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Home > Equity Market > Reliance Industries Ltd.- Director's Reports >

Reliance Industries Ltd.- Director's Reports

Industry: Diversified
BSE Code :500325
NSE Code :RELIANCE
Business Group:Ambani Group
LTP (Rs.) :959.1  (1.89%) [NSE]
ISIN No :INE002A01018
Face Value/M Lot :10.00/1
P/E Ratio : 14.76
Market Cap : 309997.17 Cr
You can view full text of the latest Director's Report for the company.
Year End : 03 / 2013
Dear Shareholders,

The Directors are pleased to present the 39th Annual Report and the audited accounts for the financial year ended March 31, 2013.

Financial Results

The financial performance of the Company, for the year ended March 31, 2013 is summarised below:

2012-13 2011-12 Rs. crore $ Mn* Rs. crore $ Mn*

Profit before Tax 26,284 4,842 25,750 5,061

Less: Current Tax 5,244 966 5,150 1,012

Deferred Tax 37 7 560 110

Profit for the year 21,003 3,869 20,040 3,939

Add: Balance in Profit & Loss Account 7,609 1,668 6,514 1,453

Add: On Amalgamation 1,116 206 - -

29,728 5,743 26,554 5,392

Less: Appropriation:

Transferred to General Reserve 18,000 3,316 16,000 3,145

Transferred to Capital Redemption Reserve on buy back of Equity Shares 43 8 4 1

Proposed Dividend on Equity Shares 2,628 484 2,531 497

Tax on Dividend 447 82 410 81

Closing Balance 8,610 1,853 7,609 1,668

* 1 $ = Rs. 54.285 Exchange Rate as on March 31, 2013 (1 $ = Rs. 50.875 as on March 31, 2012)

Results of Operations

The global economy in the Financial Year (FY) 2012-13 improved slowly, but was short on expectations. Several European economies experienced recession due to high unemployment, banking fragility, fiscal tightening and sluggish growth. The U.S. economy improved marginally, driven mainly by housing and the consumer sectors; however, capital investments remained sluggish. Among the Asian economies, China going through a political transition, experienced considerably slow growth. Deceleration in industrial output and exports weakened India's economic growth significantly.

FY 2012-13 proved to be a challenging year amidst global economic uncertainties and disturbances in many parts of the world. Despite these constraints and challenging environment, the Company performed reasonably well and the highlights of the performance are as under:

- Revenue from operations increased by 9.2% to Rs. 371,119 crore ($68.4 billion)

- Exports increased by 15% to Rs. 239,226 crore ($ 44.1 billion)

- PBDIT decreased by 2.6% at Rs. 38,785 crore ($ 7.1 billion)

- Profit Before Tax increased by 2.1% at RS. 26,284 crore ($ 4.8 billion)

- Cash Profit was at Rs. 30,505 crore ($ 5.6 billion)

- Net Profit increased by 4.8% to Rs. 21,003 crore ($3.9 billion)

- Gross Refining Margin was $ 9.2 / bbl for the year ended March 31, 2013

The consolidated revenue from operations of the Company for the year ended March 31, 2013 was Rs. 397,062 crore, an increase of 10.8% on a Year-on-Year basis.

The Company is 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. 28,950 crore ($ 5.3 billion) was paid in the form of various taxes and duties.

The Company featured in the Fortune Global 500 list of the world's largest corporations for the eighth consecutive year. The company was ranked 99th based on sales and 130th based on profits.

Buy-Back of Equity Shares

The Buy-back Offer announced by the Company on January 20, 2012 was closed on January 19, 2013. Pursuant to the said Buy-back, the Company bought back and extinguished 4,62,46,280 equity shares of Rs. 10 each of an aggregate face value of Rs. 46,24,62,800 (which includes 36,63,431 equity shares of Rs. 10 each bought back in FY 2011-12). Consequent to the Buy-back, the paid- up equity share capital of the Company as on March 31, 2013 (excluding allotment of shares made during the year pursuant to Employees Stock Option Scheme) stood at RS. 3228,47,61,257.

The Buy-back programme was the largest ever implemented to-date in the history of Indian capital markets and was EPS (Earnings Per Share) accretive for the Company. It is expected to supplement earnings growth from operations, for higher EPS, in the near future.

Dividend

Your Directors have recommended a dividend of Rs. 9.00 per Equity Share (last year Rs. 8.50 per Equity Share) for the financial year ended March 31, 2013, amounting to Rs. 3075 crore (inclusive of tax of Rs. 447 crore and net of reversal of excess provision of previous year) one of the highest payout by any private sector domestic company. The dividend will be paid to members whose names appear in the Register of Members as on May 13, 2013; in respect of shares held in dematerialised form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date.

The dividend payout for the year under review has been formulated in accordance with shareholders' aspirations and the Company's policy to pay sustainable dividend linked to long term growth objectives of the Company to be met by internal cash accruals.

Credit Rating

The Company continues to have the highest domestic credit ratings of AAA from CRISIL (S&P subsidiary) and Fitch. Moody's and S&P have reaffirmed investment grade ratings for international debt of the Company, as Baa2 positive outlook (local currency issuer rating) and BBB positive outlook respectively. The Company's international rating from Moody's and S&P is higher than the country's sovereign rating. Strong credit ratings by leading international agencies reflect the Company's financial discipline and prudence.

Employees' Stock Option Scheme

The Employees' Stock Compensation Committee, constituted in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (`the SEBI Guidelines'), administers and monitors the Employees' Stock Option Scheme of the Company.

The applicable disclosures as stipulated under the SEBI Guidelines as at March 31, 2013 (cumulative position) are provided in Annexure I to this Report.

The issuance of equity shares pursuant to exercise of Options does not affect the statement of profit and loss of the Company, as the exercise is made at the market price prevailing as on the date of the grant plus taxes as applicable.

The Company has received a certificate from the Auditors of the Company that the Scheme has been implemented in accordance with the SEBI Guidelines and the resolution passed by the shareholders. The Certificate would be placed at the Annual General Meeting for inspection by members.

Management's Discussion and Analysis Report

Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.

Some of the Major events of the year include the following:

RIL-BP Partnership

In its second year of the partnership, Reliance Industries Limited (RIL) and BP combined their expertise in deepwater exploration and development and operations in India. Both the teams worked closely to understand the complex geology of the east-coast of India including KG-D6 block. The efforts are on to map out an exploration and development campaign that will efficiently target high quality prospects in deeper zones and optimise existing as well as future development plans.

Smart Transformation At Reliance (STAR)

The Company has embarked on one of the largest business transformation project STAR in order to make RIL "FUTURE READY". It would help the Company bring end-to-end digital chain to free up resources, will also help enhance organisational entrepreneurship, create a world-class human resource framework to retain talent and fulfill mission of being an "Employer of Choice".

Shale Gas Business

FY 2012-13 was a pivotal year for RIL's North American Shale Gas business. It gained significant growth momentum and delivered superior performance despite adverse market conditions imposed by low gas prices and higher service costs. It was landmark year strategically, as Reliance completed carry obligations in the Carrizo and Pioneer JVs and transitioned into post-carry mode, allowing for improved governance rights and increased alignment on activity levels.

Retail Business

The retail business continued its growth journey during the year with new store launches as well as strong same store sales growth. The business accomplished a milestone by crossing a revenue of Rs. 10,000 crore during the year. The business grew by 42% to reach revenue of Rs. 10,800 crore as against Rs. 7,599 crore registered in the previous financial year. The business has achieved cash break- even with earnings before depreciation, finance cost and tax expense (EBDIT) of Rs. 78 crore. The milestone of crossing Rs. 10,000 crore revenue and reaching cash break- even at EBDIT level is a significant step in Reliance Retail's journey towards attaining market leadership by democratizing access to all types of products and services across all segments for the discerning Indian customer.

During the year under review, the realignment and consolidation of the various formats of retail businesses being carried on by the subsidiary companies of Reliance Retail Limited, was proposed, subject to necessary approvals of the High Court of Judicature at Bombay.

The consolidation exercise and consequent reduction in the number of companies will help in enhancing operational flexibility, efficiencies and greater and optimal utilisation of resources and also lead to significant reduction in the multiplicity of legal and regulatory compliances.

Infocomm Business

Reliance Jio Infocomm Limited "RJIL" (formerly Infotel Broadband Services Limited) with Broadband Wireless Access (BWA) spectrum in all the 22 telecom circles of India, plans to provide reliable fast internet connectivity through the 20 MHz, contiguous, Pan-India BWA spectrum. In addition to connectivity, RJIL also plans to enable end-to-end solutions that address the entire value chain across various digital services in key domains of national interest such as education, healthcare, security, financial services, government-citizen interfaces and entertainment. RJIL aims to comprehensively address the requisite components of the customer need, thereby fundamentally enhancing the opportunity and experience of hundreds of millions of users in India.

RJIL has finalized key agreements with its technology partners, service providers, infrastructure providers, application partners, device manufacturers and other strategic partners for the project. It aims to create a digital eco system which can be used to benefit the industry, the government and, above all, the people of this country. RJIL has also completed the detailed planning for Pan India implementation of the infrastructure needed for the project.

Reliance Haryana SEZ

The Model Economic Township (MET) has been envisioned to be developed as an industrial infrastructure to support economic growth in a public private partnership framework with the Government of Haryana through HSIIDC Limited (a Government of Haryana company).

The start-up phase of operationalization of MET in the district Jhajjar of Haryana has commenced during the year.

Reliance Jamnagar Infrastructure Limited

During the year under review, Reliance Jamnagar Infrastructure Limited, a wholly owned subsidiary which was acting as a co-developer in the Jamnagar SEZ got amalgamated with the Company.

Expansion of Operations

Your Company has commenced implementing significant expansion plans in the Petrochemical business and on completion over the next 3 to 4 years, the overall volume is expected to increase by more than 60%. Your Company is also setting up the world's largest petcoke gasification facility at Jamnagar to convert the lowest cost fossil fuels - coal and coke into gas.

Consolidated Financial Statements

In accordance with the Accounting Standard (AS) -21 on Consolidated Financial Statements read with AS-23 on Accounting for Investments in Associates and AS-27 on Financial Reporting of Interest in Joint Ventures, the audited Consolidated Financial Statements are provided in the Annual Report.

Subsidiaries

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

Details of major subsidiaries of the Company and their business operations during the year under review are covered in the Management's Discussion and Analysis Report.

Directors

Shri Mahesh P. Modi, Dr. Dharam Vir Kapur, Dr. Raghunath A. Mashelkar and Shri Pawan Kumar Kapil, Directors, retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting.

Directors' Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed that:

(i) in the preparation of the annual accounts for the year ended March 31, 2013, the applicable accounting standards read with requirements set out under Schedule VI to the Companies Act, 1956, have been followed and there are no material departures from the same;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013 and of the profit of the Company for the year ended on that date;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the Directors have prepared the annual accounts of the Company on a `going concern' basis.

Auditors and Auditors' Report

M/s. Chaturvedi & Shah, Chartered Accountants, M/s. Deloitte Haskins & Sells, Chartered Accountants and M/s. Rajendra & Co., Chartered Accountants, Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

The Company has received letters from all of them to the effect that their re-appointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for re-appointment within the meaning of Section 226 of the said Act.

The Notes on Financial Statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments.

Cost Auditors

The Company has appointed the following cost auditors for conducting Cost Audit for the financial year 2012-13:

(i) For the Textiles Business - M/s. Kiran J. Mehta & Co, Cost Accountants;

(ii) For the Chemicals Business - M/s. Diwanji & Associates, Cost Accountants, M/s. K. G. Goyal & Associates, Cost Accountants, M/s. V J. Talati & Co., Cost Accountants, M/s. Bandyopadhyaya Bhaumik & Co., Cost Accountants, M/s Shome & Baneijee, Cost Accountants, M/s. Kiran J. Mehta & Co, Cost Accountants and M/s. Dilip M. Malkar & Co., Cost Accountants;

(iii) For the Polyester Business - Shri Suresh D. Shenoy, Cost Accountant, M/s. V. Kumar & Associates, Cost Accountants;

(iv) For Electricity Generation - M/s. Dilip M. Malkar & Co., Cost Accountants;

(v) For Petroleum Business - M/s. V. J. Talati & Co., Cost Accountants; and

(vi) For Oil & Gas Business - M/s Kiran J. Mehta & Co., Cost Accountants; Shri Suresh D. Shenoy, Cost Accountant; M/s Bandyopadhyaya Bhaumik & Co., Cost Accountants and M/s Shome & Banerjee, Cost Accountants.

M/s Shome & Banerjee, Cost Accountants have been nominated as the Lead Cost Auditor of the Company.

Secretarial Audit Report

As a measure of good corporate governance practice, the Board of Directors of the Company appointed Dr. K.R. Chandratre, Practicing Company Secretary, to conduct the Secretarial Audit. The Secretarial Audit Report for the financial year ended March 31, 2013, is provided in the Annual Report.

The Secretarial Audit Report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Securities Contracts (Regulation) Act, 1956, Depositories Act, 1996, The Foreign Exchange Management Act, 1999 to the extent applicable to Overseas Direct Investment (ODI), Foreign Direct Investment (FDI) and External Commercial Borrowings (ECB), all the Regulations and Guidelines of SEBI as applicable to the Company, including The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, The Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998, Listing Agreements with the Stock Exchanges and the Memorandum and Articles of Association of the Company.

Particulars of Employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the Directors' Report. Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided in Annexure-II to this Report.

Transfer of amounts to Investor Education and Protection Fund

Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956, relevant amounts which remained unpaid or unclaimed for a period of 7 years have been transferred by the Company to the Investor Education and Protection Fund.

Pursuant to the provisions of Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company as on June 07, 2012 (date of last Annual General Meeting) on the website of the Company (www.ril.com), as also on the Ministry of Corporate Affairs website.

Corporate Governance

The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The Company has also implemented several best Corporate Governance practices as prevalent globally.

The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report.

The requisite Certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is attached to this Report.

Business Responsibility Report

SEBI, vide its Circular CIR/CFD/DIL/8/2012 dated August 13, 2012, mandated the top 100 listed entities, based on market capitalisation at BSE and NSE, to include Business Responsibility Report as part of the Annual Report describing the initiatives taken by the companies from Environmental, Social and Governance perspective.

Accordingly, the Business Responsibility Report is attached and forms part of the Annual Report.

Acknowledgement

Your Directors would like to express their appreciation for the assistance and co-operation received from the financial institutions, banks, Government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the executives, staff and workers of the Company.

For and on behalf of the Board of Directors

Mukesh D. Ambani

Chairman and Managing Director

April 16, 2013

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