Reliance OB3 Presentation

8/2/2019 Reliance OB3 Presentation

1/17


2/17

Introduction Largest publicly traded company in India by market capitalization

and second-largest public corporation in India when ranked by

revenue.

Started by the legendary Late Dhirubhai H. Ambani.

Revenues in excess of USD 55 billion.

Exports products worth USD 7 billion to more than 100 countries.

Followed a Backward Vertical Integration

a 'Fortune Global 500 company' and employs more than 25,000

professionals across the world.


3/17

Competency in executing large scale project implementationat incredible speed

Large capacities to achieve economies of scale Raising finance at cheapest possible cost

Constantly creating shareholders wealth

Ventured into new business in subsidiary mode and once the

business get mature and profitable they merged it with parentcompany

Backward vertical integration has been the cornerstone of theevolution and growth of Reliance.

Starting with textiles in the late seventies, Reliance pursued astrategy of backward vertical integration - in polyester, fibreintermediates, plastics, petrochemicals, petroleum refiningand oil and gas exploration and production - to be fullyintegrated along the materials and energy value chain.


4/17

RIL Evolution The birth of RIL took place through a merger of Manylon Ltd.

And Reliance Textile industries Ltd.

In 1988 Ril mainly followed organic growth strategy by setting

up plants in Patalganga

In 1987 Reliance petrochemicals Ltd. Was incorporated to

manufacture ethylene oxide (EO), monoethylene glycol (MEG),

vinyl chloride monomer (VCM), poly vinyl chloride(PVC) and

high density polyethylene (HDPE).

RPL was merged with RIL in the year 1992


5/17

RIL Evolution(cont.)

RPEL and RPTL were formed to manufacture polyethylene

and polypropylene respectively

They were later merged with RIL in the financial year 1994-95

In 1999 Reliance petroleum Ltd was established to produce

petroleum products

Later it was merged with RIL in the year 2001

Again in 2006 another RPL was established and it was again

merged with RIL 2008


6/17

Management of Reliance


7/17

Reliance Board Structure

ManagingDirector

VP -Operations

Sr.Production

Manager

Sr. DispatchOfficer

VPMaterials

VP - Adminand

accounts

VPMarketing &

Sales

VP - HumanResources

VP Qualitycontrol

VP EnergyCell


8/17

Functional Structure

Activities are grouped together by common functionfrom the bottom to the top of the organization like allHR are located in the HR department and vicepresident HR is responsible for all HR activities.

Strengths:

Economies of scale within functional departments

Enables in depth knowledge and skill development

Enables organization to accomplish functional goals

Is most suitable with few products


9/17

Functional Structure

Weaknesses:

Slow response time to environmental changes as

compared to Divisional structure

May cause decisions to pile on top, hierarchy

overload

Leads to poor horizontal coordination among

departments

Results in less innovation

Involves restricted view of organization goals


10/17


11/17

RIL and its Subsidiaries Subsidiary Monitoring framework: All subsidiary companies of the Company are Board managed with

their Boards having the rights and obligations to manage suchcompanies in the best interest of their stakeholders.

Financial statements, in particular the investments made by theunlisted subsidiary companies, are reviewed quarterly by the Audit

Committee of the Company. All minutes of Board meetings of the unlisted subsidiary companies

are placed before the Companys Board regularly.

A statement containing all significant transactions and arrangementsentered into by the unlisted subsidiary companies is placed beforethe Companys Board.

Financial Reporting: The Consolidated Financial Statementspresented by the Company include the financial results of itssubsidiary companies and all the listed subsidiaries.

This structure lead to complete control over

subsidiaries business with limited liability.


12/17

Subsidiary v/s SBU Structure SBU Structure:

It is also called as Internal Capital Asset Market. Many largeorganizations like GE follow this structure.

It is suitable when a conglomerate has large number of distinctand unrelated businesses like GE has some hundreds ofdiversified businesses like aero engines, consumer products,healthcare, oil & gas etc.

These SBUs are autonomous business units with almost

negligible internal linkage across the SBUs.

The role of Company board is limited to allocate capitalamong SBUs while in most of business decisions these unitsare autonomous. So this structure is popularly known as

Internal Capital Assets Market.


13/17

Subsidiary v/s SBU Structure (cont.)

SBU structure is most suitable when company is on aspree of Acquisitions and divestments, as this easethe de-coupling of a business unit and its valuation.

As independent SBUs are not listed and captive tolarge conglomerate for capital requirement, theseSBUs get cheaper and convenient capital ascompared to their independent listing on capital

market. Also due to Group as a whole going biggerwith more number of SBUs, it has dominance inmarket.


14/17

Why Reliance prefer Subsidiaries?

To mitigate the business risk:o Reliance ventures into new business through subsidiary

route and invest minimum capital required to have vetopower(management control) and rest of the project isfinanced by either long term debt or public offering.

o They offer innovative financial instruments like flexibledebentures with higher returns which attract mass retailinvestors.

o After the gestation period when business get profitable andsustainable, Reliance merge it with parent company.

o So, this policy enables them to venture into diversifiedbusinesses with minimal risk and same time sufficientcontrol over business.


15/17

Now


16/17

References

Reliance Annual Report

Ril.com

Moneycontrol.com

Wikipedia


17/17

Documents

Reliance OB3 Presentation