Sterlite Industries India Ltd Merged Directors Report

Dear Shareholders,

The Directors of your Company are pleased to present the 38th Annual Report, with the statement of the audited accounts for the financial year ended on March 31, 2013.

FINANCIAL PERFORMANCE SUMMARY

The financial highlights of your Company as per the IGAAP (Indian Generally Accepted Accounting Principles) are summarised below:

Particulars	Standalone		Consolidated
	Year ended March 31, 2013	Year ended March 31, 2012	Year ended March 31, 2013	Year ended March 31, 2012
Net Sales / Income from Operations	18,910.29	18,084.62	44,921.89	40,966.77
Profit from operations before other income, finance costs and exceptional items	552.80	780.94	8,437.10	8,033.51
Other Income	2,093.62	2,247.68	3,470.08	3,163.21
Finance costs	615.39	597.46	922.24	852.42
Exceptional items	100.00	423.32	117.53	472.64
Profit from Ordinary Activities before tax	1,931.03	2,007.84	10,867.41	9,871.66
Tax expense	353.76	350.36	1,618.39	2,110.55
Net Profit from Ordinary activities after tax	1,577.27	1,657.48	9,249.02	7,761.11
Paid up equity share capital (Face value of Rs 1 each)	336.12	336.12	336.12	336.12
Reserves excluding revaluation reserves as per balance sheet	25,227.25	24,401.26	50,619.05	45,719.56
Earnings per share (Rs)			18.03	14.36
Transferred to General Reserve	200.00	400.00	-	-
Interim Dividend	773.07	336.13	-	-
Transferred to Debenture	41.08	1.50	-	-
Redemption Reserve
Proposed dividend on Equity shares (incl. Dividend distribution tax)	-	350.15	-	-

PERFORMANCE REVIEW

Standalone

During the year under review, your Company increased production, reduced Treatment Charges and Refining Charges (TC/RCs) and sulphuric acid realisation along with improved copper recovery and higher premium. However, these gains were partially offset by higher costs of production.

Your Company reported net revenue from operations of Rs 18,910 Crore, an increase of 5% compared to 2011-12. The increase was primarily on account of an increase in copper sales from 3,20,518 tonnes to 3,50,471 tonnes.

TC/RC realisation during the year was 12.76 cents/ lb, as compared to 14.56 cents/lb in the previous year due to low spot TC/RC in first half of financial year. Additionally, force majeure declared by Freeport and mining disruptions at Collahuasi, which are major sources for copper concentrate supplies, affected realisation on copper.

The earnings before interest, tax depreciation and amortisation (EBITDA) for the same period decreased 12% from Rs 3,191 Crore to Rs 2,809 Crore. Similarly, Net Profit decreased 5% from Rs 1,657 Crore to Rs 1,577 Crore. Production of cathodes at our Copper Smelter was 3,53,154 tonnes, up 8.4% on a year-on-year (y-o-y) basis. Copper rods volume also increased to 1,71,855 tonnes compared to 1,61,421 tonnes in the previous year. We also produced 10,60,519 tonnes sulphuric acid and 1,19,793 tonnes phosphoric acid during the year.

Your Company maintained its leadership position in domestic copper with record sales of 1,96,626 MT. We also exported 1,53,844 MT of copper cathode, which is higher, as compared to last year.

Due to high stock and lower demand of Phosphoric Acid, our sales volume remained muted at 1,19,171.15 tonnes compared to 1,51,726 tonnes in the previous year.

Projects

Your Company’s power plant at Tuticorin was commissioned during the year and is currently operating at almost full capacity.

Your Company’s Expansion Project at Tuticorin by putting up an additional 4 Lakh Tonnes Per Annum (LTPA) Copper Smelter could not progress as planned due to pending regulatory clearances. The Company has obtained the Environment Clearance from the Ministry of Environment & Forest (MoEF) in 2009. However, the Consent to Establish from the Tamil Nadu Pollution Control Board (TNPCB) is awaited. A Writ Petition was filed in 2009 in Madras High Court challenging the environment clearance.

Transfer to General Reserves

Out of the total profit of Rs 1,577 Crore for the financial year, an amount of Rs 200 Crore is proposed to be transferred to the General Reserve. The above transfer to general reserves is in compliance to the Companies (Transfer of Profits to Reserves) Rules, 1975.

Consolidated

On a consolidated basis, your Company once again delivered robust financial results, largely driven by strong operational performance from a portfolio of world-class, low cost, long-life assets against the backdrop of a challenging economic environment.

Your Company’s financial performance reflects volume growth across most businesses. We had record mined zinc and lead metal production during the year and registered increases in lead and silver volumes in Zinc India. Aluminium smelters operated above rated capacity and Power sales volumes also improved significantly although we were impacted by evacuation constraints. Copper cathode production at Sterlite Copper also increased substantially.

The global economic concerns and uncertainties drove down prices of all key commodities. In the commercial power sector, sale prices also weakened, although the impact of this was partly mitigated by the lower costs of power generation at Sterlite Energy.

Our net revenue increased 10% to Rs 44,922 Crore. During the year we achieved an EBITDA of Rs 10,574 Crore due to the Rs 6,060 Crore profit earned which was 26% higher compared to the previous year.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

DIVIDEND

The Board of Directors of your Company at its meeting held on October 23, 2012 approved the payment of an Interim Dividend Rs 1.10/- per share (i.e. 110%) on 336,12,07,534 equity shares of Rs 1/- each. The Record Date determined for payment of dividend was October 30, 2012 and the dividend was paid on November 01, 2012. The Board of Directors at its meeting held on April 29, 2013 also recommended a payment of an Interim Dividend Rs 1.20/- per share (i.e. 120%) on 336,12,07,534 equity shares of Rs 1/- each. The Record Date determined for payment of dividend was May 10, 2013 and the dividend was paid on May 14, 2013. The Total Dividend for 2012-13 was Rs 2.30 per share (i.e. 230%).

UPDATE ON ENVIRONMENTAL LITIGATION

Your Company filed a Special Leave Petition (SLP) in the Supreme Court of India challenging the Madras High Court order dated September 28, 2010, vide which the Tuticorin Copper Smelter Unit was ordered to be permanently closed. On April 2, 2013, the Honourable Supreme Court upheld our appeal filed in 2010 against the Madras High Court order for smelter closure and ordered us to deposit Rs 1 billion (approx. $ 18 million) with the District Collector, Tuticorin, which will be used to improve the environment, including soil and water, in the vicinity of the plant.

CLOSURE BY TNPCB

Tamil Nadu Pollution Control Board (TNPCB) ordered the closure of the smelter on March 29, 2013 following a few public complaints of emissions. We filed an appeal with the National Green Tribunal (NGT) against the same. NGT, Chennai, in turn, transferred the matter to NGT Principal Bench at New Delhi. Your Company is confident of restarting the Tuticorin Unit and will continue to work closely with the Regulatory Authorities for continuous improvement in environmental parameters. Your Company’s Tuticorin Unit has the best in class environment friendly technology. Your Company has recently invested more than Rs 150 Crore on environment improvements projects as per the directions of Supreme Court and TNPCB.

CREDIT RATING

CRISIL Research certifies its ratings of your Company for the financial year. The treasury portfolio of fixed income investments has been consistently evaluated as ‘Very Good’ (highest safety from credit default on CRISIL’s 4 point scale).

SCHEME OF MERGER

Scheme of arrangement between the company with Sesa Goa limited

The proposed transaction has received the approval of the High Court of Bombay at Goa on April 3, 2013. The hearings at the High Court of Madras have been completed and the order is awaited. Following the receipt of Court Approvals, a record date will be announced to complete the transaction.

An appeal was filed against the Goa Bench order before the Division Bench. The appeal has been heard and the orders are reserved. Your Company is hopeful of completing the entire process in the current fiscal.

The merger of your Company along with other subsidiaries/ associate company with Sesa Goa Limited, proposed to be named as Sesa Sterlite Limited will create seventh largest resources Company in the world.

CORPORATE GOVERNANCE, CORPORATE SOCIAL RESPONSIBILITY & BUSINESS RESPONSIBILITY REPORTS

Your Company is committed to maintain the highest standards of Corporate Governance. A separate report on Corporate Governance, pursuant to Clause 49 of the Listing Agreement with the stock exchange(s), Auditors’ Certificate on its compliance, and shareholders’ information, forms a part of this annual report.

Sustainability

During the year, your Company incorporated the system of Vedanta sustainability framework into its existing integrated management system to enable efficient operations. We launched an e-Learning module, developed on the Vedanta Sustainability Framework, to instill awareness on the sustainability framework in our employees and its implementation aspects.

Environment

Your Company continues to be fully committed to environment and follows the best environment management practices in terms of best technology, processes, use of energy, water conservation, controlled emission and hazardous waste management. The Company has recently spent more than Rs 150 Crores in Tuticorin Copper Smelter to further improve the environmental performance.

Corporate Social Responsibility (cSR) and community Development

Your Company’s CSR initiatives are aligned with the goals of United Nation’s Millennium Development Goals and the principles of the Global Compact. True to our conviction that social responsibility begins at home, we pay maximum attention to the communities and villages surrounding our facilities. Currently, most of our activities are concentrated at around 72 villages in the rural and coastal areas of Tuticorin, Tamil Nadu, and which impact the lives of about 1.5 lakh people.

Our initiatives in education stem from the conviction that it is the responsibility of private companies to join hands with government and other institutions to contribute in improving the quality of education of girls in rural areas. Projects such as "Ilam Mottukal" or "Nanhi Kali" are being implemented in 72 Government Primary schools covering 5,035 girls.

Our commitment to the communities around us naturally extends to healthcare, which is an integral component of development. Several Rural Health Clinics are run in six villages. Your Company has improved the infrastructure in Government Hospitals by sponsoring bed materials.

Our CSR policy advocates women empowerment and helps improving their economic and social status through definite social and economic policies. These in turn leads to greater confidence and ultimately, development. With this in mind, the Sterlite Women Empowerment Project (SWEP) was initiated to empower rural and coastal women by partnering with four local NGO partners.

SIIL is implementing a coastal livelihood project with the objective of providing alternate employment opportunities for coastal youths. Around 160 youths were trained in eight identified trades and achieved 88% employability rate.

A major initiative undertaken by Sterlite was the development of a Model Village, based on the concept of a Child Friendly village. A total sanitation project was implemented in two model villages and household toilets are provided to all families in the village.

Around 76% of our employees participated in various CSR activities during the reporting year.

We incurred Rs 78 Crore on CSR activities during the year.

A detailed sustainability report of your Company is given in a separate section in this annual report.

BUSINESS RESPONSIBILITY REPORT

SEBI vide its circular CIR/CFD/DIL/8/2012 dated August 13, 2012 and Clause 55 of the Listing Agreement, mandated that top 100 listed companies based on market capitalisation at BSE and NSE, to include Business Responsibility Report (BRR) as part of the annual report. The BRR shall portray the initiatives taken by the Company on governance, social, environmental and economic responsibilities of business. The initiatives taken by the Company on environmental, social and governance aspects is mentioned in the BRR which forms part of this annual report.

SUBSIDIARY COMPANIES

As on March 31, 2013, the Company had 31 subsidiaries including indirect subsidiaries.

The Ministry of Corporate Affairs, vide its circular no.2/2011 dated February 8, 2011, had granted exemption to holding companies from attaching the financial statements of its subsidiaries to the Company’s annual report. In accordance with the said circular, the Balance Sheet, the Profit & Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. The Company will make available the annual accounts of the subsidiary companies to any member of the company who may be interested in obtaining the same. The Annual Accounts of the subsidiaries companies will also be kept for inspection by any shareholders at the registered office of the holding company and of the subsidiary companies concerned at the respective companies’ registered offices. Further, the Annual Accounts of the subsidiaries are also available on the website of the Company www. sterlite-industries.com

The shareholders may refer to the statement under Section 212 of the Companies Act, 1956 and information on the financial statements subsidiaries appended to the above Statement under Section 212 of the Companies Act, 1956 in this annual report for further information on these subsidiaries.

Members may write to the Company Secretary at Sterlite Industries (India) Limited, SIPCOT Industrial Complex, Madurai By-pass Road, TV Puram P.O, Tuticorin 628 002, to obtain a copy of the financial statements of the subsidiary companies.

DIRECTORS

Mr. Sandeep Junnarkar and Mr. Gautam Doshi retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The brief profiles of Mr. Sandeep Junnarkar and Mr. Gautam Doshi are given in the chapter on Corporate Governance.

INFORMATION PURSUANT TO SECTION 217 OF THE COMPANIES ACT, 1956

A. Conservation of energy, research & developments, technology absorption, foreign exchange earnings and outgo

The particulars as prescribed under Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are set out as an annexure to the Directors’ Report.

B. Particulars of employees

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of employees are set out as an annexure to the Directors’ Report. However, as per provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the report and the accounts are being sent to all the shareholders excluding the aforesaid information. Any shareholder desirous of obtaining such particulars may write to the Company Secretary at the registered office of the Company.

C. Directors’ Responsibility Statement

As required under Section 217(2AA) of the Companies Act, 1956, with respect to Directors’ Responsibility Statement it is hereby confirmed that:

a) In the preparation of the Annual Accounts for the year ended March 31, 2013, the applicable accounting standards have been followed and there is no material departures from the same;

b) The Directors have selected such accounting policies have been selected and they have consistently applied them and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013 and of the profit of the Company for the year ended on that date;

c) The Directors confirm have taken proper and sufficient care for maintenance of adequate accounting records have been taken in accordance with the provisions of this Act, for safeguarding the assets of the Company, and for preventing and detecting fraud and other irregularities;

d) The Directors have prepared the annual accounts of the Company on a ‘going concern’ basis.

AUDITORS & AUDITORS’ REPORT

The statutory auditors of the Company, M/s. Chaturvedi & Shah, Chartered Accountants and M/s. Deloitte Haskins & Sells, Chartered Accountants, hold office until the conclusion of the ensuing Annual General Meeting. M/s. Chaturvedi & Shah and M/s. Deloitte Haskins & Sells, Chartered Accountants have confirmed their eligibility and willingness to accept office of Auditors. The Audit Committee and the Board of Directors therefore recommend M/s. Chaturvedi & Shah and M/s. Deloitte Haskins & Sells, Chartered Accountants as Statutory Auditors of the Company for 2013-14 for the approval of shareholders.

The Notes on Financial Statements referred to in the Auditors Reports are self-explanatory and do not call for any comments and explanation.

COST AUDITORS

As per the requirement of the Central Government and in pursuance of Section 233B of the Companies Act, 1956, your Directors have appointed M/s Ramnath Iyer & Company, Cost Accountants as cost auditors of the Company to carry out the audit of cost accounting records for 2012-13. The cost audit report will be filed the Central Government as per the timelines.

ADEQUACY OF INTERNAL CONTROLS

The Company, as part of Vedanta Group, has a strong internal control system in place. The internal control system of the Company is supported by the Management Assurances Services (MAS) function. Your Company has a documented Standard Operating System (SOPs) for procurement, project / expansion management, capex, human resources, sales and marketing, finance, treasury, compliance, Safety, Health and Environment (SHE) and manufacturing.

An annual audit plan is drawn in consultation with the MAS team as approved by the Audit Committee. The internal controls system and mechanism is reviewed periodically to make it robust, so as to meet the challenges of the business. The Company has a system of carrying out internal audit, covering monthly physical verification of inventory, monthly review of accounts and a quarterly review of all business processes. To enhance internal controls, the internal audit follows stringent grading mechanism, focusing on the implementation of all recommendations of internal auditors. The internal auditors make periodical presentations to the Audit Committee, who review the same and ensure strict compliance.

Our risk management framework acts as an effective tool in mitigating the various risks which our business are exposed in the course of their operations as well as in their strategic action. The risk management framework ‘Turnbull Risk Matrix’ is designed to help the organisation meet its objectives through alignment of the operating controls to the mission and vision of the Company. The Company also has a well-documented internal controls systems and disclosure control required for compliance to the Sarbanes Oxley Act of 2002.

DEPOSITORY SYSTEM AND LISTING OF SHARES

Details of the depository system and listing of shares are given in the section "Additional Shareholder Information", which forms a part of the Corporate Governance Report and is attached with the Annual Accounts.

REGISTRAR AND SHARE TRANSFER AGENT

M/s. Karvy Computershare Private Limited, Hyderabad, is the Registrar and Share Transfer Agent of the Company. Details of the depository system and listing of shares are given in the section "Additional Shareholder Information", which forms a part of the Corporate Governance Report and is attached with the Annual Accounts.

FIXED DEPOSITS

Your Company has not accepted / invited any fixed deposits from the public under section 58A of the Companies Act, 1956.

HUMAN RESOURCES

‘SPEED SMART HUMBLE’, the DNA of Sterlite is the core principle of every HR process, from recruitment to performance management. Recruitment which is the beginning of the HR cycle inducts talent into the organisation with a special focus on Women Empowerment and Geomix. The Learning and Development wing is responsible for grooming talent recruited and shaping them into future leaders. This is ensured through continuous internal and external training sessions bridging the gaps in technical and behavioral skill sets. Retention of employees, as the key measure to the effectiveness of HR functions, is ensured through a plethora of rewards and recognition schemes and employee engagement initiatives including the flagship Employee Connect programme. Your Company’s HR practices won several awards apart from being branded the ‘4th Best Employer 2012-13’ by World HRD Congress.

ACKNOWLEDGEMENTS

Your Company maintained healthy, cordial and harmonious industrial relations at all levels. The enthusiasm and unstinting have enabled your Company to remain at the forefront of the industry. The Directors place on record, their sincere appreciation for significant contributions made by the employees through their dedication, hard work and commitment towards the success and growth of the Company.

The Directors also acknowledge the support and assistance extended to us by the Government of India, various state governments, and government departments, financial institutions, bankers, shareholders and investors at large, and look forward to having the same support in our endeavours.

For and on behalf of the Board of Directors,

Anil Agarwal

Chairman

Place: Mumbai

Dated: April 29, 2013

Annexure-A

STATEMENT CONTAINING PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR THAT ENDED 31 MARCH 2013.

(a) Conservation of energy:

a) Conservation of natural resources continues to be the key focus area of your company. Some of the important steps taken in this direction follow.

i. Elimination of furnace oil consumption in super heater and Phosphoric acid plant by modifying steam turbine generator resulting in savings of Rs 47.5 Crore per annum

ii. Use of blowers in place of compressed air in ETP

iii. Conversion of HT to LT motors in slag granulation

iv. Replacement of FO with compressed air in ISA furnace - resulting in savings of Rs 1.5 Crore per annum

b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy

i. C.E improvement from 97% to 97.5% and liberator efficiency improvement from 70% to 77% in Tuticorin Refinery

ii. Bus bar bolt tightening in Tuticorin Refinery

c) Impact of above measures in a) and b) for reduction of energy consumption and consequent impact of cost of production of goods.

The efforts taken to conserve energy will not only bring down the cost of production significantly, but will also help us to preserve environment by reducing GHG emissions.

d) Total energy consumption and energy consumption per unit of production.

As per form A attached.

FORM ‘A’

(b) Technology absorption

Efforts made in technology absorption as per Form B annexed.

(c) Foreign exchange earnings and outgo

a) Activities relating to export, initiatives taken to increase export, development of new export markets for products and services, and export plan:

The export volume for 2012-13 was 153,844 MT, a 30.18% increase from the previous year.

b) Total Foreign exchange used and earned:

		Rs in Crore
S.No. Particulars	2013	2012
1) Foreign Exchange Earnings	9,112.87	8,530.31
2) Foreign Exchange Outgo
CIF Value of imports of Raw Material, Components & Spare parts	16,322.27	14,480.49
Capital Goods	55.24	2.79
Others	372.66	725.37

Form ‘A’

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

Particulars	Unit	Year ended March 31, 2013	Year ended March 31, 2012
a. Power and Fuel consumption electricity
Purchase Unit	MWH	411,770	4,79,702
Rate / Unit	Rs	6.28	4.71
Own generation Unit*	MWH	48512	77,581
Cost / Unit	Rs	9.76	7.09
Furnace oil**
Quantity	KL	27,267	28,116
Total Amount	Rs in Crore	104	103
Average Cost per litre	Rs	38.10	36.50
Diesel
Quantity	KL	216	240
Total Amount	Rs in Crore	0.93	1.05
Average Cost per litre	Rs	42.99	43.96
L.P.G./LNG/PROPANE/IPA
Quantity	MT	6,114	4195
Total Amount	Rs in Crore	39.72	20.90
Average Cost per litre	Rs	64.97	49.82
NATURAL BRIQUTTE
Quantity	MT	0	0
Total amount	Rs in Crore	0	0
Average cost per MT	Rs	0	0
b Consumption per mT of cathode
Electricity	MWH	1.30	1.71
Furnace Oil	KL	0.08	0.09
Diesel	KL	0.00	0.00
L.P.G. / Propane / IPA	MT	0.02	0.01

* This includes the WHRB generation also. ** This includes the FO consumed in CPP also.

Form ‘B’

FORM OF DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION RESEARCH AND DEVELOPMENT (R & D)

1. Specific areas in which R & D carried out by the Company	Not Applicable
2. Benefits as a result of R & D	Not Applicable
3. Future plan of action	Not Applicable
4. Expenditure on R & D
a. Capital	Not Applicable
b. Recurring
c. Total
d. Total R & D expenditure as a percentage of total turnover

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1	Efforts in brief made towards technology absorption, adaptation and innovation	As a part of process initiatives in Silvassa
		Automation of IPA addition in CCR process was completed
		Mineral based oil was replaced with synthetic oil in CCR
		Casting cooling water filtration system was installed in CCR
2	Benefits derived as a result of above efforts e.g., product improvement, cost reduction, product development, import substitution	The above-mentioned initiatives have resulted in a lower cost of production and better working environment
3	In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), the following information may be furnished:	NIL
	a. Technology imported;
	b. Year of import;
	c. Has technology been fully absorbed
4	Barcode based SAP linked Unmanned Weighbridge Operation	Automation of weigh-scales for transfer of anode scarp inside the plant through SAP

For and on behalf of the Board of Directors,

Anil Agarwal

Chairman

Place: Mumbai

Dated: April 29, 2013