1. Reliance Industries Limited Financial Presentation
April 18, 2000

2. Index Performance Highlights Operating Environment
Financial Performance
Business Review
Reliance Petroleum
Power & Telecom
Stock Buyback Programme
Summary

3. Performance Highlights
Reliance continues to lead the Indian private sector with highest sales, profits, assets, and net worth
Record production volume of 8.9 million tonnes in the year an increase of 26%
Net external sales up 54% for the year
Rs. 25,000 crores (US$ 6 bn) Jamnagar refinery and petrochemicals complex completed in record time frame
Acquisition of control over Raymond Synthetics’ polyester capacity of 75,000 tonnes per year
Exports up 164% at Rs. 1,811 crores (US$ 415 mn)
14 new oil and gas exploration blocks awarded - RIL the No. 1 E&P player in the private sector in India

4. Financial Highlights - Q4 1999-2000
Sales Rs 6,594 crores $ 1,512 mn +83%
Gross Profit Rs 1,593 crores $ 365 mn +88%
Cash Profit Rs 1,284 crores $ 294 mn +95%
Net Profit Rs 654 crores $ 150 mn +72%
All-time record performance for the quarter - nearly % growth on all major financials

5. Financial Highlights - 1999-2000
Sales Rs 20,301 crores $ 4,654 mm +40%
EBDIT Rs 4,746 crores $ 1,088 mm +43%
Cash Profit Rs 3,738 crores $ mm +44%
Net Profit Rs 2,403 crores $ mm +41%
EPS Rs / share $ / share +25%
Cash EPS Rs / share $ / share +27%
Reliance continues to lead the Indian private sector -
highest sales, profits, assets, and net worth

6. Operating Environment

7. Positive Demand Environment in Asia
Positive external balances, low inflation and stable FX rates will be the key themes in Asian economies in

8. Economic Recovery in India
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 4% - 5% band
Long term interest rates have declined significantly - the 10 year Treasury rate is around 10.50% per annum
Foreign exchange reserves have crossed US$ 37 billion, imparting considerable stability to the Indian rupee
The bulging FX reserves of US$ 37 billion, and the declining interest rate scenario, provide for a stable environment

9. Crude Price Trends (Brent)
High 32.75
Current
21.81
Low - 9
There are indications of a return to price stability in the crude markets: the 15 year average is US$ range

10. Petrochemicals - Price Movements
International Prices (US$ / T )
April 2000 % above % below
price recent bottom previous peak
PE % -16%
PP % -33%
PVC % -6%
POY % -38%
PSF % -49%
PTA % -52%
PX % -67%
MEG % -8%
Naphtha % -18%
Prices of most products are still significantly lower than 1995 peak prices - naphtha close to previous cycle high

11. Petrochemicals - Trends and Outlook
Petrochemicals demand in Asia has remained strong even at higher price levels - operating rates are high
Project cancellations/delays over the last few years bode well for regional demand - supply balance
New gas based plants coming up in the Middle East enjoy lower feedstock cost advantage, but have significant capital cost/production inefficiencies and freight penalty
Optimism that petrochemicals price and margin recovery will be sustained
Globally competitive and fully integrated producers like RIL well positioned to benefit from the petrochemicals upcycle

12. International Feedstock Price Trends
(US$ / T )
Average Average % April %
Change 2000 below
price peak
Crude ($/bbl) % %
Naphtha % %
EDC % %
Average feedstock prices were sharply higher during the year - driven by the firm trend in crude prices

13. International Product Price Trends
(US$ / T )
Average Average % April 2000
Change prices
POY % 1150
PSF % 930
PTA % 530
MEG % 640
PE % 710
PVC % 650
PP % 800
Average international product selling prices were generally 20% - 40% higher

14. Domestic Product Price Trends
( Local prices in Rs. / kg )
Average Average % April 2000
Change prices
POY % 63.6
PSF % 56.0
PTA % 32.1
MEG % 35.4
PE % 47.0
PVC % 41.0
PP % 39.5
Domestic product selling prices, as in the past, tracked international trends

15. Financial Performance

16. Income Statement for
Reported net profit has been impacted to the extent of Rs billion (US $ 25 million) by the additional operating costs, incurred till December 31, 1998, as a result of the accident to the SBM system.
Claims of Rs billion (US$ 57 million) for physical damage, loss of revenue, increased cost of working, and other like losses, have been lodged with insurance companies.
Record performance despite steep increase in feedstock prices and high volatility in product prices

17. US GAAP Reconciliation
The difference is mainly on account of change in method of depreciation, deferred taxation and foreign currency assets

18. Reliance remains focussed on the petrochemicals business
Business Mix
Reliance remains focussed on the petrochemicals business

19. Profitability Ratios
Reliance’s total debt:equity ratio (based on gross, long term and short term, debt) continues to remain a healthy 0.94:1.
Net gearing, after netting off cash and liquid assets, stands at a very conservative 33%.
Net interest cover has improved to 6.6 times.
The net debt to cash flow at 1.8 means Reliance’s internal cash flows for less than 2 years are sufficient to wipe out the company’s entire debt liability.
Strong liquidity ratios compare favourably with leading global chemical companies - an important competitive advantage over most regional producers with weaker financial fundamentals.
Significant improvement in all key profitability ratios - OPM, NPM, and RONW

20. Liquidity Ratios Total Assets have increased to over Rs. 29,000 crores
Reliance’s total debt:equity ratio (based on gross, long term and short term, debt) continues to remain a healthy 0.94:1.
Net gearing, after netting off cash and liquid assets, stands at a very conservative 33%.
Net interest cover has improved to 6.6 times.
The net debt to cash flow at 1.8 means Reliance’s internal cash flows for less than 2 years are sufficient to wipe out the company’s entire debt liability.
Strong liquidity ratios compare favourably with leading global chemical companies - an important competitive advantage over most regional producers with weaker financial fundamentals.
Total Assets have increased to over Rs. 29,000 crores
Debt:Equity ratio maintained at 0.88:1
Net interest cover up at 8.1 times

21. Growth in Production and Sales
Sales revenue growth of 39.5%, contributed by:
Impact of sales volume growth %
Impact of increase in average product selling prices %
Net external sales up 54% for the year
Robust growth in domestic demand - over 90% of production sold within India
Value added export opportunities captured
Production volume increased 26% to a record level of 8.9 million tonnes
Production volumes increased 33% to a record level of 5.27 million tonnes in the first nine months of
This is despite the temporary dislocation in feedstock supplies at the Hazira petrochemicals complex in October 1998.
Total production volume slated to touch nearly 7 million tonnes for the full year - final production volume for the year likely to be 20% higher than beginning of the year estimates.
Sales revenues were up 11% at Rs billion (US$ 2.6 billion) in the first nine months.
This comprised of the impact of volume growth at 23%, partially offset, to the extent of 12%, by the decline in average product selling prices.
Reliance sold 95% of its production within India.
Value added export opportunities selectively pursued with export revenues increasing 145% to Rs billion (US $ 121 million).
Exports focussed on quality conscious markets of US and Europe, in recognition of the superior quality of Reliance’s products.

22. Stability of Operating Margins
Operating margins improved to 20%
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
Rationalisation of customs duties
Ability to operate plants at peak rates and sell most of the production in the domestic markets, differentiates Reliance from other global petrochemical producers
Operating margin remained largely stable at around 19%, even after considering the higher operational costs incurred as a result of the damage to the SBM.
Key factors, limiting the impact of an adverse operating environment, were:
- Strong volume growth - total production volumes increased 33%, from 3.95 million tonnes to 5.27 million tonnes.
- Sharp decline in feedstocks’ prices, offsetting the decline in product selling prices.
- High degree of integration and value addition.
- Gains from the continuing focus on productivity and cost reduction; and
- Depreciation of the Indian rupee.
Reliance has the distinction of not cutting operating rates even once over the last almost 2 years of Asian crisis - a significant competitive advantage.

23. Export Revenues Increase Sharply
RIL’s total exports increased 164% from Rs. 685 crores ($ 161 mn) to Rs. 1,811 crores ($ 415 mn)
Manufactured exports increased 116% from Rs crores ($ 161 mn) to Rs. 1,478 crores ($ 339 mn)
RIL has also entered into long term arrangements with RPL for exports of various petroleum products
During the year, RIL exported Rs. 333 crores ($ 76 mn) of petroleum products sourced from RPL
Maintaining top end ratings from domestic as well as international credit rating agencies is a stated objective of Reliance.
Reliance is India’s only company with a constrained international rating. This means international credit rating of RIL’s overseas debt instruments would be higher than Moody’s Ba2, if it were not capped at that level by India’s credit rating.
Low net gearing and net debt to cash flow ratios are reflective of the conservative financial policies being pursued by the company.
International borrowings of $ 1.3 billion completely hedged with matching dollar assets held offshore by Reliance.
Annual foreign debt service obligations of about $ 100 million are more than adequately covered by the company’s export revenues alone.
Current export revenues alone provide nearly 4 times cover for RIL’s FX denominated interest liability

24. Export Revenues to Rise Further
Export revenues are likely to increase further in the year to $ mn (Rs crores)
RIL’s requirement of feedstocks can be almost entirely sourced from the Jamnagar complex
RIL to have substantial net foreign exchange earnings in the year
Exports driven primarily by superior economics - thrust on value added exports and speciality grades
Maintaining top end ratings from domestic as well as international credit rating agencies is a stated objective of Reliance.
Reliance is India’s only company with a constrained international rating. This means international credit rating of RIL’s overseas debt instruments would be higher than Moody’s Ba2, if it were not capped at that level by India’s credit rating.
Low net gearing and net debt to cash flow ratios are reflective of the conservative financial policies being pursued by the company.
International borrowings of $ 1.3 billion completely hedged with matching dollar assets held offshore by Reliance.
Annual foreign debt service obligations of about $ 100 million are more than adequately covered by the company’s export revenues alone.
Reliance to emerge as one of the largest manufacturer exporters in India

25. Export Revenues Trends
RIL’s exports represent less than 10% of total revenues, even after a 20 times increase in absolute terms in 4 years

26. Conservative Financial Management
Top-end domestic AAA credit rating - international rating constrained by sovereign ceiling
RIL’s cash flows for less than 2 years are sufficient to extinguish its entire net debt
Foreign exchange risks largely eliminated - ECBs represent just over 2 years’ export revenues
RIL has repatriated FX of nearly US$ 800 mn (nearly Rs. 3,500 crores) from its offshore ECB proceeds
RIL FX exposure additionally covered by the natural hedge in its petrochemicals business - rupee outlook also stable

27. Capex/ Expansion Framework
RIL will allocate upto 50% of its internal accruals over the next 3 years for capacity expansion/debottlenecking
Additional capacities to be implemented at around 50% - 60% of the current replacement cost of comparable assets
This will ensure lower capital intensity and attractive returns through the business cycle
Increased focus on specialities in new capacity creation
Majority of key customers of Reliance’s polyester and plastics have been with the company for a long time, indicating high degree of customer satisfaction and strong brand equity.
Number of customers lost usually represents a fractional percentage figure in any given year for major products.
For instance, in plastics, the PE and PP businesses did not lose even a single customer in , whereas in polyester, the PFY and PSF businesses together lost 11 existing customers.
New customers continue to come to Reliance at an ever increasing pace - in , the number of direct polyester and plastics customers increased by 26% and 27% respectively.
Majority of the top 100 consumers of plastics and polyester in India buy from Reliance - 100% of the top consumers of PE and PP bought from Reliance Similar numbers for PSF and PFY stand at 95% and 64% respectively.
Excellent credit quality of customers is reflected in quick conversion of receivable into cash, and low working capital requirement.
Franchise power provides substantial marketing leverage in home markets - clearly a long term competitive advantage and an effective entry barrier.
RIL will implement necessary capex plans and acquisition strategies to maintain and enhance its leadership in rapidly growing domestic markets

28. Capex/Expansion Plans
Reliance intends to double its polyester capacity in 3 years, through acquisitions and fresh capacity creation
Debottlenecking of naphtha cracker planned from 750,000 tpa to 1 million tpa of ethylene
Plans for PE debottlenecking, and setting up new capacity for PTA and MEG in line with polyester expansion
RIL’s capex is unlikely to exceed Rs. 1,000 crores (approx. US$ 250 million) in the year

29. 2000-01 Capex Covered by Depreciation
Reported net profit has been impacted to the extent of Rs billion (US $ 25 million) by the additional operating costs, incurred till December 31, 1998, as a result of the accident to the SBM system.
Claims of Rs billion (US$ 57 million) for physical damage, loss of revenue, increased cost of working, and other like losses, have been lodged with insurance companies.
Capex for will be less than 80% of depreciation, indicating the strong free cash flow generation

30. Free Cash Flows are Rising
Reported net profit has been impacted to the extent of Rs billion (US $ 25 million) by the additional operating costs, incurred till December 31, 1998, as a result of the accident to the SBM system.
Claims of Rs billion (US$ 57 million) for physical damage, loss of revenue, increased cost of working, and other like losses, have been lodged with insurance companies.
Free cash flows are increasing as profits rise and the proportionate spending on capex reduces

31. Capex Trends vis-à-vis Total Assets
Reported net profit has been impacted to the extent of Rs billion (US $ 25 million) by the additional operating costs, incurred till December 31, 1998, as a result of the accident to the SBM system.
Claims of Rs billion (US$ 57 million) for physical damage, loss of revenue, increased cost of working, and other like losses, have been lodged with insurance companies.
Future capex, as a proportion of Total Assets, will be significantly lower - less than 5% for

32. CWIP Declines to Rs. 300 Crores
Reported net profit has been impacted to the extent of Rs billion (US $ 25 million) by the additional operating costs, incurred till December 31, 1998, as a result of the accident to the SBM system.
Claims of Rs billion (US$ 57 million) for physical damage, loss of revenue, increased cost of working, and other like losses, have been lodged with insurance companies.
Post Jamnagar, entire asset base is generating returns - CWIP has declined to insignificant levels

33. Tax Liability Maintained at 2%-4% PBT
RIL’s tax liability has been maintained in the 2%-4% range since MAT imposition - MAT rate now reduced to 7.5%

34. Business Review

35. Globally Ranked Capacities
Global Rank
POY 4
PSF 5
PTA 6
PX 3
PP 6
PE (swing) 10
RIL has emerged as a significant global producer of petrochemicals in all its major products

36. Reliance’s Leading Business Position
Among top 10 producers globally of all its major products
Unique vertical integration from crude refining to fabrics and plastics - capturing value addition of over 1000%
Deriving over 90% revenues from domestic market
Leading the market in all its product categories with market shares ranging from 47% to 87%
Globally competitive capital and operating cost position
RIL alone contributes over 1% of India’s GDP and 1.5% of government’s revenue receipts

37. Growing Market Shares
RIL’s market share % change
Polyester 44% 47% +3%
(PFY, PSF, PET)
Fibre Intermed. 84% 87% +3%
(PTA, MEG, PX)
Plastics 56% 56% -
(PE, PP, PVC)
Polyester market share expansion driven by acquisitions
Plastics market share maintained in the face of additions to industry capacity

38. Robust Growth in Domestic Demand
Historic Future growth
CARG Estimates Growth Drivers
(last 5 yrs) (per annum)
Polyester 14% 8% - 15% - Lower prices
(PFY, PSF, PET) Substitution of cotton
Fibre Intermed. 15% 8% - 15% - Growth in polyester PTA, MEG, PX) demand
Plastics 12% 10% - 15% - 8% cut in excise
(PE, PP, PVC) JPMA implementation Edible oil packaging
- Telecom (Cables and Ducting)
Demand growth in domestic markets continues to be strong - a key factor that differentiates the India from most of the countries in the region.
Demand has grown at 10%-15% over the last 5 years for most of Reliance’s products, and similar rates of growth are forecast for the future as well.
Sharply lower unit prices to the consumer, and substitution of cotton, are the key themes driving the growth in domestic demand of polyester. Sustained decline in international prices, and sharp cuts in excise and custom duties, have led to polyester becoming substantially cheaper that cotton. This corrects a historic anomaly, and integrates India with the global trends.
Excise duty on PFY has been cut from over 100% in 1992 to about 35% currently. Similarly, import tariffs on PFY have come down from over 150% to 35% over the same time frame. As a result, the price of PFY to the consumer has dropped sharply from over Rs. 170/ kg to about Rs. 70/kg since Similarly, price of PSF to consumer has fallen from over Rs. 80/kg to about Rs. 50/kg. In the mean time, price of cotton has increased from Rs. 40/kg to Rs. 60/kg, with the price of cotton yarn rising from Rs. 60/kg in 1992 to over Rs. 100/kg currently. This reversal in the relationship between cotton and polyester prices has led to the blending ratios in textiles shifting in favour of polyester. This factor is likely to continue to drive polyester demand growth well into the future.
Demand for plastics is driven primarily by lower prices, substitution of traditional materials, and changing consumer lifestyles.
The move towards freeing cement, fertiliser, and other commodities from the provisions of the Jute Packaging Mandatory Act (JPMA) and the requirement of mandatory packaging of edible oils, are likely to be substantial demand drivers in the future.
Reliance’s new PP plant will be well positioned to capitalise on these demand growth opportunities.
Domestic demand growth momentum likely to be maintained in double digit range

39. Excise Duty Cuts to Boost Demand
The Union Budget for has reduced excise duties on plastics by 8%, from 24% to 16%
For the first time, this brings excise duties on plastics to the same level as alternative packaging materials
The cost advantage enjoyed, on this account, by aluminium, glass, etc. now stands removed
Consumer choice to be driven solely on product attributes, and not on artificial duty-based cost considerations
Lower end prices to customers to boost demand
Majority of key customers of Reliance’s polyester and plastics have been with the company for a long time, indicating high degree of customer satisfaction and strong brand equity.
Number of customers lost usually represents a fractional percentage figure in any given year for major products.
For instance, in plastics, the PE and PP businesses did not lose even a single customer in , whereas in polyester, the PFY and PSF businesses together lost 11 existing customers.
New customers continue to come to Reliance at an ever increasing pace - in , the number of direct polyester and plastics customers increased by 26% and 27% respectively.
Majority of the top 100 consumers of plastics and polyester in India buy from Reliance - 100% of the top consumers of PE and PP bought from Reliance Similar numbers for PSF and PFY stand at 95% and 64% respectively.
Excellent credit quality of customers is reflected in quick conversion of receivable into cash, and low working capital requirement.
Franchise power provides substantial marketing leverage in home markets - clearly a long term competitive advantage and an effective entry barrier.
Excise duty reduction on plastics has removed the cost advantage enjoyed by alternative packaging materials - demand likely to receive a major boost

40. Foodgrains Packaging opened to Plastics
Foodgrains/sugar packaging in the country has been opened up to plastics, for the first time in decades
Earlier, all foodgrains/sugar were to be packaged in jute bags, despite 100% cost penalty over PE/PP woven sacks
Jute Packaging Material Act 1987 (JPMA) relaxed w.e.f. March 31, limit for foodgrains/sugar reduced from 100% to 90%, and urea from 20% to 15%
Whole new markets opened up for PE/PP - significant increase in consumption
Jute availability inadequate for growing foodgrains/sugar production - growth of 140 mn tonnes in last 10 years
Majority of key customers of Reliance’s polyester and plastics have been with the company for a long time, indicating high degree of customer satisfaction and strong brand equity.
Number of customers lost usually represents a fractional percentage figure in any given year for major products.
For instance, in plastics, the PE and PP businesses did not lose even a single customer in , whereas in polyester, the PFY and PSF businesses together lost 11 existing customers.
New customers continue to come to Reliance at an ever increasing pace - in , the number of direct polyester and plastics customers increased by 26% and 27% respectively.
Majority of the top 100 consumers of plastics and polyester in India buy from Reliance - 100% of the top consumers of PE and PP bought from Reliance Similar numbers for PSF and PFY stand at 95% and 64% respectively.
Excellent credit quality of customers is reflected in quick conversion of receivable into cash, and low working capital requirement.
Franchise power provides substantial marketing leverage in home markets - clearly a long term competitive advantage and an effective entry barrier.
A single new market for packaging of foodgrains/sugar has opened, unlocking vast demand potential for PE/PP

41. Strong Potential for Demand Growth
Total demand in ‘000 tonnes/year
PFY & PSF PP, PE, PVC
India
China
World
Chinese consumption at 3-4 times current Indian levels, indicates potential for sustained demand growth

42. Business Review - Polyester
Domestic polyester demand growth at 7% per annum
Reliance’s volumes increased faster, partly owing to acquisition of polyester capacity

43. Business Review - Plastics
Domestic demand increased at 7% per annum
RIL’s volumes increased industry growth

44. Business Review - Oil and Gas
Oil and gas business now accounts for 2.4 % of revenues

45. New Oil & Gas Initiative
RIL has been awarded a total of 14 offshore blocks under GOI’s New Exploration Licencing Policy (NELP)
Deep and shallow water offshore blocks awarded on the basis of international competitive bidding
RIL the No. 1 E&P player in the private sector in India
RIL’s exploration acreage exceeds 1,00,000 sq. kms off the West and East coast of India
RIL to invest approximately Rs. 200 crores ($ 50 million) per year over the next years in exploration activities
RIL is leveraging on the in-house knowledge base and skill sets developed in the producing Panna, Mukta, and Tapti, oil and gas fields

46. Significant Incentives - NELP
US$ denominated prices for oil and gas
No signature, discovery or production bonus
No mandatory state participation
No cess on oil and/or gas
Significantly lower royalties
Freedom to market the oil & gas production in the domestic market
No customs duty on the items imported for the project
100% cost recovery for the cost incurred
100% tax deduction for all expenditure (incl. capex)

47. Moving up the Value Chain - Specialities
Speciality as %age of total volume Premium over
commodity
PE 5% 13% 26% 12%
PP NA 17% 30% 13%
POY Nil 10% 22% 14%
PSF 9% 41% 45% 10%
Majority of key customers of Reliance’s polyester and plastics have been with the company for a long time, indicating high degree of customer satisfaction and strong brand equity.
Number of customers lost usually represents a fractional percentage figure in any given year for major products.
For instance, in plastics, the PE and PP businesses did not lose even a single customer in , whereas in polyester, the PFY and PSF businesses together lost 11 existing customers.
New customers continue to come to Reliance at an ever increasing pace - in , the number of direct polyester and plastics customers increased by 26% and 27% respectively.
Majority of the top 100 consumers of plastics and polyester in India buy from Reliance - 100% of the top consumers of PE and PP bought from Reliance Similar numbers for PSF and PFY stand at 95% and 64% respectively.
Excellent credit quality of customers is reflected in quick conversion of receivable into cash, and low working capital requirement.
Franchise power provides substantial marketing leverage in home markets - clearly a long term competitive advantage and an effective entry barrier.
Near doubling of speciality grades to differentiate RIL from commodity producers, enhance margins, enable expansion into new markets, and deliver superior overall value

48. Tariffs - WTO Commitments
Current WTO Bound
import tariffs Rates
POY 20% 20%
PSF 20% 20%
PTA 20% 40%
MEG 20% 40%
PE 30% None
PP 30% None
PVC 30% 40%
Import tariffs on POY, PSF have already reached WTO bound rates
Tariffs on polymers likely to also gradually decline to 20% range in the next 3-5 years

49. Strong Performance under Declining Tariffs
Strong performance in a declining import tariff environment: global competitiveness demonstrated

50. Reliance Petroleum

51. RPL - World’s Largest Grassroots Refinery
World’s largest grassroots 27 million tpa refinery completed ahead of schedule
The No. 1 private sector player, with over 25% share in the domestic market, and maximum value addition
The only Indian refinery capable of producing diesel with <0.05% sulphur and gasoline with <1% benzene
Currently marketing controlled products through oil PSUs - approx. 25% - 30% consumed within the group
RPL to benefit from the hugely deficit and rapidly growing Indian markets

52. Global Competitiveness and Outlook
Conservative funding of project cost of Rs. 14,250 crores ($ 3.4 bn) with debt:equity ratio of less than 0.9:1
Significant benefits from 30% - 50% lower per unit capital costs compared to large refineries commissioned in the region in recent times
Based on full operating rates, RPL to achieve turnover of over Rs. 25,000 crores (US$ 5.7 bn) in FY
RPL to rank among top 5 private sector companies in India on all major financial parameters in the first year
RPL is the most valuable petroleum company in Asia with market cap of over Rs. 28,000 crores (US$ 6.5 bn)

53. Power and Telecom

54. Reliance Telecom - Update
Cellular services now available in 36 cities: current subscriber base of over 75,000
Average revenues per subscriber comparable to metro levels at Rs per month
Subscriber base growing at over 100% per annum
Reliance’s cellular services span 7 circles, 13 states, 1/3rd of India’s land mass and 1/3rd of India’s population
Implementation of basic services in progress in Gujarat
Reliance Telecom’s cellular operations EBITDA positive - unlocking of value through listing at appropriate time

55. Reliance Power - Update
500 MW Jamnagar and 447 MW project Patalganga IPPs, to achieve financial closure in FY
Commissioning in months from ‘Zero’ date
RIL’s contribution unlikely to exceed Rs. 325 crores (US$ 75 million) per year over the next 3 years
Jamnagar IPP to add value to bottom of the barrel output - petroleum coke, from the RPL refinery
Attractive regulatory regime for IPPs ensures healthy profitability and offers a steady stream of income
Reliance to leverage its core competence and strong presence in the energy-oil-petrochemicals chain

56. Stock Buyback

57. Objectives of Share Buyback
Return cash to shareholders in tax efficient, and investor friendly, manner - no sacrificing growth opportunities
Manage stock price volatility, lower beta, and attract longer term investors
Optimise Weighted Average Cost of Capital (WACC), thereby enhancing global competitiveness, and ROE
Achieve higher all-round valuation, enabling use of RIL stock in the long term as currency for acquisitions
Achieve increase in RIL’s market capitalisation, thereby contributing to enhancement of overall shareholder value

58. Domestic Stock Price Performance
% change
Period Date RIL Price Absolute Relative to
Sensex
Current 17 Apr
Calendar YTD 31 Dec
1 year 17 Apr
2 year 17 Apr
3 year 17 Apr
5 year 17 Apr
10 year 17 Apr
RIL stock price has consistently outperformed the Sensex over all time frames

59. Returns to GDR/FCCB Investors
% change
Issue Date Issue Current ($) Absolute Relative
Price ($) Price to Sensex
GDR 1 May
GDR 2 Feb
FCCB Nov
The RIL GDR is trading at US$ 20, translating into a stock price of over Rs. 435 per share, and representing a premium of nearly 50% to the underlying domestic stock price

60. RIL’s Declining Beta 2
1.3
1.1
Source : Morgan Stanley
Consistent decline in RIL’s Beta reflects reduced volatility - reduction in weighted average cost of capital (WACC)

61. Regulatory Framework
Buyback can not exceed 25% of paid up capital and free reserves - approx. Rs. 3,000 crores for RIL
Buyback in any financial year can not exceed 25% of the equity of Rs. 1,053 crores - approx. 26 crore shares
Shares bought back have to be cancelled, and cannot be held as Treasury stock for re-issue
Post-buyback, total Debt/Equity ratio not to exceed 2:1 - RIL is below 0.9:1
RIL comfortably meets all regulatory parameters for the stock buyback programme

62. Highlights of RIL Buyback Proposal
Maximum amount not exceeding Rs. 1,100 crores (US $ 250 million) - largest ever share buyback in India
Maximum buyback price of Rs. 303 per share represents 22% premium to average of one-year trading price range
Also represents 52% premium to recent low of Rs on March14, 2000, less than 20 trading sessions ago
Judicious exercise of share buyback at upto Rs. 303 per share, to contribute to maximisation of shareholder value
RIL will be implementing the largest ever stock buyback programme in India

63. Highlights of RIL Buyback Proposal
RIL will adopt the transparent “open market purchases” methodology for the buyback, with full disclosures
There will be no negotiated deals, spot transactions, or any private arrangements
Promoters will not offer their shares under the buyback programme
The promoters may continue with “creeping” acquisition of shares during the buyback programme
RIL’s promoters will not offer their shares under the buyback programme

64. No Equity Offering for 2 Years
As per prevailing regulations, RIL cannot make a fresh offer of equity shares, for any purpose, for a period of 2 years from the date of completion of the stock buyback
RIL has not made an equity offering for almost 6 years - in all RIL would not have issued equity for 8-9 years
During this period, RIL has increased capacities to nearly 10 million tpa, maintaining its debt:equity below 1:1
RIL can issue bonus shares during the 2 year lock-up period, and/or announce stock splits
RIL cannot make a fresh offering of equity shares for 2 years, for any purpose, including mergers and acquisitions

65. Exponential Growth - No Equity Offering
RIL has achieved exponential growth in the past 6 years without any fresh equity offerings

66. Value Creation through Buyback
Completion of RIL’s buyback programme at upto Rs. 303
per share will lead to, at the minimum :
2.3% rise in EPS for FY
Higher EPS growth of 36.4% (against current estimates of 33.4%) in next 12 months
70 basis points expansion in ROE to 22.9% in FY
20% rise in value added (ROCE—WACC) through a higher return on capital, and lower cost of capital
Source: Morgan Stanley Dean Witter estimates
The buyback, upto Rs. 303 per share, will enhance EPS/ROE, and lead to shareholder value enhancement

67. Positive Signals to Shareholders
Buyback proposal is intended to send out clear signals to
RIL investors
RIL will reward shareholders by returning cash to them
High growth to continue
Lower stock price volatility
Lower Weighted Average Cost of Capital (WACC), enhancing global competitiveness
RIL will endeavour to protect the interests of long term shareholders, by neutralising speculative forces

68. Summary

69. Summary
Stability returning to the overall petrochemicals price environment with recent drop in crude prices
Improving outlook for global and regional petrochemicals industry - positive demand momentum coupled with a more disciplined approach to capacity creation
RIL has implemented significant expansion in capacity close to the bottom of the cycle - net external sales up 54% this year
RIL well positioned to participate in the industry upcycle with nearly 10 mn tpa capacity, global competitiveness and fully integrated operations
Production volumes increased 33% to a record level of 5.27 million tonnes in the first nine months of
This is despite the temporary dislocation in feedstock supplies at the Hazira petrochemicals complex in October 1998.
Total production volume slated to touch nearly 7 million tonnes for the full year - final production volume for the year likely to be 20% higher than beginning of the year estimates.
Sales revenues were up 11% at Rs billion (US$ 2.6 billion) in the first nine months.
This comprised of the impact of volume growth at 23%, partially offset, to the extent of 12%, by the decline in average product selling prices.
Reliance sold 95% of its production within India.
Value added export opportunities selectively pursued with export revenues increasing 145% to Rs billion (US $ 121 million).
Exports focussed on quality conscious markets of US and Europe, in recognition of the superior quality of Reliance’s products.
Expansion in petrochemicals margins will lead to significantly higher returns for RIL

70. Summary
RIL is generating a ROCE (Return on Capital Employed) of 22% on its operating businesses
Significant hidden values in investments in RPL, BSES, L&T, RCL, Telecom and Oil and Gas - RIL share value estimated at approx. Rs. 600 per share
Future cash flows will be used in accordance with the capital allocation framework enunciated by the company
Stock buyback demonstrates confidence of management in future prospects, and undervaluation of RIL stock
The buyback demonstrates the management’s confidence on future prospects and under-valuation of the RIL stock

71. Reliance Industries Limited India’s World Class Corporation