Interim Results

15th Nov 2007 07:03

Vedanta Resources PLC15 November 2007 Vedanta Resources plc Interim Results for the Six Months Ended 30 September 2007 Highlights • Financial Performance- Group Revenue up 29 % to $3.9 billion, driven by strong volume growth- Group EBITDA up 6% to $1.4 billion, on the back of strong volume growth, acquisition of Sesa Goa and operating efficiencies offset by the appreciating Indian rupee- Operating profit up 5% to $1.2 billion- Attributable profit up 4% to $465 million- Basic EPS up 4% at 161.6. US cents, EPS on the basis of Underlying Profit at 151.3 US cents- Interim dividend proposed at 16.5 US cents per share- Free cash flows of $1,283.8 million- Strong balance sheet with net assets of $8.4 billion and nil gearing- ROCE (excluding project capital work in progress) continues to be strong at 44.3% (annualised) • Strong Operational Performance- Highest quarterly Aluminium, Zinc and Indian Copper production volumes- First stream of Lanjigarh alumina refinery commissioned in August 2007- Ongoing exploration at Hindustan Zinc increases reserves (in $ millions, except as stated)--------------------------------------------------------------------------------Consolidated Group Results H1 2008 H1 2007 Change--------------------------------------------------------------------------------Revenue 3,887.9 3,004.5 29.4%EBITDA 1,364.6 1,290.5 5.7%EBITDA Margin 35.1% 43.0% -Operating Profit 1,236.8 1,174.1 5.3%Attributable Profit 465.0 447.6 3.9%Basic Earnings per Share (US cents) 161.6 156.1 3.5%ROCE (excluding project capital work in progress) 44.3% 86.0% NA--------------------------------------------------------------------------------Interim Dividend (US cents per share) 16.5 15.0 10.0%-------------------------------------------------------------------------------- "Our primary focus over the past few years has been to deliver significant valueto the shareholders and at the same time build an organisation which isunparalleled in terms of quality, scale and diversity." said Mr. Anil Agarwal,Chairman, Vedanta Resources plc. "We believe that our organic growth pipeline,which is unique in the industry, is well positioned to take advantage of majordeveloping economies in India and China." For further information, please contact:Sumanth Cidambi Associate Director - Investor Relations [email protected] Resources plc Tel: +44 20 7659 4732 / +91 22 6646 1531 James Murgatroyd Robin WalkerFinsbury Tel: +44 20 7251 3801 About Vedanta Resources plcVedanta Resources plc is a London listed FTSE 100 diversified metals and mininggroup. Its principal operations are located throughout India, with furtheroperations in Zambia and Australia. The major metals produced are aluminium,copper, zinc, lead and iron ore. For further information, please visitwww.vedantaresources.com.www.vedantaresources.com. DisclaimerThis press release contains "forward-looking statements" - that is, statementsrelated to future, not past, events. In this context, forward-looking statementsoften address our expected future business and financial performance, and oftencontain words such as "expects," "anticipates," "intends," "plans," "believes,""seeks," "should" or "will." Forward-looking statements by their nature addressmatters that are, to different degrees, uncertain. For us, uncertainties arisefrom the behaviour of financial and metals markets including the London MetalExchange, fluctuations in interest and or exchange rates and metal prices; fromfuture integration of acquired businesses; and from numerous other matters ofnational, regional and global scale, including those of a political, economic,business, competitive or regulatory nature. These uncertainties may cause ouractual future results to be materially different that those expressed in ourforward-looking statements. We do not undertake to update our forward-lookingstatements. Chairman's Statement I am delighted to report record six months results, which build on our excellentachievements in 2007. The continued delivery of our project pipeline, combinedwith our recent acquisition of Sesa Goa, has led to the creation of India'slargest diversified mining group, with leading market positions in aluminium,copper, zinc, lead and iron ore. Furthermore, our industry leading pipeline ofexpansion projects provide a strong foundation for further growth. Financial Performance We recorded revenues and EBITDA of $3.9 billion and $1.4 billion in the firsthalf of this year. Despite strong appreciation in the Indian rupee in theperiod, revenues and EBITDA increased due to higher volumes and tight costcontrol. It is particularly pleasing, in an environment of industry wide costincreases, that we remain firmly in the lowest cost quartile in the majority ofour businesses. Our strong net cash position and excellent cash generationallows us to invest in future growth and buy-out minorities. Industry Leading Organic Growth Our Phase II expansion programme is progressing well with the expectedcommissioning of the new zinc smelter as well as the second stream of theLanjigarh alumina refinery in the December quarter. The Jharsuguda aluminiumsmelter will be producing metal one year ahead of schedule and mine productionfrom the Konkola Deeps will commence in early 2009. The new Nchanga smelter ison track for completion on schedule. I am also pleased to announce continued exploration success at Hindustan Zincwhere we have added substantial reserves to an already strong base. Consolidation of Minorities We have made further progress in our plans to consolidate minorities in theperiod. Arbitration proceedings for our acquisition of the 28.4% stake in KCMwere resolved favourably in the period, the independent valuation is beingundertaken and we expect to be able to conclude this exercise shortly. Ourdiscussions with the Government of India regarding the acquisition of theremaining stakes in BALCO and HZL are on track and we are hopeful of concludingthis exercise before the FY 2008 year end. Successful Diversification The acquisition of Sesa Goa has added a fourth major commodity to our portfolioand we look forward to updating the market with our plans for expanding thisbusiness. We announced last year our entry into the commercial power business with a2,400 MW coal based power project. We have successfully received a 320 milliontonne coal block allocation from the Government of India, which will enable usto apply our established skills as a miner to support this business. Our subsidiary Sterlite Energy has also announced its intention to developfurther power projects to increase capacity up to 10,000 MW in five years. Ourown established skills will enable us to capitalise on the tremendousopportunity that India offers in the energy sector. Corporate Social Responsibility As the company expands we continue to share the benefits of our success and thefruits of development with the communities who live in and around ouroperations. Vedanta Resources is proud to support medical, literacy andeducation initiatives as well as many other schemes to ensure a sustainablelivelihood for the communities around our operations. We are determined to limit the environmental impact of our operations and wecontinue to pursue energy consumption reduction targets throughout the group. Wehave progressed our first project in green energy with the successfulcommissioning of 63.2 MW of wind power plants as of September 2007. Outlook The domestic economy and the economies of our main markets in Asia continue toenjoy healthy growth supporting robust demand for our metals. Domestic Indianopportunities, both in metals and in power, remain immense with per capitaconsumption of both lagging behind China. With our unique project pipeline andour proven ability to deliver organic growth, we continue to believe that wewill deliver superior returns to our shareholders. We are looking forward todelivering another year of growth. Anil AgarwalChairman 15 November 2007 Business Review Summary Production volumes for the Aluminium, Copper and Zinc businesses during the sixmonths ended 30 September 2007 ("H1 2008") were significantly higher than thecorresponding prior period ("H1 2007"), primarily due to full production fromthe new Korba smelter, the ramp up of the Tuticorin smelter, stabilisation ofthe Chanderiya smelter and the positive impact of the various initiatives takenat our Konkola operations. The first stream of the Lanjigarh alumina refinery has produced 28,000 tonnes ofcalcined alumina in H1 2008 and is now undergoing stability trials. The secondstream of the refinery is currently in the commissioning phase and is expectedto start production by December 2007. As regards the environmental permits forthe Lanjigarh bauxite mines, the Supreme Court of India has now concludedhearings and we are hopeful of a positive resolution to this matter shortly. The 170,000 tpa zinc hydro smelter expansion at Chanderiya is ahead of scheduleby three months and is now expected to be commissioned by December 2007. Theother expansion projects are all progressing well and are on track for scheduledcompletion. Our efforts to consolidate our holdings in KCM, BALCO and HZL are progressingwell. The valuation date for the ZCI call option has been fixed as August 2005and with the determination of this key date, we expect the process to becompleted shortly. In the case of BALCO, as directed by the court, mediationproceedings have begun and both the Government of India and Sterlite haveappointed their independent mediators. We expect the mediation proceedings to becompleted in the near future. In April 2007, we acquired a 51.0% controlling stake in Sesa Goa Limited ("SesaGoa"), India's largest private sector and a globally cost-competitive iron oreproducer-exporter. Sesa Goa's iron ore mining operations are located in the ironore rich Indian states of Goa, Karnataka and Orissa. This acquisition providesus with an industry leadership position in the attractive iron ore business inIndia. Sesa Goa, through its subsidiary Sesa Industries Limited, is also engagedin the manufacture of pig iron. We have also completed our open offer to thepublic shareholders of Sesa Goa to acquire an additional 20% of its shares asrequired under Indian takeover regulations. We now hold 51.2% of Sesa Goa. Group revenues at $3,887.9 million and EBITDA at $1,364.6 million are higher by29.4% and 5.7% respectively compared with the corresponding previous period.Both revenue and EBITDA were adversely impacted by the appreciation of theIndian rupee against the US dollar, lower TC/RCs and lower zinc concentratesales, neutralised by the increase in volumes across the Aluminium, Copper andZinc businesses due to higher production from our expanded capacities, volumesfrom the iron ore business acquired in April 2007 and maintaining stable costs(in local currency terms), with ongoing focus on operational efficiencies. Segmental revenue and EBITDA are presented in the table below. (in $ millions, except as stated)-------------------------------------------------------------------------------- H12008 H12007 ChangeRevenueAluminium 566.7 396.2 43.0%Copper 2,191.1 1,678.4 30.5%- India/Australia 1,611.1 1,190.2 35.4%- Zambia 580.0 488.2 18.8%Zinc 964.3 881.5 9.4%Iron Ore 161.4 - NAOthers 4.4 48.4 NA 3,887.9 3,004.5 29.4% ========= ========= ======= EBITDAAluminium 192.4 136.4 41.1%Copper 356.9 456.1 (21.7)%- India/Australia 145.0 211.7 (31.5)%- Zambia 211.9 244.4 (13.3)%Zinc 740.4 703.5 5.2%Iron Ore 78.1 - NAOthers (3.2) (5.5) NA 1,364.6 1,290.5 5.7% ========= ========= =======--------------------------------------------------------------------------------Aluminium Business (in $ millions, except as stated)-------------------------------------------------------------------------------- H12008 H12007 Change FY 2007Revenue 566.7 396.2 43.0% 993.4EBITDA 192.4 136.4 41.1% 415.4EBITDA margin 33.9% 34.4% NA 41.8%Operating profit 157.8 109.2 44.5% 358.4- Production volumes ('000 mt) - Alumina: Korba/Mettur 145 150 (3.3)% 299- Alumina: Lanjigarh 28 - 26.5% -- Aluminium 196 155 351Average LME cash settlement prices ($/mt) 2,654 2,565 3.5% 2,663- Unit costs ($/mt) * - BALCO II 1,725 2,051 (15.9)% 1,687 - BALCO II, without alumina 790 812 (2.7)% 740--------------------------------------------------------------------------------* At relevant period average current exchange rates Operating performance at both the Korba smelters has continued to improve as aresult of ongoing initiatives. Aluminium production in H1 2008 at196,000 tonnes, an increase of 26.5% compared with H1 2007, is in line with thefull rated capacity. The unit costs of BALCO II have reduced significantly. With the softening ofalumina prices in the global markets, consumption costs of alumina came down to$935 per tonne of aluminium in H1 2008 compared with $1,239 per tonne ofaluminium in H1 2007. Manufacturing costs other than alumina reduced by 13.4% inIndian rupee terms as a result of higher volumes and better process parameters.The presentation of unit cash cost in US dollars in the table above, howevershow a lesser reduction due to the appreciation of the Indian rupee vis-a-visthe US dollar by 11.1%. The significant appreciation of the Indian rupee vis-a-vis the US dollar by11.1% has adversely affected revenues and consequently earnings. However, due tohigher volumes and lower operating costs, EBITDA in the Aluminium Business roseto $192.4 million, an increase of 41% from the corresponding prior period. The first stream of the 1.0-1.4 mtpa alumina refinery at Lanjigarh wassuccessfully completed and produced 28,000 tonnes of calcined alumina during Q2.The refinery started dispatching alumina to BALCO in early August 2007. Thesecond stream of the refinery is on course for completion and is expected tostart production by December 2007. Both streams I and II of the refinery areexpected to be fully stabilised by the end of FY 2008. With regard to the environmental clearances for developing the Lanjigarh bauxitemines, the hearing of the arguments has now been completed by the Supreme Courtof India and we are hopeful of an early and positive resolution of the matter. Work on the first phase of the 500,000 tpa aluminium smelter and the associatedcaptive power plant at Jharsuguda, Orissa is progressing well. Equipmentdeliveries are progressing as per schedule and the plant erection work hascommenced. Phase 1 of this project comprising a 250,000 tpa smelter and theassociated captive power plant is on track for commissioning by mid-2008, a yearahead of schedule. Copper Business Copper - India and Australia (in $ millions, except as stated)--------------------------------------------------------------------------------------- H12008 H12007 Change FY 2007Revenue 1,611.1 1,190.2 35.4% 2,553.4EBITDA 145.0 211.7 (31.5)% 365.6EBITDA margin 9.0% 17.8% NA 14.3%Operating profit 125.5 175.2 (28.4)% 333.3Production volumes ('000 mt) - Mined metal content 15 15 NA 28- Cathode 172 137 25.5% 313- Rod 107 87 23.0% 178Average LME cash settlement prices(USc/lb) 348.2 338.6 2.8% 316.7Unit smelting costs (USc/lb) 5.9 5.2 13.5% 6.1Realised TCRCs (USc/lb) 18.8 37.1 (49.3)% 31.1---------------------------------------------------------------------------------------(*At relevant period average current exchange rates) Total production at 172,000 tonnes during H1 2008 was 25.5% more than thecorresponding prior period. The higher volumes are the result of thede-bottlenecking initiatives completed at our Tuticorin smelter last year. Minedmetal production at our Australian mine was consistent with H1 2007 at15,000 tonnes. The unit costs of production remained stable in Indian rupee terms, the currencyin which a majority of the costs are incurred. While our overall efficiencieshave improved, the increase in recovery of copper and significantly improvedby-product management has offset higher energy prices. However, while presentingthe unit cash cost, they appear to have increased to 5.9 USc/lb over thecorresponding previous period due to the appreciation of the Indian rupeeagainst the US dollar by 11.1%. TC/RCs in H1 2008 were 18.8 USc/lb in line with our earlier projection andmarket trend. Considering the current market conditions we expect the TC/RCs tofurther decline in the second half of the current fiscal year. EBITDA in H1 2008 was $145.0 million compared with $211.7 million in thecorresponding prior period, attributed to significantly lower TC/RC realisationand the impact of duty reductions in the current period, partially offset bybetter by-product management. Copper - Zambia (in $ millions, except as stated)--------------------------------------------------------------------------------------- H12008 H12007 Change FY 2007Revenue 580.0 488.2 18.8% 1,015.9EBITDA 211.9 244.4 (13.3)% 468.3EBITDA margin 36.5% 50.1% NA 46.1%Operating profit 177.1 216.8 (18.3)% 413.3Production volumes ('000 mt) - Mined metal content 41 43 (4.7)% 84- Cathode 79 70 12.9% 142Average LME cash settlement prices (USc/lb) 348.2 338.6 2.8% 316.7Unit costs (USc/lb) 190.3 143.9 32.2% 173.6--------------------------------------------------------------------------------------- Copper cathode production in H1 2008 was 79,000 tonnes compared with theproduction of 70,000 tonnes in H1 2007 primarily due to an increase inproduction from the tailings leach plant. As a result of on going improvementmeasures and stabilisation of operations, the production from the tailings leachplant was substantially higher at 34,000 tonnes in H1 2008, an increase of 54.5%compared with 22,000 tonnes in the corresponding previous period. Mined metalproduction, as a result of various improvement initiatives, is showing animproving trend. Unit costs of production were 190.3 USc/lb in H1 2008 compared with 143.9 US c/lb in H1 2007. The increase in costs is primarily due to higher expenditure onrepairs and maintenance to improve operational efficiencies, costs of materialmovement at the TLP dams and reclamation area to comply with environmentalguidelines and higher manpower costs. EBITDA at $211.8 million in H1 2008, despite an increase in sales volume, waslower than the corresponding prior period primarily due to higher unit costs ofproduction and LME gains arising from settlement of provisional to final pricesin the corresponding prior period due to sharp rise of LME prices in April andMay 2006. Work on the Konkola Deeps mine expansion project is progressing well with thesinking of the main hoisting shaft and other auxiliary shafts on schedule. Workat the Nchanga smelter expansion project remains on track with major equipmentdelivered on site and erection activities progressing in line with our schedule. As the mining expansion project is progressing, we have ascertained that thepotential for increasing output from the project is high. We have thereforerevised the scope and configuration of the Konkola Deeps project. We had earlierannounced an expansion in targeted output of 4.0 mtpa, from 2.0mtpa to 6.0 mtpa.The revised scope and configuration now envisages an increase in targeted outputof 5.5mtpa, from 2.0 mtpa to 7.5mtpa, an increase of 37.5% over the earlierannounced expansion. In addition, we have created a mid shaft loading stationwhich will augment our revenue stream from mid-2009, earlier than planned. Theincrease in target output and general inflationary trends in construction andother project work have resulted in an increase in the estimated project costfrom $400 million to $674 million. The estimated project cost of the Nchanga smelter expansion has also beenrevised to $372 million from an earlier estimated $280 million due to anincrease in capacity from the 250 kt announced earlier to 300 kt now,engineering changes, soil and earthquake rating increase and generalinflationary trends in project and construction work. Zinc Business (in $ millions, except as stated)--------------------------------------------------------------------------------------- H12008 H12007 Change FY 2007Revenue 964.3 881.5 9.4% 1,888.1EBITDA 740.4 703.5 5.2% 1,453.9EBITDA margin 76.8% 79.8% NA 77%Operating profit 713.1 679.3 5.0% 1,402.8Production volumes ('000 mt) - Mined metal content 278 256 8.6% 505- Refined metal 187 161 16.1% 348Average LME cash settlement prices ($/mt) 3,447 3,333 3.4% 3,581Unit costs($/mt) 906 838 8.1% 862---------------------------------------------------------------------------------------(*At relevant period average current exchange rates) The total production of 278,000 tonnes in H1 2008 was higher by 8.6% comparedwith H1 2007 primarily due to higher production from the Agucha mines. Refinedzinc production was 187,000 tonnes in H1 2008, an increase of 16.1% comparedwith H1 2007 primarily due to production from the new hydro smelter, whichproduced 81,000 tonnes in H1 2008. Sales were augmented by sale of 135,000 drymetric tonnes zinc concentrate and 15,000 dry metric tonnes of lead concentrate. Unit costs of production excluding royalties, were stable in Indian rupee terms,the currency in which a majority of the costs are incurred. However, due to theappreciation of the Indian rupee against the US dollar, costs excludingroyalties appear to be higher at $678 per tonne in H1 2008. Royalties, which areLME-linked, amounted to $228 per tonne in H1 2008, leading to total unit costsof production of $906 per tonne in H1 2008. EBITDA in H1 2008 was $740.4 million, an increase of 5.2%, primarily due to anincrease in metal volumes and higher commodity prices despite the impact of therupee appreciation against the US dollar and lower sale of zinc and leadconcentrate due to the imminent commissioning of new Chanderiya smelter. With its continuous focus on exploration, HZL has increased its reserves andresources to 209.4 million tonnes as at 31 March 2007, an increase of32 million tonnes post depletion. This has been independently reviewed andcertified by a mining consultant of international repute. Work on the new 170,000 tpa Chanderiya hydro smelter is in the final stages ofcompletion with expected commissioning by December 2007, about three monthsahead of our earlier announced schedule of early 2008. The 88,000 tonne perannum de-bottlenecking project and associated captive power plant is alsoprogressing as scheduled. Iron Ore (in $ millions, except as stated)--------------------------------------------------------------------------------------- H12008 H12007 Change FY 2007Revenue 161.4 - - -EBITDA 78.1 - - -EBITDA margin 48.4% - - -Operating profit 40.5 - - -Production volumes ('000 mt) -Saleable Ore 3,782 - - ----------------------------------------------------------------------------------------Represents numbers in the post acquisition period of five months up to 30 September 2007 and are not directly comparable with the corresponding prior period In April 2007, we acquired a 51% controlling stake in Sesa Goa, India's largestprivate sector iron ore producer-exporter. Sesa Goa's iron ore mining operationsare located in the iron ore rich Indian states of Goa, Karnataka and Orissa. Overall production and consequent shipment of iron ore is generally lower duringthe first half of the financial year due to the impact of the seasonal monsooncycle in the region, and usually follows a one-third two-third pattern in thefirst and second halves of the financial year. The total production in the above table represents production in the postacquisition period of five months. On a comparable basis for the six-monthperiod, the production was 4.73 million tonnes compared with 4.23 million tonnesproduced by Sesa Goa in the corresponding previous six month period. Sesa Goa recorded an EBITDA of $78.1 million during the post acquisition periodof five months in H1 2008. Our open offer to the public shareholders of Sesa Goa to acquire an additional20% of its shares as required under Indian takeover regulations was completed inthe third week of September 2007. Post completion of this offer, we now own51.2% of Sesa Goa. Commercial Energy Work on our 2400 MW (4X600 MW) coal based independent thermal power plant isprogressing well. The EPC contract has been placed and engineering andprocurement activities are on track. The project is on schedule for progressivecommissioning in late FY 2009 as announced previously. As part of our green energy initiative, we have successfully commissioned 63.2MW as of September 2007, out of the total contracted 148.8 MW of wind powerplants. Work on the remaining plants is on schedule with progressivecommissioning expected by March 2008. Financial Review Background Our condensed consolidated interim financial report is prepared in accordancewith IFRS as adopted for use in the European Union. Our reporting currency isthe US dollar. Key Financial Performance Indicators (in $ million, except as stated)-------------------------------------------------------------------------------------- 30 September 2007 30 September 2006 31 March 2007EBITDA 1,364.6 1,290.5 2,703.0Underlying EPS (USc per share) 151.3 161.5 327.0Free Cash Flows 1,283.8 606.0 1,504.2ROCE*(excluding project capitalwork-in-progress) 44.3% 86.0% 78.5%Net Debt / (Cash) (2,277.2) (216.0) (432.7)--------------------------------------------------------------------------------------*Annualised basis Key Financial Highlights • Strong financial performance across all businesses helped by higher volumes and stable operating costs in local currency• Acquisition of a 51% stake in Sesa Goa and completion of open offer• Sterlite listing on New York Stock Exchange ("NYSE") raising fresh equity of $2 billion - the largest IPO by an Indian entity in the United States of America at the time of its listing• Net cash increased significantly from $432.7 million at 31 March 2007 to $2,277.2 million at 30 September 2007• Strong free cash flow of $1,283.8 million representing 94% of EBITDA aided by higher operational profits, higher investment income and efficient working capital management• ROCE (adjusted for project capital work-in-progress) continues to be strong at 44.3% Summary of Financial Performance Overall financial performance in H1 2008 was satisfactory with good resultsreported by all our businesses. Profit after tax in H1 2008 was $971.5 million,an increase of nearly 15% compared with $846.1 million in H1 2007. Underlyingearnings were lower at 151.3 US cents per share compared with 161.5 US cents pershare in the corresponding prior period as a result of higher operating profiton account of higher volumes across the metals, higher investment income and alower effective tax rate being more than offset by the higher share ofminorities after the issue of fresh equity by Sterlite during H1 2008. Volumes were higher than the corresponding prior period across the Aluminium,Copper and Zinc businesses, as a result of full production from the new Korbasmelter, ramp up of the Tuticorin smelter, improved efficiencies in our Zambianoperations and the stabilisation of the Chanderiya smelter respectively. The overall financial performance was adversely affected by the followingfactors: • Appreciation of the Indian rupee vis-a-vis the US dollar by about 11%. The average exchange rate in H1 2008 was Rs. 40.9/$1 compared with Rs. 46.0/$1 in H1 2007,• Softening of TC/RCs by almost half their levels in H1 2007, and• Sale of lesser quantity of zinc and lead concentrate in H1 2008 considering the imminent commissioning of the new smelter at Chanderiya. Cost pressures also continued in all operations mainly in fuel and otheroperating expenses. These adverse factors were overcome to a large extent byincreased production volumes and better management of costs which remainedgenerally stable in Indian Rupee terms in most of our Indian operations. Sterlite raised $2.0 billion through an equity offering listed on the NYSE. Atthe time of its listing, this was the largest IPO by an Indian company in theUnited States of America. The funds raised will be deployed towards theconsolidation of our shareholding in HZL, in our energy business and for othercorporate purposes. In April 2007, Vedanta acquired a 51% controlling stake in Sesa Goa, India'slargest private sector producer-exporter of iron ore, for a purchaseconsideration of $981 million. Vedanta's H1 2008 financial results include theresults of Sesa Goa for the five-month period since acquisition. Net cash at 30 September 2007 was $2,277.2 million, up from $432.7 million at31 March 2007, mainly as a result of inflows from Sterlite's equity offering of$2.0 billion and strong cash generation by all businesses. Free cash flowgenerated by operations in H1 2008 was $1,283.8 million, up from $606 milliongenerated in H1 2007. Better working capital management resulted in converting alarger proportion of operating profit to cash and this enabled us to meet ourcapital commitments in our expansion projects. Gross debt increased by about$1 billion compared with 31 March 2007 as a result of the acquisition of thecontrolling stake in Sesa Goa. Vedanta's Phase II expansion programme estimated at $5.7 billion is progressingwell. Many of these projects are expected to be commissioned within the next 18to 36 months. At 30 September 2007, approximately $1.4 billion of the totalcapital outlay was spent, with $3.1 billion committed but not yet spent. A detailed discussion on the financial performance of the Group is set outbelow. Income Statement (in $ million, except as stated)--------------------------------------------------------------------------------- H1 2008 H1 2007 ChangeRevenue 3,887.9 3,004.5 29.4%EBITDA 1,364.6 1,290.5 5.7% ------- ------- ----EBITDA margin 35.1% 43.0% NAOperating special items 29.8 (22.6) NADepreciation and amortization (157.6) (93.8) 68.0%Operating profit 1,236.8 1,174.1 5.3% ------- ------- ----Share of loss of associate - (1.2) NAProfit before interest and tax 1,236.8 1,172.9 5.4% ------- -------- ----Net interest (charge) / income 75.8 (6.3) NAProfit before tax 1,312.6 1,166.6 12.5% ------- ------- -----Income tax expense (341.1) (320.5) 6.4%Tax rate 26.0% 27.5% NAMinority interest (506.5) (398.5) 27.1%Minority interest rate 52.1% 47.1% NAAttributable to equity shareholders in parent 465.0 447.6 3.9% ===== ===== ====Basic earnings per share (US cents) 161.6 156.1 3.5%Underlying earnings per share (US cents) 151.3 161.5 (6.3)%--------------------------------------------------------------------------------- Revenue Vedanta's revenue in H1 2008 was $3,887.9 million, up from $3,004.5 million inH1 2007, an increase of 29.4% mainly on account of higher volumes in the Copperbusiness in India and the Aluminium business. Revenues in H1 2008 also includerevenues of $161.4 million from Sesa Goa which was acquired during H1 2008.Growth in all continuing operations was mainly the result of higher volumes fromexpansion and de-bottlenecking activities. Our realisations over average LMEprices have improved in H1 2008 over H1 2007. However, in our Indian operations,higher metal prices were more than offset by the appreciation of theIndian rupee vis-a-vis the US dollar thereby resulting in lower netrealisations. Segmental revenues are set out in the table below. (in $ millions, except as stated)---------------------------------------------------------------------------------Revenue by segment 30 September 2007 30 September 2006 ChangeAluminium 566.7 396.2 43.0%Copper- India/Australia 1,611.1 1,190.2 35.3%- Zambia 580.0 488.2 18.8%Zinc 964.3 881.5 9.4%Iron ore 161.4 - NAOthers 4.4 48.4 (90.9)% 3,887.9 3,004.5 29.4% ======= ======= =====---------------------------------------------------------------------------------EBITDA and Operating Profit (in $ millions, except as stated)---------------------------------------------------------------------------------EBIDTA by segment 30 September 2007 30 September 2006 ChangeAluminium 192.4 136.4 41.1%Copper- India/Australia 145.0 211.7 (31.5)%- Zambia 211.9 244.4 (13.3)%Zinc 740.4 703.5 5.2%Iron ore 78.1 - NAOthers (3.2) (5.5) NA 1,364.6 1,290.5 5.7% ======= ======= ====--------------------------------------------------------------------------------- Average prices of aluminium, copper and zinc in H1 2008 were higher than inH1 2007 by about 3%. However, the appreciation of the Indian rupee vis-a-vis theUS dollar was about 11%. This resulted in a lower net realisation on ourproducts sold by our Indian operations. We derive a significant proportion ofour profits from our Indian subsidiaries, whose functional currency is theIndian rupee. TC/RCs in our Indian copper operations continue to soften in line with themarket trend as well in line with our earlier projections. In H1 2008, averageTC/RCs were lower than H1 2007 by approximately 50%. The impact of the reductionwas more pronounced on operating profits because lower TC/RCs per tonne wererealised on higher volumes. Furthermore, the profits of our Zambian copper business in H1 2007 included again of $52 million arising from the settlement of provisionally priced sales inthe last quarter of fiscal 2006 due to the sharp increase in copper prices inApril and May of 2006. Despite rising input costs, particularly fuel costs, we have been able tocontain our overall costs at nearly the same levels as in H1 2007. This hasenabled us to reduce the impact of the above mentioned adverse factors on theprofitability of our Indian operations. Although costs in rupee terms arestable, the appreciation of the Indian rupee against the US dollar renders theresultant reported unit cash costs higher than in the corresponding priorperiod. Costs in our Zambian operations are higher than in H1 2007 mainly due torepairs and maintenance of the plant to improve plant availability andoperational efficiencies and higher manpower costs. EBITDA for H1 2008 was $1,364.6 million, up from $1,290.5 million in H1 2007, anincrease of 5.7%. EBITDA from continuing operations was stable, despite highervolumes, for the reasons mentioned above. Operating profit in our Indian operations in H1 2008 was adversely affected bythe depreciation of US dollar against the Indian rupee, lower TC/RCs in ourIndian copper operations and lower sale of zinc and lead concentrate due to theimminent commissioning of our new smelter at Chanderiya. Depreciation ofUS dollar against the Australian dollar affected our Australian operations aswell. The effect of these factors were largely neutralised by a significantincrease in volumes in all our businesses and our sustained focus on costs whichresulted in stable unit operating costs in most of our Indian operations. Operating profit in H1 2008 was $1,236.8 million, an increase of 5.3% comparedwith $1,174.1 million in H1 2007. The depreciation charge in H1 2008 was higherthan H1 2007 by $64 million mainly on account of the acquisition of Sesa Goawhere we have recognised fixed assets of $2,238 million relating to the fairvalue of mining reserves. After adjusting for special items, details of whichare given below, operating profit in H1 2008 has increased by about 1% overH1 2007 mainly for reasons discussed earlier. The profit on the disposal of Sterlite Gold of $29.8 million has been recordedas a special item in the income statement in H1 2008. In the income statement ofH1 2007, we accounted for a net loss of $22.6 million as special items onaccount of provisions made for a probable future liability arising fromguarantees issued on behalf of IFL, an associate company, a loss on sale of thePower Transmission Line division of Sterlite and expenses on a voluntaryseparation scheme in HZL and MALCO. Net Finance Income/Costs Net finance income in H1 2008 was $75.8 million compared to net finance costs of$6.3 million in H1 2007. Net finance income consisted of investment revenues of$135.1 million and finance costs of $59.3 million. A large part of the higherinvestment income was earned from investing the proceeds from the Sterlite ADRissue and higher returns on the investment of surplus cash generated fromoperations in HZL. Moreover, we have improved our yield on the investment ofsurplus cash. We have repaid some of the borrowings in our subsidiaries whichhave resulted in lower interest payments except for the new loan contracted foracquisition of Sesa Goa earlier in this financial year. Taxation The effective tax rate in H1 2008 has been reduced to 26.0% from the FY 2007rate of 27.1%. The lower projected effective tax rate, as compared to the fullyear rate, reflects the likely impact of various initiatives undertaken by us insome of our major operating subsidiaries as well as tax credits arising from therevision of our tax estimates. Of the overall tax charge, current tax hasincreased marginally from approximately 20.7% to approximately 21.3% mainlybecause of change in profit mix among subsidiaries and also due to theacquisition of Sesa Goa whose cash tax rate is close to the marginal tax rate inIndia. The tax rate is sensitive to availability of various incentives whichdiffer from subsidiary to subsidiary due to differing tax rates in India andZambia and also to the change in profit mix among subsidiaries. Attributable Profit Attributable profit for H1 2008 was $465.0 million compared with $447.6 millionin the corresponding prior period, an increase of 3.9%. Higher operating profit,higher investment revenues and the lower effective tax rate were factors whichcontributed to higher profit for the current period. However, these factors werelargely offset by the lower effective holding in Sterlite and its subsidiariesafter the issuance of fresh equity by Sterlite in the current period. Earnings Per Share Basic earnings per share increased to 161.6 US cents per share in H1 2008compared with 156.1 US cents per share in H1 2007. Whilst the profit after taxhas increased by 15% over H1 2007, Basic EPS has only increased by 3.5% due tothe higher share of minorities on account of change in profit mix amongsubsidiaries and the dilution of Vedanta's shareholding in Sterlite. However,underlying EPS is lower as compared with H1 2007 as the underlying profit forH1 2008 is adjusted for profit on disposal of subsidiary. Balance Sheet Vedanta's balance sheet continues to be strong with shareholders' equity at$3,662.2 million, up from $2,326.9 million at 31 March 2007. Apart fromadditions to retained earnings from operations, $698.5 million was added toshareholders' equity by Sterlite's offering of shares on the New York StockExchange ("NYSE"). Our gearing at 30 September 2007 was negative (net cash) indicating a largepotential to raise funds, if required, for future growth. Net cash of$2,277 million at 30 September 2007 represents an increase of $1,845 millionfrom the position at 31 March 2007. Cash and cash equivalents together withliquid investments as at 30 September 2007 were $5,031 million, a result ofstrong operational cash flows and the infusion of funds from Sterlite's equityoffering. Our gross debt was $2,725 million of which $535 million was operatingsubsidiary debt. External debt held by operating subsidiaries has reducedmarginally from $560.8 million at 31 March 2007 We continue to focus on minimising the working capital usage in the operationsand these measures have resulted in a reduction of gross working capital i.e.inventory and trade receivables expressed as a percentage of turnover from 28%at 31 March 2007 to 27.8% at 30 September 2007. Our capital employed increasedto $6,153 million at 30 September 2007 up from $3,719 million at 31 March 2007mainly on account of net addition to property, plant and equipment of$3,391 million of which $2,408 million relates to the Sesa Goa acquisition,partially reduced by lower working capital on account of higher efficiencies. ROCE on an adjusted capital employed basis (capital employed reduced by projectcapital work-in-progress) and on a comparable basis (excluding Sesa Goa) was74.3% which is in line with H1 2007. At the time of the acquisition of Sesa Goa,we have recognised property, plant and equipment of $2.2 billion relating to thefair value of Sesa Goa's mining reserves. Therefore, ROCE including Sesa Goa is44.3% in H1 2008. This ratio is expected to be significantly higher for the fullyear since a large proportion of Sesa Goa's annual profits arise in the secondhalf of the financial year due to a seasonal business cycle. We continue to focus on maintaining a strong balance sheet to fund our futuregrowth. Cash Flow and Debt (in $ millions, except as stated)----------------------------------------------------------------------------------------- 30 September 2007 30 September 2006 31 March 2007EBITDA 1,364.6 1,290.5 2,703.0Special items 29.8 (22.6) 1.7Working capital movements 168.7 (340.2) (542.1)Changes in long termcreditors and non-cash items 26.4 (28.1) (11.5)Sustaining capital expenditure (98.7) (94.5) (194.4)Sale of tangible fixed assets - 1.7 28.9Net interest (paid)/received 15.1 (25.2) (39.5)Dividend received 32.9 10.7Tax paid (255.0) (175.6) (475.6) -------- -------Free Cash Flow 1,283.8 606.0 1,504.2 -------- -----Expansion Capital Expenditure (722.0) (285.8) (934.5)Acquisitions (755.7) (36.6) (59.5)Dividends paid (86.3) (55.1) (126.1)Sale of non core business/ subsidiary 83.1 - 32.1Issue of shares of subsidiary to minority 1,969.4 - -Other movements 72.2 (0.6) 28.4Movement in net(debt)/cash 1,844.5 227.9 444.6 ======= ===== =====----------------------------------------------------------------------------------------- While operating profits were almost at the same levels as those in H1 2007, ourimproved efficiencies in working capital management have resulted in a higherproportion of operating profit being converted to free cash flow. We generated$1,283.8 million as free cash flow, which represents 103.8% of our operatingprofit. Our working capital efficiency which is gross working capital expressedas a percentage to turnover has reduced from 28% to 27.8%. This reduction wasachieved despite a significant increase in volumes in all our businesses fromexpanded capacities and de-bottlenecking initiatives. We invested $98.7 million in sustaining capital expenditure during H1 2008 tomaintain our assets and to improve operational efficiencies. Of the$1,283.8 million of free cash flow, we invested $722.0 million in funding ofgrowth projects and paid $86.3 million as dividend. We raised fresh debt of $1 billion to acquire Sesa Goa and the entire proceedswere used to fund the acquisition. American Depositary Shares In June 2007, Sterlite raised $2.0 billion in an IPO (net of expenses) bylisting its shares on the NYSE. At the time of its listing, this was the largestever IPO by an Indian company in the United States of America. The offering wasover-subscribed and Sterlite issued 150 million shares at $13.44 per share. Theproceeds from the issue are proposed to be utilised in acquiring the equitystake of the Government of India in HZL, for our commercial energy project atJharsuguda and for other corporate purposes. The offering resulted in reduction of Vedanta's shareholding in Sterlite from75.9% to 59.9%. This reduction has not resulted in any change in control andhence Sterlite continues to be consolidated in Vedanta's condensed consolidatedfinancial information. This reduction has been accounted in Vedanta'sconsolidated financial statements as an equity transaction. The carrying amountof the minority interest has been adjusted to reflect the change in Vedanta'sinterest in the net assets of Sterlite. The difference between the amount bywhich the minority interest is so adjusted of $1,270.9 million and theconsideration received of $1,969.4 million is recognised directly in equity andattributed to equity holders of Vedanta. Acquisitions In April 2007, we acquired a controlling 51% stake in Sesa Goa, India's largestprivate sector iron ore producer-exporter for a consideration of $981 million.By virtue of acquiring the controlling stake in Sesa Goa, we also acquired SesaGoa's subsidiary, Sesa Industries Limited, a company engaged in the manufactureand sale of pig iron. After acquiring the 51% stake in Sesa Goa, we made an open offer for anadditional stake of 20%, as required by current Indian takeover regulations. Theopen offer was taken up by a very small proportion of the shareholders, sincethe market price increased and exceeded the offer price in the interveningperiod. The transaction is now complete and at 30 September 2007, Vedanta'sholding in Sesa Goa is 51.2%. To fund this acquisition, we raised a debt of$1 billion. We have accounted for this acquisition in accordance with IFRS 3 'BusinessCombinations'. The fair value of the assets and liabilities of the acquiredbusiness has resulted in the recognition of assets in the form of miningproperties and leases of $2.2 billion. We believe that this acquisition gives usan entry into the ferrous metals business where we see a large potential forgrowth and enhancement in shareholder value. Disposals During H1 2008 we disposed our 84.2% equity shareholding in Sterlite Gold andits Armenian subsidiary which was engaged in gold mining and processing for atotal consideration of $111 million comprising $86 million for its equity valueagainst a carrying value of $53 million and $25 million towards the settlementof borrowings which Sterlite Gold owed to Vedanta companies. The related costsof disposal were $3.0 million. Whilst we continued to negotiate with the Armenian Government to resolve theoutstanding issues in the implementation agreement, we also evaluated ouroptions to exit this business and in August 2007 we entered into an agreementfor disposal of the business. We tendered our shares in Sterlite Gold in an all-cash offer to the buyer at aprice of $0.3845 per Sterlite Gold share which we believe is good for Vedantashareholders since it represents a premium for Vedanta's controlling interest inSterlite Gold. We completed the sale of the business in September 2007 and wehave recorded a net gain of $29.8 million in the income statement of H1 2008. Projects All the expansion projects announced at the time of our IPO in December 2003 arelargely complete. We completed all these projects at or below the estimated costand in totality we have saved about 10% of the estimated cost of $2.2 billion. The cost of our Phase II expansion projects was earlier estimated to be$5.3 billion. We have recently reviewed our project costs and we estimate thatthe cost of our KDMP and Nchanga smelter expansion projects would be higher thanthe earlier estimates by $274 million and $92 million respectively due toincrease in targeted output in the mine, general inflation, engineering changesand soil and earth quake rating increase. We expect to reduce the impact of thecost increase by generating early revenue stream by mid-shaft loading andoverall advancement of the schedule. (in $ millions, except as stated)------------------------------------------------------------------------------------------------------- Estimated Committed but Phase 1 Expansion projects cost At 30 September 2007 not yet spent Status ------------------------------------------------------------------------------------------------------ Committed Spent ------------------------------------------------------------------------------------------------------Lanjigarh alumina refinery 800.0 800.0 677.7 122.3 In progressTotal 800.0 800.0 677.7 122.3 ===== ===== ===== =====------------------------------------------------------------------------------------------------------ (in $ millions, except as stated)------------------------------------------------------------------------------------------------------ Estimated Committed but Phase 2 Expansion projects cost At 30 September 2007 not yet spent Status ------------------------------------------------------------------------------------------------------ Committed Spent ------------------------------------------------------------------------------------------------------Jharsuguda aluminiumsmelter 2,100.0 1,759.3 540.6 1,218.7 In progressKonkola Deep copper mine 674.0 368.0 161.5 206.5 In progressNchanga copper smelter 372.0 303.5 189.6 113.9 In progressChanderiya zinc smelter 300.0 297.5 253.9 43.6 In progressWind power project 164.4 132.0 97.4 34.6 In progressZinc debottlenecking 170.0 134.4 43.3 91.1 In progressCommercial Energy-Jharsuguda 1,900.0 1,463.5 156.9 1,306.6 In progressTotal 5,680.4 4,458.2 1,443.2 3,015.0 ======= ======= ======= =============================================================================================================Grand total(Phase 1 + Phase 2) 6,480.4 5,258.2 2,120.9 3,137.3 ======= ======= ======= ============================================================================================================= Compliance and Risk Management Following the recent listing of Sterlite on the NYSE, we have started work oncompliance with the Sarbanes-Oxley Act ("SOX"). Sterlite and its subsidiariesare included in this exercise. Sterlite is required to be compliant with theinternal control aspect of SOX by March 2009 but we expect this process to becompleted ahead of the target date. During H1 2008, we recognised losses of approximately $80 million on strategichedging transactions for some quantities of copper and zinc. Outstanding hedgedquantities at 30 September 2007 were 45,600 tonnes in respect of copper and17,925 tonnes in respect of zinc and lead. All these positions will be settledduring FY 2008. We have a robust risk management system in place. Our risk management process iscoordinated by our management assurance function and regularly reviewed by ourAudit Committee. The periodical assurance process includes physical verificationof inventory, management information systems and business process and controls.Overall internal control environment and risk management program is reviewed byour Audit Committee on behalf of the Board of Directors. Risks and Uncertainties Our businesses are subject to several risks and uncertainties and result fromthe business environment in which we operate and other factors over which wehave little or no control. These risks include operational, financial, health &safety, environmental, political, market-related and strategic risks. Details ofthe principal risks affecting our business and our actions to mitigate them havebeen detailed in our most recent Annual Report. More specifically for the second half of this financial year, the risks whichthe directors believe could have a material impact on the financial performanceand position of our businesses include: a decline in LME prices of Copper, Zinc,Aluminium and Lead, a decline in iron ore prices; a weakening of the US dollarparticularly against Indian Rupee; a reduction in Treatment Costs and RefiningCharges in our Indian copper operations; as well as unexpected delays in thecompletion of our expansion projects and ramping up of production in the newlyexpanded capacities. Responsibility Statement We confirm that to the best of our knowledge: (a) the condensed set of financial statements has been prepared in accordance with IAS 34(b) the interim management report includes a fair view of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). By order of the Board Chief Executive Officer Chief Financial OfficerKuldip Kaura Dindayal Jalan14 November 2007 14 November 2007 Condensed Consolidated Income Statement----------------------------------------------------------------------------------------------------- Six months ended Six months ended Year ended 30 September 2007 30 September 2006 31 March 2007 ----------------------------------------------------- Notes $million $million $million-----------------------------------------------------------------------------------------------------Revenue 3 3,887.9 3,004.5 6,502.2Cost of sales (2,521.0) (1,723.6) (3,840.4)-----------------------------------------------------------------------------------------------------Gross profit 1,366.9 1,280.9 2,661.8 Other operating income 30.4 57.6 102.1Distribution costs (72.9) (52.5) (106.7)Administrative expenses (117.4) (89.3) (149.6)Administrative expenses - special items 4 29.8 (22.6) (1.7)-----------------------------------------------------------------------------------------------------Operating profit 3 1,236.8 1,174.1 2,505.9Investment revenues 135.1 60.8 127.5Finance costs (59.3) (67.1) (147.7)Share of loss of associate - (1.2) (1.3)-----------------------------------------------------------------------------------------------------Profit before taxation 1,312.6 1,166.6 2,484.4Income tax expense 5 (341.1) (320.5) (672.7)-----------------------------------------------------------------------------------------------------Profit for the period/year 971.5 846.1 1,811.7=====================================================================================================Attributable to:Equity holders of the parent 465.0 447.6 934.2Minority interests 506.5 398.5 877.5----------------------------------------------------------------------------------------------------- 971.5 846.1 1,811.7=====================================================================================================Earnings per shareBasic (US Cents) (not annualised) 6a 161.6 156.1 325.6Diluted (US Cents) (not annualised) 6a 150.0 144.7 305.4----------------------------------------------------------------------------------------------------- Condensed Consolidated Balance Sheet ------------------------------------------------------------------------------------------------------------ As at As at As at Notes 30 September 2007 30 September 2006 31 March 2007 ------------------------------------------------------------------------------------------------------------ASSETSNon-current assetsGoodwill 13.5 11.7 12.1Property, plant and equipment 7,228.5 3,054.7 3,838.0Financial asset investments 33.1 34.4 34.6Other non-current assets 34.7 24.7 27.3Other financial assets (derivatives) 68.0 68.3 72.1Deferred tax assets 32.7 28.8 28.3------------------------------------------------------------------------------------------------------------ 7,410.5 3,222.6 4,012.4------------------------------------------------------------------------------------------------------------Current assetsInventories 1,120.0 941.2 879.7Trade and other receivables 1,040.3 740.5 942.9Other current financial assets (derivatives) 44.1 72.1 51.5Liquid investments 4,559.0 205.7 600.4Cash and cash equivalents 10 472.1 2,014.1 1,584.8------------------------------------------------------------------------------------------------------------ 7,235.5 3,973.6 4,059.3------------------------------------------------------------------------------------------------------------TOTAL ASSETS 14,646.0 7,196.2 8,071.7------------------------------------------------------------------------------------------------------------LIABILITIESCurrent liabilitiesShort term borrowings (1,201.1) (179.3) (249.1)Trade and other payables (1,520.9) (1,160.5) (1,172.4)Other current financial liabilities (derivatives) (165.2) (66.1) (101.4)Provisions (0.3) (29.7) -Current tax liabilities (68.0) (93.9) (63.0)------------------------------------------------------------------------------------------------------------ (2,955.5) (1,529.5) (1,585.9)------------------------------------------------------------------------------------------------------------Net current assets 4,280.0 2,444.1 2,473.4------------------------------------------------------------------------------------------------------------Non-current liabilitiesMedium and long term borrowings (924.0) (1,205.1) (879.3)Convertible loan notes (600.2) (601.5) (598.4)Trade and other payables (7.4) (11.6) (11.6)Other financial liabilities (derivatives) (86.6) (92.1) (94.8)Deferred tax liabilities (1,309.5) (335.6) (425.3)Retirement benefits (40.2) (39.3) (35.3)Provisions (232.5) (211.3) (230.3)Non equity minority interests (59.4) (59.4) (59.4)------------------------------------------------------------------------------------------------------------ (3,259.8) (2,555.9) (2,334.4)------------------------------------------------------------------------------------------------------------Total liabilities (6,215.3) (4,085.4) (3,920.3)------------------------------------------------------------------------------------------------------------Net assets 8,430.7 3,110.8 4,151.4============================================================================================================EQUITYShare capital 28.8 28.7 28.8Share premium account 18.7 18.8 18.7Share based payment reserves 12.6 7.1 7.3Convertible bond reserve 117.7 123.1 119.5Hedging reserve (51.9) (23.7) (29.7)Other reserves 1,660.8 501.9 661.0Retained earnings 1,875.5 1,153.4 1,521.3------------------------------------------------------------------------------------------------------------Equity attributable toequity holders of the parent 3,662.2 1,809.3 2,326.9Minority interests 4,768.5 1,301.5 1,824.5------------------------------------------------------------------------------------------------------------Total equity 8,430.7 3,110.8 4,151.4============================================================================================================ Condensed Consolidated Cash Flow Statement-------------------------------------------------------------------------------------------------------------- Six months ended Six months ended Year ended $million Note 30 September 2007 30 September 2006 31 March 2007 --------------------------------------------------------------------------------------------------------------Operating activitiesProfit before taxation 1,312.6 1,166.6 2,484.4Adjustments for: -Depreciation 157.6 93.8 195.4Investment revenues (135.1) (60.8) (127.5)Finance costs 59.3 67.1 147.7Profit on disposal of property,plant and equipment - - (21.0)Share based payment charge 5.3 - 5.6Loss on disposal of non core business - - 2.3Share of loss in associate - 1.2 1.3Other non-cash items 21.1 (24.1) (12.0)--------------------------------------------------------------------------------------------------------------Operating cash flows beforemovements in working capital 1,420.9 1,243.8 2,676.2Increase in inventories (94.8) (447.7) (361.8)Decrease/(Increase) in receivables 86.9 (159.3) (410.4)Increase in payables 151.5 262.8 222.5==============================================================================================================Cash generated from operations 1,564.4 899.6 2,126.5Dividend received 32.9 5.5 10.7Interest income received 114.5 72.2 138.6Interest paid (95.0) (103.0) (193.4)Income taxes paid (255.0) (175.6) (475.6)Dividends paid (57.6) (41.0) (84.3)--------------------------------------------------------------------------------------------------------------Net cash from operating activities 1,304.2 657.7 1,522.5--------------------------------------------------------------------------------------------------------------Cash flows from investing activitiesAcquisition of subsidiary 8 (990.4) (36.6) (54.3)Cash acquired with subsidiary 8 4.5 0.8 0.8Proceeds from disposal of subsidiary 9 83.4 1.1 32.3Cash disposed of with subsidiary 9 (0.3) - (0.2)Purchases of property, plant and equipment (710.2) (410.4) (1,154.5)Proceeds on disposal ofproperty, plant and equipment - 1.8 28.9Dividends paid to minority interests of subsidiaries (28.7) (14.1) (41.8)Decrease/(increase) of liquid investments (3,585.1) 39.3 (345.1)Purchase of financial asset investments - - (0.2)--------------------------------------------------------------------------------------------------------------Net cash used in investing activities (5,226.8) (418.1) (1,534.1)--------------------------------------------------------------------------------------------------------------Cash flows from financing activitiesIssue of ordinary shares - - 0.2(Decrease)/increase in short term borrowings 984.5 (11.8) 25.0(Decrease)/increase in long-term borrowings (78.9) 7.8 (324.8)Redemption of preference shares in subsidiary - (42.1) -Proceeds from issue of shares to minorityinterests of subsidiaries 1,969.4 - -Net cash from financing activities 2,875.0 (46.1) (299.6)--------------------------------------------------------------------------------------------------------------Net(decrease)/increase in cashand cash equivalents (1,047.7) 193.5 (311.2)--------------------------------------------------------------------------------------------------------------Effect of foreign exchange ratechanges (65.1) (26.7) 48.7Cash and cash equivalents atbeginning of period/year 1,584.8 1,847.3 1,847.3--------------------------------------------------------------------------------------------------------------Cash and cash equivalents atend of period/year 10 472.1 2,014.1 1,584.8============================================================================================================== Condensed Consolidated Statement of Changes in Equity Attributable to equity holders of the company ---------------------------------------------------- Share Based Convertible Share Share payment bond Hedging Other Retained Minority Total $millions capital premium reserves reserve reserve reserves* earnings Total interests equity------------------------------------------------------------------------------------------------------------------------As at 1 April2006 28.7 18.6 4.1 123.3 (29.1) 213.1 1,058.4 1,417.1 921.7 2,338.8Profit for theperiod - - - - - - 447.6 447.6 398.5 846.1Acquisition ofa subsidiary - - - - - - - - 12.4 12.4Conversion ofconvertible bond - 0.2 - (0.2) - - - - - -Exchange differences on translation offoreign operations - - - - (0.6) (23.9) - (24.5) (22.4) (46.9)Transfers ** - 311.6 (311.6) - - -Movement in fair value of cash flowhedges and financialinvestments - - - - 6.0 1.1 - 7.1 5.4 12.5Dividends paid - (41.0) (41.0) (14.1) (55.1)Recognition of share based payment - - 3.0 - - - - 3.0 - 3.0------------------------------------------------------------------------------------------------------------------------As at 30 September 2006 28.7 18.8 7.1 123.1 (23.7) 501.9 1,153.4 1,809.3 1,301.5 3,110.8------------------------------------------------------------------------------------------------------------------------ Attributable to equity holders of the company ---------------------------------------------------- Share Based Convertible Share Share payment bond Hedging Other Retained Minority Total $millions capital premium reserves reserve reserve reserves* earnings Total interests equity------------------------------------------------------------------------------------------------------------------------At 1 April2006 28.7 18.6 4.1 123.3 (29.1) 213.1 1,058.4 1,417.1 921.7 2,338.8Profit for theperiod - - - - - - 934.2 934.2 877.5 1,811.7Acquisition ofa subsidiary - - - - - - - - 10.2 10.2Gain on acquisition of subsidiary - - - - - - 0.3 0.3 - 0.3Conversion ofConvertible bond - 0.1 - - - - - 0.1 0.1Convertiblebond transfer - - - (3.8) - - 3.8 - - -Exchange differences on translation offoreign operations - - - - - 51.6 - 51.6 53.9 105.5Transfers ** - - - - - 393.5 (393.5) - -Movement in fair value of cash flowhedges and financialinvestments - - - - (0.6) 2.8 - 2.2 3.0 5.2Dividends paid - - - - - - (84.3) (84.3) (41.8) (126.1)Recognition of share based payment - - 5.6 - - - 5.6 - 5.6Exercise 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------------------------------------------------------------------------------------------------------------------------ Attributable to equity holders of the company ---------------------------------------------------- Share Based Convertible Share Share payment bond Hedging Other Retained Minority Total $millions capital premium reserves reserve reserve reserves* earnings Total interests equity------------------------------------------------------------------------------------------------------------------------At 1 April 2007 28.8 18.7 7.3 119.5 (29.7) 661.0 1,521.3 2,326.9 1,824.5 4,151.4Profit for theperiod - - - - - - 465.0 465.0 506.5 971.5Acquisition ofa subsidiary(note 8) - - - - - - - - 963.0 963.0Disposal of asubsidiary (note 9) - - - - - - - - (9.7) (9.7)Convertible bond transfers - - - (1.8) - - 1.8 - - -Sterlite ADRoffering *** - - - - - - 698.5 698.5 1,270 1,969.4Exchange differences on translation offoreign operations - - - - 0.6 247.4 - 248.0 250.2 498.2Transfers ** - - - - - 753.5 (753.5) - - -Movement infair value of cash flow hedges andfinancial investments - - - - (22.8) (1.1) - (23.9) (8.2) (32.1)Dividends paid - - - - - - (57.6) (57.6) (28.7) (86.3)Recognition of share based payment - - 5.3 - - - - 5.3 - 5.3------------------------------------------------------------------------------------------------------------------------At 30 September 2007 28.8 18.7 12.6 117.7 (51.9) 1,660.8 1,875.5 3,662.2 4,768.5 8,430.7------------------------------------------------------------------------------------------------------------------------ * Other reserves comprise the currency translation reserve, merger reserve, investment revaluation reserve and the general reserves established in the statutory accounts of the Group's Indian subsidiaries. ** Under Indian law, a general reserve is created through a year-on-year transfer from the income statement. The purpose of these transfers is to ensure that distributions in a year are less than the total distributable results for that year. This general reserve becomes fully distributable in future periods. *** In June 2007, Sterlite listed on the New York Stock Exchange and raised $2,025.5 million (before expenses). The offering resulted in a reduction of Vedanta's shareholding in Sterlite from 75.98% to 59.87%. This reduction has not resulted in any change in control and hence Sterlite continues to be consolidated in Vedanta's consolidated financial statements. This reduction has been accounted in Vedanta's consolidated financial statements as an equity transaction. The carrying amount of the minority interest has been adjusted to reflect the change in Vedanta's interest in Sterlite's net assets. The difference between the amount by which the minority interest is adjusted and the consideration received is recognised directly in equity and attributed to equity holders of Vedanta. Notes to the Financial Information 1. Basis of preparation The financial information in this interim financial report is prepared underInternational Financial Reporting Standards ('IFRS'). The interim condensedconsolidated financial information does not constitute statutory accounts asdefined in Section 240 of the Companies Act 1985. The financial information for the full preceding financial year has been derivedfrom the statutory accounts for the financial year ended 31 March 2007 as filedwith the Registrar of Companies. The auditors' report on the statutory accountsfor the year ended 31 March 2007 was unqualified and did not contain statementsunder section 237(2) of the Companies Act 1985 (regarding adequacy of accountingrecords and returns) or under section 237(3) (regarding provision of necessaryinformation and explanations). The financial information prepared under IFRS in respect of the six months ended30 September 2007 and 30 September 2006 is unaudited but has been reviewed bythe auditors and their report is set out on pages 38-39. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with IFRS, this announcement does not itself containsufficient information to comply with IFRS. The Company published full financialstatements that comply with IFRS for the year ended 31 March 2007. 2. Accounting policies This interim financial report, including all comparatives, has been preparedusing the same accounting policies and methods of computation as followed in theannual financial statements for the year ended 31 March 2007 as published by theCompany. In addition, this interim report for the six month period ended30 September 2007 has been prepared under International Accounting Standard('IAS') 34 Interim financial reporting. IFRS and International Financial Reporting Interpretations Committee ('IFRIC')interpretations are subject to ongoing review and possible amendment orinterpretative guidance which may affect the financial statements for the yearending 31 March 2008. Foreign exchange rates The following exchange rates to US dollar ($) have been applied:------------------------------------------------------------------------------------------------------------------------ Average rate to Average rate to Average rate six months ended six months ended to year ended As at As at As at 30 September 2007 30 September 2006 31 March 2007 30 September 2007 30 September 2006 31 March 2007------------------------------------------------------------------------------------------------------------------------Indian 40.86 45.96 45.29 39.74 45.96 43.59RupeeAustralianDollar 1.20 1.33 1.31 1.13 1.34 1.25------------------------------------------------------------------------------------------------------------------------ 3. Segmental analysis (a) Business segmentsThe following tables present revenue and profit information regarding theGroup's business segments for the six months ended 30 September 2007 and30 September 2006 and for the year ended 31 March 2007. Items after operatingprofit are not allocated by segment. Six months ended 30 September 2007------------------------------------------------------------------------------------------------------------- Total Aluminium Copper Zinc Iron Ore Other Elimination Operations Revenue Sales toexternal customers 566.7 2,191.1 964.3 161.4 4.4 - 3,887.9Inter-segment sales 1.2 - - - (1.2) --------------------------------------------------------------------------------------------------------------Segment revenue 567.9 2,191.1 964.3 161.4 4.4 (1.2) 3,887.9 ===== ======= ===== ===== === ===== =======-------------------------------------------------------------------------------------------------------------Result Operating profit 157.8 302.6 713.1 40.5 22.8 0.0 1,236.8 ===== ===== ===== ==== ==== === =======------------------------------------------------------------------------------------------------------------- Six months ended 30 September 2006------------------------------------------------------------------------------------------------------------- Total Aluminium Copper Zinc Iron Ore Other Elimination Operations RevenueSales to externalcustomers 396.2 1,678.4 881.5 - 48.4 - 3,004.5Inter-segment sales 27.1 - - - - (27.1) --------------------------------------------------------------------------------------------------------------Segment revenue 423.3 1678.4 881.5 - 48.4 (27.1) 3,004.5-------------------------------------------------------------------------------------------------------------ResultOperating profit 109.2 392.0 679.3 - (6.4) - 1,174.1------------------------------------------------------------------------------------------------------------- Year ended 31 March 2007------------------------------------------------------------------------------------------------------------- Total Aluminium Copper Zinc Iron Ore Other Elimination Operations RevenueSales to externalcustomers 993.4 3,569.3 1,888.1 - 51.4 - 6,502.2Inter-segment sales 28.1 - - - - (28.1) --------------------------------------------------------------------------------------------------------------Segment revenue 1,021.5 3,569.3 1,888.1 - 51.4 (28.1) 6,502.2 ======= ======= ======= ==== ====== =======-------------------------------------------------------------------------------------------------------------ResultOperating profit 415.4 833.9 1,453.9 - (0.2) - 2,505.9 ===== ===== ======= ===== =======------------------------------------------------------------------------------------------------------------- (b) EBITDA(1) by Segment Six months ended Six months ended Year ended $million 30 September 2007 30 September 2006 31 March 2007 ---------------------------------------------------------------------------------------------Aluminium 192.4 136.4 415.4Copper 356.9 456.1 833.9---------------------------------------------------------------------------------------------- India/Australia 145.0 211.7 365.6- Zambia 211.9 244.4 468.3---------------------------------------------------------------------------------------------Zinc 740.4 703.5 1,453.9Iron Ore 78.1 - -Other (3.2) (5.5) (0.2)---------------------------------------------------------------------------------------------Group EBITDA 1,364.6 1,290.5 2,703.0Depreciation (157.6) (93.8) (195.4)---------------------------------------------------------------------------------------------Operating special items 29.8 (22.6) (1.7)---------------------------------------------------------------------------------------------Group operating profit 1,236.8 1,174.1 2,505.9=============================================================================================(1) EBITDA being Earnings before interest, taxation, depreciation and amortisation, and special items (note 4). 4. Special items Administrative expenses Six months ended Six months ended Year ended $million 30 September 2007 30 September 2006 31 March 2007 ---------------------------------------------------------------------------------------------Restructuring and redundancies - (2.5) (2.6)Impairment of investment in associate - (0.4) (0.5)Provision for guarantees given onbehalf of associate - (17.1) (17.3)Loss on sale of property,plant and equipment - (0.3) (0.8)Profit on disposal ofnon core assets - - 21.8Profit on disposal of subsidiary (note 9) 29.8 - - Loss on disposal ofnon core business - (2.3) (2.3)--------------------------------------------------------------------------------------------- 29.8 (22.6) (1.7)============================================================================================= 5. Income tax expense Six months ended Six months ended Year ended $million 30 September 2007 30 September 2006 31 March 2007 ---------------------------------------------------------------------------------------------Current tax:Foreign tax:- India 262.3 227.7 484.4- Zambia 0.7 1.2 2.1- Australia 17.1 - 29.7- Other - 14.4 (2.0) 280.1 243.3 514.2---------------------------------------------------------------------------------------------Deferred tax:Current year movement in deferred tax 61.0 77.2 156.3Attributable to decrease inthe rate of Indian corporation tax - - 2.2--------------------------------------------------------------------------------------------- 61.0 77.2 158.5---------------------------------------------------------------------------------------------Total income tax expense 341.1 320.5 672.7---------------------------------------------------------------------------------------------Effective tax rate 26.0% 27.5% 27.1%============================================================================================= 6. Earnings per share (a) Basic earnings per share amounts are calculated by dividing net profit forthe period attributable to ordinary equity holders of the parent by the weightedaverage number of Ordinary Shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the net profitattributable to ordinary shareholders by the weighted average number of OrdinaryShares outstanding during the period (adjusted for the effects of dilutiveoptions). The following reflects the income and share data used in the basic and dilutedearnings per share computations:----------------------------------------------------------------------------------------------------- Six months ended Six months ended Year ended $million 30 September 2007 30 September 2006 31 March 2007 ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net profit attributable toequity holders of the parent 465.0 447.6 934.2=====================================================================================================----------------------------------------------------------------------------------------------------- Six months ended Six months ended Year ended $million 30 September 2007 30 September 2006 31 March 2007 -----------------------------------------------------------------------------------------------------Weighted average number of Ordinary Shares for basic earnings per share 287.7 286.8 286.9Effect of dilution:-----------------------------------------------------------------------------------------------------Convertible loan notes 27.9 27.9 27.9-----------------------------------------------------------------------------------------------------Share options 3.1 3.5 3.1-----------------------------------------------------------------------------------------------------Adjusted weighted average number of Ordinary Shares for diluted earnings per share 318.7 318.2 317.9=====================================================================================================-----------------------------------------------------------------------------------------------------Basic earnings per share on Six months ended Six months ended Year ended the profit for the period/year 30 September 2007 30 September 2006 31 March 2007 -----------------------------------------------------------------------------------------------------Profit for the period attributable to equity holders of the parent ($million) 465.0 447.6 934.2Weighted average number ofOrdinary Shares of theCompany in issue (million) 287.7 286.8 286.9-----------------------------------------------------------------------------------------------------Earnings per share on profitfor the period/year (UScents per share) 161.6 156.1 325.6=====================================================================================================-----------------------------------------------------------------------------------------------------Basic earnings per share on Six months ended Six months ended Year ended the profit for the period/year 30 September 2007 30 September 2006 31 March 2007 -----------------------------------------------------------------------------------------------------Profit for the period/yearattributable to equity holders of the parent ($million) 465.0 447.6 934.2Adjustment in respect of convertible bonds of Vedanta ($million) 13.0 12.8 36.7Adjustment in respect of convertible bonds of Sterlite ($million) - - ------------------------------------------------------------------------------------------------------Profit for the period/year after dilutive adjustment 478.0 460.4 970.9-----------------------------------------------------------------------------------------------------Adjusted weighted averagenumber of Ordinary Shares ofthe Company in issue (million) 318.7 318.2 317.9-----------------------------------------------------------------------------------------------------Diluted earnings per share on profit for the period/year (US cents per share) 150.0 144.7 305.4===================================================================================================== Profit for the period 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 period of this conversion would be the interest payable on the convertible bond. The outstanding awards under the Long Term Incentive Plan ('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 this financial information. (b) Earnings per share based on Underlying Profit for the period/year The Group's Underlying Profit is the attributable profit for the period/year after adding back special items and their resultant tax and minority interest effects: ========================================================================================================== Six months ended Six months ended Year ended $million 30 September 2007 30 September 2006 31 March 2007 ----------------------------------------------------------------------------------------------------------Profit for the period/year attributableto equity holders of the parent 465.0 447.6 934.2Administrative expenses - special items (29.8) 22.6 1.7Tax effect of special items - (1.7) 3.7Minority interest effect of special items - (5.3) (1.5)==========================================================================================================Underlying profit for the period/year 435.2 463.2 938.1==========================================================================================================----------------------------------------------------------------------------------------------------------Basic earnings per share on the Six months ended Six months ended Year ended underlying profit for the period/year 30 September 2007 30 September 2006 31 March 2007 ----------------------------------------------------------------------------------------------------------Underlying profit for the period/year($million) 435.2 463.2 938.1Weighted average number of OrdinaryShares of the Company in issue (million) 287.7 286.8 286.9----------------------------------------------------------------------------------------------------------Earnings per share on Underlying Profit for the period/year (US cents per share) 151.3 161.5 327.0========================================================================================================== 7. Dividends Six months ended Six months ended Year ended $million 30 September 2007 30 September 2006 31 March 2007 ----------------------------------------------------------------------------------------------------------Amounts paid as distributions toequity holders:Final dividend paid for 2006-07: 20 US cents per share (2005-06: 14.3 US cents per share) 57.6 41.0 41.1Interim dividend paid 2006-07: 15 US cents per share - - 43.2---------------------------------------------------------------------------------------------------------- Proposed interim dividend for the six months ended 30 September 2007 was 16.5 US cents per share. 8. Business combination On 23 April 2007, Vedanta acquired 100% of Finsider International CompanyLimited ('Finsider'), an investment holding company incorporated in UnitedKingdom, from Mitsui & Company, Japan for a consideration of US$ 981.0 million(excluding acquisition expenses of $9.4 million). Finsider held 51.0% of SesaGoa Limited ("Sesa Goa"), a public limited company incorporated in India andlisted on the Bombay Stock Exchange and the National Stock Exchange of India,which in turn held 88.8% of Sesa Industries Limited ("Sesa Industries"). Thus,by virtue of Vedanta acquiring Finsider, Sesa Goa and Sesa Industries becamesubsidiaries of Vedanta with an effective date of 23 April 2007, being the dateat which control passed to Vedanta. As a result, the financial information ofFinsider, Sesa Goa and Sesa Industries has been consolidated from 23 April 2007. Sesa Goa is a company mainly involved in iron ore mining, processing and themanufacture of metallurgical coke. Sesa Industries is involved in pig ironoperations. The consolidated net assets of Finsider acquired are detailed in the table below. Fair value$ million Book value adjustments Fair value---------------------------------------------------------------------------------------AssetsNon-current assetsProperty, plant and equipment 119.0 2,289.5 2,408.4Other non-current assets 0.2 - 0.2--------------------------------------------------------------------------------------- 119.2 2,289.5 2,408.6---------------------------------------------------------------------------------------Current assetsInventories 80.1 9.1 89.2Trade and other receivables 79.3 - 79.3Liquid investments 230.2 - 230.2Other current financial asset (derivatives) 2.0 - 2.0Cash and cash equivalents 4.5 - 4.5--------------------------------------------------------------------------------------- 396.1 9.1 405.2---------------------------------------------------------------------------------------LiabilitiesCurrent liabilitiesShort term borrowings (2.0) - (2.0)Trade and other payables (45.6) - (45.6)Current tax liabilities (8.2) - (8.2)--------------------------------------------------------------------------------------- (55.8) - (55.8)---------------------------------------------------------------------------------------Non-current liabilitiesDeferred tax liabilities (17.7) (781.3) (799.0)Provisions (2.0) - (2.0)--------------------------------------------------------------------------------------- (19.7) (781.3) (801.0)---------------------------------------------------------------------------------------Net assets 439.8 1,517.3 1,957.0---------------------------------------------------------------------------------------Less: Minority interests recognised on first acquisition (966.6)--------------------------------------------------------------------------------------- 990.4---------------------------------------------------------------------------------------Satisfied by : Cash consideration paid 981.0Acquisition expenses 9.4--------------------------------------------------------------------------------------- 990.4--------------------------------------------------------------------------------------- The Company has carried out a provisional fair value assessment of the assetsacquired. The assets have been valued provisionally as a result of timeconstraints between the date of acquisition and 30 September 2007. The fairvalues may be amended if necessary, in accordance with IFRS 3 BusinessCombination, in light of subsequent knowledge or events to the extent that thesereflect conditions as at the date of acquisition. Since the date of acquisition, the Finsider group has contributed $161.4 millionto the revenue and $40.5 million to the net profit of the Group for the periodended 30 September 2007. If Finsider had been acquired at the beginning of theperiod, the revenue of the Group would have been $220.8 million higher and thenet profit of the Group would have been $55.3 million higher. Overall productionand consequent shipment of finished goods is significantly lower during theinterim period, due to seasonal monsoon conditions in the region. The Group acquired a further 71,451 shares, equating to a 0.182% interest inSesa Goa on 24 September 2007 following an open offer for consideration of$3.6 million in cash. The total holding in Sesa Goa following this transactionwas 51.2%. The impact on minority interests as a result of the offer was adecrease of $3.6 million. The total increase in minority interests resultingfrom the acquisition of Sesa Goa was $963.0 million. 9. Disposal of a subsidiary In September 2007, Vedanta, through one of its subsidiaries, sold all of theissued and outstanding shares it held in Twin Star International (84.2%) whichwas the owner of 223,417,031 common shares of Sterlite Gold Limited for aconsideration of $85.9 million. Further, Vedanta received $25.0 million towardssettlement of outstanding debt which Sterlite Gold and its subsidiaries owed toVedanta and its group companies. Sterlite Gold, through its wholly owned subsidiary in Armenia, Ararat GoldRecovery Company LLC 'AGRC', was engaged in gold mining activities in Armenia.Sterlite Gold also held 100% interests in the following companies on the date ofits disposal: • First Dynasty Mines (USA) LLC• First Dynasty Mines Armenia Limited• AGRC Services Limited• First Dynasty Mines Holding Company Limited All the companies listed above were non-operating. From January 2007, the gold mining operations in Armenia were suspended pendingresolution of some of the key clauses of the implementation agreement enteredinto with the Government of the Republic of Armenia. Due to delay in finding aresolution, Vedanta continued to explore other alternatives and in August 2007entered into an agreement with a third party for sale of the business togetherwith all assets and liabilities. The agreement involved the sale of Vedanta'sfull shareholding in Sterlite Gold at a price of $0.3845 per Sterlite Gold shareequating to the total of $85.9 million and the settlement by the purchaser ofSterlite Gold's $25.0 million payables to the Vedanta Group. The gain on disposal of Sterlite Gold operations of $29.8 million has beenrecognised in the income statement under the caption Administrative expenses -special items. Sterlite Gold's operations constituted an insignificant proportion of Vedanta'srevenues and were presented in the "Other" segment in accordance with IAS 14Segment Reporting. The impact on minority interests resulting from the disposal of Twin StarInternational, Sterlite Gold and its subsidiaries was a decrease of $9.7million. The net assets of Twin Star International consolidated at the date of disposal,at 27 September 2007 and 31 March 2007 were as follows: $million As on 27 September 2007 As on 31 March 2007 ----------------------------------------------------------------------------------------AssetsNon-current assetsProperty, plant and equipment 91.7 94.1Financial asset investments - 3.3---------------------------------------------------------------------------------------- 91.7 97.4----------------------------------------------------------------------------------------Current assetsInventories 2.3 3.2Trade and other receivables 4.4 4.4Cash and cash equivalents 0.3 1.6---------------------------------------------------------------------------------------- 98.7 106.6----------------------------------------------------------------------------------------LiabilitiesCurrent liabilitiesBorrowings from Vedanta Group (25.6) (5.9)Trade and other payables (4.3) (3.9)Current tax liabilities (1.4) (1.4)---------------------------------------------------------------------------------------- (31.3) (11.2)----------------------------------------------------------------------------------------Non-current liabilitiesLong term borrowings - (41.6)Deferred tax liabilities (14.3) (14.3)---------------------------------------------------------------------------------------- (45.6) (67.1)----------------------------------------------------------------------------------------Net assets 53.1 39.5--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Reduction in minority interest 9.7--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Cash consideration 85.9Net assets disposed (53.1)Disposal expenses (3.0)----------------------------------------------------------------------------------------Profit on disposal 29.8---------------------------------------------------------------------------------------- $25.0 million of borrowings due to the Vedanta Group were repaid, as part of thesale and purchase agreement, after the balance sheet date. 10. Movement in net debt (1)---------------------------------------------------------------------------------------------------------------------- Debt due within one year Debt due after one year ---------------------------------------------------------- Debt Debt Cash and cash carrying Debt related carrying Debt related Liquid Total net $ million equivalents value derivatives(2) value derivatives(2) investments (debt)/cash ----------------------------------------------------------------------------------------------------------------------At 1 April 2006 1,847.3 (239.8) 2.8 (1,836.4) (30.2) 244.4 (11.9)Cash flow 193.5 53.9 - (7.8) - (39.3) 200.3Disposal of non core business - 23.1 - - - - 23.1Other non-cash changes - (20.9) 2.9 20.4 6.6 0.5 9.5Foreign exchangedifferences (26.7) 4.4 - 17.2 - 0.1 (5.0)----------------------------------------------------------------------------------------------------------------------As at 30 September 2006 2,014.1 (179.3) 5.7 (1,806.6) (23.6) 205.7 216.0====================================================================================================================== Debt due within one year Debt due after one year ---------------------------------------------------------- Debt Debt Cash and cash carrying Debt related carrying Debt related Liquid Total net US$ million equivalents value derivatives(2) value derivatives(2) investments (debt)/cash ----------------------------------------------------------------------------------------------------------------------At 1 April2006 1,847.3 (239.8) 2.8 (1,836.4) (30.2) 244.4 (11.9)Cash flow (311.2) (25.0) - 324.8 - 345.1 333.7Disposal of non corebusiness - 23.1 - - - - 23.1Other non-cash changes - 9.1 (9.9) 68.3 11.6 3.5 82.6Foreign exchangedifferences 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====================================================================================================================== Debt due within one year Debt due after one year ---------------------------------------------------------- Debt Debt Cash and cash carrying Debt related carrying Debt related Liquid Total net US$ million equivalents value derivatives(2) value derivatives(2) investments (debt)/cash ----------------------------------------------------------------------------------------------------------------------At 1 April2007 1,584.8 (249.1) (7.1) (1,477.7) (18.6) 600.4 432.7Cash flow (1,026.3) (984.5) - 78.9 - 3,585.1 1,653.2Acquisition ofsubsidiaries 4.5 (2.0) - - - 230.2 232.7Disposal of non corebusiness (0.3) - - - - - (0.3)Other non-cashchanges - 54.5 (2.9) (100.5) 0.1 - (48.8)Foreign exchangedifferences (90.7) (20.0) - (24.9) - 143.3 7.7----------------------------------------------------------------------------------------------------------------------As at 30September 2007 472.0 (1,201.1) (10.0) (1,524.2) (18.5) 4,559.0 2,277.2======================================================================================================================(1) Net debt being total debt after fair value adjustments under IAS 32 and 39 as reduced by cash and cash equivalents and liquid investments. (2) Debt related derivatives exclude commodity related derivative financial assets and liabilities. 11. Other disclosures Capital commitments-------------------Contractual commitments to acquire fixed assets were $3,137.3 million at30 September 2007 (30 September 2006: $ 1,813.0 million; 31 March 2007:$3,150.0 million). Contingent liabilities and guarantees-------------------------------------A summary of the most significant matters is set out below: GuaranteesAs at 30 September 2007, $370.7 million of guarantees had been advanced to theGroup's banks in normal course of business (31 March 2007: $198.9 million)including guarantees advanced by KCM of $211.1 million. The Group has alsoentered into guarantees advanced to the customs authorities in India of$607.6 million (31 March 2007: $107.6 million) relating to the payment of importduties on purchases of fixed assets at VAL $531.1 million (31 March 2007:$100.9 million) and Sesa Goa Limited $67.1 million. Export ObligationsThe Indian entities of the Group have export obligations of $1,838.0 million (31March 2007: $1,328.4 million) over eight years, on account of concessional ratesof import duty paid on capital goods under the Export Promotion Capital GoodsScheme laid down by the Government of India. In the event of the Group'sinability to meet its obligations, the Group's liability would be $293.3 million(31 March 2007: $191.0 million), reduced in proportion to actual exports. Guarantees to SuppliersThe Group has given corporate guarantees to certain suppliers of concentrate.The value of these guarantees was $90.0 million at 30 September 2007 (31 March2007: $90.0 million). Miscellaneous Disputes - Sterlite, HZL, MALCO, BALCO and Sesa GoaThe Indian excise and related indirect tax authorities have made several claimsagainst the above companies for additional excise and indirect duties. Theclaims mostly relate either to the assessable values of sales and purchases orto incomplete documentation supporting the companies' returns. The approximate value of claims against the companies total $216.0 million (31March 2007: $155.1 million), of which $ 35.9 million (31 March 2007:$48.9 million) is included as a provision in the balance sheet as at 30September 2007. In the view of the Directors, there are no significantunprovided liabilities arising from these claims. Sterlite GoldFollowing the disposal of Sterlite Gold on 27 September 2007 there were noclaims pending against the Group from the Armenian Government (31 March 2007:$46.5 million). Related party transactionsThe information below sets out transactions and balances between the Group andvarious related parties for the period. These related parties include SterliteOptical Technologies Limited ('SOTL'), which is related by virtue of having thesame controlling party as the Group, namely Volcan. As India Foils Limited('IFL') is an associate of the Group, it is also regarded as a related party. The tables below set out transactions with related parties that occurred in thenormal course of trading. SOTL--------------------------------------------------------------------------------------------- Six months ended Six months ended Year ended $million 30 September 2007 30 September 2006 31 March 2007 ---------------------------------------------------------------------------------------------Sales to SOTL 32.1 20.5 59.0Sale of aluminium conductor division - 32.3 32.3---------------------------------------------------------------------------------------------Reimbursement of expenses - 31.1 0.2=============================================================================================Purchases from SOTL - - 1.1=============================================================================================Amounts receivable at period end 9.3 - 11.0============================================================================================= Transactions with SOTLPursuant to the terms of the Shared Services Agreement dated 5 December 2003entered into by the Company, Sterlite and SOTL, the Company and Sterliteprovided various commercial services in relation to SOTL's businesses on anarm's length basis and at normal commercial terms. For the year ended 31 March2007, the commercial services provided to SOTL were performed by certain senioremployees of the Group on terms set out in the Shared Services Agreement. Theservices provided to SOTL in that year amounted to $21,940. There was nomaterial change during the six months ended 30 September 2007 (30 September2006: $20,895). Twin Star Infrastructure LimitedSterlite Energy had issued cumulative convertible preference shares to Twin StarInfrastructure Limited prior to its acquisition by the Group and an amount of$6.5 million was outstanding as at 30 September 2007. During the year ended 31March 2007, Sterlite Energy paid dividends on the cumulative convertiblepreference shares of $3,544 to Twin Star Infrastructure Limited. Sterlite FoundationDuring the period ended 30 September 2007, $0.4 million was paid to SterliteFoundation (30 September 2006: $0.3 million, 31 March 2007: $0.6 million).During the period, $0.1 million (30 September 2006: $nil; 2007: $ nil) wasreceived from the Sterlite Foundation towards reimbursement of expenses.The Sterlite Foundation is a registered not-for-profit entity engaged incomputer education and other related social and charitable activities. The majoractivity of the Sterlite Foundation is providing computer education fordisadvantaged students. The Sterlite Foundation is a related party as it iscontrolled by members of the Agarwal family. Sesa Community Foundation LimitedFollowing the acquisition of Sesa Goa, the Sesa Community Foundation Limitedbecame a related party of the Group. During the period, $ 0.1 million was paidto the Sesa Community Foundation Limited. The Anil Agarwal Foundation (formerly the Vedanta Foundation)During the period, $0.1 million (30 September 2006 $ nil; 31 March 2007:$0.1 million) was received from the Anil Agarwal Foundation towardsreimbursement of expenses. The Anil Agarwal Foundation is a registerednot-for-profit entity engaged in social and charitable activities. The AnilAgarwal Foundation is controlled by members of the Agarwal family. IFL--------------------------------------------------------------------------------------------- Six months ended Six months ended Year ended $million 30 September 2007 30 September 2006 31 March 2007 ---------------------------------------------------------------------------------------------Sales to IFL 19.1 20.7 43.9---------------------------------------------------------------------------------------------Guarantees 45.8 - 41.8Trade receivables and advances 9.8 6.9 8.8---------------------------------------------------------------------------------------------Loans receivable at period end 10.4 6.9 6.2============================================================================================= During the period, the Group advanced $0.7 million to IFL as short-termadvances. The Group has given corporate guarantees to certain banks andfinancial institutions in relation to IFL, an associate of the Group, againstwhich a provision of $19.7 million has been recognised in the financialstatements (30 September 2006 : $ 17.1million; 31 March 2007: $17.3 million). Volcan--------------------------------------------------------------------------------------------- Six months ended Six months ended Year ended 30 September 2007 30 September 2006 31 March 2007 --------------------------------------------------------------------------------------------- $million $million $million---------------------------------------------------------------------------------------------Reimbursement of bank charges (0.2) (0.1) (0.4)---------------------------------------------------------------------------------------------Amounts receivable/(payable) at period/year end 0.1 (0.1) -============================================================================================= In relation to the shares of Sterlite held by Twin Star, MALCO issued guaranteesto the Income Tax Department of India, at the request of Volcan. The amountpayable for the period ended 30 September 2007 was $0.2 million (30 September2006: $0.1 million; 31 March 2007: $0.4 million). In addition, a limited number of employees are seconded from Sterlite to IFL,SOTL and Sterlite Gold and similarly from IFL, SOTL and Sterlite Gold toSterlite. The company which benefits from the seconded employee bears theiremployment costs. Transactions with Directors and their Connected Persons The remuneration of the directors and the executive committee members of theGroup is set out below in aggregate for each of the categories specified in IAS24 Related Party Disclosures.--------------------------------------------------------------------------------------------- Six months ended Six months ended Year ended $ million 30 September 2007 30 September 2006 31 March 2007 ---------------------------------------------------------------------------------------------Short-term employee benefits 9.5 2.7 5.4---------------------------------------------------------------------------------------------Post employment benefits 0.4 0.4 0.3---------------------------------------------------------------------------------------------Share based payments 3.4 4.7 0.7--------------------------------------------------------------------------------------------- 13.3 7.8 6.4============================================================================================= Independent Review Report to Vedanta Resources Plc We have been engaged by the Company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprises the condensed consolidated income statement, thecondensed consolidated balance sheet, the condensed consolidated cash flowstatement, the condensed consolidated statement of changes in equity and relatednotes 1 to 11. We have read the other information contained in the half-yearlyfinancial report and considered whether it contains any apparent misstatementsor material inconsistencies with the information in the condensed set offinancial statements. This report is made solely to the Company in accordance with InternationalStandard on Review Engagements (UK and Ireland) 2410 issued by the AuditingPractices Board. Our work has been undertaken so that we might state to theCompany those matters we are required to state to them in an independent reviewreport and for no other purpose. To the fullest extent permitted by law, we donot accept or assume responsibility to anyone other than the Company, for ourreview work, for this report, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 2, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting," as adopted by the European Union. Our responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the financial report for thesix months ended 30 September 2007 is not prepared, in all material respects, inaccordance with International Accounting Standard 34 as adopted by the EuropeanUnion and the Disclosure and Transparency Rules of the United Kingdom'sFinancial Services Authority. Deloitte & Touche LLPChartered Accountants14 November 2007LondonUnited Kingdom Glossary and definitions ADRAmerican Depository Receipts Aluminium BusinessThe aluminium business of the Group comprising its fully-integrated bauxitemining, alumina refining and aluminium smelting in India Attributable ProfitProfit for the financial year before dividends to the shareholders of VedantaResources plc BALCOBharat Aluminium Company Limited, a company incorporated in India BoardThe board of directors of the Company BusinessesThe Aluminium Business, the Copper Business and the Zinc Business together Capital EmployedNet assets before net (debt)/cash Cash Tax RateCurrent taxation as a percentage of profit on ordinary activities beforetaxation CMTCopper Mines of Tasmania Pty Ltd, a company incorporated in Australia Company or VedantaVedanta Resources plc Copper BusinessThe copper business of the Group comprising a copper smelter, a refinery and twocopper rod plants in India, a copper mine in Australia and an integratedoperation in Zambia consisting of three mines, a leaching plant and a smelter CSRCorporate social responsibility CYCalendar Year DirectorsThe directors of the Company Dollar or $United States dollars, the currency of the United States of America EBITDAEarnings before interest, taxation, depreciation, goodwill amortisation andspecial items (see note 4) EBITDA MarginEBITDA as a percentage of turnover Economic Holdings or Economic InterestThe economic holdings/interest are derived by combining the Group's direct andindirect shareholdings in the operating companies. The Group's Economic Holdings/Interest is the basis on which the Attributable Profit and net assets aredetermined in the consolidated accounts EPSEarnings per Ordinary Share Executive DirectorsThe executive directors of the Company Expansion Capital ExpenditureCapital expenditure that increases the Group's operating capacity Free Cash FlowCash flow arising from EBITDA after net interest, taxation, Sustaining CapitalExpenditure and working capital movements (see Financial Review) FYFinancial year GAAPGenerally Accepted Accounting Principles GearingNet debt as a percentage of Capital Employed GovernmentThe Government of the Republic of India GroupThe Company and its subsidiary undertakings and, where appropriate, itsassociate undertaking HSEHealth, safety and environment HZLHindustan Zinc Limited, a company incorporated in India IFLIndia Foils Limited, a company incorporated in India Glossary and definitions (continued) IFRSInternational Financial Reporting Standards Interest CoverEBITDA divided by finance cost KCM or Konkola Copper MinesKonkola Copper Mines PLC, a company incorporated in Zambia LIBORLondon Inter Bank Offered Rate ListingThe listing of the Company's Ordinary Shares on the London Stock Exchange on 10December 2003 Listing ParticularsThe listing particulars dated 5 December 2003 issued by the Company inconnection with its Listing LMELondon Metals Exchange London Stock ExchangeLondon Stock Exchange plc LTIPVedanta Resources Long Term Incentive Plan MALCOThe Madras Aluminium Company Limited, a company incorporated in India mt or tonnesMetric tonnes MWMegawatts of electrical power Non-executive DirectorsThe non-executive directors of the Company NYSENew York Stock Exchange Ordinary SharesOrdinary shares of $0.10 each in the Company Return on Capital Employed or ROCEProfit before interest, taxation, special items, tax effected at the Group'seffective tax rate as a percentage of Capital Employed Reward PlanVedanta Resources Share Reward Plan Sesa GoaSesa Goa Limited, a company incorporated in India engaged in the business ofmining iron ore SEWTSterlite Employee Welfare Trust, a long-term investment plan for Sterlite seniormanagement, not controlled by the Group. SOTLSterlite Optical Technologies Limited, a company incorporated in India SOVLSterlite Opportunities and Ventures Limited, a company incorporated in India SOXSarbanes-Oxley Act Special itemsItems which derive from events and transactions that need to be disclosedseparately by virtue of their size or nature SterliteSterlite Industries (India) Limited, a company incorporated in India Sustaining Capital ExpenditureCapital expenditure to maintain the Group's operating capacity TC/RCTreatment charge/refining charge being the terms used to set the smelting andrefining costs tpaMetric tonnes per annum TCMThalanga Copper Mines Pty Limited, a company incorporated in Australia Twin StarTwin Star Holdings Limited, a company incorporated in Mauritius Twin Star Holdings GroupTwin Star and its subsidiaries and associated undertaking Underlying EPSUnderlying earnings per ordinary share on underlying profit Glossary and definitions (continued) Underlying profitAttributable profit for the year after adding back special items and theirresultant tax and minority interest effects VALVedanta Alumina Limited, a company incorporated in India VolcanVolcan Investments Limited, a company incorporated in the Bahamas VRHLVedanta Resources Holdings Limited, a company incorporated in the United Kingdom ZCIZambia Copper Investment Limited, a company incorporated in Bermuda ZCCMZCCM Investments Holdings plc, a company incorporated in Zambia Zinc BusinessThe zinc-lead business of the Group comprising its fully integrated zinc-leadmining and smelting operations in India This information is provided by RNS The company news service from the London Stock Exchange

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