Dear Fellow Shareowners,
In FY 2013-14 the global economy showed signs of recovery with growth
in demand from the developed countries in the second half of the year.
Emerging markets, including India, had to face multiple challenges of
rising current account deficit, depreciation of the local currency and
additional pressure due to capital outflows.
Despite global and domestic challenges, Reliance continued its growth
path. Reliance achieved a record revenue ofRs. 4,01,302 crore ($ 67.0
billion) and net profit of Rs. 21,984 crore ($ 3.7 billion). We became
the first company in the private sector to record revenues of over Rs.
4,00,000 crore. Reliance also achieved its highest ever exports ofRs.
2,75,825 crore ($ 46.0 billion) during the year, contributing a record
69% of revenues. The continued growth of exports is an indicator of the
growing demand for our products and services across the world.
FY 2013-14 was another record- setting year for RIL. Our Refining
business delivered the highest- ever profits with a sharp recovery in
gross refining margins towards the end of the year. Petrochemical
earnings grew significantly with margin expansion across polymers and
downstream polyester products.
The vertical integration across the refining and petrochemicals chain is
a major advantage due to assured feedstock, lower volatility of margins
and ability to take advantage of the opportunity in each product in the
Domestic upstream production was lower compared to the prior year due
to continuing geological complexities. The shale gas business in the US
grew significantly during the year and has become a material contributor
to our earnings.
We are now Indias largest retailer and turned profitable this year.
We have also accelerated our efforts to roll-out our state-of-the- art
4G services across the country, which will add an exciting new
dimension to our consumer facing service offerings.
Refining & Marketing
Our Jamnagar refinery complex continued to operate at over 110% of the
design capacity, processing 68.0 MMT of crude, testament to our
world-class assets and quality of operations. Global utilisation rates,
in comparison, were 85% in North America, 76% in Europe and 85% in
Asia. This was supported by stable middle distillate cracks, favorable
crude differentials and currency movement. In addition to the market
dynamics, Reliances performance was driven by its operational
excellence and well- executed strategies around crude sourcing and
product placement. Continuing its emphasis on processing the
challenging and most advantageous crudes, 64% of the total crude
processed during the year was advantaged. The ability to operate at
high utilisation levels and optimise product slate to suit market
conditions enabled Reliance to capture opportunities in the market.
As a part of our continuing efforts for energy conservation, we are
working on the petcock gasification project which is under rapid
execution. This will provide competitive energy costs for our
integrated refining complex at Jamnagar and improve profitability.
Earnings from the Petrochemical business increased by 17.5% on the back
of strong polymer and downstream polyester margins coupled with
favorable exchange rate movement. This was partly offset by weak fire
margins in the second half of the year
Demand growth in India for petrochemical products during FY 2013-14 was
at a cyclical low compared to the double digit growth rates seen in the
prior five and ten year periods. Domestic polymer demand growth was
particularly weak at 3%. Reliance increased its polymer production by
2% to 4.5 MMT and maintained its leadership with a market share of 40%
in the domestic polymer market.
The margins in the polyester chain were impacted by excess capacity of
PTA, slow growth in demand for polyester fire and yarn and volatility
in paraxylene prices. Domestic polyester demand growth was at 6%.
Reliance commissioned its new PFY facility at Silvassa which is the
most automated and one of the most environment friendly plants
globally. This is the first in the series of expansions that have been
planned. With the economy and consumption being at the bottom of the
down-cycle, the RIL start-ups would be ideally placed at a time when
demand would emerge.
Exploration and Production
In our domestic upstream business, production from the KG-D6 block
continued to decline during the year. The fall in production is mainly
attributed to the geological complexity and natural decline in the
fields and higher than envisaged water ingress. Several activities were
therefore undertaken to sustain production and enhance recovery from
the existing producing fields. During the year, two significant
discoveries were made in the KG basin and Cauvery basin. Development
activities in the two CBM blocks is gathering momentum. The new
discoveries and the efforts to enhance recovery will strengthen Indias
Reliance continued to balance its international portfolio by evaluating
new blocks and assigning existing blocks. Reliances Shale Gas business
continued on its growth path and has now achieved materiality in many
respects. Our investments in the US Shale Gas ventures have started
creating value for our shareholders. This business achieved record
revenues and EBITDA for the year with significant growth. Reliances
share of net sales was at 131 BCFe in CY 2013, a growth of 54% y-o-y on
account of about 1.6 fold increase in number of wells put on production
from end of CY 2012.
We are delighted that our retail business continues to sustain its
leadership position across several formats. It has become Indias
largest retailer by revenues. It achieved the milestone of over 10
million square feet of retail space during the year. It also achieved
break-even on a net profit basis during the year. Our retail offerings
continue to delight our customers reflected in a record number of repeat
customers and a healthy rate of growth in the same stores. Each format
continues its plan of aggressively expanding its footprint as well as
enhanced product and service offerings in existing stores to improve
revenues and profits.
Our ambitious goal of making India one of the global leaders in the
delivery of digital content continues to gather steam. Reliance Jio
Infocomm received Unified Licenses for all 22 service areas across India
thus becoming the first telecom operator to get a pan India license.
Several telecom infrastructure sharing arrangements with multiple
operators were signed during the year. This will help us accelerate the
roll-out of our 4G services while preserving capital and environment.
We have a strong balance-sheet to support our ambitious growth plans.
Reliance is the only Asian company in the oil & gas sector to be rated
two notches above the sovereign by S&P. Reliance is now rated higher
than some of its global emerging market peers demonstrating its
strength and competitive position in the refining and petrochemicals
sectors. The rating also underpins Reliances position as a leading
large-scale, integrated and efficient oil refining and petrochemicals
During the year, Reliance continued to make significant progress on
strengthening people practices and processes to attract and retain
world-class talent. Several measures including new performance
management systems and flexible work hours were put in place.
Reliance has always prided itself in investing and contributing to
Indias economic growth. We make a unique contribution to the Indian
economy as Indias largest exporter, accounting for 14.7% of the
countrys exports. Reliance has been globally and nationally
felicitated for creating sustained long-term shareholders value. We
are implementing several projects both in the manufacturing domain and
service sector to continue this tradition of creating significant
shareholders value. We are confident that our largest capital
expenditure cycle will create significant value to all our stakeholders.
During the year, Reliance Foundation started severa initiatives in new
geographies in the rural transformation and information service area.
Reliance Foundations role in relief and rehabilitation efforts in
Uttarakhand was acclaimed and earned significant respect. Reliance
Foundation continues its work in the identified domains of education,
healthcare, rura transformation, urban renewal and protection of
Indias arts, culture and heritage. would like to thank all my
colleagues in India and around the world for their commitment and
contribution towards Reliances growth. As we strengthen our core, we
look at the future eagerly to continue to generate shareholders value.
am grateful to the Board of Directors for their support and guidance. I
would like to express my deep gratitude to all our stakeholders for the
continued faith reposed in Reliance.
With best wishes, Sincerely,
Mukesh D. Ambani
Chairman & Managing Director
18th April 2014