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Vedanta Resources (VED)

  Print      Mail a friend       Annual reports

Thursday 01 June, 2006

Vedanta Resources

Final Results

Vedanta Resources PLC
01 June 2006


                                                                     1 June 2006

                             Vedanta Resources plc
                    Results for the year ended 31 March 2006


Highlights

• Record Financial Performance

- Group Revenue up 96.5% to $3,702 million and Group EBITDA up 142.6% to
  $1,102 million, driven by better prices and strong volume growth

- Operating profit up 187.7% to $944 million

- Strong balance sheet with net assets of $2.3 billion and gearing of
  under 1%

- ROCE (excluding project capital work in progress) significantly higher
  at 37.9% up from 32.0%

- Basic EPS up 108.3% at 130.2 US cents, EPS on the basis of underlying
  profits up 166.3%

- Final dividend proposed at 14.3 US cents per share bringing full year
  dividend to 20.0 US cents


• Volume Led Growth

- Phase 1 expansion projects in copper and zinc completed

- Korba aluminium smelter production being ramped up progressively

- Second phase of expansion projects totalling $3.1 billion announced
  during the year

- 50,000 tpa lead plant commissioned making us India's largest primary
  producer of lead


                                             (in US$ millions, except as stated)
--------------------------------------------------------------------------------
Consolidated Group Results                                FY 2005
                                               FY 2006  (restated)*   Change
--------------------------------------------------------------------------------
Revenue                                        3,701.8    1,884.2      96.5%
EBITDA                                         1,101.5      454.0     142.6%
EBITDA Margins                                   29.8%      24.1%         -
Operating Profit                                 943.8      328.0     187.7%
Attributable Profit                              373.5      178.9     108.8%
Basic Earnings per Share (US cents)              130.2       62.5     108.3%
ROCE (excluding project capital work in          37.9%      32.0%                      
progress)
--------------------------------------------------------------------------------
Final Dividend (US cents per share)              14.30      11.55       23.8
--------------------------------------------------------------------------------
(*. Restated for the impact of adopting IFRS)


'I am delighted to report spectacular growth in revenues and profits this year,
reflecting the strong growth in volumes and favourable commodity prices. I
believe we have only just started to realise our full potential. We have a clear
strategy for growth and the strength of our pipeline makes us unique in the
industry.' said Mr. Anil Agarwal, Chairman, Vedanta Resources plc. 'We are on
track to becoming the only company producing 1mtpa in each of our three metals,
as well as achieving cost leadership. We have already announced $3.1 billion of
investments this year and Vedanta is very well positioned to realise further
opportunities in India. I am looking forward to another year of continued
growth.'


For further information, please contact:

Sumanth Cidambi
Associate Director - Investor Relations         sumanth.cidambi@vedanta.co.in
Vedanta Resources plc                           Tel: +44 20 7659 4732 / +91 22 6646 1531    

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



Chairman's Statement

Performance in 2006

I am privileged to be writing to you following a year of spectacular growth in
your company. Vedanta's market capitalisation now stands at over $7 billion
compared with under $2 billion at the time of the IPO in December 2003. Total
shareholder returns (TSR) during the year ended 31 March 2006 were 204% with the
company achieving record EBITDA of over $1.1 billion. Using the TSR measure,
Vedanta's 2006 returns were superior to all diversified mining and metals
companies listed on the UK main market.

I firmly believe we are unique due to the strength of our project growth
pipeline. In our first phase of growth, the expanded Tuticorin copper smelter,
the new zinc smelter at Chanderiya and the new aluminium smelter at Korba have
been commissioned with capital costs and time frames ahead of industry norms.
The next phase of our growth with investments of over $3 billion is well under
way. These aspects make Vedanta a creator of value and 2006 saw significant new
value created.

I also believe that Vedanta's competitive advantage is its relentless focus on
improving the efficiency of its operations. Volume growth, productivity gains
and other continuous improvement measures will enable us to achieve our vision
of being amongst the lowest cost producers.

Demand and Markets

Demand for metals continues to be robust. Primary and secondary metal demand is
especially supported by increased activity in the industrial and infrastructure
sectors in emerging markets and Asia will clearly be a driver of growth for
metals in the short to medium term.

India is an attractive destination for metal producers in terms of being a
natural resources hub, setting up capacities at attractive capital costs and
providing access to rapidly growing domestic and nearby Asian markets. The
Indian Government continues to maintain its policy of growth and liberalisation.
The recently announced 2007 Union Budget promises a continuation of policies to
grow the economy and encourage inward investment, by increasing budgetary
allocations for infrastructure spending specifically in roads, ports,
telecommunications and urban infrastructure. We expect these measures to ensure
continuing and accelerating Indian demand growth for metals and the Group is
well positioned to play a leading part in this growth.

Growth

We continue to remain focused on our vision of becoming a million-tonne-per-annum
producer of each of our key metals and remain firmly on track to achieve this. 
For this next phase of our growth, several major projects with a total investment
of $3.1 billion were announced last year and are now being implemented.

We see a lot of promise in Zambia and believe that the copper industry will
remain a major driver of its economy. The copper belt once produced nearly
750,000 tpa of copper but this has since reduced significantly. We foresee that
with its rich copper resource, Zambia can regain its position as a major global
producer of copper. Vedanta is making a major contribution to the Zambian
economy by developing the Konkola deep ore body, one of the richest in the world
with over 215 million tonnes of resource at 3.8% grade, an investment of
$400 million. Our investment in Zambia includes a further $280 million for a
smelter expansion project which will increase our total smelting capacity to
400,000 tpa at KCM.

In India, we are investing in a new 170,000 tpa zinc smelter project at
Chanderiya and also in the development and construction of India's largest
aluminium asset with its associated 1215 Mw captive power plant in Jharsuguda,
Orissa. Upon completion, these projects will service the rapidly increasing
demand for these metals and strengthen our competitive position in the global
Copper, Zinc and Aluminium businesses.

Closely aligned with our expansion plans is our exploration programme focused on
delivering adequate resources that meet and sustain our long-term metal
production growth. We have put in place a sustainable exploration model by
creating scaleable infrastructure and allocating appropriate resources. I
believe these measures will yield good results.

These are landmark projects not only for Vedanta but also for the countries in
which we operate. In addition to commercial benefits from primary and secondary
economic activity, our investments will bring development to several regional
communities in India and Zambia on a previously unforeseen scale.

The efficiency, with which our growth projects continue to be delivered at low
costs of development, set against the backdrop of rapidly expanding growth in
industrial activity and infrastructure investment in India and Asia allows us to
benefit independent of the commodity cycle.

One of the most important aspects of growth is the careful management of the
Group's finances. We manage our expansion programmes within conservative gearing
levels. Our issue of $725 million in convertible bonds in February 2006
demonstrated our ability to obtain efficient financing that complements our
expansion programme and optimises overall financing costs of the business.

Whilst mergers and acquisitions are not the central platform of our growth, we
will evaluate inorganic opportunities that create compelling shareholder value.
Given our demonstrated strength in the turn around of underperforming assets, we
will look at opportunities where we can add substantial value.

Sustainable and Responsible Development

Sustainable development is at the very heart of our business strategy. Whilst we
are humbled by the vast impact of our industry towards the basics of life, we
also recognise the potential impact upon the environment and on occupational
hazards and safety for communities and habitats close to our operations.

Our continued focus on safety has shown improvements, with the safety index
(LTIFR) improving by 30% during the year. In spite of these efforts, we
experienced some fatalities at our operations during the year. Any loss of life
is not tolerable and we have instituted guidelines and procedures to prevent the
recurrence of such incidents.

Sustainable development for us also encompasses conservation of natural
resources like water, especially in arid regions such as Rajasthan. We have
taken the utmost care in all our expansion projects in selecting energy
efficient and environmentally friendly technologies.

I am also pleased to report significant extensions in all parts of the company's
social, health and safety and environmental activities in Zambia. Our investment
in a company-wide community based HIV treatment programme and our sponsorship
of soccer have been both unprecedented and uplifting. In India, our involvement
with micro enterprise through the Self Help Groups ('SHG') especially with women
at Lanjigarh, Tuticorin and our other locations has been a great success. Over
3,600 women have been trained for micro enterprise management and are a part of
over 180 SHGs. These SHGs play an active role in the development of the
communities. We continue to support education for children through Bal Wadis,
supplemented with midday meal schemes and health checkups. In our
state-of-the-art hospitals and clinics at our various operating locations and
through mobile health camps conducted in the surrounding villages, we provide
quality health care to over a quarter of a million people.

With a conducive policy framework in place and a robust implementation and
governance structure, we remain committed to raising the quality of life and
social well being of all the communities in which we operate.

Board and management

We have a Board that brings together a broad range of backgrounds and
experience. Each Board member brings an individual outlook, which has improved
our collective decision making process. Given the increased scale of the group's
operations, the work of the several Board committees is an enormous task and I
wish to thank the chairmen and members of these committees for their
contribution in the year. I also remain grateful for the healthy and
constructive direction and support the Board continues to provide to our
management team.

In addition, specifically, I am pleased that Mr Kuldip Kaura's service contract
with the Company which was due to expire on 30 June 2006 has been extended to 31
March 2008.

People

The successes that I have been able to report in this statement are due to the
outstanding commitment and contribution of our employees and I wish to thank
them on behalf of the entire Board.

We are proud of the knowledge and intellectual capital that our young
professional workforce brings to the organisation. The challenging assignments
they are given at an early stage in their careers make them highly motivated,
committed and enthusiastic. Our hands-on participative style of management
continues to strengthen our organisational culture and values through to the
grass roots level.

Talent management remains a key driver of performance across Vedanta. Our access
to the substantial pool of high quality professional talent, especially in
India, enables us to consistently attract world-class professionals. We have
created attractive working environments with highly competitive incentives
approaches, which ensure that we are amongst the most preferred employers in the
regions in which we operate. I am particularly pleased to report that we have
recently issued long-term incentive options to a large proportion of our
employees re-emphasising a collective commitment to align their interests to the
enhancement of shareholder value over the long-term.

Outlook

In the last 24 months Vedanta has built a strong reputation for creating lasting
shareholder value underpinned by delivery and growth. Looking ahead, we must
progress the next phase of our growth in a responsible manner commensurate with
our position as a leading mining and metals company while continuing to generate
superior returns for our shareholders. In light of my comments on demand and
markets I remain confident that we are well on our way to deliver on this.

Business Review

Group revenue has doubled to $3,701.8 million and EBITDA at $1,101.5 million has
increased by 142.6% compared with the previous year. Operating profit at $943.8
million is also higher as compared to $328.0 million in the previous year. These
increases are due to higher volumes from expanded facilities, better prices
across all metals and a full year contribution from the operations at KCM.
Operating costs are generally in line with our expectations at all businesses
except the copper business in Zambia.

EBITDA margin has increased to 29.8% from 24.1% in the previous year mainly due
to higher prices and product mix. Underlying profit has increased to US$ 373.5
million from $140.1 million and EPS, based on underlying profit, to 130.2 US
cents per share from 48.9 US cents per share.

Capital employed has increased by $529.7 million during the year on account of
capitalisation of expansion projects and the consequent increase in working
capital. Despite this increase, ROCE (before capital work in progress) increased
to 37.9% from 32.0% in the previous year mainly due to improved productivity and
higher prices.

Operations

Aluminium

The Aluminium Business comprises two companies, BALCO and MALCO. BALCO is a
fully integrated producer with its own bauxite mines, a captive power plant and
refining, smelting and fabrication facilities at Korba in the eastern part of
India. MALCO is also a fully integrated producer with two bauxite mines, a
captive power plant and refining, smelting and fabrication facilities at Mettur
in Southern India.

This year was a milestone for our Aluminium business as the BALCO expansion
project comprising the new 250,000 tonne aluminium smelter with associated 540
MW captive power plant came on stream. This project was completed in record time
from ground breaking in May 2003 to the start of commissioning in May 2005. By
March 2006, 216 pots and all four units of the power plant were progressively
commissioned. The production of 70,000 tonnes from the new smelter and overall
good performance of existing facilities resulted in a higher output of 211,000
tonnes, an increase of 55.1% from the previous year.

The existing plants at BALCO and MALCO have performed well and have operated to
full capacity during the year, producing 141,000 tonnes, an increase of 4%
compared with the previous year. The new Korba plant has achieved production of
14,000 tonnes in March 2006. However, as a result of power plant tripping due to
stormy weather in the 3rd week of May 2006, the pot-line was destabilised.
Efforts to stabilise the production from disrupted pots are ongoing. These will
be stabilised along with the commissioning of all pots progressively by the
second quarter of the current financial year according to our present
assessment. As a result of this, the overall production effect is estimated to
be a reduction of by 25,000 tonnes. As all the four units of the new power plant
ramped up ahead of the smelter we exported surplus power to the local grid
during the year and will continue to do so until all of the pots are stabilised.

Despite better capacity utilisation and higher output, the unit costs of BALCO's
existing plant rose to $1,497 per tonne during the current year from $1,347 per
tonne in the previous year on account of increased power costs due to a change
in coal mix and higher coal prices coupled with an increase in the input prices
of caustic soda, fluoride and carbon, etc impacting the industry. We will
continue to debottleneck and further improve output, which will partially
mitigate the trend of rising input costs. Unit costs of MALCO have also been
affected by similar factors, increasing to $1,671 per tonne from $1,466 per
tonne.

The unit costs of BALCO's new plant were $2,045 per tonne. During the year
alumina was sourced from third party vendors at an average cost of $1,160 per
tonne of metal produced. Other manufacturing costs were $885 per tonne. These
costs are progressively reducing with the increase in volumes, stabilisation of
operating parameters and efficient running of the captive power plant and we
expect these to stabilise towards the end of the year. We expect a gradual
softening of alumina prices during the year.

We continue to focus on improving the sales mix in terms of a higher tonnage of
value added products such as rolled products which rose by 31% during the year
to 46,000 tonnes, thereby improving our contribution. We started exporting
during this year to countries including in South East Asia and the Middle East.
We will continue to develop these and other markets as the production from our
new smelter ramps up.

Revenues in the aluminium business increased by 60.8% to $453.0 million, with
EBITDA at $ 135.3 million, an increase of 79.0% from the previous year. The
increase in revenue and profitability is mainly due to better volumes, improved
product mix and higher LME prices which were about 14% higher than that in the
previous year. These factors have more than offset the higher alumina prices for
the new Korba smelter and other input costs and the reduction in import tariff
on aluminium from 10% to 7.5% effective March 2006.

Work on the $800 million alumina project at Lanjigarh, Orissa is progressing
well. This includes a 1-1.4 million tpa alumina refinery with an associated
captive power plant and bauxite mines. For the refinery and power plant, the
delivery of major equipment, vessels and materials are on schedule, with
constructive activities in full swing. We expect the mechanical completion of
the refinery and power plant by the end of the second quarter of the current
financial year and, thereafter, we plan to start commissioning activities using
bauxite sourced from third parties.

In respect of the mine, there have been public interest submissions to the
Honourable Supreme Court of India sub-committee regarding certain environmental
aspects in 2004. After due process of investigation and deliberation, on 3
February 2006, the Honourable Supreme Court of India has passed an order that
the Ministry of Environment & Forests (MOEF) should consider this matter and
submit its report to the Forest Advisory Committee. The next hearing is expected
to take place in July 2006 and we are hopeful of an early resolution of the
matter.

The green-field 500,000 tpa aluminium smelter and associated 1,215 Mw captive
power plant in Jharsuguda, Orissa, to be built at an investment of an estimated
at $2.1 billion, have been approved by the Board in December 2005. This project
will be implemented in two phases of 250,000 tpa each. Construction of the first
phase, including 5 units of the 135 Mw each captive power plant, is expected to
be completed in the second half of 2009. The second phase comprising the
remaining 4 units of the captive power plant is expected to be completed by the
end of 2010. This investment includes the cost of the smelter, associated power
facilities and all necessary infrastructures including a railway network, water
pipelines and a township for employees. Activities related to the ordering of
critical equipment and regulatory clearances has commenced. Design engineering
and other pre-construction activities are also in progress.

Copper

The Copper Business consists of three major operations: the Sterlite smelter in
India, the CMT copper mine in Australia and the KCM operations in Zambia.
Sterlite is the leading copper producer in India. Sterlite's copper operations
include a smelter, refinery, phosphoric acid plant, and copper rod plant at
Tuticorin in Southern India, a refinery and two copper rod plants at Silvassa in
Western India and a copper mine at Tasmania in Australia. KCM is a large
integrated copper producer operating three copper mines, a smelter, a refinery
and a tailing leach plant in Zambia.

Copper - India/Australia

We completed the expansion of the Tuticorin smelter to 300,000 MT during the
year and quickly ramped up the production. From the third quarter onwards the
smelter has been operating at its capacity of 75,000 tonnes per quarter. We
produced 273,000 tonnes of cathodes, an increase of 58.7% from the previous
year. From these, we produced 167,000 tonnes of copper rods, an increase of
33.6% from the previous year. We continue to focus on increasing the production
of copper rods which was 61.2% of the total production. As planned, the
maintenance shutdown of the Tuticorin smelter for a period of 21 days in April
2006 has been completed and the smelter is back on line.

Despite higher energy prices, unit conversion costs decreased to 6.1 cents/lb
from 7.1 cents/lb in the previous year on account of higher volumes, better
recovery of metal and improved realisation of by-products.

We exported 165,000 tonnes of copper cathodes and copper rods, 60.4% of
production, against 89,000 tonnes in the previous year. Exports included 79,000
tonnes of copper rods against 56,000 tonnes in previous year. The Middle East,
China, Japan, Philippines and Thailand are our key export markets and we
continue to develop a larger customer base for the export of copper rods.

On the back of strong market conditions, TC/RC realisation increased
substantially to 23.1 c/lb, from 8.6 c/lb in the previous year. The effect of
stronger TC/RC globally in the first half of the year was felt mainly in the
second half. We see a softening of TC/RC terms is likely to be reflected in
future settlements. We continue to make good progress in our strategy of
securing long term contracts with mines.

Revenues at the Copper-India/Australia business more than doubled to $1,537.9
million, with EBITDA of $219.0 million, an increase of 151.7% as compared to the
previous year primarily on account of significant increase in the LME copper
prices by approximately 37% over the previous year. The increase in EBITDA is
attributable mainly to better TC/RC's, improved product mix and a reduction in
overall unit costs of production.

While import tariffs on copper were reduced from 10% to 7.5% effective March
2006, the effect is negligible due to a corresponding reduction in import duty
on copper concentrate to 2% from 5%. Duty assistance on the export of copper is
equivalent to import duty on copper concentrate.

CMT produced 30,000 tonnes of copper in concentrate during the year, an increase
of 8.7% over the previous year production due to operational efficiencies and
improved grade. Australian mines contributed a total of 34,000 tonnes during the
year including marginal production from TCM in the first half of the year which
accounted for about 11 % of total concentrate requirements of the Indian copper
smelter operations. Operations at TCM were closed and the processing plant was
disposal off during the year along with associated liabilities.

Copper - Zambia

Copper cathode production in the year was at 164,000 tonnes, out of which
110,000 tonnes was from the Nkana smelter and the balance of 54,000 tonnes was
from the tail leach plant. Mined metal production in the year was 99,000 tonnes.
On the back of strong commodity prices, revenues at the Copper-Zambia business
were $703.4 million for the year with EBITDA at $206.3 million.

Overall production performance at KCM was not up to our expectations largely due
to the low head-grade in the ore which has affected concentrate production,
lower acid soluble feed the for tail leach plant and lower equipment
availability throughout all operations. Mining operations at the open pit were
also affected in last quarter of the financial year due to adverse weather
conditions.

Unit costs of production (including mining) were at 127.9 cents/lb for the year,
compared to 106.2 cents/lb for the 5 months period in the previous year. Apart
from lower output, the main factors contributing to the increase in unit costs
were the appreciation of about 30% in the Zambian Kwacha, local wage increases
and a higher expenditure on plant maintenance, higher crude and sulphuric acid
prices.

We have taken steps to reduce operating costs by increasing capacity utilisation
and improving the efficiency of existing plants and the new sulphur based acid
plant. Better recovery from the smelter and availability of improved grade from
the Konkola mine will further help in reducing costs of production and enhancing
output. Upgrading of tank houses at the tail leach plant, better slag
management, stabilisation of cranes and furnace, and replacement of the CT hood
and mouth at the Nkana smelter will enhance the plant availability and output.
Similarly for the Konkola and Nchanga mines, we are making efforts to improve
the plant availability, de-bottlenecking their capacities and improving the
operating parameters to enhance mined metal output.

During the year, we have commissioned the sulphuric acid plant and achieved the
rated output. This will increase our captive capacity of acid by 180,000 tonnes
per annum which will help in reducing our dependence on acid procurement from
external parties at higher prices and thus reduce our overall costs for tailing
leach plant production.

The KDMP expansion project will increase the copper ore output from the Konkola
mine by 4 million tpa to 6 million tpa at an estimated cost of $400 million.
This project includes the sinking of a new shaft, widening an existing downcast
shaft, installing a new headgear, establishing a new pumping station to expand
copper ore mining operations and 6 mtpa concentrator. All government approvals
for KDMP have been received. The project is due for completion in late 2009 and
activities for ordering of major infrastructure contracts have commenced.

After a detailed feasibility analysis, the concept of the augmentation and
smelting capacity has been modified to establish a new smelter at the Nchanga
mine premises with a capacity of 250,000 tpa. This shift in location will give
us an advantage in terms of locational synergies and savings in transportation
costs of the acid to the tail leach plant and for concentrate from KDMP. After
this, the overall smelting capacity at KCM will increase to 400,000 tpa, which
will enable us to treat concentrate from other mines over and above that from
our captive mines. The overall project cost of this smelter, including the
associated facilities, is now estimated at $280 million and is expected to be
completed by mid 2008. The technology contract has been signed with Outokumpu
and further tenders for detailed engineering have been released and the process
of short-listing the vendors has started.

Zinc

The Zinc Business is operated by HZL, the third largest integrated producer in
the world. HZL's zinc operations include three lead-zinc mining complexes, one
lead-zinc smelter and two zinc smelters in the state of Rajasthan in northwest
India and one zinc smelter in the state of Andhra Pradesh in southeast India.
HZL has a smelting capacity of about 400,000 tpa of zinc metal and 85,000 tpa of
lead metal.

The new hydro smelter at Chanderiya and the associated 154 MW coal based captive
power plant were commissioned in the year and ramped-up on time and below
budget. The new smelter produced 71,000 tonnes of zinc in the year, operating
close to its rated capacity in March 2006. The total zinc metal output during
the year was 284,000 tonnes, an increase of 34.0% compared with the previous
year. We produced 472,000 of tonnes mined metal content, an increase of 33.0%
from the previous year, primarily due to increased output from Rampura Agucha
mines post-expansion. The Zinc business posted excellent all round results on
account of higher volumes from mines and smelters, controlling of costs and high
LME prices.

Unit cost of production was at $691 per tonne, which is marginally lower than
the previous year's level of $695 per tonne. During the year, cost reduction as
a result of various positive improvement measures in terms of volumes,
productivity, and savings in procurement costs, were offset by higher LME linked
royalties impacting costs adversely by $35 per tonne. With the progressive
stabilisation of volumes from the new plant, costs of production improved
appreciably towards the last quarter.

We sold 323,000 tonnes of zinc metal in the year, 11.8% more than the prior
year, with the additional output coming from tolling activities. We maintained a
leadership position in the domestic Indian market which accounted for about 96%
of sales, and we exported small quantities to develop the near-by market
potential. With double-digit growth in the domestic market, we will continue to
sell most of our output domestically. In addition to refined zinc metal, we also
sold 195,000 dmt, of surplus zinc concentrate in the year, having zinc metal
content of about 100,000 tonnes.

Revenues at the Zinc business rose to $875.5 million from $486.4 million, an
increase of 80.0% with EBITDA for the year at $532.9 million, up from $218.5
million, an increase of 143.9% compared with the previous year. The increase in
revenues is due to better metal volumes and increased zinc prices approximately
46% from the previous year. The increase in EBITDA is mainly attributable to
better volumes and realisation and partly to a reduction in unit costs of
production. The import tariffs on zinc were reduced from 10% to 7.5% effective
March 2006 and tariff on lead remains the same at 5%.

A new ausmelt lead smelter was commissioned in early February 2006 and is
expected to achieve its rated rate capacity by mid 2006. This has increased
capacity from 35,000 tpa to 85,000 tpa of lead metal at the Chanderiya lead zinc
smelter.

We announced a second 170,000 tpa smelter to be built at Chanderiya, identical
to the hydro smelter recently commissioned at Chanderiya. Activities related to
ordering and regulatory clearances have commenced. 60% of ordering and 80% of
engineering is now complete and pre-construction activities are in full swing.
The smelter and the captive power plant are expected to be commissioned by early
2008.

Others

The Group's other activities include an aluminium conductor business which is a
division of Sterlite consisting of two power transmission aluminium conductor
plants.

During the year we sold 57,000 tonnes of conductors an increase of 14% from the
previous year. Revenues increased to $132.0 million, an increase of 30.2% from
the previous year, mainly due to an increase in aluminium prices. EBITDA
increased to $8.0 million mainly due to increased profitability in the conductor
business attributable to increases in aluminium prices and lower costs.

Group Structure

We continue in our endeavours to acquire the outstanding minority stakes in
BALCO and KCM. Upon completion of these two transactions, we will have further
consolidated our ownership in the aluminium and copper businesses.

People

We have invested in developing our organisation, processes and people to support
and sustain a growing business of global size and stature. The Group has an SBU
based flat organisation structure to promote empowerment, wider ownership and a
higher degrees of commitment and accountability. Our hands-on participative
management style and the involvement of top management continue to strengthen
our operational architecture and value system down to grass-roots level. A
robust performance management system that aligns organisational and individual
goals sustains the development of employees and the organisation.

The Group has 23,000 employees, of whom 4,000 are professionals in engineering,
business management, HR and finance. It is a core belief for the Group to
attract, develop and retain high quality talent to produce top quality results.
The Group considers all management positions to be leadership positions where
people are expected to make a meaningful contribution in their respective work-
areas as well as the organisation as a whole. There is a well-defined process
for the career development of employees whereby challenging assignments with
commensurate responsibilities are given to deserving employees, even at a young
age.

As the Group charts an aggressive and determined course of action to grow
rapidly and achieve ambitious targets, each employee's contribution will be a
key ingredient for the success of the Group. In this sense, the key to unlocking
the phenomenal potential that lies ahead of Vedanta rests with each one of our
employees. Group management has a strong belief that the fruits of success must
be shared with the employees. Towards this objective we have a unique programme
called the Long Term Incentive Plan (LTIP) designed to create wealth for our
employees. Under this plan, a large proportion of our employees are covered and
they stand to benefit from the superior performance of the Company reflected in
higher shareholder return- in comparison with its peers.

Exploration

The clear focus of exploration within the Vedanta Group is to deliver resources
which enable Vedanta to meet and sustain its long term metal production growth
objectives. The core commodities for exploration are copper, zinc and bauxite.
During the year, exploration focused on identifying and delineating near mine
resources which have the potential to add significant value to our existing
mining operations, whilst also building a portfolio of green-field opportunities
particularly in zinc. The most significant success was increasing the resources
at depth below the Rampura Agucha zinc deposit in Rajasthan, India. The Group
continues to increase the allocation of resources and funds in the field of
exploration.

Sustainable Development

We remain committed to managing our businesses in a socially responsible manner.
The management of environment, employees, health and safety and community
issues, in respect of our operations is central to the success of our
businesses. Our commitment to quality, health, education and livelihood
opportunities for the communities where we operate has been consistent and
progressive.

Awards and Recognition

Our pursuit of excellence in all areas of our business has been widely
recognised. We won the 2005 Recognition of Commitment Award from the Institute
of Internal Auditors, USA. This award values three attributes, Excellence,
Quality and Outreach and recognises our demonstrated strengths and continued
focus on assurance practices and process improvements, making us the only
manufacturing company out of a total of four companies in India to have ever
received this award.

In the areas of HSE, there have been a number of landmarks during the year,
including:

   • Tuticorin copper smelter received the British Safety Council award for 2005
   • Rampura Agucha mine received the National Energy Conservation Award for
     2005 in the mining sector from the Ministry of Power, Govt. of India, the
     first ever given under this category.
   • The Confederation of Indian Industries (CII) has awarded the Sterlite
     copper operations the National Award for Excellence in energy management.
   • MALCO received the first place for excellent water efficiency at a
     national level and third place for leadership and excellence in HSE in
     Southern India, awarded by CII for year 2005.

Future Outlook

The current growth in the global copper, aluminium and zinc markets is
consistent with that in 2005-06 and markets are expected to remain expected to
be healthy in the future. Growth in all these metals will primarily be driven by
Asia and emerging markets such as China and India. Real Indian GDP has grown at
an average rate of 6% p.a. over the last ten years, and is now growing at almost
8%. The Indian Government has continued its focus on investments, job creation,
rural development, infrastructure growth, employment, health and education with
requisite stress on comprehensive economic reforms. Industrial growth in India
has risen by around 10% per annum and similar growth levels are expected to
continue. Investments in the power generation and transmission, housing, real
estate, automobile and transport sectors are expected to drive future growth for
copper, aluminium and zinc into double-digits, thus increasing the per capita
consumption of these metals.

In 2006-7 we expect to have higher production from our expanded capacities.
Volume growth and productivity and process improvements through the use of
modern tools such as six-sigma are expected to continue to improve our cost of
production.

Our new projects are also progressing well and we expect will be delivered on
schedule, thereby adding to volumes progressively until 2009-10 consistent with
growing demand. Once these projects are completed our capacities in copper,
aluminium and zinc will be closer to our vision of 1 million tpa in each of
these metals. This increase in volumes will ensure growth and relative
insulation from changes in commodity cycle.


FINANCE REVIEW

Key financial performance indicators

+---------------+-----------+-----------+-----------+-----------+------------+
|KPIs           |           |2005-06    |2004-05    |2003-04    |2002-03     |
+---------------+-----------+-----------+-----------+-----------+------------+
|EBITDA         |$ million  |1,101.5    |454.0      |322.7      |224.3       |
+---------------+-----------+-----------+-----------+-----------+------------+
|Underlying EPS |US cents   |130.2      |48.9       |24.5       |11.9        |
|               |per share  |           |           |           |            |
+---------------+-----------+-----------+-----------+-----------+------------+
|Free Cash Flow |$ million  |634.8      |204.4      |367.7      |144.2       |
+---------------+-----------+-----------+-----------+-----------+------------+
|ROCE (excluding|%          |37.9       |32.0       |24.1       |14.6        |
|project capital|           |           |           |           |            |
|work in        |           |           |           |           |            |
|progress)      |           |           |           |           |            |
+---------------+-----------+-----------+-----------+-----------+------------+
|Net Debt/(Cash)|$ million  |11.9       |74.3       |(422.3)    |331.1       |
+---------------+-----------+-----------+-----------+-----------+------------+

Note: Figures for 2005-06 and 2004-05 are under IFRS and figures for 2003-04 and
2002-03 are under UK GAAP

Key financial highlights

   •$725 million, 20-year convertible bonds issued at a coupon of 4.6%. The
    issue, the largest of its kind in the UK during the year, extended the
    maturity profile of Group debt and broadened the Company's investor base.

   •Net Debt was reduced to under $12.0 million and gearing to under 1% even
    after incremental project capex of $605.5 million

   •Record Free Cash Flow of $634.8 million due to higher operational
    earnings sustained by the efficient management of working capital..

Summary of financial performance

Strong contributions from all of our metals resulted in an increase in profit
before tax from $352.1 million (before special items) to $934.7 million, growth
of 165.5%. Similarly, Underlying Earnings Per Share grew to US cents 130.2 up
from US cents 48.9, an increase of 166.3%.

Net Debt as at 31 March 2006 was $11.9 million, down from $74.3 million as at 31
March 2005 as a result of record Free Cash Flow of $634.8 million and expansion
capex of $605.5 million. Free Cash Flow in 2005 was $204.4 million and the
increase of over $430.4 million was due to good operating results and management
of working capital balances partially offset by tax.

Our Phase I capital investments of $2.2 billion are largely complete and at a
level below the budgeted amounts. Production has been ramped up at Tuticorin
(copper) and Chanderiya I (zinc) and the ramp up of capacity at Korba
(aluminium) continues. The refinery project at Orissa is also progressing.
$211.2 million remains committed but as yet unspent on these projects.

Phase II of our expansion programme is now underway with $3.1 billion of
projects announced during the year. A significant proportion of funding for this
programme will be from operational cash flows.


A summary of the Group's income statement is set out below:

Summary of income statement         31 March 2006 31 March 2005
                                        $ million     $ million   % change
--------------------------------------------------------------------------
EBITDA                                    1,101.5         454.0      142.6
--------------------------------------------------------------------------
EBITDA margin %                              29.8          24.1
Operating special items                         -        (22.3)
Depreciation and amortisation             (157.7)       (103.7)
--------------------------------------------------------------------------
Operating profit                            943.8         328.0      187.7
--------------------------------------------------------------------------
Share of loss of associate                  (1.4)         (5.6)
Surplus from acquisition                        -          56.5
--------------------------------------------------------------------------
Profit before interest and tax              942.4         378.9      148.7
--------------------------------------------------------------------------
Net interest                                (7.7)           7.4
--------------------------------------------------------------------------
Profit before tax                           934.7         386.3      142.0
--------------------------------------------------------------------------
Income tax expense                        (280.4)        (87.0)
Tax rate %                                   30.0          22.5
Minority Interest                         (280.8)       (120.4)
Minority Interest rate %                     42.9          40.2
--------------------------------------------------------------------------
Attributable to equity shareholders         373.5         178.9      108.8
in parent
Basic earnings per share (US cents/         130.2          62.5      108.3
share)
--------------------------------------------------------------------------
Underlying earnings per share
(US cents/share)                            130.2          48.9      166.3
--------------------------------------------------------------------------

Note : The results of 31 March 2005 include five months of KCM's post
acquisition earnings.

A detailed discussion on the financial performance of the Group is set out
below.

Revenue

Vedanta's full year revenue grew by 96.5 % to $3,701.8 million (2005: $1,884.2
million) on account of, additional metal produced by all businesses, higher
metals prices and the inclusion of KCM's full year revenues. In addition to
overall sales volume growth, the proportion of sales made up of value-added
products in the Aluminium and Copper businesses was increased as these products
command a higher premium.


Revenue by product         31 March 2006   31 March 2005        % change
                                ($million)     ($million)
--------------------------------------------------------------------------
Aluminium                          453.0           281.7            60.8
Copper                           2,241.3         1,014.7           120.9
Zinc                               875.5           486.4            80.0
Others                             132.0           101.4            30.2
--------------------------------------------------------------------------
Total                            3,701.8         1,884.2            96.5
--------------------------------------------------------------------------

All metals continue to earn a premium over LME in both Indian and international
markets and benefit from Indian import tariffs.

The Group is organised into product segments and its production is marketed both
domestically and internationally. A large portion of Copper production is sold
principally to countries in Asia whereas Aluminium and Zinc are principally sold
into the Indian market. Revenues from sales to customers in India was $1,762.3
million (47.6%), while sales to the rest of Asia were $1,448.1 million (39.1%)
and to Europe were $353.5 million (9.5%).

EBITDA and Operating Profit

Higher volumes and better prices have led to EBITDA growth of 142.6% to $1,101.5
million (2005: $454.0 million). While costs have been contained in our Indian
Copper and Zinc businesses, unit costs in Aluminium have increased similar to
other major global aluminium producers. Unit costs at our Zambian copper
operations increased due to low production levels and certain other external
factors described more fully in the business review. Tariff reductions from 10%
to 7.5% effective 28th February 2006 and applicable to all our metals other than
lead, had only a marginal impact on the results for the financial year.

The EBITDA margin increased to 29.8 % from 24.1% as a result of better prices
including improved TC/RCs, a product mix skewed towards the higher margin zinc
business and the management of costs in the Indian Copper business and the Zinc
business.

EBITDA by product           31 March 2006    31 March 2005     % change
                              ($million )      ($million )
--------------------------------------------------------------------------
Aluminium                           135.3             75.6         79.0
Copper                              425.3            163.0        160.9
Zinc                                532.9            218.5        143.9
Others                                8.0            (3.1)            -
--------------------------------------------------------------------------
Total                             1,101.5            454.0        142.6
--------------------------------------------------------------------------

The increase in average metal prices achieved plus volume gains, (excluding KCM
which was included in the 2004-5 results for 5 months) together contributed
$521.7 million of the $647.5 million increase.

Sales of surplus zinc concentrate having zinc metal content of about 100,000
tonnes generated EBITDA of $130.1 million during the year.

On the cost side, significant increases in mining royalties in the Zinc business
and the Copper mines in Australia were more than offset by cost savings despite
industry-wide inflationary pressures. However the Aluminium business in India
experienced a cross-industry surge in energy and other input costs as well as
the impact of a start-up phase at the new Korba smelter. The Zambian copper
business was adversely affected by the appreciation of the Zambian Kwacha
against the US Dollar and higher labour costs.

Group operating profit increased to $943.8 million up from $328.0 million, an
increase of 187.7 %. Depreciation charges increased to $157.7 million from
$103.7 million reflecting a full year depreciation charge on KCM assets of $43.3
million (2005: $24.2 million for five months) and projects commissioned during
the year. The operating profit of the previous year included an impairment
charge of $17.8 million for certain non-core assets and restructuring costs of
$4.1 million. Operating profit on a comparable basis rose by $593.5 million or
169.4%.

Net Finance Costs

Net finance costs were $7.7 million compared to net finance income of $7.4
million in the previous year. Commissioning of new capacity borrowing costs
which had previously been capitalised are now charged to the income statement.
In addition to general interest rate rises, the unwinding of the discount on
environmental and other provisions related to the acquisition of KCM in the
previous year has contributed to the change in finance costs compared with last
year.



Net Finance Costs                   Year ended 31   Year ended 31
                                       March 2006      March 2005
                                        ($million)      ($million)
------------------------------------------------------------------
Interest payable                           (124.1)          (60.8)

Unwinding of discount and
interest on defined benefit
pension arrangements                        (11.3)           (1.9)

Interest and other investment                75.7             45.0
income

Capitalisation of borrowing
costs net of foreign exchange
differences and interest
income                                       52.0            25.1
------------------------------------------------------------------
Net interest in income statement             (7.7)            7.4
------------------------------------------------------------------

Taxation

The effective tax rate for the year is 30.0% which is higher than that of the
previous year at 26.4 % after adjusting for the surplus on the KCM acquisition
and 22.5% on an unadjusted basis. The main reason for the higher tax rate is the
change in profit mix, a higher tax charge for the copper operations in India
where the business moved to a normal tax regime having achieved certain
threshold levels of profitability and due to changes in tax laws in some
subsidiaries. Of the overall tax charge, current tax has remained relatively
constant at just under 20%.
Minority interests

The Group's ownership in subsidiaries has increased to 57.1% from 50.4% in the
previous year on a comparable basis (after adjusting for the treatment of the
KCM surplus on acquisition in 2005). The full year impact in 2005-06 of
increased ownership in Sterlite together with higher profits from companies in
which there are lower minority shareholdings have affected the overall minority
interest level.

Attributable Profit

Attributable profit for the year was $373.5 million against $178.9 million in
the previous year, an increase of 108.8 %. This has been the result of strong
performances across all our businesses. The increase in underlying earnings over
the previous year was $233.4 million, an increase of 166.6 % over the previous
year. Underlying earnings exclude the effects of special items and their tax and
minority impact and we believe it is an important tool to measure the recurring
performance of the Group.

Reconciliation to underlying profit
                               31 March 2006 31 March 2005     % change
                                  ($million)    ($million)
------------------------------------------------------------------------
Profit for the year                    373.5         178.9        108.8
attributable to the equity
holders of the parent
Special items                              -          22.3
Surplus on acquisition of KCM              -        (56.5)
Taxation effect                            -         (1.6)
Minority interest impact                   -         (3.0)
Underlying profit for the year         373.5         140.1        166.6
------------------------------------------------------------------------
EPS on profit for the year
(US cents per share)                   130.2          62.5        108.3
------------------------------------------------------------------------
EPS on Underlying Profit (US           130.2          48.9        166.3
cents per share)
------------------------------------------------------------------------

Earnings per share and dividends

EPS for the year increased to US cents 130.2 per ordinary share, a growth of
108.3 % compared with the previous year. EPS on underlying profit rose by 166.3
% over the previous year.

Dilutive elements include adjustments for the convertible bond of 3.1 million
shares and 3.6 million shares to be issued under the LTIP. On this basis, the
fully diluted EPS increased by 108.5 % compared with the previous year from 61.5
US cents to 128.2 US cents.

In line with the Company's progressive dividend policy, the Board proposes a
final dividend of 14.3 US cents per ordinary share for the year 31 March 2006
giving a total dividend for the full year of US cents 20.0 per Ordinary Share.
The total dividend is higher by 17.3% than the previous year's dividend of 17.05
US cents per share.

Cash flow

The Group delivered strong Free Cash Flow of $634.8 million an increase of
$430.4 million reflecting improved operating cash and working capital
management. Cash inflows have been utilised in funding the Group's expansion
projects.

Cash flow                                     31 March 2006  31 March 2005
                                                 ($million)     ($million)
--------------------------------------------------------------------------
EBITDA                                              1,101.5          454.0
Special items                                             -         (21.9)
Working capital movements                            (169.7)        (181.7)
Changes in long term creditors and non-cash           (17.1)          52.8
items
Sustaining capital expenditure                        (80.6)         (67.1)
Sale of tangible fixed assets                           0.7           14.1
Net interest paid                                     (20.5)          17.2
Dividend received                                       7.0            2.8
Tax paid                                             (186.5)         (65.8)
--------------------------------------------------------------------------
Free Cash Flow                                        634.8          204.4
--------------------------------------------------------------------------
Expansion Capital Expenditure                        (605.5)        (734.4)
Acquisitions                                              -          (30.6)
Dividends paid to equity shareholders                 (49.4)         (15.8)
Dividends paid to minority shareholders                (8.9)          (7.7)
Foreign exchange                                      ( 7.7)          (9.9)
Equity component of convertible loan notes            123.3              -
De-consolidation of SEWT - cash and                   (58.7)             -
preference shares
Other movements *                                      34.5           97.6
--------------------------------------------------------------------------
Movement in net(debt)/cash                             62.4         (496.6)
--------------------------------------------------------------------------

* Project creditors of $2.0 million (2005: $80.5 million) re-classified from
working capital movements into other movements shown below Free Cash Flow.

Working capital levels were affected by increased inventories at the Korba
smelter and at the expanded copper business at Tuticorin. In addition, higher
metal prices and strong fourth quarter sales have led to higher levels of trade
receivables.

The cash tax rate has been consistent to last year's levels.

The Group has invested $80.6 million in Sustaining Capital Expenditure during
the year for operational efficiencies and to meet HSE commitments. In addition,
full year cash flows have been included for KCM.

Gross debt was $2,103.6 million as at 31 March 2006, including $600.4 million in
respect of convertible bonds issued during the year. The equity component of the
convertible bond of $123.3 million is recorded as part of equity in the balance
sheet. Cash and cash equivalents together with liquid investments were $2,091.7
million as at 31 March 2006. We continue to remain focused on maintaining a
strong balance sheet.

Projects

Total capital expenditure during the year on expansion projects announced at the
time of the IPO was $546.3 million.

Expansion projects -    Original  Spent to    Committed       Status
announced in           estimated  31 March  but not yet
previous years              cost        06        spent
                       ($million)($million)   ($million)
--------------------------------------------------------------------
                                         
Orissa (Alumina)           800.0     417.1        188.1  In progress
Korba Smelter              550.0     471.5         14.6  In progress
(Aluminium)                                               
Korba Power Plant          350.0     289.7          5.6    Completed
(Aluminium)
Tuticorin (Copper)          87.0      87.0            -    Completed
Chanderiya                 335.0     264.7          2.9    Completed
(Zinc-Lead)
Rampura Agucha              90.0      45.2            -    Completed
(Zinc-Lead)
--------------------------------------------------------------------
Total                    2,212.0   1,575.2        211.2
--------------------------------------------------------------------
                        
During the year, we have announced four large expansion projects with an
estimated capital cost of $3,080 million. Funds spent on new projects announced
during the year totalled to $48.8 million to March 2006. Commitments on these
new projects at 31 March 2006 are $961.3 million.

Expansion projects - announced   
during the year                     
                               Estimated cost  Spent to 31   Committed but
                                                  March 06   not yet spent
                                    ($million)   ($million)      ($million)
---------------------------------------------------------------------------
Jharsuguda (Aluminium)                2,100.0         32.1           763.3
Konkola Mine (Copper)                   400.0          4.3            62.0
Nchanga Smelter (Copper)                280.0          3.1            46.7
Chanderiya (Zinc)                       300.0          9.3            89.3
---------------------------------------------------------------------------
Total                                 3,080.0         48.8           961.3
---------------------------------------------------------------------------
                                     
We believe such a strong growth pipeline is unparalleled in our industry.

Acquisitions

We have exercised our right to buy the 49% stake held by Government of India in
BALCO. The value of this stake is to be determined by an independent valuer. The
independent valuer's report has been submitted to the Government and on 30 March
2006 Sterlite delivered a cheque to the Government for $246.3 million together
with a request for a transfer of shares. This amount is subject to final
determination by an arbitrator in respect of the interest included in the
consideration. As at the date of this report, the Government had not encashed
the cheque. In respect of this, no change in Sterlite's interest in BALCO is
reflected in these financial statements.

We have also sent a notice expressing our interest to acquire ZCI's stake of
28.5% in KCM. The process of appointing an independent valuer is underway.

Balance sheet

Shareholders' equity as at 31 March 2006 stood at $1,417.1 million up from
$1,110.5 million as at 31 March 2005. Minority interests increased to $921.7
million (2005: $636.2 million) and Net Debt decreased to $11.9 million as at 31
March 2006 as compared to $74.3 million at 31 March 2005. Cash and cash
equivalents as at 31 March 2006 was $2,091.7 million which included $719.7
million (net of issue cost) raised on the convertible bond issue.

As a result of capital expenditure during the year, capital employed increased
by $529.7 million to $2,350.7 million. The net book value of the Group's
property, plant and equipment increased from $2,288.6 million at the end of
previous year to $2,763.0 million as at 31 March 2006.

Goodwill which arose as a result of the acquisition of Sterlite is carried in
the balance sheet at $12.1 million. Goodwill has not been impaired during the
year.

Working capital increased in absolute terms for the reasons mentioned earlier.

ROCE on an adjusted capital employed basis (capital employed reduced by project
capital work-in-progress) rose to 37.9% from 32.0% due principally to higher
prices and we expect an increased impact on account of projects delivered during
this year 2006-07. ROCE is affected by the timing of expansion projects being
delivered during the year as the full benefit of additional capacities is not
captured.

Capital Employed/ROCE             31 March 2006   31 March 2005
                                      ($million)     ($million)
---------------------------------------------------------------
Equity shareholders' funds ($           1,417.1         1,110.5
million)
Minority interests                        921.7           636.2
Net Debt                                   11.9            74.3
Capital Employed                        2,350.7         1,821.0
---------------------------------------------------------------
ROCE (net of tax) (%)                    28.1 %          13.9 %
---------------------------------------------------------------

Adjusted Capital Employed/ROCE    31 March 2006   31 March 2005
                                      ($million)     ($million)
---------------------------------------------------------------
Capital Employed                        2,350.7         1,821.0
Less : Project capital work in          (608.6)       (1,028.9)
progress
Adjusted Capital Employed               1,742.1           792.1
---------------------------------------------------------------
Adjusted ROCE (net of tax) (%)            37.9%          32.0 %
---------------------------------------------------------------

New debt of $725 million was raised during the year through the issue of
convertible bonds at a coupon rate of 4.6 %. The bonds can be converted into one
ordinary share each represented by a Depository Receipt ('DRs'). The bond
holders earliest redemption option is after seven years. The holders of the DRs
will not be entitled to exercise voting rights. The convertible bond has been
accounted for in accordance with IFRS whereby the compound instrument has been
split into equity and debt portions. The equity component has been valued at
$123.3 million and the balance is treated as debt.

External debt held by subsidiaries was $905.6 million on 31 March 2006 as
compared to $929.7 million on 31 March 2005. Cash flows generated from
operations have been utilised to repay part of the subsidiary debt, particularly
in Sterlite and BALCO.

Until 28 March 2006, Sterlite operated the Sterlite Employee Welfare Trust
('SEWT'), a long term investment plan, the activities of which included granting
share options in Sterlite to its senior management. The SEWT was previously
consolidated into the Group accounts by virtue of its status as an ESOP Trust
controlled by the Group.

On 28 March 2006, the Trustees decided to amend the SEWT's objectives to exclude
share option plans for Sterlite employees and to include social and charitable
activities.

Vedanta reviewed the treatment of the SEWT under IFRS and concluded that due to
the change in its objectives it ceased to represent an ESOP Trust. Moreover, the
SEWT is no longer controlled by the Group and therefore does not qualify for
consolidation in Vedanta's Group accounts.

Deconsolidation of the SEWT resulted in a reduction in the Group's effective
shareholding in Sterlite by 2.49% to 75.93%. At 28 March 2006, being the date of
deconsolidation, the net assets of the Group were reduced by $58.7 million.
Equity shareholders' funds reduced by $88.2 million.


Consolidated income statement

                                        Note   Year ended  Year ended
                                                 31 March    31 March
                                                     2006        2005
                                                $ million   $ million
---------------------------------------------------------------------
Continuing operations
Revenue                                   2       3,701.8     1,884.2
Cost of sales                                   (2,591.4)   (1,415.7)
---------------------------------------------------------------------
Gross profit                                      1,110.4       468.5

Other operating income                               41.5        25.9
Distribution costs                                 (81.1)      (51.5)
Administrative expenses                           (127.0)      (92.6)
Administrative expenses - special items  3a             -      (22.3)
---------------------------------------------------------------------
Operating profit                          2         943.8       328.0
Investment revenue                        4          51.6        37.5
Finance costs                             5        (59.3)      (30.1)
Share of loss of associate                          (1.4)       (5.6)
Special item - surplus on acquisition    3b             -        56.5
---------------------------------------------------------------------
Profit before taxation                              934.7       386.3
Tax expense                               6       (280.4)      (87.0)
---------------------------------------------------------------------
Profit for the year                                 654.3       299.3
---------------------------------------------------------------------
Attributable to:
Equity holders of the parent                        373.5       178.9
Minority interests                                  280.8       120.4
---------------------------------------------------------------------
                                                    654.3       299.3
---------------------------------------------------------------------

Basic earnings per ordinary share 
(US Cents)                                7         130.2        62.5

Diluted earnings per ordinary share       7         128.2        61.5
(US Cents)



Consolidated balance sheet
                                                        As at        As at
                                                     31 March     31 March
                                                         2006         2005
                                           Note     $ million    $ million
--------------------------------------------------------------------------
ASSETS
Non-current assets
Goodwill                                                 12.1         12.2
Property, plant and equipment                         2,763.0      2,288.6
Interest in associate                                     1.8          3.3
Financial asset investments                              27.1         24.8
Other non-current assets                                 27.3         34.6
Other financial assets (derivatives)                     63.2            -
Deferred tax asset                                       71.9         90.0
--------------------------------------------------------------------------
                                                      2,966.4      2,453.5
--------------------------------------------------------------------------
Current assets
Inventories                                             535.0        337.7
Trade and other receivables                             593.0        339.6
Other current financial assets                           49.0            -
(derivatives)
Liquid investments                          10          244.4        262.0
Cash and cash equivalents                   10        1,847.3      1,185.6
--------------------------------------------------------------------------
                                                      3,268.7      2,124.9
--------------------------------------------------------------------------
TOTAL ASSETS                                          6,235.1      4,578.4
--------------------------------------------------------------------------
LIABILITIES
Current liabilities
Short term borrowings                       9         (239.8)      (194.7)
Convertible loan notes                                      -       (23.7)
Trade and other payables                              (942.5)      (675.0)
Other current financial liabilities                   (114.7)            -
(derivatives)
Provisions                                             (12.2)       (37.0)
Current tax liabilities                                (34.7)       (15.1)
--------------------------------------------------------------------------
                                                    (1,343.9)      (945.5)
--------------------------------------------------------------------------
Net current assets                                    1,924.8      1,179.4
--------------------------------------------------------------------------
Non-current liabilities
Medium and long term borrowings             9       (1,236.0)    (1,303.5)
Convertible loan notes                                (600.4)            -
Trade and other payables                               (15.6)       (41.2)
Other financial liabilities (derivatives)              (93.4)            -
Deferred tax liabilities                              (286.9)      (234.9)
Retirement benefits                                    (38.2)       (38.6)
Provisions                                            (222.5)      (208.6)
Non equity minority interests                          (59.4)       (59.4)
--------------------------------------------------------------------------
                                                    (2,552.4)    (1,886.2)
--------------------------------------------------------------------------
Total liabilities                                   (3,896.3)    (2,831.7)
--------------------------------------------------------------------------
Net assets                                            2,338.8      1,746.7
--------------------------------------------------------------------------
EQUITY
Share capital                                            28.7         28.7
Share premium account                                    18.6         18.6
Share based payment reserves                              4.1          2.5
Convertible bond reserve                                123.3            -
Hedging reserves                                       (29.1)            -
Other reserves                                          213.1         43.9
Retained earnings                                     1,058.4      1,016.8
--------------------------------------------------------------------------
Equity attributable to equity holders of              1,417.1      1,110.5
the parent
Minority interests                                      921.7        636.2
--------------------------------------------------------------------------
Total equity                                          2,338.8      1,746.7
--------------------------------------------------------------------------
The consolidated balance sheet was approved by the Board on 31 May 2006


Consolidated cash flow statement

                                         Year ended  Year ended
                                           31 March    31 March
                                               2006        2005
                                   Note   $ million   $ million
---------------------------------------------------------------
Operating activities
Profit before taxation                        934.7       386.3
Adjustments for:
Depreciation                                  157.7       103.7
Investment revenue                           (51.6)      (37.5)
Finance costs                                  59.3        30.1
Other non-cash items                            8.5      (27.3)
Other adjustments                               1.4         6.1
---------------------------------------------------------------
Operating cash flows before                 1,110.0       461.4
movements in working capital
Increase in inventories                      (190.1)      (61.0)
Increase in receivables                      (236.8)      (79.1)
Increase/(decrease) in payables                231.6      (18.1)
---------------------------------------------------------------
Cash generated from operations                914.7       303.2
Dividends received                              7.0         2.8
Interest income received                       58.5        57.8
Interest paid                                (112.1)      (64.1)
Income taxes paid                            (186.5)      (65.8)
Dividends paid                                (49.4)      (15.8)
---------------------------------------------------------------
Net cash from operating activities            632.2       218.1
---------------------------------------------------------------


Investing activities
Acquisition of subsidiary                         -      (28.3)
Cash acquired with subsidiary                     -        41.2
Purchases of property, plant and            (656.2)     (535.3)
equipment
Proceeds on disposal of property,               0.7        14.1
plant and equipment
Dividends paid to minority                    (8.9)       (7.7)
interests of subsidiaries
Disposal/(purchase) of liquid                  12.8     (164.0)
investments
Investment in associate                         0.1       (6.2)
Buyback of shares from minority                   -       (2.3)
interests of subsidiaries
Deconsolidation of cash held by SEWT          (19.5)         -
---------------------------------------------------------------
Net cash used in investing activities        (671.0)    (688.5)
----------------------------------------------------------------

Financing activities
Issue of ordinary shares                          -         0.1
Proceeds from issue of                        719.7           -
convertible loan notes
Increase/(decrease) in short term              28.4      (96.6)
borrowings
(Decrease)/increase in long-term             (20.9)       607.0
borrowings
Proceeds from issue of shares to                  -         1.7
minority interests of
subsidiaries
----------------------------------------------------------------
Net cash from financing                       727.2       512.2
activities
----------------------------------------------------------------
Net increase in cash and cash                 688.4        41.8
equivalents
Exchange difference                          (26.7)       (3.5)
Cash and cash equivalents at       10       1,185.6     1,147.3
beginning of year
----------------------------------------------------------------
Cash and cash equivalents at end   10       1,847.3     1,185.6
of year
----------------------------------------------------------------


Consolidated statement of changes in equity

                              Attributable to equity holders of the Company
                  ----------------------------------------------------------------------

$ million          Share   Share    Share Convertible Hedging     Other Retained   Total  Minority   Total
                 capital premium    based        bond reserves reserves earnings         interests  equity
                                  payment                             *
                                 reserves     reserve
-----------------------------------------------------------------------------------------------------------
At 31 March 2005    28.7    18.6      2.5           -        -     43.9  1,016.8 1,110.5     636.2 1,746.7
Adjustment for         -       -        -           -     (3.2)     0.9     (9.8)  (12.1)     (2.1)  (14.2)
adoption of IAS
39**
-----------------------------------------------------------------------------------------------------------
At 1 April 2005     28.7    18.6      2.5           -     (3.2)    44.8  1,007.0 1,098.4     634.1 1,732.5
Profit for the         -       -        -                    -        -    373.5   373.5     280.8   654.3
year
Issue of               -       -        -       123.3        -        -        -   123.3         -   123.3
convertible bond
De-consolidation       -       -        -           -        -        -    (88.2)  (88.2)     29.5  (58.7)
of SEWT
Movement on            -       -        -           -        -        -     (0.4)   (0.4)     24.6    24.2
increase in
minority
interests
Exchange               -       -        -           -      0.2    (16.1)       -   (15.9)    (14.1)  (30.0)
differences on
translation of
foreign
operations
Transfers              -       -        -           -        -    184.7  (184.7)       -         -       -
IPO related            -       -        -           -        -        -      0.6     0.6         -     0.6
credit
Movement in fair       -       -        -           -    (26.1)    (0.3)       -   (26.4)    (24.3)  (50.7)
value of cash
flow hedges and
financial
investments
Dividends paid         -       -        -           -        -        -    (49.4)  (49.4)     (8.9)  (58.3)
Recognition of         -       -      1.6           -        -        -        -     1.6         -     1.6
share based
payment
-----------------------------------------------------------------------------------------------------------
At 31 March 2006    28.7    18.6      4.1       123.3   (29.1)    213.1  1,058.4 1,417.1     921.7 2,338.8
-----------------------------------------------------------------------------------------------------------

* Other reserves comprise:
                                      Currency     Merger  Investment   General    Total
                                   translation    reserve revaluation  reserves
                                       reserve                reserve
-----------------------------------------------------------------------------------------
At 1 April 2004                              -        4.4           -       8.3     12.7
Exchange differences on                   13.2          -           -         -     13.2
translation of foreign operations
-----------------------------------------------------------------------------------------
Transfer from retained earnings              -          -           -      18.0     18.0
At 31 March 2005                          13.2        4.4           -      26.3     43.9
Adjustment for adoption of IAS 39**          -          -         0.9         -      0.9
-----------------------------------------------------------------------------------------
At 1 April 2005                           13.2        4.4         0.9      26.3     44.8
Exchange differences on                  (16.1)         -           -         -    (16.1)
translation of foreign operations
Revaluation of available-for-sale            -          -        (0.3)        -    (0.3)
investments
Transfer from retained earnings              -          -           -     184.7    184.7
-----------------------------------------------------------------------------------------
At 31 March 2006                          (2.9)       4.4         0.6     211.0    213.1
-----------------------------------------------------------------------------------------
** Details of the accounting policy change are provided in note 38.

*** Under Indian law, a general reserve is created through a year on year
    transfer from the income statement. 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.


Notes to the financial information

1. General information and accounting policies


For accounting periods beginning on or after 1 April 2005, the Group is required
to prepare consolidated financial statements in accordance with International
Financial Reporting Standards ('IFRSs') in place of United Kingdom Generally
Accepted Accounting Principles ('UK GAAP'). For these purposes, IFRSs comprise
the Standards and Interpretations issued by the International Accounting
Standards Board ('IASB') and Interpretations issued by the International
Financial Reporting Interpretations Committee ('IFRIC') that have been endorsed
by the European Union by 31 March 2006.


This preliminary results announcement is for the year ended 31 March 2006. The
announcement, including all comparatives, has been prepared using the accounting
policies consistent with all IFRS Standards and Interpretations which are
mandatory for accounting periods beginning on or after 1 April 2005. The
following Standards have been adopted early by the Group:


• IFRS 6 'Exploration for and Evaluation of Mineral Resources' is applicable to
  the Group from 1 April 2006. However, the Group adopted this standard early from
  1 April 2004.

• IFRS 2 'Share based payments' has been adopted early by the Group from 1 April
  2004, for its grant of equity instruments to its employees.

The accounting policies and methods of computation followed in this announcement
are those set out in the news release 'Vedanta Resources plc Adoption of
International Financial Reporting Standards' published by the Company on 27
September 2005. The news release is published on the Company's website,
www.vedantaresources.com, and includes explanations of the significant UK GAAP
to IFRS differences and reconciliations for:

• total shareholders' equity as at 1 April 2004 (date of transition to IFRS), 30
  September 2004 and 31 March 2005; and

• profit attributable to shareholders for the period ended 30 September 2004 and
  the year ended 31 March 2005.

While the financial information contained in this preliminary results
announcement has been computed in accordance with IFRS, this announcement does
not itself contain sufficient information to comply with IFRSs. This
announcement does not constitute the Group's statutory accounts for the year
ended 31 March 2006 but is derived from those accounts. The statutory accounts
for the year ended 31 March 2006 will be delivered to the Registrar of Companies
following the Company's AGM. The auditors have reported on those accounts and
their reports were unqualified and did not contain statements under Sections 237
(2) or (3) Companies Act 1985.

The information contained in this announcement for the year ended 31 March 2005
does not constitute statutory accounts. A copy of the statutory accounts for
that year, which were prepared under UK GAAP, has been delivered to the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain statements under section 237(2) of the Companies Act 1985
(regarding adequacy of accounting records and returns) or under section 237(3)
(regarding provision of necessary information and explanations).

2. Segment information

The Group's primary format for segment reporting is business segments. The
business segments consist of non-ferrous metals i.e. aluminium, copper and zinc,
with residual components being reported as others. Business segment data
includes an allocation of corporate costs to each sector on an appropriate
basis. The risks and returns of the Group's operations are primarily determined
by the nature of the different activities that the Group engages in.
Inter-segment sales are charged based on prevailing market prices. The Group's
activities are organised on a global basis.


(a) Business segments

The following table presents revenue and profit information and certain asset
and liability information regarding the Group's business segments for the years
ended 31 March 2006 and 2005.


                                      
Year ended 31 March 2006              Continuing Operations              
                       ---------------------------------------------------                                              
                                                                                Total
$ million              Aluminium    Copper      Zinc     Other Elimination Operations
-------------------------------------------------------------------------------------
Revenue
Sales to external          453.0   2,241.3     875.5     132.0           -    3,701.8
customers
Inter-segment sales         40.1         -         -         -      (40.1)          -
-------------------------------------------------------------------------------------
Segment revenue            493.1   2,241.3     875.5     132.0      (40.1)    3,701.8
-------------------------------------------------------------------------------------
Result
Operating profit           102.8     338.6     489.5      12.9           -      943.8
Net finance costs                                                               (7.7)
Share of associate's                                                            (1.4)
loss
-------------------------------------------------------------------------------------
Profit before taxation                                                          934.7
Tax expense                                                                   (280.4)
-------------------------------------------------------------------------------------
Profit for the year                                                             654.3
from continuing
operations
-------------------------------------------------------------------------------------
Assets and liabilities
Segment assets           1,214.1   2,001.4   1,223.3     811.5           -    5,250.3
Interest in associate                                                             1.8
Unallocated assets                                                              983.0
-------------------------------------------------------------------------------------
Total assets                                                                  6,235.1
-------------------------------------------------------------------------------------
Segment liabilities      (745.7) (1,405.8)   (319.5)   (614.3)           -  (3,085.3)
Unallocated                                                                   (811.0)
liabilities
-------------------------------------------------------------------------------------
Total liabilities                                                           (3,896.3)
-------------------------------------------------------------------------------------
Other segment
information
Additions to property,     540.5      96.6      49.0         -           -      686.1
plant and equipment
Depreciation              (32.5)    (80.6)    (43.5)     (1.1)           -    (157.7)
-------------------------------------------------------------------------------------

                                      
Year ended 31 March 2006             Continuing Operations              
                       ---------------------------------------------------      
                                                                                Total
$ million              Aluminium    Copper      Zinc     Other Elimination Operations
-------------------------------------------------------------------------------------
Revenue
Sales to external         281.7   1,014.7     486.4     101.4                1,884.2
customers
Inter-segment sales        26.3         -         -         -      (26.3)          -
-------------------------------------------------------------------------------------
Segment revenue           308.0   1,014.7     486.4     101.4      (26.3)    1,884.2
-------------------------------------------------------------------------------------
Result
Operating profit/          57.4     103.2     190.6    (23.2)           -      328.0
(loss)

Non-operating special                                                           56.5
items
-------------------------------------------------------------------------------------
Operating profit                                                               384.5
after special items
Net finance revenues                                                             7.4
Share of associate's                                                            (5.6)
loss
-------------------------------------------------------------------------------------
Profit before                                                                  386.3
taxation
Tax expense                                                                    (87.0)
-------------------------------------------------------------------------------------
Profit for the year                                                            299.3
from continuing
operations
-------------------------------------------------------------------------------------
Assets and
liabilities
Segment assets            965.9   1,703.2     877.5     712.0                4,258.6
Interest in associate                                                            3.3
Unallocated assets                                                             316.5
-------------------------------------------------------------------------------------
Total assets                                                                 4,578.4
-------------------------------------------------------------------------------------
Segment liabilities      (694.7) (1,081.2)   (337.8)   (552.5)              (2,666.2)
Unallocated                                                                   (165.5)
liabilities
-------------------------------------------------------------------------------------
Total liabilities                                                           (2,831.7)
-------------------------------------------------------------------------------------
Other segment
information
Additions to              438.3      49.5     245.8      70.7                  804.3
property, plant and
equipment
Depreciation              (18.3)    (55.9)    (28.8)     (0.7)                (103.7)
Impairment losses             -         -         -     (17.8)                 (17.8)
-------------------------------------------------------------------------------------


(b) EBITDA* by segment
                                              Year ended       Year ended
                                           31 March 2006    31 March 2005
                                               $ million        $ million
-------------------------------------------------------------------------

Aluminium                                          135.3             75.6
Copper                                             425.3            163.0
- India/Australia                                  219.0             87.0
- Zambia                                           206.3             76.0
Zinc                                               532.9            218.5
Other                                                8.0            (3.1)
-------------------------------------------------------------------------
EBITDA                                           1,101.5            454.0
Depreciation                                     (157.7)          (103.7)
Operating special items                                -           (22.3)
-------------------------------------------------------------------------
Group operating profit                             943.8            328.0
-------------------------------------------------------------------------

* EBITDA represents operating profit before special items, depreciation and
amortisation.

(c) Geographical segmental analysis

The Group's operations are located in India, Zambia and Australia. The following
table provides an analysis of the Group's sales by geographical market,
irrespective of the origin of the goods:
                                              Year ended       Year ended
                                           31 March 2006    31 March 2005
                                               $ million        $ million
-------------------------------------------------------------------------
Far East                                           963.8            487.1
India                                            1,762.3          1,130.6
Africa                                             136.6             19.0
Other                                              839.1            247.5
-------------------------------------------------------------------------
Total                                            3,701.8          1,884.2
-------------------------------------------------------------------------

The following is an analysis of the carrying amount of segment assets, and
additions to property, plant and equipment, analysed by the geographical area in
which the assets are located :
                              Carrying amount of   Additions to property,
                                segment assets      plant and equipment
                                ---------------     -------------------

                             Year ended Year ended Year ended  Year ended
                               31 March   31 March   31 March    31 March
                                   2006       2005       2006        2005
                              $ million  $ million  $ million   $ million
-------------------------------------------------------------------------
Australia                         163.1      112.8        3.8         2.4
India                           3,869.2    3,456.8      618.6       780.0
Zambia                            768.4      639.8       63.7        20.9
Other                           1,434.4      369.0          -         1.0
-------------------------------------------------------------------------
Total                           6,235.1    4,578.4      686.1       804.3
-------------------------------------------------------------------------




3.       Special Items
a.       Administrative expenses
                                              Year ended       Year ended
                                           31 March 2006    31 March 2005
                                               $ million        $ million
-------------------------------------------------------------------------
Restructuring and redundancies                         -            (4.1)
Impairment of non-core assets                          -           (17.8)
Loss on sale of assets                                 -            (0.4)
-------------------------------------------------------------------------
                                                       -           (22.3)
-------------------------------------------------------------------------

b. Others
                                              Year ended       Year ended
                                           31 March 2006    31 March 2005
                                               $ million        $ million
-------------------------------------------------------------------------
Release of surplus on acquisition *                    -             56.5
-------------------------------------------------------------------------
                                                       -             56.5
-------------------------------------------------------------------------

* As set out in the Group's financial statements for the year ended 31 March
2005 as presented under UK GAAP, the Group acquired KCM in November 2004. The
assets and liabilities acquired were included at provisional fair values. The
difference between the total consideration of $46.1 million and provisional fair
value of net assets acquired ($102.0 million) was recognised in the UK GAAP
financial statements as negative goodwill totalling $56.5 million.

As explained in the press release dated 27 September 2005 (see note 1), under
IFRS negative goodwill is not recognised in the balance sheet but is recognised
immediately in the income statement.


4.       Investment revenue
                                                 Year ended      Year ended
                                              31 March 2006   31 March 2005
                                                  $ million       $ million
---------------------------------------------------------------------------
Interest and other financial income                    67.6            48.3
Dividend income from other financial                    7.0             2.8
investments
Foreign exchange gain/(loss) on cash and                              
liquid investments                                      1.1            (6.1)
Expected return on defined benefit                      1.1             0.9
arrangements
Capitalisation of foreign exchange                    (25.2)           (8.4)
differences and interest income
---------------------------------------------------------------------------
Total investment revenue                               51.6            37.5
---------------------------------------------------------------------------

5.       Finance costs
                                                 Year ended      Year ended
                                              31 March 2006   31 March 2005
                                                  $ million       $ million
---------------------------------------------------------------------------
Interest on bank loans and overdrafts                  75.6            49.8
Interest on convertible loan notes                      4.0               -
Interest on other loans                                44.5            11.0
Unwinding of discount on provisions                     5.6               -
Unwinding of discount on KCM deferred                   2.1               -
consideration
Interest on defined benefit arrangements                4.7             2.8
Capitalisation of borrowing costs                     (77.2)          (33.5)
---------------------------------------------------------------------------
Total finance costs                                    59.3            30.1
---------------------------------------------------------------------------

6.       Tax

                                                 Year ended     Year ended
                                              31 March 2006  31 March 2005
                                                  $ million      $ million
---------------------------------------------------------------------------
Current tax:
UK Corporation tax                                        -           (0.6)
Foreign tax - India                                   177.8           65.3  
              Zambia                                    1.1            0.2
              Other                                     7.1            0.5
---------------------------------------------------------------------------
                                                      186.0           65.4
---------------------------------------------------------------------------
Deferred tax:
Current year movement in deferred tax                  94.4           29.3
Attributable to decrease in the rate of                   -           (7.7)
Indian corporation tax                                 94.4           21.6
---------------------------------------------------------------------------
Total tax expense                                     280.4           87.0
---------------------------------------------------------------------------
Effective tax rate                                    30.0%           22.5%
---------------------------------------------------------------------------


Major components of income tax expense for the year ended 31 March 2006 are:
 
                                                Year ended     Year ended
                                              31 March 2006  31 March 2005
                                                  $ million      $ million
---------------------------------------------------------------------------
Consolidated income statement
Current tax
Current tax charge                                    186.0           65.4

Deferred tax
Deferred tax charged to income statement               94.4           21.6
---------------------------------------------------------------------------
Income tax expense reported in consolidated           280.4           87.0
income statement
---------------------------------------------------------------------------
Consolidated statement of changes in equity
Deferred tax reported in equity                        13.5              -
---------------------------------------------------------------------------


Overview of the Indian direct tax regime

The following is an overview of the salient features of the Indian direct tax
regime relevant to the taxation of the Group:

   • companies are subject to Indian income tax on a stand alone basis. There
     is no concept of tax consolidation or Group relief in India;
   • companies are charged tax on profits of assessment years which run from
     1 April to 31 March. For each assessment year, a company's profits will be
     subject to either regular income tax or Minimum Alternative Tax ('MAT'),
     whichever is the greater;
   • regular income tax is charged on book profits (prepared under Indian
     GAAP) adjusted in accordance with the provisions of the Indian Income Tax
     Act. Typically the required adjustments generate significant timing
     differences in respect of the depreciation of fixed assets, relief for
     provisions and accruals, the use of tax losses brought forward and pension
     costs. Regular income tax is charged at 30% (plus surcharges) taking the
     effective tax rate to 33.66%. The corporate tax rate up to 2004-05 was 35%
     (plus surcharges) taking the effective tax rate to 36.59%.
   • MAT is charged on book profits but typically with a limited number of
     adjustments. MAT is charged at 7.5% (plus surcharges). From the year
     2006-07, MAT will be charged at 10% (plus surcharges). However, MAT paid
     during a year can be set off against normal tax within a period of seven
     years succeeding the assessment year in which the MAT credit arose.
   • there are various tax exemptions or tax holidays available to companies
     in India. The most important to the Group are:



    (i)  The industrial undertakings' exemption. Profits of newly constructed
         industrial undertakings located in designated areas of India can benefit from a
         tax holiday. A typical tax holiday would exempt 100% of the plant's profits for
         five years, and 30% for the next five years, and

    (ii) The power plants' exemption. Profits on newly constructed power plants
         can benefit from a tax holiday. A typical holiday would exempt 100% of profits
         in ten consecutive years within the first 15 years of the power plants'
         operation. The start of the ten-year period can be chosen by a company;

   • tax is payable in the financial year to which it relates; and
   • tax returns submitted by companies are regularly subjected to a
     comprehensive review and aggressive challenge by the tax authorities. There
     are appeals procedures available to both the tax authorities and taxpayers
     and it is not uncommon for significant or complex matters in dispute to
     remain outstanding for several years before they are finally resolved in the
     High Court or the Supreme Court.
 

Overview of the Zambian Tax Regime

   • copper and cobalt mining companies pay company tax at 25%;
   • period for carry forward of tax losses for KCM and Smelterco is 20 years;
   • companies are charged tax on profits of accounting years;
   • income tax is charged on book profits (prepared under IFRS) adjusted in
     accordance with the provisions of the Income Tax Act 1996 as amended; and
   • tax returns are submitted on a self assessment basis to the Zambian
     Revenue Authority ('ZRA') which will review the return if found inadequate.
     Any disputes will be referred to the Revenue Appeals Tribunal and
     subsequently to the High Court or the Supreme Court.


A reconciliation of income tax expense applicable to accounting profit before
income tax at the statutory income tax rate to income tax expense at the Group's
effective income tax rate for the year ended 31 March 2006 is as follows:

                                             Year ended     Year ended
                                          31 March 2006  31 March 2005
                                              $ million      $ million
----------------------------------------------------------------------
Accounting profit before income tax               934.7          386.3

At Indian statutory income tax rate of            314.6          141.4
33.66% (2005: 36.59%)
Temporary difference not recognised in             (6.0)           1.2
deferred tax
Utilisation of tax losses                           0.6           (3.0)
Disallowable expenses                               7.1           12.7
Non-taxable income                                 (5.0)         (26.5)
Impact of tax rate differences                    (14.3)         (15.4)
Tax holiday and similar exemptions                (17.8)         (27.5)
Dividend distribution tax on overseas               2.7            3.0
subsidiaries
Minimum Alternative Tax                             1.7            1.1
Adjustments in respect of previous years           (3.2)             -
----------------------------------------------------------------------
At effective income tax rate of 30.0%             280.4           87.0
(2005: 22.5%)
----------------------------------------------------------------------


7.       Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year (adjusted for the effects of dilutive
options).

The following reflects the income and share data used in the basic and diluted
earnings per share computations:

                                             Year ended     Year ended
                                          31 March 2006  31 March 2005
                                              $ million      $ million
----------------------------------------------------------------------
Net profit attributable to equity                 373.5          178.9
holders of the parent
----------------------------------------------------------------------

                                             Year ended     Year ended
                                          31 March 2006  31 March 2005
                                                million        million
----------------------------------------------------------------------
Weighted average number of ordinary               286.8          286.4
shares for basic earnings per share

Effect of dilution:

Convertible loan notes                              3.1              -
Share options                                       3.6            1.5
----------------------------------------------------------------------
Adjusted weighted average number of               293.5          287.9
ordinary shares for diluted earnings per share
----------------------------------------------------------------------

(a) Earnings per share based on profit for the year

Basic earnings per share on the profit       
for the year

                                             Year ended     Year ended
                                          31 March 2006  31 March 2005
----------------------------------------------------------------------
Profit for the year attributable to               373.5          178.9
equity holders of the parent($ million)
Weighted average number of shares of the          286.8          286.4
Company in issue (million)
----------------------------------------------------------------------
Earnings per share on profit for the              130.2           62.5
year (US cents per share)
----------------------------------------------------------------------


Diluted earnings per share on the profit     
for the year
                                             Year ended     Year ended
                                          31 March 2006  31 March 2005
----------------------------------------------------------------------
Profit for the year attributable to               373.5          178.9
equity holders of the parent ($ million)
Adjustment in respect of convertible                2.7              -
bonds of Vedanta ($ million)
Adjustment in respect of convertible                  -          (1.9)
bonds in Sterlite ($ million)
----------------------------------------------------------------------
Profit for the year after dilutive                376.2          177.0
adjustment ($ million)
----------------------------------------------------------------------
Adjusted weighted average number of               293.5          287.9
shares of the Company in issue (million)
----------------------------------------------------------------------
Diluted earnings per share on profit for          128.2           61.5
the year (US cents per share)
----------------------------------------------------------------------


Shares issued during the year ended 31 March 2005 were 303,000 on 18 March 2005
and 85,000 on 31 March 2005 pursuant to the exercise of the second tranche of
awards under the Reward Plan. Shares issued under the Long Term Incentive Plan
on 22 February 2006 were 2,506,350.

The issue of these shares has been included in determining the 2006 weighted
average number of shares.

Profit for the year would be diluted if holders of the convertible bonds in
Vedanta exercised their right to convert their bond holdings into Vedanta
equity. The impact on profit for the year of this conversion would be the
interest payable on the convertible bond.

The outstanding awards under the LTIP are reflected in the diluted EPS figure
through an increased number of weighted average shares.

There have been no other transactions involving ordinary shares or potential
ordinary shares since the reporting date and before the completion of these
financial statements.

(b) Earnings per share based on Underlying Profit for the year

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

                                             Year ended     Year ended
                                          31 March 2006  31 March 2005
                                              $ million      $ million
----------------------------------------------------------------------
Profit for the year attributable to               373.5          178.9
equity holders of the parent
Administrative expenses - special items               -           22.3
(note 3a)
Special item - release of surplus on                  -          (56.5)
acquisition (note 3b)
Tax effect of special items                           -           (1.6)
Minority interest effect of special                   -           (3.0)
items
----------------------------------------------------------------------
Underlying profit for the year                    373.5          140.1
----------------------------------------------------------------------


Basic earnings per share on Underlying       
Profit for the year

                                             Year ended     Year ended
                                          31 March 2006  31 March 2005
----------------------------------------------------------------------
Underlying profit for the year                    373.5          140.1
($million)
Weighted average number of shares of the          286.8          286.4
Company in issue (million)
----------------------------------------------------------------------
Earnings per share on Underlying Profit           130.2           48.9
for the year (US cents per share)
----------------------------------------------------------------------


Diluted earnings per share on Underlying    
Profit for the year

                                             Year ended     Year ended
                                          31 March 2006  31 March 2005
----------------------------------------------------------------------

Underlying profit for the year ($ million)        373.5          140.1
Adjustment in respect of convertible                2.7              -
bonds of Vedanta ($ million)
Adjustment in respect of convertible                  -          (1.9)
bonds in Sterlite ($ million)
----------------------------------------------------------------------
Underlying profit for the year after              376.2          138.2
dilutive adjustment ($ million)
----------------------------------------------------------------------
Adjusted weighted average number of               293.5          287.9
shares of the Company in issue (million)
----------------------------------------------------------------------
Diluted earnings per share on Underlying          128.2           48.0
profit for the year (US cents per share)
----------------------------------------------------------------------


8.       Dividends
                                                   Year ended     Year ended
                                                31 March 2006  31 March 2005
                                                    $ million      $ million
-----------------------------------------------------------------------------
Amounts recognised as distributions to equity
holders:
Equity dividends on ordinary shares:
Final dividend for 2004-05 : 11.55 US cents              33.1           15.8
per share (2003-04 : 5.5 US cents per share)
Interim dividend paid during the year : 5.7 US           16.3           15.8
cents per share (2004-05 : 5.5 US cents per share)
-----------------------------------------------------------------------------
                                                         49.4           31.6
-----------------------------------------------------------------------------

Proposed for approval at AGM but not provided

Equity dividends on ordinary shares:
Final dividend for 2005-06: 14.3 US cents per            41.0           33.1
share (2004-05: 11.55 US cents per share)
-----------------------------------------------------------------------------


9.       Borrowings
                                                        As at         As at
                                                  31 March 06   31 March 05
                                                    $ million     $ million
----------------------------------------------------------------------------
Bank loans                                              700.7         815.6
Bonds                                                   567.6         615.9
Other loans                                             207.5          66.7
----------------------------------------------------------------------------
Total                                                 1,475.8       1,498.2
----------------------------------------------------------------------------
Borrowings are repayable as:
On demand within one year (shown as current             239.8         194.7
liabilities)
In the second year                                      257.9         145.2
In two to five years                                    949.6       1,004.4
After five years                                         28.5         153.9
----------------------------------------------------------------------------
Total borrowings                                      1,475.8       1,498.2
----------------------------------------------------------------------------
Less: payable within one year                         (239.8)       (194.7)
----------------------------------------------------------------------------
Medium and long term borrowings                       1,236.0       1,303.5
----------------------------------------------------------------------------


At 31 March 2006, the Group had available US$ 443.7 million (2005: $307.0
million) of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met.



10.    Movement in Net Debt (1)

                                   Debt due within one year  Debt due after one  year
                                   ------------------------  ------------------------
US$ million               Cash and     Debt          Debt      Debt          Debt       Liquid   Total
                              cash carrying       related  carrying       related  investments     Net
                       equivalents    value derivatives(2)    value derivatives(2) US$ million    Debt
-------------------------------------------------------------------------------------------------------
At 31 March 2005           1,185.6  (218.4)             -  (1,303.5)            -        262.0   (74.3)
IAS 32 and IAS 39              1.0     5.4          (15.1)     15.8         (17.5)           -   (10.4)
adjustments
-------------------------------------------------------------------------------------------------------
Adjusted opening           1,186.6  (213.0)         (15.1) (1,287.7)        (17.5)       262.0   (84.7)
balance sheet at 1
April 2005
Cash flow                    688.4   (28.4)             -    (704.1)            -        (12.8)  (56.9)
Other non-cash changes       (1.0)    (2.0)          17.9     135.2         (12.7)           -   137.4
Foreign exchange            (26.7)     3.6              -      20.2             -         (4.8)   (7.7)
differences
-------------------------------------------------------------------------------------------------------
At 31 March 2006           1,847.3  (239.8)           2.8  (1,836.4)        (30.2)       244.4   (11.9)
-------------------------------------------------------------------------------------------------------

(1) Net Debt being total debt after fair value adjustments under IAS 32 and 39
    as reduced by cash and cash equivalents and liquid investments.

(2) Debt related derivatives exclude commodity related derivative financial
    assets and liabilities.

5 Year Summary
                                      As per IFRS               As per UK GAAP
                                     ------------               --------------
                                 Year ended Year ended Year ended Year ended Year ended
                                   31 March   31 March   31 March   31 March   31 March
                                         06         05         04         03         02
                                  $ million  $ million  $ million  $ million  $ million
---------------------------------------------------------------------------------------
Revenue                             3,701.8    1,884.2    1,289.5      963.1      601.3
---------------------------------------------------------------------------------------
EBITDA                               1101.5      454.0      322.7      224.3      109.7
Depreciation                         (157.7)    (103.7)     (71.8)     (59.2)     (46.1)
Goodwill amortisation/impairment          -          -       (0.5)      (0.4)      (0.4)
Exceptional/special items                 -      (22.3)     (13.3)     (50.1)      (5.0)
---------------------------------------------------------------------------------------
Operating profit                      943.8      328.0      237.1      114.6       58.2
Share of (loss)/profit in              (1.4)      (5.6)      (1.2)      (0.5)       0.3
associate
Non-operating exceptional/                -       56.5       (1.2)      (0.7)         -
special items
---------------------------------------------------------------------------------------
Profit before interest and            942.4      378.9      234.7      113.4       58.5
taxation
Net finance (costs)/investment         (7.7)       7.4       (1.3)     (35.0)     (35.3)
revenues
---------------------------------------------------------------------------------------
Profit before taxation                934.7      386.3      233.4       78.4       23.2
Taxation                             (280.4)     (87.0)     (76.0)     (20.5)      (6.7)
---------------------------------------------------------------------------------------
Profit after taxation                 654.3      299.3      157.4       57.9       16.5
Equity minority interests            (280.8)    (120.4)     (85.1)     (33.4)     (15.3)
---------------------------------------------------------------------------------------
Profit attributable to equity         373.5      178.9       72.3       24.5        1.2
shareholders in parent
Dividends paid during the year        (49.4)     (31.6)                               -
---------------------------------------------------------------------------------------
Retained profit                       324.1      147.3       72.3       24.5        1.2
---------------------------------------------------------------------------------------
Basic earnings per share (US
cents per share)
Profit for the financial year         130.2       62.5       25.3        8.6        0.4
Underlying Profit for the             130.2       48.9       26.6       11.9        2.2
financial year
Dividend paid during the year         17.25      11 .0                     -          -
(US cents per share)
---------------------------------------------------------------------------------------

Dividends declared in relation to year ended 31 March 2004 under UK GAAP of
$15.8 million are included in the year ended 31 March 2005 on payment basis.

The financial information for the years ended 31 March 2003 and 2002 has been
derived from the Listing Particulars without material change. The information
for the year ended 31 March 2004 has been restated for the effect of UITF
Abstract 38 'Accounting for ESOP Trusts' as disclosed in note 1 to the financial
statements for that year. No restatement has been made for 2003 and 2002.

All numbers in the five year summary for the years ended 31 March 2005 and 31
March 2006 are stated under IFRS and numbers for the years ended 31 March 2004,
31 March 2003 and 31 March 2002 are stated under UK GAAP. The Group adopted IFRS
with effect from 1 April 2004.



Production                    000's mt     000's mt     000's mt    000's mt    000's mt
----------------------------------------------------------------------------------------
Aluminium                          211          136          129         127          98
 BALCO                             174          100           97          96          68
 MALCO                              37           36           32          31          30
Copper                             437          240          179         156         114
 Sterlite                          273          172          179         156         114*
 KCM                               164           68            -           -           -
Zinc                               284          212          221         207           -
-----------------------------------------------------------------------------------------
* 9 months

                                   2006         2005         2004        2003         2002
------------------------------------------------------------------------------------------
Cash costs of production    US cents/lb  US cents/lb  US cents/lb US cents/lb  US cents/lb
Aluminium - BALCO #                67.9         61.1         56.2        56.8         71.5
Aluminium - MALCO                  75.8         66.5         53.8        48.9         54.8
Copper - Sterlite*                  6.1          7.1          7.8         9.1           10
Copper - KCM                      127.9        106.2            -           -            -
Zinc                               31.3         31.5         25.9        30.1         38.6
------------------------------------------------------------------------------------------
# This excludes new smelter COP
* Only smelting cost



Glossary and Definitions


Aluminium Business
The aluminium business of the Group comprising its
fully-integrated bauxite mining, alumina refining and
aluminium smelting operations in India


Attributable Profit
Profit for the financial year before dividends attributable to the
equity shareholders of Vedanta Resources plc


BALCO
Bharat Aluminium Company Limited, a company
incorporated in India


Board
The board of directors of the Company


Businesses
The Aluminium Business, the Copper Business and
the Zinc Business together


Capital Employed
Net assets before Net (Debt)/Cash


Cash Tax Rate
Current taxation as a percentage of profit before
taxation


CMT
Copper Mines of Tasmania Pty Ltd, a company
incorporated in Australia


Company or Vedanta
Vedanta Resources plc


Copper Business
The copper business of the Group comprising a
copper smelter, two refineries and two copper rod plants
in India, two copper mines in Australia and an
integrated operation in Zambia consisting of three
mines, a leaching plant and a smelter


CSR
Corporate social responsibility


Directors
The directors of the Company


Dollar or $
United States dollars, the currency of the United
States of America



EBITDA
Earnings before interest, taxation, depreciation,
goodwill amortisation/impairment and special items


EBITDA Margin
EBITDA as a percentage of turnover


Economic Holdings
The Economic Holdings are derived by
combining the Group's direct and indirect
shareholdings in the operating companies.


EPS
Earnings per Ordinary Share


Expansion Capital Expenditure
Capital expenditure that increases the Group's
operating capacity


Free Cash Flow
Cash flow arising from EBITDA after net interest,
taxation, Sustaining Capital Expenditure and working
capital movements


GAAP
Generally Accepted Accounting Principles


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 associate undertaking


HSE
Health, safety and environment


HZL
Hindustan Zinc Limited, a company incorporated in
India


IFL
India Foils Limited, a company incorporated in India


IFRS
International Financial Reporting Standards



KCM or Konkola Copper Mines
Konkola Copper Mines PLC, a company incorporated
in Zambia


LIBOR
London Inter Bank Offered Rate


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


LME
London Metal Exchange


LSE
London Stock Exchange
London Stock Exchange plc


LTIFR
Lost Time Injury Frequency Rate: the number of lost time
injuries per million man hours worked

LTIP
The Company's Long Term Incentive Plan


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


mt or tonnes
Metric tonnes


Mw
Megawatts of electrical power


Net (Debt)/Cash
Total debt after fair value adjustments under IAS 32 and 39,
cash and cash equivalents and liquid investments


Non-executive Directors
The non-executive directors of the Company


Ordinary Shares
Ordinary shares of $0.10 each in the Company


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


Reward Plan
The Company's Reward Plan


SEWT
Sterlite Employee Welfare Trust



SOTL
Sterlite Optical Technologies Limited, a company
incorporated in India


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


Special items
Items which derive from events and transactions
that need to be disclosed separately by virtue of
their size or nature


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


Sustaining Capital Expenditure
Capital expenditure to maintain the Group's
operating capacity


TC/RC
Treatment charge/refining charge
used to set smelting and refining costs


tpa
Metric tonnes per annum


TCM
Thalanga Copper Mines Pty Limited, a company
incorporated in Australia


Twin Star
Twin Star Holdings Limited, a company incorporated
in Mauritius


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


Underlying EPS
Underlying profit per Ordinary Share


Underlying Profit
Profit for the year after adding back special
items and their resultant tax and minority interest
effects


VAL
Vedanta Alumina Limited, a company incorporated in
India


VFJL
Vedanta Finance (Jersey) Limited, a company
in Jersey



Volcan
Volcan Investments Limited, a company incorporated
in the Bahamas


VRCL
Vedanta Resources Cyprus Limited, a company incorporated
in Cyprus


VRFL
Vedanta Resources Finance Limited, a company incorporated
in the United Kingdom


VRHL
Vedanta Resources Holdings Limited, a company
incorporated in the United Kingdom


ZCI
Zambia Copper Investment Limited, a company
incorporated in Bermuda


ZCCM
ZCCM Investments Holdings plc, a company
incorporated in Zambia


Zinc Business
The zinc-lead business of the Group comprising its
fully integrated zinc-lead mining and smelting operations in India







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