Annual Report 2015-16

Enhancing the quality of life.

Starting up to a digital life. “Our dreams have to be bigger. Our ambitions higher. Our commitment deeper. And our efforts greater. This is my dream for Reliance and for .”

Padma Vibhushan Shri Dhirubhai H. Ambani Founder Chairman

Reliance has started up a transformative force with a view to digitally empower and enrich Indians with a distinctly digital identity of their very own.

Enhancing the quality of life. Starting up to a digital life.

Reliance’s businesses and operations have a In its inherent role as a curator of development, deep and wide impact across Indian society. Reliance is nurturing India’s digital dream for Over the past five decades, Reliance has become a bright and brilliant future. Reliance started an integral part of people’s lives, present in a transformative force with a view to digitally their midst, in every moment, keeping them empower and enrich Indians with a distinctly connected, safe and better. digital identity of their very own. Reliance also continues to cater to its consumers’ diverse Since its inception, Reliance has partnered the needs through over 150 major products and nation to develop and grow into its full potential brands across energy and service sectors. and propel the India growth story forward. From the hydrocarbons sector to new-age consumer Reliance is proud to have been a catalyst in businesses, Reliance today has a firm foothold India’s transformation into an attractive economy across sectors, driving the economy forward. globally by directing its investments and focus in areas that will continue to define and shape the These pioneering efforts demonstrate Reliance’s new India. unwavering faith in the nation’s potential and purpose. Invigorating India through insightful Reliance is visibly enhancing the quality of life innovations and strategic investments, Reliance and starting up to a digital life. In doing so, with a select few, has been an architect of the Reliance is partnering the creation of a country’s growth trajectory. new India. Inside this Report

Corporate Financial Overview 2 Statements 256 Letter to Shareowners / 4 2 / Reliance at a Glance Standalone 3 / Key Performance Indicators 257 / Independent Auditors’ Report on 4 / Letter to Shareowners Financial Statements 8 / The Board of Directors 262 / Balance Sheet 10 / Enhancing the Quality of Life 263 / Profit and Loss Statement 12 / Making Lives Better 264 / Cash Flow Statement 14 / - Starting up to a Digital Life 266 / Significant Accounting Policies 16 / Jio - Reimagining Digital Life 270 / Notes on Financial Statements 18 / Nurturing Digital Entrepreneurship 20 / People and Innovation Consolidated 21 / Research and Technology 314 / Independent Auditors’ Report on 22 / An Integrated Approach Towards Consolidated Financial Statements Enhancing the Quality of Life / 10 Sustainable Growth - 5P’s 318 / Consolidated Balance Sheet 24 / Strategic Framework and Outcome 319 / Consolidated Profit and Loss 26 / Review of Operations Statement 38 / 320 / Consolidated Cash Flow Statement 40 / Awards and Recognition 322 / Significant Accounting Policies on 41 / Company Information Consolidated Accounts 42 / Major Products and Brands 323 / Notes on Consolidated Financial 53 / Product Flow Chart Statements 54 / Financial Highlights 374 / Salient Features of Financial Statements of Subsidiary / Associates / Joint Ventures Management Review / 55 Management Review 55 Shareholder 55 / Management’s Discussion and Analysis Information 380 132 / Report on Corporate Social Responsibility 380 / Shareholders’ Referencer 392 / Notice of Annual General Meeting • Attendance Slip and Proxy Form • Members’ Feedback Form 2015-16 Business Responsibility Report / 148

Governance 148 OTHER REPORTS AND INFORMATION:

148 / Business Responsibility Report • Corporate sustainability related On the cover: 170 / Corporate Governance Report information ril.com/Sustainability/ The cover depicts Reliance’s core belief 198 / Auditors’ Certificate on Corporate CorporateSustainability.aspx of adding value to the quality of life Governance • Quarterly results and Analyst of all stakeholders through ensuring 206 / Directors’ Report Presentations ril.com/InvestorRelations/ growth and progress, in addition to FinancialReporting.aspx better products and services. Reliance • Financial statements of subsidiary endeavours to achieve this through companies ril.com/InvestorRelations/ consistent investments and innovations Downloads.aspx across the energy and consumer businesses. Reliance is building new business of digital services through Jio, Scan the QR Code on your smart device to the world’s largest start-up, which will view the Annual Report online at herald a transformational ecosystem www.ril.com/ar2015-16/index.html leading to a digitally-enabled life for all its consumers and stakeholders. Limited Enhancing the quality of life. Starting up to a digital life. Annual Report 2015-16 Reliance at a Glance RIL is India’s largest private sector company on key financial parameters. It is a US$44.7 billion significant global player in the integrated energy value chain, and has a growing presence in the retail and digital services in India. Built on strong values, RIL `2,96,091 crore Annual Revenue is steadfastly rooted in the culture of safety, integrity and commitment. RIL is dedicated to its vision of partnering India’s economic growth and social well-being. RIL strives to be a product and service leader across its industries, a US$4.2 billion great work-place and above all, to create value for its stakeholders and society. `27,630 crore BUSINESSES AT A GLANCE* All figures in` crore Net Profit Refining and Marketing Revenue EBIT 2,34,946 23,598 nd Petroleum Refining 2 Largest Owns and operates two of the world’s largest and most complex Producer of polyester fibre/ refineries with crude processing capacity of 1.24 MMBPD yarn, globally

4th Largest Petrochemicals Revenue EBIT Producer of PTA, globally 82,410 10,221 Polymers, Polyester, Fibre intermediates, Elastomers and Chemicals 6th Largest Integrated petrochemicals player with Top 10 rankings in key products globally and having balanced portfolio of liquid and Producer of PX, globally gas crackers Oil and Gas Revenue EBIT 6th Largest 7,527 378 Producer of PP, globally Exploration and Production of Oil and Gas Interests in onshore and offshore exploration and production in 8th Largest India and significant presence in US shale Producer of MEG, globally Retail Revenue EBIT 21,612 506 151 Pan India footprint in Major products and brands across Organised Retail energy and service sectors Market leader with over 12.8 million sq. ft. of retail space and having presence in over 500 cities

1,000+ Digital Services Pan India spectrum RIL’s Petroleum Retail network 846.1 MHz outlets currently operational Building a countrywide broadband next generation infrastructure to deliver digital content, applications and services 3,383 Retail stores currently operating across India Media and Entertainment Revenue EBIT Jio 3,403 182 Deployed the largest amount of Broadcasting and Digital Properties spectrum for 4G in India Interests in television, print, internet, film, mobile content and allied businesses

*Read more about Consolidated Segment Information on Pg. 363 2 Corporate 02 Management 55 148 Financial 256 Shareholder 380 Overview 54 Review 147 Governance 255 Statements 379 Information 396 Reliance at a Glance Key Performance Indicators

Profit and Loss Metrics (Consolidated)(Profit After Tax CAGR of 27.2%)* Turnover Profit After Tax Earnings Per Share ` crore ` crore `

23.8% y-o-y 17.2% y-o-y 17.1% y-o-y

15-16 2,96,091 15-16 27,630 15-16 93.8 14-15 3,88,494 14-15 23,566 14-15 80.1 13-14 4,46,339 13-14 22,493 13-14 76.5 12-13 4,08,392 12-13 20,879 12-13 70.7 11-12 3,68,571 11-12 19,724 11-12 66.2

Balance Sheet Metrics (Consolidated) (Networth CAGR of 30.6%)* Networth Debt Equity Ratio Book Value Per Share ` crore `

11.5% y-o-y 11.3% y-o-y

15-16 2,43,643 15-16 0.74 15-16 826.5 14-15 2,18,482 14-15 0.74 14-15 742.3 13-14 1,98,670 13-14 0.70 13-14 675.9 12-13 1,82,030 12-13 0.59 12-13 619.9 11-12 1,69,445 11-12 0.55 11-12 568.9

Social Metrics (Standalone)

R&D Expenditure Total Recycled Material HSE Expenditure ` crore ’000 tonnes ` crore

3.2% y-o-y 13.9% y-o-y 16.4% y-o-y

15-16 1,259 15-16 82.03 15-16 337.31 14-15 1,220 14-15 71.99 14-15 289.75 13-14 1,218 13-14 69.15 13-14 284.95 12-13 1,118 12-13 63.22 12-13 281.90 11-12 989 11-12 64.90 11-12 247.13

Shareholders Metrics (CAGR of 31.6% in Market Capitalisation)* India’s first private sector company to feature in Fortune Global 500 list of ‘World’s Largest Market Capitalisation Dividend Per Share Corporations’, currently ranking 215th in ` crore ` terms of revenue and 126th in terms of profit. Reliance continues to feature in the list for the 13th consecutive year. 26.9% y-o-y 5.0% y-o-y Ranks 238th in the Financial Times’ FT 15-16 3,38,703 15-16 10.5 Global 500 2015 list of the world’s largest 14-15 2,66,847 14-15 10.0 companies. 13-14 3,00,405 13-14 9.5 Ranked 121st on the Forbes Global 2000 list 12-13 2,49,802 12-13 9.0 (2016). Continues to be the top ranked and one of the most valued Indian company. 11-12 2,44,757 11-12 8.5

* CAGR since IPO i.e. 38 years 3 Reliance Industries Limited Enhancing the quality of life. Starting up to a digital life. Annual Report 2015-16 Letter to Shareowners

Mukesh D. Ambani Chairman and Managing Director

Dear Fellow Shareowners,

I am delighted to write you to report yet another year of outstanding achievements for our energy and materials businesses. Despite persisting global economic uncertainty, we have delivered the best operating and financial performance in our history.

Our new projects in the hydrocarbons become the world’s fastest growing major The global oil demand is expected to grow and digital services businesses have made economy. However, the Indian economy by 1.4 million b/d in CY 2016 and probably significant progress. We have invested over too faced challenges from slow agricultural by 1.3 million b/d in CY 2017. This is on the `1,12,000 crore (US$17 billion) in growth with two consecutive poor back of 1.8 million b/d of demand growth FY 2015-16, the highest-ever by any monsoons and sharp contraction in exports recorded during CY 2015. This cumulative corporate in Indian history. This large due to weak global demand and lower growth of over 4 million b/d of global investment spread across all our businesses commodity prices. oil demand over three successive years will create sustained and significant value bodes well for the refining industry. The for our stakeholders. As we near the end of Against this backdrop, Reliance recorded demand growth for all our key products in our largest capital expenditure cycle, we are its highest-ever consolidated net profit the refining and petrochemicals business focused on ensuring a smooth start-up and of `27,630 crore (US$4.2 billion) during remained robust in India. Oil demand in stabilisation of the new growth platforms the year, a growth of 17.2% y-o-y. Strong India grew by 10.9%, the highest growth across our hydrocarbon and consumer operating performance from the refining rate seen in the past 15 years. This was led businesses. and petrochemicals business led to higher by strong growth of 14.1% in gasoline, 7.5% operating profits (PBDIT), which increased in diesel, 8.8% in jet kerosene and 20.7% in Global economic activity remained muted by 14.2% on a y-o-y basis to `52,503 crore naphtha. during the year as oil prices remained soft. (US$7.9 billion). The benefits of low crude The oversupply situation continued as oil oil and energy prices for our downstream The petrochemical product demand too producing countries vied for market share. businesses clearly outweigh the impact of remained above long-term averages. Indian Emerging markets dependent on Chinese these factors on our upstream segment, polymer market experienced growth rate growth were impacted as China moves from reflecting in the record earnings for the of 15%, surpassing China to become the an infrastructure and export economy to year. This underscores the robustness of fastest growing polymer market. Polyester a consumption based economy. Despite our integrated model and quality of assets demand growth sustained at 5% for the these macro headwinds, India was resilient which deliver strong operating cash flows in year. and overtook China’s growth rate to a challenging environment. 4 Corporate 02 Management 55 148 Financial 256 Shareholder 380 Overview 54 Review 147 Governance 255 Statements 379 Information 396 Letter to Shareowners

Reliance invested over `1,12,000 crore (US$17 `23,598 crore billion) in FY 2015-16, the highest-ever by any Record EBIT of Refining and Marketing Business corporate in Indian history in creating growth engines for the future. `27,630 crore Highest-ever consolidated net profit in FY 2015-16

Refining and Marketing This allowed us to capture the benefits of We made rapid progress in the completion Reliance’s world-class refining infrastructure a widening differential between light and of the new ROGC and aromatics project. at Jamnagar enabled us to deliver heavy crude oil. These projects upon completion will add a very strong performance despite the significant volumes to our polymer business turbulence in the energy sector. EBIT from Staying true to our commitment to growth, and enhance integration for the polyester refining business increased by 49.1% y-o-y we aim to achieve significant long-term chain. The new cracker will be among the to `23,598 crore. EBIT margins expanded energy cost reduction with the completion lowest cost producers of ethylene in the from 4.7% in FY 2014-15 to 10% in of the petcoke gasification project, where world. We have also made substantial FY 2015-16. Our gross refining margins low value petroleum coke will be used progress in the US ethane import project, stood at US$10.8/bbl in FY 2015-16, to produce high value syngas to increase which will lower costs and ensure long- the highest in the last seven years and Jamnagar’s energy self-sufficiency. term feedstock security, flexibility and significantly outperformed the Singapore Furthermore, we continue to re-commission competitiveness. benchmark. our petroleum retail network which has now expanded to over 1,000 outlets. In the polyester chain, we added substantial Our refineries benefited from robust growth volumes in efforts to further integrate our in global oil product demand and over Petrochemicals business. We now produce 650 KTA of PET supplied oil markets. Transportation fuels Reliance’s petrochemical division continued at Dahej, making it the largest bottle-grade benefited the most, with gasoline the key to deliver sustained growth. Demand for PET resin capacity at a single location growth driver. Gasoline cracks were seen downstream products increased as lower globally. To cater to the large PET capacity, at historic high levels during the year. The oil prices softened end product prices. we also successfully commissioned PTA refining business was effectively supported Reliance’s petrochemicals business has a facilities of a total capacity of 2.3 MMTPA in by a robust risk management framework wide product portfolio, superior feedstock Dahej during the year. Our fully integrated which is an integral part of the operations. linkages and serves high-growth end- polyester business model allows us to also markets including automobiles, packaging, benefit from inherent logistics and cost Leveraging the flexibility provided by consumer durables, agriculture and advantages. our refining assets at Jamnagar, we were infrastructure sector in India. Favourable able to optimise our crude and product demand-supply dynamics were reflected Reliance is confident of placing all our slate to capture higher margins from light in margin expansion across key product incremental output from the new projects distillates. Our refineries processed new categories. Overall EBIT margin for the in the domestic markets to meet India’s grades of crude to make use of advantaged segment expanded by 380 bps to 12.4% for growing demand. feedstock available at significant discounts. the year. 5 Reliance Industries Limited Enhancing the quality of life. Starting up to a digital life. Annual Report 2015-16

Letter to Shareowners (contd.)

Pg. 26 Pg. 28 Pg. 30 Refining and Marketing Petrochemicals Exploration and Production World-class refining infrastructure at Jamnagar Rapid progress in new ROGC and aromatics Unlocked significant shareholder value by enabled to deliver an unprecedented project. These projects will add significant monetising its EFS midstream investment performance. Reliance’s gross refining volumes to RIL’s polymer business and enhance for US$1.07 billion. margins stood at US$10.8/bbl in FY 2015-16, integration for the polyester chain. RIL has also the highest in the last seven years. successfully commissioned second phase of PTA.

Exploration and Production rate of 29% CAGR in the last five years. We envisage ushering in the era of Low energy prices have created a In FY 2015-16, we added 624 new stores “visuality”, where video will replace voice as challenging environment for upstream taking our total stores to 3,245 stores, the new communication medium. business of Reliance. Conserving cash while spread over 12.8 million square feet and it is retaining optionality and preparedness currently operating 3,383 stores. “Reliance Our customer offerings are built on four for ramp-up was accorded a high priority Fresh” has consistently appeared in the list key strategic dimensions, viz. widest during the year. Measures were taken in of most trusted national brands. coverage, substantially superior network the shale gas business to optimise capital quality, transformational data capacity expenditure and opex through effective The integration of advanced infrastructure and affordable services. We have made production management. The capital built by Jio and physical retail presence considerable progress on all of these fronts expenditure for US Shale business was cut will help us create a differentiated during the year. by 25% on y-o-y basis. Reliance strategically omni-commerce model for our retail unlocked significant shareholder value by business. We are augmenting reach to During the year, Reliance Jio moved monetising its EFS midstream investment customers through online-offline product towards completion of its network for US$1.07 billion. assortment across trade channels. These infrastructure as well as business services efforts in building a seamless interface will and platforms. We on-boarded over 1.5 On the domestic front, KG D6 production deliver superior value proposition for our million test users, who have been using fell due to natural decline in the producing customers. the services extensively. This has enabled wells. During the year, Government of testing of the network, user applications India issued new gas pricing policy which As India shifts to a digitally empowered and services and business platforms. The includes marketing and pricing freedom society, we anticipate a significant demand feedback from test users is extremely for production from discoveries in deep for devices to connect users to a digital encouraging. The test programme will be water, ultra-deep water and high pressure- ecosystem. Keeping this in mind, we have progressively upgraded into commercial high temperature areas. Both Reliance started building the largest distribution operations in the coming months. and its partner BP, are evaluating the new reach for devices in India. We have policy and investment plans to develop introduced “LYF” models of smartphones In order to further deepen the network discovered resources. and televisions to enable user’s access to coverage, Reliance Jio acquired spectrum the 4G LTE experience. in the 800 MHz band across 13 circles, to Consumer Businesses – Reliance become the only operator with pan India Retail and Digital Services The next wave of growth in India will LTE spectrum in both the 800 MHz and In our retail business, we have reached be enabled through internet and data 2300 MHz bands. Reliance Jio also has significant milestones over the past couple capabilities. Our digital initiative continues spectrum in the 1800 MHz band across of years and continue the high growth to gather speed to provide anytime, 18 circles. In addition, Reliance Jio has trajectory. now caters to anywhere access to innovative and entered into an agreement for sharing of over 3.5 million customers every week. With empowering digital content, applications spectrum in the 800 MHz band across 21 over `20,000 crore of revenue, it is India’s and services, thereby propelling India into circles (4 circles are still awaiting approval). largest retailer and has sustained a growth global leadership in the digital economy. Reliance Jio is the only telecom service

6 Corporate 02 Management 55 148 Financial 256 Shareholder 380 Overview 54 Review 147 Governance 255 Statements 379 Information 396 Letter to Shareowners

Pg. 32 Pg. 34 Pg. 36 Retail Jio Media and Entertainment Caters to over 3.5 million customers every RJIL acquired spectrum in the 800 MHz band One of India’s leading Media and Entertainment week. With over `20,000 crore of revenue, it is across 13 circles, to become the only operator (M&E) players, with a presence across several the largest retailer in India. with pan India LTE spectrum in both the 800 MHz businesses including television content and 2300 MHz bands. RJIL also has spectrum in production and distribution, theatrical exhibition the 1800 MHz band across 18 circles. of films and media services.

provider using sub-GHz spectrum band Governance and Safety continued to provide accelerated high for LTE services in the country today. The Reliance has always accorded the highest impact solutions to India’s multifarious combined spectrum footprint across importance to health and safety in the development challenges. Various efforts of frequency bands provides significant existing plants and the projects. A fully the Foundation have positively impacted network capacity and deep in-building equipped and qualified HSE (Health Safety several hundreds of thousands marginal coverage for Reliance Jio. and Environment) organisation has been households in areas of health, livelihoods, provided for each location to govern, education and relief during natural At Reliance, we truly believe that document and provide HSE assurance. The calamities. Our sports initiatives, aimed empowering people with high quality process of first and second party audits at development of youth and reviving the internet access will help India progress and continued at all sites with feedback being sporting landscape in the country, reached move towards a more knowledge based provided to the Board of Directors. out to over 2 million school-going children. and connected society. During the year, Reliance contributed `652 To have a better assessment of the crore towards CSR activities, accounting for Robust Balance Sheet business and functional risks and to 2.38% of our profit after tax. RIL enjoys prime credit ratings as a result of monitor risk mitigation effectiveness its fiscal prudence and strong cash flows. based on risk evaluation, the concept At the close, I would like to thank the During the year, RIL and its subsidiaries of BRAC (Business Risk and Assurance entire team at Reliance for an outstanding tied-up long-term foreign currency facilities Committee) was introduced with senior year which is reflective of their efforts, of about US$6.3 billion. With its unparalleled management personnel on the committee. dedication and commitment to success. access to global debt markets, Reliance successfully re-priced and re-financed debt On the governance front we have put I would like to place on record my sincere instruments thereby reducing interest cost. in place a comprehensive Reliance appreciation to the Board of Directors for This year we concluded the largest financing Management System, a holistic set of their guidance. I would like to express my transaction globally in the telecom sector management systems, organisational gratitude to all our stakeholders for their supported by K-sure. This was also the structures, processes and requirements to continuing faith in Reliance. longest tenure telecom financing supported enable more evolved governance and risk by K-sure. assurance framework for Reliance through With best wishes, its three key core elements: Operating Sincerely, During the year, we became the first Management System (OMS), Financial private sector energy company globally Management System (FMS) and People to issue notes backed by the EXIM Bank Management System (PMS). of the USA. Also, we are the first energy company globally to issue Formosa Bond. Sustainable Growth Our innovative financings earned us various An integral part of Reliance’s philosophy is Mukesh D. Ambani accolades during the year, including ‘Issuer its commitment to empower and enhance Chairman and Managing Director of the Year’ award for 2015 from IFR Asia and the quality of lives of millions of people. July 15, 2016 ‘Best Corporate Issuer - 2015’ from The Asset. During the year, Reliance Foundation

7 Reliance Industries Limited Enhancing the quality of life. Starting up to a digital life. Annual Report 2015-16 The Board of Directors

Shri Mukesh D. Ambani Smt. Nita M. Ambani Chairman and Managing Director Non Executive, Non Independent Director Chairman: Finance Committee

Shri Nikhil R. Meswani Shri Hital R. Meswani Executive Director Executive Director Member: Stakeholders’ Chairman: Health, Safety and Relationship Committee, Environment Committee Corporate Social Responsibility Member: Stakeholders’ and Governance Committee, Relationship Committee, Finance Committee Finance Committee, Risk Management Committee

Shri P. M. S. Prasad Shri Pawan Kumar Kapil Executive Director Executive Director Member: Health, Safety and Member: Health, Safety and Environment Committee, Risk Environment Committee Management Committee

Read the profiles of the Board of Directors on Pg. 199 8