Reliance Industries Limited

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Reliance Industries Limited Financial
Presentation H1 FY 2001-02 October 31, 2001
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Forward Looking Statements
This presentation contains forward-looking
statements which may be identified by their use
of words like plans, expects, will,
anticipates, believes, intends, projects,
estimates or other words of similar meaning.
All statements that address expectations or
projections about the future, including, but not
limited to, statements about the strategy for
growth, product development, market position,
expenditures, and financial results,are
forward-looking statements. Forward-looking
statements are based on certain assumptions and
expectations of future events. The Reliance group
companies referred to in this presentation cannot
guarantee that these assumptions and expectations
are accurate or will be realised. The actual
results, performance or achievements, could thus
differ materially from those projected in any
such forward-looking statements. These companies
assume no responsibility to publicly amend,
modify or revise any forward looking statements,
on the basis of any subsequent developments,
information or events, or otherwise.
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Contents
Operating Environment Financial
Performance Business Review Reliance
Petroleum Reliance Infocom Value Creation Summary
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Operating Environment
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Strong Performance under Difficult Environment

• Strong operational and financial performance
  achieved in continuing adverse industry
  environment
• General economic slowdown in India and globally
  led to weak demand conditions for several of
  Reliances products
• Focus on high operating rates, specialities,
  productivity gains, integration and reduction in
  financial costs have contributed to continued
  profit growth
• Increase in overall uncertainty in view of the
  recent global developments

Reliances operational and financial strengths
have enabled it to maintain performance in
difficult industry conditions
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Volatility in Feedstock Prices
Feedstock price volatility has created
uncertainty over petrochemicals industry margins
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Trend in Feedstock Product Prices -
International
change in international prices H1 FY02 over H1
FY01
Raw Material
International product prices have generally
declined in greater proportion than feedstock
prices
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Trend in Feedstock Product Prices - Domestic
change in domestic prices H1 FY02 over H1 FY01
Raw Material
Declines in domestic prices are less pronounced
due to RILs superior customer relationships and
effective supply chain management initiatives
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Petrochemicals Industry Margins Under Pressure

• Global petrochemical margins under pressure
  during H1
• Leading international petrochemicals companies in
  US, Europe and Asia have reported weak
  performances
• Historically low product prices - currently
  trading 20-50 below 10 year averages
• Uncertain future outlook for margins in view of
• - global demand slowdown
• - continued volatility in feedstock prices

The global petrochemicals industry is currently
passing through one of the most uncertain and
difficult times in recent years
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RILs H1 Performance Highlights

• Capacity utilisation 104
• Production volumes 5.7 mn. tonnes, up 9
• Domestic sales 88 of total sales
• Exports US 328 mn. (Rs.1,569 crores)
• Market shares polyester 53
• intermediates 78
• polymers 50

RIL has achieved high capacity utilisation rates
despite weak demand conditions for some products
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• H1 Financial Performance

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RILRPL - Financial Highlights

H1 FY 2001-02 Rs.crs.
mn. Sales 30,000 6,300 Operating
Profit 4,600 1,000 Cash Flow 3,500 800 Net
Profit 2,200 500 Total Assets 52,000 11,000
Reliance continues to be the No. 1 business group
in India in terms of all major financial
parameters
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RIL Income Statement for Q2 FY 2001-02
Q2 FY 2001-02
Q2 FY 2000-01 Change Rs.crs.
mn. Rs.crs. mn. Sales 6,234 1,302 6,721 1,459
-7 Trading Sales - - 1,673 363 Total
Sales 6,234 1,302 8,394 1,822 EBITDA 1,414 295 1,4
08 306 Interest 255 53 333 73 Depreciation 422 88
381 83 Tax 34 7 34 7 Deferred Tax 1 - - - Net
Profit 702 147 660 143 6 Cash Profit 1,124 235 1,
041 226 8
Lower interest costs have contributed to profit
growth
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RIL Income Statement for H1 FY 2001-02
H1 FY 2001-02
H1 FY 2000-01 Change Rs.crs.
mn. Rs.crs. mn. Sales 12,624 2,637 12,856 2,79
1 (2) Trading Sales - - 2,153 467 - Total
Sales 12,624 2,637 15,009 3,258 (16) EBITDA 2,716
567 2,643 574 3 Interest 512 107 631 137 (19) D
epreciation 818 171 747 162 10 Tax 64 13 62 13 -
Deferred Tax 2 - - - - Net Profit 1,320 276 1,203
261 10 Cash Profit 2,138 447 1,950 423 10
Strong performance in the continuing adverse
global and domestic environment in the
petrochemicals industry
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Income Statement - Consolidated H1 2001-02

Q2 FY 2001-02 H1 FY
2001-02 Rs.crs mn. Rs.crs.
mn. Sales 6,234 1,302 12,624 2,637 Total
Expenditure 4,996 1,044 10,211 2,133 Operating
Profit 1,238 259 2,413 504 Share in Income of
Associates 220 46 502 105 Other
Income 163 34 251 52 Interest 256 53 514 107 Depre
ciation 422 88 818 171 Tax 35 7 66 14 Net
Profit 908 190 1,768 369
Consolidated net profit reflects the true picture
of RILs returns on its investments
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Segment Information
Rs Crores
Petrochemicals Refining Others Segment
Revenue 11,902 17,331 722 Segment Results
(EBIT) 1,378 1,371 416 Capital Employed 15,544 18,
318 5,034 Return on Capital Employed
(ROCE) 18 15 17
Return on Capital Employed significantly higher
than cost of capital for a large petrochemical
and refining enterprise
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Factors Contributing to RILs Profit Growth

• Lower raw material prices
• Greater focus on speciality products,
  contributing to higher margins
• Continued focus on cost, productivity and
  efficiency
• Interest cost savings, owing to prepayment and
  refinancing

Aggressive efforts to enhance sales realisation
through speciality grades, and cost reduction
measures have delivered results
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RIL Profitability Ratios

• H1 FY 2001-02 FY 2000-01
• OPM 19.2 17.4
• NPM 14.9 13.2
• ROE 19.6 18.1
• ROCE 18.4 18.0
• EPS - Rs. () 25.1 (0.52) 22.8 (0.49)
• Cash EPS - Rs() 40.6 (0.85) 38.1(0.83)
• excluding FX gains

Margins have improved in a tough operating
environment
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Consolidated Profitability Ratios

• H1 FY 2001-02
• NPM 20.0
• ROE 25.4
• ROCE 15.6
• EPS - Rs. () 33.6 (0.70)

At the current market price, RIL shares are
trading at 7.5 times consolidated EPS
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RIL Liquidity Ratios

• H1 FY 2001-02 FY 2000-01
• Debt Equity 0.72 0.72
• Gearing 44 41
• Interest Cover 3.7x 3.3x
• Total Debt/Cash Flow 2.0x 1.8x

RILs strong cash flows and refinancing efforts
have enabled reduction of interest costs
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Reliance is Indias Largest Exporter

• Reliance is by far the largest exporter in India
  - manufactured exports of US 1.08 billion (Rs.
  5,150 crores) in the first half
• The current exports represent 120 times growth
  over the annual exports of Rs. 86 crores (US 25
  million) just 5 years ago
• Individually too, RIL and RPL are Indias top 2
  exporters - still only 12 of RILs and 21 of
  RPLs sales come from exports
• RILs manufactured exports were US 328 mn (Rs.
  1,569 crores) in the first half
• RIL exports products to over 90 countries,
  including to the most quality conscious customers
  globally

Reliances high exports demonstrate the
international quality of its products, and its
ability to compete against global leaders
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• Business Review

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RILs Product Mix
Composition of RILs sales
Petrochemicals businesses dominate RILs
portfolio - share of oil and gas business likely
to increase
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Oil Gas - Update

• RIL is Indias largest private sector EP
  operator in India, with total acreage of over
  175,000 square kms
• Well balanced EP portfolio comprising 25 onshore
  and offshore, deep and shallow water blocks
• Exploration work progressing well - drilling of
  first well likely next year
• Exploration capex expected to be Rs. 1,500 -
  2,000 crores (US 300 - 400 million) over next 3
  years

Oil and Gas operations are likely to make an
enhanced contribution to RILs future revenue
and profit growth
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Oil and Gas - Production Growth
Oil Production in kT Gas Production in kTOE
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Output from the 2 currently producing oil and gas
fields of Panna- Mukta and Tapti (PMT) has
further increased in H1
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Polyester - Production Growth
Production in 000 tonnes
16
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Polyester demand increased by only 3 during the
first half, reflecting weak demand conditions in
the domestic markets
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Polyester - Prospects

• Demand slowdown in H1 due to seasonal factors,
  Diwali timing, inventory drawdown, and lower
  demand from apparels segment
• Reliance is responding by creating new markets
  for speciality grades and growing high potential
  segments
• Increasing focus on polyester grades finding
  application in segments with higher growth
  potential such as home furnishings, automobiles,
  and industrial textiles
• Polyester demand in India likely to grow at
  double digit rates over the long term - CARG of
  15 over last 10 years

Reliance has a strategy in place for countering
temporary demand slowdown and taking advantage of
the long term growth opportunity
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Fibre Intermediates - Production Trend
Production in 000 tonnes
-6
-1
RILs lower production only reflects RILs
planned shutdowns and the impact of new industry
capacity operating at fuller levels
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Polymers - Production Growth
Production in 000 tonnes
16
10

• Polymers demand has shown further strong growth
  of 15 during the first half - on top of 11
  growth in FY 2000-01
• Higher relative industry production growth
  reflects the impact of new industry capacities
  operating at fuller rates during H1

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Polymers - Update

• Healthy demand growth for RILs polymers during
  H1
• - PP 17
• - PE 12
• - PVC 16
• Demand from high growth user industries like
  telecom, packaging, food and beverages, consumer
  durables
• Domestic demand / supply balance is progressively
  improving with healthy growth

RIL is the leading player in the rapidly growing
polymers market in India with a 50 market share
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• Reliance Petroleum

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RPL - Mixed Demand Trends
Y-o-Y growth in half yearly demand LPG 10.2 Gas
oline 5.8 HSD -5.3 SKO -5.6 All
Products -1.5

• LPG and gasoline continue to register strong
  demand growth
• Negative growth rates for middle distillates

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RPL Higher Operating Rates

• RPLs high operating rates despite the domestic
  demand slowdown reflect
• Integration with groups downstream operations
• Ability to tap exports markets
• Flexibility of product slate

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Capacity Utilization RPL vs. Indian Peers
H1 Capacity Utilization RPL 107 IOC
(Incl. CPCL BRPL) 85 BPCL (Incl. KRL NRL)
101 HPCL 94 MRPL 53
RPL has operated at significantly higher capacity
utilisation rates compared to other Indian
refineries

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RPL - Income Statement for H1 FY 2001-02
H1 FY2001-02
H1 FY2000-01 Rs.crs.
mn. Rs.crs. mn. Change Gross
Sales 17,331 3,620 14,308 3,106 21 EBITDA 1,830 3
82 1,479 321 24 Interest 489 102 456 99 Deprecia
tion 407 85 297 64 Tax 67 14 54 12 Net
Profit 867 181 672 146 29 Cash
Profit 1,274 266 969 210 31
RPL is Indias largest private sector company in
terms of sales
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RPL - Factors Contributing to Profit Growth

• High capacity utilisation rates of 107 leading
  to 14 volume growth from 12.6 to 14.4 million
  tonnes
• Improved product mix to take advantage of niche
  opportunities
• Import tariff rationalisation in October, 2000,
  as well as in March and April, 2001, leading to
  higher effective import tariff differentials
• Stability of earnings through risk management
• Advantageous price setting mechanism for export
  cargoes
• Ongoing productivity gains and cost reductions

Strong volume growth and superiority of RPL
refinerys configuration have contributed
significantly to net profit growth
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Trends in Benchmark GRMs
July-Sep Oct-Dec Jan-Mar Apr-June July-Sep 2000
2000 2001 2001 2001 RPL 6.4 6.4 5.3 5.7 4.9 US
Gulf Coast 1.3 2 3.3 3 1 Mediterranean 5 4.8 2.9
2.8 1 Rotterdam 2.6 3.1 2.5 2.4 1.2 Singapore 4.
5 2.7 3.1 2.3 1.5
RPL has reported consistently higher and less
volatile GRMs
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RPL - Factors Contributing to Higher GRMs

• High complexity - Ability to process heavy and
  sour varieties of crude oil
• Superior product slate - leading to higher value
  addition per barrel
• Ability to optimise product mix in response to
  market conditions
• Favourable location and access to world class
  infrastructure - leading to lower
  freight/logistics costs
• World class risk management techniques employed
  to hedge margins

RPLs fundamental strengths ensure superior GRMs,
even under difficult industry conditions
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RPL - Profitability Ratios

• Q2 FY2001-02 Q2 FY2000-01
• OPM 9.31 9.34
• NPM 4.86 4.47
• ROE 17.7 23.2
• Annualised EPS - Rs. () 3.34 (0.07) 3.13 (0.07)
• Annualised CEPS - Rs. () 4.90 (0.10) 4.50 (0.10)

RPLs ROE ranks amongst the highest in refining
companies globally
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RPL - Profitability Ratios

• H1 FY2001-02 H1 FY2000-01
• OPM 9.8 9.8
• NPM 5.0 4.7
• ROE 19.5 20.9
• Annualised EPS - Rs. () 3.34 (0.07) 3.13 (0.07)
• Annualised CEPS - Rs. () 4.90 (0.10) 4.51 (0.10)

RPLs ROE ranks amongst the highest in refining
companies globally
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RPL - Liquidity Ratios

• H1 FY2001-02 FY2000-01
• Debt Equity 0.83 0.83
• Gearing 45.1 43.9
• Interest Cover 3.26 2.98
• Total Debt / Cash Flow 2.26 2.95

RPLs strong liquidity ratios reflect healthy
cash flows and conservative financial position
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RPL - Indias Largest Exporter

• RPL is Indias largest exporter with exports of
  US 1,375 mn (Rs. 6,410 crores) in FY 2001
• H1 exports of RPLs products have increased 67
  to US 759 mn (Rs. 3,581crores)
• RPL exported 3.6 million tonnes of products
  during H1 - Gasoline, HSD, and naphtha were the
  largest items of exports
• RPLs products have been exported to 14
  countries, including to the most quality
  conscious customers globally

RPLs exports reflect global competitiveness,
international quality of products, operational
flexibility and world class logistics
capabilities
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RPL - Future Growth Strategies

• Capacity increase possible through
  debottlenceking at marginal cost - capital cost
  advantage will be further enhanced
• Investments in pipeline infrastructure - will
  result in smooth evacuation of products and
  enhanced cost competitiveness
• Evaluating a multi-pronged strategy to enter the
  business of retail marketing of controlled
  products in India
• - potential joint ventures and alliances
• - acquisitions of marketing and distribution
  assets (participating in disinvestment of
  government owned oil PSU IBP)
• - development of its own distribution and
  marketing infrastructure

RPLs entry into marketing will enhance
integration and provide opportunities for
generating attractive returns
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Cellular Business
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Reliances GSM Circles
Reliances existing GSM mobile operations span
1/3rd of Indias geographical area and cover
nearly 400 million people
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Reliance Telecom - Update

• 54 growth in GSM based cellular subscriber base
  over last six months as compared to industry
  growth rate of 34
• Subscriber base has crossed 300,000 mark with
  services in 118 cities across 15 states
• Leading market shares in most circles
• Pre-paid services account for over 90 of
  cellular revenues low risk strategy
• Strength of Reliance Mobile brand and expertise
  in building retail consumer franchise
  demonstrated

Reliance has successfully established an
extensive GSM network in the central and eastern
part of the country
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Kolkata GSM Circle

• Won the Kolkata GSM license for Rs. 78 crores
  (US 16 million) under the fourth cellular
  license bidding
• Presence in Kolkata circle to offer synergy in
  operations and marketing efforts in the entire
  Eastern region
• Acquisition of Kolkata circle to enable superior
  roaming facilities throughout the region
• Roll out plans being finalised

Kolkata circle forms a synergistic fit with
Reliances existing GSM cellular operations in
the Eastern region
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Reliance Infocom
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Reliance Infocom - Current Status

• National footprint with licences signed for
  providing fixed line services in 18 circles
• Fixed line licences also enable tapping of mobile
  segment through WLL services in addition to
  existing GSM business
• First company to receive National Long Distance
  (NLD) LOI
• Work on 60,000 route kms, world class IP backbone
  on schedule project on target for completion by
  end 2002
• Participating in process for disinvestment of
  VSNL, Indias monopoly international long
  distance carrier - ILD services to be opened up
  to private sector in April, 2002

Reliance Infocoms comprehensive business model
targets opportunities in high growth voice and
data markets
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Reliance Infocom - Investment Plans

• Reliance Infocom to be the holding company for
  all infocom and related businesses of Reliance
  group
• Reliance Infocom to invest up to Rs. 25,000
  crores (US 5 bn) over the next 5 years
• Project proposed to be financed with 21
  debtequity
• RIL is the lead investor with 45 equity stake

Reliances infocom investments are likely to
yield attractive returns, and create superior
value for RILs shareholders
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Value Creation
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RILs Share Price Performance
change Period RIL Sense
x Nifty 1 year -16 -20 -17 2
year 8 -33 -27 3 year 130 5 16 5
year 142 -7 4 10 year 206 59 -
RIL shares have consistently outperformed the
broad market over all time frames - Compounded
return of 19 per annum over the last 5 years
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RILs Share Buyback Philosophy

• Our consistent and transparent policy regarding
  share buyback
• Rs. 303 not an automatic trigger for buyback
• Share price decline part of global market
  meltdown
• RIL shares have been outperforming Sensex and
  other leading stocks over all time frames
• Buyback not a mechanism for providing exit to
  short term traders / speculators / operators
• Investment of cash flows directed towards highest
  return investments

RILs share buyback program is focussed on
enhancing value for long term shareholders
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RILs Beta Has Declined
Significant reduction in share price volatility,
beta and WACC achieved over the last few years
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Value Creation

• Consistent focus on value creation as operating
  managers
• Through margin improvement focus on
  productivity improvements and higher margin
  products
• Through capital efficiency stretching and
  sweating existing assets, focus on high returns
  investment for future growth
• Through financial efficiency - continuous
  innovation to lower financial costs and reduce
  the cost of capital

Market recognition of value creation in the
company has led to superior share price
performance
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Summary
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Summary

• RIL is on track to deliver more than 11 million
  tonnes in production volume in the current
  financial year
• RIL has reported good performance in a very
  difficult industry environment, reflecting the
  strength of its cost and market positions, and
  the success of its business strategies
• Global petrochemicals margins are likely to
  remain under pressure, owing to the world-wide
  slowdown in demand
• RILs future investments in oil and gas and
  infocom are likely to generate attractive returns
  in the medium to long term

Reliance will endeavour to continue to perform
well and create superior value for all its
shareholders, despite the tough operating
environment for the global petrochemicals industry
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Reliance Industries Limited Indias World Class
Corporation