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Vedanta Resources (VED)

  Print      Mail a friend       Annual reports

Wednesday 16 May, 2007

Vedanta Resources

Final Results - Part 1

Vedanta Resources PLC
16 May 2007

                              Vedanta Resources Plc
              Preliminary Results for the Year Ended 31 March 2007

• Another year of record financial performance
  - Group revenue up 75.6% to $6,502.2 million and Group EBITDA up 145.4% to
    $2,703.0 million, driven by better prices and strong volume growth
  - Underlying EPS up 151.2% at 327 US cents
  - Free cash flow increased by 137.0% to $1,504.2 million
  - ROCE (excluding project capital work in progress) significantly higher at 78.5%,
    up from 37.9%
  - Final dividend proposed at 20 US cents per share bringing full year dividend to
    35 US cents per share

• Sector leading organic growth
  - $7.5 billion investment programme
  - First phase of $2.2 billion completed on time and within budget
  - The next phase of $5.3 billion under implementation and on schedule
     o Lanjigarh alumina refinery completed and ramping up in progress
     o Work progressing well on $2.1 billion Jharsuguda aluminium project
     o Expansion projects in HZL ahead of schedule and KCM on track
     o Work on 2,400 MW independent power project commenced

•  Leveraging established skills
   - $1.0 billion acquisition of Sesa Goa post year-end provides entry into very
     attractive iron ore business

                                             (in US$ millions, except as stated)
Consolidated Group Results                          FY 2007   FY 2006   Change
Revenue                                             6,502.2   3,701.8     75.6%
EBITDA                                              2,703.0   1,101.5    145.4%
EBITDA Margin                                          41.6%     29.8%       - 
Operating Profit                                    2,505.9     943.8    165.5%
Attributable Profit                                   934.2     373.5    150.1%
Basic Earnings per Share (US cents)                   325.6     130.2    150.1%
Earnings per Share on Underlying Profit (US cents)    327.0     130.2    151.2%
ROCE (excluding project capital work in progress)      78.5%     37.9%       - 
Final Dividend (US cents per share)                    20.0      14.3

'Vedanta Resources is emerging as an exceptional diversified mining company with
a world class resource base. Our record of delivery continues with strong
financial results and project completions on time and within budget. The $2.2
billion of growth projects that we set out at the time of our IPO have
essentially been completed and a further $5.3 billion of projects are well
underway, taking us towards our goal of one million tonnes in each of our
metals.' said Mr. Anil Agarwal, Chairman, Vedanta Resources plc. 'Our project
pipeline is unique in our industry as is our proven ability to deliver organic
growth. Together with our successful diversification into iron ore and power, 
we are in a strong position to deliver superior returns to our shareholders.'

For further information, please contact:
Sumanth Cidambi                   
Associate Director - Investor Relations     Tel: +44 20 7659 4732 / 
Vedanta Resources plc                            +91 22 6646 1531

Faeth Birch                                 Tel: +44 20 7251 3801
Robin Walker

About Vedanta Resources plc
Vedanta Resources plc is a London listed diversified metals and mining group.
Its principal operations are located throughout India, with further operations
in Zambia, Australia and Armenia. The major metals produced are aluminium,
copper, zinc, lead, iron ore and gold. For further information, please visit

This press release contains 'forward-looking statements' - that is, statements
related to future, not past, events. In this context, forward-looking statements
often address our expected future business and financial performance, and often
contain words such as 'expects,' 'anticipates,' 'intends,' 'plans,' 'believes,'
'seeks,' 'should' or 'will.' Forward-looking statements by their nature address
matters that are, to different degrees, uncertain. For us, uncertainties arise
from the behaviour of financial and metals markets including the London Metal
Exchange, fluctuations in interest and or exchange rates and metal prices; from
future integration of acquired businesses; and from numerous other matters of
national, regional and global scale, including those of a political, economic,
business, competitive or regulatory nature. These uncertainties may cause our
actual future results to be materially different that those expressed in our
forward-looking statements. We do not undertake to update our forward-looking


Performance in 2007
I am delighted to report that our group has delivered another excellent year's
result. We reported revenues of $6.5 billion, up 76% over last year with a
record EBITDA of $2.7 billion, up 145%. Return on capital employed (excluding
capital work in progress) more than doubled to 78.5%. Our portfolio of existing
assets and completed expansion projects continue to yield superior performance
and we continue to make investments that will drive sustainable long-term
growth. We are emerging as an exceptional diversified mining company with world
class resources. Our record of delivery continues with project completions on
time and within budget and strong financial results.

Accelerating organic growth
We are implementing a $7.5 billion organic growth programme. The $2.2 billion
expansion programme announced at the time of our IPO in December 2003 in
aluminium, zinc and copper pipeline is now almost complete. The next phase of
our expansion announced at a total cost of $5.3 billion is now well underway.
Aimed at creating one million tonnes in each of our metals, with industry
leading capital costs and record time to commissioning, this offers a solid
foundation for continued growth and value creation. These growth projects are
fully funded and we believe will deliver superior returns on our capital
investment. Rigorous discipline in evaluating projects and maintaining the
financial flexibility of a strong balance sheet continue to underpin every
single capital investment that we make.

We began construction of a 2,400MW Independent Power Project in Jharsuguda, at
an estimated cost of $1.9 billion, scheduled for completion in 2010. India has
large thermal coal resources of over 250 billion tonnes. The coal industry is in
the process of government deregulation, which will enable us to obtain coal
blocks for our power plants.

Diversification through leveraging established skills
I am delighted to announce our 51% acquisition of Sesa Goa Ltd. ('Sesa'), a high
quality iron ore company in India, for $1.0 billion, shortly after the year end.
This acquisition is a natural fit for Vedanta and provides us with strong growth
potential by leveraging our established project and mining skills. It provides
us with a strategic leadership position in an important bulk commodity and
places us in an ideal position to capitalise on India's huge iron ore reserves,
the world's third largest.

Consolidation of minorities
The consolidation of our corporate structure remains a key pillar of our
strategy. We have made significant strides on this front, with our share of
attributable profits currently at 51.5%, up from 36.7% in September 2003.
However, I believe further significant opportunities lie ahead of us, in respect
of our buyouts of the minority stakes in BALCO, KCM and HZL. I look forward to
reporting progress on these initiatives during the year. Also, our recent
acquisition of Sesa was accompanied by an open offer to acquire an additional
20% of that company, which we expect to conclude by July of this year.

The past year demonstrates the power of literally tens of thousands of high
calibre individuals working together to move our organisation forward. It gives
me great satisfaction to see where we are as a company as well as great
enthusiasm for Vedanta's future. The women and men of our company have driven
superior results by executing our ambitious targets, while remaining true to our
values. The success story that I am able to report in this statement is due to
their passion, commitment and contribution which deserve the highest praise and

I would also like to thank all my fellow directors for their invaluable
contribution to our decision making and the healthy and constructive direction
and support they provide our management team.

Sustainable development
Sustainable development is an integral part of our business philosophy. The
processes and performance on safety, health, environment and community
development continue to evolve in line with the vision set out as part of our
HSE and social policies. Efforts in the areas of lost time injuries and
conservation of natural resources such as water and energy yielded particularly
positive results.

We lay much emphasis on enhancing the quality of life for the communities in
which we operate. Our focus on health and education continues in partnership
with local and regional authorities. The midday meal scheme in Chittorgarh,
Rajasthan positively impacting the lives nearly two hundred thousand children is
an initiative that is especially close to my heart.

Global demand for metals continues to be strong on the back of strong
consumption from China, India and other emerging markets, supported by increased
activity from industrial and infrastructure sectors. Economic and industrial
growth in India will continue to drive double digit growth in our commodities.
With our recently concluded acquisition of Sesa, our product portfolio now
mirrors India's rich resource deposits. Our project pipeline is unique in our
industry as is our proven ability to deliver organic growth, resulting in
superior returns to our shareholders.

Anil Agarwal

15 May 2007


Business Overview

We are a diversified metals and mining group with principal operations in India,
Australia and Zambia. We primarily produce aluminium, copper, zinc and lead. Our
goal is to create a world class metals and mining business and generate strong
financial returns for our shareholders. We seek to achieve this by:

•  optimising and realising the full potential of our assets and reducing unit
   costs of production, including maximizing throughput, debottlenecking of
   existing capacities, increasing operational efficiencies and plant availability,
   reducing energy costs and consumption, increasing automation, improving
   recoveries, reducing raw material costs and seeking better utilisation of
•  completing our growth pipeline projects within budget and on time to capitalise
   upon the growing demand for metals in India and abroad, particularly in China,
   South East Asia and Middle East;
•  consolidating our group structure and continuing to increase our ownership in
   the underlying businesses; and
•  leveraging established skills by seeking further growth opportunities in India
   and outside India in the metals and mining and related businesses.

The key strengths of our businesses are:

•  world-class, high quality resources of global scale;
•  focus on operational excellence;
•  a strong competitive position in the growing Indian and Asian markets with a
   diversified portfolio;
•  experience in operating and expanding our business, allowing us to capitalise on
   the growth and resource potential of India;
•  management and execution teams with proven track record for value delivery and
   improving operational efficiency and profitability;
•  a strong pipeline of expansion projects; and
   strong cash flows and robust balance sheet to pursue world class projects.

FY 2007 Performance Highlights

Summary performance in FY 2007 is set out in the table below.
(in $ million, except as stated)         FY 2007       FY 2006        % change
Aluminium                                  993.4         453.0           119.3%
Copper                                   3,569.3       2,241.3            59.3%
 -  India/Australia                      2,553.4       1,537.9            66.0%
 -  Zambia                               1,015.9         703.4            44.4%
Zinc                                     1,888.1         875.5           115.7%
Others                                      51.4         132.0           (61.1%)
                                         6,502.2       3,701.8            75.6%

(in $ million, except as stated)         FY 2007       FY 2006        % change
Aluminium                                  415.4         135.3           207.0%
Copper                                     833.9         425.3            96.1%
 -  India/Australia                        365.6         219.0            66.9%
 -  Zambia                                 468.3         206.3           127.0%
Zinc                                     1,453.9         532.9           172.8%
Others                                      (0.2)          8.0          (102.5%)
                                         2,703.0       1,101.5           145.4%

Operating Profit
Aluminium                                  358.4         102.8           248.6%
Copper                                     746.6         340.3           119.4%
 -  India/Australia                        333.3         177.3            88.0%
 -  Zambia                                 413.3         163.0           153.6%
Zinc                                     1,402.8         489.5           186.6%
Others                                      (0.3)         12.9          (102.3%)
Unallocated corporate expenses              (1.6)         (1.7)           (5.9%)
                                         2,505.9         943.8           165.5%

Aluminium                                   41.8%         29.9%             NA
Copper                                      23.4%         19.0%             NA
 -  India/Australia                         14.3%         14.2%             NA
 -  Zambia                                  46.1%         29.3%             NA
Zinc                                        77.0%         60.9%             NA
Group                                       41.6%         29.8%             NA

Group revenues in FY 2007 were $6,502.2 million, an increase of 75.6% compared
with the previous year with EBITDA more than doubled at $2,703.0 million.
Operating profit in FY 2007 was $2,505.9 million, an increase of 165.5% compared
with $943.8 million in the previous year. These increases were primarily due to
higher volumes and better prices realised across all metals. The major increase
in volume was in the aluminium business due to a substantial increase in
production from the new Korba smelter and in zinc mined production leading to
additional sales of zinc and lead concentrate during the year.

The revenue mix in FY 2007 has also changed primarily due to an increase in
contribution from the Aluminium and Zinc Businesses, which more than doubled in
absolute terms compared with FY 2006. Similarly, the absolute contribution of
the Aluminium and Zinc Businesses to the EBITDA was also significantly higher
due to higher revenue growth and higher EBITDA margins in these businesses as
compared with FY 2006.

Operating costs were stable in all businesses, despite significant industry cost
pressures due to increase in inflation, freight, power costs and raw material
prices, except in respect of our Copper - Zambia operations where they have

EBITDA margin increased to 41.6% from 29.8% in the previous year primarily due
to higher production volumes, better price realisations and a change in the
product and business mix.

Capital employed increased from $2,350.7 million to $3,718.7 million, an
increase of $1,368.0 million. This was due to capitalisation of Phase 1
expansion projects, capital expenditure during FY 2007 incurred in Phase II
projects and the consequent increase in working capital. Despite this increase,
ROCE (excluding capital work in progress) was 78.5% in FY 2007, up from 37.9% in
the previous year mainly due to improved productivity and higher metal prices.

Aluminium Business

Demand and Markets
World primary aluminium consumption increased from 32.0 million tonnes in
CY 2005 to 34.7 million tonnes in CY 2006, an increase of 8.4%, and is expected
to grow at similar levels in the coming year primarily due to increased demand
in China. Global production of primary aluminium increased from 32.0 million
tonnes in CY 2005 to 34.0 million tonnes in CY 2006, an increase of 6.3%, and is
expected to reach c38.0 million tonnes in CY 2007 due to rapid implementation of
new capacity projects, ramp-up of idle capacities in China, smelter restarts in
USA and Germany and further expansions in India, Middle East, Russia and South

The majority of aluminium produced in India is consumed in the building and
construction, transport, electrical appliance and equipment and packaging
industries. Indian demand for primary aluminium increased at a compound annual
growth rate of 12.0% between CY2001-2006 on the back of high demand from the
electrical, construction and transportation sector. Electrical applications
continue to be the largest end-use sector in India, consuming approximately 35%
of aluminium production in CY 2006 as a result of the continuing drive to
provide electricity throughout the country. Transport is also a major consumer,
contributing approximately 22% of demand, although the average aluminium use in
Indian-made automobiles is still approximately one-third of that in western-made
automobiles. The demand in India is likely to be robust on the back of strong
GDP growth and will grow at similar levels.

Business Overview
Our aluminium business comprises two operating companies, BALCO and MALCO. BALCO
is a partially integrated aluminium producer with two bauxite mines, one
refinery, two smelters, a fabrication facility and two captive power plants at
Korba in central India. MALCO is a fully integrated producer with two bauxite
mines, a captive power plant and refining, smelting and fabrication facilities
at Mettur in southern India. Our primary products are aluminium ingots, rods and
rolled products.

The performance of our Aluminium Business in FY 2007 is set out in the table
(in $ millions, except as stated)           FY 2007      FY 2006      % change
Production volumes (kt)
- Alumina                                       299          296           1.0%
- Aluminium                                     351          210          67.1%
Average LME cash settlement prices ($/t)      2,663        2,028          31.3%
Unit costs ($/t)
- BALCO Plant 1                               1,510        1,497           0.9%
- BALCO Plant 2                               1,687        2,045         (17.5%)
- BALCO Plant 2 (excluding costs of alumina)    740          885         (16.4%)
- MALCO                                       1,664        1,671          (0.4%)
Revenue                                       993.4        453.0         119.3%
EBITDA                                        415.4        135.3         207.0%
EBITDA margin                                  41.8%        29.9%           NA
Operating profit                              358.4        102.8         248.6%

Production Performance
Production of 351,000 tonnes of aluminium in FY 2007 was significantly higher
than the previous year's production of 210,000 tonnes, an increase of 67.1%.
This was primarily due to an increase in production due to the full ramp-up of
our new Korba smelter, which produced 208,000 tonnes during the year. The
stabilisation process of our new Korba smelter was quicker than estimated and as
a result the plant has consistently achieved rated capacity in the last two
quarters with the fourth quarter output at 62,000 tonnes. Our existing smelters
at BALCO and MALCO produced 143,000 tonnes in FY 2007, marginally higher than
their rated capacity, as a result of continuous improvement efforts. The captive
power plants at Korba continue to operate at their rated capacity.

Unit Costs
The unit costs of BALCO's existing plant were broadly stable at $1,510 per tonne
in FY 2007 compared with $1,497 per tonne in the previous year. The increase is
primarily on account of higher input prices of carbon and fluoride which was
largely offset by savings in power costs due to better operational efficiencies
achieved at the power plants. Unit costs at MALCO were also affected by similar
factors and were $1,664 per tonne, marginally down from $1,671 per tonne.

The unit costs of BALCO's new plant were $1,687 per tonne in FY 2007, a
significant reduction from $2,045 per tonne in the previous year, primarily due
to the full ramp-up of the new Korba smelter coupled with a softening in global
alumina spot prices. Manufacturing costs excluding alumina reduced appreciably
to $740 per tonne compared with $885 per tonne in FY 2006, despite pressure on
input costs. The reduction was mainly due to the stabilisation of operating
parameters in the smelter and operational efficiencies at the 540MW captive
power plant. We continue to source alumina from third party vendors and achieved
an average consumption cost of $947 per tonne of aluminium produced, a reduction
from $1,160 per tonne in the previous year, mainly due to gradual softening of
global alumina prices.

With the ramp-up of the new Korba smelter, a challenge was to increase our sales
substantially in both the domestic and export markets. We were able to increase
our market shares in the domestic market and also develop export markets in
South East Asia, the Middle East and Europe. We achieved export volumes close to
100,000 tonnes in FY 2007. We also obtained the LME registration for the
aluminium ingots of the new Korba smelter under the brand 'BHARATAL'. This has
improved the acceptability of our product and enabled an increase in premiums

We continue to focus on improving our sales mix in terms of a higher tonnage of
value added products such as rolled products, which rose by 26.1% in FY 2007 to
58,000 tonnes, including exports of hot rolled products. Sales of wire rods have
also increased to 107,000 tonnes on the back of higher production from existing
rod plants. These efforts will continue to maximize the share of value added

Financial Performance
Revenues in our Aluminium Business in FY 2007 increased by 119.3% to
$993.4 million, with EBITDA at $415.4 million, an increase of 207.0% compared
with FY 2006. The increase was primarily due to the substantial increase in
production volumes from the new Korba smelter, improved product mix and higher

Lanjigarh Alumina Refinery
Work on the $800 million alumina project at Lanjigarh, Orissa, which includes a
1.0-1.4 mtpa alumina refinery with an associated captive power plant is
complete. One unit of the captive power plant was commissioned in February 2007.
Progressive commissioning of the refinery has also commenced with the charging
of sourced bauxite in the last week of March 2007 in the first of the two
streams. After completion of the processing cycle, output of alumina will
commence by the end of the first quarter of the current fiscal year.

As regards the environmental clearances for developing the Lanjigarh bauxite
deposits, the Ministry of Environment and Forests (MOEF) has received reports
from its various nominated subcommittees and has made its recommendation to the
Supreme Court of India. The matter is still to be heard and decided by the
Supreme Court of India. We are hopeful of a positive resolution of this matter

Jharsuguda Aluminium Smelter
Work on the first phase of the green-field 500,000 tpa aluminium smelter and
associated 1,215MW captive power plant in Jharsuguda, Orissa, at an estimated
investment of $2.1 billion is progressing well. Orders for critical equipment
for the smelter and captive power plant have been placed with vendors. The
project is on schedule with commissioning of the first phase of 250,000 tpa and
five units of 135 MW each of the captive power plant expected in the second half
of CY 2009. The second phase of 250,000 tpa with four units of 135 MW each of
the captive power plant is expected to be complete by the end of CY 2010.

Copper Business

Demand and Markets
Global refined copper consumption increased from 16.9 million tonnes in CY 2005
to 17.5 million tonnes in CY2006, an increase of 3.5% and is expected to grow at
the same rate in CY 2007, driven mainly by demand from the construction and
power sectors. Asia, including China, and Western Europe together account for
nearly 72% of global refined copper consumption. With a compound annual growth
rate of 7.6% between CY 2001-2006, Asia is currently the fastest growing copper
market in the world and is expected to grow even more strongly, dominated by its
use in electric wires and cables.

Global refined copper production increased from 16.6 million tonnes in CY 2005
to 17.4 million tonnes in CY 2006, an increase of 4.8%. Global production is
expected to further increase to 19.2 million in CY 2007, primarily due to the
commissioning of new smelters mainly in China, Africa, India and Japan.

In India, refined copper consumption increased at a compound annual growth rate
of 8.9% between CY 2001-2006. It was supported by strong growth in user segments
such as winding wires, power cables and other applications in construction,
infrastructure and alloy segments, offset by a decline in demand for copper used
in jelly filled telecom cables. Refined copper consumption in India is expected
to grow in line with GDP growth.

Business Overview
Our Copper Business comprises three major operations - Sterlite's custom
smelting operations in India, CMT's mining operations 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,
sulphuric acid plant and copper rod plant at Tuticorin in Southern India, a
refinery and two copper rod plants at Silvassa in Western India. In addition, we
own the Mt. Lyell copper mine at Tasmania in Australia, which provides a small
percentage of our copper concentrate requirements at Sterlite. KCM is a large
integrated copper producer operating three copper mines, a smelter, a refinery
and a tailings leach plant in Zambia.

Copper - India/Australia

The performance of our Copper - India/Australia business in FY 2007 is set out
(in $ millions, except as stated)            FY 2007       FY 2006      Change
Production volumes (kt)
- Mined metal content                             28            34       (17.6%)
- Cathodes                                       313           273        14.7%
- Rods                                           178           167         6.6%
Average LME cash settlement prices ($/t)       6,984         4,099        70.4%
Unit costs (USc/lb)                              6.1           6.1           -
Realised TC/RCs (USc/lb)                        31.1          23.1        34.6%
Revenue                                      2,553.4       1,537.9        66.0%
EBITDA                                         365.6         219.0        66.9%
EBITDA Margin                                   14.3%         14.2%         NA
Operating Profit                               333.3         177.3        88.0%

Production Performance
Production of copper cathodes at our Indian operations was 313,000 tonnes in
FY 2007, an increase of 14.7% compared with FY 2006, primarily due to the
innovative debottlenecking of our Tuticorin smelter to 400,000 tpa. Production
is steadily ramping up and contributed 89,000 tonnes in the fourth quarter with
production close to rated capacity in March 2007. As announced earlier, our
Tuticorin smelter was under planned shutdown for eight days in April 2007 for
carrying out modifications and improvements at the sulphuric acid plant. The
smelter is currently producing at its rated capacity. The production of copper
rods was 178,000 tonnes in FY 2007, an increase of 6.6% compared with FY 2006.

Mined metal production at our Australian mines was 28,000 tonnes in FY 2007
against production of 34,000 tonnes in FY 2006. Production in FY 2006 includes
output of 4,000 tonnes from TCM. TCM's operations were closed in the first half
of FY 2006. The production at our CMT mine was also impacted due to a temporary
two-week disruption in the mining activities as a result of minor rock fall
incident. Post investigation of the incident by an independent expert, the site
was declared safe and mining activities, restored in the month of March 2007,
have now picked up to normal levels of production. CMT supplies c. 9% of the
total concentrate requirements of our Indian copper smelting operations.

Unit Costs
Unit conversion costs, which consists of costs of smelting and refining,
remained the same at 6.1 USc/lb. Higher energy prices which impacted costs were
offset by higher credit for free metal due to higher LME prices. We anticipate
costs of production to reduce further with increased volumes and improved

We were largely insulated from volatility in the spot market during FY 2006
since a large part of our total concentrate requirement was sourced through long
term contracts with mines including captive supplies from our CMT operations.
Our TC/RC realisation was 31.1 USc/lb in FY 2007, up from 23.1 USc/lb in FY 2006
as a result of favourable market conditions.

Spot TC/RCs started softening at the beginning of CY 2007 as the concentrate
market has now moved to deficit primarily due to lower mine production globally.
We continued to make good progress in our strategy of securing a majority of our
concentrate feed requirement under long term contracts with mines.

Sales in the domestic market increased 10.4% to 117,000 tonnes in FY 2007,
primarily due to an increase in demand from the electrical and power sector. We
exported 195,000 tonnes of copper cathodes and copper rods, to our key overseas
markets - the Middle East, China, Japan, Philippines and Thailand. We continue
to develop a large customer base for the export of copper rods.

Financial Performance
Revenues in our Copper - India/Australia business increased 66.0% to
$2,553.4 million in FY 2007, with a corresponding EBITDA of $365.6 million, up
by 66.9%, compared with FY 2006. The increase in EBITDA was attributable mainly
to better TC/RCs, higher volumes and increased contribution from CMT as a result
of high copper prices, have more than offset the reduction in import tariff on
copper from 7.5% to 5.0%. These became effective from the last week of
January 2007.

Copper - Zambia

The performance of our Copper - Zambia Business in FY 2007 is set out in the
table below.
(in $ millions, except as stated)          FY 2007      FY 2006       % change
Production volumes (kt)
- Mined metal content                           84           99          (15.2%)
- Cathodes                                     142          164          (13.4%)
Average LME cash settlement prices ($/t)     6,984        4,099           70.4%
Unit costs (USc/lb)                          173.6        127.9           35.7%
Revenue                                    1,015.9        703.4           44.4%
EBITDA                                       468.3        206.3          127.0%
EBITDA Margin                                 46.1%        29.3%            NA
Operating Profit                             413.3        163.0          153.6%

Production Performance
The production of copper cathodes at Zambia was 142,000 tonnes for FY 2007,
lower by 22,000 tonnes as compared with FY 2006. The production from our
tailings leach plant was 54,000 tonnes during FY 2007, lower by 13,000 tonnes as
compared with FY 2006, primarily on account of unstable plant operations due to
a minor fire in July 2006 and a temporary stoppage in November 2006 with time
taken to re-stabilise the plant and its operating performance in terms of
throughput and recovery. The production from Nkana smelter was 101,000 tonnes,
lower by 9,000 tonnes compared with FY 2006, primarily due to a planned shutdown
taken in the second quarter of FY 2007 to install a new CT hood and improve
equipment availability. Mined metal production during FY 2007 was also lower at
84,000 tonnes compared with 99,000 tonnes in the previous year, due to low
equipment availability, lower developed reserves and frequent flooding in
declines at one of our production shafts.

The production at our Konkola operations fell short of our expectations in
FY 2007. We are taking several initiatives and measures to improve the plant
reliability and equipment availability as well as improving recoveries and
operational efficiencies. In addition to supplementing the operating management
team, we have engaged global consultants of repute in the fields of asset
optimization and productivity to support our operational improvement
initiatives. With these actions currently underway, we expect to reach
production levels equivalent to 200,000 tonnes per annum in FY 2008.

Unit Costs
Unit costs of production (including mining) were 173.6 USc/lb for the year
compared with 127.9 USc/lb in FY 2006. The primary reasons for this increase in
unit costs were lower mined metal and finished copper production, increase in
wage costs and other operating expenditure. The increase in wage costs and other
operating expenditure reflects to some extent an industry-wide trend where costs
have increased by c. 35 USc/lb over the last two years.

Financial Performance
FY 2007 revenues at our Zambia - Copper business increased by 44.4% to
$1,015.9 million with a corresponding EBITDA of $468.3 million, an increase of
127.0%, compared with FY 2006, primarily on account of the significant increase
in LME copper prices of approximately 70%.

The work on KDMP expansion project to increase the copper ore output from the
Konkola mine to 6 million tpa is progressing well with orders for all major
items including the concentrator placed. Work on the head gear foundation and
collar for the main shaft is now complete. Shaft sinking is progressing as per
schedule and the main shaft has been sunk to a level of over 76 metres with
various pipes and ventilation shafts on track. The basic engineering for the
250,000 tpa Nchanga smelter expansion project is complete. Statutory clearances
are in place and construction activities are in full swing with most of the
piling and concreting work completed.

Zinc Business

Demand and Markets
Global zinc consumption increased from 10.6 million tonnes in CY 2005 to
11.3 million tonnes in CY2006, an increase of 6.6%, and is expected to grow at
similar rates fuelled by double-digit growth in China, India and other emerging
markets. The key growth driver is demand from the steel galvanizing market,
which is growing primarily due to robust demand from the automotive and
automotive parts industries.

Global zinc production increased from 10.1 million tonnes in CY 2005 to
10.6 million tonnes in CY 2006, an increase of 4.9%, and is expected to further
increase to 11.6 million tonnes in CY 2007 due to commissioning of new smelters.

Consumption of refined zinc in India increased at a compound annual growth rate
of 9% between CY2003-2006, primarily by the galvanising sector, which currently
accounts for an estimated 70% of total consumption. Galvanising is primarily
applicable for sheet, tube and structural products. Applications in the
construction and infrastructure sector are also increasing which will boost the
overall growth of the market.

Business Overview
Our Zinc business is operated by HZL, India's leading and only fully integrated
zinc-lead producer. HZL's zinc operations include three lead-zinc mines, two
zinc smelters, one lead smelter and one lead-zinc smelter in the state of
Rajasthan in North West India and one zinc smelter in the state of Andhra
Pradesh in South East India.

The performance of our Zinc business in FY 2007 is set out in the table below.
(in $ millions, except as stated)          FY 2007      FY 2006       % change
Production volumes (kt)
- Mined metal content                          505          472            7.0%
- Refined metal                                348          284           22.5%
Average LME cash settlement prices ($/t)     3,581        1,614          121.9%
Unit costs ($/t)
- Including royalty                            862          691           24.7%
- Excluding royalty                            606          575            5.4%
Revenue                                    1,888.1        875.5          115.7%
EBITDA                                     1,453.9        532.9          172.8%
EBITDA Margin                                 77.0%        60.9%            NA
Operating Profit                           1,402.8        489.5          186.6%

Production Performance
Mined metal production from all our mines was 505,000 tonnes in FY 2007, an
increase of 7.0% from FY 2006, primarily due to an increase in output from our
Rampura Agucha mine. Total refined zinc metal production during FY 2007 was
348,000 tonnes, compared with 284,000 tonnes in FY 2006, up by 22.5%. The
increase in refined metal production was primarily due to the ramp-up of our new
Chanderiya hydro smelter, which produced 136,000 tonnes in FY 2007 and achieved
13,500 tonnes in the month of March 2007, close to its rated capacity.

The production of lead during the year was 45,000 tonnes as compared with
previous year production of 24,000 tonnes. The Ausmelt plant has now been
stabilized and we expect to achieve its rated capacity by the end of the second
quarter of the current financial year.

Unit Costs
Unit cost of production excluding royalties in FY 2007 was $606 per tonne,
higher by $31 per tonne compared with FY 2006. Unit costs rose primarily due to
lower realisation for by-products and higher manufacturing expenses, which were
largely offset by benefits from stabilization of the power plant. Royalties,
which are LME-linked, were $256 per tonne in FY 2007 compared with $116 per
tonne in FY 2006. Overall costs were at $862 per tonne in FY 2007 as compared
with $691 per tonne in FY 2006.

We sold 350,000 tonnes of zinc metal during the year in the domestic and export
markets, an increase of 8.3% over FY 2006 on the back of increased production
from the new Chanderiya hydro smelter. In addition to refined zinc metal, we
also sold 254,000 dry metric tonnes of zinc concentrate containing 133,000
tonnes of equivalent metal and 59,000 dry metric tonnes of lead concentrate
containing 28,000 tonnes of equivalent metal.

Financial Performance
Revenues at our Zinc business more than doubled to $1,888.1 million with a
corresponding EBITDA of $1,453.9 million, in FY 2007, primarily due to higher
LME zinc prices, which more than doubled compared with the previous year, and
higher metal volumes.

Construction activities for our second 170,000 tpa smelter at Chanderiya with
its associated captive power plant are in full swing and on track for
commissioning earlier than scheduled, with all orders placed. The roaster plant,
which is the first stage of the smelting process, has been completed. The
leaching and purification plant and cell-house are also on track for completion
earlier than scheduled. Work on the associated captive power plant, and at the
Rampura Agucha concentrator to raise the milling capacity to 5.0 million tpa, is
progressing well. Progress overall is good and we expect to commission the
project about three months ahead of our earlier declared schedule date of early

Work on the smelter debottlenecking project to increase the zinc capacity by an
additional 88,000 tonnes and the new captive power plant of 80MW at our Zawar
location is progressing well. All critical orders are placed and project will be
completed as per schedule by early 2008.

In respect of our green energy project in the State of Gujarat and Karnataka, a
turnkey contract for 125MW of wind power has been placed for setting up the
project. The first phase of 38.4MW wind power project was commissioned in March
2007 in the State of Gujarat and is working satisfactorily. The other projects
in the State of Gujarat and Karnataka are under execution and on schedule for
progressive commissioning during the current financial year.

Other Businesses

Power Transmission Conductor Business
Our non-core Power Transmission Conductor business was sold effective
1 July 2006 as a going concern together with all associated liabilities to SOTL,
a related party of our Group, for a consideration of $32.3 million. The terms
for sale of this non-core business was negotiated with SOTL on an arm's length
basis based on an independent valuation report. The loss arising on this sale
was $2.3 million.

Gold Business
In August 2006, we completed our acquisition of a majority stake in SGL, a
company engaged in gold mining and processing and listed on the Toronto Stock
Exchange in Canada. SGL's principal assets are located in Armenia and include an
open pit gold mine at Zod and a gold processing plant at Ararat. The Zod mine
has the potential to be a world class mine, with existing development potential
in addition to exploration upside.

The equivalent gold production in FY 2007 was 17,662 ounces with lower output
during the fourth quarter at 1,923 ounces. Mining operations were suspended in
the last quarter of FY 2007 pending resolution of some of the key clauses of the
implementation agreement entered into with the Government of the Republic of
Armenia. Whilst we continue to negotiate with the Armenian Government to resolve
these issues, we are also evaluating our options to exit this business if our
negotiations do not prove fruitful.

Commercial Energy Business
During the year, we announced a project to enter into the commercial energy
business in India. This project involves setting up a 2,400MW (600MW x 4) green
field coal based thermal power plant in Jharsuguda, Orissa at an estimated cost
of $1.9 billion. The power generated will be sold to the State Electricity
Boards and power trading companies in India. Preliminary design for the project
is complete with detailed engineering under progress. Pre-construction
activities including soil investigation and area grading have started and the
EPC contracts for the project have also been placed. Overall, the project is on
track and as per schedule for progressive commissioning from December 2009 as

Group Structure

We continue to seek to increase our direct ownership of our underlying
businesses to derive additional synergies as an integrated group. We are
continuing our discussions with the Government of India to buy its 49% stake in
BALCO. We also continue to explore legal and other options to resolve this
matter. We expect this exercise to be concluded in the next few months.

Our call option to buy the Government of India's 29.5% stake in HZL became due
for exercise anytime after 11 April 2007. We currently intend to exercise this
option and will inform the markets appropriately.

Our efforts to buy out ZCI's 28.4% stake in KCM continue. Currently, the matter
is under arbitration which we expect will be decided by June 2007. The valuation
exercise is expected to be completed shortly thereafter and we will decide on
our future course of action depending on the outcome of the valuation exercise.


Our vision is to build an organisation with world class capabilities and a high
performance culture. We believe that for an organisation to flourish and
consistently deliver high performance, it must follow an engaging and focused
strategy - in our case, achieving one million tonnes production in each of our
metals, deliver operational excellence - become a low cost producer, have a
performance oriented culture and be a fast, flexible and flat organisation.

We have a talent pool of around 25,000 employees, with over 5,000 professionals
in engineering, business management, human resources and finance. We recruited
c. 1,700 engineers and over 200 management and finance professionals for various
technical and management positions in the last three years. We continue to
emphasise a well-defined process for the leadership development of our
employees, where challenging assignments with commensurate responsibilities are
given to deserving employees, even at a younger age. The 'Stars of Business' is
one such initiative which supports the organisation by creating successful
managers and empowering them to move far beyond their current roles and
responsibilities and unleash their confidence and ability to contribute as the
most successful 'Business Leaders of Tomorrow'.

In FY 2007, we initiated our 'Global Leadership Programme' within the group,
aimed at providing challenging learning opportunities in an international
environment to young high-potential candidates. This initiative was kicked off
with c. 25 employees being exchanged between our Copper - Zambia and Indian

We have several ongoing initiatives in the areas of learning and development.
These include deputations to leadership development programmes at premier
management institutes in India, supplemented by large scale training efforts in
skills and knowledge enhancement in operational areas by deputing engineers and
technicians to globally benchmarked plants and technology/equipment suppliers.
We invited project proposals from all our employees across all levels of our
organisation in order to tap and develop their entrepreneurial skills. There are
multiple project proposals, in different stages of implementation, which play an
important part in developing the individual and simultaneously adding value to
our organisation.

We offer best in class compensation packages to facilitate induction and
retention of people. This is supplemented by various variable pay and
performance-linked bonus schemes. We have a stock award programme called the
Long Term Incentive Plan ('LTIP') which not only covers senior management but
extends to relatively younger professionals in the organisation. The first
tranche of our LTIP programme awarded in 2004 came out with an excellent
performance on the TSR score-card with 100% vesting. This has created wealth and
significantly motivated our employees. The LTIP scheme is an ongoing programme
with options issued in FY 2006 and 2007 as well to employees.


Our exploration team in India comprising 22 geo-scientists with relevant
expertise is focused on identifying and delineating near-mine resources which
have the potential to add significant value to our existing mining operations.

As part of our ongoing exploration efforts, we have revisited the historical
data and inducted expertise and talent together with relevant technology
advancements, to enable a vigorous search for new discoveries in green-field
areas. We constantly upgrade our technical skills for exploration activities
across all sites. We also continued to increase the allocation of resources and
funds in the field of exploration. In FY 2007, we spent $6 million on our
exploration efforts compared with less than $3 million in FY 2006. The main
exploration activities in FY 2007 were conducted in our zinc business and to
some extent at our CMT mine in Australia.

Total zinc-lead reserves of 69.2 million tonnes as on 31 March 2006 including
53.4 million tonnes at Rampura Agucha have improved significantly as a result of
ongoing exploration activities including 40,000 meter drilling by HZL,
post-depletion to feed production during the year. The results are currently
being vetted by consultants and will be shared in the near future. The ongoing
exploration work at Sindesar Khurd site is showing encouraging results which is
likely to add upon indicated resources significantly.

Sustainable Development

Sustainable development is an integral part of our business philosophy. Our
processes and performance on health, safety and environment ('HSE') have evolved
in tandem with our sustainable development goals. We stay committed to further
improve our performance in line with our HSE and Social Policy.

This year we took a step forward in bringing more clarity and transparency of
our reported performance. We have aligned some of our performance objectives and
targets in accordance with the Global Reporting Initiative (GRI G3) guidelines
and have reported 10 core non-economic indicators highlighting our sustainable
development performance. Our performance has shown positive trends on most

A dedicated team of 288 HSE experts and 40 Community Development experts (plus
126 village extension workers) employed across our operations steer these
functions. Resources wherever required were allocated. During the year we have
spent US$ 49.7 million on HSE related projects, which includes expenditures of
US$ 22 million for environmental protection and investments in environmental
improvement projects. These are over and above normal operating costs in these

During FY 2007, our efforts in the fields of environment, safety and community
development initiatives were appreciated and we have received several national
and international accolades.

Business Outlook

Global metal demand continues to be healthy, on the back of strong demand from
China and other emerging markets including India. India demonstrated a GDP
growth of slightly over 9% in FY 2007 with corresponding industrial growth at
11% and is poised to grow at similar levels in FY 2008, with a focus on
infrastructure development, faster industrialisation and other growth
initiatives including a deregulation of power sector. At current estimates of
longer-term metal demand growth, the world will need an additional 2.0 million
tonnes of aluminium, 0.75 million tonnes of copper and 0.5 million tonnes of
zinc approximately per year, which augers well for our growth initiatives.

Metal production across all our operations will improve in FY 2008 as a result
of full capacity utilisation of the expansion and debottlenecking initiatives
completed in FY 2007. With the improvement in productivity consequent to
improvement in volumes supplemented by other procurement and supply management
initiatives, unit costs of production are also expected to reduce, towards our
vision of achieving top decile costs of production in each of our metals.

Work on all of our projects is progressing well and we expect that they will be
delivered on schedule. The progressive increase in volumes coupled with our low
cost of production provides us with an excellent opportunity to take advantage
of global demand growth and relatively insulate from a downside in the commodity


The Finance Review provides a balanced and comprehensive analysis, including the
key business trends and financial performance during FY 2007, together with a
discussion on some of the factors that could affect the future financial
performance of the business.


Our financial statements are prepared in accordance with International Financial
Reporting Standards ('IFRS') as adopted for use in the European Union. Our
reporting currency is the US dollar.

Key Financial Performance Indicators*
(in $ millions, except as stated)         FY 2007    FY 2006    FY 2005    FY 2004
EBITDA                                    2,703.0    1,101.5      454.0      322.7
Underlying EPS (US Cents per share)         327.0      130.2       48.9       26.6
Free Cash Flow                            1,504.2      634.8      204.4      335.4
ROCE (excluding project capital WIP) (%)     78.5       37.9       32.0       24.1
Net (Cash)/Debt                            (432.7)      11.9       74.3     (422.3)
*Figures for FY 2007, FY 2006 and FY 2005 are under IFRS and figures for FY 2004 are 
 under UK GAAP

Key Financial Highlights

• Increased profitability driven by significant increased production and higher
  prices and stable operating costs,
• Improved free cash flow of $1,504.2 million due to higher operational earnings
  sustained by the efficient management of working capital,
• Strong balance sheet providing sufficient leverage for funding expansion
  projects and acquisitions
• Net cash of $432.7 million from net debt of $11.9 million at 31 March 2006,
  primarily due to improved cash flows enabling early retirement of debt in
• ROCE (adjusted for project capital work in progress) significantly higher at
  78.5% in FY 2007 up from 37.9% in FY 2006.

Summary of Financial Performance

During FY 2007, our Indian operations in particular have recorded large gains in
volumes and were able to take advantage of the strong metal prices during the
year. As a result, EBITDA increased to $2,703.0 million, up from
$1,101.5 million, a growth of 145.4%, whilst operating profits grew
$2,505.9 million, up from $943.8 million, an increase of nearly 166%. Our
Zambian operations recorded higher operating profits during the current year
over the previous year due to higher copper prices.

We generated free cash flows of $1,504.2 million, representing 56% of EBITDA and
reflecting a minimum outflow on account of working capital despite higher metal
prices and volumes. Increased free cash flows have enabled us to fund project
capital expenditure of $934.5 million entirely from internal sources.

Tax outflow in FY 2007 amounted to $475.6 million representing 19.1% of profit
before tax, a rate marginally lower than in FY 2006. The effective tax rate in
FY 2007 of 27.1% is lower the FY 2006 tax rate of 30.0%, primarily due to
improved tax management initiatives at some of our subsidiaries specifically,
Sterlite and HZL.

Underlying profit increased to $938.1 million in FY 2007 from $373.5 million in
FY 2006 mainly due to strong operational results in all our businesses.
Underlying earnings per share increased by 151.2% to 327.0 US cents. Amounts
attributable to minority interests increased in FY 2007 because of better
financial performance at HZL and at BALCO where Vedanta's economic interest is
relatively lower.

Capital productivity, measured in terms of ROCE (excluding capital work in
progress), improved to 78.5% in FY 2007 from 37.9% in FY 2006, reflecting better
asset utilisation, in terms of both fixed assets and working capital.

We reported net cash of $432.7 million at 31 March 2007, a significant
improvement over net debt of $11.9 million at 31 March 2006. Good operating
profits and working capital management resulted in strong cash flows enabling us
to repay subsidiary debt of $345 million after investing $934.5 million in
expansion projects. With gross debt levels at just 41.6% of total equity and a
net cash position of $432.7 million, we have adequate head room for growth and
acquisition financing.

A detailed discussion on the financial performance of the Group is set out
(in $ millions, except as stated)               FY 2007    FY 2006    % change
Revenue                                         6,502.2    3,701.8       75.6%
EBITDA                                          2,703.0    1,101.5      145.4%
  EBITDA margin (%)                                41.6%      29.8%         -
Operating special items                            (1.7)         -          -
Depreciation and amortisation                    (195.4)    (157.7)         -
Operating profit                                2,505.9      943.8      165.5%
Share of loss of associate                         (1.3)      (1.4)         -
Profit before interest and tax                  2,504.6      942.4      165.8%
Net interest charge                               (20.2)      (7.7)
Profit before tax                                2,484.4      934.7      165.8%
Income tax expense                                (672.7)    (280.4)         -
  Tax rate (%)                                      27.1%      30.0%         -
Minority Interest                                 (877.6)    (280.8)         -
  Minority Interest rate (%)                        48.4%      42.9%         -
Attributable to equity shareholders in parent      934.2      373.5      150.1%
Basic earnings per share (US cents per share)      325.6      130.2      150.1%
Underlying earnings per share (US cents per share) 327.0      130.2      151.2%

Our FY 2007 revenues were $6,502.2 million with corresponding EBITDA of
$2,703.0 million. An analysis of revenues and EBITDA by business has been
provided earlier in the Business Review section of this preliminary results

Group Operating Profit
Group operating profit increased to $2,505.9 million up from $943.8 million, an
increase of 165.5%.


Depreciation charges increased to $195.4 million from $157.7 million mainly due
to capitalisation of expansion projects and increased sustaining capital

Special Items

In FY 2007, we reviewed our financial exposure to IFL, an associate company,
taking into consideration the financial condition of IFL. Sterlite had issued
corporate guarantees on behalf of IFL. We estimated the fair value of these
guarantees and recognised a provision of $17.3 million on the basis of our
estimate of the probable future liability.

Additionally on 1 July 2006, the Power Transmission Conductor division of
Sterlite was sold to Sterlite Optical Technologies Limited, a company under the
control of Volcan for a consideration of $32.3 million based on a valuation by
an independent valuer. This was identified as a non-core business at the time of
our IPO in December 2003. The transaction resulted in an immaterial loss of
$2.3 million which has been recognised as a special item in the income
statement. The sale of this non-core business does not materially impact our
revenues or profits.

In FY 2007, an amount of $2.6 million was incurred towards voluntary separation
of employees. During the year, Sterlite also sold one of its old non-operating
manufacturing facilities in the suburbs of Mumbai for $22.1 million, realising a
profit of $ 21.8 million on this transaction.

Net Finance Costs

Our net finance costs in FY 2007 were $20.2 million compared to $7.7 million in
FY 2006 as a result of the full year impact of the convertible bond issue of
$725 million issued in the second half of FY 2006 and general interest rate
rises, partially offset by the early repayment of debt in HZL and BALCO and the
optimum use of short term funding arrangements. Income from investments has
risen sharply mainly due to generation of surplus cash from operations. Our
investment policy continues to emphasise on capital protection while maximising
yields by investment in innovative financial products.

(in $ millions)                                             FY 2007    FY 2006
Net Finance Costs
Interest payable                                               22.6     (124.1)
Unwinding of discount and interest on defined benefit
pension arrangements                                          (10.1)     (11.3)
Interest and other investment income                          (74.1)      75.7
Capitalisation of borrowing costs net of foreign exchange
differences and interest income                                41.4       52.0
Net interest in income statement                              (20.2)      (7.7)


Our effective tax rate for FY 2007 was lower at 27.1% compared with 30.0% in
FY 2006, reflecting the various measures undertaken by us to improve our
efficiencies in tax management in general and specifically in some of our major
Indian operating subsidiaries such as Sterlite and HZL. During the year Sterlite
set up a 100% Export Oriented Unit ('EOU') at Tuticorin and HZL established wind
energy generating projects which enjoy considerable tax benefits. Despite a
lower effective tax rate over the previous year, current tax has remained
relatively constant at c. 20% of profits before tax mainly because of an
increase in the amount of minimum alternative tax that we paid and a change in
the profit mix. Our tax rate is sensitive to the availability of various
incentives which differ due to differing tax rates in India and Zambia and also
to a change in the profit mix between our subsidiaries.

Minority Interests

The pattern of profit contributions from subsidiaries underwent a change during
FY 2007 with higher contributions from HZL and BALCO, which have higher minority
interests. The change in profit mix has led to an increase in minority interests
from 42.9% in FY 2006 to 48.4% in FY 2007, despite no change in the Vedanta's
shareholding in any of its subsidiaries during the year.

Attributable and Underlying Profit

Attributable profit for FY 2007 was $934.2 million against $373.5 million in
FY 2006, an increase of 150.1%, the result of strong performances across all our
businesses. Underlying profit in FY 2007 was $938.1 million, an increase of
151.2% over FY 2006. Underlying earnings exclude the effects of special items
and their tax and minority impact and we believe this is an important tool to
measure our recurring performance.

Earnings per Share ('EPS') and Dividends

EPS for the year increased to 325.6 USc per share, a growth of 150.1% compared
with FY 2006. EPS on underlying profit rose by 151.2% over the previous year.
The higher EPS reflects the good performance of all our businesses in returning
higher value to the shareholders.

In line with our progressive dividend policy, our Board proposes a final
dividend of 20 USc per share for FY 2007, taking full year dividend to 35 USc
per share. The total dividend is higher by 75% compared with FY 2006 dividend of
20.0 US cents per share.

The table below sets out the reconciliation to Underlying Profits.
(in $ millions, except as stated)                FY 2007    FY 2006   % change
Profit for the year attributable to the equity
holders of the parent                              934.2      373.5      150.1%
  Special items                                      1.7          -         NA
  Effect of taxation                                 3.7          -         NA
  Effect of minority interests                      (1.5)         -         NA
Underlying profit for the year                     938.1      373.5      151.2%
EPS on profit for the year (USc per share)         325.6      130.2      150.1%
EPS on underlying profit (USc per share)           327.0      130.2      151.2%

Balance Sheet

Our summary balance sheet is presented below.
(in $ millions)                     As at 31 March 2007    As at 31 March 2006
Goodwill                                           12.1                  12.1
Property, plant and equipment                   3,838.0               2,763.0
Cash, cash equivalents and liquid
investments                                     2,185.2               2,091.7
Trade receivables                                 942.9                 593.0
Other current and non current
assets                                          1,093.5                 775.3
Total assets                                    8,071.7               6,235.1
Trade payables                                 (1,184.0)               (958.1)
Borrowings                                     (1,726.8)             (2,076.2)
Other current and non current liabilities      (1,009.5)               (862.0)
Total liabilities                              (3,920.3)             (3,896.3)
NET ASSETS                                      4,151.4               2,338.8

Equity attributable to equity
holders of the parent                           2,326.9               1,417.1
Minority interests                              1,824.5                 921.7
TOTAL EQUITY                                    4,151.4               2,338.8

Shareholders' equity as at 31 March 2007 stood at $2,326.9 million, up from
$1,417.1 million as at 31 March 2006. Minority interests increased to
$1,824.5 million from $921.7 million as at 31 March 2006. Net debt of
$11.9 million as at 31 March 2006 became net cash of $432.7 million as at
31 March 2007. Cash and cash equivalents including liquid investments as at
31 March 2007 were $ 2,185.2 million.

As a result of capital expenditure in FY 2007, our capital employed increased by
$1,368.0 million to $3,718.7 million at 31 March 2007. The net book value of our
property, plant and equipment increased from $2,763.0 million at the end of
FY 2006 to $3,838.0 million at 31 March 2007. Nearly three-quarters of the
increase in capital employed was attributable to an increase in property, plant
and equipment and the remainder to increases in working capital. The increase in
working capital was influenced by higher metal prices.

ROCE on an adjusted capital employed basis (capital employed reduced by project
capital work-in-progress) rose to 78.5% from the previous year of 37.9% due
principally to higher operational results aided by higher metal prices and
higher volumes. ROCE is affected by the timing of expansion projects being
delivered during the year due to the time lag in capturing the full benefit of
additional capacities.

External debt held by operating subsidiaries was $560.8 million at 31 March 2007
compared with $905.6 million at 31 March 2006. Cash flows generated from
operations have been utilised to repay part of the subsidiary debt, particularly
in Sterlite, BALCO and HZL. HZL is now a debt-free company.

Cash and cash equivalents, together with liquid investments were
$2,185.2 million as at 31 March 2007 compared with $2,091.7 million as at
31 March 2006. Strong cash flows, resulting from good operational profits and
better working capital management, have resulted in generation of free cash of
$1,504.2 million which was partly used to fund our expansion projects, retire
debt, and to acquire a majority stake in SGL. We remain focused on maintaining a
strong balance sheet to fund our future growth.

We continue to be awarded ratings from Moodys and Standard & Poors. These
ratings provide us with the financial flexibility and access to various sources
of funding at competitive rates. Our current ratings and India current sovereign
rating are as follows:
Credit Rating Agency               Vedanta         India Sovereign
Standard & Poors                   BB              BBB
Moodys                             Ba1             Baa3

Fund Raising Plans
Sterlite has made substantial progress in its plans to raise funds from the US
capital markets. During FY 2007, Sterlite announced its intention to raise
capital through an ADR offering to be listed on the New York Stock Exchange
('NYSE'). The proceeds of the offering will enable Sterlite to capitalise on
attractive growth opportunities in India and maintain a strong balance sheet. 
It will allow Sterlite to exercise its call option to acquire the Government of
India's remaining interest in HZL, enable us to expand into the commercial
energy sector in India, reduce debt and to acquire complementary businesses that
we determine to be attractive opportunities. We have filed the prospectus and we
are hopeful of listing Sterlite securities on the NYSE in the near future after
completing all necessary steps and obtaining clearance from the US Securities
and Exchange Commission.

Cash Flows

The summary cash flow statement is set out below.
(in $ millions)                                          FY 2007      FY 2006
EBITDA                                                   2,703.0      1,101.5
  Special items                                              1.7            -
  Working capital movements                               (542.1)      (169.7)
  Changes in long-term creditors and non-cash items         11.5        (17.1)
  Sustaining Capital Expenditure                          (194.4)       (80.6)
  Sale of tangible fixed assets                             28.9          0.7
  Net interest paid                                        (39.5)       (20.5)
  Dividend received                                         10.7          7.0
  Tax paid                                                (475.6)      (186.5)
Free Cash Flow                                           1,504.2        634.8
  Expansion Capital Expenditure                           (934.5)      (605.5)
  Acquisitions                                             (59.5)           -
  Dividends paid to equity shareholders                    (84.3)       (49.4)
  Dividends paid to minority shareholders                  (41.8)        (8.9)
  Equity component of convertible loan notes                   -        123.3
  Sale of non core business                                 32.1            -
  Deconsolidation of SEWT - cash and preference shares         -        (58.7)
  Other movements*                                          28.4         26.8
Movement in net (debt)/cash                                444.6         62.4
*Project creditors of $2.3 million (FY 2006: $2.0 million) reclassified from
working capital movements into other movements below free cash flow

We delivered strong free cash flows of $1,504.2 million, an increase of
$869.4 million, reflecting improved operating profits and working capital
management. Working capital management is a key driver across our Group and
ongoing control measures to minimise working capital usage in the operations are
in place in all our subsidiaries. Such measures have resulted in a reduction in
gross working capital, i.e. inventory and receivables expressed as a percentage
of turnover, from 30.5% to 28.0%. This reduction was achieved despite a
significant increase in volumes in our Indian aluminium and copper businesses
resulting from expanded capacities and debottlenecking initiatives,

We invested $194.4 million in sustaining capital expenditure during FY 2007
primarily to achieve operational efficiencies including debottlenecking
initiatives and expenditure on mine development.

Strong free cash flows have also enabled internal funding of project capital
expenditure of $934.5 million, higher dividend payment of $126.1 million and
early repayment of subsidiary debt of $344.8 million.

Gross debt was $1,726.8 million as at 31 March 2007, including $598.4 million in
respect of convertible bonds issued during the year. The equity component of the
convertible bond of $119.5 million is recorded as part of equity in the balance
sheet. Cash and cash equivalents together with liquid investments were
$2,185.2 million as at 31 March 2007.


During fiscal 2006, we announced four large expansion projects (Phase II
expansion projects) including our expansion into power generation. We spent
$208.0 million on Phase I expansion projects announced at the time of our IPO.
Additionally, total capital expenditure during 2007 on Phase II expansion
projects was $726.6 million. Amounts committed but not yet spent on Phase II
expansion projects at 31 March 2007 were $2,928.0 million.

The total expenditure incurred to date on Phase 1 and Phase 2 expansion projects
is set out in the tables below.
(in $ millions,          Original         
except as stated)       estimated         Spent to  Committed, but   
                             cost    31 March 2007   not yet spent       Status       
Phase I expansion projects
  Lanjigarh refinery        800.0           614.6             61.5   In progress 
  Korba smelter             550.0           475.9             10.2     Completed
  Korba power plant         350.0           292.7                      Completed
  Tuticorin smelter          87.0            87.0                      Completed
  Chanderiya smelter        335.0           267.8                      Completed
  Rampura Agucha mine        90.0            45.2                      Completed
Total                     2,212.0         1,783.2            71.7

(in $ millions,                 Original         
except as stated)              estimated          Spent to       Committed, but   
                                    cost     31 March 2007        not yet spent            
Phase II expansion
  Jharsuguda                      2,100.0            249.3              1,254.8
  Konkola mine                      400.0             73.6                202.1
  Nchanga smelter                   280.0             91.6                152.9
  Chanderiya                        300.0            159.4                111.9
  Wind power project                132.5             65.5                 67.0
Commercial energy
  Jharsuguda                      1,900.0            136.0              1,139.3
Total                             5,112.5            775.4              2,928.0
Grand Total                       7,324.5          2,558.6              2,999.7
*Excludes HZL debottlenecking project at an estimated cost of $170 million

Acquisitions and Divestments

In FY 2007 we completed the acquisition of a majority stake in Sterlite Gold
Limited, a company listed in Canada with its main operations in Armenia.
Sterlite Gold is engaged in gold mining and processing. We first acquired 55% of
the equity shareholding in Sterlite Gold Limited at a cost of $33.7 million and
then acquired an additional 25% stake through an open offer to existing
shareholders at a cost of $15.8 million. Acquisition costs of $2.9 million were
incurred in the transaction. As at 31 March 2007, we hold 83.7% of the
outstanding equity of Sterlite Gold Limited. We have accounted for this
acquisition in accordance with IFRS 3 'Business Combinations'. The fair value of
the assets and liabilities of the acquired business has resulted in creating
assets in the form of mining properties and leases of $71.7 million.

Our non-core Power Transmission Conductor business was sold effective
1 July 2006 as a going concern together with all associated liabilities to
Sterlite Optical Technologies Limited ('SOTL'), a related party controlled by
Volcan for a consideration of $32.3 million. The terms for sale of this non-core
business was negotiated with SOTL on an arm's length basis based on an
independent valuation report. The loss on account of this sale was $2.3 million
was recorded in the income statement as a Special Item.

During the year, we also acquired a 100% stake in Sterlite Energy Limited
('SEL') from Twinstar Infrastructure, a related party, for a consideration of
$0.1 million. SEL is the vehicle for our expansion into the commercial energy

Commodity Hedging

We generally aim to sell our produces at prevailing market prices. We engage in
hedging commodity price movements on a selective basis. During FY 2007, we
entered into strategic hedging transactions for some quantities of copper and
zinc and recognised losses of approximately $59.0 million on these transactions.
Outstanding hedged quantities as at 31 March 2007 were 57,600 tonnes in respect
of copper and 25,000 tonnes in respect of zinc, which we expect will be settled
during FY2008.

Off Balance Sheet Arrangements and Transactions, Contingent Liabilities and

We have no off-balance sheet entities. In the normal course of business, we
enter into certain commitments for capital and other expenditure and certain
performance guarantees. The aggregate amount of indemnities and other guarantees
was $438.3 million at 31 March 2007.

Contingent liabilities include penalties and fines amounting to some
$46.5 million that have been advised to AGRC by the Armenian Government in a
preliminary notice recently. We understand that the notice is to undergo further
analysis and expert review at the relevant Armenian governmental agencies in the
coming weeks before it is served in final form upon AGRC. The mining plan of
AGRC has not been approved by the Armenian Government and as a result, AGRC's
mining operations have been temporarily suspended, pending resolution of some of
the key clauses of the implementation agreement entered into with the Armenian
Government. AGRC has previously received approval for each of the annual mining
plans during the term of its Implementation Agreement with the Armenian

Contractual Obligations

Contractual cash obligations arising in the ordinary course of our business are
set out below.
(in $ millions)          < 1 year   1-2 years   2-5 years  > 5 years     Total
Payments due by period
Bank loans and other
borrowings                  249.1        76.2       769.7      631.8   1,726.8
Deferred consideration
for KCM acquisition           5.2         5.2           -          -      10.4
Capital commitments       1,774.0     1,376.0           -          -   3,150.0
Total                     2,028.3     1,457.4       769.7      631.8   4,887.2

Changes in Accounting Policies

There have been no changes in accounting policies in the current year.

Post Balance Sheet Events

On 23 April 2007 we acquired a 51% controlling stake in Sesa Goa Limited ('Sesa
Goa') through the acquisition of a 100% equity stake in Finsider International,
a UK company. Sesa Goa, a company listed on Indian stock exchanges is engaged in
mining and exporting of iron ore from India. We paid a cash consideration of
$981 million to acquire this 51% stake and in accordance with prevailing Indian
regulations, we have made an open offer to shareholders to acquire an additional
20% stake. This open-offer process is expected to take about three months to
conclude. We will account for this transaction in accordance with IFRS 3 and
detailed disclosures, including those pertaining to any fair value adjustments
will be included in our FY 2008 interim report.

Consolidated Income Statement
                                          Note     Year ended      Year ended
                                                31 March 2007   31 March 2006
                                                    $ million       $ million
Continuing operations
Revenue                                     2         6,502.2         3,701.8
Cost of sales                                        (3,840.4)       (2,591.4)
Gross profit                                          2,661.8         1,110.4

Other operating income                                  102.1            41.5
Distribution costs                                     (106.7)          (81.1)
Administrative expenses                                (149.6)         (127.0)
Administrative expenses - special items     3            (1.7)              -
Operating profit                            2         2,505.9           943.8
Investment revenue                          4           127.5            51.6
Finance costs                               5          (147.7)          (59.3)
Share of loss of associate                               (1.3)           (1.4)
Profit before taxation                                2,484.4           934.7
Tax expense                                 6          (672.7)         (280.4)
Profit for the year                                   1,811.7           654.3
Attributable to:
Equity holders of the parent                            934.2           373.5
Minority interests                                      877.5           280.8
                                                      1,811.7           654.3

Basic earnings per ordinary share
(US Cents)                                  7           325.6           130.2
Diluted earnings per ordinary share
(US Cents)                                  7           305.4           128.2

Consolidated Balance Sheet
                                          Note           As at          As at
                                                      31 March       31 March
                                                          2007           2006
                                                     $ million      $ million
Non-current assets
Goodwill                                                  12.1           12.1
Property, plant and equipment                          3,838.0        2,763.0
Interest in associate                                        -            1.8
Financial asset investments                               34.6           27.1
Other non-current assets                                  27.3           27.3
Other financial assets (derivatives)                      72.1           63.2
Deferred tax assets                                       28.3           71.9
                                                       4,012.4        2,966.4
Current assets
Inventories                                              879.7          535.0
Trade and other receivables                              942.9          593.0
Other current financial assets
(derivatives)                                             51.5           49.0
Liquid investments                           10          600.4          244.4
Cash and cash equivalents                    10        1,584.8        1,847.3
                                                       4,059.3        3,268.7
TOTAL ASSETS                                           8,071.7        6,235.1
Current liabilities
Short term borrowings                     9, 10         (249.1)        (239.8)
Trade and other payables                              (1,172.4)        (942.5)
Other current financial liabilities
(derivatives)                                           (101.4)        (114.7)
Provisions                                                   -          (12.2)
Current tax liabilities                                  (63.0)         (34.7)
                                                      (1,585.9)      (1,343.9)
Net current assets                                     2,473.4        1,924.8
Non-current liabilities
Medium and long term borrowings           9, 10         (879.3)      (1,236.0)
Convertible bonds                            10         (598.4)        (600.4)
Trade and other payables                                 (11.6)         (15.6)
Other financial liabilities (derivatives)                (94.8)         (93.4)
Deferred tax liabilities                                (425.3)        (286.9)
Retirement benefits                                      (35.3)         (38.2)
Provisions                                              (230.3)        (222.5)
Non equity minority interests                            (59.4)         (59.4)
                                                      (2,334.4)      (2,552.4)
TOTAL LIABILITIES                                     (3,920.3)      (3,896.3)
NET ASSETS                                             4,151.4        2,338.8
Share capital                                             28.8           28.7
Share premium account                                     18.7           18.6
Share based payment reserves                               7.3            4.1
Convertible bond reserve                                 119.5          123.3
Hedging reserves                                         (29.7)         (29.1)
Other reserves                                           661.0          213.1
Retained earnings                                      1,521.3        1,058.4
Equity attributable to equity holders of
the parent                                             2,326.9        1,417.1
Minority interests                                     1,824.5          921.7
TOTAL EQUITY                                           4,151.4        2,338.8
Approved by the Board on 15 May 2007

Consolidated Cash Flow Statement

                                          Note     Year ended     Year ended
                                                     31 March       31 March    
                                                         2007           2006
                                                    $ million      $ million
Operating activities
Profit before taxation                                2,484.4        934.7
Adjustments for:                                            -            -
Depreciation                                            195.4        157.7
Investment revenue                                     (127.5)       (51.6)
Finance cost                                            147.7         59.3
Profit on disposal of property, 
plant and equipment                                     (21.0)           -       
Share based payment charge                                5.6          1.6
Loss on disposal of non core business                     2.3            -
Share of loss of associate                                1.3          1.4
Other non-cash items                                    (12.0)         6.9
Operating cash flows before
movements in working capital                          2,676.2      1,110.0
Increase in inventories                                (361.8)      (190.1)
Increase in receivables                                (410.4)      (236.8)
Increase in payables                                    222.5        231.6
Cash generated from operations                        2,126.5        914.7
Dividends received                                       10.7          7.0
Interest income received                                138.6         58.5
Interest paid                                          (193.4)      (112.1)
Income taxes paid                                      (475.6)      (186.5)
Dividends paid                                          (84.3)       (49.4)
Net cash from operating activities                    1,522.5        632.2

Investing activities
Acquisition of subsidiary                  11a         (54.3)           -
Cash acquired with subsidiary              11a           0.8            -
Proceeds on disposal of non core           11c          32.3            -
Cash disposed of with non core             11c          (0.2)           -
Purchases of property, 
plant and equipment                                 (1,154.5)      (656.2)
Proceeds on disposal of property,
plant and equipment                                     28.9          0.7
Dividends paid to minority
interests of subsidiaries                              (41.8)        (8.9)
(Purchase) / disposal of 
liquid investments                                    (345.1)        12.8
Investment in associate                                    -          0.1
Purchase of financial asset                             (0.2)           -
Deconsolidation of cash held by SEWT                       -        (19.5)
Net cash used in investing activities               (1,534.1)      (671.0)

Financing activities
Issue of ordinary shares                                 0.2            -
Proceeds from issue of convertible                         -        719.7
Increase in short term borrowings                       25.0         28.4
Decrease in long-term borrowings                      (324.8)       (20.9)
Net cash (used in) / from financing
activities                                            (299.6)       727.2
Net increase/(decrease) in cash and
cash equivalents                                      (311.2)       688.4
Exchange difference                                     48.7        (26.7)
Cash and cash equivalents at
beginning of year                                    1,847.3      1,185.6
Cash and cash equivalents at end of       10         1,584.8      1,847.3

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      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                                                                                                     
adoption of                                                                                                        
IAS 39                  -        -        -           -     (3.2)     0.9      (9.8)    (12.1)     (2.1)    (14.2) 
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                                                                                                     
year                    -        -        -                    -        -     373.5     373.5     280.8     654.3  
Issue of                                                                                                           
bond                    -        -        -       123.3        -        -         -     123.3         -     123.3  
of SEWT                 -        -        -           -        -        -     (88.2)    (88.2)     29.5     (58.7) 
Movement on                                                                                                        
increase in                                                                                                        
interests               -        -        -           -        -        -      (0.4)     (0.4)     24.6      24.2  
differences on                                                                                                     
translation of                                                                                                     
operations              -        -        -           -      0.2    (16.1)        -     (15.9)    (14.1)    (30.0) 
Transfers               -        -        -           -        -    184.7    (184.7)        -         -         -  
IPO related                                                                                                        
credit                  -        -        -           -        -        -       0.6       0.6         -       0.6  
Movement in                                                                                                        
fair value of                                                                                                      
cash flow                                                                                                          
hedges and                                                                                                         
investments             -        -        -           -    (26.1)    (0.3)        -     (26.4)    (24.3)    (50.7) 
Dividends paid          -        -        -           -        -        -     (49.4)    (49.4)     (8.9)    (58.3) 
Recognition of                                                                                                     
share based                                                                                                        
payment                 -        -      1.6           -        -        -         -       1.6         -       1.6  
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  

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      reserve     
At 1 April 2006      28.7     18.6      4.1       123.3    (29.1)   213.1   1,058.4   1,417.1     921.7   2,338.8  
Profit for the                                                                                                     
period                  -        -        -           -        -        -     934.2     934.2     877.5   1,811.7  
Acquisition of                                                                                                     
a subsidiary            -        -        -           -        -        -         -         -      10.2      10.2  
Gain on                                                                                                            
acquisition of                                                                                                     
subsidiary              -        -        -           -        -        -       0.3       0.3         -       0.3  
Conversion of                                                                                                      
bond                    -      0.1        -           -        -        -         -       0.1                 0.1  
bond transfer           -        -        -        (3.8)       -        -       3.8         -         -         -  
differences on                                                                                                     
translation of                                                                                                     
operations              -        -        -           -        -     51.6         -      51.6      53.9     105.5  
Transfers               -        -        -           -        -    393.5    (393.5)        -                   -  
Movement in                                                                                                        
fair value of                                                                                                      
cash flow                                                                                                          
hedges and                                                                                                         
investments             -        -        -           -     (0.6)     2.8         -       2.2       3.0       5.2  
Dividends paid          -        -        -           -        -        -     (84.3)    (84.3)    (41.8)   (126.1) 
Recognition of                                                                                                     
share based                                                                                                        
payment                 -        -      5.6                    -        -         -       5.6         -       5.6  
Exercise of                                                                                                        
LTIP awards           0.1        -     (2.4)          -        -        -       2.4       0.1         -       0.1  
At 31 March                                                                                                        
2007                 28.8     18.7      7.3       119.5    (29.7)   661.0   1,521.3   2,326.9   1,824.5   4,151.4  

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