Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

Management Discussion & Analysis for the Year Ended 31st March, 1998 by joI8Pj


									               43RD CONSECUTIVE QUARTER IN A ROW OF

                   NET PROFIT OF OVER RS. 2000 CRORES

                   NET PROFIT UP 20% AT RS. 2,106 CRORES

           SALES OF RS. 21,564 CRORES, AN INCREASE OF 57%,


          EXPORTS OF RS. 2,292 CRORES, AN INCREASE OF 200%


Mumbai, January 31, 2001 - Reliance Industries Limited, has announced its unaudited
results for nine months ended December 31, 2000, establishing several new corporate
records of Sales of Rs. 21,564 crores (US $ 4,619 million) and Net Profit of Rs. 2,106 crores
(US $ 451 million) - the highest in the private sector.

 Sales (excluding merchant sales) for nine months ended December 31, 2000 were Rs.
  19,287 crores (US$ 4,132 million) against Rs. 13,707 crores for the corresponding period,
  an increase of 41%

 Operating Profit (PBDIT) for nine months increased by 28% to Rs 4,049 crores (US$ 867
  million) as against Rs 3,153 crores for the corresponding period.

 Cash Profit increased to Rs. 3,124 crores (US$ 669 million) against Rs. 2,454 crores for
  the corresponding period, an increase of 27%.

 Net Profit of Rs. 2,106 crores (US$ 451 million) against Rs. 1,749 crores for the
  corresponding period, an increase of 20%.

 The total paid up equity share capital has remained unchanged at Rs.1,054 crores (US $
  226 million).

 Earnings Per Share (EPS) for the nine months is Rs. 19.9 (US $ 0.43) & Cash
  Earnings Per Share (CEPS) for the nine months is Rs. 29.6 (US $ 0.63).
  (Annualised Earnings Per Share (EPS) is Rs. 26.6 (US $ 0.57) & Cash Earnings Per Share
  (CEPS) is Rs. 39.5 (US $ 0.85)
 The company’s contribution to the national exchequer in the form of various taxes
  increased by 12% to Rs. 3,073 Crores (US $ 658 million) over the corresponding period.

 The Company’s production increased from 6.4 million tonnes to 7.9 million tonnes,
  representing a 24% growth.

 Manufactured exports including deemed exports increased by over 200% to Rs 2,292
  crores (US $ 491 million) as against Rs 759 crores for the corresponding previous period.
  Total Exports including merchant exports of petroleum products were Rs 4,569 crores (US
  $ 979 million).

 Total Exports from Reliance Industries Ltd. (RIL) and Reliance Petroleum Ltd. (RPL)
  during the nine months were over Rs. 7000 crores (US $ 1,500 million). This ranks
  Reliance as the largest exporter from India.

 The Company’s operations have helped the nation save precious foreign exchange to
  the tune of Rs. 13,153 crores (US $ 2,818 million).

 The Company has reconciled the accounts with US GAAP. Reconciliation of Net
  Profit as per Indian GAAP and US GAAP is as under:

                                  Indian GAAP                              US GAAP

                            Rs Crs              $ MM              Rs Crs             $ MM

      Net Profit             2,106               451               1,754              376

      Difference                                                   (352)              (75)

      % Difference                                                 (17%)

The difference is mainly on account of foreign exchange fluctuation and deferred taxation.

It may, however be noted that as about 88% of the revenue of the Company is earned in
India the true and fair picture is indicated as per Indian GAAP.
Commenting on the results, Mr. Anil D. Ambani, Managing Director, Reliance Industries

"Record high levels of energy prices, leading to a steep increase in feedstock costs, and
simultaneous sharp declines in selling prices of most products, characterised the operating
environment for the third quarter, placing unprecedented pressures on margins of
petrochemicals companies worldwide.

We are encouraged that Reliance has maintained its track record of consistent financial
performance, despite these all-round pressures on profitability.

Reliance has now reported higher quarter-on-quarter sales and profits for 43 consecutive
quarters in a row, through several economic and business cycles. This is a reflection of
Reliance's continuing market leadership, and the overall global competitiveness of its

During the first nine months, Reliance has emerged as India's largest manufacturer exporter,
achieving exports of US$ 1.5 billion (Rs. 7,000 crores). The record levels of export revenues
demonstrate the international quality of Reliance's products, and contribute to diversification of

Reliance extends its sympathy to the families of all persons affected by the recent earthquake
in Gujarat.

Reliance is working in close co-operation with the government and the armed forces, and has
deployed all available human and material resources, including doctors and paramedics, other
manpower, communications, power and earthmoving equipment, vehicles, aircraft, medical
supplies, and continuous provision of food and water, besides an initial monetary contribution
of Rs. 5 crores (US$ 1.1 million) and commitment of a total of Rs 15 crores (US$ 3.2 million), to
actively support relief measures in the state, and to contribute to restoration of normalcy."

For the year ending March 2001 the Company expects to announce its results in the
second half of April, 2001.
Management Discussion & Analysis for the Nine Months Ended December 31, 2000

Sales for the nine months ended December 31, 2000 were Rs. 21,564 crores (US $ 4,619
million), up 57 % from the corresponding period.

Sales (excluding merchant sales) were Rs. 19,287 crores (US$ 4,132 million), an
increase of 41 %.

Sales include inter-divisional transfers of Rs. 3,726 crores (US$ 798) against Rs. 3,708 crores
in the corresponding period.

Sales growth of 41 % during the nine months (excluding merchant sales) is comprised of
the positive impact of 32% from volume growth, and 9 % increase in product selling prices, as
compared to the corresponding period.

Net profit for the nine months increased 20 % to Rs. 2,106 crores (US $ 451 million).

Total Exports from Reliance Industries Ltd. (RIL) and Reliance Petroleum Ltd. (RPL) during the
nine months were over Rs. 7000 crores (US $ 1,500 million). This ranks Reliance as the
largest manufacturer exporter in India.

RIL’s manufactured exports, including deemed exports, increased by over 200 % to Rs.
2,292 crores (US $ 491 million), as against Rs. 759 crores (US $ 174 million) for the
corresponding period.

The increased exports demonstrate the international quality of Reliance’s products, and
reflect the diversification of its markets.

During the period under review, total production volume increased 24 % to 7.9 million
tonnes, from 6.4 million tonnes in the corresponding period. This increase is primarily
attributable to the commissioning of the integrated Jamnagar petrochemicals complex,
subsequent to the close of the corresponding period last year.

Financial Review

Prices of major feedstocks increased sharply during the period under review, primarily as a
result of the steep rise in crude oil prices.
The rise in product selling prices lagged the increase in feedstock costs, leading to all round
pressures on profitability.

Despite these pressures, Reliance’s operating profit, before other income, increased 41 % to
Rs. 3,844 crores (US $ 823 million).

Operating margin remained largely stable at 20 %, as a result of the following:

      increased volumes
      higher product selling prices, partially offsetting increased feedstock costs
      continued focus on efficiency, productivity and cost reduction
      higher degree of integration and value addition, as a result of commissioning of the
      paraxylene facilities at Jamnagar.

Other income decreased 52 % to Rs. 205 crores (US $ 44 million), primarily on account of
lower interest income, arising from the reduction in foreign currency monetary assets, and
conversion of interest bearing Optionally Fully Convertible Debentures of RPL into equity.

The 32 % increase in interest expenses and 44 % increase in depreciation reflects the impact
of capitalisation of the new plants at the integrated Jamnagar petrochemicals complex.

Capex during the nine months under review was Rs. 400 crores (US $ 86 million), mainly
representing normal capital expenditure.

During the period, the Company has repatriated Rs. 3,401 crores (US$ 749 million
approximately) from its foreign currency monetary assets.

Export revenues alone cover the foreign exchange denominated interest liabilities on
foreign exchange debt, by more than 4 times.

Business Review

Polyester (PFY, PSF, PET)

Reliance has been ranked the 2nd largest polyester producer in the world, and the largest
polyester manufacturer in India, with a market share of 52 %.
Reliance’s production volumes in the polyester business (PFY, PSF and PET) increased 16 %
during the period under review, to 560,000 tonnes - higher than the growth rates achieved by
the industry.

Demand growth for polyester, for the period under review, was flat, in line with the general
slowdown in the economy. However, PET demand growth was buoyant, at 31%.

The annual compounded growth rates in polyester consumption in India have been in double
digits over the past more than 2 decades. Per capita polyester consumption in the country also
still remains amongst the lowest in the world. This reflects the continued potential for strong
demand growth in the future.

Reliance has increased its focus on speciality products in the polyester business. This has
enhanced market share, offers a wider product range, improves margins, and provides a
superior overall value proposition to customers.

During the period under review, 63% of PSF production, and 19% of PFY production
represented speciality products, contributing a premium of 5 – 25 % over commodity

Reliance has continued its active participation in the restructuring of the domestic polyester
industry. During the first nine months of the year, Reliance has acquired control over one more
polyester manufacturing facility, DCL Polyester Ltd., with a capacity of 40,000 tonnes per

This takes the total capacity acquired over the last 2 years to 1,80,000 tonnes per annum.

Fibre Intermediates (PX, PTA and MEG)

Reliance is the world’s 3rd largest producer of paraxylene, and the world’s 4th largest producer
of PTA.

Within the country, Reliance is the largest manufacturer of PX, PTA and MEG, with a market
share of over 80%.

Production volumes in the fibre intermediates business (PX , PTA and MEG) were up 45 % to
2.18 million tonnes.

This primarily reflects the impact of commissioning of the 1.4 million tonnes per annum
paraxylene facilities at the integrated Jamnagar petrochemicals complex.
Polymers (PP,PE and PVC)

Reliance is the largest producer of polymers in the country, with a market share of 53%.
Reliance has nearly a million tonnes per year of polypropylene (PP) capacity, and 400,000
tonnes per year of polyethylene (PE) capacity and 300,000 tonnes of polyvinyl chloride (PVC).

Reliance’s polymers business (PP, PE and PVC) reported a 30% increase in production
volumes, to 1.2 tonnes.

This mainly reflects the impact of commissioning of the 600,000 tonnes per annum of PP
capacity at the integrated Jamnagar petrochemicals complex.

Overall demand growth for Reliance’s polymer products was 15 % during the period under
review. Demand for Reliance’s major product, PP (accounting for over 60 % of production),
witnessed exceptionally strong growth rates of 25 % per annum, as a result of the continuing
substitution effect, and its wider acceptability over competing products.

Cracker Products (Ethylene, Propylene and by Products)

Reliance operates the world's largest grassroot, multi-feed cracker at its Hazira petrochemical

During the period under review, Reliance produced 554,000 tonnes of ethylene and 264,000
tonnes of propylene.

Oil & Gas

Reliance holds a 30% interest in an unincorporated Joint Venture with Enron and ONGC,
to develop the proven Panna, Mukta and Tapti (PMT) oil and gas fields. Enron has a 30%
share, and ONGC the balance 40% share.

Oil and gas production from the Panna-Mukta-Tapti Oil and Gas fields recorded further growth,
during the period under review. Oil production increased 20% from 256,000 tonnes to 307,000
tonnes. Gas production was up 2% at 517,000 MTOE (metric tonnes of oil equivalent).

Oil and Gas accounted for 3% of Reliance's revenues during the period under review,
reflecting the impact of increased production, and higher energy prices.
During the nine months, Reliance has, in a 90:10 consortium with Niko Resources of Canada,
been awarded 12 new exploration blocks by the Government, through a process of competitive
international bidding.

These 12 blocks cover a wide range of geological settings, spanning shallow and deep waters.
Together with the 2 blocks awarded to Reliance in the earlier rounds of bidding, this has made
Reliance the country's largest E&P (Exploration and Production) player in the private sector,
with exploration acreage of 1,05,765 sq. kms, off both, the east coast and west coast of India.

The Production Sharing Contracts with the Government have been signed in April 2000.
Development work will begin shortly.
                              DECEMBER 31, 2000

                                                           ( crores, except per share data)
Sr.                Particulars           Quarter Ended    Nine Months          Year ended
No                                        December 31        Ended              March 31
 .                                                        December 31
                                         2000    1999    2000    1999              2000
1.    Sales                              6,555   5,034   21,564   13,707          20,301

2.    Other Income                        51      148     205       426            687
3.    Total Expenditure
          a) Increase/decrease in
               stock in trade            (512)   (539)   (739)     (584)           (344)
          b) Consumption of raw
               materials (incl. Inter-   4,247   3,156   14,235    7,850          11,583
               Divisional Transfers)
          c) Staff cost                  105      104     309       306            375
          d) Excise Duty                 722      671    2,035     1,794          2,452
          e) Other expenditure           638      629    1,880     1,615          2,176
4.    Interest                           294      276     925       699           1,008
5.    Depreciation                       353      258    1,018      705           1,278
6.    Profit before tax                  759      627    2,106     1,749          2,460
7.    Provision for taxation               -       -       -         -              57
8.    Net Profit                         759      627    2,106     1,749          2,403
9.    Paid-up equity share capital       1,054    934    1,054      934           1,054
10.   Reserves excluding revaluation       -       -       -         -            9,865
      reserves (as per balance sheet)
      of previous accounting year
11.   Earnings per share (of Rs. 10)
      from ordinary activities            7.2     6.7     19.9     18.4            22.4
      Basic                               7.2     5.9     19.9     16.3            22.4
12.   Dividend per share                   -       -       -         -             4.00

1.   The unaudited financial results are in accordance with the standard accounting practices
     followed by the Company in preparation of its statutory accounts.

2.   The Company had revalued its Plant and Machinery located at Patalganga and Naroda
     during the financial year 1997-98. Consequent to the revaluation, there is an additional
     charge for depreciation of Rs 201 crores (US $ 43 million) for the period ended
     31st December 2000 and an equivalent amount has been withdrawn from General
     Reserve. This has no impact on profit for the period.

3.   During the quarter ended 31st March 2000, the Company had changed the method of
     providing depreciation from straight-line method (SLM) to written down value (WDV)
     method in respect of certain assets, with effect from April 1, 1999. This has been disclosed
     in the audited balance sheet of the Company for the year ended March 31, 2000. No effect
     of the change has been given in the financial results for the previous period. Had the
     change been given effect to, the depreciation would have been higher by Rs 225 crores
     (US $ 52 million) for the period ended 31st December 1999.

4.   The provision for taxation, as applicable, will be made at the end of the year.

5.   This statement has been placed before the Board at its meeting held on 31 st January 2001
     and approved by it for release.

To top