Reliance Industries Limited Call/100325_20051130.pdf · Investor Presentation November 2005 Reliance Industries Limited 2 Coverage Reliance Industries - OverviewReliance Industries

Investor Presentation

November 2005

Reliance Industries Limited

2www.ril.com

Coverage

Reliance Industries - OverviewReliance Industries - Overview

Business ReviewBusiness Review

SummarySummary

3www.ril.com

Journey of Phenomenal Growth

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1977IPO

1982 – 1988

Polyester mfg. at Patalganga

1997-1998

Cracker completion at Hazira

Net

Pro

fit (U

S$

Mill

ion)

1996-1998

Yankee Bond Issues – maturities

ranging 10 -100 years

1,731

3

1991

Hazira Petrochemicals

complex

1992-1993

1st GDR issue1999-2000

Refinery & Petrochemicals complex started

at Jamnagar

2002

RIL-RPL merger

IPCL Acquisition

Gas find in KG-D6

2004

Trevira acquisition

Fortune Global 500

4www.ril.com

Consistently Accelerating Growth

-

3,000

6,000

9,000

12,000

15,000

18,000

1994

-95

1995

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1996

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300

600

9001,200

1,500

1,800

2,100Turnover (US$ Million) Net Profit

CAGR over the last 10 years : Revenues 26% and Net Profit

18% in USD term. Growth accelerates in the last 5 years

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3,000

6,000

9,000

12,000

15,000

18,000

1999

-00

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-05

-

300

600

9001,200

1,500

1,800

2,100Turnover (US$ Million) Net Profit

5www.ril.com

Reliance - Robust Growth

(in US$ Million) FY 2000 FY 2005 CARG % (5 Years)

Revenues 3,633 16,725 35.71

Net Profit 551 1,731 25.73

Cash Profit 857 2,763 26.38

Total Assets 6,733 18,422 22.30

Market Cap 7,644 24,055 25.77

India’s first and only private sector company to feature in the Fortune Global 500 listQ-on-Q growth for almost 60 quarters

6www.ril.com

Current Capacities

(in MT) FY 2000 FY 2005 FY 2006-9 (P)

PP 360,000 1,430,000 1,710,000

PE 320,000 1,055,000 1,055,000

PVC 270,000 625,000 625,000

POY 270,000 550,000 870,000

PSF 315,000 570,000 800,000

PET 80,000 290,000 290,000

PTA 975,000 1,350,000 1,980,000

MEG 300,000 830,000 830,000

PX 246,000 1,646,000 1,956,000 Petrochemicals, incl others 8,900,000 12,500,000 15,000,000

Refining - 33,000,000 60,000,000

E & P - Gas MMSCMD 8 11 51

Planned expansion across the value chain

7www.ril.com

Changes in Global Rankings

Global leadership in Polyester

FY 2000 FY 2005

POY / PSF 4 1

PP 6 7

PTA 6 6

MEG - 5

PX 3 4

8www.ril.com

Dominant market share in India

Domestic Leadership & Global Rankings

Leading Global PositionLeading Market Shares in India

Significant position in the global petrochemical and energy business

1

3

4

6

Polyester(Fibre & Yarn)

Refining (1)

Paraxylene

Purified Trephthalic Acid

7MEG

Amongst top 10 global players in all its core businesses

(1) At any single location

Polyester 55%

Fibre Intermediates 78%

Polymers 65%

Refining 28% 7 Polypropylene

9www.ril.com

ROE & ROCE Trend

ROE (%)

20.016.1 14.8

17.0

21.9 22.7

0.0

5.0

10.0

15.0

20.0

25.0

2001 2002 2003 2004 2005 Q2FY06

Sustained improvement in ROE and ROCE

ROCE (%)

20.3 18.512.9 14.8

21.0

30.5

0.05.0

10.015.020.025.030.035.0

2001 2002 2003 2004 2005 Q2FY06

10www.ril.com

Coverage



SummarySummary

Exploration & Production (E&P)Exploration & Production (E&P)

12www.ril.com

E&P Portfolio

Producing Assets - Panna-

Mukta & Tapti

Exploration Blocks - 34

blocks in India and one each

in Yemen and Oman

Exploration Acreage - about

340,000 sq.km.

Coal Bed Methane - 5 blocks

(4,000 sq.km.)

A diversified and balanced portfolio of offshore and onshore blocks

13www.ril.com

NELP-IShallow Water Blocks : 8Deep water Blocks : 3

NELP-IIShallow Water Blocks : 1Deep Water Blocks : 2On-land Blocks : 1

NELP-IIIShallow Water Blocks : 2Deep Water Blocks : 7

NELP-IVDeep Water Blocks : 1

NELP-V (not shown in the Map)Deep Water Blocks : 4On-land Block : 1

PRE-NELP Shallow Water Blocks : 2

Tullow : 2Total : 34*

Deep Water Acreage : 245,000 sq kmShallow Water Acreage : 82,000 sq kmOnland Acreage : 13,000 sq kmTotal : 340,000 sq km

Exploration Acreage

GK-OSJ-3

14www.ril.com

Highlights

Carried out exploration program

with acquisition of 45, 000 LKM

of 2D & 35,000 sq km of 3D

Drilled 32 wells within a time

span of less than 4 years.

Drilled 19 core holes and 10 test

wells in the CBM Blocks

additionally

RIL now invests US$ 400-500 million annually towards exploration

15www.ril.com

Reserves

World class gas discovery in Krishna-Godavari basin (14 TCF

OGIP) – further potential upside under exploration

Discovery in NEC-25- puts Mahanadi offshore to petroliferous

map of India (1-1.2 TCF OGIP)

Discovered CBM Gas – puts Coal Bed Methane in the map of

India (3.65 TCF OGIP)

2008-09 will be a watershed change with E&P contributions to overall

revenue increasing significantly

16www.ril.com

Natural Gas is going to be the fuel of the 21st Century

Environment friendly

Lower price volatility

More ‘efficient’ fuel

Efficient and eco friendly transportation through pipelines

Unfortunately, natural gas consumption in India has been

constrained by availability

Recent developments in the natural gas sector could result in

share of natural gas in Indian energy basket increasing from 8%

towards the global average of > 25%

Future of Gas in India

17www.ril.com

Status – KG D6 Development

Peripheral Bund construction at onshore terminal nearing completion

FEED optimization studies being carried out

First Development well spudded with D534 rig and drilling in progress

Contract for development to be awarded in calendar Q1-06

Commercial production expected in 2008

100% of permission for ROU for East West Pipeline obtained

Further exploration is on to assess upside in this block

18www.ril.com

Status – Coal Bed Methane

GIP estimates of 3.65 TCF concurred by DGH for Sohagpur East

and West Blocks

Work program and budget for Phase II activity at Sohagpur East

and West Blocks approved by DGH

Exploration activity is currently in progress for Sonhat and

Rajasthan Blocks

Development Plan is being conceptualized for production in 2009-10

19www.ril.com

Status – NEC 25

Met ocean Studies being carried out

600 sq. km. 3D seismic data acquired pre-monsoon 2005, another

1100 sq. km. data is being acquired currently

Commerciality report for the discoveries in the block under

preparation

20www.ril.com

Overseas Assets

Yemen:

– Development Plan approved by Yemen Government

– Approval to produce up to 10,000 bbls of oil per day

– Approval to drill further exploratory wells - Hiswah 7,8,9 &10 received

– Installation of early production system in progress

– Plan to commence production by March 2006

Oman:

– Contract for 2D data reprocessing and EIA study being awarded

Refining & Marketing (R&M)Refining & Marketing (R&M)

22www.ril.com

Refining Capacity

70,000

75,000

80,000

85,000

90,000

2000 2001 2002 2003 2004 2005 2006 2007

Global Capacity Demand

Demand (vs supply) and growth rates higher in Asia

Capacity in ‘000 bpdSource: PEL, OPEC, BP statistical review, Research Reports

-5,000

10,00015,00020,00025,00030,000

2000 2001 2002 2003 2004 2005 2006 2007

Asia Capacity Demand

World Asia

2004 – 2007 (CAGR)Demand 2.31 %Capacity 0.71 %


23www.ril.com

Refining Capacity

-1,0002,0003,0004,0005,0006,0007,0008,000

2000 2001 2002 2003 2004 2005 2006 2007

China Capacity Demand

Demand in China and India is expected to grow twice the average of world demand growth

-500

1,0001,5002,0002,5003,0003,500

2000 2001 2002 2003 2004 2005 2006 2007

India Capacity Demand

Capacity in ‘000 bpdSource: PEL, BP statistical review, Research Reports

China India



24www.ril.com

World’s Largest Refineries

Reliance is world’s 3rd largest refinery at any single location and at 1.2 million bpd, it will be the single largest refinery. Expansion aimed at benefiting from the global supply gap opportunity

Refining Capacity (bpd)

450,000

458,000

493,500

495,000

520,000

557,000

605,000

817,000

940,000

660,000

0 200,000 400,000 600,000 800,000 1,000,000

Shell Eastern, Singapore

Exxon Mobile, USA

Hovensa LLC, Virgin Islands

S-oil Corp, South Korea

Exxon Mobile, USA

Exxon Mobile, Singapore

LG -Caltex, South Korea

Reliance Industries, India

SK Corp, South Korea

Paraguana Refining, Venezuela

1.2 million bpdin FY 2008/09

Source: Oil and Gas Journal

25www.ril.com

Reliance Refinery

0

100

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KB

PSD

Rel

ianc

e,Ja

mna

gar

US

Supe

rsite

Euro

pean

Supe

rsite

Asi

a Su

per

Site

Crude Throughput

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ianc

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rsite

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pean

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rsite

Shel

l,Si

ngap

ore

Complexity Index

Petrochemical Component

• Benchmarked, in the top quartile, in all performance parameters,by Solomon Associates, in 2003

• Adjudged to be the most energy efficient refinery by Shell Global Solutions in 2004

• Reliance becomes the first Asian company to be awarded the International Refiner of the Year-2005

Source: NEXANT/Solomon

26www.ril.com

Operational Excellence - GRMs

0.02.04.06.08.0

10.012.014.0

Q2 FY05 Q3 FY05 Q4 FY05 Q1 FY06 Q2 FY06

US Gulf Coast Rotterdam Mediterranean Singapore Complex Reliance

Consistently recording superior margins over Singapore complex margins – GRM of US$ 10.4 / barrel in Q2 FY06

Source: Reuters

27www.ril.com

Refinery Expansion - Key Factors

Under - investment in energy infrastructure since 1990

Shortage in refining capacity exacerbated by strong demand growth

Important structural changes

Widening light-heavy differential

Widening diesel-fuel oil differential

New refining capacity unlikely to be created in the US / Europe due to stringent laws, regulation & public sentiments

Global refinery system likely to witness demand supply

mismatch on account of lack of capacity creation

28www.ril.com

Opportunity for Reliance Expansion

Robust demand growth outpacing refining capacity addition

globally

Economic growth continues to fuel demand – 2% globally

and at 4-5% in Asia

Positive outlook for crack margins, particularly for

transportation fuels

Extensive synergies with existing assets

Reliance to increase its refinery capacity from 33 MT to 60

MT by 2008/09 with a capex of US$ 5.7 billion

PetrochemicalsPetrochemicals

30www.ril.com

30

40

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110

10 15 20 25 30 35 40

Global Ethylene Consumption & GDP

Petrochemical Industry & Economic Growth

Glo

bal e

thyl

ene

con

sum

ptio

n (

MM

T)

Strong correlation over past 2 decades

Source: GDP - IMF

Ethylene - CMAIGlobal GDP (Tr $)

R 2= 0.99

19821983

1985

19841980

19861987 1988

1989

1990

19911992

1993 1994 1995

1996

1997 1998

1999 20002001

2002 2003

1981

20042005

31www.ril.com

0

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120

140

160

2000 2002 2004 2006 2008 200980%

90%

100%

110%

World

0

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70

80

2000 2002 2004 2006 2008 200980%

90%

100%

110%

DemandDemand

MMTA

EOS

Ethylene Demand Supply

90% of new global ethylene capacity planned in East of Suez

2004 – 2009 (CAGR)Demand 3.7%Capacity 4.7%


Source : CMAI

Op. rateOp. rate

MMTA

Capacity

32www.ril.com

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45

2000 2002 2004 2006 2008 200980%

90%

100%

DemandDemand

EOS

PE Demand Supply

• Global PE op rates to gradually rise thru 2006 & 2007 to peak in 2008• Capacity and demand growth to come from East of Suez



Source : CMAI

Op. rate

Op. rate

MMTA MMTA

Capacity

33www.ril.com

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20

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120

2000 2002 2003 2004 2006 2008 200980%

90%

100%

110%

World

0

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45

50

2000 2002 2004 2006 2008 200990%

100%

110%

120%

Demand

Demand

EOS

Propylene Demand Supply

High operating rates and demand outstrips supply in EOS



Source : CMAI

Op. rate

Op. rate

MMTA MMTA

Capacity

34www.ril.com

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2000 2002 2004 2006 2008 200980%

90%

100%

110%

World

0

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30

2000 2002 2004 2006 2008 200980%

90%

100%

110%DemandDemand

EOS

PP Demand Supply

• 70% of new Global PP Capacity planned in East of Suez …• Global ORs to rise steadily beginning 2006 to peak in 2009



Source : CMAI

Op. rateOp. rate

MMTA MMTA

Capacity

35www.ril.com

Reliance benefits from its geographical and low-cost advantages

Asia becomes the Growth Driver

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100

120

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

GDP per capita (US $)

Poly

mer

s K

g/ p

er c

apita

IndiaIndonesia

China

Thailand

Malaysia

West Europe

Korea

Japan

US

36www.ril.com

No Large Additions in ME Capacity till 2008-09

Middle East ethylene capacities can create short-term demand-supply mismatch starting 2008 onwards but is likely to follow international pricing

Countries 2005 2006 2007 2008 2009 2010(in '000 MT)Iran* 1,000 2,320 820 2,200 3,100 KSA 5,200 2,600 1,300 Qatar 1,300 Kuwait 850 Abu Dhabhi 1,400 Oman 1,000 Total 1,000 2,320 8,170 7,200 4,400

Source : CMAI, ICIS LOR

* Iranian capacity excludes 520 KTA Amir KabirComplex which has gone on stream in July'05

37www.ril.com

Global Industry Outlook

Ethylene– New investments in “feedstock-advantage” ME centers– ME Cap share likely at <20% (2009)

PE– Supply tightness to continue till 2007– New ME capacity could soften markets beyond 2008– Assets to come in demand heavy or low-cost centers

(feedstock benefits)

PP– PP consumption to touch 54 MMTA from 39 MMTA– Growth forecast at 4.7%(CARG) -Capacity addition is 4.5% – Prices likely to remain firm

38www.ril.com

Operating rates and margins expected to remain firm till 2008

Middle East projected start ups to lead to softening of margins, however this will need to be monitored

“Responsible” pricing regime by ME producers likely to provide a stable margin environment given that overall capacity, post expansion will still be < 20%

Brazil’s RioPol and Iran’s Amir Kabir crackers are on stream – healthy margins continue

Reliance’s business development initiatives in the domestic markets will focus towards expanding the non-commodity based product usage

Global Industry Outlook…con’t

39www.ril.com

Asian Business Dynamics

Asian Demand supply situation has resulted in sustained up-cycle

Rising Feedstock Prices have dampened margins partially

North American Gas based Petrochemical producers are under pressure from high Gas prices ($ 14 / MMBTU)

Hurricanes have resulted in temporary outages which have helped sellers offset some of these costs by increase in product prices

This reverse arbitrage has caused many chemicals and polymer cargoes have moved from Asia to North America

Delay in Middle East projects is likely to result in petrochemical up-cycle sustaining for longer than originally envisaged

PolyesterPolyester

41www.ril.com

0

5000

10000

15000

20000

25000

30000

2000 2002 2003 2004 2005 2006 2008 20100

5000

10000

15000

20000

25000

30000

2000 2002 2003 2004 2005 2006 2008 2010

DemandDemand

POY Growth outstrips Expansion Plans

Demand growth is expected to be faster than capacity addition in Asia



World Asia

Source : PCI

Capacity

KTA KTA

Capacity

42www.ril.com

0

2000

4000

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12000

14000

16000

18000

2000 2002 2003 2004 2005 2006 2008 20100

2000

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16000

2000 2002 2003 2004 2005 2006 2008 2010

DemandDemand

PSF Demand Supply

Asian demand growth will outpace supply by 2010



World Asia

Source : PCI

Capacity

KTA KTA

Capacity

43www.ril.com

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2010

Polyester: Capacity Utilisation

India: High utilisation rate to continue – Reliance is at 100% capacity utilisation

India

S Korea

World

China

Source : PCI

44www.ril.com

Fibres: Polyester Dominance

Source: PCI

0

10

20

30

40

50

60

70

80

1960 1970 1980 1990 1995 2000 2005 2010

Cotton

Polyester

Polyester

Cellulosics

Others

Nylon

Cotton

% Reliance enters into polyester

Investment in PTA/ MEG

1.4 million tonnes Capacity

Reliance decision to enter into high-growth Polyester at the right time

45www.ril.com

Advantage Reliance

Reliance’s strength lies in integration, low cost operations and value

creation in entire chain - will mitigate risk in individual products

Organic and acquisition of MEG – capacity now at 830,000 MT

Capacity '000 MT

1,050

2,015

2,500

3,300

1,646

- 500 1,000 1,500 2,000 2,500 3,000 3,500

LG Caltex

Reliance

Sinopec Group

BP

Exxon Mobil

1,956

Capacity '000 MT

1,400

1,510

1,540

1,750

2,755

6,721

1,350

- 2,000 4,000 6,000 8,000

Reliance

Mitsui

Petrocel

FCFC

Mitsubishi

Sinopec

BP

PX PTA

1,980

Source: PCI and Company reports

46www.ril.com

Reliance - Polyester opportunities

Current operating rate in China around 70%, Taiwan and Korea

at 60% and India at over 90%

India stands to benefit from growing consumption and removal of

quotas – market expected to grow by 8-10%

Opportunities in non-apparel applications to fuel growth –

Reliance’s acquisition of Trevira allows access to over 150 IPs

Reliance among few fully integrated producers including PTA,

MEG and PX – provides stable margins across the chain – post

expansion in 2005-06, total capacity at 2 million tons

Reliance benefits from its integrated and low cost

operations

47www.ril.com

Global Industry Outlook

Polyester manufacturing is moving towards Asia and is aligned to

the textile industry

India and China are the future manufacturing bases with 80% of

capacity presently located in Asia

Indian textile exports to US has moved up by 30%, second only to

China

Low per capita consumption and low manufacturing cost will

make India a polyester manufacturing hub in the days to come

Asia to dominate world supply of polyester

48www.ril.com

Coverage



SummarySummary

49www.ril.com

Reliance: Superior Stock Performance

80

90

100

110

120

130

140

150

160

Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05

Reliance BSE Sensex SP500 Chemicals MSCI Asia ex-Japan

Indexed 2005 YTD price performance

50www.ril.com

Strong Fundamentals

Strong Cash flows Existing businesses generating cash flows of US$ 2.8 billion perannum

Solid Balance SheetTotal Assets have grown from US$ 3.6 billion to US$ 18.4 billion over the last 10 years

Conservative GearingDebt to Equity ratio of 0.37, Net Gearing at 16%

Top end Credit ratingsBaa3+Stable Outlook by Moody’sBBB+Stable Outlook by S&P (above Sovereign Rating)AAA by CRISIL (S&P-India) for the past 11 years

Demonstrated capability to execute multi-billion dollar projects on the strength of own cash flows with marginal recourse to external borrowings

51www.ril.com

Reliance: Capture Growth Opportunities

Substantial investments in E & P (US$ 4 billion)

Creation of petroleum retail network (US$ 1.5 billion)

Expansion of petroleum refinery (US$ 5.7 billion)

Increase in petrochemicals capacities (US$ 1.6 billion)

Investments of over US$ 12 billion in next five years

52www.ril.com

Market Conditions going forward

Petrochemicals operating rates and margins expected to remain firm till 2008

Middle East projected start ups to lead to softening of margins,however this will need to be monitored

Robust demand growth outpacing refining capacity addition globally

Economic growth continues to fuel demand – 2% globally and at 4-5% in Asia

Domestic gas market shortfall currently at 60 MMSCMD – gap to increase with economic development

Business prospects are very positive

53www.ril.com

Larger Strides Going Ahead

Doubling Refining capacity to 60 million tonnes to maximiserevenue opportunity

Petrochemical capacity of over 15 million tonnes with stable margins

Gas assets of over 18 TCF to capture local demand supply mismatch

Allocation of capital to high potential, higher margin E & P business. E&P targeted to contribute 15-20% of revenues by 2010

Conservative financial framework to deliver volume and sustained earning growth

What took us 30 years is being targeted to be replicated in the next 5 years

54www.ril.com

Demerger Update

RIL board approves the scheme of demerger on 05 Aug 05

Scheme details - on a 1:1 ratio, all shareholders of RIL to receive shares of

Reliance Communications Ventures LimitedReliance Energy Ventures LimitedReliance Capital Ventures LimitedGlobal Fuel Management Services Limited

RIL Corporate Governance committee ensures protection of interest of minority shareholders. Scheme also unlocks value in a transparent manner

Stock exchanges (BSE/NSE) approves scheme

Positive outcome witnessed at the Court convened EGM held on 21 Oct 05 from equity shareholders and creditors alike

Thank YouThank You

Growth is Life

Reliance Industries Limited Call/100325_20051130.pdf · Investor Presentation November 2005 Reliance Industries Limited 2 Coverage Reliance Industries - OverviewReliance Industries

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