Vedanta Resources Interim Results 2017

10 November 2016

Vedanta Resources plc

Interim Results for the Six Months ended 30 September 2016

Financial Highlights

n Revenue of US$4.9 billion and EBITDA(1) of US$1.2 billion in H1 FY2017, a reduction of 15% and 4% respectively compared to H1 FY2016, primarily due to lower commodity prices and lower volumes at Zinc India in line with mine plans

n Highest EBITDA margin (excluding custom Smelting)(2) in the last two years of 33% compared to 30% last year, driven by lower costs

n Higher operating Profit of US$720 million (H1 FY2016: US$578 million)

n Underlying Loss Per Share(3) of 18.8 US cents (H1 FY2016: loss of 57.6 US cents) and Basic Loss Per Share of 23.2 US cents (H1 FY2016: loss of 117.7 US cents), reflecting benefits of cost optimisation

n Positive free cash flow after growth capex(4) of US$166 million

n Gross debt reduced by US$118 million over one year

n Net debt increased to US$8.2 billion, due to special dividend payment by Hindustan Zinc Limited in April 2016

n Positive credit rating movements: Moody's upgraded corporate family rating from B2 to B1 and S&P revised outlook from Stable to Positive

n Interim dividend of US cents 20 per share

n Vedanta Ltd-Cairn India merger approved by shareholders; expected to complete in Q1 CY2017

Business Highlights

n Oil & Gas: stable production at Rajasthan, with increasing contribution from Mangala Enhanced Oil Recovery (EOR)

n Zinc India: lower mined metal production in line with the mine plans, H2 production expected significantly higher; silver production up 6%

n Aluminium:

§ Highest ever half-yearly production

§ Smelters continue to ramp-up, with current production run-rate of 1.1 mtpa (excluding trial run production) and 1.2 mtpa (including trial runs); ramp-up was impacted by pot outages at Jharsuguda-II and BALCO-II smelters in Q2

§ Secured coal linkages of 6 mtpa for captive power plants through auctions

n KCM: continued cost improvement - cost of production down 12% y-o-y

n Iron Ore: mining and shipments from Goa resumed from October, following the monsoon season

n TSPL Power: 1,980MW plant fully operational with third 660 MW unit capitalised, overall plant availability at 77% in Q2

Anil Agarwal, Chairman of Vedanta Resources Plc, commented: "Vedanta Resources continues to deliver on all fronts, achieving robust operational and financial performance in the first half of the financial year. We ramped-up production as planned at our Aluminium, Power and Iron Ore businesses. We continue our relentless focus on cost optimisation, generating strong free cash flow and de-levering our balance sheet. During H1, we received approval from all sets of shareholders for the merger of Cairn India with Vedanta Limited. This is a significant step towards simplifying the group, and creating long-term shareholder value, in line with our strategic priorities. Vedanta's exposure to India means we are well-positioned to benefit from world's fastest growing economy."

 (US$ million, except as stated)

(1) Earnings before interest, taxation, depreciation, amortisation / impairment and special items

(2) Excludes custom smelting revenue and EBITDA at Copper and Zinc India operations as custom smelting has different business economics

(3) Based on profit for the period, after adding back special items and other gains and losses, and their resultant tax and non-controlling interest effects (refer to note 4 of condensed financial statements)

(4) The taxes paid on distribution of dividend from group companies has been shown separately to reflect the free cash flow from operations more appropriately and the previous period amounts have been reclassified to ensure consistency

(5) EBIT net of tax divided by capital employed excluding project capital work in progress and exploratory assets and one- time impairment charge

There will be a conference call at 9:00a.m. UK time (2:30p.m. India time) on 10 November 2016 where senior management will discuss the results.

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About Vedanta Resources

Vedanta Resources plc ("Vedanta") is a London listed diversified global natural resources company. The group produces aluminium, copper, zinc, lead, silver, iron ore, oil & gas and commercial energy. Vedanta has operations in India, Zambia, Namibia, South Africa and Australia. With an empowered talent pool globally, Vedanta places strong emphasis on partnering with all its stakeholders based on the core values of trust, sustainability, growth, entrepreneurship, integrity, respect and care. To access the Vedanta Sustainable Development Report 2016, please visit http://sd.vedantaresources.com/SustainableDevelopment2015-16/. For more information on Vedanta Resources, please visit www.vedantaresources.com.

Disclaimer

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

CHAIRMAN'S STATEMENT

In the first six months of FY2017, we delivered a good set of results on all fronts. The strong performance was driven by our diversified portfolio of assets and our relentless focus on cost optimisation and free cash flows. We have seen promising signs for our sector so far this year. Commodity prices have recovered from the lows of early 2016, and there is certainly a more stable outlook.

Vedanta achieved an EBITDA of $1.2 billion with a strong EBITDA margin(1) of 33%. We generated positive free cash flow post project capex of $166 million, driven by opex and working capital optimisation.

Operationally, we had a strong first half, during which we delivered on our guidance of ramping up production of aluminium, power and iron ore, and we continued to drive down costs at all our businesses. 

In Aluminium, we achieved our highest-ever half-yearly production. Output was partially impacted by pot outages, however these have not led to any significant change to our full-year production expectations.

Our entire power portfolio is fully operational and is expected to deliver higher contribution to EBITDA.

Production at our Goa iron ore mines restarted post monsoons. We expect to reach the state-issued mining allocations for both our Goa and Karnataka operations by the end of this calendar year and we are engaging with the respective state Governments to pursue further mining allocations. 

Our Zambian copper operations have steadily improved with significant cost reductions. The business environment in Zambia improved in the first half, and royalty rates on a sliding scale have been finalised by the government.

At our Zinc International operations, pre-stripping work at the Gamsberg zinc mine in South Africa is progressing well, with major contracts currently being finalised. We plan to produce the first tonnes from this project in mid-CY2018. We will ramp up to the full capacity of 250,000 tonnes in 9-12 months. We are also working on extending the mine life for Skorpion by two years.

We have taken a significant step towards simplifying the Group structure. The Vedanta Limited and Cairn India merger has been approved by all sets of shareholders. This will help generate long-term value. We are working towards all regulatory approvals and expect to complete the merger by Q1 CY2017.

We ensure our compliance with all global regulatory requirements. Governance, which includes creating stewardship, value and building a culture of financial due diligence, is imperative in all our business decisions. This approach has led us to voluntarily publishing our second 'Tax Transparency Report'. Under the Extractive Industries Transparency Initiative, the Report details Vedanta's contribution of US$4.5 billion in FY2016 to public finances to the Governments of countries in which we operate.

Vedanta pays over 95% of its total tax contribution to the Indian Exchequer, making a significant contribution towards nation building and inclusive growth of the Indian communities. We are privileged to be included in India's journey of growth as an empowered nation. 

We, at Vedanta, are optimistic about India's growth potential and believe that the company is well-placed to explore India's resources and contribute to its economic development. India remains the fastest-growing major economy in the world and confidence in its growth story is only increasing as the Government continues to drive reforms that enable development and create jobs. Foreign Direct Investment into India increased 29% in CY2015 to US$44 billion(2), and India is now ranked the world's top investment destination by EY.

Vedanta's number one priority remains achieving the goal of Zero Harm and we are committed to enhance a culture of safety across the company. I am deeply saddened by the three fatalities to date in this year - it is imperative that we bring about a considerable improvement in the area of safety.

Sustainable Development initiatives at Vedanta are of the highest order and commitment towards 'Social License to Operate' goes beyond regulatory compliance. Earlier this year, we held our second Sustainable Development Day in London. Here, members of Vedanta's executive and management teams held an open dialogue with stakeholders about our efforts to ensure the safety of our employees and the sustainability of our operations.

Our aim is to create an ever stronger and more resilient business and our Innovation and Technology programme will help us achieve that. 'Eureka', our web based platform to nurture and incubate in house innovation and technology, provides opportunities for our talented young professionals to generate innovative ideas towards Zero Waste and Zero Discharge in all our operations/processes.

I am also personally committed to the sustainable growth and development of the countries where we operate. Social investment is particularly close to my heart. I am particularly proud of Vedanta's key project in India, focused on the empowerment of women and child welfare. Over the next three years we are building 4,000 nandghars, which are modern child care centres and promote skill development for women.

In the first half of FY2017 we welcomed Ravi Rajagopal to the Vedanta Board as a Non-Executive Director and a member of the Audit Committee. Ravi brings a wealth of experience of over three decades with leading corporations in the UK and internationally, and together with his proven management track record, is an excellent fit for our business. I thank Euan Macdonald, who retired from the Board, for his invaluable contribution to the Group as a Non-Executive Director over the past 11 years. His wealth of corporate and financial experience and his in-depth knowledge of emerging markets have been invaluable to the board deliberations.

I must extend my heartfelt thanks to all of Vedanta's employees for their continued dedication and hard work, and to my fellow Directors for their expert guidance and support in navigating the sustainable growth of our portfolio of world class assets.

ANIL AGARWAL

Chairman

(1) Margin excluding custom smelting revenue and EBITDA at Copper and Zinc India operations

(2) Source: Department of Industrial Policy and Promotion - FDI Statistics

Strategic Overview: Delivering on all fronts

The first half of FY2017 saw much stronger commodity prices compared to the lows of early 2016. We saw promising signs for our sector in H1 and the outlook looks more stable. During the first half of this financial year, we have delivered on all fronts, and we remain focused on optimising costs across all businesses.

We started ramping up the Aluminium, Power and Iron ore businesses in H1. The recent improvement in commodity prices has accelerated our progress towards our strategic objective of asset optimisation. A relentless focus on operational efficiency has driven down costs across our businesses during the period.

An ambitious target to deliver cost and marketing savings of US$1.3 billion was set in 2015 and we have already delivered cumulative savings of US$536 million over the past eighteen months. This has been achieved through an idea bank of over 1,000 cost savings initiatives across the business, including consolidation of spends and reduction of vendors, contract renegotiation and efficient logistics solutions.

We are pursuing value-accretive and low capex organic growth, in line with our approach towards prudent capital expenditure, such as our Gamsberg Zinc project and the next set of oil and gas opportunities at the Rajasthan block. Both Zinc and Oil are commodities that have a particularly favorable outlook delivering strong results.

We maintained a strong EBITDA margin in H1 of 33% (30% in H1 FY 2016) on the back of our cost optimisation drive, despite revenue for the period being impacted by lower commodity prices, and lower volumes at Zinc India as per the mine plan. We generated positive free cash flow of US$166 million, driven by strong all-round operating performance and working capital optimisation, though the new capacity ramp-ups consumed some initial working capital. We are continuing to make good progress against the Group's long-term strategic priority of increasing cash flow and de-levering.

The merger between Vedanta Limited and Cairn India has been approved by all sets of shareholders, marking an important milestone in the progress towards Group structure simplification. We believe that this will help generate long-term value for all shareholders. We are working towards all regulatory approvals for the merger and expect to complete it by Q1 CY2017.

We remain committed to our strategic priorities, and see our production ramp ups generating strong EBITDA and free cash flow during the second half of the financial year.

Finance Review

Basics of presentation of financial information

Our interim financial report is prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union. Our reporting currency is US Dollar (US$).

Executive summary

During H1 FY2017, strong operating performance driven by ramping up capacity, and delivering on cost and marketing initiatives, supported by improved commodity prices from the lows of FY2016, resulted in an EBITDA of US$1.2 billion with robust margins of 33%. (H1 FY2016: US$1.29 billion with 30% margin). Commodity prices have improved during each quarter, but were lower compared to last year, resulting in reducing EBITDA by US$190 million. Lower volumes at our Zinc business (as forecast) were partially offset by the ramp up of Iron Ore volumes post resumption last year and the full operationalisation of our Power portfolio resulted in an overall EBITDA impact of US$100 million.

Depreciation and amortisation expenses was lower given the impairment in FY2016, primarily at our Oil & Gas business and the Lisheen mine closure. As a result, profit before tax (without special items) increased by US$183 million to US$427 million y-o-y.

Free cash flow after capital expenditure was US$166 million, mainly as we used cash generated from operations for ramp up-related capex in our Aluminium and Power businesses, mining capex in the Zinc business and interest servicing. Gross debt decreased by US$118 million to US$16.3 billion.

The credit rating has been upgraded by Moody's to B1 (CFR), driven by the improvement in our operating performance and the reduction in our absolute debt levels.

Consolidated Group results

 (US$ million, except as stated)

(US$ million, except as stated)

 (US$ million, except as stated)

(1) Includes port business & elimination of inter segment transactions

(2) Earnings before interest, taxation, depreciation, amortisation/impairment and special items

(3) Operating profit of FY2016 includes impairment of US$4,934 million in oil & gas business, US$245 million in Iron Ore business and US$8 million at Copper mines of Tasmania

Consolidated operating profit variance analysis

(In US$ million)

(1) Base year impact due to local functional currency depreciation

Prices

Operating profit before special items was significantly affected by the downturn in commodity prices across Vedanta's businesses during H1 FY2017 compared to H1 FY2016. The combined fall in prices, lower premia and higher discounts resulted in an overall adverse net price hit of US$190 million.

Oil & Gas: Average Brent price was US$46/bbl, (H1 FY2016: US$56/bbl), reducing operating profit by US$96 million.

Zinc, Lead and Silver: Average zinc LME prices during H1 FY2017 were up 4% at US$2,089/tonne compared to H1 FY2016. Average lead LME prices over the period were down 2% to US$1,797/tonne compared to H1 2016 and the average silver price over H1 FY2017 was up 17% to US$18.2/ounce compared to H1 FY2016. The collective impact of the change in prices increased operating profits by US$42 million.

Aluminium: Average aluminium LME prices were down 5% to US$1,596/tonne in H1 FY2017 compared to H1 FY2016, adversely affecting operating profit by US$33 million.

Copper: Average copper LME prices were down 16% to US$4,751/tonne in H1 FY2017 compared to H1 FY2016, adversely affecting operating profit in our Zambian operation by US$44 million.

Iron Ore: Average pig iron prices were down 6% to US$275/tonne in H1 FY2017 compared to H1 FY2016, adversely affecting operating profit by US$12 million.

Power: Lower energy prices on the back of a weaker power market had an adverse effect of US$25 million.

The total fall in commodity prices decreased operating profit by US$144 million, with a further impact of US$21 million due to lower premia mainly in aluminium and higher quality discount to Brent prices at the Oil & Gas business (H1 FY2017 discount 12.3% : H1 FY2016 :10.8%).

Input commodity deflation

Input commodity prices, including imported alumina and coal, softened during H1 FY2017, positively contributing US$57 million to operating profit.

Foreign exchange fluctuation

Most of our operating currencies depreciated against US$ during H1 FY2017 compared with H1 FY2016. Weaker currencies are favourable to Vedanta, given the local cost base and US$-linked pricing in all our domestic markets. The average exchange rate for H1 FY2017 was 66.9 Indian Rupees/US$, (H1 FY2016: 64.2 Indian Rupees / US$). In Zinc International, the local currency depreciated 16% to 14.55 (H1 FY2016: 12.53). The Zambian Kwacha (ZMW) depreciated 28% to 10.1 (H1 FY2016: 7.9). These exchange rate movements added US$80 million to operating profit.

During H1 FY2016, appreciation in the Zambian Kwacha (ZMW) from 31 March 2016 level of ZMW 11.2/US$ to ZMW 9.9/US$ on 30 September 2016 positively impacted the operating profit by US$16 million, driven by the gain on the Kwacha denominated VAT receivable from Government of Republic of Zambia. During the comparable prior period, the sharp depreciation in ZMW adversely impacted operating profits by US$68 million, resulting in movement in total operating profit of US$84 million y-o-y.

All currency movement against US$ net of translation increased operating profits by US$109 million.

Exchange rates against US$:

Profit petroleum outflow

Profit petroleum outflow increased in H1 FY2017 to US$16 million, of which US$47 million was due to lower opex and capex spend during the period. This was partially offset by provisions in H1 FY2016 pertaining to past cost recoveries of US$31 million.

Regulatory

During H1 FY2017, a reduction in oil cess charge (US$35 million - from Rs.4,500 per tonne to 20% ad valorem basis) and the Government of Zambia approving a new slab-based royalty system linked to the copper prices effective from 1 April 2016, resulting in a US$15 million cost savings. These were partly offset by the increased Clean Energy Cess on coal (US$36 million) in our aluminium power and HZL businesses.

Volumes

During H1 FY2017, Vedanta concentrated on ramping up volumes at Iron Ore business, commercial operation of power units and stabilisation of aluminium pots. We observed technical issues in while stabilising pots in Jharsuguda and BALCO, which are currently under maintenance and relining. However, at Zinc India, zinc metal production was lower, in line with mine plan.

The above factors collectively impacted US$100 million to operating profit before special items.

Cost saving and marketing initiatives

We launched company-wide cost saving initiatives and price realisation improvements during FY2016. An idea bank of 1,000 initiatives across the Group is in the process of being implemented. Out cost-saving and marketing initiatives have already yielded positive results in H1 FY2017, contributing US$64 million to operating profit and we expect them to yield further benefits going forward. We achieved cumulative saving of US$536 million under this programme in last 18 month compared with FY2015 baseline.

The reported savings are on a Total Cost of Ownership (TCO) methodology which do not include benefits or extra spend due to input commodity inflation /deflation, regulatory or technology changes.

Over H1 FY2017 we widened our coverage for cost savings initiatives into areas including logistics, quality control and operation planning across all our businesses with following set of initiatives;

n Sourcing and logistics by leveraging on technology and quality controls in fuels and commodities, haulage capacities and third party logistics management

n Re-engineering and re-negotiations in tail-end contracts with rationalisations and outsourcings

n Supplier base rationalisation

n Innovative technologies

n Supplier relationship management, sales and operations planning

Allied business, Cost base & technology and Others

During H1 FY2017, allied business EBITDA reduced by US$25 million compared to H1 FY2016. The lower EBITDA was due mainly to lower off-take at captive power plant and lower volumes at the Phosphoric Acid and Precious Metals businesses. Additionally a one-off provision for Renewable Power Obligation for previous years for US$62 million during H1 FY2016 and offset the other one-off provisions / (write-backs) during the comparable period.

Depreciation and Amortisation

Depreciation and amortisation reduced by US$195 million during H1 FY2017 compared to H1 FY2016; US$172 million due to lower amortisation on account of impairment losses in Oil & Gas in FY2016. Depreciation at KCM was down US$35 million, as a major portion of Nchanga underground assets were depreciated in H1 FY2016. The decrease in depreciation and amortisation was partly offset by capitalisation of additional units at TSPL, additional pots at Korba-II and Jharsuguda II.

Income Statement

 (in US$ million, except as stated)

Revenue

Revenue was down 15% to US$4,868 million, compared to US$5,699 million H1 FY2016. The decrease was primarily due to lower Brent prices and Copper prices, a reduction in premia across the metal businesses and lower volumes at Zinc India. This was partially offset by the commissioning of a power unit at Talwandi Sabo and the ramp up of projects at BALCO and Jharsuguda.

EBITDA and Adjusted EBITDA Margin

EBITDA was US$1,233 million down 4% compared to H1 FY2016, due to lower Brent and Copper prices, and lower volumes at Zinc India partially offset by improved Zinc prices, cost efficiencies in the Aluminium business, volume increases in the Power business and local currency depreciation against US$. (see 'Operating Profit Variance' for more details).

The adjusted EBITDA margin - excluding custom smelting operations was 33% (H1 FY2016: 30%). The main margin contributors across key businesses were:

n Oil & Gas (H1 FY2016:49%,H1 FY2017:47%) - sharp decline in crude oil prices, partially offset by lower Opex, lower quality discount to Brent and cess reduction

n Zinc International (H1 FY2016:23%, H1 FY2017:52%) - one-off royalty refund at BMM and insurance receipt at Skorpion against the fire incident in early 2015 partially off-set by lower volumes

n Copper Zambia(H1 FY2016:-5%, H1 FY2017:4%) - local currency appreciation on VAT receivable and lower costs partially off-set by lower LME

n Aluminium (H1 FY2016:3%, H1 FY2017:12%) - improved cost of production and volume ramp up

n Power (H1 FY2016:27%, H1 FY2017 28%) - commissioning of new power units mainly at Talwandi Saboo

n Zinc India (H1 FY2016:51%,H1 FY2017:52%) - improved prices and one-off provision, write-back offset by lower volumes

n Copper India (H1 FY2016:10%,H1 FY2017:9%) - lower TC/RCs and lower credits

Net interest

Finance costs marginally increased by 2% to US$652 million in H1 FY2017 (H1 FY2016: US$639 million). This was due to capitalisation of new capacities in the Aluminium and Power businesses and an increase in INR-denominated borrowings in the borrowing mix. This was largely offset by the capitalisation of interest in aluminium capacities under ramp up at the Jharsuguda-II smelter (interest was previously expensed when the project was temporarily placed on hold). The average borrowing cost of the Group was 7.5% (7.3% in FY2016).

Investment revenue in H1 FY2017 marginally increased by 3% to US$386 million (H1 FY2016: US$373 million), mainly at Zinc India and Cairn India. Higher mark-to-market (MTM) gains on investments, accruing in a falling interest rate environment in India, largely offset by lower investment corpus due to a special dividend of $1.8 billion paid by Zinc India in the beginning of H1 FY2017. The average post-tax return on investment of the Group was 8.8% (7.2% in FY2016).

The marginal change in finance costs and investment revenue resulted in a flat net interest expense during H1 FY2017.

Other gains and losses

Other gains and losses include the impact of mark-to-market (MTM) on foreign currency borrowings, primarily at Vedanta's Indian businesses and the restatement of MAT credit at the Oil & Gas business. Depreciation in the Indian Rupee against the US$ during H1 FY2017 was 4% (64.23 to 66.95), against a 7% fall in H1 FY2016 (60.19 to 64.23).

Thus the MTM cost in H1 FY2017 was US$27 million (H1 FY2016: US$68 million).

Taxation

The Effective Tax Rate (ETR) in H1 FY2017 (excluding special items) was 40% compared to 92% during H1 FY2016. The significantly lower tax rate was primarily due to lower deferred tax expense at Cairn India, against a US$60 million deferred tax charge in FY2016 relating to exploration and development spend.

There were no tax special items in H1 FY2017, compared with a tax special item of US$174 million charge in Copper Zambia in H1 FY2016, due to restoration of deferred tax liabilities as a result of change in tax legislation.

Profit after tax

The profit after tax was US$257 million, compared to a loss of US$154 million in H1 FY2016. This was mainly due to lower depreciation and amortisation costs following impairment of US$5.2 billion primarily in the oil & gas division in FY2016 and negative tax special item of US$174 million at Copper Zambia in H1 FY2016.

Attributable loss

The attributable loss before special items was US$64 million, compared to a loss of US$187 million in H1 FY2016. This was mainly due to improved profit after tax.

Earnings per share (EPS)

Basic EPS for the period was a loss of 23.2 US cents (H1 FY2016: a loss of 117.7 US cents). Excluding the impact of special items and other gains and losses, the underlying EPS was a loss of 18.8 US cents per share (H1 FY2016: loss of 57.6 US cents).

Balance sheet

(In US$ million, except as stated)

Shareholder's deficit was US$(874) million at 30 September 2016, compared with US$(713) million at 31 March 2016. This primarily reflected lower commodity prices and premia, and Vedanta's FY2016 dividend payment of US$83 million (30 US cents per share).

Non-controlling interests increased to US$7,827 million at 30 September 2016 from US$7,565 million at 31 March 2016, driven by profitability in Zinc India and Cairn India.

Tangible fixed assets

During the first half of the year, we invested US$480 million in property, plant and equipment; comprising US$374 million on our expansion and improvement projects and US$106 million on sustaining capital expenditure. Expansion project expenses included US$105 million in Zinc India; US$236 million in the Aluminium and Power businesses, including Talwandi Sabo, US$21 million in our Oil & Gas business at Cairn India, and US$12 million at Zinc International.

Net Debt

Gross debt at 30 September 2016 was US$16,333 million (FY2016: US$16,263 million). This comprises total term debt of US$15,606 million and balance working capital loans. The gross debt remains at similar levels to the previous year, after using net receipts of special dividend from Zinc India for deleveraging, interest servicing and meeting ramp-up requirements in the Aluminium and Power businesses.

We remain focused on optimising our opex and capex, and increasing free cash flow. During H1 FY2017, we continued with the working capital initiatives across our businesses. Net debt at 30 September 2016 was US$8,166 million (31 March 2016: US$7,329 million) and has increased due to a special dividend at Zinc India paid to non-controlling interests during the period. Accordingly, net gearing has increased to 54% from 52%. Cash and liquid investments were US$8,167 million at 30 September 2016 (FY 2016: US$8,936 million). Our cash and liquid investments portfolio continues to be conservatively invested in high quality papers.

Of our total gross debt (excluding working capital loans of US$0.6 billion and temporary borrowing at Zinc India of US$0.3 billion) of US$15.6 billion, debt at our subsidiaries is US$9.3 billion, with the balance in the holding company. The total undrawn credit limit was US$485 million at the end of H1 FY2017.The future maturity profile of debt (in US$15.6 billion) of Vedanta Resources Plc is as follows:

(1) The debt at subsidiaries includes US$0.4 billion payable to Plc. On settlement, the Plc debt will reduced to US$ 5.9 billion

We have been successful in refinancing our maturing debt through rollovers, new debt and repayments from internal accruals during the period both at Vedanta Plc and its subsidiaries.

Of the FY2017 maturity of US$2.5 billion, US$2.2 billion is mainly short-term debt at subsidiaries. Part of this debt will repaid out of the internal accruals and balances to be rolled over, or replaced with term debt. Our refinancing plans for the rest of the year will focus on extending the maturity profile of the debt. This will include refinancing maturing debt for this year and also for future periods for long-term loans, and we expect to achieve a six-month extension to the overall portfolio.

Going Concern

The Directors have considered the Group's cash flow forecasts for the next twelve-month period from the date of signing of the interim financial statements ending 30 September 2016. Net debt has increased by US$837 million in the interim period to US$8,166 million, with US$485 million of undrawn facilities available at the balance sheet date. Further analysis of net debt is set out in note 9 of the interim financial statements. The Board is satisfied that the Group's forecasts and projections, taking into account reasonably possible changes in trading performance on cash flows and forecast covenant compliance, the limited transferability of cash within the Group, the flexibility the Group has over the timings of its capital expenditure and other uncertainties, show that the Group will be able to operate within the level of its current facilities for the foreseeable future. For these reasons the Group continues to adopt the going concern basis in preparing its condensed financial statements. Management has renegotiated certain financial covenants, which have been modified until September 2018.

Credit rating

Moody's upgraded the CFR rating of Vedanta Resources to B1/ Outlook Stable from B2/Outlook Negative and Senior Unsecured Notes ratings to B3 from Caa1 during H1 FY2017. During the same period, S&P removed the company's ratings from 'Credit Watch Negative' while affirming the corporate credit rating and issue rating at B/ Outlook Positive.

The upgrade in credit ratings is driven by improvement in operating performance.

Fund flows

The movement in fund flow in H1 FY2017 is set out below.

(1) On an accrual basis

(2) The taxes paid on distribution of dividend from group companies has been shown separately to reflect the free cash flow from operations more appropriately and the previous period amounts have been reclassified to ensure consistency

(3) Include foreign exchange movements

Project Capex

(1) Cost overrun on account of Forex changes and IDC. Total overrun would be ~$120 million

(2) Current estimate subject to Board approval

(3) Commitment till date ~US$230 million

Operational Review

Oil & Gas

Production Performance

Operations

Average gross production for H1 FY2017 was 196,629 barrels of oil equivalent/day (boepd), a reduction of 5% compared to the corresponding period. Rajasthan block production was an average rate of 167,323 boepd, supported by continued strong volumes from Mangala EOR and performance in-line with expectations from Bhagyam and Aishwariya. Encouraging results from Mangala EOR, driven by enhanced well productivity and new wells coming online, increased additional production from Mangala EOR to an average of 52,000 boepd in Q2 FY2017 (42,000 boepd : Q1 FY2017), with average of 47,000 boepd. Continued reservoir management, including production optimisation and the maximisation of liquid handling capacity, helped maintain strong performance from Bhagyam and Aishwariya. Satellite fields improved performance as production increased 20% YoY to an average of ~3.7 Kbopd in H1 FY2017.

Gas production from RDG increased from 28 mmscfd in Q1 FY2017 to 33 mmscfd in Q2 FY2017 and averaged 30 mmscfd in H1 FY2017, primarily due to superior initial well productivity after concluding the hydro-frac campaign. An additional eight wells were brought online during Q2 FY2017, after completing the fracking of 15 wells in Q1 FY2017.

The routine operational and statutory maintenance shutdown at the Mangala Processing Terminal has been rescheduled for November 2016 from Q2 FY2017. This opportunity will be used to create tie-ins for ongoing new facility enhancements, development projects and future growth projects.

(US$ per barrel)

During H1 FY2017, the average Brent price was US$45.8/bbl, compared with US$56/bbl during H1 FY2016. The oil prices started falling in late FY2015 and weakened further during FY2016 due to continuous supply growth over demand. Since April 2016, prices have recovered from record lows due to the supply disruptions and anticipated action by producers to manage supply.

Financial Performance

(in US$ million, except as stated)

Revenue during H1 FY2017 fell 22% to US$586 million (after profit and royalty sharing with the Government of India), the decline is driven by weaker crude prices. As a result, EBITDA in H1 FY2017 reduced by 27% to US$274 million. We invested US$24 million in capex during H1 FY2017, primarily on the Mangala Polymer Project and the Raageswari Deep Gas Project.

During H1 FY2017, water flood operating costs in Rajasthan were US$ 4.2/boe. We have reduced these costs to their lowest levels of the past ten quarters, at US$ 3.9/boe in Q2 FY2017, from US$4.4/boe in Q1 FY2017, through optimising facility maintenance and work-over activities. We also marginally reduced blended operating costs in H1 FY2017 to US$ 6/boe from US$6.1/boe, through renegotiating contracts and higher captive power generation, while maintaining polymer injections at our target level of 400,000 barrels of liquid per day.

In India's Union Budget FY2017, Oil Cess, a tax on crude oil production, has effectively been reduced from Rupee 4,500 per tonne to 20% ad-valorem on realised prices.

Development

Over the past six months we have focused on enhancing recovery from the large HIIP base of 7.8 billion boe across assets and to monetise the resources of over 1 billion boe in Rajasthan, through increasing productivity and taking out costs. Our development includes:

Gas development at RDG field

Using technology, expected gas recovery has increased by 26% from initial estimates. Successful completion of the 15-well hydro-frac campaign, encouraging results from initial well productivity and improved reservoir characterisation has increased recovery estimates up to 2030, including of condensate from 74 mmboe to 86 mmboe. Over the past six months, we have brought 8 wells online, and we plan to bring the remaining wells online by December 2016. We are developing the project in phases to realise capital efficiencies while maintaining production growth.

Polymer flood in Bhagyam and Aishwariya

At Bhagyam EOR, significant progress has been made on the multi-well polymer injectivity test to improve injection rate modelling. Based on the test results, a revised field development plan is expected to be submitted to the JV in the first half of CY 2017. At Aishwariya EOR, we have finalised the concept report and development plans should be submitted in H2FY2017.

Barmer Hill

Barmer Hill has a significant growth potential with a large HIIP base of 1.4 billion boe and expected ultimate recovery of 8%-10%. Our focus is on developing Barmer Hill formation of Aishwariya and Mangala by using the infrastructure already in place, inline with our return-based approach to capital investment.

For Aishwariya Barmer Hill, cost savings from drilling, completion activities and surface facility will drive a 15%-20% reduction in development costs of US$300 million, for an Estimated Ultimate Recovery (EUR) of about 30 mmbbls up to 2030. We are planning development in stages to de-risk the investment. First oil from Stage 1 is expected during the current fiscal year.

Exploration

Rajasthan

Our exploration activities are focussed on seismic data processing and interpretation. In order to enhance the current portfolio, our efforts are concentrated on integrating all available data and identifying high-impact new plays.

In the Raageshwari field and adjoining areas, Azimuthal processing of newly-acquired 3D seismic data has helped in reservoir characterisation and fracture delineation. We have processed 3D seismic data for the Air Field South area and it is ongoing for DP Field. Data interpretation and processing is underway to identify new prospects in these fields, which will act to replenish the exploration prospect inventory.

Other Assets:

Palar-Pennar (Block PR-OSN-2004/1): The drilling programme for the commitment wells is ongoing and drilling is planned to commence in Q4 FY2017. The JV is engaging with the Ministry of Petroleum & Natural Gas (MoPNG) to revise the work programme commitment from three to two wells.

KG Offshore (Block KG-OSN-2009/3): We continue to engage with the MoPNG for an extension contingent upon full lifecycle clearance from Ministry of Defence. Phase I was up to 8 March 2016. Interpretation of the new seismic volumes has resulted in the identification of four prospects and a number of smaller leads over different play types.

KG Onshore (Block KG-ONN-2003/1): ONGC, the development operator, has submitted the Field Development Plan (FDP) to the Management Committee (MC). The FDP is being reviewed by the MC.

Outlook

We remain committed to maintaining a healthy cash flow post capex. In line with guidance, Rajasthan production volumes will remain broadly at FY2016 levels, with natural declines offset by our EOR programme. In line with annual guidance, capex for FY2017 is estimated at US$100 million, of which 80% will be invested in development (primarily RDG Gas and Mangala EOR completion activities) and 20% in exploration.

We will continue investing in pre-development activities of our key projects in Core MBA fields, Barmer Hills and Satellite fields, to ensure project readiness for development with the grant of an extension of PSC. We maintain the flexibility to raise our capital investment as the oil price improves.

Zinc India

Production Performance

(1) Excluding captive consumption of 1,921tonnes in H1 FY2017 vs. 3,697 tonnes in H1 FY2016

(2) Excluding captive consumption of 3,16,000 ounces in H1 FY2017 vs. 613,000 ounces in H1 FY2016

Operations

During H1 FY2017, mined metal production was 318,000 tonnes, a reduction of 33% compared to H1 FY2016. Ore production reduced to 4.6 million tonnes compared to 5.2 million tonnes during H1 FY2016, primarily due to lower production from the Rampura Agucha open cast mine as per mine plan. Cumulative production from underground mines increased by 83% compared to the previous year, as the Rampura Agucha mine accelerated production. We are on track to achieve full-year mined metal production in-line with guidance, with the second half substantially higher than H1 FY2016.

Mined metal production during Q2 increased by 51% compared with Q1H1 FY2017. The increase was primarily driven by higher ore production from Rampura Agucha open cast, where ore body was exposed after high waste excavation in accordance with the waste-ore sequence. Zinc India's transition from open cast to underground mining continues satisfactorily.

Integrated refined silver metal production increased by 6% over H1 FY2016, despite lower mined metal volumes from Rampura Agucha open cast. This was due to significantly higher production from Sindesar Khurd mine. Zinc and lead integrated production were lower at 37% and 17% respectively, in line with mined metal production.

(US$ per tonne except where stated)

In H1 FY2017, the robust upturn in Zinc prices continues, and hovering around US$2,300/tonne -US$2,400/tonne. LME zinc prices averaged US$2,089/tonne during H1 FY2017 (H1 FY2016: US$2,013/tonne); Q2 FY2017 was US$ 2,255/ tonne (Q1 FY2017: US$ 1,918/tonne).

Average prices for lead weakened by 2% due to subdued Chinese consumption and high levels of scrap in secondary markets.

Average price of silver's increased by 17% partly due to supportive European and Japan central bank policies.

Unit Costs

During H1 FY2017, the unit cost of zinc production increased by 7%, primarily due to lower volumes as per mine plan, regulatory headwind including higher Clean Energy Cess on coal and higher mine development expenses, partly offset by cost reduction initiatives for operational and commercial efficiencies and the benefit of Indian Rupee depreciation on local cost spend.

Financial Performance

(in US$ million, except as stated)

EBITDA in H1 FY2017 was US$456 million, (H1 FY2016: US$582 million), primarily a result of lower volumes and regulatory headwind, including clean energy Cess. This was partially offset by higher silver and zinc prices and the weak Rupee.

Projects

Continuing with the high pace of mine development, the Company achieved total mine development of 28,728 metres in H1, up 14% from a year ago.

With the objective of mitigating the risk of any delays in the ramp-up of Rampura Agucha underground mine, Stage V was conceptualised in late 2014 to extend the life of the open cast mine to 2019-2020, deepening the pit by an additional 50 metres. However, concurrent mining at Rampura Agucha is leading to geotechnical challenges in both the open pit and underground. After deliberations with internal and global technical experts, Vedanta decided to modify Stage V and limit the incremental pit depth to 30 metres. This will mitigate pit wall challenges and significantly reduce waste-ore ratio, providing a fresh impetus to accelerating mine development at the underground mine in a safe manner.

Ore production from Stage V commenced during the half year and is now being accelerated to complete by March 2018. The expansion target of 1.2 million MT mined metal production will be achieved as forecast. Main shaft sinking at Rampura Agucha is progressing well and has reached the depth of 920 metres against a final depth of 950 metres. Winder erection is at advanced stage of completion and pre-equipping work for the main shaft commenced during half year.

At Sindesar Khurd mine, preparatory work for head gear erection of the main shaft commenced during the half year, while up-ramp development work is progressing well. The construction of a new mill of 1.5 mtpa is on track and commissioning is expected by end of the financial year, taking the milling capacity to 4.25 mtpa.

Zawar mill debottlenecking, along with associated power and infrastructure projects, is advancing well and planned to be completed by end of this financial year. Decline development at key mines of Zawar is progressing well.

Kayad project is now complete and the mine has attained its rated capacity.

Outlook

We reiterate our guidance for FY2017; mined metal production is expected to be higher than FY2016, with H2 FY2017 substantially higher than H1 FY2017. Integrated silver production in FY2017 will be 15 million ounces - 16 million ounces. We expect to progress in mine development and ore production from the underground mine, with approximately 60% of total mined metal production from underground mines in FY2017. The US$ cost of production excluding royalties is expected to remain stable in FY2017 compared to last year, with H2 FY2017 cost of production to be lower than H1 FY2017, due to high volumes, various efficiencies and cost saving initiatives.

Zinc International

Production Performance

Mined metal output during H1 FY2017 was 38% lower compared to H1 FY2016, due mainly to closure of the Lisheen mine in Ireland in November 2015 after 17 years in operation. Production at BMM and Skorpion improved, with production of 35,000 tonnes and 47,000 tonnes respectively. Total production, excluding Lisheen, was 12% higher than H1 FY2016.

At Skorpion in Namibia, production increased by 10% compared to the corresponding prior period, mainly on account of higher feed grades and better recoveries.

Production at BMM was 14% higher, mainly on account of a 25% increase in lead grade, in conjunction with a 3% increase in mine volume, supported by the change in mining methodology from cut-and-fill to the more productive long hole mining.

Unit costs

During H1 FY2017, unit costs of production decreased by 7% to US$1,331/tonne (H1 FY2016 : US$1,439/tonne). Excluding Lisheen, unit cost of production decreased by 16% from US$ 1,592/tonne to US$ 1,331/tonne. Lower costs were primarily driven by better realised Treatment Charges and Refinery Charges (TcRc), local currency depreciation, continued focus on labour and equipment productivity improvements, and other cost optimisation initiatives.

Financial performance

(in US$ million, except as stated)

EBITDA increased by 56% to US$88 million during H1 FY2017 despite lower revenues, due mainly to lower cost of production, a higher contribution from increased grade and recovery, and exceptional insurance and royalty refunds. Depreciation and amortisation was lower at 50% due to the Lisheen mine closure. This was partly offset by an increase in the Skorpion asset base over a short mine life.

Projects

At Gamsberg, pre-stripping mining was successfully completed and prestart mining is progressing well with 11 million tonnes of excavation. Techno-commercial discussions with vendors for plant and infrastructure and bulk mining orders have been completed. The first ore production is expected to in mid-2018 and fully ramp up to full 4 mtpa within 12 months.

Gamsberg is expected to partially replace production lost due to the closure of Lisheen mine, and should restore production to over 300ktpa.

Given the strong Zinc price, the approval of the re-commencement of Skorpion's high-wall pushback is underway. This was suspended during December 2015 when Zinc LME prices were $1500/tonne. This extends the life of the pit by an estimated 2 years - 3 years. This re-commencement allows for the Refinery Conversion Project to be accordingly deferred, as the Skorpion refinery can process oxides for the next three years. The Gamsberg concentrate will therefore be placed in the market for its first three years and offtake appetite has been tested and found adequate.

Outlook

In line with the guidance, we expect FY2017 production of 170kt-180kt and cost of production is expected at c. US$1,200 per tonne.

IRON ORE

Production performance

Operations

During August 2015, production recommenced in Goa after obtaining all necessary approvals to produce 5.5 million tonnes per annum of saleable ore. During H1 FY2017, production was 2.9 million tonnes with sales of 2.4 million tonnes. Production and sales were primarily impacted by extended monsoons. Post monsoons, mining and shipments from Goa have since resumed in early October 2016.

At Karnataka, H1 FY2017 production was 1.7 million tonnes against our environment clearance limit of 2.3 million tonnes per annum. The sales were lower due to lower e-auction sales and dispatches. However, a substantial quantity was contracted through e-auction at the end of Q2 FY2017, which will be dispatched in Q3 FY2017.

The allocated limits within the existing mining cap at Goa and Karnataka are likely to be exhausted by Q3 FY2017. The Company has appealed to the respective State Government to raise our limit once we exhaust our allocated limits within the overall available unutilised limits at the state.

During H1 FY2017, production of pig iron was 16% higher to a record production of 372,000 tonnes (H1 FY2016 : 320,000 tonne), post debottlenecking of the capacity last year.

Prices

Prices for 62Fe grade per tonne averaged US$47.8/tonne (FOB India), up 3% in H1 FY2017 y-o-y. Corresponding 56Fe ore that we produce at Goa averaged US$35.9/tonne in H1 FY2017, compared to corresponding prior period. In first half of FY2017, the price recovered following lower production forecasts from the majors and uptick in Chinese demand.

While the FOB price for 56Fe grade was US$35.9 per tonne for H1 FY2017, the realisation for Goa ore was lower given the 10% Goa permanent fund. Karnataka ex-works realisation was US$15 per tonne for H1 FY2017, as domestic prices are largely determined by Government mining companies and local demand and supply factors.

In view of the global decrease in iron ore prices in the past 18 months and industry-wide representation, export duty on lower than 58% Fe has been reduced from 10% to NIL effective from 1 March 2016 in the Union Budget FY2017.

Pig iron margin reduced from US$43 per tonne to US$32 per tonne primarily due to higher cooking coal prices.

Financial performance

(in US$ million, except as stated)

EBITDA during H1 FY2017 increased to US$72 million, compared to US$7 million in the corresponding prior period in line with the higher volumes. Acquisition-related amortisation costs are higher on account of increased volumes.

Outlook

The Company will produce 5.5 million tonnes of ore at Goa and 2.3 million tonnes at Karnataka as per the approved limits in respective states by end of Q3 FY2017. We are engaging with respective state Governments to enhance mining caps in Goa and Karnataka.

COPPER - INDIA

Production performance

Operations

During H1 FY2017, copper cathode production at Tuticorin was marginally higher at 198,000 tonnes, despite the thirteen days unplanned outage due to boiler leakage. The smelter is now producing at a normalised plant capacity level. The 160MW power plant at the Tuticorin operated at a PLF of 54% in H1 FY2017 compared to 85% in H1 FY2016, primarily due to lower off-take from Tamil Nadu Electricity Board (TNEB) and Telangana State Electricity Board (TSEB), owing to the extended monsoon season and weaker power demand in the region.

The Company has entered into a contract with the TSEB for power supply from June 2016 to May 2017 following the completion of the sales contract with the Tamil Nadu Electricity Board (TNEB). We are entitled to compensation at 20% of the contracted rate for offtake below 85% of the contracted quantity.

Over H1 FY2016, average LME copper prices fell 16% and treatment and refining charges (TCs/RCs) by 10%. Lower LME was driven primarily due to higher copper inventories and higher production levels from China.

Unit costs

At the Tuticorin smelter, the cost of production increased from 2.4 US cents/lb to 5.6 US cents/lb, due mainly to lower by-product credits, higher petro prices and increased clean energy cess on coal. Sulphuric acid realisation impacted significantly with ADNOC prices reduced from US$146 per tonne to US$81 per tonne y-o-y.

Financial performance

(in US$ million, except as stated)

EBITDA during H1 FY2017 was US$126 million, compared to US$170 million in the corresponding prior period. This decrease was mainly driven by lower TCs/RCs and lower by-product credits, which was partially offset by improved operational efficiencies.

Outlook

In line with guidance, FY2017 production is expected to be 400kt.

COPPER - ZAMBIA

Production performance

Operations

In H1 FY2017, mined metal production of 58,000 tonnes reduced by 7% year-on-year, due to lower production from the Nchanga underground mine, which was placed on care and maintenance in Q3 FY2016, and one-off equipment constraints at Konkola. Production from the Konkola underground mine was impacted by lower trackless equipment availability. At the Tailings Leach Plant, production reduced by 3% y-o-y due to throughput constraints at the mill and lower feeds from current tails.

Custom volumes at 36,000 tonnes, were 22% higher on y-o-y basis due to higher concentrate availability and improved grades. The biennial planned shutdown at the smelter scheduled for 40 days commenced on 26 September 2016, with an intent to improve shelf life of smelter and electrostatic precipitator (ESP) rebuild. Following this shutdown, the feed-rate is expected to increase from 70 tonnes to more than 80 tonnes per hour. This has partially impacted custom production at smelter.

Elevated Temperature Leach project is under stabilisation and expected to start commercial production from Q3 FY2017.

Unit costs (integrated production)

The unit cost of production, excluding royalty, was down 12% to 184 US cents/lb in H1 FY2017 compared to 210 US cents/lb in H1 FY2016. Excluding the impacts of increased power tariffs in January 2016 and the un-realised gain/loss on Kwacha denominated VAT receivables and other one-off provisions, the COP for H1 FY2017 was USc 177/lb which is lower by 11% on y-o-y basis. Factors contributing to this include: sustained cost-saving initiatives, the suspension of the high-cost underground mine at Nchanga, renegotiation of commercial contracts and alternate sourcing for major bulk supplies.

The Government of Zambia approved a new slab-based royalty system linked to copper prices effective from 1 April 2016 as referred below:

n 4% LME copper< US$4,500 per tonne,

n 5% LME copper between US$4,500 and US$6,000 per tonne, and

n 6% LME copper>US$6,000.

Financial performance

(in US$ million, except as stated)

Revenue for the period was lower y-o-y at US$405 million mainly due to lower copper prices. EBITDA in H1 FY2017 was US$17 million compared with a loss of US$24 million in the corresponding prior period. EBITDA has improved primarily on account of lower cost of production and gain on Kwacha--denominated VAT receivable, which was offset by lower copper prices in H1 FY2017 and higher power cost.

Outlook

Konkola underground mine

The Konkola underground mine remains the priority for KCM. Work is underway to improve operating productivity levels, mobile fleet utilisation and to progress a deeper horizontal development level with dewatered reserves.

Smelter and refinery

Continuous improvement is seen as we step up production from third-party concentrates. A 40-day planned biennial maintenance shutdown is progressing well and conclude by the first week of November 2016, with a prospect to improve the feed rates.

Any increase in power prices has a major adverse impact on operations at the refinery. As an alternative to power, KCM has explored options to install oil-fired boilers for electrolyte heating. This would enable the refinery to ramp up to production capacity and thereby making it viable.

Nchanga operations

At Nchanga, we are focused on sustaining and improving the operations at the Tailings Leach Plant by treating stockpiled refractory ore and old tailings. The ETL project is under stabilisation and expected to start commercial production from Q3 FY2017.

In line with guidance, full-year production is expected to ramp up during FY2017 to around 190,000 tonnes with integrated production of around 130,000 tonnes. The unit cost (excluding royalty) is expected to be in the range of US cents 150/lb - 170/lb.

ALUMINIUM

Production Performance

(1) Including trial run production of 29kt in H1FY2017 vs 38Kt in H1 FY 2016

(2) Including trial run production of 28kt in H1FY2017

(3) Jharsuguda 1800 MW and BALCO 270 MW have been moved from the power to Aluminium segment from 1 April 2016

Operations

At Lanjigarh, production ramped up with recommencement of the second stream of the refinery during Q1 FY2017, (up to 2 million tonnes per annum debottlenecked capacity) while approval was received for the expansion to 4 million tonnes per annum. In H1 FY2017, the Lanjigarh alumina refinery produced 567,000 tonnes, up 5% y-o-y, in line with the expectation of 1.4 million tonnes full-year production in FY2017. Further ramp up to 4 million tonnes will be considered when we have further visibility on bauxite sources.

Production was stable at the 261kt Jharsuguda-I and 126kt Korba-I smelters.

We achieved record half-yearly production of 541,000 tonnes of aluminium in H1, with an exit run-rate of 1.1 mtpa (excluding trial run production) in September 2016. The commissioning of pots at the first line of the 1.25 mtpa Jharsuguda-II aluminium smelter was completed at the end of July 2016. However, this line was impacted by a power outage in early August, following which 168 pots were taken out of production. The impacted pots are currently being rectified, and 26pots have restarted till date.

The commissioning of the second line of Jharsuguda-II commenced in July 2016, with 202 pots having been commissioned till date, and the balance pots continuing to be commissioned. The third line of the Jharsuguda-II smelter will commence ramp-up from end of Q3 FY2017, ahead of the earlier plan of Q4 FY2017.

The BALCO-II smelter was commissioned, with all 336 pots operational in August 2016. However, a technical issue in September 2016 took 167 pots out of production. Rectification work is in progress and these pots are expected to be re-started by Q4 FY2017.

The rolled product facility at BALCO, which was temporarily shutdown in Q2 FY2016, has recommenced operations during Q2 FY2017, and produced 5,000 tonnes during the quarter.

Unit costs

(US$ per tonne)

During H1 FY2017, alumina cost of production (COP) was US$276/tonne, compared to US$331/tonne in the corresponding prior period.

The hot metal COP at Jharsuguda was US$1,435/tonne, compared to US$1,598/tonne during H1 FY2016. The decrease was primarily due to lower alumina and coal prices, Rupee depreciation, and the implementation of various cost-saving initiatives, which were partially offset by regulatory headwinds of clean energy Cess, electricity duty and power purchase during power outages.

The cost of production at the Korba reduced to US$ 1,541/tonne from US$1,722/tonne in H1 FY2016. This decrease was due to lower alumina, power costs and currency depreciation.

Average LME prices for aluminium for the year fell to US$1,596 per tonne, a 5% decrease on the previous year's average price level of US$1,675 per tonne. World-wide, supply continues to outpace demand, which puts increasing pressure on aluminium prices and premium.

Aluminium Ingot Benchmark Main Japanese Port (MJP) premium during H1 FY2017 was lower at US$86 / tonne compared to US$139 / tonne during H1 FY2016.

Financial performance

(in US$ million, except as stated)

EBITDA during H1 FY2017 increased to US$102 million, compared to US$22 million in H1 FY2016. This was primarily due to higher volumes, input commodity deflation, Rupee depreciation and cost savings initiatives, with a one-off charge of US$36 million booked in corresponding prior period, due to Renewable Power Obligations.

Projects

During H1 FY2017, the Jharsuguda-II and Korba-II ramp up has advanced despite unplanned hitches due to power outages and other issues. Rectification work is in progress at both locations, and our team is committed to make it a success. 

Outlook

We expect to produce c.1.4 mtpa of alumina and 1.1 mtpa of aluminium (excluding trial run production) in FY2017. With a continued focus on cost reduction, we expect to achieve hot metal cost below US$1,400 / tonne in H2 FY2017.

POWER

Production performance

(1) Jharsuguda 1800 MW and BALCO 270 MW have been moved from the power to Aluminium segment from 1 April 2016

Operations

In H1 FY2017, power sales were higher at 6,039 million units compared to 5,789 million units in the corresponding prior period, due to the commissioning of additional units at TSPL and BALCO over the past year.

The Jharsuguda 600MW power plant operated at a lower Plant Load Factor (PLF) of 62% in H1 FY2017 (PLF 69% in H1 FY2016) due to power evacuation constraints.

Power sales from TSPL were significantly higher during the first half of the year. The third 660MW unit at TSPL achieved Commercial Operation Date (COD) on 24 August 2016 and was capitalised on 1 September 2016. In Q2 FY2017, all three units operated at an availability of 77% (considering the third unit from 1st September). In Q1 FY017 statutory shutdown was taken at one of the units. The Power Purchase Agreement with the Punjab State compensates Vedanta based on the availability of the plant.

The 600 MW BALCO IPP units (2x300MW) operated at a PLF of 59% in H1, due to the weak power market.

The MALCO power plant operated at a lower PLF of 28% in H1 FY2017 compared to 77% in H1 FY 2016, due to lower offtake from Telangana State Electricity Board (TSEB). We have entered into a contract with TSEB for power supply from June 2016 to May 2017, following the completion of the sales contract with the Tamil Nadu Electricity Board. However, we are entitled to compensation at 20% of the contracted rate for off-take below 85% of the contractual quantity.

Unit sales and costs

(1) Excluding TSPL

(2) Volume based on Plant Availability Factor (PAF): FY2017 - 4,364 MU and FY2016-1,911 MU

Average power sale prices were lower in H1 FY2017 at US cents 4.36/unit compared with US cents 4.86/unit in the previous year, primarily due to lower power realisation rates on account of a weak power market.

During H1 FY2017, the average power generation cost was 3.04 US cents / unit compared with 3.44 US cents/unit in the corresponding period.

Financial performance

(US$ million, except as stated)

EBITDA was higher at US$108 million due to commissioning of additional units at the TSPL and BALCO power plants.

Outlook

Given the entire power portfolio is now operational, we will continue to work towards increasing the availability and improving operational efficiencies during H2 FY2017. At TSPL, we expect to achieve 80% availability in H2 FY2017.

Port business

VGCB is one of the deepest coal terminals on the eastern coast of India, which enables docking of large Cape-size vessels.

The Vizag General Cargo Berth (VGCB) operations were impacted by reduced coal imports in the region. The tonnage handled decreased by 21% to 2.9 million tonnes in H1 FY2017, compared to 3.6 million tonnes in H1 FY2016, with reduced imports due to subdued growth in Steel and Power industry, resulting in an EBITDA reduction of 71% to US$2.1 million, compared to US$ 7.2 million in H1 FY2016.

Sustainability

Our Sustainable Development Model comprises four pillars: Responsible Stewardship, Building Strong Relationships, Adding and Sharing Value and Strategic Communications. These pillars form a sound base from which we can build a successful future for our business, while we reach for our strategic goals of growth, long-term value and sustainable development.

Responsible stewardship

Our Sustainable Development Model encapsulates Vedanta's approach to managing risk and how we conduct our business ethically. It also guides us in ensuring the health and safety of our workforce and minimising our environmental footprint.

The health, safety and wellbeing of all our workforce is of paramount importance. In H1 FY2017, we focussed on implementing our six group-wide key Safety Performance Standards. We also focussed on line management's responsibility and awareness with respect to Health and Safety.

Our 'Making Better Risk Decisions' programme is one example of coaching that we have conducted across Vedanta plc to promote awareness and accountability among line managers. This programme has already been positively received and we continue to roll it out across the Group. We are also working on consequence management and instilling the discipline of learning from incidents to minimise repeat events. 

During HI FY2017, our lost time injury frequency rate was 0.44 (FY2016: 0.46). During H1, it is our sincere regret that we had one fatality at our Iron Ore operations. Since then we had two fatalities (in Africa-KCM Operations) during early October 2016. The fatalities are being investigated in detail, with the involvement of internal and external resources.

The Corporate Safety team has initiated structured programmes to mitigate the 'high safety risk at work' areas through proper engineering and safety solutions, such as Experienced Based Risk Assessment and the mandatory implementation of performance standards. All employees and contractors have also received capacity building and safety training programmes.

The environment

Our continuous improvement projects in air, water and energy management have made good progress, but we have much more to do to meet our own challenging internal targets. Initiatives to achieve efficiency savings on water and energy, through the combination of new technology and advancing business processes, have gone well and in the first six months of this year we have already achieved 87% of our annual water conservation target and 18% of our energy conservation targets for FY2017.

During H1 FY2017 we recycled 40% of our overall non-hazardous waste into sustainable applications. We have also launched a group-wide project to promote innovation, called-Eureka. This project is designed to generate ideas from our employees on extracting value from waste and it has received an overwhelmingly positive response. New ideas will be evaluated by an internal expert panel for their feasibility and viability, and suitably awarded.

Further to the SARMACO incident, the Vedanta corporate safety function conducted a preliminary risk assessment to identify critical tailing structures and facilities, which was then taken for independent expert evaluation. M/s Goldar Associates, Africa completed the independent evaluation of nine identified critical structures and the final report is expected by Q3 FY2017. Vedanta-specific tailing management standards will then be developed and implemented in consultation with the business to avoid any such contingency.

We have also started working on developing a group-wide strategy of climate change and mitigation in lieu of INDC commitments under COP 21 of countries of our operations. Internal Power vertical in support from corporate environment is spearheading this exercise and we are aiming for both short and long-term carbon intensity reduction goals for Group businesses.

Building strong relationships

Identifying and actively managing all our stakeholder relationships - including our employees, our host communities and our shareholders and lenders - is important if we are to maintain our licence to operate. Our subsidiary businesses across the Group formally record all stakeholder expectations and outcomes through multiple levels of engagements. During H1 FY2017, about 2,000 external stakeholder engagements meetings took place with community leaders, non-governmental organisations (NGOs), Governments and Government bodies and academic institutions. More than 197 partnerships are now in place.

Further, all our CSR projects are designed to align business needs with community wants, defined through base assessment exercises. We also evaluate and realign our initiatives towards community requirements through comprehensive need and impact assessments conducted both internally and externally.

Going forward, all Vedanta Group companies will implement action plans relating to the corporate assessment in the UN's guiding principles on Business and Human Rights. We continued to implement the WBCSD - WASH pledge: Safe access to Water, Sanitation and Hygiene for the entire workforce. We fully support the UN -Women Empowerment Principles and Sustainable Development Goals.

Adding and sharing value

We believe Vedanta's role is to create value for all stakeholders. We believe that the communities in and around the areas in which we operate should share that value. Only by working in partnership with communities will our business grow. Together with shared financial, economic and social values, this will help us maintain our licence to operate.

Vedanta makes significant contributions to partner with local Governments and to help them achieve their development goals; to strengthen national and local economies, and to build infrastructure and facilities for local education and healthcare. For instance, in Punjab, Talwandi Sabo Power Limited (TSPL) has tied up with Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to provide ten water cycle-rickshaws for watering more than 15,000 saplings in the peripheral villages of TSPL. This initiative is in pursuance of National Mission for Green India, a Government of India initiative that aims to carry out the afforestation of 10 million hectares of land over the next decade.

Further, our flagship CSR initiative, 'Project NandGhar' is on track with 95 NandGhars already built so far. The NandGhars act as a pivot for all-round social development, with the centres providing interactive learning facilities for children and entrepreneurial training for women. 

Contribution to public finance:

We have released our tax transparency report for FY2016, which lays out our tax contribution to public finances in the previous fiscal year. This covers the contribution made to income tax, indirect revenue contributions (payroll taxes, value added taxes, green levies, social security contributions etc.), royalties and tax on capital gains. In summary, we have contributed US$4.5 billion to public finances, which is 42% of our revenue in FY2016 (FY2015: US$5.8 billion to public finances, 45% of revenue).

Strategic Communications:

Strategic communication is one of the essential pillars of our sustainability model. This reflects our commitment to complete transparency, and emphasises our principles of community dialogue and mutual respect, including free prior informed consent to access natural resources.

We report our economic, social and environmental performance in our Sustainable Development Report. We have aligned our Sustainability Reporting calendar with our financial calendar and all reports continue to be published annually with the Annual Report.

We have released our eighth Sustainable Development Report, which is prepared based on the Global Reporting Initiative (GRI) G4 guidelines, in accordance with core guidelines and mapped to the United Nations Global Compact (UNGC) and Sustainable Development Goals (SDGs). It reports our approach and disclosure towards triple bottom line principles - people, planet and profit - over FY2016.

We hosted our second annual Sustainable Development Day in London this year, on 24 June, 2016. Attended by a diverse set of stakeholders including lenders, investors, analysts, industry bodies and sustainability consultants, the event was opportunity to share updates and progress on our many sustainable development activities and to facilitate an open discussion with top management. Vedanta is committed to facilitating a two-way engagement with our core stakeholders and to building a deeper understanding of their material issues, which we filter down into our project initiatives.

As part of our continual engagement with stakeholders, we are committed to responding effectively to all stakeholder feedback. Multiple channels are used to maintain contact and we have a dedicated email address: [email protected]. In keeping with our policy of transparency and proactive compliance, we published our Slavery and Human Trafficking Statement for FY2016, and adhering to the requirements of the Modern Slavery Act, it is featured on our company website. 

Risks and Uncertainties

Vedanta is a globally diversified natural resources company operating across the value chain, undertaking exploration, asset development, extraction, processing and value addition with a primary focus on upstream operations.

Global uncertainty and volatility in recent years have challenge commodity companies. During this period, Vedanta has maintained a disciplined approach to capital allocation, prioritising high-return, low risk projects to maximise cash flows. We have set in motion initiatives to reduce costs, to optimise assets and to address operational issues, and these continued to gain ground throughout the year. Our well invested assets are on track to deliver near-term growth with marginal capital expenditure. A relentless focus on operational efficiency has driven down the cost of production across our businesses, mitigating the impact of falling commodity prices.

Our risk management framework is designed to be simple, consistent and clear for managing and reporting risks from the Group's businesses to the board. Risk management is embedded in our critical business activities, functions and processes. Our management systems, organisational structures, processes, standards, and code of conduct together form a system of internal control, which governs how we conduct the Group's business and manage the associated risks.

We have a multi-layered risk management framework aimed at effectively mitigating the various risks to which our businesses are exposed in the course of their operations as well as in their strategic actions. We identify risk at the individual business level for existing operations as well as for ongoing projects through a consistently applied methodology.

Formal discussion on risk management periodically takes place at business level review meetings. The respective businesses review their risks, any change in the nature and extent of the major risks since the last assessment, different control measures established for the risk and develop further action plans. These meetings are attended by business CXOs, senior management and concerned functional heads. Formally nominated Risk Officers for all operating businesses have a role to create awareness of risks at senior management level and to develop and nurture a risk management culture within the businesses. Risk Management forms an integral part of the performance management process at Vedanta.

The Audit Committee aids the Board in the risk management process by identifying and assessing any changes in risk exposure and reviewing of risk control measures. The Audit Committee is in turn supported by Group Risk Management Committee which helps the Audit Committee to evaluate the design and operating effectiveness of the risk mitigation programme and the control systems. The Group Risk Management Committee meets every quarter to discuss risks and mitigating measures. This committee reviews the robustness of this framework for individual businesses as well as progress against actions planned for key risks.

In addition to the above structure, other key risk governance and oversight committees include the following:

n Group Treasury Risk Management Committee (CFO committee) which has an oversight on treasury related risks. This committee comprises of Group CFO, business CFOs, Group Head Treasury and BU Treasury Heads

n Vedanta Board Level Sustainability Committee which looks at sustainability related risks. This committee is headed by a Non-Executive Director and has Group CEO and other business leaders as its members

n Group Capex Sub-Committee which evaluates risks while reviewing any capital investment decisions as well as instituting a risk management framework for projects

Principal risks and uncertainties and detailed information on the impact of these risks as well as the identification and mitigation measures adopted by management have been documented in Vedanta's Annual Report for FY2016. 

Updated listing of risk & uncertainties since FY2016:

n Challenges in operationalisation of investment in aluminium and power business

n Fluctuations in commodity prices (including oil)

n Access to capital

n Health, safety and environment (HSE) risk

n Extension of Production Sharing Contract of Cairn beyond 2020 or extension at less favourable terms

n Operational turnaround at KCM

n Discovery risk

n Currency exchange rate fluctuation

n Political, legal and regulatory risk

n Increasing impact of climate change and associated matters

n Tax related matters

n Breaches in IT / cybersecurity

n Community related risk

n Talent / skill shortage risk

n Transitioning of zinc and lead mining operations from open pit to underground mining

n Loss of assets or profit due to natural calamities

Our risk management framework is designed to help Vedanta meet its objectives through aligning of operating controls to the mission and vision of the Group. Mitigation plans with time lines are in place for each of risk mentioned above. The order in which these risks appear does not necessarily reflect the likelihood of their occurrence or the relative magnitude of their impact on our business.

Responsibility Statement

We confirm that to the best of our knowledge:

n The condensed set of financial statements has been prepared in accordance with IAS 34, Interim Financial Reporting; and gives a true and fair view of the assets, liabilities, financial position and profit of the undertakings included in the consolidation as a whole by DTR 4.2.4R

n 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

n The interim management report includes a fair view of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein)

By order of the Board

Tom Albanese G R Arun Kumar

Chief Executive Officer Chief Financial Officer

9 November 2016 9 November 2016

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 September 2016

 (US$ million except as stated)

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2016

 (US$ million)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(US$ million)

Financial statements of Vedanta Resources plc were approved by the Board of Directors on 09 November 2016 and signed on behalf by

Tom Albanese

Chief Executive Officer

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 September 2016

 (US$ million)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2016 (Unaudited)

(US$ million)

For the year ended 31 March 2016 (Audited)

(US$ million)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

For the six months ended 30 September 2015 (Unaudited)

(US$ million)

 (1) Other reserves comprise the currency translation reserve, merger reserve, investment revaluation reserve, debenture redemption reserve, capital redemption reserve and the general reserves established in the statutory accounts of the Group's Indian subsidiaries

Notes to the financial information

1. Basis of preparation

Vedanta Resources plc (the Company) is a company incorporated and domiciled in the United Kingdom and is a London listed diversified global natural resources major. The Condensed financial statements for the six months ended 30 September 2016 have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the European Union ('EU') and the requirements of the Disclosure and Transparency Rules ('DTR') of the Financial Conduct Authority ('FCA') in the United Kingdom as applicable to interim financial reporting.

The Condensed financial statements represent a 'condensed set of financial statements' as referred to in the DTR issued by the FCA. Accordingly, they do not include all of the information required for a full annual financial report and are to be read in conjunction with the Group's financial statements for the year ended 31 March 2016, which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by EU. The interim condensed consolidated financial statements do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the full year is based on the statutory accounts for the financial year ended 31 March 2016. A copy of the statutory accounts for that year, have been delivered to the Registrar of Companies. The auditor's report on these accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of an emphasis of matter and did not contain a statement under sections 498 (2) or (3) of the Companies Act 2006.

The financial information prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting as adopted by the European Union ('EU') in respect of six months ended 30 September 2016 and 30 September 2015 are unaudited but have been reviewed by the auditor and their report is set out on page 69 and 70.

The Group published full financial statements that comply with IFRS as adopted by the European Union for the year ended 31 March 2016.

The set of financial statements included in the interim financial report has been prepared using the going concern basis of accounting for the reasons set out in the Going Concern section of the Financial Review.

2(a). Accounting policies

During the period interim consolidated financial statements are prepared using the same accounting policies as applied in the audited 31 March 2016 financial statements.

2(b). Application of new and revised standards

The Group has adopted, with effect from April 1, 2016, the following new and revised standards and interpretations. Their adoption has not had any significant impact on the amounts reported in the financial statements.

n Amendments to IFRS 11 - Acquisition of an interest in a joint operation requires that when an entity acquires an interest in a joint operation in which the activity of the joint operation constitutes a business, as defined in IFRS 3, it shall apply, to the extent of its share in accordance with the guidance in this standard, all of the principles on business combinations accounting in IFRS 3, and all other IFRSs in relation to business combinations. The amendments apply prospectively

n Amendment to IAS 16 and IAS 38 - This clarifies the use of methods based on revenue to calculate the depreciation is not appropriate. This is because such methods reflect a pattern of generation of economic benefits that arise from the operation of the business of which an asset is part, rather than the pattern of consumption of an asset's expected future economic benefits, revenue is presumed to be inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances

n Amendments to IAS 1: Disclosure Initiative to improve and simplify disclosures within existing disclosure requirements

n Amendments to IAS 27: Equity method in separate financial statements - The amendments reinstate the equity method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements. The amendments are to be applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

n Amendments to IAS 16 and IAS 41: Bearer plants - Amendment is in relation to bearer biological assets (BBAs, e.g. fruit trees, grape vines), as to whether these assets would be better accounted for under IAS 16 Property, Plant and Equipment rather than using the fair value measurement approach prescribed by IAS 41

n Amendments to IFRS 10, IFRS 12 and IAS 28: Investment entities: Applying the Consolidation Exemption

Annual Improvements to IFRSs 2012-2014 Cycle

2012-2014 Cycle and Annual Improvements to IFRSs: 2012-2014 Cycle, are part of annual process of revising and improving existing standards. These are applicable with mandatory effective date of January 1, 2016.

n IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: Changes in methods of disposal. It adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued

n IFRS 7 Financial Instruments: Disclosures with consequential amendments to IFRS 1: Adds additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required. It further clarifies the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements

n IAS 19 Employee Benefits: Discount rate: regional market issue. Clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level)

n IAS 34 Interim Financial Reporting: Disclosure of information 'elsewhere in the interim financial report'. Clarifies the meaning of 'elsewhere in the interim report' and requires a cross-reference

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

IFRS 9 - Financial Instruments

In July 2014, the International Accounting Standards Board issued the final version of IFRS 9, Financial Instruments. The standard reduces the complexity of the current rules on financial instruments as mandated in IAS 39. IFRS 9 has fewer classification and measurement categories as compared to IAS 39 and has eliminated the categories of held to maturity, available for sale and loans and receivables. Further it eliminates the rule based requirement of segregating embedded derivatives and tainting rules pertaining to held to maturity investments. For an investment in an equity instrument which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition, on an individual share-by- share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognised in other comprehensive income would ever be reclassified to profit or loss. It requires the entity, which chooses to measure a liability at fair value, to present the portion of the fair value change attributable to the entity's own credit risk in the other comprehensive income. IFRS 9 replaces the 'incurred loss model' in IAS 39 with an 'expected credit loss' model. The measurement uses a dual measurement approach, under which the loss allowance is measured as either 12 month expected credit losses or lifetime expected credit losses. The standard also introduces new presentation and disclosure requirements. The effective date for adoption of IFRS 9 is annual periods beginning on or after 1 January 2018, though early adoption is permitted.

IFRS 15 - Revenue from Contracts with Customers

IFRS 15 - Revenue from contracts with Customers outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard replaces most current revenue recognition guidance, including industry-specific guidance. The core principle of the new standard is for companies to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively including service revenues and contract modifications and improve guidance for multiple-element arrangements. The new Standard will come into effect for the annual reporting periods beginning on or after 1 January 2018 with early application permitted.

IFRS 16 - Leases

IFRS 16- Leases, specifies recognition, measurement and disclosure criteria for leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17. The new Standard will come into effect for the annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted if IFRS 15 Revenue from Contracts with Customers has also been applied.

Following other standard, improvements and amendments to the standards have been issued upto the date of authorisation of these financial statements and will be applicable for the annual reporting periods beginning on or after 1 January 2017.

n Amendments to IAS 7, Statement of cash flows on disclosure initiative

n Amendments to IAS 12, 'Income taxes' on Recognition of deferred tax assets for unrealised losses

The Group is evaluating the requirements of these standards, improvements and amendments and has not yet determined the impact on the consolidated financial statements.

Foreign Exchange Rate

The following exchange rate to US dollar ($) have been applied:

3. Segmental Reporting

The Group is a diversified natural resources group engaged in exploring, extracting and processing minerals and oil and gas. We produce Zinc, Lead, Silver, Copper, Aluminium, Iron ore, Oil and gas and commercial power and have presence across India, South Africa, Namibia, Ireland, Australia, U.A.E. and Liberia. The Group is also in the business of port operations in India.

Vedanta Resources plc is a company incorporated in the United Kingdom under the Companies Act. The Group's reportable segments defined in accordance with IFRS 8 are as follows:

n Zinc-India

n Zinc-International

n Oil and gas

n Iron Ore

n Copper-India / Australia

n Copper-Zambia

n Aluminium

n Power

The components not meeting the quantitative threshold for reporting are being reported as 'Others'.

Management monitors the operating results of reportable segments for the purpose of making decisions about resources to be allocated and for assessing performance. Segment performance is evaluated based on the EBITDA before Special Items of each segment. Intersegment sales are charged based on prevailing market prices.

The following table's present revenue and profit information and certain asset and liability information regarding the Group's reportable segments for the six months ended 30 September 2016 and 30 September 2015 and for the year ended 31 March 2016.

(a) Reportable segments

Six months ended 30 September 2016

(US$ million)