Strategic Managemnt Seminar

8/6/2019 Strategic Managemnt Seminar

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STRATEGIC MANAGEMNT

SEMINAR

SUBMITTED BY

ATHIRA.A.(7)

FASILA.T.K

RESHMA RAVINDRAN(30)

SHEMEELA ALI(38)

SUHANI ASHIK(49)



Reliance Group

The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's largest private sector enterprise, with businesses in

the energy and materials value chain.

Group's annual revenues are in excess of US$ 30 billion.

The flagship company, Reliance Industries Limited, is a Fortune

Global 500 company and is the largest private sector company in

India.

Dhirubhai H. AmbaniFounder Chairman Reliance Group December

28, 1932 - July 6, 2002



Major Subsidiaries &

AssociatesReliance Petroleum Reliance Retail (R R L)

Reliance Global Management Services (P) Ltd

Reliance Biopharmaceuticals Ranger FarmsLtd

Reliance Engineering Associates (P) Ltd

Reliance Oil & Gas Find PetrochemicalsBusiness





PETROLEUM INDUSTRY

INDUSTRY PROFILE



� It started mainly in the northeastern part of

India especially in the place called Digboi in

the state of Assam.

� Until the 1970's, the production of petroleum

and the exploration of new locations for

extraction of petroleum were mainly

restricted to the northeastern state in India.



� An important advancement in the Indian petroleum industry came with

the passing of Industrial Policy Resolution in 1956, which emphasized

focus on the growth and promotion of industries in India.

� Another major incident was the discovery of Bombay High, which

changed the scenario of the Indian petroleum industry drastically.

� The Indian petroleum industry was sponsored completely by the

government, and the management control of the petroleum industry and

all its related activity was entirely with the government. The petroleum

industry has the most significant role to play in changing the Indian

economy from an agrarian economy to an industrial economy.



� The adoption of liberalization and privatization in July1991 changed the situation again.

�The government started allowing the Indianpetroleum industry to go into private hands and alsoentered into government and private joint ventures.The government also eased the stringent regulationprocess on the petroleum sector.

� The demand for petroleum products increased at anannual rate of about 5.5%.

� The petroleum sector in India is particularly favorable

for foreign investment because the industry is one of the fastest growing segments, and it has shown astaggering growth rate of around 13% in the recentpast.



� Some of the main petroleum products that are

manufactured for trade with foreign countries are

petroleum gases, gas oil, propane, distilled crude oil,naphtha, ethane, and kerosene.

� The petroleum industry has contributed heavily to

the manufacturing industry in the country through

foreign trade in petroleum products

� Important reason why the Indian petroleum industry

is a good option for investment is that the future of

the petroleum industry in India promises great

potential for development.



COMPANY PROFILE



�

�Reliance Petroleum Limited was set up by Reliance Industries

Limited (RIL), one of India's largest private sector companies.

� Currently, RPL is subsidiary of RIL.

� RPL also benefits from a strategic alliance with Chevron India

Holdings Pte Limited, Singapore, a wholly owned subsidiary

of Chevron Corporation USA (Chevron), which currently

holds a 5% equity stake in the Company.

� Refining activities of Reliance Industries Limited are carried

out at the Jamnagar refinery complex with refining capacity of

27 million tonnes per annum (540,000 barrels per day)..



� The refinery is able to process a wide variety of crudes- from very light to very heavy (from 18 to45 degree API) and from sweet to very heavy

(with sulphur content from 0 to 4.5%).� With an annual crude processing capacity of

580,000 barrels (92,000 m3) per stream day(BPSD), RPL will be the sixth largest refinery in

the world.� The polypropylene plant will have a capacity to

produce 0.9 million metric tonnes per annum



SPEECH OFCHAIRMAN



RIL·s 34th AGM April 21, 2008

(India)� We became India's first company in the private

sector to surpass cash profit of Rs.25,000 croresand net profit of Rs.15,000 crores (excluding

exceptional income).� Our Jamnagar refinery clearly demonstrated its

best-in-class operations with another year of highcapacity utilization and record margins.

� Reliance Petroleum Limited (RPL), a subsidiary of our Company has completed 90% progress inbuilding a new refinery



RIL·s 35th AGM October 7, 2009

(India)� The successful commissioning of the KG-D6 oil

and gas production fields and the safe start-up

of the world-class, complex refinery in the

Special Economic Zone at Jamnagar catapults

RIL into the league of integrated energy

companies globally.



» During the year, Reliance paid Rs. 17,972 crore invarious forms of taxes and duties, reflecting an

increase of 55% over the previous year.» I am pleased to inform that we are executing 1.4

million tons of Paraxylene capacity at Jamnagar.

» The new SEZ refinery at Jamnagar created

another global benchmark by achieving a peakoperating rate of 120%.

»

RIL·s 36th AGM June 21, 2010(India)



ACCOUNTS



Profit and Loss Account

� 2010.pdf (111)

� 2009.pdf (107)

�2008.pdf (105)



STRATEGIC GOALS AND PLANS TO ACHIEVE



Reliance Petroleum Limited (RPL) has submitted a plan to lay3,000 km of pipeline to carry petrol, diesel, kerosene, naphtha and

liquefied petroleum gas (LPG).

The Phase I of the project will be laying of 550 km pipeline fromJamnagar to Indore via Ahmadabad

The phase II will be 933 km pipeline extension from Indore toBhopal, Nagpur and Hyderabad, a 1,530 km branch pipeline from

Ahmadabad to Patna through Udaipur, Kota, Gwalior, Kanpur andAllahabad and a 230 km branch pipeline from Ahmadabad to

Hazira, the site of the petrochemical complex.



MARKET SHARE



� RIL refinery consistently makes 2.5 to 3 dollars perbarrel more than the benchmark Singapore GRM.Currently, the difference between sour and sweet crudegrades is about 5 dollars a barrel and hence we canexpect the RPL refinery to make about $10/Barrel of GRM.

� When completed together, RIL and RPL refinerieswould be the largest at a single location in the world at

1240 KBPD against its peers in Venezuela at 940 KBPDand 800 KBPD in Korea. Being in the SEZ, RPL wouldalso be entitled to several fiscal incentives and thatshould help it make greater returns



� Reliance acquired control of Indian

Petrochemicals Corporation Limited (IPCL) on

June 4, 2002



80%

20%

CURRENT MARKET

SHARE

Others RPL

70%

30%

MARKET SHARE BY 2012

Others RPL



GROWTH

PROFILE



Reliance surpassed all previous records in financialperformance:

Gross turnover increased to Rs. 57,120 crores (US$ 11.7billion)

Net profit was higher at Rs. 3,243 crores (US$ 665 million)

Total assets increased to Rs. 56,485 crores (US$ 11.6billion)

Net worth climbed to Rs. 27,812 crores (US$ 5.7 billion)

Reliance has achieved this growth while maintaining acareful and conservative financial profile.

Reliance's gross debt-equity ratio stands at a conservative0.64, despite the increase in total assets to Rs. 56,485crores (US$11.6 billion). Reliance has retained its 'AAAcredit ratings'.



� The consolidation of Reliance Petroleum Limitedsrefining assets with RILs existing refinery inJamnagar gives RIL a capacity of 1.24MBPD, which is about 1.6% of the worlds refiningcapacity

� Following the merger, RIL now owns 25% of theworlds most complex refining capacity and has

become the worlds largest producer of ultra-clean fuels at a single location

� To support Indias strong growth with a drop inglobal demand, RIL surrendered the Export

Orientated Unit (EOU) status for its 660,000barrels per day refinery. This has maintained highutilization.



� RIL processed 60.9 million tonnes of crude and

clocked an average utilization of

98.3%, significantly higher than the average

utilization rates for refineries globally.

� Exports of refined products were at $ 20.9

billion. This accounted for 32.8 million tonnes

of product as compared to 22.6 million tonnesin the previous year.



� Production of Petroleum Products [in Kilo

Tonnes (KT)]

PRODUCT FY2009-2010 FY2010-2011

Gases & distillates 51400 28000

Fuel oils and solids 9,400 4,450

Total production 60800 32450



52%

22%

20%

6%

Market Share

IOCL

BPCL

HPCL

others



COMPARISON WITH

THE NEAREST RIVAL



Particulars IOC BPCL HPCL IBP RPL

No. of

Refineries

10 3 2 1

Refinig

Capacity

(mtpa)

60.2 24.5 13 27

Petrol Pumps 8034 4854 4863 2778 1400

LPG Bottling

Plants

79 42 40

LPG Dealers 4990 1828 1898 74

Avaition Fuel

Stations

93 16 10

Product

Pipelines

(kms)

7404 609 511 1600



52%

22%

20%6%

Market Share

IOCL BPCL HPCL others



ASSESMENT OF THE

ENVIRONMENT



PESTEG

� POLITICAL ENVIRONMENT

� ECONOMIC ENVIRONMENT

�

SOCIAL ENVIRONMENT� TECHNOLOGICAL ENVIRONMENT

� ECOLOGICAL ENVIRONMENT

� GLOBAL ENVIRONMENT



POLITICAL ENVIRONMENT

� The political and legal environment for the whole oil

industry is very essential.

� In India the entire oil industry is been governed by OILMinistry and OIDB a Govt. body.

� This two institutes are responsible for all the decision

related to the price, quality specification etc.� Beside this the international politics also affect this

international commodity Oil a lot and also itscompanies.

� Any company operated in India had to work accordingto the norms and on the prices specified earlier byGovt bodies.



ECONOMIC ENVIRONMENT

� The gradual reduction of tariff protection has ensuredthat prices of most goods in countries like India arecloser to global levels or even much lower.

� The lower prices are much more extensive in the

services sector, which accounted for 52.4% of theIndian economy in 2004- 05.

� The use of GDP based on purchasing power parity inthe calculation of oil intensity is also validated by thefact that the figures on oil consumption are measured

in terms of volumes of input (million tons of oilequivalent-mtoe) while the GDP estimated on themarket exchange rate gives only the value of outputand not the actual volumes.



� It is only the GDP estimated on a purchasingpower parity basis which gives some indicator sothe volume of output which should form thebasis of cross country comparisons of output andestimation of oil intensity therein.

� However, though the oil intensity in India iscomparatively much lower than in most otherdeveloped and developing countries the negative

impact of high oil prices on the economy isaccentuated by the distorted pattern of oilconsumption in India.



� Economic factors generally have a long term

effect on oil prices



SOCIAL ENVIRONMENT

� Social cultural variation in the Indian context, is veryimportant for any company to work in it.

� The India is basically can be divided into four major regionson the basis of language , demography and also the income

states. These are the south, north, east and west.� The RPL as a company also operates differently in different

regions and also use different languages to attract peopletowards them.

� This is also, a reason for which the company have three

refineries in the south region out of eleven in total. Andthat also because of the merger with MRPL a local regionalcompany



TECHNOLOGICAL ENVIRONMENT

� In today's dynamic business environment, innovationthrough a sustained process of Research & Development(R&D) is the only cutting edge tool for organizations tothrive.

�

At RIL, a team of more than 100 engineers and scientists isdriving various Research and Technology (R&T) efforts inthe refining arena.

� Jamnagar refinery has set up a full scale FCC pilot plant forevaluation/selection of FCC catalysts and additives, alongwith the state-of-the-art laboratory/analytical facilities foradvanced crude characterization, NMR /InfraredSpectroscopy, Inductively Coupled Plasma (ICP) analyzer etc



� R&T has been making extensive use of variousadvanced techniques like simulation, mathematicalmodeling, Computational Fluid Dynamics (CFD)modeling, and many others to support refiningoperations, improve product quality, optimize yield of high value products like propylene/LPG/gasoline fromFCC unit and enhance bottom-of-the-barrel processing.

� Further to improve refinery margin, R&T has developed

technology for processing heavy and high TANopportunity crudes



ECOLOGICAL ENVIRONMENT

� The company RPL is very much concern about

the environmental polices of it and also very

strictly follow every small norms of it.



GLOBAL ENVIRONMENT

� The world oil demand in 2009 stood at 84.9

MBPD, a decline of 1.28 MBPD over 2008.

� As per the IEA, OECD demand in 2009 for oil fell

by 4.4% to 45.5 MBPD on a y-o-y basis while the

non-OECD demand rose by 2.1% to 39.5 MBPD.

� In January 2009, IEA had forecast world oil

demand to contract by 0.51 MBPD to 85.3 MBPDwhereas the actual decline was 1.28 MBPD.



� OPEC responded and targeted a compliance of

80-85% to the production cut levels.

� However, some countries increased their

production towards the end of the year

resulting in the compliance level dropping to

55% by the end of the year



� The world witnessed low levels of industrialproduction and global trade.

� The economic downturn reduced light product

demand and resulted in high light productstocks which have weighed on margins.

� Strategic stockpiling of crude by China, as well

as companies playing the contango traderesulted in a recovery in crude demand andprices



INDUSTRY ANALYSIS







STRENGTH

� Developing economy: � Demand for petroleum products has traced the

economic growth of the country.� With GDP expected to grow at near 7% in the long-

term, the energy sector would benefit from thesame, going forward.

�

To put things in perspective, diesel sales grew by nearly12% (which constitutes 40% of the entire petro-products basket), petrol sales by 9% and a double-digitgrowth in LPG (liquefied petroleum gas) in 1QFY05



� While this rate is not likely to sustain, we

expect the industry to witness a 4% growth in

the entire product basket in FY05 and beyond.

� Government decisions:

� The recent price increases and also the

decision to allow oil companies to increase

prices within a band of 10% augurs well forthe industry.



� This step is likely to reduce government

interference and provide some autonomy to

oil companies when it comes to increasing

petrol and diesel prices in order to protect

margins.

� Further, the duty cuts are also likely to result

in reduced under-recoveries by way of subsidies on LPG and kerosene.



WEAKNESS

� Crude prices:

� Nearly 70% of India's crude requirements are fulfilled by

imports and this figure is likely to increase going forward.

� Crude prices have breached the $45 barrier again and arelikely to remain at around $40 per barrel range.

� As per IEA, India is one of the most inefficient countries

among developing nations as far as energy usage is

concerned.



� Such high crude prices are likely to impactmargins of oil marketing companies. Given thepolitical implications, retail prices may

continue to lag the rise in input cost.� Lack of freedom: Although the government has

decided to provide autonomy to oil companies toincrease petrol and diesel prices within a 10%

band, other products such as LPG and kerosenecontinue to remain under the government controlledprice mechanism.



� As per the current estimates, the subsidies on

LPG amount to Rs 90 per cylinder after

factoring in duty cuts and that on kerosene is

over Rs 6 per litre.

� While the government has managed to reduce

its share in subsidies, select oil companies are

being forced to absorb the losses



Opportunities

� Equity Oil:

� Major oil marketing companies are now venturing

into upstream exploration and production activities

so as to secure crude supply.� To put things in perspective, IOC and OIL India are

likely to jointly bid for oil fields aboard. At the same

time, ONGC's wholly owned subsidiary, ONGC Videsh

(OVL) has acquired stakes in over 9 countries in its

quest to attain the 20 MMT (million metric tonnes)

by 2020.



� This backward integration is an opportunity

for IOC to secure at least 25% of its crude oil

requirements for the refineries.

� Natural Gas:

� Natural gas has the potential to be the fuel of the

future with demand outpacing supply by more than

two times.� Such high scarcity of natural gas provides a big

opportunity for oil companies.



� The below mentioned table indicates theallocation to the various core sectors and theshortage faced by them, thereby giving an idea of the potential for growth.

� Although Petronet LNG has now started

importing natural gas, the future holds promiseas Reliance Industries' Krishna Godavari Basingoes into commercial production in FY06 andShell commences its terminal at Hazira.

�

More exploration activities are in the pipeline andthis could reduce the country's dependence oncrude in the long term.



Threats

� Competition:

� Until FY04, oil-marketing companies hadcomplete control over the downstream

marketing business while private sectorplayers were restricted to only refining.

� However, with entry of private players such asReliance, Essar Oil and Shell (in thewaiting), the sector is likely to witnessincreased competition going forward.



� The oil PSUs had hitherto developed a

fortnightly pricing mechanism, which is likely

to discontinue.

� The price of petrol and diesel is artificially kept

high so as to cross-subsidize LPG and

kerosene.

� Since private players will not be bound to

provide for these subsidies, PSU marketing

players are likely to suffer from lowerthroughput per outlet.



� Continuing government interference:

� During the first six months of the current fiscal year, the

oil marketing companies were refrained from increasingproduct prices due to political reasons.

� This affected margins of downstream players. Going

forward, if the government interference continues, oil-

marketing companies will be at a disadvantage.� Although we believe the industry is likely to witness

increased competition, the initial retail rush by private

sector players has slowed down.

� PSU marketing companies have already stepped up theirexpansion plans and to that extent, have created

significant entry barriers for private players



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