Res PRJ

Corporate Governance
Reliance is one of the pioneers in the country in
implementing the best international practices of
Corporate Governance. In recognition of this pioneering
effort, the Institute of Company Secretaries of India has
bestowed on the Company the National Award for
Excellence in Corporate Governance for the year 2003.
Reliance's Corporate Governance Principles uphold its
global standing at the forefront of corporate governance
best practice. Reliance continues to review its corporate
governance practices to ensure that they continue to
reflect domestic and international developments to
position itself to conform to the best corporate
governance practices. It takes feedback into account in
its periodic reviews of the guidelines to ensure their

continuing relevance, effectiveness and responsiveness
to the needs of local and international investors and all
other stakeholders.
Principles
Reliance's corporate governance practices focus on the
following main principles:
Recognising the respective roles and responsibilities of
Board and management

To establish an effective
mechanism for overseeing the affairs, keeping in view the
Company's size, complexity, geographical operations and
corporate tradition & culture, the Reliance's framework is
designed to:
· Enable the Board to provide strategic guidance for the

Company and effective overseeing of the management;
· Define the respective roles and responsibilities of senior
executives and officers to ensure accountability; and
· Ensure a balance of authority such that no single individual has
unfettered powers.
Having a Board of appropriate composition, size and

commitment to adequately discharge its responsibilities
and duties
To ensure effectiveness of the Board, facilitating efficient
discharge of duties and adding value in the context of the
Company's circumstances, the Board periodically reviews its
composition and size for ensuring a strong element of
independence and commitment. Accordingly the Board is
structured in such a way that :
• It has a proper understanding of, and competence to deal
with, the current and emerging issues of the business and
the benefit of a variety of perspectives and skills.
• It has the appropriate mix of executive and nonexecutive
directors ensuring Directors' commitment and time to
participate in the affairs fully.
• It can effectively review and challenge the performance of
management and exercise independent judgement.
The Directors are elected by the shareholders. However the
Board plays an important role in the selection of candidates for
shareholders' approval. Reliance's policy does not prescribe any
Dhirubhai H. Ambani
Founder Chairman, Reliance Industries Limited, India
December 28, 1932 - July 6, 2002
Group Company: Reliance Industries Limited, India's largest private
sector company.
Reliance Group: The Reliance Group founded by Dhirubhai H. Amban
(1932-2002) is India's largest business house with total revenues of ov
Rs 99,000 crore (US$ 22.6 billion), cash profit of Rs 12,500 crore (US$ 2
billion), net profit of Rs 6,200 crore (US$ 1.4 billion) and exports of Rs
15,900 crore (US$ 3.6 billion).
The Group's activities span exploration and production (E&P) of oil and
gas, refining and marketing, petrochemicals (polyester, polymers, and
intermediates), textiles, financial services and insurance, power, teleco
and infocom initiatives. The Group exports its products to more than 10
countries the world over. Reliance emerged as India's Most Admired
Business House, for the fourth successive year in a TNS Mode survey fo
2004.
Reliance Group revenue is equivalent to about 3.5% of India's GDP. The

Group contributes nearly 10% of the country's indirect tax revenues an
over 6% of India's exports. Reliance is trusted by an investor family of
over 3.1 million - India's largest.
The Group's flagship company, Reliance Industries Limited (RIL) is the
first and only private sector company from India to feature in the 2004
Fortune Global 500 list of 'World's Largest Corporations' and ranks
amongst the world's Top 200 companies in terms of profits. RIL emerge
in the world's 10 most respected energy/chemicals companies and
amongst the top 50 companies that create the most value for their
shareholders in a global survey and research conducted by
PricewaterhouseCoopers and Financial Times in 2004. RIL also features
the Forbes Global list of world's 400 best big companies and in FT Glob
500 list of world's largest companies.
Birthplace: Chorwad, village in Saurashtra (Gujarat), India
Father's Name: Hirachand Govardhandas Ambani
Mother's Name: Jamunaben Hirachand Ambani
Career:
At the age of 17 went to Aden (now part of Yemen) and
worked for A. Besse & Co. Ltd., the sole selling distributor of
Shell products.
In the year 1958 returned to Mumbai and started his first

company, Reliance Commercial Corporation, a commodity
trading and export house.
In the year 1966, as a first step in Reliance's highly successful

strategy of backward integration, he started the textile mill in
Naroda, Ahmedabad.
In the year 1975, a technical team from the World Bank

certified that the Reliance textile plant was "excellent by
developed country standards."
In the year 1977, the company went public.
Credited with a number of financial innovations in the Indian

capital markets. Today, the Reliance Group has one of the
largest family of shareholders in the world. With an
investment of over Rs 36,000 crore (US$ 9 billion) in
petroleum refining, petrochemicals, power generation,
telecommunication services and a port terminal in a three-
year time frame, has steered the Reliance Group to its current
status as India's leading textiles-petroleum-petrochemicals-
power-telecom player.
Achievements:
Voted India's 'Top Businessman' in the 'Best of India' poll
conducted by Zee News, August 2003.
Petrotech Society conferred posthumously the 'Lifetime

Achievement Award' for his outstanding contribution to
Downstream Petroleum Industry in India, January 2003.
Rated as one of 'India's Most Admired CEOs' for the fourth

consecutive year in the Business Barons - Taylor Nelson Sofres
- Mode Survey, July 2002.
Conferred the 'Lifetime Achievement Award' by India HRD

Congress, February 2002.
Conferred 'The Economic Times Award for Corporate
Excellence for Lifetime Achievement', August 2001.
Felicitated by the Municipal Corporation of Greater Mumbai

with a citation at a civic reception, December 2000.
Conferred the 'Man of the Century' award by Chemtech

Foundation and Chemical Engineering World in recognition of
his outstanding contribution to the growth and development of
the chemical industry in India, November 2000.
Conferred the 'Indian Entrepreneur of the 20th Century' award

by FICCI (Federation of Indian Chambers of Commerce and
Industries), for his meticulous scripting of one of the most
remarkable stories of business endeavour of the 20th century,
March 2000.
Thrice (in the years 2000, 1998 and 1996) nominated as one
of the 'Power 50 - the most powerful people in Asia' by
Asiaweek magazine.
Voted as the most admired Indian of the millennium in the

field of Business & Economics in 'Legends - A Celebration of
Excellence' poll audited by Ernst & Young for Zee Network,
January 2000.
Voted as 'Creator of Wealth' of the Century in The Times of

India poll, January 2000.
Chosen as one of the three 'makers of equity' by India Today

in their special millennium issue entitled '100 People Who
Shaped India in the 20th Century', January 2000.
Chosen by the Indian Merchants' Chamber as "An Outstanding
Visionary of the 20th Century" in recognition of his unique
achievements and contribution in the development of industry
and capital markets in India, December 1999.
Voted as 'Indian Businessman of the Century' in Business

Barons Global Multimedia Poll, December 1999.
Amongst 'The Power 50 - India's 50 most powerful decision-

makers in Politics, Business & Finance', Business Barons,
August 1999.
Declared 'Most Admired Indian Business Leader' by The Times

of India, Indiatimes.com poll, July 1999.
The only Indian industrialist in 'Business Hall of Fame' in

Asiaweek, October 1998.
Awarded the Dean's Medal by The Wharton School, University

of Pennsylvania, for setting an outstanding example of
leadership, June 1998.
Chosen as 'Star of Asia' by Business Week, USA, June 1998.
Leading business magazine Business Barons placed him in its

list of 'India's 25 Most Influential Business and Financial
Leaders', June 1998.
Awarded the Companion Membership of the Textile Institute,

UK, an award which is limited to 50 living members who have
"substantially advanced the general interests of the industries
based on fibres", 1994.
Chosen 'Businessman of the Year 1993', Business India,
January 1994.
Family: Wife: Kokilaben.

Four children: two sons, Mukesh, who is Chairman & Managing
Director and Anil, Vice-Chairman & Managing Director of
Reliance Industries and two daughters, Dipti Salgaocar who lives
in Goa and Nina Kothari, who resides in Chennai
KINDS OF STOCKS EXCHANGES IN INDIA
India
Ahmedabad Stock Exchange Association Ltd.
Manek Chowk
Ahmedabad 380 001, India
Bangalore Stock Exchange (Served by India on Internet)

Direct Links to the Stock Exchange Stock Exchange
Towers
No 51 1st Cross, J C Road
Bangalore 560 027, India
Phone: 91-80-299-5233/5225 Listing Requirements
Foreign Listing Requirements
Listed Companies
Today's Trading Results
Major Index Computation

Today's Indices
Bhubaneshwar Stock Exchange Association

217 Budhraja Building
Jharpara Cuttak Road
Bhubaneshwar 751 006, India
Calcutta Stock Exchange

7 Lyins Range
Calcutta 700 001, India
Phone: 91-33-20-6957
Fax: 91-33-20-2514
Cochin Stock Exchnage Ltd.

Exchange House
38/1431 Kaloor Road Extension
Ernakulum, Kochi-682035,, India
Coimbatore Stock Exchange

Chamber Towers
8/732 Avinashi Road
Coimbatore 641 018, India
Delhi Stock Exchange Association

3 & 4/4B Asaf Ali Road
West Plaza, I.G. Stadium
New Delhi 110 002, India
Phone: 91-11-335-2951
Fax: 91-11-332-6182
Guwahati Stock Exchange Ltd.

Saraf Building Annexe
A.T. Road
Guwahati 781 001, India
Hyberabad Stock Exchange Ltd.

Bank Street
Hyderabad 500 001, India
Jaipur Stock Exchange Ltd

Rajasthan Chamber Bhawan
M.I. Road
Jaipur 302 003, India
Kanara Stock Exchange Ltd
4th Floor, Rambhavan Complex
Kodialbail
Mangalore 575 003, India
Ludhiana Stock Exchange Association Ltd

Lajpat Rai Market, Clock Tower
Ludhiana 141 008, India
Madras Stock Exchange

11 Second Line Beach
Exchange Building
Madras 600 004, India
Phone: 91-44-512-237
Fax: 91-44-514-897
Madhya Pradesh Stock Exchange Ltd.

67, Bada Sarafa
Indore 452 002, India
Mangalore Stock Exchange Limited (Served by India on

Internet)
4th Floor, Rambhavan Complex

Mangalore 575 003, Karnataka, India
Phone: 91-824-440813/440851
Fax: 91-824-21491
Meerut Stock Exchange Ltd.

Kingsway Building
345 Bombay Bazar
Meerut Cantonment 250 001, India
Mumbai Stock Exchange
Direct Links to the Stock Exchange Phiroze Jeejeebhoy
Towers
Dalal Street
Mumbai 400 001, India
Phone: 91-22-265-5860
Fax: 91-22-265-8121 Listing Requirements
Company Results
Listed Companies; GDRs


Today's Indices
Exchange Members
Publications
National Stock Exchange of India

Direct Links to the Stock Exchange Mahendra Towers,
"A" Wing
1st Floor, RBC, Worli
Bombay 400 018, India
Phone: 91-22-493-2555
Foreign Investment
Listed Companies

Today's Indices
Exchange Members
Publications
OTC Exchange of India

Direct Links to the Stock Exchange 92/93 Market Tower
"F"
Cuffe Parade
Bombay 400 005, India
Phone: 91-22-218-8164
Foreign Listing Requirements
Listed Companies

Today's Indices
Exchange Members
Publications
Pune Stock Exchange Ltd.

1177, Budhwar Peth
Bank of Maharashtra Building, 2nd Floor
Bajirao Road
Pune 411 002, India
Saurashtra Kutch Stock Exchange Ltd.

4, Swaminarayan Gurukul Building
Dhebarbhai Road
Rajkot 380 002, India
Uttar Pradesh Stock Exchange Association Ltd.

Padam Towers
14/113 Civil Lines
Kanpur 208 001, India
Vadodara Stock Exchange Ltd.

101 Paradise Complex
Tilak Road, Sayaji Gunj
Vadodara 390 005, India
SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
IN THE MATTER OF PROPOSED ACQUISTION OF SHARES/

VOTING RIGHTS OF BSES LIMITED -- APPLICATION FOR
EXEMPTION UNDER REGULATION 3(1)(l) OF THE SEBI
(SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS)
REGULATIONS, 1997
NO. : CO/504/TO/03 /2003
1.0 Reliance Capital Limited (hereinafter referred to as the

‘Acquirer’) proposes to acquire 78,00,000 equity shares
constituting 5.66% of the equity capital of BSES Limited
(hereinafter referred to as the ‘Target company’) from Reliance
Power Ventures Limited (hereinafter referred to as
‘Transferor’).
1.2 The shares of the Target company are listed at The Stock
Exchange, Mumbai, The National Stock Exchange of India
Limited, The Stock Exchange, Ahmedabad, The Calcutta Stock
Exchange Association Ltd., The Delhi Stock Exchange
Association Ltd., Bangalore Stock Exchange Ltd., Inter-
connected Stock Exchange of India Limited. The GDRs of Target
company are listed on London Stock Exchange and FCCBs are
listed on Societe de la Bourse de Luxembourg.
2.0 The Acquirer made an application dated 28th February

2003 under sub-regulation (2) of regulation 4 of the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations,
1997 (hereinafter referred to as "the Regulations") to the
Securities and Exchange Board of India (hereinafter referred to
as "SEBI") seeking exemption from provisions of regulation
11(1) and compliance with the provisions of Chapter III of the
Regulations.
3.0 In the aforesaid application, the Acquirer, inter-alia,

submitted the following:
The Acquirer and the Transferor are both group Companies of

Reliance Industries Limited (RIL).
RIL along with the Transferor and other persons acting in

concert holds 44.12% equity capital of the Target Company.
The Transferor and Reliance Industrial Investments and

Holdings Ltd (RIIHL) are wholly owned subsidiaries of RIL.
RIL is the promoter and holds 47.20% shares/ voting rights in
the Acquirer. This has been clearly stated/ disclosed in the
prospectus dated 22 December 1994 issued by the Acquirer.
The Transferor & RIL (as Acquirers) along with RIIHL made an
open offer for purchase of 3,22,81,460 shares of Target
Company, which was open from January 17, 2003 to February
15, 2003.
In the aforesaid open offer valid applications received against

the said offer aggregate to 14.10% of the Target Company. As
a result, the total shareholding of RIL, Transferor and other
persons acting in concert would be 58.22% in Target Company,
subsequent to the acceptance of shares.
Both the Acquirer and Transferor would constitute ‘group’

companies of RIL within the meaning of Reg. 3(1)(e)(i) and
would be reflected as ‘group’ companies of RIL in the Annual
report of Target Company for the Financial Year ending March
31, 2003.
Had the proposed acquisition taken place after publication of

the Annual Report of Target Company for year ending March
31, 2003, the said transfer would have been automatically
exempt under Regulation 3(1)(e)(i).
Proposed transfer is merely preceding such publication of

Annual report of Target Company and the proposed transfer
will not have any consequence on the aggregate shareholding
of the RIL group.
The proposed transfer will not result in change in the

management or control of Target Company.
4.0 The said application for exemption dated 28th February

2003 was forwarded to the Takeover Panel on 28th February,
2003 in terms of sub-regulation (4) of regulation 4 of the
Regulations. The Takeover Panel vide its report dated 10th
March 2003 has recommended, inter alia, as under:
"On the facts stated in the applications, according to the

applicant, RPVL and RCL are group companies within the
meaning of Regulation 3(1)(e)(i) of the Takeover Code. On this
basis, had the proposed acquisition taken place after the
publication of the Annual Report of BSES Limited for the
financial year ending 31st March 2003, the Acquirer would have
been entitled to automatic exemption. Subject to Securities
And Exchange Board Of India satisfying that RPVL and RCL are
group companies within the meaning of Regulation 3(1)(e)(i) of
the Takeover Code, grant of exemption as sought is
recommended."
5.0 I have taken into consideration the application dated 28th

February, 2003 the facts and documents available on record
and also the recommendations of Takeover Panel.
I have noted that RIL is a promoter of the Acquirer and holds

47.20% in the Acquirer Company.
I have noted that RIIHL, and Transferor are both wholly owned
subsidiaries of RIL and in the Annual Report of RIL for the year
ended March 31, 2002, both RIIHL and Transferor have been
shown as subsidiary companies of RIL.
I have noted that the Acquirer, the Transferor, RIIHL and RIL
belong to the same group in terms of definition of MRTP Act,
1969.
9.0 In terms of regulation 3(1)(e)(i), acquisition by virtue of

inter-se transfer of shares amongst ‘group’ coming within the
definition of group as defined in the Monopolies and Restrictive
Trade Practices Act, 1969 are exempt from the provisions of
Regulations 10,11 and 12 where persons constituting such
group have been shown as group in the last published Annual
Report of the target company, subject to compliance with
Chapter II by the transferor and the transferee.
10.0 In the instant case, I find that although the Acquirer and
Transferor have not been shown as a group in the Annual
Report of Target Company for the FY 2001-2002, they are part
of the same group in terms of the MRTP Act, 1969.
11.0 I have also observed that RIL, the Transferor along with
RIIHL made an open offer for acquisition of 32,281,460 equity
shares representing 23.44% of the total subscribed and paid-up
equity share capital (20% of the voting capital) of the Target
company. The said offer closed on February 15, 2003. From the
information available with SEBI regarding the said offer, it is
observed that pursuant to the said offer, RIL along with the
transferor, RIIHL and other body corporates holds 58.22% of
the total subscribed and paid-up equity share capital (49.67%
of total voting capital) of the Target company. I have noted that
the Acquirer is not holding any shares in the Target company
and proposes to acquire shares of the Target Company from
the Transferor pursuant to which the shareholding of the
Acquirer in the Target company would increase to 5.66%, while
the shareholding of RIL group would not change.
12.0 I also find that as a result of the proposed acquisition

there will be no change in control of the Target Company.
In view of the above, I find that in the facts of the case, the
grant of exemption would not be detrimental to the interests of
the shareholders of the Target Company.
Taking into consideration the above, the recommendations of

the Takeover Panel, in exercise of the powers conferred upon
me under sub section (3) of Section 4 of the Securities and
Exchange Board of India Act 1992 read with sub regulation (6)
of regulation 4 of the Regulations for the reasons recorded
hereinabove, I hereby grant exemption to the Acquirer for the
proposed acquisition of 78,00,000 equity shares constituting
5.66% of the equity capital of the Target company from
complying with the provisions of Chapter III of the Regulations.
The Acquirer is also directed that proposed acquisition of

78,00,000 equity shares constituting 5.66% of the equity
capital of the Target company be completed within 30 days
from the date of passing of this Order and a report under
regulation 3(4) on the same be filed by the Acquirers with SEBI.
DATE: March 28, 2003

PLACE: MUMBAI
G N BAJPAI
CHAIRMAN
SECURITIES & EXCHANGE BOARD OF INDIA
Reliance issue dominates Sebi board meeting
ENS ECONOMIC BUREAU
Posted online: Saturday, April 30, 2005 at 0112 hours IST
MUMBAI, APRIL 29: The board of the Securities and Exchange

Board of India (Sebi) has taken cognizance of the six-month-old
ownership battle in the Reliance group.
Though Sebi declined to say anything on record, insiders say

the board discussed the sale of stake in Indian Petrochemical
Corporation Ltd (IPCL) by Reliance Capital and also took note of
Anil not signing the Reliance Industries Ltd (RIL) accounts.
More in FinancialExpress»
RCL transferred 23 per cent stake it held in IPCL to two

Reliance Industries companies. Amitabh Jhunjhunwala, Anil’s
confidante and a director on the Reliance Capital board, had
dissented against the move at the recent board meet. The
board also discussed whether the IPCL stake sale violated the
takeover code. The Sebi board took no decision on these
issues. Sebi is already investigating complaints on securities
translations against Reliance Industries.
Emerging from the board meeting which lasted for over two
hours, M Damodaran, Chairman, Sebi refused to speak to the
waiting media: ''there is nothing to brief you about today’s
meeting,’’ said he. Sebi said it is keeping a close watch on
Reliance scrips in the light of allegations made by RIL vice
chairman and managing director Anil Ambani about breach of
corporate governance norms in RIL.
‘‘Sebi keeps everything under surveillance,’’ Chief Economic

Advisor and the government representative on Sebi board,
Ashok Lahiri told reporters.
“If anything comes up in surveillance, Sebi will look into the

matter,” Lahiri said when asked what steps Sebi is taking on
the alleged breach of governance norms in RIL. Anil Ambani has
said shares of all Reliance group companies were “usually
under-valued” because of absence of corporate governance
and lack of transparency.
RIL feud: MP alleges letter forgery

NEW DELHI: In a new twist to the Ambani versus Ambani fight
over the Reliance ownership issues, a Lok Sabha MP on Friday
sought an ‘‘official inquiry’’ from Prime Minister Manmohan
Singh into use of his forged letter to make serious charges
against officials in Anil’s camp. ‘‘I wish to put it on record that
this letter is a case of blatant criminal forgery. The letter even
misspells my name. The forged letterhead spells my name as
Sugriv Singh,’’ Orissa MP Sugrib Singh said in a letter to the PM.
—Agencies
RIL issue solved: The issue of the subission of the REL audited
accounts to its parent company RIL stands resolved. RIL
officials confirmed to IE that they have been received from REL.
The issue had gained controversy when RIL sent out a notice to
REL, since there was a delay in the submission of the accounts.
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
----------------
Lok Sabha in a flap over Reliance Info share sale
TIMES NEWS NETWORK[SATURDAY, APRIL 30, 2005 12:24:55

AM]
Sign into earnIndiatimes points
NEW DELHI: The alleged sale of Reliance Infocomm shares at a
discounted price resonated in the Lok Sabha today, with the
Manmohan Singh government assuring the members that legal
action would be taken recourse to if any rule-violations were
detected.
The issue figured during the question hour, and as many as 12

MPs, cutting across partylines, appended their names to the
question.
These included three from the BJP (Brijbhushan Sharan Singh,

Sukhdeo Paswan and Manorama Madhavaraj), two each from
the Congress (Rajesh Mishra and Kishanbhai V Patel), Biju
Janata Dal (Braja Kishore Tripathy and Sugrib Singh) and the
RJD (Alok Kumar Mehta and Ram Kripal Yadav), and one each
from the CPM (Hannan Mollah), CPI (Gurudas Dasgupta) and the
AIMIM (Asaduddin Owaisi).
“As per records available with the Registrar of Companies

(ROC), 10m shares of Reliance Infocomm were acquired by
three companies on September 12, ’02,’’ minister of state for
company affairs Prem Chand Gupta, who holds independent
charge, told the House in a written reply.
These shares, he pointed out, were distributed among Fairever

Traders and Consultants (34 lakh equity shares), Softnet
Traders and Consultants (33 lakh equity shares) and Prerna
Auto (33 lakh equity shares).
To a question whether Reliance Infocom had sold these 10m

shares at the rate of Re 1 each and whether the parent
company, Reliance Industries (RIL), had paid Rs 250 each for
the shares given to them, the minister replied that as per the
statutory form filed by the company with the ROC, RIL had not
been allotted any equity shares of the company after the
Gujarat High Court’s amalgamation order of December 16, ’02.
Asked whether the government or the Securities and Exchange
Board of India (Sebi) or the Company Law Board had instituted
any inquiry, Mr Gupta responding by saying that information
was being collected and “would be laid on the table of the
House’’ in due course.
He, however, clarified that the RIL was a listed company and
there was a regulatory institutional structure in the form of Sebi
to protect the interests of the shareholders of the company. “In
the event of violations of any other law, the government may
take legal action as appropriate,’’ the minister of state for
company affrairs added.
Foreign Institutional Investors (FIIs)
Foreign Institutional Investors (FIIs.) including institutions such as Pension Funds,

Mutual Funds, Investment Trusts, Asset Management or their power of attorney
holders (providing discretionary and non-discretionary portfolio management
services) are invited to invest in all the securities traded on the Primary and
Secondary markets, including the equity and other securities/instruments of
companies which are listed/to be listed on the stock exchanges in India including the
OTC Exchange of India. These would include shares, debentures, warrants, and the
schemes floated by domestic Mutual Funds. To be eligible to do so, the FIIs would
be required to obtain registration with Securities and Exchange Board of India
(SEBI). FIIs are also required to file with SEBI another application addressed to RBI
for seeking various permissions under FERA.
SEBI shall for granting registration to the FII, take into account the track record of
the FII, its professional competence, financial soundness, experience and such other
relevant criteria. FIIs seeking registration with SEBI should hold a registration from
the Securities Commission, or the regulatory organisation for the stock market in its
own country of domicile/incorporation.
SEBI's registration and RBI's general permission under FERA to an FII will be for five
years renewable for similar five year periods later on. RBI's general permission
under FERA would enable the registered FII to buy, sell and realise capital gains on
investments made through initial corpus remitted to India, subscribe/renounce
rights offerings of shares, invest on all recogised stock exchanges through a
designated bank branch, and to appoint a domestic Custodian for custody of
investments held.
The General Permission from RBI shall also enable the FII to:
1. Open foreign currency denominated account(s) in a designated bank. (These can
even be more than one account in the same bank branch each designated in
difference foreign currencies, if it is so required by FII for its operational purposes);
2. Open a special non-resident rupee account to which could be credited all receipts
from the capital inflows, sale proceeds of shares, dividends and interests;
3. Transfer sums from the foreign currency accounts to the rupee account and vice-
versa, at the market rates of exchange;
4. Make investments in the securities in India out of the balances in the rupee
account;
5. Transfer repatriatable (after tax) proceeds from the rupee account to the foreign
currency accounts);
6. Repatriate the capital, capital gains, dividends, incomes received by way of
interest, etc. and any compensation received towards sale/renouncement of rights
offerings of shares subject to the designated branch of a bank/the custodian being
authorised to deduct withholding tax on capital gains and arranging to pay such tax
and remitting the net proceeds at market rates of exchange;
7. Register FII's holdings without any further clearance under FERA.
There is no restriction on the volume of investment minimum or maximum for the
purpose of entry of FIIs, in the primary/secondary market. Also, there is no lock in
period for the purpose of such investments made by FIIs.
Portfolio investments in primary or secondary markets will be subject to a ceiling of
24% of issued share capital for the total holdings of all registered FIIs, in any one
company. The ceiling would apply to all holdings taking into account the conversions
out of the fully and partly convertible debentures issued by the company. The
holding of a single FII in any company would also be subject to a ceiling of 5% of
total issued capital. For this purpose, the holdings of a FII ground will be counted as
holdings of a single FII.
The maximum holding of 24% for all non-resident portfolio investments, including
those of the registered FIIs, will also include NRI corporate and non-corporate
investments, but will not include the following:
1. Foreign investments under financial collaborations (direct foreign investments),

which are permitted upto 51% in all priority areas.
2. Investments by FIIs through the following alternative routes:
i) Offshore single/regional Funds;
ii) Global Depository Receipts;
iii) Euro convertibles.
Disinvestment will be allowed only through stock exchanges in India, including the
OTC Exchange. In exceptional cases, SEBI may permit sales other than through
stock exchanges, provided the sale price is not significantly different from the stock
market quotations, where available.
All secondary market operations would be only through the recognised
intermediaries on the Indian Stock Exchange, including OTC Exchange of India. A
registered FII will not engage in any short selling in securities and to take delivery of
purchased and give delivery of sold securities.
A registered FII can appoint as Custodian an agency approved by SEBI to act as a
custodian of securities and for confirmation of transactions in securities, settlement
of purchase and sale, and for information reporting. Such custodian shall establish
separate accounts for detailing on a daily basis the investment capital utilisation and
securities held by each FII for which it is acting as custodian. The Custodian will
report to the RBI and SEBI semi-annually as part of its disclosure and reporting
guidelines.
The RBI shall make available to the designated bank branches a list of companies
where no investment will be allowed on the basis of the upper prescribed ceiling of
24% having been reached under the portfolio investment scheme.
The RBI may at any time request by an order a registered FII to submit information
regarding the records of utilisation of the inward remittances of investment capital
and the statement of securities transactions. RBI and/or SEBI may also at any time
conduct a direct inspection of the records and accounting books of a registered FII.
FIIs investing under this scheme will benefit from a concessional tax regime of a flat
rate tax of 20% on dividend and interest income and a tax rate of 10% on long term
(one year of more) capital gains.
Governing Laws
Two Acts mainly govern Securities Transactions in India at present.

1.The Securities Contracts (Regulation) Act, 1956; and
2.The Securities & Exchange Board of India Act, 1992.
The paper based ownership and transfer of securities has been a major drawback of the
Indian Securities Markets since it often results in delay in settlement and transfer of
securities and also lead to "bad delivery", theft, forgery etc. The Depositories Act, 1996
was therefore enacted to pave the way of smooth and free transfer of securities.
The other relevant laws, which affect the capital market, are: -
1.The Depositories Act, 1996;
2.The Foreign Exchange Regulations Act, 1973;
3. Arbitration and Conciliation Act, 1996;
4.Companies Act, 1956;
5. Debt Recovery Act (Bank and Financial Institutions Recovery of Dues Act, 1993);
6.Banking Regulation Act;
7.Benami Prohibition Act;
8.Indian Penal Code;
9.Indian Evidence Act, 1872 and;
10.Indian Telegraph Act, 1885.
The Securities Contracts (Regulation) Act, 1956

The Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as the Act),
containing a mere 31 sections, keeps a tight vigil over all the Stock Exchanges of India
since 20th February 1957. The provisions of the Act were formerly administered by the
Central Government. However, since the enactment of The Securities and Exchange
Board of India Act, 1992 the Board established under it (SEBI) concurrently has powers
to administer almost all the provisions of the Act.
By virtue of the provisions of the Act, the business of dealing in securities cannot be
carried out without a license from SEBI. Any Stock Exchange which is desirous of being
recognized has to make an application under Section 3 of the Act to SEBI, who is
empowered to grant recognition and prescribe conditions including that of having SEBI's
representation (maximum three persons) on the Stock Exchange and prohibiting the
Stock Exchange from amending its rules without SEBI's prior approval. This recognition
can be withdrawn in the interest of the trade or public. SEBI is authorized to call for
periodical returns from the recognized Stock Exchanges and make enquiries in relation
to their affairs. Every Stock Exchange is obliged to furnish annual reports to SEBI. Stock
Exchanges are allowed to make rules only with the prior approval of SEBI. The Central
Government and SEBI can direct Stock Exchanges to frame rules. Recognized Stock
Exchanges are allowed to make bylaws for the regulation and control of contracts but
subject to the previous approval of SEBI and SEBI has the power to amend the said
bylaws. The Central Government and SEBI have the power to supersede the governing
body of any recognized stock exchange and to suspend its business.
A public limited company has no obligation to have its shares listed on a recognized
Stock Exchange. But if a company intends to offer its shares or debentures to the public
for subscription by issue of a prospectus, it must, before issuing such prospectus apply
to one or more recognized stock exchanges for permission to have the shares or
debentures intended to be so offered to the public to be dealt with in each of such stock
exchange in terms of Section 73 of the Companies Act, 1956. SEBI can, however, under
TABLE A
GROUNDS SPECIFIED IN SECTION 22A FOR REFUSAL TO REGISTER TRANSFER
i) The instrument of transfer is not proper;
ii) It has not been duly stamped and executed;
iii) The certificate relating to the security has not been delivered to the company;
iv) Requirement under the law relating to the registration of such transfer has not
been complied with;
v) The transfer is in contravention of any law, rules, administrative instructions or
conditions of listing agreement;
vi) The transfer is likely to result in change in the composition of the Board of
Directors, which would be prejudicial to the interest of the company or public;
vii) The transfer is prohibited by order of any Court, Tribunal, or other legal
authority
The Securities and Exchange Board of India Act, 1992.

The Securities and Exchange Board of India Act, 1992 (hereinafter referred as "The
SEBI Act") is having retrospective effect and is deemed to have come into force on
January 30, 1992. Relatively a brief act containing only 35 sections, the SEBI Act
governs all the Stock Exchanges and the Securities Transactions in India.
A Board by the name of the Securities and Exchange Board of India (SEBI)
consisting of one Chairman and five members, one each from the department of
Finance and Law of the Central Government, one from the Reserve Bank of India
and two other persons and having its head office in Bombay and regional offices in
Delhi, Calcutta and Madras has been constituted under the SEBI Act to administer its
provisions. The Central Government has the right to terminate the services of the
Chairman or any member of the Board. The Board decides all questions in its
meeting by majority vote with the Chairman having a second or casting vote.
Section 11 of the SEBI Act provides that it shall be the duty of the Board to protect
the interest of investors in securities and to promote the development of and to
regulate the securities market by such measures, as it thinks fit. It empowers the
Board to regulate the business in Stock Exchanges, to register and regulate the
working of stock brokers, sub-brokers, share transfer agents, bankers to an issue,
trustees of trust deeds, registrars to an issue, merchant bankers, underwriters,
portfolio managers, investment advisers, etc., to register and regulate the working
of collective investment schemes including mutual funds, to prohibit fraudulent and
unfair trade practices and insider trading, to regulate take-overs, to conduct
enquiries and audits of the stock exchanges, etc.
As all Stock Exchanges are required to be registered with SEBI under the provisions
of the Act, under Section 12 of the Sebi Act all the stock brokers, sub-brokers, share
transfer agents, bankers to an issue, trustees of trust deed, registrars to an issue,
merchant bankers, underwriters, portfolio managers, investment advisers and such
other intermediary who may be associated with the Securities Markets are obliged to
register with the Board and the Board has the power to suspend or cancel such
registration. The Board is bound by the directions given by the Central Government
from time to time on questions of policy and the Central Government has the right
to supersede the Board. The Board is also obliged to submit a report to the Central
Government every year, giving true and full account of its activities, policies and
programmes. Any one aggrieved by the Board's decision is entitled to appeal to the
Central Government.
The Central Government uptill now has framed ten Rules by virtue of Section 29 of
the Sebi Act.(See Table B)
TABLE B
RULES FRAMED BY THE CENTRAL GOVERNMENT
i) SEBI (stock-brokers and sub-brokers) Rules, 1992;
ii) SEBI (Merchant Bankers) Rules, 1992;
iii) SEBI (Portfolio Managers) Rules, 1993;
iv) SEBI ( Appeal to Central Govt.) Rules 1993;
v) SEBI (Registrars to an issue and Share transfer agents) Rules, 1993;
vi) SEBI (Underwriters) Rule 1993;
vii) SEBI (Debenture Trustees) Rules 1993;
viii) SEBI (Annual Report) Rules 1994;
ix) SEBI (Form of Annual Statement of Accounts and Records) Rules 1994;
x) SEBI (Bankers to an issue) Rules, 1994.
The Board empowered by Section 30 of the SEBI Act has till now with the
previous approval of the Central Government made twelve regulations. (See
Table C)
TABLE C
REGULATIONS MADE BY THE BOARD
i) SEBI (Stock-brokers and Sub-brokers) Regulations,1992;
ii) SEBI (Merchant Bankers) Regulations, 1992;
iii) SEBI (Insider Trading) Regulations, 1992;
iv) SEBI (Portfolio Managers) Regulations, 1993;
v) SEBI (Mutual Funds) Regulations, 1993;
vi) SEBI (Registrars to an Issue and Share Transfer Agents) Regulations,
1993;
vii) SEBI (Underwriters) Regulations, 1993;
viii) SEBI (Debenture Trustees) Regulations, 1993;
ix) SEBI (Substantial Acquisition of Shares and Take Overs) Regulations,
1994.
x) SEBI (Bankers to an Issue) Regulations, 1994.
xi) SEBI (Foreign Institutional Investors) Regulations, 1995.
xii) SEBI (Depositaries and Participants) Regulations, 1996
History Reliance Share Capital Stock
Market
History
Until the Second World War, raising of capital in India from the Securities Markets
was free from all controls. After the Second World War, the Defence of India Rules
was introduced which imposed restrictions for the first time on the issue of capital.
They continued even after Independence and were formerly incorporated in the
Capital Issues (Control) Act, 1947. The office of the Controller of Capital Issues
(CCI) administered the Act. After independence in the year 1947, the Indian
Government followed the policy of giving predominance to public sector enterprises
in the economy. As part of this policy, various industries were nationalised and
certain sectors of economy were reserved for the public sector. Private Sector
Corporations were restricted and access to equity was only through the C.C.I.
Under the Capital Issues (Control) Act, 1947, companies were required to obtain
approval from CCI for raising capital. New companies were allowed to issue shares
only at par. Only existing companies with substantial reserves could issue shares at
a premium which had to be calculated in accordance with CCI norms, which were
based on an estimate of "fair value" and not on the "prevailing market price". There
were tight controls on the issue of rights and bonus shares. With the repeal of the
Capital Issues (Control) Act, 1947 on 30th May 1992, Companies are now able to
raise capital without requiring any consent from any authority either for making the
issue or for pricing it. Restrictions on rights and bonus issues have been removed.
New as well as established companies are now able to price issues according to their
estimate of market conditions. From hawking shares under a Banyan tree to
shouting matches in the trading ring, the Indian Capital Market has now entered the
hush of screen based trading.
THE BOMBAY STOCK EXCHANGE (BSE)

The Bombay Stock Exchange (BSE) established in 1875 has its roots in brokers
coming together in 1860s to trade in shares issued by various companies. The BSE
today is 120 years old and is perhaps the second oldest stock exchange in the world.
Out of the total quoted companies in India, 46% are listed on the Bombay Stock
Exchange and its share market capitalisation is 74%.
The growth in the Indian Capital Market was kicked off for the first time by the
heavy handed policy laid down under the Foreign Exchange Regulations Act, 1973
(FERA). FERA forced multinationals to reduce their share holdings to 40%.
Multinationals unloaded en-masse and that too very cheaply. The shares of
Hindustan Lever bought during that period at Rs.16/- are today quoted at Rs.605/-.
Ponds shares then sold at Rs.23/- have today grown to Rs. 900/-. In those early
days of the '70s, most brokers only dealt in forward group and very few dealt in
cash scripts.
Mr. Dhirubhai Ambani of Reliance Textiles and Industries provided people who
missed FERA an opportunity to become millionaires in their lifetime. The public issue
of Rs.2.82 crores of Reliance Textiles & Industries in November 1977 was over
subscribed 8 times despite the fact that Hindustan Lever and Hindustan Dorr-Oliver
had issues around the same time. Since then the Reliance Group has tapped the
capital markets 33 times raising Rs.10, 000 crores. From an initial base of 6200
shareholders, the Reliance Family now has 4.3 million members, which means that
one out of every four investors in India owns Reliance shares.
Then came Harshad Mehta, riding the back of the economic liberalization and the
optimism, which it generated. Mehta, illegally funded by Banks, sent the stock prices
sky-high. The BSE Index, which was 805 in April 1990, went to 1245 by March 1991
and by the end of 1992, just before the SCAM was detected, went beyond 3500.
During this phase when UTI launched its Master Gain '92 Scheme, 6.2 million
applicants poured in Rs.4712 crores.
APRIL 26: Producing $22.6 bn in revenue in 2004 and contributing 3.5% of India's GDP,
Reliance reached the top of the business world through a policy that its founder Dhirubhai
Ambani spelled out: ‘If its not the biggest, its not worth my while.’ All of that is in danger
as sons Mukesh and Anil don't see eye to eye on politics, or their lifestyles, let alone the
direction in which they want to take Reliance.
On a trip to India's west coast before his death in July 2002, Reliance Industries Ltd.
Founder Dhirajlal Hirachand Ambani surveyed the mango trees separating the company's
Jamnagar oil refinery, No. 3 in the world, from a highway. The 66,000 trees not only
served as a green buffer; they also gave India's largest non-government company another
thing to brag about: owning the country's biggest mango grove.
Ambani, 69, popularly known as Dhirubhai, wanted more. ``Reliance doesn't work like
that,'' I.M. Thimaiah, Reliance's vice president in charge of agriculture, recalls the chairman
saying. `Ì want it to be the biggest in the world.'' Thimaiah discovered that four centuries
ago, Mogul Emperor Akbar had owned 100,000 mango trees, making him the record
holder.
Thimaiah ordered 36,800 more trees for Jamnagar, eliminating any doubt about Reliance's
place in history. ``We thought, `We'll make Dhirubhai the new emperor,''' Thimaiah says.
Three years after Dhirubhai's death, his empire is in peril of splitting apart, endangering an
icon in which one of every four Indian investors owns stock.
Dhirubhai's two sons are feuding over who will run Reliance's interests in oil and gas
exploration, petroleum refining, chemical manufacturing, telecommunications and power
generation. The businesses produced $22.6 billion in revenue last year and contributed 3.5
percent of India's gross domestic product.
Reliance is scheduled to report fourth-quarter earnings for the period ended March 31 on
Wednesday.
Mukesh and Anil
Mukesh Ambani, 47, a chemical engineering graduate from Mumbai University who loves
street food and shuns the limelight, took over as chairman. Vice Chairman Anil Ambani,
45, is a Parliament member and was MTV India's Youth Icon for 2003. The two don't see
eye to eye on politics or their lifestyles, let alone the direction in which they want to take
Reliance.
Mukesh shuttles 46 kilometers (29 miles) by helicopter between Reliance's 140-acre (57-
hectare) campus at Vashi on the outskirts of Mumbai and the chairman's office in the city's
financial center at Nariman Point.
Anil divides his time between offices in Ballard Estate, a Mumbai business district with
European facades, and the steel-and-glass headquarters of power company Reliance Energy
Ltd. Their mother, Kokila Ambani, is attempting mediation, spokesmen for the brothers
say. Mukesh and Anil declined to comment for this story.
Demystifying the Market
By the time the brothers joined Reliance in the early 1980s, Dhirubhai had helped
demystify the secrets of investing in India's stock market. He held shareholder meetings in
a Mumbai soccer stadium and delivered his addresses on TV monitors.
Before then, companies hadn't focused on share price or courted small investors, says Kisan
Ratilal Choksey, chairman of a Mumbai brokerage that bears his name. Dhirubhai
drummed up enthusiasm for each of his ventures.
``Dhirubhai conceived large projects, and whenever a project was started, he publicized it
and attracted people,'' Choksey says. ``That wasn't the case earlier.''
In 1978, the first year Reliance traded on the Mumbai stock exchange, the stock surged
fivefold to 50 rupees a share. By 1980, the price had doubled to 104 rupees, according to
``The Polyester Prince: The Rise of Dhirubhai Ambani'' (Allen & Unwin, 1998), an
unauthorized biography by Australian journalist Hamish McDonald.
`Whatever Dhirubhai Said, Happened'
An investor in Reliance's 1977 initial public offering would have earned a compounded
annual return of 23.4 percent, the company said in February. ``Whatever Dhirubhai said,
happened,'' Choksey says.
Since Dhirubhai's death, Reliance shares have lagged behind those of competitors. In the
past 12 months, the stock fell 3.6 percent to trade at 546.55 rupees on Monday compared
with a 7.6 percent gain in India's 30-company benchmark Sensitive Index.
Reliance was the fourth-worst performer in the index last year. Shares of Beijing-based
rival PetroChina Co., which last year reported the biggest profit in Asia -- $12.4 billion --
surged 31 percent during the same period.
``There's a war going on, and all wars are ugly -- they leave casualties,'' says Jon Thorn,
who manages $170 million at India Capital Fund Ltd. in Hong Kong and owns Reliance
Industries shares. ``The stock has and will underperform the broader market until the
dispute is fixed.''
Family Control
Investors worry about the feud because the Ambani family controls 46.76 percent of
Reliance Industries, the flagship company that owns the Jamnagar refinery and makes
chemicals for plastics and synthetic fibers.
Reliance's four main subsidiaries are themselves among India's biggest companies.
Reliance Energy is the No. 2 power producer by market value. Indian Petrochemicals Corp.
is the second-largest chemicals maker. Reliance Infocomm Ltd. is the No. 2 cellular phone
service company. And Reliance Capital Ltd. runs India's fifth-biggest mutual fund when
government-run funds are excluded.
Reliance plans to grow even larger. During the next five years, the company will invest $2
billion to boost petrochemical capacity to 15 million tons a year from 12 million tons.
Another $7.5 billion will go to explore for oil and gas off India's east coast and overseas, to
build a chain of gas stations, and for other initiatives, Executive Director Nikhil Meswani
says.
Nikhil and his brother, Hital Meswani, another executive director, are sons of Dhirubhai's
nephew Rasiklal Meswani and round out the family quartet that runs Reliance and its units.
The Ambani brothers are managing directors at Reliance. Mukesh is chairman of Infocomm
and Indian Petrochemicals; Anil is chairman of Reliance Energy.
Power Plant Mixup
The Ambanis' dispute may already have caused one mixup. In January 2004, Anil held a
news conference to unveil a $2.5 billion gas-fired power plant project in northern India. He
made the solo presentation without first consulting Reliance Industries' board, a board
member who declined to be identified says. Now, because Reliance is waiting for
regulatory approval to lay a pipeline linking its gas fields to the plant, production at the
3,740-megawatt plant may be delayed for at least two years, until 2009.
The feud at Reliance underscores how shareholder interests can suffer when family
members lock horns. In India, 22 of the 50 companies that make up the S&P CNX Nifty
index of the Mumbai-based National Stock Exchange are family controlled. Because India
has no tradition of shareholder lawsuits, investing in the country's family-run Companies is
riskier than elsewhere, says Jayanth Varma, a professor of finance at the Indian Institute of
Management in Ahmedabad.
`Pile on Pressure'
``There has to be pressure from outside boards of family-controlled Companies, typically
from big investors, to force good corporate governance,'' Varma says. ``These investors can
pile on pressure of a different order of magnitude than what you can expect from company
directors.''
In one recent family feud, shareholders of Canada's biggest brewer, Molson Inc., were able
to win a special payout. In June 2004, Ian Molson resigned as deputy chairman in a
succession battle with his cousin, Chairman Eric Molson. A month later, the company
agreed to merge with Adolph Coors Co., then the No. 3 U.S. brewer, in a $3.4 billion share
swap. Shareholders eventually won a one-time dividend of C$5.44 a share before
approving the merger.
Thorn says he fears the Ambanis' quarrel may force a split between Reliance's chemical and
oil businesses, eliminating a tie that has cushioned Reliance's earnings. In the quarter ended
on Dec. 31, Reliance Industries reported a 52 percent increase in profit to 20.9 billion
rupees ($477 million), its seventh straight record, as oil prices reached $55.67 a barrel in
New York. Operating margins in oil refining widened to 11.8 percent from 8.2 percent a
year earlier even as margins for the chemicals business narrowed to 8 percent from 12
percent.
`Not an Ideal Situation'
`À split is not an ideal situation,'' Thorn says. `Ènergy companies worldwide are
integrating. Why would you want to break up a company that's already integrated from oil
exploration to fuel retailing?''
A big bone of contention is whether to use the $2.1 billion in cash profit that Reliance
generated last year to expand the energy business, which Anil heads, or the
telecommunications unit, which Mukesh started.
``Reliance Industries is the biggest cash cow in the group,'' says John Band, who tracks
Reliance as president of Mumbai-based investment consultant Zoom Cortex Ltd. `Ànil
wants a piece of it for his energy business. Mukesh wants to recast Reliance as a new-
technology group by expanding the telecom business.'' Gerald Smith of Baillie Gifford &
Co. in Edinburgh says the conflicting visions are troubling for investors. ``We have
concerns about who's going to own what and what the position of minority shareholders is
going to be,'' says Smith, who manages almost $4 billion in emerging-market funds and
who bought 858,000 Reliance shares in December.
Celebrity Friends
Anil's lifestyle may be contributing to the rift, Thorn says. The younger Ambani is married
to former Bollywood actress Tina Munim and is friends with Bollywood's biggest film star,
Amitabh Bachchan. He's often photographed indulging his passion for marathons, running
on the streets of Mumbai wearing shorts and sunglasses.
In June, India's Samajwadi Party, a rival to the Congress Party, which leads the country's
ruling coalition government, backed Anil to become a member of the Indian Parliament's
upper house. Amar Singh, general secretary of the Samajwadi Party, is one of Anil's
friends.
In contrast, Mukesh spends his free time with his family. He's married to Nita Ambani, who
runs the Dhirubhai Ambani International School and the Dhirubhai Ambani Hospital, both
funded by the Dhirubhai Ambani Foundation, a Mumbai-based charity. `Ànil's hanging
out with politicians and socialites may have been a flash point in the relationship with his
brother,'' Thorn says.
Power Struggle
Like many family conflicts, the Ambani brothers' spat involves power. Mukesh joined
Reliance in 1981 at age 24, getting his feet wet by helping build a polyester yarn factory in
Patalganga, 70 kilometers north of Mumbai. He later supervised construction of a
chemicals complex at Hazira and the Jamnagar refinery, both in the western state of
Gujarat. After a cyclone struck Jamnagar in 1998, Mukesh got the construction started
again in 12 days.
Anil joined Reliance in 1983 after completing his master of business administration at the
University of Pennsylvania's Wharton School. He helped raise $9 billion to pay for
petrochemical and refining plants, selling debt to overseas and local investors.
100-Year Bond
Reliance, which hasn't issued new shares since October 1994, is one of 23 companies
globally to have sold a 100-year bond in the U.S., the Indian Institute of Management's
Varma says. Coca-Cola Co., International Business Machines Corp. and Walt Disney Co.
are among the others.
When Dhirubhai was alive, he kept a lid on any squabbling between his sons. Hints of a rift
surfaced six months after his death. In December 2002, Anil didn't attend the public
unveiling of Reliance's Infocomm mobile phone venture. Mukesh had started the venture in
1999 as a way to lead Reliance into consumer-oriented businesses and away from a
dependency on oil.
A Reliance spokesman said later that Anil wasn't available because he was presenting one
of Reliance's new cell phones to then Prime Minister Atal Bihari Vajpayee. When Vajpayee
addressed the gathering via videoconference from New Delhi, the younger Ambani wasn't
anywhere in sight. Since then, Anil has scrapped his Infocomm mobile phone and service
in favor of rivals including New Delhi-based Bharti Tele-Ventures Ltd.
On July 27, 2004, a board meeting brought the division to a head. Reliance directors
approved a proposal to give Mukesh power to overrule Anil's decisions and alter the
younger brother's role in the company.
Mukesh Gains Power
The proposal, which Bloomberg News obtained, stated, ``Mukesh D. Ambani, as chairman
and managing director, being accountable and responsible to the board, will exercise the
specific power to allocate, delegate or assign specific duties, responsibilities and powers to
managing directors, whole-time directors and all executives and employees.'' As for Anil,
``his functions will be under the overall authority of the chairman and managing director,''
the proposal stated.
Anil shot back in e-mails to Mukesh on July 29 and 30, asking for the proposal to be
suspended. He said the plan hadn't been circulated before the meeting, the brothers had
never discussed altering their roles and the document hadn't gotten a fair hearing because it
was listed in the agenda under Health, Safety and Environment Committee, according to
the e-mails, which Bloomberg News obtained.
Ìn the Dark'
Anil followed with a letter on Oct. 25. ``The supplementary agenda was introduced without
my knowledge and consent, keeping me completely in the dark,'' he wrote in the letter,
which was obtained by Bloomberg News.
On Nov. 16, the rift spilled into the public. Mukesh told a journalist at the Hilton Towers in
Mumbai that there were `òwnership issues'' inside Reliance. The news sparked the biggest
drop in Reliance shares in three months -- a 3.4 percent decline to 527.15 rupees on Nov.
19, the day the comments were widely circulated in newspapers.
Just six weeks earlier, on Oct. 6, Mukesh had denied there was a dispute when money
manager Nandita Parker questioned him in New York.
``He told me I shouldn't believe everything I read in the papers,'' says Parker, who manages
$12 million at Karma Capital Management LLC in Old Greenwich, Connecticut.
Directors Resign
On Nov. 25, six of 14 directors of Reliance Energy resigned without giving a reason.
Reliance Energy's shares tumbled 6 percent, their biggest drop in six months. Anil got a
break for his side in December. India's Business
Standard newspaper, the country's second-largest business paper by circulation, reported
that Mukesh owned more of Infocomm than Reliance Industries did.
Basudeb Sen, former executive director of Unit Trust of India, the nation's biggest mutual
fund, questioned the setup because Reliance Industries had spent more than any other
investor on Infocomm stock -- $2.85 billion as of March 31, 2004, according to Reliance's
April 2004 report to investors on earnings.
`Ìt was a surprise to know that Infocomm was held in majority by Mukesh Ambani in his
personal capacity,'' Sen says. ``That was never the case with any Reliance group ventures in
the past. The shareholdings were always split between Reliance Industries and the Ambani
family.''
Today, Reliance owns 45 percent of Infocomm; Mukesh and companies he controls own
the rest, says Infocomm spokesman Jimmy Mogal. Unit Trust, which was broken into two
funds in 2003, owns about 1 percent of Reliance Industries' shares.
Buyback Plan
Later in December, Reliance's plan to spend as much as 30 billion rupees to buy back 10
percent of its shares stirred up further animosity.
`À buyback at this stage is completely inappropriate,'' Anil told journalists when he arrived
at the company's Nariman Point office for the Dec. 27 board meeting called to discuss the
proposal.
He ended his comments with a reference to Sun Tzu, a Chinese general who wrote ``The
Art of War'' more than 2,000 years ago. `Ì am reminded of the Chinese philosopher who
said the objective of war is peace,'' he told the group. `Ì would like to add two more
elements to it, which is dignity and, above all, self-respect. The Reliance group is the dream
of my father, Dhirubhai Ambani, and I will endeavor to protect and enhance his legacy.''
Concerned about further turbulence, Indian Finance Minister P. Chidambaram urged the
brothers to resolve their dispute quickly and privately.
`Ì have advised both of them to sort out problems within the four walls of their house,''
Chidambaram told reporters on Jan. 7 at an event organized by the Mumbai stock
exchange.
Nose for Profit
Dhirubhai, son of a schoolteacher father in the village of Chorwad in western India, started
Reliance with a 15,000 rupee investment and built it over four decades. Too poor to pursue
college, he left for Aden, Yemen, at age 16. He worked in a gas station, sold petroleum
lubricants and, as a young man, dreamed of someday owning his own refinery, Mukesh
said in a November 2003 speech.
`Àden was the Dubai of that time,'' Mukesh recalled in an interview with Bloomberg News
in April 2004, referring to Aden's role as a trading port in the British Empire. ``My father
went there to get savings.''
In Aden, Dhirubhai demonstrated his ability to smell a profit. In the 1950s, he started
buying Yemenese rials, a silver coin and the country's main currency. He'd figured out that
the silver content was worth more than the coin's exchange value.
Dhirubhai melted the coins into ingots and sold them to bullion dealers in London before he
was stopped three months later, according to ``The Polyester Prince.''
One-Room Apartment
After eight years in Aden, he returned to India and set up base in Mumbai in 1958. ``He'd
earned 10,000 rupees,'' Mukesh said in the interview. ``He started with one table, one chair
and a shared telephone because he couldn't afford one just for himself.''
In 1959, Dhirubhai founded Reliance Commercial Corp. to trade spices and yarn. Anil was
born in 1959, followed by daughters Dipti in 1961 and Nina in 1962. The family including
Dhirubhai, his wife and four children lived in a one-room apartment in Jai Hind Society, a
building that housed 500 families. Anil and Mukesh shared each other's clothes, Anil said
in an interview posted on his Web site.
By 1966, Reliance had begun making fabrics for suits and saris at a textile mill at Naroda in
Gujarat. In 1967, the first full year of production, Reliance had a profit of 1.3 million
rupees on sales of 9 million rupees, according to ``The Polyester Prince.'' Dhirubhai plowed
money back into the mill to buy more machines, selling its fabric under the Vimal brand,
named for the son of his older brother, Ramniklal Ambani.
Cadillac, Mercedes
In 1968, the Ambani family moved out of Jai Hind Society building to a bigger apartment.
Dhirubhai started driving a Cadillac and later a Mercedes-Benz, according to ``The
Polyester Prince.'' In 1977, Reliance made a profit of 12.8 million rupees on sales of 687
million rupees. The company changed its name to Reliance Textile Industries Ltd. That
year, Reliance sold shares for the first time, raising 28 million rupees. The IPO was the start
of Dhirubhai's relationship with the stock market. He decided to run his own share
recording service to track his stockholders, recalls V.V. Bhat, Reliance's group president of
management services. Trouble was, he needed a computer, an almost impossible feat
because of India's import and export controls, Bhat says. The closest he could come was a
word processor, so Dhirubhai imported a computer by calling it a word processor, Bhat
says.
`Ì don't know how it was managed or by whom,'' he says.
``This computer could also do word processing.''
`Serve Shareholders'
Customs officials investigated, and Bhat paid a 50,000 rupee fine. ``You call it flouting
laws or what you like, but the fact is, I got my computer to serve shareholders,'' says Bhat,
who ran the share registry with the Wang Laboratories Inc. machine. Dhirubhai's ambitions
turned to chemicals and synthetic fibers, the germs of a strategy to own the raw materials
required for his textile business. To fund the growing empire, Reliance offered four issues
of partly convertible bonds, a seldom-used instrument at the time. Such a debt security
allowed a bondholder to partially exchange some of his holding for equity shares. From
1979 to 1982, Reliance raised a total of 918 million rupees from debentures sold to small
investors.
In 1982, Dhirubhai moved from making polyester fabric at his mills to manufacturing the
polyester filament yarn that goes into the fabric. He pulled Mukesh out of Stanford
University in California, where he was studying for an MBA, to help build new plants.
They bought the latest machines, which could produce 10,000 tons of polyester yarn a year
at a time when total Indian consumption was 6,000 tons a year.
`Bold Decision'
`Ìt was a bold decision, and it stemmed from the fact that growth levels in India will only
rise,'' Executive Director Hital Meswani says.
The polyester yarn factory set the tone for Reliance's strategy. Dhirubhai sought the newest
technology and built large plants capable of competing with the best in the world. Today,
the 7,500-acre Jamnagar complex accounts for a quarter of India's refining capacity. Its size
and design let Reliance refine crude in a way that makes the plant more competitive than
refineries elsewhere in India and in Singapore, a benchmark for the region, Meswani says.
Reliance earned an average of $9.80 on each barrel of crude oil it processed into fuels in
the December quarter compared with $8.80 for Singapore refiners, the company said on
Jan. 21.
``Reliance's refinery is state-of-the-art, equipped with all the necessary gadgets that help it
meet the most-stringent fuel norms, unlike other Indian refiners who have only some of the
equipment,'' says S. Raghunath, country head of the Indian unit of Trafigura Beheer BV, an
Amsterdam-based commodities trader.
Soccer Stadium Meeting
Reprising a tack he'd taken in melting down silver coins and importing a banned computer,
Dhirubhai tested the limits again in 1984: He constructed a plan to convert the
nonconvertible portion of Reliance debentures into shares. In April, Reliance offered to
exchange every 100 rupees of debentures for 1.4 shares. The move erased 700 million
rupees of debt from Reliance's balance sheet and increased share capital by 100 million
rupees according to a book on Indian industrialists by Gita Piramal called ``Business
Maharajas'' (Viking, 1996).
In 1985, Dhirubhai held the company's annual general meeting at a Mumbai soccer
stadium. About 12,000 shareholders crammed inside, sitting under canvas awnings as they
watched the proceedings on TV monitors, according to ``The Polyester Prince.'' That year,
the company had 1.2 million stock and bondholders, and Dhirubhai dropped ``Textile'' from
the company's name.
Dhirubhai Suffers Stroke
In February 1986, a stroke left Dhirubhai's right side partially paralyzed. About the same
time, the Indian Express newspaper ran a series of stories that criticized Reliance and
questioned why Reliance had been able to convert nonconvertible debentures. The press
reports may have persuaded the government of Prime Minister Rajiv Gandhi to refuse to let
Reliance change any more nonconvertible bonds, ``Business Maharajas'' says.
Dhirubhai again turned to the public, this time with an issue of fully convertible debentures.
He raised 4 billion rupees. The new funds marked a resurgence that allowed Dhirubhai to
continue his vision of owning the entire chain of production from raw materials to finished
goods.
In 1991, Reliance built a plant at Hazira to use petrochemicals such as naphtha to produce
chemicals for plastics and polyester yarn. In 1996, Reliance made its biggest bet when it
invested $6 billion to build the 27-million-ton-a-year oil refinery at Jamnagar. The
complex's capacity was roughly equal to the difference between the demand for fuel in
India and the existing supply.
``We were about to double the size of the Reliance group almost overnight-both in terms of
capital expenditure and group sales,'' Hital Meswani says.
World Record
Reliance completed the refinery in less than three years, setting a world record, according
to a report by Netherlands-based Shell Global Solutions, the engineering consulting firm
and unit of Royal Dutch/Shell Group that helped design Jamnagar. The plant required the
amount of steel in 16 Eiffel Towers. Today, the complex includes a port, a desalination
facility and a power plant. A town with houses, a school and a hospital for workers sprawls
out nearby.
Jamnagar is one of the few refineries in the world that can process very thick, high-sulfur
grades of crude oil into pure, low-polluting gasoline and diesel fuel -- the grades sold in
California, Meswani says.
`Wing It'
On June 24, 2002, Dhirubhai suffered a second stroke and slipped into a coma. He died 12
days later in a Mumbai hospital. ``He managed to wing it through some very difficult times
to sustain extremely fast growth of his company and to build up production in just his own
lifetime,'' ``The Polyester Prince'' author McDonald says.
Even as the brothers feud, Reliance is pursuing growth by using technology to fulfill
Dhirubhai's vision and complete the final leg of the company's petroleum chain.
Last year, Reliance began operating 320 gas stations along national highways. The stations,
which sell mostly diesel fuel, carry Reliance's flame logo and blue, green and white colors.
Reliance expects to have as many as 2,500 outlets by the end of this year and 5,800 in three
years, P.M.S. Prasad, CEO of Reliance's petroleum business, says.
A sensor in each pump lets workers monitor a gas station's fuel supply from a control room
at a new Reliance campus in Vashi. Workers can dispatch trucks to tanks that need filling
and change prices at pumps anywhere in the country, Prasad says.
Oil and Gas
Similar control rooms, with 15-foot-high walls covered with banks of screens, house teams
of traders in charge of buying crude oil and engineers who monitor data from drilling
platforms in real time. In a smaller room that looks like a movie theater, engineers
manipulate three-dimensional images of seismic blocks on a curving concave screen to aid
in oil and gas exploration.
Just before Dhirubhai died, Reliance made the biggest natural gas discovery of the year,
which was off India's east coast. Now, it plans to spend $2.5 billion to develop the field. It's
prospecting for oil in the Middle East, Russia, South America and West Africa and has
found oil in Yemen, the country where Dhirubhai's fascination with the petroleum industry
began.
Like their father, the brothers have had some run-ins with authorities. When Reliance
Infocomm started selling phone service in February 2003, government regulations limited
the company to providing calls within a city's limits. In October 2003, the Vajpayee
government freed Infocomm from the limited-range restriction. At the same time, it fined
Infocomm 4.85 billion rupees for having provided cell phone services outside the
prescribed area when the regulation was in force.
1.5 Billion-Rupee Fine
In March 2005, Infocomm paid a further 1.5 billion-rupee fine to the government for
routing international calls as local calls. India's Department of Telecommunications
charged that Reliance had taken calls that originated outside India, brought them into the
country and changed them to local calls before routing them to their final destinations.
The method allowed Infocomm to make a smaller payment to state-owned phone
companies, which are compensated for providing phone services below cost, the three-
member Telecom Dispute Settlement & Appellate Tribunal, which reviewed the case,
found in March. Infocomm denied wrongdoing.
Infocomm reported a loss of 3.9 billion rupees in the year ended on March 31, 2004, its
first year of operation. In March 2005, the company discontinued services to 984,123
subscribers who hadn't paid their bills.
100 Million Subscribers
By March 2006, Infocomm plans to double its subscribers, says Kamal Nanavaty, the chief
operating officer in charge of wireless businesses. Infocomm has 10.64 million subscribers
and is expanding its network to cover two-thirds of India's 600,000 villages and 5,700
towns by the end of this year. Nanavaty estimates Infocomm will have 100 million
subscribers, or about 40 percent of India's total market, in less than five years.
``There are towns where a cellular tower comes up and 500 phones go on,'' he says.
Infocomm plans to roll out high-speed Internet and interactive television services to homes
by the end of this year.
``The dispute has not had any impact at all,'' Nanavaty says, referring to the brothers' feud.
``They do what they are supposed to do; we do what we are supposed to'' Mukesh is
branching into embryonic stem cell research, the creation of synthetic proteins and
industrial biotechnology through a company he controls called Reliance Life Sciences Ltd.
K.V. Subramaniam, a senior executive vice president at Reliance Industries and head of the
life sciences business, says there are plans to invest $200 million in Life Sciences by 2006.
``This opportunity will unfold toward the latter part of this decade,'' Subramaniam says.
Investors are worried about more-urgent matters closer to home. They want the two feuding
brothers to make up and to take a cue from their father, who put shareholders and his
company first.
ONE YEAR RESULTS OF INDIAN STOCK

MARKET
Foreign investors may invest and trade India through Country Funds (IIF, IFN, IGF, JFI), or individual
stocks with ADRS on the NYSE such as ICICI (IC) or Nasdaq listed companies such as Infosys Tech
(INFY) and SATYAM INFOWAY (SIFY). To track the Indices and Prices of shares, visit Bombay Stock
Exchange (BSE) and National Stock Exchange of India (NSE).
DECEMBER
The BSE SENSEX closed today i.e. 30th Nov'04 at an all time high of 6234. The BSE SENSEX on 9th
Jan'04 tested an all time high of 6249.50 but closed at 6199. The BSE SENSEX created history today by
closing at a very bullish level of 6234. Up smartly 5.8 % from the Nov'04 close of 5891. The intra month
high and low for the month of Nov'04 were 6248 and 5878. The BSE SENSEX just fell short of testing the
all time high of 6249.50 as on 9th Jan'04.
The BSE SENSEX was bullish in Nov'04 as predicted. The SENSEX breached the 6000 level easily. It
also broke all important level of 6150 in Nov'04. FIIs were very aggressive buyers of Indian Equities. FIIs
pumped in around US $ 1.2 Billion into Indian Equities in the month of Nov'04. In the calender year 2003
- FIIs pumped in US $ 6.59 Billion into Indian Equities. In the calendar 2004 till 30th Nov'04, FIIs have
already pumped in approx US 7.0 Billion. It is expected that in calendar 2004 - this figure might be close
to US $ 8.0 Billion. In other words analysts feel that in the month of Dec'04 - FIIs will pump in US $ 1.0
Billion into Indian Equities. If this happens, then the BSE SENSEX will easily go past the all time high of
6249.50 and will enter into ' Unchartered Territory '.
FIIs were very aggressive Buyer's into the frontline IT Sector, Banking and Auto Component Sector
Stocks in Nov'04. Indian Operators were very active in the Mid Cap Stocks. Mid Cap Stocks are having a
dream run but some of these Stocks are not based on fundamentals. Investors have already been cautioned
not to invest into Mid Cap Stocks without checking the fundamentals.
We feel the BSE SENSEX will be in a bullish mode in Dec'04. The levels to watch are :
S1 6150 S2 6000 S3 5880

R1 6250 R2
Beyond 6250 the BSE SENSEX could be heading anywhere. It could test 6500 to 6700 levels in the next
few months to come. This depends primarily depends on the FII activity. FIIs have favoured Indian
Equities ahead of China and Brazil. If FIIs pump in another US $ 1.0 Billion in Dec'04 as anticipated by
the analysts then we can see a level of 6400+ in Dec'04 itself. We feel that BSE SENSEX will give a sharp
200+ point reaction after crossing 6250 levels. At this reaction we recommend investment into four new
Stocks.
We are recommending four additional Stocks to be bought for medium to short term horizon ( 3 to 6
months ) as below :
1. TIMKEN INDIA : It is a leading manufacturer of Taper Roller Bearings and is a Indian Subsidiary of
Automotive/Railways Bearing Giant - TIMKEN Inc. of USA. It closed today i.e. 30th Nov'04 at Rs.69.00.
Its 52 week high and low are Rs. 87.00 and Rs. 33.00. Keep a buying target figure of Rs. 60 to 62. Target
price Rs. 120+
2. CUMMINS INDIA : It is a leading manufacturer of Diesel Engines in India both for Automotive and
Stationary use. This company too is now an Indian subsidiary of CUMMINS Inc. USA - a global giant in
Diesel Engines. It closed today at Rs. 125.00. It's 52 week high and low are Rs.135.00 and Rs. 90.00
respectively. Keep a buying target price of Rs. 118 to 120. Target price Rs. 180+
3. UTI BANK : We did not recommend any Banking Stocks over the past two years as we were worried
about the high level of NPAs. This Banking Stock closed today at Rs. Rs.166.00. It's 52 week high and
low are Rs. 179.00 and Rs.84.00. Keep a buying target of Rs. 145 to 150. This Bank could be a " Takeover
Target ". Investors are advised to keep watchful eye on this Stock as regards the volumes traded on the
BSE or NSE. If the Stock is traded heavily - there is some action in the Stock. Target price could be Rs.
250 to Rs. 300.
4. STANDARD INDUSTRIES : This is an old Textiles Stock and closed today at Rs. Rs. 19.40. Buy this
Stock at market prices - say Rs. 20.00 to 21.50 We feel this Stock will be Rs. 40.00++ in a matter of three
months. Post Textiles QUOTA Dismantling from Jan'05 onwards - this Stock will see a frenzied activity.
EXIT from this Stock at Rs. 40.00.
We had recommended some Stocks in Oct'04. A brief synopsis :
1. HELIOS and MATHEWSON : This Software Stock tested a level of Rs. 211.00 on a cum-bonus
basis. We hope investors booked partial profits. Anyway it closed today ex-bonus level at Rs. 88.00. We
advise Investors to stay invested. We stick to our target price of Rs. 180.00++
2. MRPL : This is our multi-bagger of 2004-05. It closed today at Rs. 45.00. Stay invested. We stick to
our price of Rs. 100.00++.
3. ARVIND MILLS : This Textile major closed today at Rs. 114.00 up smartly from Rs. 84.00 as of 4th
Oct'04. It tested a new 52 week high of Rs. 119.00 in Nov'04. Stay invested. We stick to our target price of
Rs. 250.00.
4. GTN TEXTILES : This Cotton Yarn major closed today at Rs. 72.00 ( new 52 week high ) up smartly
from Rs. 53.00 as of 4th Oct'04. Exit at Rs. 80.00+
5. PETRONET LNG : This closed at Rs. 23.40 marginally down from Rs. 24.00 as of 4th Oct'04. Stay
invested. This will be multi-bagger of 2005-06.
6. TCS : This Indian Software major closed at its new 52 week high of R. 1287.00 up smartly from
1081.00 as of 4th Oct'04. Stay invested. This is a Stock for every Indian Investor's Portfolio. Stay invested.
7. L & T : This Engineering Major closed today at its new 52 week high of Rs. 912.00 p smartly from Rs.
874.00 of 4th Oct'04. This is a Stock for every Indian Investor's Portfolio. Stay invested till further advise.
In August 2002 we had recommended LIQUOR and SPIRITS Stock - McDOWELL at a level of Rs.
45.00. We had predicted that this Stock will be Rs. 150.00 in about one year's time. We were off by 12
months or so. McDOWELL closed today at Rs. 124.00 but tested a 52 week high of Rs. 136.00 in Nov'04.
This Stock will be Rs.150.00+ in the very near future. Investors who hold this Stock are advised to
completely exit from this Stock at around Rs. 150.00. Some Market Pundits were making a laughing stock
of our prediction in August 2002 about this Stock. These guys called me a few days back and were amazed
about the bull run in the Stock. God has been kind !
We predict Stocks in our own queer ways and most of the time our long term predictions have been 'Bulls
Eye'. We again repeat Investors who have the holding capacity for medium to long term and who follow
our timely entry/exit directions, will for sure make big bucks in the Indian Stocks.
The Indian Stock Markets are in for a big Bull Run in the coming months and all the negative news is
being discounted. Happy Investing in Indian Stocks !
NOVEMBER
The October 2004 closing is taken as 5th Nov'04 - weekly closing at BSE. BSE SENSEX closed today at a
bullish level of 5891 up 1.8 % from 4th Oct'04 closing of 5785. As predicted BSE SENSEX corrected
sharply in the month of Oct'04. The intra month high and low were 5901 and 5558 ( breaching S3 level of
5580 as mentioned in the forecast for Oct'04 ). US Light Crude at NYMEX tested record high of US $
55.67 pbbl on 25th Oct'04. High Oil prices are a cause of worry globally as this would lead to inflation.
The FIIs are bullish on India and we predict that BSE SENSEX will test and even break the all important
level of 6000 in Nov'04. At any level above 6000 - INVESTORS ARE ADVISED TO BOOK PROFITS.
The levels to watch in Nov'04 are :

S1 5840 S2 5750 S3 5680
R1 5940 R2 6000
No new Shares are being recommended. It is the time to take profits home, if any !
OCTOBER
The Sept'04 closing is taken as 4th Oct'04.
BSE SENSEX closed today at a whopping bullish level of 5785 up 10.2 % from 6th Sept'04 closing of
5246. We had predicted that BSE SENSEX would not breach the 200 DMA level of 5375 but due to very
heavy FII buying after mid Sept'04 the BSE SENSEX turned extremely bullish. Bears were running for
cover !
The intra month low and highs for Sept'04 for the BSE SENSEX were 5240 and 5785. Mid Caps rallied
like mad bulls - some with little floating stocks and almost nil fundamentals. We had advised investors to
stay away from these stocks.
Aggressive FII buying towards mid September in the front line blue chips in Oil and Gas, Petrochemicals,
Heavy Engineering Machinery, Cement, Steel, Sugar,Textiles and Cotton Yarn sectors propelled BSE
SENSEX past the confirmed bullish trigger of 5720.
The Securities Turnover Tax ( STT ) was effective in the Stock Markets w.e.f. 1st Oct'04. The same was
well received by all section of investors - FIs, FIIs and individual investors. There were some
apprehensions on the implementation of STT by the Indian Stock Market Regulator - SEBI, which were
cleared to everybody's satisfaction by the last week of Sept'04. This further propelled the BSE SENSEX.
There is only 10 % capital gains tax on short term stock trading profits and nil capital gains tax on long
term profits ( beyond 12 months ) as per the Budget announced in July'04 by the Indian Finance Minister.
This was a good news for all sections of investors but the ambiguities in implementation of STT was not
reflecting truly on the Indicies since the announcement a few months back. Once SEBI clarified as
mentioned above - bulls moved into the Stock Markets aggressively in the last week of Sept'04. Short
sellers were trapped and rushed in to cover their positions. This always adds further impetus to the
Indicies.
FIIs pumped in close to US $ 600 Million into Indian Equities in Sept'04. Bulk of this investment was
done after mid Sept'04. FIIs were dormant in Aug'04. FIIs pumped in close to US $ 1.0 Billion each in
Taiwan and South Korean Equities during the same period.
The BSE SENSEX is now in a bullish mode with the under current also in the same mode. It is well above
the 200 DMA level of 5420 and will find a very strong support at a level of 5720.
The BSE SENSEX will correct sharply in the coming weeks and may then head towards an all
important level of 6000! There are a few concerns which are entailed towards the end of this update.
The levels to watch in Oct'04 are :

S1 5720 S2 5640 S3 5580
R1 5840 R2 6000
We are recommending a few stocks as below for medium and long term investments. Investors who have a
long term perspective have gained enormously on our advise. Investors to enter when the BSE SENSEX
corrects sharply in Oct'04 or accordingly as the case maybe.
Medium Term:
For the next six months or so we fancy
a) HELIOS and MATHEWSON : A new kid on the block in the midcap software sector with strong
fundamentals. It closed today at Rs. 123. This price is with 1:1 Bonus and we hope ex-bonus price would
be around Rs.80 to 90. The 52 week high and low levels are Rs. 184 and Rs. 22 respectively. We expect
this Stock to test Rs. 180 to 200 in the next six months from the ex-bonus level of Rs. 80+. This is a
turnaround story.
b) MRPL : This is our multi bagger for 2004 ! We are extending the same to 2005. It closed today at Rs.
45. We expect MRPL to be profitable company in 12 calendar months from now. It has started generating
cash profits and we hope by 31st March'05 or 30th Sept'05 the company would have have wiped out all its
accumulated losses ( Rs. 6271 Million ). As on 31st March'04 the cash profit was Rs. 4594 Million and
accumulated losses were Rs. 6271 Million. Substantial improvement in performance YoY. We feel MRPL
will be a dividend candidate by 30th Sept'05, if not earlier. We expect the price to be
Rs. 100+ in six months time as the stock markets discount the future.
Long Term :
The following are being recommended for 12 months perspective in mind. These Stocks will give
substantial returns as per our understanding in the long term as they are fundamentally strong stocks and
are leaders in the pack in their sector.
1. ARVIND MILLS : This textile major is our fancied Stock in this sector ahead of RAYMOND and
ZODIAC. It closed today at Rs. 84. The 52 high/low levels are 85/41 respectively.
We feel post 2005 April when the Quota Regime will be dismantled globally under the MFN Agreement -
ARVIND MILLS will be the best gainer in the textiles sector. ARVIND is adding capacity to manufacture
garments on an international scale with global benchmarks. It is already the world's second largest denim
producer in the world. Plus now vertically integrated up the value chain for manufacture of garments apart
from denim garments. We feel this Stock will be Rs. 250+ in the long term.
2. GTN TEXTILES : As a corollary to the bullish trend in the Indian Textiles sector - the Indian Cotton
Yarn Sector is another growth story. We prefer this medium sized niche yarn producer with conservative
yet professional management over the yarn biggies viz NAHAR,VARDHAMAN and MARAL.
GTN closed toady at Rs. 53. The 52 week high/low levels are 60/27 respectively. We expect this Stock to
test a level of Rs. 80+ in the long term.
3. PETRONET LNG : We have fancied Oil and Gas sector over the past three years or so. Long term
investors have made huge gains on our recommended stocks in this sector - IBP and ONGC.
LNG - Liquefied Natural Gas is the fuel of the future for Power Generation, Urea and host of Other
Industries which consume large amounts of energy. It is a clean fuel. PETRONET LNG is promoted by
PSU Oil Giants in India ( IOC, GAIL etc. ) with equity participation by the LNG supplier from Qatar. This
is a joint-stock company which will Re-gasify the imported LNG at two major ports on the west coast of
India and then transport the same through out the Nation. It is laying pipeline grid covering almost all user
geographical areas in India.
We feel this is another multi bagger stock for 2005. It closed today Rs. 24. The 52 week high/low levels
are 27/14 respectively. In the long term this Stock could be Rs. 45++.
This is one Stock which we advise long term investors to add to their portfolios and keep for three years or
so. It could test Rs. 250+.
Must for a long term investors portfolio.

4. TCS : India's largest Software company was not floated on the Stock Markets. It was closely held by
TATA SONS - India's biggest industrial house TATAs. The recent IPO from TCS was oversubscribed and
well received by all sections of investors - FIs, FIIs and individual investors.
It closed today at Rs. 1081 - its new high since the IPO in Sept'04. Its low is Rs. 959. We feel long term
investors should have this Stock in their portfolios for the next couple of years.
Over the next twelve months or so we feel that the investors should get 100 % returns on this Stock.
5. LARSEN : Our old favourite, now a pure Engineering Company. Investors who missed are now
advised to buy this de-merged stock for long term. It closed today at Rs. 874. Since its debut post de-
merger of Cement Business it has tested a high of Rs. 899 and a low of Rs. 636.
As advised in our Aug'04 Update - This Engineering Giant Stock is a must for every long term investor.
From these levels of Rs. 800 to 850 we see a 100 % return on investment in the next twelve months or so.
Over the next couple of years - long term investors can expect multiple gains.
As usual we address concerns too in our update.
i) Crude Oil prices above US $ 50 pbbl are a sure cause of worry. Although this level is not sustainable but
one never knows what can happen in Niger Delta or Iraq or Venezuela or even with Yukos ? Any disaster
in these areas could propel Crude Oil to US $ 54++.
ii) India's FDI is too low as compared to China. China's FDI in 2004 is estimated at US $ 60 Billion.
India's FDI in calender 2004 would not exceed 4.5 Billion. India needs FDI to upgrade its roads, ports etc.
in the Infrastructure Sector.
iii) China Factor. We had mentioned in our Aug'04 update that China would be under pressure to de-value
its currency - Renimbi or Yuan. America is putting pressure on China to do exactly the same !
Investors to keep a keen eye on the China Situation. Chinese have recently admitted to the world media for
the first time that that their banking sector needs reforms before they open their markets as per WTO
Guidelines. Please go through our comments on the China Factor in our Aug'04 Update. What we
predicted seems to be coming true !
SEPTEMBER
The BSE SENSEX closed today i.e. 6th Sept'04 at level of 5246 up approx. 1.0 % from the 2nd Aug' 04
close of 5202. The intra month high and low for the BSE SENSEX was 5269 and 5022. This low was
tested after the price of US Light Crude tested US $ 49.40 pbbl at NYMEX on Friday - 20th Aug'04. We
had predicted in the Special August'04 Update that if US Light Crude Oil futures close above
$ 45.50 level for three consecutive days at NYMEX , then the price of Crude Oil would test $ 50 level at
NYMEX. We were just short on our prediction !
The BSE SENSEX would be range bound for the month of Sept'04. There is a major resistance at the 200
DMA i.e. 5375. The 100 DMA for the BSE SENSEX is at a level of 5125. The levels to watch are as
below :
R1 5375
S1 5200 S2 5125 S3 5040
We feel the BSE SENSEX will move between 5040 and 5375. Some pundits are predicting that the BSE
SENSEX will breach past the 200 DMA of 5375 and then from this level gain another 100 to 150 points.
We feel this level of 5375 will not be breached.
FII activity is limited on the Indian Stock Markets. FIIs poured more funds into equities in South Korea
and Taiwan in Aug'04 as compared to India. We feel this trend will continue and FIIs will not buy Indian
Equities aggressively in the near future due to inflationary pressures in the Indian Economy and lack of
equity culture on the retail level in India as compared to other Asian economies as above.
Domestic Operators have taken a fancy to Mid Cap Stocks in Textiles, Paper, Auto and Metals Sector.
These Mid Cap Stocks have liquidity problems. We do not advise Investors to put funds into Stocks which
are not liquid - float is less. In turbulent times it is not easy to get out of these Stocks. We prefer to invest
funds in frontline blue chip fundamental stocks in respective sectors.
Yes, there is enough money to be made in Mid Cap Stocks but we feel that most of these Stocks are and
can be easily manipulated by Operators and Fund Managers as the Equity is small and aggressive buying
can propel prices and vice a versa. These Stocks are risky as per our judgement. Investors can easily be
trapped in these Stocks. Stay away from these Mid Caps until there is a M & A or a Turnaround Story. We
will advise if there is/are any sure bets in these Stocks.
One issue which is bothering us is the continued pressure from the Left Front on the Govt. to slow down
the Reforms Process in India. The ruling Congress Party is supported by the Left Front which has
Communist Agenda. We feel that the Indian Stock Markets cannot be bullish unless this Left Front is 'out
of the scene'. Unfortunately this cannot happen in the present circumstances as the Govt. cannot remain in
power without the support of the Left Front.
Hence we feel that BSE SENSEX will not breach the 5375 level in the near future. Traders can have a field
day with Mid Cap Stocks!
SPECIAL AUGUST OIL UPDATE

We had mentioned in our forecast for August'04 that US Light Crude Oil may test US $ 45.45 pbbl. It
tested this level on 12th Aug'04 at NYMEX. Bull's Eye !
Three consecutive closings at NYMEX above a level of US $ 45.50 pbbl will propel the Crude Oil prices
into unchartered territories. Very serious situation if the Crude Oil prices spiral out of control and test a
level of US $ 50 pbbl as per some petroleum sector analysts at leading global brokerage houses. We also
feel this level of US $ 50 pbbl is a distinct possibility now.
Stock Markets will crash worldwide. Hence we advise global investors to completely exit from all equities
except core oil exploration companies - SHELL, MOBIL-EXXON, BP etc.
Indian investors have already been advised to only stay invested in ONGC and MRPL. We stick to our
recommendation.
Enter LARSEN and TOUBRO now at around Rs. 650 levels as we expect Indian Stock Markets to be
bearish.
YUKOS, VENEZUELA and now IRAQ factors are weighing very heavy on global Crude Oil prices which
are showing no signs of weakening on the charts.
We advise investors in India to completely exit out of all equities including Sugar and Commodity Stocks.
Stay invested only in ONGC and MRPL or other Oil Stocks viz. IOC, HPCL, BPCL etc.
Chaotic situation ahead.
AUGUST
The BSE SENSEX closed today i.e.2nd Aug'04 at a level of 5202, up 7.3 % from the July 14 closing of
4847. The prime reason for this rally was that two issues - Turnover Tax on Equities and progress of SW
Monsoon, were both addressed favourably. Former by the Indian Finance Minister and latter by the
Almighty.
Turnover Tax concessions were announced by the Hon. Finance Minister to the satisfaction of all players
in the Indian Financial Markets - FIIs, FIs, Banks, Day Jobbers, Investors and Brokers.
SW Monsoon although late by 4 weeks or so did finally shower well on the dry and parched areas of
Central and North Western India. About 25 % of India's GDP still come from Agriculture and most of the
same is heavily dependent on the SW Monsoon rains.
The BSE SENSEX highs and lows for the period 14th July - 2nd Aug'04 were 5211 and 4845 respectively.
We predict BSE SENSEX to be bullish for the month of August'04 but will face a major resistance at its
200 DMA i.e. 5340. The levels to watch are :
R1 5240 ( 100 DMA ) R2 5340

S1 5150 S2 5000 S3 5940
The Indian Stock Markets are now in sync with global markets. The Crude Oil prices and the American
Terror Alert are two factors, which loom large on the Global Stock Markets of which DJIA is the
undisputed king. The former adds inflationary pressures on the consumer retail indices worldwide and the
latter keeps investors at bay as the fear of terrorist attacks are a big negative.
These two factors will cast a doubt on the Global Stock Markets, which take cues from the American
Stock Market. Crude Oil tested an all time high US $ 43.92 pbbl at NYMSE for US Light Crude today - a
level never seen since 1983 when Crude Oil Futures trading started at NYMSE. Situation in Iraq, Problems
with YUKOS and Political turmoil in Venezuela are not getting better either. Crude Oil will remain firm -
above US $ 40 pbbl in the next six to eight weeks. Do not be surprised if US Light Crude Oil tests US $
45.45 within the next four to five weeks.
We forecast a major terrorist attack in Paris within the next four to five weeks by Islamic Militants who
may have links to UBL. There may not be a major terrorist attack in USA in the near future. But with Paris
burning - markets will crash worldwide. We hope our predictions about Paris are not correct.
One more factor which is of concern to global investors is the China Factor - IMF has long ago said in its
annual report that four of China's largest Banks - Bank of China, China Agricultural Bank etc. are
technically insolvent. The Chinese Govt. is re-capitalizing these sick Banks to keep them afloat. No one
really knows what is the actual level of NPAs of these four large Chinese Banks plus the NPAs of China's
Regional Banks.Some western economists estimate that the NPAs of the Big Four in China would exceed
US $ 600 Billion. To stem the GDP Growth in China i.e. 'slow down' the 'over heated economy' - Chinese
think tank is now seriously reviewing the possibility of devaluation of their currency - Renimbi or Yuan.
For years now, Renimbi has been pegged constant to the US $, whereas currencies in Asia have
depreciated since 1997 against the US $. JAPANESE YEN, THAI BAHT, PILLIPINO PESO,
MALAYSIAN RINGITT, PAKISTANI RUPEE and INDIAN RUPEE have all depreciated between 16 to
28 % since this period. China has not revalued or devalued its currency while all Asian Economies have
adjusted their currencies.
We predict that China will devalue its Renimbi before Nov'04. When this happens - commodity prices
worldwide will crash. Wheat, Edible Oil, Fertilizer, Iron Ore, Steel, Alumina, Aluminium etc. prices will
be depressed as China will import less of these commodities which it is currently gulping ! Investors are
advised to completely exit all commodity stocks except GOLD.
For the Indian Investors the same applies. Please exit from SESA GOA, TISCO, HINDALCO, NALCO, -
these are Stocks of Iron Ore/Steel and Aluminum Companies, which are exporting their produce in
substantial ratios of their total production. Investors can
re-enter these Stocks later as and when advised. As of now we feel that it is the time to exit from these
Indian Commodity Stocks.
Indian Investors are also strongly advised to completely exit from Sugar Stocks in the next two months or
so, if they are holding the same. Sugar prices are having a dream run and the bottom lines of Indian Sugar
Cos. are very healthy. Remember Stock Markets discount the future always. We predict that India will be
short on Sugar in the next six months or so. Govt. of India will have no option but to allow free import of
Sugar like in the late 90s. The Sugar prices will be depressed as cheap imported Sugar from Brazil,
Philippines, Thailand etc. will flood the Indian Markets. Hence we feel it is the right time to exit from
Indian Sugar Stocks - BALRAMPUR CHINI, BAJAJ HINDUSTAN, THIRU AROORAN etc.
We had mentioned that we will re-view engineering major - LARSEN & TOUBRO Ltd. ( L & T ) post de-
merger of its Cement Business.
De-Merged L & T was listed on BSE on 23rd June'04 at Rs. 636. L & T now has a face value of Rs. 2.00.
It tested a high of Rs. 807 on 22nd July'04 at BSE. We strongly recommend this Engineering Company's
Stock at Rs. 750+ levels. Must for every Indian Investor's Portfolio who has a long-term perspective.
We advise investors to re-enter ONGC and MRPL. ONGC is defensive stock. MRPL is our multi-bagger
for 2004.
JULY
The Update for the month of July'04 is delayed on account of Union Budget which was announced on 8th
July'04 and also on account of SW Monsoon which has a big impact on the Indian Economy.
The BSE SENSEX closed today (14th July'04) at a level of 4847, about 1% lower as of 4th June'04. The
Budget announced by the new Govt. has lead to a lot of confusion amongst the coalition partners. This has
resulted to a debate in the Govt. regarding the rollback of some decisions and some compromises. The
details of the Budget are available on MoF's Website. The Budget is Farm Sector Reforms Oriented but a
lot of sectors have been left out in the lurch. The Left Parties are against Market Reforms and increase in
FDI in Telecom and Insurance Sectors. The Govt. has to deal with these difficult issues.
There are possibilities of a rollback of Turnover Tax on the Equities and other Financial Instruments
Traded. Nothing is clear and hence we are going to wait till end July'04 for further predictions for the
Indian Stock Markets.
SW Monsoon is also playing hide and seek! The prediction by the Met Department was that the Monsoon
would be more than normal. The onset was good but now it seems that SW Monsoon may not be as good
as predicted. If the SW Monsoon does not progress well in the next three days further northwest then the
Stock Markets will go southwards.
Keeping in view the uncertainty of the Budget Rollbacks and Concessions plus the possible Partial Failure
of the SW Monsoon, we advise investors to completely stay away from the Equities Markets. The BSE
SENSEX may crash to 4200 levels if the SW Monsoon fails to proceed further towards Northwest in India
and the Finance Minister on Turnover Tax on Equities does not announce the concessions.
JUNE
The closing of May'04 is taken as 4th June'04 - Friday. The BSE SENSEX closed today at 4889 - down
3.5%.The BSE SENSEX closed on 14 May'04 at 5070, down a whopping 329 points. This crash was
followed by the worst ever intra-day crash in the 129-year history of BSE. The BSE SENSEX crashed by
16.6 % on Monday - 17th May'04 from a level of 5070 to 4227 (down 16.6 % intra-day) before recovering
to close at 4505. Down 565 points i.e. 11.1 %. This is the single largest daily fall in the history of BSE
since its inception 129 years back. Political uncertainty was the main reason as no political party got a
majority in the results of the General Elections. FIIs were heavy sellers of Indian Equities.
We had advised investors to completely exit the Indian Equity Markets well in time. We predicted in the
last update that there will a heavy bear hammering in Indian Equities. Exactly the same happened. The
intra-month highs and lows from 17th May'04 to 4th June'04 were 5213 and whopping 4227.
As predicted by us as one possibility - Indian National Congress Party formed the Government in New
Delhi with outside support from the Left Front (Communists). The Indian Stock Markets regained their
lost ground after the new minority Govt. was sworn in with the support of Leftists who propagate populist
policies and are anti-reform. The Prime Minister was a surprise candidate - a bureaucrat turned politician -
Dr. Manmohan Singh. Dr. Singh - a renowned Oxford educated economist who is hailed as India's
Reforms Man, has held many important positions in his life as a bureaucrat. He was the Governor of
India's Central Bank - Reserve Bank of India. He was also Indian Finance Minister in 1991 to 1995 in the
Congress Govt.
We feel that the Left Front will the call the shots in India with this minority Govt. in place in New Delhi.
The Left Front is totally against economic liberalization and globalization. We fear that fiscal deficit may
balloon up to 12 % of the Indian GDP in this fiscal if the Left Front has its way. They have a firm grip on
this Congress lead Govt. as they are against scrapping or lowering of Petroleum and Farm Sector subsidies.
The PSU Oil companies will face the music in the coming months and maybe years. No one knows when
will the Left Front withdraw support to the Congress Govt. Congress Party does not have the numbers in
the lower house of the Parliament to run the Govt. without the support of the Left Front. A very sad state
of affairs but the facts are facts.
WE ADVISE INVESTORS TO STAY AWAY FROM THE EQUITY MARKETS TILL FURTHER
ADVISE. PARK FUNDS IN LOW YIELD BUT SECURE DEBT FUNDS OF THE PRIVATE
BANKS OR FIIs.
MAY
The update is delayed on account of Indian General Election Results, which were declared on 13th
May'04.
The ruling BJP led NDA Govt. lost the people's mandate and the serving Prime Minister and his team of
Ministers resigned today i.e. 15th May'04. No one ever thought that the ruling NDA Govt. would be voted
out of power. We mentioned on the 6th May'04 forecast that the Third Front could form the Govt. in New
Delhi with the support of the Congress Party. Who knows - our prediction may come true? In politics
anything can happen.
There was no single political party with a clear mandate to form the Government in New Delhi as per the
results announced by the Election Commission. However the single largest party was the main opposition
party - The Indian National Congress. But the problem is that even the Congress Party cannot form a stable
Govt. in Delhi without the support of the Left Front, which is dominated by the Communists.
The BSE SENSEX closed today i.e. 14th May'04 (Black Friday) at a whopping low level of 5070. Down
12 % from the 2nd April'04 level of 5788. The fall in the BSE SENSEX today was 329.00 points or
6 % - highest fall in a single day since 4th April 2000, when it fell 361.48 pts. It was bloodbath, carnage,
mayhem - call what you may on BSE and NSE in India on Black Friday. The intra month highs and low
were 5979 and 5044.
The main reason of this fall on the Stock Markets was that the Indian National Congress cannot form the
Government without the support of the Left Front. The Left Front dominated by the Communists has
clearly spelt out that they will only support the Congress Party if the Profitable PSUs are not disinvested
and privatized, Disinvestment Ministry is scrapped, Labour reforms are put on hold, Subsidy to farm sector
is increased, Oil sector subsidy is not cut inspite of soaring Crude Oil etc etc. Communists are demanding
their pound of flesh after a long time ! FIIs do not like back tracking of Reforms which the NDA Govt.
was pushing very successfully. Hence Foriegn Hedge Funds and FIIs dumped Indian Stocks on this Black
Friday.
There is political instability in India as of now. This is very bad for the Indian Stock Markets. FIIs have
invested close to US $ 7.00 Billion in the Indian Equities over the last eighteen months or so.
Imagine the BSE SENSEX if even 3.50 Billion Dollars are
re-deemed by the FIIs from Indian Equities. BSE SENSEX could be anywhere between 3800 to 4800
levels depending on the FIIs Selling or Exit India Equity policy for a few months or till the next General
Elections. We do not know what stand FIId will take, as it is contingent on political scenario in India?
Unfortunately - We are not experts at predicting political events.
The Left Front may only support the Congress Party from outside and may not join the Government. Then
the Congress Party will have even more difficulty in forming a stable Govt. as it would need support from
a few more small regional political parties.
Political instability is a big big negative for the Stock Markets. We feel that even if the Congress Party is
able to muster enough support and it forms the Govt. in New Delhi - the Coalition would be on a shaky
foundation. Anytime the Congress led Coalition Govt. could be swept away from power on account of
Communists and Socialists putting roadblocks in the Reforms Process. Also these set of alliance partners
will force Congress Party to announce populist measures which are big drag on the National Treasury.
WE ADVISE INVESTORS TO COMPLETELY EXIT FROM THE EQUITY MARKETS ASAP

AND SWITCH THEIR FUNDS TO LOW YIELD DEBT MARKET. WE FEEL THE INDIAN
STOCK MARKETS ARE IN A FOR A BEAR PHASE TILL A NEW STABLE GOVT. IS IN
PLACE IN NEW DELHI.
There might be very strong bear hammering in the Indian Stock Markets in the balance two weeks of
May'04. There could be a sharp technical rally of about 150 to 300 points or so on the BSE SENSEX, but
this seems unlikely. If there is a sharp technical rally on account of Congress Party forming a Govt. - Use
this rally to exit from the Equity market completely. Do not be emotional. Just convert your
investments from Equity to Debt until further advice.
On 13th May'04 - US Light Crude tested an all time high of

US $ 41.57 pbbl in New York. This level is higher than that of October 1990 when the US Light Crude hit
US $ 41.15 pbbl in New York. Higher oil prices give rise to inflation and global markets head southwards.
Global Investors should keep a close tab on the Crude Oil prices. It is time to partially switch from Stocks
into physical Gold or Gold Futures in the Global Markets. Gold might test US $ 450 pto in the near future.
We prdeicted in Dec'03 that Crude Oil will test US $ 40 mark in the short term !
The update for May'04 will be done between 13th and 15th May'04 as we expect the results of the General
Elections on the 13th May'04. By 15th May'04 we will have some clarity who is going to form the next
Govt. in New Delhi.
If a stable Govt. is formed by the BJP led NDA Coalition then the Indian Stock Markets will be very
bullish.
If an unstable Govt. is formed by the Third Front supported by Congress then the Indian Stock Markets
will crash. In this case Investors should exit Equity Markets completely.
We will advise Investors accordingly between 13th and 15th May'04.

We regret we are delaying the May'04 forecast by two weeks.
APRIL
The closing of March is taken as 2nd April'04 (weekly closing at BSE ). The BSE SENSEX closed today
at 5788 down 1.6 % from the Feb'04 closing level of 5880. The intra month highs and lows were 5951 and
a whopping low of 5325. The Stock Markets were bearish in the second and third week of March'04 as
against our prediction of being bullish. The Markets were bearish on account of fiscal year ending profit
booking by domestic FIs and Indian Investors.
BSE SENSEX breached even the S4 level of 5600 in the month of March'04. It in fact tested a low of 5325
as mentioned above. Heavy profit booking by Indian Mutual Funds as the financial year closed on 31st
March'04. On the positive side the BSE SENSEX could only break the R1 level of 5740 as forecasted for
the month of March'04.
The BSE SENSEX showed remarkable recovery towards the end of March'04 after the GoI announced that
Indian GDP growth was 10.4 % in Q3 of the current fiscal (Oct'03 to Dec'03). In India the fiscal year is
from 1st April to 31st March. This news brought backs bulls to the Indian Stock Markets. FIIs returned
back to the ring !
We feel that BSE SENSEX will be range bound in April as the Nation goes to polls in April'04. The
election results would be available in the beginning of May'04. However we expect the under tone to be
bullish as poll analysts predict the return of the current BJP lead NDA Coalition Government. In this event
the Indian Stock Markets will be firm control of bulls and we predict that the BSE SENSEX will break the
R3 level of 6250 convincingly. FIIs will be active Buyers of Indian Equities. Even domestic FIs and other
Indian investors will be active buyers in the Stocks. Retail Investors will also join the bandwagon! It will
be a beginning of a new bull phase in the Indian Stock Markets. We will advise investors accordingly
maybe by a 'special update' close to or after the election results.
BSE SENSEX will be range bound for April'04 with a bullish undertone. We predict the BSE SENSEX to
oscillate between 5600 to 6000. However the levels to watch are:
R1 5850 R2 6000 R3 6150 R4 6250
S1 5760 S2 5680 S3 5600 S4 5540
Investors are advised to sit on the fence with an intention to enter the Equity Market if the poll results are
as per prediction of the analysts! We do not forecast political events.
A stronger Indian Rupee is the spoilsport in the medium term! The for the Indian Software Industry it is
highly export oriented. The Indian Rupee has recently appreciated to level of Rs. 43.30 to a US Dollar.
Stronger Indian Rupee hurts the revenue and hence the bottomlines of export dependent companies. Indian
Software Majors like INFOSYS, SATYAM and WIPRO will have lower profits if the Indian Rupee
appreciates further vis a vis the US Dollar. These Indian Software majors earn more than
80 % of their revenues from the North American Market and the currency is US Dollar.
A brief synopsis of a few our favorite and/or recommended Stocks.
- LARSEN: This engineering giant closed today at Rs. 526. We hope investors booked profits at Rs. 600+
as advised in Jan'04 update. This Stock tested a new 52 week high of Rs. 614 in March'04. Exit from this
Stock.
- MRPL: This Refinery Stock now under the ONGC umbrella closed today at Rs. 56. We advise investors
to stay invested in this Refinery Stock even though the margins are under pressure due to high Crude Oil
prices. This Stock will be re-rated when ONGC buys out 17 % equity of HPCL in MRPL. This is likely to
happen after the next government is in place by May'04 onwards. This Stock is a multi bagger for calendar
2004.
- TISCO: It closed today at Rs. 403. We advise investors to stay invested
- ONGC: It closed substantially higher today at Rs. 859. ONGC's maiden IPO of Rs. 100 Billion was
oversubscribed by about 6 times by the close on 13th March'04. We advise investors to stay invested in
ONGC as Crude Oil prices are firming up.
We had predicted in Dec'03 that Crude Oil could test US $ 40 pbbl levels in the near future. On 17th
March'04 - US Light Crude April futures tested a level of US $ 38.81 in New York. This is a new 13 year
high level. Highest since October 1990. We feel we will see a level of US $ 40 pbbl soon as predicted in
Dec'03.
- HPCL: It closed today at Rs. 526. This Oil Refiner and a major Retailer tested a new 52 week high of
Rs. 542 in the month of March'04. We had predicted last month that Oil and Gas sector stocks will be
bullish ! Investors are advised to buy this Stock at market prices if the BJP lead NDA Government returns
to power in the forthcoming polls. This will be first Stock to be disinvested or privatized if the said
Government returns to power in New Delhi.
- NALCO: This PSU Aluminium major closed today at a strong level of Rs. 193. Book partial profits at
Rs. 250+. Balance stays invested. It is a Rs. 450+ Stock if the said government returns to power in New
Delhi. This Stock will be privatized.
- TATA MOTORS: It closed today at Rs. 496. Book profits or exits at Rs. 600+ in the medium term.
- RELIANCE: It closed today at Rs. 566. We hope investors booked profits at Rs. 600+. Exit from this
Stock at Rs. 600+ levels if not done already as advised last month.
We are not recommending any fresh Stocks till we are close to the results of the forthcoming
General Elections in India.
MARCH
The reference date for Feb'04 closing is taken as today i.e. 5th Mar'04 as we were waiting for the outcome
of ONGC's - Rs. 100 Billion (US $ 2.22 Billion) IPO to open on BSE/NSE on 5th March'04 morning. This
is the single largest IPO in India's history and it made history of all sorts. GoI offered 10 % of ONGC's
Equity between Rs. 680 to Rs. 750 band to the various Investors both in India and Overseas. In the first
half an hour of trade ONGC's IPO worth Rs.100 Billion, was lapped up by Indian and Global Investors. By
today evening the IPO was over-subscribed by 2.7 times. The IPO is open till March 13th and analysts
predict it will be over-subscribed by 4 times. GAIL IPO was also on the offer today. It was a much smaller
IPO (US $ 300 Million) but was over-subscribed by 8 times by close of today. We salute the Indian
Disinvestment Minister!
BSE SENSEX closed today (5th March'04) at 5880 higher 4.6 % than Jan'04 closing of 5621. The intra
month high and lows were 6083 and choppy low of 5556. SENSEX was choppy in the last week of Feb'04.
As predicted BSE SENSEX was range bound between 5600 to 6000 levels. It however was very close to
the S2 level of 5550.
FIIs were nett buyers of Indian Equities in the month of Feb'04 too. ONGC and GAIL IPO's were a step in
the right direction. FIIs were active investors in the ONGC and GAIL IPO offerings. GoI's Disinvestment
Target for this Fiscal (Rs. 145.00 Billion i.e. approx. US $ 3.2 Billion) will more or less be met with the
super success of these two IPOs. Plus it is official now - GoI's Central Statistical Organization has declared
that Indian Economy will grow this Fiscal at 8.1 % on an annualized basis. This makes the Indian
Economy - The fastest growing Economy in the World!
We feel that BSE SENSEX will be bullish range for the month of March'04. FIIs will be active Buyers of
Indian Equities. Fiscal Deficit will be stemmed for the current Fiscal (ends on 31st March'04) as GoI will
fetch close to Rs. 130 Billion from it's Disinvestment Programme. Political Parties had blocked the
privatization of HPCL, NALCO, EIL, SCI etc. These Parties also blocked Disinvestment of BPCL. The
Indian Disinvestment Minister in one stroke decided to meet the Disinvestment Target of the current Fiscal
by placing ONGC's and GAIL's 10 % Equity in the Indian and Global Markets. It was a very bold move
and paid dividends. Once again we congratulate the Indian Disinvestment Minister.
FIIs were always worried about De-railment of the Disinvestment Programme and India's Fiscal Deficit.
With these two issues addressed by the Indian Finance and Disinvestment Ministers, we feel FIIs will pour
more funds into the Indian Equities in the near future. Since Jan'04 FIIs have been chasing a few Indian
Blue Chip Auto and Bank Stocks. Since the start of this Fiscal (1st April'03) FIIs have pumped in about
US $ 7.0 Billion into Indian Equities and about 1.0 Billion into Indian Debt Markets. This is an astounding
figure and shows the level of confidence FIIs have in the Indian Economy.
We did not put up any Banking Stocks on our Radar Screen this fisca inspite of the passing of the Asset
Securitization Bill by the GoI. We were pessimistic about India's PSU Banks, which have high NPAs. We
feel that FIIs will focus on India's Oil and Gas Sector and Non-Ferrous Metals Sectors in addition to the
Auto and Banking Sector Socks in the near future.
Merrill Lynch has predicted that BSE SENSEX will test 7600 level within the next 12 to 15 months We
are even more bullish than Merrill Lynch - If the current NDA Govt. is returned to power in May'04 after
the General Elections and the Indian Monsoon is above average in June-July'04, we predict BSE SENSEX
will be 8000+ in Sept'04 itself. Investors to please note that this prediction is contingent on two factors -
Return of the NDA Govt. in May'04 and a good Monsoon by July'04. Failing which BSE SENSEX might
be around 4000 levels or lower. But we somehow have a gutfeel that the former will be true! Cheers to the
Indian Stock Markets.
We are bullish for the month of March'04. However the levels to watch are :
R1 5940 R2 6150 R2 6250

S1 5840 S2 5760 S3 5680 S4 5600
Investors can make fresh purchases of recommended Equities.
- LARSEN: This engineering giant closed today at Rs. 596. We hope investors booked profits at Rs. 600+
as advised in Jan'04 update. This Stock will be re-rated after De-merger and split. We advise investors to
liquidate their holdings at these levels or Rs. 600+ levels. We will review after De-merger of Cement
Division and Relisting of the split Stock.
- MRPL: This Refinery Stock now under the ONGC umbrella closed today at Rs. 58. We repeat MRPL is
our Stock for 2004. We stick to our prediction of Rs. 200+ in calendar 2004. Investors can buy this Stock
at these levels with a stop loss of Rs. 48. MRPL is now running at 100 % capacity utilization - Thanks to
ONGC's Management.
- TISCO: It closed today at Rs. 442. Target price - Rs. 600, as revised in Dec'03 forecast.
- ONGC: It closed substantially higher today at Rs. 802 as its maiden IPO of Rs. 100 Billion was
oversubscribed by about 3 times by close of today. ONGC could touch Rs.1500+ levels or more in the next
nine months after the total De-Control of Natural Gas prices. Plus Crude Oil prices are firming up.
We had predicted in Dec'03 that Crude Oil could test US $ 40 pbbl levels in the near future. On 4th
March'04 - US Light Crude tested US $ 37.20 in NY. This level is a new one-year high for US Light Crude
prices. Political crisis in Venezuela and OPEC Production Cuts may be the two prime reasons for the
Crude Oil prices firming up. We feel we will see a level of US $ 40 pbbl soon as predicted in Dec'03.
- NALCO: This PSU Aluminium major closed today at a strong level of Rs. 180. Book partial profits at
Rs. 250+. Balance stay invested. It is a Rs. 450+ Stock. This is our old favourite stock and now with FIIs
focusing on Indian Non-Ferrous Industry - we feel there is no better Stock in this Sector although it is PSU
Stock.
- TATA MOTORS: It closed today at Rs. 534. It tested a new 52-week high of Rs. 570 during the month.
Book profits or exits at Rs. 600+ in the medium term. This Stock is FIIs darling!
- RELIANCE: It closed today at Rs. 586. We hope investors booked profits at Rs. 600+. Exit from this
Stock at Rs. 600+ levels.
We recommend fresh investments in MRPL and NALCO for investors who do not hold these two stocks
and wish to invest in the Indian Equities. Please remember we recommend Stocks with long term
perspective and outlook. Returns have been handsome for investors who have held on to our recommended
stocks over the long term.
FEBRUARY
The reference date for Jan'04 closing is taken as 3rd Feb'04 as we were waiting for some clear trend to
emerge for the BSE SENSEX. We are late by a couple of days.
BSE SENSEX closed today ( 3rd Feb'04 ) at 5621 lower 6.7% than Dec'03 closing of 6027. On 9th Jan'04
history was created once again at the BSE. The SENSEX touched an all time high of 6250 on 9th Jan'04
although it closed much lower for the day at 6120. BSE SENSEX had intra month high of 6250 and a
whopping low of 5550. SENSEX was like a yo-yo for a few days and was 'Day Jobbers' nightmare. Too
much volatility is not a good sign for the Markets.
BSE SENSEX was so volatile that it breached pass our predicted R1 at 6150 and crashed below our S4
level of 5750 during the month of Jan'04. As predicted BSE SENSEX gave a very sharp reaction after
testing/breaching 6150 levels.
FIIs were nett buyers of Indian Equities again in the month of Jan'04. The Indian Economy may grow at
around 7 % per annum in the coming year as per most of the leading economists and as per Survey of GoI.
The General Elections have been pre-poned by the current coalition Government in India. The General
Elections will be held sometime in April'04 instead of Nov'04. This important development will also have
an impact on the Indian Stock Markets in May'04 when the new Government is in place in New Delhi. A
stable Government will propel the BSE SENSEX past 6500 levels or even 6800 levels in May'04. Failing
which one could see BSE SENSEX at 4500 levels in case there is an Un-Stable Government after the
General Elections.
We feel that BSE SENSEX will be range bound for the month of Feb'04 as estimated by some leading
stock market pundits - between 5600 to 6000 levels. But we feel that BSE SENSEX may test a very crucial
level of 5450 in Feb'04. A very good level for punters or traders to enter for short term gains!
For the month of Feb'04 the levels to watch are:
R1 5780 R2 5860 R3 5940 R4 6150

S1 5600 S2 5550 S3 5450
No investment is recommended for the time being in the Indian Equities. Small Investors are advised to
stay away from the Equity Market, as volatility would hurt.
- LARSEN: This engineering giant closed today at Rs. 502. It tested a new 52 week high of Rs. 602
during the month as predicted. We hope investors booked profits at Rs. 600+.
- MRPL: This Refinery Stock now under the ONGC umbrella closed today at Rs. 52. It tested a new new
52-week high of Rs. 69 during the month. This Refinery Stock will soon be under the ONGC Umbrella
completely. ONGC wishes to pick up HPCL's 16.9 % equity in MRPL at Rs. 37.50 per Share. This awaits
GoI's approval, which now would be when the new Govt. is in place after the General Elections.We repeat
MRPL is our Stock for 2004. We stick to our prediction of Rs. 200+ in calendar 2004.
- TISCO: It closed today at Rs. 386. It tested a new 52-week high of Rs. 466 during the month. In fact this
is a eleven year high for this Steel Major. We hope investors booked profits at - Rs. 450+ levels. Target
price - Rs. 600, as revised in Dec'03 forecast.
- ONGC: It closed substantially lowers today at Rs. 692. It tested a new 52-week high of Rs. 995 during
the month. Subsidy on LPG and Kerosene has hit the quarterly results of this Oil and Gas Giant. Only a
temporary blip ! Ultimately GoI will pay ONGC the subsidy amount and in any case over the next year or
so we expect subsidy on LPG to be near zero. On Kerosene the subsidy may take another two years. On
the positive side we expect Natural Gas (NG) prices to be completely
'De-Controlled' in the next one year.Just watch ONGC touch Rs.1500+ levels or more in the next nine
months after the said de-control. Stock Markets discount the future ! If Crude stays firm the way it is -
ONGC may even cross Rs. 1800 levels in the medium term as this is a bonus post de-control of NG Prices.
We had predicted in Dec'03 that Crude Oil could test US $ 40 pbbl levels in the near future. On 5th Jan'04
Crude tested
US $ 33.95 in NY. GOLD tested US $ 428.50 pto at LME on the same day. A fifteen year high since 1988.
PLATINUM tested US $ 850 on the LME. A level not seen since 1980 - a 24 year high.
- NALCO: This PSU Aluminium major closed today at whopping low of Rs. 146. It tested a new 52-week
high of Rs. 206 during the month. Book partial profits at Rs. 250+. Balance stay invested. It is a Rs. 450+
Stock.
- TATA MOTORS: It closed today at Rs. 512. It tested a new 52-week high of Rs. 540 during the month.
Book profits or exits at Rs. 600+ in the medium term.
- RELIANCE: It closed today at Rs. 556. It tested a new 52-week high of Rs. 603 as predicted. We hope
investors booked profits at Rs. 600+.
The Indian Stock Markets will be range bound for Feb'04.

JANUARY
The reference date for Dec'03 closing is taken as today - i.e. 2nd Jan'04 as this is the weekly closing at
BSE.
BSE SENSEX created history of all sorts by closing today (2nd Jan'04) at it's highest ever level at 6027.
On 14th Feb'2000 the BSE SENSEX had tested an intra day high of 6150 but closed on 2/14/200 at 5924.
Today is a Golden Day in Indian Stock Markets as for the first time the BSE SENSEX closed above the
magical figure of 6000.
Please refer to our Special Mid-Oct'03 Update for the Indian Stock Markets. We had predicted that BSE
SENSEX was for sure heading towards that magical figure of 6150!
The BSE SENSEX closed today at 6027 up a whopping 17 % from the 1st Dec'03 level of 5161. The BSE
SENSEX was far far bullish than our predictions for the month of Dec'03. We had predicted a level of
5450 for the month of Dec'03.
FIIs were heavy buyers of Indian Equities in the month of Dec'03. This was on the back of some
encouraging figures that Indian GDP grew by 8.2 % in Q2 of 2003-04 as compared to 5.2 % QoQ for
2002-03 fiscal. The two primary reasons were Bumper Monsoon Rains in India this summer. This fuels
rural demand of FMCG Products and Consumer Durables in India. Secondly there was a substantial
growth in the Services Sector in the Indian Economy.
Shares of Automobiles, Auto Ancillaries, Banks, Cement, Steel, Power, FMCG and Pharma were in good
demand on the Indian Stock Markets in Dec'03. FII hot money chasing a few quality Stocks in the Indian
Stock Markets! Some penny and worthless stocks rise in such bull rallies. Investors should be very careful
to stay away from such stocks.
The Indian Economy may grow in excess of 6.2 % this fiscal. All most all Stock Market Pundits are saying
that BSE SENSEX will be around 6500 to 6800 levels by June'04. We feel that BSE SENSEX will be far
far ahead of 6800 levels by June - Sept'04. We will update in the due course of time.
For the month of Jan'04 the levels to watch are :

R1 6150
S1 6000 S2 5920 S3 5840 S4 5750
We are not recommending any new shares at these 6000+ levels of BSE SENSEX. Investors to book profit
all levels of BSE SENSEX above 6150 levels. We feel the BSE SENSEX will give a sharp reaction after
testing 6150 levels.
- LARSEN: This engineering giant closed today at Rs. 537- a new 52 week high. The Stock has performed
better than our expectations. We are revising the price target of this Blue Chip to
Rs. 600+. After De-merger of it's Cement Business, the company is planning to sell it's 'non-core'
engineering businesses i.e. glass containers, metal packaging etc. Book profits at around Rs 600.
- MRPL: This Refinery Stock now under the ONGC umbrella closed today at Rs. 54 - a new 52 week
high. We repeat MRPL is our Stock for 2004. We stick to our prediction of Rs. 200+ in calendar 2004.
- TISCO: It closed today at Rs. 457 - a new 52 week high. Investors to book partial profits at these - Rs.
450+ levels. Target price - Rs. 600, as revised in Dec'03 forecast.
- ONGC: It closed toady at Rs. 943 - a new 52 week high. Our prediction that ONGC is a Rs. 900 Stock
has hit a bull's eye !
ONGC has been our favourite stock for the past 15 months or so.
The GoI has decided to sell 10 % equity of ONGC in the Indian Market through an IPO Route to raise
about US $2.76 Billion. The Disinvestment and Strategic Sale of Equity in PSUs - HPCL, NALCO etc.
had hit a serious roadblock with GoI. The GoI has a target to raise cash to the tune of US $ 3.0 Billion by
end of this fiscal year i.e. by 31st March'04. The Disinvestment and Privatization Programme of GoI had
to be stalled for various reasons. The GoI is cash strapped and has a burgeoning fiscal deficit - in excess of
10% of it's annual GDP. In one stroke GoI decided to sell 10 % equity of ONGC and GAIL - another
smaller profitable PSU to raise this money and bridge the ficsal deficit as per it's Annual Plan. We salute
the Disinvestment Minister - GoI, for his bold initiative. We also congratulate the GoI for this momentous
decision.
This decision of GoI led to fresh demand of both the Stocks - ONGC and GAIL.GoI has targeted to raise
US $ 220 Million from the sale of 10 % of GAIL's Equity.
Based on the above news of a forthcoming IPO this fiscal for ONGC and the fact that we predict a bullish
BSE SENSEX in the coming six to nine months - we are revising our target price for ONGC upwards from
Rs.1200 for March'04. We predict a price of Rs.1500 to 1800 for ONGC by March'04. This could be a Rs.
2500 Stock by June-Sept'04 if Crude Oil prices do not come below US $ 30 pbbl.
We have predicted in Dec'03 that Crude Oil could test US $ 40 pbbl levels in the near future. We stick to
our predictions. Hence ONGC to be a Rs. 2500 Stock can be a reality as far we are concerned!
GOLD tested US $ 415.50 PTO in Asia on 29th Dec'03 - highest figure since Feb'96. We stick to our
predictions of GOLD testing US $ 450+ PTO in the near future.
- NALCO: This PSU Aluminium major closed today at a new 52 week high of Rs. 203. Book partial
profits at Rs. 250+. If and when the GoI decides to privatize this PSU - This stock could be Rs. 450+. It all
depends on the next Government at the seat of power in Delhi in June'04 or Dec'04. General Elections are
due in Nov'04 but could be pre-poned and held in May'04. Then the new Government will be in place by
end June'04.
- TATA MOTORS: It closed today at a new 52 week high of

Rs. 461. Target price Rs. 600+ in the medium term.
- RELIANCE: It closed today at Rs. 590 - a new 52 week high. This Stock has also performed better than
our expectations. Book profits at Rs. 600+.
The BSE SENSEX has performed much better than the other Indices in the Asian Economies in the past 12
months in 2003. BSE SENSEX was up by 73 % as compared to HANG SENG - Up 34 %, Singapore's
STRAIT TIMES - Up 29%, KOSPI - Up 29% and TAIWAN's - Up 32 %. NIKKEI 225 was also up
smartly.
The FOREX Reserves of GoI are close to US 100 Billion. This is welcome news. The GoI is addressing to
fiscal Deficit. The only other major problem, which needs to fix on the Macro Level in the Indian
Economy, is the level of - Domestic Debt. The new Finance Minister will address this too in his
unconventional style ! We sincerely hope this will happen soon.
Some corporations issue both common and preferred stock. Each provides unique
benefits to investors. Both common and preferred shareholders own a company, so
the two types vary largely by rights. Common stock confers voting and pre-emptive
rights. Preferred stock may trade voting and pre-emptive rights for dividends and a
higher claim to liquidated company assets than common stock.
In this tutorial, we will first explain shareholder rights and privileges, followed by
common and preferred stocks and their respective properties. For common stock,
we will cover these topics:
• Shareholders Rights and Privileges
• An Overview Of Common Stock
• Types Of Common Stock Dividends
For preferred stock will cover these areas:

• An Overview Of Preferred Stock
• Types Of Preferred Stock
• Features Of Preferred Stock
SHAREHOLDER RIGHTS AND PRIVILEGES

Both common and preferred shareholders have the following rights and privileges
(although preferred shareholders may have theirs restricted or applied only in
certain situations).
VOTING RIGHTS
Owners of common stock have the right to vote on company matters. For example,
they can vote on whether to allow a stock split, or whether the objective of the
company should be changed. They cannot, however, vote on whether dividends
should be distributed.
A shareholder has one vote for each share owned. To cast their votes, most
shareholders use a form of absentee ballot called a proxy.
Shareholders also elect the management of the corporation. There are two methods
of voting. The statutory method provides one vote per share for each vacant seat;
this method benefits those who hold many shares. The cumulative method allows
those who do not own many shares to have as many votes as there are seats to be
filled. Shareholders can cast all their votes for one candidate or distribute their votes
among several. For example, if five directors were to be elected, an owner of 30
shares of stock with the cumulative voting right would have 150 votes that they
could cast for one director or spread among the five directors.
PREEMPTIVE RIGHTS
Preemptive rights may give shareholders the right to keep their proportionate
ownership of the company. If the company offers a new issue of stock to the public,
shareholders are accorded the right to buy new shares to keep their percentage of
ownership the same. With preemptive rights, they can maintain voting control,
share of earnings and share of assets.
Preemptive rights let common shareholders buy new shares of stock before non-
stockholders. Thus, these rights assure the keeping of previous percentages of
ownership. They must be exercised within 45 days. If they are not, the company
may sell the stock to non-shareholders.
OTHER RIGHTS OF COMMON STOCKHOLDERS
Shareholders have the right to inspect the books and records of the company. They
also have the right to sue the management for any unauthorized activities.
They have the privilege of receiving dividends as cash, stock or property. The board
of directors, however, is allowed to forego paying dividends if it feels that doing so is
against the best interests of the corporation.
Stockholders also have the right to receive distributions of any remaining assets
should the company go out of business. However, as stated before, they are last in
line for the asset-claiming privilege. Preferred shareholders are paid before common
shareholders.
AN OVERVIEW OF COMMON STOCK

Common stock represents ownership in a corporation.
Common stock dividends may be paid in cash, stock or property. The most common
payment method is a cash dividend. The board of directors determines whether or
not to pay dividends to common shareholders. Increases or reductions most
frequently depend on how well the company is performing. In a weak economy the
company may even suspend dividends until its balance sheet improves.
Should the corporation issuing the stock go bankrupt and have to sell its assets,
common stockholders will receive the assets, but only after all other creditors,
bondholders and preferred stockholders receive them first.
TYPES OF COMMON STOCK DIVIDENDS
Common stock pays dividends in three forms: cash, stock and property. Let's take a
look at each one.
Cash dividends are those that are paid out in cash form. They are treated as
investment income and are taxable in the year they are paid.
Stock dividends are dividends paid out in the form of additional stock shares in the
corporation, or shares of a subsidiary corporation. They are usually issued in
proportion to shares owned. For example, for every 100 shares of stock owned, a 4
percent stock dividend will yield four extra shares. When the company distributes
these new shares to investors, the price of each share decreases to account for the
new shares. This is a recalculation of cost basis. It means that the stock dividends
will not be taxed when distributed.
Stock dividends benefit the company by conserving its cash and they benefit the
shareholder by increasing his/her number of shares of the company.
Property dividends are paid with assets owned by the issuing company. Property
dividends are usually paid in the form of products or services that the corporation
produces. Often the corporation, when paying property dividends, will use securities
of other companies owned by the issuer.
This concludes our look at common stock. Read below to learn about preferred stock
ownership.
PREFERRED STOCK
Preferred stock also represents ownership in a corporation.
Preferred stock promises guaranteed dividends and a claim on a company's assets
that is above that of common shareholders. The tradeoff may be that preferred
shareholders cannot vote or share other specified rights. Preferred stock pays a
fixed dividend that is specified and set down in advance. Unless the stock is retired
or called back, it will continue paying dividends forever.
Preferred stock is usually issued with a $100 par (face) value. The dividend
payments are a fixed percentage of the par. For example, if the par value of a stock
share were $100 with a 6 percent annual dividend rate, the annual dividend would
be $6 on that share. In recent years, some companies have also begun issuing
preferred shares with variable rates tied to interest rates.
The par value is the most that the shareholder will receive if the company declares
bankruptcy. Preferred stock is generally issued at its par value.
TYPES OF PREFERRED STOCK
Preferred stock further divides into four types: cumulative, non-cumulative,

participating and convertible.
Cumulative preferred stock accords its owner a continuous claim to his or her
dividends. Any unpaid dividends accumulate until the corporation resumes paying
them. Since the cumulative preferred owner is entitled to all past and present
dividends, he or she is paid before common shareholders once payment is resumed.
If the board of directors suspends dividends, the shareholder still has a claim on
them.
Non-cumulative (straight) preferred is the opposite of cumulative preferred: it
doesn't confer a steady claim on dividends in the event of a dividend suspension.
Shareholders of this type may not be paid any missed dividends prior to payments
being made to the common shareholders.
Participating preferred shareholders receive extra dividends over their nominal
ones when the company makes an extra profit and the board of directors declares
dividends.
Convertible preferred stock may be converted to a certain number of shares of common stock.
Preferred investors who want the opportunity to share in the appreciation of the company's common
stock may find this option attractive.
Preferred stock has features other than fixed, steady dividends. The next section will explain these
features.
FEATURES OF PREFERRED STOCK
LIMITED VOTING RIGHTS

Preferred stockholders may be limited to voting only in these situations:
• When the company wants to merge with another
• When the company wants to liquidate a large portion of its assets
• When the company wants to issue new bonds or preferred stock
CALL PROVISIONS
Preferred stock may carry a call provision. This means that the issuing company can
repurchase the stock from the shareholders. Though preferred stock is usually called
at par value, some call provisions actually tack on a premium.
Because of the steady dividends accorded to preferred shareholders, call provisions
are not usually advantageous to them, despite any premiums. However, a
corporation may use calls as a way to eliminate dividends, thus increasing earnings
for common shareholders.
2003Reliance Industries Limited2Forward Looking StatementsThis presentation contains

forward-looking statements which may be identified by their use of words like “plans,”
“expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “estimates” or other
words of similar meaning. All statements that address expectations or projections about the
future, including, but not limited to, statements about the strategy for growth, product
development, market position, expenditures, and financial results, are forward-looking
statements. Forward-looking statements are based on certain assumption andexpectations of
future events. The Reliance group companies referred to in this presentation cannot
guarantee that these assumption and expectations are accurate or will be realised. The
actual results, performance or achievements could thus differ materially from those
projected in any such forward-looking statements. These companies assume no
responsibility to publicly amend, modify or revise anyforward looking statements, on the
basis of any subsequentdevelopments, information or events, or otherwise.
--------------------------------------------------------------------------------
Page 2
3ContentsUpstream & Downstream - PetroleumUpstream & Downstream -
PetroleumBackgroundBackgroundPowerPowerPetrochemicalsPetrochemicalsInfocommInf
ocommSummarySummaryBackgroundBackground
--------------------------------------------------------------------------------
Page 3
5Reliance ranks potentially amongst the world’s top 200companies in terms of net
profitsIndia’s only fully integrated energy company - Exploration & Production (E&P),
Refining & Marketing (R&M), petrochemicals, and textiles - together with interests in
Power and InfocommUS$ bnRankSales16.81Exports2.51Cash Flow2.11Net Profit1.01Net
Worth7.91Assets17.11Market Cap15.51Reliance - India’s No. 1 Group6Reliance makes
the largest contribution to the Indian economy, as a single business houseKey Contribution
to Indian EconomyIndiaReliance(US$ billion)(US$ billion)%GDP /Gross
Turnover471.013.73%Indirect Taxes30.02.89% Exports51.02.45%BSE Market
Cap149.09.87%Weightage in BSE Sensex15%Weightage in MSCI India15%
--------------------------------------------------------------------------------
Page 4
7RIL has recorded 14 consecutive years of consistent profitgrowth, through business
cyclesConsistent Track Record of Long Term GrowthCAGR %Since 197710 Years5
yearsTurnover30%32%37%Net Profit32%29%20%Cash profit33%29%26%Total
Assets34%26%21%Market Cap37%24%19%EPS19%16%11%8Global Ranking in Major
BusinessesGlobal RankPolyester (fibre and yarn)2Paraxylene3PTA5PP7Refining4thlargest
at a single locationReliance – amongst top 10 global players in all its businesses
--------------------------------------------------------------------------------
Page 5
9Leading Market Shares in
India69511006790171002310020406080100120MEGPTAPXPOY/PSFPolymer%
Domestic MarketRILNearest CompetitorRIL enjoys leading market shares in the country,
in all its major businesses10Reliance’s manufacturing facilities are all based on
contemporary leading technologies, with world-scale capacitiesCapacities and
TechnologiesProductTechnologyCapacity (000 MT) RefineryUOP / ABB / Foxboro /
Rosemount 31,000 PolyesterDuPont, USA804ParaxyleneUOP, USA1, 646PTAICI, UK1,
286LABUOP, USA100PolyethyleneNovacor Chemicals, Canada435PVCGeon Company,
USA300MEGABB Lummus Crest, Netherlands360Ethylene CrackerStone & Webster,
USA750PolypropyleneJohn Brown, UK (Unipol process)1,050PETDuPont, USA300
--------------------------------------------------------------------------------
Page 6
11Corporate PhilosophyWorld scale, and world classState-of-the-art
technologiesIntegrationGlobal competitivenessLeadership in chosen areas of
businessSuperior Project ExecutionFinancial ConservatismHighest standards for Health,
Safety and EnvironmentConsistent overall shareholder value enhancementReliance
benchmarks itself with global best practices in allaspects of its operations12Reliance -
India’s Largest ExporterReliance is by far the largest exporter in India with exports ofUS$
2.4 billionRIL exports its petroleum and petrochemicals products to over 100
countriesExports still account for only 18% of Reliance’s turnoverNew export offices
opened in 18 countriesReliance’s record exports demonstrate the international quality of its
products, and its ability to compete with global leadersIndiaReliance%Total Exports51
2.45%(US$ billion)
--------------------------------------------------------------------------------
Page 7
13Reliance’s Financial StrengthReliance’s total assets have grown from US$ 1.9 billion
toUS$ 13.42 billion over the last 10 yearsThis has been achieved with the debt:equity ratio
being brought down down from 0.84 to 0.6 in the same period, indicatingfinancial
conservatism of a high degreeReliance has consistently maintained its ‘AAA’ credit
ratings,indicating the company’s financial strength and flexibilityReliance’s cash flows at
current levels for less than 2 years are adequate to extinguish its entire net debtThe scale of
Reliance’s operations enable the company to take upmulti-billion dollar projects on the
strength of its own cash flowsPetroleum BusinessPetroleum Business
--------------------------------------------------------------------------------
Page 8
15Exploration & ProductionPetroleum BusinessGas Marketing & TransmissionRefining &
Marketing16Reliance’s E&P initiatives will add significantly to profitability, while
enhancing economic and energy security for the countryE & P – Opportunities in
IndiaPetroleum Demand Supply Scenario in India:– Deficit of 83 million tonnes of crude
oil per year– Deficit of 30 billion cubic metres of gas per annumGas Demand Projection: –
Current domestic demand is 151 MMSCMD– Demand expected to touch 231 MMSCMD
in next 5 yearsReliance’s investments in E&P will: – Contribute to higher energy security
for the country– Enhance integration levels for RelianceOil imports the single largest
import item –US$ 17 billion, in 2002-03Current gas supply is just 65 MMSCMDWindow
of opportunity for Reliance
--------------------------------------------------------------------------------
Page 9
17Reliance’s Upstream AssetsReliance holds 30% interest in the producing Panna, Mukta
and Tapti oil and gas fields – current revenues are US$ 170 million per yearReliance has
acquired 32 blocks in India in the last few years –90% interest in 25 blocks, and 40% -
100% interest in remaining blocks– 2 blocks in pre-NELP round of bidding– 12 blocks in
NELP-1– 4 blocks in NELP-2– 9 blocks in recent NELP-3– 5 acquired blocksReliance also
has two Coal Bed Methane blocks with an area ofabout 1000 sq.km. – preparatory work for
drilling is on17% interest in 1 onshore block in Yemen – oil already struckRIL is the
largest private sector E&P operator in India, with total acreage of over 288,000 square
kilometers18Reliance’s Exploration PortfolioExploration Portfolio (>288000 Sq.km.)Pre-
NELP Blocks2NELP I Blocks12NELP II Blocks4NELP III Blocks9Acquired
Blocks5Total32Gas Discovery -KG DWN 98/3 (D6)
--------------------------------------------------------------------------------
Page 10
19World Scale Gas Discovery – KG-D6The largest gas discovery in the world in 2002 -
India’s biggest gas discovery in nearly three decadesGas in-place : 14 Trillion Cubic Feet -
Capable of producing 60 MMSCMD - The current supply of natural gas to consumers in
India is only 65 MMSCMDFurther exploration has the potential to significantly increase
the gas in-place in KG-D6 Block - about 80% of the block still to be exploredExploration
and delineation programme being firmed up -drilling campaign to commence in December
2003First gas planned in 24-30 months from Zero Date, based on timely receipt of various
government and other approvalsReliance will alter the oil and gas industry landscape in
India20Significant Contribution to Reliance’s Future Revenue StreamThis gas discovery
will lead to an incremental revenues ofnearly US$ 2 billion for RelianceEBITDA margins
in this business are generally in the range of 40%-50%Estimated pay-back period of 3-4
years conservativelyRevenues from Oil & Gas business will enhance, and provide stability
to, RIL’s existing earnings stream from refining andpetrochemicals businessesThe
contribution of the Oil & Gas business to RIL’s revenues andprofits will grow significantly
in the future
--------------------------------------------------------------------------------
Page 11
21Attractive Policy FrameworkNo customs duty on equipment imported for the project
-resulting in lower capital costsComplete marketing rights - enabling Reliance to optimise
realisations from the domestic marketsUS$ denominated prices for oil and gas100% tax
write-offs on expenditure/depreciation - providing a tax shield on income from existing
operations Complete 7 year corporate tax exemptionSignificant fiscal and other incentives
will enhance RIL’s overall returns from the E&P business22E&P – Key Associates &
Human ResourcesDevelopment concept being finalized in collaboration with
theinternationally reputed consultants, Aker Kvaerner Reservoir development plan under
preparation with assistance fromDeGolyer & MacNaughton of the US Environmental
Impact Assessment studies initiated for offshore &onshore portions through NIO &
NEERIReliance’s Oil & Gas division has a committed world class Human Resource
poolThis division is keeping pace with the growing needs – organization has grown by
more than 10 times to about 300 over last three yearsEach person has access to world class
technology and processesA combined experience of about 2000 man-years working in top
drive to realize the shared dream
--------------------------------------------------------------------------------
Page 12
23Gas Marketing & TransmissionMarket & Transmission24KG-D6 - Projected Gas
Demand2521302026101143362518139030-4670-8020-
30050100150200250300CurrentConsumption2001Subst.Growth 2001-10Total demandby
2010Tamil NaduGujaratUttar PradeshMaha- rashtraAndhraPradeshOthers20-25Gas
demand projection by segment and by key states (1) Gas currently being used as feedstock
as petrochemicals also considered (2) Includes 4 MMSCM of replacement and 15
MMSCMD of additional demand growth (3) Based on Cris Infic estimates 27 and 17.3
MMSCM/D Power IndustryFertilizer Citygas75120-14580-105200-250135 (60%)30-
40100 -11050-802521302026101143362518139030-4670-8020-
30050100150200250300CurrentConsumption2001Subst.Growth 2001-10Total demandby
2010Tamil NaduGujaratUttar PradeshMaha- rashtraAndhraPradeshOthers20-25Gas
demand projection by segment and by key states(1) Gas currently being used as feedstock
as petrochemicals also considered(2) Includes 4 MMSCM of replacement and 15
MMSCMD of additional demand growth(3) Based on Cris Infic estimates 27 and 17.3
MMSCM/D Power IndustryFertilizer Citygas75120-14580-105200-250135 (60%)30-
40100 -11050-80(1) Gas currently being used as feedstock as petrochemicals also
considered(2) Includes 4 MMSCM of replacement and 15 MMSCMD of additional demand
growth(3) Based on Cris Infic estimates 27 and 17.3 MMSCM/DPower IndustryFertilizer
Citygas75120-14580-105200-250135 (60%)30-40100 -11050-80India is a hugely gas
deficit country
--------------------------------------------------------------------------------
Page 13
25Superior Economics of Domestic Gas over LNGFate of LNG projects under
development in India now uncertainNo country imports LNG if the market can be served
bydomestic gas - major LNG importers are only countries likeJapan, South Korea &
FrancePrivate producers in India are presently charging gas pricescapped at $3.11/mmbtu
for gas from old gas fields, and$4.75/mmbtu for some of the new gas fields With
deregulation in coming years, gas prices are likely to reach an equilibrium based on the
supply-demand economicsGas from Reliance’s finds in India will be far more competitive
than imported LNG26Gas Pipeline – OptionsB H U T A NP A K I S T A
NTHIMPUKARNATAKAANDHRA PRADESHTAMIL NADUKERALAMADHYA
PRADESHORISSAGOASRI
LANKAMAHARASHTRAGUJARATBIHARTrivandrumCOCHINKAKINADAVISHAK
HAPATNAMChandrabhagaKOLHAPURMANGALOREVIJAYAWADAGopalpurPuriPA
RADIPBANGLADESHDiu
HeadJakhauOkhaPorbandarVeravalKANDLABANGALOREJAMNAGARKARACHIPon
dicherryCHENNAI PANAJI GANDHI NAGAR MUMBAI CALCUTTA PATNA
BHUBANESHWAR BHOPAL WESTBENGAL
KG20MB04SR02KG19KK08MND10GK01MB05NEC25GK
OSJ3SR01GS1D5D7KGD4KGD6D1D2D5D6D7D8AHMEDABAD INDORE CUTTACK
KAYANKUMLAM HYDERABAD CHHATISGARH RAIPUR JABALPUR RAICHUR
NAGPUR TUTICORINCHAND
RAPURBELLARYURANENNOREPUNEJHARKHANDRANCHIDABHOLRAJASTHA
NUTTAR PRADESHTROMBAYDAHANUKGON1(HBJ
INTERCONNECT)SURATHKALGK OS5GK OSJ1GK ON90/2CB ON1PANNA &
MUKTATAPTIGUNA (VIJAIPUR)HAZIRA (HBJ INTERCONNECT)WARDHAKG5
6A&BD9KG18RIL is evaluating possible pipeline routes for bringing gas to the customers
-statutory clearances also being pursued simultaneously
--------------------------------------------------------------------------------
Page 14
27Exploration & ProductionPetroleum BusinessRefining & MarketingGas Marketing &
Transmission28Petroleum Products - Strong Demand
GrowthLPGMSNAPHTHAATFSKOHSDAll Products1990-
200010.3%5.2%12.2%2.8%3.5%6.4%5.8%1980-
200014.8%7.0%8.0%3.4%5.3%6.9%5.9%1970-
200012.7%4.8%8.7%3.9%4.4%8.1%5.8%India has consistently witnessed a healthy
CARG of nearly 6% in demand growth for petroleum productsCompounded Annual Rate
of Growth - Petroleum Products in India
--------------------------------------------------------------------------------
Page 15
29Reliance’s refinery is India’s only private sector refinery with a domestic market share of
25% High Complexity World Class RefineryReliance operates the world’s largest
grassroots refinery,processing 31 million tonnes per annum of crude – increasing to 33
million tpa by 200430%+ capital cost per tonne advantage over its global peersOne of the
most complex refineries - Nelson complexity index of 13.7 (including petrochemicals) –
contributing to higher gross refining marginsProcessing heavy/ light crude in 70:30 mix
leading tooptimisation of crude cost by $ 1–2 /bbl - capability to produce higher value
products from lower cost, heavier grade crude30Lowest Capital Cost Refinery in
AsiaSignificant savings arising from completion of Asia’s most complex refinery at 30-
50% lower per tonne capital costCompanyCommissioningCapacityCapital Cost per
UnitNelsonyear(Mbpsd)Cost capacityIndex($ million)($ per bpd)MRPL,
India19966067011.26.5Shell, Malaysia19961251,97815.84.14Star Petro,
Malaysia19961501,82012.1-IOC, Panipat, India19981209868.26.31RIL - only
Refinery19995403,2095.99.93- with petrochemicals 199913.77
--------------------------------------------------------------------------------
Page 16
31Reliance has dedicated access to India’s largest port,comprehensive logistics
infrastructure and captive power facilitiesComprehensive Logistics InfrastructureRefinery
site in close proximity to crude oil supply sources in Middle-EastDedicated all weather port
capable of handling VLCCs – resulting in optimisation of crude delivery costIntegrated
product evacuation infrastructure through rail, road,sea, and pipelines enables cost effective
and timely evacuationIntegrated captive power facilities32Reliance – Superior Refining
MarginsHigh complexity, superior product slate, ability to optimise crude mix ensure
superior GRMs for RIL under all scenarios(US$/bbl)Last 3 years
AverageReliance5.2Singapore2.4Delta2.8Rotterdam1.1Delta4.1NY Harbor1.8Delta3.4
--------------------------------------------------------------------------------
Page 17
33Industry-wide Capacity UtilisationReliance’s refinery is consistently operating at
around115% capacity utilisation levels86%86%89%114%60%75%90%105%120%Asia
PacificEuropeN AmericaReliance34MarketingRetail Marketing
--------------------------------------------------------------------------------
Page 18
35Future Growth OpportunitiesReliance will capture marketing margins through its entry
into retail marketing of transportation fuelsRIL has approvals for setting up over 5,800
retail outlets – work underway to set up 1,500 retail outlets in Phase 1 by April 2004State-
of-the-art retail network with higher throughput per outlet compared to existing industry
averagesMarketing agreement with government oil companies IOC, HPCL, and BPCL for
offtake upto March 2004 – separate agreement with IOC till 2008Reliance’s entry into
marketing will enable it to achievedownstream integration, and enhance overall return on
capital36Retail Business EnvironmentIndustry
RelianceIndustryPositionPlans*PositionTodayNo. of ROs18,5002,30020,800Market Size
(mmtpa)296.430Average Sales (mt/RO)130230120Reliance targets: 22% market share with
11% of total ROs selling nearly double the industry averageAt double the Industry average,
we have a compelling value proposition* GOI approvals for 5,849 ROs
--------------------------------------------------------------------------------
Page 19
37R & M – Key Business StrategyOutstanding experience to the customer thro’ use
ofinternationally proven technologies from Flying J, Leading HSD retailer in USUnique
value proposition for each customer segmentThrust on cost-effective retail network of high
qualityMinimum logistics cost to gain competitive edgeLeveraging of IT/Infocomm
infrastructure as a key differentiator in RO operationsHighest customer value at lowest total
cost38R & M – Supply Chain ManagementA state of the art system now under
implementation to facilitatean efficient management of supply chain from crude to retail
outletThis system will ensure• Prevention of dry out at any retail outlet• Optimal cost of
primary & secondary distribution• Optimal inventory levels at refinery, terminals & retail
outlets• Efficient management & control of distribution fleetLeading edge Supply Chain
Management System to back up retail sales
--------------------------------------------------------------------------------
Page 20
39R & M – IT Integrated RO OperationStock information available realtime at terminal /
HOOnline price changes from central command centreOnline performance evaluation for
each ROMultiple options for payments at RO- bank credit / debit cards, Reliance fleet /
loyalty cards etc. High band width communication network offers sub-second response for
identification/payment authorization Connectivity for bank ATMs even in remote ROsState
of the art communication facilities for enhanced fleet efficiency including vehicle
trackingReliance will transform the total customer experience with thelaunch of its retail
outlets for marketing transportation fuelsPetrochemicalsPetrochemicals
--------------------------------------------------------------------------------
Page 21
41Low Per Capita Consumption in IndiaIndia - amongst the largest and fastest growing
petrochemicals markets in the world – consumption expected to treble every
decadeIndiaChinaWorldPolyesterPer Capita Consumption (kg) 1.56.83.3Absolute
Consumption (million tonnes) 1.57.219.4PolymersPer Capita Consumption
(kg)3.81820Absolute Consumption (million tonnes)3.820120Strong double digit demand
growth - India to be the 3rd largest polymer market in the world by 2010Strong growth
potential and prospects for petrochemicals in the Indian market – characterised by low per
capita consumption42Indian polyester consumption - grown at CARG of 15% over the last
decade32234838650957762883910971224135713361467050010001500200019911992199
3199419951996199719981999200020012002Indian Polyester consumption (Figures in
‘000 tonnes)Polyester – Consistent Growth in Demand
--------------------------------------------------------------------------------
Page 22
43India’s polymers consumption has grown at CARG of 14%over the last 10
years664800945104512781479163619082209233928403120010002000300040001991199
21993199419951996199719981999200020012002Indian Polymers (PE,PP,PVC)
consumption (Figures in ‘000 tonnes)Polymers - Sustained Demand Growth 44Slowdown
in Global Ethylene Capacity AdditionGrowth in Ethylene capacity saw significant
slowdown in 2002Ethylene capacity (MTPA)ChangeJan-03Jan-02MTPA%Asia
Pacific28.327.11.24.4Eastern Europe /FSU7.47.5-0.1-1.3Middle East /
Africa10.09.40.66.2North America35.835.40.41.2South America4.34.30.00.0Western
Europe23.523.20.31.4Total Capacity109.4107.02.42.2Source: Oil & Gas Journal, March
31, 2003Only 2.4 mn tonnes of net additions compared to 6.2 mn tonnes in2001……
lowest net addition of capacity since 1993…
--------------------------------------------------------------------------------
Page 23
45Operating rates expected to show steady improvement from current trough……which are
likely to lead to significant improvement in marginsSource:Chem Systems POPS
2003,CMAI Vinyls 2002Global Operating rates (%)8 0 %8 5 %9 0 %9 5 %2 0 0 02 0 0 12
0 0 22 0 0 32 0 0 42 0 0 5PPPVCLDPELinear PE46Deficits in Polymers will begin to
emerge by 2004-05Reliance to benefit from these opportunities……Net Trade : All
Polymers (Kt)-384-550-440147266515367-540-44-800-600-400-
20002004006001997/981998/991999/002000/012001/022002/03* 2003/04* 2004/05*
2005/06*Source: CPMA
--------------------------------------------------------------------------------
Page 24
47Reliance – India’s Leading Petrochemicals PlayerHazira Cracker – @ 750,000 tonnes
per annum is one of the largest multi-feed crackers in Asia CapacityPolyesters
(PFY/PSF/PET) 0.9 MMTPAFibre intermediates (PX/PTA/MEG) 3.0 MMTPAPolymers
(PE/PP/PVC) 2.6 MMTPACapacity utilisation rates 100% plus–achieved recordproduction
of nearly 12 million tonnes in FY 2002-03Reliance leads in industry consolidation –
acquired polyester capacities of over 250,000 tonnes in the last three yearsRIL’s global
scale and competitiveness have contributed to itsleadership in the petrochemicals
industry48Emphasis on Higher Margin Speciality GradesSpeciality as % Premium over of
Total Volume CommodityFY-03(US$/MT)(%)POY32%65 - 450 3% - 28%PSF60%20 -
7001% - 50% PE14%10 - 453% - 16%PP22%15 - 1001% - 7%PVC14%405%Reliance is
consistently increasing its emphasis on premiumspeciality grades to further enhance
margins
--------------------------------------------------------------------------------
Page 25
49RIL – New Investment in PetrochemicalsReliance has planned over 2 million tonnes per
annum ofadditional capacities over the next three to five years (capacity in million tonnes)
IncreaseCurrentFuture (%)PX / OX1.65
2.2536%PP1.001.4040%MEG0.360.5039%PTA1.281.7839%PSF0.300.3413%PET0.080.3
0275%Styrene-0.55-Reliance’s investment plans in petrochemicals are aimed atcapturing
the benefits of rapidly growing domestic markets50Improving Profitability in a scenario of
Declining Import TariffsReliance anticipated the sharp reduction in import tariffs, and
implemented appropriate strategies to counter the same:Reliance has consistently generated
increased profits despite the sharp reduction in import tariffs over the past decade1993
1994 199519962001 2002 2003Peak Tariff (%)110856550403530Peak Tariff
(%)110856545303025Reliance ProductsNet Profit (US$ Mn) 102184338380567665864
--------------------------------------------------------------------------------
Page 26
51No Significant Impact of Tariff Reduction in FutureFuture reduction in import tariffs
will be minimal and will have no impact on Reliance’s
earnings20022003200420052006Peak Tariff (%) 3530252020Peak Tariff
(%)3025202020(Reliance Products)Import duties on all petrochemicals already at WTO
bound rates, except for polymersPolymer tariffs will decrease by only 5% in the next fiscal
– no significant impact on profitability 52Acquisition of IPCLReliance has acquired IPCL,
India’s 19th largest company in terms of sales and 2nd largest petrochemicals
companyManagement control acquired effective June 2002Reliance’s petrochemicals
production of 11.8 million tpa has increased by over 4.4 million tpa with this acquisition
Acquisition in line with global trends of industry consolidation to achieve enhanced size,
scale, integration and financial flexibilityReliance’s acquisition of IPCL is viewed as being
among the mostsuccessful examples of privatisation in the Indian context
--------------------------------------------------------------------------------
Page 27
53Unique Competitive AdvantageTwo naphtha crackers at Hazira & Baroda and two gas
crackers at Gandhar & Nagothane - feedstock and product mix flexibilityPotential for
greater feedstock integration in future - Gas from Reliance’s E&P venture can be utilised as
feedstock at IPCLSharing of infrastructure and manufacturing facilities to provide
significant logistics and distribution advantagesSix separate manufacturing sites in Western
India - an area accounting for over 60% of downstream user industryShared R&D efforts to
significantly improve productdevelopment and processingRIL+IPCL : A leading player for
the full range of petrochemicals54Benefits in IPCL – Post AcquisitionFeedstock integration
– Replacement of IOC and importednaphtha by Reliance naphtha - EDC from IPCL to
RelianceFinancing costs reduced 22% by refinancing and prepayment of high cost
loansSignificant overall increase of 18% in production at IPCL post acquisition – all
complexes operated at more than 100%Optimisation of manufacturing operations using
acomprehensive linear programming model has resulted insignificant savingsFurther
integration of IPCL operations with Reliance iscontinuingIntegration process aimed at
maximising synergies betweenReliance and IPCL has shown great success
--------------------------------------------------------------------------------
Page 28
PowerPower56Electricity Act – A Major Milestone The Electricity Act is the single most
important piece oflegislation for the power sector, repealing 3 Acts, one of whichwas
nearly 100 years oldConsumers will have freedom of choice of suppliers, leading to
competitive tariffs Improvement in quality and reliability of power supplyElectricity to
soon be a service like any other, traded onbenchmarks of customer satisfactionIncreased
competition to raise customer care to international standardsGreater role for automation and
technologyIndian consumers will witness benefits of free competition for the first time in
the power sector
--------------------------------------------------------------------------------
Page 29
57Unique Growth Opportunity – Lowest Levels of Per Capita Power Consumption in
IndiaInstalled power generation capacity in India is 105,000 MW By comparison, China
has 320,000 MW – more than 3 timesAnnual addition to generation capacity in India 4,000
MW China has added 20,000 MW per year over past 5 yearsIndia’s per capita power
consumption is 400 Kwh - less than 1/6thof global level, and below even half the Asian
average100,000 MW of additional power generation capacity needed to bridge existing
deficit, and cater to future demand over next decadeThere is a unique growth opportunity
for BSES, benefitting from power sector reforms58Electricity Act – Salient
FeaturesUnbundling of SEBs (State Electricity Boards) into functional entities of
generation, transmission and distribution has been made mandatoryPower generation is
delicensed – Removal of cumbersome approval process– A generating company may
supply electricity to anylicensee Increase in competition in the transmission sector by way
of private sector participation – to improve country’s woefully inadequate transmission
capacity
--------------------------------------------------------------------------------
Page 30
59Electricity Act – Salient FeaturesDistribution sector freed up by allowing:– open access
on existing infrastructure– creation of new networks– privatisation of SEBs Approval for
distribution licenses based on new network would be automatic – however, the new
licensee shall be subject to Universal Service Obligation (USO)The Regulatory
Commission to ensure that there is nodistortion of competition and predatory pricing
Stringent anti-theft provisions to act as deterrent against theft and pilferage – to help in
curbing losses in the sector60BSES – Acquisition by Reliance GroupThe new name
‘Reliance Energy’ will directly communicateassociation with Reliance Group, and the
larger dimension of BSES’ future plansPursuant to the second open offer, BSES became
part of the Reliance Group on January 18, 2003Reliance Group now has 58.2% equity stake
in BSES – valued at over US$ 600 million at current market priceOn mark -to-market
basis, Reliance’s investments in BSES have appreciated by US $ 170 millionAfter
acquisition by Reliance, BSES stock price has appreciated by nearly 50% in just under six
months – 26% outperformancecompared to BSE SensexThe only utility company in Sensex
– has a weightage of 2%
--------------------------------------------------------------------------------
Page 31
61BSES – Key Background InformationBSES is the leading private sector power utility
company in the countryBSES’ total customer base is over 5 million covering
substantialareas of Mumbai, Delhi and OrissaDistribution area spans about 1.24 lakh
sq.kms covering an estimated population of 45 million15,600 million units of electricity
billed to industrial, commercial and residential consumersBSES’ total distribution capacity
is nearly 5,000 MWBSES’ aggregate power generation capacity is 885 MW62Future
Growth OpportunitiesDevelopment of a comprehensive blue print for pursuingfuture
growth in deregulated environment:– Expansion of customer base into new areas–
Evaluation of plans for gas based power generation plant– Development of business plans
and capabilities inTransmission and Power Trading businesses Transforming the
organisation – people and cultureBSES’ growth strategy for the future is focused on
integration –“FROM WELL HEAD – TO WALL SOCKET”
--------------------------------------------------------------------------------
Page 32
Reliance InfocommReliance Infocomm64Reliance Infocomm – Achievements3.8 mn
subscribers nationwideThird largest wireless operator in India within 4 months of
launchHighest number of Postpaid subscribers50% of net adds in Jul and 35% in AugAt 0.8
cents a minute, broke the Long Distance price barrier600 MoUs/Month – twice GSM
averageLaunched India’s first ever Wireless Internet Portal, R -World, averaging over 25
million hits a day75,000 subs accessing the internet @ 60-70 kbps through PCs using
Reliance mobile phones
--------------------------------------------------------------------------------
Page 33
65Creating competitive and superior customer valuePan-India coverage for mobile and
broadband servicesNext generation technology–CDMA 2000 1X, DWDM, Gigabit Metro
EthernetLarge scale and scope - enhanced capital productivityResponsive delivery of
service–Comprehensive and integrated OSS, BSS, DSSNetworked multi-channel Pan-India
touch points for customer care and service experienceIntegrated strategy across an extended
infocomm value chainInfocomm operations across the value chainContent
ProviderApplication DeveloperHosting & StorageNetwork OperatorService ProviderCPE
ProviderCustomerTraditional telecom value chainDigital Marketplace66Marketing
Strategy230 Webworlds (Retail broadband centres)7,100 Point of Sales Outlets1,000 Direct
Sales Agents4,800 Independent Sales Agents195 Distributors covering 50,000
merchantsEnterprise Sales Team(300 + 1,000 FoS)4,800 Customer Care
executivesReliance has broken the tariff barrier, and made telecom services affordable for
the massesMulti-channel pan –India distribution and customer-care networkInnovative
pricing to drive penetration
--------------------------------------------------------------------------------
Page 34
67‘Reliance Everywhere’ – ‘R’ Vision For Data ServicesPartner with a range of apps. /
content providers to develop a suite of data services . .Mobile Consumer and
EnterpriseGames, News, Music, Videos, MMS, Web access, Location- based services,
Mobile payments, Mobile Office, Workforce managementEnterprise BroadbandWireless
POS, Video Conferencing, Web Conferencing, Multimedia messaging, Sales Force
Automation, Fleet managementConsumer BroadbandDigital TV channels, Broadband
Internet, Video-on-Request channels, 64 Kbps IP Telephony with Photo ID, Video
Phone/Conferencing. . that can be accessed through any device….PDAsSmart phones /
Mobile phones PC/LaptopsTVsDigital Set- top boxesOver 200 Content partners and over
10,000 content itemsOver 9,200 individual and corporate registered application
developers47 applications & 35 games live on ‘R World’ – to scale to 150 applications
shortly68The third largest operator in the mobile market within four months of
launchOperatorGSMWLL (M)TotalMarket shareTotalMkt
shareBharti4.394.3920%0.3519%BSNL3.690.54.1919%0.3117%Reliance0.593.554.1419
%0.6535%Hutch3.23.2014%0.2513%Tata
1.810.292.1010%0.169%BPL1.261.266%0.042%Others2.802.8013%0.105%Total17.744.3
422.08100%1.86100%Additions for AugustAug 03Figures in MillionsAnd expect to
become the market leader by the end of the yearSource: COAI and ABTO
--------------------------------------------------------------------------------
Page 35
69Reliance Infocomm – Road MapNew Products/Services: –Prepaid plans–More Handset
Models (B/W, Colour, PDA, Camera)–Fixed wireless phones and terminals–Mobile
applicationsFurther expansion of distribution network–Target 800 WebWorlds and 1,500
WebPoints nationwideEnterprise voice and data products targeting 300,000 customers by
March ’04–POTs , PBX, video conferencing, Toll-free, Centrex, Universalnumber, High
speed Internet, L2/L3 VPNsILD PoPs in Hong Kong and LondonNew products & services
will sustain the momentum of rapid subscriber acquisition70Reliance Telecom – GSM
BusinessReliance’s GSM cellular subscriber base has touched nearly600,000 by the end of
August 2003Services operational in 7 telecom circles comprising 118 cities in 15
statesReliance’s GSM cellular operations span 1/3rd of India’sgeographical area and cover
an area of nearly 400 millionpeoplePre-paid services account for 95% of cellular revenues
– low risk strategyReliance has successfully established an extensive GSM network in the
central and eastern part of the country
--------------------------------------------------------------------------------
Page 36
71CapexRIL’s current exposure to Infocomm is US$ 1,043 million, comprised of US$ 508
million in equity and US$ 535 million in debtAdditional exposure currently estimated at
US$ 500 million in debt this yearReliance Infocomm targets to achieve 5-6 million
subscribers by March 2004, becoming the largest operator in IndiaExpected to break-even,
and even report marginal profit in very first yearNo external debt in Reliance
InfocommReliance Infocomm to have adequate flexibility to raise equity and debt
financing from 2004, on the strength of its own Balance SheetReliance Infocomm may
even have sufficient positive cash flows in the medium term to prepay RIL debt ahead of
maturityReliance Infocomm is less than a year away from attaining profits at the net level,
and being in a position to raise external financingSummarySummary
--------------------------------------------------------------------------------
Page 37
73An Integrated Energy company, with interests in services businessesA diversified
portfolio of manufacturing and services businessesOil & GasRefining & MarketingPower/
BSESPetrochemicalsIPCLTextilesEnergy ChainInfocom / TelecomReliance
InfocommRelianceTelecomA marketof over1 billion consumers74Reliance is India’s
leading private sector company – ideally positioned to participate in the growth of the
Indian economyReliance will leverage its market leadership position anddemonstrated
strengths to realise the benefit of the growing energy and petrochemicals marketsFuture
earnings growth to be driven by investments in oil & gas, retail marketing of petroleum
products, and potentialimprovement in the petrochemicals business cycleInvestments in the
Infocomm business will start yieldingreturns from next yearIndia’s leading Private Sector
Co.Reliance has significant investments in key growth sectors of the Indian economy
--------------------------------------------------------------------------------
Page 38
75Reliance Growth ModelReliance’s increasing annual cash flows enable the company to
pursue major growth opportunitiesIn 1995, when Reliance took up the US$ 2.5 billion
Haziraproject, its total cash flows were US$ 412 million per yearIn 1997, when the US$ 6
billion Jamnagar complex was taken up for implementation, Reliance’s cash flows were
US$ 500 million per yearIn 2000, when the US$ 4 - 5 billion infocomm project was
announced, Reliance cash flows were US$ 850 million per yearToday, with cash flows of
US$ 1.5 billion per year, Reliance is in a far stronger financial position to comfortably
implement its various projects76Reliance’s Shareholding PatternPromoters/ Associates/
Trust47%Others16%Domestic Institutions11%Foreign Investors26%Foreign shareholding
has increased by nearly 5% since1st January 2003 – inflow of over US$ 500 million in
RIL’s stockReliance shares are widely held by 3.5 million investors -amongst the largest
shareholder families in the world
--------------------------------------------------------------------------------
Page 39
77RIL shares have consistently outperformed the broad market over all time framesStock
Price Performance% changeRILSensexNiftyYTD36%25%21%1 Year57%39%35%3
Years19%-1%0%5 Years239%36%47%10 Years199%53%--78Reliance’s beta has
declined significantly over the years,reflecting reduced volatility, and bringing down cost
of capitalReliance – One Year Beta0.60.81.01.21.41.61.82.0Jan-96Sep-96Apr-97Nov-
97Jul-98Feb-99Sep-99Apr-00Nov-00Jun-01Jan-02Aug-02Mar-03One Year Rolling Beta
--------------------------------------------------------------------------------
Page 40
79RIL’s discount to the Sensex PE has virtually been eliminated inrecent years, reflecting
perceptions of improved fundamentalsValuation - PE Multiple
Trend0510152019961997199819992000200120022003Sensex PERIL PE80Reliance is the
leading corporate in a market of a billion peopleReliance is a convergent play between the
manufacturing and services businessesA combination of the energy chain and the
information and communication businessesA company at the crossroads of the old and new
economy Reliance’s superior operational and financial performance reflec ts its global
competitiveness, prudent business strategies, andability to maintain profitability through
business cyclesReliance is committed to a conservative financial framework, anda
consistent endeavor to maximise overall shareholder value Summary
--------------------------------------------------------------------------------
Page 41
81Reliance has recently been included in the Forbes List of World’s 400 Best Big
Companies, April 2003No. 4 in Ìndia’s Biggest Wealth Creators’ - BT – Stern Stewart
study, April 2003No. 1 in India’s `Best Financial Management’ - FinanceAsia poll, March
2003Best Annual Report in India and among the best 25 in Asia - CFO Asia’s Best Annual
Reports Survey, March 2003No.3 in Ìndia’s Most Respected Companies’ - Businessworld,
January 2003No.1 in `Most respected Indian companies’ - PricewaterhouseCoopers survey
in Financial Times, January 2003Awards and Recognition82Among the world’s 10 most
respected energy and chemical companie s - PricewaterhouseCoopers survey in Financial
Times, January 2003Among the World’s Most Respected Companies
-PricewaterhouseCoopers survey in Financial Times, January 2003No.5 in Òverall Best
Managed Company’ of India - Asiamoney, December 2002 – January 2003No.1 in `Long
Term Vision’, No.1 in `Financial Soundness’, No.2 in Òverall Leadership’ - Far Eastern
Economic Review (FEER) survey, Review 200: Asia’s Leading Companies, December
2002`Most Admired Business House’ `Business Barons – TN Sofres Mode Opinion Poll’,
July 2002Reliance is among Asia’s 10 most creditworthy companies - Asset Annual
Benchmark Survey, Asia’s Best Credits, July 2002Awards and Recognition
--------------------------------------------------------------------------------
Page 42
Thank YouThank YouGrowth is Life
In this tutorial, we will explore what is meant by the many names given to stocks
and the corporations that issue them. Each of the following types refers to any of
several different qualities of stocks or companies. For example, a stock's name may
come from the size of the company that issued it, or it may be named for its
investment objective. You will be introduced to a number of stock types in this
tutorial:
• Blue Chip Stocks
• Penny Stocks
• Income Stocks
• Value Stocks
• Other Types of Stocks
BLUE CHIP STOCKS
The term "blue chip" comes from poker, where the blue chips carry the highest
value. Large, established firms with a long record of profit growth, dividend payout
and a reputation for quality management, products and services are referred to as
Blue Chip companies. These firms are generally leaders in their industries and are
considered likely candidates for long-term growth. Because Blue Chip companies are
held in such high esteem, they often set the standards by which other companies in
their fields are measured. Well-known blue chips include IBM, Coca-Cola, General
Electric and McDonald's.
Blue chip stocks are included in the Dow Jones Industrial Average, an index
comprised of 30 companies that are all major players in their respective industries.
Popular among individual and institutional investors alike, the 30 stocks listed on the
Dow account for about one fifth of the total market value (over $8 trillion) of all U.S.
stocks.
Investors who seek investments that pay moderate dividend yields and that also
grow are attracted to blue chip stocks. These stocks are usually priced high because
of their demand, have relatively low volatility and deliver a steady stream of
dividends. The main downside is that, since they are so large, they have little room
to appreciate, compared to smaller, up-and-coming stocks.
PENNY STOCKS
Penny stocks are low-priced, speculative stocks that are very risky. Companies with
a short or erratic history of revenues and earnings issue them. They are the lowest
of the low in price and many stock exchanges choose not trade them.
Penny stocks (also called designated securities) have these specific qualities: they
sell for less than $5, they are sold over the counter (but not on the NASDAQ), and
their companies have 2 million dollars or less in net tangible assets. They are listed
daily on the Pink Sheets.
The appeal of penny stocks comes from their low price. Though the odds are against
it, if the company that issued them suddenly finds itself on a growth track, their
share price can rise rapidly. These stocks are popular among small speculators.
INCOME STOCKS
Income stocks are those stocks that pay higher-than-average dividends over a
sustained period. These above average dividends tend to be paid by large,
established companies with stable earnings. Utilities and telephone company stocks
are often classified as income stock.
Income stocks are popular with investors who want steady income for a long time
and who do not need much growth in their stock's value (though some growth does
occur). In this sense, investors who choose them have something in common with
bondholders. Income stocks can actually be more profitable than bonds. To
maximize income, some investors will even seek out companies that frequently raise
their dividends and are not saddled with debt.
VALUE STOCKS
A value stock is a stock that is currently selling at a low price. Companies that have
good earnings and growth potential but whose stock prices do not reflect this are
considered value companies. Both the market and investors are largely ignoring
their stocks. Investors who buy value stocks believe that these stocks are only
temporarily out of favor and will soon experience great growth. Factors such as new
management, a new product or operations that are more efficient may make a value
stock grow quickly.
Many companies alternate between value and growth...it is a part of the business
cycle. Value stocks are attractive to investors who watch markets carefully for
undervalued stocks they feel will move upward.
OTHER TYPES OF STOCKS
These are also worth noting.
Defensive stocks are those whose prices stay stable when the market declines and
are issued by industries that naturally do well during recessions. Food and utilities
companies are defensive stocks. Debt collection companies also tend to perform well
when the market turns sour.
Cyclical stocks are stocks that move up or down in sync with the business cycle.
Examples include the housing industry and industrial equipment companies, because
these companies serve the needs of growing economies. Investors who do not mind
buying and selling as the market fluctuates tend to like cyclical stocks. Individuals
who prefer to hold a stock for a long time may not like them unless they can
weather ups and downs in the stock's value.
Gold stocks are the stocks of gold-mining companies. Their value moves up or
down with the price of gold.
Treasury stock is stock that has been bought back by the company that issued it.
Companies may buy their stock back from investors when they believe it is
underpriced on the market. The company can then set aside the stock for future
uses such as debt payment or the awarding of stock options.
Simply put, bull markets are movements in the stock market in which prices are
rising and the consensus is that prices will continue moving upward. During this
time, economic production is strong, jobs are plentiful and inflation is low. Bear
markets are the opposite-- stock prices are falling, and the view is that they will
continue falling. The economy will slow down, coupled with a rise in unemployment
and inflation. In either scenario, people invest as though the trend will continue.
Investors who think and act as though the market will continue to rise are bullish,
while those who think it will keep falling are bearish.
The basics of bull and bear markets will be reviewed in this tutorial. Specifically we
will cover the following:
• What Drives Bull And Bear Markets?
• Predicting Bull And Bear Markets
• Investing During Bull Markets
• Investing During Bear Markets
WHAT DRIVES BULL AND BEAR MARKETS?
What causes bull and bear markets? They are partly a result of the supply and
demand for securities. Investor psychology, government involvement in the
economy and changes in economic activity also drive the market up or down. These
forces combine to make investors bid higher or lower prices for stocks.
To qualify as a bull or bear market, a market must have been moving in its current
direction (by about 20% of its value) for a sustained period. Small, short-term
movements lasting days do not qualify; they may only indicate corrections or short-
lived movements. Bull and bear markets signify long movements of significant
proportion.
There are several well-known bulls and bears in American history. The longest-lived
bull market in U.S. history is the one that began about 1991 and is still climbing.
Other major bulls occurred in the 1920's, the late 1960's and the mid-1980's.
However, they all ended in recessions or market crashes.
The best-known bear market in the U.S. was, of course, the Great Depression. The
Dow Jones Industrial Average lost roughly 90 percent of its value during the first
three years of this period. There were also numerous others throughout the
twentieth century, including those of 1973-74 and 1981-82.
PREDICTING BULL AND BEAR MARKETS
Investors turn to theories and complex calculations to try to figure out in advance
when the market will scream upward or tumble downward. In reality, however, no
perfect indicator has been found.
In their attempts to predict the market, economists use technical analysis. Technical
analysis is the use of market data to analyze individual stocks and the market as a
whole. It is based on the ideas that supply and demand determine stock prices and
that prices, in turn, also reflect the moods of investors. One tool commonly used in
technical analysis is the advance-decline line, which measures the difference
between the number of stocks advancing in price and the number declining in price.
Each day a net advance is determined by subtracting total declines from total
advances. This total, when taken over time, comprises the advance-decline line,
which analysts use to forecast market trends.
Generally, the A/D line moves up or down with the Dow. However, economists have
noted that when the line declines while the Dow is moving upward, it indicates that
the market is probably going to change direction and decline as well.
INVESTING DURING BULL MARKETS
A key to successful investing during a bull market is to take advantage of the rising
prices. For most, this means buying securities early, watching them rise in value and
then selling them when they reach a high. However, as simple as it sounds, this
practice involves timing the market. Since no one knows exactly when the market
will begin its climb or reach its peak, virtually no one can time the market perfectly.
Investors often attempt to buy securities as they demonstrate a strong and steady
rise and sell them as the market begins a strong move downward.
Portfolios with larger percentages of stocks can work well when the market is
moving upward. Investors who believe in watching the market will buy and sell
accordingly to change their portfolios.
Speculators and risk-takers can fare relatively well in bull markets. They believe
they can make profits from rising prices, so they buy stocks, options, futures and
currencies they believe will gain value. Growth is what most bull investors seek.
The opposite of all this is true when the market moves downward.
INVESTING DURING BEAR MARKETS
Successful investing in bear markets can involve many different strategies. Some
investors try to secure their assets in less volatile securities such as fixed-income
bonds or money market securities. Others wait for the downward trend of prices to
subside. When it does, they begin buying. Still others seek to take advantage of the
falling prices.
When the market goes down, portfolios with a greater percentage of bonds and cash
fare well because their returns are fixed. Many financial advisors emphasize the
value of fixed income and cash equivalent investments during market downturns.
Another strategy is to simply wait for the downward prices to reverse themselves.
Investors who wish to remain invested in stocks may seek out companies in
industries that perform well in both bull and bear markets -- shares in these
companies are called defensive stocks. The food industry, utilities, debt collection
and telecommunications are popular defensive stocks. However, there is no
guarantee that a defensive stock will perform well during any market period.
Finally, some investors attempt to exploit profits from the downward price
movements. One method is to sell at the beginning of a downward turn, when prices
are still high. Proponents of this strategy wait for prices to bottom out before
reinvesting in the market. However, as simple as it sounds, this process involves the
nearly impossible task of timing the market. Another, more complicated way to
attempt to profit from falling prices is called selling short. To learn about selling
short, check the tutorial in the Investment Strategies section.
CONCLUDING REMARKS
There are many investment methods that seasoned investment professionals use to
take advantage of opportunities during bull or bear markets. Methods such as dollar-
cost averaging, selling short, and diversification exist. Understanding well-founded
strategies will help you to improve your chances for superior performance in either
market environment. However, there is no surefire way to always succeed. The best
weapon you can employ is education. To begin your educational journey, you can
refer to the specific tutorials on each of the bolded terms above. Do your homework!
This tutorial introduces stocks and the stock market. It also covers the meaning of
stocks and what they do for investors.
We will cover these topics:
• What Is Stock?
• Why do Companies Issue Stock?
• What are Stock Exchanges?
• What Benefits Do Investors Get From Stock Ownership?
WHAT IS STOCK?
Stock is ownership in a company, with each share of stock representing a tiny piece
of ownership. The more shares you own, the more of the company you own. The
more shares you own, the more dividends you earn when the company makes a
profit. In the financial world, ownership is called equity.
There are two primary classes of stock. The one you choose depends on what you
want from a stock. Preferred stock typically pays regular dividends and is favored by
investors who want income foremost from their stocks. Common stock represents
ownership of a company and may offer more rights and privileges than preferred
stock.
Investors may purchase stock on the primary or secondary market. A company sells
its stock to the public on the primary market through its initial public offering.
Investors may sell their shares through brokers to other investors on the secondary
market. The secondary market can be structured as an auction market, like the
other exchanges, or a dealer market, like the NASDAQ. Stock prices can be found
(quotes) in newspapers, on television and the Internet.
WHY DO COMPANIES ISSUE STOCK?
Businesses issue stock to raise money. They use this money to finance expansions,
pay for equipment, and fund projects, etc. Corporations issue stock when they may
need additional capital to operate successfully.
The fancy term for issuing stock to raise money is equity financing. The money
received from investors who buy stocks is called equity capital. In the world of
securities, the word "equity" usually refers to stocks. The other method of raising
money is debt financing, which involves selling bonds. That is the subject of other
tutorials.
When companies make profits, they may reward their stockholders with pieces of
their profits, known as dividends. Dividends are an incentive for investors to hold
stocks.
Now that you know the why of buying stocks, you will need to know the where.
WHAT ARE STOCK EXCHANGES?
Exchanges are the physical locations where stocks are bought and sold. They are the
sisters of the over-the-counter (OTC) market. The OTC refers to a market in which
securities transactions are conducted through a telephone and computer network
connecting dealers in stocks and bonds, rather than on the floor of an exchange.
Together, these two markets form the secondary market. The primary and
secondary markets together make up the stock market.
Exchanges are located all over the world, with the most famous one being the New
York Stock Exchange. The NYSE annually trades almost $12 trillion dollars worth of
capital. Thousands of stocks are listed on this exchange. When you buy a stock, you
will need to learn which exchange(s) list it. Other than locating a quote in the
newspaper, with online trading and the automation of order systems, there is very
little reason to determine where the stock trades from the customer's viewpoint.
The Securities and Exchange Commission (SEC) regulates stock trading and
exchanges. The National Association of Securities Dealers (NASD) administers
additional regulation. The NASD makes and enforces rules for its members and
enforces federal securities acts and the SEC makes rules for its membership. As you
read more about investing, you will become more familiar with these organizations
and their protective regulations.
All the technicalities aside, read below to learn what you, as an investor, get out of
stock ownership besides your piece of the company.
WHAT BENEFITS DO INVESTORS GET FROM STOCK OWNERSHIP?
In addition to owning part of a company, you have the potential to receive monetary
benefits when you own stock shares. Owning stock may allows you the opportunity
to earn money on money.
Historically, stocks have performed better than most other investments. This is a
testament to the growth of the economy in the United States. From 1955 to 1994,
the average yearly return of a share of stock was approximately 10 percent. This
means that if $10,000 were invested in stocks in 1955, and dividends and capital
gains were reinvested instead of kept, this $10,000 would have been worth about
$444,000 by 1994.
We hope you have gotten a better idea of stocks and the stock market from this
tutorial.
Companies throughout the world issue new stock shares every day. But, what is
stock and why does a company issue it? To help you to better understand these
important concepts in this tutorial we will discuss:
• What is capital?
• Equity vs. Debt
• Why do corporations issue stock?
• Advantages for stock holders
Let us begin by defining the word capital.
WHAT IS CAPITAL?
Let's imagine that you decide to start up your own ice cream shop business. You will
need to invest in equipment, food supplies and property. All the money that you
invest to start your business is called capital. Essentially, the capital of a business
consists of all of its assets (or items to assist in the creation of wealth).
What if it dawns on you that you don't have enough cash to buy all the needed
assets? Let's see how new businesses and companies deal with this problem.
EQUITY vs DEBT
To start a new business (or fund a new project) a company can raise money in two
ways - by selling shares of equity or by incurring debt. If the owner of our ice cream
parlor invested all their own savings to buy the materials necessary to start the
business, they made an equity investment in the company. Equity is simply
ownership of a corporation. Typically, ownership units in a corporation are referred
to as stock.
However, if our owner did not have necessary funds to start their own business they
could finance their operation in one of two ways:
1. Issue stock (or certificates of partial ownership in his company) to people who
may be interested in helping their venture out in return for a proportional share
of the profits that the company might generate.
2. Borrow money that will need to be paid back with interest.
So, what are the advantages of selling stock?
WHY DO CORPORATIONS ISSUE STOCKS?
Businesses issue stock to raise capital.
Advantages of issuing stock:
1. A Company can raise more capital than it could borrow.
2. A Company does not have to make periodic interest payments to creditors.
3. A Company does not have to make principal payments.
Disadvantages of Issuing Stock:
1. The principal owners have to share their ownership with other shareholders.
2. Shareholders have a voice in policies that affect the company operations.
ADVANTAGES FOR STOCK HOLDERS
As part owner of a corporation, you may be entitled to share in the profits of the
company. There is also a chance that the company will grow and the price of the
stock may rise.
If the company achieves economic success, the stock value will go up and
stockholders will benefit. For example, if you invested $1,000 to buy 100 shares of a
company at $10 each and the shares rose to $13 each you would gain $300. This is
equivalent to a 30% return. In cases like this, both the stockholders and the
business would be pleased.
This concludes the brief tutorial on why companies issue stocks.
You may have heard the terms "small-cap," "mid-cap" or "large-cap" in your reading
about stocks and the companies that issue them. This short tutorial will discuss
segments of the stock market. It will cover the following topics:
• Market Capitalization
• Small-Cap Stocks
• Mid-Cap Stocks
• Large-Cap Stocks
We will first read about market capitalization and what it means.
MARKET CAPITALIZATION
"Cap" is short for capitalization, which is the market value of a stock.
Capitalization gives a picture of a stock's size. You can calculate a stock's
capitalization by multiplying its market price by the number of its shares outstanding
("outstanding" means in the hands of the public). For example, if Stock A has a
present value of $10 per share, and there are one million shares of it in the hands of
public investors, then Stock A has a capitalization of $10 million.
Corporate stock is often grouped by the company's capitalization. For example, one
model would group companies as follows:
Small-cap -- less than $500 million Mid-cap -- between $500 million and $3 billion
Large-cap -- over $3 billion
These lower and upper limits will vary depending upon the model. However, the
general classification scheme remains true.
You can see that stocks are grouped based on their issuer's capitalization. That is
where the terms small-cap, mid-cap and large-cap come in. On the next page, you
will read about small-cap stocks.
SMALL-CAP STOCKS
The Stock of small companies that have the potential to grow rapidly is classified as
small-cap stock. Many of these companies are relatively new. How they will behave
in the market is often difficult to predict. Because of their small size, growth spurts
can affect their prices and earnings dramatically. On the other hand, they tend to be
volatile and may decline dramatically.
Most initial public offerings are for small-cap companies. Most small-cap stocks are
oriented toward growth. Growth and aggressive-growth mutual funds often look for
small-cap companies for their portfolios. Because they look to grow rapidly, small-
cap stocks are likely to forego paying dividends to investors so that profits can be
reinvested for future growth.
Small-cap stocks are popular among investors who are looking for growth, who do
not need current dividends, and who can tolerate price volatility. If successful, these
investments can generate significant gains.
MID-CAP STOCKS
Mid-cap stocks are typically stocks of medium-sized companies. They still offer the
growth potential with the stability of a larger company. Stocks of many well-known
companies that have been in business for decades are mid-cap stocks.
Baby blue chips are mid-cap stocks that have steady growth and a good track
record. They are like blue-chip stocks (which are large-cap stocks) but lack the size
of blue chips. These stocks tend to grow well over the long term.
Mid-cap stocks, like small caps, emphasize growth but pay a relatively larger share
of their earnings as dividends.
LARGE-CAP STOCKS
Stocks of the largest companies such as IBM or GE and other movers and shakers of
the economy--are classified as large-cap stocks. These are large established
companies (many are blue chips). They often keep large reserves of cash to take
advantage of new business opportunities. Together they make up over half of the
value of American stock.
Because of their large size, large-cap stocks are not expected to grow as rapidly as a
smaller capitalized company. Successful mid-caps and the small-caps tend to
outperform them over time. Investors looking for dividends and preservation of
capital with some growth potential choose them. Large-cap stocks pay relatively
more in dividends than small- and mid-cap stocks.
Investors who want their money to remain relatively safe over the long term are
often attracted to large-cap stocks.
This concludes our short look at "caps."
In this tutorial, we will guide you through the process of buying and selling stocks.
This process may appear complicated at first, but is, in fact, quite simple. It has its
own rules, its own set of characters and its own language code.
We will discuss the following topics:
• Where Do I Buy Stock?
• How Do I Make Trades?
• What Are Some Of The Orders I Can Place?
WHERE DO I BUY STOCK?
Stock is evidence of ownership in a corporation. Corporations whose shares are
owned by persons outside the "corporate family" are publicly traded. The Securities
and Exchange Commissions (SEC) established the National Association of Securities
Dealers (NASD) to make rules to assure orderly commerce in publicly traded stocks.
Persons in the business of trading stocks are brokers and must register with the
SEC.
When you want to buy (or sell) shares of a publicly traded stock, you will use the
services of a broker*. A broker (stockbroker) must pass an examination on
securities law to be licensed to trade securities. Licensed individuals are registered
representatives of brokers. Brokerage Houses are large firms that deal in securities
and may belong to an exchange such as the New York Stock Exchange or the
American Stock Exchange.
*Some companies allow shareholders to purchase shares directly from the company
without having to use a broker. For more information about this, see the tutorial on
Dividend Reinvestment Plans.
HOW DO I MAKE TRADES?
After you have opened an account, you need to decide which type of account is best
for your needs.
Cash Accounts are for investors who will just buy or sell shares of stock with the
money that they deposit into the account.
Margin Accounts are for investors who may wish to borrow against their securities
or engage in special trading activities. For more information about margin accounts,
see the Introduction to Margin Accounts and Buying On Margin tutorials.
Normally you can make trades in your account in person, by mail, on the telephone,
or over the Internet. Each brokerage firm will advise you of their capability to handle
your orders.
WHAT ARE SOME OF THE ORDERS I CAN PLACE?
A market order gives your broker the signal to buy or sell a particular security at
the current market price. A market order guarantees execution, it does not
guarantee a specific price. You can give your broker additional instructions:
Limit order - Allows you to instruct your broker to buy or sell a stock at a specific
price (or better). You would use a limit order when the stock you are interested in is
changing in price. This prevents the broker from buying too high, or selling too low.
A limit order guarantees a price but not an execution.
Stop loss order - Lets you instruct your broker to sell a stock if it falls below a
specified price to prevent further loss. You would use a stop loss order if you were
concerned that a stock you own will fall in price. A stop loss order is used to protect
unrealized profits or prevent further losses on a position.
Good-till-canceled (GTC) or day order - When placing a limit, stop or stop-limit
order, you will be asked if you want it to be "good until it is canceled" or "good for
the day." This allows you to choose the length of time the order will remain open for
execution at the marketplace. At Ameritrade, GTC orders are canceled at the end of
the next month.
This concludes our tutorial on buying and selling stocks.
In the following tutorial, we will provide you with some suggestions on where to find
useful information about the financial market.
As you enter the world of stock investing, it may be a good idea to familiarize
yourself with the useful information you will need.
We will cover the following topics in this tutorial:
• Stock symbols
• Where to find a stock
• Web sites and print media
STOCK SYMBOLS
A wise investor will always do a financial analysis before purchasing a stock. In order
to obtain information about a prospective company, one needs to know the stock of
the company (sometimes referred to as a ticker symbol).
Next, one may find it useful to review the company's stock quotes, charts and
earning estimates in order to decide whether the company is a good investment.
Fortunately, all of this information is easy to find.
WHERE TO FIND A STOCK
Two basic ways for finding stock information are on the Internet and through various
print media.
Web sites providing stock information are usually sponsored by brokerage firms such
as Ameritrade, or by non-broker affiliated quoting services such as Quicken. They all
provide similar data, but vary in server range, amount of information, and speed.
You may also look for web sites that have been created from print media. These
have market reports.
WEB SITES & PRINT MEDIA
Several research firms offer an Internet version of their popular print reports. They
do not have the option for immediate investing, but usually offer links to various
brokerage institutions. These include:
• Individual Investor
• Zack's Research
• Valueline
• Morningstar
• Personal Wealth and
• The Wall Street Journal
If you prefer to have a paper edition of market information, you may want to invest
in any of the following paper sources:
• Value Line
• Zack's Investment Research
• Morningstar
• Standard & Poor's
• Wall Street Journal
• Investors Business Daily
• Barron's
This concludes our brief tutorial on finding stock symbols, quotes, charts, and
earning estimates. Good luck on entering the exciting world of investing!
The very first sale of stocks to the public is called an initial public offering (IPO), and
occurs on the primary market. This tutorial will cover the following factors involved
in initial public offerings:
• The Process of Issuing Securities
• The Basics of Underwriting
• Types of Underwriting Arrangements
• The Prospectus
• Ways A Stock May Be Advertised Before It Is Sold
• Hot Issues, Free-Riding and Withholding, and "When, As, and If-Issued"
Stocks
THE PROCESS OF ISSUING SECURITIES
Corporations sell stock to the public as one way to raise capital. Before it can issue
new stock, a corporation must first file registration statements with the Securities
and Exchange Commission (SEC) http://www.sec.gov. A twenty-day wait is required
before it can sell the stocks.
The issuing company may make their registration statement public with a
preliminary prospectus called a red herring that summarizes the registration
statement. Basic information about the new offering is also provided, including how
many shares are being offered and which brokerage companies will distribute the
stock to the public. At the time of issue, a final prospectus is presented. This
includes the price of the stock (its offering price).
THE BASICS OF UNDERWRITING
A Corporation going public hires an investment banker to help it sell its stock. This
process is called underwriting. The investment banker functions as an intermediary
between the issuing corporation and the public. In most cases, the underwriter
(investment banker) purchases the stocks from the company for resale to the public.
To reduce its own risk, the investment banker may form an underwriting syndicate
of other investment bankers to co-purchase the shares. The underwriting syndicate
forms a selling group to sell specified allotments of the issue. The investment banker
(underwriting syndicate) then marks up the price of the offering. This markup
represents the fee for the syndicate's service. The difference between the price the
underwriter pays and the price the public pays is called the underwriting spread.
The syndicate manager may bid on the stock in the offering to "stabilize" the price.
This bid must be less than or equal to the offering price. By law, the prospectus
must make this attempt to stabilize the stock price known to the public.
The SEC also requires the underwriter to investigate the issuing company-
particularly any audits, how it uses proceeds, its financial statements and the
management team. This process is called due diligence.
TYPES OF UNDERWRITING ARRANGEMENTS
A stock issue can be underwritten by several methods.
The underwriter can act as an agent, in which it tries to sell as much of the issue as
it can at market prices. This is a best effort arrangement.
The issuing company can also agree to issue new stock on the condition that all of it
is sold. If all of the stock is not sold, then it will withdraw the issue. This is an all-or-
none arrangement.
A negotiated underwriting is when the issuer and the corporation negotiate the
terms of the issue, the price, the size and other details.
The issue may be subject to competitive bids from investment bankers. The top
bidder underwrites the issue and resells it to the public.
When a public company issues more of its stock, it must first offer that stock to
existing shareholders; that is their preemptive right. A standby is the public sale of
whatever stock the existing shareholders have not yet purchased.
A firm commitment arrangement is when an investment banker buys all of the stock
from the corporation and then resells it to the public at a higher price.
A private placement is an offering in which the company sells to private investors
and not to the public. Private placements do not have registration fees.
THE PROSPECTUS
Prospectuses are legal documents that explain the financial facts important to an
offering. They must precede or accompany the sale of a primary offering. The law
requires companies selling primary offerings to send prospectuses to anyone who
wants to buy a primary offering. Prospectuses may also be used to solicit orders.
Customers should read a prospectus carefully before purchasing any primary
offering.
Prospectuses include but are not limited to the following:
• Offering price
• Legal opinions about the issue
• Underwriting method
• The history of the company
• Other costs related to investing in the stock
• The management team
• The handling of proceeds
The prospectus must be provided to customers before they complete any
transactions. It must also include the SEC's disclaimers that it does not approve or
disapprove of the stock being offered, and that it does not judge the prospectus'
statements for accuracy.
WAYS AN ISSUE MAY BE ADVERTISED BEFORE IT IS SOLD
A new issue of stock is allowed to be advertised before it is actually sold, although it
may not be sold during the actual registration period.
Registered representatives are allowed to accept oral solicitations from clients. They
are not allowed to sell any shares of the new stock. Neither are they allowed to
affirm any offers of sale.
Registered representatives may send red herrings, or preliminary prospectuses, to
clients. Information in these documents will discuss why the stock is being sold and
the offering timetable. Red herrings are only issued for information purposes.
Tombstone advertisements are ads that announce the new stock. Their sole purpose
is to function as communication. They are not prospectuses. They are called
tombstones because they provide prospective buyers with the "bare bones"
information: the name of the stock, the issuer and how to obtain a red herring.
NEWLY ISSUED STOCKS: GETTING THE NAMES STRAIGHT
Three aspects of IPO's deserve special attention: hot issues, free-riding and
withholding, and the so-called "when, as, and if-issued" stocks.
A hot issue is a security sold by broker-dealers on the secondary market just after it
is first issued. If a broker-dealer buys a hot issue and withholds it from sale to get a
higher price later, the broker-dealer is engaging in an illegal practice called "free
riding and withholding." This is illegal because it robs the public of its chance to buy
the stock at a fair price. The prohibition extends to financial dependents and
immediate family members of broker-dealers.
New stock may not be sold until after the registration period has expired. If the
stock has not been issued by that time, it may be sold conditionally as a "When, as,
and if-issued" stock. Should it fail to be issued, all buys, sells, earnings and losses
will be canceled.
This concludes the introductory tutorial on Initial Public Offerings. For more
information on Investing in IPOs check out the tutorial titled Investing in Initial
Public Offerings under the Investment Strategy section.
Risk is an inherent part of investing. Generally, investors must take greater risks to
achieve greater returns. Those who do not tolerate risk very well have a relatively
smaller chance of making high earnings than do those with a higher tolerance for
risk.
In order to understand the different types of risk, we have broken them down into
these levels:
• Personal Risks
• Company Risks
• Market Risks
• National And International Risk
PERSONAL RISKS
This category of risk deals with the personal level of investing. The investor is likely
to have more control over this type of risk compared to others.
Timing risk is the risk of buying the right security at the wrong time. It also refers
to selling the right security at the wrong time. For example, there is the chance that
a few days after you sell a stock it will go up several dollars in value. There is no
surefire way to time the market.
Tenure risk is the risk of losing money while holding onto a security. During the
period of holding, markets may go down, inflation may worsen, or a company may
go bankrupt.
There is always the possibility of loss on the company-wide level, too. Click here to
learn more.
COMPANY RISKS
There are two common risks on the company-wide level. The first, financial risk, is
the danger that a corporation will not be able to repay its debts. This has a great
effect on its bonds, which finance the company's assets. The more assets financed
by debts (i.e., bonds and money market instruments), the greater the risk. Studying
financial risk involves looking at a company's management, its leadership style, and
its credit history.
Management risk is the risk that a company's management may run the company
so poorly that it is unable to grow in value or pay dividends to its shareholders. This
greatly affects the value of its stock and the attractiveness of all the securities it
issues to investors.
MARKET RISKS
Fluctuation in the market as a whole may be caused by the following risks.
Market risk is the chance that the entire market will decline, thus affecting the
prices and values of securities. Market risk, in turn, is influenced by outside factors
such as embargoes and interest rate changes see Political Risk below.
Liquidity risk is the risk that an investment, when converted to cash, will
experience loss in its value.
Interest rate risk is the risk that interest rates will rise, resulting in a current
investment's loss of value. A bondholder, for example, may hold a bond earning 6%
interest and then see rates on that type of bond climb to 7%.
Inflation risk is the danger that the dollars one invests will buy less in the future
because prices of consumer goods rise. When the rate of inflation rises, investments
have less purchasing power. This is especially true with investments that earn fixed
rates of return. As long as they are held at constant rates, they are threatened by
inflation. Inflation risk is tied to interest rate risk, because interest rates often rise to
compensate for inflation.
Exchange rate risk is the chance that a nation's currency will lose value when
exchanged for foreign currencies.
Reinvestment risk is the danger that reinvested money will fetch returns lower
than those earned before reinvestment. Individuals with dividend-reinvestment
plans are a group subject to this risk. Bondholders are another.
NATIONAL AND INTERNATIONAL RISKS

National and world events can have profound effects on investment markets.
Economic risk is the danger that the economy as a whole will perform poorly.
When the whole economy experiences a downturn, it affects stock prices, the job
market, and the prices of consumer products.
Industry risk is the chance that a specific industry will perform poorly. When
problems plague one industry, they affect the individual businesses involved as well
as the securities issued by those businesses. They may also cross over into other
industries. For example, after a national downturn in auto sales, the steel industry
may suffer financially.
Tax risk is the danger that rising taxes will make investing less attractive. In
general, nations with relatively low tax rates, such as the United States, are popular
places for entrepreneurial activities. Businesses that are taxed heavily have less
money available for research, expansion and even dividend payments. Taxes are
also levied on capital gains, dividends and interest. Investors continually seek
investments that provide the greatest net after-tax returns.
Political risk is the danger that government legislation will have an adverse effect
on investment. This can be in the form of high taxes, prohibitive licensing, or the
appointment of individuals whose policies interfere with investment growth. Political
risks include wars, changes in government leadership, and politically motivated
embargoes.
This concludes our look at the major risks of investing.
The stock table provides you with essential information about the company's stock
price (valuation). The following tutorial will guide you through the various data
that is presented in a stock table. Being able to understand a stock table is very
helpful when investing.
We will present and provide examples for the following topics:
• Example Of A Stock Table

• Stock Market Table Terms
The stock table provides you with essential information about the company's stock
price (valuation). The following tutorial will guide you through the various data
that is presented in a stock table. Being able to understand a stock table is very
helpful when investing.
Let us begin with an example of a table that could be found in the financial section
of a major newspaper such as The Wall Street Journal. The Wall Street Journal is
not the only newspaper that provides information on the stock market; many
other local and national newspapers also provide this service. However, the
information is usually presented in a similar manner. To improve your
understanding of stock tables please review the following example:
EXAMPLE OF A TABLE
The date is the date at which the trading activities occurred, not the date of the
newspaper. Stocks are always listed alphabetically, from A to Z. The following
data is presented for shares of a hypothetical company named "XYZ CORP."
We will begin by explaining the first four columns.
STOCK MARKET TABLE TERMS
(1) High-Low. The first column is the highest and lowest prices at which the
stock was sold in the past year (52 weeks). In our example, the highest price was
$47 and the lowest was $37.
(2) Company Symbol. The second column is the abbreviated name of the firm
issuing the stock. The symbol of the company stands next to the abbreviated
name. In our case, it is "Z." This symbol is sometimes referred to as the
company's "ticker symbol."
(3) Dividends. Dividends are the amount a company pays to its stockholders. The
third column is the annual dividend paid per share. In our example, it is $2.30.
(4) Volume. The fourth column titled "VOL" implies the volume of shares (in
100s) that were traded that day. In our example, on August 22, 1999, 33,500
shares were traded by XYZ. Volume may give you an indication on the size of the
breadth of the market for a company's shares.
(5) The YLD column approximates the dividend yield. The dividend yield is the
current return on invested capital. We can use it to compare dividend returns for
firms that have different stock prices. We derive the dividend yield by dividing the
current dividend by the closing stock price. In our case the dividend yield is 5%,
calculated as follows:
Dividend
$2.30
= 5.427%
Price (8th column)

$42.375
(6) The 6th column is the price to earnings (P/E) ratio. The P/E ratio compares
the price per share to the earnings per share. It shows how much an investor is
willing to pay for $1 of current earnings per share (EPS). Price/Earning ratio is
calculated by dividing the price by the earnings per share (EPS). Applying this
formula to our example we get the following:
Price (8th column)
$45.375
= 10
(the stock is selling for 10X the earning ratio)
EPS
$4.27
(7) The seventh column titled "Hi Lo" represents the highest and lowest prices at
which trades were completed during the last trading day. In our example, the high
was at $43 and the low was at $40.
(8) The eighth column titled "Close" is the last price at which a trade was made
during the trading day. In our example it is $42-3/8 ($42.375).
(9) Finally, the last (ninth) column of the table titled "Net Chg" stands for the
change between the closing price for previous day and the current day. Let us say
XYZ closed at $41 3/8 on the preceding business day; hence on August 23, 1999
it closed higher by $1. The Net change is measured in dollar value.
Note: Many newspapers, such as Investor's Business Daily, often change the
sequence of the provided information. Some newspapers may provide less
information (e.g., only providing the closing price and not the high and low for the
day).
In this tutorial, you will learn about corporate earnings and why they are important
to you as an investor. You will learn what goes into corporate earnings and how to
use earnings information to make a decision about investing in a corporation. You
will progress through the following topics:
• What Are Company Earnings?
• Why Are Earnings Important To You as an Investor?
• What Makes Up Corporate Earnings?
• Where Do You Find Corporate Earnings Information?
• How Do You Use Earnings Information To Make An Investment Decision?
WHAT ARE COMPANY EARNINGS?
Business 101: You go into business to make money. Unless an organization is a not-
for-profit enterprise, its goal is to make money for the owners. In order to make
money, the business must have income to pay its employees, utility bills, costs of
production and other operating expenses. If a company has cash left over after
paying its expenses, it has earnings. Earnings are a company's net profit.
The nature of a business defines how it makes earnings. Two sources of company
earnings are income from sales of goods or services and income from investment.
For example, a manufacturer produces goods for sale to its customers. A bank sells
depository services to its customers. All businesses generate income by providing
either goods or services to customers.
Another source of income is investment. Investments generate income for
businesses and individuals from either interest on loans, dividends from other
businesses, or gains on the sale of investment property.
Company earnings are the sum of income from sales or investment after paying
its expenses.
Sounds simple enough, but what does this have to do with you?
WHY ARE EARNINGS IMPORTANT TO YOU AS AN INVESTOR?
Remember from the previous lesson that people go into business to make money.
Well, if you invest in a company's stock, you gain an undivided share of the
company. Typically, when a company earns more money, shareholders do as well.
Meanwhile, if you invest in bonds of the company, the company uses part of its
earnings to repay interest and principal on the bonds. The more earnings the
company has, the more secure you can be that the company will make your interest
payments. So, company earnings are important to you because you make money
when the business you invest in makes money When a company you own stock in
has positive earnings, it benefits you in several ways.
• You may receive a portion of the earnings as a dividend
• The company may reinvest earnings for future growth.
• The company may invest earnings to generate additional income.
In any case, earnings are important to you because they provide a company with
capital to make money for you as an investor.
WHAT MAKES UP CORPORATE EARNINGS?
Income from sales and investments produce earnings.
Before a company can sell its product or service, it incurs expenses to produce
them. These expenses may include cost of materials, labor, market research,
marketing, sales and distribution and overhead. Before a company can show a
profit, it must first settle the costs of doing business.
The way in which a business conducts its operations is an important element to
understand when evaluating a company's earnings. Companies that are devoting
significant resources to creating a new product may have a relatively weak earnings
now. But, if that new product catches on, profits could quickly rise and the earnings
may begin to soar. Meanwhile, companies that have great earnings now, but are not
investing any money to ensure that their business success will continue, may have
significant problems in the future.
When evaluating corporate earnings you should not only look at the income sources,
but the expenses as well. They can reveal the company's long-term strategy for
making money, or uncover potential inefficiency or mismanagement.
WHERE DO YOU FIND CORPORATE EARNINGS INFORMATION?
The best place to learn about company earnings is the corporate annual report. The
annual report contains information on the company philosophy and its position in the
marketplace. It also contains audited financial statements. These tell you all about
the company's financial operations. You can obtain an annual report directly from
the company's public relations department or on the Web by searching the
Securities and Exchange Commission's EDGAR database at
http://www.sec.gov/edgarhp.htm.
To find information about the company's earnings, you should study the "income
statement" and "balance sheet." The income statement shows the sources of a
company's income, production costs and other expenses. The balance sheet shows
the company's overall financial strength and potential for future growth. You can
learn more about the financial statements in our tutorials on Understanding the
Income Statement, and Understanding the Balance Sheet.
HOW DO YOU USE EARNINGS INFORMATION TO MAKE AN INVESTMENT
DECISION?
How you use this information depends upon your investment goals. If you are an
income investor, you probably want to invest in a company that is paying dividends.
If you are looking for long-term growth, dividends may not be as important to you.
The "financials" will show you whether a company is oriented for income, growth, or
a bit of both. You can get all this information from the financials. But you must
compare the financials for different companies in the same industry to see which has
characteristics best suited to your investment goals.
A convenient way to compare companies is through earnings per share (EPS).
EPS represents the net profit divided by the number of outstanding shares of stock.
When comparing earnings per share of several companies that are candidates for
your investment dollars, here are a few things for which to look. Companies:
• With higher earnings are stronger than companies with lower earnings.
• That reinvest their earnings may pay low or no dividends but may be poised
for growth.
• With lower earnings, and higher research and development costs, may be on
the brink of a breakthrough (or disaster).
• With higher earnings, lower costs and lower shareholder equity, may be a
target for a merger.
When comparing different companies' earnings you should ask yourself,
• Why are they different?
• Do the differences make sense for these companies?
This concludes our brief introduction tutorial about understanding company's
earnings. By now, you should know what earnings are, how they are calculated and
why they are important to investors. You also know how to find current earnings
information.
In the following tutorial, we will look at the information available in corporate
reports. We will cover the following topics:
• What is an Annual Report And Why Is It Useful To Investors?
• Required Information
• How to Obtain Annual Reports
• Quarterly and Other Financial Reports
WHAT IS AN ANNUAL REPORT AND WHY IS IT USEFUL TO INVESTORS?
A Company is required by law to provide its shareholders with information about its
operations. An annual report satisfies this obligation.
The information in an annual report shows the company finances. It is extremely
useful to investors because it allows them to use their own judgment on how well
the company is doing and forecast its future earnings and dividends. For an investor,
this information is critical for making investment decisions.
You can also read the Chairman's letter about the company's future goals. Use
caution with these letters since the author is company representative. You may want
to look at how accurate this letter has been in the past to give you an idea how
much you can trust it.
Read below here to find out what is included in an annual report.
REQUIRED INFORMATION
An annual report is a brief profile on the health of a company. Here is what
comprises an annual report:
• A letter from the chairman on the high points of business in the past year with
predictions for the next year.
• Its philosophy: a section that describes how the company does business.
• An extensive report on each section of operations in the company. This portion
of the report may describe the services or the products that the business
offers.
• Financial information that includes the profit and loss (P&L) statements and a
balance sheet. The P&L statement describes income and expenses and gives
the net profit for the year. The balance sheet describes assets and liabilities
and compares them to the previous year. In this section, important
information may be revealed in the footnotes. They may discuss current or
pending lawsuits or government regulations that have an impact on company
operations.
• An auditor's letter confirming that all of the information provided in the report
is accurate and has been certified by independent accountants.
Keep in mind that the public relations department of the company produces the
annual report. The report should be very accurate with all the information described
in the best possible manner.
HOW TO OBTAIN ANNUAL REPORTS
Annual reports are mailed automatically to all shareholders of record. To obtain the
annual report for a company in which you do not own shares, call the public
relations (or shareholder relations) department of the company. You may also look
on the company web site, or search the Internet. There are several sources on the
Internet providing information on public companies. You can search the EDGAR
database at http://www.sec.gov/edgarhp.htm, The Microsoft Investor Web site at
http://www.investor.msn.com, The American Association of Individual Investors at
http://www.aaii.org, or Yahoo Financial Web site at
http://biz.yahoo.com/p/u/utx.html, to name a few. Simply keying in the stock's
symbol will provide you with the needed information.
QUARTERLY AND OTHER FINANCIAL REPORTS
Besides the annual report, companies provide several other financial reports such as
a quarterly report, 10-K reports and statistical supplements.
Quarterly reports are very similar to the annual reports except they are issued
every three months and are less comprehensive. They may be obtained in the same
way as an annual report.
Larger firms issue 10-K reports that are more detailed than annual reports. A 10-K
report provides detailed information about divisions and subdivision of the company.
These reports are sent to stockholders only by request. One should contact the
company's corporate secretary to receive a 10-K. All 10-K filings are available on the
EDGAR database at http://www.sec.gov/edgarhp.htm.
Statistical Supplements are reports of larger corporations as well. They provide
financial information, such as statement data and key ratios, which can be dated
back ten to twenty years. These reports are also posted on the EDGAR database
(http://www.sec.gov/edgarhp.htm).
This concludes our tutorial on corporate financial reports.
In this tutorial, we will guide you through the process of buying and selling stocks.
This process may appear complicated at first, but is, in fact, quite simple. It has its
own rules, its own set of characters and its own language code.
We will discuss the following topics:
• Where To Buy Stock?
• How To Make Trades?
• What Are Some Of The Orders To Be Placed?
WHERE TO BUY STOCK?

Stock is evidence of ownership in a corporation. Corporations whose shares are
owned by persons outside the "corporate family" are publicly traded. The Securities
and Exchange Commissions (SEC) established the National Association of Securities
Dealers (NASD) to make rules to assure orderly commerce in publicly traded stocks.
Persons in the business of trading stocks are brokers and must register with the
SEC.
When you want to buy (or sell) shares of a publicly traded stock, you will use the
services of a broker*. A broker (stockbroker) must pass an examination on
securities law to be licensed to trade securities. Licensed individuals are registered
representatives of brokers. Brokerage Houses are large firms that deal in securities
and may belong to an exchange such as the New York Stock Exchange or the
American Stock Exchange.
*Some companies allow shareholders to purchase shares directly from the company
without having to use a broker. For more information about this, see the tutorial on
Dividend Reinvestment Plans.
HOW TO MAKE TRADES?
After you have opened an account, you need to decide which type of account is best
for your needs.
Cash Accounts are for investors who will just buy or sell shares of stock with the
money that they deposit into the account.
Margin Accounts are for investors who may wish to borrow against their securities
or engage in special trading activities. For more information about margin accounts,
see the Introduction to Margin Accounts and Buying On Margin tutorials.
Normally you can make trades in your account in person, by mail, on the telephone,
or over the Internet. Each brokerage firm will advise you of their capability to handle
your orders.
WHAT ARE SOME OF THE ORDERS CAN BE PLACED?
A market order gives your broker the signal to buy or sell a particular security at
the current market price. A market order guarantees execution, it does not
guarantee a specific price. You can give your broker additional instructions:
Limit order - Allows you to instruct your broker to buy or sell a stock at a specific
price (or better). You would use a limit order when the stock you are interested in is
changing in price. This prevents the broker from buying too high, or selling too low.
A limit order guarantees a price but not an execution.
Stop loss order - Lets you instruct your broker to sell a stock if it falls below a
specified price to prevent further loss. You would use a stop loss order if you were
concerned that a stock you own will fall in price. A stop loss order is used to protect
unrealized profits or prevent further losses on a position.
Good-till-canceled (GTC) or day order - When placing a limit, stop or stop-limit
order, you will be asked if you want it to be "good until it is canceled" or "good for
the day." This allows you to choose the length of time the order will remain open for
execution at the marketplace. At Ameritrade, GTC orders are canceled at the end of
the next month.

Res PRJ

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Res PRJ

Uploaded by

Copyright:

Available Formats

Corporate Governance

Reliance is one of the pioneers in the country in

implementing the best international practices of

Corporate Governance. In recognition of this pioneering

effort, the Institute of Company Secretaries of India has

bestowed on the Company the National Award for

Excellence in Corporate Governance for the year 2003.

Reliance's Corporate Governance Principles uphold its

global standing at the forefront of corporate governance

best practice. Reliance continues to review its corporate

governance practices to ensure that they continue to

reflect domestic and international developments to

position itself to conform to the best corporate

governance practices. It takes feedback into account in

its periodic reviews of the guidelines to ensure their

to the needs of local and international investors and all

Reliance's corporate governance practices focus on the

following main principles:

Recognising the respective roles and responsibilities of

Board and management

· Enable the Board to provide strategic guidance for the

Having a Board of appropriate composition, size and

Reliance Group revenue is equivalent to about 3.5% of India's GDP. The

In the year 1958 returned to Mumbai and started his first

In the year 1966, as a first step in Reliance's highly successful

In the year 1975, a technical team from the World Bank

In the year 1977, the company went public.

Credited with a number of financial innovations in the Indian

Petrotech Society conferred posthumously the 'Lifetime

Rated as one of 'India's Most Admired CEOs' for the fourth

Conferred the 'Lifetime Achievement Award' by India HRD

Felicitated by the Municipal Corporation of Greater Mumbai

Conferred the 'Man of the Century' award by Chemtech

Conferred the 'Indian Entrepreneur of the 20th Century' award

Voted as the most admired Indian of the millennium in the

Voted as 'Creator of Wealth' of the Century in The Times of

Chosen as one of the three 'makers of equity' by India Today

Voted as 'Indian Businessman of the Century' in Business

Amongst 'The Power 50 - India's 50 most powerful decision-

Declared 'Most Admired Indian Business Leader' by The Times

The only Indian industrialist in 'Business Hall of Fame' in

Awarded the Dean's Medal by The Wharton School, University

Chosen as 'Star of Asia' by Business Week, USA, June 1998.

Leading business magazine Business Barons placed him in its

Awarded the Companion Membership of the Textile Institute,

Family: Wife: Kokilaben.

Bangalore Stock Exchange (Served by India on Internet)

Major Index Computation

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchnage Ltd.

Coimbatore Stock Exchange

Delhi Stock Exchange Association

Guwahati Stock Exchange Ltd.

Hyberabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange Ltd.

Mangalore Stock Exchange Limited (Served by India on

4th Floor, Rambhavan Complex

Meerut Stock Exchange Ltd.