1 Reliance Industries Limited First Half Results 2000-01 October 31, 2000.

1

Reliance Industries Limited

First Half Results 2000-01

October 31, 2000

2

Reliance - India’s No. 1 Group

Management Philosophy and Strengths

Financial Performance

Business Outlook

Future Growth Plans

Shareholder Value Enhancement

Summary

Index

3

India’s No. 1 GroupIndia’s No. 1 Group

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Reliance - India’s No. 1 Group

Rs. Crs. $ bn Rank

Sales 55,000 12.0 1

Cash Flow 7,000 1.5 1

Net Profit 4,800 1.1 1

Market Cap 62,000 13.5 1

Reliance is India’s largest, and fastest growing group

First generation enterprise - built on organic growth

RIL’s ROE is the highest amongst Asian chemicals companies, and ranks amongst the top 1 percentile for global chemicals companies

Reliance Industries Ltd.

Financial numbers based on consensus analyst estimates

5

Key Role in Indian Economic Growth

Reliance has

leveraged global

scale and

competitiveness in

its operations to

build leadership in

the vast Indian

markets

Reliance generates over 3% of India’s GDP

Reliance contributes over 5% of the government’s total tax revenues - the largest by any business house

India’s largest, and the amongst the world’s largest, shareholder families - over 5 million retail investors

Reliance is now playing a leadership role in creation of a world class infocom infrastructure in India


6

Integrated, globally ranked Integrated, globally ranked producer, with leading market producer, with leading market shares in Indiashares in India

World’s largest grassroots refinery World’s largest grassroots refinery with 25% share of Indian marketwith 25% share of Indian market

India’s largest private E&P operator, India’s largest private E&P operator, with acreage > 100,000 sq. kms.with acreage > 100,000 sq. kms.

E&P

R&M

Petrochemicals

Presence in All Major Growth Sectors

Fully

integrated

player

capturing

value across

the entire

energy chain


7

Presence in All Major Growth Sectors

India’s largest captive India’s largest captive power facilities, IPPs, and power facilities, IPPs, and generation and distribution generation and distribution

infrastructureinfrastructure

Power

Existing basic and cellular Existing basic and cellular circles covering 380 circles covering 380

million people, and 1/3rd million people, and 1/3rd of India’s geographyof India’s geography

New economy and services sector initiatives will sustain high growth rates in the future

Building state-of-the-art, world class, Building state-of-the-art, world class, infocom infrastructure to capture infocom infrastructure to capture growth opportunities across the growth opportunities across the

entire digital value chainentire digital value chain

Infocom

Telecom


8

Consistent Track Record of Growth

Compounded Annual Rate of Growth (%)

Since 1977* 10 Year 5 Year

Sales 28 27 24

Net Profit 39 39 18

Cash Profit 37 31 22

Assets 37 28 21

Market Cap 42 42 23

EPS 19 19 14

Only Indian group to report consistent sales and profit growth for 42 consecutive quarters in a row, over the last more than 10 years


* Date of first IPO

9

Group Structure

FinancialServices

RIL

RelianceInfocom

ReliancePetroleum

RelianceTelecom

BSESRelianceCapital

Refining Nationwidebroadband network

Basic(existing)

Powergeneration

Oil & Gas

Petrochemicals - polyester and polymersTextiles

Value addedservices

Voice, dataand image

T & DCellular(existing)

64% Upto 50% 26% 27% 47%

Marketing


10

Leadership in India’s Capital Markets

RIL RPL GroupWeightage in

BSE Sensex 12% 11% 23%

NIFTY 10% 9% 19%

MSCI - India 9% - 9%

MSCI - Asia Pacific 0.7% - 0.7%

The Reliance Group’s leadership is reflected in the significant weightages in benchmarks related to India


Management Philosophy and Management Philosophy and StrengthsStrengths

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Management Philosophy

Reliance is the Reliance is the

leading Indian leading Indian

group to think, group to think,

and act, truly and act, truly

world scale and world scale and

world classworld class

World scale operations

Leading edge, state-of-the-art, technologies

Global best practices

Global competitiveness

Integration

Market leadership

Financial conservatism

Shareholder value enhancement


13

Organisational Attributes

Young committed team - over 20,000 people, with an average age of just 35 years

Entrepreneurial, new ideas driven approach

Speed in thought and action

Agility in responding to an ever changing environment

Commitment to excellence

Informal work culture

A pure meritocracy - performance brings rewards

Reliance’s Reliance’s

mantra is mantra is

innovation in innovation in

thinking, and thinking, and

efficiency in efficiency in

execution - execution -

turning dreams turning dreams

into realityinto reality


14Core Competencies

Largest in-house pool of intellectual capital

Attracting and retaining the best people, and

nurturing the ‘intrapreneurial’ spirit

Unique financial engineering capabilities

Demonstrated ability to implement complex,

multi-billion dollar projects in record time frames

Ability to create world class assets at 30%+

capital cost advantage compared to peer group

Absorption of diverse and complex

technologies and optimal operation of plants

Reliance’s core Reliance’s core

competence lies in competence lies in

its ability to its ability to

conceptualise and conceptualise and

implement multi-implement multi-

billion dollar billion dollar

projectsprojects


15

Recent Achievements

Investment of over Rs. 35,000 crores (US$ 9 bn) in new refinery and petrochemicals complexes completed in the last 5 years

World’s largest 27 mn tpa grassroots refinery completed in world record time of 36 months

Implemented India’s largest port project in 18 months - capacity of over 50 mn tpa

Implemented India’s largest rail/ road loading and despatch terminal with capacity of 10 mn tpa

Implemented India’s largest 500 MW captive power plant in less than 12 months

Implementation of large projects in 12-18 months less than the time taken by peer group

Unique Unique

combination of combination of

resource resource

mobilisation mobilisation

and project and project

management management

skill-sets - rare skill-sets - rare

even in the even in the

global contextglobal context


16Global Competitiveness

30% + capital cost advantage over global peer group, in creation

of new assets

Capacity expansion through debottlenecking, providing further capital cost advantage over new capacity creation

Personnel, and SG&A, costs amongst the lowest in the universe of global chemicals companies

Globally competitive power costs - all manufacturing complexes run on 100% captive power facilities

Competitive financing, from the domestic and international markets

Reliance’s sustainable competitive strengths translate into superior

returns and profitability ratios for the company


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Differentiation Strategy

Reliance’s differentiation strategy is built around:

World class quality of products

Widest range of product grades

Reliability of supplies at competitive prices

Extensive nation-wide distribution network

Just in time deliveries for even the smallest customer - significant savings in inventory costs

Technology and product development support

Market reputation Market reputation

and customer and customer

relationships are relationships are

key key

long term long term

advantagesadvantages


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Current Financial PerformanceCurrent Financial Performance

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Sales Rs. 15,009 crs. (US $ 3,258 mn)

Operating Profit Rs. 2,643 crs. (US $ 574 mn)

Net Interest Cost Rs. 477 crs. (US $ 104 mn)

Cash Profit Rs. 2,012 crs. (US $ 437 mn)

Net Profit Rs. 1,347 crs. (US $ 292 mn)

Annualised CEPS Rs. 38.1 (US $ 0.83)

Annualised EPS Rs. 25.5 (US $ 0.55)

Financial Highlights - H1 2000-01

Strong performance despite sharp rise in feedstock costs


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Interest 423 97 631 137Depreciation 447 103 665 144Tax - - - -

Total Sales 8,673 1,989 15,009 3,258 +73Sales(excl. RPL 8,673 1,989 12,856 2,791 +48exports)

Net Profit 1,112 257 1,347 292 +20

Cash Profit 1,569 360 2,012 437 +28

Income Statement

EBITDA 1,992 457 2,643 574 +33

H1 1999-00 H1 2000-01 % ChangeRs. crs. $ mn.$ mn.Rs. crs.

Profit under US GAAP is Rs. 1,114crs. ($ 242mn), which is 19% lower primarily due to the impact of foreign exchange fluctuations


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Composition of 48 %

Sales Revenue Growth

Impact of volume growth 25 %

Impact of price increases 23 %

Growth in Production and Sales


Production volumes increased 35 % to 5.3 million tonnes

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Avg. H1 2000-01 over

Avg. H1 1999-2000

International prices of

key raw materials : higher by 25% - 40%

Domestic selling prices

of major products : higher by 1% - 30%

Sharp Increase in Feedstock Costs


Naphtha prices did not fully track the increase in crude oil prices -

impact also partly neutralised by higher product selling prices

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Profitability Ratios

H1 1999-00 H1 2000-01

OPM * % 19.8 19.4

ROE% 19.6 19.9

EPS – Rs. ($) 11.8 ($0.27) 12.7($0.28)

Cash EPS – Rs. ($) 16.6($0.38) 19.0 ($0.41) * Excluding RPL Exports

RIL has maintained its healthy profitability ratios


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30 Sep 99 30 Sep00

Gross Debt : Equity 0.98 0.83

L T Debt : Equity 0.87 0.76

Net Debt: Equity 0.52 0.73

Net Gearing (%) 34.3 42.2

Gross Interest Cover 3.1 4.2

Net Interest Cover 5.5 5.5

Net Debt / Cash Flow 1.6 2.0

Liquidity Ratios

Conservative liquidity ratios reflect inherent financial strength


25Growth in Exports

Primary thrust on domestic markets, with 87% of revenues coming from sales within India

Focus of exports on the quality conscious markets of Europe and the US, with an emphasis on speciality grades

Manufactured exports up 300% to Rs. 1,684 crores (US$ 366 mn)

Total exports, including RPL’s products, at Rs. 3,837 crores (US$ 833 mn)

RPL will now directly export its products, to take advantage of the new risk management policy announced by the government

Selective export

opportunities

contribute to

diversification of

markets, and

optimal utilisation

of installed

facilities


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Business PerformanceBusiness Performanceand Outlookand Outlook

27Business Mix

Exports of RPL’s products in the first half accounted for 14% of the total revenues

RIL's sales86%

Export of RPL's

production14%

Break-down of total revenues


28Business Mix

Contribution of the oil and gas division to RIL’s revenues and profitability is steadily increasing

Fabrics1%

Polyester21%

Oil and Gas3%

Chemicals15%

Plastics & Int.

34%

Fibre Int.26%

Break-down of RIL’s sales - excluding exports of RPL’s products


29Oil and Gas - Plans and Outlook

RIL is India’s No.1 private sector E&P player with 100,000 sq. kms in exploration acreage

Oil and Gas production from existing fields is growing at 5%-10% per year

Potential to increase gas production by 3 times

14 exploration blocks recently awarded under attractive new policy regime, with fiscal and other benefits

Results from initial studies of the new exploration blocks are encouraging

Reliance is

generating

attractive dollar

denominated

revenues from

its growing oil

and gas

business


30Polyester (PFY, PSF and PET)

Reliance is the world’s 3rd largest polyester producer

Compounded domestic demand growth in double digits - RIL’s production increased 15% in the first half

India’s 1.4 mn tonnes polyester market is still less than 1/3rd the size of the Chinese market

Specialities, with premium pricing of 10%, now account for 25%-60% of RIL’s total production

Industry consolidation is leading to improved pricing power, expanded product range, and higher product integration

Reliance is the only polyester producer, making investments to participate in future demand growth in India


31

Polyester (PFY, PSF and PET)

Polyester margins improving

Industry operating at peak capacity utilisation

No capacity additions over the last 2-3 years,

owing to then prevailing weak industry conditions

No new capacity in the pipeline

Reliance will benefit significantly, owing to the

scale of its operations and integration


Per capita

consumption

of polyester

in India

remains

amongst the

lowest in the

world

32Polymers (PP, PE and PVC)

Domestic demand for RIL’s plastics growing at compounded rate of 10%-15% per year

Demand for polypropylene, which accounts for nearly 2/3rd of RIL’s plastics production, is growing at over 20% per annum

Huge domestic demand potential - India’s 2.7 mn tonnes plastics market compares with China’s consumption of 12.6 mn tonnes

Diverse applications in fast growing sectors, such as telecom, food and beverages, FMCG, automobiles, etc.

Reliance is the most globally competitive player, operating in perhaps the world’s fastest growing plastics market


33Polymers (PP, PE and PVC)

New capacity additions in Middle and Far East may pressure industry margins in the short term

Reliance’s overall competitiveness, and leadership in rapidly growing home markets, will cushion the impact on the company

Import duties close to WTO resting points - limited room for further reduction in the short term

Rupee depreciation enhances pricing flexibility

Improved outlook from 2002, owing to limited capacity additions beyond 2001

RIL’s market

leadership and

global

competitiveness

will minimise

the impact of

regional

oversupplies


34Reliance Petroleum

RPL operates the largest, and most complex, refinery in India, with over 25% of total domestic capacity

World’s largest grassroots refinery, with capacity of 27 mn tpa - the 7th largest refinery in the world at any single location

30% + capital cost advantage, over global peer group

Flawless start-up, and quick synchronisation of entire refinery complex within a world record timeframe of 3 months

Capacity utilisation of 101% achieved in the second quarter of operations - a unique achievement even in the global context

RPL and RIL are now India’s top 2 private sector companies


35

Sales Rs. 14,308 crs. ($ 3,106 mn)

Operating Profit Rs. 1,479 crs. ($ 321 mn)

Interest Cost Rs. 456 crs. ($ 99 mn)

Cash Profit Rs. 1,023 crs. ($ 222 mn)

Net Profit Rs. 726 crs. ($ 158 mn)

Annualised CEPS Rs. 4.76 ($ 0.10 )

Annualised EPS Rs. 3.38 ($ 0.07 )

RPL’s Financial Highlights - H1 2000-01

Record performance in the very first half year of operations


36Highest Profitability in the Indian Refining Sector

RPL’s Gross Refining Margin (GRM) of over US$ 6 per barrel, is the highest in the Indian refining sector

RPL’s ability to optimise the feedstock and product mix on a dynamic basis, provides a competitive edge vis-à-vis other refineries

Processing of heavier crude oils has enabled RPL to take advantage of differential pricing trends, contributing to higher GRMs

A unique achievement, as many international refineries have taken 3 to 5 years before processing heavier crude oils

RPL’s unique

configuration, and

high complexity,

have contributed to

the highest levels

of value addition,

and enhanced

GRMs


37RPL - India’s Largest Manufacturer Exporter

Exports of RPL’s products were Rs. 2,138 crores (US$ 464 million) in the first half

Products exported to the US, Europe and the Far East (including Japan)

Significant exports reflect superior quality of products, meeting the most stringent international environment specifications

Exports facilitated by dedicated port and logistics infrastructure

RPL will now be India’s largest manufacturer exporter

RPL achieved

peak operating

rates despite the

slowdown in

domestic demand,

owing to

acceptability of its

products in export

markets


38RPL - Regulatory Environment

RPL’s margins are determined by international market related prices, even under the current regulatory environment

RPL is required to sell 5 controlled products (gasoline, diesel, kerosene, LPG, ATF) to oil PSUs

Market determined import parity prices received for controlled products

Payments received directly from oil PSUs normally within 10 days - not linked to the OCC pool mechanism

All other products marketed directly by RPL - 20%-30% output consumed by group companies

Complete flexibility in sourcing of crude oil, and determining product mix


39

Reliance Petroleum - Benefits to RIL

RIL’s investment

in RPL has

rapidly created

significant

shareholder

value, in a

business

regarded as

having long

gestation

RPL will pay a dividend this year - contributing to RIL’s cash flows RIL will consolidate RPL’s financials, from the year 2001-02, fully reflecting the benefits of its investments in the company The value of RIL’s stake in RPL translates into a value of nearly Rs. 180 per RIL share RIL’s unrealised capital gains on this account are nearly Rs. 12,500 crores (over US$ 2.7 bn) RPL will deploy its cash flows to enter into retail marketing from the year 2002 RPL also has the ability to significantly enhance capacity at marginal incremental cost, to capture future demand growth


40Reliance Telecom - Cellular Operations

Rapid growth in coverage and subscriber base, currently over 125,000 subscribers in 45 cities

Subscriber growth in first six months at 62%, far surpassing industry growth rate of 39%

Average revenue per user (ARPU) of over Rs. 1,000 per month - in line with trend in metros

Coverage being extended to nearly 100 cities by 2001

Reliance’s licensed area covers 13 states, 1/3rd of India’s geographical area, and 380 mn population

India’s largest network, and the growing presence in large contiguous areas, fits in perfectly with the group’s infocom plans


41

Future Growth PlansFuture Growth Plans

42

Reliance is India’s leading business house, consistently pursuing growth opportunities to maximise shareholder value


Reliance Value Creation Philosophy

Growth Growth OpportunityOpportunity

Superior returns Superior returns on investmentson investments

Shareholder value Shareholder value enhancementenhancement

DeregulationDeregulation

Brand equityBrand equity

Huge domestic marketHuge domestic market

Cash flowsCash flows

Project Project executionexecution

RelianceReliance

43Growing Cash Flows

1642 17332320 2559

36814122

0

1000

2000

3000

4000

5000

1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01(E)

RIL’s cash flows

have consistently

grown over the last

5 years - the

reinvestment needs

in existing business

are small in

comparison

2000-01 : Consensus analyst estimates


44

Capturing New Opportunities

Maintain, and enhance, market leadership in existing E&P, R&M, petrochemicals, and power businesses

Deploy significant free cash flows from existing businesses to capture attractive growth opportunities in New Economy and services sectors

Reliance’s strategy for the new infocom businesses leverages its demonstrated project management capabilities, financial engineering skills and brand equity

Investments in existing and new businesses will surpass hurdle return targets, and enhance shareholder value

Reliance’s leadership in Indian markets will be further strengthened with its new infocom initiatives


45

Huge Market Opportunity

India is the only remaining telecom market opportunity in the world, with enormous growth potential

Inadequate existing infrastructure

Extremely low penetration rates:

India ChinaFixed Lines (mn) 30 140Cellular (mn) 3 70Internet (mn) 4 19

(Analyst forecasts for CY 2000)

Recently announced deregulation measures

open up vast markets for growth

Infocom

currently

represents the

largest market

opportunity in

India in the

services sector


46

Attractive low entry fee, and/or revenue sharing model

Path-breaking telecom reforms have been announced, opening up all markets to the private sector:

Fast Paced Market Deregulation

Telecom reforms have opened up rapidly growing, multi-billion dollar voice, data and image markets in India


National Long Distance (NLD)National Long Distance (NLD)

Basic telephony (including WLL*)Basic telephony (including WLL*)

Cellular - new operators in all circlesCellular - new operators in all circles

3G services - nationwide*3G services - nationwide*

International Long Distance by 2002International Long Distance by 2002

Subsea/ submarine connectivitySubsea/ submarine connectivity and landing stations and landing stations

International gatewaysInternational gateways

Internet service providers (ISPs) already allowedInternet service providers (ISPs) already allowed

* under consideration

47

Global Trends in Convergence Strategies Paradigm shift in the profile of the telecom industry - traditional circuit switched to router based IP networks

Move towards vertically integrated, convergent offerings in voice, data and value-added services, with end-user/application focus, not limited to bandwidth plays

Traditional telcos modifying core strategies to provide seamless, end-to-end connectivity, and the full range of applications/solutions

Data-centric players acquiring incumbent telcos, to enhance customer access, and range of offerings

Shift away from a regional focus to global reach

Deregulation has provided the opportunity for creation of a world class infocom business in India


48

Reliance’s Infocom Initiatives

Reliance is building a nationwide, terabit bandwidth, broadband network connecting India’s top 115 cities - representing over 50% of the country’s GDP

All optic, facilities based, intelligent IP networks - robust and scaleable

Reliance will leverage its bandwidth and related infrastructure to capture value across the entire digital chain

A complete bouquet of services, and high quality end-to-end connectivity, will enable it to offer a superior value proposition to customers

Reliance’s

low-cost

communications

infrastructure,

and integrated

approach, will

provide a lasting

competitive edge


49Nationwide Broadband Network Connecting Top 115 Cities in India

Largest

broadband

network of its kind,

covering around

60,000 route

kilometers, with

significant future

scaleability


Work already in progress

50

Voice Offerings

Reliance to offer the complete range of services covering voice, data, and image, and value added services/ applications Voice services to provide end-to-end connectivity, to customers on a nationwide basis Leading presence targeted in all segments of the voice market - present size approximately Rs. 35,000 crores (US$ 8 billion):

- Local

- National Long Distance

- International Long Distance

- Mobile

Reliance will

provide all voice

services on a

nationwide basis,

thereby delivering

superior service

to a large

customer base


51

Reliance’s comprehensive offerings strategy will reduce risk, and generate attractive returns even in an intensely competitive scenario


Data and Other Value Added Services

Reliance Infocom’s Reliance Infocom’s communications communications

infrastructureinfrastructure

Bandwidth selling/ tradingBandwidth selling/ tradingServing ISPs/ ASPs/ Serving ISPs/ ASPs/ content and other service content and other service providersproviders

Media-castingMedia-casting

E-E-commercecommerce

Secure VPNsSecure VPNs

Managed Managed software software servicesservices

ColocationColocation Web-hostingWeb-hosting

Call centresCall centres

Internet data centresInternet data centres

52

Strategy for Last Mile Connectivity

Reliance’s initial focus on connecting business customers Strategy for providing last mile access for the household segment to be driven by market revenue potential Selection of technology for last mile access (fibre, DSL, cable, wireless, satellite, etc.) based on techno-commercial viability Existing cable networks not appropriate for last mile connectivity:

- poor quality of infrastructure

- inability of existing cable to provide two way communication

- Unorganised structure, with 65,000 small cable operators

- illegal networks/ operations abound

Reliance’s strategy for building the last mile access will be consistent with dynamics of the Indian market place


53Competitive Landscape - Incumbents At a Disadvantage

Government owned telcos face constraints of:

- existing legacy infrastructure

- procedural delays

- funding Existing private operators in local telephony are limited in number, and have no significant first mover advantage:

- regional focus, with operations limited to a single state

- early stage of operations, and limited number of subscribers

- high upfront licence fees penalty

- capital cost disadvantages

- funding constraints


54Competitive Landscape - New Players Bandwidth supplier model of some government bodies:

- delays in implementation

- limited revenue potential

- cost and funding issues A few private sector players focussing on data-centric services:

- Inability to provide bundled voice and data services, leading to significantly reduced revenue potential

- No end-to-end connectivity

- Extensive dependence on third party infrastructure, resulting in quality of service and/or cost issues

- Implementation and funding issuesReliance has the credibility as a sponsor, and the vision and ability, to capture the total infocom opportunity in a world class manner


55

The Reliance Advantage

Scale - leading to cost advantages Project management skills - track record of executing complex projects with significant capital cost advantage Financial strength - leads to ability to negotiate better prices with equipment/ project suppliers and contractors End-to-end connectivity to end customers without reliance on external infrastructure - the only way to ensure high quality connectivity in the Indian context Strategy of capturing all possible revenue streams, also leads to the ability to provide the best value proposition to customer

Reliance will lead the market with sustainable advantages in terms of cost and the ability to provide high quality service to customers


56

History of success in brand marketing, advertising, market positioning and retail marketing

Widely credited with creation of equity cult in the country – developed a 5 mn base of retail investors

Created an entire market for polyester where none existed

Established the most successful premium fabrics brands in India – Vimal and Harmony

Reliance is a

strongly customer-

centric and

marketing oriented

organisation, with a

history of identifying

and developing

attractive market

opportunities

Successful Track record in Brand Marketing and Customer Service


57

Serves subscriber base of over 125,000 for its cellular services Serves over 25,000 industrial and small consumers in its petrochemicals business Preferred supplier status with majority of customers Known for taking service to the next level of hand-holding and mentoring Derives sizeable revenues from selling key raw materials to co-producers

– ability to provide comfort level, and ensure competitiveness of customers is enhanced

Reliance is

essentially a story of

success in brand

marketing, and in

creating and sharing

value on a large scale

Successful Track record in Brand Marketing and Customer Service


58

Reliance Infocom - Current Status Backbone presently being implemented in 12 states - Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra, Gujarat, Rajasthan, Delhi, Haryana, Uttar Pradesh, Madhya Pradesh, Orissa, W. Bengal

Over 30,000 strong construction force at work

Fast growing team of highly qualified and experienced industry professionals from all over the world

Rollout of services based on market revenue potential

Fibre being sourced internationally - 100% in-house project management

The nationwide backbone to be completed by end 2002

Reliance will rollout its services and offerings in a phased manner, starting in the next financial year


59Reliance Infocom - Corporate Structure

Reliance Infocom will be the holding

entity implementing all infocom and

related ventures, under its umbrella

RIL will be the lead investor in

Reliance Infocom with upto 50% equity

holding

Balance equity to be held by

Reliance’s promoters/strategic/financial

investors

Reliance Infocom will enter into JVs

and alliances wherever required

Reliance Infocom’s

proposed corporate

structure is

designed to

enhance overall

value for RIL

shareholders


60

Shareholder Value EnhancementShareholder Value Enhancement

61Corporate Governance

Reliance is committed to the highest international standards of corporate governance

Reliance provides US GAAP reconciliation for the benefit of its international investors since the past more than 3 years

Endowed a chair for Corporate Law and Governance, at the National Law School

Reliance has adopted policy documents - “Values and Commitments”, “Code of Ethics”, “Business Policies” and “Insider Trading Policy”

Shareholders’ approval for ESOP has been obtained - programme will be introduced shortly

Reliance

considers good

corporate

governance as

the primary driver

for generation of

superior

shareholder

value


62

Conservative Financial Management

Top end domestic AAA credit rating

– international ratings constrained by sovereign ceiling

RIL’s cash flows for approximately 2 years are sufficient to extinguish its entire net debt

Conservative management of foreign exchange risk

Dollar revenues from oil and gas provide additional cover

External debt of $ 1.3 billion has weighted average maturity of 22 years

RIL has achieved

quantum growth in

the scale of its

operations, while

pursuing

conservative

financial policies


63

Growth without Further Equity Dilution

Reliance has achieved exponential growth without any equity offering for the past 6 years:

- increase in capacity from 1 million tonnes to nearly 10 million per annum- 1000% growth in capacity- over 500% growth in total revenues- over 800% increase in net profit after tax

Reliance was the only Indian company to announce, in 1997, that it would not make an equity offering till 2000 Under current Indian regulations, Reliance’s stock buyback precludes issue of any further equity till 2003

RIL has achieved exponential growth without any equity offerings, generating superior returns for investors


64Increased Promoters’ Stake

RIL’s promoters’ have increased their equity stake by 2%, to over 40% during the current financial year Shares have been acquired through open market purchases, under the existing regulatory framework Existing guidelines allow the promoters to acquire an additional 5% of equity in every 12 month period on a rolling basis Room for further acquisition of 3% stake i.e. 30 mn shares in the current year, taking stake to over 43% This level of management stake, is unprecedented, in the Indian context, in a company of this scale and size

RIL’s promoters have publicly expressed their intention to increase their equity stake, through secondary market purchases over a period of time


65Shareholding Pattern

Promoter group 40%

Institutions - Domestic 20%

Institutions - Foreign 20%

FIIs 13%

GDRs 7%

Public 20%

Over 2 million retail small investors hold less than 100 shares each, accounting for 13% of equity, which has rarely been traded

One in every 4 retail investors in India is an investor in Reliance group shares


66RIL’s Approach to Share Buyback

RIL has completed all formalities for commencement of its share buyback:

–- validity till June 12, 2001 and then renewable

Day-to-day timing of buyback will depend on

volatility in capital markets, short term speculative

pressures, relative stock price performance, etc.

Significant reduction in share price volatility,

beta and WACC since buyback announcement

Rs. 303 is the maximum buyback price,

required to be specified only because of Indian

regulations

India’s largest

share buyback for

Rs. 1100 crores

(US$ 250 mn),

with a maximum

price of Rs. 303

per share


67RIL share’s superior price performance

% ChangeRIL Sensex Nifty

YTD 30% -26% -21%

1 year 30% -17% -11%

2 year 176% +32% +42%

3 year 61% -2% 8%

5 year 145% 8% +19%

10 year 214% 187% -

The RIL stock price has consistently outperformed the broad market indices over all time frames


68

Returns to GDR/FCCB Investors

% changeIssue Date Issue Current ($) Absolute Relative

Price ($) Price to Sensex

GDR 1 May 1992 8.17 13.3 +62 +82

GDR 2 Feb 1994 11.75 13.3 +13 +49

FCCB Nov 1993 9.18 13.3 +43 +49

The RIL GDR has outperformed the Sensex, even in US$ terms


69Best Sensex Performer - Jan to Oct 2000

RIL is the best performing Sensex stock year-to-date

30%

13%

-2%

-23% -25% -26% -28% -30% -30% -32%-37%

-41% -43%-50% -51% -53%

-65%-73% -74%-80%

-60%

-40%

-20%

0%

20%

40%


70RIL Best Performer Amongst Leading Global Petrochemicals Stocks

30%19%

-1%

-3% -5% -7% -8% -9% -9%

-28% -32% -33% -33%-42%

-65%-77%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

RIL is amongst the best performing petrochemicals stocks globally


71

0.8

1.0

1.2

1.4

1.6

1.8

2.0

RIL’s Declining Beta

RIL’s beta has declined below 0.9 from about 1.2, since the time of the buyback announcement 6 months back

Source : Morgan StanleySource : Morgan Stanley

2

0.9

1.2

- One Year Rolling Beta


72

SummarySummary

73Summary

RIL’s profits from its existing petrochemicals

businesses are growing faster than most

companies globally

Free cash flows being deployed in value

generating infocom investments

Opportunity to gain exposure to potential

market leader in convergent voice, data, and

image offerings in the huge Indian markets

Reliance is the demonstrated leader in

identifying and capturing attractive market

opportunities in India

A world class

enterprise, at the

intersection of the

‘old’ and the ‘new’

economy


74

Reliance Industries Limited

India’s World Class Corporation

1 Reliance Industries Limited First Half Results 2000-01 October 31, 2000.

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