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Vedanta Resources (VED)

  Print      Mail a friend       Annual reports

Monday 21 June, 2004

Vedanta Resources

Final Results

Vedanta Resources PLC
21 June 2004


21 June 2004

Vedanta Resources plc Audited Preliminary Results for the year ended 31 March
                                      2004

Highlights

• Group(1) turnover increased by 33.8% to US$1,289.5 million (2003:
US$963.1 million)

• Group EBITDA(1) increased by 43.9% to US$322.7 million (2003: US$224.3
million)

• Group operating profit before exceptional items(2) up by over 50%

• ROCE(1) up from 14.4% to 16.8%

• Profit for the year increased 171.8% to US$66.6 million (2003: US$24.5
million)

Listed in London in December 2003, raising net proceeds of US$825.3 million

Significant progress towards strategic objectives

Cost of production significantly reduced

• Copper reduced by 14% to 7.8 US cents per lb (2003: 9.1 US cents per
lb)

• Zinc reduced by 14% to 25.9 US cents per lb (2003: 30.1 US cents per
lb)

• Aluminium costs will undergo a step change with the commissioning of
the Korba smelter, starting in 2006.

Major capacity expansions underway as part of a US$2 billion programme of
investment

• At Tuticorin in the copper business

• At Rampura Agucha and Chanderiya in the zinc and lead business

• At Korba and Orissa in the aluminium business

Good progress in consolidating Group ownership

• 5% increase in Vedanta's(1) holding in Sterlite(1) with a further 2.4%
post year end

• 18.92% increase in Sterlite's holding in HZL(1)

• Sterlite rights issue will lead to further consolidation of group
ownership structure


Brian Gilbertson, Chairman of Vedanta commented:


'This is a sound result for Vedanta. All of our businesses are delivering
improved performance, and as the benefits of the US$2 billion capital investment
programme come through over the next few years, they will support our
progressive dividend policy and superior shareholder returns.'


Anil Agarwal, Chief Executive of Vedanta commented:

'I am encouraged by the progress that has been made since flotation. Over that
period we have seen good production growth in several areas which, combined with
cost control and higher metals prices, has resulted in excellent financial
results.'

(1) See Note 11 - Glossary and Definitions

(2) See Consolidated Profit and loss account

CHAIRMAN'S STATEMENT

The Listing(1) of Vedanta Resources plc ('Vedanta' or the 'Company') on the
London Stock Exchange in December last year was a watershed for the Group.
Thanks to the growing awareness among international investors of the potential
of the Indian economy, and thanks equally to the strong growth prospects of the
Group, we were able to raise US$825.3 million, net of expenses. This was an
amount we judged sufficient to complete the capital programmes at our existing
operations, and to bring our two new mega-projects to full production. That
outcome constituted the second largest listing on the London Stock Exchange in
2003 and the first primary listing there of an Indian company, a tribute to the
initiative of Anil Agarwal in building the Group.

At the time of the Listing, we committed ourselves to a four-pillar strategy
which, if successfully implemented, will give the Group a growth profile
unrivalled in our industry. Sound progress has been made since then and so far
there have been no material set-backs.

The first pillar is to achieve optimum operating efficiency at our existing
operations. Committed capital expenditures, totalling around US$400 million,
will enable us to modernise, de-bottleneck and expand the output of our plants,
with beneficial impact on our unit costs. Progress this past year was
particularly evident at our zinc operation, HZL where costs have come down
significantly, particularly helped by control of energy input costs. The new
copper smelter at Tuticorin is now mechanically complete after some
disappointing delays. The new acid and power plants are now in use, and full
start up will occur as soon as the authorities issue the final permits. We
expect to receive these in a few weeks.

The second pillar of our strategy is to complete our two mega-projects, the
250,000 tpa(1) Korba aluminium smelter at a capital cost of US$900 million, and
the 1 million tpa Orissa alumina refinery (capital cost US$800 million). First
metal output at Korba is planned for March 2006; successfully achieved, this
will constitute a rapid construction programme by international standards. At
Orissa, production is scheduled to commence by March 2007. Our studies suggest
that the bauxite resources and regional potential could sustain substantially
larger outputs in the years ahead. Good progress is being made on both projects.
The civil engineering works there were completed ahead of the monsoon and some
120 of the 288 pots were in place by the end of May 2004. At Orissa, the designs
and plans are well developed and civil engineering work has begun on the site
and surrounding facilities. The project involves some 40 engineering packages
and orders for around half of these have already been placed. Our project
managers have embraced the challenges of delivering these projects on time and
within budget, and remain confident of successful delivery. We are considering
the possibility of introducing a partner into the Orissa project, to join us in
developing the substantial regional potential to its full capacity in the
decades ahead.

The third pillar of our strategy is to release the value trapped within the
Group structure, by consolidating ownership. Here, satisfactory progress has
been achieved in the six months since Listing. We have made two purchases of
Sterlite shares. The first of 4.98% in January 2004 for US$58.0 million and then
2.4% in April 2004 for US$21.4 million, and we recently announced terms for a
US$440 million rights issue in Sterlite, all of which are likely to increase our
holding. Studies are currently under way to establish how further consolidation
might best be achieved.

Another opportunity open to us, is our option to acquire the Government's(1) 49%
holding in BALCO(1). A valuer is to be appointed by the Government and the Board
(1) will then be in a position to report back to shareholders.

Increased ownership of assets with growing profits is a happy outcome. As
detailed in the Operating and Financial Review herein, consolidated Group
operating profit for the year ended 31 March 2004 was US$237.1 million, up 107%
from US$114.6 million in the previous year. Our EBITDA margin (1) has climbed
from 23%, to 25%, and our return on capital employed ('ROCE') has reached 16.8%
(2003: 14.4%). As our capital projects are completed - effectively tripling our
pre-Listing capital base - and start contributing to Group cash flows, the
financial benefits to our shareholders should be material. On the basis of this
year's results and future prospects, and in keeping with the announced
progressive dividend policy, the Directors(1) are recommending a dividend of 5.5
US cents per Ordinary Share(1), representing a dividend for the four months from
Listing to the end of the financial year equivalent to 16.5 US cents for the
full year. This dividend reflects our confidence in the cash flows and stability
of the Group, and translates to a yield of 3.16% at current market prices.

The fourth and final pillar of our strategy is to seek additional investment
opportunities where we believe we have the necessary skills to add value. We
remain preferred bidder for Konkola Copper Mines, which was indicated as a
possible investment in our Listing Particulars(1). We are in the final stages of
evaluating an acquisition structure that should bring substantial benefits to
our shareholders.

The currently planned investment programme will be funded from the Listing
proceeds, from the Free Cash Flow(1) and an increase in debt, which is covered
by our balance sheet. We expect our gearing to remain at prudent levels, rising
towards 40% during the investment phase.

Shortly after the year end the general election in India brought a new coalition
Government into power. There was much market uncertainty in the immediate
aftermath of that unexpected change. Initial statements by the incoming
Government on its privatisation policy did not alleviate investor concerns and
we hope for greater clarity in the months ahead. Although Vedanta's growth
targets over the next few years will be determined almost entirely by its
already committed projects, in the longer term we would welcome further
investment opportunities, including privatisations, in an economy that has such
potential.

We should also recognise that the outcome reflects a well-functioning democratic
process in what is the world's second most populous nation, and brings to power
a Government committed to improved economic circumstances for the vast numbers
that are poor. Such improvement can only come from growth in the overall economy
and that in turn will fuel demand for Vedanta's commodities - aluminium, copper
and zinc - without which growth in a modern economy is not possible.

In the light of our progress since Listing, the trajectory of the Vedanta share
price has been most disappointing. Issued at £3.90, the shares have since traded
well below that level. In my judgement, Vedanta is today a very undervalued
share, and this situation will inevitably correct itself as we methodically
deliver the key results of our corporate strategy over the next two years.

Our Listing carries with it the commitment to the highest standards of corporate
governance. Responsibility for delivering on this commitment rests in the first
instance with the Board of Directors. The one week delay in reporting our
results was therefore most disappointing to the Board, as it was to
shareholders. We have undertaken to review our reporting structures and
authorities to prevent any recurrence.

On 22 May 2004, Mr P. Chidambaram resigned from the Board, following his
appointment as Finance Minister in the new Indian Government. I would like to
thank him for his contribution and I am sure that he will play a pivotal role in
the continuing development of India. I am very pleased to welcome as new
Directors, Mr Naresh Chandra (who has had a distinguished career in Government
in India, with much recent experience in governance matters) and Mr Jean-Pierre
Rodier (the successful former Chairman and Chief Executive of Pechiney, a
leading aluminium producer, who also has wide previous experience in copper and
zinc). In preparation for Listing we appointed Mr Peter Sydney-Smith as Finance
Director, formerly Finance Director of BPB.

These Directors will strengthen and complement the skills and experience of the
Board, and bring sound judgement to our future deliberations. The appointment of
these Directors gave us the opportunity to further strengthen the Board
Committees and bring our Board structures in line with the new Combined Code.
This reaffirmed our commitment to best practice corporate governance.

I commend the Vedanta executive team, and our employees throughout the Group,
for the sound progress achieved since Listing. Their talents and commitment will
be the critical ingredients in delivering on the ambitious targets that are set
for the year ahead.


Brian Gilbertson
Chairman
18 June 2004


OPERATING & FINANCIAL REVIEW

Operational and financial highlights

On 10 December 2003, Vedanta Resources plc achieved a primary listing on the
London Stock Exchange. Vedanta Resources plc issued 130 million shares at a
price of 390p each, giving net proceeds of US $825.3 million. These proceeds are
being applied to carry out the strategy stated in our listing particulars:

  * Optimise the performance of the existing assets
  * Greenfield growth
  * Consolidate the Group structure
  * Leverage established skills

On 15 March 2004, the Group was admitted to the FTSE 250 index, and became the
first major Indian group to achieve a primary listing on the London Stock
Exchange.

It has only been six months between our Listing and the production of our first
Annual Report, but a great deal has been achieved in that time and the progress
made has been encouraging.

Over that period we have seen good production growth in several areas, which
when combined with cost control and strong metal prices, has resulted in strong
financial results. Turnover has increased by 34% to US$1,289.5 million. Group
operating profit has increased by over 100% to US$237.1 million for the year,
compared to US$114.6 million in 2003. At the year end our EPS(1) was 23.3 US
cents, (compared to an EPS on Underlying Profit(1) of 24.5 US cents ), based on
286 million ordinary shares in issue.

We have continued to make progress on improving output, productivity and cost
reductions in all of our operations, which was made difficult by the headwind of
shipping and energy costs. The Indian rupee was less volatile than many other
currencies, with the average rate moving from INR48.5 to INR45.9 to the US
dollar.

We raised US$825.3 million net of expenses when we listed, to support a US$2
billion capital programme, of which US$300 million has been invested so far. The
balance is to be spent over the next three years, principally at Korba and
Orissa. At the year end net cash was US$422.3 million. The capital raised,
combined with the cashflow generated within the Group, will maintain our debt
within prudent levels, while enabling us to carry out all of our plans.

Consolidation of group structure

One aim of our strategy has been to simplify the Group structure and enhance
shareholder return by increasing our ownership of the underlying assets and
reducing minorities. Since Listing we have made two purchases of Sterlite shares
and this has taken our effective interest to 68.1% to date. We recently reported
a rights issue at Sterlite and we will take up any rights not taken up by other
shareholders. This should increase our holding further and will put cash into
the subsidiaries for their development plans. Minorities' share of earnings is
similar to last year at 57.7%. This is partly due to the success of the zinc
business, where minority interests are high. This number is likely to reduce
going forward, and was already running at 53.5% in the second half of the year,
reflecting the actions that we have taken.

Tariff reductions

In January 2004 the Government of India reduced tariffs across all of our
products. The tariffs were reduced by 5% on copper and zinc, and a special
tariff of 4% was permanently removed across all product groups including inputs
of imported materials, such as imported coal. This has left tariffs of 15% on
aluminium and 20% on copper, zinc and lead. The net impact on our EBITDA and
operating profit was a reduction of around US$10 million over a period of some 3
months. We believe that tariffs in India will continue to decline, though we
cannot predict when any reduction will take place.

Our aim is to reduce our costs of production, to ensure that we remain
competitive. Expansion will help reduce costs and continued liberalisation will
lead to a more open economy and stronger economic growth. This is obviously
beneficial for the sale of our products and it is a change and challenge that we
welcome.

Metals pricing and usage

Exceptional demand from China and recovery in several western economies have
driven metals prices up to high levels. The level of metals prices does, of
course, have a direct impact on our business. Our volume, however, is based on
levels of demand within India and is less dependent on the global scene. India
has enjoyed a period of strong economic growth and this is also reflected in our
results.

Zinc and lead

The zinc market was buoyant last year with average prices on the London Metal
Exchange of 40.8 US cents per lb compared to 35.2 US cents per lb in 2003. We
are a fully integrated producer and this means we benefit fully from any
strength in the metal price. Global demand rose fast at around 3% in 2003, but
this is modest compared to an increase in India of some 9%. Nearly 75% of zinc
in India is used in galvanising and substantial investment in infrastructure
projects is driving the demand.

Our share of the Indian zinc market rose significantly from 62% to 75%. This was
achieved by increasing production and by tolling around 36,000 tpa of excess
contained zinc in concentrate. We currently have surplus mining capacity, but as
our own new smelting capacity is commissioned at Chanderiya, this tolled zinc
will be moved through our smelters, at higher margin.

The output of zinc concentrate rose to 615,000 tpa (2003: 486,000 tpa) and
73,000 tpa of lead (2003: 56,000 tpa). Production of finished zinc metal
increased from 207,000 tpa to 221,000 tpa. Several initiatives were taken to
reduce costs, through better energy use, purchasing systems and productivity
rates. This reduced the unit cost of production from 30.1 US cents per lb to
25.9 US cents per lb. This was particularly pleasing given the increase in
metallurgical coal costs. We believe that further work can be done, particularly
in reducing power costs and making further operational improvements.

We continue to make good progress with the implementation of our growth plans in
the zinc business. Over the course of this financial year we are building a new
power plant and smelter at Chanderiya which will take our production there from
100,000 tpa to 270,000 tpa. This should be commissioned by June 2005. Over the
same period we are increasing the output at the Rampura Agucha mine by 1.3
million tpa to 3.3 million tpa, which will feed the smelter and is due to
commence in December 2004. A captive power plant of 154MW(1) is being installed
which should play a significant role in reducing costs. These expansion plans
will lift our zinc capacity from a total of 210,000 tpa to 380,000 tpa.

The Indian lead market has a demand supply gap of around 100,000 tonnes. We have
consequently decided to more than double our refined lead production capacity at
Chanderiya from 34,000 tonnes to 85,000 tonnes. The facility is expected to be
commissioned by July 2005.

Copper

Vedanta is primarily a refiner of copper and the copper market was challenging
for us over the year. Global demand grew at around 2.6%, nearly twice the level
of supply. This was largely due to increased demand from China for refined metal
and some unplanned shutdowns at substantial mines, all leading to a very tight
global market. Stocks of copper reduced significantly over the year and copper
prices reached a nine year high of 136 US cents per lb.

Due to the tight copper market, combined treatment and refining charges TC/RC(1)
during 2004 averaged around 8 US cents per lb against the average of 13 US cents
per lb during 2003. We source a part of our concentrate requirements through our
own mines, and we continue to increase our contracts in the TC/RC market and
thereby reduce our exposure to the spot market.

It seems likely that the market will continue to be tight, though supply is
slowly starting to recover and some global smelting capacity has been withdrawn
as a consequence of the low refining charges.

As our production numbers show, in spite of the tight market, we were able to
source copper and even increased production, with a focus on higher value areas.
Cathode production increased over the year by 15% to 178,700 tonnes (2003:
155,700 tonnes), production of copper wire rods rose by 29% to just under
123,000 tonnes. With sufficient capacity for copper wire rods already in place,
the additional conversion of cathodes into rods incurs minimal additional
capital, but has produced some US$20 million of EBITDA, around twice the
previous level.

We continued to make strong progress on cost reduction, with the unit cost
declining from 9.1 US cents per lb to 7.8 US cents per lb. This was mainly
achieved through reduced consumption of power and petroleum products and
improvement in recovery rates at the smelter.

Over the year Tuticorin smelter has been undergoing significant expansion from
180,000 tpa of capacity to 300,000 tpa. The smelter and associated plant is
mechanically complete and under commissioning. We anticipate that when the full
benefits of the expansion come on stream, we should be able to reduce our unit
cost by a further 2.0 US cents to 5.8 US cents per lb.

Aluminium

The use of aluminium in India remains modest compared to the rest of the world
but with significant growth potential. Increased global demand again put
pressure on prices, with aluminium prices rising by 10%. Alumina prices (the raw
material for aluminium) remained high being driven by the demand from China as
they increase aluminium capacity.

The production of aluminium at Vedanta is divided between two separate Group
subsidiaries, MALCO(1) and BALCO. Both companies have output close to operating
capacity with combined production of 129,000 tpa (2003: 127,000 tpa). BALCO
represents around 75% of aluminium output. Production has seen a modest
increase, but there was a focus on improving product mix with higher value added
products, such as rods and rolled products. We anticipate that the impact of
value added product will increase next year. A new cold rolling facility of
36,000 tpa was commissioned during the year and will reach full production in
2005.

The unit cost of production at BALCO decreased from 56.8 US cents per lb to 56.2
US cents per lb, helped by an improvement in captive power production, which
reduced our need to purchase more expensive power from the grid. Our costs were
held back by the increase in caustic soda prices and the US$/Indian rupee
exchange rate. There was a significant voluntary retirement scheme, which saw
employee numbers decline by 775 to 4,000. An exceptional charge of US$13.3
million was incurred relating to this programme. In carrying out these
programmes we take full account of the welfare of the individuals, many of whom
have worked with the Group for many years.

Costs at MALCO rose over the year, from 48.9 US cents per lb to 53.8 US per
cents per lb, mainly as a result of rising fuel costs and an additional tax
imposed by the state government on power generation. MALCO purchase imported
coal, where prices rose faster than the domestic coal used for power generation
at BALCO.

The aluminium business is undergoing significant change. The major developments
at Korba and Orissa will transform this business over the next three years
enabling us to both increase production and significantly reduce our unit cost
of production. A 250,000 tpa smelter is being built at Korba, which will take
our total capacity from 135,000 tpa to 385,000 tpa. A captive power plant,
generating some 540MW, is being built as part of this scheme. The cost of this
project is around US$900 million and should be commissioned by March 2006,
though the power plant should be completed some months before that. Orders for
critical and long lead items have already been placed and work is currently on
schedule.

During the year, work started on the alumina refinery with bauxite mining and
captive power generation facility at Lanjigarh in the mineral rich state of
Orissa, India. The project should be completed by March 2007, developing the
fourth leg of our business. It will not only cater for alumina demand at the new
Korba smelter but will also help Vedanta access export markets. The project is
progressing on schedule with critical orders for refinery and power plant
already having been placed and preliminary site civil engineering works having
been started.

Corporate social responsibility

As a major industrial company and employer we have an important role to play in
our local communities. Although there has been much growth and improvement in
India over the years, there remain substantial parts of the population whose
health and economic welfare is fragile. We are committed to working in this area
and hope that we can share the benefits of our success and growth with our local
communities. At all of our sites we make it clear that safety is of the upmost
importance.

Financial reporting

The financial statements have been prepared in accordance with United Kingdom
generally accepted accounting principles ('UK GAAP') and the requirements of the
Companies Act 1985. Vedanta presents its accounts US dollars with subsidiary
companies maintaining accounts in their local currency and translating to US
dollars upon consolidation.

The financial information has been prepared on the basis that the Group had
existed throughout the two year period beginning 1 April 2002. The Directors
believe that this information reflects the ongoing business of the Group more
clearly.

Financial results for the year ended 31 March 2004

Group operating profit was US$237.1 million, an increase of 107% on the prior
year. These excellent results were underpinned by an outstanding contribution
from the Zinc Business, as well as a steady increase in profits from the
Aluminium Business whilst operating at close to full capacity. Copper
contributed robust profits despite challenging TC/RC conditions.

There was an operating exceptional charge of US$13.3 million relating to
voluntary retirement schemes at BALCO and HZL and follows similar schemes in
2003, also at BALCO and HZL.

The operating profit includes US$14.0 million of foreign exchange gains on
working capital balances that were largely offset by charges of US$9.9 million
relating to the Reward Plan(1) and against old debtor balances. The foreign
exchange gains were partly reversed in the first two months after the year end
as a result of the weakening of the Indian rupee.

The share of loss in associates is attributable to the Group's interest in India
Foils Limited. India Foils Limited management are implementing a turnaround
strategy to return the business to profitability.

Foreign exchange and net interest

The Group had a net interest expense for the year of US$1.3 million, including
US$14.1 million of foreign exchange gains on foreign currency funds held by the
Group. These gains were partly reversed subsequent to year end. If these gains
are excluded, the Group had a net interest expense of US$15.4 million, a
reduction of US$19.6 million on the 2003 charge. This is due to a combination of
factors, including the interest earned on the Listing proceeds, and lower
interest rates arising from successfully re-negotiating debt facilities to take
advantage of lower Indian interest rates.

Taxation

The Group's effective taxation rate has risen to 32.6% (2003: 26.1%). The
reasons for this increase are two-fold. Firstly, change in profit mix and lower
tax shelters increased the effective rate of tax, and secondly, there were two
significant unusual tax items in the year. Of the unusual items, the Group has
foregone a tax deduction of US$1.5 million for the cost of shares awarded to
employees in recognition of their contribution to the Company's development and
growth over the period leading up to the Listing. In addition, a tax charge of
US$5.4 million arose on the purchase of 4.98% of Sterlite from the SEWT(1). The
Group has incurred this tax charge but the profit relating to the charge was
eliminated upon consolidation. If these two items are excluded, the Group's
effective tax rate would be 29.6%. The cash tax rate of the Group was 24.6%
(2003: 32.5%). The future cash tax rate is expected to remain around this level,
benefiting from capital investments.

Minority interests

The minority interest charge for the year was 57.7% of post tax profits. In the
first six months of the year the charge was 63.3% and this fell to 53.5% in the
last six months.

The improvement in the second half of the year arose from acquiring an
additional 18.92% of HZL and the increased ownership of Sterlite (see below).
However, full year minority interests of US$90.8 million (2003: US$33.4 million)
reflects the significant improvement in the profitability of HZL, which is
subject to a large effective minority interest (57.3% at 31 March 2004).

Profit for the year

The profit for the year was US$66.6 million against US$24.5 million in 2003, an
increase of 172% reflecting higher commodity prices, lower costs of production
and success in simplifying the Group structure.

The Underlying Profit was US$70.2 million, an increase of 106% on the prior year
Underlying Profit of US$34.1 million (See note 4).

EPS and dividends

The EPS based on profit for the year was 23.3 US cents, against 8.6 US cents in
2003. The EPS based on Underlying Profit rose 106% to 24.5 US cents in 2004.

To provide a meaningful comparison, the EPS for both years has been calculated
using the total number of shares in issue immediately after Listing (286
million). Any issue of shares after Listing has been included in calculating the
weighted average number of shares for 2004. There is no difference between basic
and diluted EPS (see note 4).

As set out in the Listing Particulars, the Group will pursue a progressive
dividend policy to reflect the Group's growth prospects whilst still ensuring an
appropriate level of dividend cover is maintained.

The Board has proposed a dividend of 5.5 US cents per Ordinary Share in respect
of the year ended 31 March 2004, being approximately one third of the dividend
that would have been proposed had the Group been in existence for the full year
(being 16.5 US cents per Ordinary Share).

If approved by shareholders at the AGM(1) to be held on 29 July 2004, the final
dividend will be paid on 20 August 2004 to shareholders on the register as at
the close of business on 23 July 2004.

Subject to shareholder approval, the dividend will be paid in US dollars unless
shareholders elect to receive dividends in pounds sterling. Included within the
Annual Report will be a currency option which should be completed if
shareholders wish to receive a dividend in pounds sterling. The exchange rate to
be applied to convert the dividends into pounds sterling will be 0.547 which is
the average exchange rate for the five business days prior to 18 June 2004.

Future dividends will be paid in August and January, in approximate proportions
of one third and two thirds of the annual dividend respectively.

Cash flow

There was a net cash inflow to the Group of US$753.4 million as a result of the
Listing proceeds of US$825.3 million.

The higher commodity prices and increased sales volumes have resulted in debtor
and stock cash outflows of US$93.3 million. This was mostly offset by a higher
level of creditors, but when including the increased level of extended trade
credit, to take advantage of competitive financing, there was a working capital
inflow of US$169.8 million.

Acquisition expenditure includes US$70.5 million to exercise a call option to
acquire an additional holding in HZL and deferred consideration of US$10.6
million for the acquisition of 20% of SOVL(1) in 2003.

The Group has capital expansion projects in excess of US$2.0 billion, which will
deliver a significant increase in capacity and future earnings.

Expenditure to date on these projects totalled US$294.3 million with a further
US$1.8 billion outstanding, of which two thirds has been committed and 80% is to
be spent over the next two years.

A substantial portion of the estimated project cost has funding in place and
financial initiatives are ongoing to ensure the completion of all funding
requirements in the near future.

Balance sheet

Capital employed

Capital Employed(1) increased from US$841.3 million to US$1,000.9 million as a
result of the expansion projects, with partial offset from improved working
capital.

Benefiting from higher profits, the Group's ROCE (net of tax) increased to 16.8%
in 2004 against 14.4% last year, comfortably above the Group's cost of capital.
These continuing strong returns underline the earnings potential in the Group.
In the short term the major expansion projects at Orissa and Korba are expected
to reduce the Group's ROCE. This reduction will be offset to an extent by the
completion of Tuticorin this year and Chanderiya and Rampura Agucha next year.

Non-core assets

Following the Listing of the Company, the Directors have identified a number of
assets which are regarded as non-core to the Group's businesses. These assets
have a carrying value of approximately US$65.0 million in aggregate. These are
being actively marketed for disposal and are expected to realise their book
value. The disposal programme is being closely monitored to maximise
realisation.

Minority interests and simplification of the group structure

The minority shareholders' interests rose modestly to US$437.1 million. The
current year profit attributable to minority interests of US$90.8 million plus
foreign exchange movements (US$39.4 million) were offset by the effect of higher
ownership of subsidiary companies. A central pillar of the Group's strategy is
to simplify the ownership structure so as to maximise earnings potential. In the
second half of the year this strategy has progressed as follows:

  * HZL (18.92%)

On 12 November 2003, the Group acquired an additional 18.92% holding in HZL for
US$70.5 million, by exercising a call option on the Government of India, taking
direct ownership to 64.9% (effective ownership at 31 March 2004 is 42.7%).

  * Sterlite (4.98%)

In January 2004, the Group acquired an additional 4.98% holding in Sterlite from
the SEWT (a quasi-subsidiary) for a consideration of US$58.0 million with the
funds being retained within the Group. This increased the Group's effective
interest in Sterlite to 65.8%.

In April 2004, the Group acquired a further 2.4% of Sterlite from the SEWT for a
consideration of US$21.4 million, taking the Group's effective holding to 68.1%.

• Sterlite rights issue

In December 2003 Sterlite initiated a rights issue that received clearance from
SEBI in June 2004. The terms of this offer were altered to a 1 for 2 offer to
take account of market developments and this has been re-submitted to SEBI for
final approval. The Group has fully underwritten the issue in support of the
strategy to fund expansion and simplify the Group structure. Completion is
expected in the second half of 2004.

Net cash/(debt) and gearing(1)

The receipt of the Listing proceeds resulted in the Group holding net cash of
US$422.3 million at 31 March 2004, compared to US$331.1 million of net debt in
2003. Therefore, the Group was not geared at 31 March 2004 (2003: gearing
39.4%). In the medium term, the gearing ratio is expected to peak below 40% in
2006-07 as we invest in the expansion projects.

The level of gross debt has risen to US$818.9 million (2003: US$478.0 million)
due to the draw down of new facilities in HZL and BALCO ahead of project
requirements, in line with Indian banking practice.

The debt is largely held by Sterlite, HZL and BALCO, being US$354.2 million,
US$132.8 million and US$251.8 million respectively.

The Group had US$1,188.5 million of current asset investments at 31 March 2004
(2003: US$81.7 million) which is due to holding the Listing proceeds until they
are passed down to subsidiaries, plus the increased cash balances as a result of
the draw down of facilities as described earlier. These funds will be
progressively utilised to finance investment.

Shareholders' funds

Total shareholders' funds increased to US$986.1 million from US$105.0 million at
31 March 2003, benefiting from the Listing proceeds of US$825.3 million and
retained earnings for the year.

Outlook

Metal prices may soften from current high levels, though stocks are low and the
supply-demand balances in several areas suggest that pricing could remain firm.
Regardless of the influence on pricing, the outlook for metal demand in India is
strong and we are well placed to take advantage of this.

We should be able to make further good progress at our zinc operations this
year, increasing volume in line with Indian demand. Tuticorin is ready to
produce from the new furnace and, subject to receiving the permits, the benefits
of this increased capacity and lower costs should be apparent over the course of
the year. We are operating close to capacity at our aluminium operations and
although we will always try to push the limits further, the major change will be
felt when the expansion at Korba comes on stream in March 2006.

There are several opportunities to simplify the corporate structure and we
should be able to report some positive progress over the year.

In the first quarter we have carried out planned shutdowns for maintenance at
Tuticorin (copper) and Chanderiya (zinc and lead). These shutdowns will lead to
a more modest first quarter, but without affecting our overall expectations for
the year.

We will continue to move forwards with our growth projects and continue to
improve on the efficiency of our operations. We approach the coming year with
confidence and with many opportunities to develop.


FINANCIAL AND PRODUCTION HIGHLIGHTS

                                                31 March 2004    31 March 2003

Group turnover (US$ million)                          1,289.5            963.1
Group EBITDA (US$ million)                              322.7            224.3
EBITDA margin                                            25.0%            23.3%
Group operating profit (US$ million)                    237.1            114.6
Group operating profit margin                            18.4%            11.9%
Group operating profit before exceptional               250.4            164.7
items (2) (US$ million)
Group operating profit before exceptional                19.4%            17.1%
items margin
Group operating exceptional items (US$                  (13.3)           (50.1)
million)
Net interest payable (US$ million)                       (1.3)           (35.0)
Effective tax rate                                       32.6%            26.1%
Equity minority interests (US$ million)                  57.7%            57.7%
Profit for the year (US$ million)                        66.6             24.5
Underlying Profit (US$ million)                          70.2             34.1
Return on capital employed                               16.8%            14.4%
Average US$/INR exchange rate                            45.92            48.49

SEGMENTAL ANALYSIS

Copper                                           31 March 2004   31 March 2003
Production cathode (tonnes)                            178,654         155,700
Production copper rods (tonnes)                        122,713          95,100
Unit cost (US cents per lb)                                7.8             9.1
Turnover (US$ million)                                   592.8           406.7
EBITDA (US$ million)                                      94.1           101.0
Net assets (US$ million)                                 169.2           283.6

Aluminium                                        31 March 2004   31 March 2003
Production MALCO (tonnes)                               32,226          31,000
Unit cost MALCO (US cents per lb)                         53.8            48.9
Production BALCO (tonnes)                               96,829          96,000
Unit cost BALCO (US cents per lb)                         56.2            56.8
Turnover (US$ million)                                   223.4           220.7
EBITDA combined (US$ million)                             53.6            38.3
Net assets (US$ million)                                 353.9           187.6

Zinc                                             31 March 2004   31 March 2003
Production (tonnes)                                    220,664         207,100
Unit cost (US cents per lb)                               25.9            30.1
Turnover (US$ million)                                   401.1           291.1
EBITDA (US$ million)                                     179.3            87.1
Net assets (US$ million)                                 391.4           299.3

CONSOLIDATED PROFIT AND LOSS ACCOUNT

--------------------------------------------------------------------------------
                                          Note         Year ended    Year ended
                                                    31 March 2004 31 March 2003
                                                      US$ million (reclassified)
                                                                    US$ million
--------------------------------------------------------------------------------
Group and share of associate's turnover                  1,300.6           975.8
Less: associate's turnover                                 (11.1)          (12.7)
--------------------------------------------------------------------------------
Group turnover                               2           1,289.5           963.1

Cost of sales                                            (973.9)          (733.7)
--------------------------------------------------------------------------------
Gross profit                                              315.6            229.4
Selling and distribution costs                            (35.6)           (30.8)
Administration expenses                                   (60.1)          (107.2)
-----------------------------------------------------------------------------------  
|   -normal                                               (46.8)           (57.1) |
|   -exceptional                                          (13.3)           (50.1) |
-----------------------------------------------------------------------------------
Other operating income                                     17.2             23.2
--------------------------------------------------------------------------------
Group operating profit                        2            237.1           114.6
-----------------------------------------------------------------------------------
|    Operating profit before operating        2            250.4           164.7  |
|    exceptional items                                                            |
|    Operating exceptional items                          (13.3)           (50.1) |
-----------------------------------------------------------------------------------
Share of operating loss in associate                       (1.2)            (0.5)
Loss on disposal of fixed assets                           (1.2)            (0.7)
--------------------------------------------------------------------------------
Profit on ordinary activities                             234.7            113.4
before interest and taxation
Investment income                                          39.7             14.7
Interest payable                                          (41.0)           (49.7)
--------------------------------------------------------------------------------
Profit on ordinary activities              2              233.4             78.4
before taxation
Tax on profit on ordinary                  3              (76.0)           (20.5)
activities         
--------------------------------------------------------------------------------
Profit on ordinary activities                             157.4             57.9
after taxation
Equity minority interests                                 (90.8)           (33.4)
--------------------------------------------------------------------------------
Profit for the financial year                              66.6             24.5
Dividends                                  5              (15.8)               -
--------------------------------------------------------------------------------
Retained profit for the year               5               50.8             24.5
--------------------------------------------------------------------------------
Basic earnings per share (US cents
/share)
Profit for the year                        4               23.3              8.6
Underlying Profit for the year             4               24.5             11.9
--------------------------------------------------------------------------------
Diluted earnings per share (US
cents/share)
Profit for the year                        4               23.3              8.6
Underlying Profit for the year             4               24.5             11.9
--------------------------------------------------------------------------------

There is no material difference between the profit on ordinary activities before
taxation and the profit for the year stated above, and their historical cost
equivalents.

All turnover and operating profit for the year is derived from continuing
operations.

CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
                                                 31 March 2004    31 March 2003
                                      Note         US$ million      US$ million
--------------------------------------------------------------------------------
Fixed assets
Intangible assets                                          3.6              3.7
----------------------------------------------------------------------------------
|    Goodwill                                             12.2             12.5  |
|    Negative goodwill                                    (8.6)            (8.8) |
----------------------------------------------------------------------------------
Tangible fixed assets                                  1,268.4            889.1
Investment in associate                                    2.7              0.3
Other investments                                         36.5             30.1
--------------------------------------------------------------------------------
                                                       1,311.2            923.2
--------------------------------------------------------------------------------
Current assets
Stocks                                                   199.9            170.1
Debtors                                                  245.5            173.5
Current asset investments                              1,188.5             81.7
Cash at bank and in hand                                  52.7             65.2
--------------------------------------------------------------------------------
                                                       1,686.6            490.5
--------------------------------------------------------------------------------
Creditors: amounts falling due within one year
Short-term borrowings                                   (295.3)          (220.3)
----------------------------------------------------------------------------------
|    Loans                                              (245.8)          (220.3) |
|    Convertible bonds                                   (49.5)               -  |
----------------------------------------------------------------------------------
Other current liabilities                               (586.5)          (277.8)
--------------------------------------------------------------------------------
                                                        (881.8)          (498.1)
--------------------------------------------------------------------------------
Net current assets/(liabilities)                         804.8             (7.6)
--------------------------------------------------------------------------------
Total assets less current                              2,116.0            915.6
liabilities
Creditors: amounts falling due after                    (529.9)          (261.4)
more than one year
Provisions for liabilities and                          (162.9)          (144.0)
charges
Equity minority interests                               (437.1)          (405.2)
--------------------------------------------------------------------------------
Net assets                                  2            986.1            105.0
--------------------------------------------------------------------------------
Capital and reserves
Called up equity share capital              6             28.6                -
Shares to be issued                         6                -                -
Share premium account                       7             18.6                -
Merger reserve                              7              4.4                -
Other reserves                              7              8.3             37.9
Profit and loss account                     7            926.2             67.1
--------------------------------------------------------------------------------
Equity shareholders' funds                              986.1            105.0
--------------------------------------------------------------------------------

CONSOLIDATED CASH FLOW STATEMENT
--------------------------------------------------------------------------------
                                                    Year ended       Year ended
                                                 31 March 2004    31 March 2003
                                         Note      US$ million      US$ million
--------------------------------------------------------------------------------
Net cash inflow from operating              6            496.3            233.5
activities   
--------------------------------------------------------------------------------
Returns on investments and servicing
of finance
Interest and other income                                 34.6             19.6
Interest paid                                            (42.0)           (47.7)
Dividend received from fixed asset                         0.8                -
investments
Dividend paid to minority                                (10.1)            (4.9)
shareholders   
--------------------------------------------------------------------------------
                                                         (16.7)           (33.0)
--------------------------------------------------------------------------------

Taxation                                                 (57.5)           (25.5)
--------------------------------------------------------------------------------

Capital expenditure and financial
investment
Payments to acquire tangible fixed                      (349.0)           (45.5)
assets
Proceeds from the sale of fixed                            2.8              1.4
assets
Purchase of fixed asset investments                       (9.2)               -
Proceeds from sale of fixed asset                          1.8              0.8
investments    
--------------------------------------------------------------------------------
                                                        (353.6)           (43.3)
--------------------------------------------------------------------------------

Acquisitions
Purchase of interest in subsidiary                       (81.1)          (160.4)
company
Net cash acquired with subsidiaries                          -             11.6
Issue of shares to minorities                                -              0.7
Buyback of shares from minorities                            -            (40.8)
--------------------------------------------------------------------------------
                                                         (81.1)          (188.9)
--------------------------------------------------------------------------------

Cash outflow before use of liquid                        (12.6)           (57.2)
resources and financing    
--------------------------------------------------------------------------------
Management of liquid resources
(Purchase)/sale of current asset                      (1,065.0)             9.8
investments                             
--------------------------------------------------------------------------------
                                                      (1,065.0)             9.8
--------------------------------------------------------------------------------
Financing
Issue of ordinary shares (net of share      7            825.3                -
issue expenses)
Repayment of share application money        7            (26.2)               -
pending allotment in SOVL
Increase in short term borrowings           9            141.7             53.2
Increase in long term borrowings            9            120.8             45.5
Repayment of non-equity minority            9                -             (4.1)
interests   
--------------------------------------------------------------------------------
                                                       1,061.6             94.6
--------------------------------------------------------------------------------

(Decrease)/increase in cash in the                       (16.0)            47.2
year                                   
--------------------------------------------------------------------------------

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET CASH/(DEBT)

--------------------------------------------------------------------------------
                                                    Year ended       Year ended
                                                 31 March 2004    31 March 2003
                                         Note      US$ million      US$ million

--------------------------------------------------------------------------------
(Decrease)/increase in cash in the          9            (16.0)            47.2
year
Increase in debt                            9           (262.5)           (98.7)
Cash inflow/(outflow) from management       9          1,065.0             (9.8)
of liquid resources    
--------------------------------------------------------------------------------
Increase/(decrease) in net cash/(debt)      9            786.5            (61.3)
resulting from cash flows

Non cash movements in debt                  9                -            (25.6)
Loans and finance leases acquired with      9                -             (3.8)
subsidiary
Foreign exchange differences                9            (33.1)            (9.5)
--------------------------------------------------------------------------------
Increase/(decrease) in net cash/(debt)      9            753.4           (100.2)
in the year
Net debt at the beginning of the            9           (331.1)          (230.9)
year    
--------------------------------------------------------------------------------
Net cash/(debt) at the end of the           9            422.3           (331.1)
year                                    
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

--------------------------------------------------------------------------------
                                                    Year ended       Year ended
                                                 31 March 2004    31 March 2003
                                                   US$ million      US$ million
--------------------------------------------------------------------------------
Profit for the financial year
Group                                                     69.9             26.8
Associated undertaking                                    (3.3)            (2.3)
--------------------------------------------------------------------------------
                                                          66.6             24.5
--------------------------------------------------------------------------------

Gain on reduction of minority interest due to             13.0             25.2
increase in interest in subsidiary
shareholding
Repayment of share application money pending             (26.2)               -
allotment in SOVL
Foreign exchange differences on foreign                   13.2             (6.7)
currency net investments         
--------------------------------------------------------------------------------
Total recognised gains relating to the year               66.6             43.0
--------------------------------------------------------------------------------

NOTES TO THE ACCOUNTS

1. Basis of preparation

Vedanta Resources plc ('Vedanta' or the 'Company') was incorporated on 22 April
2003 and its Ordinary Shares(1) were listed on the London Stock Exchange on 10
December 2003 (the 'Listing') having become the new parent company of the Twin
Star Holdings Group, after the group reorganisation of Volcan Investments
Limited ('Volcan'), Vedanta, Vedanta Resources Holdings Limited ('VRHL') and
Twin Star Holdings Limited ('Twin Star').

Prior to the Listing the Twin Star Holdings Group(1) comprised Twin Star, a
company incorporated and resident in Mauritius, and its principal operating
subsidiaries were Sterlite Industries (India) Limited ('Sterlite'), Bharat
Aluminium Company Limited ('BALCO'), Madras Aluminium Company Limited ('MALCO')
and Hindustan Zinc Limited ('HZL'). The Twin Star Holdings Group was a wholly
owned subsidiary of Volcan. After the Group reconstruction on 10 December 2003,
Twin Star became an intermediate holding company in the Group, with its
underlying investments remaining unchanged, and its immediate parent becoming
VRHL, which in turn became a wholly owned subsidiary of Vedanta. Subsequent to
the Listing, Vedanta was 53.9% owned by Volcan.

The accountants' report for the Twin Star Holdings Group as presented in the
Listing Particulars was prepared on the basis that the disposal of certain
assets (being Sterlite Optical Technologies Limited, Sterlite Optical
Technologies Inc, Allumo AG ZUG, Manjiri Finvest Pvt Ltd and Sterlite Gold
Limited, together with certain amounts receivable from these entities and from
Mr D P Agarwal) to Twin Star International Limited had taken effect prior to 1
April 2000.

To provide information which is meaningful to the Company's shareholders, the
Directors believe that it is necessary to prepare the accounts on the basis that
the Group, excluding the assets sold to Twin Star International Limited, had
existed throughout the two year period beginning 1 April 2002. The Directors
believe that this information reflects the ongoing operations of the Group more
clearly. Vedanta and VRHL's combination with the Twin Star Holdings Group has
been accounted for as a group reconstruction under the provisions of FRS 6
('Mergers and Acquisitions') and is presented as if the Company and VRHL had
been the holding company and intermediate holding company, respectively, of the
Twin Star Holdings Group for each year presented.

Certain balances within the profit and loss comparatives before Group operating
profit for the year ended 31 March 2003 have been reclassified to ensure a
consistent presentation in the Group's financial information. Where
reclassifications have occurred, these are disclosed in the relevant notes.

The consolidated financial information for the Group has been prepared under the
historical cost convention and in accordance with applicable United Kingdom
accounting standards.

2. Segmental analysis

(a) By class of business

The segmental analyses by class of business set out below include a category
called 'Other' which comprises the results and balance sheet items for Vedanta,
VRHL, Vedanta Alumina Limited, Sterlite Paper Limited, Monte Cello Corporation
NV, Twin Star and the aluminium conductor business of Sterlite.

Group turnover
--------------------------------------------------------------------------------
Class of business                             Year ended            Year ended
                                           31 March 2004         31 March 2003
                                             US$ million         (reclassified)
                                                                   US$ million
--------------------------------------------------------------------------------

Aluminium                                          223.4                 220.7
Copper                                             592.8                 406.7
Zinc                                               401.1                 291.1
Other                                               72.2                  44.6
--------------------------------------------------------------------------------

                                                 1,289.5                 963.1
--------------------------------------------------------------------------------


Group operating profit
--------------------------------------------------------------------------------
Class of business                                  Year ended       Year ended
                                                31 March 2004    31 March 2003
                                                  US$ million      US$ million
--------------------------------------------------------------------------------

Aluminium                                                35.4             29.6
Copper                                                   65.6             76.4
Zinc                                                    155.7             60.4
Other                                                    (6.3)            (1.7)
--------------------------------------------------------------------------------
Group operating profit before operating                 250.4            164.7
exceptional items

Operating exceptional items                             (13.3)           (50.1)
--------------------------------------------------------------------------------

Group operating profit                                  237.1            114.6
--------------------------------------------------------------------------------
Aluminium                                                22.1             15.8
Copper                                                   65.6             76.4
Zinc                                                    155.7             24.1
Other                                                    (6.3)            (1.7)
--------------------------------------------------------------------------------

Earnings before interest, tax, depreciation, goodwill amortisation and
exceptional items ('EBITDA')
--------------------------------------------------------------------------------
Class of business                             Year ended            Year ended
                                           31 March 2004         31 March 2003
                                             US$ million           US$ million
--------------------------------------------------------------------------------

Aluminium                                           53.6                  38.3
Copper                                              94.1                 101.0
Zinc                                               179.3                  87.1
Other                                               (4.3)                 (2.1)
--------------------------------------------------------------------------------
Group EBITDA                                       322.7                 224.3

Goodwill amortisation                               (0.5)                 (0.4)
Depreciation                                       (71.8)                (59.2)
Operating exceptional items                        (13.3)                (50.1)
--------------------------------------------------------------------------------

Group operating profit                             237.1                 114.6
--------------------------------------------------------------------------------

Depreciation
--------------------------------------------------------------------------------
Class of business                             Year ended            Year ended
                                           31 March 2004         31 March 2003
                                             US$ million           US$ million
--------------------------------------------------------------------------------

Aluminium                                           18.1                  10.8
Copper                                              28.5                  25.3
Zinc                                                23.6                  21.3
Other                                                1.6                   1.8
--------------------------------------------------------------------------------

                                                    71.8                  59.2
--------------------------------------------------------------------------------

Profit on ordinary activities before taxation
--------------------------------------------------------------------------------
Class of business                                 Year ended       Year ended
                                               31 March 2004    31 March 2003
                                                 US$ million      US$ million
--------------------------------------------------------------------------------

Aluminium                                               22.8             13.9
Copper                                                  37.9             42.8
Zinc                                                   163.9             29.8
Other                                                   12.1             (5.8)
--------------------------------------------------------------------------------
                                                       236.7             80.7

Share of loss in associate before taxation              (3.3)            (2.3)
--------------------------------------------------------------------------------

                                                       233.4             78.4
--------------------------------------------------------------------------------


Net assets
--------------------------------------------------------------------------------
Class of business                               31 March 2004    31 March 2003
                                                  US$ million      US$ million
--------------------------------------------------------------------------------

Aluminium                                               353.9            187.6
Copper                                                  169.2            283.6
Zinc                                                    391.4            299.3
Other                                                    82.8             67.1
--------------------------------------------------------------------------------
Net assets before net cash/(debt), goodwill             997.3            837.6
and minority interests

Goodwill                                                  3.6              3.7
Net cash/(debt)                                         422.3           (331.1)
Equity minority interests                              (437.1)          (405.2)
--------------------------------------------------------------------------------

Net assets                                              986.1            105.0
-----------------------------                       -----------      -----------


Net cash/(debt)
--------------------------------------------------------------------------------
Class of business                          31 March 2004         31 March 2003
                                             US$ million           US$ million
--------------------------------------------------------------------------------

Aluminium                                          (75.8)                 (3.2)
Copper                                            (318.0)               (346.3)
Zinc                                                43.9                  32.7
Other                                              772.2                 (14.3)
--------------------------------------------------------------------------------

                                                   422.3                (331.1)
--------------------------------------------------------------------------------

At 31 March 2004 and 2003, copper net debt included loans of US$17.3 million and
US$36.7 million respectively, which were raised to purchase the zinc business,
HZL.


(b) By location

All turnover and operating profit for the Group is derived from India.


Turnover by destination
--------------------------------------------------------------------------------
Location                                      Year ended            Year ended
                                           31 March 2004         31 March 2003
                                             US$ million           US$ million
--------------------------------------------------------------------------------

Far East                                           200.3                  50.0
India                                              980.9                 827.8
Other                                              108.3                  85.3
--------------------------------------------------------------------------------

                                                 1,289.5                 963.1
--------------------------------------------------------------------------------


Net assets/(liabilities)
--------------------------------------------------------------------------------
Location                                        31 March 2004    31 March 2003
                                                  US$ million      US$ million
--------------------------------------------------------------------------------

Australia                                                11.9             14.9
India                                                 1,008.7            817.1
Other                                                   (23.3)             5.6
--------------------------------------------------------------------------------
Net assets before net cash/(debt), goodwill             997.3            837.6
and minority interests

Goodwill                                                  3.6              3.7
Net cash/(debt)                                         422.3           (331.1)
Equity minority interests                              (437.1)          (405.2)
--------------------------------------------------------------------------------
Net assets                                              986.1            105.0
--------------------------------------------------------------------------------


3. Tax on profit on ordinary activities

--------------------------------------------------------------------------------
                                                31 March 2004    31 March 2003
                                                  US$ million      US$ million
--------------------------------------------------------------------------------

Tax charge/(credit) for the year
UK corporation tax (2004 - 30%, 2003 - 30%)               4.6                -
Indian corporation tax (2004 - 35.88%, 2003 -            69.6             22.6
36.75%)
Adjustments in respect of prior year                     (4.9)             0.7
Minimum alternate tax                                     0.7              2.8
Current tax on exceptional items                         (1.2)            (2.0)
--------------------------------------------------------------------------------
Total current tax                                        68.8             24.1

Deferred tax                                             11.2             12.5
Deferred tax on exceptional items                        (4.0)           (16.1)
--------------------------------------------------------------------------------
Total deferred tax                                        7.2             (3.6)
--------------------------------------------------------------------------------
Total tax charge                                         76.0             20.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Effective tax rate                                       32.6%            26.1%
--------------------------------------------------------------------------------

4. Earnings per Ordinary Share

Earnings per share on the profit for the year

--------------------------------------------------------------------------------
Basic earnings per share on the profit for the      Year ended      Year ended
year                                             31 March 2004   31 March 2003
--------------------------------------------------------------------------------

Profit for the financial year (US$ million)               66.6            24.5
Weighted average number of shares of the Company         286.0           286.0
in issue (millions)      
--------------------------------------------------------------------------------
Earnings per share on profit for the year                 23.3             8.6
(US cents/share)                                                           
-------------------------------------------------------------------------------- 
--------------------------------------------------------------------------------
Diluted earnings per share on the profit for the    Year ended      Year ended
year
                                                 31 March 2004   31 March 2003
--------------------------------------------------------------------------------

Profit for the financial year after dilutive              66.6            24.5
adjustments
(US$ million)
Weighted average number of shares in the Company         286.2           286.0
in issue after dilutive adjustments (millions)       
--------------------------------------------------------------------------------
Diluted earnings per share on profit for the              23.3             8.6
year
(US cents/share)
--------------------------------------------------------------------------------

The EPS calculation, has assumed that the number of Ordinary Shares in issue
immediately after Listing (being 286,000,000) had been in issue from 1 April
2002. The only other issue of shares subsequent to the Listing were 388,000
Ordinary Shares issued pursuant to the exercise of the first tranche of awards
under the Reward Plan on 31 March 2004, and the issue of these shares has been
used in determining the 2004 weighted average number of shares. The Directors
believe that this pro-forma EPS provides a more meaningful comparison of the
Group's ongoing business than using the statutory EPS which would only reflect
shares issued at the date of Listing.

The second tranche of awards under the Reward Plan and the outstanding awards
under the Vedanta Resources Long Term Incentive Plan ('LTIP') are reflected in
the diluted EPS figure through an increased number of weighted average shares.

Earnings per share based on Underlying Profit

The Group's Underlying Profit is the profit for the financial year after adding
back the operating and non-operating exceptional items and their resultant tax
and minority interest effects, as shown in the table below:

--------------------------------------------------------------------------------
                                                   Year ended       Year ended
                                                31 March 2004    31 March 2003
                                                  US$ million      US$ million
--------------------------------------------------------------------------------

Profit for the financial year                            66.6             24.5

Operating exceptional items                              13.3             50.1
Tax effect of operating exceptional items                (4.8)           (18.1)
Minority interest effect of operating                    (5.6)           (22.6)
exceptional items

Non-operating exceptional items                           1.2              0.7
Tax effect of non-operating exceptional                  (0.4)               -
items
Minority interest effect of non-operating                (0.1)            (0.5)
exceptional items          
--------------------------------------------------------------------------------
Underlying Profit                                        70.2             34.1
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Basic earnings per share on Underlying Profit       Year ended      Year ended
                                                 31 March 2004   31 March 2003
--------------------------------------------------------------------------------

Underlying Profit for the financial year (US$             70.2            34.1
million)
Weighted average number of shares in the company         286.0           286.0
in issue (millions)
--------------------------------------------------------------------------------
Earnings per share on Underlying Profit                   24.5            11.9
(US cents/share)                                                          
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Diluted earnings per share on Underlying            Year ended      Year ended
Profit
                                                 31 March 2004   31 March 2003
--------------------------------------------------------------------------------

Underlying Profit for the financial year after            70.2            34.1
dilutive adjustments (US$ million)
Weighted average number of share in the Company          286.2           286.0
in issue after dilutive adjustments (millions)       
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Diluted earnings per share on Underlying                  24.5            11.9
Profit
(US cents/share)
--------------------------------------------------------------------------------

5. Dividends

The Directors have proposed a dividend for the year ended 31 March 2004 of 5.5
US cents per Ordinary Share. This equates to a total dividend payable of US$15.8
million.

6. Called up Equity Share Capital

--------------------------------------------------------------------------------
                              31 March 2004                31 March 2003
                          Number of  Value of shares   Number of  Value of shares
                             Shares      US$ million      shares      US$ million
                                                       
--------------------------------------------------------------------------------
Authorised
--------------------------------------------------------------------------------
Ordinary Shares of 10   400,000,000            40.0           -               -
US cents each
Deferred shares of £1        50,000             0.1           -               -
each     
--------------------------------------------------------------------------------
                        400,050,000            40.1           -               -
--------------------------------------------------------------------------------

Called up and fully
paid                        
--------------------------------------------------------------------------------
Ordinary Shares of 10   286,388,000            28.6           -               -
US cents each
Deferred shares of £1        12,500               -           -               -
each                         
--------------------------------------------------------------------------------
                        286,400,500            28.6           -               -
--------------------------------------------------------------------------------

Shares to be issued
--------------------------------------------------------------------------------
Ordinary Shares of 10      388,000               -            -               -
US cents each                
--------------------------------------------------------------------------------
                           388,000               -            -               -
--------------------------------------------------------------------------------


At general meetings, each member present or by proxy has one vote on a show of
hands, and on a poll every member who is present in person or by proxy has one
vote for every Ordinary Share.


The holders of deferred shares shall not have the right to receive notice of any
general meeting of the Company nor the right to attend, speak or vote at any
such general meeting. The deferred shares have no rights to dividends and, on a
winding-up or other return of capital entitle the holder only to the payment of
the amounts paid on such shares after repayment to the holders of Ordinary
Shares of the nominal amount paid up on the Ordinary Shares and the payment of
£100,000 per Ordinary Share.


The Reward Plan

On 26 February 2004, awards of 776,000 Ordinary Shares were granted to 43
employees pursuant to the Reward Plan. The exercise price of these awards was 10
US cents per share. The first tranche of awards vested immediately, and upon
exercise, 388,000 Ordinary Shares were issued and credited as fully paid on 31
March 2004.


The second tranche of awards vests on 26 February 2005. The shares to which the
second tranche of awards relate are classified as shares to be issued


Initial Public Offering

On Listing, 156,000,000 ordinary shares in the Company were issued to Volcan
Investments Limited in exchange for its investment in the Twin Star Holdings
Group(1), and 130,000,000 Ordinary Shares were issued to public shareholders at
£3.90.


7. Consolidated reconciliation of movement in equity shareholders' funds
----------------------------------------------------------------------------------------------------------------
                   Share capital   Share premium  Merger reserve   Other reserves  Profit and loss         Total
                                         account                                           account
                     US$ million     US$ million     US$ million      US$ million      US$ million   US$ million
----------------------------------------------------------------------------------------------------------------
Equity shareholders'           -              -                -             37.9             67.1         105.0
funds at 1 April
2003
Retained profit                -              -                -                -             50.8          50.8
for the year
Gain on reduction              -              -                -                -             13.0          13.0
of minority
interest due to
increase in
interest in
subsidiary
shareholding
Repayment of                   -              -                -            (26.2)              -         (26.2)
share application
money pending
allotment in
SOVL
Shares issued to            15.6              -              4.4                -           (20.0)            -
Volcan
Shares issued to            13.0          863.7                -                -               -         876.7
public
shareholders
Share issue                    -         (51.4)                -                -               -         (51.4)
costs
Transfer due to                -        (793.7)                -                -           793.7             -
capital
reduction
Shares issued/to               -             -                 -                -             5.0           5.0
be issued under
the Reward Plan
Net transfer of                -             -                 -             (6.0)            6.0             -
current year
profits to
general reserve
Foreign exchange               -             -                -               2.6            10.6          13.2
differences                
----------------------------------------------------------------------------------------------------------------
Equity                      28.6          18.6               4.4              8.3           926.2         986.1
shareholders'          
funds at 31 March
2004
----------------------------------------------------------------------------------------------------------------


During the year, the Company repaid share application funds of US$26.2 million
that were pending allotment in SOVL, a subsidiary company.


The investment in Twin Star had a carrying value of US$20.0 million in the
accounts of Volcan. As the Company was not incorporated as at 31 March 2003, and
the comparatives are prepared on a pro-forma basis, as disclosed in note 1, the
issued share capital and share premium account of Twin Star have been included
in the profit and loss account reserves as at 31 March 2003. As required by the
Companies Act 1985, Section 132, upon issue of 156,000,000 ordinary shares to
Volcan, Twin Star's issued share capital and share premium account have been
eliminated and a merger reserve of US$4.4 million arose, being the difference
between the carrying value of the investment in Twin Star in Volcan's accounts
and the issued share capital to Volcan.


As required by the Companies Act and FRS 4 'Capital Instruments', the Company
wrote off US$51.4 million of costs incurred as a direct result of the Company's
Listing.


Being a newly incorporated company, Vedanta had no distributable reserves. On 10
December 2003, the High Court in London authorised a capital reduction, under
which the share premium account was reduced by US$793.7 million in order to
create distributable reserves.


As at 31 March 2004, other reserves comprise the general reserves established in
the statutory accounts of the Group's Indian subsidiaries. Under Indian law, a
general reserve is created through a year on year transfer from the profit and
loss account. The amount transferred is 5% of the profits for the year for each
Indian company as stated in Indian GAAP. The purpose of these transfers is to
ensure that distributions in a year are less than the total distributable
results for that year. This general reserve becomes fully distributable in
future periods.


8. Reconciliation of operating profit from to net cash inflow from operating
activities

--------------------------------------------------------------------------------
                                                 Year ended        Year ended
                                              31 March 2004     31 March 2003
                                                US$ million       US$ million
--------------------------------------------------------------------------------
Operating profit                                      237.1             114.6
Depreciation                                           71.8              59.2
Goodwill amortisation                                   0.5               0.4
(Increase)/decrease in stocks                         (16.1)             19.2
Increase in debtors                                   (77.2)            (47.5)
Increase in creditors                                 263.1              93.8
Increase in other long term creditors                  (6.6)              1.8
Other non cash items                                   23.7              (8.0)
--------------------------------------------------------------------------------

Net cash inflow from operating activities             496.3             233.5
--------------------------------------------------------------------------------

Net cash inflow from operating activities is stated after cash outflows relating
to operating exceptional items of US$13.3 million in the year ended 31 March
2004 and US$41.4 million in the year ended 31 March 2003.

Included in the other non-cash items for the year ended 31 March 2004 is the
US$5.0 million cost of the Reward Plan. The remainder of this movement relates
to non-cash working capital movements.

9. Analysis of net cash/(debt)

----------------------------------------------------------------------------------------
                                       
                                                      Other        Foreign 
                                                   non-cash       exchange   At 31 March
                At 1 April 2003     Cash flow       changes    differences          2004
                    US$ million   US$ million   US$ million    US$ million   US$ million
----------------------------------------------------------------------------------------
Cash at bank and           65.2         (16.0)            -            3.5          52.7
in hand
Debt due within          (220.3)       (141.7)         88.1          (21.4)       (295.3)
one year
Debt due beyond          (257.7)       (120.8)        (88.1)         (57.0)       (523.6)
one year                 
----------------------------------------------------------------------------------------
                         (412.8)       (278.5)            -          (74.9)       (766.2)

Current asset              81.7       1,065.0             -           41.8       1,188.5
investments             
----------------------------------------------------------------------------------------
Net (debt)/cash          (331.1)        786.5             -          (33.1)        422.3
----------------------------------------------------------------------------------------

10. Announcement based on audited accounts

The financial information set out herein does not constitute the Company's
statutory accounts for the year ended 31 March 2004, but is derived from these
accounts. The first statutory accounts of the Company, for the year ended 31
March 2004, will be delivered to the Registrar of Companies following the
Company's AGM subsequent to their approval by shareholders. The auditors have
reported on those accounts and their report was unqualified and did not contain
statements under Sections 237(2) or (3) Companies Act 1985.

11. Glossary and definitions

AGM - The annual general meeting of the Company which is scheduled to be held on
Thursday 29 July 2004 at 12 noon at the City Presentation Centre, 80 Coleman
Street, London, EC2R 5BJ

BALCO - Bharat Aluminium Company Ltd, a company incorporated in India

Board - The board of Directors of the Company

Capital Employed - Net assets before net cash/(debt) and equity minority
interests

Directors - The directors of the Company

EBITDA - Profit before interest, taxation, depreciation, goodwill amortisation
and exceptional items (see note 2)

EBITDA Margin - EBITDA as a percentage of turnover

EPS - Earnings per share

Free Cash Flow - Cash flow arising from EBITDA after net interest, taxation,
sustaining capital expenditure and working capital movements

Gearing - Net debt as a percentage of Capital Employed

Government - The Government of the Republic of India

Group - The Company and its subsidiary undertakings and, where appropriate, its
associated undertaking

HZL - Hindustan Zinc Limited, a company incorporated in India

Listing - The listing of the Company's Ordinary Shares on the London Stock
Exchange on 10 December 2003

Listing Particulars - The listing particulars dated 5 December 2003 issued by
the Company in connection with its Listing

MALCO - Madras Aluminium Company Limited, a company incorporated in India

MT - Metric tonnes

MW - Megawatts of electrical power

Ordinary Shares - ordinary shares of 10 US cents each in the Company

Return on Capital Employed or ROCE - Profit before interest, taxation, operating
and non-operating exceptional items, tax effected at the Group's effective tax
rate as a percentage of Capital Employed

Reward Plan - The Vedanta Resources Share Reward Plan

SEWT - The Sterlite Employee Welfare Trust, a long term investment plan for
Sterlite senior management

SOVL - Sterlite Opportunities and Ventures Limited, a company incorporated in
India

Sterlite - Sterlite Industries (India) Limited, a company incorporated in India

TC/RC - Treatment charge/refining charge being the terms used to set the
smelting and refining costs

tpa - Metric tonnes per annum

Twin Star Holdings Group - Twin Star and its subsidiaries and associated
undertaking

Underlying Profit - Profit for the year after adding back operating and
non-operating exceptional items and their resultant tax and minority interest
effects (see Note 4)

Vedanta or Company- Vedanta Resources plc

                                    -ends -

For further information, please contact:

John Smelt, Head of Investor Relations
Peter Sydney-Smith, Finance Director       Tel: +44 20 7251 3801 (21 June 2004)
Vedanta Resources plc                           +44 20 7670 6070 (thereafter)

James Murgatroyd
Faeth Birch
Robin Walker
Finsbury                                   Tel: +44 20 7251 3801










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