DIRECTORS' REPORT Dear Members, Your Directors are pleased to present the Forty first Annual Report and the Company's audited financial statement for the financial year ended March 31, 2015. RESULTS OF OPERATIONS AND THE STATE OF COMPANY'S AFFAIRS The highlights of the Company's performance are as under: • Revenue from operations decreased by 15.1% to Rs. 3,40,814 crore ($ 54.5 billion). • Exports decreased by 17.1% to Rs. 2,28,651 crore ($ 36.6 billion). • PBDIT increased by 1.3% to Rs. 40,323 crore ($ 6.5 billion). • Profit before Tax increased by 5.9% to Rs. 29,468 crore ($ 4.7 billion). • Cash Profit increased by 3.4% to Rs. 31,832 crore ($ 5.1 billion). • Net Profit increased by 3.3% to Rs. 22,719 crore ($ 3.6 billion). • Gross Refining Margin was $ 8.6 / bbl for the year ended March 31, 2015. The consolidated revenue from operations of the Company for year ended March 31, 2015 was down by 13% to Rs. 3,88,494 crore ($ 62.2 billion). The decline in turnover reflects a sharp fall in crude oil prices during the second half of the year. Strong operating performance from the refining business and stable petrochemicals business performance led to higher operating profits. Consolidated operating profits before other income and depreciation increased by 7.3% on a year on year basis from Rs. 34,799 crore to Rs. 37,364 crore. Profit after Tax was higher by 4.8% at Rs. 23,566 crore as against Rs. 22,493 crore in the previous year. The financial year 2014-15 has been a very successful and important year for the Company. The Company's refining business delivered record earnings in a year when the collapse of oil prices unsettled the hydrocarbons market. During the year, RIL Jamnagar refineries processed 67.9 MMT of crude, achieving an average utilization rate of 110%. The Company was able to capitalize on the market conditions through its operational excellence, higher efficiency and well executed strategies around crude sourcing and product placement. The revenue from Petrochemicals segment decreased reflecting lower product prices resulting from sharp decline in crude and feedstock prices. KG-D6 field produced 1.96 million barrels of crude oil, 0.32 million barrels of condensate and 158 BCF of natural gas in 2014-15, reflecting a growth of 12% in case of Condensate and a reduction of 3% and 12% of Crude Oil and Natural Gas respectively on a year on year basis. The decline in production was largely due to natural decline in fields coupled with partial shutdown of MA field due to Hudhud cyclone. The capital expenditure of Reliance on a consolidated basis for 2014-15 was Rs. 1,00,247 crore including exchange rate difference capitalization. The capital expenditure was principally on account of ongoing expansion projects in petrochemicals and refining business at Jamnagar, Dahej and Hazira, Broadband access and US Shale gas projects. During the year, the Company commissioned its new PBR Plant at Hazira, Gujarat, with capability to produce Nickel and Neodymium grade PBR. With the commissioning of this facility, the Company's total PBR capacity is now at 115 KTPA. RIL also started its new 150 KTPA SBR plant during the year which is expected to stabilise in the coming months. During the last quarter of 2014-15, RIL started phase-1 PTA capacity of 1,150 KTPA and 650 KTPA of PET capacity at Dahej, Gujarat. Both these plants are expected to stabilise operations in the coming months and will be advantageously positioned to reap the benefits of integration. The new PET resin facility is one of the largest bottle-grade PET resin facility at a single location globally. The new PTA plant has been built with Invista technology and is highly energy efficient and environment friendly. Indian market is currently deficit in PTA by over 1.5 MMTPA. The start-up of the new PTA plant at Dahej will take India closer to self-sufficiency in PTA. The Company has made offerings of Senior Unsecured Notes priced under Rule 144A/Regulation S of the Securities Act, 1933 (USA) aggregating US $ 1.75 billion during January and February 2015. These funds will be utilized for ongoing capital expenditure. 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. 33,322 crore ($ 5.3 billion) was paid in the form of various taxes and duties. The Company is featured in the Fortune Global 500 list of the world's largest corporations for the eleventh consecutive year and was ranked 114th in terms of revenues and 155th in terms of profit. No material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company. DIVIDEND Your Directors have recommended a dividend of Rs. 10 (i.e. 100%) per equity share (last year Rs. 9.50 per equity share) for the financial year ended March 31, 2015, amounting to Rs. 3,559 crore (inclusive of tax of Rs. 615 crore), one of the highest payout by any private sector company in India. The dividend payout is subject to approval of members at the ensuing Annual General Meeting. The dividend will be paid to members whose names appear in the Register of Members as on May 11, 2015 and 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 the Company's policy to pay sustainable dividend linked to long term growth objectives of the Company to be met by internal cash accruals. 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 developments in business operations / performance of major subsidiaries consolidated with RIL are as below: Shale Gas Business Reliance's shale gas business continued on its growth trajectory with revenues and EBIT increasing 20.1% and 36.3% respectively, despite a challenging price environment. RIL's share of net sales volume was at 168 BCFe, compared to 131 BCFe in 2013. EBITDA of $ 775.1 million in 2014, was up 26% y-o-y. Operationally, the business continued its strong performance during calendar year 2014, with production reaching the new record levels across the JVs. Gross JV production averaged at ~1.2 Bcfe/day, reflecting growth of 26% over the levels achieved in calendar year 2013. The business has reached an overall development maturity (with a significant part of the acreages held by production) and this provides adequate investment flexibility in managing the low price environment through prioritizing well capex in the most prolific areas. Retail Business Reliance Retail business grew by 21.2% to reach revenue of Rs. 17,640 crore as against Rs. 14,556 crore registered in the previous financial year. It continued to grow profitably, achieving profits before depreciation, finance cost and tax expense (PBDIT) of Rs. 784 crore, an increase of 116% on a year on year basis. The format sectors collectively witnessed a five-year CAGR of 31% in revenues. During the year, Reliance Retail consolidated its market leadership in all of the focus sectors of digital, lifestyle and value sectors. During the year, Reliance Retail undertook an unprecedented store opening plan on an accelerated pace and added a net total of 930 stores to further increase its reach in the underserved markets. A total of 0.9 million square feet area was added. As on 31st March 2015, Reliance Retail operated 2,621 stores, covering an area of 12.5 million square feet across 200 cities. Jio Infocomm RIL's subsidiary, Reliance Jio Infocomm Limited (RJIL) is the only private player with Broadband Wireless Access (BWA) spectrum in all the 22 telecom circles of India. It plans to provide reliable fast internet connectivity through the 20 MHz, contiguous, pan-India BWA spectrum. RJIL has also successfully acquired 1800 MHz spectrum across 14 key circles in February, 2014. In March 2015, RJIL has successfully acquired the right to use spectrum in 800 MHz & 1800 MHz in 13 key circles across India in the Spectrum Auction conducted by Department of Telecommunications (DoT), Government of India. With this acquisition, in addition to the pan-India 2300 MHz spectrum, RJIL has spectrum in either 800 MHz or 1800 MHz or both in 20 out of the total of 22 circles in the country. RJIL's total equivalent spectrum footprint has increased from 597.6 MHz to 751.1MHz (including uplink and downlink), strengthening its position as the largest holder of liberalized spectrum. This combined spectrum footprint across frequency bands provides significant network capacity and deep in-building coverage. RJIL plans to provide seamless 4G services using LTE in 800 MHz, 1800 MHz and 2300 MHz through an integrated ecosystem. RJIL is working aggressively in achieving the minimum roll out obligations as specified in the Notice Inviting Application for the spectrum auction in 2010, per the Test Schedule Test Procedure (TSTP) issued by DoT in March, 2015. Media and Entertainment During the year, Independent Media Trust (IMT), of which RIL is the sole beneficiary, acquired the control of Network18 Media & Investments Limited (Network18), including its subsidiary TV18 Broadcast Limited (TV18). This acquisition will differentiate Reliance's Jio Infocomm business by providing a unique amalgamation at the intersect of telecom, web and digital commerce via a suite of premier digital properties. Network18 has interests in television, digital content, filmed entertainment, digital commerce, magazines, mobile content and allied businesses. Network18, through its group companies, operates a combined bouquet of over 30 channels. Network18 operates a number of digital and mobile properties offering digital content and commerce, including home shopping and online ticketing. It also publishes special interest magazines and has a presence in film production and distribution. From the date of acquisition of control to 31st March, 2015, Network 18's operating revenue stood at Rs. 2,747 crore and EBIT at Rs. 135 crore, on a consolidated basis. CONSOLIDATED FINANCIAL STATEMENT In accordance with the Companies Act, 2013 ("the Act") and 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 Interests in Joint Ventures, the audited consolidated financial statement is provided in the Annual Report. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES During the year under review, companies listed in Annexure I to this Report have become or ceased to be Company's subsidiaries, joint ventures or associate companies. A report on the performance and financial position of each of the subsidiaries, associates and joint venture companies as per the Companies Act, 2013 is provided as Annexure A to the consolidated financial statement and hence not repeated here for the sake of brevity. The Policy for determining material subsidiaries as approved may be accessed on the Company's website at the link: <http://www.ril.com/getattachment/759df65c->9a8d-42ff-a23c-e1c5d892e0c7/Policy-for-determining-Material-Subsidiaries.aspx DIRECTORS' RESPONSIBILITY STATEMENT Your Directors state that: a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; b) 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, 2015 and of the profit of the Company for the year ended on that date; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared the annual accounts on a 'going concern' basis; e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 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 the Listing Agreement forms an integral part of this Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of corporate governance is attached to the report on Corporate Governance. BUSINESS RESPONSIBILITY REPORT As stipulated under the Listing Agreement, the Business Responsibility report describing the initiatives taken by the Company from environmental, social and governance perspective is attached as part of the Annual Report. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: <http://www.ril.com/getattachment/007dfb3a->20aa-4b32-9a5b-ac51738bad00/Policy-on-Materiality-of-Related-Party-Transaction.aspx Your Directors draw attention of the members to Note 32 to the financial statement which sets out related party disclosures. CORPORATE SOCIAL RESPONSIBILITY (CSR) The Corporate Social Responsibility and Governance Committee (CSR&G Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Company's website at the link: <http://www.ril.com/getattachment/> d5fd70ef-e019-47e5-bb83-de2077874505/Corporate-Social-Responsibility-Policy.aspx The key philosophy of all CSR initiatives of the Company is guided by three core commitments of Scale, Impact and Sustainability. The Company has identified six focus areas of engagement which are as under: • Rural Transformation: Creating sustainable livelihood solutions, addressing poverty, hunger and malnutrition. • Health: Affordable solutions for healthcare through improved access, awareness and health seeking behaviour. • Education: Access to quality education, training and skill enhancement. • Environment: Environmental sustainability, ecological balance, conservation of natural resources. • Protection of National Heritage, Art and Culture: Protection and promotion of India's art, culture and heritage. • Disaster Response: Managing and responding to disaster. • Corporate Overview Management Review Governance Financial Statements Shareholder Information 157 • The Company would also undertake other need based initiatives in compliance with Schedule VII to the Act. • During the year, the Company has spent Rs. 761 crore (around 2.85% of the average net profits of last three financial years) on CSR activities. • The Annual Report on CSR activities is annexed herewith marked as Annexure II. RISK MANAGEMENT During the year, your Directors have constituted a Risk Management Committee which has been entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company's enterprise wide risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. A Group Risk Management Policy was reviewed and approved by the Committee. The Company manages, monitors and reports on the principal risks and uncertainties that can impact its ability to achieve its strategic objectives. The Company's management systems, organisational structures, processes, standards, code of conduct and behaviors together form the Reliance Management System (RMS) that governs how the Group conducts the business of the Company and manages associated risks. The Company has introduced several improvements to Integrated Enterprise Risk Management, Internal Controls Management and Assurance Frameworks and processes to drive a common integrated view of risks, optimal risk mitigation responses and efficient management of internal control and assurance activities. This integration is enabled by all three being fully aligned across Group wide Risk Management, Internal Control and Internal Audit methodologies and processes. INTERNAL FINANCIAL CONTROLS The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation were observed. DIRECTORS AND KEY MANAGERIAL PERSONNEL In accordance with the provisions of the Act and the Articles of Association of the Company, Shri Hital R. Meswani and Shri P.M.S. Prasad, Directors of the Company, retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment. Shri Mahesh P. Modi, Independent Director of the Company passed away in February 2015. The Board places on record its deep appreciation for the valuable contribution made by him during his tenure as Director of the Company. Shri Maheswar Sahu, who was appointed as an additional director, demitted office as a Director effective March 30, 2015. During the year under review, the members approved the appointments of Smt. Nita M. Ambani as a non-executive Non-Independent Director who is liable to retire by rotation and of Shri Mansingh L. Bhakta, Shri Yogendra P. Trivedi, Dr. Dharam Vir Kapur, Prof. Ashok Misra, Prof. Dipak C. Jain, Dr. Raghunath A. Mashelkar and Shri Adil Zainulbhai as Independent Directors who are not liable to retire by rotation. The members have also re-appointed Shri Mukesh D. Ambani as the Managing Director and Shri Hital R. Meswani and Shri P.M.S. Prasad as whole-time directors, designated as executive directors. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges. The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the non-executive directors and executive directors. The Company had engaged two consultants for looking at the best practices prevalent in the industry and advising with respect to evaluation of Board members. On the basis of recommendations of the consultants and the Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors, a process of evaluation was followed by the Board for its own performance and that of its Committees and individual Directors. The details of programmes for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link: <http://www.ril.com/getattachment/3b0559bd-20fd-4e3e->8a35-1c0a8f090224/Familiarisation-Programme-for-Independent-Director.aspx The following policies of the Company are attached herewith marked as Annexure IIIA and Annexure IIIB: a) Policy for selection of Directors and determining Directors independence; and b) Remuneration Policy for Directors, Key Managerial Personnel and other employees. EMPLOYEES' STOCK OPTION SCHEME The Human Resources, Nomination and Remuneration Committee of the Board of Directors of the Company, inter alia, administers and monitors the Employees' Stock Option Scheme of the Company in accordance with the applicable SEBI Guidelines. The applicable disclosures as stipulated under the SEBI Guidelines as on March 31, 2015 (cumulative position) with regard to the Employees' Stock Option Scheme (ESOS) are provided in Annexure IV to this Report. The issue 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 members. The certificate would be placed at the Annual General Meeting for inspection by members. Voting rights on the shares issued to employees under the ESOS are either exercised by them directly or through their appointed proxy. AUDITORS AND AUDITORS' REPORT Statutory Auditors M/s. Chaturvedi & Shah, Chartered Accountants, Deloitte Haskins & Sells LLP, Chartered Accountants and M/s. Rajendra & Co., Chartered Accountants, Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. They have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for re-appointment. The Notes on financial statement referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark. Cost Auditors The Board has appointed the following cost auditors for conducting the audit of cost records of the Company for various segments for the financial year 2014-15: (i) For Textiles Business - M/s. Kiran J. Mehta & Co., Cost Accountants; (ii) For 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. Kiran J. Mehta & Co., Cost Accountants, M/s. Bandyopadhyaya Bhaumik & Co., Cost Accountants, M/s. Shome & Banerjee, Cost Accountants and M/s. Dilip M. Malkar & Co., Cost Accountants; (iii) For Polyester Business - Shri Suresh D. Shenoy, Cost Accountant and 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 - Shri Suresh D. Shenoy, Cost Accountant and M/s. Shome & Banerjee, Cost Accountants. M/s. Shome & Banerjee, Cost Accountants, were nominated as the Company's Lead Cost Auditor. Secretarial Auditor The Board has appointed Dr. K.R. Chandratre, Practising Company Secretary, to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith marked as Annexure V to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. DISCLOSURES: CSR&G Committee The CSR&G Committee comprises Shri Yogendra P. Trivedi (Chairman), Shri Nikhil R. Meswani, Dr. Dharam Vir Kapur and Dr. Raghunath A. Mashelkar as other members. Audit Committee The Audit Committee comprises Independent Directors namely Shri Yogendra P. Trivedi (Chairman), Dr. Raghunath A. Mashelkar and Shri Adil Zainulbhai as other members. All the recommendations made by the Audit Committee were accepted by the Board. Vigil Mechanism The Vigil Mechanism of the Company, which also incorporates a whistle blower policy in terms of the Listing Agreement, includes an Ethics & Compliance Task Force comprising senior executives of the Company. Protected disclosures can be made by a whistle blower through an e-mail, or dedicated telephone line or a letter to the Task Force or to the Chairman of the Audit Committee. The Policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link: <http://www.ril.com/getattachment/c5c2d3f9-8a4d-4075->830f-33d9917d05b4/Vigil-Mechanism-and-Whistle-Blower-Policy.aspx Meetings of the Board Seven meetings of the Board of Directors were held during the year. For further details, please refer report on Corporate Governance on page no. 128 of this Annual Report. Particulars of Loans given, Investments made, Guarantees given and Securities provided Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement (Please refer to Note 11, 12, 13 and 37 to the standalone financial statement). Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure VI to this Report. Extract of Annual Return Extract of Annual Return of the Company is annexed herewith as Annexure VII to this Report. Particulars of Employees and related disclosures In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annual Report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. The full Annual Report including the aforesaid information is being sent electronically to all those members who have registered their email addresses and is available on the Company's website. GENERAL Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Details relating to deposits covered under Chapter V of the Act. 2. I ssue of equity shares with differential rights as to dividend, voting or otherwise. 3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report. 4. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries. 5. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. ACKNOWLEDGEMENT Your Directors would like to express their sincere 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 Company's executives, staff and workers. For and on behalf of the Board of Directors Mukesh D. Ambani Chairman and Managing Director Date : April 17, 2015 |