Vedanta Report

An Assignment On The company-Vedanta

Submitted to Prof.v skhekar

Submitted by Group 5 Vijay Singh Priyanka Raghunandan Thriveen VC Khoma Adril Almeida Sumeet Rungta

Date of submission-10/11/2009 1

Table of Contents Introduction ...................................................................................................................................... 4 Portfolio of product and services ....................................................................................................... 5 Copper .......................................................................................................................................... 5 Zinc ............................................................................................................................................... 6 Aluminium ..................................................................................................................................... 7 Iron ore ......................................................................................................................................... 9 Commercial power generation business ........................................................................................ 9 People and process strength ........................................................................................................... 10 People ......................................................................................................................................... 10 Recruitments ........................................................................................................................... 10 Growth and Development........................................................................................................ 10 Labour rights ........................................................................................................................... 10 Vedanta Bal Chetna Anganwadi Project ................................................................................... 11 Safety ...................................................................................................................................... 11 Pricing, Distribution & Advertising……………………………………………………………………………………………………10 Process ........................................................................................................................................ 11 Energy ..................................................................................................................................... 11 Climate change ........................................................................................................................ 11 Raw material consumption ...................................................................................................... 12 Water management................................................................................................................. 12 Waste management ................................................................................................................ 12 Biodiversity.............................................................................................................................. 12 Competitive strength....................................................................................................................... 13 Sustainability ................................................................................................................................... 15 Nurturing People ..................................................................................................................... 15 Empowering Communities ....................................................................................................... 15 Health and Safety .................................................................................................................... 15 Environmental Stewardship ..................................................................................................... 15 Core competency ............................................................................................................................ 15 Strategy........................................................................................................................................... 16 Integral to the business philosophy .......................................................................................... 16 2

Conservation of natural resources ........................................................................................... 16 The local communities ............................................................................................................. 16 The people............................................................................................................................... 17 Health and safety ..................................................................................................................... 17

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Introduction Vedanta Resources is a London-based FTSE 100 metals and mining group, diversified in operations and inclusive in scope. Currently operate in India, Zambia and Australia, with extensive interests in aluminium, copper, zinc and lead. Employ over 29,000 people in the various locations. In December 2003, became the first Indian company to be listed on the London Stock Exchange. Vision: achieving and sustaining a global leadership position in non-ferrous metals. The mission is to become a million-ton per annum producer at the lowest decile costs in aluminium, copper and zinc. In so doing, will put India on the global metals and mining map. Vedanta has undertaken several Greenfield and Brownfield expansion projects in a number of locations in order to achieve this goal. The capital expansions completed in the first phase involved fairly complex project technologies, and an investment of $2.2 billion. It has completed these expansions in record time, at costs significantly lower than international benchmarks, and now, the next phase of the expansion pipeline is currently underway. They believe that 'India is a fast-emerging and attractive resource destination, and they believe the strategy and business objectives will harness India's high-quality wealth of mineral resources at low costs of development, positioning it as a leader on the global metals and mining map.' Chairman, Anil Agarwal For thirty years, they have continually demonstrated ability to deliver major value-creating projects, offering unparalleled growth at lowest costs and generating superior financial returns for the shareholders. At the same time, they continue to ensure that expansion projects meet high conservative financial norms and do not place an unwarranted burden on the balance sheet and financial resources. They develop and manage a diverse portfolio of mining and metals businesses to provide attractive returns to the shareholders, whilst always carrying out activities in a socially and environmentally responsible manner, creating value for the communities where they operate. As one of the largest metals and mining groups in India, they remain continually committed to managing the business in a socially responsible manner. The management of environment, employees, health and safety and community issues, in respect of the operations is central to the success of the business. The majority of operations are certified to the International Management Systems Standard ISO 14001. They have also won numerous awards for safety and environment: won the 2005 Recognition of Commitment Award from the Institute of Internal Auditors, USA, for the demonstrated strengths and continued focus on achieving operational efficiencies and process improvements. Vedanta is the only manufacturing company out of a total of four Indian companies to have ever received this award; the other recipients from India are in the technology and banking sectors. 4

Portfolio of product and services Copper The copper business is comprised of operations in India, Zambia and Australia. The Indian copper business is principally one of custom smelting and is operated by Sterlite, while the Zambian copper business is owned and operated by KCM. They own 59.9% of the share capital of Sterlite and 79.4% of the share capital of KCM. Sterlite was India‟s largest metals and mining company based on net sales in fiscal 2008. In addition, they own the Mt. Lyell copper mine in Tasmania, Australia, which provides a small percentage of Sterlite‟s copper concentrate requirements. The Zambian operations are comprised of four mines, one at Konkola, two at Nchanga and one at Nampundthey, a tailings leach plant at Nchanga and a smelter at Nkana. The copper cathode production increased from 436,827 tonnes in fiscal 2006 to 489,782 tonnes in fiscal 2008, representing a CAGR of 5.9%. The production increases, together with higher copper market prices, drove revenue of the copper business from $2,241.3 million in fiscal 2006 to $4,221.9 million in fiscal 2008, representing a CAGR of 37.2%. KCM is also installing a new smelter at Nchanga, which is scheduled for commissioning in mid-2008. The smelter, with a total capital outlay of approximately $372 million, is expected to have a capacity to produce 300,000 tpa of copper anode and 1,850 tonnes per day of sulphuric acid. Feed concentrates are expected to be primarily from KCM‟s own mines. KCM also announced the Konkola Deeps Mining Project or KDMP, approved KCM‟s board of directors in July 2005. KDMP will unlock the potential of the 215mt Konkola ore body. Mid-shaft loading is expected in early 2009 with full commissioning in late 2010. Post completion of KDMP, ore production from the Konkola mine will increase from 2.0 mtpa to 7.5 mtpa. The estimated project cost is $674 million. Work on the KDMP, including the sinking of the main hoisting shaft and other auxiliary shafts, is progressing on schedule.

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Zinc The fully integrated zinc business is owned and operated by HZL, India‟s leading zinc producer with a 79.7% market share by volume of the Indian zinc market in fiscal 2008, according to the Indian Lead Zinc Development Association. HZL was the world‟s fifth largest zinc mining company in 2007 based on mine production and is also one of the top ten lead mining companies by production volume worldwide, according to Brook Hunt. Sterlite owns 64.9% of the share capital of HZL.

HZL‟s operations include three lead-zinc mines, three hydrometallurgical zinc smelters, one lead smelter and one lead-zinc smelter in Northwest India and one hydrometallurgical zinc smelter in Southeast India. HZL‟s zinc production increased from 283,698 tonnes in fiscal 2006 to 426,323 tonnes in fiscal 2008, representing a CAGR of 22.6%. The production increases, together with higher zinc market prices, drove revenue of the zinc business from $875.5 million in fiscal 2006 to $1,941.5 million in fiscal 2008, representing a CAGR of 48.9%. HZL has recently announced expansion projects that will take its total integrated zinc-lead capacity to 1,065,000 tonnes per annum with fully integrated mining and captive power generation capacities, thereby making it the world‟s largest integrated zinc-lead producer by 2010. HZL will continue to maintain its superior cost leadership position among the zinc producers in the world. Two brownfield smelter projects, which will increase the production capacities of zinc and lead by 210,000 kt and 100,000 kt respectively, will be undertaken at Rajpura Dariba in Rajasthan, India. HZL expects to increase its silver production from the current levels of approximately 100120 tonnes per year to a level of approximately 500 tonnes per year in the form of silver and silver bearing residue. A large part of this increase would be from the Sindesar Khurd mine where silver occurrences are approximately at levels of 200 ppm and from the use of appropriate technology in the new smelters. The expansion is supported by HZL‟s strong reserves and resources of 232.3 million tonnes containing 27.5 million tonnes of zinc-lead metal at 31 March 2008. The reserves and resources position have been earlier independently reviewed and certified as per the JORC standard. To support the increased smelting capacities, HZL will expand its ore production capacity at the Rampura Agucha mine from 5 mtpa to 6 mtpa. Further, ore production at the Sindesar Khurd mine, the new star in HZL‟s mining portfolio, will be increased from 0.3 mtpa to 1.5 mtpa. HZL will also start mining activity at the Kayar mine which will have a production capacity of 0.3 mtpa.

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In line with the group‟s philosophy of being a fully self reliant producer of power, a captive thermal power plant with a capacity of 160MW will also be set up at Rajpura Dariba. The zinc and lead smelters as well as the 160MW captive power plant and the Rampura Agucha mine expansion will be complete by mid-2010. The expansions at the Sindesar Khurd and Kayar mines will be completed in phases by early 2012.

The total investment in these projects is estimated at $ 900 million. This investment includes the cost of the smelters, captive power facilities, mine development and shaft sinking and other infrastructure. The expansion will utilise the same technology and project management skills that successfully delivered the Chanderiya II expansion project ahead of schedule.

Aluminium The aluminium business is primarily owned and operated by BALCO. Sterlite owns 51.0% of the share capital of BALCO. MALCO and Vedanta Aluminium also contribute to the aluminium business. They own 80.0% of the share capital of MALCO and 70.5% of the share capital of Vedanta Aluminium, with Sterlite owning the remaining 29.5% of Vedanta Aluminium. BALCO and MALCO are two of the four primary producers of aluminium in India and together had a 31.0% primary market share by volume in India in fiscal 2008, according to the Aluminium Association of India. BALCO increased its production of ingots, rods and rolled products from 173,743 tonnes in fiscal 2006 to 358,670 tonnes in fiscal 2008, representing a CAGR of 43.7%. BALCO recently received a coal block allocation of 211.0 million tonnes for use in its captive power plants. MALCO‟s aluminium operations are comprised of two bauxite mines and the Mettur Dam alumina refining and aluminium smelting complex with a captive power plant and fabrication facility, all of which are located in the State of Tamil Nadu in Southern India. MALCO increased its production of ingots and rods from 36,718 tonnes in fiscal 2006 to 37,635 tonnes in fiscal 2008. In addition, they are expanding the aluminium business through Vedanta Aluminium. In March 2007, Vedanta Aluminium began the progressive commissioning of a 1.4 mtpa greenfield alumina refinery project and an associated 90 MW captive power plant, at Lanjigarh in the State of Orissa. Vedanta Aluminium is also building a greenfield 500,000 tpa aluminium smelter, together with an associated 1,215 MW captive power plant, in Jharsuguda in the State of Orissa, in two phases of 250,000 tpa each. Commissioning of the first phase commenced in May 2008, and they expect the second phase to begin commissioning in 2010. They also recently announced a $7.8 billion investment programme to increase the fully integrated aluminium smelting capacity to nearly 2.6 mtpa by 2012. Upon completion, this is

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expected make us Asia‟s largest and among the top 5 integrated producers of aluminium worldwide. India is positioned to become one of the world‟s largest producers of aluminium, with the 6th largest reserves of bauxite globally of c2.3 billion tonnes and the 4th largest reserves of coal worldwide of over 250 billion tonnes. Of these reserves, over 1.4 billion tonnes of bauxite and 62 billion tonnes of coal reserves are co-located in the State of Orissa alone. Vedanta‟s existing presence in the region, together with its excellent track record of executing projects ahead of time and at low capital costs, make it ideally placed to lead the development of these abundant bauxite and coal reserves. India also has the benefit of a fast growing domestic market with close proximity to the high growth markets of Asia and the Middle East. Demand for aluminium globally is projected to grow strongly at a compound rate of 5.7% between 2007 and 2020, with India and China projected to grow at 8.2% and 9.7%, respectively in the same period. The next phase of brownfield growth projects comprises a 1,250 kt aluminium smelter project in Jharsuguda, Orissa (the “Jharsuguda II Project”), as well as a 325 kt aluminium smelter project together with an associated 1,200 MW captive thermal power plant in Korba, Chattisgarh (the “Korba III Project”). Correspondingly, they will also increase the alumina production capacity at Lanjigarh from 1.4 mtpa to 5 mtpa. The Jharsuguda II Project will comprise four pot lines, each containing 336 cells. The first three pot lines with a total capacity of 937.5kt are scheduled to produce first metal by March 2010 and will be fully commissioned by September 2011. The fourth pot line with a capacity of 312.5kt will be fully commissioned by September 2012. The associated captive thermal power plant will comprise three units of 660 MW each. The commissioning of the power plant units is being scheduled to meet the power requirement of the new Jharsuguda smelter. The Korba III Project will comprise one single pot line containing 336 cells and is expected to produce first metal by October 2010. It will be fully commissioned by September 2011. The associated captive thermal power plant will comprise four units of 300 MW each. The commissioning of the power plant units is being scheduled to meet the power requirement of the new Korba smelter. The increase in alumina production capacity will be achieved by debottlenecking the capacity of the existing 1.4mtpa alumina refinery by an additional 0.6 mtpa by March 2010 and building three new production streams of 1 mtpa each. The first stream of 1 mtpa is scheduled for commissioning by mid 2010 and all three streams are expected to be completed by mid 2011. The experienced in-house project management teams that implemented the earlier 245 kt brownfield aluminium smelter project at Korba, the 1.4 mtpa Lanjigarh alumina refinery, and

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the 500 kt greenfield aluminium smelter project at Jharsuguda (one year ahead of schedule), will manage these projects. The estimated investment in the aluminium smelter projects is $5.65 billion for the Jharsuguda II Project and $2.0 billion for the Korba III Project, to be phased over four years. The total additional investment in Lanjigarh is estimated at $2.15 billion and is expected to be phased over three years. This investment includes the cost of building the aluminium smelters and the alumina refinery, the associated power facilities and all necessary infrastructure including railway networks and water pipelines. The investment will be funded through a combination of existing cash, internal cash accruals and external financing.

Iron ore The iron ore business is owned and operated by Sesa Goa, India‟s largest producer-exporter of iron ore in the private sector by volume in fiscal 2007, according to the Federation of Indian Mineral Industries. In April 2007, they acquired a 51% ownership in Sesa Goa, which owns 88.3% of the share capital of SIL. Sesa Goa is engaged in the exploration, mining and processing of iron ore. Sesa Goa owns or has the rights to proved and probable reserves which consist of an estimated 180.5 million tonnes of iron ore at an average grade of 61.1%.

In fiscal 2008, Sesa Goa produced approximately 12.4 million tonnes of iron ore fines and lumps, of which 11.5 million tonnes were produced after the acquisition of Sesa Goa in April 2007. Sesa Goa‟s mining operations are carried out in the Indian States of Goa, Karnataka and Orissa. In addition, Sesa Goa manufactures pig iron and metallurgical coke. Revenue of the iron ore business for the post-acquisition period of eleven months ended 31 March 2008 was $888.9 million.

Commercial power generation business They are developing a commercial power generation business in India that leverages the experience in building and managing captive power plants that support the primary businesses. As of 31 March 2008, the total power generation capacity of the ten captive power plants and wind power plants was 1,383 MW, including four thermal coal-based captive power plants with a total power generation capacity of 849 MW that they built within the last four years.

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Pricing, Distribution & Advertising: 1. Pricing: 2. Distribution:

From Global Metals’ Price Index Iron ore is exported Zinc, Aluminium & Copper have both global and Indian buyers All this is done by CFAs(carrying and forwarding agents)

3. Advertising:

Almost no advertising Reason: Commodity market and brand value of Vedanta

People and process strength People Recruitments

Vedanta‟s operations have grown several folds over the last few years and so has its demand for high quality human resources for its operations and up coming projects. Every individual who joins the organisation has the “right to grow‟‟ is the fundamental principle that drives the Talent Engagement Process at Vedanta. They believe in inducting large number of fresher‟s from campus and provide them with accelerated global career opportunities. They hire science graduates, engineers, qualified finance professionals and other functionally qualified professionals directly from reputed campuses. They have also initiated special recruitment drive of Ex-Servicemen from Defence Forces for various roles in security, administration and core and strategic support roles. Growth and Development

The Group has a unique and well demonstrated track record of providing career opportunities from within. Hiring predominantly fresher‟s and grooming them to take leadership roles. Employees with a performance track record and high potential are identified through a well structured and transparent development process and are given accelerated growth with specialized technical and general management training, periodic job rotations and leadership guidance. Labour rights

At Vedanta, they ensure that all our businesses are in compliance with all labour regulations of the land and they strive to uphold all labour rights. They proactively and frequently meet with representatives of labour unions at all sites to deliberate on employee concerns and 10

evolve pragmatic solutions that are progressive in nature for long term well being of both employees and all stake holders associated with the group. Vedanta Bal Chetna Anganwadi Project

The project being conducted in partnership with the State Government‟s Integrated Child Development Services program and the Vedanta Foundation, in 937 centers, currently reaches out to 30,347 children at BALCO, Korba, HZL and VAL, Lanjigarh Safety

Safety continues to be a focus and a subject matter of continuous improvement. During the year they deployed external consultant like E.I DuPont de Nemours and British Safety Council, to help upgrade the safety performance. The Loss Time injury frequency Rate (LTIFR) during the year continued to show an improving trend. The LTIFR for 2008-09 at 1.67 translates to reduction of 13% over the previous year and over 56% during the last three years. They regret to inform that the total number of fatalities this year was 22, which is unacceptable. These accidents have been thoroughly investigated and corrective measures put in place. As a first step DuPont and British Safety Council were engaged to conduct a safety assessment across all locations and their recommendations are in the process of being implemented.

Process Energy

Energy is one of the principal resources and the focus is on its conservation and efficient use. They use energy in its different forms like coal, coke breeze, pet coke, fuel oil, LPG, diesel, and electricity, besides energy from renewable sources like biomass, and through recovery of waste heat. Specific energy consumption continued to show an improving trend during the year. Against target reduction of 5%, the actual reductions for the year at Sesa, HZL and Balco were 28%, 9% and 4% respectively. On the Green energy front they have increased the installed capacity of the wind farms from 107 MW to 123.2MW. The same are operating at design levels. Climate change

They utilize carbon intensive fuels, generate captive power for all the major operations and also import electricity which contribute to direct and indirect carbon dioxide emissions. They have strengthened the focus and are getting independent carbon foot-printing done. This year HZL‟s Wind Power Plants, at Gujarat and Karnataka were registered as CDM projects by the UNFCCC, with CER potential of 2, 23,164 per annum. About 58,000 CERs realised from the earlier registered waste heat recovery projects were also sold during the year.

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Raw material consumption

They continue to manufacture metals by extraction of ore from the mines and then processing the same in the smelting operations. This year the focus was on productivity and process improvement, benefits of which will be reflected in the forthcoming quarters. Water management

Similar to energy, water is another crucial resouece in the operations. They have put in structured efforts to reduce fresh water consumption and increasing the recycle and reuse of treated effluent. Across the operations, they have taken forward host of initiatives, notably being reduction of specific water consumption at the zinc operations by 18%. Waste management

They focus on a „4R‟ waste strategy – Reduce, Recycle, Reuse and Reclaim. They believe that actions to reduce waste, either by encouraging material efficiency, reducing the generation of waste, or enabling the recovery and reuse of discarded material is a critical element of sustainable development. Biodiversity

They conduct an environmental impact assessment study for all the projects as well as the expansion activities. They strive to take the utmost care to protect the biodiversity which may be affected by or is adjacent to any of the operating locations.

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Competitive strength They believe that they have the following competitive strengths: A leading diversified and the largest non-ferrous metals and mining company in India Vedanta is a leading diversified and the largest non-ferrous metals and mining company in India based on revenue. They have substantial market share across the copper, zinc and aluminium markets in India. They are India‟s largest iron ore producer-exporter by volume in the private sector. Specifically, 

Sterlite is the leading custom copper smelter in India based on production volume in fiscal 2008, and according to International Copper Promotion Council, India had a 42.6% primary market share by sales volume in India in fiscal 2008;

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HZL is India‟s only integrated zinc producer, had a 79.7% market share by volume in India in fiscal 2008, according to ILZDA, and was the world‟s fifth largest zinc mining company in 2007 based on mine production and is one of the top ten lead mining companies by production volumes worldwide, according to Brook Hunt;

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Vedanta, through its subsidiaries BALCO and MALCO, is the second largest primary producer of aluminium in India with a 31.0% primary market share by volume in India in fiscal 2008, according to AAI. BALCO was the fastest growing primary producer of aluminium in India in fiscal 2007 based on quantity of aluminium produced as a result of the ramp-up in production at its 245,000 tpa Korba aluminium smelter. BALCO‟s 245,000 tpa Korba smelter was in the lowest cost quartile in terms of all aluminium smelters operations worldwide in 2007, according to Brook Hunt; and

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Sesa Goa was India‟s largest producer-exporter of iron ore in the private sector by volume in fiscal 2007, according to the Federation of Indian Mineral Industries. Sesa Goa accounted for approximately 10.5% of India‟s total iron ore exports and 1.4% of the world trade in iron ore in fiscal 2007, according to the Goa Mineral Ore Exporters‟ Association. It has operations in the States of Goa, Karnataka and Orissa and, being strategically located in India, is well positioned to benefit from the continued growth of the Asian economies, including China. The acquisition of Sesa Goa has further diversified the business and allowed us to participate in the strong growth in the iron ore sector.

High quality assets and resources making us a low-cost producer They believe that the business has assets of global size and scale. The costs of production in the Indian copper, zinc and aluminium businesses are competitive with those of leading metals and mining companies in the world, which they believe is enabled by the high quality assets, operational skills and experience and the integrated nature of the operations. Specifically: 13

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Sterlite‟s Tuticorin smelter was one of the top ten custom copper smelters worldwide in 2007, according to Brook Hunt, and the largest in India by production volume in fiscal 2008. In 2007, Sterlite‟s Tuticorin smelter was also in the lowest cost quartile in terms of all copper smelting operations worldwide and its Tuticorin and Silvassa refineries had the seventh and eighth lowest costs of production, respectively, of all copper refining operations worldwide, according to Brook Hunt. Brook Hunt projects that they will be the world‟s eighth largest refined copper producer on a production volume basis in 2008.

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HZL‟s operations are fully integrated with its own mining and captive power generation capacities. HZL was the world‟s fifth largest zinc mining company in 2007 based on mine production and is also one of the top ten lead mining companies by production volume worldwide, according to Brook Hunt. HZL‟s largest zinc mine, Rampura Agucha, was ranked third in the world in 2007 in terms of contained zinc deposits on a production basis and the fourth largest on a reserve basis, according to Brook Hunt. HZL was in the lowest cost quartile in terms of all zinc mining operations worldwide in 2007 and the fourth largest producer of zinc worldwide and HZL‟s Chanderiya smelter was the third largest smelter on a production basis worldwide in 2007, according to Brook Hunt. Brook Hunt projects that HZL will be the world‟s largest integrated zinc mining and smelting company on a production volume basis in 2008.

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The aluminium business‟ operations are fully integrated with respect to their power requirements through their captive power plants. BALCO‟s 245,000 tpa Korba smelter was in the lowest quartile in terms of all aluminium smelter operations in 2007, according to Brook Hunt. BALCO recently received a coal block allocation of 211.0 million tonnes for use in its captive power plants. In March 2007, Vedanta Aluminium began the progressive commissioning of a 1.4 mtpa greenfield Lanjigarh alumina refinery project and an associated 90 MW captive power plant. The Lanjigarh alumina refinery has started production from a single stream operation and produced 267,000 tonnes of alumina in fiscal 2008. They are seeking to further lower the costs across all of the operations. Factors contributing to the success in lowering the costs of production include:

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the focus on continually reducing manufacturing costs and seeking operational efficiency improvements;

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the building and managing captive power plants to supply a substantial majority of the power requirements of the operations; and

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they access to relatively large and inexpensive labour and talent pools in India and Zambia. They view strict cost management and increases in productivity as fundamental aspects of the day-to-day operations and continually seek to improve efficiency.

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They believe that holding substantial cash and current assets and maintaining low leverage are important for providing sufficient liquidity and meeting the cash outflow requirements of the capacity expansion projects.

Sustainability During 2008, they continued they efforts to ingrain and deliver on Vedanta‟s sustainability strategy, managing and addressing non financial considerations, material and integral to the business and important to the key stakeholders. The sustainable development strategy the “Vedanta Way” is all encompassing. It comprises of the following elements: Nurturing People

People are the key assets. They are committed to build a flexible, flat and learning organization with an engaged and high performing work force. They believe in nurturing and mentoring leaders from within and providing opportunities for growth based on meritocracy, performance and integrity Empowering Communities

Communities are integral to the business. They are committed to enhancing the quality of life of the communities near the operations and creating self sustaining communities. They work to gain and nurture the social license to operate in the host communities Health and Safety

They are committed to providing a safe, secure and healthy workplace for all employees by using the best technology and practices Environmental Stewardship

Respect for nature, enhanced resource conservation and use of environmental friendly technology are embodied in the working

Core competency Vedanta's core competency is in developing low cost, Indian aluminium smelting capacity with captive, low cost power.

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Strategy The strategic goal is to create a world-class metals and mining company and to generate strong financial returns. The strategy is based on the following four key pillars: Continuing focus on asset optimisation and reducing the cost of production. Increasing they capacities through greenfield and brownfield projects. Consolidating they corporate structure and increasing they direct ownership of the underlying businesses to derive additional synergies as an integrated group. Seeking further growth and acquisition opportunities where they can leverage they transactional, project execution and operational skills and experience. They core values of growth, entrepreneurship, excellence, trust and sustainability not only encompass the business philosophy, but also underline the relationships with all the stakeholders, shape the culture of the company and guide us in the actions and decisions.

Integral to the business philosophy

Sustainability is integral to the business philosophy. They see the key drivers of the approach as being: proactive engagement with the stakeholders; attracting and retaining the best talent; the provision of a safe and healthy working environment; the focus on using environmentally friendly technologies in all of the businesses and the drive to conserve natural restheces.

Conservation of natural resources

This is a fundamental aspect of everything they do. they have set ambitious targets at each of the businesses to use less resources. The water and energy conservation performance has been promising and has exceeded the targets in some instances. This area will continue to be an area of focus in the coming years.

The local communities

They believe they have a responsibility to engage with the communities in which they operate and to foster their social and economic development. These principles are embedded across the organisation and are a key element of the employee training, development and performance at all levels.

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The people

The people are the key asset and drive the overall performance. The vision is to build a flexible, agile and flat organisation with world-class capabilities and a high-performance culture. Respect for the individual, valuing diversity, fostering entrepreneurship, ensuring an enabling environment and developing a “can do” attitude is a way of life at Vedanta. Health and safety

vedanta is committed to achieving best practice in health and safety at all of the sites. The systems are well established and are regularly reviewed and monitored taking into account the own experiences and industry best practice. Knowledge-sharing around Vedanta‟s companies plays an important part in this process.

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Future plans of Vedanta: They possess a strong portfolio of greenfield and brownfield projects that we intend to pursue: 

Copper segment: KCM is expanding its smelting and mining capacities. KCM is constructing a new 300,000 tpa smelter at Nchanga, which they expect to commission in mid-2008. KCM is developing the KDMP, which is expected to increase KCM‟s Konkola mine copper ore output to 7.5 mtpa and be completed in 2010.

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Zinc segment: In April 2008, HZL announced $900 million of expansion projects to increase its total lead-zinc capacity to 1,065,000 tpa with fully integrated mining and captive power generation capacities. These projects include: o

establishing two brownfield smelters which are expected to increase the production capacities of zinc and lead by approximately 210,000 tonnes and 100,000 tonnes, respectively, at Rajpura Dariba in the State of Rajasthan, both of which are expected to be completed by mid-2010;

o

expanding ore production capacity at the Rampura Agucha mine from approximately 5 mtpa to 6 mtpa and at the Sindesar Khurd mine from approximately 0.3 mtpa to 1.5 mtpa. HZL is expected to start mining activity at the Kayar mine, which is expected to have a production capacity of approximately 0.3 mtpa. These projects are expected to be completed by early 2012;

o

setting up a captive power plant with a capacity of 160 MW at Rajpura Dariba, which is expected to be completed by mid-2010; and

o

increasing silver production from the current levels of approximately 100 to 120 tpa to approximately 500 tpa, primarily from the Sindesar Khurd mine where silver occurs at approximately 200 parts per million (“ppm”).

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Aluminium segment: Vedanta Aluminium is building a greenfield 500,000 tpa aluminium smelter, together with an associated 1,215 MW captive power plant, in Jharsuguda in the State of Orissa, in two phases of 250,000 tpa each. Commissioning of the first phase commenced in May 2008, a year ahead of schedule, and will be progressively commissioned during fiscal 2009. Work has commenced on the second phase and they expect it to begin commissioning in 2010.

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Power segment: They are executing the plan to enter the commercial power generation business with Sterlite Energy‟s construction of a 2,400 MW thermal coal-based power facility (comprising four units of 600 MW each) in Jharsuguda in the State of Orissa. The project is expected to be progressively commissioned from December 2009. They have obtained coal block allocations of 112.2 million tonnes from the Ministry of Coal to support this facility. In addition, BALCO entered into a memorandum of understanding in October 2006 with the Government of Chhattisgarh, India and the CSEB to build a thermal coalbased 1,200 MW power facility, along with an integrated coal mine, in the State of Chhattisgarh. 18

Ideally positioned to capitalise on India’s growth and resource potential They believe that the experience operating and expanding the business in India will allow us to capitalise on attractive growth opportunities arising from factors including: 

India‟s large mineral reserves. According to the IBM 2005, the total copper ore, lead-zinc ore, bauxite and iron ore resources of India are estimated at 1.4 billion tonnes, 0.6 billion tonnes, 3.3 billion tonnes and 25.2 billion tonnes, respectively. According to the Geological Survey of India 2008, the total coal resources of India are 264.5 billion tonnes as of 1 April 2008. According to CRISIL Research, India‟s bauxite reserves are the fifth largest in the world with total recoverable reserves estimated at 2,600 million tonnes, and according to the Energy Information Administration, a statistical agency of the United States government, India has the fourth largest coal reserves in the world as of 2007. In addition, according to Indian Steel Alliance, India has the sixth largest iron ore reserves in the world.

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India‟s economic growth and proximity to other growing economies. India is one of the fastest growing large economies in the world with a 9.6% increase in real GDP from fiscal 2006 to 2007 and a 9.0% increase in real GDP from fiscal 2007 to 2008, according to the Central Statistical Organisation Ministry of Statistics and Programme Implementation. This growth has been driven primarily by significant increases in industrial production and investments in infrastructure. They believe that the focus on the metals and power segments will allow us to directly benefit from this growth. In addition, India is strategically located close to other growing economies in China, Southeast Asia and the Middle East.

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India‟s large and inexpensive labour and talent pools. India has, compared to other industrialised nations, low labour costs and a large and skilled labour pool, including many well-educated professionals. According to Brook Hunt, the demand for copper, zinc and aluminium in India is expected to grow from 458,000 tonnes, 428,000 tonnes and 1.1 million tonnes in 2006 to 982,000 tonnes, 824,000 tonnes and 2.5 million tonnes in 2015, representing CAGR of 8.8%, 7.5% and 9.6%, respectively. According to CRU, demand for iron ore in India is expected to grow from 71.2 million tonnes in 2007 to 129.0 million tonnes in 2012, representing a CAGR of 11.4%.

Entrepreneurial management team with outstanding track record The senior management has significant experience in all aspects of the business and has transformed Vedanta into a leading metals and mining company that is listed on the LSE and included in the FTSE 100 Index. Mr. Anil Agarwal, the founder, remains involved in overseeing the business as the Executive Chairman. The experienced and focused management and dedicated project execution teams have a proven track record of:

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successfully implementing capital-intensive projects to increase the production capacities: o

increasing the lead metal capacity of HZL‟s lead-zinc smelter at Chanderiya from 35,000 tpa to 85,000 tpa in February 2006;

o

increasing the copper anode capacity of Sterlite‟s Tuticorin copper smelter from 180,000 tpa to 300,000 tpa in 2005 and then to 400,000 tpa in November 2006;

o

completing brownfield expansions with the addition of HZL‟s two hydrometallurgical zinc smelters with 170,000 tpa capacity each, together with coal-based captive power plants of 154 MW and 80 MW at Chanderiya in the State of Rajasthan in May 2005 and December 2007, respectively. The capacities of both smelters were increased to 210,000 tpa through de-bottlenecking in April 2008;

o

increasing the capacity of the Rampura Agucha lead-zinc mine and processing plant from 2.4 mtpa to 5.0 mtpa of ore to supply the brownfield zinc smelter expansion at Chanderiya in the State of Rajasthan between 2003 and 2008; and

o

expanding the Korba facility by adding a 245,000 tpa aluminium smelter to bring the total installed capacity to 345,000 tpa of aluminium in November 2006;

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selecting attractive acquisition opportunities and successfully improving the operations and profitability of acquired businesses: o

on 5 November 2004, they acquired a 51.0% ownership interest in KCM through the wholly-owned subsidiary, VRHL, and on 9 April 2008, they acquired an additional 28.4% ownership interest in KCM following the exercise of the call option, increasing the Group‟s ownership interest to 79.4%; and

o

on 23 April 2007, they acquired a 51.0% ownership interest in Sesa Goa through the acquisition of Finsider International Company Limited (“Finco”) and further acquired a 0.2% ownership interest in Sesa Goa through an open offer in September 2007, increasing the Group‟s ownership interest to 51.2%.

They utilise project monitoring and assurance systems to facilitate timely execution of the projects. In addition, they have established relationships with leading domestic and international vendors that support the expansion projects. Since the UK listing of Vedanta, they have spent $4,476.8 million through fiscal 2008 on the expansion projects in the copper, zinc, aluminium and commercial power generation businesses.

They acquired the zinc business through the acquisition of HZL and the main aluminium business through the acquisition of BALCO. In both instances, they have been successful at increasing production levels from the existing assets by improving operational efficiencies, 20

lowering the costs of production by commissioning captive power plants and growing the businesses through capacity expansions, specifically:

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increasing HZL‟s production from 172,140 tonnes of zinc ingots and 214,447 tonnes of zinc mined metal content when they acquired HZL in 2002 to 218,862 tonnes of zinc ingots and 551,295 tonnes of zinc mined metal content in fiscal 2008, representing an increase of 27.1% and 157.1%, respectively, by increasing the production of HZL‟s original two hydrometallurgical zinc smelters, one lead-zinc smelter and three lead-zinc mines; and

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increasing the production of BALCO‟s original aluminium smelter from 89,164 tpa when they acquired management control of BALCO in 2001 to 109,279 tpa in fiscal 2008, representing an increase of 22.6%.

Ability and capacity to finance world-class projects through strong cash flow and prudent financial policies

They have generated strong cash flows in recent years due to the substantial volume growth, robust commodity prices and the cost reduction measures as illustrated by the improved cash flow from operating activities of $2,232.9 million in fiscal 2008 compared with $632.2 million in fiscal 2006. Moreover, they have a strong balance sheet which will enable us to finance future expansion projects.

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