RIL annual report 2011-12: Ten things to note

Reliance Industries, the energy-to-retail conglomerate, released its 220-page annual report late on Tuesday. The company has disclosed the annual revenue data for the retail business and is bullish about the data services business it plans to roll out soon.

Here are ten things to note if you have an interest in the company:

• Tough year: In his letter to shareholders, Mukesh Ambani, chairman and MD of the company, called 2011-12 a challenging year due to an unprecedented economic uncertainty in Europe, geopolitical upheaval in the Middle East and a slowing down of economic growth across Asia. Reliance Industries net profit for 2011-12 was lower than that of 2010-11. This has happened for the first time in at least 20 years. Reliance has always reported a higher net profit over a previous year.

• Operating profits: The company’s operating profit margin (Operating profit as a percentage of revenue) is at 11.7 per cent, the lowest level in 20 years. This is an indicator of efficiency in the company’s operation. It also shows that the company has to work hard to generate income from operations.

• Net Profit margin: The net profit margin, which is net profit as a percentage of revenue, is the lowest in 10 years at 5.9 per cent. The last time, it saw levels below this was in 2001-02. As a result, the company's market capitalisation is down by over Rs 1,00,000 crore during the year to March 2012. 

• Mukesh Ambani’s pay: The annual report highlights that Mukesh Ambani continues to draw Rs 15 crore as annual remuneration against Rs 38 crore approved by shareholders.

• Related parties: Loans and advances to related parties stand at Rs 10,243 crore against Rs 7,108 crore. The annual report lists 138 related entities that are subsidiaries or associate companies of Reliance Industries or owned by the promoter group. RIL paid Rs 1,508 crore as hire charges and electric power, fuel and water charges to associate companies. These include Reliance Utilities and Power Private Rs 369 crore (Previous Year Rs 292 crore), Reliance Utilities Rs 771 crore (Previous year Rs 625 crore). Hire charges were paid to Reliance Industrial Infrastructure Rs 21 crore (Previous Year Rs 22 crore), Gujarat Chemicals Port Terminal  got Rs 66 crore (Previous Year Rs 44 crore), Reliance Gas Transportation Infrastructure Rs 235 crore (Previous Year Rs 652 crore), Reliance Ports and Terminals Rs 86 crore (Previous Year Rs 72 crore), Reliance Corporate IT Park Limited Rs 1 crore (Previous Year ` NIL).

• Outlook: The refining business accounts for two-thirds of the company’s net sales and 40 per cent of the company’s profit before interest and tax (PBIT). The profitability is under pressure, according to latest quarterly results. The annual report says that the company is taking steps to strengthen its competitive position by cutting costs. These include petcoke gasification to achieve a sharp reduction in the energy cost. These measures are being supplemented by many others that seek to improve the refinery yield pattern.

• Cash: RIL’s cash and cash equivalents as at March 31, 2012 amounted to Rs 70,252 crore ($ 13.8 billion). The increase in cash was primarily driven by a receipt of the balance consideration from BP, the global energy giant. Bulk of this money is lying in banks or fixed return instruments. The company holds its annual general meeting on 7 June 2012 in Mumbai.

• Debt free: As on March 31, 2012, RIL’s total debt was at Rs 68,259 crore ($ 13.4 billion). Over 86% of its long-term debt and almost all of RIL’s short-term debt was denominated in foreign currencies. This makes RIL a debt-free company since the cash it holds is more than the debt.

• Reliance Retail: During the year under review, Reliance Retail witnessed strong growth in sales from existing stores (20 per cent) and also added new stores. At a consolidated level, Reliance Retail has posted revenue from operations of Rs 7,599 crore for the financial year representing a growth of 25 per cent over last year. The company has 1,300 stores in various formats and plans to grow the 'density' of every store.

• Infotel Broadband: There is no financial update in the annual report on the new business other than highlighting the potential for wireless broadband services in India. The company’s owns 479 crore shares of Infotel Broadband services worth Rs 4,795 crore.