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Chairman's
Statement at RIL's AGM on 31st October 2002
Dear Shareowners,
It gives me great pleasure to welcome all of you
to the 28th Annual General Meeting of Reliance Industries
Ltd.
The company's accounts for the year ended March
31, 2002, along with the Directors' and Auditors'
report, a Letter to Shareholders and Management
Discussion and Analysis, have already been circulated
to you.
With your permission, I would like to take them
as read.
1. Tribute
I address you today for the first time as the Chairman
and Managing Director of your Company.
Memories of all the past Annual General Meetings
of Reliance are floating in my mind.
In each of these meetings, I sat by the side of
my father Shri Dhirubhai Ambani, Founder Chairman
of Reliance.
His scintillating wit, disarming humour, inspiring
voice, charming laughter, the unbreakable bond between
you and him - all these are coming back to my mind.
I can feel as if he is sitting there, smiling and
talking to me and to all of you. I hear him telling
me;
"Sitting before you
are members of my huge family - The Reliance Family.
They gave me enormous respect and affection as the
head of the family. And in return, I took care of
them. Now, you are in my place. You have the responsibility
to protect and promote their interest."
Dhirubhai achieved the miracle known as Reliance
with your unflinching support.
I am confident of your continuing and wholehearted
support.
And I promise that we will take Reliance to greater
heights.
We will do everything to enhance the value of your
investments in the long run and to give you good
returns in the short run.
I am acutely conscious of the duty he has entrusted
me with, the values he has bequeathed, the task
he has set and the vision he has outlined.
I derive enormous strength from what I have learnt
from him and look to the future with determination
and confidence.
2. Performance Review
2.1 Operating Performance
You will be happy to know that Reliance performed
resiliently in an environment characterised by constraints
on global economic growth, demand-supply imbalances
in virtually every sector and volatility in energy,
petrochemical feedstock and product markets.
This performance was achieved on the strength of
global competitiveness of Reliance's operations,
leadership in domestic markets and healthy presence
in export markets.
All major plants operated at over 100% capacity
utilisation, setting new records in production volumes.
2.2 Financial Performance
Consequently, Reliance surpassed all previous records
in financial performance:
- Gross turnover increased
to Rs. 57,120 crores (US$ 11.7 billion)
- Net profit was higher
at Rs. 3,243 crores (US$ 665 million)
- Total assets increased
to Rs. 56,485 crores (US$ 11.6 billion)
- Net worth climbed
to Rs. 27,812 crores (US$ 5.7 billion)
Reliance has achieved this growth while maintaining
a careful and conservative financial profile.
Reliance's gross debt-equity ratio stands at a conservative
0.64, despite the increase in total assets to Rs.
56,485 crores (US$11.6 billion). Reliance has retained
its 'AAA credit ratings'.
2.3 Export Performance
Reliance qualified to be reckoned as India's largest
exporter during the year.
Exports increased to Rs. 11,200 crores (US$ 2.3
billion) from Rs. 9,370 crores (US$ 2 billion) in
the previous year.
Reliance exported its products to about 100 countries.
New offices were opened in Shanghai, Ho Chi Min
City, Jakarta, Jebel Ali and Istanbul.
New offices are being opened in North America, Latin
America and Eastern Europe.
Reliance's customers included those in the US and
Europe with stringent quality demands.
Reliance's ability to export high volumes across
the globe reflects its international competitiveness
and superior logistics capabilities.
This strong growth in exports has been achieved
while retaining the thrust on domestic markets.
Exports still represent only 20% of the company's
gross turnover.
In recognition of your company's outstanding achievement
in exports, Reliance was granted the 'Golden Super
Star Trading House' status by the Directorate General
of Foreign Trade, Government of India.
2.4 Current Year's
Performance
In the current financial year, Reliance continues
to fare well.
Financial results for the second quarter of the
current year have been separately announced today.
3. RIL-RPL Merger
Reliance Petroleum Limited (RPL) merged into Reliance
Industries Limited (RIL) effective September 19,
2002.
In a physical sense, this has enabled Reliance to
complete the integration across the energy and materials
value chain - ranging from oil and gas exploration
and production, refining and marketing, petrochemicals,
power and textiles.
In a competitive sense, the merger has created a
firm foundation for Reliance to compete with other
global energy majors; supported by a robust balance
sheet and strong operational synergies.
The merger has elevated Reliance to the status of
India's largest private sector company on all financial
parameters, including sales, assets, net worth,
cash profits and net profits.
It has also made Reliance enjoy global rankings
in all its major businesses.
Above all, the merger places Reliance in the reckoning
for a place in the Fortune
Global 500 list of the world's largest
corporations.
The merger of Reliance Industries Limited and Reliance
Petroleum Limited seeks to consolidate businesses
across the value chain.
This is consistent with global industry trends.
The merger will bring about operational synergies,
logistics advantages, cost efficiencies, productivity
gains, rationalisation of business processes and
optimisation of fiscal incentives.
These would result in strong financials, enhanced
flexibility and reduced volatility in the earnings
stream.
All these factors will enhance shareholder value.
4. IPCL Acquisition
Reliance acquired control of Indian Petrochemicals
Corporation Limited (IPCL) on June 4, 2002.
This acquisition prepares Reliance, together with
IPCL, to compete on a stronger footing in the global
market, where major petrochemical companies follow
a strategy of market consolidation.
To illustrate, the top five global players in polyethylene
and polypropylene enjoyed a share of 25% of the
global market in 1994.
By the year 2004, they would command more than 35%
of the global market.
Together with IPCL, Reliance would rank as the 11th
largest polymer producer in the world.
However, this combined polymers manufacturing capacity,
of 26 lakh tonnes per year, would still be only
about one third of the capacity of Dow, the largest
manufacturer of polymers in the world.
I am delighted to mention that Reliance has turned
around IPCL's performance in the very first quarter.
Production has increased by 25%, profit before tax
by 140% and interest cost has reduced by 30%.
This represents a realisation of all synergies at
lightning speed.
Reliance will continue to look for opportunities,
in India and abroad, to improve market leadership,
through an appropriate mix of 'bolt-on' acquisitions
and globally competitive organic growth.
5. Downstream Petroleum
Sector
The deregulation of marketing of transportation
fuels from April 1, 2002 offers Reliance an opportunity
to laterally expand downstream in the petroleum
sector of the energy value chain.
Reliance has received government approvals for establishing
about 5,800 retail outlets for marketing of transportation
fuels across India and aims to establish these outlets
by March 31, 2004.
This petroleum retailing initiative presents a unique
opportunity to Reliance to get close to the final
consumer across the length and breadth of India.
Reliance will seek to win and retain consumers by
delivering clean and unadulterated fuels to correct
quantities.
Thus, through forward integration from refining
into marketing, combined with a world-class differentiated
retail customer experience, Reliance will further
enhance long-term shareholder value.
6. Power Sector
Consistent with the vision of global leadership
in the energy value chain, Reliance strengthened
its position in the power sector by increasing ownership
of BSES to 43.4%.
BSES, India's leading utility company, has a power
generation capacity of 885 MW, holds licences for
distribution of power in major areas of Mumbai,
Orissa and Delhi and enjoys a customer base of over
five million.
Reliance's investment in BSES is driven by a vision
of building adequate power infrastructure in India
and making available uninterrupted quality power
to consumers in a cost efficient manner through
optimal operational efficiencies and the highest
levels of productivity.
Reliance will also derive substantial benefits from
convergence of interests in areas such as Infocomm
and retailing, leveraging on the distribution strength
of BSES.
With the expected acceleration of reforms and privatisation
in the power sector, Reliance sees substantial growth
opportunities in the future.
7. Infocomm Sector
Reliance is the lead investor in Reliance Infocomm
Limited, which is on the threshold of ushering in
a digital revolution in India.
Our founder Chairman, Shri Dhirubhai Ambani, had
a dream - to put the power of information and communications
in the hands of common people at an affordable cost.
That, he believed, would help them overcome the
handicaps of illiteracy and lack of mobility.
On his birthday, on December 28th this year, Reliance
Infocomm will launch a major initiative to translate
his dream into reality.
Beginning with the villages of Gujarat, this Infocomm
revolution will sweep the country - and cover thousands
of villages and hundreds of cities across the country
next year.
This aggressive roll out is possible because the
Infocomm project has progressed at a blistering
pace during the past year.
With this initiative, Reliance has taken the first,
but a big step forward in a major avenue for growth.
It will prepare Reliance for taking the mantle of
leadership in the knowledge intensive business to
harness the potential of millions of knowledge workers
of our country.
It will provide them a platform to develop and offer
IT solutions for our farmers, businesses, schools,
colleges, hospitals, government and public sector
organisations.
It will facilitate harnessing of India's formidable
software talent to develop products for the global
market and realise substantially higher value for
their efforts.
Hence, it will make Reliance Infocomm a powerful
vehicle for India to attain knowledge leadership
in the world.
The power of this vision and opportunity is evidenced
by the fact that Reliance Infocomm has attracted
over five thousand professionals to join its rolls
from all over the world in a short span of one year.
Reliance Infocomm has the potential to bring about
an unprecedented increase in India's exports and
trigger a quantum leap in India's economic growth.
In summary, Reliance Infocomm will become a major
catalyst for changing the face of India and improving
the quality of life of our people.
In the process, it will earn for you attractive
returns and increase the value of your investments.
8. Human Capital
Reliance recognises that the future of enterprises
in the knowledge economy depends on building competencies
in people and on harnessing diverse talents.
In this light, Reliance has built a human capital
edifice, with formidable breadth, depth, young blood
and discipline.
About a third of Reliance's human resources have
professional education. About half of them are less
than 35 years of age.
Collectively, they represent three competencies
- in building world-class assets at very aggressive
costs and operating them at high productivity, in
coming up with innovative solutions in virtually
every aspect of a business and in engaging customers
with a very strong value proposition.
Today, Reliance is leveraging these three competencies
to create extraordinary value in its new initiatives
in oil and gas, petroleum retailing and Infocomm.
Above all, Reliance is endeavouring to create a
new ecosystem for people-based competency.
It seeks to unleash the potential of talent by setting
great goals, challenging tasks, focusing on meaningful
social impacts and fostering a conducive learning
environment.
Reliance also recognises that organisational competencies
are also a product of embedded systems and processes.
With this perspective, Reliance is weaving competencies
through networks and online integration of processes,
workflow and transactions.
Systems are being shifted from being task centric
to team centric and customer centric.
Enterprise wide information technology based processes
are being implemented for better productivity, faster,
less-expensive and better quality services and quicker
integration of new businesses.
9. Corporate Governance
For Reliance, Corporate Governance revolves around
earning the trust of all constituencies in how Reliance
conducts its business.
This translates into attaining the highest levels
of transparency, accountability and equity, in all
facets of operations, and in all interactions with
stakeholders, including shareholders, employees,
government and lenders.
Reliance recognises communication as a key element
in the effective functioning of the overall corporate
governance framework, and emphasises continuous,
efficient and relevant communication with all its
external constituencies.
10. Social Capital
Reliance believes that building social capital is
as important as building financial capital.
Reliance has placed education and health at the
core of its socially oriented initiatives.
In this perspective, Reliance has supported the
creation and management of several institutions
in school education, higher education in science
and technology and tertiary health care.
11. Oil and Gas Sector
Before I conclude, I would like to share with you
the realisation of our Founder Chairman's dream.
India is an energy-starved country and imports a
staggering Rs 65,000 crores worth of crude oil every
year, which is about two thirds of its annual requirement.
Shri Dhirubhai Ambani had a conviction that India
is a highly under-explored country for oil and gas.
He firmly believed that India needed a sharply focussed
and intense exploration programme, backed by best-in-class
technology, people and processes.
To realise Shri Dhirubhai Ambani's dream, Reliance,
like in its other businesses, created from scratch
a winning combination of people, processes, systems
and technology to create a world-class exploration
and production company.
Reliance started its exploration programme straightway
in deep water and drilled its very first well at
a depth of more than 2,100 feet, the first ever
for a new exploration and production company.
Reliance is now drilling in water depths of about
6,000 feet, which is the deepest ever so far accomplished
in India.
Reliance has broken the myth that deep-water exploration
is a prerogative of a small club of international
oil companies.
I am delighted to share with you our most momentous
and historic achievement of the year - India's biggest
gas discovery in nearly three decades and one of
the largest gas discoveries in the world this year.
Reliance has discovered natural gas in the very
first well it drilled in the deep-water block D6
in Krishna Godavari basin off Andhra Pradesh coast.
This success comes in an aggressive schedule of
20 months from the receipt of exploration licence.
This is the first ever discovery by an Indian private
sector company.
Of the five exploration wells drilled so far in
the block, Reliance has achieved a 100% success
rate, which is a significant achievement for any
upstream company.
The in place volume of natural gas is in excess
of 7 trillion cubic feet, equivalent to about 1.2
billion barrels or 165 million tonnes of crude oil.
Based on the recoverable reserves of over 5 trillion
cubic feet, the gas availability to consumers in
the country would increase by almost 60%.
Reliance continues to explore this block and expects
to see further upside.
We would strive to deliver about 40 million standard
cubic metres of gas per day to consumers in three
to four years, after obtaining requisite government
approvals for development.
The reserves would catapult Reliance into the league
of integrated global energy companies.
It would signal a giant step in ensuring energy
security for India, as the production would account
for almost 4% of India's energy needs.
Higher energy security for India will promote higher
levels of economic growth and development leading
to better national security.
This new discovery is a living testimony to the
farsightedness of that great visionary, Shri Dhirubhai
Ambani, son of a schoolteacher from a remote village
in Saurashtra, Gujarat, who has done India proud.
It is also a vindication of his conviction in India's
potential and is, in fact, his posthumous gift to
a nation he loved with his whole being.
In his memory, we will name the discovered gas fields
as Dhirubhai 1, 2 and 3.
Today, Reliance is the largest private sector exploration
and production company in India, with over 177,000
sq. kms of exploration acreage in 23 offshore and
onshore blocks.
This is likely to go up by a further 100,000 sq.
kms, with successes expected in the third round
of bidding under the New Exploration and Licensing
Policy of the Government of India.
With just under 2,000 sq. kms of the total acreage
explored so far, Reliance envisages a significant
potential in the upstream oil and gas business.
Consequently, Reliance will be making significant
investments in these exploration and production
blocks over the next two years.
This oil and gas initiative will lead to a new avenue
for value creation for shareholders.
It will open enormous opportunities for economic
growth and development in India.
12. A Strategic Perspective
Dear Shareowners,
Reliance has grown at a dramatic pace.
This achievement is not accidental.
It has been possible because of Reliance's ability
to anticipate the nature and direction of opportunities
in the market place.
But it is not enough to see an opportunity.
It is also necessary to leverage them.
The Reliance leadership has been able to shape businesses
to harness those opportunities in the interest of
the company and its shareholders.
Globalisation, new technologies and changing demography
are inexorably and continuously changing the face
and frontiers of opportunities.
Unprecedented advances in information, communication
and other technologies are transforming corporate
structures and business models.
Reliance has demonstrated an unmatched ability to
keep in step with these dramatic advances.
This has enabled Reliance to always remain one step
ahead of times.
In the process, Reliance has raised the threshold
of India's advancement.
Reliance is presently building on these strengths.
It is shaping a future that seeks to attain global
leadership.
This objective will be achieved not by waiting for
something providential to happen.
It will be realised on the strength of the company's
capacity, competitiveness and competency.
We are fortifying the depth and width of the value
chain. We are infusing operational and strategic
flexibility.
We are diversifying market presence.
And above all, we are getting close to the final
consumer.
These elements are seminal to the Reliance architecture
and will enable your company to carve out a leadership
position globally.
As a result of all this, Reliance aspires to contribute
significantly to realising the dream of transforming
India into a major economic power in the 21st century.
First, by bettering energy security, leading to
economic security and, in turn, national security.
Second, by bridging the economic opportunities in
the developed world with the talent available in
India, through an overarching Infocomm infrastructure.
Third, by participating in the global market opportunity
in hydrocarbon based materials.
And finally, by building a professional resource
base among the youth of India on an unprecedented
scale in diverse areas.
This is not only an aspiration, but also a dream.
A dream rooted in reality and resolve.
As my father, Shri Dhirubhai Ambani, would say;
"We must dare to dream."
And as a tribute to him, let me add: " We must strive
to realise what we dream".
The confidence of our shareholders is critical to
realising this dream.
You have shown your belief in our potential.
I look forward to your unflinching support as Reliance
surges ahead to translate Dhirubhai Ambani's dreams
into reality.
I look forward to your robust backing in creating
a great future for Reliance.
Our conviction flows from our faith in the future
of India.
Our inspiration comes from the vision of our Founder
Chairman.
Our strength comes from you, our shareholders.
Our confidence comes from our dedicated and world-class
workforce.
This is a combination that gives us enormous self-confidence.
13. Acknowledgements
Before I conclude, I would like to thank the Central
and State Governments, shareholders, investors,
bankers, financial institutions, lenders, suppliers
and customers of Reliance for their consistent support.
I would also like to thank all employees of Reliance
for their commitment and hard work.
I thank all my colleagues on the Board for their
continued support and encouragement.
14. Concluding Remarks
Dear Shareowners,
Dhirubhai regarded himself as a Trustee acting on
your behalf.
To create value for shareholders was his religion.
To give you the best return was the mission of his
life.
Today, as I speak from the place he occupied, I
pledge to you, dear shareholders, that for all of
us in Reliance - His vision is everlasting
His values are eternal
His principles are fundamental
With these words, I seek your blessings in our efforts
to realise his vision and to serve you better.
| Mumbai
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| October
31, 2002 |
Chairman
and Managing Director |
Note: This does not purport to be a record of the
proceedings of the 28th Annual General Meeting of
the Company |
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