Vedanta Resources Regulatory News (VED)

Vedanta Resources plc

Full Year Results For The Year Ended 31 March 2013

Financial Highlights

n Revenue of US$15.0 billion, up 7%

n EBITDA of US$4.9 billion, up 21%; EBITDA margin of 45%1

n Underlying EPS2 of US$ 1.33, down 6%

n Free cash flow of US$3.5 billion before growth capex, and US$1.5 billion after growth capex

n Net Debt reduced by US$1.5 billion, gearing ratio reduced to 31% from 35%

n Strong balance sheet with Cash and Liquid Investments of US$8.0 billion

n Final dividend of 37 US cents per share, up 6%

Business Highlights

n Significant production growth across the portfolio

o Record production of mined zinc-lead and integrated silver at Zinc India

o Record oil & gas production driven by 32% higher output at Rajasthan block

n Strong cost performance despite industry-wide inflationary trends

n Recommenced oil & gas exploration drilling in Rajasthan and achieved a successful discovery in April 2013

n Mine life extensions at Zinc-India, Copper and Iron Ore operations

n Karnataka iron ore mining restrictions lifted in April; continued state-wide restriction on mining in Goa; Lanjigarh approvals progressing

n Group simplification received approval from High Court of Bombay at Goa; Madras High Court Order awaited

(in $ millions, except as stated)

1 Excludes custom smelting at Copper and Zinc-India operations

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

3. Based on profit for the period after adding back special items and other gains and losses, and their resultant tax and minority interest effects (refer to note 6 of Condensed financial statements)

Mr Anil Agarwal, Chairman of Vedanta Resources plc said, "Vedanta has once again delivered a strong performance. Operationally, the group has seen great success, with oil and gas production up 19%, exploration recommencing in Rajasthan, and a successful discovery at the block in April. The group also achieved strong growth across copper, aluminium, lead and sliver, maintaining our position as a large global diversified natural resources company. We delivered positive free cash flow of $1.5 billion after growth capex, and have maintained progressive dividends."

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About Vedanta Resources plc

Vedanta Resources plc ("Vedanta") is a London listed FTSE-100 diversified global resources major. The group produces Aluminium, Copper, Zinc, Lead, Silver, Iron ore, Power, and Oil and Gas. Vedanta has world-class assets in India, Zambia, South Africa, Namibia, Ireland, Liberia, Australia and Sri Lanka and a strong organic growth pipeline of projects. With an empowered talent pool globally, Vedanta places strong emphasis on partnering with all its stakeholders based on the core values of entrepreneurship, excellence, trust, inclusiveness and growth. For more information, please visit:www.vedantaresources.com.

Disclaimer

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

CHAIRMAN'S STATEMENT

Overview

In the first half of the financial year (H1 FY2013), Vedanta has delivered strong operational and financial results driven by production growth across the portfolio and strong cost performance. The Cairn India acquisition that was completed in December last year has been performing well and has delivered significant increase in production. Further, the simplification of our Group structure is progressing well, laying the foundation for a more efficient corporate and capital structure. I would like to thank our employees for their contribution to these results and our shareholders for their continued support. 

Strong position in growth markets

Global growth and commodity demand remains volatile and emerging markets continue to be the key drivers of growth. Vedanta is well positioned to capitalize on emerging market growth with a significant portion of its assets in India and Africa. For example, India imports over 80% of its crude oil requirements, and we are currently the largest private sector producer of crude oil in India. With significant production growth since acquisition and a balanced portfolio of oil & gas assets that have exploration upside, we are well positioned to drive production growth in oil & gas. Similarly, with favorable demographics and urbanization driving consumption growth in India, we are well placed to meet the growing demand as India's largest domestic producer across our remaining commodities.

A strong operating and financial performance

We achieved record production of mined zinc-lead and silver at Zinc India and an impressive 32% increase in oil & gas production driven by higher output at the Rajasthan block. Despite industry-wide inflationary pressures, we have reduced or maintained unit costs across majority of our operations. Whilst we are not immune to cost inflationary pressures, we continued to control costs and have demonstrated a track record of implementing operational improvements and maintaining our relatively new asset base at low sustaining capex costs.

Driven by a robust operating performance, we delivered 21% growth in EBITDA to US$ 4.9 billion and a 45% EBITDA margin1 despite lower LME prices. We achieved positive free cash flows after growth capital expenditure of around $1.5 billion, and remain focused on deleveraging. Our balance sheet remains strong with cash and liquid investments of $8 billion.

On behalf of the Board, I would like to thank our 31,000 employees across the world for their contribution to these results. Their commitment and efforts, combined with the strength of our management team, continue to drive our performance.

Robust execution of our strategy

Long term value

We have a proven track record of consistently growing our reserves and resources (R&R) organically in our mining operations and this year our exploration activities resulted in the addition of significant R&R in our Zinc-India, Copper and Iron Ore operations. 

Following Government approval to allow exploration in development areas, we recommenced drilling at our Rajasthan oil & gas operations to realize its basin potential of 300,000 bopd, and already achieved an early discovery in April, the 26th in the block.

Last year we initiated a group structure consolidation exercise to simplify our group structure, create a more efficient capital structure with better alignment of debt and cash flows across the Group, deliver significant synergies and unlock value for shareholders. This exercise has received shareholder approvals and various regulatory approvals including the approval of the High Court of Bombay at Goa, and we now await the final approval of the High Court of Madras.

Organic growth and selective M&A

We delivered production ramp-up across the portfolio during the year, and remained focused on capital allocation to low-risk brownfield projects with attractive returns. We successfully integrated the oil & gas operations of Cairn India, and ramped up production at our Rajasthan operations by 40% to c.175,000 bopd since completing the acquisition in December 2011. One of the significant milestones was recommencing exploration at Rajasthan, and we achieved a discovery in April. With potential for further upside at the proven Rajasthan block, we plan to invest c.80% of our $3bn oil & gas capex program on the Rajasthan block the over the next three years. At our cost-efficient Zinc-India business, we plan to grow mined metal capacity by 20% to 1.2mtpa driven primarily by brownfield expansion projects over the next six years.

Last year we acquired iron ore assets close to the coast in Liberia, including some brownfield deposits. We rapidly ramped up exploration and completed drilling of 65,000 metres, which has yielded positive results and indicated c.1 billion of JORC2 certified reserves and resources with substantial further upside. Further drilling is in progress and we are on track to deliver the first shipment by March 2014.

Recently, the Supreme Court lifted the ban on mining of iron ore in Karnataka and we are working towards resuming our mining operations in the region. Mining in Goa, however remains suspended and the Supreme Court process is in progress. Vedanta is India's largest private sector miner of iron ore and committed to responsible mining practices.

Sustainability

Following the development and group-wide roll-out of our business sustainability framework last year, we have consistently implemented this across the Group to enhance the value of our business, reduce our risks and preserve our licence to operate.

In addition to our c.31,000 strong workforce, we indirectly create employment for around 60,000 people through our contractors. We are one of the largest employers of mining engineers and geologists in India and one of the largest contributors to India's Exchequer. In Zambia, we are both the largest private sector employer and largest contributor of taxes. Our community programmes benefit around 3.7 million people in India and Africa, across 2,200 villages, and I take great pride in the positive impact we are making on across our communities.

We have made considerable progress on our five priority areas:

1. Embed sustainable development into every aspect of what we do.

2. Improve our health and safety performance for a safer, more secure and healthier environment.

3. Contribute further and in a more targeted way to local communities.

4. Continue to manage and minimise our impact on air, water and land.

5. Maintain a dialogue with stakeholders to help us further understand what is needed to help support a sustainable society and planet.

Further detail will be available in our comprehensive Sustainability Report for the year.

Vedanta has complied with the recommendations outlined in the sustainability review by URS Scott Wilson, and I expect to complete this process during 2013. We are keen to continue working with all our stakeholders on this journey, ensuring we are a sustainable business that will deliver value to all stakeholders.

Dividends

We have progressively increased our dividend since listing in FY 2004, delivering a 15% CAGR since listing in FY 2004. This year the Board has recommended a final dividend of 37 US cents per share, an increase of 6%. This takes the total dividend for the year to 58 US cents per share, 5% above last year.

Governance

We have recently inducted two new Independent Non-Executive Directors to the Vedanta board. In August 2012, Geoffrey Green joined our board. As a long serving legal adviser to major listed companies in the UK, Mr. Green has a wealth of knowledge and expertise in relation to the strategic issues of UK listed companies, and the UK corporate governance framework. In May 2013, we announced that Deepak Parekh will join our board. Mr. Parekh has extensive experience at India's premier housing finance company, HDFC Limited, where he currently serves as Non-Executive Chairman, and also serves on the boards of several other companies such as Lafarge SA in France and DP World Limited in the U.A.E.

Looking forward

We remain positive on the prospects for our well balanced and diversified portfolio of commodity assets despite the volatility in commodity prices. Our focus continues to be on generating shareholder returns through measured capital allocation, with a focus on low-risk, phased projects with high returns.

1 Excludes custom smelting at Copper and Zinc India operations.

2 JORC stands for Joint Ore Reserves Committee

Anil Agarwal

Chairman

16 May 2013

BUSINESS REVIEW

Strategic Context

We continued to deliver on our strategy during the year in an uncertain economic environment. Our diversification into oil & gas enabled us to deliver strong financial results despite a difficult year for the mining industry and some company specific challenges. Challenges for the industry persisted in 2012 as the market uncertainty and volatility witnessed since the global financial crisis continued. The marked economic slowdown in China, a troubled euro zone and only an insipid recovery in the US were the main factors which depressed the economic sentiments of the global economy. The global industry also faced falling prices combined with increasing costs creating further pressure on margins in the mining and metal industry. In addition to these factors, during the year our iron ore businesses in Goa and Karnataka were impacted by the mining bans which reduced our operating profit by US$485.3 million compared to the previous year Against this backdrop, we improved our operational performance delivering production growth and reducing costs across all our segments. Following our acquisition of the controlling stake in Cairn India, it delivered excellent financial results in its first full year and helped us to create a world class diversified natural resource company.

Delivering our strategy

Over the years we have built a diversified company with a well-balanced portfolio covering oil & gas, metals, bulks and power and are India's leading natural resource company. Most of our growth projects are now complete so we have passed the inflexion point where free cash flow exceeds our growth capital expenditure. We are now focused on deleveraging and reducing debt.

We continue to focus on delivering growth and long term value for our stakeholders, by investing in, and maintaining, structurally low cost, high quality assets with long operational lives where we can drive further improvement through efficiencies. Structurally our Tier1 asset portfolio provides with a competitive cost position as majority of our businesses are in the lowest quartile of the global cost curve.

Our success in extending our resource base is essential to sustain future growth. We are committed to sustainable development, reflecting the needs of all our stakeholders - our employees, our local communities, our environmental stakeholders - as well as our shareholders.

Key Strategic Priorities

n Disciplined production growth across the portfolio with a focus on returns.

n Continue to add reserves and resources to drive long-term value by extending resources at a faster rate than we deplete them through a continued focus on drilling and exploration programmes.

n Reduce gearing from cash flow as we have reduced an inflection point where free cash flow exceeds capex.

n Complete the simplification of the Group structure to more closely, align debt with cash flow and deliver significant synergies.

Growth

Organic growth

We have continued to focus on extending our existing resources and growing our assets organically, investing in projects that expand our capacity and increase our production volumes.

During the year, our aluminium smelters operated at more than the rated capacity and volume increased significantly over FY 2011-12. We had record production of lead and silver at our Zinc India subsidiary with copper cathode production improving in Sterlite as well as at Konkola Copper Mines (KCM) Sterlite Energy operated at a higher plant load factor (PLF) increasing commercial power generation, although this was constrained by power transmission capacity. This higher generation of commercial power was also supported by an increase in green energy powered from our wind power plants.

Selective and value accretive M&A

Whilst our primary focus is on growing our existing assets, we pursue selective acquisitions that are value-enhancing for our shareholders. We seek large proven, assets with the potential for growth and/or cost improvement, where we can leverage our skills and experience. These could include new geographies and commodities that meet our investment criteria. Last year, we acquired a controlling interest in Cairn India, the largest private oil producer in India. In 2012, Cairn India contributed 49% of the Group's EBITDA. This diversification has helped the group improve the profitability despite adverse commodity prices in copper, aluminium, zinc, lead and silver.

During the year, we acquired the outstanding 49% stake in the brown field and green field iron ore assets in Liberia in Western Africa for a cost of US$33.5 million. West Africa is an emerging hub for iron ore. The region has approximately 34 billion tonnes of reserves and resources, with the potential to become a 100 million tonnes per annum iron ore exporting region.

Long term value

Optimise returns

As the majority of our assets have had recent investment or are new, over the period our businesses have demonstrated lower annual sustaining capital cost. We believe there is further potential for cost reduction with the ramp up of production, continued focus on asset optimisation and improved raw material sourcing.

Reserves and resources

In line with our strategy to maintain long mine life for our assets and our target to add more than we mine, we continue to focus on our exploration programmes - on both brown field and green field sites. During FY 2012-13, our exploration activities resulted in the successful addition of reserves and resources (R&R) at our zinc and iron ore businesses.

Key achievements include:

n 1.0mt contained metal added to R&R in Zinc India, prior to depletion of 0.9mt equivalent of mined out metal during the year.

n Significant exploration success in our Indian Iron Ore business, with the net addition of 59mt to reserve and resources, extending the mine life to 20 years.

n Exploration success in Liberia, first iron ore R&R declared at 966mt

n Konkola Copper Mine (KCM) has substantively increased its R&R by 78mt on a net basis. This increase in R&R has contributed to a 20% increase in contained copper compared to March 2012

n Copper Mines of Australia (CMT) added 5.4mt to reserves, prior to depletion of 2.5mt. With a total reserves of 8.9mt of copper ore on 31 March 2013, the mine life has been extended to around four years.

Group structure

Last year we initiated a major project to simplify our group structure and unlock value. This is focused around the merger of Sesa Goa Ltd and Sterlite industries (India) Ltd to form Sesa Sterlite Ltd, aiming to create a more efficient capital structure across the Group with better alignment of debt and cash flows, as well as delivering significant synergies. The necessary approval from the High Court of Bombay at Goa has been received and we now await the approval of the High Court of Madras.

Sustainability

Sustainability is a core element of our guiding strategy and supports us in growing Vedanta's business and creating long-term value for our stakeholders.

Embedding Sustainability

We have been working to train and develop our employees and contractors in our sustainability framework, to both embed a culture of sustainability across the business as well as implement the framework's supporting practices and procedures. To date more than 9,000 people across the Company have been trained on the framework which is aligned to international sustainability standards.

An assurance and site audit process - The Vedanta Sustainability Assurance Programme or VSAP -has been introduced over the last year to embed this commitment at the operational level and behaviour change programmes are also underway.

As we implement our framework, we enhance the value of our business while reducing risks and preserving our license to operate.

Responsible Stewardship

Responsible Stewardship extends to our employees and their health and safety, our business processes which are centred around risk management, and the management of our land and our environmental impact.

Health & Safety

The Health & Safety of the people who work for the Vedanta Group remains a key focus and we are saddened to report twenty fatalities during the year. The company and the operational management is committed to sustain and further intensify our actions to make our operations fatality free. As a leading indicator of improving safety environment we see a reduction in the injury rates, and over the past five years we have more than halved our Lost Time Injury Frequency Rate from 1.67 to 0.72. With safety management continually improving around the Group, we remain committed to meeting our target of zero fatalities.

Environment

Vedanta continues to work on managing its impact on the natural environment. Our continuous improvement projects in air, water and energy management have made good progress, but we have much more to do, to meet our own challenging targets. As evidence, during the year, 5.63mt of non-hazardous waste has been successfully recycled. Vedanta was also rated eighth among 38 FTSE metal and mining companies by the Carbon Disclosure Project as it improved its score from 63 in 2012 to 76 in 2013.

Building Strong relationships

Establishing and maintaining close links with our stakeholders is an essential part of our journey as a sustainable business.

Throughout the year some 3,400 stakeholder engagement meetings took place, with community leaders, non-governmental organisations (NGOs), governments and government bodies, academic institutions and around 2,000 partnerships are now in place.

Adding and sharing value

We contributed US$5.3 billion to the Exchequer through direct and indirect taxes, royalty and oil tax.

We employ, directly and through contractors, more than 87,000 people. We play a significant role in growing local skills and in the development of local infrastructure, including roads, sanitation, education and medical facilities. We made a community investment of US$42 million this year, reaching 3.7 million people and providing support for schools, hospitals, health centres and farmers.

BUSINESS REVIEW

Financial Results

(in US$ million, except as stated)

* includes Cairn India results with effect from 8thDecemeber 2011,

** on Proforma basis for FY 2011-12

HIGHLIGHTS:

n Strong performance in the current challenging environment driven by a diversified portfolio of world-class, low cost, long-life assets

n Revenues up 7.0% to US$15.0 billion, EBITDA up 21.4% to US$4.9 billion

n EBITDA margin 32.6%, EBITDA margin (excluding custom smelting), 44.9%

n Significant contribution from Cairn India's first full year performance

n Robust cost performance across operations despite global inflationary pressure

n Strong free cash flow, up 39.5% at US$3.5 billion. Free cash flow after project capital expenditure US$1.5 billion.

n Record production of mined zinc-lead and integrated silver at Zinc India

n Record oil & gas production driven by 32.1% higher output at Rajasthan block

n Karnataka iron ore mining restrictions lifted in April, continued state-wide restriction on mining in Goa

n Significant increase in reserves & resources at Zinc India, Iron Ore and Copper in Africa

n Recommenced exploration drilling in the Rajasthan block and made 26th discovery in the block

n Return on capital employed (ROCE) improved to 17.5% (FY 2011-12:11.3%)

n Net debt reduced by 14.4% down to US$8.6 billion, cash and liquid investments of US$8.0 billion

n Net gearing of 31.4%, reduced by 11.0%

n Group consolidation and simplification approval received from the High Court of Bombay at Goa; Madras High Court approval awaited

n Final dividend of 37 US cents per share, up by 6.3%,progressive dividend maintained

Overview

Vedanta has once again delivered a strong set of financial results, largely driven by strong operational performance from a diversified portfolio of world-class, low cost, long-life assets set against the backdrop of a challenging economic environment and some company specific challenges. Our financial performance during the year reflects volume growth across most of our businesses with the exception of iron ore, where the operations were impacted by mining bans. We had record mined zinc and lead metal production during the year as well as strong 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 KCM and Sterlite India also increased substantially. Acquired by the Group in December 2011, Cairn India achieved excellent results in its first full year of operations, delivering strong production growth and operating costs.

The global economic concerns and uncertainties have driven down the prices of all key commodities. In the commercial power sector, sales prices also weakened, although the impact of this was partly mitigated by the lower costs of power generation.

Despite global inflationary pressures, we have been able to position majority of our businesses in lowest quartiles of the cost curve. At Zinc India we are placed in the first cost quartile while Zinc International business is in the second cost quartile. Our aluminium operation maintained its strong second cost quartile positioning and the cost positioning even without captive bauxite.

During the year we delivered EBITDA of US$4,888.3 million up by 21.4%. Operating profit was higher at US$2,512.0 million, up by 5% and attributable profit of US$157.4 million.

We continued to maintain a strong balance sheet, with cash and liquid investments totalling US$7,981.7 million. During the financial year, the ramp up in production following the substantial investment in our assets generated significantly higher free cash flow of US$3,534.7 million, significantly exceeding growth capital expenditure ofUS$2,019.1 million .

Our gross debt as at 31 March 2013 was US$16,592.8 million (31 March 2012 US$16,955.4 million), a reduction of US$362.6 million. Net debt also came down more significantly to US$8,615.6 million (31 March 2012: US$10,064.4 million) and the gearing ratio reduced to 31.4% from 35.3% in the previous year. The group simplification project announced last year, is in the advanced stage of completion and this will facilitate alignment of debt and cash flow generation thus help accelerate deleveraging.

Key developments

Iron ore operations remain affected by the mining bans in Goa and Karnataka. Honourable Supreme Court of India has given clearance for resumption of mining operations for A and B category mines in Karnataka through its order dated 18 April 2013. Sesa Goa's Karnataka mine falls under B category, and we are in the process of securing the necessary statutory clearances and expect to resume mining in Q1 FY 2013-14.

Iron Ore mining in the State of Goa has been suspended with effect from 11 September 2012. An appeal against this has been made to the Honourable Supreme Courtland we are awaiting dates for initial hearings. In the meantime, the State Government and major miners including Sesa Goa, have filed their responses to the Central Empowered Committee report. Separately, we have filed an application to the Court seeking a stay on the mining ban and restrictions on ore transportation.

The Ministry of Environment and Forests ("MOEF") rejected the approval obtained by the Orissa Mining Corporation ("OMC") for the final stage forest clearance needed for the commencement of the Niyamgiri mining project. This is one of the bauxite supply sources close to our alumina refinery. Following the petition filed by OMC challenging the MOEF decision , the Honourable Supreme Court, through its order dated April 18, 2013,has directed the State Government of Orissa to place any unresolved issues and claims of the local communities under the Forest Rights Act before the Gram Sabha, the council representing the local community. The Gram Sabha will consider these claims and communicate its decision to the MOEF through the State Government of Orissa within three months. The MOEF will then take a final decision on the granting of stage II forest clearance for the Niyamgiri mining project within two months.

VAL had undertaken the expansion project for the alumina refinery with an understanding that since there was no change in the manufacturing process and expansion was within the same premises, no fresh environmental clearance was required. This view was challenged by MOEF and the Company has been directed to apply afresh for environmental clearance for the expansion project. VAL has complied with this and the application is in process. The MOEF has now sought certain clarifications from the Government of Orissa and based on the results, it will set the date for the public hearing for the proposed expansion project. In the meantime, VAL has put the alumina refinery expansion activity on hold. Due to the shortage of bauxite, VAL temporarily suspended its refinery operations at Lanjigarh from December 5, 2012. Orissa government has appointed a ministerial level committee to examine the issue of mineral based raw material supplies, including bauxite for alumina plants. The committee is expected to submit its report shortly. For more details refer to Note No 2 (b) Critical accounting judgement and estimation uncertainty of the Consolidated Financial Statements for the year ended 31 March 2013.

Finance Review

Consolidated Revenue:

(in US$ million, except as stated)

* FY 2011-12 includes Cairn India results wef 8thDecemeber 2011

Consolidated EBITDA

(in US$ million, except as stated)

* FY 2011-12 includes Cairn India results wef 8thDecemeber 2011

Consolidated Operating Profit

(in US$ million, except as stated)

* FY 2011-12 includes Cairn India results wef 8thDecemeber 2011

Operating Profit Variance

Consolidated operating Profit Variance

(In US$ million)

* FY 2011-12 includes Cairn India results with effect from 8thDecemeber 2011

** Excluding Cairn and Iron Ore business

New and Acquired Operations

Assets are reported as new and acquired operations until there is a full year period for comparison. Our diversification into the oil & gas sector through the acquisition of Cairn India on 8 December 2011, contributed US$638.5 million to the total operating profit of US$2,512.0 million for the year. EBITDA for Cairn India was US$1,726.7 million higher with higher depreciation and amortisation charges of US$1,088.2 million.

Iron Ore Business

The mining ban in Goa and Karnataka impacted our iron ore business significantly during the year and contributed a negative variance of US$495.2 million to operating profits before special items compared with FY 2011-12.

Prices

The prices of many commodities declined during the financial year as global economic growth slowed and concerns surrounding the economic outlook increased. Average aluminium prices declined by 15% whereas zinc, lead and copper prices were also lower by 7% each. Our Power business is situated in India, where the demand continues to exceed supply with the precarious financial health of power distribution companies frequently creating downward pressure on power prices due to their inability to finance the power demand. These lower prices across all commodities (except oil & gas, and iron ore) had a negative impact of US$ 637.9 million which was partially offset by higher premiums to LME prices of aluminium of US$119.0 million. The impact of lower prices was US$ 254.8 million in Aluminium business, US$212.4 million in both the Zinc businesses and approximately US$161 million in Copper Zambia and Australia. In aggregate, the operating profit for the year was negatively impacted by US$518.9 million as a result of lower prices despite the higher premiums realised for aluminium.

Exchange Rates

During the year we experienced exchange rate volatility of the Indian rupee against the US dollar. This improved operating profit margins for our businesses located in India as the depreciation of the Indian rupee reduced the costs in dollar terms. Combined with higher sales revenues in rupee terms, this improved operating profitsbyUS$87.8 million.

Volumes

During the year, we had record mined zinc and lead metal production as well as strong increases in lead and silver volumes in Zinc India. Aluminium smelters operated above rated capacity and power sales volume improved significantly although we were impacted by power transmission constraints. These were mainly due to regional power distribution capacity constraints and legalised supply and demand imbalances. Copper cathode production at KCM and Sterlite India also increased. These increases in production volume contributed a positive variance of US$154.1 million to operating profits.

Costs

The global cost-inflationary environment prevailing in the sector was largely mitigated by our significant presence in India and Zambia, higher production volumes and operational efficiencies. There was a reduction in aluminium costs of US $89.4 million and a reduction in power generation costs of US$79.3 million which was partially offset by an increase in copper costs. These cost reductions increased operating profits by US$65.8 million.

The following exchange rates against the US dollar have been applied:

Special Items

Special items to the value of US$41.9 million for FY 2012-13 included US$9.4 million mainly due to voluntary redundancy charges, US$4.7 million restructuring related costs, US$9.4 million project cost write off and US$18.4 million towards the compensation ordered by the Supreme Court in regards to the Tuticorin Smelter issues In FY 2011-12special items amounted to US$230.2 million mainly related to provision for ASARCO and costs related to the Cairn India acquisition.

Depreciation

The depreciation charge excluding Cairn India and our Iron Ore business in FY 2012-13 was US$743.8 million compared to US$697.3 million in FY 2011-12. Depreciation charges were higher at Copper Zambia due to the capitalisation of the Konkola Deep Mining Project (KDMP) and other projects. These higher depreciation charges for FY 2012-13 reduced operating profit by US$46.4 million.

Amortisation

The mining reserves related to our acquisitions are being amortised based on a unit of production basis over the total estimated remaining reserves and resources.

The amortisation charge (excluding Cairn India and our Iron Ore business) in FY 2012-13 was US$71.5 million as compared to US$138.0 million in FY 2011 -12.Amortisation charges at Zinc International decreased by US$ 56.4 million and by US$9.0 million at BALCO increasing operating profit by US$66.6 million in the financial year.

Income Statement

 (in US$ million, except as stated)

Revenue

Consolidated revenues in FY 2012-13 grew to US$14,989.8 million, up 7.0% as compared with the previous year. Cairn India contributed US$ 3,223.4 million to our revenue in its first full year of operations. Despite our major businesses delivering higher volume growth, with the exception of iron ore, weak commodity prices lowered revenues. Revenue was also impacted by the suspension of iron ore mining in Goa from September 2012 and the continued mining ban in Karnataka.

EBITDA Margin

EBITDA increased by 21.4% to US$4,888.3 million including a full year of operating results from Cairn India which contributed US$1,726.7 million. This clearly demonstrates the resilience of our diversified business portfolio which helped insulate our EBITDA performance from lower commodity prices and the disruption of iron ore operations during the year. Despite this, we were able to deliver a consistent improvement in EBITDA margin.

EBITDA margin was 32.6% in FY 2012-13 compared with 28.7% in FY 2011-12. Excluding our custom smelting operations, EBITDA margin in FY 2012-13 was 44.9 % (FY 2011-12: 40.6%). Customs business EBITDA in FY 2012-13 was US$ 214.4 million,4% of the total EBITDA generated in FY 2012-13.

Performance in our individual business segments is summarised below:-

n In our Zinc businesses, margin was largely maintained despite fall in zinc, lead and silver prices. This was a result of higher mined metal & silver production and robust cost management.

n EBITDA margin in our copper businesses reduced due to lower London Metal Exchange (LME) prices and lower by-product sales credit for sulphuric acid partially offset by higher volumes of copper production.

n Our Aluminium business delivered an increase in EBITDA margin up to 11.1%, despite a significant decrease in aluminium prices due to an improvement in metal premiums and a reduction in the cost of production.

n Our Power business EBITDA margin increased as a combined effect of a fall in both sales prices and the cost of power generation.

n Oil and gas EBITDA margin was marginally lower than the previous year due to higher revenue sharing resulting from the profit petroleum charge; the Government of India's (GoI) share of profits from the country's oilfields. Cairn India shares profits from oil with the Government after recovering its share of costs as per the terms of a production sharing contract. Profit petroleum charges are paid on a quarterly basis to the GoI.

EBITDA margin trend of our businesses is as per follows :

Depreciation and Amortisation

The additional depreciation charge of US$460.9 million in FY 2012-13 included US$420.2 million from Cairn India for the full year charge as compared to four months in FY 2011-12. The balance of the increase in depreciation was due to the capitalisation of growth projects at KCM, Zinc India and Sterlite Energy. The Cairn India acquisition amortisation charge for the full year was US$834.5 million in FY 2012 -13 as compared to US$ 166.5 million in FY 2011-12. This was partially offset by lower amortisation costs of US$136 million at our Iron Ore business following lower production and at Zinc International where amortisation costs were down by US$56.4 million.

Net Interest

Net interest expense was US$520.9 million in FY 2012-13 compared with US$420.3 million in FY 2011-12. The increase was primarily due to additional finance costs for the full year on the debt incurred in FY 11-12 for the Cairn India acquisition, partially offset by higher income received on cash and liquid investments. Investment income in FY 2012-13 was US$ 673.1 million, compared with US$525.4 million in FY 2011-12, mainly due to higher cash and liquid investments and improved yield on investments.

Gross finance costs increased to US$1,422.3 million in FY 2012-13 up from US$1,170.5 million in FY 2011-12. The interest capitalised in FY 2012-13 was US$228.3 million (FY 2011-12 US224.8 million). As a result the finance cost charged to the income statement was US$1,194.0 million in FY 2012-13, up from US$945.7 million in FY 2011-12.

The average debt in FY 2012-13 was US$16,791.9 million, compared with an average of US$13,750.4 million in FY 2011-12. The average debt maturity at 31 March 2013 was 3.3 years as compared to 3.5 years in previous year. Refinancing arrangements being planned to be completed in the current year will extend the average maturity profile of the debtor 4.4 years. Our debt constitutes 43% fixed interest rate and 57% on a floating interest rate basis reflecting a balanced debt portfolio.

Other Gains and Losses

Other gains and losses include the impact of mark to market (MTM) on foreign currency borrowings, primarily at our Indian businesses and also from the periodical valuation of embedded derivatives relating to the foreign currency convertible bonds at Sterlite and Sesa Goa.

The other losses in FY 2012-13 were US$285.2 million, as compared with a loss of US$314 million in FY 2011-12. During FY 2012-13, MTM losses on foreign currency borrowings were US$309.9 million (FY 2011-12 US$411.3 million). These mark-to-market losses were caused by volatility in the Indian rupee /US dollar exchange rate, which depreciated by 6.3% in the year, moving from 1 US$ = Rs51.16 to1US$= Rs54.39. The Indian rupee depreciation impacted the uncovered loans denominated in US dollars. The gain on MTM of embedded derivatives of US$24.7 million (FY 2011-12 US$97.1 million ) was related to the foreign currency convertible bond at Sterlite and Sesa Goa.

Profit Before Taxation

Profit before taxation at US$1,705.9 million was in line with the profit before taxation achieved in previous year. Although operating profit was higher than last year byUS$124.3 million and foreign exchange losses were lower by US$29.0 million, these were partially offset by higher net interest expenses of US$100.6 million and US$92.2 million profit from Cairn India whilst it was an associate of Sesa Goa for the period July to November 2011 in FY 2011-12.

Taxation

Profit after tax increased by 35.6% to US$1,665.8 million due to lower tax charge . The effective tax rate reduced to 2.4%, significantly lower than the 29.6% rate in FY 2011-12 largely due to nil tax rates at Cairn India on the back of a tax holiday in the Rajasthan oil fields, reorganisation of Cairn India subsidiaries and reversal of deferred tax liabilities on amortisation costs. Also, tax planning measures in our operating subsidiaries have resulted in lower tax rates primarily as a result of tax holidays on power plants and area based incentives.

Attributable Profit

Attributable profit for the year was at US$157.4 million; higher than US$59.8 million in the previous year due to changes in profit mix. Improved attributable profit from Cairn India's first full year of operation, lower losses in VAL improved the attributable profit of the Company. However, this was impacted by lower profits from our Iron Ore business, Copper Zambia and higher interest at Group level.

Earnings Per Share

Basic Earnings per Share (EPS) for FY 2012-13 was 57.7 US cents per share as against 21.9 US cents per share in FY 2011-12, reflecting the increase in attributable profit. Fully diluted EPS was 56.7 US cents per share (FY 2011-12: 21.6 US cents per share). Underlying EPS was 133.1 US cents per share as against 142.0 US cents per share in the previous year.

Refer note No 13 of the Consolidated Financial Statements for the year ended 31 March 2013

Balance Sheet

(In US$ million, except as stated)

Shareholders' equity was US$4,398.4 million at 31 March 2013 compared to US$4,650.6 million at 31 March 2012 reflecting the increase in attributable profit due to equity holders during the period, offset by currency losses following the depreciation of the Indian rupee against the US dollar.

Minority interests increased to US$14,463.0 million at 31 March 2013 from US$13,768.9 million as at 31 March 2012, due to an increased share of profit partially offset by foreign currency losses.

Tangible Fixed Assets

During the year, we added US$2,409.3 million to property, plant and equipment comprising of US$2,019.1 million on our expansion and improvement projects and US$390.2 million spent on sustaining capital expenditure. Expansion project expenses were US$ 701.2 million in our Power business mainly at TSPL, US$382.9 million in our Aluminium business, US$423.6 million at Cairn India, US$235.5 million at Zinc India and the balance in other projects at KCM, VGCB, Sterlite Copper, etc.

Net Debt

At 31 March 2013, net debt was US$8615.6 million (31 March 2012 US$10,064.4 million), a reduction of US$1448.8 million resulting from strong cash flow. Cash and liquid investments were US$7981.7 million as at 31 March 2013. Gross debt as on 31 March 2013 was US$16,592.8 million as compared to US$16,955.4 million as at 31 March 2012.As a commitment to deleverage the balance sheet, the Company utilised strong free cash flow generation from substantially-invested assets to reduce the gross debt by US$362.6 million, after investing US$2,019.1 million in growth projects.

External debt at our operating subsidiaries was US$7,530.9 million (31 March 2012 US$7,692.9 million) and debt at Vedanta Resources Plc was US$9061.9 million (31 March 2012 US$9,262.5 million). Of the US$16,592.8 million total debt, US$2,434.5 million consists of convertible bonds. Near term debt maturities at face value of US$4,472.0 million due in FY 2013-14 comprises of US$2,794.0 million due at holding company level and the balance of US$1,678.0 million in subsidiary companies. US$809.8 million has been repaid in the current year and the balance is in the process of being refinanced. For the debt due at subsidiaries in FY 2013-14, US$700 million will be paid through internal cash flow generation and the balance mainly from working capital related loans which will be refinanced.

Our cash and liquid investments portfolio continues to be conservatively invested in debt mutual funds and in cash and fixed deposits with the banks. Additionally, the investments portfolio at our Indian entities is independently reviewed by CRISIL Limited and our investment portfolio has been rated as "Very Good".

We continue to have a strong balance sheet with capital employed of US$18,861.4 million. Net debt comprised debt of US$16,592.8 million offset by US$7,981.7 million of cash and liquid investments. Anticipated future cash flows and undrawn fund based committed facilities of US$2,144.2million, together with cash and liquid investments of US$7,982 million as at 31 March 2013, will assist in meeting our short term and long term fund requirement.The Company continued to maintain its ratings from Standard & Poor's, Moody's & Fitch: ratings are BB, Ba1 and BB+ respectively. We have been recently put on credit watch by some of the credit rating agencies, however due to our prudent financial policy, disciplined capital allocation and absolute resolve to deleverage the balance sheet, we are confident we will retain the ratings in the near future and improve the ratings going forward.

The Company generally maintains a healthy net debt/equity ratio and retains flexibility to raise funds as and when required. Our balance sheet remained strong with net gearing of 31.4% as compared to 35.3% in FY 2011-12.

As at 31 March 2013, we had a multiple of 1.8x net debt/EBITDA (1.9x : FY 2011-12) , 3.4x EBITDA/ Gross Interest expenses (4.5 x : FY 2011-12) and2.1 x net asset/debt (2.5x : FY 2011-12), which reflects a robust and strong balance sheet.

Of our total gross debt of US$17.1 (Face Value) billion, debt at our subsidiaries is US$7.6 billion, with the balance in the holding company. The future maturity profile of debt (in US$ billion) at our subsidiary companies and at the holding company Vedanta Resources Plc is as follows:

Cash Flows

The movement in net (debt)/cash in FY 2012-13 is set out below.

(in US$ million, except as stated)

1 On an accrual basis

2 Includes foreign exchange movements

Operating free cash flow before growth capital expenditure in FY 2012-13 was US$3,534.7 million as compared to US$ 2,533.8 million in FY 2011-12, up by US$1,000.9 million. EBITDA conversion to free cash flow was 72.3% as compared to EBITDA conversion to free cash flow of 62.9% in FY 2011-12. Expansion capital expenditure during the year was US$2,019.1 million as compared to US$2,398.2 million, lower by US$379.1 million, and cash flow generation after expansion capex was US$1,515.6 million, significantly higher than the previous year. The Company's capital expenditure programme has begun to taper off, reflecting the company's disciplined approach to capital allocation. The sale of fixed assets/investments represents the sale of Hudbay Shares during the year for US$158.1 million.

We purchased the remaining 49% stake of Western Cluster Limited (WCL) in Liberia for US$33.5 million

Project capex

Project capex (continued)

Increase in Shareholding

During the FY 2012-13, Sesa Goa acquired the remaining 49% of the equity of WCL, through its 100% subsidiary, for a total consideration of US$33.5 million. WCL, which is a company registered under the laws of Liberia, is an iron ore project comprising of three deposits in Bomi Hills, Bea Mountain and Mano River with estimated deposits of over 1 billion tonnes of iron ore.

The Government of India holds the minority stake in two of our Group companies - HZL (29.5%) and BALCO (49%). In line with our commitment to enhance the returns to our shareholders, we have communicated our intent to purchase its stake in both the companies to the GoI and are awaiting its response to our offer. We believe the purchase of the remaining shares would further improve the returns to our stake holders.

BUSINESS REVIEW - RISKS AND UNCERTAINTIES

Risks and Risk Management Practices

Vedanta is exposed to a variety of risks which are inherent in an international mining and resources business. The current unstable environment carries with it constantly evolving risks, making it essential for natural resources companies to manage these constantly changing risks, while simultaneously balancing the relative risk/reward equations demanded by its stakeholders. Effective management of risk supports the delivery of our objectives and achievement of sustainable growth. Hence, maintaining a robust risk management system is critical, to allow us to pursue growth opportunities, increase shareholder value and also minimise the financial, operational or reputational impact.

We have a multi-layered risk management framework aimed at effectively mitigating various risks which our businesses are exposed to in the course of their operations as well as in their strategic actions. The Board of Directors has the ultimate responsibility for management of risks and for ensuring the effectiveness of internal control systems. The Audit Committee aids the Board in this process by identification and assessment of any changes in risk exposure, review of risk control measures in place and by approval of remedial actions, where appropriate.

The Audit Committee is in turn supported by the Group Risk Management Committee (GRMC), with the assistance of the Management Assurance Services Team. The GRMC, chaired by the Group Chief Executive Officer (CEO) and comprising of the Group Chief Financial Officer (CFO) and Director-Management Assurance as its other members, helps the Audit Committee in evaluating the design and operating effectiveness of our risk mitigation program and the control systems built in. It meets every quarter to review risks as well as review the progress against the planned actions. Risk officers, whose role is to create heightened awareness on risks at senior management level, and to develop and nurture a risk management culture within the Group, have been nominated at Vedanta as well as at each of the operating companies.

We identify risk at the individual business level for existing operations as well as for ongoing projects through a consistently applied methodology, using the Turnbull matrix. , The risks are evaluated to assess their financial as well as non- financial impact, and likelihood of their occurrence. Through our management consultation process the existing risk management tools are evaluated and wherever required additional controls/steps taken. The GMRC reviews the top twenty risks every quarter. The respective businesses review these risks, change in the nature and extent of the major risks since the last assessment, control measures established for the risk and further action plans. The control measures stated in the risk matrix are periodically reviewed by the business management teams to verify their effectiveness.

External Risks

Commodity Prices

Prices of commodities we produce have historically been volatile, and any prolonged downward pressure or volatility in commodity prices could materially affect our Group's earnings and cash flows. The key commodity price sensitivities on EBITDA resulting from a change of 10% in prices are set out below:

The above sensitivities are based on FY 2012-13 volumes, costs and exchange rates and provide the estimated impact on EBITDA of changes in prices assuming that all other variables remain constant.

The diversified portfolio of commodities including sizeable exposure to oil provides some protection from the fluctuation in commodity prices. The Group's normal policy is to sell its products at prevailing market prices and not to enter into price hedging arrangements other than for businesses which are on tolling basis where back to back hedging is used to mitigate pricing risks. In exceptional circumstances we may enter into strategic commodity hedging but only with prior approval of Executive Committee(EXCO).

Regulatory, Economic, Social and Political Uncertainty

Our mining, smelting, oil and gas exploration and production operations are located in India, Zambia, Namibia, South Africa, Ireland, Australia, Sri Lanka, Liberia and our holding and investment companies are located in jurisdictions including the United Kingdom, Jersey, Mauritius, Netherlands, Cyprus, Australia and Scotland.

The political, legal, fiscal and other regulatory regimes in the countries we operate in may result in higher operating costs or restrictions such as the imposition or increase in royalties or taxation rates, export duty, impact on mining rights/ban and change in legislation pertaining to repatriation of money. Changes to government policies such as changes in royalty rates, reduction in import tariffs in India, reduction in assistance given by the GoI for exports and the reduction or curtailment of income tax benefits available to some of our operations in India, Namibia and Zambia are some of the examples of risks under this category. We may also be affected by the political acts of governments in these countries over which we have no control. Any change in government policies and legislation, including resource nationalisation, availability of foreign exchange, may also affect our business and profitability, including any retrospective changes in government policy and legislation.

A majority of our Group revenues and profits are derived from commodities sold to customers in India. Any downturn in the overall health of the Indian economy or any political or regional instability may impact margins, including any impact arising as a result import tariffs prevailing in India.

Operation and expansion of various assets within the Group remain subject to legal proceedings, most notably the expansion of the Lanjigarh refinery in VAL, the Tuticorin smelter in Sterlite, the mines of Sesa Goa in the State of Goa and the 1200 MW power project at BALCO.

Although we are hopeful that the necessary approvals will be obtained and the projects will commence within the foreseeable future, emergence of any such issues in future are not only difficult to predict, but are also beyond our control.

The company monitors regulatory and political developments on continuous basis.

Financial Risks

Currency fluctuations may negatively affect our financial results

Our assets, earnings and cash flows are influenced by a variety of currencies due to the diversity of the countries in which we operate. Fluctuations in the exchange rates of those currencies may have a significant impact on our financial results.

Although the majority of the Group's revenue is tied to commodity prices that are typically priced by reference to the US dollar, a significant part of its expenses are incurred and paid in local currency such as the Indian rupee and, to a lesser extent, the Australian dollar, the South African rand, the Zambian Kwacha and the EURO. Our Group borrowings are significantly denominated in US dollars while a large percentage of cash and liquid investments are held in other currencies, mainly in the Indian rupee. Any material fluctuations of these currencies against the US dollar could results in lower profitability or in higher cash outflows towards debt obligations.

During the financial year 2012-13 there was volatility in the Indian currency against the US Dollars and the Indian Rupee depreciated by 6.3%, which increased our mark-to-market losses on dollar loans. Our attributable profit is also impacted significantly where our companies which have higher attributable shares.

The Group seeks to mitigate the impact of short-term movements in currency on its businesses by hedging its short-term exposures progressively based on their maturity. However, large or prolonged movements in exchange rates may have a material effect on the Group's businesses, operating results, financial condition and/or prospects.

Liquidity Risks in terms of being able to fund operations and growth

Our Group is in the culmination stage of a major capital expenditure programme to increase production capacity and enhance cash flow from operations. The Group needs to fund its on-going growth capex and any near term operational/exploration capex programmes as well as meet debt maturity requirement. While the Group's balance sheet and business model are adequate to meet its funding requirements and supports its ability to raise adequate financing but a sustained adverse economic downturn and/or suspension of its operation in any business, effecting revenue and free cash flow generation, may cause some stress on the Company's financing and covenant compliance.

The Group generates sufficient cash flows from its current operations which together with the available cash and cash equivalents and liquid financial asset investments provide liquidity both in the short term as well as in the long term. However any constraints around upstreaming of funds from the subsidiariesto the Group may affect the liquidity position of the Group.

The Group has a strong balance sheet that gives sufficient headroom to raise further debt should the need arise. The Group's current ratings from Standard & Poor's, Moody's & Fitch Ratings are BB, Ba1 and BB+ respectively (2012: BB, Ba1 and BB+ respectively). These ratings support the necessary financial leverage and access to various funding sources of debt or hybrid debt instruments at competitive terms. The Group generally maintains a healthy net debt-equity ratio and retains flexibility in the financing structure to alter the ratio when the need arises.

The announced group simplification which is in the advanced stage of completion, will align the debt with the cash flow generating companies and support the deleveraging of balance sheet.

Strategic Risks

Delays in Expansion and New Projects

The Group has a number of significant expansion plans for its existing operations and planned green field projects, which involve significant capital expenditure. The timing, implementation and cost of these expansion projects are subject to a number of risks, including the failure to obtain necessary licenses, permits, consents and approvals, funding for the projects. Any failure to obtain the requisite regulatory approvals may delay or prevent the Group from commencing commercial operations at certain of these projects.

For instance, the Group does not currently have all of the required environmental approvals for the proposed expansion at the alumina refinery at Lanjigarh and related mining operations in Niyamgiri Hills in the State of Orissa. Recently, the Supreme Court of India has ruled that bauxite mining in Niyamgiri could start subject to the approval of the Gram Sabhas in the region. In order to meet our short term bauxite requirements, we are in communication with the Orissa Government regarding the allocation of new mining leases. Sourcing of bauxite from mines in neighbouring states is also being pursued.

Any delay in completing planned expansions, revocation of existing clearances, failure to obtain or renew regulatory approvals, non-compliance with applicable regulations or conditions stipulated in the approvals obtained, suspension of current projects or cost overruns or operational difficulties once the projects are commissioned may have a material adverse effect on the Group's businesses, operating results, financial condition and/or prospects. Any delay in completing planned expansion could have a material adverse effect on Vedanta's credit rating, which may increase its borrowing costs.

Health, Safety, Environmental Risks

Our mining and smelting, power generation and oil and gas exploration and production operations are subject to extensive health, safety and environmental (HSE) regulations and legislations. As regulatory standards and expectations are constantly developing, we may be exposed to increased litigation, compliance costs and unforeseen environmental rehabilitation expenses.

Potential health, environmental and community events that may have a material adverse impact on our operations include rock fall incidents in underground mining operations, well blow-outs, explosions or gas leaks, uncontrolled tailings breaches, escape of polluting substances, uncontrolled releases of hydrocarbons, human rights breaches and community protests or civil unrest. The Company has appropriate policy and standards in place to mitigate and minimise such occurrences backed by senior operating management's focus on managing the causes of such incidents, reviews and taking the necessary corrective steps.

Longer-term occupational health issues may arise due to unanticipated harmful workplace exposures or prolonged harmful exposures to employees or site contractors. These effects may create potential occupational hazards and its consequences thereon. The Company an appropriate policy in place for such matters supported by structured processes, controls and technology. Our operations ensure the issue of operational health and consequential potential risk/obligations are carefully handled. Depending on the nature of the exposure and surrounding risk, our operations have different levels of processes, controls and monitoring mechanisms.

The Company has recently implemented a fresh set of policies and standards to align its sustainability framework with international best practices.

The Company and its subsidiaries management structure and processes support the sustainability agenda. A Board appointed Sustainability Committee periodically reviews sustainability performance.

Employee Risks

The Group's efforts to continue its growth and efficient operations will place significant demands on its management resources. The Group's ability to sustain and grow its existing businesses and integrate new businesses will depend on its ability to ensure the requisite pool of management resources and on its ability to attract, train and retain personnel with the skills that enable it to keep pace with growing demands and evolving industry needs.

The Group is, in particular, dependent to a large degree on the continued service and performance of the executive management team of Vedanta and other key team members in the Group's business units. These key personnel possess technical and business capabilities that are difficult to replace. Any significant loss or diminution in the collective pool of Vedanta's executive management or other key team members could have a material adverse effect on its businesses, operating results and future prospects.

The Company has appropriate human resources policies and HR practices in place to mitigate and minimise such occurrences backed by senior management focus and commitment for taking corrective steps wherever required.

Through a combination of management tools such as appropriate compensation policies and practices, differentiating performance through transparent process, rewarding and recognising the extraordinary performance, adequate career opportunities within the Group, job rotation and long term reward and retention schemes (ESOP). Through its policies, the Company ensures it can attract and retain the right talent while aligning the individual and the business goals of the company.

Operational Risks

Discovery Risks

The increased production rates from our growth oriented operations places demand on exploration and prospecting initiatives to replace reserve and resources at a pace faster than depletion.

Actual reserves, resources or mineral potential may not conform to the geological, metallurgical or other expectations and the volume and grade of ore and recoverable hydrocarbons. As our revenues and profits are related to minerals and resource operations, our results and financial outcomes are directly linked to our ability to replace existing reserves and the success of our exploration.

A failure in our ability to discover new reserves, enhance existing reserves or develop new operations in sufficient quantities to maintain or grow the current level of our reserves could negatively affect our prospects. There are numerous uncertainties inherent in estimating ore and oil and gas reserves, and geological, technical and economic assumptions that are valid at the time of estimation may change significantly when new information becomes available. The uncertain global financial outlook may affect economic assumptions related to reserve recovery and require reserve restatements which could negatively affect our results and prospects.

Our experience in monitoring and measuring reserve and resources with the support of a dedicated professional team and continued focus on exploration both brown field and green field, over the years has resulted in the Company adding more reserves and resources over and above depletion.

Failure to Meet Production and Costs Targets

Our operations are subject to conditions and events beyond our control that could, among other matters, increase our mining, transportation or production costs, disrupt or halt operations at our mines, smelters and power plants and production facilities for varying lengths of time or even permanently. These conditions and events include disruptions in mining and production due to equipment failures, unexpected maintenance problems and other interruptions, non-availability of raw materials of appropriate quantity and quality for our energy requirements, disruptions to or increased cost of transport services or strikes and industrial actions or disputes. A spill or other contamination from production, storage, export, shipment or sale of oil or other hydrocarbon products in our oil and gas operation could result in significant environmental liabilities.

It is our policy to realise market prices for our commodities and the profitability of our operations is dependent upon our ability to produce metals at a low cost which in turn is a factor of our commercial and operational efficiencies and productivity. The prices of many of our input materials are influenced by a variety of factors including demand and supply as well as inflation. An increase in the cost of such input materials would adversely impact our competitiveness.

While few of these risks can be beyond our control, we have adequate and competent experience in these areas and have consistently demonstrated our ability to manage these problems proactively.

Operation Review

Zinc-Lead-Silver - India

Production Performance

1. Including captive consumption 7 kt v/s 7 kt in FY 2012-13 v/s FY 2011-12.

2. Including captive consumption 1088 thousand ounces v/s 1,123 thousand ounces in FY 2012-13 vs FY 2011-12.

3. All % change in production figures have been calculated without rounding the number up to 1,000.

Key Achievements

n Highest ever mined zinc and lead production of 870kt

n Record integrated silver metal production of 10.35moz, up 36.0% over previous year

n Ramp-up of lead and silver production from the Dariba Smelter and Sindesar Khurd Mine

n Maintained lowest quartile cost position

n Gross addition of 25mt to Reserves and Resources

Strategic Priorities

n Realise production capacity

n Develop cost efficient and reliable underground mines

n Achieve growth to 1.2 mtpa mined zinc-lead metal

n Continue to focus on adding reserves and resources

Operations

Mined metal production for the financial year was 870,000 tonnes, 4.8% higher than the previous year primarily due to increased production from the Rampura Agucha mine.

The integrated production of refined zinc was 660,000 tonnes, lower than the previous year but in line with the mine plan for the year. Sales of Zinc metal-in-concentrate (MIC) were 61,000 tonnes, following surplus concentrate produced in second half. Integrated production of refined lead was up 19.7% at 107,000 tonnes for the financial year.

Integrated production of silver was a record 10.35 moz for the financial year, up 36.0%, driven by higher output from Sindesar Khurd mine and Dariba lead smelter.

Unit Costs

During FY 2012-13, the unit cost of zinc production was lower at US$998 per tonne as against US$1,010 per tonne in FY 2011-12 partially helped by the depreciation of the Indian rupee, even though acid credit was much lower than the previous year. During the year the fall in coal price and lower specific coal consumption helped in reducing the captive power cost. The business remains in the lowest cost quartile compared with other global producers backed by high quality assets.

Financial Performance

(in US$ million, except as stated)

EBITDA for FY 2012-13 decreased to US$1,165.3 million, as compared to US$1,244.8 during FY 2011-12. The positive impact of higher volumes of silver and lead and depreciation of the Indian rupee was offset by lower metal prices, lower zinc volumes and lower by-product credits. Metal prices were lower during the year: zinc was down by 7.2%, lead reduced by 6.9% and silver fell by 13.6%.

Projects

The Board of Directors of Hindustan Zinc Limited (HZL) has approved the next phase of growth. HZL has been actively conducting exploration activities, which have increased net Reserve and Resources (R&R) across all mines to 348.3mt of ore as at the end of FY 2012-13. Based on a long-term evaluation of assets and in consultation with mining experts, Zinc India has finalised plans for the next phase of growth, which will involve the sinking of underground shafts and developing underground mines. The plan includes developing a 3.75mtpa underground mine at Rampura Agucha and expanding the Sindesar Khurd mine from 2.0mtpa to 3.75mtpa. Other mines will also be expanded: capacity at the Zawar mines will expand from 1.2mtpa to 5.0mtpa, the Rajpura Dariba mine from 0.9mtpa to 1.2mtpa and the Kayad mine from 0.35mtpa to 1.0mtpa. It will also involve the opening up of a small new mine at Bamnia Kalan in the Rajpura Dariba belt.

The growth plan will increase mined metal production capacity to 1.2mtpa MIC. These mines will be developed using best-in-class technology and equipment, ensuring the highest level of productivity. The projects will be completed in six years and the benefit of these growth projects will start flowing in from the third year, even though project activities will continue until FY 2018-19. Annual capital expenditure for these projects will average US$250-US$300 million over the next six years (totalling approximately US$1.5 billion).

The Company's Board has approved HZL's proposal for the next phase of growth to 1.2mtpa MIC.

Exploration

Our exploration success has continued and during the year we added 24.6mt to R&R, prior to depletion of 8.6mt. With a total R&R of 348.3mt containing 35.1mt of zinc lead and 910moz of silver as at 31 March 2013, we have maintained our leading position with over 25 years of remaining mine life.

We have a strong track record of low cost exploration and have increased R&R five times, net of depletion, since2003.

Outlook

Mined metal production in FY 2013-14 is expected to be close to 1mt, 15.0% higher than FY 2012-13. We expect commercial production to commence at the Rampura Agucha underground mine and the Kayad mine during the current financial year and normal operations at the Zawar mine will also contribute to increased mined metal production. In addition, we expect to produce around 11.2moz of integrated saleable silver in FY 2013-14. During the current year, we expect mined metal and refined metal capacities to be nearly balanced.

Zinc-Lead-Silver - Zinc International

Production Performance

Key Achievements

n Stable operating and improved cost performance despite fall in grades and volume

n Production volumes in line with mine plan

Strategic Priorities

n Feasibility study of Gamsberg & Swartberg projects underway

n Feasibility study for Refinery Conversion Project being investigated to co-treat sulphide opportunity in Namibia

n Focus on increasing the mine life of all assets though in pit and near pit drilling & exploration continues

Operations

Total production of zinc and lead MIC and zinc refined metal was 426,000 tonnes, which comprised 280,000 tonnes of zinc and lead MIC at the Lisheen and Black Mountain Mine (BMM), and 145,000 tonnes of refined zinc at the Skorpion mine. This compared with production of 444,000 tonnes in the previous financial year.

Unit Costs

The unit cost of production reduced in FY2012-13 to US$ 1,092 per tonne from US$ 1,146 per tonne in FY2011-12, primarily due to operational efficiencies and favourable currency movements.

Financial Performance

(in US$ million, except as stated)

EBITDA for the FY 2012-13 was US$294.5 million and operating profit was US$110.6 million. Operating profit fell due to lower zinc and lead prices, and lower volume, mainly from the Lisheen mine partially offset by lower cost of production (CoP).

Outlook

In FY 2013-14, production at Zinc-International is expected to be impacted by a fall in grade and progressive reduction in production at the Lisheen mine, which will lead to lower production volumes at around 390-400kt for FY 2013-14. During the current year we plan to complete the feasibility study for the Gamsberg/Swartberg and Refinery Co-treatment projects.

OIL & GAS

Production Performance

* Data from 8th Dec 2011 till 31st March 2012, ** FY 2011-12 data are for Full Year

Key Achievements

n Record full year gross production up by 18.8%, driven by 32.1% higher output at the Rajasthan block

n Commenced production from Aishwariya field and gas sales from the Rajasthan block

n Re-commenced exploration drilling in the Rajasthan block and made the 26thdiscovery in the block

n Infill drilling campaign in the CB/OS-2 block completed successfully; resulting in doubling the production potential

n Farmed-in to the PetroSA"Block1" in the Orange Basin, offshore South Africa, with 60% interest and operatorship

Strategic Priorities

Rajasthan:

n Achieve production rate of 200 - 215,000 bopd

n Test ~50% of Prospective Resources volumes

n Leverage Gas Sales Potential

Other Blocks:

n Appraise KG-ONN-2003/1 block potential

n Ravva: Drill "high risk, high value" prospect

n Commence exploration operations in offshore assets KG-OSN-2009/3, PR-OSN-2004/1 and MB-DWN-2009/1

n Sri Lanka: Evaluate options to monetize discovered gas resource

n South Africa: 3D survey acquisition to be completed within Q1 FY 2013-14 operations

Operations

Gross production during the year was 205,323 boepd 18.8% higher than the corresponding period last year. The increase was primarily due to a 32% increase in production at the Rajasthan block The Rajasthan block is currently producing oil from five of its oil fields, specifically; Mangala Aishwariya, Saraswati, Raageshwari and Bhagyam. Current production is~175,000 bopd. In addition, we commenced commercial sales of gas. Production at the Aishwariya field started in March 2013 and reservoir performance has been in line with expectations. The field is expected to ramp up to 10,000 bopd in coming months as additional wells are drilled and completed.

Resource Base

Following the GoI clarification on conducting exploration activities in development areas, Cairn India spudded its first exploration well Raageshwari-South-1 in the southern part of the Rajasthan block. This resulted in an oil discovery which is the 26th discovery made in the block so far. The volumes of oil in place and the potential resource base associated with this discovery are under evaluation.

The Company plans to undertake an aggressive exploration and appraisal (E&A) drilling programme in the block with 100 wells planned in a three year period. These wells target gross recoverable risked prospective resources of 530 mmboe.

Efforts to monetise 20 other discoveries (including Barmer Hill) in the block are ongoing. Development Plans have also been submitted for two other satellite discoveries in the block: NI field and NE field.

Post the Mangala enhanced oil recovery (EOR) polymer pilot, a field development plan (FDP) for a full field application has been submitted to the Joint Venture Partner (JV). The JV partner is technically aligned to the application of EOR in the field and expected to start in FY 2014-15.

Financial Performance

(in US$ million, except as stated)

* Data from 8th Dec 2011 till 31st March 2012

EBITDA during the year was US$2,439.7 million mainly due to increased production from the Rajasthan block. Operating profit for the period was US$1,004.8 million.

The Rajasthan field direct operating expenses including transportation was US$ 3.2/bbl for the year.

Under the petroleum profit regulations, Cairn India shares its oil profits with the GoI after recovering its share of costs as per the terms of a production sharing contract. The petroleum profit is paid on a quarterly basis to the Government of India

The profit petroleum of the Rajasthan block (net to the company) was US$ 518 million during the year.

Exploration

After a long hiatus, the GoI provided policy clarity to allow exploration activity in development blocks and this enabled Cairn India to move quickly to unlock the full potential of the Rajasthan Block. Cairn India immediately embarked on an intensive exploration programme which met with its first success - the 26th discovery in the block, which further reaffirmed that this world class block has significant untapped potential. During the year, in addition to our renewed exploration efforts in Rajasthan, our focus was on increased exploration activity across the asset portfolio to harness the remaining potential of producing blocks, including Ravva and CB/OS-2 and other exploration acreages.

In Sri Lanka, data from both exploration phases is being evaluated and integrated to fully understand the block's future potential as options are being evaluated to monetize the discovered gas resource.

In the Orange Basin in South Africa, following an assignment of 60% operating interest in 'Block 1', exploration operations have commenced.

Outlook

With the Rajasthan Block current production is at ~170,000 bopd, FY2013-14 exit production rate is expected at hit 200,000-215,000 bopd. The Aishwariya field is expected to ramp up to the approved FDP rate of 10,000 bopd over the next few months and the Bhagyam field is expected to ramp up to the approved FDP rate of 40,000 bopd in H2 FY2013-14.

IRON ORE

Production Performance

Key Achievements

n Acquired remaining 49% shares of Western Cluster Limited (WCL) Liberia

n Net addition of 59mt R&R in Indian operations

n Karnataka mining cleared by the Supreme Court

n Drilling confirmed certified R&R of 966mt at Liberia

Strategic Priorities

n Resume mining at Karnataka and Goa

n Phased development of Liberia mining project

n Continue to add reserve and resources by active exploration in existing areas

Operations

Iron ore operations were affected by the suspension of mining in Goa and Karnataka. On 18 April 2013, the Honourable Supreme Court of India gave clearance for the resumption of mining operations for A and B category mines in Karnataka, subject to statutory clearances. Sesa Goa's Karnataka mine falls under B category, and is awaiting statutory clearances, including forest clearance which expired in October 2012, to resume mining. We expect to commence mining in Q1 FY 2013-14.

Regarding the suspension of mining in Goa from September 2012, the date for the initial hearing is yet to be fixed by the Honourable Supreme Court of India. In the meantime, the State Government and major miners, including Sesa Goa, have filed their responses to the Central Empowered Committee report. Separately, we have filed an application to the Supreme Court seeking a stay on the suspension of mining and restrictions on ore transportation.

The production of pig iron and metallurgical coke was significantly higher by 24% and 10% to 308,000 tonnes and 275,000 tonnes, respectively. The increase is primarily due to the commissioning of new pig iron capacity and the associated metallurgical coke capacity in Q2 FY 2012-13.

Financial Performance

(in US$ million, except as stated)

EBITDA in FY 2011-13 was lower at US$84.2 million compared with US$721.4 million in the previous year. Lower EBITDA was mainly due to the continued Karnataka mining ban as well as the Sesa Goa mining ban imposed in September 2012. Operating profit was lower at US$(4.0) million in FY 2012-13compared with US$481.3 million in FY 2011-12, reflecting the fall in EBITDA.

Exploration

The Company's focus on exploration activities has yielded significant R&R accretion in Goa and Karnataka, with a net addition of 59mt of reserves and resources during the year taking the total R&R to 433mtin India as compared with 374mt as at 31 March 2012, implying 20+ years' mine life.

 100% acquisition of WCL, Liberia

During the year, Sesa Goa acquired the remaining 49% of the outstanding common shares of WCL for a cash consideration of US$ 33.5 million, taking the equity interest in the project to 100%.

At our Liberia iron ore project, exploration activities are progressing well with ~69,000 meters of drilling completed up to 31 March 2013 including 54,000 meters in Bomi. The maiden R&R confirmation as per the Joint Ore Reserves Committee (JORC) at Liberia stand at 966mtas on 31 March 2013 with a significant upside going forward.

We plan to develop he project in phases with a target capacity of ~30 mtpa. We remain committed to our first shipment target by end of FY2013-14, while continuing to work on the initial phase of 2 mtpa which envisaged to be completed by end of CY 2014. In the first phase, the saleable ore will be transported to the Monrovia port by road. 

The R&R position in India and Liberia has been independently reviewed and certified as per the JORC standard.

Outlook

We expect to resume operations at Karnataka in next few months and we are hopeful that the Goa mining ban will be resolved by the intervention of the Honourable Supreme Court.

COPPER - INDIA/AUSTRALIA

Production Performance

Key Achievements

n Record copper cathode production

n Strong operating performance at Copper India

n Commissioned first 80MW unit of the 160 MW captive power plant at Tuticorin in Q3 FY 2013

n Increased mined metal volumes in Australian copper mine

n R&R increased to 8.9mtat Australia mine with mine life around four years

Strategic Priorities

n To resume Indian operations (currently under closure as per the order of the Tamil Nadu Pollution Control Board (TNPCB)

n Sustain efficiency of cost leadership at copper smelting operations

n Commissioning of second unit captive power plant

Operations

Production of cathodes at our Copper India business was 353kt in FY2012-13, up 8.4% year on year. Mined metal production in our Australian mines also improved at 26kt in FY2012-13.

Unit Costs

CoP increased from 0.0 US cents per/lb to 8.7 US cents per/lb, mainly due to significantly lower by-product credits and higher power and petroleum costs.

In FY 2012-13, the unit cost of production at our Australian operations, including treatment and refining charges (TC/RCs) and freight, was 220 US cents per lb down from 233 US cents per lb in FY 2011-12.

Financial Performance

(in US$ million, except as stated)

EBITDA for FY 2012-13 was US$219.1 million compared with US$298.0 million in the previous year. This decrease was primarily due to an increase in CoP, partially offset by positive currency movement resulting from the depreciation of the Indian rupee and EBITDA from the power plant. TC/RCs received in FY 2012-13 were also lower by 12% at 12.8 US cents per lb compared with 14.5 US cents per lb in FY 2011-12. Operating profit was US$157.5 million in FY 2012-13 as compared with US$164.0 million in FY 2011-12.

Tuticorin Copper Smelter Update

Following a few public complaints against emissions, the TNPCB ordered closure of the Tuticorin Copper Smelter on March 29, 2013. The Company's appeal against the TNPCB order has been admitted by National Green Tribunal (NGT). An expert committee constituted by NGT has submitted its report and the matter is now being heard by NGT.

Separately, on 2 April 2013, the Honourable Supreme Court has upheld our appeal filed in 2010 against the Madras High Court order for smelter closure and ordered us to deposit US$ 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. Over the two year court process, regulatory bodies had inspected and confirmed that the plant meets the required standards. Some recommendations for improvements had been proposed during inspection, all of which had been implemented.

Projects

160 MW captive power plant

The first 80MW unit of the captive power plant was commissioned during the year and operating near to full capacity. The second unit is expected to be commissioned duringQ1 FY 2013-14.

400 ktpa copper smelter

The project is under hold and awaiting consent to establish from TNPCB.

Outlook

Due to the bi-annual shutdown planned in FY 2013-14 and the recent closure, we anticipate that production will be lower as compared to FY 2012-13. This will also depend on the commencement of operations after the current suspension. Sale of surplus power will augment the financial performance.

COPPER - ZAMBIA

Production Performance

Key Achievements

n Integrated production up by 15.5% at 160kt

n Mined metal production increased by 12.0%

n Added 78mt on net basis to R&R

Strategic Priorities

n Unlock volume growth potential

n Realise cost efficiency driven by volume growth and other measures

n Ramp up mine development at Konkola to realise its ore production potential

n Start production in the Nchanga Upper Ore Body mine

Operations

Integrated copper production was 15.5% higher at 160kt for the financial year. Total copper cathode production was higher by 8% at 216kt for the full year. The increase was driven by production ramp-up at the Konkola mine, following the development of dewatered reserves using the Konkola Deep Mining Project (KDMP) infrastructure, and by higher primary copper production at the Nchanga Tailings Leach Plant (TLP).

Mined metal production for the financial year was 159kt, up by 12.0%. This was lower than our internal estimates due to a temporary suspension of mining at the Chingola Open Pit (COP F&D), due to non renewal of third party mining contract.

Unit Costs

The unit cost of production was increased at 255.1 US cents per lb in FY 2012-13, up 7.7% compared with FY 2011-12. The cost increased due to higher stripping ratios, lower ore production at the Nchanga open pit, and the impact of changes in wages and currency regulations.

Financial Performance

(in US$ million, except as stated)

EBITDA in FY 2012-13 was US$257.3 million compared with US$387.9 million in the previous year, impacted by lower metal prices and increases in the cost of production, partially offset by increased volume.

Projects

The new 3mtpa Nchanga West Concentrator was commissioned during the year and at KDMP, the bottom shaft loading was also completed in FY 2012-13, ahead of schedule.

Exploration

The Konkola Copper Mine (KCM) has substantially increased its R&R during FY 2012-13 following the completion of a revised life of mine plan for the Konkola mine and continued success in its exploration program. During the year the Company added, on a net basis, 78mt to its R&R. This increase in R&R has contributed 20% increase in contained copper compared to March 2012, with an overall mine life over 30 years.

Outlook

We expect to deliver about 180kt-190kt integrated production in FY 2013-14 at a cost of around 240 US cents per lb in H1 FY 2013-14 and 200 US cents per lb in H2 FY 2013-14. In view of the temporary suspension of COP F&D, the Company has drawn up an interim plan for an alternate feed of copper ore to the concentrator. The new concentrator for both the East and West mill would provide flexibility to the Nchanga operation and also improve recoveries and output. We expect improved mine output from the Konkola mine.

ALUMINIUM

Production Performance

Key Achievements

n Record Aluminium production of 774kt

n Both BALCO and Jharsuguda smelter operated above rated capacity

n Considerable improvement in operational efficiencies

n Maintained second quartile cost position

n 12.3% increase in value added product volumes from 404kt to 453kt

Strategic Priorities

n Expedite development of captive coal block at BALCO

n Secure captive bauxite mine and realise true cost efficiency potential

n Start-up of Lanjigarh 1.0 mtpa refinery

n Complete ongoing expansion project

Operations

Production of aluminium in FY 2012-13 was 774kt tonnes, an increase of 14.7% compared with the previous year. This was primarily attributable to the 22.6% increase in production to 527kt from the Jharsuguda 500ktpa aluminium smelter. The Jharsuguda-I operated above the rated capacity, with significant improvement in specific power consumption, throughput and other operational parameters.

Operations at the Korba smelter were stable and it continued to operate at its rated capacity.

Alumina production at Lanjigarh remains temporarily suspended since 5 December 2012, due to inadequate availability of bauxite. We remain engaged with the Orissa State authorities for allocation of bauxite as per our existing memorandum of understanding (MoU) with the Orissa State Government. A ministerial level committee is looking into the issue of bauxite supply and is expected to submit its report shortly.

The Ministry of Environment and Forests (MOEF) had earlier rejected the application for the final stage forest clearance for the Niyamgiri mining project of Orissa Mining Corporation (OMC) which is one of the sources of supply of bauxite to the alumina refinery of VAL. Following the petition filed by OMC challenging the MOEF decision, the Honourable Supreme Court through its order dated April 18, 2013 has directed the State Government of Orissa to place unresolved issues and claims of the local communities under the Forest Right Act before the Gram Sabha, the council representing the local community. The MOEF through the State Government of Orissa within three months. On conclusion of the proceedings of the Gram Sabha, the MOEF will then take a final decision on granting the stage II forest clearance for the Niyamgiri mining project within two months.

Unit Costs(US$ per tonne)

CoP of hot metal at Jharsuguda decreased to US$1,869 per tonne compared with US$2,188 per tonne in the previous year, reflecting improved operating performance, a decrease in prices of e-auction coal and favourable rupee movement, partly offset by increased carbon and alumina cost. Even without captive bauxite and the reliance on imported alumina, our aluminium operations were ranked in the second quartile of the global cost curve.

Operating costs at the Korba smelter were also lower during the year but higher than Jharsuguda, primarily due to higher coal costs on account of coal tapering from May 2012 and other fixed costs.

Financial Performance

(in US$ million, except as stated)

EBITDA for FY 2012-13 was US$214.0 million improved by 17.3%, as compared to US$182.5 million in FY 2011-12. EBITDA increased due to higher volume and metal premiums with improved operational and cost efficiencies offset by lower metal prices which dropped significantly by 14.7%. We witnessed a substantial rise in aluminium premiums year on year following the shortage of primary metal in the physical market due to capacity cutbacks. The premium on aluminium ingots has increased significantly from US$150 per tonne to US$175 per tonne. Operating profit also increased to US$21.1 million.

Projects

At the 325ktpa Korba-III aluminium smelter, mechanical and electrical completion and pre-commissioning of the first phase of 84 pots out of a total 336 pots have been completed. Further work is in progress, and we plan to tap first metal in Q2 FY2013-14. The smelter plans to initially draw power from the existing 810MW power plants at BALCO. The 1,200MW captive power plant is awaiting final stage regulatory approvals.

Having obtained the Stage-II forest clearance for the 211mt coal block at BALCO, the process for forest land has been initiated by the State Government, and we are in the process of signing the mining lease agreement. We expect to commence mining by the end of Q2 FY2013-14.

We continue to evaluate the potential start-up date of the 1.25mtpa Jharsuguda-II Aluminium smelter.

Outlook

We expect our existing facilities will continue to operate at close to their rated capacities in the coming year. The resultant increased volumes, combined with operational efficiencies and expected higher proportion of value added products should provide improved returns.

POWER

Production Performance

Key Achievements

n Record sales of 8,888 million units, up 35.8% from the previous year

n Strong cost performance, lower cost of generation

Strategic Priorities

n Enhance power sales and transmission strategy

n Stabilisation of the fourth unit at Sterlite Energy Limited & improved Plant Load Factor

n Improve coal sourcing

n Complete 1,980MW Talwandi Sabo power project

Operations

Power sales were 8,888 million units during FY 2012-13, compared with 6,544 million units during the previous year. This increase was primarily due to higher power generation and sales from three units of the Jharsuguda 2,400MW power plant.

The plant load factor (PLF) of the three operating units in the year was 47%. Overall the station delivered an effective PLF of 40% taking into account all four units. The fourth unit was commissioned on 31 March 2013. PLF was lower than capacity as distribution limits were imposed after the grid failures in August 2012 and there were also power transmission bottlenecks.

The PLF trend accelerated in Q4 FY 2012-13 and was at 58% for three units and 44% for the station as a whole. The increase in PLF was driven by the commissioning of the new shared 1,000MW Raipur-Wardha transmission line in January 2013, and partial easing of the transmission restrictions.

Unit Costs

Average power generation costs in FY 2012-13 were US cents 4.0 per unit compared with US cents 5.5 per unit in FY 2011-12, primarily driven by reduced e-auction coal cost and higher usage of linkage coal, plant stabilisation and rupee depreciation translating to lower costs in US dollar terms. Average power sales prices were lower in FY 2012-13 at US cents 6.6 per unit compared with US cents 7.5 per unit in FY 2011-12.

Financial Performance

(US$ million, except as stated)

EBITDA in FY 2012-13 was US$215.0 million, higher than the EBITDA of US$122.0 million delivered in FY 2011-12. EBITDA rose primarily due to higher volumes and lower generation costs, partially offset by a fall in power tariffs.

Projects

Talwandi Sabo IPP

Work at the Talwandi Sabo power project is progressing well and the first unit is expected to be synchronized in Q2 FY2014 and each subsequent unit at four monthly intervals.

Outlook

We expect 60-70% PLF for all four units at Sterlite Energy Limited in the near future with further easing of transmission constraints.

Overall Outlook

As the world economy returns to growth, a number of factors will continue to drive demand for commodities including positive signs from China, inflation falling in India and rising income and increased prosperity in developing countries with associated industrialisation and urbanisation. With its proximity to emerging markets and strong low cost assets, Vedanta is well placed to take advantage of these opportunities. Our disciplined approach to capital allocation will ensure that we focus our investment in projects that will yield attractive returns and Cairn India and the Iron Ore project in Liberia, in particular have significant potential for future growth that meet these criteria. We shortly hope to receive the final approvals on the Group simplification initiatives, unlocking value for our shareholders.

CONSOLIDATED INCOME STATEMENT

 (US$ million except as stated)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(US$ million except as stated)

CONSOLIDATED BALANCE SHEET

 (US$ million except as stated)

* The previous year balance sheet has been restated to give effect to the fair value adjustments to provisional fair values and business combination accounting relating to the acquisition of Cairn India Limited during the year ended 31 March 2012. The change in fair valuation is due to the retrospective application of a decrease in the tax rate applied in the deferred tax calculation following the approval for the reorganization of Cairn India.

Financial Statements of Vedanta Resources plc, registration number 4740415 were approved by the Board on 15 May 2013

MS Mehta - Director

CONSOLIDATED CASH FLOW STATEMENT

(US$ million except as stated)

* Year ended 31 March 2012 includes cash paid for acquisition of US$8,683.2 million and cash acquired on acquisition of US$665.8 million.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(US$ million)

 (US$ million)

(1)OTHER RESERVES COMPRISE:

(US$ million)

2 Under Indian law, a general reserve is created through an annual transfer of net income to general reserves at a specified percentage in accordance with applicable regulations. The purpose of these transfers is to ensure that the total dividend distribution is less than the total distributable results for that year. Transfer to General reserves also includes US$5.5 million of debenture redemption reserve.

3 In December 2012, the Group acquired remaining 49% stake in Western Cluster Limited ('WCL') at a consideration of US$33.5 million. This resulted in increase in Group's stake in WCL from 51% to 100%. The increase has been accounted in the financial statements as an equity transaction. The carrying amount of the non-controlling interest has been adjusted to reflect the change in Group's interest in the Net assets of WCL.

4 During the year ended 31 March 2012, the shareholding in Lakomasko BV, a Group company and 100% subsidiary of the Company was transferred to THL Zinc Holdings BV, a Group company and 58.02% subsidiary of the Company as on 31 March 2012. The carrying amount of non-controlling interest has been adjusted to reflect the change, with US$22.2 million being recycled from Investment revaluation reserve.

5 The merger reserve arose on incorporation of the Company during the year ended 31 March 2004. The investment in Twin Star had a carrying amount value of US$20.0 million in the accounts of Volcan. As required by the Companies act 1985, Section 132, upon issue of 156,000,000 Ordinary shares to Volcan, Twin Star's issued share capital and share premium account have been eliminated and a merger reserve of US$4.4 million arose, being the difference between the carrying value of the investment in Twin Star in Volcan's accounts and the nominal value of the shares issued to Volcan.

NOTES TO PRELIMINARY ANNOUNCEMENT

1. General information and accounting policies

This preliminary results announcement is for the year ended 31 March 2013. While the financial information contained in this preliminary results announcement has been computed in accordance with International Financial Reporting Standards ("IFRS"), this announcement does not itself contain sufficient information to comply with IFRS. For these purposes, IFRS comprise the Standards issued by the International Accounting Standards Board ("IASB") and Interpretations issued by the IFRS Interpretations Committee (formerly known as the International Financial Reporting Interpretations Committee)("IFRIC") that have been endorsed by the European Union. The financial information contained in the preliminary announcement has been prepared on the same basis of accounting policies as set out in the previous financial statements.

Going Concern:

The Group requires funds both for short-term operational needs as well as for long-term investment programmes mainly in growth projects. The Group generates sufficient cash flows from its current operations which, together with the available cash and cash equivalents and liquid financial asset investments, provide liquidity both in the short term as well as in the long-term. Anticipated future cash flows and undrawn committed facilities of US$2,144 million, together with cash and liquid investments of US$7,982 million as at 31 March 2013, are expected to be sufficient to meet the ongoing capital investment programme and liquidity requirement of the Group in the foreseeable future.

The Group has a strong Balance Sheet that gives sufficient headroom to raise further debt should the need arise. The Group's current ratings from Standard & Poor's, Moody's and Fitch are BB, Ba1 and BB+ respectively. These ratings support the necessary financial leverage and access to debt or equity markets at competitive terms, taking into consideration current market conditions. The Group generally maintains a healthy gearing ratio and retains flexibility in the financing structure to alter the ratio when the need arises. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

2. Compliance with applicable law and IFRS

The financial information contained in this preliminary results announcement has been prepared on the going concern basis. This preliminary results announcement does not constitute the Group's statutory accounts as defined in section 434 of the Companies Act 2006(the "Act") but is derived from those accounts. The statutory accounts for the year ended 31 March 2013 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held on 1 August 2013. The auditors have reported on those accounts and their report was unqualified, with no matters by way of emphasis, and did not contain statements under section 498(2) of the Act(regarding adequacy of accounting records and returns) or under section 498(3) (regarding provision of necessary information and explanations).

The information contained in this announcement for the year ended 31 March 2013 also does not constitute statutory accounts. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, with no matters by way of emphasis, and did not contain statements under sections 498(2) or (3) of the Companies Act 2006.

3. Critical accounting judgement and estimation uncertainty

Assessment of impairment at Lanjigarh Refinery

As set out in the risks and uncertainties of this Preliminary Announcement, the planned operations of existing refinery is dependent on securing low cost bauxite resources from surrounding areas . Due to paucity of bauxite, the Vedanta Aluminium Limited ("VAL") has temporarily suspended its refinery operations at Lanjigarh from 5 December, 2012.The refinery expansion project is subject to receipt of certain regulatory approvals.

In view of the temporary suspension of operations and change in the legal status for Lanjigarh refinery, it has been assessed that there is no impairment of the Lanjigarh Refinery and the Refinery expansion project on March 31, 2013 based on the assumptions set out below and that the Value in use ("VIU") exceeds the carrying value of the assets.

n The State of Orissa has abundant bauxite resources and under the terms of the MOU with the Government of Orissa, management is confident that bauxite will be made available in the short to medium term.

n The State of Orissa has taken certain measures including reservation of areas for mining operations or undertaking prospecting and constitution of Ministerial Committee for formulation of policy for supply of ores to Orissa based industries on long term basis.

n On the continued operations and planned refinery expansion, management is confident that the conditions for construction of the alumina refinery will be fulfilled and expects the approval in due course.

The Ministry of Environment and Forests ("MOEF") rejected issue of final stage forest clearance for Niyamgiri Mining lease of Orissa Mining Corporation ("OMC") which is one of the sources of supply of bauxite to the alumina refinery of VAL. The Hon'ble Supreme Court vide its order dated 18 April 2013 has directed the State Government of Odisha to place unresolved issues and claims of the local communities under the Forest Right Act and rules before the Gram Sabha (Village council of Rayagada and Kalahandi districts of Odisha). The Gram Sabha would consider these claims within three months and communicate the same to MOEF through the State Government of Odisha. On conclusion of the proceedings before the Gram Sabha, the MOEF shall take a final decision for grant of final stage forest clearance for the Niyamgiri mining lease of OMC within two months thereafter.

The Group is also considering sourcing bauxite from alternate sources to support the existing and expanded refinery operations.

Management expects that the mining approvals for mining and the statutory approvals for the expansion project would be received as per the timelines mentioned below :

Activity Expected Date

Restart of the existing plant July 13

Approval for Refinery expansion January 2014 with project to commence from October 2014

Mining operations at Niyamgiri Mining approval by September 2013 with production expected to commence in September 2015.

However, the above timelines are not in control of the Company. Should one or more of this assumption not be borne out, a reassessment of the carrying value of refinery would need to be made. The carrying value of assets as at 31 March 2013 is US$1,423.6 million.

Assessment of impairment at Tuticorin

Following a few public complaints of emission, Tamil Nadu Pollution Control Board (TNPCB) ordered closure of the Tuticorin Copper Smelter on 29 March, 2013. The Company's appeal against the TNPCB order has been admitted by National Green Tribunal ("NGT"). An expert committee constituted by NGT has submitted its report and the matter is now being heard by NGT.

Separately, on 2 April 2013, the Honourable Supreme Court has upheld our appeal filed in 2010 against the Madras High Court order for smelter closure and ordered us to deposit US$18.4 million with the District Collector, Tuticorin, which will be used to improve the environment, including soil and water, in the vicinity of the plant. Over the two year court process, regulatory bodies had inspected and confirmed that the plant meets the required standards. Some recommendations for improvements had been proposed during inspection, all of which had been implemented.

Management is certain that the Tuticorin Smelter have been operating for the last 17 years with requisite approvals and consents issued by regulatory authorities. The plant adheres to the highest standards of environment, health and safety practices, benchmarked to international standards and all operating parameters are within the permissible range. Management is confident that the unit will be permitted to continue operations and accordingly concluded that no impairment of the asset is required. The carrying value of assets as at 31 March 2013 is US$214.2 million.

Assessment of impairment of Karnataka and Goa mines at Sesa Goa

Karnataka Mining

From July 2011 a mining ban was imposed in various parts of the state of Karnataka thereby affecting the Narrain mine owned and operated by Sesa Goa which has a carrying cost of US$296.0 million.

Since the time of the ban the Central Empowered Committee appointed to submit its report in respect of illegal mining has recommended that operations only recommence after reclamation and rehabilitation works are undertaken by the company

Sesa's Karnataka mines, which fall under category B mines, have been permitted to resume mining activities by Supreme Court of India on 19 April 2013 subject to fulfilment of conditions. These conditions are the renewal of forest clearance and completion of reclamation and rehabilitation work to the satisfaction of a Monitoring Committee.

Having substantially complied with all laid down conditions; Sesa is expecting to start mining activities in the next few months.

Goa Mining

Iron Ore mining in Goa has been suspended state wide with effect from 11 September 2012 for which an appeal with Honourable Supreme Court is pending. The Honourable Supreme Court is expected to fix the dates for initial hearings. In the meantime, the State Government and major miners, including Sesa Goa, have filed their responses to the Central Empowered Committee report. Separately, the Group has filed an application to the Court seeking a stay on the mining ban and restrictions on ore transportation. The carrying value of assets affected as at31 March 2013 is US$799.0 million.

4. Segment information

The Group's primary format for segmental reporting is based on its business segments. The business segments consist of zinc, iron ore, copper, aluminium, power and oil and gas with components not meeting the quantitative threshold for reporting being reported as "Others". Business segment financial data includes certain corporate costs, which have been allocated on an appropriate basis. The risks and returns of the Group's operations are primarily determined by the nature of the different activities in which the Group is engaged. Inter-segment sales are charged based on prevailing market prices. The Group's activities are organised on a global basis.

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

n Zinc- India

n Zinc-International

n Oil and gas

n Iron Ore

n Copper-India/Australia

n Copper-Zambia

n Aluminium

n Power

Management monitors the operating results of reportable segments for the purpose of making decisions about resources to be allocated and for assessing performance. Segment performance is evaluated based on the EBITDA of each segment.

(a) Reportable segments

The following tables present revenue and profit information and certain asset and liability information regarding the Group's reportable segments for the years ended 31 March 2013 and 2012

Year ended 31 March 2013

(US$ million)