Security Analysis and portfolio management

Mini Project

Submitted to,

Prof. Maya Balaji

By,

Mayur patel

Prn: 092034

1. BRIEF INDUSTRY ANALYSIS:-

Reliance Industries Limited is India's largest private sector conglomerate company by market

value, with an annual turnover of US$ 45.09 billion and profit of US$ 3.6 billion for the fiscal

year ending in March 2010 making it one of the largest India's private sector companies, being

ranked at 264th position in the Fortune Global 500 (2009[3]) and at the 126th position in the

Forbes Global 2000 list (2010).

Reliance was founded by the Indian industrialist Dhirubhai Ambani in 1966. Ambani has been a

pioneer in introducing financial instruments like fully convertible debentures to the Indian stock

markets. Ambani was one of the first entrepreneurs to draw retail investors to the stock markets.

Critics allege that the rise of Reliance Industries to the top slot in terms of market capitalization

is largely due to Dhirubhai's ability to manipulate the levers of a controlled economy to his

advantage.

Though the company's oil-related operations form the core of its business, it has diversified its

operations in recent years. After severe differences between the founder's two sons, Mukesh

Ambani and Anil Ambani, the group was divided between them in 2006. In September 2008,

Reliance Industries was the only Indian firm featured in the Forbes's list of "world's 100 most

respected companies".

Stock

According to the company website "1 out of every 4 investors in India is a Reliance

shareholder.". Reliance has more than 3 million shareholders, making it one of the world's most

widely held stocks. Reliance Industries Ltd, subsequent to its split in January 2006 has continued

to grow. Reliance companies have been among the best performing in the Indian stock market.

Businesses

Major subsidiaries and associates

Reliance Petroleum Limited (RPL) was a subsidiary of Reliance Industries Limited (RIL)

and was created to exploit the emerging opportunities, creating value in the refining sector

worldwide. Currently, RPL stands amalgamated with RIL.

Reliance Life Sciences is a research-driven, biotechnology-led, life sciences organization

that participates in medical, plant and industrial biotechnology opportunities. Specifically, these

relate to Biopharmaceuticals, Pharmaceuticals, Clinical Research Services, Regenerative

Medicine, Molecular Medicine, Novel Therapeutics, Biofuels, Plant Biotechnology and

Industrial Biotechnology.

Reliance Industrial Infrastructure Limited (RIIL) is engaged in the business of setting

up / operating Industrial Infrastructure that also involves leasing and providing services

connected with computer software and data processing.

Reliance Institute of Life Sciences (Rils), established by Dhirubhai Ambani Foundation,

is an institution of higher education in various fields of life sciences and related technologies.

Reliance Logistics (P) Limited is a single window solutions provider for transportation,

distribution, warehousing, logistics, and supply chain needs, supported by in house state of art

telematics and telemetry solutions.

Reliance Clinical Research Services (RCRS), a contract research organization (CRO)

and wholly owned subsidiary of Reliance Life Sciences, has been set up to provide clinical

research services to pharmaceutical, biotechnology and medical device companies.

Reliance Solar, The solar energy initiative of Reliance aims to bring solar energy systems and

solutions primarily to remote and rural areas and bring about a transformation in the quality of

life.

Relicord is the first and one of the most dependable stem-cell banking services of South East

Asia offered by Mukesh Ambani controlled by Reliance Industries.

Infotel Broadband is a broadband service provider, it is wholly owned by RIL for 4,800

crore.

Oil and gas discovery

In 2002, Reliance found natural gas in the Krishna Godavari basin off the coast of Andhra

Pradesh near Vishakapatnam.[15] It was the largest discovery of natural gas in world in financial

year 2002-2003.[16] On 2 April 2009, Reliance Industries (RIL) commenced natural gas

production from its D-6 block in the Krishna-Godavari (KG) basin.

The gas reserve is 7 trillion cubic feet in size. Equivalent to 1.2 billion barrels (165 million

tonnes) of crude oil, but only 5 trillion cubic feet are extractable.

On 2008 Oct 8, Anil Ambani's Reliance Natural Resources took Reliance Industries to the

Bombay High Court to uphold a memorandum of understanding that said RIL will supply the

natural gas at $2.34 per million British thermal units to Anil Ambani.

Reliance retail

Reliance Retail is the retail business wing of the Reliance business. Many brands like Reliance

Fresh, Reliance Footprint, Reliance Time Out, Reliance Digital, Reliance Wellness, Reliance

Trendz, Reliance Autozone, Reliance Super, Reliance Mart, Reliance iStore, Reliance Home

Kitchens, and Reliance Jewel come under the Reliance Retail brand

2.   BRIEF BACKGROUND OF THE COMPANY :-

PRODUCTS PORTFOLIO

The Company expanded into textiles in 1975. Since its initial public offering in 1977, the

Company has expanded rapidly and integrated backwards into other industry sectors, most

notably the production of petrochemicals and the refining of crude oil.

The Company from time to time seeks to further diversify into other industries. The

Company now has operations that span from the exploration and production of oil and gas to the

manufacture of petroleum products, polyester products, polyester intermediates, plastics,

polymer intermediates, chemicals and synthetic textiles and fabrics.

The Company's major products and brands, from oil and gas to textiles are tightly integrated

and benefit from synergies across the Company. Central to the Company's operations is its

vertical backward integration strategy; raw materials such as PTA, MEG, ethylene, propylene

and normal paraffin that were previously imported at a higher cost and subject to import duties

are now sourced from within the Company. This has had a positive effect on the Company's

operating margins and interest costs and decreased the Company's exposure to the cyclicality of

markets and raw material prices. The Company believes that this strategy is also important in

maintaining a domestic market leadership position in its major product lines and in providing a

competitive advantage.

The Company's operations can be classified into four segments namely:

Petroleum Refining and Marketing business

Petrochemicals business

Oil and Gas Exploration & Production business

Others

The Company has the largest refining capacity at any single location.

The Company is:

Largest producer of Polyester Fibre and Yarn

4th largest producer of Paraxylene (PX)

5th largest producer of Polypropylene (PP)

7th largest producer of Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol

(MEG)

COMPETITIVE PROFILE:-

Last Price Market Cap.

(Rs. cr.)

Sales

Turnover

Net Profit Total Assets

Reliance 1,081.80 353,982.69 192,461.00 16,236.00 199,665.30

IOC 428.10 103,940.65 269,136.03 10,220.55 95,119.08

BPCL 719.50 26,012.96 135,331.48 735.90 35,281.91

Essar Oil 149.70 20,444.04 37,652.00 -514.00 15,027.38

HPCL 500.05 16,933.06 124,752.42 574.98 32,860.34

MRPL 82.80 14,511.52 32,287.94 1,112.38 7,292.97

Chennai Petro 249.75 3,719.06 24,927.26 603.22 7,539.97

3. FINANCIAL PERFORMANCE ANALYSIS

Ratio Analysis of Reliance Industry Ltd

PARTICULARS EQUATION DATA 2007 DATA 2008

Return on

EquityProfit after tax

Shareholder ’ s fund119434390

2.72 194585420

3.59

Book

Value Per

Share

sharehoder ' sfundNo .of outstanding share

439010

439 542010

542

Earnings

per sharePAT

No .of out . shares11943

101194.3 19458

101945.8

Dividends

payout ratio

Equity dividendsPAT

144011943

o.12 163119458

0.08

CAGR (Sales)( Sales of 2010Sales of 2007 )

13−1 ( 192091

111699 )13−1

20%

CAGR

(Eps)( EPS of 2010EPS of 2007 )

13−1

1625.51194.3 36%

Sustainabl

e Growth ratio

ROE

×(1−D /Pratio)2.72×(1-0.12) 2.39

3.59

×(1-0.08) 3.30

P/E ratioPrice per share

Earninig per share

6841194.3 0.57

11321945.8 0.58

PARTICULARS EQUATION DATA 2009 DATA 2010

Return on

Equity Profit after taxShareholder ’ s fund

153097270

2.11 162353930

4.13

Book

Value Per

Share

sharehoder ' sfundNo .of outstanding share

727010

727 393910

393

Earnings

per share PATNo .of out . shares

1530910

1530.9 1623510

1623.5

Dividends

payout ratio

Equity dividendsPAT

189715309

o.12 208416235

0.13

Sustainabl

e Growth ratio

ROE×(1−D /Pratio) 2.11×(1-0.12) 1.86

4.13×

(1-0.13) 3.59

P/E ratio

Price per shareEarninig per share

7891530.9 0.52

10811623.5 0.67

4. VALUATION OF THE STOCK:- (use D/P ratio or P/E Ratio to calculate Ke)

For year 2010:

Ke = 2084/1081 + 1.45

= 1.93 + 1.45

Ke = 3.38

5.       TECHNICAL ANALYSIS-CHART:-

Share Price History of Reliance Industries Ltd.

Date High Low Open Close Volume

22/10/2010 1093.8 1074.35 1085.45 1081.8 4486466

21/10/2010 1087.85 1049.2 1052.0 1081.65 8520014

20/10/2010 1064.4 1038.0 1039.4 1049.45 4167720

19/10/2010 1068.7 1039.25 1065.0 1044.4 4246988

18/10/2010 1064.95 1033.25 1042.25 1047.45 5076676

15/10/2010 1068.0 1035.6 1060.0 1040.35 2652016

14/10/2010 1081.5 1054.2 1075.0 1059.0 5580792

13/10/2010 1074.0 1054.7 1056.1 1073.05 5478523

12/10/2010 1069.4 1046.15 1068.0 1055.6 3195565

11/10/2010 1072.25 1053.1 1056.0 1069.2 5896732

08/10/2010 1054.8 1030.55 1046.7 1049.65 4769466

6. Bibliography:

http://www.Google.com

http://www.relianceindustry.com

http://www.bseindia.com

http://www.India infoline.com

http://www.Moneycontrol.com

http://www.topstockresearch.com