reliance industries - 2011-07-22 - bnp paribas[1]

8/12/2019 Reliance Industries - 2011-07-22 - BNP Paribas[1]

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Reliance Industries RIL INTARGET INR900.00

BUYPRIOR TP INR965.00CLOSE INR732.55

INDIA / OIL & GAS UP/DOWNSIDE +22.9% UNCHANGED

Now it becomes attractiveWeak US and Euro growth outlook leads to R & P de-rating But recent correction accounts for the decline in Ref & PetWorst case value: PMT+D6+shale+de-rated R&P = INR712/sh Reiterate BUY at SoTP based TP of INR900; Valuation play

RIL now makes a case for itselfRecall, in our last update E&P stalls, Ref& Pet Hold21 July 2011, we provided

detailed analysis on RIL concluding that are-rating was some time away andvaluations at that time provided only a10% upside to play for, which in our viewwas not very appealing. Since then, theshares of RIL have corrected ~16% andnow the potential upside is lookingappealing. We do not expect demanddestruction of the same kind as seen inthe last downturn and taking aconservative view on current margins; weexpect in the worst case, GRMs to dip toUSD8.5/bbl and see very limited downside (Exhibit 2). We also do not

include the BP cash which due to decline in E&P valuations will act as acushion and also provide a floor for the E&P valuations.

We reduce earnings estimate for possible Ref weaknessWe reduce FY12-14 earnings estimates by 5-10% primarily on loweringour GRM assumptions and EBIT margins in petrochemical segment onpotential margin compression on the back of weak demand cues frommajor export destinations like the US and Eurozone. We gather fromcompany data that these two regions contribute close to 30% of refiningexports. We now assume blended refining GRMs of USD9.75/bbl (earlierUSD10.5) in FY12 and USD10.5/bbl (earlier USD11) for FY13. Wereduce EBIT margins by 100ppt in petrochemical segment for FY12/13,to 13% and 14% respectively. During the last downturn in FY09, RILspetrochemical EBIT declined as low as 11.5%. We see 3% EPS impact

for every 1% negative impact to petrochemical EBIT margins, and c.6%EPS impact for every USD1/bbl reduction in refining GRMs.

Valuations now a good enough reason to accumulateWe reiterate our BUY rating on RIL with a revised TP of INR900 (prior TPof INR965). Revisions come primarily on back of reduced GRMs tocapture potential weakness in demand from the West and also to presenta conservative earnings profile while still presenting attractive upsidefrom CP. RIL due to negative news flow on E&P has seen a severemultiple de-rating and at current levels is trading at 11.5x times FY12EEPS and 7x EV/EBITDA as compared to five year historical average of16x times and 11x times. During the downturn RIL traded in line withrecent valuations at 11x earnings. We recommend RIL as a valuationplay with limited downside. While we acknowledge the absence of any

near-term catalysts, the recent correction makes the shares attractive.Risks: Further decline in E&P and Refining.

HOW WE DIFFER FROM THE STREET

BNP Consensus % Diff

Target Price (INR) 900.00 1040.87 (13.5)

EPS 2012 (INR) 64.40 71.82 (10.3)

EPS 2013 (INR) 68.11 80.36 (15.2)

Positive Neutral Negative

Market Recs. 40 7 1

KEY STOCK DATA

YE Mar (INR m) 2012E 2013E 2014E

Revenue 3,780,996 3,767,315 3,454,687

Rec. net profit 210,806 222,941 243,198

Recurrin g EPS (INR) 64.40 68.11 74.30Prior rec. EPS (INR) 68.63 75.26 80.07

Chg. In EPS est. (%) (6.2) (9.5) (7.2)

EPS growth (%) 4.2 5.8 9.1

Recurring P/E (x) 11.4 10.8 9.9

Dividend yield (%) 1.2 1.2 1.2

EV/EBITDA (x) 7.1 6.1 5.0

Price/book (x) 1.3 1.2 1.1

Net debt/Equity 9.3 (5.4) (14.7)

ROE (%) 12.7 11.9 11.7

(18)

(13)

(8)

(3)

27

700

800

900

1,000

1,1001,200

Aug -10 No v-10 Feb-11 May-11 Aug -11

(% )(INR) Reliance In du stries

Rel to MSCI India

Share price performance 1 Month 3 Month 12 Month

Absolute (%) (15.7) (19.7) (23.2)

Relative to country (%) (2.3) (7.2) (10.0)

Next results October 2011

Mkt cap (USD m) 52,416

3m avg daily turnover (USD m) 85.0

Free float (%) 50

Major shareholder Promoter Holding (45%)

12m high/low (INR) 1,111.85/741.20

3m historic vol. (%) 24.2

ADR ti cker INSERT

ADR cl osi ng price (USD; [DATE]) INSERT

Sources : Bloomberg consensus; BNP Paribas estimates

INDUSTRY OUTLOOK

NEW INFORMATION

RECENT COMPANY & SECTOR RESEARCH

E&P talk hints at downside ................................. 26 Jul 2011

E&P stalls, Ref & Pet hold ................................... 20 Jul 2011

Landbri dge project is back ............................... 17 A ug 2011

Overall positive outlook ...................................... 8 Aug 2011

Amit Shah

+91 22 [email protected]

Sriram Ramesh+91 22 33704369

[email protected]

22 August 2011PREPARED BY BNP PARIBAS SECURITIES ASIATHIS MATERIAL HAS BEEN A PPROVED FOR U.S DISTRIBUTION. IMPORTANT DISCLOSURES CAN BE FOUND IN THE DISCLOSURES APPENDIX.
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AMIT SHAH RELIANCE INDUSTRIES 22 AUGUST 2011

2 BNP PARIBAS

FY12 basisWorst

caseBasecase

Bestcase

D6 production (mmscmd) 40.00 47.00 47.00

Refining blended GRMs (USD/bbl) 8.50 9.75 10.50

Petchem EBIT (%) 12.00 13.00 15.00

EPS (INR/share) 57.57 64.40 72.77

Upside/(Downside) to base case (%) (10.6) 0.0 13.0

Target price (INR/share) 712.00 900.00 1,062.00

Upside/ (Downside) from CMP (%) (2.6) 23.1 45.3

Key Earnings Drivers & Sensitivity In the worst case - KG-D6 production goes down to

40mmscmd, GRMs at USD8.5/bbl and petrochemical EBIT

at 12% - we see EPS downside of c.11% and TP downside

of c.3% from current levels (assuming de-rated multiples)

In the best case we see EPS upside of c.13% to our basecase petrochemical EBIT at 15%, GRMs at USD10.5/bbl

Sources: BNP Paribas estimates

OECD World Crude Oil Price FOB Spot Brent USD and

Reliance Indust ries (3M and 6M realised-vol)

Regression DXY ( USD proxy, with heavy weighting on

Euro) to Reliance Industries

0

20

40

60

80

100

120

140160

180

Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

(%)

OECD World Crude Oil Price FOB Spot Brent USD -3M Reali sed - Vol

OECD World Crude Oil Price FOB Spot Brent USD -6M Reali sed - Vol

Reliance Industries -3M Realised - Vol

Reliance Industries -6M Realised - Vol

Sources: Bloomberg; BNP Paribas

-5.00%

-3.00%

-1.00%

1.00%

3.00%

5.00%

7.00%

9.00%

-25.00% -15.00% -5.00% 5.00% 15.00% 25.00% 35.00%

DXY(USDproxy,withheavyweightingonEuro)

Reliance Indu striesDXY ( USD pro xy, with heavy weighting on Euro) = 93 + -0.0134 * RIL IN Eq uityR Square = 0.0766Regression based o n 261 observations of 5 years weekly data.Sources: Bloomberg; BNP Paribas

India sector co rrelation matrix at 25 July 2011

Aut os Bank sEngineering &Construction

Metals &Mining Oil & Gas IT Services Telecom Utilities Property

Aut os 1.00 0.67 0.64 0.66 0.50 0.43 0.36 0.58 0.62

Banks 1.00 0.71 0.70 0.58 0.46 0.36 0.63 0.66

Engineering & Construction 1.00 0.71 0.58 0.46 0.41 0.65 0.68

Metals & Mini ng 1.00 0.66 0.50 0.40 0.69 0.72

Oil & Gas 1.00 0.40 0.30 0.57 0.57

IT Services 1.00 0.27 0.45 0.38

Telecom 1.00 0.43 0.43

Utilities 1.00 0.63

Property 1.00

Source: BNP Paribas Sector Strategy

Long/short chart The risk experts

-2 s-1 sMe a n+1 s+2 s

0.0390

0.0490

0.0590

0.0690

0.0790

0.0890

A u g -0 8 Fe b -0 9 Au g -0 9 Fe b -1 0 Au g -1 0 Fe b -1 1

(x )

R e l i anc e I ndu s t r i es -B S E Sens ex 30 I ndex

The Risk Experts Our starting point for this page is a recognition of the

macro factors that can have a significant impact on stock-

price performance, sometimes independently of bottom-up

factors.

With our Risk Expert page, we identify the key macro risks

that can impact stock performance.

This analysis enhances the fundamental work laid out in

the rest of this report, giving investors yet another resource

to use in their decision-making process.

Sources: Bloomberg, BNP Paribas


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3 BNP PARIBAS

Exhibi t 1: Valuation - SoTP

Business New (INR/sh) Comments

Refining and Petrochemicals

Refining - incl. RPL 317 Valued at 7.0x EV/EBITDA, a slight premium to global peers owing to complexity

Petrochemicals 238 Valued at 7.0x EV/EBITDA, a slight premium to global peers owing to better margin control and strong domesticdemand

Sub total 555

E & P

Oil and Gas - PMT 39 Valued at 4x EV/EBITDA; maturing fields + under CAG lens - hence a de-rated multiple

KG D6 Gas (D1/D3) 126 DCF at 9% WACC. Using a 2P reserve estimate of 11.2tcf of gas (including effect of NIKO reserve downgrade)

KG D6 Oil (MA) 15 DCF at 9% WACC. Using a 2P reserve estimate of 44mn bbls of oil

KG D6 Gas - Upsides 15 2P reserves of 2.2tcf, valuing at USD3 EV/boe

KG D3 block 5 2C reserves of 683bcf, valuing at USD3 EV/boe

NEC-25 8 2P reserves of 1.2tcf, valuing at USD3 EV/boe

CBM 11 Sohagpur East & West Reserves only, 2P reserve estimate of 3tcf, assuming 50% optionality, valuing at USD3EV/boe

Sub total 219

TOTAL STANDALONE 774

Net Cash 63 Includes sale value of treasury shares at CMP and investments

Standalone Equit y Value 837

RIL- Shale ventures

Atlas JV 18 Cost of capital of 10% and average long term gas price assumption o f USD6.0/mmbtu

Pioneer JV 15 Cost of capital of 10%; Potential upside on liquids rich play, which is ~50% of acreage

Carizzo JV 5 Valued recoverable reserves of 3.4tcfe, 60% stake at EV/boe of USD2 (based on Atlas/Pioneer acquisition value)

Shale Sub total 37

Reliance Retail 26 Valued at 25% discount to equity investment

TARGET PRICE 900

Source: BNP Paribas estimates

Exhibit 2: Whats the current price factoring in !!!

217

712

900

1,062

228

204

63

90

34 1127

2673

4940

0

200

400

600

800

1,000

1,200

PMT + D1/D3 +MA + Shale

Refining:USD8.5/bbl &

trough 6xEV/EBITDA

Petchem: 13%EBIT, trough 6x

EV/EBITDA

Cash (in cl.treasury) +

Investments

W or st Cas e GRMs atUSD9.75/bbl (7x)

Petchem: 7xEV/EBITDA

CBM D3 (2C)/ NEC-25/ D6 upsides

Retail Base Case BP CashPremium +

PerformanceLinked payments

Other E&Pupsides (D9, D3

prospective)

Peak PetchemEBIT @ 15%

Best Case

(INR/sh)

(WORST CASE) (BASE CASE)(BEST CASE)

(CMP not reflec ting any E&P upside or BP cashpremium)

Source: BNP Paribas Estimates


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4 BNP PARIBAS

Exhibi t 3: P/E Chart Huge cash pile is a defensive Exhibi t 4: EV/EBITDA Implying trough valuations

6.7

16.7

3

6

9

12

15

18

21

24

Apr-05

Aug-05

Dec-05

Apr-06

Aug-06

Dec-06

Apr-07

Aug-07

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

Aug-11

Minimum

5-yr average

(x)

5.8

11.3

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Apr-05

Aug-05

Dec-05

Apr-06

Aug-06

Dec-06

Apr-07

Aug-07

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

-

Minimum

5-yr average

(x)

Sources: Bloomberg, BNP Paribas Estimates Sources: Bloomberg, BNP Paribas Estimates

Exhibit 5: How does RIL fare vs. global peers across business segments

P/E EV/EBITDA P/BV Dividend Yield

Market Cap. 1 Yr Fwd 2 Yr Fwd 1 Yr Fwd 2 Yr Fwd 1 Yr Fwd 2 Yr Fwd 1 Yr Fwd

(USD m) (x) (x) (x) (x) (x) (x) (%)

Global Petrochemicals 22,269 9.8 8.6 7.2 6.5 1.7 1.5 3.4

Asian Refiners 16,859 8.6 7.9 6.9 6.4 1.4 1.3 4.5

E&P - Global 34,962 15.8 11.5 5.8 4.8 1.7 1.5 1.9

Blended Average 23,044 10.8 9.0 6.7 6.0 1.6 1.4 3.5

Relian ce Indust ries 53,168 11.5 10.9 7.2 6.1 1.4 1.2 1.0

Sources: Bloomberg, BNP Paribas Estimates

Exhibit 6: Key operating assumptions

Operating Segment FY10 A FY11 A FY12 E FY13 E FY14 E

E&P

KG-D6 gas (mmscmd) 39.00 56.00 46.00 45.00 55.00

KG-D6 Oil (bpd) 11,086 21,418 14,500 14,500 10,000

Panna-Mukta Gas (mmscmd) 5.38 5.70 5.92 6.00 6.00

Tapti gas (mmscmd) 8.50 7.65 6.50 6.50 6 .50

Panna-Mukta Oil (bpd) 35,625 34,904 34,000 33,000 32,000

Tapti Condensate (bpd) 3,769 3,253 3,400 3,000 2,500

Refining

Jamnagar, DTA, Utilization (%) 98 95 100 100 100

SEZ refinery, Utilization (%) 99 122 115 115 115

Operating cost (USD/bbl) 2.33 2.42 2.75 2.75 2.50

Depreciation (USD/bbl) 1.54 1.76 2.00 2.00 2.00

Blended GRMs (USD/bbl) 6.68 8.40 9.75 10.50 10.50

X-Rate (INR/USD) 47.42 45.60 44.70 45.00 45.00

Petrochemicals

Blended Product Spreads (USD/ton) 454 518 605 588 592

EBIT margins (%) 16.4 15.9 12.9 13.4 15.6

Utilization (%) 94 97 100 100 100

Source: BNP Paribas estimates


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5 BNP PARIBAS

F I N A N C I A L S T A T E M E N T S

Reliance Industries

Profit and Loss (INR m)Year Ending Mar 2010A 2011A 2012E 2013E 2014E

Revenue 2,037,397 2,658,106 3,780,996 3,767,315 3,454,687

Cost of sales ex depreciation (1,546,027) (2,044,242) (3,105,008) (3,072,897) (2,706,092)Gross profi t ex deprec iat ion 491,370 613,864 675,988 694,418 748,595Other operating income 0 0 0 0 0Operating costs (182,431) (224,262) (289,038) (292,049) (314,038)Operat ing EBITDA 308,939 389,602 386,950 402,369 434,557Depreciation (109,458) (141,210) (132,839) (140,299) (160,812)Goodwill amortisation 0 0 0 0 0Operat ing EBIT 199,481 248,392 254,111 262,070 273,744Net financing costs 1,264 1,320 16,250 22,494 35,183Associates 0 0 0 0 0Recurring non operating income 0 0 0 0 0Non recurring items 86,056 (9,170) 0 0 0Prof it before tax 286,801 240,542 270,361 284,564 308,928Tax (42,563) (47,830) (59,555) (61,623) (65,730)Prof it af ter tax 244,238 192,712 210,806 222,941 243,198Minority interests 796 220 0 0 0

Preferred dividends 0 0 0 0 0Other items 0 0 0 0 0Reported net p ro fi t 245,034 192,932 210,806 222,941 243,198Non recurring items & goodwill (net) (86,056) 9,170 0 0 0Recur ring net profi t 158,978 202,102 210,806 222,941 243,198

Per share (INR)

Recurring EPS * 48.61 61.80 64.40 68.11 74.30Reported EPS 74.93 58.99 64.40 68.11 74.30DPS 7.43 8.48 8.74 8.74 8.74

Growth

Revenue (%) 34.7 30.5 42.2 (0.4) (8.3)Operating EBITDA (%) 31.9 26.1 (0.7) 4.0 8.0Operating EBIT (%) 12.2 24.5 2.3 3.1 4.5Recurring EPS (%) (48.9) 27.1 4.2 5.8 9.1

Reported EPS (%) (21.2) (21.3) 9.2 5.8 9.1Operating performance

Gross margin inc depreciation (%) 18.7 17.8 14.4 14.7 17.0Operating EBITDA margin (%) 15.2 14.7 10.2 10.7 12.6Operating EBIT margin (%) 9.8 9.3 6.7 7.0 7.9Net margin (%) 7.8 7.6 5.6 5.9 7.0Effective tax rate (%) 14.8 19.9 22.0 21.7 21.3Dividend payout on recurring profit (%) 15.3 13.7 13.6 12.8 11.8Interest cover (x) - - - - -Inventory days 64.3 65.1 57.5 70.2 74.7Debtor days 13.4 17.7 16.1 17.0 17.8Creditor days 85.7 80.4 76.9 93.4 100.1Operating ROIC (%) 9.2 10.3 10.3 11.3 12.1Operating ROIC WACC (%) (4.6) (3.5) (3.4) (2.4) (1.6)ROIC (%) 8.8 9.4 9.3 10.1 10.8

ROIC WACC (%) (5.0) (4.3) (4.4) (3.6) (2.9)ROE (%) 12.1 13.7 12.7 11.9 11.7ROA (%) 6.2 7.1 6.1 5.8 5.8* Pre exceptional, pre-goodwill and fully diluted

Sources: Reliance Industries; BNP Paribas estimates

EPS growth to slow at 6%over FY11-14E comparedto 14% in FY07-11


6/9


6 BNP PARIBAS

Reliance Industries

Cash Flow (INR m)Year Ending Mar 2010A 2011A 2012E 2013E 2014E

Recurring net profit 158,978 202,102 210,806 222,941 243,198Depreciation 109,458 141,210 132,839 140,299 160,812Associates & minorities (796) (220) 0 0 0

Other non-cash items 0 0 0 0 0Recurring cash flow 267,641 343,092 343,645 363,240 404,010Change in working capital (154,973) 21,354 16,180 (2,825) 11,935Capex - maintenance 0 0 0 0 0Capex new investment (101,306) (268,758) (19,881) (64,937) (177,495)Free cash flow to equit y 11,362 95,688 339,944 295,478 238,449Net acquisitions & disposals 0 0 0 0 0Dividends paid (24,309) (27,719) (28,601) (28,601) (28,601)Non recurring cash flows 86,056 (9,170) 0 0 0Net cash flow 73,109 58,799 311,343 266,877 209,848Equity finance 15,638 676 57,119 0 0Debt finance (116,511) 195,007 (170,011) (15,000) (15,000)Movement in cash (27,765) 254,481 198,452 251,877 194,848

Per share (INR)

Recurring cash flow per share 81.84 105 105 111 123FCF to equity per share 3.47 29.26 104 90.27 72.85

Balance Sheet (INR m)Year Ending Mar 2010A 2011A 2012E 2013E 2014EWorking capital assets 552,149 679,405 962,901 958,231 857,489Working capital liabilities (425,856) (574,467) (874,143) (866,648) (777,840)Net working capital 126,293 104,938 88,758 91,583 79,649Tangible fixed assets 1,772,249 1,878,417 1,765,459 1,690,097 1,706,780Operating invested capital 1,898,542 1,983,355 1,854,217 1,781,680 1,786,428Goodwill 0 0 0 0 0Other intangible assets 0 0 0 0 0Investments 131,123 215,962 215,962 215,962 215,962Other assets 0 0 0 0 0Invested capital 2,029,664 2,199,317 2,070,179 1,997,642 2,002,390Cash & equivalents (138,908) (301,390) (505,277) (762,972) (964,077)Short term debt 0 0 0 0 0Long term debt * 646,055 841,062 671,051 656,051 641,051

Net debt 507,147 539,672 165,774 (106,921) (323,025)Deferred tax 106,776 110,709 116,144 121,963 128,219Other liabilities 0 0 0 0 0Total equity 1,410,007 1,540,914 1,780,238 1,974,578 2,189,175Minority interests 5,735 8,022 8,022 8,022 8,022Invested capital 2,029,664 2,199,317 2,070,179 1,997,642 2,002,390* includes convertibles and preferred stock which is being treated as debt

Per share (INR)

Book value per share 431 471 544 603 669Tangible book value per share 431 471 544 603 669

Financial strength

Net debt/equity (%) 35.8 34.8 9.3 (5.4) (14.7)Net debt/total assets (%) 19.5 17.5 4.8 (2.9) (8.6)Current ratio (x) 1.6 1.7 1.7 2.0 2.3CF interest cover (x) - - - - -

Valuation 2010A 2011A 2012E 2013E 2014ERecurring P/E (x) * 15.1 11.9 11.4 10.8 9.9Recurring P/E @ target price (x) * 18.5 14.6 14.0 13.2 12.1Reported P/E (x) 9.8 12.4 11.4 10.8 9.9Dividend yield (%) 1.0 1.2 1.2 1.2 1.2P/CF (x) 9.0 7.0 7.0 6.6 5.9P/FCF (x) 210.9 25.0 7.1 8.1 10.1Price/book (x) 1.7 1.6 1.3 1.2 1.1Price/tangible book (x) 1.7 1.6 1.3 1.2 1.1EV/EBITDA (x) ** 7.4 7.5 7.1 6.1 5.0EV/EBITDA @ target price (x) ** 8.8 8.9 8.5 7.4 6.3EV/invested capital (x) 1.4 1.3 1.2 1.2 1.0* Pre exceptional, pre-goodwill and fully diluted** EBITDA includes associate income and recurring non-operating income

Sources: Reliance Industries; BNP Paribas estimates

Clarity on capex anddeployment key for

attractive ROEs goingforward


7/9


7 BNP PARIBAS

H I S T O R Y O F C H A N G E I N I N V E S T M E N T R A T I N G A N D / O R T A R G E T P R I C E

Reliance Industries (RIL IN)

Date Reco TP

3-Nov-08 BUY 821

24-Apr-09 REDUCE 715

13-Feb-10 HOLD 1,010

22-Feb-11 BUY 1,077

Amit Shah started covering this stock from 31 October 2008Price and TP are in local currency

Valuation and risks: Downside risks to our SoTP-based TP are a steep decline in KG-DG production and RILs inability to benefit from refining strength.

Source: Bloomberg, BNP Paribas


8/9


8 BNP PARIBAS

D I S C L A I M E R S & D I S C L O S U R E S

ANALYST(S) CERTIFICATION

*Amit Shah, BNP Paribas Securities India Pvt Ltd, +91 22 33704368, [email protected].

*Sriram Ramesh, BNP Paribas Securities India Pvt Ltd, +91 22 33704369, [email protected].

The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certifies that (i) all views expressed in this report accuratelyreflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies, or issuers mentioned in this report; (ii) nopart of the compensation of the analyst(s) was, is, or will be, directly or indirectly, relate to the specific recommendation or views expressed herein;and (iii) is not aware of any other actual or material conflicts of interest concerning any of the subject securities companies, or issuers referencedherein as of the time of this certification.

* Employed by non-US affiliate of BNP Paribas Securities Corp., and is not registered/ qualified pursuant to NYSE and/ or FINRA regulations.

GENERAL DISCLAIMER

This report was produced by BNP Paribas Securities India Pvt Ltd, a member company of the BNP Paribas Group. "BNP Paribas is themarketing name for the global banking and markets business of BNP Paribas Group

1. This report is for the use of intended recipients only and may

not be reproduced (in whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, therecipient agrees to be bound by the terms and limitations set forth herein.

BNP Paribas analysts prudently perform analysis and create quantitative models and estimates derived from their own review of publicly availabledata without any assistance from any represented company. BNP Paribas analyst estimates and models reflect the analysts current judgment only;they are neither all-inclusive nor can they be guaranteed. The analysts analysis and models are subject to change based on various other factors.Valuations are based on internal quantitative models and qualitative interpretation. No representation or warranty, express or implied, is made thatsuch information or analysis is accurate, complete or verified and it should not be relied upon as such.

Analysts' compensation is not linked to investment banking or capital markets transactions performed by BNP Paribas or the profitability orrevenues of particular trading desks.

BNP Paribas analysts may participate in company events such as site visits and are prohibited from accepting payment by the company ofassociated expenses unless pre-approved by authorized members of Research management.

This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs ofindividual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging inany trading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities orother investments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in thisreport. Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative orwithout the recipients own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the productsmentioned in this report may not be available for sale in certain jurisdictions.

BNP Paribas is not aware of any other actual or material conflicts of interest concerning any of the subject securities and companies referencedherein as of the time of publication of the research report.

This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whosebusiness involves the acquisition, disposal or holding of securities, whether as principal or agent. BNP Paribas Securities (Asia) Limited, a

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This report may be distributed in the United States only to major institutional investors (as such term is defined in Rule 15a-6 under the SecuritiesExchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a major institutional investor. Where thisreport has been distributed in the United States it will have been reviewed by a FINRA S16 qualified registered supervisory analyst or a S24qualified and authorized person, in accordance with FINRA requirements concerning third party affiliated research. All U.S. institutional investorsreceiving this report should effect transactions in securities discussed in the report through BNP Paribas Securities Corp. BNP Paribas SecuritiesCorp. is a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation.Reproduction, distribution or publication of this report in any other places or to persons to whom such distribution or publication is not permittedunder the applicable laws or regulations of such places is strictly prohibited.

This report is distributed in Singapore by BNP Paribas Securities (Singapore) Limited ("BNPPSSL") and may be distributed in Singapore only to anaccredited investor or an expert investor, each as defined under the Financial Advisers Regulations ("FAR") and the Securities and Futures Act(Chapter 289) of Singapore, as amended from time to time. In relation to the distribution to such categories of investors, BNPPSSL and itsrepresentatives are exempted under Regulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore,regarding the disclosure of certain interests in, or certain interests in the acquisition or disposal of, securities referred to in this report.

This report is being distributed in Australia by BNP Paribas Sydney Branch, registered in Australia as ABN 23 000 000 117 at 60 Castlereagh StreetSydney NSW 2000. BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licenceno. 238043 and therefore subject to regulation by the Australian Securities & Investments Commission in relation to delivery of financial services. Byaccepting this document you agree to be bound by the foregoing limitations, and acknowledge that information and opinions in this document relateto financial products or financial services which are delivered solely to wholesale clients (in terms of the Corporations Act 2001, sections 761G and761GA; Corporations Regulations 2001, division 2, reg. 7.1.18 & 7.1.19) and/or professional investors (as defined in section 9 of the CorporationsAct 2001).

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a solicitation to trade in such securities. BNP Paribas Securities (Taiwan) Co., Ltd. may not execute transactions for clients in these securities. Thispublication may not be distributed to the public media or quoted or used by the public media without the express written consent of BNP Paribas.

The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law, and persons into whosepossession this report comes should inform themselves about, and observe, any such restrictions. By accepting this report you agree to be boundby the foregoing instructions. This report is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of


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or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law orregulation.

All research reports are disseminated and available to all clients simultaneously through our internal client websites. For all research available on aparticular stock, please contact the relevant BNP Paribas research team or the author(s) of this report.1

No portion of this report was prepared by BNP Paribas Securities Corp. personnel, and references to BNP Paribas in this General Disclaimer section and in theimmediately following Important Disclosures section refer to BNP Paribas Securities India Pvt Ltdonly.

IMPORTANT DISCLOSURES

The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended inthis report:

Company Disclosure (as applicable)

Reliance Industries NA

BNP Paribas represents that:1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees.2. It had an investment banking relationship with this company in the last 12 months.3. It received compensation for investment banking services from this company in the last 12 months.4. It beneficially owns 1% or more or the market capitalization of this company.5. It makes a market in securities issued by this company.6. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position

in securities issued by this company or derivatives thereof.7. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company.

Add it ional Disc losures

Within the next three months, BNP Paribas may receive or seek compensation in connection with an investment banking relationship with one ormore of the companies referenced herein.

Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report isavailable in our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst namedon the front of this note or your BNP Paribas representative.

All share prices are as at market close on 19 August 2011 unless otherwise stated.

RECOMMENDATION STRUCTURE

Stock RatingsStock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price.BUY (B). The upside is 10% or more.HOLD (H). The upside or downside is less than 10%.REDUCE (R). The downside is 10% or more.

Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause atemporary mismatch between upside/downside for a stock based on market price and the formal recommendation.

* In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market willreassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, ourrecommendation is an assessment of the mismatch between current market price and our assessment of current fair value.

Industry RecommendationsImproving (): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months.Neutral (): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months.Deteriorating (): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months.

Country (Strategy) RecommendationsOverweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity.

Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returnsrelative to the market cost of equity.

Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine

market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity.

RATING DISTRIBUTION (as at 19 August 2011)

Total BNP Paribas coverage universe 540 Investment Banking Relationship (%)

Buy 348 Buy 4.31

Hold 137 Hold 3.65Reduce 55 Reduce 1.82

Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) ofthis report.

2011 BNP Paribas Group

reliance industries - 2011-07-22 - bnp paribas[1]

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