tcs 2010 analysis

8/8/2019 TCS 2010 Analysis

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ANALYSIS OF ANNUAL REPORT 2008-09

SUBMITTED BY

HARIPRIYA (0409002)

PANKAJ (0409008)

MANASA (0409006)

SUMANTH (0409004)


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PREFACE

This report deals with the analysis of the annual report of Reliance industries ltd for the year

2008-09 with reference to the following terms:

y Accounting policyy Fixed assetsy Liabilitiesy Depreciationy Inventoriesy Dividendsy Reserves and Surplusy Secured and Unsecured loansy Income Statementy Balance Sheety Cash Flow Statementy Notes To Accountsy Directors Reporty Corporate Governance Reporty Auditors Report


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CONTENTS

Introduction to reliance...4

Accounting policy5

Fixed assets..6

Liabilities .8

Depreciation ....9

Inventories ...11

Dividends .11

Reserves and Surplus12

Secured and unsecured loans13

Income statement.14

Balance sheet15

Cash flow statement..16

Notes to accounts..17

Directors report18

Corporate governance report.20

Auditors report21


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INTRODUCTION TO RELIANCE.

The Reliance Group was founded by Dhirubhai H. Ambani in the year 1932. It is the India's

largest private sector enterprise, with businesses in the energy and materials value chain, withannual revenues more than US$ 28 billion. It is listed in Fortune Global 500 Company and is the

largest private sector company in India. They started with textiles in the late seventies, with a

strategy backward vertical integration- in polyester, fiber intermediates, plastics, petrochemicals,

petroleum refining and oil and gas exploration and production - to be fully integrated along the

materials and energy value chain. The Group's activities span exploration and production of oil

and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates,

plastics and chemicals), textiles, retail and special economic zones. Reliance enjoys global

leadership in its businesses, being the largest polyester yarn and fibre producer in the world and

among the top five to ten producers in the world in major petrochemical products.

The Company now has operations that span from the exploration andproduction of oil and gas to the manufacture of petroleum products, polyester products, polyesterintermediates, plastics, polymer intermediates, chemicals and synthetic textiles and fabrics. The

Company's major products and brands, from oil and gas to textiles are tightly integrated andbenefit from synergies across the Company. Central to the Company's operations is its vertical backward integration strategy; raw materials such as ethylene, propylene and normal paraffinthat were previously imported at a higher cost and subject to import duties are now sourced fromwithin the Company. This has had a positive effect on the Company's operating margins andinterest costs and decreased the Company's exposure to the cyclicality of markets and rawmaterial prices. The Company believes that this strategy is also important in maintaining adomestic market leadership position in its major product lines and in providing a competitiveadvantage.

The Company's operations can be classified into four segments namely:

y Petroleum Refining and Marketing businessy Petrochemicals businessy Oil and Gas Exploration & Production businessy Others


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ACCOUNTING POLICY

Principles, rules and procedures selected, and consistently followed, by the management of an

organization (the accounting entity) in preparing and reporting the financial statements are calledas accounting policies. Accounting policies deal specifically with matters such as consolidationof accounts, depreciation methods, goodwill, inventory pricing, and research and developmentcosts. These policies must be disclosed in the annual financial statements.

Reliance industries ltd prepared its financial statements in accordance with Indian GenerallyAccepted Accounting Principles (GAAP) under the historical cost convention, except for certainfixed assets which are revalued in accordance with the generally accepted accounting principlesin India and the provisions of the company act 1956 and applicable accounting standards issuedby the Institute ofChartered Accountants ofIndia (ICAI) on the accrual basis. The financialstatements of the company and its subsidiary companies are combined on line-by-line basis.

Adding together the book value of assets, liabilities, income and expenses after eliminating intragroup transactions in accordance with accounting standards 21(AS 21) CONSOLIDATEDFINANCIAL STATEMENTS

Fixed assets are stated at cost net of cenvat /value added tax and includes amounts added onrevaluation , less accumulated depreciation and impairment loss, if any. All costs includingfinancing cost till commencement of commercial production, net charge on foreign exchangecontracts and adjustments arising from exchange rate variation attributable to the fixed assets arecapitalized.

Joint venture transactions have been accounted by using the proportionate consolidation method

as per accounting standards (AS 27) FINANCIAL REPORTING OFINTEREST IN JOINTVENTURE TRANSACTIONS.

Investment in associate companies has been accounted under the equity method as perAS 23ACCOUNTING FORINVESTMENTS INASSOCIATES INCONSOLIDATEDFINANCIALSTATEMENTS. The difference between the cost of investment in the associates and the shareof net assets at the time of acquisition of shares in the associates is identified in the financialstatements as goodwill or capital reserve as the case may be.

Investments other than in subsidiaries and associates have been accounted as per accountingstandards AS13 ACCOUNTING OFINESTMENT

As far as possible the consolidated financial statements are prepared using uniform accountingpolicies for like transactions ad other events in similar circumstances. Accounting policies havebeen consistently applied except when a newly issued accounting standard is initially adopted ora revision to an existing accounting standard requires a change in the accounting policy.


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The other accounting policies are set out under SIGNIFICANT ACCOUNTNG POLICIES

Intangible assets are stated at cost of acquisition less accumulated amortization.

FIXEDASSETS ANDDEPRECIATION:

Fixed assets are valued at cost less accumulated depreciation and impairment if any. Capitalwork in progress comprises of project development expenditure, cost of construction material atsites and advances against capital expenditure. Intangible assets include technical knowhow fee,software,(other than internally generated) and jetties. Depreciation has been charged at the ratesas pr the companies act on diminishing balance method.

INVESTMENTS:

Investments are classified into long term investment and other investment. Long term investmentinclude government and other securities (unquoted), six years national saving service certificateand department with sales tax department and other government authorities. Trade investmentsinclude unquoted equity and preference shares in various companies. Other investments includeequity shares quoted and unquoted in subsidiary companies of the holding company.

Current investments are carried at lower of cost are quoted / fair value, computed category wise.Long term investments are stated at cost. Provision for diminution in the value of long term

investment is made only if such a decline is other than temporary.

INVENTORIES:

Inventories are measured at lower of cost or net realizable value after providing forobsolescence, if any. Cost of inventories comprises of cost of purchase, cost of conversion andother costs incurred in bringing to their respective present location and conditions. Cost of rawmaterial, process chemicals, stores and spares, packing materials, trading and other products aredetermined on weighted average basis. By products are valued at net realizable value. Cost ofwork in progress and finished stock is determined on absorption cost in method.

TURNOVER:

Turnover includes sale of goods, services, sales tax, service tax, excise duty and sales during trial

run period, adjusted for discounts, value added tax and gains/losses on corresponding hedgecontracts.


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CASH ANDBANKBALENCES:

Cash and bank balances comprise of cash and deposits in current accounts with scheduled andother banks and in fixed deposit account with scheduled banks.

FIXED ASSETS

Fixed assets are those assets which are of permanent nature and are held by the company on along term basis, such as land, buildings, plant and machinery, furniture and fixtures, etc. Theseassets help in earning revenue and cannot be easily converted into cash. Fixed assets can be oftwo types

1. Tangible2. Intangible assets.1. Tangible assets: are those assets which have physical substance.

Examples: land, building, furniture etc.

2. Intangible assets: are those assets which do not have any physical substance.Examples: goodwill, patents,

The companys fixed assets are a composite of both tangible and intangible assets. The tangible

assets are as follows:

(Rupees in crores)

PARTICULARS AMOUNT (2009) AMOUNT (2008)

Land - freehold 5142.78 994.79

Leasehold 1968.64 651.50

Buildings 9736.59 6373.80

Plant and machinery 124599.95 90732.03

Electrical installations 3009.69 2343.15

Furniture and fixtures 642.12 472.26

Vehicles 343.93 282.26Equipments 4274.02 2196.50

Ships 396.46 274.94

Air crafts and helicopters 78.89 185.82

Leased assets 364.15 133.17

Intangible assets 6625.21 4536.97


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OBSERVATIONS:

The net fixed assets are calculated after deducting accumulated depreciation and adding capitalwork in progress which amounted to Rs 73,845.97cr for the year 2009 and Rs 49,884.10 for theyear 2008. The increase in capital work in progress is due to the new projects undertaken by the

company and the cost of construction material at the site and other advances under the newproject. The net tangible assets amounted to Rs150193.07cr in 2009 and Rs 104510.05cr in 2008.There is an increase in assets from 2008 to 2009 because of the following additions to the assets.Rs 49615.07cr is added to the gross block, which includes investment in plant and machineryRs.36558.75 and equipment costing Rs.2393.65 are the major contributories to the cost ofadditions to angible assets includes Rs 12900.63cr on revaluation of building, plant andmachinery and equipment as on 1-1-2009 and Rs 154.82cr on revaluation of building , plant andmachinery and storage tanks . Some of the tangible assets where also disposed during the year2008 and 2009 amounting to Rs. 3932.05 cr. The intangible assets during the year 2009increased to 6625.21 when compared to Rs.4536.97 cr of 2007-08. The major contributoriesinclude the cost of gettis amounting to Rs 1754.82cr. The companys intangible assets include

technical knowhow, software and construction of gettis which have shown an increase. Theamounts are as follows:

In crores of rupees

PARTICULARS AMOUNT (2009) AMOUNT (2008)

Technical knowhow 2595.40 2192.92

Software development 460.87 392.27

Gettis 3568.94 1951.78

LIABILITIES

Liabilities are debts or obligations of a company. Liabilities are of two types

1. Long term liabilities2. Current liabilities

1. Long term liabilities:Long term liabilities are those liabilities that are carried over a number of years or atleast

more than one accounting cycle.Examples: bank loan, bonds payable, mortgage payable etc.

2.Current liabilities:Current liabilities are those liabilities that are due to others in a short period of time. Theseliabilities are paid off using current assets.


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Examples: bills payable, outstanding expenses, incomes received in advance etc.

Liabilities of the company comprises of the following:In crores of rupees

PARTICUARS AMOUNT(2009) AMOUNT(2008)

Share capital 1374.68 1453.39Reserves and surplus 119812.61 82374.69

Secured loans 10747.73 19576.52

Unsecured loans 65508.87 31119.57

Current liabilities 35756.98 23417.51

Provisions 3115.03 3449.18

OBSERVATION:Share capital decreased due to allotment of by back shares in pursuant to various schemes ofamalgamation without payment being received in cash. There is an increase in reserves andsurplus which is a result of increase in profit (net profit increased from Rs82374.69cr in the

year 2008 to Rs119812.61cr in the year 2009).Increase is current liabilities is due to increasein sundry creditors i.e., micro, small and medium entrepreneurs, liabilities for leased assetsand interest accrued but not due on loans it increased from Rs 23417.51cr in 2008 toRs35756.98cr in 2009. The decrease in provisions is due to decrease in provision for incometax, provision for leave encashment /superannuation /gratuity. There is also an increase inproposed /interim dividend and also for tax on dividend. The decrease in secured loans isdue to repayment of foreign currency term loans and working capital loans. There is anincrease in non convertible debentures compared to the previous year. The increase insecured loans from 31119.57 in 2007-08 to 65508.87 in 2008-09 is due to increase in longterm and short term loans from bank and others.

DEPRECIATION

Depreciation is a non-cash expense that reduces the value of an asset as a result of wear andtear, age or obsolescence. Most assets lose their value over time and this loss in value iscalled depreciation. Since it is a non-cash expenditure it reduces the reported earnings of afirm and increases the free cash flow in a firm. The following are the various methods usedto value depreciation :

1. Straight line method2. Written down value method3. Production units method4.

Sum of digits method

OBSERVATIONS

Depreciation on fixed assets is provided on written down value method at the rates and in

the manner prescribed in schedules XIV to the companies act 1956 over their useful life

except,: on fixed assets pertaining to refining segment. Depreciation is provided on straight


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line method over their useful life; on fixed assets with a life of two years or more. On fixed

bed catalysts having life of less than two years 100% depreciation is provided.

PART

ICULA

RS ESTIMA

TED

USEFUL LIFE

Building 15 years

Plant and machinery 5 years

2.5 years

Furniture and fixtures 5 years

Vehicles 5 years

5 years


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INVENTORIES

Inventories include raw materials, work in progress goods and completely finished goods which

are a part of a businesss assets that are ready or will be ready for sale. Turnover of inventory is

one of the primary source of revenue generation and subsequent earnings for the company.

Possessing too high inventory or too little inventory isnt good because high inventory poses arisk of storage, obsolescence, and spoilage costs and too little inventory poses a risk of losing out

on potential sales and potential market share.

Rs. In crores

Inventories 2008-09 2007-08

Stores, chemicals and packingmaterial

3592.71 1829.24

Raw material 6171.78 8552.36

Stock in process 5612.12 4508.37

Finished goods/trade goods 4733 4236.17The increase in finished goods, stock in process when compared to the previous year is due to

use of raw material for production.

DIVIDENDS

A portion of the companys earnings distributed among shareholders of the company is called as

dividend. Dividends may be in the form of cash, stock or property. It is usually referred to as

returns on shares. Usually stable companies issue dividends to their shareholders while high

growth companies rarely offer dividends because all their profits are reinvested to maintain their

higher than average growth.

OBSERVATIONS:

The directors of the company have declared an dividend of Rs13 per equity share

for the financial year ending 31.03.2009 amounting to 2219 crores. Further the company also

received dividend on the investment made in other companies amounting to 44.41crores during

the financial year 2008-09. During the year 2007-08 the company received 33.86 crores as a

dividend for the investments made in other companies .


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RESERVES AND SURPLUS

Reserves represent retained profit. These reserves are created for different purposes; they are

appropriations to net profit. Some examples of reserves are general reserve, capital reserve,

debenture redemption reserve etc. These reserves are maintained to meet some future losses.

Surplus is defined as the profit which is set aside after paying expenses and other necessarydeductions such as rents paid, interest paid, dividends paid etc.

The reserves of the company includes reserves created on revaluation of assets, exchange

fluctuation reserve, capital redemption reserve and securitys premium account reserve,

debentures redemption reserve, statutory reserves, general reserve and other reserves received

from associate companies.

Reserves and surplus of Reliance Industries ltd comprises of the following items:

In crores of rupees

PARTICULARS AMOUNT (2009) AMOUNT(2008)

Capital reserve 880.36 3604.78

Securitys premium 45364.42 21312.02

General reserve 54003.95 50003.95

Revaluation reserve 12229.78 1198.63

Statutory reserve 88.03 87.25

Exchange fluctuation reserve 29.40 (26.72)

Debenture redemption reserve 927.07 587.02

Capital redemption reserve 887.94 887.94

Profit and loss(surplus) 5391.95 4710.11

Total 119812.61 82374.69

Observations:

The increase in reserves compared to previous year is due to revaluation of assets and creation of

provision and securities premium account consequent of amalgamation of companies. The

capital reserve of the company has reduced by nearly 2800 crores is due to reduction of reserve

consequent of amalgamation of companies. The increase in share premium account is mainly due

to declaration of premium on issue of shares amounting to 16727.0 crores and consequent of

amalgamation amounting to 13429.09. There is also a proportion increase in the profit of thecompany when compared to previous year due to increase in activities. The change in other

reserves is considered as normal increase.


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SECURED AND UNSECURED LOANS

A secured loan is a loan for which the borrower pledges collateral that will be forfeited to the

lender if the borrower fails to repay the loan. Example: Bank

loan,

An unsecured loan is a loan that is issued and supported only by the borrowers creditworthiness,

rather than by some sort of collateral. Example: Commercial paper,

debentures,

The secured loans of the company of the company comprises of debentures, term loans from

banks (foreign currency and rupee loans) and working capital loans(foreign currency loans and

rupee loans).

Rs in crores

Details of secured loans 2009 2008Debentures 8642.14 4118.12

Term loans 2033.50 12913.42

Working capital loans 72.11 2544.98

Total 10747.73 19576.52

The secured loans of the company were reduced by nearly 8800 crores due to repayment of term

loans and working capital loans .the rupee term loans from banks are secured by a first ranking

paripassu mortgage over lease hold interest of the company units. Rupee term loans are also

secured by hypothecation of vehicles. Working capital loans are secured by hypothecation of

present and future stock of raw material, stock in process, finished goods, stores and spares, book

dates etc., working capital loans are also secured by way of lien against term deposits with bank.

The unsecured loans of the company comprises of long term and short term loans from banks

and others and also includes convertible debentures of Rs 100 each and deffered sales tax

liability. There is a considerable increase in the long term loans due to inclusion of loans taken

by erstwhile reliance petroleum ltd as secured loan, secured on paripassu basis with rupee term

loans.


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Rs in crores

Details of unsecured loans 2009 2008

Long term 57118.71 24,560

Short term 8367.46 6531.70

Debenture 22.40 27.62

Deferred sales tax liability 65508.87 31119.57

INCOME STATEMENT

A financial statement that summarizes the revenues, costs and expenses incurred during aspecific period of time - usually a fiscal quarter or year. These records provide information thatshows the ability of a company to generate profit by increasing revenue and reducing costs. This

statement is also known as a "statement of profit and loss", or "income statement" or an "incomeand expense statement". This statement includes both operating and non-operating items.

Observation :

There is a considerable increase in manufacturing and other expenses due to increase in the

cost of electricity and power, fuel and water, lease rents and exchange differences even

though there is an increase in sales the purchase have been reduced by nearly 2600 crores.

The increase/ decrease in other incomes ad expenditure appears to be normal.

The income statement includes the following:

(Rs in crores )

Particulars 2009 2008

Net turn over 151224.01 137146.66

Other income 1914.24 5956.95

Variation in stock 2269.54 1533.93

Purchase 7201.77 9850.71

Manufacturing and other expense 12286.63 105685.28

Interest and finance charges 1816.27 1086.52

depreciation 5650.98 5004.20

appropriations 14289.46 17914.21Balance of profit from previous year 4710.11 3044.17

Balance carried to balance sheet 5391.95 4710.11


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BALANCE SHEET

The balance sheet is one of the main financial statements reported by business. The balance sheet

lists assets, liabilities and owners equity of the business, thereby presenting a snapshot of the

financial position of the business as of a particular point in time. The balance sheet balances the

listed accounts with the accounting equation;

ASSETS = LIABILITIES + OWNERS EQUITY (CAPITAL)

OBSERVATION:

Reliance industries ltd prepares its balance sheet in the vertical format. It comprises of sources

and application of funds. Sources of funds include share holders funds and reserves and surplus.

Application of funds includes fixed assets (both tangible and intangible), investments, deferred

tax assets and net current assets (current assets less current liabilities). The balance sheet tallies

at Rs 207203.37 cr as at 31.03.2009.

SOURCES OF FUNDS

SHARE HOLDERS FUNDS:

The authorized share capital is Rs 3000cr divided into 2500000000 cr equity shares of Rs 10/-

each. The preference shares50,00,00,000 of Rs 10/- each. The issued, subscribed and paid up

capital as at march 31st 2009 and march 31st 2008 was Rs137,49,46,369 equity shares of Rs 10

each.

RESERVES AND SURPLUS:

Reserves and surplus has increased from Rs 82374.69cr to Rs 119812.61 cr in 2009.

APPLICATION OF FUNDS

FIXED ASSETS:

The block in tangible assets increased from Rs 113945.21cr to Rs 180890.17cr during the year

2008-09 and intangible assts increased to 6625.21cr from 4536.97.

INVESTMENTS:

Investments are Rs 9522.85 in 2008 and 6435.54 in 2009. Investments have decreased in

2009 dure to sale of investments in other companies.

NET CURRENT ASSETS:


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Net currents assets are the difference between current assets and current liabilities. Debtors have

decrease from Rs 6068.30cr to Rs 4844.97cr due to realization of book debts. Cash balances

have also increased. There is an overall increase in both current assets and current liabilities

resulting in the decrease of net current assets.

CASH FLOW STATEMENT

Cash flow statement is one of the main financial statements that show actual cash inflows and

cash outflows from operating activities, investing activities and financing activities. This

statement does not include non-cash incomes and expenses and outstanding expenses and

accrued incomes. As the name suggests it includes only those transactions which result in cash

inflow or cash outflow.

OBSERVATION :

Cash flows are reported using the direct method, whereby net profit before tax is adjusted for the

effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating

cash receipts or payments and items of income or expenses associated with investing or

financing cash flows. The net cash flows generated from operating activities is Rs. 1824.86 cr.

The net cash flows used in investing activities are Rs. (24084.20) and the net cash flows used in

financing activities are Rs. 23732.58. The cash and cash equivalent at the end of the period is Rs

22176.53cr.


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NOTES TO ACCOUNTS

1. Reliance Petroleum Limited (RPL) engaged in setting up of integrated crude oil refineryfacilities along with ancillary units in a special economic zone has been amalgamated

with company

2. The assets, liabilities, right and obligations of erstwhile RPL have been transferred to andvested with the company with effect from 1stApril, 2008 and have been recorded at their

respective fair values, under the purchase method of accounting for amalgamation.

3. 6,92,52,623 equity shares of Rs 10/- each fully paid up are to be issued to the equityshare holders of the amalgamating company whose names are registered in the register of

members on record date, without payment being received in cash. Pending allotment, the

face value of such shares has been shown as equity share suspense. The company hassince allotted the shares on 30th September, 2009.

4. 339, 19, 58,030 equity shares of erstwhile RPL held by the company have been cancelled.5. Excess of the fair value of et assets taken over by the company over the paid up value of

equity shares to be issued and allotted of Rs 13,429.09 crore has been credited to

securities premium account.

6. From the effective date the authorized share capital will stand increased to Rs. 6000.00crore consisting of 500, 00, 00,000 equity shares of Rs. 10/- each and 100, 00,000,000

preference shares of Rs 10/- each.

7. As per accounting standard 15 employee benefits, the disclosures as defined in theaccounting standards.

8. Turn over includes income from services of Rs 59.96 crore and sales during trial periodof Rs 2604.53 crore.

9. The company based on report issued by the international valuers has revalued plant andmachinery, equipment and buildings situated at gandhar and nagothane as on 1st January,

2009 by an amount of Rs 12,900.63 crore and an equivalent amount of fixed assets

carried out in the past.

10.The company announced a voluntary separation scheme( VSS) for the employees ofpatalganga unit during the year. About 430 employees accepted the VSS offered by the

company. A sum of Rs 110.79 crore has been paid during the year and debited to profitand loss account under the head payment to and provisions for employees. The

company has paid Rs 10.53 crores with an cost audit fees of 0.21 and it paid Rs. 38.21

and a commission to non executive directors of Rs 1.09.


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DIRECTORS REPORT

Reliance petroleum limited has been amalgamated with the company. The scheme ofamalgamation was sanctioned by the honorable high court of judicature at Bombay.

RESULTS OF OPERATION:

The year under review was a transformational year for the company. The company has

set new global benchmarks for project execution. This was a landmark year for the

company for its operating performance with earning growth admidst extraordinary

challenges of price volatility and price reduction.

DIVIDENDS AND BONUS:

the company have declared a dividend of Rs 13/- per equity share for the financial yearended 31st March, 2009 amounting to Rs 2219 crore one of the highest ever payout by the

company. The shareholders of the erstwhile RPL shall also be eligible to receive the

dividend.

CREDIT RATING:

The company continues to have highest credit rating ofAAA from CRISIL and fitch.

Moodys and S&P have reaffirmed investment ratings for the international debt of the

company, as Baa2 and BBB respectively.

EMPLOYEES STOCK OPTION SCHEME:

Employees stock option scheme was approved and implemented by the company andoptions were granted to employees accordance with the securities and exchange board of

India.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

managements 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.

SUBSIDARIES:

ministry of corporate affairs, government of India 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.

GROUP:

pursuant to intimation from the promoters, the name of the promoters and the entities

comprising group are disclosed in the annual report for the purpose of the SEBI


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DIRECTORS RESPONSIBILITY STATEMENT:

pursuant to the requirement under section 217 of the companies act, 1956, with respect to

directors responsibility statement.

CONSOLIDATED FINANCIAL STATEMENTS:

In accordance with the accounting statement

AS-21on consolidated financial statements

read with accounting standard AS-23 on accounting for investments in associates and

AS-27 on financial reporting of interest in joint ventures, the audited consolidated

financial statements are provided in the annual report.

SECRETERIAL AUDIT REPORT:

As a measure of good corporate governance practice the board of the directors of the

company appointed practicing company secretary, to conduct secretarial audit of the

company.

PARTICULARS OF EMPLOYEES:

In term of the provision of section 217(2A) of the companies Act 1956, read with the

companies rules, 1975 as amended the names and other particulars of the employees are

set out in the annexure to the directors report.

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 ac 1956, read with the companies rules, 1988 are provided in the

annexure-1 to this report.

TRANSFER OF AMOUNT TO INVESTOR EDUCATION ANDPROTECTION FUND:

pursuant to the provisions or section 205A(5) of the companies act, 1956

dividends, interest on debentures and matured debentures which remained unpaid

as unclaimed for a period of 7 years have been transferred by the company to the

Investor Education and Protection Fund.


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CORPORATE GOVERNANCE:

The company is committed to maintain highest standards of corporate

governance.

CORPORATE GOVERNANCE REPORT

Corporate governance is about commitment to values and ethical business conduct. It is a set of

laws, regulations, processes and customs affecting the way a company is directed, administered,

controlled or managed.

In accordance with clause 49 of the Listing Agreement with the Stock Exchanges in India (clause

49) and some of the best practices followed internationally on Corporate Governance, the report

containing the details of governance systems and processes at Reliance Industries Ltd is as

under:

1. CORPORATE GOVERNANCE PHILOSOPHY:It is believed that moving close towards their aspirations of becoming a global

corporation, which gives them confidence of having put in the right building blocks for

future growth and ensuring that achieving ambitions in a prudent and sustainable manner.

2. INDEPENDENT STATUTORY AUDITORS:The Companys accounts are audited by a panel of three leading independent audit firms.

3. GUIDELINES FOR THE BOARD/COMMITTEE MEETINGS:The company has defined guidelines for the meeting of the board and board committees.

These guidelines seek to systematize the decisions making process at the meeting of the

board and board committees in an informed and efficient manner.

4. KEY BOARD ACTIVTIES DURING THE YEAR:The board provides and critically evaluates strategic direction of the company,

management policies and their effectiveness. Their remit is also to ensure that the long-

term interests of the shareholders are being served. The agenda for board reviews include

strategic review from each of the Board committees, a detailed analysis and review of

allocation and budgets.

5. CORPORATE SOCIAL RESPONSIBILITY (CSR):Social welfare ad community development is at the core of RILs CSR philosophy and

this continues to be a top priority for the company.

6. REPORTING ON TRIPLE BOTTOM-LINE PERFORMANCE:RIL commenced annual reporting on its triple-bottom-line performance from FY 2004-

05. All its sustainability reports are externally assured and GRI checked.

7. INTERNAL CHECKS AND BALENCES:


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The heart of their processes is the wide use of technology and ensures robustness and

integrity of financial reporting.

8. LEGAL COMPLIANCE UNIT:A dedicated legal compliance audit cell within the management audit cell ensures that the

company conducts its business with high standard of legal, statutory and regular

compliances.

9. SHARE HOLDERS COMMUNICATIONS:The board recognizes the importance of two-way communication with shareholders and

of giving a balance report of results and progress and responds to questions and issues

raised in a timely and consistent manner. Reliances corporate website; ww.ril.com has

information for institutional and retail shareholders alike.

10.EMPLOYEES STOCK OPTION SCHEME:One of the widest programs of its kind in the Indian corporate sector, the program was

introduced in 2007 ad covers more than 14,000 employee-owners.

11.BEST GOVERNANCE POLICIES:It is companys constant endeavor to adopt the best governance practices as laid down an

international code of Corporate Governance and as practiced by well known global

companies.

12.ROLE OF THE COMPANY SECREATEARY IN OVERALLGOVERNANCE PROCESS:

The company secretary plays a key role in ensuring that the board procedures are

followed and regularly reviewed.

AUDITORS REPORT

Auditors report is a document prepared by the auditors appointed to examine and certify the

accounting records and financial position of a firm. It must be filed every year by an

incorporated or registered firm along with audited financial statements.

OBSERVATION: The auditors report states that the audit is in accordance with the auditing

standards generally accepted in India. The audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. The audit also includes

assessing the accounting principles used and significant estimates made by the management. It

also involves the evaluation of financial statement presentation.


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