JSW Steel Ltd

Overview

The global economy expanded by 5.0% in 2010 as against 0.5% in 2009. This recovery wascharacterised by:

1) Moderate growth in advanced economies, spurred by stimulus measures. Privateconsumption which fell sharply during the crisis picked up.

2) Growth in emerging and developing economies remained robust buoyed by resurgentcapital inflows due to abundant global liquidity and strong domestic demand.

3) Global liquidity improved, credit spreads narrowed, equity and debt capital marketsopening up enabling several corporations to raise capital to meet funding requirements.

Challenges

Pockets of vulnerability persisted; real-estate markets and household incomes remainedweak in some major advanced economies. Volatility and uncertainty re-emerged in Euro area.

Concerns about banking sector losses and fiscal sustainability triggered by crisis inIreland, Spain, Greece and Portugal led to unprecedented widening of credit spreads forthese countries.

The turmoil in mid-2010 in the Euro zone led to a spike in global risk aversion andscaling back of capital allocation by fund managers to emerging markets. However, duringthe recent bout of turbulence, the financial stress was limited primarily to the peripheryof the Euro area. Quantitative easing and stimulus packages by several countries createdhuge liquidity in financial markets and Central banks in emerging economies faced thechallenge of high inflation and started pursuing a hawkish monetary policy by raisingreserve ratios and hiking policy rates.

Natural disasters across the globe posed a significant challenge for global economicgrowth. Floods, earthquakes and drought among others took a massive toll on human life,resulting in wealth erosion.

GDP Growth

Source: IMF

Estimates for 2011

The global economy is on a recovery path while Advanced economies are expected to pickup growth momentum. The emerging economies will consolidate with moderate growth as thefocus is shifted to contain inflation rather then pursuing growth.

Advanced economies: The growth is projected at 2.6% in 2012. The new fiscalpackages passed in late 2010 in the US and Japan will boost economic growth in 2011.Although growth in the periphery of the euro area is marked down for 2011, this willoffset by an upward revision in economic growth in Germany, owing to stronger domesticdemand.

Emerging and developing economies: In 2011, growth in emerging and developingeconomies is expected to be at 6.5%, a modest drop from 7.30% registered in 2010.Developing Asia will continue with its rapid growth. Other emerging regions are expectedto continue their strong rebound; notably, growth in sub-Saharan Africa - projected at5.5% in 2011 - higher than the economic growth in all other regions, except developingAsia.

Snapshot (2010)

Source: World Steel Association/ISSB

The CY 2010 could be rated as the year of 'broad based recovery', in terms of economicrevival, steel production, trade and consumption, except the threat of sovereign defaultsin parts of Europe. Besides, weather extremities namely, extreme heat and cold waves,drought, floods, cyclones, among others are also causes of concern.

The Global Steel Industry reached a new high in 2010 after a disastrous 2008. Theglobal demand growth was at 13% after a steep fall in 2008. Asia was the leading steelproducer with a 64% share in the global crude steel production. China was the largestproducer with a 44% share, India ranked fifth in world crude steel production.

The steel demand in advanced economies recovered, stimulated from social spending bygovernments, the demand in rest of the world, including China continued to expand.

Source: World Steel Association

The contribution of emerging economies to the growth in world steel production andconsumption is evident as stated hereunder:

Surplus production from China and advanced economies was absorbed by growing importsfrom rest of the emerging world.

Production

In 2010, global steel production grew 15%, to 1,414 MnT. The growth is significantconsidering the huge downslide in steel production and consumption in the last quarter of2008 (due to the global economic crisis). The growth in 2010 exceeded the previous recordset in 2007. Interestingly, the most significant rise in steel production in 2010 was inthose geographies where it had contracted the maximum in 2008 and 2009, namely NorthAmerica, Europe and Japan. Despite the considerable rebound, steel production in thesenations remained below the pre-crisis levels.

Source: World Steel Association

Crude Steel Production

Source: World Steel Association

(4) Indian Economy

The Indian economy was one of the fastest growing economies to recover from theeconomic crisis, registering a second year of accelerated growth. The Indian economy grewat a robust rate of 8.50% in 2010-11 (8% in 2009-10).

Year 2010-11 witnessed fairly strong economic growth at 8.50% contributed by a stronggrowth in agriculture at 6.60%. Industry witnessed a moderation in growth from at 8% in2009-10 to 7.90% in 2010-11. Services continued to support the overall economic growthcontributing around 58% to overall GDP.

Private consumption expenditure grew significantly in 2010-11, as a consequence ofincreasing disposable income. The growth was 22% and 26% respectively in consumer durablesand passenger car segments.

In 2010-11, exports grew 37% to USD 246 billion against USD 179 billion in 2009-10;imports grew 22.6% to USD 351 billion in 2010-11 against USD 288 billion in 2009-10 -resulting in a trade deceit of USD 104 billion in 2010-11 against USD 109 billion in2009-10.

The confidence in the Indian growth story was rejected by the record Fll infiows intothe economy and the revival in investor confidence, helping the Indian stock marketsregain pre-crisis record levels. Net capital infiows increased to US$ 36.7 bn as on March31, 2010; foreign exchange reserves grew by US$ 20 bn to US$ 303.50 bn.

Snapshot

(Source: CSO)

Challenges

Even though the macro economic data displayed a strong performance, they were marked bysignificant volatility, as evident from the data points and the sentiments primarilydriven by global clues and policy responses to moderate inflation.

The headline inflation witnessed a relentless rise during the first half of 2010 andremained in double digits for almost five months in 2010. The uneven monsoon during 2009and domestic supply side constraints coupled with rising international food grain pricespushed the prices of primary food articles, manufactured goods and services.

As India witnessed robust growth, it was simultaneously challenged by rising commodityprices - both domestically and internationally. This was partially mitigated by timelyintervention of the government through fiscal and monetary policy responses.

Optimism for 2011-12

Given the strong underlying growth momentum of the Indian economy, the outlook remainspositive with a sustained increase in service sector growth, normalising agriculturaloutput due to expected favourable monsoon and robust private consumption. Further, thesubstantial governmental outlays on building physical and social infrastructure withthrust on PPP model of development is expected to lead to sustained growth in industrialsector.

Economic activity is expected to take a step forward towards a high growth trajectorywith GDP expected to grow at around 8.8% during 2011, as private demand gathers momentumand supports overall growth process.

National manufacturing and investment zones to create more jobs

According to the Economic Survey 2007-08, about 64.8% of India's population will be inthe working age of 15-64 years by 2026. By 2015, India will have 800 million people in theworking age group of 15- 59, ahead of China which is expected to have only 600 million.Thus, India will need to create employment opportunities at that scale, in both theservice and manufacturing sectors.

With the objective of helping the Indian manufacturing sector achieve its truepotential and to be an engine for job creation, the Ministry of Commerce and Industryproposed the creation of a number of National Manufacturing & Investment Zones (NMIZ),which would enhance contribution by the manufacturing sector in overall economy.

Contribution by every Indian to country's economy

Source: Derived from PM-EAC

(5) Indian Steel Industry

Snapshot (2010-11)

Overview

The Indian steel industry ranks fifth in the world with an estimated crude steelproduction of 63 MnT in FY 2010-11. Integrated steel producers contributed 55% of thetotal crude steel production in 2010-11 and 45% by secondary producers.

During the period from 1997-98 to 2000-01, steel production witnessed a marginal growthof 3% CAGR. However, during 2001-02 to 2007-08, owing to a boom in the infrastructure andautomobile sectors, the industry witnessed a sharp turnaround and registered a steep hikeof 12% CAGR.

Snapshot (2010-11)

Source: JPC

In 2010-11, steel consumption grew at a healthy 10% from 59 MnT in 2009-10 to 66 MnT,owing to strong demand from the infrastructure, construction, automobile, and industrialsectors. Rising production capacities has reduced India's import dependency from 13% in2009-10 to about 10% in 2011-12.

Performance Trend

(MnT)

Source: JPC

Capacity addition programme

According to estimates by the Ministry of Steel, India is slated to add around 200 MnTof capacity during the next decade, increasing overall crude steel capacity from 78 MnT in2010-11 to around 280-290 MnT by 2020. Certain estimates suggest that India would emergeas the world's second largest steel producer by 2015-16.

Capacity Build-Up

Per Capita Consumption

India presents a high growth potential with its per capita finished steel consumptionof 54 kg, compared with 430 kg in China and 187 kg globally. Interestingly, India's percapita steel consumption in rural locations is only 13 kg, with 70% of Indians residing inthese areas. The government is making efforts to leave adequate income in the hands of therural masses through attractive procurement prices for agricultural produce and NREGAscheme. Rural markets are expected to emerge as a huge opportunity for increasing steelconsumption in the coming years.

India's Per Capita apparent steel consumption comparison C.Y. 2010/ FY 2010-11

(Kgs)

Source: E&Y

i) Construction and Infrastructure

Infrastructure is the key to sustain India's economic growth. The challenge ofsuccessfully leaping over the "double digit growth barrier", can be overcomeonly through higher investment in infrastructure.

The Eleventh Five Year Plan emphasised the importance of investment in infrastructurefor achieving a sustainable growth of 9 to 10% in GDP over the next decade. In thiscontext, it envisaged an increase in investment in physical infrastructure from about 5%of GDP witnessed during the Tenth Plan to about 9% of GDP by 2011-12 (terminal year of theEleventh Plan). This requires an estimated investment of Rs. 20,56,150 crores (US$ 514 bn)during the Eleventh Plan period as compared to an estimated investment of Rs. 8,71,445crores (US$ 218 bn) during the Tenth Plan period. An ambitious target of Rs. 40,99,240crores (US$ 1,025 bn) has been set for the Twelfth Five Year Plan.

Investment in infrastructure in the first 3 years of the Eleventh Plan Period wellexceeded the target of Rs. 9,81,119 crores. The actual investment was r10,65,828 crores,which is 7.1% of the GDP and 9% over the planned expenditure. Investments in the power,telecommunications, irrigation and Oil and Gas pipelines have exceeded the target duringthis period.

The total bank lending to infrastructure has gone up from 12.5% of total nonfood creditat end-March 2010 to 14.4% by end-Feb, 2011, registering an impressive growth of 34%.

ii) Capital Goods

The development of a strong and vibrant engineering and capital goods sector has beenat the core of the industrial strategy in India, since the planning process was initiatedin 1951. The emphasis that this sector received was primarily influenced by the erstwhileSoviet Union model, though rapid state-led industrialisation, by developing the coreengineering and capital goods sector. Following the liberalization of Indian economy in1991, private sector participation increased manifold in this sector thus accelerating thestrong momentum.

India has a strong engineering and capital goods base today. The Indian capital goodssector is characterised by a large range of products (almost all major capital goods aredomestically manufactured) - a legacy of the import substitution policy. Even nations withtechnologically advanced capital goods sectors do not produce the entire range of capitalgoods, but instead focus on segments, or sub segments.

The engineering sector employs about 2.6 million people directly, which accounts for29% of the total workforce engaged in the organised sector. The industry is largelydominated by organised players, as the sector demands a high level of investment.

India's contribution to engineering exports constitute only 0.8% of the world. Totalexports of engineering products grew from about US$ 13.2 billion in 2004-05 to US$ 60.15billion constituting around 25% of total exports from India registering a growth of 29%. Atarget of US$ 125 billion for engineering exports was set by the Ministry of commerce forthe year 2013-14.

The growing industrialisation and demand from the various infrastructure sectorssynergised the growth of the capital goods industry. The capital goods sector in thecountry registered a growth of 15% in 2010-11.

Source: CSO

Since 100% FDI is permitted through the automatic route and considering the growthpotential in India, several international players entered the Indian engineering sector,thereby increasing the competitiveness of the industry.

iii) Auto and Auto Components

In India, there are 100 people per vehicle, compared to 82 in China. The Indianautomobile industry is expected to achieve mass motorisation status by 2014-15.

The brilliant performance of the automotive sector is attributed to improvinginfrastructure, excise duty reduction on passenger vehicles, easy financing of second handvehicles, access to finance in rural and semi-urban areas and the emergence of India as amanufacturing hub for the automotive industry. Some of the unique features of the Indianautomobile Industry are as under:

• India is emerging as a potential automobile hub.

• Foreign players are investing in the auto industry to create additionalcapacities.

• Two- wheeler motorcycles contribute 80% of the segment size.

• Unlike in the USA, the Indian auto industry is dominated by Passenger cars.

• 2/3rd of auto components production is directly consumed by the OEM's.

• India is the largest three-wheeler market in the world.

• India is the second largest two- wheeler manufacturer in the world.

• India is the 2nd largest tractor manufacturer in the world.

• India is the 7th largest commercial vehicle manufacturer in the world.

• India is the 4th largest car maker in Asia.

• India ranks 6th in passenger vehicles in the world after China, Japan, Germany,Korea and Brazil.

Subsequent to liberalisation, the automobile sector has been aptly described as the'sunrise sector' of the Indian economy since it has witnessed tremendous growth. Atpresent 100% FDI is permissible under automatic route in this sector. The FDI inslows intothis sector is around US$ 6 billion during 2010-11 (Apr-Feb). Since 1991, the number ofmanufacturing facilities in the automobile sector in India has grown progressively in linewith the growing demand in the country. The auto manufacturers are investing to increasemanufacturing capacity from present 3.6 Mn units to 4.5 Mn units.

The domestic sales of auto industry achieved a growth of 26% during 2010-11. Exportsconstitute around 12% of total sales, registering a growth of 30% in 2010-11. The trend inproduction and sales growth of the automobile industry is as under:

Challenges

Iron ore: Although, India has the world's 8th largest reserve of iron ore and isthe 4th largest iron ore producer globally, it exports about 54% of its production toother steel making nations - draining the nation of this precious natural resource andsimultaneously importing steel from other countries. Since iron ore mines are not allotedto steel producers or approval for mining leases are delayed inordinately for valueaddition, no meaningful investment on the ground in the steel sector is happening to addnew steel capacities.

Coking coal: A primary ingredient for steel making, is in short supply. It accountsfor only 12% of India's total coal reserves. Further, government delays in allotting coalblocks for captive consumption by steel manufacturers is severely impacting thecompetitive edge of the Indian steel sector. India's coking coal imports surged 39%between 2009-10 to 2010-11. This refelects the import dependency of 62% in 2010-11. Theimport of coking coal is expected to go up to 42 MnT by 2011-12 from the current level of32 MnT. As an alternative solution, Indian steel producers acquired or on the lookout toacquire coal assets globally. As the operationalization of these assets takes considerabletime, steel producers are beset with the problem of shortage of coking coal and they areconstrained to import most of this coking coal requirement at exhorbitant prices.

Water: 1 tonne of steel production requires around 2.6 cubic metres of water,depending upon recycling of efficiency levels. Accordingly, water as a resource, isimmensely significant for producing steel.

Logistics: Every 1 tonne of steel generates a traffic of around 5 tonnes includingthe inbound and outbound material fiow. Accordingly, logistic infrastructure is of immenseimportance for the Indian steel sector for a number of reasons 1) raw material needs to bemet largely through imports, 2) steel consumption is widely dispersed across the countryinvolving transportation of finished steel to consumption locations and 3) high logisticscosts make transportation a huge challenge. The Indian railway network is inadequate;rakes are in short supply and port infrastructure is unable to cope up with increasedvolumes. Increasing fuel prices makes road transport costs prohibitive.

Expansion clearances: Land allocation, Mining leases, Environment and Forestclearances and Infrastructure connectivity for Greenfield expansions remain the majorchallenges impacting the creation of new capacities.

Product development: India's steel industry expenditure in R&D is still below1% of its total turnover. As the economy matures there is a growing need for specialgrades of steel like Boiler quality, API, Auto grade, requiring greater attention ontechnology and R & D.

Based on the recommendations of the Working Group on Steel Industry, a new schemei.e.,Scheme for Promotion of R&D in Iron and Steel Sector has begun with an outlay ofRs. 118 crores for the 11th Five Year plan. Under this scheme, R&D is being pursued inthree major areas namely:

• Development of innovative/path breaking technologies.

• Beneficiation and utilising of Indian iron ore fines and non-coking coal.

• Improvement of steel quality produced through induction furnace route.

Environment: Environment management and energy efficiency constitute an importantbenchmark for assessing any sector or company performance, both globally and in India. TheMinistry of Steel through various schemes and regulations by the government isfacilitating reduction in energy consumption and emission levels.

JSW has taken steps in each of these areas to remain competitive as explained in thefollowing sections.

Operational Performance

JSW Steel is India's leading steel manufacturer, with a steel manufacturing capacity of7.8 mtpa.(which will increase to 11 mtpa by Q1 2011-12). The Company has fourmanufacturing facilities at the following locations: Vijayanagar (6.8 mtpa integratedsteel facility), known as the upstream unit, Tarapur and Vasind (for value-added flatproducts), referred to as downstream facilities and Salem (1 mtpa integrated steelfacility for long products of high value and special steels). The Company is among the fewcoveted integrated steel producers, with a presence across the entire value chain in flatsand longs segment, and offers a variety of product basket.

JSW'S VALUE CHAIN

Performance, 2010-11

The Company registered an improved performance in 2010-11, rejected in an increase inoutput - hot metal production increased by 8.5%, crude steel production increased by 7.4%and HR coil/sheets production increased by 41%. New facilities were commissioned, capacitywas added, new products and new customers were introduced.

At Vijayanagar, ore availability improved from captive mines. As a result ofstabilisation of operations at HSM 2, the volume of HR products has increasedsignificantly. Salem Works emerged as the largest special steels unit in India followingthe commissioning of a blooming mill. Products from these units received approvals from anumber of global OEMs. The downstream (Tarapur and Vasind) units recorded a higherproduction to address a significant demand in increase for coated products from theautomotive and white goods sectors. A new 300 MW power generation facility wascommissioned in 2010-11 at Vijayanagar.

The production performance during FY 2010-11 was as under:

(Mn Tonnes)

(1) Vijayanagar Works

Vijayanagar Works, which is JSW Steel's flagship unit has an annual capacity of 6.8mtpa which will increase to 10 mtpa in Q1 2011-12. It is Karnataka's only integrated steelfacility and is widely acknowledged as a centre of steel making innovation.

This state-of-the-art facility is driven by a simple philosophy: 'Question everyconvention, replace the often quoted 'why' with the bolder 'why not''. The facilitypossesses contemporary technologies, has produced 5.77 million tonnes of steel (5.04million tonnes flat and 0.73 million tonnes long) in 2010-11 and redefined a number ofglobal steel manufacturing benchmarks.

Different league

The Vijayanagar Works is the only landlocked integrated steel plant in the world withan annual capacity of 6.8 mtpa (will become 10 mtpa by Q1 2011-12). It is the largeststeel manufacturing facility at a single location in India. The facility comprises thebest technologies, the most cost-efficient global steel plant, zero discharge andextensive greenary that has increased local rainfall.

Preparatory section

Considering declining raw material volumes from any one vendor and deteriorating inputquality, the beneficiation plant will play a very critical role in upgrading the inferioriron ore to superior feed for iron making units.

Highlights, 2010-11

• Witnessed a 16% increase of in-house manufactured coke from 2.32 million tonnesin 2009-10 to 2.70 million tonnes, reducing dependancy on high-cost imported coke.

• Commissioned a pilot coke oven facility to blend coal for sustaining cokequality and productivity.

• Entered into long-term arrangements for the sale of tar and sulphur.

• Enhanced pellet production by 14% from 3.17 million tonnes in 2009-10 to 3.62million tonnes in 2010-11.

• Commissioned the beneficiation plant for up-gradation of Iron ore quality.

• Increased sinter production by 13% from 4.62 million tonnes in 2009-10 to 5.24million tonnes; sinter quality improved considerably.

Key initiatives, 2010-11

The preparatory segment undertook a number of initiatives:

• Optimised coal cake charge in coke ovens 1 and 2, enhancing coke productivity.

• Reduced coal cake height, facilitating gas penetration throughout the cake;reduced losses from the cake's core (not completely coked), improving coke yield and cokequality.

• Increased the semi soft-coking coal content in the coal cakes to 10%; optimisedcoal blend by using US coals for the first time.

• Improved utilisation of coke oven gas commissioning of the gas mixing station.

• Eliminated coke screening at coke oven; thereby improving usable coke yield.

• Altered the pellet making process, which eliminated dust generation in thepellet making process - a positive impact on the environment.

• Improved feed quality from beneficiation plants II and process modification,enhancing pellet production.

• Stabilised operations of sinter plant 3, the largest such facility in India;achieved a capacity utilisation of 66% within six weeks of commissioning.

• Ground and homogenised the sinter unit feed to the right size.

• Increased the quantum of mill scale into the sinter feed; increased processwaste volume in sinter, reducing cost.

• Revamped the ESP at the sinter plant 1 for improved environment management.

Road ahead, 2011-12

• Commission the second phase of beneficiation plant II to process low grade finesto reduce costs.

• Modernise beneficiation plant I in line with the technology of beneficiationplant II, enabling it to upgrade iron ore quality.

Iron making zone

This segment constitutes the largest cost component in steel manufacture and itscriticality lies in maximising the plant availability and optimising costs.

Highlights, 2010-11

• Witnessed a 11% increase in Hot metal production from 5.57 million tonnes in2009-10 to 6.19 million tonnes in 2010-11.

• Commissioned a coal briquetting unit to reduce hot metal production cost.

• Registered the highest metal production through BF 1 and 2 at 2.12 milliontonnes (1.93 million tonnes in 2009-10).

• Stabilised BF3 operations and reported the highest monthly production of 9018TPD (March 2011), which is higher than the rated capacity.

• Achieved continuous tapping practice at BF3 for 30 hours every day (both tapsfunctional 24 hours and some additional time of simultaneous operation); plantavailability increased from 90% in 2009-10 to 97.5% in 2010-11.

• Manufactured and supplied more than 150,000 tonnes of API X grade steel (forpipe manufacturing) to domestic and international markets.

Key initiatives, 2010-11

The team undertook a number of productivity enhancement and cost optimisationinitiatives:

• Sustained optimum operation parameters in the corex units despite using coalfrom diverse sources.

• Reduced slag generation, increased hot metal production and reduced the fuelrate.

• Commissioned additional bunkers in the stock house for material storage;increased the minimum stock level in the bunkers which reduced fines generation whenmaterial was stored in bunkers.

• Installed one turbo blower which will act as standby for both Blast furnace 1and 2.

• Replaced the electrical actuated system used for operating stoves in BF 1 withhydraulic systems; this provided consistent air fiow to the furnace and improvedproductivity.

• Replayed thermo couples (instruments used to measure the temperature in thefurnace with a usable life of around 6 months) in the stove dome with pyrometers(indefinite life), improving furnace availability.

• Upgraded the boiler control in BF 1 from manual to PLC-based control, improvingfurnace availability.

• Replaced calibrated ore with sinter in the furnace feed in BF 1 and 2, savingcosts.

• Developed an ore washing facility in BF 3 which washed out the fines from thefurnace feed, improving furnace productivity.

• Replaced single chamber tuyere by double chamber tuyere in BF 3 - a bufferarrangement that eliminated the need of furnace shutdowns/ process interruptions due totuyere burning.

• Altered the nut coke screen in BF 3, enhancing net nut coke consumption andlowering the cost of screening fines.

• Reused blow water from BF gear box, secondary cooling circuit of BF 3, in GCP,saving 500 m3/day of make-up water; replaced industrial water with seepage water in slaggranulation unit which saved 200 m3/day of make-up water.

Road ahead, 2011-12

• Convert the burden distribution technology in BF 2, expected to improveproductivity.

• Measure the carbon footprint of every product and process, a European regulationexpected to cascade to the Indian environment.

Steel melting shop

This zone converts hot metal to steel in various grades, each grade with a specificchemical composition that will allow its use for that particular application. Hence, inthe steel melting shop, better productivity (through higher plant availability) andvalue-addition remain the team's focus.

Highlights, 2010-11

• Produced 5.77 million tonnes of crude steel from the SMS facilities, 11% higherthan crude steel production in 2009-10; reduced hot metal handling loss from 1.68% inApril 2010 to 1.62% in March 2011.

Key initiatives, 2010-11

• Enhanced converter utilisation, increasing average heats per day from 70 in2009-10 to 73 in 2010-11.

• Introduced lime fine injection at the desulphurising station, reducing overallcalcium carbide consumption in the SMS facilities.

• Installed the auto scaring equipment which prevents oxygen contact with slabsurface, minimising scale formation and enhancing surface quality.

• Developed 32 new grades of value-added steel.

• Improved gas recovery from 0.168 Gcal/TIs in 2009-10 to an average 0.176Gcal/Tls, which was used in generating power and other processes.

Road ahead, 2011-12

Commission SMS 2 with additional caster in Q1 2011-12.

Rolling section

These facilities add value to basic steel forms to create user-convenient forms;product grades (thickness and sizes) are customised to user applications; millproductivity is of prime importance to product quality and organisational profitability.

Highlights, 2010-11

• Recorded an increase in the proportion of HR products in the HSM 1 -thinnergauge products accounted for 32% of the production against 27% in 2009-10.

• Rolled 17 new product grades in HSM 1, catering to diverse user requirements.

• Commissioned HSM 2 with single furnace operations; achieved optimum capacityutilisation with single furnace; commissioned second furnace in February 2011, taking themill's operational capacity to 3.5 mtpa.

• Received JFE Audit Certification at HSM 2 for being perfectly suited for rollingauto grade steel.

• Production at CRM increased by 18% from 0.735 million tonnes in 2009-10 to 0.87million tonnes in 2010-11.

• Commenced rolling special grades for leading automobile OEMs namely Ford Motors,Ashok Leyland, M&M and GM, among other leading brands; increased supplies to HyundaiMotors significantly.

• Developed new products, namely, steel for welding electrodes and leaded gradesteel (exported to the US).

• Developed special TMT bars (500 ys and 550 ys grade) suited for infrastructureprojects.

• Received the BIS Certification for welding grade steel and for TMT rods,expected to strengthen product acceptance for projects by institutional clients.

Key initiatives, 2010-11

Hot strip mill: The Company has two hot strip mills with a total cumulative labelcapacity of 6.7 mtpa. The first unit is capable of rolling products up to 1,350 mm widthwhile the second HSM unit is the widest mill in India, equipped with sizing presses and anautomatic line inspection facility, which makes it the first mill-of-its-kind in India.The combination of these two mills allows the Company to roll the widest range of HR coilsin India.

• Improved operation and maintenance practices in HSM 1 strengthened plantutilisation from 84.9% in 2009-10 to 86.08% in 2010-11; prime yield also improved from94.67% in 2009-10 to 95.66% in 2010-11, bringing non prime/NCO to the new benchmark levelof below 2.5%.

• Developed 17 new grades of steel to cater to diverse end user segments.

Cold rolling mill: The cold rolling mill is a state-of the-art mill withcontemporary technology, the first-of-its-kind in India with complete automation. This isthe first global instance of a single-stand skin pass mill (capacity 0.875 mtpa) in theelectrolytic line. The shape metre in the tail end of the skin pass mill for superiorfatness to the rolled products is a pioneering technology in India and a rare feature inthe global steel industry. The mill performance exceeded projections, resulting insizeable value-addition for the Company. During the year, the Company undertook thefollowing improvements for superior performance:

• Increased jumbo HR coils feed in the cold roll mill; reducing material feedingtime and improving mill productivity.

• Developed 13 new product grades, namely low carbon grades (extra deep drawn anddeep drawn), IF grades, dual-phase trip steel (980 mpa strength) and HRPO 400/440, amongothers.

• Improved checklist and enhanced preventive care, resulting in better equipmentutilisation; from 83% in 2009-10 to 86% in 2010-11.

• Optimised automatic sequence to increase productivity (from 121 tonnes per hourto about 129 tonnes per hour) and safety.

• Achieved crane centre marking; eliminating operational delay and enhancingproductivity.

• Optimised packing cost though unique initiatives in packing practices.

Wire rod mill: The Company's wire rod mill is the fastest of its kind in India(drawing wire at 110m/sec); developing the largest product range (5.5 mm -22 mm) andproviding the maximum yield. It is also the only mill in India with an air coolingconveyor, allowing it to roll high carbon steel seamlessly. The team undertook thefollowing improvements:

• Formed 25 cross functional teams within the wire rod mill for identifying andarresting minor problem areas in the mill.

• Reduced the overall gas consumption 13.7% by altering furnace temperature inline with the product thickness being rolled (low thickness products would imply lowtemperature in the furnace); it also reduced scaling on the billet.

• Reduced cobbles in the final product by undertaking timely preventivemaintenance of the equipment.

• Reduced process wastage due to cobble, by pushing the billet nearest to thefurnace exit door back into the furnace on the detection of a cobble.

Bar rod mill: This is the highest speed and widest range bar rod mill in India,capable of manufacturing a wide product mix (TMT, angle, square, engineered rounds, squareround corners) and in multiple sizes (from 8mm to 40mm). The versatility extends to theproduct strength - the mill can develop products up to a maximum strength capability of1150 mpa. In 2010-11, the team implemented a number of mill improvement measures forimproving the value-proposition from this facility:

• Augmented cooling facilities for converting the entire TMT production to 500grade TMT products (earlier about 75% was the 415 grade TMT).

• Developed the 50x50x6 angles and engineering round (4 sizes) for the first time- these products found strong acceptance from user segments.

• Adhered strictly to preventive maintenance schedules and minor processimprovements, increasing yield from 93.5% in 2009-10 to about 96% in January 2011 andreducing the conversion cost in the bar rod mill.

Road ahead, 2011-12

The road ahead for the rolling mills would be towards productivity enhancement,developing superior product grades and optimising operational expenses:

In the hot rolling section, the team is working to ramp up the operations of therecently commissioned HSM 2 unit which will primarily roll high strength steel to be usedin niche automotive applications.

The blueprint for the cold rolling section encompasses the following measures, enablingthe Company to scale the value chain and cater to quality-stringent customers:

• Further enhance yield in the mills.

• Develop new product grades namely, EDD and IF grades skin panel for catering toMNC automobile clients.

• Roll substrata sourced from JFE facilities for meeting the requirements ofglobal automotive players.

• Establish an electrolyte line for superior surface qualities.

• Set up the new 2.3 mtpa cold rolling mill which will roll high end productsdemanded by the automotive sector, namely dual-phase steel and strip steel.

The wire rod mill expects to enhance capacity utilisation, which was impacted in2010-11 owing to the non-availability of billets. The bar rod mill is working on upgradingTMT production to 100% 500D grade from the present 500 grade, strengthening realisations.As a branding exercise, the team expects to add equipment which will engrave the JSW brandand grade on the TMT product.

(2) Salem, India's largest special steel plant

India's largest single location dedicated special steel facility is at the bottom ofthe J-curve with a promise of accelerated growth in business and profitability growth.

Operations

• Successfully stopped the production of TMT bars in December 2009 which wasreplaced with special steels completely.

• Improved overall coke yield from 69.18% in 2009-10 to 69.98% in 2010-11; reducedcoke fine generation.

• Achieved record coal fines injection of 139 kg per tonne of hot metal in theblast furnace in October 2010.

Products and markets

• Received product approvals from leading global automotive giants.

• Developed creep resistant boiler grade steel (T-11).

• Received approval for products developed for Indian Railways.

Key Initiative, 2010-11

• Modified the waste heat boiler of the coke oven plant which allowed 10% morewaste heat to be recovered for onward power generation.

• Improved the stamp charging technique, increasing the BF coke percentagechargeable to the blast furnace from 90% in 2009-10 to 91.5% in 2010-11.

• Developed the Basket Test equipment to predict coke quality from coal blends,resulting in superior coke manufacture.

• Introduced a chemical binder in the sinter (when using large quantity of oresuper fines as input); used granulated steel slag as the hearth layer in the sinter plant.These improvements enhanced sinter productivity from 2,800 tonnes per day in 03 2010-11 toabout 3,100 tonnes per day in 04 2010-11.

• Increased the proportion of sinter in the blast furnace input from an average57% in 2009-10 to an average 62% in 2010-11, reducing the use of coke and calibrated orein the blast furnace which optimised production costs.

• Increased the injection of coal fines and dust to optimise costs.

• Injected chemical fluxes with coal fines in the blast furnace, reducing silicavariations in the hot metal and improving productivity in the steel making shop, a firstfor the Indian Steel Industry.

• Blended bed-recovered coal (coal spillage at various plant locations) with coalfines for injection as PCI in the blast furnace.

• Developed a unique air-conditioner which performed very well in dust-prone areas- example, hot metal zones, crane cabins, resulting in improved working conditions andproductivity.

• Developed in-house, a unique burden probe mechanism that checked temperature andair flow at the top of the blast furnace (essential for monitoring complete combustion ofthe blast furnace burden) at a third of the prevailing cost.

• Optimised processes with minimal variations; modified process parameters in theladle furnace, reducing oxygen in steel by 3 ppm and nitrogen by 8 ppm. This helpeddevelop a larger number of grades and guarantee steel with an oxygen content <12 ppm(an international benchmark).

• Modified the billet caster to cast longer billets suited for the Vijayanagarwire rod and bar mills. This initiative minimised billet shortfall in Vijayanagar and whatwas sold as billets was now marketed as rolled products.

• Increased mill scale utilisation in the sinter manufacturing process as a costeffective replacement for iron ore without impacting product quality.

Products and clients

Developed more than 100 product grades for diverse customer requirements, largelyfocused on the automotive and auto-component sectors; each grade being customised for aspecific customer.

Road ahead, 2011-12

• Implement modifications in the waste heat recovery boilers at the coke ovens forcost-effective power generation.

• Design a simplified test for determining coke fluidity from coal blends, whichis expected to reduce testing time.

• Work with automotive OEMs to develop high-strength steel for leaf springs,reducing steel consumption and increasing fuel consumption per vehicle.

• Accelerate product approvals from OEMs.

• Work closely to develop automotive gear steels for application which are beingimported.

• Implement automated testing facility for steel bar, thereby avoiding operatorbias for OEM.

Environment management at Salem

• Replaced two-thirds of river sand used in the blast furnace runner with EOF slagfines, facilitating waste recycling.

• Introduced flue dust from the blast furnace as an additive in cementmanufacture, which improved cement productivity for the cement company and dispose aprocess waste for the steel maker.

(3) Downstream units focused on brand building

JSW's Tarapur and Vasind facilities focus on value-addition, providing a wide productrange (HR Pickled & Oiled coils, HR plates, CRCA products, galvanised, plain andcorrugated products and colour-coated products) for multi-sectoral applications.

JSW possesses India's largest galvanised steel capacity; it has the prestigiousGalvalume Certification of BIEC International Inc.; its colour-coated facility offers morethan 200 shades of colour-coated galvanised products; it provides any shade of materialon-demand within three weeks.

Highlights, 2010-11

• Renamed Jindal Vishwas as JSW Vishwas and Jindal Vishwas Plus as JSW VishwasPlus to strengthen the JSW recall.

• Achieved the highest plant load factor of 102.56% (December 2010) in the newlycommissioned 30 MW power plant at Tarapur.

• Increased the production of thinner gauges (< 0.20 mm) at Tarapur for export.

• Launched Pragati, a new product with lower zinc and paint coating for roofingapplication; this product was launched in West Bengal, Maharashtra and Gujarat.

• Conducted 1,000 hours of salt-spray test on the anti-finger print galvalumeproduct.

Key initiatives, 2010-11

'Where change is constant' - This phrase fits best for the JSW team, where the labeledcapacity is only the start to great achievements. The ability to see things differentlyand draw more from equipment is what sets JSW apart from other players in the Indian steelindustry. In keeping with this passion, the teams operating the downstream units undertooka number of improvement/modification initiatives resulting in superior products,productivity and profitability.

Tarapur

• Replaced DC drives with AC drives in one galvanising line, saving 4 units ofpower per tonne and reducing breakdowns.

• Increased handling capacity at the entry section of the two colour-coated linesfrom 10 tonnes per coil to 25 tonnes, resulting into productivity and yield improvement.

• Commissioned the Trapezoidal Profile facility.

• Introduced the Eloguard chemical in the water used in the boiler, reducing DMwater consumption in the power plant by 40%.

• Commissioned the Ammonia Injection system to ensure the SPM level from stackremains within the permissible incase of non-functioning of the ESP - an importantenvironment management initiative.

• Commissioned a dry fog system in the coal and ash handling system to controlcoal and ash dust emissions.

• Installed islanding relay at the 11KV grid incoming feeder; completed relaysetting with proper protection coordination for the successful islanding of the powerplant against disturbances in the 132KV state power grid.

Vasind

• Commissioned the 1220 mm wide sophisticated Senfung machine, which providesmultiple proxies to galvanised sheets. The equipment is equipped with flying-type profileshear, hydraulic system with variable speed and automatic roller type stacker arrangementwhich can cut up to 16 ft length sheets. This equipment generates scratch-free sheets withuniform profile and precise length accuracy.

• Installed and designed a plate length measuring device in the hot rolling platemill, resulting in precise finished plate lengths with minimal rejections.

• Installed permanent electro-magnets in two cranes in the hot rolling plate millfor secure material lifting, enhancing the safety quotient in the plant.

• Commissioned new belt wrapper assembly in the galvanising line which reduced thescratches in the tail end of the coil, maintained coil tension right throughout winding,resulting in superior surface quality and improved yield of galvanised products.

• Developed and installed an auto soot blowing system in a waste heat recoveryboiler for superior operations.

• Replaced existing electrical drives with energy efficient variants.

• Replaced flat belts for pulley drives leading to energy savings; replacedconventional acid pumps with energy-efficient variants.

• Established an environment control laboratory to check ambient air, stack andin-plant sampling, drinking water and effluents.

Product development

Road map, 2011-12

The downstream unit teams will draw up blueprints comprising, capacity addition andmodifications to existing facility, enhancing value from downstream units.

Tarapur

• Upgrade the TM2 mill for higher production (output of 5000 t/ month CR > 0.25mm); install Thyristor drive in the mill, entry tension reel, delivery tension reel andpay-off reel.

• Modify the flux line in the 'heat to coat' furnace continuous coating line,boosting production by around 2,900 tonnes a month.

• Install Regenarating Re-generative Thermal Oxidiser in the colour coating line(CCL1) to reduce LPG consumption.

• Enhance the furnace capacity of CSD1 from 12 TPH (full hearth) to 16.5 TPH,permitting the team to develop new product grades.

• Install a Mangalorian Tile Profile machine to eliminate the need for externaljob working.

Vasind

• Commission the railway siding at Vasind.

• Commissioning of Natural gas project (from LPG/Furnace oil to natural gas); thegas pipeline is being routed by GAIL. The fuel conversion will be at the HR plate mill(furnace oil to natural gas) and the galvanising facility (from LPG to natural gas).

• Initiate product diversification, adding value-added produces to the productbasket namely, galvanised products (EDD grades) for automobile and appliances andcolour-coated sheets for structural application and appliances.

• Modification of CG1 for manufacturing EDD grade products to be value-added innew coating lines.

(1) Material Procurement

A tonne of steel consumes about four tonnes of natural resources (coal and iron ore),making adequate, proximate and economic availability critical to profitability.

JSW's iron ore is sourced from the Bellary belt, 20 km from its site. The beneficiationplant utilises inferior grade iron ore and iron ore fines, making it the only steel unitin the state to utilise all iron ore grades.

The Company imports its entire coking coal; corex coal, (low grade coking coal used foriron making in the corex units) and thermal coal (for power generation) are procured fromglobal destinations.

A. Iron ore Highlights, 2010-11

• Initiated iron ore sourcing from Chitradurga, reducing its dependence onBellary.

• Reduced the proportion of high grade ore (80% in 2009-10 to 30% in 2010-11)following commissioning of beneficiation plant.

Key initiatives, 2010-11

• Tied up for additional iron ore sources to feed the 3.2 mtpa steel meltingcapacity that will become operational in Q1 2011-12.

Road ahead, 2011-12

• Source low grade iron ore to meet the plant's entire requirement, resulting in ahuge cost saving.

• Pursue with the Government for mine allocations.

Highlights, 2010-11

• Shifted from Annual to Quarterly sourcing contracts.

• Increased vendors and diversified geographic sourcing.

Key initiatives, 2010-11

• Maintained sufficient inventory, insulating it from sudden price spikes.

• Sourced about 12% of the total coking coal requirement from the US and Canada.

• Added new Australian vendors for corex coal; added vendors from South Africa.

Road ahead, 2011-12

• Increase coking coal sourcing from different global geographies.

• Scout for more coal assets from USA, Canada, Indonesia, Columbia, Australia,Newzealand and South Africa.

(2) Raw Material Handling

At JSW Steel, competent raw material management is critical on account of the sheervolume to be handled daily - At 11 mtpa stage, the daily receipt would be around 28,000tonnes of coal, 60,000 tonnes of iron ore and 15,000 tonnes of fluxes. This management iscomplex, the same input having to be sourced from various geographies. The team needs tooptimise the process, as every handling exercise generates some fine quantity which is notdesirable.

Highlights, 2010-11

• Managed 21 million tonnes of raw material, 20% higher than in 2009-10.

• Increased monthly rake handling by 20%, managed 515 rakes in December 2010 themonthly highest during the year. Rake handling was maintained at 15 rakes/day on average.

• Installed higher capacity vibro-feeders in screen houses which synchronised theworking of screens with vibro-feeders, increasing base daily production from 9,000 tonnesto 14,000 tonnes.

Key initiatives, 2010-11

• Modified the belt replacement procedure, screw take-up arrangement, skirt boardarrangement and support structure of the conveyor, critical for BF3 material feeding;reduced belt replacement time from 14 hours to six hours, increasing plant availability.

• Modified the side beam structure of wagon tippler 4, used superior material forthe box fabrication and provided additional stiffeners for better strength and crack free,efficient performance.

• Increased barrel reclaimer strength by modifying the structure of the harrowtrolley from the rolled to fabricated section.

• Installed a reversible conveyors facilitating, increased flexibility in feedingcorex and blast furnace units.

• Lifted the drive base frame of one conveyor to avoid monsoonal breakdowns in theconveyor drive.

Road ahead, 2011-12

• Minimise wastage by fewer handling.

• Briquetting of coal fines.

• Iron ore recovery from slime.

(3) Logistics Management

At JSW, 1.3 lacs tonnes of material needs to be managed and moved daily; a number thathas increased each year over the last five years.

At 11 mtpa steel production capacity, JSW will need to move more than 46 million tonnesof material annually (inward and outward) in addition to material transfers between itsoperating units.

The required logistics management is similar to regulating train movements at a busystation; manage 33 rakes and 600 trucks, moving 26,000 tonnes of hot metal in torpedoes,ladles internally - every day!

The Company created an adequate logisitics management infrastructure:

• Raw material receipt yard with 26 full length rake lines

• 6 wagon tipplers for unloading coal, coke and fluxes in BOXN rakes

• Track hopper for handling iron ore in bottom discharge wagons, capacity tounload 12 rakes: 42,000 tonnes per day

• Dedicated rake handling yards for coal requirement

• Steel despatch yards at all production units like hot strip mills, cold rollingmill, wire rod and bar mills for both road and rail

• Dedicated rail loading yard - north yard will have 9 lines and weighbridges.Moreover, the in-facility logistics infrastructure comprises 165 km railway line, 41locomotives and 15 wagons used for internal material transfer.

The Company's imports are managed across the four ports in Goa, Krishnapatnam, Chennaiand Karaikal. The majority of imports are routed through Goa (around 6 million tonnes) andtransported to the Vijayanagar facility through the rail route. The Karaikal port feedsthe Salem facility while the other two ports import for both facilities.

Highlights, 2010-11

• Managed 23.0 million tonnes cargo against 19.9 million tonnes in 2009-10, a 16%increase over the previous year.

• Invested Rs. 76.58 crores in additional logistics management infrastructure.

• Handled the highest dry bulk cargo at Chennai port in Q2 and Q3 and at Karaikalport in Q2 (recognised by the Port Trust).

• Rake availability at Goa increased from 3-4 rakes per day to about 5-6 rakes perday, increasing rail material handling by 1 million tonnes.

Key initiatives, 2010-11

• Inaugurated a new locomotive service center in November 2010 to maintain ownedlocomotives, optimising costs.

• Commissioned a track hopper dedicated for iron ore unloading in March 2011;introduced bottom discharge rakes introduced in the iron ore circuit.

• Invested in a central traffic control system for monitoring movement and safetyat the raw material receipt yard to track and track and control the overall movement oftrains inside JSW.

• Stabilised wire rod and TMT despatches by road and rail - 0.74 million tonnesdespatched during the year under review.

• Implemented the rake loading facility at HSM-II, reducing internal shifting offinished goods for outward dispatch; an average 1,000 wagons loaded monthly which wouldincrease to 4,500 wagons per month.

• Created an import cargo tracking system (from load port to plant receipt)through single software system.

• Improved rake handling process in Vijayanagar, increasing rake handling from12-13 rakes to 15-16 rakes per day.

Road ahead, 2011-12

• Commission the railway track signalling and interlocking facility in line withrailway system proposed in two phases:

• Phase I - Raw material receipt yard and track hopper

• Phase II - Steel despatch yard and hot metal yards

• Create the eastern yard for unloading steam coal for Group companies andstabilise the rakes with 12 lines.

• Create a TXR facility for rake examination planned in and around JSW.

• Create a container rake for loading and stuffing cold rolled products meant forexport.

• Develop additional infrastructure facilities at Goa port in line with increasedexports.

• Receive 19 JSW locomotives along with the existing 22 locomotives to handleincreased volumes.

(4) Energy Management

JSW's energy management comprises the successful reduction of fossil fuel consumptionin power generation, practices to transform waste to wealth and reduction of specificenergy consumption in downstream product manufacture.

In doing so, the team minimises pollution, sustains resources longer (utilising wastegases in the operational process, replacing fossil fuel) and builds the nation(manufacturing steel, the infrastructure backbone).

Highlights, 2010-11

• Specific energy consumption declined from 6.469 gcal per tonne of steel in2009-10 to 6.193 gcal per tonne of steel, despite the commissioning of a number ofancillary units of 3.2 mtpa expansion project which necessitated higher power consumption.

• Received the CII Award for Excellence in Energy Management 2010 for the thirdsuccessive time.

• Commissioned a 300-MW coal-based power generation facility in September 2010 tocomplete self-sufficiency in power requirements up to 6.8 mtpa; replaced the power drawnfrom JSW Energy.

Power generation: JSW Steel (Vijayanagar) is among the few integrated Indian SteelPlants where a large percentage (64.30% as on March 31, 2011) of power generation utiliseswaste heat, processed gas and solid waste. At 6.8 mtpa, the Vijayanagar unit requires369.78 MW to sustain operations across all facilities; its own generation stood at 334.40MW, the balance was drawn from JSW Energy. To emerge self-sufficient at the 10 mtpa stage,the Company is establishing a 300 MW power generation unit, expected to commenceoperations by December 2012. The captive power generation at Vijayanagar Works is managedby JSW Energy Limited.

Power distribution: The seamless distribution of power to all operating andancillary units is monitored by a specialised power distribution cell. The efficiency ofthe team is rejected in only three power outages in 2010-11 against over 7 outages in2009-10 (a single outage could result in a significant drop in productivity and sizeabletime to ramp up to the standard operations leading to a colossal loss of financialresources). The team undertook a number of initiatives to ensure continuous and fault-freepower distribution to all units.

Key initiatives, 2010-11

• Introduced 'islanding', which isolated the disturbance area from the plant grid.The Company installed 'CLIMS', an intelligent, real-time load management system - aserver-based technology - to balance generation with consumption and allow the simulationof all 'islanding' possibilities, resulting in proactive alarms for disturbances leadingto immediate remedial action.

• Replaced the ID Fan at the top of the converter (SMS unit) with a variablevoltage and variable frequency fan, reducing fan speed when there is no oxygen blowinginto the converter (hence, no hot air coming out of the converter) and reducing SMS powerrequirement.

• Developed an in-house neutral ground resistor to reduce energy flow to theneutral earth transformer in the event of a massive energy fault. This reduced energyfluctuation at the busbar of feeder transformers, preventing equipment damage.

Gas and heat utilisation: The Company generates processed gases from variousoperational units with high calorific value which are recycled for heating and generatingpower. The energy management team maximises the utilisation of these waste gases,minimising power requirement.

Key initiatives, 2010-11

• Reduced idle heating hours in the pellet plant, reducing specific heatconsumption.

• Replaced the by pass electrical actuator with hydraulic high capacity actuator,facilitating 94% of BF gas to pass to the turbine installed at the top of BF III.

• Improved furnace heat regime coupled with operational consistency, increasingthe injection of coal dust.

• Utilised mixed gas for power generation in CPP-1 during Corex unit shutdowns,enhancing power generation at CPP-1 from 93.59 MW in 2009-10 to 99.45 MW.

• Replaced main valves with smaller diameter auxiliary valves to ensure fiame offlare stack in the corex unit; increased corex gas utilisation from 97.75% in 2009-10 to98.92% in 2010-11.

• Stabilised gas mixing stations in the coke oven unit, improving coke oven gasutilisation.

• Improved BF gas utilisation from 73.06% in 2009-10 to 88.06%.

• Developed a gas monitoring system, covering the entire plant, this facilitated areal-time monitoring of gas generation and consumption, optimising gas consumption.

• Developed schemes to replace high calorific corex gas with BF gases for powergeneration; generated 103.84 MW by utilising BF gas.

• Replaced LPG consumption for heating runners in iron making zone with additionalcoke oven gas (with the commissioning of coke oven 4).

Blueprint, 2011-12

• Reduce flaring of BF (<5%) and corex (<1%) gases, eliminating the flaringof other process-generated gases.

• Develop a system for sensible heat recovery at the LD vessel.

• Develop a waste heat recovery system at the sinter cooler unit and in the stovesof all blast furnaces.

Extracting wealth from gas

(5) Research and Development

At JSW, innovation is driven by its skilled R&D team. It works to redefine nationaland global benchmarks in iron and steel manufacture. The result is improved productivityand consistently declining costs. The R&D team comprises 44 qualified members who workalong with shop-floor teams to design and implement shop-floor processes; its efforts arefacilitated by a full-hedged R&D centre equipped with contemporary infrastructure,pilot testing and simulation facilities. R&D activities are focused on plantperformance improvement, new process development, product and grade development, energyconservation and waste management. The innovation-centric mindset at JSW is rejected inits investment in R&D - the Company invested Rs. 42.44 crores in 2010-11 (capex) tostrengthen its infrastructure.

Department structure

For increasing the innovation benefits made by the R&D team, the Companyrestructured its R&D cell. It re-designated the R&D cell at the Vijayanagar unitas the corporate R&D cell - the centre for all research activities with R&Dsub-centres at other units, namely Salem, Tarapur and Vasind, reporting to the corporatecell. A number of R&D projects have been identified for each of the sub-centers. Mostkey research and development activities would be conducted at the corporate R&D cell,while its implementation would be undertaken by sub-centre teams. Also, R&D activitiesreviewed by the Board of Directors on a quarterly basis.

Process modifications

• Identified new coal sources and developed coal blends for consistently achievinga coke CSR of 65 and above.

• Developed the process of utilising coal tar pitch in coal-cake preparationreplacing water. This initiative improves coke CSR by 2-3 points, increases gas generationfrom the coke oven (hence more power generation) and reduces water consumption.

• Improved pellet quality at the drying stage through a novel improvisation -increased the pellet size in the hearth enabling improved circulation of hot air forbetter firing of pellets - consequently, the under-fired pellets reduced from 8% to 5%.

• Increased the melting rate and adopted the high-alumina slag practice, reducingthe fuel rate and slag rate by 30 kg per tonne of hot metal and 27 kg per tonne of hotmetal in the Corex units.

• Developed technology for the briquetting of coal fines for its usage in theCorex unit.

• Improved pellet disk yield from 80% to 88% through optimisation of disk angle,rotational speed of the disk, and water distribution, minimising recycling of over-sizedand under-sized and optimising costs.

• Improved gas utilisation efficiency in BF 3, improving the fuel rate andoptimising operational cost.

• Reduced grinding loss of back-up rolls by about 10% at the hot strip mill - I,increasing its usable life.

Predictive models

Iron and steel making is conducted in a closed environment under extreme conditions(extremely high temperature, pressure and toxic gases), making it necessary to closelymonitor operations. But there is hardly any scope for monitoring actions inside steelmaking vessels and for proactive preventive action. The furnace behaviour can only begauged from the quality of the output allowing for reactive correction at best leading tohuge costs (product loss) and time loss (furnace shutdown for rectification).Consequently, predictive models are emerging as a key tool for improved operations,providing proactive details of possible outcomes, facilitating derisking.

Sulphur prediction in steel melting shop: The R&D corporate cell developed asulphur prediction model which facilitated estimating sulphur content in hot metal at thehot metal desulphurisation stage, allowing the team to take preventive action proactively,improving steel quality.

Predictive model for channeling in the blast furnace: Channeling refers to theupward flow of air in the blast furnace in a channel. This could lead to uneven burning ofinput in the blast furnace, impacting productivity and product quality. The Companycreated a scientific model allowing early detection of air channeling, facilitatingproactive measures for air flow in the blast furnace.

The team also developed a prediction model for the detection of silicon in hot metalallowing it to take adequate preventive measures.

Product development

The team developed 27 new slab and 2 new billet grades. The key products developedcomprise:

• Automotive grade steels for interior and exterior applications.

• Silicon steel - non-oriented.

• Line pipe steel including API X-70 grade. API X-80 grade is under development.

Patents filed

The R&Dteam filed 5 patents during 2010-11:

• A Method for Reheating of Individual Ovens after shut down for non-recovery cokeoven.

• An Oven Identification System for Coke Ovens for alignment and positioning ofguide and pusher car.

• A System for Effiuent Treatment at Coke Oven Plant and a method for suchtreatment.

• A Sinter Charge for higher productivity and a method for its manufacture

• A Simulator System for desulphurization of Coke Oven Gas and a gas treatmentmethod using such system.

Copyrights Registered

• Model to estimate Direct reduction, Top gas and Minimum carbon rate in BlastFurnace.

• Model to Estimate Coke and Ore Layer Voidage in Blast Furnace.

• Mathematical Model for Hydro-cyclone Performance.

• Hearth Liquid Level Prediction Model.

• Model to Predict Tuyere Velocity and Kinetic Energy in BF & COREX.

Publication of technical papers

Some of the research work was converted in to 12 Nos. of publications in internationaljournal of repute, such as Iron and Steel Institute of Japan (ISIJ), Ironmaking andSteelmaking, World Cement, Steel Research International, World Iron and Steel and SteelGrips.

National Award

Mr. P. Prachethan Kumar, Manager (R&D and SS) was awarded the 'Young Metallurgistof the Year 2010' at the National Metallurgist Day 2010 at Bangalore, instituted by theMinistry of Steel in recognition of his contributions in steel research.

Blueprint, 2011-12

• Commercialise the production of briquetted coal fines in the Corex units.

• Establish production facility for mill-scale briquette for its directapplication in steel making.

• Establish a full-hedged benehciation laboratory for advanced research on thetechnology and process modihcations for improving productivity and product quality.

• Establish a pilot scale benehciation research facility for utilising BHO (bandedhematite quartzite) grade ores with extremely low iron content

• Establish advanced characterization laboratories.

• Augment product development research by addition of vacuum induction meltingfurnace.

• Expand the R&D team.

• Initiate R&D projects at its Vasind, Tarapur and Salem locations.

Coal briquetting technology

The Company used high-cost, imported coal as feed for its Corex units. Over 45% of theimported coal gets screened-off for fines. Consequently, imports are significantly higherthan the actual quantum required for making hot metal.

To meet this challenge, the R&D team developed the coal briquetting technologywhich completely utilised the coal fines in making hot metal. Besides, it would improveplant availability and productivity and reduce the fuel rate in Corex. More importantly,it would significantly reduce the working capital blocked in importing such high-costcoals.

The Company is establishing a 0.6 million tonne briquetting facility at VijayanagarWorks, which is under commissioning.

(6) Project Management

JSW Steel has been the most aggressive capacity creator in India's steel industry,simultaneously executing multiple capital-intensive projects at any given time.

In 2010-11, the team executed more than Rs. 50 billion projects at the Company'svarious locations. The uniqueness of the Company's project management is rejected in thefollowing realities:

• All projects are implemented by an in-house team, which facilitates low-cost,timely implementation, leveraging resident knowledge.

• The project management team comprises cross-functional participation; membersfrom diverse departments bring diverse skills and capabilities to supplement the coreproject management team.

• The cement, TMT and steel plates and sheets used in the Company's projects areavailable in-house.

• Following project completion, the team is given the responsibility of operatingand managing the facility.

Consequently, the project management teams redefined global and Indian benchmarks interms of time taken to commission projects and stabilise operations.

Timely execution

• JSW managed and reviewed projects real-time through a centralised projectmanagement team along with the project team responsible for the particular project.

• Institutionalised a system of regular project review meets by senior management;undertook in-depth gap analysis between the budgeted progress and actual performance; drewfrom organisational resources to accelerate projects.

• Leveraged 2.8 mtpa expansion project capabilities to spearhead 3.2 mtpaexpansion Project in addition to hiring new cross-departmental members.

• Increased the average procurement packet size from vendors, strengtheningcommercials and optimising capital expenditure.

Achievements, 2010-11

• Commissioned certain facilities of 3.2 mtpa expansion project.

• Two of the four batteries (1.95 mtpa capacity) of coke oven 4 were commissionedin December 2010.

• Sinter plant 3 (5.75 mtpa capacity) was commissioned in February 2011 - thelargest such facility in India.

• 300 MW captive power plant (CPP 3) was commissioned in September 2010.

• Ladle Heating Furnace-3 & 4, Converter-3 & 4 and Caster-3 & 4 werecommissioned in phases by March 2011.

• Lime calcination plant - Kiln 8 (capacity 300 TPD) commissioned.

• First phase of the 20 mtpa beneficiation plant was commissioned in phases byApril 2011.

• Commissioned Phase I of blooming mill project at Salem.

Road map, 2011-12

The Company plans to commission the following:

• Blast furnace 4 (capacity 3.2 mtpa) and Sinter plant 4(capacity 2.4 mtpa) in Q12011-12, taking the total operational crude steel making capacity to 10 mtpa atVijayanagar.

• Second phase of the new HSM, taking the rolling capacity of this facility to 5mtpa.

• Pellet making (capacity 4.2 mtpa) by Jun 2011.

• Second phase of the beneficiation plant 2 by November 2011, taking the totalcapacity of this unit to 20 mtpa.

• Cut-to-length facility at the hot strip facility to cater to the 2 mtr wideplate market by July 2011.

• Lime calcination plant - 3 x 600 TPD lime kiln will be commissioned by July2011.

• Water pipeline from Alamatti to Vijayanagar-82% work of 160KM pipeline iscompleted; project to be completed by June 2011.

The Company plans to undertake a number of capital-intensive projects at its Salemfacility:

• Commission Phase II of the blooming mill; install the finishing section todevelop high-value steel grades.

• Install an automated inspection line at the blooming mill (Phase 2) for meetingthe demand for 100% finished products; inspection of specialised steel.

• Install bar coding machines for accurate finished product stocking and bandcutting saws for faster sample making.

• Strengthen raw material handling by installing a wagon tippler and associatedequipment to facilitate a faster rake turnaround and reduce demurrage charges.

• Replace the old chimney at the coke oven plant with a new one along with a 32TPH waste heat recovery boiler; achieve a safety mandate and generate low cost power.

• Introduce steam injection facility in the sinter plant that is expected toenhance productivity by about 130 TPD.

• Modify EOFs, bay extension and material handling facilities at the steel meltingshop, increasing productivity.

• Upgrade the existing bar and rod mill, expected to improve productivity (by3,000 tonnes per month) and quality.

• Upgrade de-dusting units at the blast furnaces and steel melting shop for betterenvironment management.

90 days ahead of schedule

The first battery of coke oven 4 was commissioned in September 2010 and the secondbattery of the same unit was commissioned in December 2010, three months ahead ofschedule, saving the Company's cost, difference between procurement and own production.

(7) Marketing

At JSW, saleable volumes have grown multi-fold. Consider this: in just four years,saleable steel volumes more than doubled. The Company's unique marketing policy - sellthen make - accelerated sustainable growth. To strengthen its focus on diverse varioussegments, JSW Steel restructured its marketing set up.

Highlights, 2010-11

• Growing focus in value-added sectors, commencing supplies to M/s. Ashok Leyland,M/s. Kalyani Lemmerz, M/s. Toyota Motors, M/s. Bharat Forge, M/s. Tata Motors and manyothers.

• Growing focus on value-added grades and products including medium/ high carbonsteels, high tensile and HSLA grades for auto sector, API Grade steels for oil and gassector, forging quality steels for auto application among others.

• Contribution of retail sales up from 16% in 2009-10 to 23%

• Increasing sales from stock yards.

• Reducing semis sales from 22% of total sales in 2009-10 to 6% in 2010-11.

• Sales volumes increased 7% from 5.72 million tonnes in 2009-10 to 6.10 milliontones in 2010-11.

• Sale of value-added products grew 7% over the previous year.

• Received product approvals from leading global automotive OEMs and large Indiancorporates for flat and long products.

• Received an award from Hyundai for 'Best Contribution' as a vendor in thecategory of raw material supplies - in the very first year of our association.

• Award of best debutant supplier from Ashok Leyland Limited.

Highlights, 2010-11

• Contributed 49% to country's incremental demand for C-steel hats.

• Share in domestic market of hats up from 10% in 2009-10 to 13% in 2010-11.

• Share in domestic market of HR coils & sheets up from 15% to 21%.

• Sales of C-steel rolled products by 26% with hats at 28% and longs at 22% v/sDomestic market witnessing a growth of 11% with hats at 6% and longs at 16%.

• HR coils sales up by 51% with growing focus on auto, oil and gas, generalengineering and Retail.

• Cold rolled sales up by 29% with growing focus in auto sector, leading toincreasing sales to OEM's.

• Expanding retail outlets with sales up by 77% driven by increasing presence inrural/semi-urban area.

Long products

The Company's long product spans the entire value chain spectrum - TMT products, WireRod coils, bars, rounds and structurals. The thrust on special steels altered the salesmix in favour of value-added grades. The team seeded new markets for existing products,introduced new products developed at its plants and worked with leading corporates forproduct approvals which would result in increased volumes from the current year.

Highlights 2010-11

• Received product approvals from Honda for global supply of steel to be used forforging crankshafts; received approvals from leading Indian OEMs namely, Ashok Leyland,M&M, Wipro Fuilds, among others.

• Received approval from Bharat Forge for the supply of steel for various forgingswhich are exported to international destinations.

• Received approvals from BHEL, Indian Railways for other special steel grades fordiverse critical applications.

• Entered into tie-ups with processing units for value-adding to steel in linewith customer requirements.

• Increased TMT bar sales volumes to institutional clients; their proportion inthe TMT sales mix increased from 55% in 2009-10 to about 65%.

• Entered into the welding electrode segment successfully.

Retail sales

JSW created a first-of-its kind distribution network, 'JSW Shoppe', with 280 outlets ason March 31, 2011, in more than 136 districts of India, with more than 49% of the outletsin semi-urban and rural locations.

JSW Shoppe is an honest attempt to market quality steel products to the steel consumerin these locations by educating the consumer of product usage -allowing them to makeinformed decisions. It is a one-stop shop, showcasing all JSW products; the outlets havethe ambience of a mini-departmental store, resulting in enhanced product branding andcustomer education.

In three years of its existence, JSW Shoppe has emerged as an aspiration forentrepreneurs in semi-urban and rural locations - word of mouth emerging as an effectivebranding and network expansion tool.

Highlights, 2010-11

• Sales through the JSW Shoppe increased 77% from 0.64 million tonne in 2009-10 to1.12 million tonnes

• Number of outlets increased from 174 as on March 31, 2010 to 280 as on March 31,2011.

• Organised the JSW Shoppe on wheels across numerous locations for growingawareness of the product and the brand.

• Created a second distribution level under the JSW Shoppe umbrella -createdretail outlets for very small quantities as it requires a complete different mindset tomanage these customers.

Supplies to projects having national significance

• Kakrapar Nuclear Power Station - Nuclear Power Corporation of India Ltd - NPCIL

• Bharat Heavy Electricals Limited - BHEL

• Indian Oil Corporation Ltd. - lOCL

• Mangalore Rehnery and Petrochemicals Ltd. - MRPL

• Pune International Cricket Stadium

• Delhi Metro Railway Corporation - DMRC

• Bangalore Metro Rail Corporation - BMRC

• Mono Rail project - Mumbai Metropolitan Regional Development Authority - MMRDA

• Chennai Metro Rail Corporation - CMRC

• Indira Gandhi International Airport

• Lodha Residential Tower - world's largest residential tower under construction

• Maharashtra State Generating Power Co. Ltd. - MAHAGENCO

Branding and Advertisement

• Thrust on branding initiatives viz.

• JSW Vishwas - "Pehchaan Nayi, Vishwas Wahi" campaign launched.

• JSW TMT Plus launched at regional locations.

• JSW Pragati launched in colour-coated product segment.

• Increasing awareness through active participation in exhibitions viz.

• Roof India - Chennai.

• Global Investor's Meet - Bangalore.

• ACETECH in Mumbai and New Delhi.

• Expanding reach and penetration in semi-Urban and rural markets through novelscheme - "Shoppe on Wheels".

• Publicity campaigns for brand promotion through wall paintings.

• Periodic customer meets spread across regions.

• Dealers/customers plant visits.

Road ahead, 2011-12

• Increase the reach of JSW Shoppe by strengthening the network to 400+ by March31, 2012.

• Cost-effective initiatives to strengthen the recall of the JSW Shoppe throughsimple and effective branding initiatives - electronic, bus panels, hoardings, paintings,among others.

• Market increased production of long products.

• Cater to the requirements of automotive OEMs; obtain product approvals from OEMcustomers for various products which are under various stages of approval.

• Increase the share of value-added products in the sales of long product.

Vision 2015

About 600 Shoppes by 2015 and an average monthly sales volume of 1,000 tonnes perShoppe, cumulating to about 7.2 mn tonnes of steel annually (post-2015 when all 600Shoppes are operational).

(8) Human Resource

Counter-convention, determination and stretch achievements is what JSW is all about -built solely on the passion of its employees who dare-to-dream and persevere-to-perform -delivering possibly the most unbelievable results.

Consider this: a team size of 8,925 members are responsible for the manufacture andmarketing of 11 mtpa of crude steel, predictably the smallest team size per tonnemanufactured in India's growing steel sector. Interestingly, at JSW, the labour cost pertonne of steel is the lowest globally!

Mindset

Holistic personality development is what the corporate aspires to give its teammembers.An individual could be an expert in his/her chosen field, but competence is notjust about domain knowledge, but an aptitude for multitasking. This organisational beliefinspired a culture of multifaceted capability, accelerating individual development andempowering a team. The organisation provides a plethora of opportunities to the individualand the entire family, resulting in huge recognition for the brand, an immediatewillingness to be part of the team, significantly higher retention and numerous instancesof employees rejoining.

Recruitment

The irony is that skilled people resources are getting exceedingly scarce in the secondmost populous nation of the world. Attracting qualified professionals is becomingincreasingly challenging in India. The same holds true for JSW.

Building the JSW team rapidly is of critical importance for important reasons:

• Enhanced capacities in various in-plant sections; new capacities/facilities werecommissioned in each of the previous five years; more projects are planned in existinglocations.

• Added green field capacities in new locations; inorganic growth opportunitiesneed to be streamlined to the JSW standard.

• Adopted state-of-the-art technologies in the manufacturing process.

The Company recruits graduate, diploma engineers and management students from leadingengineering and management colleges. In 2010-11, the Company participated in campusrecruitment for management graduates from IIMs and engineers from NITs. The Company heldwalk-in interviews for recruiting prospective employees. The Company's lateral recruitmentof experienced professionals is driven through references, connections, advertisements andplacement agencies.

Mentoring young trainees

To groom fresh recruits into the JSW culture and to enable them to make a meaningfulcontribution to the organisation, the team launched a mentoring programme. Seniors fromthe same department partnered fresh recruits for facilitating them in learning the ropeswith ease and to seamlessly adapt to the culture and practices of the organisation withspeed.

The HR team organised development initiatives for grooming mentee's like Input SeekingSession by Thomas International, Mumbai One day workshop on "Achieving Personal &Professional Excellence", was organised to get mentees clarity on aligning personalgoals with the organisational goal. They were provided individual feedback reportsoutlining their strengths and development areas to help formulate their individualdevelopment plan.

Composition and Qualification

JSW Steel's 8,925 employees comprise a rich pool of MBAs, CAs, CSs, ICWAs, ITIs,engineers, graduates, postgraduates and diploma holders as on

March 31, 2011.

Qualification profile of JSW Steel's employees

Even as the average experience of the senior management is over 20 years, the Company'saverage employee age is about 33 years, a prudent mix of energy and experience.

Employee Welfare

The Company aims to create an efficient, healthy and satisfied work-force for theorganisation. Honest and sincere efforts are made whereby employee motivation is highlyprioritised. Existing benefits were ensured to run well while new benefits were alsoannounced.

Employee Benevolence Scheme

Group Personal Accident (GPA) takes care of the financial needs of the family of thedeceased employee to a large extent. However, death due to sudden/ prolonged illness suchas heart attack, internal organ failures or permanent total disability renders the familyin great financial distress. To provide financial assistance to the family of the employeein case of his/her death/permanent total disability due to sudden/prolonged illness, whilein service. It covers all death/permanent total disability due to reasons other thanaccident, which is covered under GPA. All permanent employees of JSW Group companies,including probationers and trainees, are eligible for the benefits under the scheme.

Township

The Company has set up townships, spanning a total residential population of over 1546families. These townships are supported with sound infrastructure and amenities (24x7electricity, water supply, ATMs of major banks and shops). Weekly car service (for carowners at subsidised costs) and weekly auto exhibitions (for local car dealers) areorganised in the township. In December 2010, the Company launched Wi-Fi facility atVijaynagar township for the employees; 4,000 new houses have been planned for the comingyear in the following townships:

• Vidyanagar

• Vijay Vithal Nagar township

• Shankar Gudda township

• Township planned in Basapur

Medical Assistance

A 75 bed, multi-speciality hospital (Jindal Sanjivani Hospital) spread across 27,000sq. ft. was set up in 2003 in Toranagallu to provide exceptional medical aid facilities.The non profit entity is a joint effort of JSW Steel, Jindal Education and Medical Trust.

Fitness and Recreation facilities

In order to create a healthy working environment, the Company encourages physicalfitness by providing facilities for squash, badminton, table tennis, billiards, swimming,football, cricket, volleyball and gymnasium at a state-of-the-art sports club. It alsoprovides movie theatres and subsidised food at its in-house restaurant.

Knowledge Centre

JSW maintains the following schools for the children of employees at Vijayanagar

• Jindal Vidyamandir - affiliated to CBSE, providing world-class educationalfacilities.

• Jindal Adarsh Vidyamandir (JAV) - state board affiliated school situated at theShankar Gouda colony.

Scholarships

The Company granted scholarships to the meritorious children of employees to pursueprofessional degree courses like engineering, medicine, management, architecture, andchartered accountancy, among others.

Transportation

The Company provides transportation facilities to employees through its 19 buses and 42cars.It provides transportation for people commuting from Bellary, Hospet, Vidyanagartownship, V.V Nagar township, and Shankar Gudda colony.

Canteen

A total of 13 independent canteen facilities are provided, catering to every departmentin the plant. Healthy food at affordable prices is provided to employees. Further, 10restaurants catering different cuisines are maintained in the townships.

Employee Communication

A communication exercise was undertaken across the plant for all employees to voicetheir opinions, issues and suggestions to the top management. The platform for employeeswas "SAMPARK" and "SAMOOH".

Rewards and Recognition

JSW culture comprises rewards and recognition. The performance-based reward systemfacilitates the Company in pursuing its strategic goals and objectives. JSW's effectiveemployee recognition system is uncomplicated to attain the desired outcome and improveemployee performance retention.

The employees are rewarded and recognised by the following:

Mentorship Development Programme: An attempt to facilitate learning in a smootherand non-practical environment, whereby attempts are made to identify factors to contributefor success of the 'mentoring initiative'. This programme was launched in 14 departments,whereby a complete brief was given about the role of mentor and process of mentoring.

* Employee Survey: Conducted a survey by McKinsey seeking employee views througha standard questionnaire. The employees' views then served as a source of input fororganisation-specihc interventions.

* Engagement Survey: Commissioned a study by Assess People, a pioneer inworkforce assessments, to elicit the opinions of employees to gauge responses on variousfacets of engagement with the organisation. The hndings were shared with the employee andtheir views considered for the improvement plan.

Performance Management and Reward System

JSW Steel's functional meritocracy is based on individual performances. The Company'sperformance management and review system evaluates employee performance across multipleKPIs (targets and achievements; working style and culture; business/domain knowledge andpersonal growth; organisational initiatives).

Besides, the Company promotes talent from within, offering members the scope to grow intheir roles, coupled with an opportunity for cross-functional movement. The Company'scompensation package is linked to performance and benchmarked to better-than-industrystandards. As an extension, the Company introduced ESOPs for senior executives. About2,855 executives are now proud partners in the Company's growth. This initiative has gonea long way in integrating the individual with the organisation.

360 Degree Feedback - 360 Degree Feedback process has been launched in JSW for GMand above levels across the group, covering around 270 employees. The objective of 360Degree Feedback Process is to enable leaders to get feedback on their leadership style asperceived by others and enable individuals to develop leadership potential by helping themto capitalize on their strengths. In this process, participants (GM and above) will getthe feedback from their superior(s), peers/colleagues and direct reportees/juniors ontheir leadership effectiveness. The entire process will be conducted online by T.V. RaoLearning System Ltd., Ahmedabad. After the feedback process gets over, participants willbe given individual feedback report which will be based on all the responses received fromthe feedback providers and they will be encouraged to formulate their IndividualDevelopment Plan (IDP).

Highlights, 2010-11

• Inducted young professionals from campus recruitment and initiated coaching andmentoring for them to enable them adapt to the JSW Culture quickly.

• Rolled out and implemented Annual Training Plan to equip employees across levelswith knowledge and skill. Also, strengthened various learning platforms to intensifylearning and development through initiatives such as - e-learning modules and saturdaylearning forums among others.

• Strengthened talent management process and identified more than two hundred highpotential employees, across levels to build internal talent pool. Identified talent poolis being exposed to top quality training and other developmental inputs. Strengthened thesuccession planning exercise; identified star performers within the organisation who havebeen shifted to the fast track growth mechanism to groom them for assuming largerresponsibilities.

• Conducted employee engagement survey and facilitated implementation of actionplan to raise employee engagement level.

• Engaged McKinsey for a organisation-wide survey of the employees to seeking theviews of the team on various issues which served as a base for further improvement.

• Undertook a massive drive to educate the team on the vision, mission and valuesof the Company.

• Organised workshop titled 'Role of Women in the Corporate World' for the womenemployees which focused on managing challenges faced by working women in today's world. Italso catered to the art of balancing career and family, role of women in leadership,management talent and developing personal competencies, among other topics.

Accolades and Awards for HR Excellence

JSW has won prestigious awards during the year for HR excellence.

• Awarded for the "Innovative HR Practices". The award was handedover at Asia Pacific HRM Congress on September 3, 2010.

• Conferred with "The Award for Institution Building" at World HRCongress held on February 11, 2011.

• Conferred with "Best Practices in Talent Management Award" inLondon on November 10, 2010. The grand event was hosted by Osney Media, London.

Road ahead, 2011-12

• Recruit more members for managing additional business volumes consequent to thecomplete commissioning of 3.2 expansion project.

• Strengthen the training initiative.

• Undertake expansion of residential colonies to cater to the additions to theteam.

• Analyse the findings of the McKinsey survey, providing solutions to the criticalissues as per the survey report.

• Building talent pool and leadership development.

(9) Corporate Communications

The corporate communications team at JSW Steel manages and orchestrates all internaland external communications. The goal is to showcase JSW profile consistent to its size,stature and performance, manage perceptions among media and stakeholders about Company'sbusiness strategy and future prospects, and strengthen the Company's brand image.

Strategy

To raise the profile of JSW consistent with its size, stature and performance among thebusiness and financial media, customers, potential employees and opinion leaders.

• Conduct ongoing research and analysis both internally and externally to identifycommunication opportunities and issues related to JSW Steel and other verticals.

• Build consensus and manage perceptions among media and the financial communityabout the Company's business strategy and future prospects.

• Provide consultancy on all aspects of corporate reputation management, investorrelations, public affairs and crisis management.

• Enhance the corporate image of the Company among all key constituencies.

• Improve analysts' tracking interest and stock coverage.

Major Achievements

• JSW organised a visit to Vijayanagar and Ratnagiri for Mumbai andBangalore-based journalists

• JSW Ispat strategic alliance: event was unprecedented in terms of mediacoverage.

• JSW Severfiield plant inauguration

Media Relations

Media relations is a bridge building exercise between the Company and the media, a taskcrucial for correct and factual information, dissemination and creating the right Companyimage for the outside world. It is important for the Company to create platforms fromwhere relevant information can be effectively passed on for positive impact. The corporatecommunications team conducted several communication activities during this fiscal:

• Organised more than seven press conferences regularly through 2010-11 toannounce quarterly results, strategic issues and key business decisions.

• Organised a media visit to Vijayanagar in August 2010 to announce commissioningof new state-of-the-art hot strip mill. A similar exercise was undertaken at the time ofannouncing the inauguration of JSW Severfiield Structures Ltd facility at Vijayanagar inNovember 2010.

Crisis Management

The corporate communication team possesses skills and techniques to identify, assess,understand and cope with serious situations, from the moment it first occurs to the pointwhen recovery procedures start. Crisis management helps identify potential risks and makeschanges to hedge against the crisis.

Financial Communications

The Company's finances are proactively communicated to investors across the world, tostrengthen investor confidence and provide a platform for individual interaction amongconcerned investors, financial analysts and securities market professionals. The corporatecommunication team organised:

• Analyst meet at every quarter end.

• Special analyst meet to inform about the Ispat alliance.

Branding

JSW's branding strategy is aimed at nurturing the JSW brand and managing stakeholders'perception to maximise business value. Branding, in the JSW has an integrated marketingapproach with business solutions which create a uniform message for all stakeholders.

The Company has followed the policy of sustained branding as any other large corporateprimarily using Out-Of-Home as the reminder medium. The branding activity includes use ofoutdoors.We are present at all major airports and locations across major cities based onresearch and analysis. Prominent branding mediums are 'Neon Signage' at Nariman Point, ACbuses branding and railway stations' branding.

At JSW, strategy goes through the following cyclical process:

• Identifying the brand's stakeholders.JSW's stakeholders comprise investors,customers and the community.

• Understanding where the brand is currently; periodically conduct an imageperception research on various brand-related parameters to get an idea of the Company'sposition compared with competitors.

• Understanding competition and market trends; market and competitors' inputsinfiuence brand management.

• Denning the positioning of the brand; the overall corporate strategy gives anidea about the JSW brand's position with respect to a timeframe.

• Communicating coherently and consistently with stakeholders.

Messaging

Our branding is focused on people and community development services. We positionourselves as a responsible corporate citizen.

During the year, corporate communication undertook a survey in Mumbai, Delhi,Bangalore, Hyderabad, Chennai and Kolkata to understand the OOH and TV campaign's brandawareness recall. The total awareness was more than 102%, using aided and non-aided recallmethods. The branding initiative and messaging generated over 10 million footfallsaccording to TAM rating across India. Sports branding is also gaining momentum.

JSW Squash World Cup 2011

As part of new initiatives, the Company entered into sports promotion in a major way.JSW Steel sponsored 'World Squash Cup 2011' in Chennai. Further, the company undertook aspecial promotion of the event. The result was a huge recall for brand JSW. Matches wereshown on ESPN and reached millions of people.

Outdoor branding during ICC Cricket World Cup

The company also initiated topical branding depending on the favour of the season, e.g.using sports promotion. At the time of the Cricket World Cup, outdoor branding campaignswere undertaken using Indian cricketers' images. As a part of topical branding, electronicmedia was used like NDTV, Times Now, ET Now and BBC for presentation during Union Budget2011.

Internal communication

JSW gives due importance to internal communication to promote employee-managementrelationship and interaction. The Company provides several mediums to employees tocommunicate with the management.

Website management

Today's dynamic business environment requires continuous updating of information. TheCompany proactively updates its website with the help of a team to provide the factualinformation to its stakeholders at all times. As an environment-friendly initiative, thecorporate communication team introduced daily news briefings which are posted on thewebsite, saving paper.

(10) Information Technology

JSW Steel continues to leverage technology in its continuing pursuit of enhancing dataaccuracy and increasing efficiencies. The Company has taken a very important initative tohave a comprehensive relook at business processes and usher in best practices, This isaimed to enhance the capability to take informed decisions based on accurate informationdriven by robust IT system. This is a simplified and more effective process which in turnwill enhance the overall efficiency. While this exercise will be taken up in FY 2012, alot of preliminary work on this was done during the year, leading to key decisions. During2010-11, several strategic initiatives were taken up, including:

• New 'state-of-the-art' data center built at Vijayanagar, to serve local needsand act as Disaster Recovery Center for the Datacenter at Bengaluru.

• Optimised data network and provided redundancy across all JSW locations,including branches and Stockyards.

• Upgraded server and storage infrastructure to handle growth and enhanceperformance.

• The release of the Coal Tracking and Demurrage calculation system. The systemwill ensure improved planning and inventory management cycles. Also, the system will alsoact as an Early Warning system in case of delay in unloading of the cargo at various portstherefore intimating plants of the delay in the logistics of the supply and also allow forprovisioning of demurrages.

• Implementation of the Yard Management system at Vijayanagar. With this release,the entire inventory tracking system is now fully automated as there exist systems thattrack inventory, both raw material and finished goods, from raw material entry to issue ofgate pass thereby ensuring availability of data.

• Tighter Integration of Order Management and Manufacturing Systems atVijayanagar, aimed at better planning of production schedules, ensuring a fasterturnaround time from order to delivery.

• JSW Plant Operations Dashboards. A dashboard designed to report plant activityon real-time basis including the relay of technical parameters.The system will beimplemented across plants shortly.

• Implementation of Human Resource Management System (HRMS) systems, therebyenabling employees across locations to access a standard user interface that will enablethem to perform self service transactions and access specific policies and procedures.

• Initiated Data cleansing to standardise data structures related to vendor,customer and item masters.

Internal Control

The Company has a proper and adequate system of internal control commensurate with thesize and nature of its business. Internal control systems are an integral part ofCorporate Governance. Some significant features of internal control system are:

• Adequate documentation of policies, guidelines, authorities and approvalprocedures covering all the Company's important functions.

• Deployment of an ERP system which covers most of its operations and is supportedby a defined on-line authorisation protocol.

• Ensuring complete compliance with laws, regulations, standards and internalprocedures and systems

• Derisking the Company's assets/resources and protecting them from any loss.

• Ensuring the integrity of the accounting system; the properly authorisedrecording and reporting of all transactions.

• Preparation and monitoring of annual budgets for all operating and servicefunctions.

• Ensuring a reliability of all financial and operational information.

• Audit Committee of Board of Directors, comprises of Independent Directors. TheAudit Committee regularly reviews audit plans, significant audit findings, adequacy ofinternal controls and compliance with Accounting Standards, among others.

• A comprehensive Information Security Policy and continuous updation of ITSystems.

The internal control systems and procedures are designed to assist in theidentification and management of risks, the procedure-led verification of all compalianceas well as an enhanced control consciousness.

Internal Audit

The Company has an internal audit function that inculcates global best standards andpractices of international majors into Indian operations. The Company has a stronginternal audit department comprising of more than 25 executives reporting to AuditCommittee comprising of Independent/Nominee Directors who are experts in their field. TheInternal Audit Department received ISO 9001:2008 certification during the year.

The Company integrated the COSO (Committee of Sponsoring Organisations of the TreadwayCommission) framework with its audit process to strengthen its financial reportingcompatible with business ethics, effective controls and governance.

The Company extensively practices delegation of authority across its team, whichcreates effective checks and balances within the system to arrest all possible gaps withinthe system. The internal audit team has access to all organisational information,facilitated by its ERP implementation.

Audit plan and execution

The Company's Internal Audit Department prepared a risk-based audit plan. The auditfrequency is decided by risk ratings of areas/functions and the audit plan is carried outby its internal team.

Addition to the audit plan: The audit plan is periodically reviewed to includeareas that have assumed significance in line with the emerging industry trend andaggressive corporate growth. Moreover, the Audit Committee relies on internal customerfeedback and external events for inclusion of areas into the audit plan.

(12) Risk Management

JSW follows the Committee of Sponsoring Organizations' (COSO) framework of EnterpriseRisk Management to anticipate and address risks while being aligned with ISO 31000:2009standards that deal with risk management guidelines.

The risk management is marked by the following: ownership of process-specific riskswith the process owner; regular interactions at units and corporate offices to understandinterdependencies, prioritise and respond proactively; ongoing supervision of thisfunction by a sub-committee of Directors consisting of Executive and IndependentDirectors.

Top risks relating to investments, projects, markets, infrastructure, logistics,materials, technology, operations, performance, processes, environment, health and safetyare discussed actively. These activities are coordinated by the Chief Risk Officer.

Highlights 2010-11

(Rs. in crores)

The Gross Turnover and Net Turnover for the year stood at Rs. 25,131 crores and Rs.23,163 crores, respectively, with a growth of 29% and 27% respectively, over the previousyear, mainly driven by better product-mix and volumes.

The EBIDTA for the year was Rs. 4,856 crores and the EBIDTA margin was 20.8%. TheCompany posted a PAT of Rs. 2,011 crores.

The Company's total net debt gearing was at 0.57 (as against 1.14, as on 31.03.2010).The weighted average interest cost of Debt was lower at 7.58% (as against 8.08% as on31.03.2010).

Revenue Analysis

(Rs. in crores)

Product wise quantity break-up (Mn tonnes)

The significant growth in revenues during the year was mainly attributable to theleveraged prudent mix, focus on domestic market and widening of the product basket.

Highlights 2010-11

• Sales volumes increased 7% from 5.72 million tonnes in 2009-10 to 6.10 milliontonnes in 2010-11.

• Reducing Semis Sales from 22% of total sales in 2009-10 to 6% in 2010-11.

• Sale of value added products grew 7% in 2010-11 over the previous year.

• Contribution of Retail sales up from 16% in 2009-10 to 23% in 2010-11.

• Retail sales through Shoppe accounted for 23% of domestic sales excluding semis.

• Sales through the JSW Shoppe increased 77% from 0.64 million tonne in 2009-10 to1.12 million tonnes in 2010-11.

• Number of JSW Shoppe outlets increased from 174 as on March 31, 2010 to 280 ason March 31, 2011.

Other Income

(Rs. in crores)

Other income for the year was lower by Rs. 246 crores largely due to reduction inexchange gain of Rs. 67 crores relative to last year gain of Rs. 413 crores. Other incomeincludes the increase in VAT refund of Rs. 174 crores as compared to previous year Rs. 92crores due to increase in VAT rate from 4% to 5% in current year and increase inindigenous raw materials consumption due to increase in rate and volume.

Materials

(Rs. in crores)

The Company's expenditure on raw materials increased 36% from Rs. 10,461 crores in2009-10 to Rs. 14,254 crores in 2010-11. The increase was largely due to the increase incrude steel production by 7% and increase in iron ore price by 43% and coal price by 27%during 2010-11 compared to the prices in 2009-10.

Employees Remuneration and Benefits

(Rs. in crores)

Employees remuneration and benefits were up mainly due to annual increase in salary,provision made for ESOP expenses pursuant to announcement of ESOP'2010 and rise inmanpower relating to operations, on commissioning of HSM2 and certain facilities of 3.2mtpa expansions at Vijayanagar. The Company employed about 8,925 employees as on 31stMarch, 2011, vis-a-vis 7,703 as at the end March last year.

Manufacturing and Other Expenses

(Rs. in crores)

There was increase in power consumption on account of higer volume of production, inparticular, increase in production of Flat and Long products. However, increase in captivegeneration of power helped in containing cost per tone of finished goods. Increase inother cost mainly relate to higher consumption of stores and spares (14% increase of Rs.133 crores), repairs & maintenance (54% increase of Rs. 159 crores), due to increasein scale of operations on commencement of HSM2, Phase 1 of Benhciation plant, Phase 1 ofBlooming Mill and certain facilities under 3.2 mtpa expansion project during the year.

Net Finance Charges

(Rs. in crores)

The Company's net finance cost for FY 2010-11 is lower by Rs. 164 crores, mainly due toprepayment of loans by Rs. 2,739 crores and interest income on investment of surplusfunds.

Depreciation

(Rs. in crores)

Depreciation increased by 23% from Rs. 1123 crores in 2009-10 to Rs. 1379 crores in2010-11 due to commencement of the following projects during the year.

• Phase 1 of HSM 2.

• Phase 1 of Beneficiation plant.

• Phase 1 of Blooming Mill.

• Certain facilities of 3.2 mtpa expansion project viz, 300 MW Power Plant, Sinterplant-3, Converter-4, Castor-3 and Lime Kiln at Vijayanagar works

Fixed Assets

(Rs. in crores)

Gross Block increased during the year due to capitalization of certain projects. Investments

(Rs. in crores)

Infusion of equity capital in subsidiaries was Rs. 147 crores. The company acquired45.53% stake in Ispat Industries at Rs. 2,157 crores and the rest is towards investment inmutual fund.

Inventories

(Rs. in crores)

The average inventory holding in terms of number of days as on 31st March, 2011 was 81days vis-a-vis 68 as on 31st March, 2010. Higher inventory of raw materials and spares wasmainly due to prepone commencement of 3.2 mtpa expansion project for which inventorybuildup was planned. Higher value of finished goods is due to increase in cost ofproduction.

Sundry Debtors

(Rs. in crores)

The average debtors i.e. collection period, in terms of number of days as on 31st March2011 was 12 days, compared to 11 days as on 31st March, 2010.

Loans and Advances

(Rs. in crores)

Loans and Advances increased from Rs. 2,123 crores in 2009-10 to Rs. 3,324 crores in2010-11. The increase was mainly due to addtion of:

a) Loans and advance given to subsidiaries amounting to r 641 crores.

b) Minimum Alternative Tax credit entitlement of Rs. 198 crores.

Current Liabilities

(Rs. in crores)

The current liabilities increased by Rs. 2,442 crores from Rs. 7,622 crores in 2009-10to Rs. 10,064 crores in 2010-11. The increase was mainly due to increase in the level ofactivity and increase in value of purchase/services for the 3.2 mtpa expansion project.

Secured and Unsecured Loans

(Rs. in crores)

The Company's net long-term debt equity ratio declined from 1.14 as on 31st March, 2010to 0.57 as on 31st March, 2011, as the Company met its entire repayment schedule in2010-11.

Secured debt is reduced from Rs. 8,987 crores in 2009-10 to Rs. 7,676 crores in2010-11. The decrease was mainly due to utilization of Rs. 2,739 crores received from JFEto pre-pay high-cost debt.

(Rs. in crores)

Capital Employed

Total capital employed increased by 37% from Rs. 23,256 crores as on 31st March, 2010to Rs. 31,494 crores as on 31st March, 2011.

Return on capital employed declined from 16.8% in 2009-10 to 12.7% in 2010-11. This isexpected to get corrected over the next year, due to efficiency in scale of operations andfunds invested in expansion of ongoing projects would start generating returns from nextyear.

Own Funds

Net worth increased from Rs. 9,427 crores as on 31st March, 2010 to Rs. 16,946 croresas on 31st March, 2011 due to plough-back of operational surplus into the business andequity infusion by JFE/Promoters to fund the Company's future growth initiatives. Returnon networth was lower at 15% in 2010-11. The book value improved from Rs. 504 as on 31stMarch, 2010 to Rs. 736 as on 31st March, 2011.

Reserves: Reserves and surplus increased from Rs. 9,179 crores as on 31st March,2010 to Rs. 16,133 crores as on 31st March, 2011. This is a zero cost fund whichstrengthens the ability of the Company to undertake growth initiatives.

(E) LOOKING INTO THE FINANCIAL STATEMENTS (CONSOLIDATED)

The Company's consolidated financial statements include the financial performance ofthe following Subsidiaries, Joint Ventures and Associates.

Subsidiaries:

i. JSW Steel (Netherlands) B.V.

ii. JSW Steel (UK) Limited

iii. Argent Independent Steel (Holdings) Limited

iv. JSW Steel Service Centre (UK) Limited

v. JSW Steel Holding (USA) Inc.

vi. JSW Steel (USA) Inc.

vii. JSW Panama Holdings Corporation

viii. Inversiones Eroush Limitada

ix. Santa Fe Mining

x. Santa Fe Puerto S.A.

xi. JSW Natural Resources Limited

xii. JSW Natural Resources Mozambique Limitada

xiii. JSW Steel Processing Centres Limited

xiv. JSW Bengal Steel Limited

xv JSW Natural Resorces India Limited

xvi. Barbil Beneficiation Company Limited

xvii. JSW Jharkhand Steel Limited

xviii. JSW Building Systems Limited

xix. JSW ADMS Carvo Lda

xx. Periama Holdings, LLC

xxi. Planck Holdings, LLC

xxii. Purest Energy, LLC

xxiii. Prime Coal, LLC

xxiv. Lower Hutchinson Minerals, LLC

xxv. Caretta Minerals, LLC

xxvi. Periama Handling, LLC

xxvii. Rolling S Augering, LLC

xxviii. Meadow Creek Minerals, LLC

xxix. Hutchinson Minerals, LLC

xxx. R.C. Minerals, LLC

xxxi. Keenan Minerals, LLC

xxxii. Peace Leasing, LLC

Joint Ventures:

i. Vijayanagar Minerals Private Limited

ii. Rohne Coal Company Private Limited

iii. Geo Steel LLC

iv. JSW Severfield Structures Limited

v. JSW Structural Metal Decking Limited

vi. Gourangdih Coal Limited

Associates:

i. Jindal Praxair Oxygen Company Private Limited

ii. JSW Energy (Bengal) Limited

iii. Ispat Industries Limited

The Company has reported a Consolidated Gross Turnover, Net Turnover, EBIDTA and PAT ofthe Company of Rs. 25,868 crores, Rs. 23,900 crores, Rs. 4,947 crores and Rs. 1,754crores, respectively. The consolidated net profit was lower mainly due to lossesattributable to US Plate and Pipe Mill operation. The consolidated net worth and net debtwas Rs. 16,765 crores and Rs. 14,156 crores respectively. The consolidated debt gearingwas at 0.84 as on 31.03.2011.

(F) OUTLOOK

On macro scale, 2011 could be viewed as the year continuing to witness economicrecovery, revival, resurgence, challenge of surging commodity prices, inflation andsovereign crisis. International Monetary Fund - IMF has projected Global Economic growthrate to marginally slow down from 5% in 2010 to 4.4% in quantitative terms the worldoutput is estimated to grow by US $ 5.7 trillion. Advanced world as well as the Emergingand the Developing world are slated to witness a marginal reduction in economic growthrates at 2.4% and 6.5% respectively.

The year commenced with an unprecedented wrath of the natural calamities including thehistoric 3/11 catastrophe in Japan leading to a supply shortage in comodities as well asinputs for automobile and few downstream industries.

Steel Industries having strong linkages to the profile and growth rates of globaleconomic expansion, is slated to show growth both in production and demand. However thereis expected to be a marginal imbalance between the production rate vis-a-vis demand.China, with its 12th Five Year Plan activated, plans to focus on its domestic consumptionwith increasing emphasis on restructuring and development.

World Steel Association has projected the World Steel Demand growing by 77-MnT / 6% to1360-MnT, while China is expected to continue its Global dominance at 44% while growing at5% to 605-MnT. Advanced World is slated to witness demand growth at 5.3% while theEmerging and Developing world at 6.3%.

Indian Steel will see capacity additions to meet the accelerating domestic demand ledby rising investments and consumption supplemented by growing export opportunities forvalue-added engineering products. As per the projection of worldsteel, Indian steel demandis estimated to grow on a strong footage @ 13.3% in CY 2011, while witnessing a growth of10.6% in production to 66-MnT in FY 2010-11.

Major challenges for Global Steel Industry in near term shall be sustainability ofdemand under rising inflationary pressure while cost pressures stueezing the margins. Onthe other hand, the bigger challenge going forward for the Global Steel Producers shall beto explore innovative technologies and processes for iron and steel making adaptingalternate energy solutions with improved energy efficiency and low emission intensity.

Forward looking and Cautionary Statements:

Certain statements in the Management Discussion and Analysis concerning our futuregrowth prospects are forward looking statements, which involve a number of risks, anduncertainties that could cause actual results to differ materially from those in suchforward looking statements. The risks and uncertainties relating to these statementsinclude, but are not limited to, risks and uncertainties regarding fiuctuations inearnings, our ability to manage growth, intense competition within Steel Industryincluding those factors which may affect our cost advantage, wage increases in India, ourability to attract and retain highly skilled professionals, time and cost overruns onfixed-price, fixed-time frame contracts, client concentration, restrictions onimmigration, our ability to manage our internal operations, reduced demand for steel, ourability to successfully complete and integrate potential acquisitions, liability fordamages on our service contracts, the success of the companies which - has made strategicinvestments, withdrawal of fiscal governmental incentives, political instability, legalrestrictions on raising capital or acquiring companies outside India, unauthorized use ofour intellectual property and general economic conditions affecting our industry. TheCompany does not undertake to update any forward looking statements that may be made fromtime to time by or on behalf of the Company.