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Vedanta Resources (VED)

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Wednesday 16 May, 2007

Vedanta Resources

Final Results - Part 2

Vedanta Resources PLC
16 May 2007



Notes to Preliminary Announcement

1. General information and accounting policies

This preliminary results announcement is for the year ended 31 March 2007. The
announcement, including all comparatives has been prepared using the accounting
policies consistent with the 2006 and 2007 audited financial statements.

Compliance with applicable law and IFRS

The financial statements have been prepared in accordance with those parts of
the Companies Act 1985 applicable to companies reporting under IFRS, Article 4
of the IAS Regulation and International Financial Reporting Standards (IFRS) as
adopted by the European Union and related interpretations.

For Vedanta, there are no differences between IFRS as adopted for use in the
European Union and full IFRS as adopted for use by the International Accounting
Standards Board.

While the financial information contained in this preliminary results
announcement has been computed in accordance with IFRS, this announcement does
not itself contain sufficient information to comply with IFRSs. This
announcement does not constitute the Group's statutory accounts for the year
ended 31 March 2007 but is derived from those accounts. The statutory accounts
for the year ended 31 March 2007 will be delivered to the Registrar of Companies
following the company's AGM. The auditors have reported on those accounts and
their reports were unqualified and did not contain statements under sections 237
(2) or (3) of Companies Act 1985.

The information contained in this announcement for the year ended 31 March 2006
does not constitute statutory accounts. A copy of the statutory accounts for
that year has been delivered to the Registrar of Companies. The auditors' report
on those accounts was unqualified and did not contain statements under
section 237(2) of the Companies Act, 1985 (regarding adequacy of accounting
records and returns) or under section 237(3) (regarding provision of necessary
information and explanations).

2. Segment information

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

Business segments

The following tables present revenue and profit information and certain asset
and liability information regarding the Group's business segments for the years
ended 31 March 2007 and 2006.
                                                        
Year ended 31 March 2007                                Continuing Operations                                  
                                   -----------------------------------------------------------------           Total
$ million                            Aluminium       Copper         Zinc         Other  Elimination       Operations
---------------------------------------------------------------------------------------------------------------------
Revenue
Sales to external customers              993.4      3,569.3      1,888.1          51.4            -          6,502.2
Inter-segment sales                       28.1            -            -             -        (28.1)               -
---------------------------------------------------------------------------------------------------------------------
Segment revenue                        1,021.5      3,569.3      1,888.1          51.4        (28.1)         6,502.2
---------------------------------------------------------------------------------------------------------------------
Result
Segment result before special                                                                                        
items                                    358.8        745.1      1,405.1           0.2            -          2,509.2
Special items                             (0.4)         1.5         (2.3)         (0.5)           -             (1.7)
---------------------------------------------------------------------------------------------------------------------
Segment result after special                                                                                         
items                                    358.4        746.6      1,402.8          (0.3)           -          2,507.5
---------------------------------------------------------------------------------------------------------------------
Unallocated corporate expenses                                                                                  (1.6)
---------------------------------------------------------------------------------------------------------------------
Operating profit                                                                                             2,505.9
Net finance costs                                                                                              (20.2)
Share of associate's loss                                                                                       (1.3)
                                                                                                     ----------------
Profit before taxation                                                                                       2,484.4
Tax expense                                                                                                   (672.7)
                                                                                                     ----------------
Profit for the year from                                                                                     1,811.7
continuing operations
                                                                                                     ----------------

Assets and liabilities
Segment assets                         1,878.8      2,629.9      2,170.4       1,001.9            -          7,681.0
Unallocated assets                                                                                             390.7
                                                                                                     ----------------
Total assets                                                                                                 8,071.7
                                                                                                     ----------------
Segment liabilities                     (629.8)    (1,559.1)      (255.9)       (185.2)           -         (2,630.0)
Unallocated liabilities                                                                                     (1,290.3)
                                                                                                     ----------------
Total liabilities                                                                                           (3,920.3)
                                                                                                     ----------------

Other segment information
Additions to property, plant and                                                                                     
equipment                                261.8        316.3        245.8         305.0            -          1,128.9
Depreciation                             (56.6)       (88.9)       (48.9)         (1.0)           -           (195.4)
---------------------------------------------------------------------------------------------------------------------

2. Segmental information
                                                        
Year ended 31 March 2006                                Continuing Operations                                       
                                   ------------------------------------------------------------------          Total
$ million                            Aluminium       Copper         Zinc         Other  Elimination       Operations
---------------------------------------------------------------------------------------------------------------------
Revenue
Sales to external customers              453.0      2,241.3        875.5         132.0            -          3,701.8
Inter-segment sales                       40.1            -            -             -        (40.1)               -
---------------------------------------------------------------------------------------------------------------------
Segment revenue                          493.1      2,241.3        875.5         132.0        (40.1)         3,701.8
---------------------------------------------------------------------------------------------------------------------
Result
Segment result                           102.8        340.3        489.5          12.9            -            945.5
Unallocated corporate expenses                                                                                  (1.7)
---------------------------------------------------------------------------------------------------------------------
Operating profit                                                                                               943.8
Net finance costs                                                                                               (7.7)
Share of associate's loss                                                                                       (1.4)
                                                                                                          -----------
Profit before taxation                                                                                         934.7
Tax expense                                                                                                   (280.4)
                                                                                                          -----------
Profit for the year from                                                                                       654.3
continuing operations
                                                                                                          -----------

Assets and liabilities
Segment assets                         1,217.3      2,001.4      1,223.3         808.3            -          5,250.3
Interest in associate                                                                                            1.8
Unallocated assets                                                                                             983.0
                                                                                                          -----------
Total assets                                                                                                 6,235.1
                                                                                                          -----------
Segment liabilities                     (748.9)    (1,405.8)      (319.5)       (611.1)           -         (3,085.3)
Unallocated liabilities                                                                                       (811.0)
                                                                                                          -----------
Total liabilities                                                                                           (3,896.3)
                                                                                                          -----------

Other segment information
Additions to property, plant and                                                                                     
equipment                                540.5         96.6         49.0             -            -            686.1
Depreciation                             (32.5)       (80.6)       (43.5)         (1.1)           -           (157.7)
---------------------------------------------------------------------------------------------------------------------

2. Segmental information 

(b) EBITDA(1) by segment
                                                    Year ended     Year ended    
                                                 31 March 2007  31 March 2006 
                                                     $ million      $ million     
------------------------------------------------------------------------------
Aluminium                                                415.4          135.3  
Copper                                                   833.9          425.3  
------------------------------------------------------------------------------
- India/Australia                                        365.6          219.0  
- Zambia                                                 468.3          206.3  
------------------------------------------------------------------------------
Zinc                                                   1,453.9          532.9  
Other                                                     (0.2)           8.0  
------------------------------------------------------------------------------
EBITDA                                                 2,703.0        1,101.5  
Depreciation                                            (195.4)        (157.7) 
Operating special items                                   (1.7)             -  
------------------------------------------------------------------------------
Group operating profit                                 2,505.9          943.8  
------------------------------------------------------------------------------

(1) EBITDA represents operating profit before special items, depreciation and
amortisation

(c) Geographical segmental analysis

The Group's operations are located in India, Zambia and Australia. The following
table provides an analysis of the Group's sales by geographical market,
irrespective of the origin of the goods:
 
                                                    Year ended     Year ended    
                                                 31 March 2007  31 March 2006 
                                                     $ million      $ million     
------------------------------------------------------------------------------
Far East                                               2,056.5          963.8  
India                                                  2,670.9        1,762.3  
Africa                                                   253.3          136.6  
Europe                                                   760.5          353.5  
Middle East                                              647.0          429.5  
Other                                                    114.0           56.1  
------------------------------------------------------------------------------
Total                                                  6,502.2        3,701.8  
------------------------------------------------------------------------------

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

                       Carrying amount of segment      Additions to property,     
                                           assets         plant and equipment        
                              As at         As at    Year ended    Year ended   
                      31 March 2007 31 March 2006 31 March 2007 31 March 2006
                          $ million     $ million     $ million     $ million    
------------------------------------------------------------------------------
Australia                     229.2         163.1          10.0           3.8  
India                       6,071.5       3,869.2         844.9         618.6  
Zambia                      1,090.7         768.4         269.1          63.7  
Other                         680.3       1,434.4           4.9             -  
------------------------------------------------------------------------------
Total                       8,071.7       6,235.1       1,128.9         686.1  
------------------------------------------------------------------------------

3. Special items
                                                     Year ended     Year ended    
                                                  31 March 2007  31 March 2006 
                                                      $ million      $ million     
------------------------------------------------------------------------------
Provision for guarantees                                                       
given on behalf of                                                             
associate                                                (17.3)             -  
Restructuring and                                                              
redundancies                                              (2.6)             -  
Loss on sale of property,                                                      
plant and equipment                                       (0.8)             -  
Impairment of investment                                                       
in associate                                              (0.5)             -  
Profit on disposal of non                                                      
core assets *                                             21.8              -  
Loss on disposal of non                                                        
core business (note 11c)                                  (2.3)             -  
------------------------------------------------------------------------------
                                                          (1.7)             -  
------------------------------------------------------------------------------

* Sale of unused property in Mumbai.

4. Investment revenue
                                            Note     Year ended    Year ended   
                                                  31 March 2007 31 March 2006
                                                      $ million     $ million    
------------------------------------------------------------------------------
Interest and other                                                            
financial income                                         136.4          67.6  
Dividend income                                                               
from other                                                                    
financial                                                                     
investments                                               10.7           7.0  
Foreign exchange                                                              
gain on cash and                                                              
liquid investments                                         1.1           1.1  
Expected return on                                                            
defined benefit                                                               
arrangements                                               1.2           1.1  
Capitalisation of                                                             
foreign exchange                                                              
differences and                                                               
interest income                                          (21.9)        (25.2) 
------------------------------------------------------------------------------
                                                         127.5          51.6  
------------------------------------------------------------------------------

5. Finance costs
                                            Note    Year ended    Year ended   
                                                 31 March 2007 31 March 2006
                                                     $ million     $ million    
------------------------------------------------------------------------------
Interest on bank                                                              
loans and                                                                     
overdrafts                                               113.8          75.6  
Interest on                                                                   
convertible bonds                                         36.7           4.0  
Interest on other                                                             
loans                                                     49.2          44.5  
Unwinding of                                                                  
discount on                                                                   
provisions                                                 7.3           5.6  
Unwinding of                                                                  
discount on KCM                                                               
deferred                                                                      
consideration                                              0.7           2.1  
Interest on defined                                                           
benefit                                                                       
arrangements                                               3.3           4.7  
Capitalisation of                                                             
borrowing costs                                          (63.3)        (77.2) 
------------------------------------------------------------------------------
                                                         147.7          59.3  
------------------------------------------------------------------------------

6. Tax
------------------------------------------------------------------------------
                                            Note     Year ended    Year ended   
                                                  31 March 2007 31 March 2006
                                                      $ million     $ million    
------------------------------------------------------------------------------
Current tax:                                                                  
UK Corporation tax                                           -             -  
Foreign tax - India                                      484.4         177.8  
Zambia                                                     2.1           1.1  
Australia                                                 29.7           5.4  
Other                                                     (2.0)          1.7  
------------------------------------------------------------------------------
                                                         514.2         186.0  
------------------------------------------------------------------------------
Deferred tax:                                                                 
Current year                                                                  
movement in                                                                   
deferred tax                                             156.3          94.4  
Attributable to                                                               
decrease in the                                                               
rate of Indian                                                                
corporation tax                                            2.2             -  
------------------------------------------------------------------------------
                                                         158.5          94.4  
------------------------------------------------------------------------------
Total tax expense                                        672.7         280.4  
------------------------------------------------------------------------------
Effective tax rate                                        27.1%         30.0% 
------------------------------------------------------------------------------

Deferred tax reported in equity is a credit of $3.5m (2006: $13.5m).

A reconciliation of income tax expense applicable to accounting profit before
income tax at the statutory income tax rate to income tax expense at the Group's
effective income tax rate for the year ended 31 March 2007 is as follows:

                                                   Year ended    Year ended   
                                                31 March 2007 31 March 2006
                                                    $ million     $ million    
------------------------------------------------------------------------------
Accounting profit before                                                     
tax                                                   2,484.4         934.7  
At Indian statutory                                                          
income tax rate of                                                           
33.66% (2006: 33.66%)                                   836.3         314.6  
Accelerated capital                                                          
allowances                                               (0.9)         (6.0) 
Utilisation of tax                                                           
losses                                                   (0.3)          0.6  
Disallowable expenses                                     8.8           7.1  
Non-taxable income                                      (17.0)         (5.0) 
Impact of tax rate                                                           
differences                                             (37.5)        (14.3) 
Tax holiday and similar                                                      
exemptions                                             (126.9)        (17.8) 
Dividend distribution                                                        
tax on overseas                                                              
subsidiaries                                             12.3           2.7  
Minimum Alternative Tax                                   4.8           1.7  
Adjustments in respect                                                       
of previous years                                        (6.9)         (3.2) 
------------------------------------------------------------------------------
At effective income tax                                                      
rate of 27.1% (2006:                                                         
30%)                                                    672.7         280.4  
------------------------------------------------------------------------------

7. Earnings per share

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

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

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

------------------------------------------------------------------------------
                                                     Year ended    Year ended    
                                                  31 March 2007 31 March 2006 
                                                      $ million     $ million     
------------------------------------------------------------------------------
                                                                               
Net profit attributable to                                                     
equity holders of the                                                          
parent                                                   934.2          373.5  
------------------------------------------------------------------------------
                                                    Year ended     Year ended    
                                                 31 March 2007  31 March 2006 
                                                       million        million       
------------------------------------------------------------------------------
Weighted average number of                                                     
ordinary shares for basic                                                      
earnings per share                                       286.9          286.8  
Effect of dilution:                                                            
Convertible bonds                                         27.9            3.1  
Share options                                              3.1            3.6  
------------------------------------------------------------------------------
Adjusted weighted average                                                      
number of ordinary shares                                                      
for diluted earnings per                                                       
share                                                    317.9          293.5  
------------------------------------------------------------------------------

(a) Earnings per share based on profit for the year
Basic earnings per share on the profit for the       Year ended     Year ended    
year                                              31 March 2007  31 March 2006                              
------------------------------------------------------------------------------
Profit for the year                                                            
attributable to equity                                                         
holders of the parent ($ million)                        934.2          373.5  
Weighted average number of                                                     
shares of the Company in                                                       
issue (million)                                          286.9          286.8  
------------------------------------------------------------------------------
Earnings per share on                                                          
profit for the year (US cents per share)                 325.6          130.2  
------------------------------------------------------------------------------
 
Diluted earnings per share on the profit for the    Year ended     Year ended    
year                                             31 March 2007  31 March 2006                              
------------------------------------------------------------------------------
                                                  
Profit for the year                                                            
attributable to equity                                                         
holders of the parent ($ million)                        934.2          373.5  
Adjustment in respect of                                                       
convertible bonds of                                                           
Vedanta ($ million)                                       36.7            2.7  
------------------------------------------------------------------------------
Profit for the year after                                                      
dilutive adjustment ($ million)                          970.9          376.2  
------------------------------------------------------------------------------
Adjusted weighted average                                                      
number of shares of the                                                        
Company in issue (million)                               317.9          293.5  
------------------------------------------------------------------------------
Diluted earnings per share                                                     
on profit for the year (US cents per share)              305.4          128.2  
------------------------------------------------------------------------------

During the year ended 31 March 2007, 791,011 options issued under the Long Term
Incentive Plan were converted to equity shares pursuant to vesting and exercise
of the options. Also during the year ended 31 March 2007, 7,746 shares were
issued on conversion of the convertible bond. The issue of these shares has been
included in determining the 2007 weighted average number of shares.

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

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

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

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

The Group's Underlying Profit is the profit for the year after adding back
special items and their resultant tax and minority interest effects, as shown in
the table below:
------------------------------------------------------------------------------
                                                   Year ended    Year ended   
                                                31 March 2007 31 March 2006
                                                    $ million     $ million    
------------------------------------------------------------------------------
Profit for the year                                                          
attributable to equity                                                       
holders of the parent                                   934.2         373.5  
Administrative expenses -                                                    
special items (note 4)                                    1.7             -  
Tax effect of special                                                        
items                                                     3.7             -  
Minority interest effect                                                     
of special items                                         (1.5)            -  
------------------------------------------------------------------------------
Underlying Profit for the                                                    
year                                                    938.1         373.5  
------------------------------------------------------------------------------

Basic earnings per share on Underlying Profit for    Year ended    Year ended   
the year                                          31 March 2007 31 March 2006                           
------------------------------------------------------------------------------
Underlying profit for the                                                    
year ($ million)                                        938.1         373.5  
Weighted average number of                                                   
shares of the Company in                                                     
issue (million)                                         286.9         286.8  
------------------------------------------------------------------------------
Earnings per share on                                                        
Underlying Profit for the                                                    
year                                                                         
(US cents per share)                                    327.0         130.2  
------------------------------------------------------------------------------
 
Diluted earnings per share on Underlying Profit    Year ended    Year ended   
for the year                                    31 March 2007 31 March 2006                             
------------------------------------------------------------------------------
Underlying profit for the                                                    
year ($ million)                                        938.1         373.5  
Adjustment in respect of                                                     
convertible bonds of                                                         
Vedanta ($ million)                                      36.7           2.7  
------------------------------------------------------------------------------
Underlying profit for the                                                    
year after dilutive                                                          
adjustment ($ million)                                  974.8         376.2  
------------------------------------------------------------------------------
Adjusted weighted average                                                    
number of shares of the                                                      
Company in issue (million)                              317.9         293.5  
------------------------------------------------------------------------------
Diluted earnings per share                                                   
on Underlying Profit for                                                     
the year                                                                     
(US cents per                                                                
share)                                                  306.6         128.2  
------------------------------------------------------------------------------
 
8. Dividends
                                                   Year ended    Year ended   
                                                31 March 2007 31 March 2006
                                                    $ million     $ million    
----------------------------------------------------------------------------
Amounts recognised as distributions to equity                                
holders:                                                                     
Equity dividends on ordinary shares:                                         
Final dividend for 2005-06: 14.3 US cents per share                                                    
(2004-05 : 11.55 US cents                                                    
per share)                                               41.1          33.1  
Interim dividend paid                                                        
during the year : 15 US                                                      
cents per share (2005-06 :                                                   
5.7 US cents per share)                                  43.2          16.3  
----------------------------------------------------------------------------
                                                         84.3          49.4  
----------------------------------------------------------------------------
Proposed for approval at AGM                                                 
                                                                             
Equity dividends on ordinary shares:                                         
Final dividend for                                                           
2006-07: 20 US cents per                                                     
share (2005-06: 14.3 US                                                      
cents per share)                                         57.5          41.1  

 

9. Borrowings
                                                         As at          As at         
                                                 31 March 2007  31 March 2006 
                                                     $ million      $ million     
------------------------------------------------------------------------------   
Bank loans                                               491.2          700.7  
Bonds                                                    581.2          567.6  
Other loans                                               56.0          207.5  
------------------------------------------------------------------------------ 
Total                                                  1,128.4        1,475.8  
Borrowings are repayable as:                                                   
On demand                                                                      
within one                                                                     
year (shown as                                                                 
current                                                                        
liabilities)                                             249.1          239.8  
In the second                                                                  
year                                                      76.2          257.9  
In two to five                                                                 
years                                                    769.7          949.6  
After five                                                                     
years                                                     33.4           28.5  
------------------------------------------------------------------------------ 
Total                                                                          
borrowings                                             1,128.4        1,475.8  
Less: payable                                                                  
within one                                                                     
year                                                    (249.1)        (239.8) 
------------------------------------------------------------------------------ 
Medium and                                                                     
long term                                                                      
borrowings                                               879.3        1,236.0  
------------------------------------------------------------------------------ 

At 31 March 2007, the Group had available US$1,011.4 million (fund and non fund
based) (2006: $443.7 million- fund based) of undrawn committed borrowing
facilities in respect of which all conditions precedent had been met.


 

 

10. Movement in Net (Debt) / Cash (1)
                                   Debt due within one year        Debt due after one year                              
                                   ------------------------------- ---------------------------
US$ million              Cash and    Debt carrying    Debt related Debt carrying  Debt related       Liquid   Total Net 
                             cash            value  derivatives(2)         value   derivatives  investments    (Debt) /
                      equivalents                                                          (2)  US$ million        Cash 
------------------------------------------------------------------------------------------------------------------------
At 1 April 2005          1,186.6          (213.0)          (15.1)     (1,287.7)        (17.5)       262.0        (84.7) 
Cash flow                  688.4           (28.4)                       (698.8)            -        (12.8)       (51.6) 
Other non-cash                                                                                                          
changes                     (1.0)           (2.0)           17.9         135.2         (12.7)           -        137.4  
Foreign                                                                                                                 
exchange                                                                                                                
differences                (26.7)            3.6               -          14.9             -         (4.8)       (13.0) 
------------------------------------------------------------------------------------------------------------------------
At 1 April 2006          1,847.3          (239.8)            2.8      (1,836.4)        (30.2)       244.4        (11.9) 
Cash flow                 (311.2)          (25.0)              -         324.8             -        345.1        333.7  
Disposal of                                                                                                             
non core                                                                                                                
business                       -            23.1               -             -             -            -         23.1  
Other non-cash                                                                                                          
changes                        -             9.1            (9.9)         68.3          11.6          3.5         82.6  
Foreign                                                                                                                 
exchange                                                                                                                
differences                 48.7           (16.5)              -         (34.4)            -          7.4          5.2  
------------------------------------------------------------------------------------------------------------------------
At 31 March 2007         1,584.8          (249.1)           (7.1)     (1,477.7)        (18.6)       600.4        432.7  
------------------------------------------------------------------------------------------------------------------------

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

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

 


11. Business Combinations

Sterlite Gold

The Group acquired the following companies during the year ended 31 March 2007:
--------------------------------------------------------------------------------
Names of company Principal         Date of          Proportion of        Cost of       
acquired         activity          acquisition             shares    acquisition   
                                                         acquired     ($ million)                 
Welter Trading   Investment        22 May 2006             100.0%             -                      
Limited          holding company                                             
                 
Twin Star                                                                    
International    Investment        23 August               100.0%          33.7 *                               
Limited          holding company   2006
--------------------------------------------------------------------------------

* $2.9 million of acquisition expenses were additionally incurred in the
acquisition of Twinstar International Limited and its subsidiaries.

Vedanta acquired 100% of Welter Trading Limited, a company incorporated in
Cyprus, on 22 May 2006. On 23 August 2006, Welter Trading Limited acquired 100%
of Twin Star International Limited ('TSI'), a company incorporated in Mauritius
and 100% owned by Volcan Investments ('Volcan'). Volcan holds 54% of the equity
of Vedanta.

TSI held 55.09% of Sterlite Gold Limited ('Sterlite Gold'), a company
incorporated in Canada and listed on the Toronto Stock Exchange. By virtue of
Welter Trading Limited acquiring 100% of TSI, Sterlite Gold became a subsidiary
of Vedanta with an effective date of 23 August 2006, being the date at which
control passed to Vedanta. As a result, the financial information of TSI and
Sterlite Gold has been consolidated from 23 August 2006.

From 23 August 2006 to 31 March 2007, the Group acquired a further 28.6%
interest in the equity of Sterlite Gold for $17.7million through an open offer
to minority shareholders. The Group's total holding in Sterlite Gold as at 31
March 2007 was 83.7%.

From the date of acquisition, Sterlite Gold held 100% interests in the following
companies:

• First Dynasty Mines (USA) LLC

• First Dynasty Mines Armenia Limited

• AGRC Services Limited

• First Dynasty Mines Holding Company Limited

• Myanmar First Dynasty Mines Limited (since liquidated)

• Ararat Gold Recovery Company LLC ('AGRC')

AGRC is a company involved in gold mining activities and is incorporated in
Armenia. All other companies listed above are non-operating.


The consolidated net assets of TSI acquired at the first acquisition are
detailed in the table below. There was no material change in the fair value of
assets and liabilities acquired at the following acquisitions.

 
$ million                            Book value     Fair value   Fair value   
                                                   adjustments   
----------------------------------------------------------------------------
Assets                                                                        
                                                                              
Non-current                                                                   
assets                                     
Property, plant and                         
equipment                                  11.4          71.7          83.1         
Financial asset                                                               
investments                                 4.7             -           4.7                                            
----------------------------------------------------------------------------
                                           16.1          71.7          87.8  
Current                                                                       
assets                                                                        
Inventories                                 2.7             -           2.7          
Trade                                       
and other receivables                       2.7             -           2.7                                            
Cash and cash equivalents                   0.8             -           0.8                                            
----------------------------------------------------------------------------
                                            6.2             -           6.2  
Liabilities                                                                   
Current                                    
liabilities                            
Trade and other                                                               
payables                                   (2.9)            -          (2.9)                                    
----------------------------------------------------------------------------
                                           (2.9)            -          (2.9) 
Non-current                                                                   
liabilities                                                                   
Borrowings from                                                               
Vedanta Resources plc                     (10.2)            -         (10.2)       
Deferred tax liabilities                      -         (14.3)        (14.3)       
Provisions                                 (1.8)            -          (1.8)                                           
----------------------------------------------------------------------------
                                           (12.0)        (14.3)        (26.3) 
Net assets                                   7.4          57.4          64.8  
Less: minority interests                                                      
recognised on first                                                           
acquisition                                                            (29.1)              
Add: reduction                                                         
in minority interests on              
following acquisitions                                                  18.9         
----------------------------------------------------------------------------
                                                                        54.6  
Satisfied by:                                                                 
Cash                                                                          
consideration on first                                                        
acquisition                                                             33.7      
Cash consideration on following                                              
acquisitions                                                            17.7               
Acquisition                                                  
expenses                                                                 2.9               
----------------------------------------------------------------------------
                                                                        54.3  
Gain on following                                                             
acquisition recognised in                                                     
retained earnings                                                        0.3  
----------------------------------------------------------------------------
                                                                        54.6  
----------------------------------------------------------------------------

Since the date of acquisition, Sterlite Gold has contributed $2.9 million to the
revenue and $(4.1) million to the net profit of the Group for the year ended 31
March 2007. If TSI Group had been acquired at the beginning of the period, the
revenues of the Group would have been $6,506.7 million and the profit attributed
to equity holders of the parent of the Group would have been $1,811.5 million.

(b) Acquisition of Sterlite Energy

During the year ended 31 March 2007, Sterlite acquired 100 % of the equity of
Sterlite Energy, a related party previously controlled by Volcan. The cost of
acquisition was $0.1 million.



(c) Disposal of Non Core Business

The Board of Sterlite passed a resolution on 21 August 2006 to divest its non
core aluminium conductor business, a reporting unit classified in the Group's
'Other' segment. The Group sold the business to SOTL, a company owned and
controlled by Volcan, a related party, for $32.3 million. The loss on this sale
was $2.3 million. The carrying value of the assets and liabilities disposed of
were as follows:

----------------------------------------------------------------------------
                                                                  $ million    
Property, plant and equipment                                          18.6  
Current assets                                                         83.4  
Total assets                                                          102.0  
Debt                                                                   23.1  
Current liabilities                                                    44.3  
Total liabilities                                                      67.4  
Net assets disposed                                                    34.6  
Less: consideration received                                          (32.3) 
Loss on disposal (note 3)                                               2.3  
----------------------------------------------------------------------------

 
Glossary and Definitions

5S
A Japanese concept laying emphasis on housekeeping and occupational safety in a
sequential series of steps as Sort (Seiri); Set in Order (Seiton); Shine
(Selso); Standardise (Seiketsu); and Sustain (Shitsuke)

Adapted Comparator Group
The new comparator group of companies used for the purpose of comparing TSR
performance in relation to the LTIP, adopted by the Remuneration Committee on 1
February 2006 and replacing the previous comparator group comprising companies
constituting the FTSE Worldwide Mining Index (excluding precious metals)

AGM or Annual General Meeting
The annual general meeting of the Company which is scheduled to be held on
Wednesday 2 August 2006 at 3.00pm, UK time, at the Mayfair Conference Centre, 17
Connaught Place, London W2 2EL

AE
Anode effects

AIDS
Acquired immune deficiency syndrome

Aluminium Business
The aluminium business of the Group, comprising its fully-integrated bauxite
mining, alumina refining and aluminium smelting operations in India, and trading
through the Bharat Aluminium Company Limited and The Madras Aluminium Company
Limited, companies incorporated in India

Articles of Association
The articles of association of Vedanta Resources plc

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

BALCO
Bharat Aluminium Company Limited, a company incorporated in India

Board or Vedanta Board
The board of directors of the Company

Board Committees
The committees reporting to the Board: Audit, Remuneration, Nominations and
Health, Safety and Environment, each with its own terms of reference

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

Capital Employed
Net assets before Net (Debt)/Cash

Capex
Capital expenditure

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

CEO
Chief executive officer

CII
Confederation of Indian Industries

CLZS
Chanderiya lead and zinc smelter

CO2
Carbon dioxide

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

Combined Code or the Code
The Combined Code on Corporate Governance published by the Financial Reporting
Council in July 2003 and applying to listed companies for reporting years
beginning on or after 1 November 2003

Company or Vedanta
Vedanta Resources plc


Convertible Bonds

$725 million 4.60% guaranteed convertible bonds due 2026, issued by a
wholly-owned subsidiary of the Company, Vedanta Finance (Jersey) Limited
('VFJL'), and guaranteed by the Company, the proceeds of which are to be applied
towards re-financing subsidiary indebtedness, the Company's capital expenditure
programme including the Jharasaguda aluminium smelter project and other general
corporate purposes.
 

Copper Business

The copper business of the Group, comprising:

•  a copper smelter, two refineries and two copper rod plants in India, trading
   through Sterlite Industries (India) Limited), a company incorporated in India;

•  one copper mine in Australia, trading through Copper Mines of Tasmania Pty
   Limited, a company incorporated in Australia; and

•  an integrated operation in Zambia consisting of three mines, a leaching plant
   and a smelter, trading through Konkola Copper Mines PLC, a company incorporated
   in Zambia.


CREP
Corporate responsibility for environmental protection

cents/lb
US cents per pound

CRRI
Central Road Research Institute

CSR
Corporate social responsibility

CTC
Cost to company, the basic remuneration of executives in India, which represents
an aggregate figure encompassing basic pay, pension contributions and allowances

Deferred Shares
Deferred shares of £1.00 each in the Company

DGMS
Director General of Mine Safety in the Government of India

Directors
The directors of the Company

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

DRs
Depositary receipts of 10 US cents, issuable in relation to the $725 million
4.6% guaranteed convertible bonds due 2026.

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

EBITDA Margin
EBITDA as a percentage of turnover

Economic Holdings or Economic Interest
The economic holdings/interest are derived by combining the Group's direct and
indirect shareholdings in the operating companies. The Group's Economic Holdings
/Interest is the basis on which the Attributable Profit and net assets are
determined in the consolidated accounts

E&OHSAS
Environment and occupational health and safety assessment standards

E&OHSMS
Environment and occupational health and safety management system

EPS
Earnings per Ordinary Share

ESOP
Employee share option plan

ESP
Electrostatic precipitator

Executive Committee
The executive committee to whom the Board delegates operational management and
comprising the Executive Directors and the senior management within the Group

Executive Directors
The executive directors of the Company

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

Financial Statements or Group financial statements
The consolidated financial statements for the Company and the Group for the year
ended 31 March 2006 as defined in the Independent Auditors' Report to the
members of Vedanta Resources plc on page 67

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

GAAP, including UK GAAP and Indian GAAP
Generally Accepted Accounting Principles, the common set of accounting
principles, standards and procedures that companies use to compile their
financial statements in their respective local territories

GDP
Gross domestic product

Gearing
Net Debt as a percentage of Capital Employed

GJ
Giga joules

Government or Indian Government
The Government of the Republic of India

Gratuity
A defined contribution pension arrangement providing pension benefits consistent
with Indian market practices

Group
The Company and its subsidiary undertakings and, where appropriate, its
associate undertaking

HSE
Health, safety and environment

HZL
Hindustan Zinc Limited, a company incorporated in India

IAS
International Accounting Standards

ICMM
International Council on Mining and Metals

IFL
India Foils Limited, a company incorporated in India

IFRIC
International Financial Reporting Interpretations Committee

IFRS
International Financial Reporting Standards

INR
Indian Rupees

Interest Cover
EBITDA divided by finance costs

ISO 9001
An international quality management system standard published by the
International Organisation for Standardisation

ISO 14001
An international environmental management system standard published by the
International Organisation for Standardisation

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

KDMP
Konkola deep mining project

Key Result Areas or KRAs
For the purpose of the remuneration report, specific personal targets set as an
incentive to achieve short-term goals for the purpose of awarding bonuses,
thereby linking individual performance to corporate performance

KLD
Kilo litres per day

KPIs
Key performance indicators

Kwh
Kilo-watt hour

Kwh/d
Kilo-watt hour per day

LIBOR
London inter bank offered rate

Listing or IPO (Initial Public Offering)
The listing of the Company's Ordinary Shares on the London Stock Exchange on 10
December 2003

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

Listing Rules
The listing rules of the Financial Services Authority, with which companies with
securities that are listed in the UK must comply

LME
London Metals Exchange

London Stock Exchange
London Stock Exchange plc

Lost time injury
An accident/injury forcing the employee/contractor to remain away from his/her
work beyond the day of the accident

LTIFR
Lost time injury frequency rate: the number of lost time injuries per million
man hours worked

LTIP
The Vedanta Resources Long Term Incentive Plan or Long Term Incentive Plan

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

Management Assurance Services
The function through which the Group's internal audit activities are managed

MAT
Minimum alternative tax

MIS
Management information system

MOEF
The Ministry of Environment & Forests of the Government of the Republic of India

mt or tonnes
Metric tonnes

MW
Megawatts of electrical power

NCCBM
National Council of Cement and Building Materials

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

NGO
Non-governmental organisation

NIHL
Noise induced hearing loss

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

OHSAS 18001
Occupational Health and Safety Assessment Series (standards for occupational
health and safety management systems)

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

PBT
Profit before tax

PFC
Per fluorocarbons

PHC
Primary health centre

PPE
Personal protective equipment

Provident Fund
A defined contribution pension arrangement providing pension benefits consistent
with Indian market practices

Recycled water
Water released during mining or processing and then used in operational
activities

Relationship Agreement
The agreement dated 5 December 2003 between the Company, Volcan Investments
Limited and members of the Agarwal family that regulates the ongoing
relationship between them, the principal purpose of which is to ensure that the
Group is capable of carrying on business independently of Volcan, the Agarwal
family and their associates

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

The Reward Plan
The Vedanta Resources Share Reward Plan, a closed plan approved by shareholders
on Listing in December 2003 and adopted for the purpose of rewarding employees
who contributed to the Company's development and growth over the period leading
up to Listing in December 2003

RO
Reverse osmosis

SA 8000
Standard for Social Accountability based on international workplace norms in the
International Labour Organisation ('ILO') conventions and the UN's Universal
Declaration of Human Rights and the Convention on Rights of the Child

Senior Management Group
For the purpose of the remuneration report, the key operational and functional
heads within the Group

Sesa Goa
Sesa Goa Limited, a company incorporated in India

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

The Share Option Plan
The Vedanta Resources Share Option Plan, a closed plan approved by shareholders
on Listing in December 2003 and adopted to provide maximum flexibility in the
design of incentive arrangements over the long term

SHGs
Self helf groups

SID
Senior Independent Director

SO2
Sulphur dioxide

SBU
Strategic Business Unit

SOTL
Sterlite Optical Technologies Limited, a company incorporated in India

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

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

SPM
Suspended particulate matter. Fine dust particles suspended in air

Sterling, GBP or £
The currency of the United Kingdom

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

SGL
Sterlite Gold Ltd., a company listed on the Toronto Stock Exchange

Superannuation Fund
A defined contribution pension arrangement providing pension benefits consistent
with Indian market practices

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

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

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

TGS
Tail gas scrubber

TGT
Tail gas treatment

tpa
Metric tonnes per annum

TPM
Tonne per month

TSR
Total shareholder return, being the movement in the Company's share price plus
reinvested dividends

Turnbull Guidance
The revised guidance on internal control for directors on the Combined Code
issued by the Turnbull Review Group in October 2005

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

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

UITF
Urgent Issues Task Force

Underlying EPS
Underlying earnings per Ordinary Share

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

US cents
United States cents

VAL
Vedanta Alumina Limited, a company incorporated in India

VFD
Variable frequency drive

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

VFL
Visible felt leadership

Volcan
Volcan Investments Limited, a company incorporated in the Bahamas

VRCL
Vedanta Resources Cyprus Limited, a company incorporated in Cyprus

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

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

VSS
Vertical Stud Soderberg

Water used for Primary Activities
Total new or make-up water entering the operation and used for the operation's
primary activities; primary activities are those in which the operation engages
to produce its product

WBCSD
World Business Council for Sustainable Development

ZCI
Zambia Copper Investment Limited, a company incorporated in Bermuda

ZCCM
ZCCM Investments Holdings plc, a company incorporated in Zambia

Zinc Business
The zinc-lead business of the Group, comprising its fully-integrated zinc-lead
mining and smelting operations in India, and trading through the Hindustan Zinc
Limited, a company incorporated in India



 


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