Sterlite Industries (India) Limited
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For
the six-month period ended September 30, 2010
Commission File Number 001 33175
Sterlite Industries (India) Limited
(Exact name of registrant as specified in the charter)
Not Applicable
(Translation of Registrants name into English)
Republic of India
(Jurisdiction of incorporation or organization)
Vedanta, 75 Nehru Road
Vile Parle East
Mumbai, Maharashtra 400-099, India
+91-22-6646-1000
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form
20-F or Form 40-F.
Form 20-F þ Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether the Registrant by furnishing the information contained in this Form
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes o No þ
If Yes is marked, indicate below the file number assigned to registrant in connection with Rule
12g3-2(b): Not applicable.
CONVENTIONS USED IN THIS REPORT
In this report, references to US or the United States are to the United States of America,
its territories and its possessions. References to UK are to the United Kingdom. References to
India are to the Republic of India. References to $, US$, dollars or US dollars are to
the legal currency of the United States, references to Rs., Rupees or Indian Rupees are to
the legal currency of India and references to AUD, Australian dollars or A$ are to the legal
currency of the Commonwealth of Australia. References to ¢ are to US cents. References to lb
are to the imperial pounds (mass) equivalent to 0.4536 kilograms, references to tons are to
metric tons, a unit of mass equivalent to 1,000 kilograms or 2,204.6 lb, references to oz are to
ounces, with one kilogram being equivalent to 35.2740 oz and one ton equivalent to 32,000 oz, and
references to ha are to hectares, a unit of area equal to 10,000 square meters or 107,639 square
feet. Unless otherwise indicated, the unaudited condensed consolidated interim financial
information for the fiscal year ended March 31, 2010 and for six-month period ended September 30,
2009 and 2010 for our Company included in this report has been prepared in accordance with
International Financial Reporting Standards, or IFRS, and its interpretations issued by the
International Accounting Standards Board, or IASB.
References to a particular fiscal year are to our fiscal year ended March 31 of that year.
Our fiscal quarters end on June 30, September 30 and December 31. References to a year other than a
fiscal year are to the calendar year ended December 31.
We conduct our businesses both directly and through a consolidated group of companies that we
have ownership interests in. Unless otherwise stated in this report or unless the context otherwise
requires, references in this report to we, us, our, Sterlite, our company or our
consolidated group of companies mean Sterlite Industries (India) Limited, its consolidated
subsidiaries and its predecessors, collectively, including Monte Cello BV, or Monte Cello, Copper
Mines of Tasmania Pty Ltd, or CMT, Thalanga Copper Mines Pty Ltd, or TCM, Bharat Aluminium Company
Limited, or BALCO, Sterlite Energy Limited, or Sterlite Energy, Sterlite Opportunities and Ventures
Limited, or SOVL, Vizag General Cargo Berth Private Limited or VGCB, Hindustan Zinc Limited, or
HZL, Fujairah Gold FZE, Sterlite (USA), Inc., or Sterlite USA, and Talwandi Sabo Power Limited, or
TSPL. References in this report to SIIL mean Sterlite Industries (India) Limited. Our
consolidated financial information does not include Vedanta Resources plc, or Vedanta, Vedanta
Resources Holdings Limited, or VRHL, Konkola Copper Mines plc, or KCM, Twin Star Holdings Limited,
or Twin Star, Welter Trading Limited, or Welter Trading, the Anil Agarwal Discretionary Trust,
Onclave PTC Limited, or Onclave, The Madras Aluminium Company Limited, or MALCO, Sterlite
Technologies Limited, or STL, Monte Cello Corporation NV, or MCNV, Twin Star Infrastructure
Limited, Sesa Goa Limited, Sesa Industries Limited, and Vedanta Aluminium Limited, or Vedanta
Aluminium, except that as to Vedanta Aluminium, our consolidated financial statements account for
our 29.5% Non-Controlling interest therein under the equity method of accounting, but Vedanta Aluminium is
not otherwise included in our consolidated group of companies or our consolidated financial
statements. References to the Vedanta group are to Vedanta and its subsidiaries. In this report,
references to The London Metal Exchange Limited, or LME, price of copper, zinc, lead or aluminum
are to the cash seller and settlement price on the LME for copper, zinc, lead or aluminum for the
period indicated.
Unless otherwise specified, translation of amounts for the convenience of the reader has been made
in this report from Indian Rupee to US dollars at the noon buying rate of $1.00 = Rs. 44.56 in the
City of New York for cable transfers of Indian Rupee as certified for customs purposes by the
Federal Reserve Bank of New York on September 30, 2010. No representation is made that the Indian
Rupee amounts represent US dollar amounts or have been, could have been or could be converted into
US dollars at such rates or any other rate.
I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements as defined in the safe harbor
provisions of the US Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on our current expectations, assumptions, estimates and projections about our
company and our industry. These forward-looking statements are subject to various risks and
uncertainties. Generally, these forward-looking statements can be identified by the use of
forward-looking terminology such as anticipate, believe, estimate, expect, intend,
will, project, seek, should and similar expressions. These forward-looking statements
include, among other things, the discussions of our business strategy and expectations concerning
our market position, future operations, margins, profitability, liquidity and capital resources. We
caution you that reliance on any forward-looking statement involves risks and uncertainties, and
that, although we believe that the assumptions on which our forward-looking statements are based
are reasonable, any of those assumptions could prove to be inaccurate and, as a result, the
forward-looking statements based on those assumptions could be materially incorrect. Factors which
could cause these assumptions to be incorrect include, but are not limited to:
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a decline or volatility in the prices of or demand for copper, zinc, aluminum or
power; |
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events that could cause a decrease in our production of copper, zinc, aluminum or
power; |
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unavailability or increased costs of raw materials for our products; |
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our actual economically recoverable copper ore, lead-zinc ore or bauxite reserves
being lower than we have estimated; |
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our ability to expand our business, effectively manage our growth or implement our
strategy, including our entry into the commercial power business; |
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our ability to retain our senior management team and hire and retain sufficiently
skilled labor to support our operations; |
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regulatory, legislative and judicial developments and future regulatory actions and
conditions in our operating areas; |
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increasing competition in the copper, zinc, aluminum or power industry; |
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political or economic instability in India or around the region; |
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worldwide economic and business conditions; |
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our ability to successfully consummate strategic acquisitions; |
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the outcome of outstanding litigation in which we are involved; |
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our ability to maintain good relations with our trade unions and avoid strikes and
lock-outs; |
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any actions of our controlling shareholder, Vedanta; |
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our business future capital requirements and the availability of financing on
favorable terms; |
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the continuation of tax holidays, exemptions and deferred tax schemes we enjoy; |
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changes in tariffs, royalties, customs duties and government assistance; and |
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terrorist attacks and other acts of violence, natural disasters and other
environmental conditions and outbreaks of infectious diseases and other public health
concerns in India, Asia and elsewhere. |
II
These and other factors are more fully discussed in Managements Discussion and Analysis
of Financial Condition and Results of Operations in this report and in our other filings
with the US Securities and Exchange Commission, or the SEC, including Item 3. Key
Information D. Risk Factors, Item 5. Operating and Financial Review and Prospects and
elsewhere in our annual report on Form 20-F for fiscal 2010. In light of these and other
uncertainties, you should not conclude that we will necessarily achieve any plans,
objectives or projected financial results referred to in any of the forward-looking
statements. Except as required by law, we do not undertake to release revisions to any of
these forward-looking statements to reflect future events or circumstances.
III
Index to Unaudited Condensed Consolidated Interim Financial Statements
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Page(s) |
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F-1 |
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F-2 |
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F-3 |
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F-4 |
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F-5 |
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F-6 |
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STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME
(Indian Rupees in millions except share or per share amounts unless otherwise stated)
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Six-month period ended September 30, |
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Notes |
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2009 |
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2010 |
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2010 |
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(Rs. In |
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(Rs. in |
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(US dollars in |
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millions) |
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millions) |
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millions) |
Revenue |
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4 |
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105,730 |
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119,528 |
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2,682.4 |
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Cost of sales |
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(81,570 |
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(90,785 |
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(2,037.4 |
) |
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Gross profit |
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24,160 |
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28,743 |
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645.0 |
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Other operating income |
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1,444 |
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982 |
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22.0 |
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Distribution expenses |
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(1,510 |
) |
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(1,338 |
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(30.0 |
) |
Administration expenses |
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(2,626 |
) |
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(2,801 |
) |
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(62.9 |
) |
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Operating profit |
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21,468 |
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25,586 |
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574.1 |
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Investment and other income |
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5 |
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8,947 |
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10,101 |
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226.7 |
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Finance and other costs |
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6 |
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(3,259 |
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1,761 |
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39.5 |
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Share in Consolidated (loss)/profit of associate |
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1,398 |
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(1,343 |
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(30.1 |
) |
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Profit before tax |
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28,554 |
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36,105 |
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810.2 |
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Income tax expense |
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7 |
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(5,433 |
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(8,809 |
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(197.7 |
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Profit for the period |
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23,121 |
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27,296 |
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612.5 |
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Profit attributable to: |
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Equity holders of the parent |
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16,303 |
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19,702 |
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442.1 |
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Non-Controlling
Interests |
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6,818 |
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7,594 |
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170.4 |
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23,121 |
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27,296 |
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612.5 |
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Earnings per share |
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25 |
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Basic |
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4.97 |
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5.86 |
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0.1 |
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Diluted |
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4.97 |
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5.39 |
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0.1 |
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Weighted average number of equity shares used in
computing earnings per share |
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Basic |
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3,281,458,062 |
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3,361,207,534 |
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3,361,207,534 |
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Diluted |
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3,281,458,062 |
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3,446,945,134 |
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3,446,945,134 |
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The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
F-1
STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
(Indian Rupees in millions except share or per share amounts unless otherwise stated)
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Six-month period ended September 30, |
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2009 |
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2010 |
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2010 |
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(Rs. in |
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(Rs. in |
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(US dollars in |
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millions) |
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millions) |
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millions) |
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Profit for the period |
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23,121 |
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27,296 |
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612.5 |
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Other comprehensive income, net of tax: |
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Exchange differences on translating foreign operations |
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1,437 |
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338 |
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7.6 |
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Available-for-sale financial investments |
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181 |
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44 |
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1.0 |
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Cash flow hedges |
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270 |
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321 |
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7.2 |
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Share of other comprehensive (loss)/income of associate |
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277 |
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239 |
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5.4 |
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Total other comprehensive income for the period, net of taxes |
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2,165 |
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942 |
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21.2 |
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Total comprehensive income |
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25,286 |
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28,238 |
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633.7 |
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Total comprehensive income attributable to: |
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Equity holders of the parent |
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18,382 |
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20,649 |
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463.4 |
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Non-Controlling
Interests |
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6,904 |
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7,589 |
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170.3 |
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25,286 |
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28,238 |
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633.7 |
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The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
F-2
STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(Indian Rupees in millions except share or per share amounts unless otherwise stated)
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As of |
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March 31, |
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September 30, |
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September 30, |
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Notes |
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2010 |
|
2010 |
|
2010 |
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(Rs. in |
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(Rs. in |
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(US dollars in |
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millions) |
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millions) |
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millions) |
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ASSETS |
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Non-current assets |
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Property, plant and equipment |
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8 |
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226,629 |
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249,201 |
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5,592.5 |
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Leasehold land prepayments |
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1,220 |
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1,217 |
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27.3 |
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Investment in associate |
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9 |
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4,621 |
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3,518 |
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78.9 |
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Financial assets investments |
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10 |
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1,362 |
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1,406 |
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31.6 |
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Other non-current assets |
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11 |
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10,227 |
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16,762 |
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376.2 |
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Total non-current assets |
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244,059 |
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272,104 |
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6,106.5 |
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Current assets |
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Inventories |
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12 |
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29,822 |
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41,820 |
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938.5 |
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Current tax asset |
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660 |
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111 |
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2.5 |
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Trade and other receivable |
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13 |
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118,907 |
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77,486 |
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1,738.9 |
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Short term investments |
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14 |
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211,022 |
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237,088 |
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5,320.7 |
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Derivative financial assets |
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115 |
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298 |
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6.7 |
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Restricted cash and cash equivalents |
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15 |
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60 |
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75 |
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1.7 |
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Cash and cash equivalents |
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16 |
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2,021 |
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2,744 |
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61.6 |
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Total current assets |
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362,607 |
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359,622 |
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8,070.6 |
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Assets held for sale |
|
17 |
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|
188 |
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51 |
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1.1 |
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Total assets |
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606,854 |
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631,777 |
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14,178.2 |
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LIABILITIES |
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Current liabilities |
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Short-term borrowings |
|
20 |
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19,121 |
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15,772 |
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354.0 |
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Acceptances |
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29,901 |
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29,643 |
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|
665.2 |
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Trade and other payables |
|
18 |
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|
35,095 |
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34,715 |
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779.1 |
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Derivative Financial Liabilities |
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|
669 |
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|
371 |
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8.3 |
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Provisions |
|
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|
748 |
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|
782 |
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17.6 |
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Current tax liabilities |
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|
863 |
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1,429 |
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32.1 |
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Total current liabilities |
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86,397 |
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82,712 |
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1,856.3 |
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Net current assets |
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276,210 |
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276,910 |
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6,214.3 |
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Non-current liabilities |
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Long-term borrowings |
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20 & 21 |
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43,578 |
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46,781 |
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1,049.8 |
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Deferred tax liabilities |
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17,955 |
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18,617 |
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417.8 |
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Retirement benefits |
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|
865 |
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1,320 |
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29.6 |
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Provisions |
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|
382 |
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|
398 |
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8.9 |
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Other non current liabilities |
|
19 |
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|
5,689 |
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6,465 |
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145.1 |
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Total non-current liabilities |
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68,469 |
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73,581 |
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1,651.2 |
|
Total liabilities |
|
|
|
|
154,866 |
|
|
|
156,293 |
|
|
|
3,507.5 |
|
Net assets |
|
|
|
|
451,988 |
|
|
|
475,484 |
|
|
|
10,670.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
1,681 |
|
|
|
3,361 |
|
|
|
75.4 |
|
Security premium |
|
|
|
|
182,797 |
|
|
|
181,117 |
|
|
|
4,064.6 |
|
Other components of equity |
|
|
|
|
2,723 |
|
|
|
3,670 |
|
|
|
82.4 |
|
Retained earnings |
|
|
|
|
177,971 |
|
|
|
193,999 |
|
|
|
4,353.6 |
|
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
|
|
365,172 |
|
|
|
382,147 |
|
|
|
8,576.0 |
|
|
|
|
|
|
Non-Controlling
Interests |
|
|
|
|
86,816 |
|
|
|
93,337 |
|
|
|
2,094.7 |
|
|
|
|
|
|
Total Equity |
|
|
|
|
451,988 |
|
|
|
475,484 |
|
|
|
10,670.7 |
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
F-3
STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Indian Rupees in millions except share or per share amounts unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended September 30, |
|
|
2009 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. In |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxes |
|
|
28,554 |
|
|
|
36,105 |
|
|
|
810.2 |
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
3,913 |
|
|
|
4,701 |
|
|
|
105.5 |
|
|
|
|
|
Provision for doubtful debts/advances |
|
|
|
|
|
|
26 |
|
|
|
0.6 |
|
|
|
|
|
Fair valuation gain on financial assets held for trading |
|
|
(1,257 |
) |
|
|
(1,752 |
) |
|
|
(39.3 |
) |
|
|
|
|
Profit on sale of fixed asset, net |
|
|
|
|
|
|
(81 |
) |
|
|
(1.8 |
) |
|
|
|
|
Share in consolidated (profit) / loss of associate |
|
|
(1,398 |
) |
|
|
1,343 |
|
|
|
30.1 |
|
|
|
|
|
Exchange (gains)/loss, net |
|
|
264 |
|
|
|
(595 |
) |
|
|
(13.4 |
) |
|
|
|
|
Gain on fair valuation of conversion option |
|
|
|
|
|
|
(2,320 |
) |
|
|
(52.1 |
) |
|
|
|
|
Interest and dividend income |
|
|
(6,297 |
) |
|
|
(8,225 |
) |
|
|
(184.6 |
) |
|
|
|
|
Interest expenses |
|
|
1,602 |
|
|
|
1,174 |
|
|
|
26.3 |
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease/(Increase) in trade and other receivables |
|
|
2,496 |
|
|
|
(3,497) |
|
|
|
(78.4) |
|
|
|
|
|
(Increase) in inventories |
|
|
(10,939 |
) |
|
|
(12,061 |
) |
|
|
(270.6 |
) |
|
|
|
|
(Increase)/decrease in other current and non-current assets |
|
|
2,071 |
|
|
|
(1,764 |
) |
|
|
(39.6 |
) |
|
|
|
|
(Decrease) in trade and other payable |
|
|
5,152 |
|
|
|
(857 |
) |
|
|
(19.2 |
) |
|
|
|
|
(Decrease)/ Increase in other current and non-current liabilities |
|
|
(1,576 |
) |
|
|
58 |
|
|
|
1.3 |
|
|
|
|
|
Proceeds from short term investments |
|
|
1,429,732 |
|
|
|
227,730 |
|
|
|
5,110.6 |
|
|
|
|
|
Purchases of short term investments |
|
|
(1,504,534 |
) |
|
|
(201,787 |
) |
|
|
(4,528.4 |
) |
|
|
|
|
|
|
|
Cash generation/(used) from operation |
|
|
(52,217 |
) |
|
|
38,198 |
|
|
|
857.2 |
|
|
|
|
|
Interest paid |
|
|
(2,569 |
) |
|
|
(1,599 |
) |
|
|
(35.8 |
) |
|
|
|
|
Interest received |
|
|
2,932 |
|
|
|
6,194 |
|
|
|
139.0 |
|
|
|
|
|
Dividend received |
|
|
2,958 |
|
|
|
1,945 |
|
|
|
43.7 |
|
|
|
|
|
Income tax paid |
|
|
(5,059 |
) |
|
|
(6,897 |
) |
|
|
(154.7 |
) |
|
|
|
|
|
|
|
Net cash from (used)/ provided in operating activities |
|
|
(53,955 |
) |
|
|
37,841 |
|
|
|
849.4 |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(35,939 |
) |
|
|
(24,961 |
) |
|
|
(560.2 |
) |
|
|
|
|
Proceeds from sale of property, plant and equipment |
|
|
27 |
|
|
|
486 |
|
|
|
10.9 |
|
|
|
|
|
Loans repaid by related parties |
|
|
|
|
|
|
72,702 |
|
|
|
1,631.5 |
|
|
|
|
|
Loans to related parties |
|
|
(18,133 |
) |
|
|
(31,994 |
) |
|
|
(718.0 |
) |
|
|
|
|
Proceeds from short term deposits |
|
|
39,746 |
|
|
|
21,129 |
|
|
|
474.2 |
|
|
|
|
|
Purchases of short term deposits |
|
|
(11,577 |
) |
|
|
(71,433 |
) |
|
|
(1,603.1 |
) |
|
|
|
|
Net changes in restricted cash and cash equivalents |
|
|
(1,475 |
) |
|
|
(15 |
) |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(27,351 |
) |
|
|
(34,086 |
) |
|
|
(765.0 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of equity shares ,net |
|
|
76,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from/(repayment of) working capital loan, net |
|
|
4,000 |
|
|
|
2,152 |
|
|
|
48.3 |
|
|
|
|
|
Proceeds from/(repayment of) acceptances, net |
|
|
(8,666 |
) |
|
|
(401 |
) |
|
|
(9.0 |
) |
|
|
|
|
Repayment of other short term borrowings |
|
|
(2,294 |
) |
|
|
(2,000 |
) |
|
|
(44.9 |
) |
|
|
|
|
Proceeds from other short-term borrowings |
|
|
13,060 |
|
|
|
2,427 |
|
|
|
54.5 |
|
|
|
|
|
Proceeds from long-term borrowings |
|
|
5,473 |
|
|
|
978 |
|
|
|
21.9 |
|
|
|
|
|
Repayment of long-term borrowings |
|
|
(2,836 |
) |
|
|
(1,479 |
) |
|
|
(33.2 |
) |
|
|
|
|
Payment of dividends to equity holders of the parent, including dividend tax |
|
|
(3,437 |
) |
|
|
(3,674 |
) |
|
|
(82.5 |
) |
|
|
|
|
Payment of
dividends to Non-Controlling interest, including dividend tax |
|
|
(725 |
) |
|
|
(1,068 |
) |
|
|
(24.0 |
) |
|
|
|
|
|
|
|
Net cash
provided/(used) by financing activities |
|
|
81,107 |
|
|
|
(3,065 |
) |
|
|
(68.9 |
) |
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
370 |
|
|
|
33 |
|
|
|
0.7 |
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
171 |
|
|
|
723 |
|
|
|
16.2 |
|
|
|
|
|
Cash and cash equivalents at the beginning of the period |
|
|
2,701 |
|
|
|
2,021 |
|
|
|
45.4 |
|
|
|
|
|
Cash and cash equivalents at the end of the period |
|
|
2,872 |
|
|
|
2,744 |
|
|
|
61.6 |
|
|
|
|
|
|
|
|
Supplementary disclosure of non-cash investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables for purchase of property, plant and equipment |
|
|
17,263 |
|
|
|
19,360 |
|
|
|
434.5 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
F-4
STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
(Indian Rupees in millions except share or per share amounts unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity holders of the parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
sale |
|
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
Securities |
|
of foreign |
|
financial |
|
flow |
|
Retained |
|
|
|
|
|
Non-Controlling |
|
Total |
|
|
capital |
|
premium |
|
operations |
|
investments |
|
hedges |
|
earning |
|
Total |
|
Interest |
|
equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at April 1, 2009 |
|
|
1,417 |
|
|
|
106,532 |
|
|
|
(399 |
) |
|
|
(21 |
) |
|
|
830 |
|
|
|
142,174 |
|
|
|
250,533 |
|
|
|
70,070 |
|
|
|
320,603 |
|
Profit
for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,303 |
|
|
|
16,303 |
|
|
|
6,818 |
|
|
|
23,121 |
|
Exchange differences on translation of foreign operations |
|
|
|
|
|
|
|
|
|
|
1,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,437 |
|
|
|
|
|
|
|
1,437 |
|
Movement in available for sale financial investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181 |
|
|
|
|
|
|
|
|
|
|
|
181 |
|
|
|
|
|
|
|
181 |
|
Net movement in fair value of cash flow hedges, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184 |
|
|
|
|
|
|
|
184 |
|
|
|
86 |
|
|
|
270 |
|
Share in consolidated other comprehensive income of associate, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277 |
|
|
|
|
|
|
|
277 |
|
|
|
|
|
|
|
277 |
|
|
Total
comprehensive income for the period |
|
|
|
|
|
|
|
|
|
|
1,437 |
|
|
|
181 |
|
|
|
461 |
|
|
|
16,303 |
|
|
|
18,382 |
|
|
|
6,904 |
|
|
|
25,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Capital |
|
|
264 |
|
|
|
76,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,532 |
|
|
|
|
|
|
|
76,532 |
|
Dividend paid including tax on dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,437 |
) |
|
|
(3,437 |
) |
|
|
(725 |
) |
|
|
(4,162 |
) |
|
Balance
as at September 30, 2009 |
|
|
1,681 |
|
|
|
182,800 |
|
|
|
1,038 |
|
|
|
160 |
|
|
|
1,291 |
|
|
|
155,040 |
|
|
|
342,010 |
|
|
|
76,249 |
|
|
|
418,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at April 1, 2010 |
|
|
1,681 |
|
|
|
182,797 |
|
|
|
896 |
|
|
|
326 |
|
|
|
1,501 |
|
|
|
177,971 |
|
|
|
365,172 |
|
|
|
86,816 |
|
|
|
451,988 |
|
Profit for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,702 |
|
|
|
19,702 |
|
|
|
7,594 |
|
|
|
27,296 |
|
Exchange differences on translation of foreign operations |
|
|
|
|
|
|
|
|
|
|
338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
338 |
|
|
|
|
|
|
|
338 |
|
Movement in available for sale financial investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
|
|
|
|
44 |
|
Net movement in fair value of cash flow hedges, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
326 |
|
|
|
|
|
|
|
326 |
|
|
|
(5 |
) |
|
|
321 |
|
Share of other comprehensive income of associate, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239 |
|
|
|
|
|
|
|
239 |
|
|
|
|
|
|
|
239 |
|
|
Total
comprehensive income for the period |
|
|
|
|
|
|
|
|
|
|
338 |
|
|
|
44 |
|
|
|
565 |
|
|
|
19,702 |
|
|
|
20,649 |
|
|
|
7,589 |
|
|
|
28,238 |
|
|
Shares issued |
|
|
1,680 |
|
|
|
(1,680 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend paid including tax on dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,674 |
) |
|
|
(3,674 |
) |
|
|
(1,068 |
) |
|
|
(4,742 |
) |
|
Balance
as at September 30, 2010 |
|
|
3,361 |
|
|
|
181,117 |
|
|
|
1,234 |
|
|
|
370 |
|
|
|
2,066 |
|
|
|
193,999 |
|
|
|
382,147 |
|
|
|
93,337 |
|
|
|
475,484 |
|
|
Balance
as at September 30, 2010 (in US dollars in millions) |
|
|
75.4 |
|
|
|
4,064.6 |
|
|
|
27.7 |
|
|
|
8.3 |
|
|
|
46.4 |
|
|
|
4,353.6 |
|
|
|
8,576.0 |
|
|
|
2,094.7 |
|
|
|
10,670.7 |
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated interim
financial statements.
F-5
STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Company Overview
Sterlite Industries (India) Limited and its consolidated subsidiaries (the Company or Sterlite)
are engaged in non-ferrous metals and mining in India and Australia. Sterlite Industries (India)
Limited (SIIL) was incorporated on September 8, 1975 under the laws of the Republic of India.
SIILs shares are listed on National Stock Exchange and Bombay Stock Exchange in India. In June
2007, Sterlite completed its initial public offering of American Depositary Shares, or ADS, each
representing one equity share, and listed its ADSs on the New York Stock Exchange. In July 2009,
Sterlite completed its follow-on offering of an additional 131,906,011 ADSs, each representing one
equity share, which are listed on the New York Stock Exchange.
SIIL is a majority-owned subsidiary of Twin Star Holdings Limited (Twin Star) which is in turn a
wholly-owned subsidiary of Vedanta Resources plc (Vedanta), a public limited company incorporated
in the United Kingdom and listed on the London Stock Exchange plc. Twin Star held 54.6 % of SIILs
equity as of September 30, 2010.
The Companys copper business is principally one of custom smelting and includes a copper smelter,
a refinery, a phosphoric acid plant, a sulphuric acid plant, a copper rod plant and two captive
power plants at Tuticorin in Southern India, and a refinery and two copper rod plants at Silvassa
in Western India. In addition, the Company owns and operates the Mt. Lyell copper mine in Tasmania,
Australia through its subsidiary, Copper Mines of Tasmania Pty Ltd (CMT), which provides a small
percentage of the copper concentrate requirements, and a precious metal refinery in Fujairah in the
UAE.
The Companys zinc business is owned and operated by Hindustan Zinc Limited (HZL) in which it has
a 64.9% interest as of September 30, 2010. HZLs operations include four lead-zinc mines, four zinc
smelters, one lead smelter, one lead-zinc smelter, four sulphuric acid plants, a silver refinery
and five captive power plants in the State of Rajasthan in Northwest India, one zinc smelter and a
sulphuric acid plant in the State of Andhra Pradesh in Southeast India and a zinc ingot melting and
casting plant in the State of Uttarakhand in North India.
The Companys aluminum business is owned and operated by Bharat Aluminium Company Limited (BALCO)
in which it has a 51.0% interest as of September 30, 2010. BALCOs operations include two bauxite
mines, two power plants (of which one is used to produce power for captive consumption), and
refining, smelting and fabrication facilities in Central India.
The
Company owns 29.5% Non-Controlling interest in Vedanta Aluminium Limited (Vedanta Aluminium), 70.5%
owned subsidiary of Vedanta.
The Company acquired 100% shareholding of Sterlite Energy Limited (SEL) during fiscal 2007. SEL
is engaged in power generation business in India. SEL has commenced construction of its 2,400 MW
thermal coal-based commercial power facility in the State of Orissa in Eastern India.
In July 2008, following a competitive bidding process in which SEL was selected as the successful
bidder, SEL acquired 100% ownership interest in Talwandi Sabo Power Limited (TSPL), a company
created by the Punjab State Electricity Board of India for the purpose of undertaking a 1,980 MW
thermal coal-based commercial power project in the State of Punjab, India. TSPL is a development
stage enterprise in the process of constructing the power plant.
2. Basis of preparation of financial statements
Basis of preparation
These interim financial statements have been prepared in accordance with the accounting policies
that the Company had previously adopted in its annual financial statements for the fiscal year ending March 31, 2010. Those
accounting polices are based on IFRS and its interpretations. The policies set out below were consistently applied to all periods
presented unless otherwise noted.
F-6
Basis of measurement
The unaudited condensed consolidated interim financial statements have been prepared on a
historical cost basis and on an accrual cost basis, except for derivative financial instruments,
liquid investments, available-for-sale financial assets and defined benefit pension obligations
that have been measured at fair value.
Recently issued accounting pronouncements
a) At the date of authorization of these financial statements, the following standards interpretations
and amendments which have not been applied in these financial statements were in issue but were not
yet effective:
In May 2010, the IASB issued Improvements to IFRS a collection of amendments to
certain IFRSs as part of its program of annual improvements to its standards, which is intended
to make necessary, but non-urgent, amendments to standards that will not be included as part of
another major project. The amendments resulting from these improvements mainly have effective dates
for annual periods beginning on or after January 1, 2011 respectively, although
entities are permitted to adopt them earlier. The Company is currently evaluating the impact, if
any, the adoption of these improvements will have on the Companys consolidated financial
statements.
IFRS 3 (Revised 2008) Business Combinations
IFRS 7 Financial Instruments: Disclosures
IAS 1(Revised 2007) Presentation of Financial Statements
IAS 27 (Revised 2008) Consolidated and Separate Financial Statements
IAS 34 Interim Financial Reporting
IFRS 9, Financial Instruments
In November 2009, the International Accounting Standards Board issued IFRS 9, Financial
Instruments: Recognition and Measurement, to reduce the complexity of the current rules on
financial instruments as mandated in IAS 39, Financial Instruments: Recognition and Measurement:
Eligible Hedged Items. The effective date for IFRS 9 is annual periods beginning on or after
January 1, 2013 with early adoption permitted. 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 recognized in other
comprehensive income would ever be reclassified to profit or loss. The Company is currently evaluating the
requirements of IFRS 9, and has not yet determined the impact on its unaudited condensed
consolidated interim financial statements.
F-7
(b) Standards adopted by the Company during the period ended September 30, 2010 is as below
:
(i) IFRS 3 (Revised 2008), Business Combinations is applicable for annual periods beginning on
or after July 1, 2009. This standard was adopted by the company from April 1, 2010. Business
Combinations consummated after April 1, 2010 will be impacted by this standard. IFRS 3 (Revised)
primarily requires the acquisition-related costs to be recognized as period expenses in accordance
with the relevant IFRS. Costs incurred to issue debt or equity securities are required to be
recognized in accordance with IAS 39. Consideration, after this amendment, will include fair values
of all interests previously held by the acquirer. Re-measurement of such interests to fair value
would be carried out through net profit in the statement of comprehensive income. Contingent
consideration is required to be recognized at fair value even if not deemed probable of payment at
the date of acquisition
IFRS 3 (Revised) provides an explicit option on a transaction-by-transaction basis, to measure
any Non-controlling interest (NCI) in the entity acquired at fair value of their proportion of
identifiable assets and liabilities or at full fair value. The first method will result in a
marginal difference in the measurement of goodwill from the old IFRS 3; however the second approach
will require recording goodwill on NCI as well as on the acquired controlling interest. Upon
consummating a business transaction in future the company is likely to adopt the first method for
measuring NCI. The revised standard has no impact on the Company in these financial statements
since there are no business combinations consummated during the half year ended September 30, 2010.
(ii) IAS 27 (Revised 2008), Consolidated and Separate Financial Statements is applicable
for annual periods beginning on or after July 1, 2009. This standard was adopted by the company
from April 1, 2010. It requires a mandatory adoption of economic entity model which treats all
providers of equity capital as shareholders of the entity. Consequently, a partial disposal of
interest in a subsidiary in which the parent company retains control does not result in a gain or
loss but in an increase or decrease in equity. Additionally purchase of some or all of the NCI is
treated as treasury transaction and accounted for in equity and a partial disposal of interest in a
subsidiary in which the parent company loses control triggers recognition of gain or loss on the
entire interest. A gain or loss is recognized on the portion that has been disposed off and a
further holding gain is recognized on the interest retained, being the difference between the fair
value and carrying value of the interest retained. This Standard requires an entity to attribute
their share of net profit and reserves to the NCI even if this results in the NCI having a deficit
balance. The revised standard has no impact on the Company in these financial statements since
there is no disposal of subsidiary nor purchase of the NCI during the half year ended September
30, 2010.
Going concern
The unaudited condensed consolidated interim financial statements have been prepared in accordance
with the going concern basis of accounting.
Convenience translation
The accompanying unaudited condensed consolidated interim financial statements are presented in
Indian Rupee, the functional and presentational currency of the Company. Solely for the convenience
of the readers, the unaudited condensed consolidated financial statements as of and for the period
ended September 30, 2010 have been translated into US dollars ($) at the noon buying rate of
$1.00 = Rs. 44.56 in the City of New York for cable transfers of Indian Rupee as certified for
customs purposes by the Federal Reserve Bank of New York on September 30, 2010. No representation
is made that the Indian Rupee amounts represent US dollar amounts or have been, could have been or
could be converted into US dollars at such a rate or any other rate.
F-8
3. Significant accounting policies
A. Basis of consolidation
The unaudited condensed consolidated interim financial statement incorporates the results of SIIL
and all its subsidiaries, being the entities that it controls. This control is normally evidenced
when SIIL is able to govern an entitys financial and operating policies so as to benefit from its
activities or where SIIL owns, either directly or indirectly, the majority of an entitys equity
voting rights unless in exceptional circumstances it can be demonstrated that ownership does not
constitute control.
The results of subsidiaries acquired or sold during the period are consolidated for the periods
from, or to, the date on which control passed. The financial statements of subsidiaries are
prepared for the same reporting period as the parent company, using consistent accounting policies.
Adjustments are made to bring any dissimilar accounting policies that may exist in line with
Companys policy.
Intra-group balances and transactions, and any unrealized income and expenses arising from
intra-group transactions, have been eliminated in preparing the unaudited condensed consolidated
interim financial statements. Unrealized losses are eliminated unless costs cannot be recovered.
B. Investments in Associates
Investments in associates are accounted for using the equity method. An associate is an entity over
which the Company is in a position to exercise significant influence over operating and financial
policies and normally owns between 20% and 50% of the voting equity but is neither a subsidiary nor
a joint venture. Goodwill arising on the acquisition of associates is accounted for in accordance
with the policy set out above and is included in the carrying value of investments in associate.
Investment in associates is initially recorded at the cost to the Company and then, in subsequent
periods, the carrying value is adjusted to reflect the Companys share of the associates
consolidated profits or losses, other changes to the associates net assets and is further adjusted
for impairment losses, if any. The consolidated statements of income and comprehensive income
includes the Companys share of associates results, except where the associate is generating
losses, the Companys investments in the associate has been written down to zero and the Company
has no legal or constructive obligation to make any payments on behalf of the associate.
Unrealized gains arising from transactions with associates are eliminated against the investment to
the extent of the Companys interest in the associate. Unrealized losses are eliminated in the same
way as unrealized gains, but only to the extent that there is no evidence of impairment of the
asset transferred.
C.Revenue Recognition
Revenues are measured at the fair value of the consideration received or receivable, net of
discounts, volume rebates, outgoing sales taxes, excise duty and other indirect taxes.Revenues are
recognised when all significant risks and rewards of ownership of the asset sold are transferred to
the customer and the commodity has been generally delivered to the shipping agent. Revenues from
sale of material by-products are included in revenue.
Dividend income is recognised when the shareholders right to receive payment is established.
Interest income is recognised using an effective interest method.
Certain of our sales contracts provide for provisional pricing based on the price on The London
Metal Exchange Limited (LME), as specified in the contract, when shipped. Final settlement of the
prices is based on the applicable price for a specified future period. The Companys provisionally
priced sales are marked to market using the relevant forward prices for the future period specified
in the contract and same is adjusted in revenue.
D. Business Combinations
Acquisitions are accounted for under the purchase method. The acquirers identifiable assets,
liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3, are
recognized at their fair value at the acquisition date.
Excess purchase consideration, being the difference between the fair value of the consideration
given and the fair value of the identifiable assets and liabilities acquired, is is recorded as
goodwill. Goodwill arising on acquisitions is reviewed for impairment annually.Where the fair
values of the identifiable assets and liabilities exceed the cost of acquisition, the surplus is
credited to the statement of income in the period of acquisition. Where it is not possible to
complete the determination of fair values by the date on which the first post-acquisition financial
statements are approved, a provisional assessment of fair value is made and any adjustments
required to those provisional fair values, and the corresponding adjustments to purchased goodwill,
are finalized within 12 months of the acquisition date.
F-9
Internally generated goodwill is not recognized.
The
interest of Non-Controlling shareholders in the acquiree is initially measured at the Non-Controlling
interests proportion of the net fair value of the assets, liabilities and contingent liabilities
recognised.
E. Property, Plant and Equipment
(i). Mining Properties
Exploration and evaluation expenditure is written off in the period in which it is incurred.
The costs of mining properties, which include the costs of acquiring and developing mining
properties and mineral rights, are capitalised as property, plant and equipment under the heading
Mining properties in the period in which they are incurred.
When a decision is taken that a mining property is viable for commercial production, all further
pre-production primary development expenditure other than land, buildings, plant and equipment, etc
is capitalised as part of the cost of the mining property until the mining property is capable of
commercial production. From that point, capitalised mining properties are amortized on a
unit-of-production basis over the total estimated remaining commercial reserves of each property or
group of properties.
Exploration and evaluation assets acquired are recognised as assets at their cost of acquisition
subject to meeting the commercial production criteria mentioned above and are subject to impairment
review.
Stripping costs/secondary development expenditure incurred during the production stage of
operations of an ore body is charged to the statement of income immediately.
In circumstances where a property is abandoned, the cumulative capitalized costs relating to the
property are written off in the period.
Commercial reserves are proved and probable reserves. Changes in the commercial reserves affecting
unit of production calculations are dealt with prospectively over the revised remaining reserves.
(ii). Other Property, Plant and Equipment
The initial cost of property, plant and equipment comprises its purchase price, including import
duties and non-refundable purchase taxes, and any directly attributable costs of bringing an asset
to working condition and location for its intended use. It also includes the initial estimate of
the costs of dismantling and removing the item and restoring the site on which it is located.
Expenditure incurred after the property, plant and equipment have been put into operation, such as
repairs and maintenance, are normally charged to the statement of income in the period in which the
costs are incurred. Major inspection and overhaul expenditure is capitalized.
(iii). Assets in the Course of Construction
Assets in the course of construction are capitalized in the assets under construction account. At
the point when an asset is capable of operating in the manner intended by management, the cost of
construction is transferred to the appropriate category of property, plant and equipment. Costs
associated with the commissioning of an asset are capitalised until the period of commissioning has
been completed and the asset is ready for its intended use.
F-10
(iv). Depreciation
Mining properties and other assets in the course of development or construction, freehold land and
goodwill are not depreciated. Capitalised mining properties costs are amortised once commercial
production commences, as described in Property, Plant and Equipment Mining Properties.
Other buildings, plant and equipment, office equipment and fixtures, and motor vehicles are stated
at cost less accumulated depreciation and any provision for impairment. Depreciation commences when
the assets are ready for their intended use. Depreciation is provided at rates calculated to write
off the cost, less estimated residual value, of each asset on a straight-line basis over its
expected useful life, as follows:
|
|
|
|
|
|
|
Buildings: |
|
|
|
|
|
Operations |
|
30 years |
|
Administration |
|
50 years |
|
Plant and equipment |
|
10 20 years |
|
Office equipment and fixtures |
|
3 20 years |
|
Motor vehicles |
|
9 11 years |
Major inspection and overhaul costs are depreciated over the estimated life of the economic benefit
derived from such costs. The carrying amount of the remaining previous overhaul cost is charged to
the statement of income if the next overhaul is undertaken earlier than the previously estimated
life of the economic benefit.
The Company reviews the residual value and useful life of an asset at least at each financial
year-end and, if expectations differ from previous estimates, the change(s) is accounted for as a
change in accounting estimate.
F .Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount
will be recovered through a sale transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the asset (or disposal group) is
available for immediate sale in its present condition. Management must be committed to the sale
which should be expected to qualify for recognition as a completed sale within one year from the
date of classification.
Non-current assets and disposal groups classified as held for sale are not depreciated and are
measured at the lower of carrying amount and fair value less costs to sell. Such assets and
disposal groups are presented separately on the face of the statement of financial position.
G. Financial Instruments
(i). Non-derivative financial assets
The Company initially recognises loans and receivables and deposits on the date that they are
originated. All other financial assets are recognised initially on the trade date at which the
Company becomes a party to the contractual provisions of the instrument.
The Company derecognises a financial asset when the contractual rights to the cash flows from the
asset expire, or it transfers the rights to receive the contractual cash flows on the financial
asset in a transaction in which substantially all the risks and rewards of ownership of the
financial asset are transferred.
Financial assets and liabilities are offset and the net amount presented in the statement of
financial position when, and only when, the Company has a legal right to offset the amounts and
intends either to settle on a net basis or to realise the asset and settle the liability
simultaneously.
The Company has the following non-derivative financial assets: financial asset investments,
short-term investments, cash and cash equivalents, loans and receivables.
(a). Financial asset investments
Financial asset investments are classified as available for sale and are initially recorded at cost
and then remeasured at subsequent reporting dates to fair value. Unrealized gains and losses on
financial asset investments are recognised directly in other comprehensive income. Upon disposal or
impairment of the investments, the gains and losses in other comprehensive income are recycled into
the statement of income.
F-11
Investments in unquoted equity instruments that do not have a market price and whose fair value
cannot be reliably measured are measured at cost. Equity investments are recorded in non-current
assets unless they are expected to be sold within one year.
(b). Short term investments
Short term investments represent short-term marketable securities and other bank deposits with an
original maturity between three to twelve months.
Short-term marketable securities are categorized as held for trading and are initially recognised
at fair value with any gains or losses arising on remeasurement recognised in the statement of
income.
(c). Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand,
and short-term deposits which have a maturity of three months or less from the date of acquisition.
(d). Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are
not quoted in an active market are classified as loans and receivables. Trade receivables are
stated at their transaction value as reduced by appropriate allowances for estimated irrecoverable
amounts. The allowance accounts in respect of loans and receivables are used to record impairment
losses unless the Company is satisfied that no recovery of
the amount owing is possible; at that point the amounts are considered irrecoverable and are
written off against the loans and receivables directly.
Loans and other receivables are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the effective interest rate, except
for short term receivables when the interest would be immaterial.
(ii). Non-derivative financial liabilities
The Company initially recognises debt securities issued and subordinated liabilities on the date
that they are originated. All other financial liabilities are recognised initially on the trade
date at which the Company becomes a party to the contractual provisions of the instrument.
The Company derecognises a financial liability when its contractual obligations are discharged or
cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the statement of
financial position when, and only when, the Company has a legal right to offset the amounts and
intends either to settle on a net basis or to realise the asset and settle the liability
simultaneously.
The Company has the following non-derivative financial liabilities: Borrowings, Foreign currency
convertible notes, trade and other payables.
(a). Borrowings
Interest bearing loans and borrowings are initially recorded at the proceeds received. After
initial recognition, interest bearing loans and borrowings are subsequently measured at amortised
cost using the effective interest rate method. Gains and losses are recognised in the statement of
income when the liabilities are derecognised as well as through the effective interest rate method
(EIR) amortisation process.
Amortised cost is calculated by taking into account the finance charges, including premiums payable
on settlement or redemption and direct issue costs that are an integral part of the EIR. The EIR
amortisation is included in finance costs in the statement of income. The unamortised portion is
classified with the carrying amount of debt.
(b). Foreign currency convertible notes
Convertible notes issued in foreign currency are convertible at the option of the holder into
ordinary shares of the Company according to the terms of the issue. The conversion option which is
not settled by exchanging a fixed amount of cash for a fixed number of shares is accounted for
separately from the liability component as derivative and initially accounted for at fair value.
The liability component is recognized initially at the difference between the fair value of the
note and the fair value of the conversion option. Directly attributable notes issue costs are
allocated to the liability component and the conversion option in proportion to their initial
carrying amounts.
F-12
Subsequent to initial recognition, the liability component is measured at amortized cost using the
effective interest method. The conversion option is subsequently measured at fair value at each
reporting date, with changes in fair value recognized in statement of income. The conversion option
is presented together with the related liability.
(c). Trade and other payables
Trade and other payables are recognised at their transaction cost, which is its fair value, and
subsequently measured at amortised cost.
(iii). Derivative financial instruments
In order to hedge its exposure to foreign exchange, interest rate and commodity price risks, the
Company enters into forward, option, swap contracts and other derivative financial instruments. The
Company does not hold derivative financial instruments for speculative purposes.
Derivative financial instruments are initially recorded at their fair value on the date of the
derivative transaction and are re-measured at their fair value at subsequent financial position
dates.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are
recognised in profit or loss immediately, together with any changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk. Hedge accounting is discontinued when
the Company revokes the hedge relationship, the hedging instrument expires or is sold, terminated,
or exercised or no longer meets the criteria for hedge accounting,
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges are recorded in other comprehensive income. The gain or loss relating to the
ineffective portion is recognized immediately in the statement of income. The cumulative gain or
loss previously recognized in other comprehensive income remains there until the forecast
transaction occurs. When the hedged item is a non-financial asset, the amount recognized in other
comprehensive income is transferred to the carrying amount of the asset when it is recognized. In
other cases the amount recognized in other comprehensive income is transferred to profit or loss in
the same period that the hedged item affects profit or loss. However, when a hedge of a forecast
transaction subsequently results in recognition of a
non financial asset, the associated cumulative gains and losses previously deferred in equity are
transferred from equity and included in the initial measurement of the cost of that asset. Hedge
accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised,
or no longer qualifies for hedge accounting. If a hedged transaction is no longer expected to
occur, the net cumulative gain or loss recognized in the other comprehensive income is transferred
to statement of income.
Derivative financial instruments that do not qualify for hedge accounting are marked to market at
the financial position date and gains or losses are recognized in the statement of income
immediately.
Derivatives embedded in other financial instruments or other host contracts are treated as separate
derivatives when their risks and characteristics are not closely related to those of host contracts
and the host contracts are not carried at fair value with unrealised gains or losses reported in
the statement of income.
H. Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity instruments issued by the Company are recognised at
the proceeds received, net of direct issue costs.
I. Borrowing costs
Borrowing costs directly relating to the acquisition, construction or production of a qualifying
capital project under construction are capitalized and added to the project cost during
construction until such time that the assets are substantially ready for their intended use i.e.
when they are capable of commercial production. Where funds are borrowed specifically to finance a
project, the amount capitalized represents the actual borrowing costs incurred. Where surplus funds
are available out of money borrowed specifically to finance a project, the income generated from
such short term investments is also capitalised and deducted from the total capitalised borrowing
cost. Where the funds used to finance a project form part of general borrowings, the amount
capitalized is calculated using a weighted average of rates applicable to relevant general
borrowings of the Company during the period.
All other borrowing costs are recognized in the statement of income in the period in which they are
incurred.
F-13
J. Impairment
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective
evidence that it is impaired. A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated future cash flows of
that asset.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the
difference between its carrying amount, and the present value of the estimated future cash flows
discounted at the original effective interest rate. An impairment loss in respect of an
available-for-sale financial asset is calculated by reference to its fair value.
Significant financial assets are tested for impairment on an individual basis. The remaining
financial assets are assessed collectively in groups that share similar credit risk
characteristics. All impairment losses are recognized in the statement of income. Any cumulative
loss in respect of an available-for-sale financial asset recognized previously in other
comprehensive income is transferred to the statement of income on recognition of impairment. An
impairment loss is reversed if the reversal can be related objectively to an event occurring after
the impairment loss was recognized. For financial assets measured at amortized cost and
available-for-sale financial assets that are debt securities, the reversal is recognized in the
statement of income. For available-for-sale financial assets that are equity securities, the change in fair value is recognized directly in other comprehensive income.
The allowance accounts in respect of trade and other receivables are used to record impairment
losses unless the Company is satisfied that no recovery of the amount owing is possible; at that
point the amounts are considered irrecoverable and are written off against the financial asset
directly.
Non-financial assets
The carrying amounts of the Companys non-financial assets, other than inventories and deferred tax
assets are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the assets recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and
its fair value less costs to sell. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets
or groups of assets (the cash-generating unit).
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit
exceeds its estimated recoverable amount.
Impairment losses are recognized in the statement of income. Impairment losses recognized in prior
periods are assessed at each reporting date for any indications that the loss has decreased or no
longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the
assets carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been recognized.
K. Government grants
Government grants are not recognised until there is a reasonable assurance that the Company will
comply with the conditions attaching to them and that the grants will be received. Government
grants relating to tangible fixed assets are treated as deferred income and released to the
statement of income over the expected useful lives of the assets concerned. Other grants are
credited to the statement of income as and when the related expenditure is incurred.
L. Inventories
Inventories including work-in-progress are stated at the lower of cost and net realisable value,
less any provision for obsolescence. Cost is determined on the following bases:
|
|
|
purchased copper concentrate is recorded at cost on a first-in, first-out (FIFO) basis;
all other materials including stores and spares are valued on a weighted average basis;
|
F-14
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|
|
finished products are valued at raw material cost plus costs of conversion, comprising
labour costs and an attributable proportion of manufacturing overheads based on normal
levels of activity and are moved out of inventory on a FIFO basis; and
|
|
|
|
|
by-products and scrap are valued at net realisable value
|
Net realisable value is determined based on estimated selling price, less further costs expected to
be incurred to completion and disposal.
M.Taxation
Tax expense represents the sum of current tax and deferred tax.
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws
that have been enacted or substantively enacted by the reporting date and includes any adjustment
to tax payable in respect of previous years. In interim period income tax expense is accrued using
the tax rate that would be applicable to expected total annual earnings. Such estimated average
annual effective income tax rate is applied to the pre-tax income of the interim period.
Subject to exceptions below, deferred tax is provided, using the balance sheet method, on all
temporary differences at the reporting date between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes:
|
|
|
tax payable on the future remittance of the past earnings of subsidiaries where the
timing of the reversal of the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the foreseeable future;
|
|
|
|
|
deferred income tax is not recognised on goodwill which is not deductible for tax
purposes or on the initial recognition of an asset or liability in a transaction that is
not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
|
|
|
|
|
deferred tax assets are recognised only to the extent that it is more likely than not that
they will be recovered.
|
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the reporting date. Tax relating to items recognized
directly in other comprehensive income is recognised in other comprehensive income and not in the
statement of income.
The carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to
the extent that it is no longer probable that sufficient taxable profit will be available to allow
all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same
taxation authority and the relevant entity intends to settle its current tax assets and liabilities
on a net basis.
N. Retirement benefit schemes
The Company operates or participates in a number of defined benefits and defined contribution
pension schemes, the assets of which are (where funded) held in separately administered funds. For
defined benefit pension schemes, the cost of providing benefits under the plans is determined
separately each year for each plan using the projected unit credit method by independent qualified
actuaries.
Actuarial gains and losses arising in the year are recognised in full in the statement of income
for the year. For defined contribution schemes, the amount charged to the statement of income in
respect of pension costs and other post-retirement benefits is the contributions payable in the
year.
O. Share based payments
SIIL does not have any outstanding share based payments. Vedanta offers certain share based
incentives under the Long-Term Incentive Plan (LTIP) to employees and directors of SIIL and its
subsidiaries. Vedanta recovers the proportionate cost (calculated based on the grant date fair
value of the options granted) from the respective group companies, which is charged to the
statement of income.
F-15
P. Provisions for liabilities and charges
Provisions represent liabilities to the Company for which the amount or timing is uncertain.
Provisions are recognized when the Company has a present obligation (legal or constructive), as a
result of past events, and it is probable that an outflow of resources, that can be reliably
estimated, will be required to settle such an obligation. If the effect of the time value of money
is material, provisions are determined by discounting the expected future cash flows to net present
value using an appropriate pre-tax discount rate that reflects current market assessments of the
time value of money and, where appropriate, the risks specific to the liability. Unwinding of the
discount is recognized in the statement of income as a finance cost. Provisions are reviewed at
each reporting date and are adjusted to reflect the current best estimate.
Q. Restoration, rehabilitation and environmental costs
An obligation to incur restoration, rehabilitation and environmental costs arises when
environmental disturbance is caused by the development or ongoing production of a mine. Such costs,
discounted to net present value, are provided for and a corresponding amount is capitalised at the
start of each project, as soon as the obligation to incur such costs arises. These costs are
charged to the statement of income over the life of the operation through the depreciation of the
asset and the unwinding of the discount on the provision. The cost estimates are reviewed
periodically and are adjusted to reflect known developments which may have an impact on the cost
estimates or life of operations. The cost of the related asset is adjusted for changes in the
provision due to factors such as updated cost estimates, changes to lives of operations, new
disturbance and revisions to discount rates. The adjusted cost of the asset is depreciated
prospectively over the lives of the assets to which they relate. The unwinding of the discount is
shown as a finance and other cost in the statement of income.
Costs for the restoration of subsequent site damage, which is caused on an ongoing basis during
production, are charged to the statement of income as extraction progresses. Where the costs of
site restoration are not anticipated to be material, they are expensed as incurred.
R. Foreign currency translation
The functional currency for each entity in the Company is determined as the currency of the primary
economic environment in which it operates. For all principal operating subsidiaries, the functional
currency is the local currency of the country in which it operates.
In the financial statements of individual group companies, transactions in currencies other than
the functional currency are translated into the functional currency at the exchange rates ruling at
the date of the transaction. Monetary assets and liabilities denominated in other currencies are
translated into the functional currency at exchange rates prevailing on the reporting date.
Non-monetary assets and liabilities denominated in other currencies and measured at historical cost
or fair value and are translated at the exchange rates prevailing on the dates on which such values
were determined. All exchange differences are included in the statement of income except any
exchange differences on monetary items designated as an effective hedging instrument of the
currency risk of designated forecasted sales, which are recognized in other comprehensive income.
For the purposes of the consolidated financial statements, items in the statement of income of
those entities for which the Indian Rupees (functional currency of SIIL) is not the functional
currency are translated into Indian Rupees at the average rates of exchange during the year. The
related statements of financial position are translated at the rates as at the reporting date. Exchange differences arising on translation are
recognised in other comprehensive income. On disposal of such entities the deferred cumulative
exchange differences recognised in equity relating to that particular foreign operation are
recognised in the statement of income.
S. Earnings per share
The Company presents basic and diluted earnings per share (EPS) data for its equity shares. Basic
EPS is calculated by dividing the profit or loss attributable to equity shareholders of SIIL by the
weighted average number of equity shares outstanding during the period. Diluted EPS is determined
by adjusting the profit or loss attributable to equity shareholders and the weighted average number
of equity shares outstanding for the effects of all dilutive potential equity shares.
F-16
T. Critical accounting judgments and estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions, that affect the application of accounting policies and the
reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and
liabilities at the date of these consolidated financial statements and the reported amounts of
revenues and expenses for the years presented. Actual results may differ from these estimates under
different assumptions and conditions
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and future periods
affected.
In particular, information about significant areas of estimation uncertainty and critical judgments
in applying accounting policies that have the most significant effect on the amounts recognized in
the financial statements are included in the following accounting policies and/or notes:
i. |
|
Note 8 and the accounting policy on property, plant and equipments- Mining reserve estimates
and useful life of property, plant and equipment. |
ii. Note 17 and the accounting policy on impairment of assets: In assessing the property, plant and
equipment for impairment, factors leading to significant reduction in profits such as changes in
commodity prices, the Companys business plans and significant downward revision in the estimated
mining reserves are taken into consideration. The carrying value of the assets of a cash generating
unit (CGU) and associated mining reserves is compared with the recoverable amount of those assets,
that is, the higher of fair value less costs to sell and value in use. Value in use is usually
determined on the basis of discounted estimated future cash flows. This involves management
estimates on commodity prices, market demand and supply, economic and regulatory climates, long
term mine plan and other factors. Any subsequent changes to cash flow due to changes in the
abovementioned factors could impact on the carrying value of the assets.
iii. |
|
Accounting policy on restoration, rehabilitation and environmental costs: |
Provision is made for costs associated with restoration and rehabilitation of mining sites as soon
as the obligation to incur such costs arises. Such restoration and closure costs are typical of
extractive industries and they are normally incurred at the end of the life of the mine. The costs
are estimated on the basis of mine closure plans and the estimated discounted costs of dismantling
and removing these facilities and the costs of restoration are capitalized when incurred reflecting
ourobligations at that time. A corresponding provision is created on the liability side. The
capitalized asset is charged to the income statement over the life of the asset through
depreciation over the life of the operation and the provision is increased each period via
unwinding the discount on the provision. Management estimates are based on local legislation and/or
other agreements. The actual costs and cash outflows may differ from estimates because of changes
in laws and regulations, changes in prices, analysis of site conditions and changes in restoration
technology.
iv. |
|
Accounting policy on retirement benefit schemes |
|
v. |
|
Note 26 and 29 Contingencies: |
The Company also has significant capital commitments in relation to various capital projects which
are not recognized on the statement of financial positions. In the normal course of business,
contingent liabilities may arise from litigation and other claims against the Company. Guarantees
are also provided in the normal course of business. There are certain obligations which management
has concluded, based on all available facts and circumstances, are not probable of payment or are
very difficult to quantify reliably, and such obligations are treated as contingent liabilities and
disclosed in the notes but are not reflected as liabilities in the consolidated financial
statements. Although there can be no assurance regarding the final outcome of the legal proceedings
in which Company involved, it is not expected that such contingencies will have a materially
adverse effect on its financial position or profitability.
vi. |
|
Note 7 and accounting policy on taxation: |
In preparing consolidated financial statements, the Company recognises income taxes in each of the
jurisdictions in which it operate. There are many transactions and calculations for which the
ultimate tax determination is uncertain. The Company recognises liabilities for anticipated tax
audit issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the current and deferred income tax assets and liabilities in the period in
which such determination is made.
vii. |
|
Note 9 on investments in associates: |
Consequent
to ongoing delay in approval for the Niyamgiri mines, the Company has
reviewed the carrying value of its investments in Vedanta Aluminium
for impairment, and has concluded that no impairment is necessary
based on possible alternate sources of obtaining bauxite.
F-17
4. Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended September 30, |
|
|
2009 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Gross revenue |
|
|
111,201 |
|
|
|
128,374 |
|
|
|
2,880.9 |
|
Less: excise duty |
|
|
(5,470 |
) |
|
|
(8,846 |
) |
|
|
(198.5 |
) |
|
|
|
Revenue, net of excise duty |
|
|
105,730 |
|
|
|
119,528 |
|
|
|
2,682.4 |
|
|
|
|
5. Investment and other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended September 30, |
|
|
2009 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Dividend income on financial assets held for trading |
|
|
2,958 |
|
|
|
2,267 |
|
|
|
50.9 |
|
Fair value gain on financial assets held for trading |
|
|
1,257 |
|
|
|
1,752 |
|
|
|
39.3 |
|
Interest income on bank deposits |
|
|
84 |
|
|
|
1,906 |
|
|
|
42.8 |
|
Interest income on loans and receivables |
|
|
3,220 |
|
|
|
4,040 |
|
|
|
90.7 |
|
Foreign exchange gain /(loss) |
|
|
1,482 |
|
|
|
180 |
|
|
|
4.0 |
|
Capitalisation of interest income(1) |
|
|
(54 |
) |
|
|
(44 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
8,947 |
|
|
|
10,101 |
|
|
|
226.7 |
|
|
|
|
|
|
|
Notes: |
|
(1) |
|
Capitalisation of interest income relates to the income from temporary surplus funds,
specifically borrowed to acquire/ construct qualifying assets. |
6. Finance and other costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended September 30, |
|
|
2009 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Interest on borrowings other than convertible notes |
|
|
(1,433 |
) |
|
|
(733 |
) |
|
|
16.4 |
|
Interest on convertible notes |
|
|
|
|
|
|
(939 |
) |
|
|
21.1 |
|
Bank charges |
|
|
(223 |
) |
|
|
(189 |
) |
|
|
4.3 |
|
Unwinding of discount on provisions |
|
|
(5 |
) |
|
|
(8 |
) |
|
|
0.2 |
|
Gain on fair valuation of conversion option |
|
|
|
|
|
|
2,320 |
|
|
|
(52.1 |
) |
Foreign exchange (loss)/gain |
|
|
(1,997 |
) |
|
|
195 |
|
|
|
(4.4 |
) |
Others |
|
|
(208 |
) |
|
|
(462 |
) |
|
|
10.4 |
|
Capitalisation of finance costs(1) |
|
|
607 |
|
|
|
1,577 |
|
|
|
(35.4 |
) |
|
|
|
|
|
|
(3,259 |
) |
|
|
1,761 |
|
|
|
(39.5 |
) |
|
|
|
|
|
|
Notes: |
|
(1) |
|
Capitalisation of finance costs relates to funds borrowed both specifically and generally to
acquire/ construct qualifying assets. The rate for capitalisation of interest relating to
general borrowings was approximately NIL and 12.69% for the period ended September 30, 2009
and 2010 respectively. |
|
(2) |
|
Finance costs include Rs.1,433 million and Rs. 1,672 million ($37.5 million) in respect of
financial liabilities which are carried at amortised cost using the effective interest rate
method for the period ended September 30, 2009 and 2010 respectively. |
F-18
7. Tax expenses
The following are the details of tax expenses charged to the statement of income for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six-month period ended September 30, |
|
|
2009 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Current tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Current tax on the profit for the period |
|
|
4,663 |
|
|
|
8,317 |
|
|
|
186.7 |
|
Credits in respect of current tax for earlier Period |
|
|
175 |
|
|
|
46 |
|
|
|
1.0 |
|
|
|
|
Total current tax |
|
|
4,838 |
|
|
|
8,363 |
|
|
|
187.7 |
|
|
|
|
Deferred tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of temporary differences |
|
|
595 |
|
|
|
446 |
|
|
|
10.0 |
|
|
|
|
Total deferred tax |
|
|
595 |
|
|
|
446 |
|
|
|
10.0 |
|
|
|
|
Tax expense for the period |
|
|
5,433 |
|
|
|
8,809 |
|
|
|
197.7 |
|
Effective income tax rate (%) |
|
|
19.0 |
|
|
|
24.4 |
|
|
|
24.4 |
|
F-19
8. Property, plant and equipments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US dollar in |
|
|
Rs. In millions |
|
millions |
|
|
|
|
|
|
Land |
|
|
|
|
|
|
|
|
|
Office |
|
|
|
|
|
|
Mining |
|
and |
|
Plant and |
|
Motor |
|
equipments |
|
|
|
|
|
|
property |
|
Building |
|
equipments |
|
vehicles |
|
and fixtures |
|
Total |
|
Total |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2010 |
|
|
17,435 |
|
|
|
14,350 |
|
|
|
143,127 |
|
|
|
372 |
|
|
|
2,684 |
|
|
|
177,968 |
|
|
|
3993.9 |
|
Additions |
|
|
|
|
|
|
857 |
|
|
|
5,748 |
|
|
|
25 |
|
|
|
258 |
|
|
|
6,888 |
|
|
|
154.6 |
|
Disposals/adjustments* |
|
|
|
|
|
|
(26 |
) |
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(4 |
) |
|
|
(38 |
) |
|
|
(0.9 |
) |
Foreign exchange |
|
|
221 |
|
|
|
(1 |
) |
|
|
106 |
|
|
|
1 |
|
|
|
10 |
|
|
|
337 |
|
|
|
7.6 |
|
|
September 30, 2010 |
|
|
17,656 |
|
|
|
15,180 |
|
|
|
148,980 |
|
|
|
391 |
|
|
|
2,948 |
|
|
|
185,155 |
|
|
|
4,155.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2010 |
|
|
10,186 |
|
|
|
3,361 |
|
|
|
48,175 |
|
|
|
133 |
|
|
|
1,356 |
|
|
|
63,211 |
|
|
|
1,418.6 |
|
Charge for the period |
|
|
445 |
|
|
|
203 |
|
|
|
3,951 |
|
|
|
15 |
|
|
|
73 |
|
|
|
4,687 |
|
|
|
105.2 |
|
Disposals/adjustments* |
|
|
|
|
|
|
(3 |
) |
|
|
8 |
|
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(1 |
) |
|
|
|
|
Foreign exchange |
|
|
221 |
|
|
|
0 |
|
|
|
104 |
|
|
|
1 |
|
|
|
10 |
|
|
|
336 |
|
|
|
7.5 |
|
|
September 30, 2010 |
|
|
10,852 |
|
|
|
3,561 |
|
|
|
52,238 |
|
|
|
147 |
|
|
|
1,435 |
|
|
|
68,233 |
|
|
|
1,531.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plants and equipment as at: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2010 |
|
|
7,249 |
|
|
|
10,989 |
|
|
|
94,952 |
|
|
|
239 |
|
|
|
1,328 |
|
|
|
114,757 |
|
|
|
2,575.3 |
|
Assets under construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111,872 |
|
|
|
2,510.6 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226,629 |
|
|
|
5,085.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010 |
|
|
6,804 |
|
|
|
11,619 |
|
|
|
96,742 |
|
|
|
244 |
|
|
|
1,513 |
|
|
|
116,922 |
|
|
|
2,623.9 |
|
Assets under construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132,279 |
|
|
|
2,968.6 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249,201 |
|
|
|
5,592.5 |
|
|
September30, 2010 (US dollar in
millions) |
|
|
152.7 |
|
|
|
260.7 |
|
|
|
2,171.1 |
|
|
|
5.5 |
|
|
|
34.0 |
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Adjustments refer to classification of certain property, plant and equipments as assets held
for sale, refer Note 17. |
Plant and equipment includes refineries, smelters, power plants and related facilities, data
processing equipment and electrical fittings.
Certain property, plant and equipment are pledged as collateral against borrowings, the details
related to which have been described in Borrowings. Interest (net) capitalised as part of
property, plant and equipment was Rs. 1,533 million
($34.4 million) for the period ended September
30, 2010.
F-20
9. Investment in associate
Vedanta Aluminium is a non public entity engaged in the production of metallurgical grade alumina
and other aluminium products. Vedanta Aluminium cater to a wide spectrum of industries and has its
presence in Jharsuguda and Lanjigarh, in the state of Orissa. The Company owns a 29.5% interest in
Vedanta Aluminium. Vedanta owns the remaining 70.5% interest.
The Companys investment in Vedanta Aluminium consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investment |
|
|
4,621 |
|
|
|
3,518 |
|
|
|
78.9 |
|
|
|
|
Total |
|
|
4,621 |
|
|
|
3,518 |
|
|
|
78.9 |
|
|
|
|
Summarized consolidated financial information in respect of Vedanta Aluminium is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
22,681 |
|
|
|
22,565 |
|
|
|
506.4 |
|
Non-current assets |
|
|
244,867 |
|
|
|
267,539 |
|
|
|
6,004.0 |
|
|
|
|
Total assets |
|
|
267,548 |
|
|
|
290,104 |
|
|
|
6,510.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
149,486 |
|
|
|
177,615 |
|
|
|
3,986.0 |
|
Non-current liabilities |
|
|
102,398 |
|
|
|
100,566 |
|
|
|
2,256.9 |
|
|
|
|
Total liabilities |
|
|
251,884 |
|
|
|
278,181 |
|
|
|
6,242.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended September 30, |
|
|
2009 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions ) |
|
millions ) |
|
millions) |
Total revenue |
|
|
1,161 |
|
|
|
21,230 |
|
|
|
476.4 |
|
Operating (loss) |
|
|
(1,021 |
) |
|
|
(437 |
) |
|
|
(9.8 |
) |
Profit/(loss) for the period |
|
|
4,738 |
|
|
|
(4,551 |
) |
|
|
(102.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share in
consolidated profit/(loss) of associate |
|
|
1,398 |
|
|
|
(1,343 |
) |
|
|
(30.1 |
) |
Share in consolidated other comprehensive
(loss)/income of associate, net of tax |
|
|
277 |
|
|
|
239 |
|
|
|
5.3 |
|
F-21
10. Financial assets investments
Financial asset investments represent investments classified and accounted for as
available-for-sale investments
Movements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
Beginning of the period, |
|
|
1,044 |
|
|
|
1,362 |
|
|
|
30.6 |
|
Changes in fair value |
|
|
318 |
|
|
|
44 |
|
|
|
1.0 |
|
|
|
|
As at September 30, |
|
|
1,362 |
|
|
|
1,406 |
|
|
|
31.6 |
|
|
|
|
Available for sale financial assets consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted |
|
|
378 |
|
|
|
422 |
|
|
|
9.5 |
|
Unquoted |
|
|
984 |
|
|
|
984 |
|
|
|
22.1 |
|
|
|
|
|
|
|
1,362 |
|
|
|
1,406 |
|
|
|
31.6 |
|
|
|
|
Quoted investments represent investments in equity securities that present the Company with
opportunities for return through dividend income and gains in value. The fair values of such
securities are determined by reference to published price quotations in active market.
Unquoted investments are held at cost and principally represent an investment in the equity share
capital of the Andhra Pradesh Gas Power Corporation Limited. The fair value of unquoted equity
investments cannot be reliably measured as the variability in the range of fair value estimates is
significant and the probabilities of the various estimates cannot be reasonably assessed.
11. Other non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
Loans to associate |
|
|
8,890 |
|
|
|
8,390 |
|
|
|
188.3 |
|
Loans to
other related parties |
|
|
|
|
|
|
6,922 |
|
|
|
155.4 |
|
Other non-current assets |
|
|
1,337 |
|
|
|
1,450 |
|
|
|
32.5 |
|
|
|
|
|
|
|
10,227 |
|
|
|
16,762 |
|
|
|
376.2 |
|
|
|
|
12. Inventories
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
Raw materials and consumables |
|
|
15,908 |
|
|
|
21,287 |
|
|
|
477.7 |
|
Work-in-progress |
|
|
12,847 |
|
|
|
18,346 |
|
|
|
411.7 |
|
Finished goods |
|
|
1,067 |
|
|
|
2,187 |
|
|
|
49.1 |
|
|
|
|
|
|
|
29,822 |
|
|
|
41,820 |
|
|
|
938.5 |
|
|
|
|
F-22
Inventories with a carrying amount of Rs. 4,419 million and Rs. 7,075 million ($158.8 million) have
been pledged as security against certain bank borrowings of the Company as at March 31, 2010 and
September 30, 2010, respectively.
13. Trade and other receivables
Trade and other receivables (net of allowances) consist of the following for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
Trade receivables |
|
|
4,963 |
|
|
|
7,822 |
|
|
|
175.5 |
|
Trade receivables from associate |
|
|
634 |
|
|
|
1,553 |
|
|
|
34.9 |
|
Trade receivables from other related parties |
|
|
423 |
|
|
|
199 |
|
|
|
4.5 |
|
Loans to associate |
|
|
95,709 |
|
|
|
53,750 |
|
|
|
1,206.2 |
|
Loans to other related parties |
|
|
6,805 |
|
|
|
4 |
|
|
|
0.1 |
|
Balance with Government authorities |
|
|
2,589 |
|
|
|
4,875 |
|
|
|
109.4 |
|
Prepayments |
|
|
624 |
|
|
|
952 |
|
|
|
21.4 |
|
Claims/refunds receivable |
|
|
3,365 |
|
|
|
2,742 |
|
|
|
61.5 |
|
Advances for supplies |
|
|
1,525 |
|
|
|
1,031 |
|
|
|
23.1 |
|
Other receivables |
|
|
2,270 |
|
|
|
4,558 |
|
|
|
102.3 |
|
|
|
|
|
|
|
118,907 |
|
|
|
77,486 |
|
|
|
1,738.9 |
|
|
|
|
The credit period given to customers ranges from zero to 90 days. Other receivables primarily
include deposits and interest receivable. For terms and conditions for receivables from associate
and other related parties, refer to related party disclosure.
Trade receivables with a carrying value of Rs. 1,430 millions and Rs. 1,609 million ($36.1 million)
have been given as collaterals towards borrowings as at March 31,2010 and September 30, 2010
respectively.
Allowances for impairment of trade and other receivables
The change in the allowance for impairment of trade and other receivables is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
Balance at the beginning of the Period |
|
|
184 |
|
|
|
230 |
|
|
|
5.2 |
|
Allowance made during the Period |
|
|
57 |
|
|
|
26 |
|
|
|
0.6 |
|
Written off |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
230 |
|
|
|
256 |
|
|
|
5.7 |
|
|
|
|
14. Short term investments
Short term investments consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
Bank deposits |
|
|
31,296 |
|
|
|
71,241 |
|
|
|
1,598.8 |
|
Other investments |
|
|
179,726 |
|
|
|
165,847 |
|
|
|
3,721.9 |
|
|
|
|
|
|
|
211,022 |
|
|
|
237,088 |
|
|
|
5,320.7 |
|
|
|
|
F-23
Other investments include mutual fund investments and certificate of deposits and are fair valued
through the statement of income. Bank deposits are made for periods of between three months and one
year depending on the cash requirements of the Company and earn interest at the respective deposit
rates.
The Company has pledged short term investments of Rs. 64 million and Rs. 62 million ($1.4 million)
as at March 31, 2010 and September 30, 2010 respectively, to secure certain banking facilities.
15. Restricted cash and cash equivalents
Restricted cash and cash equivalents consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Cash at banks |
|
|
60 |
|
|
|
75 |
|
|
|
1.7 |
|
|
|
|
|
|
|
60 |
|
|
|
75 |
|
|
|
1.7 |
|
|
|
|
Cash at banks is restricted in use as it relates to unclaimed deposits & debentures, dividends and
interest on debentures.
Short term deposits have been pledged with banks for credit facilities.
16. Cash and cash equivalents
Cash and cash equivalents consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Cash at banks and in hand |
|
|
1,789 |
|
|
|
2,744 |
|
|
|
61.6 |
|
Short-term deposits and short-term investments |
|
|
232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,021 |
|
|
|
2,744 |
|
|
|
61.6 |
|
|
|
|
17. Assets held for sale
As of September 30, 2010, the Company recognized assets amounting to Rs.51 million as assets held
for sale. Such assets related to the Companys aluminum segment.
A description of the assets held for sale is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010 |
|
|
|
|
|
|
Accumulated |
|
|
|
|
Gross Value |
|
Depreciation |
|
Net Value |
|
|
(Rs. in |
|
(Rs. in |
|
(Rs. in |
|
|
millions) |
|
millions) |
|
millions) |
Building |
|
|
70 |
|
|
|
(66 |
) |
|
|
4 |
|
Plant & Machinery |
|
|
347 |
|
|
|
(300 |
) |
|
|
47 |
|
|
|
|
Total |
|
|
417 |
|
|
|
(366 |
) |
|
|
51 |
|
|
|
|
The relatively high cost of operation of BALCOs Plant I 100,000 tpa smelter which used the
Vertical Stud Soderberg (VSS) technology at Korba and the steep decline in LME prices made the
existing operations at the smelter unviable. Consequently, operations at the smelter were being
phased out of production commencing in February 2009 and operations at the smelter ceased on June
5, 2009.
F-24
Consequently, the Company recognised Plant 1 smelter assets at Korba, the main receiving station
and distribution system used in the above mentioned smelter, Fume treatment plant (FTP), Profile
tube shop and Bidhan Bagh Unit under the head Assets held for sale. The Company obtained approval
for dismantling and disposing of these assets from the appropriate level of management. During the
period ended September 2010, part of the assets recognised as held for sale with a carrying value
of Rs. 462.5 million have been disposed off. The balance disposal is expected to be completed by
January 2011.
The estimated fair value less costs to sell of the assets held for sale is Rs. 246 million as at 30
September , 2010 and the carrying value is Rs. 109.6 million. Since the estimated fair value less
costs to sell of these assets is higher than the carrying value, no impairment was recognized. The
carrying value of the assets has been shown separately in the statement of financial positions.
18. Trade and other payables
Trade and other payables consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Trade payables |
|
|
19,736 |
|
|
|
18,515 |
|
|
|
415.5 |
|
Advances from customers |
|
|
1,838 |
|
|
|
312 |
|
|
|
7.0 |
|
Amount due to related party |
|
|
1,216 |
|
|
|
1,381 |
|
|
|
31.0 |
|
Security deposit and retentions |
|
|
3,092 |
|
|
|
3,362 |
|
|
|
75.5 |
|
Project
creditors |
|
|
6,879 |
|
|
|
8,043 |
|
|
|
180.5 |
|
Other payables |
|
|
2,334 |
|
|
|
3,102 |
|
|
|
69.6 |
|
|
|
|
|
|
|
35,095 |
|
|
|
34,715 |
|
|
|
779.1 |
|
|
|
|
Trade payables are non-interest bearing and are normally settled within 90 day terms. The fair
value of trade and other payables is not materially different from the carrying values presented.
Other payables include statutory dues and others.
19. Other non-current liabilities
Non-current liabilities consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at March 31, |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Security deposits and retentions |
|
|
5,689 |
|
|
|
6,465 |
|
|
|
145.1 |
|
|
|
|
|
|
|
5,689 |
|
|
|
6,465 |
|
|
|
145.1 |
|
|
|
|
20. Loans and borrowings
Short-term loans and borrowings represent borrowings with an original maturity of less than one
year. Long-term loans and borrowings represent borrowings with an original maturity of greater than
one year. Maturity distribution is based on contractual maturities. Interest rates on floating-rate
debt are generally linked to benchmark rates.
Short-term loans and borrowings consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
millions) |
|
millions) |
|
millions) |
|
|
|
Banks and financial institutions |
|
|
6,942 |
|
|
|
9,427 |
|
|
|
211.6 |
|
Current portion of long-term loans and borrowings(1) |
|
|
12,179 |
|
|
|
6,345 |
|
|
|
142.4 |
|
|
|
|
Short-term loans and borrowings |
|
|
19,121 |
|
|
|
15,772 |
|
|
|
354.0 |
|
Weighted average interest rate on short-term loans and
borrowings |
|
|
4.1 |
% |
|
|
2.2 |
% |
|
|
2.2 |
% |
Unused line of credit on short-term loans and borrowings |
|
|
121,507 |
|
|
|
121,739 |
|
|
|
2,732.0 |
|
F-25
Long-term loans and borrowings consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
million) |
|
million) |
|
millions) |
|
|
|
Banks and financial institutions |
|
|
26,840 |
|
|
|
26,459 |
|
|
|
593.8 |
|
Non-convertible debentures |
|
|
6,000 |
|
|
|
5,600 |
|
|
|
125.7 |
|
Convertible Notes |
|
|
22,226 |
|
|
|
20,323 |
|
|
|
456.0 |
|
Others |
|
|
691 |
|
|
|
744 |
|
|
|
16.7 |
|
|
|
|
Long-term loans and borrowings |
|
|
55,757 |
|
|
|
53,126 |
|
|
|
1,192.2 |
|
Less: Current portion of long-term loans and borrowings |
|
|
(12,179 |
) |
|
|
(6,345 |
) |
|
|
(142.4 |
) |
|
|
|
Long-term loans and borrowings |
|
|
43,578 |
|
|
|
46,781 |
|
|
|
1,049.8 |
|
|
|
|
The scheduled maturity of long term borrowings is summarised below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
March 31, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2010 |
|
2010 |
|
|
(Rs. in |
|
(Rs. in |
|
(US dollars in |
|
|
million) |
|
million) |
|
millions) |
|
|
|
Borrowings Repayable |
|
|
|
|
|
|
|
|
|
|
|
|
Within one year (included in short-term borrowings) |
|
|
12,179 |
|
|
|
6,345 |
|
|
|
142.4 |
|
In the second year |
|
|
5,956 |
|
|
|
10,384 |
|
|
|
233.0 |
|
In two to five years |
|
|
32,522 |
|
|
|
28,823 |
|
|
|
646.8 |
|
After five years |
|
|
5100 |
|
|
|
7,574 |
|
|
|
170.0 |
|
|
|
|
Major loans and borrowings are as follows:
Working capital loans
The Company has credit facilities from various banks for meeting working capital requirements,
generally in the form of credit lines for establishing letters of credit, packing credit in foreign
currency, or PCFC, cash credit and bank guarantees. Amounts due under working capital loans as of
March 31, 2010 and September 30, 2010 were Rs.
1,337 million and Rs. 3,490 million ($78.3 million),
respectively. The working capital loan of Rs. 3,490 million ($78.3 million) outstanding as of
September 30, 2010 consist of Rs. 1,797 million ($40.3 million) under a US dollar denominated PCFC
loan, and a Rs. 1,693 million ($38.0 million) under a cash credit facility. Interest on the PCFC
facility is based on the London Inter-Bank Offer Rate, or LIBOR, plus 75 basis points. The working
capital loans are secured against the inventories and trade accounts receivables except for PCFC
facility as at September 30, 2010 which is unsecured.
Foreign currency loans
In November 2008, BALCO obtained a US dollar denominated unsecured loan facility of $25.0 million
from DBS Bank Ltd, Singapore arranged by DBS Bank Ltd, Mumbai Branch, to meet our capital
expenditure requirement on projects. The rate of interest payable on this facility is 6 Month LIBOR
plus 345 basis points. The loan is repayable in three equal yearly installments beginning November
2013. The amount outstanding under this facility as of 31 March, 2010 and 30 September, 2010 was
Rs. 1,097 million and Rs. 1,091 million ($24.5 million).
On June 29, 2009, Sterlite Energy entered into US dollar denominated secured term loan facility of
$140.0 million (Rs. 6,496 million) with India Infrastructure Finance (UK) Company Limited as lender
and SBI as facility agent to finance the costs of purchasing machinery and equipment from overseas,
supplied in connection with the building of its 2,400 MW thermal coal-based power facility in
Jharsuguda in the State of Orissa. The rate of interest payable under this facility is six-month
LIBOR plus 535 basis points per annum to be reset semi-annually, which was reset to six-month LIBOR
plus 480 basis points from August 2009. 60% of the loan is repayable in 48 quarterly installments
beginning on a date falling six months after the date of commercial operation of the last unit of
the power facility, 36% of the loan amount is repayable at the end of 12 years from June 29, 2009
in a single installment and the balance 4% of the outstanding loan is repayable in eight quarterly
installments commencing from December 2022. The facility is secured by, among other things, a first
charge over the movable and immovable properties and tangible or intangible assets of Sterlite
Energy as well as charges over certain of its bank accounts. As of September 30, 2010, Sterlite
Energy has not drawn down on the loan.
F-26
Term loans
As of September 30, 2010, the Company had several loans from various banks and financial
institutions described as follows two syndicated term loan from Royal Bank of Scotland ( formally
known as ABN AMRO Bank N.V)., or RBS, two term loans from ICICI Bank Limited, or ICICI Bank, one
term loan from the State Bank of India, or SBI, one term loan from Punjab National Bank, or PNB,
one term loan from Jammu and Kashmir Bank, or J&K Bank, one syndicate term loan from SBI and one
term loan from the Allahabad Bank
In September 2003 and August 2004, BALCO obtained two syndicated Indian Rupee fixed rate term loan
facilities from ABN AMRO totaling Rs. 17,000 million to meet capital expenditure requirements of
projects, of which Rs. 15,904 million has been drawn down at an average interest rate of 7.3% per
annum. The weighted average interest rate on the loan outstanding is 7 %. These facilities are
secured by a first charge on the movable and immovable properties, present and future tangible or
intangible assets and other than current assets of BALCO. The first loan of Rs. 10,000 million was
repayable in 12 quarterly installments beginning in January 2007 and it has been repaid in October
2009. No amount is outstanding under first loan of Rs.10,000 million as on September 30, 2010. The
second loan of Rs. 7,000 million, of which Rs. 5,904 million has been drawn down, is repayable in
eight quarterly installments commencing from May 2009. An amount of Rs. 5,308.7 million was repaid
under the second loan as of September 30, 2010. As of March 31, 2010 and September 30, 2010, the
balances due under the loans were Rs. 1,510 million and Rs. 592 million ($13.3 million),
respectively.
Pursuant to the approval of the Board for Industrial and Financial Reconstruction, or BIFR, for the
rehabilitation scheme of India Foils Limited or IFL in November 2008, SIIL assumed two loans
aggregating to Rs. 1,023 million granted by ICICI Bank, on the same terms and conditions by way
of two novation agreements entered into among SIIL, IFL and ICICI Bank. The interest rates for
these facilities were linked to ICICI bank benchmark advance rate, or I-BAR. The first loan of Rs.
1,020 million, of which Rs. 773 million was transferred to us pursuant to the novation agreement,
has an interest rate of 10% per annum, which was reset to 10.5% from December 2009, and is
repayable in 12 quarterly installments beginning from November 2008, of which Rs. 495 million was
paid by September 30, 2010. The second loan of Rs. 250 million has an interest rate of 10% per
annum, which was reset to 11% from June 2009, and is repayable in 16 quarterly installments
beginning from November 2008, of which Rs. 141 million was repaid by September 30, 2010. As of
September 30, 2010, we had repaid Rs. 636 million of these loans, out of the total loan amount of
Rs. 1,023 million. As of March 31, 2010 and September 30, 2010, the balances due under the two
loans were Rs. 558 million and Rs. 403 million ($9.0 million), respectively. These loans are
unsecured.
In February 2009, Sterlite Energy obtained an Indian Rupee fixed rate term loan facility of Rs.
5,000 million from SBI, of which Rs. 2,000 million had been drawn down. The interest rate of the
loan is 75 basis points lower than the State benchmark advance lending rate, or SBAR. The purpose
of the loan is to meet capital expenditure requirements on projects. As at September 30, 2010, the
balance due under the loan was Rs. 2,000 million ($44.9 million). This is an unsecured loan.
In June 2009, Sterlite Energy obtained an Indian Rupee fixed rate term loan facility of Rs. 1,500
million from the PNB, of which Rs. 740 million had been drawn down. The interest rate of the loan
is 12.0% per annum, which has been reset to 11.5% per annum with effect from June 29, 2009. The
purpose of the loan is to meet capital expenditure requirements on projects. As of September 30,
2010, the balance due under the loan was Rs. 740 million
($16.6 million). This is an unsecured
loan.
In June 2009, Sterlite Energy obtained an Indian Rupee fixed rate term loan facility of Rs. 1,000
million from the J&K Bank, of which Rs. 200 million had been drawn down. The interest rate of the
loan is 12.0% per annum, which has been reset to 11.5% per annum with effect from June 29, 2009.
The purpose of the loan is to meet capital expenditure requirements on projects. As of September
30, 2010, the balance due under the loan was
Rs. 200 million ($4.5 million). This is an unsecured
loan.
On June 29, 2009, Sterlite Energy entered into an Indian Rupee term loan facility from a syndicate
of banks, with SBI acting as facility agent, of Rs. 55,690 million ($1,200.2 million), to finance
the cost of building a 2,400 MW thermal coal-based power facility at Jharsuguda in the State of
Orissa at an interest rate of 11.5% per annum until June 28, 2010. Thereafter, the interest rate
will be reset on a yearly basis to a rate that is 25 basis points below the State Bank of India
Benchmark Advance Rate. The facility is secured by, among other things, a first charge over the
movable and immovable properties and tangible or intangible assets of Sterlite Energy as well as
charges over certain of its bank accounts. The loan is repayable in 48 quarterly installments
beginning on a date falling six months after the date of commercial operation of the last unit of
the power facility. As of September 30, 2010, Sterlite Energy has not drawn down on this facility
All amounts drawn down by Sterlite Energy under
the loan facilities granted by IDBI, SBI, PNB and J&K Bank will be deemed to be a draw down under
this loan facility from the initial draw down date of this facility.
In December, 2009, Sterlite Energy obtained an Indian Rupee fixed rate term loan facility of Rs.
1,500 million from the Allahabad Bank, which was fully draw down. The interest rate of the loan is
8%. Loan is for a period of 90 days from the date of disbursement. This loan has been repaid in
August ,2010 and the balance due as of September 30, 2010, is Nil
F-27
Buyers credit
Sterlite Energy had utilized extended credit terms relating to purchases of property, plant and
equipment for our projects. As of March 31, 2010 and September 30, 2010, the balance due under this
facility was Rs. 13,717 million and Rs. 12,075 million
($271.0 million), respectively. These loans
bear interest at LIBOR plus 187 basis points.These are unsecured.
In June 2010, BALCO was sanctioned uncommitted buyers credit facility of $50.0 million from DBS
Bank Limited Singapore, arranged by DBS Bank, Mumbai Branch to assist the import of goods into
India upto 1 year for raw materials and upto 3 years for Capex. As of September 30, 2010, balance
due under this facility was Rs.1,229.0 million ( $27.6 million) and repayable from April 2012 to June
2013. The facility was utilized for import of capital goods and secured by way of first parri
passue charge on capital goods imported under the facility.
BALCO had utilized buyers credit facility for meeting project expenditure requirements. As of
March 31, 2010 and September 30, 2010, the balances due under this facility were Rs. 1,128 million
and Rs. 1,121 million ($25.2 million). These loans bear interest at 6 Month LIBOR plus 75 basis
points. These are unsecured debts.
In
April 2009, BALCO obtained a one time capex letter of credit
limit of $100.0 million from the SBI,
which is secured by first pari passu charges on the movable and immovable fixed assets of BALCO.
The charge on movable assets has already been created and the creation of charge on immovable
assets is under process. As of September 30, 2010, the balance due under this facility was Rs.
4,327 million ($97.1 million). The interest rate on this facility is LIBOR plus 200 basis points.
The said facility is repayable from November 2011 to April 2012. The facility was funded by SBI
Hongkong and the Bank of Baroda London.
In June 2009, BALCO obtained a non-fund based limit of Rs. 6,250 million from the AXIS Bank for the
purchase of capital goods for projects, which is secured by a subservient charge on the current
assets and movable fixed assets of BALCO. As of September 30, 2010, the balance due under this
facility was Rs. 4,116 million ($92.4 million).The interest rate on this facility is LIBOR plus 200
basis points. The said outstanding amount is repayable from December 2011 to August 2012. The
facility was funded by SBI Hongkong, the Bank of Baroda London and DBS Bank Singapore
In January 2010, BALCO obtained a non-fund based limit of Rs. 6,000 million from ICICI Bank for the
purpose of import of capital goods, which is secured by exclusive charge on assets to be imported
under the facility. As of September 2010, the balance due under this facility was Rs. 4,274 million
($95.9 million).The interest rate on this facility is LIBOR plus 200 basis points. The said
outstanding amount is repayable from March 2012 to December 2012. The facility was funded by SBI
Tokyo, HSBC Mauritius , Bank of Baroda London, Bank of Baroda, Newyork,and SBI Bahrain..
Non-convertible debentures
In
April 2003, SIIL issued Rs. 1,000 million ($22.4 million) Indian Rupee denominated
non-convertible debentures to Life Insurance Corporation of India, or LIC. The debentures were
issued in two tranches. Tranche A, in the amount of Rs.
400 million ($9.0 million), is due in April
2010 and the same is paid and Tranche B, in the amount of Rs.
600 million ($13.5 million), is due
in April 2013. Interest payable on these debentures is linked to annualized Government of India
security rates. The applicable interest rate is 8.2% per annum. These debentures are secured by
certain of the Companys immovable properties.
In
November 2008, BALCO issued Rs. 5,000 million ($112.2 million) in Indian Rupee denominated
non-convertible debentures to LIC. The debentures are repayable in three equal yearly installments
beginning in November 2013. The applicable interest rate is 12.3% per annum. The debentures are
secured and have a pari passu charge on BALCOs movable and immovable properties tangible or intangible assets, other than
BALCOs current assets to the extent of 1.33 times the issued amount of the debentures.
21. Convertible notes
Foreign Currency Convertible Notes (FCCNs) due 2014
On
October 29, 2010, SIIL raised US$ 500 million by way of 4.0% Convertible Senior Notes of $1,000
each. Subject to certain exceptions, the note holders have an option to convert these Notes into
ADSs (each ADS represent one of equity share, per value Rs. 2 per share) at any time prior to
business day immediately preceding the maturity date at a conversion rate of Rs. 42.8688 ADSs per
$1,000 principal amount of notes which is equal to a conversion price of approximately $23.33 per
ADS from. The conversion price will be subject to certain adjustments. Further, SIIL has a right to
redeem in whole or parts of the notes, these Notes at any time after November 4, 2012, subject to
certain exceptions. Unless previously converted, redeemed or purchased and cancelled, these Notes
will be due for redemption on October 30, 2014.
F-28
22. Business Combinations
a. Call option HZL
SIILs wholly-owned subsidiary, Sterlite Opportunities and Ventures Limited (SOVL), had two call
options to purchase all of the Government of Indias shares in HZL at fair market value. SOVL
exercised the first call option on August 29, 2003 and acquired an additional 18.9% of HZLs issued
share capital, increasing its shareholding to 64.9%. As at March 31, and September 30, 2010, the
Government of Indias holding in HZL was 29.5%. The second call option provides SOVL the right to
acquire the Government of Indias remaining 29.5% share in HZL. This call option is subject to the
right of the Government of India to sell 3.5% of HZL shares to HZL employees. This call option is
also subject to the Government of Indias right, prior to the exercise of this call option, to sell
its shares in HZL through a public offer. From April 11, 2007, SOVL has the right to exercise the
second call option. The option has no expiry date. The Company exercised the second call option via
its letter dated July 21, 2009. The Government has stated that they are maintaining the same stand
as in BALCO on the validity of the call option, and has refused to act upon the second call option.
The Company has invoked the Arbitration clause for referring the matter to arbitration, and
appointed an arbitrator, and requested the Government to nominate its arbitrator nominee so that
Arbitral Tribunal is constituted. As the Government of India has not appointed its arbitrator, the
Company filed an Arbitration application u/s 11(6) of the Arbitration and Conciliation Act 1996 in
the Delhi High Court for constitution of arbitral tribunal. The Delhi High Court has, via its order
dated May 18, 2010, directed the parties to appoint mediators for mediation of the dispute, and if
mediation fails, arbitration will commence. The Government of India has intimated the appointment
of Mr. Sanjiv Mishra (former retired government officer) as their mediator and SOVL has appointed
Mr. Nimesh Kampani, chairman and managing director of JM Financials Ltd., as its mediator.
Mediation is under progress.
b. Call option BALCO
SIIL purchased a 51.0% holding in BALCO from the Government of India on March 2, 2001. Under the
terms of the shareholders agreement (SHA) for BALCO, SIIL has a call option that allows it to
purchase the Government of Indias remaining ownership interest in BALCO at any point from March 2,
2004. SIIL exercised this option on March 19, 2004. However, the Government of India has contested
the purchase price and validity of the option. SIIL sought an interim order from the High Court of
Delhi to restrain the Government of India from transferring or disposing of its shareholding
pending resolution of the dispute. The High Court on August 7, 2006 directed that the parties
should attempt to settle the dispute by way of a mediation process as provided for in the SHA.
However, as the dispute could not be settled through mediation, it was referred to arbitration as
provided for in the SHA. Arbitration proceedings commenced on February 16, 2009. The Company has
filed its claim statement with the Arbitration Tribunal. After the filing of the reply by the
Government of India, the arbitration hearings concluded on August 29, 2010. The parties were
directed to file their written submissions within three weeks. SIIL filed its written submission on
September 20, 2010. However, in view of the subsequent judgement of the Bombay High Court, which
supported the contentions made by SIIL, the arbitration tribunal has, at the request of Government
of India, given an opportunity to both the parties to make oral submission on
the judgement and the hearing for the same was fixed on October 9, 2010. The hearing had been
concluded and the arbitration award is awaited.
23. Equity Share Capital
SIILs issued equity share capital as of March 31, 2010 and September 30, 2010 was Rs. 1,618
million and Rs. 3,361 million
($75.4 million), consisting of 840,400,422 and 3,361,207,534
equity shares respectively.
The shareholders of SIIL, in its annual general meeting held on June 11, 2010, approved the stock
split of the equity share from the facevalue of Rs. 2 per share to Re 1 per share each fully paid
up, and bonus issue in the ratio of 1:1 post stock split.
24. Dividends
Each equity share holder is entitled to dividends as and when declared by SIIL and pays dividends
after obtaining shareholders approval. Dividends are paid in Indian Rupees. Remittance of
dividends outside India is governed by Indian law on foreign exchange and is subject to applicable
taxes.
On April 26, 2010, the board of directors of SIIL recommended a final dividend of Rs. 3.75 per
equity share for the year ended March 31, 2010, which was approved by shareholders at the general
meeting, held on June 11, 2010. The dividend and dividend distribution tax amounting to Rs. 3,151
million and Rs. 523 million for the fiscal year ended
March 31, 2010, respectively has since been paid.
Dividends are payable from the profits determined under generally accepted accounting principles in
India (Indian GAAP) from statutory standalone financial statements.
F-29
Under Indian law, a company is allowed to pay dividends in excess of 10.0% of its paid-up capital
in any year from profits for that year only if it transfers a specified percentage of the profits
of that year to reserves. The Company makes such transfers to general reserves.
25. Earnings per share (EPS)
The shareholders of SIIL, in the annual general meeting held on June 11, 2010, approved the stock
split of its equity share from the face value of Rs. 2 per share to Re 1 per share each fully paid
up, and bonus issue in the ratio of 1:1 post stock split. The computations of basic and diluted EPS
have been adjusted retroactively for all periods presented to reflect the change in capital
structure. All references in these consolidated financial statements to number of shares and per
share amounts have been retroactively restated to reflect bonus and stock split made.
The following reflects the income and share data used in the basic and diluted earnings per share
computations:
Computation of weighted average number of shares
|
|
|
|
|
|
|
|
|
|
|
For the period ended September 30, |
|
|
2009 |
|
2010 |
Weighted average number of ordinary shares for basic earnings per share |
|
|
3,281,458,062 |
|
|
|
3,361,207,534 |
|
Effect of dilution: |
|
|
|
|
|
|
|
|
Convertible notes |
|
|
|
|
|
|
85,737,600 |
|
|
|
|
|
|
|
|
|
|
Adjusted
weighted average number of ordinary shares for diluted earnings per share |
|
|
3,281,458,062 |
|
|
|
3,446,945,134 |
|
|
|
|
|
|
|
|
|
|
Computation of basic and diluted earnings per share
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended September 30, |
|
|
2009 |
|
2010 |
|
2010 |
|
|
(Rs. in millions |
|
(US dollars in millions |
|
|
except EPS data) |
|
except EPS data) |
Profit for the period
attributable to equity
holders of the parent |
|
|
16,303 |
|
|
|
19,702 |
|
|
|
442.1 |
|
Weighted average number
of ordinary shares for
basic earnings
per share |
|
|
3,281,458,062 |
|
|
|
3,361,207,534 |
|
|
|
3,361,207,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
4.97 |
|
|
|
5.86 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended September 30, |
|
|
2009 |
|
2010 |
|
2010 |
|
|
(Rs. in millions |
|
(US dollars in millions |
|
|
except EPS data) |
|
except EPS data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period attributable to equity holders of the parent |
|
|
16,303 |
|
|
|
19,702 |
|
|
|
442.1 |
|
Adjustment in respect of convertible notes |
|
|
|
|
|
|
(1,134 |
) |
|
|
(25.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period after dilutive adjustment |
|
|
16,303 |
|
|
|
18,568 |
|
|
|
416.7 |
|
Adjusted weighted average number of ordinary shares for diluted
earnings per share |
|
|
3,281,458,062 |
|
|
|
3,446,945,134 |
|
|
|
3,446,945,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
4.97 |
|
|
|
5.39 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
Profit for the period would be increased if holders of the convertible notes in SIIL exercised
their right to convert their bond holdings into SIIL equity. The impact on profit for the period of
this conversion would be the reduction in effective interest cost, exchange difference on
reinstatement of debt portion of convertible note and mark to market of conversion option on the
convertible notes
26. Commitments, contingencies, and guarantees
In the normal course of business, the Company enters into certain capital commitments and also
gives certain financial guarantees. The aggregate amount of indemnities and other guarantees, on
which the Company does not expect any material losses, was Rs.
70,230 million ($1,576.1 million) as
of September 30, 2010.
a. Commitments and contingencies
i. Commitments
Capital commitments
The Company had significant capital commitments as of September 30, 2010 amounting to Rs. 127,044
million ($2,851.1 million), related primarily to capacity expansion projects, including commitments
amounting to Rs. 76,034 million ($1,706.3 million) for its commercial power generation business and
Rs. 32,796 million ($736.0 million) for capacity expansion at BALCO.
Export obligations
The Company had export obligations of Rs. 112,643 million ($2,527.9 million) over the next eight
years on account of concessional rates of import duties paid on capital goods under the Export
Promotion Capital Goods Scheme enacted by the Government of India. If the Company is unable to meet these obligations, its
liability would be Rs. 15,333 million ($344.1 million), reduced in proportion to actual exports.
Due to the remote likelihood of it being unable to meet its export obligations, the Company does
not anticipate a loss with respect to these obligations and hence has not made any provision in its
unaudited condensed consolidated interim financial statements.
ii. Contingencies
Certain of the Companys operating subsidiaries have been named as parties to legal actions by
third party claimants and by the Indian sales tax, excise and related tax authorities for
additional sales tax, excise and indirect duties. These claims primarily relate either to the
assessable values of sales and purchases or to incomplete documentation supporting the Companys
tax returns. The total claim related to these tax liabilities is Rs.
6,184 million ($138.8
million). The Company has evaluated these contingencies and estimated that some of these claims may
result in loss contingencies and hence has recorded Rs. 101 million ($2.3 million) as current
liabilities as of September 30, 2010.
The claims
by third party claimants amounted to Rs. 1,407 million ($31.6 million) as of September
30, 2010. No liability has been recorded against these claims, based on the Companys expectation
that none of these claims will become its obligations. Although the results of legal actions cannot
be predicted with certainty, it is the opinion of the Companys management, after taking
appropriate legal advice, that the likelihood of these claims becoming its obligations is remote
and, as a result, the resolution of these claims will not have a material adverse effect, if any,
on the Companys business, financial condition or results of operations.
Therefore, the Company has not recorded any additional liability beyond what is stated above in
relation to litigation matters in the unaudited condensed consolidated interim financial
statements.
Vedanta Aluminium has certain disputes which are in appeal. Disputed liabilities in appeal
primarily relates to entry tax on the import of goods and others
amounting to Rs. 748 million
($16.8 million), being the proportionate share of the Company in the referred contingencies as at
September 30, 2010 . The Company has evaluated these contingencies and estimated that the
likelihood of these disputes becoming an obligation is remote and as a result, will not have any
material adverse effect on Companys financial conditions or
results of operations.
b. Guarantees
The Company has given guarantees in the normal course of business for the purpose as stated below
as of September 30, 2010:
F-31
|
|
|
Guarantees on the issuance of customs and excise duty bonds amounting to Rs. 1,324
million ($29.7 million) for import of goods including capital equipment at concessional
rates of duty. The Company does not anticipate any liability on these guarantees. |
|
|
|
|
Corporate guarantee of Rs. 33,000 million ($740.6 million) on behalf of Vedanta
Aluminium for obtaining credit facilities. The Company also issued corporate guarantees of
Rs. 14,386 million ($322.8 million) for importing capital equipment at concessional rates
of duty under the Export Promotion Capital Goods Scheme enacted by the Government of
India. Vedanta Aluminium is obligated to export goods worth eight times the value of
concessions enjoyed in a period of eight years following the date of import, failing which
the Company will be liable to pay the dues to the Government of India. As of September
30,2010, the Company determined that it has no liability on these corporate guarantees. |
|
|
|
|
Bank guarantee amounting to AUD 5.0 million (Rs. 214 million or $4.5 million) as of
September 30, 2010, in favor of the Ministry for Economic Development, Energy and
Resources, as a security against rehabilitation liabilities by CMT. The same guarantee is
backed up by the issuance of a corporate guarantee of Rs. 320 million ($7.2 million).
These liabilities have been fully recognized in the Companys unaudited condensed
consolidated financial statements. The Company does not anticipate any additional
liability on these guarantees. |
|
|
|
|
Bank indemnity guarantees amounting to AUD 2.9 million
(124 million or $2.8
million) as of September 30, 2010, in favor of the State Government of Queensland,
Australia, as a security against rehabilitation liabilities that are expected to occur at
the closure of the mine. The environmental liability has been fully recognized in the
Companys unaudited condensed consolidated financial statements. The Company does not
anticipate any additional liability on these guarantees. |
|
|
|
|
Performance bank guarantees amounting to Rs. 3,122 million ($70.1 million) as of
September 30, 2010. These guarantees are issued in the normal course of business while
bidding for supply contracts or in lieu of advances received from customers. The
guarantees have varying maturity dates normally ranging from six months to three years.
These are contractual guarantees and are enforceable if the terms and conditions of the
contracts are not met and the maximum liability on these contracts is the amount mentioned
above. The Company does not anticipate any liability on these guarantees. |
|
|
|
|
Bank guarantees for securing supplies of materials and services in the normal course of
business. The value of these guarantees as of September 30, 2010
was Rs. 2,410 million
($58.1 million). The Company has also issued bank guarantees in the normal course of
business for an aggregate value of Rs. 655 million ($14.7 million) for litigation, against
provisional valuation and for other liabilities. The Company does not anticipate any
liability on these guarantees. |
The
Companys outstanding guarantees cover obligations aggregating
Rs. 55,235 million ($1,239.6
million) as of September 30, 2010, the liabilities for which have not been recorded in its
unaudited condensed consolidated interim financial statements.
27. Segment Information
The Company is primarily in the business of non-ferrous mining and metals in India and Australia.
The Company has five reportable segments: copper, zinc, aluminum, power and corporate and others.
The management of the Company is organized by its main products: copper, zinc, aluminum and power.
Each of the reportable segments derives its revenues from these main products and hence these have
been identified as reportable segments by the Companys chief operating decision maker (CODM).
Segment profit amounts are evaluated regularly by the Companys Group Chief Executive Officer
(Group CEO) who has been identified as its CODM in deciding how to allocate resources and in
assessing performance.
Copper
The copper business is principally one of custom smelting and includes a copper smelter, a
refinery, a phosphoric acid plant, a sulphuric acid plant, a copper rod plant, a doré anode plant
and two captive power plants at Tuticorin in Southern India and a refinery and two copper rod
plants at Silvassa in Western India. The Company obtains a small quantity of copper concentrate
from its Mt. Lyell copper mine in Tasmania, Australia, owned by CMT. The segment also includes a
precious metal refinery at Fujairah in the United Arab Emirates.
Zinc
The Companys zinc business is owned and operated by HZL. HZLs operations include four lead-zinc
mines, four hydrometallurgical zinc smelters, one lead smelter, one lead-zinc smelter, four
sulphuric acid plants, a silver refinery and five
F-32
captive power plants in the State of Rajasthan in
Northwest India, one hydrometallurgical zinc smelter and a sulphuric acid plant in the State of
Andhra Pradesh in Southeast India, and a zinc ingot melting and casting plant at Haridwar in the
State of Uttarakhand in North India
Aluminum
The aluminum business is owned and operated by BALCO. BALCOs operations include two bauxite mines,
one alumina refinery, two aluminum smelters, of which operations at the old 100,000 tpa aluminum
smelter at Korba was partially suspended from February 2009 and ceased completely on June 5, 2009,
and two captive power plants, of which the 270 MW power plant is now used for commercial purposes,
since the shutdown of the 100,000 tpa smelter, in the State of Chhattisgarh in Central India. Power
generated by the 270 MW power plant is sold to third parties.
Power
The commercial power generation business includes the 123.2 MW of wind power plants commissioned by
HZL and one 270 MW power plant at BALCOs Korba facility which was previously for captive use
before the shutdown of the 100,000 tpa aluminum smelter at Korba on June 5, 2009. SELs and TSPLs
power business are still under development.
Corporate and others
The operating segment Corporate and others includes other corporate activities.
Business segments
The operating segments reported are the segments of the Company for which separate financial
information is available. Segment profit amounts are evaluated regularly by the Group CEO who has
been identified as its CODM in deciding how to allocate resources and in assessing performance.
The following table presents revenue and profit information and certain assets information
regarding the Companys business segments for the Six-month periods ended September 30, 2009 and
2010.
a. For the Six-month period ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
|
|
Copper |
|
Zinc |
|
Aluminum |
|
Power |
|
and others |
|
Elimination |
|
Total |
|
|
(Rs. in millions) |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers |
|
|
58,668 |
|
|
|
32,075 |
|
|
|
12,386 |
|
|
|
2,601 |
|
|
|
|
|
|
|
|
|
|
|
105,730 |
|
Inter-segment sales |
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
810 |
|
|
|
|
|
|
|
(861 |
) |
|
|
|
|
|
|
|
Segment revenue |
|
|
58,668 |
|
|
|
32,075 |
|
|
|
12,437 |
|
|
|
3,411 |
|
|
|
|
|
|
|
(861 |
) |
|
|
105,730 |
|
|
|
|
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
|
3,343 |
|
|
|
18,139 |
|
|
|
2,084 |
|
|
|
1,818 |
|
|
|
(3 |
) |
|
|
|
|
|
|
25,381 |
|
Depreciation and amortization |
|
|
(983 |
) |
|
|
(1,373 |
) |
|
|
(1,196 |
) |
|
|
(361 |
) |
|
|
|
|
|
|
|
|
|
|
(3,913 |
) |
|
|
|
Operating profit |
|
|
2,360 |
|
|
|
16,766 |
|
|
|
888 |
|
|
|
1,457 |
|
|
|
(3 |
) |
|
|
|
|
|
|
21,468 |
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,259 |
) |
Investment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,947 |
|
Share in profit/(loss) of associate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,398 |
|
|
|
|
|
|
|
1,398 |
|
Tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,433 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,121 |
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
52,056 |
|
|
|
74,301 |
|
|
|
65,800 |
|
|
|
66,738 |
|
|
|
336 |
|
|
|
|
|
|
|
259,231 |
|
Investment in associate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,861 |
|
|
|
|
|
|
|
16,861 |
|
|
|
|
|
|
|
52,056 |
|
|
|
74,301 |
|
|
|
65,800 |
|
|
|
66,738 |
|
|
|
17,197 |
|
|
|
|
|
|
|
276,092 |
|
|
|
|
Financial assets investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,254 |
|
Liquid Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235,499 |
|
Cash & cash equivalent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,358 |
|
Loan to related parties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
556,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and
equipment |
|
|
1,543 |
|
|
|
13,817 |
|
|
|
9,458 |
|
|
|
16,174 |
|
|
|
(2 |
) |
|
|
|
|
|
|
40,990 |
|
F-33
b . For the Six-month period ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
Copper |
|
|
Zinc |
|
|
Aluminum |
|
|
Power |
|
|
and others |
|
|
Elimination |
|
|
Total |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US dollars |
|
|
|
(Rs. in millions) |
in millions) |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers |
|
|
61,180 |
|
|
|
40,732 |
|
|
|
13,797 |
|
|
|
3,819 |
|
|
|
|
|
|
|
|
|
|
|
119,528 |
|
|
|
2,682.4 |
|
Inter-segment sales |
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
395 |
|
|
|
|
|
|
|
(437 |
) |
|
|
|
|
|
|
|
|
|
|
|
Segment revenue |
|
|
61,180 |
|
|
|
40,732 |
|
|
|
13,839 |
|
|
|
4,214 |
|
|
|
|
|
|
|
(437 |
) |
|
|
119,528 |
|
|
|
2,682.4 |
|
|
|
|
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
|
5,125 |
|
|
|
20,821 |
|
|
|
2,237 |
|
|
|
2,107 |
|
|
|
(3 |
) |
|
|
|
|
|
|
30,287 |
|
|
|
679.6 |
|
Depreciation and amortization |
|
|
(950 |
) |
|
|
(2,130 |
) |
|
|
(1,256 |
) |
|
|
(365 |
) |
|
|
|
|
|
|
|
|
|
|
(4,701 |
) |
|
|
(105.5 |
) |
|
|
|
Special items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
4,175 |
|
|
|
18,691 |
|
|
|
981 |
|
|
|
1,742 |
|
|
|
(3 |
) |
|
|
|
|
|
|
25,586 |
|
|
|
574.1 |
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,761 |
|
|
|
39.5 |
|
Investment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,101 |
|
|
|
226.7 |
|
Share in consolidated loss
of associate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,343 |
) |
|
|
(30.1 |
) |
Income Tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,809 |
) |
|
|
(197.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,296 |
|
|
|
612.5 |
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
67,241 |
|
|
|
92,301 |
|
|
|
80,356 |
|
|
|
84,444 |
|
|
|
349 |
|
|
|
|
|
|
|
324,691 |
|
|
|
7,286.6 |
|
|
|
|
Investment in associate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,518 |
|
|
|
|
|
|
|
3,518 |
|
|
|
78.9 |
|
|
|
|
|
|
|
67,241 |
|
|
|
92,301 |
|
|
|
80,356 |
|
|
|
84,444 |
|
|
|
3,867 |
|
|
|
|
|
|
|
328,209 |
|
|
|
7,365.5 |
|
|
|
|
Financial assets investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,406 |
|
|
|
31.6 |
|
Liquid Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,37,088 |
|
|
|
5,320.7 |
|
Cash & cash equivalent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,819 |
|
|
|
63.3 |
|
Loan to
related parties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,144 |
|
|
|
1,394.6 |
|
Current tax asset |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111 |
|
|
|
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
631,777 |
|
|
|
14,178.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant
and equipment |
|
|
3,368 |
|
|
|
6,465 |
|
|
|
11,994 |
|
|
|
5,423 |
|
|
|
14 |
|
|
|
|
|
|
|
27,264 |
|
|
|
611.9 |
|
28. Related Party Transactions
The Company enters into transactions in the normal course of business with its related parties,
including its parent, Vedanta and its subsidiaries and companies over which it has significant
influence. The significant transactions relate to normal sale and purchase of goods, and
investments. All inter-company transactions and balances are eliminated in consolidation. A summary
of significant related party transactions for the Six-month period ended September 30, 2009 and
2010 is noted below:
Enterprises where the principal shareholders have control or significant influence
|
|
|
Vedanta Resources plc (Vedanta) |
|
|
|
|
Twin Star Holdings Limited (Twin Star) |
|
|
|
|
The Madras Aluminium Company Limited (MALCO) |
|
|
|
|
Sterlite Technologies Limited (STL) |
|
|
|
|
Konkola Copper Mines plc (KCM) |
|
|
|
|
Monte Cello Corporation NV (MCNV) |
|
|
|
|
Sterlite Foundation |
|
|
|
|
Anil Agarwal Foundation |
|
|
|
|
Vedanta Medical Research Foundation ( VMRF) |
|
|
|
|
Political and Public Awareness Trust |
|
|
|
|
Volcan Investments Limited (Volcan) |
|
|
|
|
Vedanta Resources Holding Limited |
|
|
|
|
Vedanta Jersey Investment Limited |
F-34
|
|
|
Vedanta Resource Cyprus Limited |
|
|
|
|
Sesa Goa Limited (Sesa Goa) |
|
|
|
|
Sesa Industries Limited (Sesa Industries) |
|
|
|
|
Twinstar Infrastructure Limited |
|
|
|
|
V S Dempo and Company Private Limited ( V S Dempo) |
|
|
|
|
Dempo Mining Corporation Private Limited ( DMCPL) |
Associate
Vedanta Aluminium Limited (Vedanta Aluminium)
Key managerial personnel
|
|
|
Mr. Anil Agarwal, Non executive chairman |
|
|
|
|
Mr. Navin Agarwal, Executive vice-chairman |
|
|
|
|
Mr. Tarun Jain, Director of finance |
|
|
|
|
Mr. D. D. Jalan, Whole time director |
The Company enters into transactions in the normal course of business with its related parties,
including its parent Vedanta, and its subsidiaries and Companies over which it has significant
influence. A summary of significant related party transactions for the period ended September 30,
2009 and 2010 is noted below.
The following table provides the total amount of transactions that have been entered into with
related parties for the relevant financial period. The significant transactions relate to the
normal sale and purchase of goods and loans and investments. All inter-company transactions and
balances are eliminated on consolidation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period ended September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
(Rs. in |
|
|
(Rs. in |
|
|
(US dollars in |
|
|
|
millions) |
|
|
millions) |
|
|
millions) |
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
STL |
|
|
990 |
|
|
|
1,028 |
|
|
|
23.1 |
|
MALCO |
|
|
|
|
|
|
1 |
|
|
|
0.0 |
|
Vedanta Aluminium |
|
|
728 |
|
|
|
39 |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,718 |
|
|
|
1,068 |
|
|
|
24.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of goods/services |
|
|
|
|
|
|
|
|
|
|
|
|
STL |
|
|
1 |
|
|
|
|
|
|
|
|
|
Sesa Industries |
|
|
29 |
|
|
|
6 |
|
|
|
0.1 |
|
Sesa Goa |
|
|
|
|
|
|
8 |
|
|
|
0.2 |
|
Vedanta Aluminium |
|
|
416 |
|
|
|
3,029 |
|
|
|
68.0 |
|
KCM |
|
|
373 |
|
|
|
|
|
|
|
|
|
MALCO |
|
|
|
|
|
|
205 |
|
|
|
4.6 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
819 |
|
|
|
3,247 |
|
|
|
72.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent income |
|
|
|
|
|
|
|
|
|
|
|
|
Vedanta Aluminium |
|
|
7 |
|
|
|
7 |
|
|
|
0.2 |
|
Total |
|
|
7 |
|
|
|
7 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income / (Finance costs) |
|
|
|
|
|
|
|
|
|
|
|
|
Vedanta |
|
|
(11 |
) |
|
|
(10 |
) |
|
|
(0.2 |
) |
MALCO |
|
|
(90 |
) |
|
|
(96 |
) |
|
|
(2.2 |
) |
Vedanta Aluminium |
|
|
1,263 |
|
|
|
3,583 |
|
|
|
80.4 |
|
Twin Star |
|
|
(1,584 |
) |
|
|
(1,440 |
) |
|
|
(32.3 |
) |
F-35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period ended September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
(Rs. in |
|
|
(Rs. in |
|
|
(US dollars in |
|
|
|
millions) |
|
|
millions) |
|
|
millions) |
|
KCM |
|
|
106 |
|
|
|
21 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(316 |
) |
|
|
2.058 |
|
|
|
46.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Vedanta |
|
|
(121 |
) |
|
|
(115 |
) |
|
|
2.6 |
|
Total |
|
|
(121 |
) |
|
|
115 |
|
|
|
(2.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans given/(repaid) during the period |
|
|
|
|
|
|
|
|
|
|
|
|
Vedanta Aluminium |
|
|
17,050 |
|
|
|
(40,900 |
) |
|
|
(917.9 |
) |
Vedanta
Jersey Investment Ltd. (VJIL) |
|
|
|
|
|
|
6,922 |
|
|
|
155.3 |
|
KCM |
|
|
|
|
|
|
(6,730 |
) |
|
|
(151.0 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
17,050 |
|
|
|
(40,708 |
) |
|
|
(913.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantees outstanding given / (taken)** |
|
|
|
|
|
|
|
|
|
|
|
|
Vedanta Aluminium |
|
|
48,792 |
|
|
|
47,386 |
|
|
|
1,063.4 |
|
Vedanta |
|
|
|
|
|
|
(7,674 |
) |
|
|
(172.2 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
48,792 |
|
|
|
39,712 |
|
|
|
891.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donations |
|
|
|
|
|
|
|
|
|
|
|
|
Sterlite Foundation |
|
|
33 |
|
|
|
15 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
33 |
|
|
|
15 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** |
|
Maximum guarantee amount and does not represent actual liability. |
The significant receivables from and payable to related parties as at September 30, 2009 and 2010
are set out below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
|
March 31, 2010 |
|
|
September 30, 2010 |
|
|
September 30, 2010 |
|
|
|
(Rs. in millions) |
|
|
(Rs. in millions) |
|
|
(US dollars in millions) |
|
Receivable from: |
|
|
|
|
|
|
|
|
|
|
|
|
STL |
|
|
196 |
|
|
|
153 |
|
|
|
3.4 |
|
Vedanta Aluminium |
|
|
634 |
|
|
|
1,553 |
|
|
|
34.9 |
|
MALCO |
|
|
7 |
|
|
|
8 |
|
|
|
0.2 |
|
KCM |
|
|
|
|
|
|
22 |
|
|
|
0.5 |
|
Sesa Goa |
|
|
10 |
|
|
|
10 |
|
|
|
0.2 |
|
Twin Star |
|
|
1 |
|
|
|
|
|
|
|
|
|
Anil Agarwal Foundation |
|
|
2 |
|
|
|
2 |
|
|
|
0.0 |
|
V S Dempo |
|
|
2 |
|
|
|
1 |
|
|
|
0.0 |
|
DMCPL |
|
|
1 |
|
|
|
1 |
|
|
|
0.0 |
|
VMRF |
|
|
205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,057 |
|
|
|
1,750 |
|
|
|
39.3 |
|
|
|
|
|
|
|
|
|
|
|
Loans to: |
|
|
|
|
|
|
|
|
|
|
|
|
Vedanta Aluminium |
|
|
104,599 |
|
|
|
62,140 |
|
|
|
1,394.5 |
|
KCM |
|
|
6,805 |
|
|
|
4 |
|
|
|
0.1 |
|
VJIL |
|
|
|
|
|
|
6,922 |
|
|
|
155.3 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
111,404 |
|
|
|
69,066 |
|
|
|
1,550.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable to: |
|
|
|
|
|
|
|
|
|
|
|
|
STL |
|
|
7 |
|
|
|
|
|
|
|
|
|
Vedanta Aluminium |
|
|
263 |
|
|
|
36 |
|
|
|
0.8 |
|
Vedanta |
|
|
875 |
|
|
|
1,293 |
|
|
|
29.0 |
|
MALCO |
|
|
22 |
|
|
|
20 |
|
|
|
0.4 |
|
KCM |
|
|
49 |
|
|
|
26 |
|
|
|
0.6 |
|
Sesa Industries Limited |
|
|
|
|
|
|
6 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,216 |
|
|
|
1,381 |
|
|
|
31.0 |
|
|
|
|
|
|
|
|
|
|
|
F-36
Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made in ordinary course of business There have
been no guarantees provided or received for any related party receivables or payables. For the
period ended September 30 2009 and 2010, the Company has not recorded any impairment of receivables
relating to amounts owed by related parties. This assessment is undertaken each financial year
through examining the financial position of the related party and the market in which the related
party operates.
Loan to associates
The loan granted to Vedanta Aluminium is intended to finance its planned capital expenditures. The
loan is un-secured. Interest is charged at bank rate (as declared by Reserve Bank of India RBI)
plus 2% on a loan of Rs. 9,140 million (with a tenure of
10 years) and at 8% on
Rs. 50,500 million
(repayable within a period of one year)
SIIL has also subscribed to non convertible debentures of Vedanta Aluminium for Rs. 2,500 million
which carries an interest rate of 8% and is secured and repayable within a period of one year.
Loan to fellow subsidiary
The Company had granted loan to KCM which was intended to finance its working capital and project
requirement. The loan is since been repaid.
The Company had granted loan to Vedanta Jersey Investment Ltd. of Rs 6,922 million ($155.3
million) which carries interest @ 2.3% and is unsecured.
29. Recent Developments:
i) On 10 May 2010, Vedanta announced the acquisition of Anglo Americans Zinc Assets (Anglo Zinc)
for a total cash consideration of $1,338.0 million, on an attributable, debt and cash free basis.
Anglo Zinc comprises the 100 per cent owned Skorpion mine in Namibia, the 100 per cent owned
Lisheen mine in Ireland and the 74 per cent owned Black Mountain Mines, which includes the Black
Mountain mine and Gamsberg project in South Africa. Skorpion has been acquired by a subsidiary of
Sterlite Infra Limited, itself a wholly owned subsidiary of Sterlite Industries (India) Limited for
a cash consideration of approximately $707.0 million dated
December 3, 2010.
ii) Ministry of Environment and Forests (MOEF) clearance for mining at Niyamgiri hills MOEF, in a
statement issued on August 24, 2010, refused the final approval to the Orissa Mining Corporation
(OMC) proposal for the bauxite mining at Niyamgiri hills, in the State of Orissa, following the
report of Dr. N.C. Saxena committee and recommendation of Forest Advisory Committee, MOEF. Since
all the issues raised in Dr. Saxena Committee report were already looked into by Honble Supreme
Court, hence the same cannot be raised again as per principle of res judicata. After the grant of
environment clearance, certain groups of persons and individuals have filed appeal challenging the
grant of environment clearance before National Environment Appellate Authority (NEAA) on the same
issues which were raised during hearing in Supreme Court. NEAA ,disposing all the appeals vide its
order dated September 15, 2010, has refused to relook into the issues already discussed in the
Supreme Court under the principle of res judicata, but advised MOEF to look into the two
environment impact
assessment s (EIAs) prepared for the mining project. As per NEAA order, additional conditions, if
any required can be incorporated by MOEF in the Environment Clearance, which remains inoperable for
the time being, till MOEF revisits the matter. In view of the ongoing delay in approval of the
Niyamgiri mining, the Government of Orissa is actively considering allocation of alternative
sources of bauxite to Vedanta Aluminiums alumina refinery, from
the State of Orissa.
iii) The Central Excise Department has issued an exparte notice for reversal of Cenvat credit of Rs
3,150 million along with interest of Rs 88 million for non compliance of Rules 4(5a) and 4(6) of
the Cenvat Credit Rules, in respect of non-return of job work challans for the period March to
September 2009 within stipulated time. In addition, the Department has also alleged violation of
Advance license conditions for the period 2005-2009. No show cause notice in this regard has been
served on SIIL. SIIL filed two writ petitions in Madurai Bench of Madras High Court. By an order
dated July 22, 2010, the Honble Madurai Bench of Madras High Court has granted interim stay till
the disposal of the writ petitions against the ex-parte proceedings initiated by the department
vide notices dated June 8, 2010 and June 9, 2010. SIIL has also been legally advised that the
alleged charges are not legally sustainable and there is no financial
liability on SIIL.
F-37
iv) The reorgnisation plan proposed by ASARCO and sponsored by SIILs wholly owned subsidiary,
Sterlite (USA) Inc was rejected by the US District Court in November 2009. SIIL preferred to file
an appeal against the order of US District Court. In Nov 2010, US Court of Appeals for the Fifth
Circuit dismissed that appeal. Bankruptcy Court had also approved the motion of ASARCO to
terminate the Settlement and Purchase and Sale Agreement (PSA) and allowed it to draw on the USD 50
million Letter of Credit. SIIL has contested the same and has filed an application before the
Bankruptcy Court for refund of USD 50 million drawn down by ASARCO and payment of compensation for
legal expenses. On March 17, 2010, ASARCO has filed a complaint in US Bankruptcy court for
breaching the May 2008 agreement and has claimed damages suffered as a result of the alleged
breach, which is being contested by SIIL. SIIL believes that no significant additional loss will
arise from these claims.
v) In response to the various writ petitions filed in the year 1996-1998 challenging the environment
clearances for setting up of the copper smelter at Tuticorin, the Madras High Court concluded its
hearings in February 2010 and by its order of September 28, 2010 ordered the closure of the smelter
at Tuticorin. SIIL has filed a special leave petition before the Supreme Court of India against the
order of the Madras High Court on September 29, 2010. The SLP was heard on October 01, 2010,
October 18, 2010 and December 13, 2010 and interim orders staying the Madras High Court order dated
Sept. 28, 2010 has been passed. Matter is adjourned to the last week of January 2011 for further
hearing.
F-38
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our unaudited condensed
consolidated financial statements and the related notes included elsewhere in this report. We urge
you to carefully review and consider the various disclosures made by us in this report and in our
other SEC filings, including our annual report on Form 20-F for fiscal 2010. Some of the
statements in the following discussion are forward-looking statements. See Special note regarding
forward-looking statements. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those set forth
elsewhere in this report and those set forth below.
Overview
We are a non-ferrous metals and mining company with operations in India and Australia. We also
have a Non-Controlling interest in Vedanta Aluminium Limited, or Vedanta Aluminium, an alumina refining
and aluminum smelting company, and are developing a commercial power generation business in India
that leverages our experience in building and managing captive power plants used to support our
copper, zinc and aluminum businesses. We have experienced significant growth in recent years
through various expansion projects which have expanded our copper smelting business, by acquiring
our zinc and aluminum businesses in 2002 and 2001, respectively, through the Government of India
privatization programs and by successfully growing our acquired businesses. We believe our
experience in operating and expanding our business in India will allow us to capitalize on
attractive growth opportunities arising from Indias large mineral reserves, relatively low cost of
operations and large and inexpensive labor and talent pools.
The following tables are derived from our unaudited condensed consolidated financial data and
set forth:
|
|
|
the revenue for each of our business segments as a percentage of our revenue on a
consolidated basis; |
|
|
|
|
the operating profit for each of our business segments as a percentage of our operating
profit on a consolidated basis; and |
|
|
|
|
the segment profit, calculated by adjusting operating profit for depreciation and
amortization, as applicable, for each of our business segments as a percentage of our
segment profit on a consolidated basis. |
|
|
|
|
|
|
|
|
|
|
|
Six months ended September 30, |
|
|
2009 |
|
2010 |
|
|
(In percentages) |
Revenue: |
|
|
|
|
|
|
|
|
Copper |
|
|
55.5 |
|
|
|
51.2 |
|
Zinc |
|
|
30.3 |
|
|
|
34.1 |
|
Aluminum |
|
|
11.7 |
|
|
|
11.5 |
|
Power |
|
|
2.5 |
|
|
|
3.2 |
|
Corporate and others |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit: |
|
|
|
|
|
|
|
|
Copper |
|
|
11.0 |
|
|
|
16.3 |
|
Zinc |
|
|
78.1 |
|
|
|
73.1 |
|
Aluminum |
|
|
4.1 |
|
|
|
3.8 |
|
Power |
|
|
6.8 |
|
|
|
6.8 |
|
Corporate and others |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit(1) : |
|
|
|
|
|
|
|
|
Copper |
|
|
13.2 |
|
|
|
16.9 |
|
Zinc |
|
|
71.5 |
|
|
|
68.7 |
|
Aluminum |
|
|
8.2 |
|
|
|
7.4 |
|
Power |
|
|
7.1 |
|
|
|
7.0 |
|
Corporate and others |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
1
|
|
|
Note: |
|
(1) |
|
Segment profit is calculated by adjusting operating profit for depreciation and amortization.
Our segment profit may not be comparable to similarly titled measures reported by other
companies due to potential inconsistencies in the method of calculation. We have included our
segment profit because we believe it is an indicative measure of our operating performance and
is used by investors and analysts to evaluate companies in our industry. Our segment profit
should be considered in addition to, and not as a substitute for, other measures of financial
performance and liquidity reported in accordance with IFRS. We believe that the inclusion of
supplementary adjustments applied in our presentation of segment profit are appropriate
because we believe it is a more indicative measure of our baseline performance as it excludes
certain charges that our management considers to be outside of our core operating results. In
addition, our segment profit is among the primary indicators that our management uses as a
basis for planning and forecasting of future periods. The following table reconciles
operating revenue to segment profit for the periods indicated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended September 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
(in millions) |
|
Copper: |
|
|
|
|
|
|
|
|
|
|
|
|
Segment Result |
|
Rs. |
2,360 |
|
|
Rs. |
4,175 |
|
|
$ |
93.7 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
983 |
|
|
|
950 |
|
|
|
21.3 |
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
Rs. |
3,343 |
|
|
Rs. |
5,125 |
|
|
$ |
115.0 |
|
|
|
|
|
|
|
|
|
|
|
Zinc: |
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
Rs. |
16,766 |
|
|
Rs. |
18,691 |
|
|
$ |
419.5 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,373 |
|
|
|
2,130 |
|
|
|
47.8 |
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
Rs. |
18,139 |
|
|
Rs. |
20,821 |
|
|
$ |
467.3 |
|
|
|
|
|
|
|
|
|
|
|
Aluminum: |
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
Rs. |
888 |
|
|
Rs. |
981 |
|
|
$ |
22.0 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,196 |
|
|
|
1,256 |
|
|
|
28.2 |
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
Rs. |
2.084 |
|
|
Rs. |
2,237 |
|
|
$ |
50.2 |
|
|
|
|
|
|
|
|
|
|
|
Power: |
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
Rs. |
1,457 |
|
|
Rs. |
1,742 |
|
|
$ |
39.1 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
361 |
|
|
|
365 |
|
|
|
8.2 |
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
Rs. |
1,818 |
|
|
Rs. |
2,107 |
|
|
$ |
47.3 |
|
|
|
|
|
|
|
|
|
|
|
Corporate and Others: |
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
Rs. |
(3 |
) |
|
Rs. |
(3) |
|
|
$ |
(0.1 |
) |
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
Rs. |
(3 |
) |
|
Rs. |
(3) |
|
|
$ |
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
Business Summary
Our company is comprised of the following business segments:
|
|
|
Copper. Our wholly-owned copper business is principally one of custom smelting and
includes a copper smelter, a refinery, a phosphoric acid plant, a sulphuric acid plant, a
copper rod plant, a doré anode plant and two captive power plants at Tuticorin in the State
of Tamil Nadu in Southern India and a refinery and two copper rod plants at Silvassa in
Western India. In addition, we own the Mt. Lyell copper mine in Tasmania, Australia, which
provides a small percentage of our copper concentrate requirements, and a precious metal
refinery in Fujairah in the UAE. Our primary products are copper cathodes and copper rods. |
|
|
|
|
Zinc. Our zinc business is owned and operated by Hindustan Zinc Limited, or HZL, Indias
leading zinc producer with a 74.0% market share by sale volume of the Indian zinc market in
fiscal 2010, according to India Lead Zinc Development Association, or ILZDA. We have a
64.9% ownership interest in HZL. The remainder of HZL is owned by the Government of India
(29.5%) and institutional and public shareholders (5.6%). HZL is a fully integrated zinc
producer with operations including four lead-zinc mines, four hydrometallurgical zinc
smelters, one lead smelter, one lead zinc smelter, four sulphuric acid plants, a silver
refinery and five captive power plants in the State of Rajasthan in Northwest India, one
hydrometallurgical |
2
|
|
|
zinc smelter and a sulphuric acid plant in the state of Andhra Pradesh in Southeast India,
and a zinc ingot melting and casting plant at Haridwar in the State of Uttarakhand in North
India. HZLs primary products are zinc and lead ingots. |
|
|
|
|
Aluminum. Our aluminum business is primarily owned and operated by Bharat Aluminium
Company Limited, or BALCO. We have a 51.0% ownership interest in BALCO. The remainder of
BALCO is owned by the Government of India. We have exercised our option to acquire the
Government of Indias remaining 49.0% ownership interest, though the exercise of this
option has been contested by the Government of India and the Government of India retains
the right and has expressed an intention to sell 5.0% of BALCO to BALCO employees. BALCOs
operations include two bauxite mines, one alumina refinery, two aluminum smelters and two
captive power plants. Operations at the older 100,000 tpa aluminum smelter was partially
suspended from February 2009 and ceased on June 5, 2009. Following the shut down of the
100,000 tpa aluminum smelter, the 270 MW captive power is now used for commercial purpose
as power generated by the power plant is sold to third parties. BALCOs primary products
are aluminum ingots, rods and rolled products. |
|
|
|
|
Power. Our commercial power generation business includes the 123.2 MW of wind power
plants commissioned by our 64.9% owned subsidiary HZL and a 270 MW power plant at BALCOs
Korba facility which was previously for captive use before the shut down of the 100,000 tpa
aluminum smelter at Korba on June 5, 2009. Our power business is still under development,
and we expect to have meaningful operating results for our commercial power generation
business segment in the fiscal 2011, when Sterlite Energys first power project to
construct a 2,400 MW thermal coal-based power facility (comprising four units of 600 MW
each) in Jharsuguda in the State of Orissa is expected to begin progressively commissioning
starting in the third quarter of fiscal 2011, with full completion anticipated by the
second quarter of fiscal 2012. We have obtained coal block allocations of 112.2 million
tons from the Ministry of Coal of the Government of India to support this facility. Pending
the development of the coal blocks, we intend to source 2.57 mtpa of coal, which is
expected to meet a substantial portion of the coal requirements of the first 600 MW unit of
the power plant, from the coal linkage provisionally assured to us by Mahanadi Coal Fields
Ltd in June 2008. A coal linkage is a long term supply contract for the delivery of coal
meeting contract specifications. We have also received a letter of assurance from Mahanadi
Coal Fields Ltd dated July 14, 2010 provisionally assuring the supply of 6.94 million tons
per annum of E / F Grade coal for the remaining three units of the Jharsuguda Power
Project. Further, in July 2008, Sterlite Energy was awarded the tender for a project to
build a 1,980 MW thermal coal-based commercial power plant at Talwandi Sabo, in the State
of Punjab, India, by the Government of Punjab. The project is expected to be completed in
second quarter of fiscal 2014. We also propose to develop an additional unit of 660 MW
near Talwandi Sabo for which we have entered into a memorandum of understanding with the
Government of Punjab on October 4, 2010 . On October 30, 2009, Sterlite Energy filed an
initial offering document with the Securities and Exchange Board of India for a proposed
initial publicoffering of its equity shares for an estimated offering size of Rs. 51,000
million ($1,144.5 million). |
|
|
|
|
Corporate and Others. Our corporate and other business segment primarily includes our
equity investment in Vedanta Aluminium. We hold a 29.5%
Non-Controlling interest in Vedanta
Aluminium, which is not consolidated into our financial results and which is accounted for
as an equity investment. |
Global Economic Conditions
Recent global market and economic conditions have been unprecedented and challenging and have
resulted in tighter credit conditions and recession in most major economies in the last several
years. Continued concerns about the systemic impact of potential long-term and wide-spread
recession, energy costs, geopolitical issues, the availability and cost of credit, and the global
housing and mortgage markets have contributed to increased market volatility and diminished
expectations for western and emerging economies. However, as of September 30, 2010, we had a strong
balance sheet with cash and liquid investments totaling Rs. 239,907 million ($5,383.9 million), net
cash and no significant near-term debt redemption obligations.
Passive Foreign Investment Company
As discussed in our annual report on Form 20-F for the financial year ended March 31, 2010,
declines in the market prices of our equity shares and ADSs may increase the likelihood that we
will be treated as a passive foreign investment company, or PFIC, for United States federal income
tax purposes for our current or any subsequent taxable year. While we will be unable to determine
if we are a PFIC until the end of our taxable year ended March 31, 2011, if we are treated as a
PFIC, certain adverse United States federal income tax consequences could apply to a US Holder (as
defined under Item 10. Additional Information E. Taxation United States Federal Income
Taxation in our
3
annual report on Form 20-F ) holding an ADS or equity share during such year. US Holders are
urged to consult their own tax advisors regarding the potential application of the PFIC rules to
their ownership of ADSs or equity shares and the availability and advisability of any elections.
See Item 3. Key Information D. Risk Factors Risks Relating to our ADSs We may be
classified as a passive foreign investment company, which could result in adverse United States
federal income tax consequences to US Holders. and Item 10. Additional Information E. Taxation
United States Federal Income Taxation in our annual report on Form 20-F.
Factors Affecting Results of Operations
Our results of operations are primarily affected by commodity prices, our cost of production,
our production output, government policy in India and exchange rates.
Metal Prices and Copper TcRc
Overview
Our results of operations are significantly affected by the treatment charge and refining
charge, or TcRc, of copper in our copper business and the commodity prices of the metals that we
produce, which are based on The London Metal Exchange Limited, or LME, prices, in our zinc and
aluminum businesses. Both the TcRc of copper and the commodity prices of the metals we produce can
vary significantly when supply of and demand for copper smelting and refining capacity and the
metals we produce fluctuate. While copper smelters and metal producers are unable to influence the
market rate of the TcRc or commodity prices directly, events such as changes in copper smelting or
commodity production capacities, temporary price reductions or other attempts to capture market
share by individual smelters and metal producers, including by our consolidated group of companies,
may have an effect on market prices. Moreover, the prices realized by us can, to some extent, be
affected by the particular terms we are able to negotiate for the contractual arrangements we enter
into with buyers. Price variations and market cycles, including recent volatility for both LME
prices and the copper TcRc, have historically influenced, and are expected to continue to
influence, our financial performance.
Global market and economic conditions in the past two years have been unprecedented and
challenging with tighter credit conditions and recession in most major economies continuing into
2009. These conditions, combined with volatile oil prices, declining business and consumer
confidence and increased unemployment, have contributed to volatility of unprecedented levels. As a
result of these market conditions, the cost and availability of credit has been and may continue to
be adversely affected, leading to decreased spending by businesses and consumers and, in turn,
corresponding decreases in global infrastructure spending and commodity prices. The outlook for the
copper TcRc and copper, zinc and aluminum commodity prices remains uncertain in the short to medium
term, and further decreases, including as a consequence of continued challenging, or a further
deterioration in, global market and economic conditions, may have an adverse impact upon our
financial performance.
Copper
The revenue of our copper business fluctuates based on the volume of our sales and the LME
price of copper. However, as our copper business is primarily one of custom smelting and refining,
with approximately 9.9% of our copper concentrate requirements sourced from our own mine, the
profitability of our copper business is significantly dependent upon the market rate of the TcRc.
We purchase copper concentrate at the LME-linked price for the relevant quotational period less a
TcRc that we negotiate with our suppliers but which is influenced by the prevailing market rate for
the TcRc. The market rate for the TcRc is significantly dependent upon the availability of copper
concentrate, worldwide copper smelting capacity and transportation costs. The TcRc that we are able
to negotiate is also substantially influenced by the TcRc terms established by certain large
Japanese custom smelters. The profitability of our copper business as to the portion of our copper
business where we source copper concentrate from third parties, which accounted for 90.1% of our
copper concentrate requirements during the six-month ended September 30, 2010, is thus
dependent upon the amount by which the TcRc we are able to negotiate exceeds our smelting and
refining costs. The profitability of our copper operations is also affected by the prices we
receive upon the sale of by-products, such as sulphuric acid and precious metals, which are
generated during the copper smelting and refining process. The prices we receive for by-products
can vary significantly, including as a result of changes in supply and demand and local market
factors in the location the by-product is produced. The following table sets forth the average TcRc
that we have realized for the periods indicated:
4
|
|
|
|
|
|
|
|
|
|
|
Six
months ended September 30, |
|
|
2009 |
|
2010 |
|
|
(in US cents per pound) |
Copper TcRc |
|
13.2¢/lb |
|
12.7¢/lb |
The LME price of copper affects our profitability as to the portion of our copper business
where we source copper concentrate from our own mine, which accounted for approximately 9.9% of our
copper concentrate requirements during the six-month period ended September 30, 2010 and
which is expected to decrease as a percentage in the future as the reserves of our sole remaining
copper mine, Mt. Lyell in Tasmania, Australia, are expected to be exhausted by fiscal 2013 and to
the extent we seek to increase our copper smelting and refining capacity. The following table sets
forth the daily average copper LME price for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Six
months ended September 30, |
|
|
2009 |
|
2010 |
|
|
(in US dollars per ton) |
Copper LME |
|
$ |
5,276 |
|
|
$ |
7,131 |
|
Zinc and Aluminum
The revenue of our zinc and aluminum businesses fluctuate based on the volume of our sales and
the respective LME prices of zinc and aluminum. Our zinc business is fully integrated, so its
profitability is dependent upon the difference between the LME price of zinc and our cost of
production, which includes the costs of mining and smelting. BALCO is a partially integrated
producer and during the six-month ended September 30, 2010 sourced all of its alumina
requirements from third party suppliers, including 32% from international and domestic suppliers
and 68% from Vedanta Aluminium. Korba alumina refinery were ramped down as a result of the
shut-down of the BALCO Plant 1 100,000 tpa old smelter in June 2009. The profitability of our
aluminum business is dependent upon the LME price of aluminum less the cost of the sourced alumina
and our cost of production. The following table sets forth the daily average zinc, lead and
aluminum LME prices for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Six
months ended September 30, |
|
|
2009 |
|
2010 |
|
|
(in US dollars per ton) |
Zinc LME |
|
$ |
1,621 |
|
|
$ |
2,015 |
|
Lead LME |
|
$ |
1,722 |
|
|
$ |
1,989 |
|
Aluminum LME |
|
$ |
1,652 |
|
|
$ |
2,090, |
|
India Market Premium
Generally, our products sold in India are sold at a premium to the LME market price due to a
number of factors including the customs duties levied on imports by the Government of India, the
costs to transport metals to India and regional market conditions. See Government Policy. As a
result, we endeavor to sell as large a quantity of our products as possible in India.
Hedging
We have historically engaged in hedging strategies to a limited extent to partially mitigate
our exposure to fluctuations in commodity prices, as further described in Qualitative
Disclosures about Market Risk Commodity Price Risk.
Cost of Production
Our results of operations are, to a significant degree, dependent upon our ability to
efficiently run our operations and maintain low costs of production. Efficiencies relating to
recovery of metal from the ore, process improvements, by-product management and increasing
productivity help drive our costs down. Costs associated with mining and metal production include
energy costs, ore extraction and processing costs at our captive mines, labor costs and other
manufacturing expenses. Cost of production also includes cost of alumina for our aluminum business,
as described under Metal Prices and Copper TcRc. Cost of production does not include the cost
of copper concentrate for our copper business, though such cost is included in our cost of sales.
Energy cost is the most significant component of the cost of production in our metal
production businesses. Most of our power requirements are met by captive power plants, which are
primarily coal-fueled. Thermal coal, diesel
5
fuel and fuel oil, which are used to operate our power plants, and metcoke, which is used in
the zinc smelting process, are currently sourced from a combination of long-term and spot
contracts. Our aluminum business, which has high energy consumption due to the power-intensive
nature of aluminum smelting, sources approximately 57% of its thermal coal requirement from a
subsidiary of Coal India Limited, or Coal India, under a five-year supply agreement entered into in
August 2006. Shortages of coal at Coal India may require that a greater amount of higher priced
imported coal be utilized. For example, in April 2005, a shortage of coal led Coal India to reduce
the amount of coal supplied to all its customers, except utilities, including BALCO, forcing BALCO
to utilize higher priced imported coal. However, in January 2006, we were allotted a 31.5 million
ton share in the Madanpur Coal Block for use in HZLs captive power plant. We intend to begin
operations at the Madanpur Coal Block upon receipt of all regulatory approvals. In addition, in
November 2007, we were allotted a 211.0 million ton share of a coal block by the Ministry of Coal
for use in BALCOs captive power plant. Any change in coal prices or the mix of coal that is
utilized, primarily whether the coal is sourced locally or imported, can affect the cost of
generating power.
For our zinc business and the portions of our copper and aluminum businesses where we source
the ore from our own mines, ore extraction and processing costs affect our cost of production. In
our zinc and copper businesses, the ore extraction and processing costs to produce concentrates are
generally a small percentage of our overall cost of production of the finished metals. In our
aluminum business, the bauxite ore extraction cost is not significant but the refining cost to
produce alumina from bauxite ore represents approximately one-third of the cost of production of
aluminum. In addition, a significant cost of production in our zinc business is the royalty that
HZL pays on the lead-zinc ore that is mined, which royalty is a function of the LME prices of zinc
and lead. See Government Policy Taxes and Royalties.
Labor costs are principally a function of the number of employees and increases in
compensation from time to time. Improvements in labor productivity in recent years have resulted in
a decrease in the per-unit labor costs. We outsource a majority of BALCOs and Copper Mines of
Tasmania Pty Ltds, or CMTs, mining operations, a substantial portion of HZLs mining operations
and a limited number of functions at our copper, zinc and aluminum smelting operations to third
party contractors.
Other manufacturing expenses include, among other things, additional materials and consumables
that are used in the production processes and routine maintenance to sustain ongoing operations.
None of these represents a significant portion of our costs of production.
Cost of production as reported for our metal products includes an offset for any amounts we
receive upon the sale of the by-products from the refining or smelting processes. We divide our
cost of production by the daily average exchange rate for the year to calculate the US dollar cost
of production per lb or ton of metal as reported.
Production Volume and Mix
Production volume has a substantial effect on our results of operations. We are generally able
to sell all of the products we can produce, so our revenue generally fluctuates as a result of
changes in our production volumes. Production volumes depend on our production capacities, which
have generally increased in recent years across all of our businesses. For our mining operations,
production volumes also depend upon the quality and consistency of the ore. Per-unit production
costs are also significantly affected by changes in production volumes in that higher volumes of
production generally reduce the per unit production costs. Therefore, our production volumes are a
key factor in determining our overall cost competitiveness. We have benefited from significant
economies of scale as we have increased production volumes in recent years though production
volumes for a number of our primary products in our copper, zinc and particularly our aluminum
businesses decreased between the six-month period ended September 30, 2009 and 2010 due to
planned and unplanned shut downs. For example, operations at BALCOs older 100,000 tpa aluminum
smelter were partially suspended from February 2009 and ceased on June 5, 2009. The following table
summarizes our production volumes for our primary products for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended September 30, |
Segment |
|
Product |
|
2009 |
|
2010 |
|
|
|
|
|
(tons) |
Copper |
|
Copper cathode(1) |
|
|
169,447 |
|
|
|
144,833 |
|
|
|
Copper rods |
|
|
104,864 |
|
|
|
101,211 |
|
Zinc |
|
Zinc |
|
|
279,977 |
|
|
|
340,758 |
|
|
|
Lead |
|
|
26,783 |
|
|
|
28,665 |
|
Aluminum |
|
Ingots |
|
|
31,755 |
|
|
|
15,391 |
|
|
|
Rods |
|
|
71,168 |
|
|
|
80,374 |
|
|
|
Rolled Products |
|
|
33,026 |
|
|
|
32,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aluminum |
|
|
135,949 |
|
|
|
127,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
|
(1) |
|
Copper cathode is used as a starting material for copper rods. Approximately one ton of
copper cathode is required for the production of one ton of copper rod |
6
In addition, the mix of products we produce can have a substantial impact on our results of
operations as we have different operating margins in each of our businesses, and within each
business our operating margins vary between the lower margins of primary metals and the higher
margins of value-added products such as copper rods and aluminum rolled products. For example,
copper cathodes are converted in our copper rod plant into copper rods, a value-added product which
has a higher margin than copper cathodes. As copper rods have higher margins, we endeavor to sell
as large a percentage of copper rods as possible. As the production volume of our various products
fluctuate primarily based on market demand and our production capacity for such products, the
percentage of our revenues from those products will also fluctuate between higher and lower margin
products, which will in turn cause our operating income and operating margins to fluctuate.
Periodically, our facilities are shut down for planned and unplanned repairs and maintenance
which temporarily reduces our production volume.
Government Policy
India Customs Duties
We sell our products in India at a premium to the LME price, due in part to the customs duties
payable on imported products. Our profitability is affected by the levels of customs duties as we
price our products sold in India generally on an import-parity basis. We also pay a premium on
certain raw materials that we import or which are sourced locally but which are priced on an
import-parity basis as a result of customs duties, with copper concentrate, coal, petroleum
products, alumina, carbon and caustic soda being the primary examples.
The following table sets forth the customs duties that were applicable for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 22, 2007 |
|
April 29, 2008 |
|
January 3, 2009 |
|
|
to April 28, 2008 |
|
to January 2, 2009 |
|
to present |
Copper |
|
|
5.0 |
% |
|
|
5.0 |
% |
|
|
5.0 |
% |
Copper concentrate |
|
|
2.0 |
% |
|
|
2.0 |
% |
|
|
2.0 |
% |
Zinc |
|
|
5.0 |
% |
|
|
0.0 |
% |
|
|
5.0 |
% |
Aluminum |
|
|
5.0 |
% |
|
|
5.0 |
% |
|
|
5.0 |
% |
In addition, the Finance Act (2 of 2004) of India, which has been in effect since July 8,
2004, levies an additional surcharge at the rate of 2.0% of the total customs duty payable which
has been further increased to 3.0% of the total customs duty payable effective March 1, 2007. We
are also liable to pay an additional duty of customs (CVD), of 8.0% of the assessable value and
basic custom duty, which is levied on imports in India.
In January 2004, the special additional duty, or SAD, of 4% which was also levied on imports
of copper, zinc and aluminum was abolished, reducing the effective customs duties levied on all
imports. The Government of India may reduce or abolish customs duties on copper and aluminum in the
future, although the timing and extent of such reductions cannot be predicted. As we sell the
majority of the commodities we produce in India, any further reduction in Indian tariffs on imports
will decrease the premiums we receive in respect of those sales. Our profitability is dependent to
a small extent on the continuation of import duties and any reduction would have an adverse effect
on our results of operations and financial condition.
Export Incentives
The Government of India provides a variety of export incentives to Indian companies. Indian
exports of copper, aluminum and zinc receive assistance premiums from the Government of India.
Export incentives do not outweigh the Indian market price premiums. Accordingly, notwithstanding
the export incentives, we endeavor to sell as large a quantity of our products as possible
domestically.
For
the six months ended September 30, 2009 and 2010, exports accounted for 38.0% and 30.3%,
respectively, of our copper business revenue. The following table sets forth the export
assistance premiums, either as
7
Indian Rupees per ton of exports or as a percentage of the Free on Board, or FOB, value of
exports, on copper cathode and copper rods for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 15, 2006 |
|
September 1,2008 to |
|
September 20, 2010 |
|
|
to August 31, 2008 |
|
September 19, 2010 |
|
to Present |
|
|
(percentage of FOB value of exports) |
Copper Cathode |
|
|
2.2 |
%(1) |
|
|
2.2 |
%(3) |
|
|
2.0 |
% (5) |
Copper rods |
|
|
|
|
|
|
|
|
|
|
|
|
With Cenvat |
|
|
2.2 |
%(2) |
|
|
2.2 |
%(4) |
|
|
2.0 |
%(6) |
Without Cenvat |
|
|
2.2 |
%(2) |
|
|
2.2 |
%(4) |
|
|
2.2 |
%(6) |
|
|
|
Notes: |
|
(1) |
|
Subject to a cap of Rs. 7,500 per ton. |
|
(2) |
|
Subject to a cap of Rs. 7,760 per ton. |
|
(3) |
|
Subject to a cap of Rs. 7,000 per ton. |
|
(4) |
|
Subject to a cap of Rs. 9,800 per ton. |
|
(5) |
|
Subject to a cap of Rs. 7,500 per ton. |
|
(6) |
|
Subject to a cap of Rs. 9,800 per ton |
For the six months ended September 30, 2009 and 2010, exports accounted for 33.4% and
42.4%, respectively, of our zinc business revenue. The following table sets forth the export
assistance premiums, as a percentage of the FOB value of exports, on zinc concentrate, zinc ingots
and lead concentrate for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 9, 2007 |
|
|
|
|
|
November 5, 2008 |
|
|
to November 3, 2008 |
|
November 4, 2008 |
|
to Present |
|
|
(percentage of FOB value of exports) |
Zinc concentrate |
|
|
3.0 |
% |
|
|
2.0 |
% |
|
|
3.0 |
% |
Zinc ingots |
|
|
5.0 |
% |
|
|
4.0 |
% |
|
|
5.0 |
% |
Lead concentrate |
|
|
3.0 |
% |
|
|
3.0 |
% |
|
|
3.0 |
% |
For the six months ended September 30, 2009 and 2010, exports accounted for 4.6% and
0.7%, respectively, of our aluminum business revenue. The following table sets forth the export
assistance premiums, as a percentage of the FOB value of exports, on aluminum ingots, aluminum rods
and aluminum rolled products for the periods indicated:
|
|
|
|
|
|
|
October 9, 2007 to Present |
|
|
(percentage of FOB value of exports) |
Aluminum ingots |
|
|
3.0 |
% |
Aluminum rods |
|
|
5.0 |
% |
Aluminum rolled products |
|
|
4.0 |
% |
The Government of India may further reduce export incentives in the future, which would
adversely affect our results of operations.
Taxes and Royalties
Income
tax on Indian companies is presently charged, and during the six-month period ended
September 30, 2010 was charged, at a statutory rate of 30.0% plus a surcharge of 7.5% on
the tax and has an additional charge of 3.0% on the tax including surcharge, which results in an
effective statutory tax rate of 33.2%. We have in the past had an effective tax rate lower than the
statutory rate, benefiting from tax incentives on infrastructure projects in specific locations.
Profits of companies in India are subject to either regular income tax or a Minimum Alternate
Tax (MAT), whichever is greater. The MAT rate is currently, and
during the six-month period ended
September 30, 2010 was, 19.9% of the book profits as prepared under Indian GAAP. Amounts
paid as MAT may be applied towards regular income taxes payable in any of the succeeding seven
years subject to certain conditions.
A tax on dividends declared and distributed by Indian companies is charged at an effective tax
rate of 16.6%. This tax is payable by the company distributing the dividends. Dividends from our
subsidiaries to us are also subject to this tax, though we do not pay income tax upon the receipt
of any such dividends.
We
currently pay an excise duty of 8.0% (prior to December 6, 2008,
the excise duty was 14.0%,
from December 6, 2008 to February 23, 2009, the excise duty
was 10.0%) and an additional charge of
3.0% on the excise duty based on all of our domestic production intended for domestic sale and charge this excise duty
and additional charge to our domestic customers.
8
We are also subject to government royalties. We pay royalties to the State Governments of
Chhattisgarh and Rajasthan in India based on our extraction of bauxite and lead-zinc ore. Most
significant of these is the royalty that HZL is currently required to pay to the State of
Rajasthan, where all of HZLs mines are located, at a rate of 8.4% with effect from August 13, 2009
(6.6% prior to August 13, 2009) of the zinc LME price payable on the zinc metal contained in the
concentrate produced and 12.7% (5.0% prior to August 13, 2009) of the lead LME price payable on the
lead metal contained in the concentrate produced. The royalties paid by BALCO on extraction of
bauxite are not material to our results of operations. We also pay royalties to the State
Government of Tasmania in Australia based on the operations at CMT at a rate equal to the sum of
1.6% of the net sales plus 0.4 times the profit multiplied by the profit margin over net sales,
subject to a cap of 5.0% of net sales.
There are several tax incentives available to companies operating in India, including the
following:
|
|
|
profits from newly established units in special economic zones are entitled to a tax
holiday for a specified period; |
|
|
|
|
profits from newly constructed power plants (including for captive use) benefit from a
tax holiday for a specified period; |
|
|
|
|
investments in projects where alternative energy such as wind energy is generated can
claim large tax depreciation in the first year of operations; and |
|
|
|
|
income from investment in mutual funds is exempt from a tax subject to certain
deductions. |
We have benefited from these tax incentives. Such benefits have resulted in lower effective
tax rates, both within SIIL and in some of our operating subsidiaries such as BALCO and HZL. HZLs
new export unit, effective from the quarter ended June 30, 2008, has benefited from its 100% export
unit status, where profits on export sales are exempt from tax for a specified period. BALCO and
HZL have considerable investments in captive power plants enjoying tax exemptions, and HZL has also
benefited from establishing wind energy generating projects. HZL also benefits from a tax holiday
exemption with respect to its newly commissioned zinc ingot melting and casting plant at Haridwar
in the State of Uttrakhand in North India. In addition, a large part of SIILs and HZLs investment
of surplus cash are in tax exempt instruments.
Exchange Rates
We sell commodities that are typically priced by reference to US dollar prices. However, a
majority of our direct costs in our zinc and aluminum businesses and our smelting and refining
costs in our copper business are incurred in Indian Rupees and to a much lesser extent in
Australian dollars. Also, all costs with respect to imported material for all our businesses are
generally incurred in US dollars. As a result, an increase in the value of the US dollar compared
to the Indian Rupee, and to a lesser extent the Australian dollar, is generally beneficial to our
results of operations, except to the extent that the increase results in increased costs of copper
concentrate, alumina and other imported materials for our businesses. A decrease in the value of
the US dollar relative to the Indian Rupee or Australian dollar has the opposite effect on our
results of operations.
The following table sets forth the average value of the Indian Rupee against the US dollar and
the Australian dollar against the US dollar for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Six
months ended September 30, |
|
|
2009 |
|
2010 |
|
|
(per US dollar) |
Indian Rupees |
|
Rs. |
48.54 |
|
|
Rs. |
46.09 |
|
Australian dollars |
|
AUD |
1.25 |
|
|
AUD |
1.12 |
|
|
|
|
Source: |
|
Reserve Bank of India |
The average exchange rate of the Indian Rupee against the US dollar was Rs. 48.54 per US
dollar in the six-month period ended September 30, 2009 as compared to Rs. 46.09 per US dollar in
the six-month period ended September 30, 2010, an appreciation of 5%, which positively affected our
revenue.
9
Results of Operations
Overview
Consolidated Statement of Income
The following table is derived from our unaudited condensed consolidated financial data and
sets forth our historical operating results as a percentage of revenue for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Six
months ended September 30, |
|
|
2009 |
|
2010 |
|
|
(In percentages) |
Consolidated Statement of Income: |
|
|
|
|
|
|
|
|
Revenue |
|
|
100.0 |
|
|
|
100.0 |
|
Other operating income |
|
|
1.4 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
101.4 |
|
|
|
100.8 |
|
Cost of sales |
|
|
(77.1 |
) |
|
|
(76.0 |
) |
Distribution cost |
|
|
(1.5 |
) |
|
|
(1.1 |
) |
Administration expenses |
|
|
(2.5 |
) |
|
|
(2.3 |
) |
Operating profit |
|
|
20.3 |
|
|
|
21.4 |
|
Investment income |
|
|
8.5 |
|
|
|
8.5 |
|
Finance costs |
|
|
(3.1 |
) |
|
|
1.5 |
|
Share in profit of associates |
|
|
1.3 |
|
|
|
(1.1 |
) |
|
|
|
|
|
|
|
|
|
Profit before taxes |
|
|
27.0 |
|
|
|
30.2 |
|
Tax expense |
|
|
(5.1 |
) |
|
|
(7.4 |
) |
|
|
|
Profit for the period |
|
|
21.9 |
|
|
|
22.8 |
|
|
|
|
Profit attributable to: |
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
|
15.4 |
|
|
|
16.4 |
|
Non-Controlling interest |
|
|
6.5 |
|
|
|
6.4 |
|
Comparison
of six-month period ended September 30, 2009 and September 30, 2010
Revenue, Other Operating Income and Operating Profit
Consolidated
Revenue
increased from Rs. 105,730 million in the six-month period ended September 30,
2009 to Rs. 119,528 million ($2,682.4 million) in the six-month period ended September 30,
2010, an increase of Rs. 13,798 million, or 13.1%. Revenue increased primarily as a result of an
increase in sales volume in our zinc business due to higher production, sale of power from BALCOs
270 MW power plant at Korba due to the planned permanent shut down of the old 100,000 tpa aluminum
smelter, the appreciation of the Indian Rupee against the US dollar by 5.0% and higher daily
average LME prices in our copper, zinc and aluminum segments, partially offset by lower by-product
realizations and lower production in our aluminum segment due to the shut down of the 100,000 tpa
aluminum smelter at BALCOs Korba facility.
Other
operating income decreased from Rs. 1,444 million in the six-month period ended
September 30, 2009 to Rs. 982 million ($22.0 million)
in the six-month period ended
September 30, 2010, a decrease of Rs. 463 million, or 32%.
Operating
profit increased from Rs. 21,468 million in the six-month period ended September 30,
2009 to Rs. 25,586 million ($574.1 million) in the six-month period ended September 30, 2010, an
increase of Rs. 4,118 million, or 19.2%. The increase was due to higher sales volumes from our
zinc business and an increase in the daily average LME prices of copper, zinc and aluminum.
Operating
profit margin increased from 20.3% in the six-month period ended September
30, 2009 to 21.4% in the six-month period ended September 30, 2010. Contributing
factors to our consolidated operating income were as follows:
10
|
|
|
Cost of sales increased from Rs. 81,570 million in the six-month period ended September
30, 2009 to Rs. 90,785 million ($2,037.4 million) in
the six-month period ended
September 30, 2010, an increase of Rs. 9,215 million, or 11.3%. Cost of sales increased primarily due to increase in royalty in our zinc
business and increase in production in our zinc business. Cost of sales as a percentage of
revenue decreased from 77.1%, in the six-month period ended September 30, 2009 to
76.0% in the six-month period ended September 30, 2010. |
|
|
|
|
Distribution costs decreased from Rs. 1,510 million in
the six-month period ended
September 30, 2009 to Rs. 1,338 million
($30.0 million) in the six-month period
ended September 30, 2010, a decrease of Rs. 172 million, or 11.4%. This decrease was
due to improved efficiency in logistics management. As a percentage of revenue, distribution
cost decreased from 1.4% in the six-month period ended September 30, 2009 to 1.1% in
the six-month period ended September 30, 2010. |
|
|
|
|
Administration expenses increased from Rs. 2,626 million
in the six-month ended September
30, 2009 to Rs. 2,801 million ($62.9 million) in the
six-month period ended
September 30, 2010, an increase of Rs. 175 million, or 6.7%, primarily as a result
of an increase in exploration and technical consultancy costs at HZL and an increase in
other general costs as a result of expansion of our business. As a percentage of revenue,
administration expenses decreased from 2.5 % in the six-month period ended September
30, 2009 to 2.3 % in the six-month period ended September 30, 2010. These
expenses increased primarily in our zinc business as a result of an increase in capacity and
the scale of our operations and increased wages under the long term settlement of wage agreement
effective from July 1, 2007 with the labor union representing our employees. |
|
|
|
|
During the six-month period ended September 30, 2010, we charged to profit and loss
account Rs. 311 million on account of contribution towards the Cancer Research Hospital
project being set up by Vedanta Medical Research Foundation at Raipur in Chhattisgarh. The
contribution has been made by us as a part of our Corporate Social Responsibility initiative
in healthcare. |
Copper
Revenue
in the copper segment increased from Rs. 58,668 million for the six-month period ended
September 30, 2009 to Rs. 61,180 million
($1,373.0 million) for the six-month period ended
September 30, 2010, an increase of Rs. 2,512 million, or 4.3%. This increase was primarily
due to the higher daily average copper LME prices during the six-month period ended September
30, 2010 compared to the six-month period ended September 30, 2009.
|
|
|
Copper cathode production decreased from 169,447 tons in the six-month period ended
September 30, 2009 to 144,833 tons in the six-month period ended September
30, 2010, a decrease of 14.5%. The production in the six-month period ended
September 30, 2010 was lower as compared to the six-month period ended September
30, 2009, primarily due to the planned bi-annual plant maintenance shut down for 22
days in June and July 2010. Copper cathode sales decreased from 62,925 tons in the
six-month period ended September 30, 2009 to 43,930 tons in
the six-month period
ended September 30, 2010, an decrease of 30.2% due to decreased production. |
|
|
|
|
Production of copper rods decreased from 104,864 tons in the six-month period ended
September 30, 2009 to 101,211 tons in the six-month period ended September
30, 2010, a decrease of 3.5%. Copper rod sales decreased from 103,718 tons in the
six-month period ended September 30, 2009 to 99,498 tons in
the six-month period
ended September 30, 2010, a decrease of 4.1%. The decrease in sales was in line
with the decrease in production. |
|
|
|
|
Sales of copper in the Indian market increased from 107,334
tons in the six-month period
ended September 30, 2009 to 110,337 tons in the six-month period ended September
30, 2010, an increase of 2.8%, and our exports decreased from 59,309 tons in the
six-month period ended September 30, 2009 to 33,090 tons in
the six-month period
ended September 30, 2010, a decrease of 44.21%. We endeavor to sell as large a
quantity of our products as possible domestically, where we receive an Indian market
premium. Our domestic sales as a percentage of total sales increased from 64.4% in the
six-month period ended September 30, 2009 to 76.9% in the six-month period ended
September 30, 2010 as the demand in the domestic market increased more rapidly than
our production volume growth. |
11
|
|
|
The daily average copper cash settlement price on the LME increased from $5,276 per ton
in the six-month period ended September 30, 2009 to $7,131 per ton in the six-month
period ended September 30, 2010, a increase of 35.2%. |
Operating profit in the copper segment increased from Rs. 2,360 million in the six-month
period ended September 30, 2009 to Rs. 4,175 million ($93.7 million) in the six-month
period ended September 30, 2010, a increase of Rs. 1,816 million, or 77.0%. This increase
is primarily due to an increase in the daily average LME prices of copper during the six month
period ended September 30, 2010 compared to the six month period ended September 30, 2009.
Zinc
Revenue in the zinc segment increased from Rs. 32,075 million in the six-month period ended
September 30, 2009 to Rs. 40,732 million ($914.1 million) in the six-month period ended
September 30, 2010, an increase of Rs. 8,658 million, or 27.0%. This was primarily due to a
increase of 24.3% in the daily average zinc LME prices during the six-month period ended September
30, 2010 compared to the six-month period ended September 30, 2009, and increase in sales
volume which is partially offset by appreciation of the Indian Rupee against the US dollar by 5.1%.
Specifically:
|
|
|
Zinc ingot production increased from 279,977 tons in the six-month period ended
September 30, 2009 to 340,758 tons in the six-month period ended September
30, 2010, an increase of 21.7%, due to ramp-up of production from our third
hydrometallurgical zinc smelter at Dariba. Zinc ingot sales increased from 278,894 tons in
the six-month period ended September 30, 2009 to 339,755 tons in the six-month
period ended September 30, 2010, an increase of 21.8%, enabled by higher production
and strong market demand in India as well as in the rest of Asia. |
|
|
|
|
Zinc ingot sales in the domestic market increased from 193,626 tons in the six-month
period ended September 30, 2009 to 201,196 tons in the six-month period ended
September 30, 2010, an increase of 3.9%, primarily due to higher production and
strong market demand in India. Export sales also increased from 82,628 tons in the
six-month period ended September 30, 2009 to 138,558 tons in the six-month period
ended September 30, 2010, a increase of 67.7%. |
|
|
|
|
The daily average zinc cash settlement price on the LME increased from $1,621 per ton in
the six-month period ended September 30, 2009 to $2,015 per ton in the six-month
period ended September 30, 2010, a increase of 24.3.%. |
|
|
|
|
The daily average lead cash settlement price on the LME increased from $1,722 per ton in
the six-month period ended September 30, 2009 to $1,989 per ton in the six-month
period ended September 30, 2010, a increase of 15.5%. |
|
|
|
|
Zinc concentrate sales decreased from 96,321 dmt in the six-month period ended September
30, 2009 to NIL dmt in the six-month period ended September 30, 2010. This
decrease was primarily due to non-availability of surplus zinc concentrate as a result of
higher consumption of zinc concentrate to produce metal with a higher concentration of zinc
at the smelters. We sold surplus lead concentrate of 20,915 dmt in the six-month period
ended September 30, 2009 and 7,471 dmt in the six-month period ended September
30, 2010 to third parties. This decrease is primarily due to the non-availability
of surplus lead concentrate as a result of higher consumption of lead concentrate to
produce metal with a higher concentration of lead at the ISPTM pyrometallurgical
smelter. |
|
|
|
|
Lead ingot production increased from 26,783 tons in the six-month period ended September
30, 2009 to 28,665 tons in the six-month period ended September 30, 2010, a increase of
7.0%, primarily due to improved lead production from the pyrometallurgical process. Lead
ingots sales increased from 26,454 tons in the six-month period ended September 30, 2009 to
28,533 tons in the six-month period ended September 30, 2010, a increase of 7.9%. |
|
|
|
|
Silver ingot production increased from 59,851 kg in the six-month period ended September
30, 2009 to 72,517 kg in fiscal 2010, an increase of 21.2%, primarily due to higher silver
content in the mined ore. The daily average silver London Bullion Metal Association, or
LBMA, price increased by 31.1% in the six-month period ended September 30, 2010 as compared
to the six-month period ended September 30, 2009. Sale of silver ingots increased from
59,163 kg in the six-month period ended September 30, 2009 to 72,709 kg in the six-month
period ended September 30, 2010, an increase of 22.9% enabled by the increase in
production. |
12
Operating profit in the zinc segment increased from Rs. 16,766 million in the six-month period
ended September 30, 2009 to Rs. 18,691 million ($419.5 million) in the six-month period
ended September 30, 2010, an increase of Rs. 1,925 million, or 11.5%. Operating margin decreased from 52.3% in the
six-month period ended September 30, 2009 to 45.9% in the six-month period ended September
30, 2010. The increase in metal volume and improved operational efficiencies were partially
offset by substantial decline in the by-product credit realization of sulphuric acid due to a
decline in the price of sulphuric acid attributable to poor market conditions and impact of long
term settlement of wage agreement effective from July 1, 2007
with labor union representing our
employees.
Aluminum
Revenue from external customers in the aluminum segment increased from Rs. 12,386 million in
the six-month period ended September 30, 2009 to Rs. 13,797 million ($309.6 million) in the
six-month period ended September 30, 2010, an increase of Rs. 1,411 million, or 11.4%,
primarily due to increase by 27% in the daily average aluminium LME prices during the six-month
period ended September 30, 2010 compared to the six-month period ended September 30,
2009. Specifically:
|
|
|
Aluminum production decreased from 135,948 tons in the six-month period ended September
30, 2009 to 127,907 tons in the six-month period ended September 30, 2010,
a decrease of 5.91% Production from the new smelter at Korba increased from 122,703 tons in
the six-month period ended September 30, 2009 to 127,017 tons in the six-month
period ended September 30, 2010. Production at the old 100,000 tpa Korba smelter
production decreased from 13,245 tons in the six-month period ended September 30,
2009 to 891 tons in the six-month period ended September 30, 2010, a decrease of
93.3% primarily due to the planned permanent shutdown of the smelter on June 5, 2010, due
to the smelters higher cost of production. |
|
|
|
|
Aluminum sales decreased from 133,016 tons in the six-month period ended September
30, 2009 to 121,782 tons in the six-month period ended September 30, 2010,
a decrease of 8.5%, due to lower production as a result of the phased shut down of the old
100,000 tpa Korba smelter on June 5, 2009 due to higher operational costs. Sales of
aluminum ingots decreased from 31,255 tons in the six-month period ended September
30, 2009 to 14,033 tons in the six-month period ended September 30, 2010, a
decrease of 55.1%, as a result of the phased shutdown of the old Korba smelter. Wire rod
sales increased from 70,473 tons in the six-month period ended September 30, 2009
to 80,096 tons in the six-month period ended September 30, 2010, an increase of
13.65%, as a result of increased production due to the stabilisation of the wire rod mill
and increased demand for this product, particularly in the electrical sector, and reflects
our continued focus on the sale of value-added products. Rolled
product sales decreased
from 31,289 tons in the six-month period ended September 30, 2009 to 27,653 tons in
the six-month period ended September 30, 2010, an decrease of 13.9%, primarily due
to the transfer of rolled product to the new smelter project. |
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Aluminum sales in the domestic market decreased from 125,726 tons in the six-month
period ended September 30, 2009 to 120,982 tons in the six-month period ended
September 30, 2010, a decrease of 3.7%, due to lower production as a result of the
phased shut down of the old 100,000 tpa Korba smelter commencing in February 2009 which
ceased operations on June 5, 2009. Our aluminum exports decreased from 7,290 tons in the
six-month period ended September 30, 2009 to 799 tons in the six-month period ended
September 30, 2010, as a result of higher premiums in the domestic market. We
endeavor to sell as large a quantity of our products as possible domestically, where we
receive an Indian market premium. Our domestic sales as a percentage of total sales
increased from 94.5% in the six-month period ended September 30, 2009 to 99.3% in
the six-month period ended September 30, 2010, due to the increased demand of the
value added product in the domestic market, and improved demand in the power market. |
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The daily average aluminum cash settlement price on the LME increased from $1,652 per
ton in the six-month period ended September 30, 2009 to $2,090 per ton in the
six-month period ended September 30, 2010, an increase of 26.5% |
Operating profit in the aluminum segment increased from Rs. 888 million in the six-month
period ended September 30, 2009 to Rs. 981 million ($22.0 million) in the six-month period
ended September 30, 2010, an increase of Rs. 93 million, or 10.4%. Operating margin
decreased from 7.2% in the six-month period ended September 30, 2009 to 7.1% in the
six-month period ended September 30, 2010.
13
Power
Revenue in the power segment increased from Rs. 2,601 million in the six-month period ended
September 30, 2009 to Rs. 3,819 million ($85.7 million) in the six-month period ended
September 30, 2010, an increase of Rs. 1,217 million, primarily due to sale of power generated by the 270 MW power plant at Korba in
commercial power markets to optimize our returns following the closure of our old aluminum smelter
at BALCOs Korba facility.
Operating profit in the power segment increased from Rs. 1,457 million in the six-month period
ended September 30, 2009 to Rs. 1,742 million ($39.1 million) in the six-month period ended
September 30, 2010, an increase of Rs. 285 million, primarily due to sale of power in the
external market generated by the 270 MW power plant at Korba.
In order to present a more accurate picture of our segment performance, a new reporting
segment has been created to disclose the revenue and profitability of our power business.
Currently, the power businesses comprise the 123 MW wind power generators at HZL and the 270 MW
power plant at BALCO. Our power business is still under development and we expect to have
meaningful operating results for our commercial power generation business segment in fiscal 2011,
when Sterlite Energys first power project is expected to begin progressive commissioning in the
third quarter of fiscal 2011.
Investment revenue
Investment revenue increased from Rs. 8,947 million in the six-month period ended September
30, 2009 to Rs. 10,101 million ($226.7 million) in the six-month period ended September
30, 2010, a increase of Rs. 1,154 million, or 12.9%, primarily due to income on the
proceeds from our ADS offering that we have invested temporarily.
Finance costs
Finance
costs decreased from a gain of Rs. 3,259 million in the six-month period ended September
30, 2009 to Rs. 1,761 million ($39.5 million) in the six-month period ended September
30, 2010, a decrease of Rs. 5,020 million, or 154.0 %. The decrease in finance cost was
primarily due to foreign exchange loss on foreign currency deposits held by CMT and an increase in
our outstanding debt in six-month period ended September 30, 2009 as compared to the
six-month period ended September 30, 2010.
Share in profit / loss of associate
Share in profit of associate was Rs. 1,398 million in the six-month period ended September
30, 2009. Share in the loss of associate was Rs. 1,343 million ($30.1 million) in the
six-month ended September 30, 2010. The increase in loss was due to increase in finance
costs of our associate.
Tax expense
Tax expense increased from Rs. 5,433 million in the six-month period ended September
30, 2009 to Rs. 8,809 million ($197.7 million) in the six-month period ended September
30, 2010. Our effective income tax rate, calculated as tax expense owed divided by our
profit before taxes was 19.0% in the six-month period ended September 30, 2009 and 24.1% in
the six-month period ended September 30, 2010. The effective tax rate was higher in the
six-month period ended September 30, 2010 primarily due to lower tax exemption for the
export oriented units at HZL and SIIL as compared to the six-month period ended September
30, 2009, which were partially offset by tax holiday exemptions for the new zinc ingot
melting and casting plant at Haridwar in the State of Uttrakhand in North India, tax holiday
exemption on the newly commissioned 16 MW wind power plant and 80 MW thermal captive power plant at
our zinc business and 540 MW thermal captive power plant at our aluminum business, and higher tax
free dividend and investment income.
Non-Controlling interest
Profit
attributable to Non-Controlling interest increased from Rs. 6,818 million in the six-month
period ended September 30, 2009 to Rs. 7,594 million ($170.4 million) in the six-month
period ended September 30, 2010, an increase of Rs. 776 million, or 11.4 %. This increase
was mainly due to higher profits in our zinc business in the Six-
14
month period ended September
30, 2010. Non-Controlling interest as a percentage of profit remains same of 6.4% for six-month
period ended September 30, 2009 and six-month period ended September 30, 2010.
Liquidity and Capital
As of September 30, 2010, we had cash and short-term investments and deposits
(excluding restricted cash and investments) totaling Rs. 239,832 million ($5,382.2 million), net
cash and no significant near-term debt redemption obligations, and SIIL had, on a standalone basis,
cash and short-term investments totaling Rs. 107,771 million
($2,418.6 million).
The cash flow summary of net cash provided or used for the period indicated:
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Six-month
period ended September 30, |
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2009 |
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2010 |
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2010 |
Net cash provided by/ (used in): |
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(Rs. in millions) |
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(Rs. in millions) |
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(US dollars in millions) |
Operating activities |
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(53,955 |
) |
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37,841 |
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849.4 |
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Investing activities |
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(27,351 |
) |
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(34,086 |
) |
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(765.0 |
) |
Financing activities |
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81,107 |
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(3,065 |
) |
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(68.9 |
) |
Net
Cash Provided/(used) by Operating Activities
Net
cash provided by operating activities was
Rs. 37,841 million ($849.4 million) in
the six-month period ended September 30, 2010 as compared to net cash
used of Rs. 53,955 million in the
six-month period ended September 30, 2009. The increase in cash flows from operating
activities was primarily due to a Decrease in trade and payable by
Rs. 6,009 million, an increase
in inventories by Rs. 1,122 million, an increase in proceeds
from short term investments by Rs. 100,745 million and increase
in trade and other receivables by Rs. 5,993 million in the six-month
period ended September 30, 2010.
Net Cash Used in Investing Activities
Net
cash used in investing activities was Rs. 34,086 million
($765.0 million) in the six-month
period ended September 30, 2010 as compared to Rs. 27,351 million in the six-month period ended
September 30, 2009 a decrease of Rs. 6,735 million
primarily due to repayment of loans to related parties by Rs. 72,702 and decrease in short
term deposits by Rs. 78,473.
Net Cash Provided by Financing Activities
Net
cash used in financing activities was Rs. 3,065 million
($68.9 million) in
the six-month period ended September 30, 2010 compared to net cash
provided of Rs. 81,107 million in the six
month period ended September 30, 2009, primarily as a result of net proceeds from issuance of
equity shares in the form of ADSs of Rs. 76,532 million in the six month period ended September
30, 2009.
We tap both the domestic and offshore markets for our long-term funding needs. Since we have
sizeable imports and exports, we access both import and export credits, based on cost
effectiveness, both in the Indian Rupee and in foreign currencies, to finance our short-term
working capital requirements. We have in place both secured and unsecured borrowings, with our
secured borrowings being generally Indian Rupee denominated bonds.
See Note 20 to our unaudited
condensed consolidated financial statements for more information on our loans and borrowings.
We have tapped different segments of borrowing resources, including banks and capital markets,
both in India and overseas. We have credit ratings of above investment grade from the local rating
agencies such as Credit Rating Information Services of India Limited, or CRISIL, and ICRA Limited.
We therefore have not had, and do not believe that we will have, difficulty in gaining access to
short-term and long-term financing sufficient to meet our current requirements.
15
Off-Balance Sheet Arrangements
In the normal course of business, we enter into certain capital commitments and also give
certain financial guarantees. The aggregate amount of indemnities and other guarantees, on which we
do not expect any material losses, was Rs. 71,218 million ($1,584.4 million) as of September
30, 2010.
Qualitative Disclosures about Market Risk
Currency Risk
The results of our operations may be affected by fluctuations in the exchange rates between
the Indian Rupee and Australian dollar against the US dollar.
We use hedging instruments to manage the currency risk associated with the fluctuations in the
Indian Rupee and Australian dollar against the US dollar in line with our risk management policy.
Typically, all exposures with a maturity of less than two years are managed using simple
instruments such as forward contracts. As long-term exposures draw nearer, we hedge them
progressively to insulate these from the fluctuations in the currency markets. In our Australian
operations, apart from funds to meet local expenses which are denominated in Australian dollars, we
strive to retain our surplus funds in US dollar terms. These exposures are reviewed by appropriate
levels of management on a monthly basis.
Hedging activities in India are governed by the Reserve Bank of India, or RBI, with whose
policies we must comply. The policies under which the RBI regulates these hedging activities can
change from time to time and these policies affect the effectiveness with which we manage currency
risk.
We have in the past held or issued instruments such as options, swaps and other derivative
instruments for purposes of mitigating our exposure to currency risk. We do not enter into hedging
instruments for speculative purposes.
16
Interest Rate Risk
Our short-term debt is principally denominated in Indian Rupees with fixed rates of interest.
Typically, our foreign currency debt has floating rates of interest linked to US dollar LIBOR. The
costs of floating rate borrowings may be affected by the fluctuations in the interest rates. We
have selectively used interest rate swaps, options and other derivative instruments to manage our
exposure to interest rate movements. These exposures are reviewed by appropriate levels of
management on a monthly basis.
Borrowing and interest rate hedging activities in India are governed by the RBI and we have to
comply with its regulations. The policies under which the RBI regulates these borrowing and
interest rate hedging activities can change from time to time and can impact the effectiveness with
which we manage our interest rate risk.
We have in the past held or issued instruments such as swaps, options and other derivative
instruments for purposes of mitigating our exposure to interest rate risk. We do not enter into
hedging instruments for speculative purposes.
Commodity Price Risk
We use commodity hedging instruments such as forwards, swaps, options and other derivative
instruments to manage our commodity price risk in our copper and zinc businesses. Currently, we use
commodity forward contracts to partially hedge against changes in the LME prices of copper and
zinc. We enter into these hedging instruments for the purpose of reducing the variability of our
cash flows on account of volatility in commodity prices. These hedging instruments are typically of
a maturity of less than one year and almost always less than two years.
Hedging activities in India are governed by the RBI and we have to comply with its
regulations. The policies under which the RBI regulates these hedging activities can change from
time to time and can impact the effectiveness with which we manage commodity price risk.
We have in the past held or issued derivative instruments such as forwards, options and other
derivative instruments for purposes of mitigating our exposure to commodity price risk. We do not
enter into hedging instruments for speculative purposes.
17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunder duly authorized.
Date:
January 11, 2011
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STERLITE INDUSTRIES (INDIA) LIMITED
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By: |
/s/ Vinod Bhandawat
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Name: |
Vinod Bhandawat |
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Title: |
Chief Financial Officer |
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