Reliance Industries

The Directors are pleased to present the 34th Annual Report and the
 audited accounts for the financial year ended March 31, 2008.
 
 Financial Results
 
 The financial performance of the Company for the financial year ended
 March 31, 2008 is summarised below:
 
                              2007-2008                       2006-2007
                                Rs. crore   $ Mn*      Rs. crore   $ Mn*
 
 Profit before Depreciation,
 Interest & Tax                 28,934.64    7,212     20,524.51   4,722
 Less: Interest                  1,077.36      269      1,188.89     274
       Depreciation      6,627.85                 6,812.16
 Less: Transfer from
       Revaluation       1,780.71                 1,997.01
       Reserve                   4,847.14    1,208      4,815.15   1,108
 Profit before Tax              23,010.14    5,735     14,520.47   3,340
 Less: Provision for
       Current Taxation          2,604.96      649      1,617.10     372
       Provision for
       Fringe Benefit Tax           47.00       12         40.34       9
       Provision for
       Deferred Tax                899.89      224        919.63     212
 Profit after Tax               19,458.29    4,850     11,943.40   2,747
 Add: Balance in Profit
      and Loss Account           2,765.37      689      3,029.09     697
      Excess provision
      for tax for earlier 
      years                         48.10       12          0.51      -
 Amount Available 
 for Appropriation              22,271.76    5,551     14,973.00   3,444
 Appropriations:
 General Reserve                16,000.00    3,988     10,565.17   2,430
 Dividend on Equity Shares       1,631.24      406      1,440.44     331
 Tax on dividend                   277.23       69        202.02      47
 Balance carried to 
 Balance Sheet                   4,363.29    1,088      2,765.37     636
                                22,271.76    5,551     14,973.00   3,444
 
 * 1 $ = Rs 40.12 Exchange Rate as on March 31, 2008 (1 $ = Rs 43.47 as
 on March 31, 2007)
 
 Results of Operations
 
 During the year, the Company has scaled new heights and set several new
 benchmarks in terms of sales, profits, networth and assets. This was a
 landmark year for the Company as it delivered record financial and
 operating performance amidst challenging and volatile market
 conditions. Turnover for the year was Rs. 1,39,269 crore ($ 34.7
 billion) against Rs. 1,18,354 crore ($ 27.2 billion) in the previous
 year, reflecting a growth of 18%.  During the year, exports were higher
 by 25% at Rs.83,492 crore ($ 20.8 billion).
 
 Profit after tax, including exceptional item, for the year was
 Rs.19,458 crore ($ 4.9 billion) as against Rs.11,943 ($ 2.7 billion)
 crore for the previous year, registering an increase of 63%. Profit
 after tax, excluding exceptional item was Rs. 15,261 crore ($ 3.8
 billion), representing an increase of 28% and the Compounded Annual
 Growth Rate (CAGR) of 30% over the past five years.
 
 Exceptional item of Rs. 4,733 crore ($ 1.2 billion) represents gains
 primarily arising out of transactions concerning shares of Reliance
 Petroleum Limited, a subsidiary of the Company.
 
 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.13,696 crore ($ 3.4
 billion) was paid in the form of various taxes and duties.
 
 Dividend
 
 Your Directors have recommended a dividend of Rs. 13/- per Equity Share
 (last year Rs. 11/- per Equity Share) for the financial year ended
 March 31, 2008, amounting to Rs.1,631 crore - the highest ever payout
 by any private sector company in India. The dividend will be paid to
 members whose names appear in the Register of Members as on May 9,
 2008; 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 pay out for the year under review has been formulated in
 accordance with the Company’s policy to pay sustainable dividend linked
 to long term performance, keeping in view the Company’s need for
 capital for its growth plans and the intent to finance such plans
 through internal accruals to the maximum.
 
 Credit Rating
 
 The Company has the highest domestic credit ratings of AAA from CRISIL
 and Fitch. Moody’s and S&P have reaffirmed investment grade ratings for
 international debt of the Company, as Baa2 and BBB, respectively. The
 Company’s international rating from S&P is higher than the country’s
 sovereign rating.
 
 Employees Stock Option Scheme
 
 Members’ approval was obtained at the Annual General Meeting held on
 June 27, 2006 for introduction of Employees Stock Option Scheme.
 
 Employees Stock Option Scheme was approved and implemented by the
 Company and Options were granted to employees in accordance with the
 Securities and Exchange Board of India (Employee Stock Option Scheme
 and Employee Stock Purchase Scheme) Guidelines, 1999 (‘the SEBI
 Guidelines’). The Employees Stock Compensation Committee, constituted
 in accordance with the SEBI Guidelines, administers and monitors the
 Scheme.
 
 The applicable disclosures as stipulated under the SEBI Guidelines as
 at March 31, 2008 are given below:
 
 a.   Options Granted                             29,763,000
 b.   Exercise Price
                       Options granted          Exercise Price
 
                           28,728,000                  1,284*
                               27,000                  1,684*
                            1,008,000                  2,292*
 
 * Plus applicable taxes, as may be levied on the Company
 
 c.   Options Vested                                     Nil
 d.   Options Exercised                                  Nil
 e.   The total number of shares arising
      as a result of exercise of Options                 Nil
 f.   Options Lapsed                                 1,711,600
 g.   Variation in terms of Options                      Nil
 h.   Money realised by exercise of Options              Nil
 i.   Total number of Options in force              28,051,400
 j.   Employee wise details of Options
      granted to:
 i.   Senior Management Personnel
 
 1.  Shri Nikhil R.Meswani                            7,00,000
 2.  Shri Hital R. Meswani                            7,00,000
 3.  Shri Hardev Singh Kohli                            50,000
 
 ii. Any other employee who received
 a grant in any one year of Options
 amounting to 5% or more of
 Options granted during that year                         Nil
 
 iii. Identified employees who were
 granted Options, during any one
 year, equal to or exceeding 1% of
 the issued capital (excluding
 outstanding warrants and
 conversions) of the Company
 at the time of grant                                     Nil
 
 k.   Diluted Earnings Per Share (EPS)
 before exceptional items pursuant to
 issue of shares on exercise of Options
 calculated in accordance with
 Accounting Standard (AS) 20
 ‘Earnings Per Share’                                Rs. 104.98
 
 As the exercise would be made at the market price prevailing as on the
 date of the grant plus applicable taxes as may be levied on the
 Company, the issuance of equity shares pursuant to exercise of Options
 will not affect the profit and loss account of the Company.
 
 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 at the Annual General Meeting held
 on June 27, 2006. 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.
 
 The Company has entered into various contracts in the areas of oil &
 gas, refining and petrochemicals businesses. While benefits from such
 contracts will accrue in the future years, their progress is
 periodically monitored.
 
 Additionally, some of the major events of the year include the
 following:
 
 - During the year the Company’s Oil and Gas Exploration & Production
 business made significant offshore discoveries in the east and west
 coast of India. RIL surpassed its previous record and had 9
 discoveries. Three gas discoveries were made in the Krishna basin in
 deep water (KG-D6-R1, KG-V-D3-A1 & B1). Two more gas discoveries were
 made in the Krishna basin in shallow water (KG-III-05-P1 & J1). A deep
 water discovery was made in the Cauvery basin (CY-D5-A1) yielding both
 oil and gas. An oil discovery was made in the deep waters of the
 prolific Krishna basin (KG-D4-MD1). One gas discovery each was made in
 the shallow waters of the Gujarat-Saurashtra basin (GS-01-B1) and
 Mahanadi basin (NEC-25-J1).  In order to assess their commerciality,
 appraisal process is underway.  The development plan for MA field
 (Dhirubhai-26) has been approved by the Management Committee. The
 development plan for Sohagpur Coal Bed Methane blocks (East and West)
 approved by the DGH.
 
 - During the year, the Company signed an agreement to acquire certain
 polyester (capacity) assets of Hualon, Malaysia. It is a leading
 polyester producer in Malaysia with a capacity of half a million tonnes
 per annum along with downstream textile manufacturing capabilities
 spread over two locations in Malaysia, namely Nilai and Malacca. This
 acquisition was the second international acquisition in the polyester
 sector after the Company acquired Trevira in Europe. This acquisition
 will help the Company consolidate its position as the world’s largest
 polyester manufacturer with an annual capacity of 2.5 million tonnes,
 which represents an increase of 25% over its existing capacity. With
 this acquisition, Reliance’s global market share in polyester fibre and
 yarn will exceed 7%.
 
 - In the Refining & Marketing business, the Company took over majority
 control of Gulf Africa Petroleum Corporation (GAPCO) and started
 shipping products to the East African markets. GAPCO owns and operates
 large storage terminal facilities and a retail distribution network in
 countries like Tanzania, Uganda and Kenya. It owns and operates large
 coastal storage terminals in Dar es Salaam (Tanzania), Mombassa
 (Kenya), and Kampala (Uganda). It has other well- spread depots in East
 and Central Africa and operates nearly 250 retail outlets.
 
 - The Company also signed MoU with GAIL (India) Limited to explore
 opportunities of setting up petrochemical plants in feedstock rich
 countries outside India.
 
 Subsidiaries
 
 Ministry of Corporate Affairs, Government of India, vide order No.
 47/108/2008-CL-III dated April 16, 2008 has granted approval that the
 requirement to attach various documents in respect of subsidiary
 companies, as set out in sub-section (1) of Section 212 of the
 Companies Act, 1956, shall not apply to the Company.  Accordingly, the
 Balance Sheet, Profit and Loss Account and other documents of the
 subsidiary companies are not being attached with the Balance Sheet of
 the Company. Financial information of the subsidiary companies, as
 required by the said order, is disclosed in the Annual Report. 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 by any investor at the Registered Office of the Company and
 that of the respective subsidiary companies. The Consolidated Financial
 Statements presented by the Company include financial results of its
 subsidiary companies.
 
 Reliance Petroleum Limited (RPL), a listed subsidiary of the Company,
 has set a rapid pace on all fronts in the implementation of a
 world-class, complex greenfield refinery at Jamnagar in Gujarat.  The
 project has made rapid strides during the year and achieved overall
 progress of 90%. Based on the progress made so far, RPL expects to
 complete the refinery project ahead of its initial schedule of
 December, 2008. During the year, the Company sold 20.80 crore equity
 shares, representing 4.62% of the equity share capital of RPL out of
 its holding of 75%. After this sale, the shareholding of the Company in
 RPL stands at 70.38%. The sale of shares monetized only a small portion
 of the Company’s holding in RPL and helped to broadbase the
 shareholding of RPL, besides unlocking value for the Company’s
 shareholders.
 
 Reliance Retail Limited (RRL), another subsidiary of the Company,
 launched its first store in November 2006 through its convenience store
 format ‘Reliance Fresh’. Since then RRL has rapidly grown to operate
 590 stores across 13 states at the end of Financial Year 2007-08. RRL
 launched its first ‘Reliance Digital’ store in April 2007 and its first
 and India’s largest hypermarket ‘Reliance Mart’ in Ahmedabad in August
 2007. This year, RRL has also launched its first few specialty stores
 for apparel (Reliance Trends), footwear (Reliance Footprints),
 jewellery (Reliance Jewels), books, music and other lifestyle products
 (Reliance Timeout), auto accessories and service format (Reliance
 Autozone) and also an initiative in the health and wellness business
 through ‘Reliance Wellness’. In each of these store formats, RRL is
 offering a unique set of products and services at a value price point
 that has not been available so far to the Indian consumer. Overall, RRL
 is well positioned to rapidly expand its existing network of 590 stores
 which operate in 57 cities.
 
 Reliance Ventures Limited, a subsidiary of the Company in a joint
 venture with Haryana State Industrial Investment Development
 Corporation (HSIIDC), is promoting Reliance Haryana SEZ Limited (RHSEZ)
 to develop the two SEZs in Haryana State. The proposed SEZs will
 function as an integrated package with all the required infrastructure
 facilities to ensure sustainable development of medium and large scale
 industries and service activities with sufficient provision for future
 growth and expansion.
 
 More details of the above subsidiaries of the Company are covered in
 Management’s Discussion and Analysis Report forming part of the Annual
 Report.
 
 Directors
 
 In terms of Article 155 of the Articles of Association of the Company,
 Shri R.H. Ambani, Shri S. Venkitaramanan, Prof. Ashok Misra and Shri
 Nikhil R. Meswani, Directors, retire by rotation and being eligible,
 offer themselves for reappointment at the ensuing Annual General
 Meeting. Brief resume of the Directors proposed to be reappointed,
 nature of their expertise in specific functional areas, names of
 companies in which they hold directorships and memberships
 /chairmanships of Board Committees, shareholding and relationships
 between directors inter-se, as stipulated under Clause 49 of the
 Listing Agreements with the Stock Exchanges in India, are provided in
 the Report on Corporate Governance.
 
 Group
 
 Pursuant to an intimation from the Promoters, the names of the
 Promoters and entities comprising ‘group’ as defined under the
 Monopolies and Restrictive Trade Practices (“MRTP”) Act, 1969 are
 disclosed in the Annual Report for the purpose of the SEBI (Substantial
 Acquisition of Shares and Takeovers) Regulations, 1997.
 
 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, 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 judgements 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, 2008 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.
 
 Consolidated Financial Statements
 
 In accordance with the Accounting Standard AS-21 on Consolidated
 Financial Statements read with Accounting Standard AS-23 on Accounting
 for Investments in Associates, the audited Consolidated Financial
 Statements are provided in the Annual Report.
 
 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
 reappointment.
 
 The Company has received letters from all of them to the effect that
 their reappointment, if made, would be within the prescribed limits
 under Section 224(1B) of the Companies Act, 1956 and that they are not
 disqualified for such reappointment within the meaning of Section 226
 of the said Act.
 
 The Notes on Accounts referred to in the Auditors’ Report are
 self-explanatory and therefore do not call for any further comments.
 
 Cost Auditors
 
 The Central Government had directed an audit of the cost accounts
 maintained by the Company in respect of textiles, polyester and
 chemicals businesses. The Central Government has approved the
 appointments of Shri S. N. Bavadekar, Cost Accountant, for conducting
 the cost audit for textiles, a part of the polyester business and a
 part of chemicals business, M/s. V.J. Talati & Co., Cost Accountants,
 for conducting the cost audit of a part of the chemicals business, M/s.
 Diwanji & Associates, M/s. Kiran J. Mehta & Co., Cost Accountants for
 conducting cost audit of a part of the chemicals business and M/s.
 Bavadekar & Co., M/s. V. Kumar &
 
 Associates, M/s. K. G. Goyal & Associates and Shri R. C. Srivastava,
 Cost Accountants, for conducting the cost audit of a part of the
 polyester business for the financial year ended March 31, 2008.
 
 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 Secretarial Audit of the Company. The
 Secretarial Audit Report for the financial year ended March 31, 2008,
 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,
 Depositories Act, 1996, Listing Agreements with the Stock Exchanges,
 Securities Contracts (Regulation) Act, 1956 and all the Regulations of
 SEBI as applicable to the Company, including the Securities and
 Exchange Board of India (Substantial Acquisition of Shares and
 Takeovers) Regulations, 1997 and the Securities and Exchange Board of
 India (Prohibition of Insider Trading) Regulations, 1992.
 
 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.
 
 However, 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 the Annexure-I to this Report.
 
 Transfer of Unpaid and Unclaimed amounts to IEPF
 
 Pursuant to the provisions of Section 205A(5) of the Companies Act,
 1956, the declared dividends and interest on debentures which remained
 unpaid or unclaimed for a period of 7 years have been transferred by
 the Company to the Investor Education and Protection Fund (IEPF)
 established by the Central Government pursuant to Section 205C of the
 said Act.
 
 Corporate Governance
 
 The Company is committed to maintain the highest standards of Corporate
 Governance. The Directors adhere to the requirements set out by the
 Securities and Exchange Board of India’s Corporate Governance practices
 and have implemented all the stipulations prescribed. The Company has
 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 declaration regarding compliance with RIL Code of Business Conduct
 and Ethics for Directors and Management Personnel forms part of Report
 on Corporate Governance.
 
 The requisite Certificate from the Auditors of the Company, M/s.
 Chaturvedi & Shah, M/s. Deloitte Haskins & Sells and M/s. Rajendra &
 Co., confirming compliance with the conditions of Corporate Governance
 as stipulated under the aforesaid Clause 49, is attached to this
 Report.
 
 Acknowledgement
 
 Your Directors would like to express their appreciation for 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 & Managing Director
 
 Mumbai
 April 21, 2008