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Reliance Industries Limited
First Half Results 1999 - 2000
October 20, 1999
Macro Economic Environment
Operating Environment
Financial Performance
Business Review
Shareholder Value Enhancement
Summary
Index
Macroeconomic Environment
GDP Growth Rates (%)
1998 1999 (E) 2000 (E)
Japan -2.8 1.4 1.7China 7.8 7.0 8.2Hong Kong -5.1 1.0 3.5South Korea -5.8 8.1 6.0Singapore 0.3 6.3 5.0Thailand -9.4 5.0 4.1Indonesia -14.5 0.1 5.1India 6.0 6.5 6.5
Source: Research Reports
Improved GDP Outlook for Asia
The Asian economic recovery is well underway - GDP growth in the region may average 5% in the year 2000
Stable Regional Currency Environment
The relative stability in regional currencies is indicative of the improvement in the overall business climate
% change overCurrency 3 months 6 months 1 year
Yen 12.8 11.9 8.9Korean Won -1.4 -0.1 10.2Singapore $ 1.9 1.9 -2.8Thai Baht -5.1 -4.8 -2.7Indonesian Rupiah -15.5 8.4 -1.4Indian Rupee -0.4 -1.2 -2.4
Performance of Regional Stock Markets
Country % changeYTD (US$)
Japan 37China 33Hongkong 25South Korea 38Singapore 41Thailand (3)Indonesia 40India 57
The general improvement in economic prospects is also reflected in buoyant stock market trends
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bre
nt
$/bbl
Low of $9
Current $22.3
Crude prices have moved up sharply - 88% year-on-year
Trends in Crude Prices
Economic Recovery in India
GDP growth estimates revised to 6 - 6.5%
Industrial production growth increased to 6.3% in August 1999 from 5.9% in July 1999
Growth in manufacturing sector at 6.1% in August 1999; electricity sector up 11%
Inflation rate remains at historic lows - WPI at 1.8%
Revival in transportation sector - medium and heavy commercial vehicles production up 63% in H1 1999-00
Cement production up 21% and steel 7% A broad-based economic recovery is underway in India
Operating Environment
International Price Trends - Feedstocks
50100150200250300350400450500550600
$/M
T
Crude-Brent Naphtha PX EDC
The strong uptrend in crude prices has driven key petrochemicals feedstocks higher
International Price Trends - Polyester
250
450
650
850
1050
$/M
T
PTA MEG POY PSF
The average prices for PSF/POY in the first half have been lower than corresponding year ago figures
Domestic Price Trends - Polyester
10
20
30
40
50
60
70
Rs/
Kg
PTA MEG POY PSF
Domestic polyester prices have tracked international trends
International Price Trends - Plastics
300
400
500
600
700
800
900
$/M
T
PE PP PVC
A significant recovery has been witnessed in plastics prices
Domestic Price Trends - Plastics
20
25
30
35
40
45
50
55
Rs/Kg
PE PP PVC
The average plastics selling prices in the first half have been 15%-20% higher than corresponding year ago figures
Factors Contributing to Price Recovery
Stronger than anticipated recovery in regional economies and continued growth in the US and Euroland
A sharp rise in crude prices - driving product prices higher, throughout the petrochemicals chain
Destocking phase over last year - inventories at normal to low levels
Y2K concerns a short term demand factor Restocking by processors Commissioning delays in some ongoing projects -
Formosa Phase II, Petronas/Union Carbide
Petrochemicals prices have been driven up by a combination of cost push and demand pull factors
Outlook for Prices and Margins
Indications are that the bottom of the petrochemicals cycle may be behind us
Demand supply balance improving - no visible capacity growth beyond the year 2001 - several major projects in the region cancelled
Stronger yen and restructuring in Japan’s petrochemicals industry to lead to further rationalisation in the supply side
Eventual weakening in crude oil prices can lead to improvement in margins
RIL’s strategy of selling 10%-15% below landed cost of imports - cushion against any reduction in import dutiesThe global petrochemicals cycle may be turning sooner
than was earlier anticipated
Domestic Demand Supply Position
POY/PSF currently balanced: strong demand growth no new capacities announced - other than RIL rationalisation by RIL leading to more competitive industry structure
Fears of PE/PP surplus unfounded: Non RIL projects running behind schedule New capacities facing technical and quality problems - unable to achieve high operating rates
New capacities subject to export obligations - reduced availability for domestic markets
RIL producing speciality grades not offered by other producers
The concerns over a possible domestic surplus in plastics do not take into consideration the ground realities
Financial Performance
Performance Highlights
Reliance continues to lead the Indian private sector with highest sales, profits, assets, and net worth
Record production level of 3.91 million tonnes in the first half - increase of 13%
400,000 tpa of PP and 930,000 tpa PX commissioned at Jamnagar - balance plants will be commissioned ahead of schedule in the current financial year
Prices of petrochemical products as well as feedstocks have moved up sharply over the last few months
Recent price trends indicate firmness in the short term
Financial Highlights
Sales Rs. 8,673 crores (US $1,989 mn)
Operating Profit Rs.1,713 crores (US $ 393 mn)
Net Interest Cost Rs. 144 crores (US $ 33 mn)
Cash Profit Rs. 1,569 crores (US $ 360 mn)
Net Profit Rs. 1,122 crores (US $ 257 mn)
Annualised CEPS Rs. 33.2 (US $ 0.76)
Annualised EPS Rs. 23.6 (US $ 0.54)First private sector company to report net profit of over
Rs. 1,100 crores in six months
Income Statement
H1 1998-99 H1 1999-00
Rs. Crs. $ mn. Rs. Crs. $ mn. Growth
Sales 7,374 1,736 8,673 1,989 18%
Op. Profit 1,443 339 1,713 393 19%
PBDIT 1,670 393 1,992 457 19%
Interest 347 82 423 97 22%
Depreciation 402 95 447 103 11%
Tax Nil Nil Nil Nil
Net Profit 921 217 1,122 257 22%
Cash Profit 1,323 311 1,569 360 19%
First private sector company to report net profit of over Rs. 1,100 crores in six months
US GAAP/ IAS Reconciliation
Indian GAAP US GAAP IAS
Rs. Crs. $ mn Rs. Crs. $ mn Rs. Crs. $ mn
Net Profit 1,122 257 1,031 236 816 187
Difference (90) (21) (306) (70)
(8% ) (27% )
The major difference is primarily on account of higher deferred taxation, arising from imposition of surcharge on corporate tax
Business Mix
Reliance remains focussed on the petrochemicals business
Textiles1.0%
Polyester21.8%
Oil and Gas2.0%
Chemicals14.9%
Plastics & Int.
38.6%
Fibre Int.21.8%
Growth in Production and Sales
Sales revenue growth of 18%, contributed by:
–Impact of sales volume growth 13%
–Impact of increase in avg. product prices 5%
Robust growth in domestic demand - over 95% of production sold within India
Value added export opportunities captured - Exports at Rs. 421 crores (US $ 97 mn)
Production volume increased 13% to a record level of 3.91
million tonnes - on course to achieve forecast production
level of 8 - 8.5 million tonnes for the full year
Enhanced Operating Margins
Operating margins increased to 19.8% in H1 99-00.
This was the result of :
strong volume growth higher product prices mitigating increased feedstock costs continued focus on efficiency, productivity and costs rationalisation of customs duty
All plants operated at rated capacity during the period
Profitability Ratios
H1 1998-99 H1 1999-00
OPM % 19.6 19.8
NPM % 12.5 12.9
RONW % 20.4 23.4
EPS – Rs. ($) 19.6($0.46) 23.6($0.54)
Cash EPS – Rs. ($) 28.2($0.67) 33.2($0.76)
Increased OPM, Improved NPM and RONW
Annualised Cash EPS of Rs. 33.2 is discounted 7 times at current price
Liquidity Ratios
30 Sep 98 30 Sept 99
Gross Debt : Equity 0.93 0.98
Net Debt: Equity 0.48 0.52
Net Gearing (% ) 33.0 35.1
Net Interest Cover 6.4 5.5
Net Debt/ Cash Flow 1.6 1.6
Conservative liquidity ratios reflect RIL’s financial strength
Conservative Financial Management
Reliance is the only Indian company having international ratings constrained by the sovereign ceiling
Net gearing of 35% reflects conservative policies
Net Debt: Cash Flow ratio of 1.6 indicates the company’s ability to retire its entire debt in less than 2 years
Forex exposure on account of international borrowings of $ 1.3 billion fully hedged by dollar assets
Annual Forex debt service outflow of about $ 110 mn. adequately covered by export revenues alone
Increasing export revenues provide additional hedge
Exports To Rise Significantly
Exports revenues up 47% to Rs. 421 crores ($ 97
mn)
Export revenues will increase about 200% to $ 400-
500 mn (around Rs. 2,000 crores) p.a. by the year
2000-01
RIL’s imports of feedstocks will drop with the
commissioning of the Jamnagar complex
RIL to have substantial net foreign exchange
earnings by
2000-01
Reliance to emerge amongst the largest manufacturer exporters from the country
Y2K Compliance
All mission critical systems have been made Y2K capable
Remediation of some non-critical systems will extend in last quarter of 1999, due to plant scheduling and equipment lead times
Contingency plans in place to control any risk arising out of year 2000 problems
Y2K costs unlikely to have any significant impact on financial position or results of operations
All major customers, international suppliers, and banks are already Y2K compliant
Y2K issues are not expected to pose any material risk to RIL’s operations
Business Review
Business Review - Polyester
Industry Reliance
(Prodn. in‘000 tonnes)
H198-99
H199-00
%change
H198-99
H199-00
%change
Polyester(PFY, PSF, PET)
640 684 7% 292 318 9%
Fibre Int.(PTA, MEG)
766 865 13% 636 745 17%
RIL emerges as the 5th largest PFY producer in the world
The full impact of the Raymond Synthetics’ capacity of 74,000 tpa to be reflected in the next year
Business Review - Polymers
Industry Reliance
(Prodn. in ‘000tonnes)
H198-99
H199-00
%change
H198-99
H199-00
%change
Plastics(PE, PP, PVC)
870 1061 22% 516 583 13%
Polymers demand grew 14% in the first half
The full impact of the 60% increase in RIL’s plastics capacity will come through in the second half
Business Review - Oil and Gas
Reliance’s prodn. H1 98-99 H1 99-00 % change
Oil (in KT) 133 167 25%
Gas (in KT) 249 331 33%
Strong growth in production volumes - gas production up sharply from 5.7 to 7.6 mm cu. metres per day
Positive impact of higher oil and gas prices
Leading Market Shares
RIL maintains its market leadership through its nationwide marketing and distribution network, product development activities and strong customer relationships
Demand Growth Potential - Polyester
China consumes about 3 times as much polyester as India - indicating strong potential for continuing demand growth
Polyester* ConsumptionTotal (mn tpa) Per capita (kgs)
India 1106 1.1
China 3755 3.0
US 2203 7.8
World 15268 2.5
*Data for PFY and PSF
Strong domestic demand growth likely to continue with China consuming nearly 4 times as much plastics as India
Plastics* Consumption
Total (mn tpa) Per capita (kgs)
India 2308 2.4
China 11785 9.6
US 19487 72.2
World 77012 13.2
*Data for PE,PP, and PVC
Demand Growth Potential - Plastics
Robust Growth in Domestic Demand
Historic Future growth CARG Estimates Growth Drivers(last 5 yrs) (per annum)
Polyester 14% 10%-15% - lower prices(PFY, PSF, PET) - substitution of
cotton
Fibre Intermed. 17% 10%-15%- growth in polyester PTA, MEG) demand
Plastics 12% 12%-15% - JPMA implementation(PE, PP, PVC) - edible oil packaging
- Substitution of traditional
materials like metals, wood, glass- Convenience, presentation
RIL’s Acquisition Strategy
Growth over the past 2 decades has been achieved mainly through the organic route
Future growth to be driven by a mix of acquisition and fresh capacity creation
The global petrochemicals industry is undergoing a consolidation phase in pursuit of scale, focus and efficiencies - Dow/Union Carbide, Equistar, Montell
The domestic industry too will need to restructure in order to ensure competitiveness
Reliance will participate in acquisition opportunities to increase business competitiveness and enhance shareholder value
• RIL has acquired control of 140,000 tpa of polyester capacity in 3 separate deals over the last 2 years
• Achieved improvement in market share, diversification of manufacturing base, and increase in overall integration
• RIL’s acquisition strategy is focused at maintaining market leadership in a regional excess supply context
• Reliance to leverage its technical skills, financial strength, nation wide network, customer relationships, and access to key inputs, in creating value through acquisitions
• Reliance working towards a more competitive industry structure by leveraging its strengths to acquire capacities
Rationalising Indian Polyester Industry
Capital Allocation Framework
RIL will allocate upto 50% of its internal accruals over the next 3 years for capacity expansion/ debottlenecking
Reliance will also pursue other avenues for deployment of its cash flows such as:
acquisition opportunities in its business areas debt reduction enhanced distributions to shareholders, through appropriate dividend and stock buyback policies (subject to an appropriate regulatory framework)
Capital Allocation Framework
RIL is committed to deployment of its future cash flows in a manner that maximises shareholder value
Capital Allocation Framework
Profit growth and capital productivity will receive due emphasis
Reliance’s profit oriented growth strategy will: enable it to achieve significantly higher rates of return on capital
require a level of investment that is significantly lower than current capacity replacement costs
strengthen its overall cost and competitive position
enhance its overall market leadership improve its product mix, customer satisfaction and customer reach
RIL will spend Rs. 1,000 crores per year on expansion and de-bottlenecking programmes over the next 3 years
This is well below the indicated level of 50% of expected internal cash accruals
Additional capacities to be implemented at around 50% of the current replacement cost of comparable assets
This will ensure lower capital intensity and substantially higher returns
Detailed feasibility studies currently being conducted
Capex Plans for next 3 Years
RIL will implement necessary capex plans to maintain and enhance its leadership in growing markets
Reliance intends to double its polyester capacity, with the focus on PFY
Reliance aims to be amongst the top 3 polyester producers in the world
Reliance aims to be the lowest cost, and the most competitive, polyester producer in the world
Demand growth for polyester continues to be in double digits - PFY demand alone is increasing by 100,000 TPA
Reliance will correspondingly increase capacity of its existing PTA plants to maintain the level of integration
Polyester Business
RIL’s polyester capacity will cross 1 million TPA over the next 3 years
Reliance intends to de-bottleneck its existing multi-feed naphtha cracker from 750,000 tpa to nearly 1 million tpa of ethylene
Simultaneous de-bottlenecking of downstream capacities to achieve higher production of polymers and other cracker products
Domestic polymer consumption has been increasing at compounded double-digit growth rates
Polymers Business
The debottlenecking of the cracker will be achieved at marginal capital costs
Shareholder Value Enhancement
Key Value Drivers
Capex programme at Jamnagar nearing completion
Continuing strong growth in overall volumes
Upside from any further recovery in the petrochemicals cycle
Improvement in capital efficiency and productivity
Capital allocation framework transparently laid down for the future
Reliance is committed to enhancing shareholder value through appropriate business and financial strategies
Unlocking Hidden Values
RIL’s 50% stake in RPL has a market value of Rs. 15,000 crores (US$ 3.5 billion)
30% Participating interest in Panna, Mukta and Tapti oil and gas fields recently valued at Rs. 2,600 crores (US $ 600 mn) in Enron restructuring
RIL’s equity stakes in BSES and L&T have market value of Rs. 1000 crores (US $ 250 mn)
Cash balances of over Rs. 6000 crores (US $ 1.5 bn) - over Rs. 60 per RIL share
Replacement value of RIL’s manufacturing assets put at Rs. 40,000 crores (US $ 9 bn) - over Rs. 400 per RIL share
Total value of the above around Rs. 65,000 crs (nearly US $ 15 bn) - over Rs. 650 per RIL share
Reliance will endeavour to take all necessary steps to unlock hidden values for enhancing shareholder value
Creeping Acquisition of RIL Shares
The promoters have acquired around 20 million shares of RIL (2% of equity) from secondary markets
Purchase of shares in full compliance of SEBI guidelines for creeping acquisitions
Under SEBI guidelines, promoters have flexibility to buy additional 3% of equity (around 30 million shares) within the same 12 month period
Acquisition reflects promoters’ strong commitment to RIL, and their firm belief in under-valuation of shares
The promoters have affirmed their commitment to enhance their shareholding in RIL, utilising the creeping provisions to the fullest extent
RIL’s Shareholding Pattern
The shareholding has become increasingly institutionalised - retail shareholding has declined from 50% to around 25% currently
Effective floating stock is much lower - loyal base of over 2.2 million small investors
Category %
Promoters 28FIIs 16GDRs 8NRI / OCBs 2Indian FIs / MFs/ Banks 21Public 25
-----100
Price Performance of RIL’s Stock
RIL’s market capitalisation has increased to over Rs. 25,000 crores (US$ 6 billion)
Increase of over Rs. 12,000 crores (nearly $ 3 billion) since January 1999
% change in the local stock price in Rs.
Absolute Outperformance
to Sensex
3 years 142% + 85%
1 year 119% + 48%
Year To Date 91% + 32%
Valuation Comparison with Peer Group
RIL’s stock price is attractively valued in comparison to its peer group companies in the West
PE Relative PE
Dupont 25 1.0
Mobil-Exxon 28 1.1
Shell 29 1.1
ICI 21 1.1
Solvay 16 1.0
RIL 12 0.6
Summary
Summary
Commissioning of the Jamnagar petrochemicals complex will take volumes to over 10 million tonnes next year
Consolidation of RPL’s earnings, significant reduction in capital work in progress, and optimal capital allocation, to drive EVA, ROCE and RONW higher in the future
Significant upside from any further improvement in petrochemicals prices and margins
Value enhancing acquisitions and fresh capacity creation at marginal costs to drive profit oriented volume growth over the next few yearsRIL has moved to the top ranks of the international
petrochemicals industry, on the strength of its world class plants and demonstrated global competitiveness
Reliance Petroleum
Background
Global Competitiveness
Regulatory Environment
Marketing and Distribution
Financial Highlights
Index
Background
World’s Largest Grassroot Refinery
RPL’s 27 million tpa refinery at Jamnagar in Gujarat is the world’s largest grassroots refinery
The mega refinery will account for over 25% of India’s total refining capacity upon full commissioning
Phase wise commissioning currently underway - expected to be completed ahead of schedule this year
Output of controlled products being lifted and marketed by public sector oil companies - IOC, BPCL and HPCL
Unique positioning in the global context - a world class, state-of-the-art refinery in a fast growing market
A Fast Growing Domestic Market
Current Indian per capita consumption levels very low at 50% of Chinese, and 2% of US, levels
Upside potential with the recovery in overall economic growth, and improving business/consumer confidence
Adequate demand supply deficits in the country for all of RPL’s products, except gasoline
Superior quality gasoline (meeting California specs) from RPL’s refinery to target suitable export markets
The hugely deficit Indian market provides a ready home for virtually all of RPL’s production
RPL - Far Ahead of the Competition
Year ofcommissioning
Installedcapacity
Nelson’sComplexity Index
HPCL, Bombay 1954 5.50 4.07HPCL, Visakh 1957 4.50 3.27IOC, Guwahati 1962 1.00 3.16IOC, Barauni 1964 3.30 3.83IOC, Gujarat 1965 9.50 3.35IOC, Haldia 1974 3.75 4.81IOC, Mathura 1982 7.50 3.28CRL, Cochin 1966 7.50 4.97MRL, Madras 1969 6.50 3.59BR & PL, Assam 1979 2.35 4.04MRPL, Mangalore 1996 3.00 6.50IOC, Panipat 1998 6.00 6.31RPL, Jamnagar 1999 27.0 9.93
RPL is the most modern refinery in India with the highest complexity and greatest scope for value addition
Reliance’s investments at Jamnagar represent 5% of gross assets of the entire Indian corporate sector
The output from the Jamnagar complex will make up around 4% of total turnover of the Indian corporate sector
The multiplier effect of activities at the Jamnagr complex will be around Rs. 112,000 crores (US$ 26 billion) - equal to around 6.5% of India’s GDP
The production at Jamnagr will result in import substitution of US$ 5 billion
The Jamnagar complex will contribute Rs. 7,000 crores (US$ 1.6 billion) each year to the national exchequer - around 7% of total tax revenues of the Indian government
Major Contribution to the Nation
Global Competitiveness
Elements of Global Competitiveness
Economies of scale
Higher complexity
State of the art technology
Enhanced integration
Efficient logistics
Superior product mix
Optimum financing costs
Supportive regulatory framework
Located in a deficit and growing market
Economies of Scale
RPL’s per unit capital costs are 30% -60% lower than other recently completed Indian and international refineries, despite its higher complexity
RPL enjoys amongst the lowest capital and operating cost positions in Asia
Refining Company Com-missioningCapacity
Capital Cost
Cost per unit capacity Nelson
Year (M bpsd) (Million $)($ per bpd) Index
MRPL, India 1996 60 670 11.2 6.50
Shell, Malaysia 1996 125 1978 15.8 4.14
Star Petroleum,Malaysia 1996 150 1820 12.1 -
IOC, Panipat, India 1998 120 986 8.2 6.31
RPL (Only Refinery) 1999 540 3209 5.9 9.93
Jamnagar Complex 1999 13.77
Higher Complexity - Superior Margins
One of the most complex refineries in Asia
Nelson’s index of nearly 14 (including petrochemicals complex) compared to about 5 for average Asian refinery
Higher complexity due to a unique configuration comprising FCC, Coker, and Reformer, and integration with downstream petrochemicals and power plants
Deeper conversion leads to higher GRMs as compared to domestic, regional, and global peers
Enables maximisation of deficit middle distillate products and minimisation of bottom-of-the-barrel output
Unique configuration and integration results in significantly higher margins compared to peer group
Benefits of Integration
RPL’s refinery is fully integrated with petrochemicals, power plants, a captive port and related infrastructure
Combined investment of over Rs. 24,000 crores (US$ 6 billion) is the largest made at a single location in India by any private sector group
Key feedstock and product linkages lead to higher efficiencies and enhanced value addition
25%-30% of refinery’s total production (mainly reformate, naphtha, propylene, and coke) to be consumed captively within the group
Substantial savings in freight and incidental costsSignificant downstream linkages constitute a unique dimension of RPL’s global competitiveness
Efficient Logistics
Access to world class fully integrated logistics for product handling and evacuation
World scale captive port at Jamnagar Largest petroleum terminal in India with
capacity to handle 50 MMT - more than India’s entire crude imports
Only all weather deep sea port in India Can receive U/VLCCs carrying over 300,000
tonnes of crude round the year Dual SPMs and sub-sea pipelines for efficient
unloading and movement of crude
India’s largest tank farm with capacity of 3.5 MMT - around 20% of tank farm capacity of the Indian petroleum sector
Efficient Logistics
India’s largest product despatch terminal (capacity 10 MMT) with facilities for movement of products by road, rail and sea
Distribution Upcoming Vadinar Kandla pipeline to provide
access to the deficit North West market through the Kandla-Bhatinda pipeline
Strategic stake in Petronet India, the parent company implementing new pipeline networks in the country
Faster turn around and significantly lower crude and product handling costs add to the competitive edge
Efficient Crude Procurement
RPL is permitted to directly import its crude requirements - opportunity for cost savings through efficient procurement
RPL’s refinery has flexibility to process virtually any traded crude neat or in blend - benefits from price differentials
Most proximate location in India to crude surplus regions of the Middle East
World class in-house crude procurement planning and processing group to optimise procurement of crude
World class systems for optimising the supply chain and maximising operating margins - distinct edge over public sector refiners
Superior Product Specifications
Technical capability to deliver world class quality
products, even beyond Euro II norms HSD with less than 0.05% sulphur (stipulated max
0.25% for year 2000) gasoline adhering to California specifications Unleaded gasoline with benzene less than 1%
Decanalisation of exports of petroleum products
provides RPL opportunities for international product
swaps
RPL’s superior product quality will give it a competitive edge in domestic and export markets
Regulatory Environment
Oil Sector Reforms
Marketing of all products except gasoline, diesel,
kerosene, LPG and ATF (aviation turbine fuel)
decontrolled
The 5 controlled products can only be marketed by
oil PSUs during the transition period upto 2002
Refinery gate pricing for controlled products, based
on tariff adjusted import parity principle
10-15% tariff differential assured for domestic
refineries for the first 5 years to provide level
playing fieldReforms allow efficient new producers to earn excess profits - no upside potential for old refineries under the APM
Fiscal Benefits available to RPL
Income tax holiday for a period of 7 years
Availability of sales tax benefits as per Government of Gujarat policy (upto 90% of the project cost for a period of 14 years)
Government has announced several fiscal incentives to promote private sector investment in the refining sector
Marketing and Distribution
Marketing Arrangements - Till 2002
25%-30% of RPL’s production will be consumed captively (mainly, reformate, naphtha, propylene, and coke)
Arrangements in place for marketing controlled output (around 60% of total production) to oil PSUs - 50% to IOC, and 25% each to BPCL and HPCL
All products, except gasoline, to be fully absorbed in the deficit domestic markets
Marketing arrangements are in place in respect of RPL’s entire output of controlled and decontrolled products
Marketing Strategy Post 2002
RPL will be free to market all products directly, post the transition period beyond 2002
The existing agreements between RPL and IOC already contemplate formation of a 50:50 joint venture for marketing part of RPL’s production of controlled products post 2002
Potential disinvestment/strategic sale of government shareholding in marketing PSUs (IBP, HPCL, BPCL) may provide attractive opportunities
Strong cash flows provide flexibility with regard to future plans for marketing and distribution of products
Financial Highlights
Financial Management
Total capital outlay of Rs. 14,250 crores (US$ 3.4 billion) for the refinery project
Conservative gross debt:equity ratio of below 1:1 despite the capital intensive nature of the project
Foreign exchange component in debt restricted to less than 4% of the total project cost
Significant cash flows from the first full year of operations provide ability to gradually pay down debt
Debt:equity ratio likely to come down to an extremely conservative 0.5:1 over the next few yearsFinancing policies have been geared towards
minimising risks in the project implementation stage
Price Performance of RPL’s Stock
RPL’s market capitalisation has increased to over Rs. 20,000 crores (nearly US$ 5 billion)
RPL GDRs are now listed and traded on the Luxembourg stock exchange
% change in the local stock price in Rs.
Absolute Outperformance
to Sensex
3 years 449% + 392%
1 year 192% + 121%
Year To Date 188% + 129%
Shareholding Pattern
Large promoters’ holding reflects very strong commitment
Daily trading volumes have crossed 15 million shares
RPL enjoys the support of over 2.3 million retail investors
Fully diluted equity of Rs. 5,200 crores (US$ 1.2 billion)
% equity
Reliance group 64GDRs 7Financial Institutions 9FIIs 1Public 19
-----100
Performance Outlook for 2000-01
RPL likely to operate at 100% capacity in the next financial year ending March 2001
Rated Asia’s most competitive refinery, in a recent benchmarking study - highest cash margins
Comparable to RIL in size: Turnover of Rs. 22,000 crores (US$ 5 billion) in
first full year of operations Likely to generate significant cash flows and
profits
RPL will rank among the top 5 companies in India in assets, net worth, sales and profits from the very first year
Reliance
India’s World Class Corporation