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FINANCIAL PERFORMANCE REVIEW AND ANALYSIS

RIL achieved a turnover for the nine months ended 31^st December 2011 of Rs.251,958 crore ($ 47.5 billion),  an increase of  37.4%  on a year-on-year basis.  Increase in volumes accounted for  3.9% growth in revenue and higher prices accounted for 33.5% growth in revenue. Exports were higher by 55.2% at Rs.156,753 crore ($ 29.5 billion) as against Rs.100,995 crore in 9M FY10-11.

Higher crude prices resulted in consumption of raw materials increasing  by  50.6% to  Rs.203,294 crore ($ 38.3 billion) on a year-on-year basis. Employee costs were at  Rs.2,265 crore ($ 427 million) for the  nine months ended 31st December 2011 as against Rs.1,938 crore. Other expenditure increased by 13.0 % from Rs.11,594 crore to Rs.13,106 crore ($ 2.5 billion) due to higher power & fuel expenses and exchange differences.

Operating profit before other income and depreciation declined by 4.3% from Rs.28,283 crore to Rs.27,055 crore ($ 5.1 billion). Net operating margin was lower at 10.7% as compared to 15.4% in the corresponding period of the previous year due to base effect and reduction in higher margin E&P operating profit arising out of lower production and due to transfer of 30% Participating Interest (PI) in KG-D6 to BP.

Other income was higher at Rs.3,897 crore ($ 734 million) as against Rs.2,135 crore on a year-on-year basis primarily due to higher average holdings as well as higher yield on investments. Depreciation (including depletion and  amortization) was  lower by  14.5% at  Rs.8,734 crore ($  1.6 billion) against Rs.10,221 crore in 9M FY 2010-11 due to lower depletion charge in oil & gas as a consequence of the transfer of 30% PI in 21 blocks to BP.

Interest cost was higher at Rs.1,899 crore ($ 358 million) as against Rs.1,632 crore in 9M FY 2010-11 principally due to  higher foreign exchange  difference. This resulted in gross interest cost  being higher at  Rs. 2,286 crore ($ 430 million) as against  Rs.1,986 crore  in 9M FY 2010-11. Interest capitalized was higher at Rs.387 crore ($ 73 million) as against Rs.354 crore.

Outstanding debt  as on  31^st December 2011 was  Rs.74,503 crore ($  14.0 billion) compared to Rs.67,397 crore as on 31^st March 2011. The Company is debt free on a net basis as compared with gearing of 13.5% as on 31^st March 2011.

RIL had cash and cash equivalents of Rs.74,539 crore ($ 14.0 billion). These were primarily in fixed deposits, certificate of deposits with banks, mutual funds and Government securities / bonds.

DOMESTIC OPERATIONS

KG-D6

Production volumes declined due to reservoir complexity and natural decline in reserves in the KGD6 block.  For 9M FY 11-12, production from KG-D6 was 3.87 million barrels of crude oil, and 436.40 BCF of natural gas, reduction of 39.8% and 21.9% respectively as compared to 9M FY 10-11. For 9M FY 11-12, production of gas condensate was 0.58 million barrels, increase of 4.0% on YoY. Gas production for this quarter was 136 BCF as compared to 147 BCF in the previous quarter.

Panna-Mukta and Tapti (PMT)

For 9M FY 11-12, Production from Panna-Mukta was 53.32 BCF of natural gas, growth of 55% and 7.71 million barrels of crude oil, growth of 24% as compared to the corresponding period of the previous year. The growth in production was  due to the return of normalized production levels following the impact of the shutdown during the corresponding period of the previous year.

Production from Tapti was 57.06 BCF of natural gas and 0.68 million barrels of condensate, a decrease of 23% and 28% respectively as compared to the corresponding period of the previous year. The decrease in production was due to natural decline.

INTERNATIONAL OPERATIONS (SHALE GAS)

Reliance has joint ventures (JVs) for shale gas business in USA with Chevron, Pioneer and Carrizo.All three JVs are in production and the gross exit production as on 31st Dec 2011 was about 233 MMSCFD of gas and 34,728 barrels of gas condensate per day.

During the 9M FY12 period, RIL processed 51.4 million tonnes of crude reflecting an average utilization rate of 110%. Average refinery utilization rate were lower across regions with North America at 84.1%,  Europe averaging at  75.5% while Asia  averaged at 82.5% in Asia. Weaker margins and lowering demand resulted in lowering of operating rates across regions vis-à-vis the same period last year.

RIL’s Gross Refining Margin (GRM) for the nine months period was at $ 9.0 / bbl, higher than the $ 8.1 / bbl it achieved in the corresponding period of the previous year. On a QoQ basis, RIL"Ÿs GRMs were lower at $ 6.8 /bbl primarily due to weaker product cracks but also due to the impact of higher crude costs and reduced Arab light-heavy differentials.

PETROCHEM BUSINESS

EBIT margins for the  nine months ended  31^st December 2011 were at  11.5% as compared to

14.9% in the corresponding period of the previous year due to base effect of higher revenues. On a trailing quarter basis, EBIT margins reduced across the olefins chain, the aromatics chain and in certain key chemicals.

ORGANISED RETAIL

Currently, Reliance Retail operates over 1,200 stores spanning ’Value’ and ‘Specialty’ segments; in 15 states and more than 100 cities in India, with a total area of more than 6 million square feet.