1. Reliance Industries Limited Financial Presentation
July 20, 2000

2. Index Operating and Financial Highlights Operating Environment
Financial Review
Business Review
New Infocom Initiatives
Summary

3. Operating Highlights for Q1 2000-01
All time record production volume of 2.63 mn tonnes - increase of 38% over Q1 FY2000
All plants, including new PX / PP facilities at Jamnagar, operated at rated capacity throughout the quarter
Feedstock costs higher by 40%-85% during the quarter, without matching improvement in product selling prices
Acquired control over DCL Polyester’s PFY capacity of 40,000 tpa - RIL is now world’s 4th largest PFY producer
Announced open offer for BSES, India’s largest utility - equity stake raised to nearly 27%

4. Financial Highlights for Q1 FY2001
Sales Rs 6,615 crores $ 1,481 mn + 72 %
Gross Profit Rs 1,235 crores $ mn %
Cash Profit Rs crores $ mn %
Net Profit Rs crores $ mn %
41 consecutive quarters with increased sales and profits - 10 year CARG of 27% for sales and 39% for net profits
Reliance continues to lead the Indian private sector with highest sales, profits, net worth, and assets

5. Operating Environment

6. Positive Demand Environment in Asia
Asia is expected to register GDP growth of over 5% in 2001

7. Stable Macro Economic Environment
GDP growth in India for the year is likely to be in the 6% - 7% range
Inflation rates are marginally higher than the previous year, but still in the 6% - 7% band
Long term interest rates have declined significantly - the 10 year Treasury rate is around 10.90% per annum
Short term volatility in the Indian rupee - broader outlook remains stable with FX reserves over $ 36 bn
The macro-economic environment in India remains stable, despite short term volatility in interest rates and FX markets

8. Crude Price Trends (Brent)
High 31.9
Current
28.56
$ per barrel
Low - 9.6
International crude prices are generally forecast to remain in the $25 plus range during the year 2000

9. International Feedstock Price Trends
(US$ / T )
Avg. Q1 Avg. Q1 % July
FY 2000 FY 2001 Change 2000
price
Crude ($/bbl)
Naphtha
EDC
Feedstock prices increased 40%-85% during the quarter, tracking higher crude prices

10. International Product Price Trends
(US$ / T )
Avg. Q1 Avg. Q1 % July 2000
FY2000 FY 2001 Change prices
POY % 970
PSF % 870
PTA % 460
MEG % 560
PE % 675
PVC % 660
PP % 620
The 20%-50% increase in international product selling prices did not match the higher increase in feedstock costs

11. Domestic Product Price Trends
( Local prices in Rs. / kg )
Avg. Avg. % July 2000
Q1 FY Q1 FY 2001 Change prices
POY % 57.8
PSF % 53.5
PTA % 32.7
MEG % 35.4
PE % 47.0
PVC % 41.0
PP % 38.9
Domestic product selling prices moved broadly in line with international prices

12. Financial Review

13. Income Statement
Cash Profits have increased 31% to Rs. 937 crores ($ 210 mn)

14. Improved Quality of Earnings
Other Income declined 48% from Rs. 150 crores ($ 35 mn) in Q to Rs. 78 crores ($ 17 mn) in Q1 2001
Full interest and depreciation expenses charged to the income statement
No interest capitalisation in Q against Rs crores ($ 28 mn) in Q1 2000
More than 60% of assets being depreciated under the more aggressive Written Down Value method - conservative accounting practice
Income statement takes into consideration full charge of interest and depreciation

15. US GAAP Reconciliation
The difference is on account of foreign exchange variations

16. Income Statement - After Removing Extraordinary Items
13% growth in profit from operations, on trailing quarter

17. Business Mix
Reliance remains focused on the petrochemicals businesses

18. Growth in Production and Sales
Sales revenue growth of 72%, contributed by:
Impact of sales volume growth %
Impact of increase in average product selling prices %
Net external sales up 91 % for the quarter
86% of production sold within India (excluding merchant exports)
Strong 740% growth in exports
Production volume increased 38% to a record level of 2.63 million tonnes during the quarter

19. Stability in Operating Margins
Operating margins (excluding merchant exports) remained stable at 19%
This was the result of :
Strong volume growth
Higher product prices mitigating higher operation costs
Gains from productivity, cost control, and efficiencies
Higher degree of integration and value addition
Stability in operating margins despite consistently higher levels of feedstock costs

20. Profitability Ratios
RIL’s market price discounts cash earnings barely 10 times

21. Liquidity Ratios
Conservative liquidity ratios reflect RIL’s financial strength

22. Exponential Growth in Exports
RIL’s total exports increased 740% from Rs. 156 crores ($ 36 mn) to Rs. 1,311 crores ($ 293 mn)
Manufactured exports increased 433% from Rs crores ($ 36 mn) to Rs. 832 crores ($ 186 mn)
Focus of exports on the quality conscious markets of Europe and the US with an emphasis on speciality grades
During the quarter, RIL exported Rs. 479 crores ($ 107 mn) of petroleum products sourced from RPL
Exports offer attractive overall returns due to related tax incentives and RIL’s ability to cater to premium markets

23. 2000-01 Exports to be nearly $ 1 billion
Export revenues likely to be nearly $ 1 billion (Rs. 4,500 crores) during current year
RIL to have substantial net foreign exchange earnings in current year due to commissioning of Jamnagar Complex
RIL emerges as India’s largest manufacturer exporter
Export revenues alone provide nearly 10 times cover for RIL’s FX denominated interest liability
Growing export revenues reflect global competitiveness and international quality of products

24. Export Revenues Trends
RIL’s exports have grown by over 50 times in last 5 years

25. Conservative Financial Management
Top end domestic AAA credit rating - international ratings constrained by sovereign ceiling
RIL’s cash flows for less than 2 years are sufficient to extinguish its entire net debt
RIL’s increased export revenues provide adequate foreign exchange risk cover
Dollar revenues from oil and gas provide additional cover
External debt of $ 1.3 billion has weighted average maturity of 22 years - no short term pressures
RIL has achieved quantum growth in the scale of its operations, while pursuing conservative financial policies

26. Reliance increases stake in BSES
Reliance has increased its equity stake in BSES, India’s leading utility, to nearly 27 %
Enhancement of stake through an open offer conducted transparently in accordance with SEBI guidelines
Reliance’s total investment for acquiring the BSES stake is nearly Rs. 800 crores
RIL will consolidate BSES’ financials from the current financial year, under the equity accounting method
Consolidation will add approximately Rs. 100 crores to RIL’s income statement
RIL’s investment in BSES is an important strategic step, in the pursuit of growth opportunities in power and telecom

27. Business Review

28. Leading Market Shares RIL’s market share Q1 2000 Q1 2001 % change
Polyester 45% 51% +6%
(PFY, PSF, PET)
Fibre Intermed. 85% 81% -4%
(PTA, MEG, PX)
Plastics 55% 55% 0%
(PE, PP, PVC)
Polyester market share expansion driven by acquisitions
Decline in Fibre Intermediates market share only reflects impact of commissioning of Mitsubishi’s PTA plant

29. Business Review - Polyester
Demand down in April and May : 12% growth in June
RIL’s polyester volumes increased faster than industry - 200,000 tpa of capacity acquired over the last 2 years

30. Business Review - Plastics
Demand growth strong at 13% - PP demand grew at 23%
Excise duty cuts and opening up of the huge foodgrains packaging markets, to support future demand growth

31. Outlook on Import Tariffs
Import tariffs on PFY and PSF cut by 15% to WTO bound rates of 20% - no further reduction likely
Import tariffs on polymers may only gradually decline by 3%-5% per annum over the next 5 years
Consistent policy of pricing products at 10-15% discount to import parity levels provides adequate flexibility
Operating margins for RIL maintained in the 20% range over last 7 years through drastic cuts in import tariffs
Impact of import tariff cuts will be largely offset by the ongoing depreciation of rupee - historically at 5%/ year
Further tariff cuts likely to be gradual, as import duties represent 25% of Indian government’s revenues

32. Business Review - Oil and Gas
RIL awarded 14 exploration blocks, becoming the No. 1 E&P player in the Indian private sector
Exploration acreage exceeds 100,000 sq. kms - deep water blocks awarded for the first time

33. Reliance Telecom - Update
Cellular services operating in 40 cities, with the subscriber base growing from 69,000 to 90,000 in Q1
Expanding service to more than 90 cities, with subscriber base expected to cross 150,000 in the current year
Cellular operations currently EBITDA positive, and likely to be cash positive by end of next financial year
Fixed line service commissioned in Jamnagar in the state of Gujarat, now extending reach to other cities
Broadband optic fibre network across Gujarat, expected to be completed in the next financial year
Reliance Telecom is achieving fast growth in subscriber numbers and revenues

34. Reliance Petroleum - Update
Commenced commercial production during the quarter
All facilities operating at rated capacities
RPL declaring results for Q on July 29, 2000
RIL will consolidate RPL’s financials, under the equity accounting method, from the next financial year - fully reflecting the value of RIL’s investment in RPL
RIL and RPL to emerge as the top 2 companies in the Indian private sector in the current financial year

35. New Infocom Initiatives

36. Reliance’s Infocom Initiatives
Reliance to build a state-of-the-art, world-class, internet
infrastructure in India
Nationwide broadband network connecting India’s top 115 cities, representing over 50% of GDP
Terabit bandwidth, and next generation technologies, for meeting future demand
All optic fibre and internet protocol based network
Network to be leveraged for providing the entire range of value added services
Building a nationwide internet infrastructure in the first phase for acquiring sustainable competitive advantage

37. Reliance’s Infocom Initiatives
Focus on value added voice, data, and image offerings over broadband networks
Will provide media-casting, web hosting, e-commerce, data centres, and managed software services
Network and bandwidth to be used for own businesses, as well as to be offered to other service providers
Global alliances under discussions with world leaders in new economy sectors
Investments to be completed over next 24 months
Targeting the complete range of business opportunities presented by the Indian infocom revolution

38. Strategy for Leadership
Harness opportunities across the digital value chain
Leverage Reliance’s demonstrated strengths in financial engineering and in executing complex projects, to attain leadership in integrated broadband services
Ability to participate in national and international long distance telephony, and voice over internet, as these sectors are deregulated
RIL to be the lead investor in all infocom initiatives
Sustaining growth momentum and enhancing shareholder value are key objectives
Strategy in place for delivering superior returns to shareholders through infocom investments

39. Summary and Outlook

40. Highest ROE in Asian Chemicals Cos.
RIL ranks amongst the top 3 chemicals companies globally in ROE terms - highest in Asia
Capital Work in Progress at lowest levels in 10 years at Rs. 60 crores ($ 13 mn) - higher returns and ROE
Free cash flows rising strongly as profits grow and capex declines - capex to cash profits ratio has declined from 240% in 1995, to less than 25% in current year
Capex unlikely to exceed 3%-4% of total assets in current year, compared with 30% 5 years ago
Capex for the current year will be more than fully covered by depreciation alone
ROE likely to show consistent improvement as relative capex spending declines, and investments generate returns

41. Global Competitiveness Supports High ROE
Economies of scale and project management strengths, lead to 30%-50% capital cost advantage
RIL’s employee cost at less than 3% of net sales is nearly 1/6th of the typical cost for the global peer group
Selling and distribution cost at below 3% of net sales is 1/5th of the typical cost for the global peer group
Globally competitive power costs - all manufacturing complexes run on 100% captive power facilities
Financing mobilised at competitive terms, from the domestic and international markets
Reliance’s sustainable competitive strengths translate into the highest returns and profitability ratios for the company

42. Superior Price Performance - Local Shares
% change
Period Price RIL Sensex
Current 353
Calendar YTD
1 year
2 year
3 year
5 year
10 year
RIL stock price has consistently outperformed the Sensex over all time frames - 9% outperformance over Q1 2001

43. Returns to GDR/FCCB Investors
% change
Issue Date Issue Current ($) Absolute Sensex
Price ($) Price
GDR 1 May
GDR 2 Feb
FCCB Nov
The RIL GDR is trading at US$ 21, translating into a stock price of over Rs. 470 per share, and representing a premium of nearly 33% to the underlying domestic stock price

44. Approvals in place for Share Buyback
Shareholder approval for India’s largest stock buyback of Rs. 1,100 crores ($ 250 mn) - open market route
Maximum share buyback price of Rs. 303 is EPS/ROE accretive, and is shareholder value enhancing
Under SEBI regulations, RIL can not make a fresh offer of equity shares for 2 years
RIL has achieved exponential growth in past 6 years without any fresh equity offerings - RIL would not have issued equity for 8-9 years
The buyback demonstrates RIL’s confidence in future growth prospects, and perception of stock under-valuation

45. Promoters Increase Stake in RIL
RIL’s promoters have increased their total equity stake to over 40%, under SEBI’s creeping acquisition guidelines
Room for further acquisition of 3% stake i.e. 3 crore shares in the current year, taking stake to over 43%
Voting rights on GDRs of 7% vest with company management, as in most Indian GDRs
Promoters will control total voting power of at least 51% in RIL - making it the only such company in India of this size and scale
Creeping acquisition of shares, combined with buyback by RIL, may potentially exceed Rs. 4,500 crores ($ 1 bn) in a year

46. Summary and Outlook
Stable outlook for core petrochemicals businesses - production volumes likely to exceed 10 million tonnes
Speciality grades already contributing 15%-60% across major products, resulting in 5%-15% premium pricing
Export revenues likely to touch $ 1 billion (Rs. 4,500 crores) during current year
Strong growth in free cash flows - driven by higher profits and declining capex levels
Infocom initiatives for capturing new opportunities
Consolidation of affiliates’ financials under equity accounting will unlock true value of RIL’s investments
RIL will achieve its stated growth targets, and enhance shareholder value by pursuing its core business strategies

47. Reliance Industries Limited India’s World Class Corporation