Reliance Ind - CU - GS - 13 April 2020

13 April 2020 | 9:16PM SGT
Reliance Industries (RELI.BO)

CL
Quality on Sale, reiterate Buy (on CL)

Buy
RELI.BO 12m Price Target: Rs1,550.00 Price: Rs1,189.25 Upside: 30.3% Nikhil Bhandari
+65-6889-2867 | nikhil.bhandari@gs.com
Goldman Sachs (Singapore) Pte
RELIq.L 12m Price Target: $44.37 Price: $32.15 Upside: 38.0%
Vinit Joshi
+91(22)6616-9158 | vinit.joshi@gs.com
RIL shares have pulled back over 20% YTD and are discounting Goldman Sachs India SPL
trough valuation multiples on trough energy business earnings. Manish Adukia, CFA
+91(22)6616-9049 | manish.adukia@gs.com
We believe the market still does not fully appreciate the “unique” Goldman Sachs India SPL
hedges in its hydrocarbon business driven by feed and product Aditya Soman
+91(22)6616-9345 | aditya.soman@gs.com
diversity and asset complexity, which would drive positive cash Goldman Sachs India SPL
For the exclusive use of HEMEN.MODI@RIL.COM
margin even during a recession with limited volume risk. We believe Key Data __________________________________
contribution from the fast-growing consumer businesses will also Market cap: Rs7.7tr / $100.8bn
Enterprise value: Rs9.9tr / $130.1bn
reach ~50% over next fiscal year with the ability to gain market 3m ADTV: NA
India
share in the current downturn from highly levered peers. All in, we Asia Refining
M&A Rank: 3
expect a rapid earnings recovery and a significant step up in FCF Leases incl. in net debt & EV?: No
Asia ex. Japan Conviction List
even under the current challenging macro environment as capex
intensity will continue to decline. Inside this note we deep dive on GS Forecast ________________________________
3/19 3/20E 3/21E 3/22E
RIL’s path to earnings recovery and sensitivities around cash Revenue (Rs mn) New 5,810,200.0 5,694,546.9 4,854,836.5 6,735,688.2
Revenue (Rs mn) Old 5,810,200.0 5,698,081.8 5,013,079.5 6,584,918.7
flows/leverage. We also address six key investor debates and EBITDA (Rs mn) 840,210.0 863,983.4 918,671.7 1,276,525.4
EPS (Rs) New 61.27 66.31 73.28 117.20
preview 4QFY20 earnings. Reiterate Buy (on CL) with 30% upside EPS (Rs) Old 61.27 66.92 80.41 123.63
potential to our Rs1,550 SOTP-based 12-month price target. P/E (X) 18.3 17.9 16.2 10.1
P/B (X) 1.9 1.8 1.6 1.4
ccca0be4d0ba400ba20aa41ca9b792dd
Dividend yield (%) 0.6 0.6 0.6 0.7
Exhibit 1: We see 30% upside to our 12M TP of CROCI (%) 12.2 12.0 11.0 13.5
Rs1,550
12/19 3/20E 6/20E 9/20E
RIL SOTP
EPS (Rs) 18.02 15.23 12.43 14.74
EBITDA Multiple EV Per sh EV
Rs bn x Rs bn Rs US$ bn GS Factor Profile ____________________________
Chemicals 292 8.0 2,335 361 $32 Growth
Refining & Market 268 6.5 1,743 270 $24
E&P 433 67 $6 Financial Returns
Treasury stock 731 113 $10
Organized Retail 3,351 519 $46
Telecom (Jio) 4,353 674 $60 Multiple
Total 12,945 2,003 $177
Net debt 1,827 283 $25 Integrated
Implied equity value 11,117 1,722 $152
Conglomerate Discount(10%) 1,112 172 $15
FY21E based SOTP valuation 10,006 1,550 $137 Percentile 20th 40th 60th 80th 100th
RELI.BO relative to Asia ex. Japan Coverage

Source: Goldman Sachs Global Investment Research
RELI.BO relative to Asia Refining
Source: Company data, Goldman Sachs Research estimates.

See disclosures for details.
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
Goldman Sachs Reliance Industries (RELI.BO)
Reliance Industries (RELI.BO) Income Statement (Rs mn) _________________________________

Buy CL Rating since Feb 6, 2012 Total revenue
3/19 3/20E
5,810,200.0 5,694,546.9
3/21E
4,854,836.5
3/22E
6,735,688.2
Cost of goods sold (4,163,253.7) (4,322,438.2) (3,522,121.0) (4,884,915.3)
SG&A (806,736.3) (508,125.3) (414,043.8) (574,247.5)
Ratios & Valuation _______________________________________ R&D -- -- -- --
3/19 3/20E 3/21E 3/22E Other operating inc./(exp.) -- -- -- --
P/E (X) 18.3 17.9 16.2 10.1 EBITDA 840,210.0 863,983.4 918,671.7 1,276,525.4
P/B (X) 1.9 1.8 1.6 1.4 Depreciation & amortization (209,340.0) (212,555.8) (239,707.0) (256,584.0)
FCF yield (%) (6.6) 3.7 6.8 8.6 EBIT 630,870.0 651,427.6 678,964.7 1,019,941.4
EV/EBITDAR (X) 11.4 11.5 10.3 7.0 Net interest inc./(exp.) (83,240.0) (81,460.8) (48,941.5) (11,555.5)
EV/EBITDA (excl. leases) (X) 11.4 11.5 10.3 7.0 Income/(loss) from associates 4,640.0 4,640.0 4,640.0 4,640.0
CROCI (%) 12.2 12.0 11.0 13.5 Pre-tax profit 552,270.0 574,606.8 634,663.1 1,013,025.9
ROE (%) 11.6 10.5 10.6 15.1 Provision for taxes (153,900.0) (143,651.7) (158,665.8) (253,256.5)
Net debt/equity (%) 57.6 49.2 36.3 20.9 Minority interest (2,490.0) (2,490.0) (2,490.0) (2,490.0)
Net debt/equity (excl. leases) (%) 57.6 49.2 36.3 20.9 Preferred dividends -- -- -- --
Interest cover (X) 3.8 3.1 3.5 5.6 Net inc. (pre-exceptionals) 395,880.0 428,465.1 473,507.4 757,279.4
Days inventory outst, sales 40.3 42.9 45.3 32.9 Post-tax exceptionals -- -- -- --
Receivable days 15.0 15.7 13.2 10.5 Net inc. (post-exceptionals) 395,880.0 428,465.1 473,507.4 757,279.4
Days payable outstanding 94.3 92.5 113.3 92.7 EPS (basic, pre-except) (Rs) 61.27 66.31 73.28 117.20
DuPont ROE (%) 10.0 9.9 9.9 13.9 EPS (diluted, pre-except) (Rs) 61.27 66.31 73.28 117.20
Turnover (X) 0.6 0.5 0.5 0.6 EPS (basic, post-except) (Rs) 61.27 66.31 73.28 117.20
Leverage (X) 2.5 2.4 2.2 2.1 EPS (diluted, post-except) (Rs) 61.27 66.31 73.28 117.20
Gross cash invested (ex cash) (Rs) 6,839,220.0 7,315,158.1 7,572,728.2 7,949,098.6 DPS (Rs) 6.50 7.00 7.50 8.00
Average capital employed (Rs) 5,487,225.0 6,352,056.2 6,480,193.9 6,549,018.6 Div. payout ratio (%) 10.6 10.6 10.2 6.8
BVPS (Rs) 599.13 658.04 723.40 832.14
Balance Sheet (Rs mn) ____________________________________
Growth & Margins (%) ____________________________________ 3/19 3/20E 3/21E 3/22E
3/19 3/20E 3/21E 3/22E Cash & cash equivalents 784,510.0 959,230.5 1,266,126.7 1,751,455.8
Total revenue growth 42.3 (2.0) (14.7) 38.7 Accounts receivable 300,890.0 189,818.2 161,827.9 224,522.9
EBITDA growth 30.8 2.8 6.3 39.0 Inventory 675,610.0 664,363.8 539,426.3 673,568.8
EPS growth 9.7 8.2 10.5 59.9 Other current assets 546,540.0 546,540.0 546,540.0 546,540.0
DPS growth 8.3 7.7 7.1 6.7 Total current assets 2,307,550.0 2,359,952.6 2,513,920.9 3,196,087.6
EBIT margin 10.9 11.4 14.0 15.1 Net PP&E 5,778,370.0 6,163,283.3 6,255,653.8 6,403,018.4
EBITDA margin 14.5 15.2 18.9 19.0 Net intangibles -- -- -- --
Net income margin 6.8 7.5 9.8 11.2 Total investments 26,940.0 26,940.0 26,940.0 26,940.0
Other long-term assets 1,911,200.0 1,911,200.0 1,911,200.0 1,911,200.0
Price Performance _______________________________________ Total assets 10,024,060.0 10,461,375.9 10,707,714.7 11,537,245.9
RELI.BO (Rs) India BSE30 Sensex Accounts payable 1,083,090.0 1,107,273.0 1,078,852.6 1,403,268.4
Short-term debt 799,990.0 799,990.0 799,990.0 799,990.0
1,800 50,000
Short-term lease liabilities -- -- -- --
1,600 45,000 Other current liabilities 1,290,140.0 1,290,140.0 1,240,140.0 1,140,140.0
Total current liabilities 3,173,220.0 3,197,403.0 3,118,982.6 3,343,398.4
1,400 40,000
Long-term debt 2,263,450.0 2,293,450.0 2,193,450.0 2,093,450.0
1,200 35,000 Long-term lease liabilities -- -- -- --
1,000 30,000 Other long-term liabilities 633,470.0 633,470.0 633,470.0 633,470.0
Total long-term liabilities 2,896,920.0 2,926,920.0 2,826,920.0 2,726,920.0
800 25,000 Total liabilities 6,070,140.0 6,124,323.0 5,945,902.6 6,070,318.4
Preferred shares -- -- -- --
Jul-19 Oct-19 Jan-20 Apr-20
Total common equity 3,871,120.0 4,251,762.8 4,674,032.1 5,376,657.6
3m 6m 12m Minority interest 82,800.0 85,290.0 87,780.0 90,270.0
Absolute (22.9)% (12.1)% (11.4)% Total liabilities & equity 10,024,060.0 10,461,375.9 10,707,714.7 11,537,245.9
Rel. to the India BSE30 Sensex 5.1% 9.2% 11.9% Net debt, adjusted 2,278,930.0 2,134,209.5 1,727,313.3 1,141,984.2
Source: FactSet. Price as of 13 Apr 2020 close.
Cash Flow (Rs mn) _______________________________________
3/19 3/20E 3/21E 3/22E
Net income 395,880.0 428,465.1 473,507.4 757,279.4
D&A add-back 209,340.0 212,555.8 239,707.0 256,584.0
Minority interest add-back -- -- -- --
Net (inc)/dec working capital (251,490.0) 146,501.0 74,507.4 27,578.2
Other operating cash flow 103,630.0 129,310.8 46,791.5 9,405.5
Cash flow from operations 457,360.0 916,832.7 834,513.3 1,050,847.1
Capital expenditures (936,260.0) (627,133.8) (304,027.0) (383,660.7)

Acquisitions 0.0 0.0 -- --
Divestitures -- -- -- --
Others 79,560.0 135,247.8 152,052.0 175,675.4
Cash flow from investing (856,700.0) (491,885.9) (151,975.0) (207,985.3)
Repayment of lease liabilities -- -- -- --

Dividends paid (common & pref) (42,820.0) (47,822.2) (51,238.1) (54,654.0)
Inc/(dec) in debt 832,940.0 30,000.0 (100,000.0) (100,000.0)
Other financing cash flows (224,850.0) (232,404.0) (224,404.0) (202,878.8)
Cash flow from financing 565,270.0 (250,226.2) (375,642.1) (357,532.7)
Total cash flow 165,930.0 174,720.5 306,896.2 485,329.1
Free cash flow (478,900.0) 289,698.9 530,486.3 667,186.4
Source: Company data, Goldman Sachs Research estimates.
13 April 2020 2
PM Summary: FCF delivery and deleveraging can surprise reset

expectations
Shares are pricing trough multiple on trough energy earnings

Our analysis suggests the stock is pricing in: (1) trough GRMs of US$6/bbl, (2) trough oil
price of US$20/bbl for petchem revenues (implying PE price of US$450/t) and (3) trough
EV/EBITDA multiple of 5x. Overall current share price implied EV of hydrocarbon
business is US$20 bn versus the base case of US$56 bn and bear case of US$42 bn as
detailed in our sensitivity analysis in this report. We believe market still doesn’t fully
appreciate the “unique” hedges in its hydrocarbon business driven by feed and product
diversity and asset complexity which would drive positive cash margin even during
recession with limited volume risk. Over the next 12 months key catalysts for
outperformance would be: (1) Quarterly earnings where delivery will could be better
than investor expectations (2) FCF generation driving lower net debt even during
challenging hydrocarbon and India macro environment, and (3) incremental newsflow
around asset sale initiatives.
Consumer growth momentum to continue

Contribution from fast growing consumer businesses will also reach ~50% over next
fiscal year with ability to gain market share in the current downturn from highly
levered peers both in telecom and retail verticals. Telecom business will likely remain
unaffected from Covid-19 and can see rise in data consumption as a majority of
population remains at home due to social distancing measures. Retail operations will
get impacted from the nation wide lockdown and we expect a rapid earnings recovery
once lockdown is lifted. Further in our view the consumer businesses can self-fund their
capex from now on and could also add to the overall FCF generation.
Concerns on balance sheet and FCF overdone
Investor queries highlight their concerns around RIL’s balance sheet FCF and debt
repayments. We note leverage has already been declining and will likely continue to
come down in FY21 as well even in our bear case scenario. Our bear case assumes (1)
US$7/bbl GRM in FY21, (2) US$20/bbl oil driving PE price of US$450/tonne and (3) a
deeper impact to retail business (down 50% YOY) from an extended period of lockdown.
Deleveraging will be driven by internal FCF generation from a combination of (1) low
cash cost and complex hydrocarbon asset base driving cash positive margins even
during a potential recession with limited volume impact, (2) telecom and grocery
cashflows which remains resilient despite the negative impact from COVID-19 and the
related nationwide lockdown in India, (3) continuous decline in capex driving positive
cashflows even for consumer businesses and (4) working capital release from lower oil
price.
Framing the path to recovery for earnings

The complexity of RIL’s energy assets together with strong consumer earnings
momentum should limit the degree of sequential decline in earnings and drive sharp
13 April 2020 3
turnaround in 2HFY21. We expect a rapid recovery for RIL’s earnings driven by (1) 60%
EBITDA growth for telecom business in FY21 on account of higher ARPU, (2) recovery in
oil prices and refining margins as supply demand trends improve in 2HFY21, and (3)
turnaround in retail business once lock down restrictions are lifted.
Preview 4QFY20 earnings

We expect overall EBITDA to decline by 8% qoq in 4QFY20 to Rs 205 bn. Petchem
earnings will be flattish as margins already reached the trough in 3QFY20. We expect a
steeper decline in refining due to inventory loss which will be partly offset by growth in
telecom earnings.
Earnings and valuation

We now expect total EBITDA growth of 6%/39%/18% through FY21E-23E led by the
sustained growth outlook for the consumer businesses, with Retail & Telecom
contribution rising to over half of total by FY23E. We update our FY20/21/22E EPS by
-1%/-9%/-5% primarily to reflect potential delaying of Jio tariff hike from 1HFY21E to 2H
due to ongoing situation around COVID-19, while also introducing FY23E EPS of
Rs143.86. Accordingly, we slightly revise down our TP by 2% to Rs1,550. The GDR

target price is US$44.37, from US$45.09 before.
We continue to use 8X avg CY20/21 (FY21/22) to value the chemical business, and 6.5X
for refining and marketing; we use EV/EBITDA to value the core refining and petchem
business, and DCF to value the high-growth telecom and retail businesses. Refining,
petrochemical and telecom are the key drivers of our valuation, accounting for c.65% of
our EV.
Key risks
Lower-than-expected refining/chemical margins, lower-than-expected ARPU, project
delays and higher future capex.
Exhibit 2: We expect growth in consumer businesses (rising to over Exhibit 3: From our Bear case analysis, even under trough refining
50% of total EBITDA in FY23E) to compound with a cyclical margins (GFC) and lower oil prices ($20/bbl) scenario, RIL could
recovery in energy business, leading to 20% EBITDA growth CAGR deliver a positive FCF...
over FY20E-23E RIL GS Base versus Bear FCF, US$ bn
RIL EBITDA by segment (US$ bn) and consumer business (Retail &
Telecom) % contribution (RHS)
$24 60% GS Base Case FCF (US$ bn) Bear Case FCF
$10
$20 50%
$2.2 $8
$1.6 $6
$16 40%
$4
$8.5
$12 $1.0 $7.1 30% $2
$1.3
$0
$3.1 $5.0
$8 20% ($2)
$4.0 $4.5 $5.0
$2.5 $5.4 ($4)
$2.1 $4.5 $3.6
$4 10% ($6)
$4.1 $4.3 $4.5 $4.5 $4.6
$3.3 $2.9 $3.0 ($8)
$0 0%
($10)
FY16 FY17 FY18 FY19 FY20E FY21E FY22E FY23E
($12)
Refining Chem Telecom Retail Consumer % [RHS]
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
13 April 2020 4
Exhibit 4: ...and deleverage in FY21E... Exhibit 5: ...while having ample liquidity in hand to pay down entire
RIL GS Base versus Bear leverage, % 2020 debt maturity assuming no refinancing
Cash & Cash Equivalents bridge assuming full paydown of debt
maturing in FY21E, US$ bn
GS Base Net Debt / Equity (%) Bear Net Debt / Equity (%) $24
60%
$20
50%
$16 $6.4
40% $11.0
$12
30%
$8
20% $13.1
$4 $8.6
10%
0% $0
C&CE, as of Mar-20 FY21E FCF Debt Maturity FYE Net Cash,
assuming Full
Paydown
Exhibit 6: We see 30% upside to ur 12M TP of Rs1,550 Exhibit 7: Current share price imply US$6/bbl GRM and oil at
RIL SOTP US$20/bbl driving PE price of US450/t...

GS Base case SOTP bridge to shareprice (Rs per sh) and implied EV
(US$ bn)
EBITDA Multiple EV Per sh EV

Rs per sh U S$ bn
Rs bn x Rs bn Rs US$ bn
Chemicals 292 8.0 2,335 361 $32 1,600 $140
Refining & Marketi 268 6.5 1,743 270 $24

100
E&P 433 67 $6 1,450
$130
Treasury stock 731 113 $10

150
Organized Retail 3,351 519 $46 $120
Telecom (Jio) 4,355 674 $60 1,300

1,550
Total 12,947 2,004 $177 100 $110
Net debt 1,834 284 $25
1,150
Implied equity value 11,113 1,721 $152 $100
1,200
Conglomerate Discount(10%) 1,111 172 $15
FY21E based SOTP valuation 10,002 1,550 $137 1,000 $90
GS Base case Oil to $20/bbl GRM to $6/bbl EV/EBITDA to Shareprice
SOTP 5X
Source: Goldman Sachs Global Investment Research Note: We use FY21/22E avg. oil of US$42/bbl, GRM of US$10/bbl and implied multiple of 7.2X
for hydrocarbon business for valuation.
13 April 2020 5
Exhibit 8: RIL is trading at trough multiple on our bear case Exhibit 9: ...despite having lower EBITDA volatility vs peers
earnings... EBITDA volatility (coefficient of variation) versus peers
Shareprice implied Avg 2020/21E EV/EBITDA
10X 1.2
1.1
7.8X 1.0
8X
0.8
5.9X
6X 5.5
0.6
0.6
4X
3.0X 0.4 0.3
0.3
2X
0.2
0.1
0X 0.0
RIL Base (Refining & RIL Bear Chemical Pure-play Refiners Refining Commodity Diversified Speciality RIL
Petchem) Chemical Chemical Chemical
Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research
Exhibit 10: We see the path forward as rapid recovery for core Exhibit 11: While over the medium term, we expect consumer and
Hydrocarbon and retail, while Jio will be miniminally impacted energy business to both deliver sequential earnings growth
Reliance recovery path by segment, EBITDA in US$ bn RIL quarterly EBITDA trend, US$ bn
Reliance Recovery Path Favorably Positioned
Minimal Impact Rapid Recovery Consumer business Energy business
Business should hold up relatively better, even if the Business should recover relatively quickly (in 1-2 Q's) $4.5
shutdowns are extended. once the environment stabilizes.
$4.0
- Telecom/Jio - Core Hydrocarbon (Refining & Petchem)
1QFY18 1QFY19 1QFY20 1QFY21E 1QFY17 1QFY19 1QFY21E
$3.5
$3
$3.0
$2
$1 $2.5
$1
$2.0
$0
$0 - Retail $1.5
1QFY18 1QFY19 1QFY20 1QFY21E
$1
$1.0
$0.5
$0.0
$0
Intermediate Recovery Longer-term

Business should recover over the intermediate term Business should recover as the environment
(2-4 Q's) once the environment stabilizes. stabilizes (potentially over 12 mths) over a longer time
horizon.
13 April 2020 6
Exhibit 12: RIL can generate positive FCF even at US$6/bbl GRM and US$20/bbl oil price as capex will surprise to the downside
Sensitivity analysis for SOTP, upside, FCF, leverage under different oil and GRM assumptions
Implied Valuation Brent Upside Brent
Rs $20 $40 $60 % $20 $40 $60
$6 1,305 1,397 1,488 $6 10% 18% 26%
GRM $8 1,380 1,471 1,562 GRM $8 17% 24% 32%
$10 1,454 1,545 1,637 $10 23% 31% 38%
$12 1,528 1,620 1,711 $12 29% 37% 45%
FY21 FCF ex WC Brent FY21 EBITDA Brent

US$ bn $20 $40 $60 US$ bn $20 $40 $60
$6 $3.8 $4.5 $5.2 $6 $10.7 $11.6 $12.5
GRM $8 $4.5 $5.2 $5.9 GRM $8 $11.6 $12.5 $13.4
$10 $5.3 $6.0 $6.7 $10 $12.6 $13.5 $14.4
$12 $6.0 $6.7 $7.4 $12 $13.6 $14.5 $15.4
Net Debt / EBITDA Brent FY21 Energy EBITDA Brent

$20 $40 $60 US$ bn $20 $40 $60

$6 2.6 2.2 1.9 $6 $4.6 $5.4 $6.3
GRM $8 2.3 2.0 1.7 GRM $8 $5.5 $6.4 $7.3
$10 2.1 1.8 1.5 $10 $6.5 $7.4 $8.3
$12 1.9 1.6 1.4 $12 $7.5 $8.4 $9.3
13 April 2020 7
➊ How low could RIL’s refining margin go in a recession?
In our view, despite challenges to refining demand in the near term, we expect Reliance
to continue to outperform regional peers/benchmark margins due to a combination of
having the highest refining complexity globally, operational excellence and favorable
crude sourcing. The complexity and low cost nature of the asset drives positive cash
margins even during recession with limited risk to volumes. We estimate margins to
trough in 4QFY20 at US$6.5/bbl due to inventory losses. We forecast GRM of
US$8.5/bbl and US$11.2/bbl in FY21/22.
Best in class refining complexity and crude sourcing

RIL’s refining assets are among the best in the world owing to high complexity, scale,
configuration and dynamic operations, enabling it to produce ultra-clean fuels (zero fuel
oil) at a low cost from discounted heavy, acidic crudes while displaying higher resilience
in periods of tough demand. Hence, RIL is able to consistently earn higher refining
margins, on average, than its regional peers and SG benchmark refining margins
highlighting its defensive nature of earnings in the current economic/demand slowdown

environment. RIL’s refineries also benefit from the heavy and sour crude feedstock
reaching multi-year lows, with reports of further cuts in May.
...to drive sustainable outperformance vs peers/benchmark margins

We believe RIL will continue to outperform benchmark and peers through the
medium and long term and forecast FY21/22E GRM of $8.5/$11.2 per bbl, at $8
premium to Reuters benchmark SG refining margins (past 5-yrs avg $5/bbl) and also
above regional peers. We further expect a rapid recovery from 4QFY20E trough as
deeper run cuts set in globally as response to the demand shock, alongside
improvements in jet/gasoline cracks once travel and transportation demand normalizes
following end of global isolation measures.
Exhibit 13: Reliance has the highest refining complexity in our Exhibit 14: ...driving more resilient refining margins versus peers
coverage... during downturns
Refining Nelson Complexity Index GRM, US$/bbl
14 Asia $16
$14
12 US
$12
10 $10
$8
8
$6
6 $4
$2
4 $0
($2)
2
($4)
0
RIL HPCL BPCL IOC S Oil SKI Thai Oil
Source: Data compiled by Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
13 April 2020 8
Exhibit 15: In our view, RIL will continue to outperform benchmark Exhibit 16: ...helped by multi-year low discounts on heavy crude
SG refining margins... feedstock
Reliance vs benchmark SG refining margins, US$/bbl Basrah and Arab Heavy crude premiums, US$/bbl
Prem/Disc. to SG GRM RIL Reuters SG GRM Basrah Heavy Arab Heavy
$18 $2
$16
$0
$14
$12 ($2)
$7
$10
$6 $3 $4 ($4)
$6 $2
$8 $4 $5
$2 $2 $4 $8
$3 $2
$6 $5 ($6)
$3
$4 $8
($8)
$2
$0 ($10)
Source: Company data, Datastream, Goldman Sachs Global Investment Research Source: Bloomberg
➋ Why are chemical earnings so resilient given volatile oil prices?

Unique feed diversity to drive relatively stable earnings

RIL’s chemical business is highly differentiated due to its scale and high levels of
integration as well as feed and product diversification, helping to drive less cyclicality in
earnings and cash flow vs peers. RIL’s cracker uses ethane, propane, naphtha as well as
off-gas (residue from refinery) as feedstock, achieving high levels of feedstock security
and integration intensity with the refinery allowing for lesser external dependency and
full margin capture.
In our view, investor concerns around margin squeeze from lower oil prices are
overdone as: (1) naphtha cracking margins have expanded which impacts two-third of
RIL’s petchem output, and (2) ethane prices have declined from 14 cents per gallon to 10
cents per gallon. It is worth noting that the cost of “off-gas” used for chemical feedstock
is linked to oil and will come down with lower oil prices.
We forecast FY21/22E chemical EBITDA of $3.6/$4.5bn with a rapid earnings recovery

post 1QFY21E while continuing to lead regional peers with the highest realized margins
per tonne basis through forward quarters.
Beyond the near to medium term volatility in oil prices as well as demand, we continue
to view RIL’s product portfolio, cost curve position and feedstock diversity as optimally
positioned amongst regional peers to maximize margin capture while reducing volatility
— enabling RIL to enjoy margin expansion in naphtha cracking during lower oil, as well
as benefits of ethane cracking advantage seen over the last few years.
13 April 2020 9
Exhibit 17: Reliance has unique feed diversity for petrochemicals... Exhibit 18: ...to drive more stable earnings and maximize margin
RIL petrochemical feed mix capture in any macro environment...
RIL realized PE spreads, US$/ton
120% PE-Naphtha Reliance Realized PE Spreads
$1,250
100%
$1,000
80%
Imported Ethane
Imported propane $750
60%
Domestic C2/C3
40% Naphtha $500
Refinery-off gas
20% $250
0% $0
Source: Company data, Goldman Sachs Global Investment Research Note: 60% naphtha and 40% ethane-based since CY2018.
Source: Bloomberg, Platts, Goldman Sachs Global Investment Research
Exhibit 19: ...allowing it to become the Asian regional champion in Exhibit 20: ...while chemical EBITDA has consistently shown
scale and margin capture... resilience

Reliance vs peers chemical margins (EBIT), US$/ton RIL petchem quarterly trend
Reliance Lotte Chem LG Chem Hanwha Chem EBITDA (US$ bn) EBITDA per tonne (US$/t) [RHS]
PTTGC PCHEM SCC IRPC
$1.50 $600
$500/t
$1.25 $500
$400/t
$1.00 $400
$300/t
$0.75 $300
$200/t
$0.50 $200
$100/t
$0.25 $100
$0/t
$0.00 $0
-$100/t
➌ Why are telecom earnings rising even amid Covid-19?
We view telecom earnings as relatively defensive, and do not foresee any significant
change in user behavior despite a tough macro environment. In fact, with a large
proportion of the population currently staying at home, we expect data usage to
potentially rise, resulting in faster adoption of home broadband, and some subscribers
upgrading to bigger data packs on wireless; we note that India has only 18 mn home
broadband users, vs >600 mn wireless broadband users.
However, our India Telecom analyst, Manish Adukia, CFA expects the ongoing situation
around COVID-19 to likely result in telcos delaying a potential tariff hike. In December
2019, Jio raised tariffs after a gap of 2 years, and we had forecast another round of tariff
increase in 1HFY21. However, we believe the potential tariff increase could be delayed
to 2HFY21, as consumption demand is likely to be negatively impacted in the near term.
13 April 2020 10
Despite a delay in tariff hike, we forecast Jio to deliver >20% top line growth for the
next two years (FY21-FY22), led by (1) the impact of recent tariff hike, (2) increased
adoption of data, and (3) new revenue streams like home broadband. Given high
operating leverage, we expect the above to translate into 40% EBITDA CAGR
(FY20-23E) for the telecom business.
Exhibit 21: We expect ARPU for Jio to approach Rs200/month by Exhibit 22: We forecast continued market share expansion for Jio
FY23 Revenue market share of Indian telcos
RIL ARPU (Rs/month) and revenue growth
6% 4% 4% 3%
9%
17%
201 26%
190
33% 12% 28% 36% 41%
32% 171 43% 44%
144
124 41% 39%
33% 27%
20% 25% 22% 22%
16%
9% 33% 32% 30% 31% 31% 31% 31%
FY20E FY21E FY22E FY23E FY24E FY17 FY18 FY19 FY20E FY21E FY22E FY23E
ARPU (Rs/month) Revenue growth (YoY) Bharti Airtel Vodafone Idea Jio Others
Note: Excluding incoming IUC revenues. Source: TRAI, Goldman Sachs Global Investment Researc
Exhibit 23: We expect capital intensity to remain low as RIL shifts Exhibit 24: Market share and Margins drive key difference in
from investment to monetisation phase and support FCF valuation of Jio versus Bharti
RIL Jio EBITDA and Capex, Rs bn Jio valaution comparison with Bharti Airtel
$6 bn $60 bn
618 $9 bn
685 $50 bn
501 $44 bn
Jio
$7 bn EBITDA
Implied
margin at
354 Jio FY22
Implied 55%, vs
market EV/
FY22 46% for
share at EVITDA
EV/ Bharti due
223 43%, vs of 8.7x
EBITDA to
151 31% for
of 9.3x operating
Bharti
200 198 leverage
170
140
Bharti Airtel Of which Africa Bharti India Incremental Incremental Jio Enterprise
FY19 FY20E FY21E FY22E FY23E Enterprise and towers Enterprise value due to value due to Value
value Value higher market higher EBITDA
EBITDA Capex
share margin
Source: Goldman Sachs Global Investment Research Market share and EBITDA margin numbers for FY22; implied value on GS target prices. INR/USD
Fx of 73
➍ What is the bear case for Retail business valuations?
Reliance Retail to fare better than competition amidst lockdown

The electronics and fashion retail businesses will remain shut until the government
decides to lift the lockdown. However, grocery business (which is the key driver of our
valuation for Reliance Retail) will continue to operate. Reliance will likely do better than
peer retailers due to (1) positive FCF at the group level and (2) cushion from grocery
13 April 2020 11
earnings.
For illustrative purposes, we conduct a sensitivity analysis on the retail segment of RIL.
This is in line with the latest published report from our retail team.
Base versus Bear case

Base case: We see relatively muted downside for the key earnings driver — the grocery
segment — as we model its contribution to Retail business EBITDA rising from 32% in
FY20E to 43% contribution in FY21E (51% on Core Retail basis). While for Consumer
Electronics and Fashion & Lifestyle segments, we model a sharp decline in 1QFY20E
before rapid earnings recovery beginning in 2Q. We model no store addition in 1QFY21.
Overall we model sales per sqft growth over the next four quarters of -5%/0%/5%/5%
for groceries and -50%/-15%/8%/8% for non-groceries.
Bear case: Assuming all other parameters remain the same as the base case, we
estimate a slightly larger impact on the grocery business as well as even more severe
decline in 1HFY21E for Consumer Electronics and Fashion & Lifestyle segments. Overall
we model sales per sqft growth over the next four quarters of -15%/-5%/3%/3% for
groceries and -70%/-50%/8%/8% for non-groceries due to a more severe impact from
an extended nationwide lockdown with no new store adds in 1Q and only a trickle in 2Q.
In our base case we expect FY22E EBITDA to be up 23% from FY20E, versus in our
bear case FY22E is flattish versus FY20E and growth only resumes by FY23E (up 45%
over FY20E).
Sensitivity to government announced lockdown

The length of the lockdown is directly correlated to the extent of declines in revenues
for the apparel and electronics business as no sales are possible during the lockdown.
For grocery, the impact is more moderate as sales are allowed but will likely be a slower
pace due to lower traffic and a smaller assortment. Further, new store adds are not
possible during the lockdown. Another important factor determined by the duration of
the lockdown will also be the pace of recovery. A shorter 21 day lockdown (as currently
in place) will likely see a faster rebound in growth compared to a longer lockdown, if
announced by the government.
The path to recovery

In our base case we assume a rapid earnings recovery, with 2HFY21 continuing
along the trajectory seen in FY20. A longer lockdown (as in our bear case) will also delay
the recovery as income growth will be relatively slower, where our FY22 earnings
forecast will still fall short of FY20 due to a larger reduction in consumption levels.
Another important factor to watch would be around developments of a differential

lockdown for large cities vs smaller towns; Reliance Retail will likely be better positioned
amongst peers due to its higher exposure to Tier 3 towns.
13 April 2020 12
Exhibit 25: We expect a rapid earnings recovery in our GS Base Exhibit 26: ...versus a relatively slower recovery in our Bear case
case for the core retail segment... RIL Core Retail Bear case EBITDA (Rs bn), and margin (%) trend
RIL Core Retail Base case EBITDA (Rs bn), and margin (%) trend
160 10% 160 10%
120 8% 120 8%
80 6% 80 6%
40 4% 40 4%
0 2% 0 2%
FY17 FY18 FY19 FY20E FY21E FY22E FY23E FY17 FY18 FY19 FY20E FY21E FY22E FY23E
Grocery Consumer Electronics Grocery Consumer Electronics

Fashion & Lifestyle Core EBITDA marrgin (%) Fashion & Lifestyle Core EBITDA marrgin (%)
Note: Core Retail consists of Grocery, Consumer Electronics, and Fashion & Lifestyle. Note: Core Retail consists of Grocery, Consumer Electronics, and Fashion & Lifestyle.
Exhibit 27: We expect throughput to recover quickly in our base Exhibit 28: We expect a more severe decline in for Consumer
case, while a prolonged lockdown would result in slower recovery Electronics and Fashion & Lifestyle segments relative to Grocery
RIL Retail Base versus Bear Sales (Rs) per Sq ft RIL Retail quarterly Sales (Rs) per Sq ft
GS Base case Sales (Rs) per Sq ft Bear case Sales (Rs) per Sq ft GS Base case Sales (Rs) per Sq ft Grocery
50,000 Fashion & Lifestyle Consumer Electronics [RHS]

15,000 30,000
40,000 12,000 25,000
9,000 20,000
30,000
6,000 15,000
3,000 10,000
20,000
0 5,000
10,000
FY17 FY18 FY19 FY20E FY21E FY22E FY23E
Exhibit 29: In accordance with the lockdown, we model in no new

store additions during 1QFY21 with recovery beginning in 2Q
RIL Retail Base versus Bear Stores and Sq ft (mn) additions, YoY
GS Base case Stores Additions Bear case Stores Additions
700
600
500
400
300
200
100
0
FY17 FY18 FY19 FY20E FY21E FY22E FY23E
Source: Company data, Goldman Sachs Global Investment Research
13 April 2020 13
Exhibit 30: RIL Retail Base case SOTP

FY29 EBITDA
FY22 Implied
SOTP (discounted) Rs EV/EBITDA EV (Rs bn) EV (US$ bn)
EV/EBITDA
bn
Grocery 111 20.0x 2,214 50.2x $30
Consumer Electronics 44 13.0x 573 14.2x $8
Fashion and Lifestyle 33 15.0x 490 25.2x $7
Connectivity 11 6.0x 68 6.1x $1
Petrol 1 6.0x 7 3.4x $0
Total 200 16.8x 3,351 35.3x $46
MV (Rs bn) 3,217
MV/share 497
Exhibit 31: RIL Retail Bear case SOTP

FY29 EBITDA
FY22 Implied
SOTP (discounted) Rs EV/EBITDA EV (Rs bn) EV (US$ bn)
EV/EBITDA
bn
Grocery 102 20.0x 2,033 56.6x $28
Consumer Electronics 33 13.0x 434 16.1x $6
Fashion and Lifestyle 24 15.0x 364 29.2x $5
Connectivity 11 6.0x 68 6.1x $1
Petrol 1 6.0x 7 3.4x $0
Total 172 16.9x 2,907 32.7x $40
MV (Rs bn) 2,771
MV/share 428
➎ What is priced in for RIL shares post recent correction?
Our analysis suggests the stock is already pricing in: (1) trough GRMs of US$6/bbl, (2)
trough oil price of US$20/bbl for petchem revenues (implying PE price of US$450/t), and
(3) trough EV/EBITDA multiple of 5x. Overall current share price implied EV of
hydrocarbon business is US$20 bn versus our base case of US$56 bn and bear case of
US$42 bn. Key catalysts for the stock’s outperformance over the next 12 months would
be: (1) quarterly earnings where delivery could be better than investor expectations, (2)
FCF generation driving lower net debt even during challenging hydrocarbon and India
macro environment, and (3) incremental newsflow around asset sale initiatives.
13 April 2020 14
Exhibit 32: Current share price imply US$6/bbl GRM and oil at Exhibit 33: ...while we view risk-reward as attractive post recent
US$20/bbl driving PE price of US450/t... pullback
GS Base case SOTP bridge to shareprice (Rs per sh) and implied EV Upside sensitivity to Brent and GRM
(US$ bn)
Upside Brent
Rs per sh U S$ bn % $20 $40 $60
1,600 $140 $6 21% 30% 38%
GRM $8 28% 36% 45%
100
1,450
$130 $10 35% 43% 52%
$12 42% 50% 59%
150 $120
1,300
1,550
100 $110
1,150
$100
1,200
1,000 $90
GS Base case Oil to $20/bbl GRM to $6/bbl EV/EBITDA to Shareprice
SOTP 5X
Note: We use FY21/22E avg. oil of US$42/bbl, GRM of US$10/bbl and implied multiple of 7.2X Source: Goldman Sachs Global Investment Research
for hydrocarbon business for valuation.

Exhibit 34: Reliance is trading close to trough multiple on bear Exhibit 35: ...despite Reliance having lower EBITDA volatility vs
case earnings... peers
Shareprice implied Avg 2020/21E EV/EBITDA versus pure-play peers EBITDA volatility (coefficient of variation) versus pure-play peers
10X 1.2
1.1
7.8X 1.0
8X
0.8
5.9X
6X 5.5
0.6
0.6
4X
3.0X 0.4 0.3
0.3
2X
0.2
0.1
0X 0.0
RIL Base (Refining & RIL Bear Chemical Pure-play Refiners Refining Commodity Diversified Speciality RIL
Petchem) Chemical Chemical Chemical
Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research
13 April 2020 15
Exhibit 36: Share price implied valuation of refining and chemical Exhibit 37: RIL implied energy business valuation has
segment has collapsed since mid Jan levels underperfomed peers with lower complexity and lower feed
Share price implied valuation of refining and chemical business, US$ bn diversification
Share price performance since coronavirus outbreak mid Jan
$80
20% 15%
$60 0%
0%
$40
(20%) (17%)
(22%) (20%)
$20
(40%)
$0
(60%)
($20)
(67%)
(80%)
RIL RIL S Oil Lotte Bharti Airtel D Mart (Retail)
"Ref+Chem" (Refining) (Chemical) (Telecom)
Share Price Implied Ref+Chem EV GS Ref+Chem EV Implied Value
Source: Bloomberg, Goldman Sachs Global Investment Research Source: Bloomberg, Goldman Sachs Global Investment Research
Exhibit 38: FY21E EBITDA and implied valuation sensitivity to key

earnings drivers
6% 5.5%
5.3%
5% 4.7%
4% 3.7% 3.7% 3.8%
3.0%
3%
2.4%
2% 1.5%
1% 0.6%
0%
US$1/bbl GRM US$10/bbl oil US$50/t petchem 10 Rupee ARPU Depreciation by
margin Rs 1
FY21 EBITDA Implied Valuation
➏ Can RIL generate positive FCF and deleverage in our bear case
scenario?
Investor queries highlight concerns around RIL’s balance sheet and debt repayments.
We note leverage has already been declining and will likely continue to come down in
FY21 as well even in our bear case scenario. Our bear case assumes (1) US$7/bbl GRM
in FY21 (2) US$20/bbl oil driving PE price of US$450/tonne, and (3) a deeper impact to
retail business (down 50% YOY) from an extended period of lockdown. Deleveraging will
be driven by internal FCF generated by a combination of: (1) low cash cost and complex
hydrocarbon asset base driving cash positive margins even during recession with limited
volume impact, (2) telecom and grocery cashflows which remains resilient despite the
negative impact from COVID-19 and the related nationwide lockdown, (3) continuous
decline in capex driving positive cashflows even for consumer businesses, and (4)
working capital release from lower oil price.
13 April 2020 16
Exhibit 39: RIL can generate positive FCF even at US$6/bbl GRM and US$20/bbl oil implying PE price of US$450/t
Sensitivity analysis
Implied Valuation Brent Upside Brent
Rs $20 $40 $60 % $20 $40 $60
$6 1,305 1,397 1,488 $6 10% 18% 26%
GRM $8 1,380 1,471 1,562 GRM $8 17% 24% 32%
$10 1,454 1,545 1,637 $10 23% 31% 38%
$12 1,528 1,620 1,711 $12 29% 37% 45%
FY21 FCF ex WC Brent FY21 EBITDA Brent

US$ bn $20 $40 $60 US$ bn $20 $40 $60
$6 $3.8 $4.5 $5.2 $6 $10.7 $11.6 $12.5
GRM $8 $4.5 $5.2 $5.9 GRM $8 $11.6 $12.5 $13.4
$10 $5.3 $6.0 $6.7 $10 $12.6 $13.5 $14.4
$12 $6.0 $6.7 $7.4 $12 $13.6 $14.5 $15.4
Net Debt / EBITDA Brent FY21 Energy EBITDA Brent

$20 $40 $60 US$ bn $20 $40 $60

$6 2.6 2.2 1.9 $6 $4.6 $5.4 $6.3
GRM $8 2.3 2.0 1.7 GRM $8 $5.5 $6.4 $7.3
$10 2.1 1.8 1.5 $10 $6.5 $7.4 $8.3
$12 1.9 1.6 1.4 $12 $7.5 $8.4 $9.3
Net Debt / EBITDA Brent FY21 Net Debt Brent

Include tower fibre debt $20 $40 $60 US$ bn $20 $40 $60
$6 3.5 3.1 2.7 $6 $27.7 $25.7 $23.7
GRM $8 3.2 2.8 2.4 GRM $8 $26.9 $24.9 $22.9
$10 2.9 2.5 2.2 $10 $26.1 $24.1 $22.1
$12 2.6 2.3 2.0 $12 $25.2 $23.2 $21.2
Exhibit 40: RIL capital intensity should continue to lower with Exhibit 41: ...while having ample liquidity in hand to pay down
completion of long gestation hydrocarbon and telecom capex... entire 2020 debt maturity assuming no refinancing
Annual capex by segment, Rs bn Cash & Cash Equivalents bridge assuming full paydown of debt
maturing in FY21E, US$ bn
$20 $24
$18 We estimate US$
$2 $2 5bn of capex for $20
$16 $6
$3 Jio in FY19 is
$14 from the $6.4
$16
$12 demerged fibre
$9 $2 $11.0
$11 and tower assets
$10 $3 $7 $12
$8 $10
$7 $3 $8
$6 $4
$13.1
$2 $2
$4 $3 $1
$6 $7 $4 $8.6
$2 $4 $5 $2 $3 $3
$4 $3 $3
$0 $1 $1 $1
$0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E FY23E C&CE, as of Mar-20 FY21E FCF Debt Maturity FYE Net Cash,
assuming Full
Refining & Petchem Jio Others Paydown
13 April 2020 17
Earnings Preview for 4QFY20
We expect overall EBITDA to decline by 8% qoq in 4QFY20 to Rs 205 bn. Petchem

earnings will be flattish as margins already reached a trough in 3QFY20. We expect
steeper decline in refining due to inventory loss which could be partly offset by growth
in telecom earnings.
Exhibit 42: We have modeled a slight sequential decline for 2 quarters, while Telecom maintains the momentum
RIL quarterly expectations
4QFY19 1QFY20 2QFY20 3QFY20 4QFY20E QOQ YOY 1QFY21E 2QFY21E 3QFY21E 4QFY21E
Refining 50 52 57 65 37 -44% -26% 35 40 62 79
Chemical 94 88 89 73 74 2% -21% 53 62 66 82
Retail 19 20 23 27 24 -12% 25% 10 15 20 26
Telecom 43 47 52 56 69 23% 59% 77 83 93 101
Others 4 6 1 3 2 NM NM 2 4 5 4
Total EBITDA 209 213 222 224 205 -8% -2% 177 204 247 291
Crude throughput 16.0 17.5 16.7 18.1 17.9 -1% 12% 15.0 16.0 18.0 18.0
GRM (US$/bbl) $8.2 $8.1 $9.4 $9.2 $6.0 ($3.2) ($2.2) $7.0 $7.4 $8.9 $10.8

Exhibit 43: We expect RIL GRM to improve sequentially from Exhibit 44: ...while Petchem earnings will be flattish as margins
4QFY20 trough while sustaining premium over benchmark already hit trough during 3QFY20
margins... RIL petchem quarterly trend
Reliance vs peers and benchmark SG refining margins, US$/bbl
Reliance Reuters SG GRM SK Inno S-Oil Thai Oil EBITDA (US$ bn) EBITDA per tonne (US$/t) [RHS]
$15 $1.50 $600
$1.25 $500
$10
$1.00 $400
$5
$0.75 $300
$0
$0.50 $200
($5)
$0.25 $100
($10) $0.00 $0
Source: Company data, Datastream, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
13 April 2020 18
Disclosure Appendix
Reg AC
We, Nikhil Bhandari, Vinit Joshi, Manish Adukia, CFA and Aditya Soman, hereby certify that all of the views expressed in this report accurately reflect
our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will
be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.
GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.
M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.
Quantum
Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.
Disclosures
Financial Advisory Disclosure
Goldman Sachs and/or one of its affiliates is acting as a financial advisor in connection with an announced strategic matter involving the following
company or one of its affiliates: Reliance Industries Limited
Coverage group(s) of stocks by primary analyst(s)
Nikhil Bhandari: Asia Chemicals, Asia Refining, India/ASEAN Oil & Gas. Vinit Joshi: India/ASEAN Oil & Gas. Manish Adukia, CFA: India TMT. Aditya
Soman: India Consumer.
Asia Chemicals: China Steel Chemical, Far Eastern New Century Corp., Formosa Chemicals & Fibre, Formosa Petrochemical Corp., Formosa Plastics,
Hanwha Chemical, IRPC PCL, Kumho Petro Chemical Co., LG Chem, Lotte Chemical, Nan Ya Plastics, Petronas Chemicals Group, PTT Global Chemical,
Siam Cement PCL, Taiwan Synthetic Rubber Corp..
Asia Refining: Bangchak Corp PCL, Bharat Petroleum, GS Holdings, Hindustan Petroleum, Indian Oil Corp., Reliance Industries, Reliance Industries
(GDR), S-Oil Corp., SK Innovation, Thai Oil.
India Consumer: Aditya Birla Fashion and Retail, Asian Paints (India), Avenue Supermarts Ltd., Britannia Industries Ltd., Colgate Palmolive (India), Dabur
India, Emami Ltd., Godrej Consumer Products Ltd., Hindustan Unilever, ITC, Jubilant Foodworks, Marico, Nestle India, Page Industries Ltd., Titan Co.,
United Breweries Ltd., United Spirits.
India TMT: Bharti Airtel, Bharti Infratel Ltd., Dish TV India, Info Edge India Ltd., MakeMyTrip Ltd., PVR Ltd., Vodafone Idea Ltd., Zee Entertainment
Enterprises.
India/ASEAN Oil & Gas: First Resources, GAIL India Ltd., Golden Agri-Resources Ltd., Gujarat State Petronet, Indraprastha Gas Ltd., Oil & Natural Gas
Corp., Oil India, Perusahaan Gas, Petronet LNG, PTT Exploration and Production PCL, PTT Public Co., Wilmar International.
Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies covered
by the Global Investment Research Division of Goldman Sachs and referred to in this research.
Goldman Sachs has received compensation for investment banking services in the past 12 months: Reliance Industries (Rs1,189.25) and Reliance
Industries (GDR) ($32.15)
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Reliance Industries
(Rs1,189.25) and Reliance Industries (GDR) ($32.15)
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Reliance Industries (Rs1,189.25) and Reliance
13 April 2020 19
Goldman Sachs had a non-securities services client relationship during the past 12 months with: Reliance Industries (Rs1,189.25) and Reliance
Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe
Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 44% 40% 16% 63% 57% 51%
As of January 1, 2020, Goldman Sachs Global Investment Research had investment ratings on 3,054 equity securities. Goldman Sachs assigns stocks
as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage groups and related definitions’ below. The Investment
Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.
Price target and rating history chart(s)

Regulatory disclosures
Disclosures required by United States laws and regulations
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Reliance Ind - CU - GS - 13 April 2020

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13 April 2020 | 9:16PM SGT

Reliance Industries (RELI.BO)

Quality on Sale, reiterate Buy (on CL)

RELI.BO relative to Asia ex. Japan Coverage

Source: Company data, Goldman Sachs Research estimates.

Reliance Industries (RELI.BO) Income Statement (Rs mn) _________________________________

Capital expenditures (936,260.0) (627,133.8) (304,027.0) (383,660.7)

Repayment of lease liabilities -- -- -- --

Source: Company data, Goldman Sachs Research estimates.

PM Summary: FCF delivery and deleveraging can surprise reset

Shares are pricing trough multiple on trough energy earnings

around asset sale initiatives.

Consumer growth momentum to continue

Framing the path to recovery for earnings

Preview 4QFY20 earnings

Earnings and valuation

Rs143.86. Accordingly, we slightly revise down our TP by 2% to Rs1,550. The GDR

RIL SOTP US$20/bbl driving PE price of US450/t...

EBITDA Multiple EV Per sh EV

Refining & Marketi 268 6.5 1,743 270 $24

Treasury stock 731 113 $10

Telecom (Jio) 4,355 674 $60 1,300

Source: Goldman Sachs Global Investment Research

Intermediate Recovery Longer-term

FY21 FCF ex WC Brent FY21 EBITDA Brent

Net Debt / EBITDA Brent FY21 Energy EBITDA Brent

$20 $40 $60 US$ bn $20 $40 $60

Source: Goldman Sachs Global Investment Research

➊ How low could RIL’s reﬁning margin go in a recession?

Best in class reﬁning complexity and crude sourcing

highlighting its defensive nature of earnings in the current economic/demand slowdown

...to drive sustainable outperformance vs peers/benchmark margins

RIL HPCL BPCL IOC S Oil SKI Thai Oil

Prem/Disc. to SG GRM RIL Reuters SG GRM Basrah Heavy Arab Heavy

➋ Why are chemical earnings so resilient given volatile oil prices?

Unique feed diversity to drive relatively stable earnings

We forecast FY21/22E chemical EBITDA of $3.6/$4.5bn with a rapid earnings recovery

120% PE-Naphtha Reliance Realized PE Spreads

Source: Bloomberg, Platts, Goldman Sachs Global Investment Research

scale and margin capture... resilience

➌ Why are telecom earnings rising even amid Covid-19?

9% 33% 32% 30% 31% 31% 31% 31%

Source: Goldman Sachs Global Investment Research

➍ What is the bear case for Retail business valuations?

Reliance Retail to fare better than competition amidst lockdown

Base versus Bear case

Sensitivity to government announced lockdown

The path to recovery

Another important factor to watch would be around developments of a differential

160 10% 160 10%

Grocery Consumer Electronics Grocery Consumer Electronics

50,000 Fashion & Lifestyle Consumer Electronics [RHS]

40,000 12,000 25,000

Exhibit 29: In accordance with the lockdown, we model in no new

GS Base case Stores Additions Bear case Stores Additions

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 30: RIL Retail Base case SOTP

Source: Goldman Sachs Global Investment Research

Exhibit 31: RIL Retail Bear case SOTP

Source: Goldman Sachs Global Investment Research

➎ What is priced in for RIL shares post recent correction?

Source: Goldman Sachs Global Investment Research

Exhibit 38: FY21E EBITDA and implied valuation sensitivity to key

4% 3.7% 3.7% 3.8%