Reliance Industries Limited

Financial Presentation

April, 1999

A. Economic Environment

B. Financial Performance

C. Business Review and Strategy

D. Jamnagar Complex

- Reliance Industries

- Reliance Petroleum

E. Summary and Outlook

Index

Economic Environment

Stable Economic Outlook for India

GDP Growth Rates (1999)

2.3%

-4.0%

1.8%2.5%

3.7%

0.9%

7.0%

5.6%

-0.5% -0.5% -1.3%

-5%

-3%

-1%

1%

3%

5%

7%

Source: Morgan Stanley

Most Asian economies have begun the recovery process -

India remains among the better performers

Indian Rupee Displays Relative Stability

The Indian rupee has been among the most stable currencies in the region

Value on % change

Currency 1 Jul 97 21 Apr 99 since July 97

Indonesian Rupiah 2430 8700 -72%

Malaysian Ringitt 2.52 3.8 -34%

Korean Won 887.3 1189 -25%

Thai Baht 28.75 37.61 -24%

Taiwanese Dollar 27.85 32.76 -15%

Indian Rupee 35.76 42.80 -16%

Prevailing 10 Year Interest Rate

1.6%

5.9%

7.5%

6.3%

5.1%

6.9%

4.1%

6.1%

12.0%

-1%

1%

3%

5%

7%

9%

11%

13%

Downward Bias in Interest Rates Likely

Long term interest rates in India will have to decline to

regional levels so as to sustain economic growth

Commodity prices are still down year-on-year, but are not losing further ground

Commodity Prices Still Down YOY

-14%-12%

-25%

-18%

-30%

-25%

-20%

-15%

-10%

-5%

0%Base Metals Prec Metals Energy Softs

Commodity Prices (% change over past 1 yr)

JP M

org

an C

om

modit

y indic

es

Recovery in crude prices reflects anticipated production cuts

- demand side fundamentals remain weak

Crude Prices Have Moved Up in 1999

0

5

10

15

20

25

Low of $9

Current $15.50

Financial Performance

Performance Highlights

Reliance continues to lead the Indian private sector with highest sales, profits, assets, and net worth

Record production level of 7.06 million tonnes in 1998-99 - increase of 26%

Record performance despite the challenges posed by damage caused to the SBM

Acquisition of polyester capacity of 65,000 tonnes - contributing to restructuring of industry

Exports up 87% at Rs. 685 crores (US$ 161 mn)

Feedstock Price Trends

Average feedstock prices declined 30% - 60%, despite the recent recovery on the back of rising crude prices

International Prices (US$ / T )

Average Average % 1997-98 1998-99 Change

Crude ($/bbl) 17.3 12.1 (30%)

Naphtha 192 132 (31%)

PX 488 290 (40%)

EDC 359 155 (57%)

International Product Price Trends

(US$ / T )

Average Average % 1997-98 1998-99 Change

POY 1166 878 (25%)

PSF 1073 671 (38%)

PTA 553 365 (34%)

MEG 633 373 (41%)

PE 722 491 (32%)PVC 694 456

(34%)

PP 665 453 (32%)International product prices are on an average down by 30%-40% despite the recent price rallies

Domestic Product Price Trends

Domestic product prices have also declined, though less sharply than international prices, due to cushioning effect of the weakening rupee

( Local prices in Rs. / kg )

Average Average % 1997-98 1998-99 Change

POY 65.5 56.3 (14%)PSF 58.9 46.3 (7%)PTA 26.5 23.1 (13%)MEG 30.6 24.2 (21%)PE 39.7 35.5 (11%)PVC 35.0 28.4 (19%)PP 34.4 31.7 (8%)

Recent Trends in Intl. Product Prices

International Prices (US$ / T )

Jan- Apr %Mar 99 99 change

POY 710 730 3%PSF 587 600 2%PTA 313 335 7%MEG 317 295 (7%)PE 468 515 10%PVC 433 470 9%PP 417 450 8%

International product prices have moved up due to regional shut-downs, low inventory levels, and rising feedstock prices

Recent Trends in Domestic Product Prices

Domestic plastics prices have also gone up in line with international trends

( Local prices in Rs. / kg )Jan- Apr %

Mar99 99 change

POY 52.7 54 2%PSF 40.8 40.5 (1%)PTA 22.8 22.5 (1%)MEG 22.2 21.0 (5%)PE 34.2 36.2 6%PVC 25.2 29 15%PP 28.7 32.4 13%

Income Statement

The net profit is after accounting for additional operating costs of Rs.141 crores ($ 33 mn); claims not included

1997-98 1998-99

Rs. Crs. $ mn. Rs. Crs. $ mn. Growth

Sales 13,404 3,394 14,553 3,430 9%

Op. Profit 2,551 646 2,710 639

PBDIT 2,887 731 3,318 782 15%

Interest 504 127 729 172

Depreciation 667 169 855 202

Tax 63 16 30 7

Net Profit 1,653 418 1,704 402 3%

Cash Flow 2,383 603 2,589 610

US GAAP/ IAS Reconciliation

Indian GAAP US GAAP IAS

Rs. Crs. $ mn Rs. Crn. $ mn Rs. Crn. $ mn

Net Profit 1,704 402 1,378 325 1,509 356

Difference (326) (77) (195) (46)

% Variation (19% ) (19% ) (11% ) (11% )

Approximately 40% of the variation with US GAAP relates to change in the method of providing depreciation

The balance variation is nominal reflecting adoption of conservative accounting policies

Business Mix

Reliance remains focussed on the petrochemicals business

Textiles2.2%

Polyester22.2%

Oil and Gas2.4%

Chemicals15.3%

Plastics & Int.

36.1%

Fibre Int.21.7%

Growth in Production and Sales

Sales revenue growth of 9%, contributed by:

–Impact of sales volume growth 26%

–Impact of decline in avg. product selling prices(17%)

Robust growth in domestic demand - over 95% of production sold within India

Value added export opportunities captured - Exports up 87% at Rs. 685 crores (US $ 161 mn)

Production volume increased 26% to a record level of

7.06 million tonnes, despite temporary dislocation in the

feedstock supply system at Hazira

Stability of Operating Margins

Operating margins remained stable around 18.6%, despite additional operating costs arising from SBM damage.

This was the result of :

strong volume growth lower feed stock prices integration and value addition gains from productivity and cost reduction depreciation of the Indian rupee by 7% in 1998-99, enhancing pricing flexibility

Ability to operate plants at peak rates and sell most of the production in the domestic markets, differentiates Reliance from other global petrochemical producers

Profitability Ratios

1997-98 1998-99

OPM % 19.0% 18.6%

NPM % 12.3% 11.7%

RONW % 21% 19%

EPS – Rs. ($) 17.6(0.45) 18.0(0.42)

Cash EPS – Rs. ($) 24.7(0.63) 27.1(0.64)

24% compounded annual net profit growth over 5 years

15% compounded annual EPS growth over 5 years

Liquidity Ratios

1997-98 1998-99

Gross Debt : Equity 0.80 0.88

Net Debt: Equity 0.33 0.39

Net Gearing (% ) 25% 28%

Net Interest Cover 6.8x 6.9x

Net Debt/ Cash Flow 1.2 1.4

Total Assets have increased 16% to over Rs. 28,000 crores

Liquidity Ratios comparable to leading global chemical companies provide comfort

Conservative Financial Management

Reliance is the only Indian company having international rating constrained by the sovereign ceiling

Net gearing of 28% reflects conservative policies

Net Debt: Cash Flow ratio of 1.4x 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

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 87% to Rs. 685 crores ($ 161

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

International Peer Group Comparison

Chemical stock prices globally have generally reflected tough operating conditions for the industry

Stock Price on

Currency 31 Mar 98 31 Mar 99 % Change

RIL INR 177 130 -26%

ICI GBp 1065 554 -48%

Eastman USD 67 42 -37%Shanghai CNY 4 2.9 -28%

Yizheng CNY 4.8 3.4 -28%

DuPont USD 68 58 -15%

Formosa TWD 33 31 -6%

Business Review and Strategy

Among top 10 producers globally of all its major products

Unique vertical integration from crude refining to fabrics and plastics - capturing value addition of over 1000%

Deriving over 95% revenues from domestic market

Leading the market in all its products with market shares ranging from 32% to 85%

Globally competitive capital and operating cost position

Reliance’s Leading Business Position

Reliance contributes over 1% of India’s GDP and 1.5% of government’s revenue receipts

Business Review - Polyester

Industry Reliance

(Prodn. in

‘000 tonnes)97-98 98-99

%change 97-98 98-99

%change

Polyester(PFY, PSF, PET)

1143 1327 16 468 592 26

Fibre Int.(PTA, MEG)

1204 1600 33 963 1339 39

•Domestic demand growth healthy at 16 % per annum

•Reliance’s volumes grew at a faster rate, partly due to its acquisition of polyester capacity

246297

341394

488553

619

777

975

1141

0

200

400

600

800

1000

1200

Historic Polyester Demand Trends

Polyester consumption in India in ‘000 tonnes

10 year CARG 19%

Strong Potential for Demand Growth

China consumes about 3 times as much polyester as India - indicating strong potential for continuing demand growthc

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

Business Review - Plastics

Industry Reliance

(Prodn. in ‘000tonnes) 97-98 98-99

%change 97-98 98-99

%change

Plastics(PE, PP, PVC)

1684 1831 9 945 1025 8

•Robust growth in domestic demand at 19 % per annum

• Imports of around 200,000 tonnes of PP indicate potential for import substitution from Reliance’s new plant

Historic Plastics Demand Trends

772 800

1,0361,236

1,4221,564

1,957

2,308

2,736

664648

0

500

1,000

1,500

2,000

2,500

3,000Polymer consumption in India in ‘000 tonnes

10 year CARG 15%

Strong Potential for Demand Growth

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

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

Business Review - Oil and Gas

Reliance’s prodn. 1997-98 1998-99 % change

Oil (in KT) 141 314 123

Gas (in KT) 262 536 105

• Oil and gas business now accounts for 2.4 % of revenues

• Government approval awaited for the proposal to expand gas production from Tapti fields by over 4 times

Growing Market Shares

Reliance’s marketshares 1997-98 1998-99 % change

Polyester(PFY, PSF, PET)

41% 45% + 4%

Fibre Intermed.(PTA, MEG)

80% 84% + 4%

Plastics(PE, PP, PVC)

56% 56% -

• Acquisition of 65,000 tonnes of polyester capacity during 1998-99 will lead to further expansion in market share

• Plastics market share will increase with the commissioning of the new PP plants

Strong Customer Franchise

Distinctive customer preference for delivering superior value

Reliance’s differentiation strategy is built around:

World class quality of products

Wide range of grades compared to other producers

Reliable supplies at globally competitive prices

Nation-wide network to service fragmented local markets

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

Free technology assistance/ consultancy for all customers

Prompt service and extensive customer contact

Loyal customer base:

– Long term relationships - 70%-80% of key customers for major products have been with Reliance for over 3 years

– Negligible customer loss

– Market penetration - Over 90% of top customers in key products source most of their requirement from Reliance

– High quality revenues - Over 90% of receivables get cleared in less than two weeks time

Market reputation and customer relationships are key long term competitive advantages

Strong Customer Franchise

Impact of Finance Bill, 1999

Marginal variation of 2% - 3% in effective custom tariffs on Reliance’s major feedstocks and products

No significant impact as Reliance is selling most products at up to 15% discount to landed price of imports

Across the board marginal cuts in excise duties on all major products of Reliance - increase in demand

Impact of budget proposals - Neutral

Strong Performance under Declining TariffsStrong Performance under Declining Tariffs

Strong performance in a declining import tariff environment: global competitiveness demonstrated

1993 1994 1995 1996 1997 1998

Peak Tariff (% ) 110 85 65 50 40 40

Peak Tariff (% ) –RelianceProducts

110 85 65 45 30 30

OPM (% ) 20 18 19 19 19 19

Net Profit (Rs.Crs.)

322 576 1065 1305 1323 1653

US $ 103 183 338 380 368 418

Future reduction in import tariff estimated at around 10-15% over the next 3-5 years

Historic rate of depreciation of the Indian rupee at 5%-7% per annum adequate to offset impact of import tariff cuts

Reliance has sufficient pricing flexibility as it is currently selling 5%-15% below the landed price of imported goods

Savings to Reliance from reduction in tariff on raw materials, chemicals, catalysts, consumable, stores and spares, presently ranging up to 60%

Savings from reduction in tariffs on capital goods

Advantage Reliance under Zero Tariffs

Reliance to benefit from an all round cut in import tariffs

Structure of Polyester Industry

Fragmented and uncompetitive industry structure - over 40 producers in India’s 1.3 mn ton market, compared to just 4 large producers controlling the 5 mn ton US market

Capacity totaling 100,000 tonnes is already closed due to poor economics

Most small players employ high leverage and are in default of loan and interest payments to banks and FIs

Destructive variable cost linked pricing by losing players puts further pressure on industry margins

Industry consolidation is both desirable and inevitable

Industry restructuring has already begun with Reliance playing a pivotal role in the process

Reliance’s Role in Industry Restructuring

Reliance acquired ICI polyester unit (30,000 TPA) a few years ago

Acquired polyester business of India Polyfibres (22,000 TPA) and JK Corp (43,000 TPA) during 1998-99

Reliance’s acquisition strategy is focused at maintaining market leadership in a regional excess supply context

Reliance to leverage its technical skills, financial strength, nationwide 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

Jamnagar Complex - Reliance Industries

Jamnagar Petrochemicals Complex

Rs. 5,500 crore (US $ 1.3 billion) petrochemicals complex comprising 1.4 million tpa PX plant and 600,000 tpa PP plant

Project commissioning has commenced

Globally competitive plants enjoying economies of scale and benefits of integration

Enhancement of feedstock, product, energy, and logistics integration

Paraxylene (PX) Project

World’s largest plant with three lines of 467,000 tonnes per annum caapcity each

Reliance to become world’s third largest producer after BP-Amoco and Exxon- Mobil

Two lines being commissioned ahead of schedule in Q2 1999-2000, and the third line in Q3 1999-2000

About 50% of the output to be captively consumed

Substantial scope for domestic sales

Polypropylene (PP) Project

One PP line of 200,000 tpa commissioned in April 99 - 200,000 tpa to be commissioned in Q2 1999-2000 and the last 200,000 tpa in Q4 1999-2000

Reliance’s total PP capacity to touch 1 million tonnes

Strong domestic demand growth of 21% p.a.

JPMA implementation and mandatory packaging of edible oil to be key growth triggers

Asia to remain large net importer of about 1 million tonnes of PP in 1999

Jamnagar Complex -Reliance Petroleum

Project Highlights

World’s largest grassroots refinery with capacity of 27 million tpa - over 25% of domestic capacity

High complexity refinery with Nelson’s index of nearly 14 (including petrochemicals complex) compared to about 5 for average Asian refinery

Fully integrated $6 bn (Rs. 25,000 crores) complex with refinery, petrochemicals, power plants, port, and related infrastructure

Global competitiveness resulting from scale, technology, complexity, and integration

25%-30% of the refinery’s output to be consumed captively

Project Highlights

50% higher capacity achieved - project cost of Rs.

14,250 crores (US $ 3.4 bn)

Capital Cost/ Ton has declined by 15% from Rs.

6,238 /T to Rs. 5,278 /T

Entire project financing fully tied up

Unit-wise commissioning process has already begun

- refinery to be fully commissioned in Q2 1999-2000

well ahead of schedule

Substitution of imports in deficit domestic markets - per capita consumption amongst the lowest in the world

Distribution & Marketing of 5 controlled products through Oil PSUs during the transition period upto 2002

Model agreement for offtake of 50% of controlled output with IOC signed - similar agreements to be concluded with BPCL and HPCL for the remaining 50%

Oil PSUs to lift products on a “Take or Pay basis”

Refinery gate pricing during transition period based on import parity

Reliance to directly market decontrolled products - already leading player in marketing of kerosene and LPG

Agreement with IOC for post-transition marketing in JV

Marketing of Products

Summary and Outlook

Petrochemicals Prices

Feedstock and product prices are showing signs of recovery - prices currently holding above previous lows

Recovery in prices of oil and oil derivatives driven so far mainly by supply side factors

Sustained recovery in prices and margins will require better demand climate, and may still be some time away

The worst in prices seems to be behind us for now

Reliance continues to create value in the most difficult times witnessed by the global petrochemicals industry

Cash Flows and Investments

Large capex programs in RIL and RPL nearing

completion with commissioning of Jamnagar

complex

Reverse cash flows from the Jamnagar complex to

be fully reflected from the next financial year

Significant cash flows even at current levels of

prices and margins - substantial upside from cycle

reversal

Utilisation of cash flows - value enhancing

acquisitions, reduction of net debt, and distribution

to stock-holders

• Record production of over 7 mn tonnes achieved in the year 1998-99 - more than 25% above initial targets

• Jamnagar petrochemicals complex being commissioned well ahead of schedule

• Capacities to increase by further 50% to more than 9 million tonnes per annum over the next two years

• Production volume for 1999-2000 likely to be in the range of 8 to 8.5 million tonnes

Reliance’s Future Outlook

Commissioning of Jamnagar petrochemicals complex and acquisitions will drive Reliance’s future growth

Reliance Industries Limited

India’s World Class Corporation