Reliance Industries Limited
Annual Report 2007

Plain-text annual report

Enriching lives. Empowering people. annual report 2006-07 Enriching lives. Empowering people. Our Founder Chairman Shri Dhirubhai H. Ambani realised his vision and dream by including not only shareholders, customers and employees but also the people of India. Our Chairman Shri Mukesh D. Ambani has taken our Founder Chairman’s vision further by extending the scope of our businesses into the next orbit, enabling us to include the entire nation in our story of growth. From textiles to oil and gas exploration and production, from being India’s only private sector company to feature in the FORTUNE Global 500 list three years in a row to being part of the top 25 climbers in the same list, we have worked hard to make every Indian proud. Keeping pace with our growth is our extraordinary commitment to individual lives through our corporate social responsibility programmes in the areas of education, healthcare and environment. Today, our entry into businesses like Special Economic Zones, Oil & Gas Exploration and Production and Retail has given us newer avenues to further enrich and empower millions of lives. We at Reliance Industries Limited, are proud to be at the helm of this movement. Letter to Shareholders Dear Shareowners, I am delighted to share with you the update on your company’s excellent performance across all operating and financial parameters. This performance has cemented Reliance Industries Limited’s (RIL) pre-eminent position as the largest private-sector enterprise in India in terms of revenues, profits, net worth, assets and market capitalization. I take this opportunity to thank you for your overwhelming support to the merger of Indian Petrochemicals Corporation Limited with Reliance Industries Limited. I warmly welcome our new shareholders into the RIL Family with great pride. This merger provides us with integration, flexibility, significant growth opportunities and ability to optimise our business operations. Continuing its rapid strides, RIL achieved several significant milestones during the year. You will be elated that Reliance Industries Limited (RIL) has become the first and only Private Sector Indian Company to record a turnover of over Rs. 1,00,000 crores and a net profit exceeding Rs. 10,000 crores. RIL’s market capitalization exceeded over Rs. 273,000 crores (USD 67 billion). Our global competitiveness continues to be recognized all over the world. Our company has fortified its position as India’s largest exporter. This year, our exports were over USD 15 billion, accounting for 56% of the turnover. Our company’s increasing exports are a clear proof of the superior quality of our products, global competitiveness and excellent logistical capabilities. The global economy continued its surge of prosperity, despite rising oil prices and geo-political challenges in a few regions. This continues to be the most productive value-generating era for the human civilisation in an increasingly globalised world. The Indian economy continues its strong economic performance with almost 9% growth. By all accounts, the Indian economy has the potential to sustain and achieve even higher growth rates. It is a matter of great satisfaction that in this environment, RIL continues to be an important catalyst in India’s impressive performance and is maintaining its all round progress with poise and assurance. As part of our commitment to propel India towards self-sufficiency and greater energy security, we are aggressively pursuing several initiatives in the Oil and Gas Exploration and Production domain. Our efforts in this aspect continue to bear fruit. This is evidenced by additional discoveries in the Mahanadi Basin, Krishna Godavari Basin and Cauvery Basin in the east coast and Gujarat Saurashtra Basin in the west coast. Our refinery had an average utilisation of 96% which compares favourably with operating rates for refineries globally. As part of our overall strategy to overcome the challenges in the domestic market and to increase our presence in the export markets as a prelude to the impending commissioning of the new Greenfield refinery, I am delighted to inform you that we have exported 57% of our aggregate refinery product volumes in the quality conscious global markets. Our leadership position in the polyester business is being further strengthened. I am proud to inform you about the commissioning of the world’s largest polyester expansion project in a record time of just eighteen months. An annual capacity of 550,000 tonnes was added, increasing our total polyester capacity to over 2 million tonnes. Today, we account for 4% of global installed capacity and about 6% of the global production. As part of ensuring our global leadership in the polyester business, we have also commissioned a 730,000 tonnes per annum PTA plant at Hazira. In the coming years, we will endeavour to strengthen our global in polyester by building and acquiring new capacities at very competitive costs. We will increase our focus on capturing the significant growth opportunities in both apparel and non-apparel segments. Our march towards global leadership in the polymer business continues unabated. During the year we increased our annual capacity of polypropylene by 280,000 tonnes at Jamnagar. leadership position As part of our overall strategy to overcome the challenges in the domestic market and to increase our presence in the export markets as a prelude to the impending commissioning of the new Greenfield refinery, I am delighted to inform you that we have exported 57% of our aggregate refinery product volumes in the quality conscious global markets. Our new value creation efforts in the domains of exploration and production, organised retailing and the Greenfield petroleum refinery and polypropylene plant in the Special Economic Zone at Jamnagar are progressing as per schedule. We are on the path to improving our global ranking in polymers by building extremely competitive new assets in India. Our new value creation efforts in the domains of exploration and production, organised retailing and the Greenfield petroleum refinery and polypropylene plant in the Special Economic Zone at Jamnagar are progressing as per schedule. Our development plan for bringing gas from the KG D6 block is on schedule. This project is the first deepwater gas development project in India. On commissioning, this will be the world’s largest and most complex deepwater gas production system. Our success in exploring for hydrocarbons in India has put India on the hydrocarbon map of the world and led to the company being recognised as an emerging global exploration and production major. We expect to make a significant contribution to enhancing the availability and security of energy for India. Reliance Petroleum Limited (RPL) continues to make rapid progress in implementation of its large, complex refinery, coming up in an SEZ at Jamnagar. Making rapid strides on all implementation fronts, RPL has achieved overall project progress of 65% at the end of the first quarter of the current year. I am happy to inform that engineering and procurement activities are nearing completion and required site infrastructure has been mobilised to sustain the fast pace of construction. RPL refinery is well on track for completion by December 2008. I am happy to announce that work is underway on building one of the largest integrated cracker and petrochemicals complex with a total capacity of 2 mmtpa in the SEZ at Jamnagar. This cracker will use refinery off gases and other byproducts as feedstock to manufacture ethylene, propylene and its downstream commodity and specialty derivatives. Last year, in the Annual General Meeting, I talked about yet another transformational initiative – in the area of organised retailing. Our initiative in the retailing domain is being developed under the banner of Reliance Retail Limited. Currently over 300 Reliance Fresh outlets have been opened to the customers. Additionally, the first specialty stores dealing in Electronics and Consumer Durables largest named Reliance Digital and hypermarket called Reliance Mart also opened to tremendous customer response. The support infrastructure including farmer collection points, India’s distribution centres and logistics network is being developed to keep pace with the stores. As part of our efforts to benchmark our performance globally, we have initiated publication of the Corporate Sustainability Report. RIL published its second sustainability report aligned to Global Reporting Initiative (GRI) framework. GRI has accorded “GRI Checked A+ level” rating for the second report. This is a unique feat and reaffirms the fact that the company has distinguished itself as a leader in the field of corporate sustainability reporting. We remain firmly committed, as always, in maximising shareholder value. Our new initiatives in organised retailing, oil and gas exploration and production and infrastructure will start generating significant shareholder value in the next few years. Along with these, we will focus on consolidating and growing our leadership position in our existing businesses. This will enable us to excel in delivering superior shareholder value. We have always betted on our youth and they have delivered results. Their youthfulness and dynamism fuels our growth plans. I am grateful to the Board of Directors of RIL for their unwavering support. I would like to convey my gratitude to the Board, customers, suppliers, bankers, employees and our shareholders for their resolute support and belief in our ability to deliver maximum shareholder value. Our outlook for the future continues to be optimistic. It is driven by the fact that the fulcrum of economic growth is shifting to Asia, propelled primarily by the unprecedented growth paradigm of the two most populous countries in the world – India and China. I am confident that with your unstinting support and the commitment and energy of our employees, Reliance will scale greater heights and set newer benchmarks in our journey to global leadership. With best wishes, Sincerely Mukesh D Ambani Chairman & Managing Director September 10, 2007 Financial Highlights Turnover Gross Profit Cash Profit Net Profit Rs. 118,354 Crore (US$ 27,227 million) Rs. 20,525 Crore (US$ 4,722 million) Rs. 17,678 Crore (US$ 4,067 million) Rs. 11,943 Crore (US$ 2,747 million) Net Profit 5 years CAGR 30% Total Assets Rs. 117,353 Crore (US$ 26,996 million) Significant contribution to India’s economic growth • Revenues equivalent to 2.9% of India’s GDP • 12% of India’s total exports • 6.5% of the Government of India’s indirect tax revenues • 5.7% of the total market capitalization • 13.4% weightage in the BSE Sensex • 11.7% weightage in the Nifty Index Growing importance across the globe • Largest producer of Polyester fibre and yarn • 4th largest producer of Paraxylene (PX) and Purified Terephthalic Acid (PTA) • 6th largest producer of Mono Ethylene Glycol (MEG) • 7th largest producer of Polypropylene (PP) RELIANCE INDUSTRIES LIMITED 1 Contents Company Information Financial Highlights Product Flow Chart Notice Management’s Discussion and Analysis Report on Corporate Social Responsibility Report on Corporate Governance Secretarial Audit Report Auditors’ Certificate on Corporate Governance Shareholders’ Referencer Directors’ Report Auditors’ Report on Financial Statements Balance Sheet Profit and Loss Account Cash Flow Statement Schedules forming part of Balance Sheet and Profit and Loss Account Significant Accounting Policies and Notes on Accounts Statement of Interest in Subsidiaries Auditors’ Report on Consolidated Financial Statements Consolidated Balance Sheet Consolidated Profit and Loss Account Consolidated Cash Flow Statement Schedules forming part of Consolidated Balance Sheet and Profit and Loss Account Significant Accounting Policies and Notes on Consolidated Accounts List of Investor Service Centres of Karvy ECS Mandate Form Claim Form for Unpaid Dividend Nomination Form Members Feedback Form Attendance Slip and Proxy Form 05 06 08 09 12 34 41 67 68 69 80 93 96 97 98 100 115 135 143 144 145 146 148 157 173 175 177 179 181 183 2 Growth is Life Major Products and Brands Product Business/ Brand Exploration & Crude Oil and Natural Production Gas Refining Liquefied Petroleum Gas (LPG) Brand Logo End Uses Technology Partner Refining, power, fertilisers, petrochemicals and other industries Domestic and industrial fuel Propylene Naphtha Gasoline Jet / Aviation Turbine Fuel Superior Kerosene Oil High Speed Diesel Sulphur Petroleum Coke Feedstock for polypropylene Feedstock for petrochmicals such as ethylene, propylene & fertiliers, etc. and as fuel in power plants Transport fuel Aviation fuel Domestic fuel Transport fuel Feedstock for fertilsers, pharmaceuticals Fuel for power plants and cement plants Polymers Repol Polypropylene (PP) Relene High Density Polyethylene (HDPE) Reclair Reon Liner Low Density Polyethylene (LLDPE) Polyvinyl Chloride (PVC) Woven sacks for cement, foodgrains, sugar, fertiliser, leno DOW, USA bags for fruits & vegetables, TQ & BOPP films and containers for packaging textiles, processed food, FMCG, office stationery, components for automobile and consumer durables, moulded furniture & luggage, houseware, geotextiles, fibres for socks, sports wear, soft luggage Woven sacks, raschel bags for fruits & vegetables, containers NOVA, Canada for packaging edible oil, processed food, FMCG, lubricants, detergents, chemicals, pesticides, industrial crates & containers, carrier bags, houseware, ropes & twines, pipes for water supply, irrigation, process industry & telecom Films for packaing milk, edible oil, salt, processed food, NOVA, Canada rotomoulded containers for storage of water, chemical storage and general purpose tanks, protective films and pipes for agriculture, cable sheathing, lids & caps, masterbatches Pipes & fittings; door & window profiles, insulation & Oxyvinyl, USA sheathing for wire & cables, rigid bottles & containers for packaging applications, footwear, flooring, partitions, roofing, I.V. fluid & blood bags Relpipe Poly-Olefin (HDPE & PP) Pipes Irrigation, water supply, drainage, industrial effluents, telecom cable ducts, gas distribution Koylene Polypropylene (PP) Koylene Koylene Indothene Indothene Indothene Polypropylene Copolymer (PP) Polypropylene Adipol (PP) Low-density Polyethylene Linear Low-density Polyethylene High-density Polyethylene Indovin Poly Vinyl Chloride Woven sacks for cement, sugar, food-grains; Leno bags for fruits and vegetables, Film for packaging of apparels, processed foods, FMCG products; House-ware and components for automobiles and consumer durable goods; furniture, luggage and sports goods; Ropes and twines; fibre and filaments; non- woven products for hygiene applications; geo-textiles; sheets and profiles for packaging, advertising and building applications. Basell Basell Basell Film for packaging of processed foods, FMCG products; Agricultural films, extrusion coating on paper, foil etc. TotalFina Film for packaging of milk, edible oil, processed foods, FMCG products; extrusion coating, roto-moulding. Ineos Woven sacks for fertilizers; Netted bags for fruits and vegetables, Film for packaging processed foods, FMCG products; House-ware and components for automobiles and consumer durable goods; luggage and sports goods, Pipes for irrigation, water supply and gas distribution. Ineos / Basell Pipes for irrigation, water supply, drainage; Pipes and profiles Oxyvinyl, USA for buildings and construction, wire and cable insulation; blood bags, catheters and other medical disposables. RELIANCE INDUSTRIES LIMITED 3 Business/ Brand Chemicals Relab Indolab Fibre Intermediates Polyester Recron Recron Stretch Recron Cotluk Recron Dyefast Product Brand Logo End Uses Technology Partner Linear Alkyl Benzene (LAB) Linear Alkyl Benzene (LAB) Paraxylene (PX) Purified Terephthalic Acid (PTA) Mono Ethylene Glycol (MEG) Staple Fibre Filament Yarn Texturised Yarn Twisted/Dyed Yarn Stretch yarns for comfortable fit and freedom of movement Cotton Look, Cotton Feel Yarns Can dye at boiling water temperature with high colour fastness UOP, USA UOP, USA UOP, USA, ICI, UK/DuPont/Investa ABB Lummus Crest Netherlands (Shell Process) E.I. DuPont, USA Zimmer, Germany Barmag, Germany Toray, Japan, Murata, Japan, ICI, UK, Rieter, Switzerland Detergents Detergents Raw material - PTA Raw material - Polyester Raw material - Polyester Apparel, home textile, industrial sewing thread, automotive upholstery, carpets, canvas, luggage, spunlace & non woven fabrics Blouse material, denim, shirting, suiting, dress material, T-shirt, sportswear, swimwear, medical bandages, diapers Dress material, shirting, suiting, furnishing fabric, curtain, bed sheet Ladies outerwear, feather yarn for knitted cardigan, decorative fabric & home furnishing Recron Superblack Dope dyed black with high consistency in shade Apparel, automotive, non-woven & interlining Recron Superdye Recron Kooltex Recron Fibrefill Recron 3S Bright, brilliant colours and soft feel, low pill Moisture management yarns Hollow fibres with high bounce and resilience Secondary Reinforcement Produts Recron Certified Quality Certified Sleep Products Woven & knitted apparel, furnishing & home textile Active sports and high performance wear applications Pillows, cushions, quilts, mattresses, furniture, toys & non-wovens E.I. DuPont, USA Construction industry (concrete/mortar), asbestos cement (sheet & pipe), paper industry (conventional & speciality), battery industry, wetlaid industry (wall papers, filtration, wipes & hygiene products) India’s first certified Pillows, Cushions & Bedcovers, made as per the quality norms and inputs specified by Reliance Relpet Textiles Vimal Harmony Polyethylene Terephthalate (PET) Packaging-water, soft drinks, beverages, confectionary, pharmaceutial, agro-chemical, food products E.I. DuPont, USA Sinco, Italy Suitings, Shirtings, Readymade Garments Furnishing fabrics, Day curtains, Automotive upholstery Fabrics, Suits, Jackets, Shirts & Trousers Furnishings, home textiles RueRel Suitings V2 Ready-to-stitch, Take away fabric Fabrics Fabrics 4 Growth is Life Business/ Brand Retail Product Brand Logo End Uses Fresh produce, food & grocery Transportation fuels Fleet Management Services Highway Hospitality Services Vehicle Care Services Trivera The sports marque Basis for breathable textiles that withstand all weathers. Protects against wind and weather, thanks to its climate control properties. The fine marque Basis for light and elegant fashion, finer than found in nature, with high weather comfort and pleasant to the bare skin. The versatile marque Basis for fleecy winter fashion and ultra light summer wear. Heat regulating even at extreme temperatures. The elestic marque The cosy marque Basis for optimised stretch performance. With good stretch and excellent recovery, moulds perfectly to the body. Basis for pillow and duvet interiors that are soft and gentle, ideal for all seasons. The receptive marque Basis for home textiles that are easy care, durable and in every way comfortable. The high performance marque Basis for long lasting lowpill, functional and prestigious fabrics. In blends or by itself, the perfect balance between looks and comfort. The classic marque Basis for easy care, hardwearing fabrics of durable quality. The pure delight of comfort with style. The flame retardant marque Basis for fabrics that are both safe and comfortable. Flame retardant to all appropriate fire protection reaquirements. Company Information RELIANCE INDUSTRIES LIMITED 5 Board of Directors Mukesh D. Ambani Chairman & Managing Director Nikhil R. Meswani Executive Director Hital R. Meswani Executive Director Hardev Singh Kohli Executive Director Ramniklal H. Ambani Mansingh L. Bhakta Yogendra P. Trivedi Dr. Dharam Vir Kapur Mahesh P. Modi S. Venkitaramanan Prof. Ashok Misra Prof. Dipak C. Jain Dr. Raghunath A. Mashelkar (from June 9, 2007) Secretary Vinod M. Ambani Board Committees: Audit Committee Yogendra P. Trivedi (Chairman) S. Venkitaramanan (Vice Chairman) Mahesh P. Modi Corporate Governance and Stakeholders’ Interface Committee Yogendra P. Trivedi (Chairman) Mahesh P. Modi Dr. Dharam Vir Kapur Employees Stock Compensation Committee Yogendra P. Trivedi (Chairman) Mukesh D. Ambani Mahesh P. Modi Prof. Dipak C. Jain Finance Committee Mukesh D. Ambani (Chairman) Nikhil R. Meswani Hital R. Meswani Health, Safety & Environment Committee Hital R. Meswani (Chairman) Dr. Dharam Vir Kapur Hardev Singh Kohli Registered Office 3rd Floor, Maker Chambers IV 222, Nariman Point Mumbai 400 021, India Tel: +91 22 2278 5000 Fax: +91 22 2278 5111 e-mail: investor_relations@ril.com http:/www.ril.com Major Manufacturing Facilities Gandhar Complex P. O. Dahej, Bharuch - 392 130, Gujarat, India Hazira Complex Village Mora, Bhatha P.O. Surat-Hazira Road Surat 394 510, Gujarat, India Jamnagar Complex Village Meghpar / Padana Taluk Lalpur Dist. Jamnagar 361 280 Gujarat, India Nagothane Complex P. O. Petrochemicals Township, Nagothane Raigad - 402 125, Maharashtra, India Naroda Complex 103/106, Naroda Industrial Estate Naroda, Ahmedabad 382 320 Gujarat, India Patalganga Complex B-4, Industrial Area, Patalganga Off Bombay-Pune Road Near Panvel, Dist. Raigad 410 207 Maharashtra, India Vadodara Complex P. O. Petrochemicals Vadodara - 391 346, Gujarat, India Registrar & Transfer Agents Karvy Computershare Private Limited 46, Avenue 4, Street No.1 Banjara Hills Hyderabad 500 034, India Tel: +91 40 2332 0666, 2332 0711 2332 3031, 2332 3037 Fax: +91 40 2332 3058 e-mail: rilinvestor@karvy.com http:/www.karvy.com Remuneration Committee Mansingh L. Bhakta (Chairman) Yogendra P. Trivedi S. Venkitaramanan Dr. Dharam Vir Kapur Shareholders’/Investors’ Grievance Committee Mansingh L. Bhakta (Chairman) Yogendra P. Trivedi Mukesh D. Ambani Nikhil R. Meswani Hital R. Meswani Solicitors & Advocates Kanga & Co. Auditors Chaturvedi & Shah Deloittee, Haskins & Sells Rajendra & Co. Bankers ABN AMRO Bank Allahabad Bank Andhra Bank Bank of America Bank of Baroda Bank of India Bank of Maharashtra Calyon Bank Canara Bank Central Bank of India Citi Bank N.A. Corporation Bank Deutsche Bank HDFC Bank Limited Hong Kong and Sanghai Banking Corporation Limited ICICI Bank Limited IDBI Bank Limited Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab National Bank Standard Chartered Bank State Bank of Hyderabad State Bank of India State Bank of Patiala State Bank of Saurashtra Syndicate Bank UCO Bank Union Bank of India Vijaya Bank 33rd Annual General Meeting on Friday, October 12, 2007 at 11.00 a.m. at Birla Matushri Sabhagar, 19, Marine Lines, Mumbai 400 020. 6 Growth is Life Consistent growth over ten years Turnover (Rs. crore) Net Profit (Rs. crore) 120,000 92,000 64,000 36,000 8,000 118,354 89,124 73,164 50,906 56,247 45,404 9,719 10,624 23,024 15,847 8 9 - 7 9 9 1 9 9 - 8 9 9 1 0 0 - 9 9 9 1 1 0 - 0 0 0 2 2 0 - 1 0 0 2 3 0 - 2 0 0 2 4 0 - 3 0 0 2 5 0 - 4 0 0 2 6 0 - 5 0 0 2 7 0 - 6 0 0 2 13,000 9,000 5,000 1,000 11,943 7,572 9,069 4,104 5,160 2,646 3,243 1 0 - 0 0 0 2 2 0 - 1 0 0 2 3 0 - 2 0 0 2 4 0 - 3 0 0 2 5 0 - 4 0 0 2 6 0 - 5 0 0 2 7 0 - 6 0 0 2 1,653 1,704 8 9 - 7 9 9 1 9 9 - 8 9 9 1 2,403 0 0 - 9 9 9 1 Net Worth (Rs. crore) Market Capitalisation (Rs. crore) 64,000 52,800 41,600 30,400 19,200 8,000 63,967 49,804 40,403 30,327 34,453 27,812 11,983 12,369 14,765 8 9 - 7 9 9 1 9 9 - 8 9 9 1 13,983 0 0 - 9 9 9 1 1 0 - 0 0 0 2 2 0 - 1 0 0 2 3 0 - 2 0 0 2 4 0 - 3 0 0 2 5 0 - 4 0 0 2 6 0 - 5 0 0 2 7 0 - 6 0 0 2 200,000 162,000 124,000 86,000 48,000 10,000 198,905 110,958 75,132 76,079 41,989 41,191 38,603 33,346 12,176 9 9 - 8 9 9 1 0 0 - 9 9 9 1 1 0 - 0 0 0 2 2 0 - 1 0 0 2 3 0 - 2 0 0 2 4 0 - 3 0 0 2 5 0 - 4 0 0 2 6 0 - 5 0 0 2 7 0 - 6 0 0 2 16,518 8 9 - 7 9 9 1 Earnings per Share (Rs.) Book Value per Share (Rs.) 100 75 50 82.2 54.2 65.1 500 375 250 440.00 289.90 357.40 217.20 246.70 25 17.6 0 8 9 - 7 9 9 1 18.0 9 9 - 8 9 9 1 22.4 25.1 29.3 36.8 23.4 2 0 - 1 0 0 2 0 0 - 9 9 9 1 1 0 - 0 0 0 2 3 0 - 2 0 0 2 4 0 - 3 0 0 2 5 0 - 4 0 0 2 6 0 - 5 0 0 2 7 0 - 6 0 0 2 129.80 140.10 199.20 125 128.30 129.90 0 8 9 - 7 9 9 1 9 9 - 8 9 9 1 0 0 - 9 9 9 1 1 0 - 0 0 0 2 2 0 - 1 0 0 2 3 0 - 2 0 0 2 4 0 - 3 0 0 2 5 0 - 4 0 0 2 6 0 - 5 0 0 2 7 0 - 6 0 0 2 Financial Highlights RELIANCE INDUSTRIES LIMITED 7 2006-07 05-06 04-05 03-04 02-03 01-02 00-01 99-00 98-99 97-98 US$ Mn 27,227 118,354 89,124 73,164 56,247 50,096 45,404 23,024 15,847 10,624 9,719 27,337 118,832 89,807 74,614 57,385 51,097 46,186 23,407 16,534 11,232 10,055 Rs. in crore 4,722 20,525 14,982 14,261 10,983 1,108 4,815 2,747 11,943 110 1,440 1,393 60 331 320 14 3,401 9,069 100 1,393 1,393 - 3,724 7,572 75 1,045 1,393 - 9,366 2,837 4,104 50 698 8,658 2,816 3,243 47.5 663 5,562 1,565 2,646 42.5 448 4,746 1,278 2,403 40 385 3,247 5,160 52.5 733 1,396 1,396 1,054 1,053 1,053 - - 342 - - 3,318 2,887 855 667 1,704 1,653 37.5 350 933 - 35 327 932 - Turnover Total Income Earnings Before Depreciation,Interest and Tax (EBDIT) Depreciation Profit After Tax Equity Dividend % Dividend Payout * Equity Share Capital Equity Share Suspense Reserves and Surplus 14,381 62,514 48,411 39,010 33,057 28,931 26,416 13,712 12,636 11,183 10,863 Net Worth 14,715 63,967 49,804 40,403 34,453 30,327 27,812 14,765 13,983 12,369 11,983 Gross Fixed Assets 24,629 107,061 91,928 59,955 56,860 52,547 48,261 25,868 24,662 22,088 19,918 Net Fixed Assets 16,376 71,189 62,675 35,082 35,146 34,086 33,184 14,027 15,448 15,396 14,973 Total Assets 26,996 117,353 93,095 80,586 71,157 63,737 56,485 29,875 29,369 28,156 24,388 Market Capitalisation # 45,757 198,905 110,958 76,079 75,132 38,603 41,989 41,191 33,346 12,176 16,518 Number of Employees 24,696 12,540 12,113 11,358 12,915 12,864 15,083 15,912 16,640 17,375 Contribution to National Exchequer 3,530 15,344 15,950 13,972 12,903 13,210 10,470 4,277 3,719 2,893 3,021 Key Indicators Earnings Per Share - Rs.# US$ 1.89 82.2 65.1 54.2 36.8 29.3 23.4 25.1 22.4 18.0 17.6 2006-07 05-06 04-05 03-04 02-03 01-02 00-01 99-00 98-99 97-98 Turnover Per Share - Rs. # Book Value Per Share - Rs. # 18.73 814.2 639.6 525.0 402.8 358.8 325.2 218.5 150.4 113.8 104.1 10.12 440.0 357.4 289.9 246.7 217.2 199.2 140.1 129.9 129.8 128.3 Debt : Equity Ratio 0.44:1 0.44:1 0.44:1 0.46:1 0.56:1 0.60:1 0.64:1 0.72:1 0.82:1 0.86:1 0.68:1 EBDIT / Gross Turnover % Net Profit Margin % RONW % ** ROCE % ** 17.3 10.1 23.5 20.5 17.3 10.1 23.5 20.5 16.8 10.2 22.7 20.5 19.5 10.3 21.9 21.3 19.5 9.2 17.0 14.0 18.7 8.2 14.8 13.2 19.1 7.1 16.1 15.3 26.8 12.8 20.0 20.4 30.6 15.5 21.8 20.0 31.2 16.0 19.0 18.3 29.7 17.0 21.6 18.7 1US$ = Rs. 43.47 (Exchange rate as on 31.03.2007) Per share figures upto 1996-97 have been recast to adjust for 1 : 1 bonus issue in 1997-98 * Including Rs. 95 crores paid to erstwhile IPCL shareholders. ** Adjusted for CWIP and revaluation # Based on 145,36,48,601 equity shares outstanding (including 6,01,40,560 equity shares to be issued to erstwhile IPCL shareholders) 8 Growth is Life Product Flow Chart Offshore Oil & Gas Refining LPG Motor Spirit Aviation Turbine Fuel High Speed Diesel Coke Sulphur Propane Fuel Oil Natural Gas Naphtha / Natural Gas Liquid Kerosene C2C3 Polypropylene Acrylonitrile Propylene Ethylene Butene-1 Vinyl Chloride Monomer Ethylene Di-Chloride (EDC) Ethylene Oxide Poly Vinyl Chloride (PVC) Di-Ethylene Glycol (DEG) Mono-Ethylene Glycol (MEG) Tri-Ethylene Glycol (TEG) HDPE / LLDPE / LDPE Acetic Acid Paraxylene Normal Paraffin Purified Terephthalic Acid (PTA) Polyethylene Terephthalate (PET) Polyester Chips LAB Polyester Filament Yarn (PFY) Polyester Staple Fibre (PSF) Texturised / Twisted Dyed Yarn Spun Yarn Wool Viscose Silk Linen Fabrics Existing products Purchased raw materials Partly purchased raw materials RELIANCE INDUSTRIES LIMITED 9 Notice Notice is hereby given that the Thirty-third Annual General Meeting of the Members of Reliance Industries Limited will be held on Friday, October 12, 2007 at 11.00 a.m., at Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400 020, to transact the following businesses : Ordinary Business : 1. To consider and adopt the audited Balance Sheet as at March 31, 2007, the Profit and Loss Account for the year ended on that date and the Reports of the Board of Directors and Auditors thereon. 2. To appoint Directors in place of those retiring by rotation. 3. To appoint Auditors and to fix their remuneration and in this regard to consider and if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution : “RESOLVED THAT M/s. Chaturvedi & Shah, Chartered Accountants, M/s. Deloitte Haskins and Sells, Chartered Accountants, and M/s. Rajendra & Co., Chartered Accountants, be and are hereby appointed as Auditors of the Company, to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting of the Company on such remuneration as shall be fixed by the Board of Directors.” Special Business : 4. To consider and if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution : “RESOLVED THAT in accordance with the provisions of Section 257 and all other applicable provisions, if any, of the Companies Act, 1956 or any statutory modification(s) or re- enactment thereof, Dr. Raghunath Anant Mashelkar, who was appointed as an Additional Director pursuant to the provisions of Section 260 of the Companies Act, 1956 and Article 135 of the Articles of Association of the Company, be and is hereby appointed as a Director of the Company liable to retire by rotation.” 5. To consider and if thought fit, to pass, with or without modification(s), the following resolution as a Special Resolution : “RESOLVED THAT in accordance with the provisions of Sections 198, 309(4), 310 and all other applicable provisions, if any, of the Companies Act, 1956 or any statutory modification(s) or re-enactment thereof for the time being in force, and the Articles of Association of the Company and subject to applicable statutory approval(s), and in supercession of the special resolution passed by the Members at the 31st Annual General Meeting of the Company, each of the Directors of the Company, other than the Managing Director and Wholetime Directors, be paid, annually, commission of Rs. 21,00,000/- (Rupees twenty one lakh) per annum, for a period of 5 (five) years starting from the financial year ending on March 31, 2008, provided that the total commission payable to all Directors in the said category of Directors shall not exceed one percent of the net profits of the Company as computed in the manner referred to under the Companies Act, 1956 or any statutory modification(s) or re-enactment thereof for the time being in force.” By Order of the Board of Directors Vinod M. Ambani President and Company Secretary Mumbai September 10, 2007. Registered Office: 3rd Floor, Maker Chambers IV, 222, Nariman Point, Mumbai 400 021, India e-mail : investor_relations@ril.com Notes : 1. A member entitled to attend and vote at the Annual General Meeting (the Meeting) is entitled to appoint a proxy to attend and vote on a poll instead of himself and the proxy need not be a member of the Company. The instrument appointing the proxy should, however, be deposited at the Registered Office of the Company not less than forty-eight hours before the commencement of the Meeting. 2. Corporate members intending to send their authorised representatives to attend the Meeting are requested to send a certified copy of the Board Resolution authorising their representative to attend and vote on their behalf at the Meeting. 3. The Company has obtained the approval of the Registrar of Companies, Maharashtra, Mumbai under Sub Section (1) of Section 166 of the Companies Act, 1956, for extension of time for holding the Annual General Meeting of the Company. 4. In terms of Article 155 of the Articles of Association of the Company, Shri Mansingh L. Bhakta, Shri Mahesh P. Modi, Dr. Dharam Vir Kapur and Shri Hital R. Meswani, Directors, 10 Growth is Life retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment. Brief resume of these Directors, nature of their expertise in specific functional areas and names of companies in which they hold directorships and memberships/chairmanships of Board Committees, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, are provided in the Report on Corporate Governance forming part of the Annual Report. The Board of Directors of the Company commends their respective re-appointments. 5. An Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956, relating to the Special Business to be transacted at the Meeting is annexed hereto. 6. Members are requested to bring their Attendance Slip along with their copy of Annual Report to the Meeting. 7. Members who hold shares in dematerialised form are requested to write their Client ID and DP ID Numbers and those who hold shares in physical form are requested to write their Folio Number in the attendance slip for attending the Meeting. 8. In case of joint holders attending the Meeting, only such joint holder who is higher in the order of names will be entitled to vote. 9. Relevant documents referred to in the accompanying Notice are open for inspection by the members at the Registered Office of the Company on all working days, except Saturdays, between 11.00 a.m. and 1.00 p.m. upto the date of the Meeting. 10. The Register of Members and Transfer Books of the Company shall remain closed from Friday, October 5, 2007 to Friday, October 12, 2007 (both days inclusive) for the purpose of the Annual General Meeting. 11. All unclaimed dividends declared up to the financial year ended March 31, 1995 have been transferred to the General Revenue Account of the Central Government as required under the Companies Unpaid Dividend (Transfer to General Revenue Account of the Central Government) Rules, 1978 (the Rules). Members who have not so far claimed or collected their dividends declared up to the aforesaid financial year are requested to claim such dividends from the Registrar of Companies, Maharashtra, CGO Complex, 2nd Floor, “A” Wing, CBD-Belapur, Navi Mumbai - 400 614, Telephone (091) (022) 2757 6802, by making an application in Form II of the Rules. A specimen of the said Claim Form is provided in the Annual Report. 12. Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956, the Company has transferred the unpaid or unclaimed dividends for the financial years 1995- 96, 1996-97, 1997-98, 1998-99 and 1999-2000 to the Investor Education and Protection Fund (the IEPF) established by the Central Government. Dividends for the financial year ended March 31, 2001 and thereafter, which remain unpaid or unclaimed for a period of 7 years from the date they became due for payment will be transferred by the Company to IEPF. Information in respect of such unclaimed dividends and the last date for claiming the same are provided in the Shareholders’ Referencer forming part of the Annual Report. Members who have not so far encashed dividend warrant(s) for the aforesaid years are requested to seek issue of duplicate warrant(s) by writing to the Company’s Registrar and Transfer Agents, M/s. Karvy Computershare Private Limited, immediately. It may be noted that the Company had sent reminders to the Members in this regard. Members are requested to note that no claims shall lie against the Company or the IEPF in respect of any amounts which were unclaimed and unpaid for a period of seven years from the dates that they first became due for payment and no payment shall be made in respect of any such claim. 13. Members who hold shares in physical form in multiple folios in identical names or joint accounts in the same order of names are requested to send the share certificates to the Company’s Registrar and Transfer Agents, M/s. Karvy Computershare Private Limited, for consolidation into a single folio. 14. Non-Resident Indian Members are requested to inform the Company’s Registrar and Transfer Agents, M/s. Karvy Computershare Private Limited, immediately of : a) Change in their Residential status on return to India for permanent settlement. b) Particulars of their Bank Account maintained in India with complete name, branch, account type, account number and address of the Bank with Pin Code Number, if not furnished earlier. 15. Members are advised to refer to the Shareholders’ Referencer provided in the Annual Report. 16. Members are requested to fill in and send the Feedback Form provided in the Annual Report. RELIANCE INDUSTRIES LIMITED 11 EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956 The Board commends the Resolution set out at Item No. 4 of the Notice for your approval. The following explanatory statement sets out all material facts relating to the Special Business mentioned in the accompanying Notice. Item No. 4 The Board of Directors of the Company (the Board), appointed, pursuant to the provisions of Section 260 of the Companies Act, 1956 (the Act) and Article 135 of the Articles of Association of the Company, Dr. Raghunath Anant Mashelkar as an Additional Director of the Company with effect from June 9, 2007. In terms of the provisions of Section 260 of the Act, Dr. Mashelkar would hold office upto the date of this Annual General Meeting. The Company has received a notice in writing from a member along with a deposit of Rs.500/- proposing the candidature of Dr. Mashelkar for the office of Director of the Company under the provisions of Section 257 of the Act. Dr. Mashelkar, is not disqualified from being appointed as Director in terms of Section 274(1)(g) of the Act and has complied with the requirements of obtaining the Director Identification Number in terms of Section 266A of the Act. The Company has received the requisite Form ‘DD-A’ from Dr. Mashelkar, in terms of the Companies (Disqualification of Directors under Section 274(1)(g) of the Companies Act, 1956) Rules, 2003, confirming his eligibility for such appointment. Dr. Mashelkar is a Ph.D. in Chemical Engineering, an eminent scientist and has a brilliant academic record and has held several high positions in the field of Science and Technology. Dr. Mashelkar is presently the President of the Indian National Science Academy (INSA) and President of Global Research Alliance, a network of publicly funded R&D Institutes from Asia- Pacific, Europe and USA with over 60,000 scientists. Dr. Mashelkar was awarded Padmashri in 1991 and Padmabhushan in 2000, and is the only third Indian Engineer to have been elected as Fellow of Royal Society (FRS) London in the twentieth century. Keeping in view his enriched expertise and knowledge, it will be in the interest of the Company that Dr. Mashelkar is appointed as a Director, who, if appointed, shall be liable to retire by rotation in accordance with the provisions of the Articles of Association of the Company. A brief resume of Dr. Mashelkar, nature of his expertise in specific functional areas and names of companies in which he holds directorships and memberships/chairmanships of Board Committees, as stipulated under Clause 49 of Listing Agreement with the Stock Exchanges in India, are provided in Report on Corporate Governance forming part of the Annual Report. Save and except Dr. Mashelkar, none of the other Directors of the Company is, in any way, concerned or interested in the Resolution set out at Item No. 4 of the Notice. Item No. 5 The Members of the Company at the 31st Annual General Meeting approved payment of commission aggregating Rs.1,00,00,000 (Rupees one crore) to non-executive Directors, that is Directors other than managing Director and Wholetime Directors of the Company. The size of the Company has grown over the years through expansions / acquisitions both in India and abroad. The sustained growth over the years has augmented the Company’s status of being India’s only world scale, fully integrated, globally competitive energy company with operations in oil and gas exploration and production, refining and marketing, petrochemicals and textiles. The management of the Company is committed to the continuing future growth. In order to bring the remuneration of non-executive Directors commensurate with the increased time and efforts put in by them and also in line with industry trend, the Board of Directors of the Company (the “Board”) approved, subject to the approval of Members of the Company and other applicable statutory approval(s), the increase in payment of commission to Rs. 21,00,000/- (Rupees twenty one lakhs) per annum, to be paid to each non-executive Director of the Company annually for a period of 5 (five) years starting from the financial year ending on March 31, 2008. The aggregate commission payable to all such Directors at any time in the said category, shall not exceed one percent of the net profits of the Company computed in the manner referred to under the Companies Act, 1956 or any statutory modification(s) or re-enactment thereof and shall be paid in addition to the sitting fee paid to them for attending meetings of the Board and Committees thereof. All Directors other than the Managing Director and Wholetime Directors may be deemed to be concerned or interested in this Resolution. Your Directors commend the Special Resolution set out in Item No. 5 of the Notice for your approval. By Order of the Board of Directors Vinod M. Ambani President and Company Secretary Mumbai, September 10, 2007. 12 Growth is Life Management’s Discussion and Analysis Forward-looking Statements This report contains forward-looking statements, which may be identified by their use of words like ‘plans’, ‘expects’, ‘will’, ‘anticipates’, ‘believes’, ‘intends’, ‘projects’, ‘estimates’ or other words of similar meaning. All statements that address expectations or projections about the future, including but not limited to statements about the company’s strategy for growth, product development, market position, expenditures, and financial results, are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The company cannot guarantee that these assumptions and expectations are accurate or will be realised. The company’s actual results, performance or achievements could thus differ materially from those projected in any such forward-looking statements. The company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events. Overview – FY 2006-07 Value creation through integration A landmark merger of Indian Petrochemicals Corporation Limited (IPCL) with Reliance Industries Ltd. (RIL) has been completed. As per the approval from the Hon. High Courts, all assets and liabilities of IPCL have been transferred to RIL with effect from 1st April 2006. As per the scheme of merger, shareholders of IPCL will receive 1 share of RIL in lieu of every 5 shares of IPCL held by them. Accordingly, 60,140,560 equity shares of the Company are being issued to the shareholders of IPCL. Following the merger, RIL with its headquarters at Mumbai, India, has manufacturing facilities located at Patalganga, Nagothane, Nagpur and Kurkumbh in the state of Maharashtra, Naroda, Hazira, Jamnagar, Vadodara and Gandhar in the state of Gujarat, Silvassa near Gujarat, Allahabad and Barabanki in the state of U.P., Dhenkanal in the state of Orissa, Hoshiarpur in the state of Punjab. Key milestones It was a year of several achievements. Reliance Petroleum Limited (RPL), a subsidiary established a key milestone by completing its Rs. 8,100 crore (US$ 1,860 million) Initial Public Offering of equity shares. The issue received an overwhelming response and the shares are listed in India on the Bombay Stock Exchange and the National Stock Exchanges. The world’s largest polyester expansion project was also commissioned by us during the year. We brought a Polyester capacity of 550 KTA on stream at globally competitive costs in a record time of eighteen months. With this expansion, our polyester capacity has been augmented to 2 million tonnes per year. Subsequently, Reliance now have 4% of global polyester capacity and 6% of global production. Following this expansion, we have commissioned a PTA plant of 730 KTA capacity at Hazira. We continue to invest aggressively in our fiber intermediates business that will help us keep pace with expansion of fibre capacity. During the year, we expanded our polypropylene (PP) capacity by 280 KTA at Jamnagar that increased the combined capacity to 1,710 KTA. With this expansion, we now have 3.5% of global PP capacity and 3.6% of global PP production. Reliance Retail Limited is in the process of building a business that will aim at offering competitive products and services to Indian consumers across several verticals in diverse geographies through multiple formats. This will be built on an integrated platform with a world-class supply chain, logistics and information technology infrastructure across the country. Reliance Retail entered the organised retail market in India with the launch of its convenience store format under the brand name of ‘Reliance Fresh’. Since the launch of the first Reliance Fresh store in November 2006 in Hyderabad, the network had expanded to 96 stores at the end of FY 2006-07 covering locations like Jaipur, Chennai, NCR, Guntur, Vijayawada and Visakhapatnam. Record financial performance During the year, we set several benchmarks in terms of sales, profits, net worth and assets. We achieved the unique status of becoming the India’s first company in the private sector to achieve a Net Profit exceeding Rs 10,000 crore. Our Net Profit for the year was at Rs. 11,943 crore (US$ 2,747 million) with a Compounded Annual Growth Rate (CAGR) of 30% over the past five years. We made a dividend payout of Rs. 11 per share - the highest ever - amounting to Rs. 1,534 crore (US$ 353 million), including dividend distribution tax. This is the highest ever payout by any private sector company in India. The erstwhile IPCL also distributed dividend of Rs. 6 per share aggregating to Rs. 109 crore (US$ 25 million), including dividend distribution tax to its shareholders. Return on Equity is at 23.5% and Return on Capital Employed is at 20.5%. Both are significantly higher than the weighted average cost of capital. Our net gearing was at 25% and the gross debt/ equity ratio was 0.44 as at March 31, 2007. We endeavour to play a pivotal role in India’s economy and strive towards contributing to its progress and development. Our revenues are equivalent to about 2.9% of India’s GDP. We account for: (cid:1) (cid:1) (cid:1) Nearly 12% of India’s total exports About 6.5% of the Government of India’s indirect tax revenues About 5.7% of the total market capitalisation in India RELIANCE INDUSTRIES LIMITED 13 (cid:1) Weightage of 13.4% in the BSE Sensex (cid:1) Weightage of 11.7% in the Nifty Index Financial Review expansion of petrochemical capacities and setting up of petroleum retail marketing outlets. Details of the capital expenditure undertaken during the year are as follows: Rs. Crore US$ Million We delivered superior financial performance during the year with improvement in all major parameters. E&P Turnover for the year was Rs.1,18,354 crore (US$ 27,227 million) as against Rs. 89,124 crore in the previous year. Refining & Marketing Petrochemicals Net Turnover for the year was Rs. 1,11,693 crore (US$ 25,694 million) as against Rs. 81,211 crore in the previous year. Other Income was Rs. 478 crore (US$ 110 million) as against Rs. 683 crore in the previous year. This decrease was on account of decrease in interest income due to utilisation of surplus funds for investment in Reliance Petroleum Limited. Consumption of raw materials was Rs. 78,693 crore (US$ 18,103 million) as against Rs. 58,343 crore in the previous year. Employee cost was Rs. 2,094 crore (US$ 482 million) as against Rs. 978 crore in the previous year. During the year erstwhile IPCL offered Voluntary Separation Scheme for the employees of Vadodara unit at a cost of Rs. 376 crore. Operating profit before other income was Rs. 20,046 crore (US$ 4,611 million) as against Rs. 14,299 crore in the previous year. Interest expenditure was Rs. 1,189 crore (US$ 274 million) as against Rs. 877 crore in the previous year. Interest capitalised during the year was Rs. 535 crore as compared to Rs. 637 crore in the previous year. The outstanding debt as on March 31, 2007 was Rs. 27,826 crore (US$ 6,401 million) compared to Rs. 21,866 crore as on March 31, 2006. Depreciation charge for the year was Rs. 4,815 crore (US$ 1,108 million) as against Rs. 3,401 crore in the previous year. Resultant from this, the profit before tax was Rs. 14,520 crore (US$ 3,340 million) as against Rs. 10,704 crore in the previous year. Provision for taxation was Rs. 1,657 crore (US$ 381 million) as against Rs. 931 crore in the previous year, which includes Fringe Benefit Tax of Rs. 40 crore (US$ 9 million). Provision for deferred tax was Rs. 920 crore (US$ 212 million) as against Rs. 704 crore in the previous year. Profit after taxation was Rs. 11,943 crore (US$ 2,747 million) as against Rs. 9,069 crore in the previous year. Note: The figures for the current year include figures of Indian Petrochemicals Corporation Limited (IPCL) which is amalgamated with the Company (RIL) with effect from 1st April, 2006 and are therefore to that extent not comparable to those of previous year. Our consolidated net profit after including the contribution of our subsidiaries and associates was Rs. 12,075 crore (US$ 2,778 million). Capital expenditure during the year was Rs. 8,980 crore (US$ 2,066 million) primarily on account of exploration and production, implementation of value maximisation projects, 5,725 1,430 462 1,363 8,980 1,317 329 106 314 2,066 Common Total Contribution to the National Exchequer We are one of India’s largest contributors to the national exchequer primarily by way of payment of taxes and duties to various government agencies. During the year, a total of Rs. 15,344 crore (US$ 3,530 million) was paid in the form of various taxes and duties. Over the years, continued growth in production and sales volumes have sustained our payment of duties and taxes despite a decline in customs and excise duty rates. Sustained leadership in exports We maintained our leadership status as India’s largest exporter.Exports including deemed exports were at Rs. 66,627 crore (US$ 15,327 million) as against Rs. 32,691 crore in the previous year. We export products to around 100 countries including to some of the most stringent quality-driven and value-driven developed markets. This demonstrates our global competitiveness, the world- class quality of our products and superior logistical capabilities. We have achieved this significant growth in exports while maintaining our share in the domestic market. Revenues from exports now represent 56% of our turnover. Petroleum products constitute 74% and petrochemicals contribute 26% of the total exports. Resources and Liquidity As part of strategy to optimise our long-term capital structure, we have strengthened our networth through equity infusion and retention of earnings. We have issued 12 crore warrants which are exercisable into equal number of equity shares of Rs.10 each on a preferential basis to the promoters/promoter group as per the provisions of SEBI guidelines at Rs. 1,402 per share. Allotment of warrants was completed in April 2007. An amount of Rs. 1,682 crore (US$ 387 million) representing 10% of this issue has been received, in compliance with the terms of issue. Prudent financial management helped us maintain a conservative financial profile even while pursuing aggressive business growth strategies. This is reflected in our domestic and international ratings. Our long-term debt is rated ‘AAA’ from CRISIL and ‘Ind AAA’ by Fitch - the highest ratings awarded by these agencies. 14 Growth is Life Our international debt has been rated BBB (Stable Outlook) by S&P, Baa2 (Stable Outlook) by Moody’s and BBB- (Stable Outlook) by Fitch. S&P has rated us above India’s sovereign rating. Our short-term debt programme is rated P1+ by CRISIL, the highest credit rating that can be assigned in this category. Our gross debt equity ratio, including long-term and short-term debt as on March 31, 2007, is at 0.44. Our long-term debt as on March 31, 2007 stood at Rs. 19,638 crore (US$ 4,518 million). Of this, foreign currency denominated debt represents 73% with an average maturity of 6.02 years. The average maturity of our long-term debt is 5.4 years. We continued to demonstrate flexibility and innovation in debt issuance. In September 2006, we closed and funded the first ever debt issuance in the US private placement market by an Indian Company. We launched a US$ 200 million issue in the US Traditional Private Placement market which was increased to US$ 300 million owing to oversubscription. This was followed, in March 2007, by a US$ 150 million deal which was upsized to US$ 250 million. Further, we also concluded a US$ 2 billion, 10-year loan (with an average maturity of 7 years) in May 2007. This makes us the first corporate borrower from India to have accessed the ECB market for this tenor and size. As at March 31, 2007, we had cash and cash equivalent of Rs. 4,012 crore (US$ 923 million). We actively manage our short-term liquidity to generate reasonable returns by investing surplus funds while preserving the safety of capital. Business Review Oil & Gas Growing demand for oil and gas globally The Exploration and Production (E&P) industry witnessed yet another great year, driven largely by high commodity prices and robust oil and gas demand. Global demand for oil grew by 0.8% from 83.1 million barrels per day in 2005 to 83.8 million barrels per day in 2006. IPE Brent prices averaged 10% higher at US$ 65 per barrel during FY 2006-07 as against an average price of US$ 59 per barrel in FY 2005-06. Natural gas prices in Asia and Europe which are predominantly linked to crude remained volatile and Henry hub natural gas prices averaged US$ 8 / MMBTU for 2006. Experts forecast gas prices to stay above historical levels in the near future. Fossil fuels are expected to remain the predominant energy source with about 80% share of energy demand globally. Oil and gas alone is expected to account for 54% of the projected demand. Alternative fuels are expected to grow rapidly but account for less than 2% of the energy demand in the foreseeable future. Global demand for oil is expected to grow at 1.3% annually while natural gas is expected to grow at about 2% per annum. However, there are concerns regarding a concurrent growth in supply. This is primarily due to low levels of spare production capacity, declining number of large discoveries and geopolitical uncertainties. The International Energy Agency (IEA), in its world energy outlook, has estimated investment requirements of over US$ 8.2 trillion over the next two decades in order to bridge the demand- supply gap. This is substantially higher than its earlier forecast of US$ 5.3 trillion which underlines a positive demand outlook for energy. Oil and gas prices are expected to remain firm in the future reflecting a tight market situation. Impact on oil and gas companies Strong profitability and cash flows for E&P companies have spurred investments across the energy value chain globally resulting in severe supply chain pressures. However, the biggest global challenge for the E&P sector is the sharp increase in the cost of equipment and services (which have doubled in recent years) resulting in a steep increase in the cost of exploration and development. The major factors that have contributed to cost escalation are increase in costs of seismic services, drilling rigs and related services, engineering, fabrication and installation costs. Over the past five years, the E&P industry has witnessed a significant growth in capital expenditure and the same trend is expected to continue in the medium term. Sector outlook – India During the year under review, India’s net import of crude oil and petroleum products grew by over 17% to an estimated US$ 39 billion, accounting for 20% of the total imports. Despite growing fears over the impact of rising inflation, experts forecast annual GDP growth of 8-9% over the next five years, thus boosting the energy demand even further. Domestic crude oil production in India was slightly higher at 34 million tonnes and gas production stood at 1,120 BCF. India’s E&P industry has received a great impetus with the growing demand for crude oil and gas in the country and policy initiatives of the Government of India to prompt investment in E&P sector. Under the New Exploration Licensing Policy (NELP) of the Government of India, 162 exploratory blocks have been acquired by participating companies. It is heartening to note that since the onset of NELP, there have been world-class discoveries that have considerably changed the prospectivity of India’s sedimentary basins. The natural gas market in India – towards market driven pricing The natural gas market is on a high growth trajectory. Natural gas accounts for 9% of total energy mix in India as against a global average of 21%. Its growth so far was constrained by limited availability and nascent transmission and distribution infrastructure. Following the large scale discoveries in the recent past and growing imports of LNG, supplies are expected to increase considerably. Pricing regime towards integration of domestic prices with global markets will be key to investments in this sector. Currently, deregulated gas accounts for 44% of India’s gas consumption but is expected to touch 70% by the end of the decade. RELIANCE INDUSTRIES LIMITED 15 The regulatory framework too is evolving and is expected to be conducive for promoting investments in this sector of national importance. In pursuance to the PNGRB (Petroleum and Natural Gas Regulatory Board) Act, a regulatory body is proposed in order to provide the investment framework to market participants and investors. Significantly large projects are being planned by various players in creating a pan India gas grid which would improve connectivity and spur demand for natural gas. Growing availability will result to the contribution of natural gas in energy sector in India growing substantially. Reliance performance - Continuing growth and productivity We are India’s largest exploration acreage holder in the private sector and our current portfolio comprises of (i) 30% interest in Panna Mukta, Tapti (PMT) fields; (ii) 33 exploration blocks awarded by Government of India under NELP and Pre-NELP licensing rounds; (iii) exploration and production rights to 5 coal bed methane (CBM) blocks; and (iv) exploration interests in Yemen, Oman, East Timor, Colombia and Australia. Our strategy is to enhance vertical integration in the energy sector and capture value across the entire energy chain. We are therefore committed to strengthening our exploration, development and production activities in search for hydrocarbons through continued focus on people, processes and technology. Our domestic producing assets, comprising (PMT) fields had a steady performance. PMT operations benefited from favorable crude oil and gas prices although the industry service cost escalation hiked up the finding, development and operating costs. During FY 2006-07, several milestones were achieved: (cid:1) (cid:1) (cid:1) The performance of PMT fields has been satisfactory. The Panna Mukta fields produced 1,766,474 tonnes of crude and 1,662 MMSCM of natural gas, reflecting a growth of 13% and 15% respectively. The Tapti field produced 2,228 MMSCM of gas and 9% higher volumes of condensate at 126,860 tonnes during FY 2006-07. Average production in Block 9 of Yemen, in which we hold 25% interest, was at 5,500 barrels per day. (cid:1) We drilled 13 wells of which 6 were notified as discoveries. On a cumulative basis, we have drilled 51 exploratory wells thus far in our acreage in India with a success rate of 61%. These are in addition to the 3 appraisal wells drilled in the KG-D6 block to date. Ongoing efforts to upgrade our E&P prospects resulted in the acquisition of 6,158 Line Kilometers (LKM) of 2D seismic data and 7,620 LKM of 3D data during the year. Gas discoveries in Dhirubhai-1 (D1) and Dhirubhai-3 (D3) in the KG-D6 block are scheduled to start production in the second half of FY 2008-09. Based on the initial reserve estimates, we had submitted an Initial Development Plan to the Director General of Hydrocarbons (DGH) in May 2004. The Initial Development Plan envisaged a production plateau of 40 Million Standard Cubic Meters Per Day (MMSCMD). The plan was approved in November 2004. Further geo-scientific analysis and exploratory work has been done in the block to assess the overall hydrocarbon potential and the recoverable reserves in these fields. This includes acquisition of additional 3D seismic data, drilling of additional exploratory wells resulting in 13 discoveries and extensive coring of two development wells. We have also obtained an independent assessment of 2P reserves for the D1 and D3 gas discoveries at 11.3 TCF which is almost twice the earlier estimates. In view of the significantly higher hydrocarbon potential and in order to meet the projected deficit of gas supply, we filed an addendum to the Initial Development Plan in October 2006 for doubling of production capacity from 40 MMSCMD to 80 MMSCMD with an initial capital expenditure of US$ 5.2 billion. The addendum has since been approved by DGH and the Management Committee. Despite the doubling of production volume, field development of D1 and D3 gas discoveries in the block KG-D6 is progressing as per plan for delivery of first gas in the second half of FY 2008-09. This project is the first deepwater gas development project in India and upon commissioning, will be among the largest and most complex deepwater gas production systems in the world. This project will be completed in six years from the first discovery making it one of the fastest deepwater gas developments in the world. All major EPC / EPIC contracts pertaining to the project have been awarded and all long lead items have been ordered. 72% of the envisaged wells in the initial phase have been drilled. About 50% of the overall offshore milestones and 35% of the onshore facility milestones has also been completed. The highly specialised engineering and fabrication of all offshore equipment by the best-in-class solution providers is underway at over 10 locations worldwide. The installation of the equipment is targeted to commence in the later part of this year. Our commitment to propel India towards greater energy security and self-sufficiency will be reaffirmed by the gas production from KG-D6. The increased production will double the indigenous gas availability in India. The production rate of 80 MMSCMD is equivalent to 450,000 barrels of oil equivalent per day (BOEPD) which is about 25% of the current oil import in the country. This will substantially improve the balance of payment situation in the future which has been worsening on account of increasing oil imports. With regards to sale of this gas, we have made an application for the approval of a price formula to the Government of India on 18th May 2007. Prior to this application, we had followed a market price discovery process to arrive at an arm’s length price in accordance with the guidelines adopted by the Ministry of Petroleum and Natural Gas for the determination of price under the PSC. The application for price approval is pending with the Government. 16 Growth is Life Delays in receiving approval of the Government to the price formula may have an adverse implication on the progress of the project and our plans for flowing gas in the second half of FY 2008-09. We have also discovered crude oil in the MA-1 well in the cretaceous section of the deepwater KG-D6 block in the Krishna Godavari Basin. The subsequent drilling of well MA-2 has confirmed our view on the prospectivity of this field. A fast track development of KG-D6 MA cretaceous oil discovery has been planned for production in second half of FY 2008-09. The commerciality of MA oil discovery has been approved by DGH in February 2007. The development plan is expected to be submitted during the second half of FY 2007-08. We plan to continue to pursue an accelerated exploration campaign in the KG-D6 block to further unlock the upside potential in the block. In the current financial year (FY 2007-08), we made one more gas discovery in KG-D6 block well “R1”. With this, our discoveries touch 18 in all in the KG-D6 block out of 21 exploration wells have been drilled. R1 was drilled at a water depth of 2,010 meters to a total depth of 4,860 meters, which is the deepest location drilled in this block. The well encountered 2 gas bearing zones and the data obtained from logging and Modular Dynamic Testing (MDT) confirmed the presence of hydrocarbons in the Mio-Pliocene intervals. The discovery, named Dhirubhai-34, has been notified to the DGH and it opens up new areas in the deep stratigraphic levels in the block and demonstrates upside potential. During FY 2006-07, we made another discovery in NEC-25 which was the seventh in the block. The well lies in the Mahanadi Basin approximately 12 kilometers north-west of the earlier natural gas discovery. Based on the evidence of data obtained from logging and MDT, the presence of hydrocarbons is confirmed. This well named Dhirubhai-32 has been notified to the DGH and the concerned authorities. In an effort to expedite the process, the development plan for the first 6 discoveries has been submitted to DGH for approval with the gas production targeted for the year 2012. We are in the process of consolidating our leadership position in deepwater exploration off the East Coast of India. During the year, we were awarded seven deepwater blocks with a combined acreage of 76,050 sq. km under NELP-VI. Of these seven blocks, two are in the Krishna-Godavari basin and the rest are in Mahanadi basin. With this, our total domestic acreage is about 337,000 sq. km. with about 86% of it in deep water. With the objective to rationalise our portfolio, we have relinquished five blocks during FY 2006-07 and more recently one block in the Kerala-Konkan basin which were assessed to be low on prospectivity. Our venture into exploration and production of CBM is the first of its kind in India and is expected to be commercially operational by 2010. The development plans for the Sohagpur East and West blocks have been submitted to the DGH for approval. Recent off-shore discoveries in the east and west coasts of India A significant discovery was also made in the west coast in block GS-01. This shallow water block was awarded to the consortium of RIL (90%) and Hardy Exploration (10%) under the NELP-II round. The GS-01 “B1” well was drilled at a water depth of 78 meters to a total depth of 2,282 meters. Hydrocarbon presence was confirmed in the mid-Miocene carbonate reservoir. Drill Stem Testing resulted in a flow of 18.6 MMSCFD of gas and 415 barrels of condensate per day. This was our first discovery in the west coast carbonate reservoir area and was named Dhirubhai-33. The DGH was notified accordingly. Recently, we announced the success of our very first well in the Cauvery deep-water basin in the east coast of India. This is the first time a hydrocarbon discovery has been made in the Cauvery deep-water basin. The deep-water block CY-DWN-2001/2 (CY- III-D5) located in the Cauvery Basin, with an area of 14,325 square kilometers, was awarded to us under the NELP-III. We hold a 100% interest in this block. The success of the well CY-III- D5-A1 in the block marks the beginning of a new vista of exploration in this basin. This well was located in a water depth of 1,185 meters and was drilled to a target depth of 4,081 meters and terminated in the crystalline basement. The presence of oil and gas with condensate has been confirmed by several tests including MDT and Drill-Stem Testing (DST). This discovery, named Dhirubhai-35, has been notified to the DGH. International operations During FY 2006-07, we further expanded our footprint in the global E&P arena. We were awarded two onshore blocks in Yemen and a deepwater block in Oman adding up to a combined acreage of 38,078 sq. kms. More recently, in FY 2007-08, we were awarded the block W06-5 covering an area of approximately 5,760 sq. kms. in the Bonaparte basin in Australia. We are working on the finalisation of production sharing contracts for the newly awarded blocks and are making satisfactory progress. Our consortium is implementing an initial programme of drilling in Yemen’s Block-9 which is scheduled for completion by the end of 2007. The production in Yemen averaged at 5,500 barrels per day. We have consolidated our operations by transferring the international exploration portfolio into a wholly owned subsidiary, Reliance Exploration and Production (REP) DMCC, incorporated in Dubai. Improved productivity from PMT Impressive progress was made on implementation of growth initiatives at the PMT fields. The expanded plan of development (EPOD) for Panna - Mukta fields comprising of the installation of 2 wellhead platforms and drilling of 6 wells is nearing completion. Of this, 4 wells are already operational and work on the remaining wells is progressing as per plan. Efforts are on to increase production by drilling additional 15 wells over the next two years. RELIANCE INDUSTRIES LIMITED 17 Meanwhile, the new revised plan of development (NRPOD) for the Tapti block is also progressing and is on track for completion during the second half of FY 2007-08. On successful completion, NRPOD is expected to produce 5.7 MMSCMD of gas and about 1,600 BOPD of condensate. demand from Non-OECD countries grew by 1.2 million BPD driven mainly by China and the Middle East, the actual demand from OECD nations shrank on the back of benign weather conditions and substitution of fuel oil by natural gas for power generation during the year. An ongoing focus on exploration and development We have charted an aggressive exploratory program for 2007-08 to explore the current acreage. Drilling has been planned in 10 blocks coupled with extensive seismic studies covering all major basins. Considering the sustained pressure in the supply chain, we are working on prudent long term contracting strategies for equipment and services that will help us hedge against project risks. We are currently operating a fleet of three rigs and have contracted an additional five rigs for the next three to four years to support our expansive exploration and development operations. Within a short span of six years as an E&P operator, we have discovered hydrocarbons in the four major offshore basins of India namely Krishna Godavari, Mahanadi, Saurashtra and Cauvery basin, with major commercial finds in deep waters. These discoveries have established us as a pioneer in the challenging deep-water exploration in India. The development of the Dhirubhai-1 and Dhirubhai-3 gas fields along with the MA field are targeted for the second half of FY 2008-09 and will most likely be followed by the development of the CBM gas field in 2010 and the NEC-25 gas field in 2012. Exploration and Production of Oil and Gas is well poised to be a significant contributor to our revenues and profitability in the near future. Refining and Marketing Global industry overview and prospects Inspite of high and volatile crude prices, the global demand trends remained positive. Stringent product specifications added more pressure on an already stretched refining system accompanied by a slow growth in new capacities. Complex refiners gained more from the high differential between light crude oil and heavy crude oil, and by strong distillate product margins relative to fuel oil. Positive demand dynamics Robust global economic growth reinforced the strong demand for petroleum products inspite of higher prices. The global economy grew by a significant 5.4% in 2006 despite concerns about tighter financial market conditions, high oil prices and inflation. The Asian region has been a key contributor to the positive growth trend. It grew by 8.9% with China and India leading the pack with impressive 11.1% and 9.4% growth in their respective economies. An impressive growth in the Middle East and CIS countries also contributed positively. The global demand for petroleum products grew steadily from 83.7 million BPD to 84.5 million BPD in 2006. While the The International Energy Agency (IEA), assuming a positive economic outlook, expects to see continued strong growth in global demand for petroleum products and forecasts it to grow by 1.8% to 86 million BPD in 2007. This growth will be driven mainly by China, India and the Middle East. The demand for petroleum products over a medium term is expected to record a 2% CAGR during 2006-2010 period, as per projections of the World Refining and Fuel Services, Hart in 2007. The gradual shift in demand in favour of lighter transportation fuels continued. The aggregate demand for gasoline, middle distillate and Jet Kero grew by 2.2% as against an average demand growth of only 1.5% for heavier products during the calendar year 2006. Expecting the shift in the demand patterns to continue, industry experts are forecasting light refined products (excluding LPG) to account for about 80% of the incremental global demand for petroleum products over the next 5 years. Growth is expected to come from gasoline, middle distillate and Jet Kero which are expected to record a CAGR of 2%, 2.4% and 2.8% respectively during 2006-2010 period. Residual fuel oil is expected to grow by a marginal 0.1% per annum during this period. Meanwhile, product specifications are now more stringent for the industry in several regions. The US rolled out Ultra Low Sulfur Diesel (ULSD) with the objective of reducing sulfur in diesel to 15 ppm and also phased out MTBE in gasoline during the year. These factors present new trade opportunities for global complex refiners, like our upcoming refinery project with ultra clean product capabilities. Refinery capacity and utilisation trends During 2006, the global refining capacity grew from 85.9 million BPD to 87.2 million BPD on the back of capacity creep by select players. The average capacity utilisation for refineries in North America, Europe and Asia touched 85%, 84% and 87% respectively. IEA estimates incremental global crude distillation capacity requirement of about 10.2 million BPD towards meeting the estimated global demand by 2011. Though several large capacity announcements have taken place in the recent years, their progress so far has been quite slow on account of the rising capital costs and shortage of skilled manpower. In an already stretched refining environment, this raises concerns on the ability of complex refiners especially to meet the incremental demand growth and improved prospects for refining margins. GRM performance Refining margins experienced volatility all over the world. Though the regional benchmarks averaged lower than their respective peaks in 2006, complex margins achieved a new high of US$ 13.6 per barrel during the first half, supported by tightened product markets, booming light product cracks and 18 Growth is Life unplanned maintenance by large refiners. However, the simple margins dropped on the back of improved utilisation, lower turnaround rate and fuel switching in China and US. Refinery cracking margins (US$ / bbl) Region 2005 2006 US Gulf Coast Rotterdam Mediterranean Singapore (Source: Reuters) 9.5 6.7 5.6 6.5 8.4 4.8 5.4 5.9 The crack spreads (differential of product to Dubai crude oil) remained healthy during the year under review. The crack spread for gasoline in Singapore averaged at US$ 11.7 per barrel in 2006 as against US$ 12.6 per barrel in 2005 while that of gas oil was at US$ 15.2 and US$ 14.7 per barrel respectively during this period. Fuel oil crack margins averaged at US$ (-)12.6 per barrel against US$ (-)8.7 per barrel in 2005, leading to lower margins for simple refiners. The medium term outlook for refining margins appear positive when viewed in context of the robust growth in demand, stretched utilisation levels and lagging new capacities. Also supportive of the margins is the expectation that the refinery capacity bottleneck is unlikely to ease prior to 2011 due to delays in completion of some major refinery projects. Changes in product specifications are also leading to lower yields of clean products as refineries are being reconfigured to meet these specifications. Complex refiners would gain further from (i) higher premiums for ultra clean products in the western markets arising from tightening product specifications and (ii) changing crude dynamics resulting in wider-than historical light-heavy differentials. Crude price movements and outlook During the year, crude prices remained volatile and touched a new high. WTI peaked at US$ 76.95 per barrel in August 2006. The spurt in crude prices was due to a combination of geopolitical events and unplanned outages of some of the oil production fields. Crude Oil Prices (US$ / bbl) 2005 2006 High Low Average High Low Average WTI Brent 69.91 42.17 56.47 76.95 55.86 66.02 67.33 38.21 54.47 78.69 55.89 65.14 Dubai 59.18 34.05 49.36 72.29 54.48 61.52 (Source: Platts) According to ESAI estimates, crude oil prices are expected to remain within the US$ 50 - 60 per barrel range in the foreseeable future. Tight global balances, geopolitical factors and unplanned supply side shock are some of the factors that are supporting high oil prices both on a current basis and for the forward period. That the price structure does not show a steep backwardation is indicative of the fact that these concerns are not transient concerns affecting today’s price alone, but are factors that will keep prices high in the forward period also. Petroleum products demand in India Aggregate Indian refining capacity increased from 132 million tonnes in FY 2005-06 to 149 million tonnes in FY 2006-07. During the year, the domestic demand for petroleum products increased by 4.6% to 111.7 million tonnes. Consumption of HSD (High Speed Diesel) which accounts for more than a third of the total consumption of petroleum products, registered a growth of 6.9% while LPG (Liquefied Petroleum Gas) demand grew by 5.1%. During the year, the demand for MS (Motor Spirit) grew by 7.5% and ATF (Aviation Turbine Fuel) consumption grew by 21.5%. During the same period, sales of Naphtha reduced by 5.6% while sale of Kerosene increased marginally by 0.1%. Reliance performance – high operating rate Our Jamnagar refinery has a capacity of 33 million tonnes per annum. It is the first refinery established by the private sector in India and is the third largest refinery at a single location in the world. During FY 2006-07, the refinery processed 31.7 million tonnes of crude at an average utilisation of 96%, which compares favorably with operating rates for refineries globally. The utilisation rate could have been higher but for the partial planned shut down in May 2006 as well as the temporary stoppage of a part of its facilities due to a fire in October 2006. For the year under review, the average gross refining margin stood at US$ 11.7 / bbl, reflecting a premium of US$ 5.6/bbl over the Singapore Complex Margins. We have consistently out-performed the benchmark which reflects the advantages we have of higher complexity and the capability to process heavier/sour crudes and produce superior product quality and mix. Our petroleum products production details are as follows: Gases & Distillates Fuel Oil & Solids Total Production Production KT FY 2005-06 FY 2006-07 25,783 4,074 29,857 28,001 4,726 32,727 Our domestic marketing efforts were adversely impacted on account of under recoveries and uneven level playing field for private players during the year. Our efforts to correct the pricing strategy to reduce under recoveries led to a drop in our domestic market share from 13% at the beginning of the year to less than 2% by September 2006. While a moderation in international crude prices and subsequent revisions in domestic prices helped RELIANCE INDUSTRIES LIMITED 19 regain part of the market share, it was still at around 6.3% at the end of FY 2006-07. The global ethylene capacity in 2006 increased at 4.4% whereas the demand grew by a healthy 5.6%. 122 120 118 116 114 6 1 1 5 0 0 2 S U a v o N The conditions in the domestic market have forced us to focus on the export markets. The aggregate export volumes of refined products grew by over 63% to 17.7 million tonnes from 10.8 million tonnes in the previous year. Exports thus accounted for 57% of the aggregate refinery product volumes and registered export revenues of US$ 11.3 billion, reflecting a growth of 92% as compared to that of the previous year. We plan to further focus on the export markets and towards this objective, we have secured the necessary approvals for the conversion of our Jamnagar complex as an Export Oriented Unit (EOU) with effect from 16th April 2007. The LPG requirement of PSUs for domestic market continues to be met from the refinery. Continued customer preference and expanding retail network By the end of the year, we had 1,385 retail outlets operational across the country, representing a network share of about 4%. We added 167 retail outlets during the year. This is a significant slowdown in the pace of retail network expansion as compared to the previous years and is primarily due to the challenges of under recoveries, current volatility in the international oil market environment and uneven level playing field for private players. We have made a representation to the Government of India to ensure a level playing field for private oil marketing companies. The second half of FY 2006-07 marked our entry in the high growth aviation fuel segment. While the third quarter witnessed the commissioning of our first Aviation Fuelling Station (AFS) at Bhubaneshwar, the last quarter of FY 2006-07 witnessed the expansion of the facilities to four additional airports. We are working towards setting up 12 additional AFSs during the current fiscal. Petrochemicals Global ethylene scenario The global petrochemical industry has experienced a paradigm shift. Middle East is fast emerging as a production hub based on cheap feedstock whereas Asia is growing as a consumption hub given the buoyant demand particularly from China and India. No major investments have been made in the developed economies while there has been an investment boom in Asia and the Middle East. Current status: Petrochemicals No major Investments in developed economics Petchem capacities & markets shifting to ME and Asia Finished product manufacturing shifting to Asia Shift in Petrochemical Industry Investments boom in ME and Asia ME Feedstock advantage China Backward integrating from polymer processing to polymer production PEs 59% Middle East as production hub and Asia as consumption hub for Petrochemicals Source: CMAI 2007 During 2006, five new crackers were brought on stream with one each in Brazil and the Middle East and three in China. In addition, six crackers have undergone major de-bottlenecking/ expansions. The overall ethylene capacity addition was 5.1 million tonnes. The region-wise/ company-wise capacity expansions in 2006 are represented in the following graph. Global Ethylene Capacity Addition : 2005 to 2006 Million Tonnes 1 2 1 o c i x e M x e m e P l i z a r B o i R a i r t s u A V M O d n a l o P N K P * n a r I * * i d u a S f A S l o s a S * * * a n i h C s r e h t O 6 0 0 2 a e r o K C C N Y * : Amir / Marun ** : JUPC / Kemya / Yanpet *** : CNOOC / Jilin / Lanzhou / Maoming / Dai Quing Source : CMAI 2007 Operating rates are the prime indicators of ethylene chain profitability. Historically, the ethylene chain profitability was seen to increase dramatically with cracker operating rates above 92-93%. With major delays anticipated in most of the Iranian projects, the capacity additions are expected to remain inadequate to significantly bring down cracker operating rates till 2008. Hence, the recovery in ethylene profitability witnessed since 2004 is expected to extend into 2008. Global ethylene markets Global Ethylene Demand by End Use - 2006 Other 5% Alpha Olefins 3% Ethyl- Benzene 7% EDC 12% Ethylene Oxide 14% 20 Growth is Life Ethylene demand is primarily driven by polyethylene and MEG. The growth drivers for polyethylene (in turn, for ethylene) are the adoption of advanced technology (micro-irrigation) in agriculture/horticultural products/plasti-culture/post-harvest management, packaging and distribution of horticultural products through modern retail chains, growing disposable incomes and consumerism, the boom in auto/transportation/retail and packaging sectors. The growth driver for MEG (in turn for ethylene) is the buoyancy in the Polyester industry in the Asian region and PET industry worldwide. A strong global economy supported by robust growth in two of the largest economies, China and India, will also help to swiftly absorb the additional products coming out of these new capacities in the Middle East and Asia. IMF predicts the global GDP to maintain a healthy growth of 5.1% during 2007 as well as through 2008. A major impetus to this growth will come from the Asian region with China and India being the main contributors. This will support a healthy demand growth for petrochemical products. We are poised to benefit from this healthy growth and have announced a world-scale and highly competitive Olefins Complex to be integrated with our Jamnagar refineries. High price environment Driven by healthy demand and supported by high oil prices during FY 2006-07, Asian olefin prices reached an all-time high. The run- up has been extremely steep in 2006. Globally, about 5.5 percent of the Ethylene capacity was offline - 3.2% due to planned shutdowns and 2.3% due to unplanned shutdowns across all regions. During the first half of FY 2006-07, petrochemical prices reached new peaks largely driven by geopolitical issues in the Middle East, Iran’s nuclear activities and issues in Nigeria. Feedstock prices however, eased in the second half of FY 2006-07 proving that the above issues have more psychological effect than physical impact. Prices reached historical peaks due to 3 key reasons : (cid:1) (cid:1) (cid:1) 70 60 50 40 30 20 10 0 Supply Chain Constraints - Planned / unplanned outages, Natural Calamities, Other events such as riots / strikes. Cost Push - Due to high prices of Crude Oil / Naphtha Demand Pull - Economic Recovery across all regions. Price Movements : Crude / Naphtha / HDPE / PP $/bbl Multiple Supply Problems Surge China Resumes Purchases Cost Push / Demand Pull $/Mt 1600 End of supply problem China Situation China Reduces Purchases Asian Crisis Lack of new capacity 9/11 Asian Recovery Crude $/bbl (Dubai) Naphtha $/bbl (MOPS) HDPE $/Mt (SEA) PP $/Mt (SEA) 1400 1200 1000 800 600 400 200 0 3 Q 1 Q 4 9 9 1 1 Q 5 9 9 1 3 Q 1 Q 6 9 9 1 3 Q 1 Q 7 9 9 1 3 Q 3 Q 1 Q 8 9 9 1 1 Q 9 9 9 1 3 Q 3 Q 1 Q 0 0 0 2 3 Q 1 Q 1 0 0 2 1 Q 2 0 0 2 3 Q 1 Q 3 0 0 2 3 Q 1 Q 4 0 0 2 3 Q 3 Q 1 Q 5 0 0 2 1 Q 6 0 0 2 3 Q 1 Q 7 0 0 2 Source : Platts Ethylene Margins : Ethylene (C2) less Naphtha Delta Ethylene (SEA) Naphtha (MOPS) C2-Naphtha 1400 $/Mt 1200 1000 800 600 400 200 0 1 Q 4 9 9 1 3 Q 1 Q 5 9 9 1 3 Q 1 Q 6 9 9 1 3 Q 1 Q 7 9 9 1 3 Q 1 Q 8 9 9 1 3 Q 3 Q 3 Q 1 Q 9 9 9 1 1 Q 0 0 0 2 1 Q 1 0 0 2 3 Q 1 Q 2 0 0 2 3 Q 1 Q 3 0 0 2 3 Q 3 Q 1 Q 4 0 0 2 3 Q 1 Q 5 0 0 2 1 Q 6 0 0 2 3 Q 1 Q 7 0 0 2 Source : Platts New capacity creation North America is currently the leader in the global ethylene capacity followed by North East Asia and West Europe. The global ethylene capacity is expected to increase from the current 121 million tonnes to 156 million tonnes by 2011, an addition of 35 million tonnes over the next five years with the Middle East accounting for over 50% of the new capacity additions. The Middle East capacity with low feedstock cost is leveraging its competitive advantage and is estimated to more than double from 13 million tonnes to over 31 million tonnes by end of 2011. With this, the Middle East ethylene capacity share in the global market is estimated to increase from 11% to 20% by 2011. However, past experience suggests that the new capacities announced particularly in the Middle East and China may be susceptible to delays. Moreover, the bunching of many new crackers during this period is already posing contracting / construction resource crunches. Most of the crackers planned in Iran, a significant component of the Middle East capacity plans, have been affected due to the above reasons. Simultaneous demand from the refinery, liquefied natural gas and chemical industries is causing a crunch on engineering and construction companies for resources like manpower, materials, fabricated equipment shop time and in process equipment and instruments. Critical equipment required to build an ethylene plant is in short supply. Equipment needs overlap with those from LNG projects in areas such as low temperature equipment, compressors/ turbines and cryogenic storage vessels. All of these factors lead to an escalation in the cost and/or project delays. Increase in steel and labour costs resulted in overall project cost escalation and cracker complexes today are 1.5 to 2.0 times more expensive than in early 2000. With the current boom in the petrochemical industry, the engineering, procurement and contracting industry is operating at capacity with order books full for next few years. We thus expect significant delays in the implementation of many of these projects resulting in a slower growth in capacity additions and higher operating rates. RELIANCE INDUSTRIES LIMITED 21 Polymers (PP, PE, PVC) Global polymer market scenario Polymer Industry in India : FY 06-07 Total Polymers 4640 Kts LDPE 5% 260 Kts LLDPE 14% 650 Kts HDPE 21% 990 Kts 13% 29% # indicate demand in million tonne % indicate % share Source : CMAI 2007 Globally demand for all polymers reached 175 million tonnes of which PE, PP and PVC accounted for 142 million tonnes showing a healthy growth of 5.9%. The growth was mainly driven by LLDPE (7%), HDPE(6.1%) and PP(6.4%). Asia, Africa and other developing regions had been the primary contributors to this growth. Capacity / Demand Growth 2006 / 2007 : Polyolefin + PVC Capacity Growth Demand Growth 19% 11% 8% 10% 10% 8% 7% 7% 6% 5% 20% 16% 12% 8% 4% 0% World Asia MEast China India The global production capacity of PE, PP and PVC touched 162 million tonnes with growth of 5.2%. Globally, 8 million tonnes of capacity was added during 2006 of which 6 million tonnes was Polyolefins and 2 million tonnes of PVC. The major capacity additions were in China and in the Middle East. Indian market scenario Consumption of these three major polymers in India reached 4.6 million tonnes registering a y-o-y growth of 10% during FY 2006- 07. PP and LLDPE registered a healthy growth of 15%. LDPE consumption grew at 8% whereas HDPE grew at 9% and PVC witnessed a modest growth of 7%. PP 34% 1,530 Kts Reliance performance PVC 26% 1,220 Kts We maintained our domestic leadership position with a market share at 57% in FY 2006-07. On a y-o-y basis, our aggregate production grew by 9.5% mainly on account of the new 280 KTA PP Line-D commissioned at Jamnagar complex in April 2006. Polymer Production in KT Product 2005-06 2006-07 PP PVC PE Total 1285 619 1031 2935 1642 562 1011 3215 Polypropylene business The global PP demand in 2006 exceeded 42 million tonnes registering a growth of 6.4%. Operating rates were in excess of 92% supporting healthy margins. International prices (SEA) increased by 17% on y-o-y basis and the domestic PP demand registered a 15% growth. We are the seventh largest producer of PP in terms of global rank. The commissioning of 280 KTA (Line D at Jamnagar) had a significant impact on the overall production. In keeping with a continuing growth strategy, we have moved apace to make the most of the existing global opportunity. We have identified and developed new applications, carried out import substitution by introduction of new grades and constantly replaced conventional material to increase consumption in the domestic market. We have also successfully exported products in the newer niche markets realising better margins. The PP growth in the domestic market during FY 2006-07 was driven by a demand from the cement, automobile and household sectors which are growing at a healthy rate of over 15%. During FY 2006-07, we introduced two new grades for the flexible packaging sector (suitable for high speed BOPP production lines) and for the lifestyle sector (non-woven). Both these grades 22 Growth is Life received international processing approvals. Our products were also successfully tried in the high-speed non-woven production lines of global equipment suppliers. This opens up a new sector with very high growth potential for our PP business. In view of the balanced demand-supply outlook for FY 2007-08, prices are expected to remain firm during the coming year. The currently available propylene from all our sites will be fully augmented to enhance production and supply larger quantities of niche grades into the domestic and international markets. With the retail boom, we will be able to aggressively promote the use of high-clarity household containers, collapsible crates, plastic trolleys, pallets, and also packaging of processed foods, edible oil, milk etc. This will not only increase the demand but will also help shift our focus to the production and supply of specialty grades thereby improving our margins. Polyethylene business Polyethylene continues to be the largest consumed commodity plastic. Global consumption reached 66 million tonnes in 2006 registering a growth of 5.8%. The operating rates were healthy at 86% as against historical averages of 80%. The prices of High- density Polyethylene (HDPE) registered a 21% y-o-y growth, Linear Low-density Polyethylene (LLDPE) 19% whereas Low- density Polyethylene (LDPE) prices increased by 18% globally. Despite high price environment, the demand for HDPE increased by 9% and LDPE by 8% due to the robust growth in the flexible packaging sector. In order to improve margins, we pursued all opportunities in the global as well as local markets. In the domestic markets, meticulous planning and execution across critical areas of pricing, supply and distribution, and customer support has resulted in significant growth in LLDPE sales. Exploring the opportunities in the international market, we have significantly stepped up our exports of HDPE. The packaging sector – supported by the retail boom - is expected to be the key driver of growth for the polyethylene business. The other major trigger for growth will be the large requirement of plastic pipes for city gas distribution and water transportation where high density PE pipes are used. In case of linear low and low density PEs, the packaging sector is set to grow at an explosive pace as the demand from retail sector increases. The end-use sectors that will drive this demand include packaging of fresh and processed foods, edible oil, and other consumer products. Poly Vinyl Chloride business The global demand of Poly Vinyl Chloride (PVC) in 2006 was at 33.5 million tonnes, an increase of just over 5% over the previous year. The growth mainly came from a growing demand for PVC products in the underdeveloped countries from the housing, construction and infrastructure development projects. Globally, PVC pipes are predicted to remain the largest end use for PVC in 2007 with an estimated demand of 13.2 million tonnes or about 39% of the total PVC demand. PVC profiles and tubes constitute the second largest application for PVC resin with 13.5% share. The demand for PVC in India experienced a 7% y-o-y growth. The infrastructure sector remains the major growth driver for the PVC business. Even though the Government spend on infrastructure is increasing, the domestic PVC demand growth remained moderate on account of higher prices. Pipes and fittings account for 70% of the total PVC consumption in India. With increasing emphasis on infrastructure, housing, water supply, health, hygiene and micro irrigation projects, PVC consumption is likely to show robust growth in FY 2007-08. Capacity expansions and trade balance in China in the foreseeable future may result in margins remaining under pressure in PVC business internationally. Polyester (PFY, PSF, PET) Global Polyester market The year 2006-07 was a challenging one for the polyester industry. Rising crude oil prices impacted an increase in the cost of raw materials while a bumper cotton crop accompanied by subsidised cotton prices exerted pressure on polyester margins. Stand-alone polyester producers across the world were affected substantially during the year. Capturing maximum value addition We, being fully integrated polyester producers making our own Paraxylene (PX), Purified Terephthalic Acid (PTA) and Mono- Ethylene Glycol (MEG) from crude oil, were best positioned to face the market uncertainties of the year. The integrated margin of the polyester value chain from naphtha in the second quarter of 2006-07 was the highest in nearly a decade. We have chosen to produce across the entire value chain from PX to polyester to capture maximum value addition and to reap savings in packing, logistics and inventory costs. We are now poised to benefit yet again with the start of a new cycle with a higher base of polyester capacity. Polyester profitability has bottomed out in 2006 and integrated polyester margins (from PX to polyester) are most likely expected to expand through 2008. The following facts reinforce our view on the chain margins. (cid:1) (cid:1) (cid:1) Demand growth to outpace capacity growth: Asian annual polyester capacity additions are likely to slow from 23% in 2003 to 6% in 2007 and 2008 while the demand is expected to remain healthy at 10%. Underestimation of the Chinese domestic demand: Rising income levels and industrialisation of hitherto poor regions in Western China have increased domestic demand for textiles. The textile industry in China is also expected to focus on the domestic market and the domestic textile consumption share is expected to jump from 65% in 2005 to 73% in 2008. Feedstock constraints: Limited PX capacity addition will tighten the overall polyester demand which bodes well for the overall integrated polyester margins. RELIANCE INDUSTRIES LIMITED 23 In addition, there are four major catalysts emerging which could drive polyester chain margins up: (cid:1) (cid:1) (cid:1) (cid:1) Relatively low inventory across the chain may lead to restocking. 2008 Beijing Olympics to drive additional demand in China. Removal of residual quotas in 2008 on China by the EU could also boost the demand. Slowdown in new capacity additions in China. Demand outlook The demand in Asia is estimated to grow by 2.4 million tonnes or by 6% in 2007 and 2008 while capacity will increase by only 1.7 million tonnes. The ability of polyester producers across Asia to successfully pass through higher costs in 2006 gives an early indication of the emerging strength of the sector. The slow-down in the new polyester capacity expansions accompanied by increase in the demand is expected to improve the capacity utilisation in polyester operations. The industry is at an early stage of a multi-year up-cycle. Key reasons for an expected turnaround: (cid:1) Shift to net incremental demand over supply between 2000 and 2005: Polyester production has undergone a shift in geographies since 1980. It moved from the west to Japan first and later to Taiwan and Korea. Today, the world’s top ten producers barring some exceptions are either in China or India. We top the world list as the largest polyester fiber and yarn manufacturer. Since growth in both the demand and the consumption will occur principally in Asia, it is a given that most of the fiber and yarn required will be produced in Asia. China and India are clearly destined to be the polyester hubs of the world. A combination of relatively high profitability, readily available capital and the emergence of homegrown technology led to an investment boom that saw peak capacity addition in 2003-05. Over those three years, almost 12 million tonnes of effective polyester capacity was added in Asia, mainly in China, while polyester production grew to around 7 million tonnes during the period. Along with this increased capacity came a lot of new polyester players right from downstream textile producers who were back- integrating to traders. The older players in China faced a margin squeeze as newer players with larger scale and more efficient processes came on-stream. In addition, polyester assets in Korea, Taiwan and Indonesia had production costs that were US$ 40-70/tonne higher than the new players in China. Currently, polyester capacities in these high-cost economies are being shut down. The polyester majors in Korea and Taiwan are closing down non-viable high- cost production units. Both these countries have witnessed more than a million tonne of capacity shut down from 2003 to 2007. During the same period, polyester production has reduced by around 1.8 million tonnes in these countries suggesting further capacity closures. Such closures are expected to improve margins of existing polyester companies. Even the more efficient producers found it difficult to justify new investment that led to low margins during these years. (cid:1) Lack of investment on unattractive returns: Only one new polyester player is expected to enter in 2007 compared to an average of nine in the previous expansion peak in China during 2003-2005. Lack of new investments would slow down new capacity additions leading to improvement in polyester margins. (cid:1) Obsolete batch capacities: A fact to be noted is that during the last period of high profitability, 3 to 4 million tonnes of batch capacities were built. These units are smaller and operate more opportunistically. More than 10 million tonnes of polyester capacity are perceived to be of batch and small polymerisation capacity globally. These capacities are outdated and uneconomical in the current competitive environment. These capacities will be phased out over a period of time while a small percentage may opt for production of high value-added, specialty products for survival. (cid:1) Feedstock constraints: Bottlenecks have not just been at the PX level but are also at the refining level. The majority of the new refining capacity is from Asia mainly the Middle East, China and India. These capacity constraints will mean that the PX from the refineries will continue to compete with gasoline production. This trend is expected to continue until 2009 given that the new global PX capacity is growing at only around 2 million tonnes per year. Globally, the PX capacity has been able to run at slightly below 90% even during the tight years. This is due to the fact that the PX capacity is impacted by any mechanical breakdown at the refinery or scheduled maintenance which may last for a few weeks. From an Asian perspective, the region has been a net importer of PX since 2002 and will continue to do so in the foreseeable future. To sum up, the limitation in PX production may prove to be negating any overcapacity in both PTA and polyester. Cotton prices are expected to remain firm in the year ahead with limited growth in crop production thereby leading to a higher cotton-price environment. This typically has a positive impact on the polyester business both from a demand perspective (higher polyester blending) and pricing perspective. With the challenge of the polyester overcapacity expectedly behind us, the demand growth globally is robust and is driving the per capita consumption of all fibers. The per capita consumption of all fibers is expected to cross 11.2 kgs. by 2010 from the current level of 10 kgs. During the same period, the polyester per capita consumption is expected to increase to 5.4 kgs from 3.8 kgs. 24 Growth is Life Indian market scenario Reliance performance – commissioned new PTA capacity Textile exports from India to the developed countries have increased in the post quota regime. A rise in the domestic textile consumption with the aid of a high GDP growth and changing lifestyle patterns is helping the consumption of polyester. The emergence of retail boom is boosting the demand for innovative products from the end consumers who have not experienced such products earlier. We are the world’s 4th largest producer of PX and PTA. We are also the world’s 6th largest producer of MEG. In the Indian context, we continue to dominate the local market share with over 70% in all the products. We have the unique advantage of total integration right from refining to textiles and enjoy a high value addition benefit with our world-scale plant across the entire value chain. Reliance performance – growth in production Using the above factors as indicators, it is evident that the margins of the integrated polyester manufacturers are expected to improve in the coming years. We are well placed with our global polyester capacity of 2 million tonnes in this business environment. The domestic demand for polyester increased from 1.8 million tonnes to 2 million tonnes this year registering a growth of 10%. We continue to lead the market with an overall 53% share. The PET bottle resin market in India grew by 34% to 162 KTA; our leadership position was maintained with 57% market share. During the year, we completed one of the largest polyester capacity expansions in the world by adding 550 KTA of new polyester capacity. As a result, our total polyester production volume increased by 29% to 1.6 million tonnes. Polyester Production in KT Product 2005-06 2006-07 PFY PSF PET Total 497 557 220 663 718 257 We are India’s largest producers of PX. There are two PTA and one MEG producer in India. Our PX, PTA and MEG plants utilisation rates are above 100%. During the period under review the PTA, MEG demand grew by 30% and 18% respectively while PX demand growth was at 19%. During the year, our production volume for fiber intermediates (PX, PTA and MEG) was close to 4.3 million tonnes, 25% higher as compared to the previous year. During the year, we commissioned a new PTA plant of 730 KTA capacity at the Hazira complex. The new PTA plant reached its rated capacity in less than ten days and is the most competitive plant globally. Incremental production from the PTA plant will cater to the captive polyester unit and will also substitute imports to meet domestic requirements. Fibre Intermediates Production in KT Product 2005-06 2006-07 PX PTA MEG Total 1,395 1,304 776 3,475 1,779 1,777 781 4,337 1,274 1,638 Cracker Products, Aromatics and Chemicals Fibre Intermediates (PX, PTA, MEG) The polyester chain is expected to reap above average margins in 2007-08, largely due to the supply constraint in PX. Fully-integrated margins are expected to continue to improve due to higher PX margins. However, margins of various components of the chain may differ considerably. The bulk of the margins will migrate to PX on account of supply constraints. PX margins are expected to remain strong in 2007 and continue to strengthen into 2008 as refining bottlenecks are expected to continue to limit PX production. PX utilisation is expected to remain high during 2006 through 2008. The overall polyester utilisation is expected to remain low because the supply constraint of PX will limit the production of PTA and therefore polyester. Even if we see surplus capacity in PTA and polyester, the integrated polyester margin therefore will largely be unaffected and polyester margins are expected to strengthen from the current levels. Most of the new PTA capacities are in China. This is expected to reduce the PTA imports into China in 2007 from a high of 7.6 million tonnes in 2006 to around 5 million tonnes. The surplus PTA volumes are expected to increase the pressure on PTA margins. During the year, we produced 1,764 KT of ethylene and 697 KT of propylene, a decline of 1% and 3% respectively over the previous year. The decline was on account of planned shutdown at the Hazira and Vadodara cracker during the year. The cracker de-bottlenecking was implemented during this planned shutdown at both the locations. We produced 157 KT of butadiene during the year representing a 15% increase over previous year. Our butadiene is well-established in the international markets as well and exports were 72 KT during the year. The strong growth in elastomers has led to an increased global demand of Butadiene. We have been supplying Butadiene to some of these deficit regions by utilising our logistics advantage to the best. Our benzene production was 657 KT during the year representing a 32% increase over the previous year. This was primarily due to capacity enhancements at Jamnagar undertaken during the last quarter of the FY 2005-06. This has catapulted our position to being the 2nd largest producer in Asia. We exported approximately 371 KT of benzene this year across different geographies. We have managed to maintain market leadership in benzene and have emerged as the supplier of choice for all consumers. There has been a shift in the regional supply-demand balance. America and the west of Europe are net deficit areas and Asian benzene is meeting the additional requirements of these regions. We have successfully focused on and supplied benzene to these deficit regions to realise better margins. (cid:1) (cid:1) We are leading a producer of Linear Alkyl Benzene (LAB) and Normal Paraffin in the country. LAB production for the year was at 163 KT. Domestic LAB market grew by 5% during the year. We have approximately 26% of domestic LAB market share. We are also the largest exporter of LAB from India. Exports are primarily to countries in the Middle East, South East Asia and Europe. Customers rate the quality of our product at par with the best in the international market. Expansion plans During the year, we also announced setting up of a global sized integrated cracker and petrochemical complex with a capacity of 2 MMTPA in the Special Economic Zone at Jamnagar in Gujarat. The cracker will use the refinery off gases and byproducts to produce ethylene, propylene and downstream derivatives. The project is expected to be implemented at a capital cost of about US$ 3 billion and likely to go on stream by FY 2010-11. This unique integration with the refinery will position the proposed cracker complex on par with the most efficient producers of olefins and derivatives globally, including those in the Middle East. We expect this proposed investment to further improve our cost competitiveness and strengthen our position as one of the lowest cost petrochemical producers in the world. Textiles Weaving a global aspiration Our Textile complex at Naroda, Ahmedabad is one of the largest and most modern textile complexes in India. Vimal, our flagship brand is one of the largest selling brands of premium textiles in the country. The brand objective set for Vimal is to emerge as the leading textile brand by 2009-10. The main growth drivers for Vimal will be an aggressive retail presence across India, innovative premium products, and foray into men’s formal wear. The brand will also offer complete solutions right from fibers to garments and will sharpen focus on the global automotive furnishing business. Aligned to these objectives, the company has taken various steps that will place the brand in the global market: (cid:1) (cid:1) (cid:1) A major upgradation in design, innovation and development activity to be able to generate and offer innovative premium products on a continuous basis. The “Vimal Masters Assemblage Symposium” is a unique initiative that endeavors to expose Indian suit craftsmen to the challenges and complexities of the evolving global formal fashion scenario. ‘Only Vimal’ plans to leverage the Vimal suiting platform to enter the fashion training segment by partnering with leading fashion institutes of the country. RELIANCE INDUSTRIES LIMITED 25 The textile division will also support downstream units to cater to the needs of the Indian and global markets. The textile division has entered into a strategic tie-up with a US based company for building a strong supply chain platform to get a major foothold in the US automotive segment. The current manufacturing facility at Naroda, Ahmedabad has been stepped-up to meet the ever-changing needs of customers. We have developed new products like: (cid:1) (cid:1) (cid:1) (cid:1) fine micron 100% wool & machine washable wool rich fabrics. blends of natural fibers like bamboo, cotton, soya, silk, wool that offer wrinkle free and anti-microbial properties, moisture management, etc. cotton look fabric with polyester. flame retardant poly / wool suiting fabric for safety gear. Opportunities We are focused on the energy chain which will continue to provide tremendous growth opportunities to an already growing economy. We are aiming at leveraging our leadership position, financial strength and project execution capabilities to effectively avail of the present and create greater opportunities. With the Indian economy projected to grow at 8-9%, the demand for oil and gas is expected to rise significantly in the future. We will continue to invest large proportions of cash flows into our E&P business. In addition to the ongoing efforts on exploration in various E&P blocks, we will be spending US$ 5.2 billion on the development of KG-D6. Upon commencement of the gas production, we will emerge as the largest domestic producers of natural gas in the country. The E&P business is expected to deliver sustainable long-term returns for the company. The global refining arena is throwing up exciting opportunities as a result of the continuing high demand for petroleum products and the robust economic growth outlook. The slow growth in capacities due to an ongoing thrust on capacity modernisation and upgradation and a continuing delay in the implementation of new capacities are expected to open up new trade opportunities, especially for ultra clean transportation fuels. While these would support margins, we foresee additional margin opportunities in the wider light – heavy differentials that can be captured by leveraging our complexity for processing heavier crudes. In petrochemicals, we will continue to maintain our leadership position through capacity expansion and investing in value-added products. We have announced the setting up of a global sized, integrated cracker and petrochemical complex with a capacity of 2 MMTPA in the Special Economic Zone at Jamnagar. The project is expected to go on stream by FY 2010-11. 26 Growth is Life Challenges, Risks and Concerns We are currently working on two large projects – the development of the KG-D6 block and the implementation of a new refinery through our subsidiary, RPL. For the RPL project, the key challenge is to complete the project by December 2008 as planned. RPL has largely mitigated the risks associated with the project in the areas of regulatory approvals, land acquisition, financial closure, procurement contracting by securing delivery commitments for all long lead and critical equipments. It has put in place robust systems to monitor the performance of commitments by all vendors and the timely identification of potential issues and development of alternatives. Supported by the commitment of global implementation partners as well as our vast experience in executing large projects, RPL is confident of completing the project on schedule. In the E&P business, the key challenge is the commercialisation of oil and gas discovery from the KG-D6 block. Towards this end, all major EPC / EPIC contracts have been awarded and all long lead items have been ordered. The pre-engineering survey for the offshore installation has been completed and nearly 50% of the detailed engineering for onshore terminals is also complete. Currently, the project is in the fabrication phase and is progressing well towards meeting the target installation and commissioning dates. In addition to the project execution challenges, the existing businesses face a risk from fluctuations in the foreign exchange rates. Our earnings in all the businesses are linked to US dollars. For us, the key input, crude oil, is purchased in US dollars. Against this, all export revenues are in foreign currency and even local prices are based on import parity prices. We also have a large portion of our debt in foreign currency for which we undertake liability management transactions and structured derivatives on an ongoing basis. Internal Controls We have a defined organisation structure and have developed well-documented policy guidelines with predefined authority levels. An extensive system of internal controls has also been implemented to ensure the optimal utilisation of resources and the accurate reporting of financial transactions and strict compliance with applicable laws and regulations. We have put in place sufficient systems to ensure that assets are safeguarded against loss from unauthorised use or disposition and that transactions are authorised, recorded, and reported correctly. Also, we have an exhaustive budgetary control system to monitor all capital related as well as other costs against approved budgets on an ongoing basis. Recognising the important role of internal scrutiny, we have an internal audit function which is empowered to examine the adequacy and the compliance with policies, plans and statutory requirements. It is also responsible for assessing and improving the effectiveness of risk management, control and the governance process. Continuous audit and verification of the systems enables the various business groups to plug any shortcomings sooner rather than later. It also measures our strategic risk management system and suggests risk mitigation measures for all key operations. The top management and the Audit Committee of the Board review the findings and recommendations of the internal audit panel. Major Subsidiaries and Associates Reliance Petroleum Reliance Petroleum Limited (RPL) is a 75% owned subsidiary. Chevron India Holdings Pte Limited, Singapore, a wholly owned subsidiary of Chevron Corporation USA (Chevron), is the second largest shareholder of RPL and currently holds a 5% equity stake in the company. RPL was formed to set up a greenfield petroleum refinery and polypropylene plant in the Special Economic Zone (SEZ) at Jamnagar in Gujarat. This global sized, highly complex refinery will be located adjacent to our existing refinery and petrochemicals complex, amongst the largest and most efficient in the world, thus creating significant synergies. RPL will be the sixth largest refinery in the world with an annual crude processing capacity of 580,000 barrels per stream day (BPSD). It will have a complexity of 14.0 - using the Nelson Complexity Index - ranking it amongst the highest in the sector. The polypropylene plant will have a capacity to produce 0.9 million tonnes per annum. The refinery project is being implemented at a capital cost of Rs. 27,000 crore (US$ 6 billion) that is being funded through a mix of equity and debt. This represents a capital cost of about US$ 10,000 per barrel per day and compares very favourably with the average capital cost of new refineries announced in recent years. The International Energy Agency (IEA) estimates the average capital cost of the new refinery in the OECD nations to be in the region of US$ 15,000 - 20,000 per barrel per day. The low capital cost of RPL becomes even more attractive when adjusted for the high complexity of the refinery. RPL’s low capital cost is a result of the benefits of ‘intelligent repeat’ of design and engineering aspects of our existing refinery, proactive procurement strategy and faster implementation of the refinery project. This is expected to provide sustainable competitive advantages in the market place and will enable RPL to deliver superior value in the coming years. RPL has embarked on an aggressive implementation plan and is targeting to complete the project within a short span of about 3 years. Project progress review During the year, RPL secured all the relevant approvals required for implementation of the refinery project including SEZ approvals and notification of the refinery project as a unit in the Jamnagar Special Economic Zone. On the engineering front, significant progress has been made during the year. While the basic engineering work was being completed, over 80% of the RELIANCE INDUSTRIES LIMITED 27 detailed engineering work was also completed. Over 93% of the estimated scope of drawings for the concrete work and underground piping activities was released to the site and the development of structural steel drawings was about 70% at the end of the fiscal year. Over 7,500 engineers have been commissioned across the globe at several interconnected locations to deliver world-class engineering output for the project. As a part of the efforts to reduce construction interferences and minimum rework at site, RPL embarked on a massive 3D site modeling effort which is nearing completion and is expected to yield significant benefits in the coming year. On the procurement front, the achievements are equally remarkable. During the year, RPL successfully concluded procurement and contracting activities for all long-lead and critical equipment with their deliveries having commenced at site. In fact, equipment installations are also in progress and have resulted in a dramatic change in the skyline of the project site. A considerable part of other procurement and contracting activities have also been concluded. Simultaneously, the company also made significant progress on the procurement of bulk materials required for the project. Over 80% of the structural steel and considerable part of piping material have been delivered to the site and the procurement of other project bulks such as, electrical instrumentation, etc. have been ensured to meet project requirements. Hence the emphasis has now shifted towards vendor monitoring to ensure compliance with quality and delivery commitments. Reflecting the success of a concerted implementation effort, the project transitioned successfully from its engineering and procurement phase to the construction phase. This was a remarkable achievement for a project of this magnitude since the transition came about within a year of the project commencement. So far, over 1.3 million cubic meters of concreting work has been completed and has gained considerable momentum in recent months. Along with the civil construction activities, rapid progress has been made for piping and equipment and front generation during the year. Nearly 40,000 tonnes of structural steel fabrication, 75% of tankage fabrication, and 30% of pipe fabrication and pipe erection work has also been completed. Overall, the project has achieved and maintained a significant progress trend throughout the year. With a cumulative progress of over 65% being achieved, there is greater confidence on sustaining the momentum and commissioning of the project by December 2008. The timely completion of the refinery project will enable the company to benefit from an early mover advantage and reap the benefits of the emerging opportunities in the sector thereby creating superior value for its stakeholders. Reliance Retail The global Retail scenario The US$ 9 trillion Retail industry is one of the world’s largest industries and still growing. 47 of the Global Fortune 500 companies & 25 of Asia’s Top 200 companies are retailers. Even as the developing countries are making rapid strides in this industry, organized Retail is currently dominated by the developed countries with the USA, EU & Japan constituting 80% of world Retail sales. Retail is a significant contributor to the overall economic activity the world over: the total Retail share in the World GDP is 27% while in the USA it accounts for 22% of the GDP. The share of organized Retail in the developing markets ranges between 20% to 55%. Traditionally, local players tend to dominate in their home markets. Wal-Mart, the world’s leading retailer, has about 8% of the US$ 2,350 billion market in the USA. Similarly, Tesco has a market share of about 13% in the US$ 406 billion UK market. The main value propositions that most large retailers use a are a combination of low price, ‘all-under-one-roof’ convenience and ‘neighborhood’ availability. The Retail industry in India India has emerged as the most attractive retail market three years in a row (source: Global Retailer Development Index, AT Kearney). The Indian Retail industry is a US$ 270 billion industry and is growing at over 13% per annum. Only about 4.6% (US$12.42 billion) of the industry is organised. If this share increases to 10% by 2011, the size of organised retailing could touch US$ 55 billion – a CAGR of over 35%. At the centre of India’s booming economy are the top six cities of Mumbai, Delhi, Chennai, Kolkata, Bangalore and Hyderabad representing 6% of the population yet contributing 14% of the GDP. Also notable is the fact that 85% of India’s urban Retail market is concentrated in the country’s eight large cities. The local Indian Retail scenario includes approximately 12 million ‘Mom and Pop’ outlets of which only 4% are larger than 500 sq. ft. in size. The per capita Retail space in India is among the lowest in the world: 2 sq. ft. per person as compared to 16 sq. ft. per person in the USA. The supply-chain segment in India currently suffers from severe inefficiencies with cumulative wastages estimated to be about US$ 11 billion or 9.8% of the agriculture component of the GDP. Low growth in the Agricultural sector over the past few years has been the result of a gradual decline in the government’s capital spending on the sector that has come down to 0.5% of the GDP in FY2006 from 1.2% in FY1982. The Purchasing Power in India is low – the average spending per month on FMCG goods, for example, is US$ 50 as compared to US$ 107 in China and US$ 390 in Hong Kong. The least organised segments in Indian Retail are Food & grocery (1%), Jewellery (2%) and Health & beauty (2%). Most of the organised retail is prevalent in categories like Apparel, Footwear, Watches, etc. Favourable Indian demographics India is the second most populous market in the world with a population of 1.03 billion. It is also among the youngest markets, 28 Growth is Life with a median age of the population at 24 years. India has the largest middle-class population at 300 million and 85% of the total population is below the age of 45 (high spending community). With the rise in the per capita disposable income, higher purchasing power and greater access to consumer finance has come higher aspirations for branded products. The private consumption is currently at 64% of India’s GDP - higher than that of countries like Europe (58%), Japan (55%) and China (42%). Retail in India currently provides employment to 15% of the population. The total population is expected to grow by around 1.2% annually with the youth population expected to grow at the same rate. India will have one of the youngest populations in the world by 2020. India’s urban population is fast-growing at 2.3% per year and is projected to increase from 28% to 40% of the total population by 2020. Gen X-consumers are increasingly attaching importance to quality and are much more brand conscious than ever before. They are keen to upgrade to new technologies and products and do so more frequently leading to higher disposal rates in products. Transitioning segmental and income demographics with booming middle class households armed with greater disposable incomes currently comprise 8% of the total number of households. This figure is expected to increase to 13% by 2010 growing annually at around 15%. Disposable incomes too are expected to rise at an average of 8.5% p.a. till 2015. The average age of home owners has come down from over 40 years a few decades ago to under 28 years. The estimated number of new home constructions is 4.5 million p.a. over the next decade. The organised Retail trade will not only benefit productivity through supply-chain enhancements and increased efficiencies in the system but will induce lower inflation due to the increased productivity that will be shared with the consumers (lower end- product prices). Reliance Retail – an overview With its foray into organised Retail, Reliance aims to forge strong and enduring bonds with millions of farmers in India and take its relationship with end-consumers to a new level. Reliance Retail will create a virtuous circle of prosperity by creating win-win partnership for farmers, small shopkeepers and consumers. This idea has been evolved based on the new paradigm in the area of the consumption of products and services in India. Reliance will expend over Rs. 25,000 crores (US$ 5.6 billion) over the next few years in building a state-of-the-art retail infrastructure in India. It will follow a multi-format strategy by opening up hypermarkets, supermarkets, seamless malls/ department stores, convenience stores and other Specialty stores across India in over 1500 towns and cities. Through this effort, Reliance Retail will create over 500,000 jobs through direct employment and over a million through indirect employment. We are poised to unfold a new and expansive chapter in India’s growth story. Performance review FY 2006-07 Reliance Retail entered the organised Retail market in India with the launch of its convenience store format under the brand name of ‘Reliance Fresh’. Since the launch of the first Reliance Fresh store in November 2006 in Hyderabad, the network has expanded to 96 stores at the end of FY 2006-07 covering locations like Jaipur, Chennai, NCR, Guntur, Vijayawada and Visakhapatnam. During this year, we also launched our B2B operations called Ranger Farms to cater to small retailers in Hyderabad. We also introduced our private label in the staples category under the ‘Reliance Select’ brand name. Reliance Retail also started its loyalty programme for customers by introducing the ‘RelianceOne’ membership card from the first day of operations in Hyderabad. Within five months of operations, the loyalty programme has over one million members enrolled and is growing at a rapid rate. This year also witnessed the launch of our first consumer durables and IT pilot specialty store branded as ‘Reliance Digital’ at the Shipra Mall in Faridabad. Reliance Digital aspires to be a one stop solution provider for all technology requirement with a wide array of brands and products covering consumer electronics, home appliances, information technology and telecommunication. Reliance Retail also launched its much awaited and India’s largest hypermarket under the brand name of “RelianceMart” at Iskon Mall in Ahmedabad in August 2007. Spread over 165,000 sq. ft. of shopping area, RelianceMart carries a range of over 95,000 products across categories ranging from fresh produce, food & grocery, home care products, apparel and accessories, non-food FMCG products, consumer durables and IT, automotive accessories, lifestyle products, footwear and more. The store also offers some unique services to the shoppers like tailoring, shoe repair, watch repair, a photo shop, gifting services and laundary services all within the store. The store network continues to expand at a rapid pace. Currently, there are over 300 Reliance Fresh Stores covering more than 30 towns and cities in 12 States. Our focus this year will be on the rapid roll-out of Reliance Fresh and hypermarkets in various parts of the country. Apart from these formats, we will also open newer formats in select cities and towns. Energy Conservation Energy conservation is one of our key focus areas. A number of best practices, studies and improvement projects have been implemented in past six years that have made our Jamnagar refinery a “Pacesetting Refinery” in the world. We regularly benchmark our energy consumption levels with global standards, and consistently work towards improving efficiencies further. The energy consumption of all our manufacturing units and utility blocks are monitored constantly and corrective steps are RELIANCE INDUSTRIES LIMITED 29 immediately taken to utilise the energy in the most optimal manner. All units utilise energy resources in a responsible and efficient manner with a focus on productivity improvement measures that result in the reduction of energy consumption. The extensive energy saving efforts at Jamnagar brought down Energy Indices resulting in fuel savings during the year 2006-07. For a greater emphasis on energy conservation, our Energy Policy has been revised during the year. A detailed review is made on a continuous basis by the Management with a focus on energy conservation and extensive monitoring is also being done by the Energy Cell with the help of automation making ours a model refinery in the world. The operation of our Captive Power Plants at Vadodara, Nagothane and Gandhar are benchmarked on a monthly basis with a view to making continuous improvements in the efficiency. Besides energy conservation, we are also looking at the opportunities of utilising the energy conservation efforts by way of Clean Development Mechanism (CDM), an initiative proposed by United Nations (UN) under the Kyoto Protocol. We have registered 5 CDM Projects with UNFCC and additional 5 projects are under various stages of validation for Registration. These CDM projects have a revenue potential of over Rs. 30 crore per annum. We are also documenting the following projects for CDM benefits: (cid:1) (cid:1) (cid:1) Biomass to Biogas to combined Heat and Power Power Plants using Natural Gas in SEZ Coal Bed Methane Project. Research & Development Research and Development (R&D) is an integral part of our strategy for achieving growth and business profitability and sustainability. During the year, the development of advanced technologies in strategic business units and new product/ application development through innovative approaches scaled new heights alongside de-bottlenecking of manufacturing plants for higher productivity & performance at reduced costs. applications. Following the successful commercialisation of our indigenously developed Polypropylene (PP) catalyst, RELCATTM, we have now commercialised RELDONOR technology for high performance PP grades suitable for meeting the requirements of high speed processing lines. This achievement has put us on a global platform in PP catalyst technology. Some of the other successful initiatives from PRTC during the year include: (cid:1) Morphology controlled catalyst for specialty PP (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) Donor technology for manufacture of PP grades for BOPP, IM, Raffia A new, energy efficient process for Ultra-high molecular weight PE High pressure (PE-80) pipe grade polyethylene PP nano-composites for next generation packaging, thermoforming and moulding applications Impact modified PP for collapsible crates New PP grades for 2 and 4 wheelers in the automotive sector Clarified PP grades for house-ware and medical applications PRTC was also engaged in two projects in the areas of cost- effective, proto-moulded domes for gobar gas plants and artificial prostheses for the physically challenged as part of our Corporate Social Responsibility (CSR) initiative. Reliance Technology Centre (RTC) Located in Patalganga, RTC’s key focus is in the area of product and process innovation for the polyester business. During the year, several new products and processes were developed right from lab scale to commercial production for the staple fibers, filament yarn and PET resin businesses. Commercialisation support for the production of novel bi-component products on the new “bico” production machine was one of the major activities. These products include: (cid:2) Recron ’Stretch’ high bulk, self-crimping filament yarns for comfort stretch in fabrics (cid:2) Recron ‘Micrelle’ ultra micro-denier (< 0.2 dpf) filament yarns for improved comfort & tactile aesthetics Polymer Research and Technology Centre (PRTC) (cid:2) Recron ‘Polylon’ for nylon replacement One of the most significant developments this year has been the establishment of the Polymer Research & Technology Centre (PRTC) in Mumbai as an R&D centre of excellence for the polymer business. The primary objective of PRTC is to pursue innovative research in polymeric and hybrid materials and to continue developing polymer applications and technologies for the benefit of customers. Intellectual property creation and knowledge management also form a core objective of PRTC. PRTC’s focus this year has been in the areas of polyolefin catalysts, polymers and allied chemicals. This includes the development of new hybrid materials, new grades and new RTC’s other activities include: (cid:1) (cid:1) (cid:1) Process studies and scale-up to 3 tonnes for commercial production of RIL’s proprietary, easy soluble ‘sea’ polymer, for the ‘Islands-In-Sea’ ultra micro-denier filaments Development and commercialisation of low abrasion delustrant jointly with ‘Sachtleben’ for full dull POY and FDY Novel finish development and field demonstration for good wet and dry dispersion of ‘Recron 3S’ short-cut polyester staple fibers for construction application 30 Growth is Life (cid:1) (cid:1) (cid:1) Development of polyester staple fibers for superior moisture management towards improved comfort Transfer of novel NG-3 process solutions to Hazira plant aimed at improving process yield and product quality through reduction of oligomer volatilisation and dust generation Pilot scale demonstration of inherently colored ‘Swarang’ polyester filaments, a novel concept developed & demonstrated at laboratory scale in RTC. Refining & Marketing Research & Technology Centre (RMRTC) A major R&D initiative this year is the establishment of Refining & Marketing R&T Centre (RMRTC) at our Jamnagar refinery. Besides providing high level technical support to the existing and new refineries at Jamnagar, RMRTC is focused to be a world class R&T Centre for developing cutting edge refining and fuel technologies so as to provide competitive edge to our downstream petroleum business. The first R&T project on Fluid Catalytic Cracking (FCC) is under execution at our new refinery in Jamnagar. The primary objective of the FCC R&T project is to enhance the propylene yield in our two FCC units. Some of the major facilities in the FCC project are: FCC pilot plant (1 b/d), catalyst evaluation units, catalyst preparation units and cold flow circulation unit. The project also includes creation of a specialised team on computational fluid dynamics (CFD), so that integrated solution comprising both catalyst and engineering may be provided by RMRTC. Most of the facilities including the pilot plant are expected to be operational by May 2008. Some of the major activities pursued by RMRTC are: (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) Creation of FCC R&T facilities and infrastructure. Joint R&D work currently in progress with BASF (supplier of current FCC catalyst/additive) to develop new catalyst and additive formulations with high propylene yield. Increasing feed pre-heat temperature to raise reactor temperature in FCC without violating coke burning limits – further work-in-progress. Explored ways to enhance VGO availability to FCC – new 70 kbpsd Solvent Deasphalting plant recommended – currently being considered under DTA modernisation plan. Possibility of Anode coke production from low value FCC bottom – new Coker-3 unit is being planned jointly with ConocoPhilips. Long term collaboration being explored with technology majors such as UOP and Chevron. Other initiatives by R&D In the area of polyester intermediates, polyester, chemicals, elastomers and cracker products, the following R&D initiatives were undertaken: (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) Development of catalyst for purification of nitrogen New generation of butene-1 catalyst Innovative process for the recovery of fuel oil Adsorptive process for recovery of propylene for PP plant off- gas Increase in ethylene and propylene yields in thermal cracking of naphtha New generation dehydrogenation catalysts Non-HF catalyst & process for production of LAB Development of new processes to extract premium quality TiO2 from polluting solid waste Process for removal of Cyanide from waste water streams in the DSAF plant We continue to participate in various collaborative projects in India and overseas. Research Alliance Agreements have been signed with various entities like the IITs (Mumbai, Delhi & Chennai), NCL, V-Life Sciences (Pune), UICT (Mumbai), Stanford University (USA), and Nova Chemicals (Canada) to pursue basic research and technological developments in the areas of nano-composites, polymer processing, next generation packaging materials, high value chemicals, biodegradable polymers, polymer additives, etc. Our partnership with CSIR under the New Millennium India Technology Initiatives (NMITLI) continues to gather momentum. A measure of success of the R&D initiatives is the number of patents granted. During the financial year under review, we have been granted the following patents: (cid:2) A process for the preparation of a lower alpha-alkene polymerisation heterogeneous solid catalyst (cid:2) Modified metallo-silicate catalyst composite, and the process and use thereof in hydrocarbon conversion (cid:2) High Performance polyolefin blend for industrial pallets and other articles as well as a process for preparation thereof (cid:2) A process and device for selective recovery of cobalt and manganese catalyst from purge stream in the manufacture of poly-carboxylic acid. Quality The overall plan of RMRTC covers other areas as well e.g. coker, hydroprocessing, aromatics, separation process, catalyst development, simulation, fuel technology, bio-refining and analytical science, etc. which will be built in a phased manner over a period of next four to five years and planned to be located at Jamnagar SEZ area. Our focus on global quality standards remained extremely high and resulted in several significant outcomes: (cid:1) RIL Jamnagar was conferred 48 Golden Certificates by Shell Global Services as part of their International Benchmarking Protocol for Excellence in Reliability in Product. RELIANCE INDUSTRIES LIMITED 31 (cid:1) Shell has rated the RIL Hazira MEG laboratory best among facilities of its type across Europe and USA. (cid:1) We successfully developed drilling fluid for Oil and Gas exploration on an experimental basis. (cid:1) As part of the ISO 22000 implementation, a Food Safety Management System was put into place for all packing grade polymers. Quality Management Systems (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) An International Quality Benchmarking System is well in place in all our laboratories which assures best QMS for our entire product profile. Employee participation in quality initiatives through Quality Circles has won several national awards. Six Sigma initiatives have contributed to better quality, cost savings and customer satisfaction across all our sites. Quality Loss Index – a statistical tool to enhance performance and productivity is in practice in all our labs. Electronic Data Management System – A web based LIMS (Laboratory Information Management System) with process QMI (Quality Measuring Instruments) interlink is in place and operational. The most advanced techniques and methods are followed by our analytical laboratories to provide reliable services. The in-house developed online Laboratory Information Management System (LIMS) is used extensively at all locations as part of the Quality Management System. Human Resource Development We strongly believe that it is “the people of Reliance” who make “the difference.” Hence, every employee is encouraged to optimise his/her full potential by availing of opportunities that exist across multiple functions, disciplines as well as geographies. Over a period of time, we have built and nurtured a workforce of over 24,000 people that includes over 8,800 Engineers, 2,500 Management Graduates, more than 200 PhDs., 1000 plus Accountants and 1000 plus other professionals. Having a diverse Business portfolio spanning not only multiple industries but also different countries, each of our businesses requires unique skill sets. We therefore offer our employees an excellent platform to learn, grow and excel in myriad fields of expertise. The efficiency of our human capital therefore, is consistent and reinforces our competitive edge. In keeping with this belief, our new recruits are given an accelerated training through a unique initiative called “Dronacharya Scheme”. The scheme has been launched at Jamnagar under which our senior personnel (Dronacharya) take charge of 2-3 youngsters each (the Arjunas) and vow to mentor them for independent positions in 3-6 months. Initial results have been extremely encouraging and the scheme is likely to be replicated at all other locations. Over 1500 young people have been recruited from different industries in the past year and are being trained to meet our expansion plans. Training plays a vital role in enhancing the efficiency, productivity and performance of all our employees. The programs are so effective that Reliance executives have the ability to execute world-class projects in record time. Over 68,600 man- days of training are undertaken to groom people both in personal as well as professional capabilities. An in-house training program focused on competency in finance and accounts develops graduates to take up higher responsibilities in the finance and accounts function. To train and upgrade managers keeping in view the demands of a global marketplace, we are introducing a customised management program that trains managers in marketing and other communication skills. We also have an advanced management program in collaboration with an international management institute for our senior managers. In order to improve professional excellence as well as develop all- round management skills of our employees, we have developed strong associations with several reputed institutions. We have sponsored a number of engineers in a customised management course: MPRE (Management Program for Reliance Engineers) at IIM Bangalore and several science graduates for a Reliance Certified Engineering course with IIT Mumbai. We also conduct special Manufacturing Programs for our senior executives in association with leading global consultants. We believe in sharing our success with our employees. In keeping with this belief, an Employee Stock Options Scheme (ESOS) has been implemented offering eligible employees the option to purchase RIL shares. The options currently granted, when exercised, could lead to the issue of 2,87,28,000 shares representing about 2% of the present equity capital. This scheme was made available to over 14,000 employees making the RIL ESOS one of the widest programs in the Indian corporate sector. We have also launched a unique initiative to encourage the spouses of employees to also work with us. The wives of employees are being trained to take up jobs – full time, part time or on call – at Reliance Retail outlets in different cities. The experimental launch in Gujarat has been successful with about 400 housewives participating. This initiative is being undertaken at other locations with particular focus on cities that have a lot of employees who have migrated from all over the country. Voluntary Separation Scheme and Special Separation Scheme were declared for the Vadodara complex in March 2007 which was opted for by 2,600 employees. Awards & Recognition We have merited a series of awards and recognitions for excellence across various facets of our businesses and activities: (cid:1) (cid:1) CNBC-TV 18’s India Leadership Awards – the newly instituted award ‘Hall of Fame’ - given to Shri Dhirubhai Ambani The first NDTV Profit Global Indian Leader award to Shri Mukesh Ambani presented by Hon’ble Prime Minister Manmohan Singh 32 Growth is Life (cid:1) (cid:1) The Economic Times’ Business Leader of the year award to Shri Mukesh Ambani received at the hands of Prime Minister Shri Manmohan Singh The United States India Business Council honoured Shri Mukesh Ambani in Washington at USIBC’s 32nd Anniversary Leadership Award for “Global Vision” in April 2007. Corporate Ranking and Ratings: (cid:1) We featured in the Fortune Global 500 list of ‘World’s Largest Corporations’ for the fourth consecutive year (cid:2) Ranked 269th in 2007 having moved up 73 places from last year. (cid:1) The IMC RBNQA Award given by the IMC Ramakrishna Bajaj National Quality Trust – Hoshiarpur. Training and Development: (cid:1) (cid:1) (cid:1) The American Society for Training & Development (ASTD) award for the Best Organisation for enterprise-wide success as a result of employee learning and development - Patalganga. The ASTD citation for ‘Excellence in Practice’ in organisational learning & development – Patalganga The Golden Peacock National Training Award for excellence in learning and development practices - Patalganga. (cid:2) Featured as one of the world’s Top 200 companies in Energy Conservation: terms of Profits. (cid:2) Among the top 25 climbers for two years in a row. (cid:2) Featured among top 50 companies with the biggest increase in Revenues. (cid:1) We ranked 182nd in the FT Global 500 (up from previous year’s 284th rank). (cid:1) (cid:1) Our maiden CSR (2004-05) report was the first Corporate Sustainability Report from the Indian Oil & Gas sector. Further, this report obtained “in-accordance” 2002- guidelines status from the Global Reporting Initiative (GRI) - the official collaborating centre of the United Nations Environment Programme (UNEP) Our second Corporate Sustainability report - ‘CSR 2005-06’ based on the new set of Sustainability Reporting Guidelines: G-3 Guidelines, has achieved yet another unique feat. This report has been rated as “GRI Checked A+ level” by GRI – the only one in India with this rating. Health, Safety and Environment: (cid:1) (cid:1) (cid:1) (cid:1) The Hindustan Lever Award for the best paper at the Annual Conference on Occupational Health - ‘CASHe, a tool for primary prevention of occupational health problems in industry’ – Patalganga. The first prize in the Good House Keeping contest for 2006- 07 (the Fertilisers & Petrochemicals category) organised by the Baroda Productivity Council for the third time in recognition of efforts highlighting the important role of good housekeeping in stepping up productivity - Jamnagar. Certificate of Appreciation by the Gujarat Safety Council for the year 2005 - in Gr. A; Category - II (Petrochemicals & Fertilisers) for achieving one million man hours without any (major) accidents – Vadodara. The National Safety Award-2004 for the fourth consecutive time from the British Safety Council, UK for reduction in accident/incident rate – Vadodara. (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) The award for excellence in Energy Conservation and Management from Maharashtra State Electricity Commission – Patalganga. The ICMA Award for Excellence in Energy Conservation & Management in recognition of our achievement in Energy Conservation & Management for the year 2004-2005 – received in 2006-07 - Jamnagar. The National Energy Conservation Award 2006 (Refineries Sector) presented by the Ministry of Power (Bureau of Energy Efficiency) for the third successive year based on performance in terms of specific energy consumption and efforts towards energy conservation - Jamnagar. The National Award for Excellence in Energy Management 2006 by CII – Gandhar. The National Award for Excellence in Water Management 2006 by CII – Gandhar. The National Energy Conservation Awards-2006 by the Ministry of Power, Government of India - Gandhar. The Confederation of Indian Industry (CII) Award for Excellence in Energy Management – Jamnagar. The Centre for High Technology (CHT) Award for the Best Performance in Furnace/Boiler Efficiency based on performance with respect to overall furnace / boiler efficiency - Jamnagar. The National Energy Conservation Award (Second Rank) for 2006 from the Ministry of Power for efforts in energy conservation for the seventh time – Vadodara. Quality: (cid:1) The Gold at the 21st International Team Excellence Competition organised by the American Society for Quality (ASQ). Ours is the only company from India in the twenty-one year history of the awards to have participated in the competition and won the Gold award – Hazira. RELIANCE INDUSTRIES LIMITED 33 (cid:1) (cid:1) (cid:1) CTO Forum Hall of Fame Award in August 2007 - first ever Hall of fame award for the best CIOs in India to the CIOs for not only providing service to their organisations but serving as idols to upcoming technology leaders in India. Best IT Implementation Award 2007 for our Knowledge Management Systems portal (KMS) awarded the best IT implementation of the year by PC Quest. CIO Excellence Award-2007, Chemical Industry Information Technology Forum, Chemical Week, Florida, US, given to the CIO for exemplary Information Technology implementation amongst global chemical companies. Social Initiatives: (cid:1) (cid:1) (cid:1) The UNAIDS Civil Society Awards 2006 in recognition of our outstanding commitment and support to the national fight against HIV and AIDS. We were accorded this year’s award for our workplace policy on HIV/AIDS and proactive support for our employees and communities in terms of life- skill development and HIV/AIDS information resilience. The prestigious TERI Corporate Award for Business Response to HIV/ AIDS 2007 in the Corporate Category III (for companies with turnover above Rs. 500 crore per annum) for our unique initiatives undertaken to combat HIV/AIDS infections, our Business Response for HIV/AIDS intervention in the Indian industry. This award, instituted by TERI in collaboration with GTZ (German Technical Co- operation) was based on a nationwide selection process conducted by a eleven-member jury panel chaired by Justice J. S. Verma, former Chief Justice of India. The World Bank published our HIV/AIDS initiatives as a case study in the “Corporate Responses to HIV/ AIDS, case studies from India”. (cid:1) (cid:1) (cid:1) (cid:1) The Commendation Certificate under the Ramakrishna Bajaj National Quality Award -2006 – Nagothane. The International Annual Six Sigma Excellence Award in the category of ‘Best Defect Elimination in Manufacturing’ for the “Polyester Fiberfill Production Cost Reduction” Project – Hazira The Strong Commitment to Excel Award by CII EXIM Bank – Hazira The Visionary Inventor of Year 2006 Award for the Patent entitled from Mark Patent Organisation of India for High Performance Polyolefin Compound for Industrial Pallet – Vadodara. Technology, Patents and R&D: (cid:1) (cid:1) (cid:1) The D.M. Trivedi Award from the Indian Chemical Manufacturing Association (ICMA) for introducing advancement in technology for Anaerobic Process Stabilisation & Optimisation at the Energy Centre - Patalganga. The Indian Institute of Chemical Engineers Award for Excellence in Product/Process for the development of Butene-1 Catalyst and Commercialisation – Vadodara. The Spheripol Process Operability Award 2005 instituted by Basell Technology Transfer in recognition of the plant’s highest operability rates in the region with an on-stream factor of 99.75% - Nagothane. Information Technology: (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) Best IT Implementation Award, in April 2006, from the Computer Society of India for implementing innovative and customer-centric solutions for petro retail business. Best IT Implementation Awards 2006 instituted by PCQUEST for implementing the largest B2B eCommerce Portal in India with more than Rs. 25,000 crore business. CIOL Gold CIO Award for 2006 for the best IT practices in any organisation in India in August 2006. CIO 100 India Award for two consecutive years - 2006 & 2007 for two and three IT Heads respectively judged amongst the top 100 CIOs in India. Technology Senate Enterprise Intelligence Award 2006 for implementing solutions like eCommerce, KMS and several other innovative solutions judged the best in India. CIO of the Year Award for the best IT enabled organisation in India from IT People. Ones to Watch - CIO - USA and CIO-India award. In May 2007, we figured among the top 20 organisations fostering excellence in IT team. Skoch Challenger Award 2007, USA for the best IT Head of the year for 2007 for managing the most IT enabled organisation in India. 34 Growth is Life Report on Corporate Social Responsibility Health Prevention through awareness We implement comprehensive preventive and promotive health care programmes at all our sites. Well-equipped occupational health centers carry out regular pre-employment and periodic medical examinations as also other preventive programmes. Occupational health activities include creating awareness, undertaking environmental and biological monitoring, implementing health risk audits, making occupational hazard assessments, etc. The medical data is analyzed periodically and is used to direct interventions at individual or group levels. The interventions include lectures, workshops and exhibitions addressing various lifestyle diseases like hypertension, heart disease and diabetes. Reducing occupational hazards Awareness programmes complemented by environmental and biological monitoring programmes impact a reduction in morbidity related to occupational hazards. We had introduced the Change Agents for Safety & Health (CASH) initiative four years back which has today taken firm root and has spread across all our sites. The objective of the initiative is to bring about a positive change and a continual improvement in occupational health practices at the workplace. This has been achieved to a great extent and continuing efforts have helped induce attitudinal and behavioural changes among the workforce. All our sites are active in providing facilities for addressing community health issues around all our premises. Community medical centers cater to preventive and curative health care services to the population at large. They also participate in and implement national programs in the health care sector. Comprehensive diagnostic and curative services The HIV/AIDS and DOTs Center at Hazira is providing yeomen service to patients suffering from TB and HIV. This center, a unique Public Private Partnership (PPP) effort, provides diagnostic, monitoring and curative services to patients. Comprehensive care is extended through interventions like counseling, education, training, social and nutritional support. The center also interacts with the vulnerable population like contract labourers and truck drivers as well as with the small and medium scale industries around Hazira. We are also replicating this successful model at Jamnagar and Patalganga. Primary mobile health care We have initiated primary health care facilities at Gadimoga village for the community around our oil and gas project in KG basin near Kakinada in Andhra Pradesh. Mobile healthcare outreach vans have also been commissioned for the Special Economic Zone (SEZs) that is being developed in Haryana. These facilities cater to the preventive and curative medical needs of the population. Mobile dispensaries A full-fledged medical center at Moti Khavdi and a mobile dispensary have been sponsored by us to cater to the community’s medical needs. Free medicines and ambulance services are part of this work. At the time of viral fever and malaria out-breaks, a mobile medical van with doctors and free medicines was sent to Sikka town and about 5,000 people were administered medical care. We have also appointed a visiting consultant for Padana’s Public Health Centre. We continued being part of welfare activities through donations and contributions for various activities including the ‘Paryavaran Mitra’, police welfare fund, consumer education and research center, Akashvani sports recreation activities, Gujarat Women Action group, Narmada Yojana, Oswal Education Trust, setting up of libraries in different talukas of Sabarkantha, Gujarat Cricket Association, etc. Jamnagar comprises a large migrant population largely due to the SEZ activities in recent times. A Community Medical Center, run at Moti Khavdi village since 1995 is the focal centre for community health programmes. Apart from various Reproductive & Child Health (RCH) services being rendered regularly, a “Health on Wheels” – mobile dispensary van provides medical services to nearby interior villages. At the center, round-the-clock free medical services are made available. Last year over 1,40,000 patients benefited from this activity and a total of 7,912 mothers and children availed the RCH services. A multi-diagnostic camp was organised where patients were examined and treated by specialist doctors free of cost. Caring for migrant workers As an outcome of massive construction activity that is underway, substantial labour force will be present at our sites at all times. Keeping this in mind, we have constructed residential complexes, provide round-the-clock medical facilities and have instituted a crèche for migrant workers. The Dhirubhai Ambani Hospital at Lodhivali, Raigad extends prompt and specialised services to the Mumbai-Pune highway accident victims. Trauma patients are provided free life saving treatment. Besides hospitalisation, it provides subsidised treatment to the lower income group patients and senior citizens. Additional activities during the year included an anti-natal camp for women, programmes on ‘Medico-Legal aspects’ and ‘Patient satisfaction in Medical practice’ for doctors in the surrounding areas and continuing medical education program on the various risk factors and lifestyle changes. A total of 1,596 patients were treated under different charity schemes such as Land affected/ Adopted villages, Mitra Parivar, Senior citizens, poor patients, etc. Community health & safety Various activities were taken up by our Occupational Health Center (OHC) as part of the community health activity. Several RELIANCE INDUSTRIES LIMITED 35 blood donation camps were also organised. Thirteen awareness programmes on ‘Prevention of HIV/AIDS’ were conducted for tanker drivers and cleaners. Nine health awareness programmes on ‘Noise Pollution’, ‘Hazards of Substance Abuse, ‘Prevention of HIV/AIDS’ and ‘First Aid’ were conducted for students in the nearby schools in the Patalganga/Mohopada area. Eleven programs on ‘Occupational Health Awareness & Chemical Hazards’, ‘Occupational Health Hazards & their Prevention’, ‘Occupational Health - Past, Present & Future’, ‘Occupational Safety & Health at Workplace’, ‘CASHe - Improving Occupational Health at Workplace’, ‘Prevention of Life Style Related Diseases’, ‘Prevention of Heart Diseases’ and ‘Importance of Medical Check ups’ were conducted in the nearby industries. On December 28, 2006, over 40,000 villagers and other stakeholders located near our Gandhar Complex, Gujarat State, got a unique ‘Gift of Life’ from this manufacturing facility. In a unique public-private partnership initiative, Gandhar Complex in partnership with the State Government of Gujarat adopted the existing Public Health Centre (PHC). This is the only nearest public health centre located in this vicinity. The other nearest one is at least 50 kms. away, located at District Bharuch. Safety The HSE committee of Directors has identified several areas of safety for our management to focus on. The Centre for HSE Excellence, under the guidance of the HSE committee of Directors, has been working towards guiding the organisation from best to excellent in HSE management. We have been active in maintaining all our businesses at best standards in the field of Health, Safety and Environment. Construction Safety, Process Safety and Behavioural issues were the major areas focused upon. The thrust has been on creating corporate guidelines, providing training to site personnel on these corporate guidelines and auditing the sites to help ensure compliance. This has helped us to further improve our safety performance. The construction of the RPL refinery at Jamnagar is progressing with a very high focus on the safety of the workers. This has helped us achieve an injury rate even below some international statistics. We have undertaken Process Safety Reviews of some of the plants through process licensors in order to ensure that the plants remain at par with the World’s Best Technology in terms of Process Safety. DuPont safety resources have completed an asset Integrity Study at our Vadodara complex and have also undertaken process safety management training. Plans are also afoot to continue this work at Vadodara. Through the development of the Centre for HSE Excellence, we are poised to take our various businesses such as oil and gas, gas pipeline, supply and distribution of petroleum products, and retail to world-class levels in Safety Management. Environment Environmental & Safety aspects have become a way of life for us. A clean environment at the workplace and surroundings is our main focus and objective for sustainable development and business growth. As a policy and system, environmental requirements are integrated into each stage of development of a project – planning, design, construction, operation and maintenance. Structured environmental monitoring, audits and management systems ensure compliance to the Environmental Protection laws of the land. This is carried out by a dedicated Environment Health and Safety (EH&S) Group reporting directly to the Chief Executive at each manufacturing complex. Community environmental initiatives Our Exploration & Production (E&P) division is involved in the fast-track development of the KG-D6 offshore block off AP coast. To enhance the biodiversity around the proposed onshore facilities in east Godavari district, we have planted mangrove saplings in association with the MS Swaminathan Foundation. Saplings have also been planted adjacent to the onshore terminal location around other project sites and yards. To study sensitive locations along and off the east coast, we are funding a research project by M/s. Wildlife Institute of India on satellite tracking of Olive Ridley turtles in the Bay of Bengal in association with other upstream operators. We have been providing drinking water, medical facilities with free medicines, educational and calamity assistance to local villagers. Our Jamnagar Refinery Complex has integrated Environmental Management System (EMS) of the Refinery and Marine Facility into a single EMS for the entire Complex which has been upgraded under ISO 14001:2004 in 2006 by LRQA. Resource conservation and environment friendly disposal systems As part of conservation measures at our Jamnagar Complex, brine discharge to the sea has been reduced by re-routing the air compressor cooling water to the desalination plant. For the efficient disposal of oily rags and other oily wastes, an incinerator plant with pollution control facilities like venturi caustic scrubber and droplet separator/demister has been commissioned and operational at the site. To further improve the efficiency of the Effluent Treatment Plant (ETP), a cooling tower has been commissioned to maintain the effluent temperature close to ambient. An earthen mound has been made on the upwind side in Pet Coke Storage Area to minimise the coke dust fines that can be blown by wind. Stringent monitoring processes For the international funding of our new refinery at Jamnagar, Environmental Due Diligence was conducted by M/s. Nexant, UK. Export credit agencies like US Exim and SACE (Italy) have also conducted site visits in connection with Environment Due Diligence for RPL. 36 Growth is Life The EH&S Group has started environmental monitoring for the RPL construction activities by NEERI as per the Environmental Management Plan of EIA. We are also associated with NEERI for base-line monitoring and the Environmental Impact Assessment (EIA) study for the SEZ at Jamnagar. The Jamnagar Refinery Complex has integrated Environmental Management System (EMS) of the Refinery and Marine Facility into a single EMS for the entire Complex which has been upgraded under ISO 14001:2004 in 2006 by LRQA. By virtue of our having adopted the treated effluent recycling scheme, the environment performance of the Hazira petrochemical complex has been recognised by the Gujarat Pollution Control Board (GPCB) and granted maximum water cess rebate. The third PTA effluent pre-treatment facility has been commissioned to produce biogas that is used as fuel in the newly commissioned bio-sludge dryer unit and polyester complex. To minimise the disposal of wastes from the complex, efforts are made to utilise wastes (as fuel) in the cement kilns. The waste samples have been tested and were found suitable as fuel. A large size refrigerant vapor recovery unit has been purchased to sustain the 53% reduction in refrigerant (CFCs) consumption. Environmental and Resource Conservation has become part of our culture which along with our association with the regulatory bodies and the community helps in our sustainable development Social Responsibility and Community Development Community education and enhancing youth employability We work in earnest towards nation building. By providing an opportunity to college students to visit our plants, we ensure that they relate their theoretical inputs with industrial practice. We also provide opportunities to engineering students to undergo in- plant training/projects as part of their academic curriculum. Ongoing efforts are made to enhance the employability/skill development of local youth by giving them opportunities to work in operating plants to improve their job prospects. We also operate schools for employees’ and the neighborhood children. Promoting female education As a part of the Government of Gujarat’s drive to promote girl education, school kits were distributed to girl students in the surrounding 32 villages of Jamnagar and Lalpur talukas. This was done in tune with the state government’s education department. A ‘waste-to-resource’ philosophy Rewards and Scholarship We practice the ‘waste to resource’ philosophy. The recovery of methane rich gas has brought value for contribution to the carbon credit projects through the Clean Development Mechanism (CDM). The switch to an energy efficient system of air supply is yet another carbon credit of value. Patalganga facility continues to minimise waste disposal by reducing the volume of bio-sludge. This is achieved by installing a decanter to reduce the water content in the sludge. The newly installed ozonation system improves the treated effluent quality to be recycled as the cooling water make-up. An incinerator has been commissioned for certain PTA waste streams thereby minimising dumping on land. PG is playing a constructive role in improving the operations of PRIA CETP (Patalganga Rasayani Industrial Association Combined Effluent Treatment Plant) and has played a major role in proving PRIA CETP to be the best run CETP. Hazardous waste is managed with the help of incinerators and the secured landfill site at our Vadodara complex built for the safe disposal of hazardous waste. The ISO-14001-2004 certification is also in place at all our three manufacturing locations and at the newly acquired sites. Our future plans include the introduction of Zero Garbage Scheme for solid waste disposal at Vadodara, Gandhar and polyester sites in line with the existing one at Nagothane. CDM projects that reduce the greenhouse gas emissions have been identified and recommended for implementation under the United Nations Framework Convention on Climate Change (UNFCCC). CDM in particular, is expected to contribute to sustainable development, mitigate climate change and assist in compliance with our emission reduction commitments. Dhirubhai Ambani SSC – Merit Reward Scheme and Dhirubhai Ambani Undergraduate Scholarship Scheme The Dhirubhai Ambani Foundation instituted SSC Merit Reward Scheme and the Undergraduate Scholarship Scheme in 1996. The objective of the schemes has been to encourage and assist district level meritorious students to pursue higher education in different vocations to help enhance the Human Resource potential of the country. Both the schemes are currently applicable in the states of Maharashtra, Gujarat, Goa and the Union Territory of Daman, Diu, Dadra Nagar Haveli. The first three in overall merit and one physically challenged student securing the highest marks in each of the 64 districts at the annual SSC and HSC examinations of the State Boards, as well as the first ten CBSE students from Maharashtra and Gujarat and three from Goa, in the merit list of CBSE New Delhi, are eligible for the Rewards and Scholarship. The total number of eligible students for the Rewards and Scholarship has grown from 294 in 1996 to 624 in 2007. The SSC Merit Reward consists of Rs. 3,000/- in cash and a bicycle. The physically challenged meritorious student is rewarded with Rs. 6,000/-. The Undergraduate Scholarship for Meritorious HSC students, payable each year till graduation ranges between Rs. 9,500/- to Rs. 31,500/- p.a. depending on the stream chosen by the scholar. The Foundation informs eligible students of their selection for the Rewards/ Scholarship, on receipt of the district / state wise merit list from the respective Boards of Education who conduct class X and XII examinations. Annual public felicitation functions are held at the doorsteps of the meritorious students. RELIANCE INDUSTRIES LIMITED 37 The Foundation has presented 5,344 SSC rewards and undergraduate scholarships during the past eleven years of which 581 have been presented to physically challenged students. 282 meritorious students received the SSC Merit Rewards during 2006 while 320 received the Scholarships at eight felicitation functions held in Maharashtra, four in Gujarat and one at Goa. The school has 1015 students and 170 teachers and staff. The faculty members come with rich experience in national and international curricula. In a fitting tribute to the school’s mission of offering worldclass education, the school’s students who took the ICSE, IGCSE and the IB examinations in 2007 have achieved extremely commendable results. To offer equal opportunities to the physically challenged meritorious students, the Foundation has extended the Rewards and Scholarship Schemes for the first five physically challenged students from all the states and Union Territories of India that provide DAF the list of such meritorious students. A total of 20 physically challenged meritorious students from the state of Rajasthan received the SSC Merit Rewards and the Undergraduate scholarships for the year 2005 and 2006. Reliance Kargil Scholarship Scheme As a tribute to the martyrs/disabled in the Kargil war in 1999, our employees contributed Rs. 1.55 crore to form a corpus fund for the welfare of the dependant children of the martyrs/disabled; 43 children of families of martyrs/disabled soldiers of the Kargil war received financial support for their education from Std. V to XII under the scheme during 2006. Dhirubhai Ambani Scholars Scheme for meritorious children of Reliance shareholders The Scheme was announced in 2003 as a one-time measure to commemorate the silver jubilee of our listing on the Bombay Stock Exchange. In the first year, 900 meritorious children of our shareholders received the scholarship. A total of 695 scholars having secured more than 60% mark at university examination of their undergraduate studies, continue to receive the scholarship for the third year for their education leading to a Degree/Diploma course. Of these, 593 scholars are pursuing degree courses in Engineering, Medicine and allied subjects while the rest 102 completed their degree courses in commerce, arts and law faculties. The Dhirubhai Ambani International School The Dhirubhai Ambani International School prepares students for the Indian Certificate of Secondary Education (ICSE), Cambridge University’s International General Certificate of Secondary Education (IGCSE) and the International Baccalaureate Diploma (IB) examinations. Since 2006, the school’s primary school program also stands enriched with its membership in the Cambridge International Primary Program (CIPP). Beyond just a single-minded pursuit of academic excellence, the school strives for children’s all-round development. It sees academic excellence as an outcome of what it does every day at the school. It continuously strives to synergize the creative and analytical skills of students, and follows a synthesis of internationally acclaimed educational practices with India’s rich educational and cultural heritage. The 29 students from the school who appeared in the ICSE examinations held in March 2007 have achieved remarkable results. These students represent the second batch of ICSE Class 10 - the Class of 2007. (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) 10 students scored above 90%; 9 students scored between 90 and 85%; 7 students scored between 85 and 80%; 3 students scored between 80 and 75%; The topper from the school scored 96.43%; The average score achieved by our students is 88%. Dhirubhai Ambani International School ICSE Class 10 Results - The Class of 2007 s t n e d u t s f o % 35 30 25 20 15 10 5 0 >90 85 to 90 80 to 85 80 to 75 % of marks This commendable performance builds on what the first batch of our ICSE students - the Class of 2006, accomplished - an average score of 87%. The IB Diploma Program is a rigorous two-year pre-university course and is well recognized by the world’s leading universities. The IB offers its programs to approximately 554,000 students in 125 countries. Candidates can opt for either the IB Diploma or the IB Certificate. World-wide, typically 80% of the students are awarded the Diploma, and the rest of them the IB Certificate. Of the 71 students of the Class of 2007, 66 received the Diploma, accounting for 93% of our students, and five finished with certificates, comprising 7% of the school’s students; generally, world-wide 20% of the students finish with a certificate. The average Diploma score of this class is 35 (out of 45), against the world average of about 30 points. Seven students achieved scores of 40 or above, while 28 students achieved scores of 36 or above. In 24 out of the 27 subjects for which the candidates entered, the school is way ahead of the world averages. 38 Growth is Life Dhirubhai Ambani International School IB Diploma Results - The Class of 2007 Dhirubhai Ambani International School IGCSE Class 10 Results - The Class of 2007 s t n e d u t s f o % 30 25 20 15 10 5 0 40 to 45 36 to 39 32 to 35 28 to 31 <28 Exam score (out of 45) d e v e i h c a s e d a r g f o % 60 50 40 30 20 10 0 * A A B Grades C

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