have
Rel.to Nifty -1.8 -2.1 6.1
helped to post better numbers in Hydrocarbon business. Infra business
margin improved by 110 bps to 8.3% on account of the execution of better
Share Holding Pattern-% margin projects. Close down of legacy projects, margin improvement scope in
3QFY17 2QFY17 1QFY17 Heavy civil engineering & T&D business and execution of better margin
Promoters 0% 0% 0% projects in infra business will help to post strong operating margin going
Public 100% 100% 100% forward. Management has maintained 50 bps of margin improvement
Others guidance in FY17.
Total 100% 100% 100%
Healthy Order:-
Company Vs NIFTY Order book at the end of the Q3FY17 stands at Rs. 258600 Cr which
140
provides two and half year revenue visibility. However, management has cut
LT NIFTY
down order intake guidance for FY17 to 10%plus from 15% earlier.
130 Management has lower down guidance due to deferment in finalization of
120 some of the projects. We continue to expect healthy order inflow in next year.
Despite muted revenue growth in Q3FY17, management is confident to
110
achieve 10%revenue growth in FY17. It can achieve higher than that if the
100 company gets some clearance in infra business. The situation in terms of
obtaining approval has shown some sign of improvement.
90
Financials Q3FY17 Q2FY17 Q3FY16 YoY % QoQ %
80 Sales 26287 25022 25928 1% 5%
Jul-16
Feb-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Management lower down sales guidance to 10% from 12-15%. It can do better if it gets some project related clearance.
Order guidance cut down to 10% plus from 15%
Maintained 50n bps margin improvement in FY17
Real estate: Shifting of factories has helped LT to commercially monetize the land bank (Chennai, Bangalore and Mumbai). Lower
interest rate would lead to revival in demand of residential realty.
Toll Collection suspended for the 23 days and lost 100 Cr of toll, will get compensation for the same
Rs. 800 Cr of loss due to demonization at PBT level
Canadian pension fund has subscribed preference share of Rs.2000 Cr and convert based on their option.
Management expects Power business to pick up after two years once manufacturing gets better.
Heavy Eng.:- Better margins in process and defense business
Margin improved in Hydrocarbon as the legacy projects completed.
Mumbai Metro Phase 3 order is stuck due to PIL against MMRDA.
110 bps margin improved in Heavy civil engineering and T&D on account of operation efficiency.
Power :- Lower order book led to lower execution, will tough to get new orders.
Mgt. expects to pick up in Power business after two years once manufacturing picks up
Company look to monetize Nabha Power plant
Seen political and other issues at Hyderabad metro project. 70% of the project is completed and schedule completion is
June 17 but it will extend.
Hydrocarbon:- International business driving the growth and margin improved on close of legacy projects.
Expect to close Kattupali port sale transaction by Q4FY17. L&T has sold Kattuppali port to Adani ports.
Demand in hydrocarbon business is weak due to lower oil price
L&T is the largest Engineering and Construction Company in India. It has presence in Construction, Hydrocarbon Eng., Power,
Heavy Eng., Shipbuilding- defense and Merchant, IT, Finance, Realty and Metro. Revenue growth in Q3FY17 was muted but strong
operating performance supported the bottom-line. Despite muted revenue growth in Q3FY17, management is confident to achieve
10% revenue growth in FY17 coupled with improvement in operating margins based on the operational efficiency. The company
has closed out some legacy projects in hydrocarbon business, which will help to post better margins going ahead. We expects to 33
bps improvement RoE in FY17. Hence, we recommend to BUY with a target price of Rs.1780.
Domestic International
200000
180000
160000
140000
120000
75600
75300
73000
70000
69255
68348
62500
100000
58175
57888
56450
80000
60000
156512
169350
174525
176500
175752
187245
180000
181900
178800
183300
40000
20000
0
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Domestic International
35700
33034
40000
29512
28372
35000
26180
23732
30000
20526
18590
18300
25000
16500
13888
13200
20000
12320
11900
11168
10574
10010
15000
8100
6766
6228
10000
5000
0
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Narnolia Securities Ltd 13
Share Holding Pattern-% Domestic Advances growth was backed by Retail Growth.
3QFY17 2QFY17 1QFY17 Advances growth in this quarter moderated to 13% YoY mainly due to
Promoters 26.1 26.4 26.3 repayment in overseas loan linked to FCNR Deposits. The domestic loan
portfolio of bank grew by 17.5% YoY while it saw contraction of 41% YoY in
Public 73.9 73.6 73.7
overseas loan. Now the domestic loan book constitutes 96% of the
Others 0.0 0.0 0.0
advances. Healthy retail loan growth continued in personal loan, credit card,
Total 100.0 100.0 100.0 home and LAS which YoY grew by 32%, 20%, 25% and 36% respectively.
On the vehicle segment auto, commercial vehicle and two-wheeler grew by
Company Vs NIFTY 16% each YoY. On sequential basis some of the loan product got impacted
due to demonetization. Business banking book contracted by 3% QoQ
150 HDFCBANK NIFTY largely due to huge repayment in demonetization period.
140
130
NIM declined by 20 bps YoY and 10 bps QoQ to 4.10% reflecting the impact of demonetization. NIM got impacted
mostly due to lower loan growth as well as negative carry of interest for fortnight on excess liquidity imposed by RBI.
Going forward CASA will have major impact on NIM. However management believes the NIM to range between 4%-
4.3%.
Other income growth moderated to 9% YoY. Fee income registered the 10% growth YoY. The fee income was mainly
impacted by the waive-off of card fee during the demonetization period. Management highlighted that the third party
distribution fee growth was also muted largely impacted by muted insurance income. However management hopes to
recover the same in further quarter. FX & Derivatives income grew by 7% YoY. Treasury gain grew by 22% YoY.
Profitability Metrix 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(bps) QoQ(bps)
Yield On Earning Assets % 10.5 10.5 10.6 10.4 10.1 9.9 9.8 9.7 9.6 -0.58 -0.11
Cost of Deposits % 5.9 5.9 6.0 6.0 5.8 5.6 5.5 5.4 5.3 -0.46 -0.10
NIM % 4.4 4.4 4.3 4.2 4.3 4.3 4.4 4.2 4.1 -0.20 -0.10
Other Income as a % of 30.8 29.9 27.8 27.6 28.9 27.8 26.5 26.6 27.4 -1.45 0.82
Total
C/I Net%Income
Ratio 42.0 44.9 45.2 45.4 42.3 44.4 45.0 44.7 42.3 -0.01 -2.42
Provision/PPP % 11.7 12.2 15.0 13.5 11.4 11.6 14.9 12.4 10.8 -0.57 -1.60
Tax % 33.8 32.3 34.6 34.2 33.9 33.5 34.6 34.5 34.4 0.47 -0.09
PAT/Total Net Income % 33.9 32.7 30.5 31.1 33.8 32.7 30.6 31.7 33.8 -0.02 2.04
NII Growth % (YoY) 23.0 21.4 23.5 21.2 24.0 24.0 21.8 19.6 17.6 -6.46 -2.10
Opex Growth % (YoY) 19.4 21.4 25.9 19.8 21.7 18.9 19.2 16.2 15.2 -6.49 -1.07
PPP Growth % (YoY) 22.9 24.9 26.2 24.2 20.0 21.5 20.0 19.5 15.2 -4.81 -4.24
PAT Growth % (YoY) 20.2 20.6 20.7 20.5 20.1 20.2 20.2 20.4 15.1 -4.97 -5.27
Yield On Earning Assets % Cost of Deposits % NIM % PAT Growth % (YoY) NII Growth % (YoY)
C/I Ratio %
12.0
30.0 47.0
10.0
25.0 46.0
8.0 45.0
20.0 44.0
6.0
15.0 43.0
4.0 42.0
10.0
41.0
2.0 5.0 40.0
- - 39.0
30.0 0.50
29.0 0.40
28.0
0.30
27.0
0.20
26.0
25.0 0.10
24.0 -
We continue to like HDFC Bank given its strong fundamentals, steady loan growth, adequate capital, best in assets quality, strong
branch network and intensive digitalization initiatives. While 3Q FY17 saw some uneven activities, we expect the operations of
banking to come to its normal situation. Despite intense competition, we expect margins of HDFCBANK to sustain in the range of
4%-4.3% backed by normal CASA level of 40% and healthy growth in retail assets. Earning momentum will be maintained with
core revenue of 19% plus growth going forward backed by healthy domestic loan growth with higher yield products. We expect
RoE of 19% going forward. Recent rally in the stock has led to achieve our previous target price of Rs 1400. However despite this
rally we dont think to exit the stock at current levels given its strong fundamentals and recommend must have in the portfolio. Also
HDFCBANK has performed much better than its peers in the industry. We maintain HOLD in this stock with the target price of
Rs 1460.
17
Narnolia Securities Ltd
Please refer to the Disclaimers at the end of this Report
HDFCBANK
Concall Highlights:
>> Around Rs 13000 Cr (US $2 Bn) of overseas loan got repayment linked to FCNR Deposits.
>> Around Rs 20000 Cr (US $3 Bn) FCNR Deposits got redemption during the quarter.
>> Domestic loan book is now at 96% of the portfolio. While it grew by 17% YoY.
>> Due to demonetization bank witnessed higher repayment and prepayment in Overdraft and cash credit facility which
affected the loan growth. There was slightly muted disbursement on retail lending.
>> Decline in NIM was due to various factor including the impact of negative carry of interest on excess liquidity
imposed by RBI during the quarter to some extent. However management expect the NIM in the range of 4-4.3% going
forward.
>> Other expenses was lower as commission to dealer got impacted due to muted retail loan disbursement. There was
also reduction in staff number.
>> Fee income was impacted due to waive off of fee on card business. Also third party fee was muted mainly due to
lower insurance business fee.
1.20
74
1.00 73
0.80 72
0.60 71
0.40 70
69
0.20
68
- 67
Advances 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Net Advances (Rs in Cr) 347088 365495 382010 418541 436364 464594 470622 494418 495043
Advances Growth YoY % 16.97 20.63 22.40 27.89 25.72 27.11 23.20 18.13 13.45
>> Growth QoQ % 6.05 5.30 4.52 9.56 4.26 6.47 1.30 5.06 0.13
Deposits 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Deposits (Rs in Cr) 414128 450796 484175 506909 523997 546424 573755 591731 634705
>> Growth YoY % 18.59 22.72 30.13 29.75 26.53 21.21 18.50 16.73 21.13
>> Growth QoQ % 6.00 8.85 7.40 4.70 3.37 4.28 5.00 3.13 7.26
CA % 13.79 16.32 13.82 13.77 14.13 16.18 13.26 13.38 15.95
SA % 27.11 27.71 25.81 25.95 25.85 27.06 26.61 27.03 29.40
CASA % 40.90 44.03 39.63 39.72 39.98 43.25 39.87 40.41 45.36
>>CASA Growth YoY % 11.00 20.58 19.92 19.41 23.67 19.05 19.24 18.76 37.43
>> Growth QoQ % 0.46 17.18 -3.34 4.94 4.04 12.81 -3.19 4.51 20.40
Credit Deposit Ratio% 83.81 81.08 78.90 82.57 83.28 85.02 82.03 83.55 78.00
Result Update(Q3FY17)
Stock Performance
1M 3M 12M Sales grew by 6% YoY to Rs 2355 cr led by pricing growth of 5.5-6% in
Absolute 4.8 11.2 18.7 Q3FY17.EBITDA remained flat in this quarter to Rs 313 cr. Gross margin
declined by 193 bps YoY to 39.8% led by inflation in flour (12%),Sugar
Rel.to Nifty -2.3 -0.5 -5.3
(40%), palm oil (20%) and milk(19%) in Q3FY17.EBITDA margin declined
by 74 bps YoY to 13.3%. PAT margin declined by 13 bps YoY to 9.4%.PAT
Share Holding Pattern-% for this quarter grew by 5% YoY to Rs 220 cr.
3QFY17 2QFY17 1QFY17
Promoters 50.7 50.7 50.7 Concall Highlights(Q3FY17)
Public 49.3 49.3 49.3
Market will be back to normal in 3 to 6 months.
Others -- -- --
In next to 2-3 months the company will restart pricing action in different
Total 100 100 100 SKU. The company is planning to 6 to 7% price hike in FY18.
Capex: Rs 350-400 cr Capex in next 18 months which includes plants,
company is putting up in Maharashtra and other places but excluding dairy
Company Vs NIFTY
business.
140 BRITANNIA NIFTY Management expects similar type of volume growth in Q4FY17.Expects to
130 clock mid single digit volume growth after demonetization effect ease off.
Tax rate: 31% for next quarters than it will resume to normal levels.
120
The company is looking to launch a new category of product.
110
Rs,Cr
100 Financials 3QFY17 2QFY17 (QoQ)-% 3QFY16 (YoY)-%
90 Sales 2355 2456 -4% 2220 6%
80 EBITDA 313 339 -8% 311 0%
Net Profit 220 234 -6% 211 5%
EBITDA% 13% 14% (53 Bps) 14% (74 Bps)
Rajeev Anand PAT% 9% 10% (17 Bps) 9% (13 Bps)
rajeev.anand@narnolia.com
Narnolia Securities Ltd 21
Please refer to the Disclaimers at the end of this Report
Concall Highlights(Q3FY17)
500 50
1552
1756
1793
1812
1787
1975
2033
2064
2019
2209
2220
2211
2197
2456
2355
0 0
16.0%
14.3% 14.7% 14.0% 14.4%
13.7% 13.8%
13.2% 13.3%
14.0% 12.3%
12.0% 11.1% 10.8%
9.9% 10.0% 9.5%
9.2% 9.3% 9.5% 9.4% 9.5% 9.4%
10.0% 8.9% 8.9% 8.6%
8.1%
8.0% 6.4% 6.8%
5.8% 5.6% 5.6% 5.9%
6.0%
0.0%
1QFY142QFY143QFY144QFY141QFY152QFY153QFY154QFY151QFY162QFY163QFY164QFY161QFY172QFY173QFY17
Company Update Reliance Jio is now finally set to commercialize its operations from 1st April
CMP 1207 2017. As per new plan, which is announced on 21st Feb 2017, customers
can opt for ongoing free calls, free data (subject to 1GB per day) and get
Target Price 1280
access to its media suite for a one-time fee of Rs 99 and Rs 303 monthly
Previous Target Price 1140 plan. We assume that at this competitive pricing, Jio will be able to retain
Upside 6% approx. 40% of its customers base post expiry of Happy new year offer on
Change from Previous 12% 31 March 2017. This will attract additional revenue of approx Rs. 15000 Cr
in FY18. On the other hand, Reliance commissioned the first phase of new
Paraxylene(PX) project at Jamnagar in Q3FY17.With the commissioning of
Market Data this plant, PX capacity will more than double from 2.0 to 4.2 MTPA. Further
BSE Code 500325 management has guided for re-opening of its 1400 retail outlets by March
NSE Symbol RELIANCE 2017 which will boost revenue in petrochemicals segment.
52wk Range H/L 1211/925
Mkt Capital (Rs Cr) 391744 Outlook
Av. Volume(,000) 532 Going forward, management of Jio has ambitious plan to cover 99% of
Nifty 8926 population in 2017. Jio has already achieved its target 100 mn customers in
just 170 days of its launch which is commendable. We expect ROE of 11%
in FY17E. Considering the future growth prospects in both Jio and
Stock Performance Petrochemicals segment, we recommend Hold rating in this stock while
1M 3M 12M revising our recommended target price to Rs. 1280.
Absolute 18.8 27.9 24.3
Rel.to Nifty 15.0 4.1 15.5 Corporate Highlights For The Quarter
Gross Refining Margin (GRM) of USD 10.8/bbl for the quarter
Share Holding Pattern-% In December 2016, RIL commissioned the first phase of new Paraxylene
3QFY17 2QFY17 1QFY17 project at Jamnagar
Promoters 46.5 46.7 46.7 Outstanding debt as on 31st December 2016 was Rs.194,381 cr
Public 53.5 53.3 53.3 compared to Rs. 180388 cr as on 31st March 2016.
Others The capital expenditure for 3Q FY 17 was Rs. 37,791 crore.
Interest cost was at Rs. 1,209 crore in 3QFY17 as against Rs. 945 crore
in corresponding period of FY16, increase is primarily on account of higher
Company Vs NIFTY average exchange rate for the quarter.
130 RELIANCE NIFTY Reliance has operated 1,151 petroleum retail outlets in the country in
125
3QFY17.
120
115 Exports from India operations were higher by 4.0% at Rs. 38,038 crore
110
105 Rs,Cr
100 Financials 2012 2013 2014 2015 2016
95
90 Sales 358501 397062 434460 375435 276544
85
80
EBITDA 34508 33045 34799 37364 44257
Net Profit 19724 20879 22493 23566 27630
Jul-16
Feb-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
EPS 60 65 70 73 85
Aditya Gupta P/E 12.4 12.0 13.4 11.3 12.3
aditya.gupta@narnolia.com
Narnolia Securities Ltd 24
Please refer to the Disclaimers at the end of this Report
Petrochemical business
3Q FY17 revenue from the Petrochemicals segment increased by 17.8% YoY to Rs. 22,854 crore, primarily due to increase in
prices across polymers and polyester chain.Petrochemicals segment EBIT increased sharply by 25.5% to Rs. 3,301 crore,
supported by favorable product deltas and marginal volume growth.
E&P Business
3Q FY17 revenues for the Oil & Gas segment decreased by 31.0% YoY to Rs. 1,215 crore. The decline in revenue was led by
lower upstream production and lower domestic gas price realization. The unfavorable upstream price environment impacted
segment EBIT which was at Rs. (295) crore, as against Rs. 258 crore in the corresponding period of the previous year. Domestic
production (RIL share) was at 23.1 Bcfe, down 24% YoY. For the accounting quarter, upstream production (RIL Share) in US
Shale business was 41.4 Bcfe, down 19% YoY basis.
Organised Retail:
Revenues for 3Q FY17 grew by 47.2% Y-o-Y to Rs. 8,688 crore from Rs. 5,901 crore. The increase in turnover was led by growth
across all consumption baskets. The business delivered strong PBDIT of Rs. 333 crore in 3Q FY17 as against Rs.237 crore in the
corresponding period of the previous year. During the quarter, Reliance Retail added 111 stores across various store concepts.
Trends crossed a milestone of 300 stores during the quarter. At the end of the quarter, Reliance Retail operated 3,553 stores
across 686 cities with an area of over 13.25 million square feet.
During 3Q FY17, revenue from the Refining and Marketing segment increased by 7.5% YoY to Rs. 61,693 crore ($ 9.1 billion).
Segment EBIT was at Rs. 6,194 crore, down 4.3% YoY on account of lower volumes and decline in GRMs. GRM for 3Q FY17
stood at $ 10.8/bbl as against $ 11.5/bbl in 3Q FY16. Reliance GRM outperformed Singapore complex margins by $ 4.1/bbl.
Reliance Jamnagar refineries processed 17.8 MMT in 3Q FY17, marginally lower on QoQ. As at the end of the quarter, Reliance
operated 1,151 petroleum retail outlets in the country.
Digital service
During the quarter, Jio announced the launch of the Jio Happy New Year Offer (JNO) effective from 4th December 2016. Under
the JNO, all the Jio subscribers are entitled to certain special benefits, which comprise of Jios Data, Voice, Video and the full
bouquet of Jio applications and content, absolutely free, up to 31st March 2017.Till 31st Dec 2016 there were 72.4 million
subscribers on the network.Jio is the only operator in India to deploy pan-India LTE on a sub-GHz band, in addition to pan-India
1800MHz and 2300MHz spectrum band.
2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Petrochemicals Revenue 27,128 27,121 26,541 25,398 26,651 23,001 21,754 20,858 21,239 19,398 20,915 20,718 22,422 22,854
Petrochemicals EBIT 2,381 2,115 2,150 1,863 2,361 2,064 2,003 2,338 2,531 2,639 2,713 2,806 3,417 3,301
Petrochemicals EBIT Margin 9% 8% 8% 7% 9% 9% 9% 11% 12% 14% 13% 14% 15% 14%
Exploration & Production
2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Oil and Gas Revenue 2,682 2,926 2,798 3,178 3,002 2,841 2,513 2,057 2,067 1,765 1,638 1,340 1,327 1,215
Oil and Gas EBIT 956 607 762 1,042 818 832 489 32 242 90 14 (312) (491) (295)
Oil and Gas EBIT Margin 36% 21% 27% 33% 27% 29% 19% 2% 12% 5% 1% -23% -37% -24%
Retail
2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Organized Retail Revenue 3,470 3,941 3,653 3,999 4,167 4,686 4,788 4,698 5,091 6,042 5,781 6,666 8,079 8,688
Organized Retail EBIT 70 38 24 81 99 133 104 111 117 147 131 148 162 231
Organized Retail EBIT Margin 2% 1% 1% 2% 2% 3% 2% 2% 2% 2% 2% 2% 2% 3%
Investment Rationale
Massive Capex programme coming onstream: RIL has spent ~70% of the planned USD1850Cr capex (this number was
USD1650Cr earlier) on its four key projects (petcoke gasification, polyester expansion, off-gas cracker and ethane sourcing).
We believe that the three expansion projects: petcoke gasifier, refinery off-gas cracker, and ethane intake facilities will be
fully operational by FY17E.The companys massive capex programme will push future earnings.
Telecom launch in FY18: The commercial launch will give us better visibility on execution, business outlook, and earnings.
RIL is the largest private player in the refining, petrochemical and E&P sectors in India.The petrochemicals segment includes
production and marketing operations of petrochemical products which include, 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 includes production and
marketing operations of the petroleum products. The oil and gas segment includes exploration, development and production of
crude oil and natural gas. RIL has made significant investments in US shale gas. In terms of EBIT, Refining contribute 60% and
Petrochemicals 30%. RIL is also expanding its presence in the areas of consumer retailing and telecom.
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