Directors’ report · · 2013-01-29Directors’ report To the members, ... convertible bonds...

Directors’ report

To the members,

The Directors take immense pleasure in presenting the 31st Annual Report together with the statement of

audited accounts for the financial year ended on 31 March 2006.

Standalone results (Rs.in crore)

Year ended 31 March 2006 2005

Turnover (Gross) 7,923.10 4,279.05

Profit before interest, tax, depreciation and amortisation 927.36 447.53

Less: Interest 120.37 102.66

Gross profit 806.99 344.87

Less: Depreciation and amortisation 128.23 114.06

Extra-ordinary items – 144.43

Profit before tax 678.76 86.38

Taxation 167.64 (20.04)

Net profit for the year 511.12 106.42

Income tax provision related to earlier years (written back) / provided (4.08) –

Add: Balance brought forward from previous year 587.21 548.65

Amount available for appropriation 1,102.41 655.07

Appropriation:

General reserve 52.00 30.00

Dividend on preference shares (including tax thereon) 0.25 0.25

Proposed dividend on equity shares (including corporate tax thereon) 79.63 37.55

Short provision of dividend of earlier year 0.05 –

Short provision for tax on dividend 0.01 0.06

Balance carried forward to next year 970.47 587.21

Standalone results

Financial review

Share capital

Finance

Dividend

Operational overview

Recognition

Group structure

Depository system

Directors

Directors’ responsibilitystatement

Auditors

Auditors’ qualificationon accounts

Particulars ofconservation of energytechnology absorptionand foreign exchangeearnings and outgo

Particulars ofemployees

Accounts of subsidiarycompanies

Acknowledgements

Annexure I

Form A

32 Directors’ Report Sterlite Annual Report 2005-06

Sterlite AW 1-68 19/08/2006 9:54 PM Page 32

33Directors’ Report Sterlite Annual Report 2005-06

Financial reviewYour company reported a record performance

during the year under review:

Gross turnover increased 85% from Rs. 4,279

crore in 2004-05 to Rs. 7,923 crore in 2005-06

PBIDTA increased 107% from Rs. 448 crore in

2004-05 to Rs. 927 crore in 2005-06

Net profit increased 380% from Rs. 106 crore to

Rs. 511 crore.

This attractive increase in revenues is primarily

attributed to the following reasons:

58% increase in copper sales from 1,71,860

tonnes in 2004-05 to 2,71,624 tonnes in 2005-06

54% increase in phosphoric acid sales from

1,09,243 tonnes in 2004-05 to 1,68,317 tonnes

in 2005-06

Higher and better TC/RC realisations

Enhanced TC/RC along with growth in volumes due

to faster ramp up of expansions contributed to

improved smelter performance. TC/RC realisations

increased substantially from 8.6 cents/lb in 2004-

05 to 23.1 cents/lb. There was a pressure on

operating costs due to a steep increase in the cost

of fuel and input chemicals and consumables,

which was more than offset by higher prices and

volumes leading to a better PBIDTA for 2006.

Share capitalSub-division and bonus issue: The Board at its

meeting held on 10 February 2006 approved the

sub-division of equity shares from Rs. 5 per share to

Rs. 2 per share and subsequent issue of bonus

shares in the ratio of 1:1 (one fully paid bonus share

of Rs. 2 each for every fully paid equity share of Rs.

2 each held by the members). The members’

approval was obtained through postal ballot held

on 29 March 2006.

Increase in the authorised share capital: As a

result of the subdivision of shares and the

subsequent issue of bonus shares, your company’s

authorised share capital of Rs. 90 crore (comprising

12,00,00,000 equity shares of Rs. 5 each

aggregating to Rs. 60 crore and 30,000,000

preference shares of Rs. 10 each aggregating to Rs.

30 crore) increased to Rs. 150 crore (comprising

60,00,00,000 equity shares of Rs. 2 each

aggregating to Rs. 120 crore and 30,000,000

preference shares of Rs. 10 each aggregating to Rs.

30 crore). Consequently the memorandum and

articles of association of the company were altered

for the respective clauses to reflect the above

amendments.

Pursuant to the members’ approval, at the

Committee of Directors meeting held on 7 April

2006 to determine the shareholders who would be

entitled for the sub-division of equity shares of Rs.



2 each and issuance of bonus shares in the ratio of

1:1, Friday, 12 May 2006 was fixed as the record

date.

Foreign currency convertible bonds (FCCBs): In

October 2003, your company issued 1% foreign

currency convertible bonds (FCCB) aggregating to

US$ 50 mn. The holders of foreign currency

convertible bonds have an option to convert the

bonds into equity shares of the company.

As of 31 March 2006, your company allotted

40,99,400 equity shares of Rs. 2 each pursuant to

the conversion of 50,000 FCCBs. As a result, there

were no outstanding FCCBs as on 31 March 2006..

FinanceThe long-term loan of US$ 25 million taken from

UBI was repaid during the year. Your company

refinanced its secured floating rate notes to the

extent of US$ 50 million through unsecured

External Commercial Borrowings yielding lower

spreads compared with the original borrowing.

There were no fresh major long-term borrowings

during the year. Despite an increasing interest rate

scenario within India and globally, the interest cost

of the company was controlled through a judicious

mix of rupee and short term foreign currency

borrowings. Your company continued to enjoy

CRISIL’s highest rating of P1+ for its short-term

borrowings and AA rating for its long-term

borrowings.

DividendThe Board of Directors recommended an equity

dividend of Rs.1.25 per share of Rs. 2 each on an

increased share capital following the allotment of

bonus shares. The dividend outflow aggregated to

Rs. 80 crore compared to Rs. 38 crore (including

dividend tax) for the previous year.Your company

paid a dividend on 2,18,75,000 1% cumulative

redeemable preference shares of Rs. 10 each for

2005-06.

Operational overview2006 was a landmark year for your company. Your

company completed major expansions like 1,20,000

tpa of copper smelting, 1,20,000 tpa of copper

refinery and 90,000 tpa of the copper rod plant,

following which its annual smelting capacity

increased to 3,00,000 tonnes.

We produced 2,73,048 tonnes of cathodes, an

increase of 59% over the previous year. From these

1,66,497 tonnes of copper rods were produced, an

increase of 33% over the previous year. There was a

focus on increasing the production of value-added

copper rods, which was 61% of the total

production during 2005-06. As planned, a

maintenance shut down of the Tuticorin smelter for

21 days was completed in April 2006 following

which the smelter was re-commissioned. The

production of phosphoric acid increased by 64%

from 1,04,902 tonnes to 1,71,893 tonnes and of

sulphuric acid by 54 % from 5,46,647 tonnes to

8,44,376 tonnes during 2005-06.

During the year under review your company

consolidated its leadership position within India

Sterlite AW 1-68 19/08/2006 9:54 PM 4


with record 1,06,279 tonnes sales of copper with a

market share of 26%. Your company exported

1,65,354 tonnes of copper (previous year 89,296

tonnes), a growth of 85%. Exports included 79,350

tonnes of copper rods against 56,061 tonnes in the

previous year. The Middle East, China, Japan,

Philippines and Thailand were the key export

markets and we continue to develop a larger

customer base for the export of copper rods.

RecognitionYour company’s pursuit of excellence in the areas

of operations, safety, environment, energy

conservation, research and development, human

resources as well as community social responsibility

was widely recognised, which included the

following

National Award for Excellence in Energy

Management for 2005 from the Confederation

of Indian Industries (CII)

Tamil Nadu Cultural Academy Social Service

Award for exemplary social service in Tuticorin

district in 2005

Award by Tuticorin Port Trust for excellent traffic

performance during 2004-05

Awarded Best Corporate Blood Donor in the

District of Tuticorin by the Tuticorin Blood

Donors Club in association with the Tamil Nadu

Voluntary Health Association

Ranked third in Human Resources Metrics in the

Best Companies to Work For in India 2005 in a

Business Today study

The Chinchpada unit upgraded from ISO 14001:

1996 to ISO 14001:2004 standards’ the unit was

also certified for ISO 9001: 2000 and OHSAS

18001: 1999

The Chinchpada laboratory was accredited to

NABL (National Accreditation Board for

Calibration and Testing Laboratories)

Qualtech Prize 2005 to the Silvassa unit for

manufacturing improvements reflected in the

reduction in de-tellurisation batch time by

Quimpro, Mumbai.

Group structureThe Agarwal Group, being a group defined under

the Monopolies and Restrictive Trade Practices Act,

1969, controls the company. A list of its group

entities is given below:

Volcan Investments Limited, Bahamas

Twinstar Holdings Limited, Mauritius

Vedanta Resources plc, United Kingdom

Vedanta Resources Holdings Limited, United

Kingdom

Mr. Dwarakaprasad Agarwal

Mr. Agnivesh Agarwal

Depository systemTrading of your company’s shares were

compulsorily in a dematerialised mode. As at 31

March 2006 some 35,181,764 (31.49%) equity

shares held by 25,729 (82.28%) shareholders of the

During the yearunder review yourcompanyconsolidated itsleadership positionwithin India withrecord 1,06,279tonnes sales ofcopper with amarket share of26%. The companyexported 1,65,354tonnes of copper



company had been dematerialised. Your company’s

shares were listed with the Bombay Stock Exchange

Limited (BSE) and National Stock Exchange of India

Limited (NSE). Both the exchanges provided

facilities for the online trading of shares to

investors anywhere across the country.

DirectorsIn accordance with the provisions of the Companies

Act, 1956 and the Articles of Association of the

company, Mr. Dwarkaprasad Agarwal, Mr. Ishwarlal

Patwari and Mr. Berjis Desai retire by rotation at the

ensuing Annual General Meeting and being eligible,

have offered themselves for re-appointment.

Corporate governanceA separate report on corporate governance

pursuant to Clause 49 of the listing agreement with

the stock exchanges, including the management

discussion and analysis, shareholders information

and auditors’ certificate on its compliance, forms a

part of this Annual Report.

Directors’ responsibility statementAs required under Section 217 (2AA) of the

Companies Act, 1956, the Directors hereby confirm

that:

(i) In the preparation of the annual accounts, the

applicable accounting standards have been

followed along with proper explanations regarding

material departures:

(ii) Such accounting policies have been selected and

applied consistently and made judgements and

estimates that are reasonable and prudent so as to

give a true and fair view of the state of affairs of

the company at the end of the financial year and of

the profit of the company for that period.

(iii) Proper and sufficient care for maintenance of

adequate accounting records have been taken in

accordance with the provisions of this Act for

safeguarding the assets of the company and for

preventing and detecting fraud and other

irregularities.

(iv) The accounts are prepared on a going concern

basis.

AuditorsM/s. Chaturvedi & Shah, Chartered Accountants

and M/s. Das and Prasad, Chartered Accountants,

were appointed as statutory auditors of your

company to conduct the audit of accounts for the

year ended 31st March 2006. Their term of

appointment expires at the conclusion of the

forthcoming annual general meeting. Your

Directors have proposed them for reappointment at

the forthcoming AGM.

Auditors’ qualification on accountsNotes to the accounts, as referred in the auditors

report, are self-explanatory and practice

consistently followed and therefore do not call for

any further comments and explanations.



Particulars of conservation ofenergy technology absorption andforeign exchange earnings andoutgoAs required under Clause (e) of Section 217 (1) of

the Companies Act, 1956 and rules made therein,

the particulars of the technology absorption and

foreign exchange earnings and outgo are given in

Annexure 1, which is attached hereto and forms

part of Director’s report.

Particulars of employeesAs required under the provisions of sub section (2A)

of section 217 of the Companies Act, 1956 read

with the Companies (Particulars of Employees)

Rules, 1975 as amended, particulars of employees

are set out in the annexure to the Director’s report.

However, as per provisions of Section 219(1) (b) (iv)

of the Companies Act, 1956, the report and the

accounts are being sent to the all the shareholders

excluding the aforesaid information. Any

shareholder interested in obtaining such particulars

may write to the Company Secretary at the

registered office of the company.

Accounts of subsidiary companiesYour company has obtained the approval under

Section 212(8) of the Companies Act, 1956 for the

year ended 31 March 2006 from Government of

India, Ministry of Company Affairs vide Letter No

47/189/2006-CL-III dated 5 May 2006 for

exemption from printing of accounts and reports of

the subsidiary companies along with its Annual

Report for the year ended 31st March 2006.

Your company is also presenting consolidated

financial statements, in accordance with

Accounting Standards 21 issued by The Institute of

Chartered Accountants of India. The consolidated

financial statements forms part of this Annual

Report.

AcknowledgementsThe Directors acknowledge the contributions made

by the employees towards the success and growth

of your company. The Directors are also thankful

for the co-operation and assistance received from

the government of India, various state

governments and government departments,

financial institutions, banks and local authorities.

The Directors thank the company’s valued and

esteemed customers for their continued patronage.

The Directors would also like to acknowledge the

continued support of the company’s shareholders

in all its endeavours.

For and on behalf of the Board of Directors

Place : Mumbai Anil Agarwal

Dated: 31 May 2006 Chairman



Particulars of technology absorption and foreign

exchange earnings and outgo as per Section 217(1)

(e) of the Companies Act, 1956 and the rules made

therein and forming part of the Directors’ Report

for the year ended 31 March 2006.

A. Conservation of energy Energy conservation continues to be the key focus

area of our company. The following are some of the

important steps taken in this direction:

I. As part of expansion of 3LTPA new waste heat

recovery system installed in ISA capable of

generating 11200 units / hr of power

II. Use of steam heaters instead of electrical heaters

in Oxygen Plant # 1 leading to a savings of 4000

units/day (approx Rs. 56 lakhs per annum).

III. Introduction of premix burners in anode furnace

launders instead of tip mix leading to a savings of

Rs. 75 lakhs / annum.

B. Technology absorption

Improvement projects: I. De-bottlenecking of phosphoric acid carried out

and capacity enhanced from 400 TPD to 600 TPD

II. Gypsum quality improved and hence sale

increased.

III. Selenium extraction plant - commissioning is in

progress and all the slime will be deselenised and

exported from Tuticorin.

IV. Catalytic converter modification in sulfuric acid

plant implemented in order to achieve emission

level at 2 kg of sulphur-dioxide per ton of sulfuric

acid production.

V. Tail gas scrubber in sulfuric acid plant will be

implemented to achieve emission level less than 1

kg of sulphur-dioxide per ton of sulphuric acid

production.

VI. As a part of water conservation, rain water

catchment pond constructed to manage the

monsoon effectively.

C. Foreign exchange earnings andoutgoDuring the year, foreign exchange outgo was Rs.

6292.31 crore (which includes import of raw

material, stores and spares and capital goods,

technical service charges, know-how, interest and

professional fees) while the foreign exchange

earned was Rs. 4244.11 crore. The details have been

given under item nos. 20 and 21 of Schedule 19

annexed to the accounts.

For and on behalf of the Board of Directors

Place : Mumbai Anil Agarwal


Annexure I



FORM A

Form for disclosure of particulars with respect to conservation of energy

Particulars Unit Year ended Year ended

31 March 2006 31 March 2005

Power and fuel consumption

Electricity

Purchase unit MWH 1,17,277.00 1,04,405.00

Total amount (Exc Dem Chgs) Rs. crore 34.00 30.00

Rate/Unit Rs. 2.90 2.89

Own generation unit MWH 3,06,064.00 2,00,666.00

Unit per unit of fuel 4.63 4.64

Cost/Unit Rs. 3.47 2.66

Furnace oil

Quantity KL 28,127.00 17,753.00

Total amount Rs. crore 40.00 19.00

Average cost per ltr Rs. 14.12 10.70

Diesel oil

Quantity KL 648.00 741.00



L.P.G./Propane/Ipa

Quantity MT 10,435.00 8,368.00



LSHS

Quantity MT 65,739.00 42,701.00


Average cost per kg Rs. 16.02 12.19


40 MDA Sterlite Annual Report 2005-06

Managementdiscussion and analysis

Performance overviewThe year 2005-06 was a landmark for the company,

reflected in an impressive growth in all the

company’s products and driven primarily by

increased capacity, higher domestic demand and

productivity gains across various units.

During the year under review, the company

completed and operationalised major expansions,

which included 1,20,000 tonnes of copper smelting

in addition to previous year’s installed capacity of

1,80,000 tonnes, a new cathode refinery of

1,20,000 tonnes and 90,000 tonnes of a copper rod

plant at Tuticorin.

Copper segmentThe company’s copper operations reported an

improvement across various parameters:

In the copper segment, the primary business of

Sterlite Industries, the total metal output

increased by 59% from 1,71,992 tonnes to

2,73,048 tonnes.

Total metal output in the copper rod segment

increased from 1,25,406 tonnes to 1,66,497

tonnes.

Production of phosphoric acid and sulphuric acid

increased by 64% and 54% from 1,04,902 tonnes

to 1,71,893 tonnes and from 5,46,647 tonnes to

8,44,376 tonnes respectively.

In terms of sales, the company continued to

maintain its leadership position in the copper

cathode and rod markets in India.

The company sold 1,06,279 tonnes of copper in

India as against 82,561 tonnes in the previous

year, an increase of 29%, representing a

domestic market share of 26%.

The company exported 1,65,354 tonnes of

copper (previous year 89,296 tonnes), a growth

of 85%. Exports included 79,000 tonnes of

copper rods against 56,000 tonnes in the

previous year.

Overall sales revenue from copper sales was Rs.

7,020 crore (previous year Rs. 3,494 crore), a

growth of 101%.

The company sold 3,69,440 tonnes of sulphuric

acid during the year under review, an increase of

about 40% over the previous year. Sulphuric acid

sales revenue registered an increase from Rs. 41

crore to Rs. 58 crore.

Phosphoric acid sales were at 1,68,317 tonnes

(value Rs. 312 crore), a growth of 54% and 70%

in terms of quantity and value respectively over

the previous year.

A new revenue stream was introduced by making

selenium as a commercial payable metal in the

anode slime, contributing Rs. 14 crore during

Performance overview

Industry overview anddevelopments

Concerns

Financial review

Internal controlsystems

Human resources

Risk Management

Outlook

Cautionary statement


41MDA Sterlite Annual Report 2005-06

2005-06. Anode slime sales generated Rs. 930

crores in 2005-06 (previous year Rs. 347 crore).

Despite a significant increase in the input prices of

all key raw materials coupled with higher energy

prices, the cost of production (till the cathode

stage) declined from 7.1 cents/lb to 6.1 cents/lb on

account of higher volumes, better metal recovery

and improved by-product realisation. During the

year under review, the company also received an

export incentive in the form of Target Plus of Rs.

100 crore for incremental exports (in 2004-05 over

the exports of 2003-04 and in 2003-04 over the

exports of 2002-03).

Conductor segmentDuring the year under review, the company sold

56,962 tonnes of conductors, an increase of 14%

over the previous year. Revenues were Rs. 649

crore, a 28% increase over the previous year,

primarily due to an increase in aluminium prices.

The transmission business of the company

continued to maintain its domestic leadership

position. Exports to new markets like South Africa,

Sudan, Oman, Gambia, Ghana and Namibia

commenced during the year under review. Power

Grid Corporation of India Ltd (PGCIL) continued to

be the company’s single largest customer

generating orders worth Rs. 2.78 billion for the

company during the year. With a sustained

emphasis on the power sector by the Government,

the demand derived from the transmission and

distribution segments is expected to increase.

Industry overview and developmentsCopper Copper is a fundamental material used in

residential and commercial construction, electrical

and electronics equipment, transportation,

industrial machinery and consumer durable

products.

Consumption: The consumption of copper is

directly related to global economic growth.

Presently, global growth continues to be robust,

largely driven by a sustained growth in China, India,

Russia and Brazil. The underlying Chinese

consumption trend remains strongly positive while

domestic metal availability is still tight driven by

industrialisation, urbanisation and consumerism.

Besides, demand growth for the material is still at

an early stage in other major developing economies

like India.

The global refined consumption in 2005 was

estimated at around 16.85 million tonnes, expected

to increase by 6.1% to 17.88 million tonnes in 2006

with Asia continuing to be the growth engine. New

applications and the increased use in the power

sector will also drive the growth in this segment. In

2007, world copper consumption is forecast to



increase by a further 3.5% to 18.1 million

tonnes, largely due to a continued growth

coming out of China.

In the first quarter of 2006, copper

consumption in China was estimated to have

increased by 2% over the previous quarter,

driven by strong economic and industrial

growth. For the remainder of 2006 and

throughout 2007, China’s copper consumption

is expected to remain relatively high, reflecting

a strong demand from continued

industrialisation, urbanisation as well as an

expansion in the electric power grids.

In the first quarter of 2006, US copper

consumption rose by 1% year-on-year, driven

in a large part by an 8% boost in construction

spending (which accounts for around half of

total US copper consumption) relative to the

same period in the previous year.

Production: The global refined copper

production in 2005 was about 16.66 million

tonnes against a consumption of 16.85 million

tonnes. In 2006, the world production of

refined copper is forecast to increase by 6.9%

to 17.81 million tonnes, largely because of

expansions in existing refined capacity in

Chile. In 2007, the world-refined production is

forecast to increase further, driven largely by

expansions in China and Chile.

Price: The industry fundamentals drove copper

prices upward since the last quarter of 2003

and well into 2005. The average LME price of

copper for 2005-06 was 4,099 US$ per tonne

against 3,000 US$ per tonne in 2004-05 in

spite of the LME stock increasing from 28,875

tonnes as on 31 March 2005 to a level of

1,21,375 tonnes as on 31 March 2006. Prices

continue to remain buoyant.

For 2006 as a whole, world refined copper

consumption is expected to exceed production

and stocks are expected to remain low.

Ongoing labour disputes, the potential for

additional supply disruptions and persistently

low stocks are expected to encourage the

continued targeting of the copper market by

investment funds and financial speculators. A

deficit in the market, strong growth and

declining metal stocks point to robust metal

prices in 2006 as well.

Source: Brook hunt(on calendar year basis)

Source: Brook hunt

Global demand and supplybalance in refined copper

(’000 tonnes)



TC/RCStrong market conditions and improved contract

terms led to better realisations. TC/RC realisations

increased substantially from 8.6 cents/lb in the

previous year to 23.1 cents/lb. During the year,

large mines reported encouraging production,

while problems at some smelters kept spot prices

for TC/RC close to their historic high levels for a

considerable period. The effect of stronger TC/RC

globally in the first half of the year was felt mainly

in the second half. A softening of TC/RC terms is

likely to be reflected in future settlements. The

company continues to make a good progress in its

strategy of securing long-term contracts with

mines.

The spot and long-term TC/ RC trend for 2004-06 is

given below.

IndiaThe consumption of copper in India is estimated at

around 4.60 lakh tonnes per annum, 3% of the

global consumption. From net importer, India is

evolving into net exporter on account of a rise in

production; exports were nearly 55% of existing

production levels, estimated at 6.50 lakh tonnes.

In India, reporting strong economic, retail,

infrastructure and capital expenditure growth, the

consumption of copper is expected to grow by

about 7% across the medium term. This will be

driven by a growing demand for copper in electrical

equipment, transformers and wiring applications

across all sectors. A low per capita consumption of

copper in India at 0.36 kg in 2005 as against a

global average of 2.1 kg points to a significant

potential in the sustainable growth of the Indian

copper industry. A rapid growth of the Indian

copper market will ensure a wider demand for

Sterlite’s expanded capacity and maintained

leadership position.

Key drivers of the domestic marketElectrification of all Indian villages by 2007 and

all households by 2012

Projected capacity increase of another 100,000

MW by 2012

APDRP (Accelerated Power Development and

Reforms Programme) Scheme

Government incentive for housing sector growth

Increase in the sales of consumer durables

(especially air conditioners and refrigerators)

Safety concerns driving the use of copper in

households

TC/RC trend

Source: Brook hunt

Despite asignificant increasein the input pricesof all key rawmaterials coupledwith higher energyprices, the cost ofproduction (till thecathode stage)declined from 7.1cents/lb to 6.1cents/lb onaccount of highervolumes, bettermetal recovery andimproved by-product realisation.



Emergence of India as a global sourcing hub for

automobiles and spare parts

ConcernsLarge zero duty imports in various forms continue

to affect the Indian market. Of these, imports from

Sri Lanka were the highest. The concerned

authorities have recognised that the import of

copper and copper products from Sri Lanka do not

meet the value-addition criterion. However, despite

their intervention to rectify the situation, the

import of duty-free copper continues, even though

there has been a 30% reduction in imports from

that country. Efforts are on to stop the misuse of

the trade agreement with Sri Lanka.

There has also been a substantial increase in the

zero customs duty copper rod imports (under the

ITA agreement) for onward use in the JFTC cable

industry. The domestic copper industry finds it

difficult to compete with this imported material as

it is required to pay customs duty on its

concentrate imports.

Financial review Capital structureThe total shareholders’ fund as at 31 March 2006

aggregated Rs. 4,122 crore of which equity capital

was Rs. 56 crore comprising 11,17,38,469 shares of

Rs. 5 each. Of the above equity shares, 40,99,400

equity shares were allotted as fully paid upon

conversion of 50,000 Foreign Currency Convertible

Bonds.

The Board at its meeting held on 10 February 2006

approved the division of equity shares and a

subsequent issue of bonus shares in the ratio of 1:1

(i.e. one fully paid bonus share of Rs. 2 each for

every fully paid equity share of Rs. 2 each held by

the members). The members’ approval was obtained

through a postal ballot held on 29 March 2006.

DividendThe Board of Directors recommended an equity

dividend of 62.5% i.e. Rs. 1.25 per share of Rs. 2

each on the increased share capital arising from the

allotment of bonus shares. The dividend outflow

aggregated Rs. 80 crore compared to Rs. 38 crore

(including dividend tax) in the previous year. The

company paid a dividend on 2,18,75,000 1%

Cumulative Redeemable Preference Shares of Rs. 10

each for the financial year 2005-06.

Reserves and surplusAs at 31March 2006, the reserves and surplus of the

company aggregated Rs. 4,045 crore. Retained

earnings accounted for 30% while the share

premium reserves accounted for the balance.

Reserves and surplus during the year increased by

Rs. 542 crore, a growth of 15%.

DebtThe company’s debt declined 16.59% from Rs.

2,440 crore in the previous year to Rs. 2,035 crore

during the year under review due to a decline in

secured loans from Rs. 627 crore to Rs. 126 crore.

The company repaid its secured foreign currency

loans of Rs. 390 crore as well as a significant

portion of its working capital loans from banks,

which declined from Rs. 124 crore to Rs. 26 crore in



2005-06. Unsecured loans increased by 5.31% from

Rs. 1,813 crore in 2004-05 to Rs. 1,909 crore in

2005-06.

Capital employedThe total capital employed by the company

increased by 2.47% from Rs. 6,328 crore to

Rs. 6,485 crore in 2005-06. The ratio of sales to

capital employed increased from 0.73 in the

previous year to 1.16; PBIDTA returns on the capital

employed improved significantly from 7.07% in

2004-05 to 14.30% in 2005-06.

Gross block and investmentsFollowing the completion of its capacity expansions

and on-going capital-work-in- progress, Sterlite’s

gross block increased by Rs. 120 crore to Rs. 2,685

crore (excluding the deduction in CWIP on account

of impairment) during the year under review.

The company followed a conservative investment

policy. It continued to focus on increasing

investments in subsidiaries. Investments declined

from Rs. 2,986 crore to Rs. 2,672 crore on account

of a decline in current investments (other than

subsidiaries). Efficient treasury management and

improved market conditions resulted in an increase

in the average pre-tax rate of return from 6.42% to

7.30%.

Inventories and debtorsInventories increased by Rs. 448 crore from Rs. 572

crore as on 31 March 2005 to Rs. 1,019 crore as on

31 March 2006, mainly on account of an increased

scale of operations coupled with higher copper

prices and higher precious metal prices compared

to the previous year. In spite of a rising inventory

level, the inventory turnover cycle declined from 48

days of sales in 2004-05 to 46 days in 2005-06.

Even as debtors increased by Rs. 167 crore from Rs.

409 crore as on 31 March 2005 to Rs. 576 crore as

on 31 March 2006 on account of increased

operations and higher copper prices, the debtor

turnover cycle declined from 34 days to 26 days

due to improved receivables management. Some of

these debtors were interest-bearing debtors while

more than 95% of the company’s debtors were less

than six months old.

Loan and advancesLoans and advances increased by Rs. 754 crore from

Rs. 499 crore as on 31 March 2005 to Rs. 1,252

crore as on 31 March 2006 due to an advance of

Rs. 500 crore given to Bharat Aluminium Company

Limited (subsidiary company of Sterlite) against the

share application money.

RevenuesNet sales and service revenue increased by Rs. 3,512

crore to Rs. 7,504 crore during the financial year

2005-06, a growth of 88% over the previous year.

The company was able to achieve this substantial

increase on account of higher volumes, better

prices and improved efficiency.

Exports as a proportion of the total sales increased

from 38.98% in 2004-05 to 53.80% in 2005-06

while total exports (FOB basis) increased 156% by

Rs. 2,584 crore to Rs. 4,238 crore during the year

under review.

The ratio of salesto capitalemployedincreased from0.73 in theprevious year to1.16; PBIDTAreturns on thecapital employedimprovedsignificantly from7.07% in 2004-05to 14.30% in2005-06.



The existingemployees were

continuouslygroomed through

formal andinformal programs

such as trainingand mentoring.The new talent,fresh as well as

experienced ideallycomplemented the

existing talent,thus increasing

competence.

Other income aggregating to Rs. 116 crore

primarily represented interest earned, dividend

income and profit earned from the sale of long-

term and current investments. Other income as a

proportion of the total income was just 1.52%

(previous year 2.81%) in 2005-06.

Raw materialsCopper concentrate, the primary raw material of

the company, was imported. The price of copper

concentrate was linked to the prevailing LME prices

of refined copper. The fully owned copper mines of

the company catered to around 11% of the

requirements of concentrates while the rest was

sourced from the other mines through a mix of

long-term contracts and spot purchases. The

company also imported rock phosphate for

conversion into phosphoric acid.

The total value of raw material consumed stood at

Rs. 6,330 crore, an increase of 96% compared to Rs.

3,226 crore in the previous year. The increase was

due to increased production volumes and higher

raw material prices during the year under review in

relation to the prevailing LME and LBMA prices.

Other manufacturing expensesOther manufacturing expenses (comprising power,

fuel, stores, spares and repairs etc.) increased from

Rs. 246 crore in the previous financial year to Rs.

372 crore in 2005-06. This accounted for 4.96% of

the net sales compared to 6.16% in the previous

year, reflecting improved manufacturing

efficiencies.

Overheads Overheads comprised personnel expenses, selling

and distribution expenses as well as administrative

and general expenses; this accounted for 3.34% of

the net sales compared to 4.38% in the previous

year.

Interest outflowIn spite of a decline in debt during the year under

review, net interest expenses increased by Rs.18

crore to Rs. 120 crore primarily on account of a

global increase in interest rates.

DepreciationDepreciation increased by Rs. 14 crore from Rs. 114

crore in 2004-05 to Rs. 128 crore in 2005-06. The

company provided depreciation on a straight-line

basis.

Corporate income taxCorporate income tax provision for the financial

year 2005-06 was at Rs.148 crore (excluding

provision for deferred tax) compared to Rs.14 crore

in the previous year. The company moved from

Minimum Alternate Tax (MAT) in the previous year

to a full tax treatment in 2005-06 on account of its

increased profits.

Internal control systemsThe company invested adequate control systems to

monitor all aspects of operations and managerial

functions. All operations were carried out in

conformity with well-defined processes. The

compliance of these processes and refinement of



the same to reflect learnings and changes in the

business environment were reviewed periodically.

Regular audits of all business activities - such as

purchase and stores, marketing, personnel,

production, maintenance works, finance and

accounts, IT systems including SAP R3 etc. - were

conducted by internal audit teams. The internal

audit function was jointly carried out with external

management audit firms of international repute.

The audit observations were reported and discussed

by the senior management and the important ones

were also presented to the Audit Committee of the

Board. The audit observations were discussed with

operational teams and feed back shared. The

recommendations generated were implemented

appropriately.

Human resources Given the people intensive nature of the company’s

business and the company’s recognition of its

employees as critical stakeholders, the company

remained committed to its Human Resources

function. Clearly the success of the company was

primarily driven by the commitment and

contribution of its employees.

The company continued to infuse talent in its

various functions through a multifaceted

recruitment process that laid a special emphasis on

areas such as domain expertise, cross functional

abilities and softer skills related to people

interaction and environment sensitivity. The

company recruited fresh and young talent from

leading national institutions including

management institutes and engineering schools. A

rigorous selection process ensured that only

deserving candidates were made job offers. A first-

class graduation was considered as the minimum

requirement for a new candidate to be considered

for employment at any level.

The young recruits underwent specially designed

training programs that familiarised them with all

the aspects of the company’s business following

which they were encouraged to work in a defined

function for meaningful contribution to the

company and themselves. The existing employees

were continuously groomed through formal and

informal programs such as training and mentoring.

The new talent, fresh as well as experienced ideally

complemented the existing talent, thus increasing

competence. For new projects, a talent pool of

existing and new talent - experienced and fresh -

was set up to benefit from an internal and external

track record.

Employee evaluation and appraisal was done via a

rigorous process covering various aspects of

domain expertise as well as skills in non-core areas.

The process aimed at creating and sustaining a high

performance culture. The company possessed

appropriate employee mechanisms of rewards and

recognition.

Risk managementAll businesses are faced with internal as well as

external risks. While internal risks are controllable,



external risks like risks arising out of natural

calamities or change in government policies are

beyond the influence of organisations.

Sterlite’s approach to risk management comprises

the identification of controllable risks by its senior

management and the timely adaptation of

mitigation measures to minimise the effect of the

risks. It realises that successful implementation of

its project depends upon understanding the

inherent risks within the project and timely

adaptation of measures to mitigate the potential

risks.

Industry riskThe positive outlook of the sector is being driven by

increasing infrastructural spend and rising

consumerism within the country. The demand for

copper, which is majorly consumed by the wires

and cable industry (almost 44.74% of total copper

consumed), is expected to increase driven by

increasing government focus on development of

power infrastructure within the country. The

housing boom as well as the increasing demand for

consumer durables is also a positive indicator for

the growth in demand of the copper industry.

Besides, India is also emerging as a hub for the

automobile and auto ancillary industries, other

major consumers of copper within the country.

Even globally the demand for copper is being driven

by the emerging markets of Asia, especially China.

China’s rapid industrialisation – developing

electricity and telecommunications networks while

expanding transport infrastructure and motor

vehicle fleets – is acreating massively adding to the

demand for copper.

Commodity riskCopper is a commodity business. Being a custom

smelter impact of price movement is minimal.

However, the demand and supply of concentrate

drives the TC/RC margins. Besides, the company’s

marketing strategy, directed at customer service

leading to customer satisfaction, provides it with an

edge within the commoditised industry.

Raw material riskSourcing of raw material at the right time and at

the right price is essential for the success of any

commodity business. To mitigate the risks of market

volatility as well as ensure short-term availability,

the company sources raw material through long-

term contracts as well as spot markets. Backward

integration through captive mines in Tasmania

protects the company from market vagaries and

ensures a potentially steady supply of raw material

at competitive costs. The location of the plant

closer to the port also makes the company

logistically more competitive with respect to the

imports of copper concentrates and exports of the

end product.

Operations riskThrough the right choice of technology the

company has ensured its technical and operational

competitiveness. The company’s smelter at

Tuticorin, Tamil Nadu, is based on a proven energy-

efficient and environment friendly technology

called ISA SMELT, sourced from the world leaders in

copper smelting technology in Australia. Similarly,

its refinery also works on the ISA technology while

its copper rod plant uses a state-of-the-art



technology sourced from Italy. The use of

contemporary technology has resulted in improved

recovery and a consistently high quality of the end

product. Besides, the company is constantly

focusing on cost and operation efficiencies that

protect its operating margins.

OutlookThe ongoing growth in the global copper,

aluminium and zinc markets are consistent with the

trend in 2005-06. Growth in all these metals will

primarily be driven by Asia and emerging markets

such as China and India. Real Indian GDP grew at

an average rate of 6% per annum over the last ten

years and is now growing at almost 8%.

The Indian Government has continued its focus on

investment, job creation, rural development,

infrastructure growth, employment, health and

education with a stress on comprehensive

economic reforms. Industrial growth in India has

risen by around 10% per annum and similar growth

is expected to continue.

Investments in the power generation and

transmission, housing, real estate, automobile and

transportation sectors are expected to drive the

growth of the copper, aluminium and zinc sectors

into double-digits, increasing per capita metal

consumption.

In 2006-07, a higher production from expanded

capacities is expected at the company. Volume

growth, productivity and process improvements

(derived through the use of modern tools like Six

Sigma) are expected to reduce production costs. An

increase in volumes will ensure growth and a

relative insulation from changes in the commodity

cycle.

Cautionary statementStatements in the Management discussion and

analysis describing the company’s objectives,

projections, estimates and expectations may be

“forward-looking statements” within the meaning

of applicable securities laws and regulations. Actual

results could differ materially from those expressed

or implied. Important factors that could make

difference to the company’s operations include

economic conditions affecting demand/supply and

price conditions in the domestic and overseas

markets in which the company operates, changes in

the Government regulations, tax laws and other

statutes and other incidental factors.

In 2006-07, ahigher productionfrom expandedcapacities isexpected at thecompany. Volumegrowth,productivity andprocessimprovements(derived throughthe use of moderntools like SixSigma) areexpected to reduceproduction costs.


50 Corporate Governance Sterlite Annual Report 2005-06

Corporategovernance report

IntroductionHigh standards of corporate governance are critical to ensure business success. Corporate governance is not

simply a matter of creating checks and balances; it is about creating an outperforming organisation which

leads to increasing employee and customer satisfaction and shareholders’ wealth. The primary objective is

to create and adhere to a corporate culture of conscience and consciousness, transparency and openness;

and to develop capabilities and identify opportunities that best serve the goal of value creation.

In accordance with Clause 49 of the Listing agreement with the Stock Exchanges in India (Clause 49) and

the best practices followed internationally on corporate governance, the details of governance systems and

processes including compliance by the Company with the provisions of Clause 49 are as under:

Company’s philosophy on code of governance The Company has always believed in conducting its affairs in a fair and transparent manner and in

maintaining the highest ethical standards in its dealings with all its constituents. It is committed to following

good corporate governance practices. The Company’s mission is to constantly review its systems and

procedures to achieve the highest level of corporate governance in the overall interest of all the

stakeholders.

The Board of Directors1. Composition of Board of Directors as at 31 March 2006The Board of Directors consists of nine members, three of which are Executive Directors and six Non-

Executive directors. The Company has a Non-Executive Chairman and the number of Independent Directors

is equal to one-third of the total number of Directors. There has been no changes in the composition of

Directors during the financial year 2005-06.

Philosophy on Code ofGovernance

The Board of Directors

Meetings held infinancial year 2005-06

Audit Committee

RemunerationCommittee

Shareholders’ andInvestors’ GrievanceCommittee

Other Committees

Code of BusinessConduct and Ethics forDirectors and SeniorManagement

General body meetings

Disclosures

Means ofcommunication

General shareholderinformation


51Corporate Governance Sterlite Annual Report 2005-06

The composition of the Board of Directors is as follows:

* The directorship held by Directors as mentioned above do not include alternate directorships and

directorships of foreign companies, Section 25 companies and private limited companies.

** In accordance with Clause 49 of the Listing Agreement, Memberships / Chairmanships of only the Audit

Committees and Shareholders’/Investors’ Grievance Committees of all public limited companies have been

considered.

Name Designation Category No. of No. of No. of

Directorships committee committee

in other memberships chairmanship

companies * held in other held in other

companies** companies**

Mr. Anil Agarwal Chairman Non Executive 5 Nil Nil

Mr. Navin Agarwal Executive Executive 14 3 Nil

Vice-Chairman

Mr. Kuldip Kumar Managing Executive 3 Nil Nil

Kaura Director

Mr. Tarun Jain Whole Time Executive 6 5 Nil

Director

Mr. Dwarka Prasad Director Non-Executive 7 Nil Nil

Agarwal

Mr.Ishwarlal Patwari Director Non-Executive 1 2 Nil

Mr.Sandeep Junnarkar Director Non-Executive 14 8 Nil

and Independent

Mr. Gautam Doshi Director Non-Executive 11 2 2

and Independent

Mr. Berjis Desai Director Non-Executive 6 Nil Nil

and Independent



2. The details of shares held by non-executive

Directors as on 31 March 2006 are as follows:

Name Number of

shares held

Mr. Anil Agarwal Nil

Mr. Dwarka Prasad Agarwal Nil

Mr. Ishwarlal Patwari 274,566

Mr. Sandeep Junnarkar 3500

Mr. Gautam Doshi Nil

Mr. Berjis Desai Nil

3. Information supplied to the BoardThe information placed before the board includes:

Annual operating plans of businesses, capital

budgets and any updates

Quarterly results of the Company and its

operating divisions or business segments

Minutes of the meetings of audit committee and

other committees of the Board

Information on recruitment of senior officers just

below the level of Board, including appointment

or removal of Chief Financial Officer and

Company Secretary

Materially important show cause, demand,

prosecution notices and penalty notices

Fatal or serious accidents, dangerous

occurrences, any material effluent or pollution

problems

Any material default in financial obligations to

and by the Company, or substantial non-

payment for goods sold by the Company

Any issue which involves possible public or

product liability claims of substantial nature,

including any judgement or order which may

have passed strictures on the conduct of the

Company or taken an adverse view regarding

another enterprise that can have negative

implications on the Company

Details of any joint venture or collaboration

agreement

Sale of material nature of investments,

subsidiaries, assets, which is not in normal course

of business

Transactions that involve substantial payment

towards goodwill, brand equity or intellectual

property

Details of foreign exchange exposures and the

steps taken by management to limit the risks of

adverse exchange rate movement, if material

Significant labour problems and their proposed

solutions. Any significant development in human

resources/ industrial relations front like signing

of wage agreement, implementation of

Voluntary Retirement Scheme etc

Non-compliance of any regulatory, statutory

nature or listing requirements and shareholders

service such as non-payment of dividend, delay

in share transfer etc

Statement of significant transactions and

arrangements entered by unlisted subsidiary

companies

Dividend declaration

General notices of interest of Directors

Internal audit findings (through the Audit

Committee)

In addition to the areas note above, the Company’s

audit committee looks into controls and security of

the Company’s critical IT applications, the internal

and control assurance audit reports of all divisions

and deviations from the Code of Business

Principles, if any.



Management discussion and analysisThe Directors’ Report includes details of

management discussion and analysis of various

businesses of the Company.

Disclosures by management to theBoardAll details relating to financial and commercial

transactions where Directors may have a pecuniary

interest are provided to the Board and the

interested Directors neither participate in the

discussion, nor do they vote on such matters.

Meetings held in financial year2005-06The Board of Directors meets at least once in a

quarter to review the Company’s performance and

financial results and more often, if considered

necessary, to transact any other business. During

financial year 2005-06, six Board meetings were

held. These were on 10 May 2005, 1 June 2005, 27

July 2005, 16 November 2005, 18 January 2006 and

10 February 2006.

Attendance record of the Directors at Board and

General Meetings held during financial year 2005-

06 are as follows:

Name of Directors No. of Board Attendance

meetings at last

attended AGM

Mr. Anil Agarwal Nil No

Mr. Navin Agarwal 2 No

Mr. Kuldip 4 No

Kumar Kaura

Mr. Tarun Jain 5 Yes

Mr. Dwarka 4 No

Prasad Agarwal

Mr. Ishwarlal Patwari 5 No

Mr. Sandeep Junnarkar 6 Yes

Mr. Gautam Doshi 5 Yes

Mr. Berjis Desai 2 No

COMMITTEE OF DIRECTORS

(i) Audit CommitteeThe Company had constituted an Audit Committee

in accordance with the requirements of Section

292A of the Companies Act, 1956 and Clause 49 of

the Listing Agreement entered with the stock

exchanges.

The terms of reference/powers stipulated by the

Board to the Audit Committee, as contained under

Clause 49 of the Listing Agreement are as follows:

A. The Audit Committee shall have the following

powers–

1. To investigate any activity within its terms of

reference.

2. To seek information from any employee.

3. To obtain outside legal or other professional

advice.

4. To secure attendance of outsiders with relevant

expertise, if it considers necessary.

B. The role of the Audit Committee shall include the

following:-

1. Oversight of the Company’s financial reporting

process and the disclosure of its financial

information to ensure that the financial statement

is correct, sufficient and credible.

2. Recommending to the Board, the appointment,

re-appointment and, if required, the replacement

or removal of Statutory Auditors and fixation of

audit fees.

3. Approval of payment to Statutory Auditors for

any other services rendered by the Statutory

Auditors.

4. Reviewing with the management, the annual

financial statements before submission to the

Board for approval, with particular reference to:-

Matters required to be included in the Directors’



responsibility statement to be included in the

Directors’ report in terms of sub-section (2AA) of

Section 217 of the Companies Act, 1956.

Changes, if any, in accounting policies and

practices and reasons for the same.

Major accounting entries involving estimates

based on the exercise of judgement by

management.

Significant adjustments made in the financial

statements arising out of audit findings.

Compliance with listing and other legal

requirements relating to financial statements.

Disclosure of related party transactions.

Qualifications in draft audit report.

5. Reviewing with the management, the quarterly

financial statements, before submission to the

Board for approval.

6. Reviewing with the management the

performance of Statutory and Internal auditors and

adequacy of internal control systems.

7. Reviewing the adequacy of internal audit

function, if any, including the structure of the

internal audit department, staffing and seniority of

the official heading the department reporting

structure, coverage and frequency of internal audit.

8. Discussion with Internal auditors any significant

findings and follow up thereon.

9. Reviewing the findings of any internal

investigations by the Internal auditors into matters

where there is suspected fraud or irregularity or a

failure of internal control systems of a material

nature and reporting the matter to the Board.

10. Discussion with Statutory auditors before the

audit commences, about the nature and scope of

audit as well as post-audit discussion to ascertain

any area of concern.

11. To look into the reasons for substantial defaults

in the payment to the depositors, debenture

holders, shareholders (in case of non payment of

declared dividends) and creditors.

12. To review the functioning of the Whistle Blower

Mechanism.

13. Carrying out such other function as may be

specifically referred to the Committee by the Board

of Directors and/or other Committees of Directors

of the Company

14. To review the following information:

The management discussion and analysis of

financial condition and results of operations;

Statement of significant related party

transactions (as defined by the Audit

Committee), submitted by management;

Management letters / letters of internal control

weaknesses issued by the Statutory Auditors;

Internal audit reports relating to internal control

weaknesses; and

The appointment, removal and terms of

remuneration of Internal auditors.

15. Reviewing the financial statements and in

particular the investments made by the unlisted

subsidiaries of the Company.

Meetings and attendance

Four Audit Committee meetings were held during

the year. The dates on which the said meetings

were held were as follows:

1 June 2005, 27 July 2005, 15 November 2005 and

18 January 2006.



The composition of the Audit Committee and

details of meetings attended are given below:

Name of Director Position Number ofheld in the committeecommittee meetings

attended

Mr. Gautam Doshi Chairman 3

Mr. Sandeep Junnarkar Member 4

Mr. Berjis Desai Member 1

(ii) Remuneration CommitteeThe Remuneration Committee of the Board

recommends the remuneration of Executive

Directors, Commission to be paid to Executive

Directors as per their respective terms of

appointment taking into account the profits and

performance of the Company, external competitive

environment and growth plans.

The scope of this Committee is to deliberate and

recommend on the Company's policy on the

following:

specific remuneration packages for executive

directors including pension rights

any other compensation payment

the Commission paid to Executive Directors

the stock options offered and other forms of

remunerating the Executive Directors.

The composition of the Remuneration Committee

are given below:

Name of Director Position held in thecommittee

Mr. Berjis Desai Chairman

Mr. Gautam Doshi Member

Mr. Anil Agarwal Member

Details of remuneration to DirectorsThe break up of remuneration paid to the Directors

during financial year 2005-06 was as follows:

(i) Executive Directors(Rupees)

Name Designation Salary & Commission Contribution to Perquisite Total

Allowance Paid PF/Pension, etc

Mr. Navin Executive 23,324,714 – 4,684,491 2,047,672 30,056,877

Agarwal Vice-Chairman

Mr. Kuldip Managing 17,378,197 – 1,134,162 494,222

Kumar Kaura Director

Mr. Tarun Jain Whole Time 15,280,572 – 1,528,920 516,760 17,326,252

Director


19,006,581


(iii) Shareholders’ and Investors’ GrievanceCommittee

Terms of reference

The Committee oversees the reports received from

the Registrar and Share Transfer Agents,

facilitates prompt and effective redressal of

shareholders’ complaints and the reporting of the

same to the Board periodically.

Secretary

Mr. A.S. Khandwala was the Compliance Officer of

the Company till 28 February, 2006 and later Mr. S.

Varadharajan was appointed as the Compliance

Officer w.e.f. 1 March, 2006.

Meetings and attendance during the year

The Shareholders and investors’ Grievance

Committee met two times during the financial year

2005-06 on June 1st, 2005 and November 15th,

2005

The composition of the Investor Grievance

Committee and details of the meetings attended by

the Directors are given on the next page.

Notes:

1. The Company has not granted any stock option to any of its Directors.

2. Service Contracts of Mr. K. K. Kaura is for a period 20th October, 2004 to 30th June, 2006 and Mr. Tarun Jain is for a

period of five(5) years from 24th November, 2004 to 23rd November, 2009 and notice period for both is three (3)

months. Mr. Anil Agarwal continues to be a Chairman from 20th October, 2004.

3. Service contract of Mr. Navin Agarwal is five(5) years wef 1st August, 2003 to 31st July, 2008 and notice period is three

(3) months.

4. Mr. Sandeep Junnarkar, a Non-Executive Director is a partner in M/s. Junnarkar & Associates, Advocates and Solicitors.

The professional fees paid to the firm during the year under review amounted to Rs.33,180/-.

5. Mr. Gautam Doshi, a Non-Executive Director was a partner in M/s. RSM & Co., a firm of Chartered Accountants till 31st

July, 2005. The professional fees paid for the services rendered by the firm during the year under review amounted to

Rs. 60,85,231/-

(ii) Non-Executive DirectorsRemuneration paid to Non-Executive Directors for the year (including sitting fees paid for attending

Committee meetings).

Directors Sitting fees (Rs.) Commission (Rs.)

Mr. Anil Agarwal – -

Mr. Ishwarlal Patwari 25,000 -

Mr. Dwarka Prasad Agarwal 20,000 -

Mr. Sandeep Junnarkar 45,000 10,00,000

Mr. Gautam Doshi 35,000 10,00,000

Mr. Berjis Desai 17,500 10,00,000

Total 1,42,500 30,00,000


*Appointed as a member w.e.f. 10 May 2005

Investor Grievance Redressal

Status of Complaints for the Financial Year 1 April 2005 to 31 March 2006

(iv) Other Committees

Share / Debenture Transfer Committee

The Board has delegated the power to approve

Share/Debenture transfer, transmission and

consider, split and/ or consolidation requests to

Shares/Debenture Transfer Committee consisting of

Directors. The Share/Debenture Transfer Committee

meets at regular intervals.

Banking and Authorisation Committee

The Banking and Authorisation Committee consists

of three Directors of the Company. The Committee

approves on behalf of the Company, any changes in

authorised signatories for banking operations,

delegation of powers for day to day excise and sales

tax matters, authorisation to specific employees for

certain contractual obligations and such other

delegation as may required.

Committee of Directors (Corporate Actions)

The Board has delegated authority to Committee of

Directors to approve corporate actions viz.

allotment of rights shares and allotment of shares

on conversion of FCCB.

The Committee of Directors met six times during

the financial year 2005-2006, viz., 11 April 2005, 16

June 2005 and 5, 20, and 29 September 2005, 14

November 2005, 14 December 2005 and 15

February 2006.

Code of business conduct and ethicsfor Directors and seniormanagementThe Board of Directors at its meeting held on 16

November 2005 has adopted the Code of Business

Conduct and Ethics for Directors and Senior

Name Category Number of Meetingsattended during the year

Mr. Sandeep Junnarkar, Chairman Non Executive & 2

Independent Director

Mr. Tarun Jain* Executive Director 2

Mr. Berjis Desai Non Executive & 1

Independent Director

Number of complaints received during the year from the investors comprising of 3196

Non receipt of Dividend/Interest Warrants, Non receipt of securities sent for transfer

and transmission, complaints received from SEBI etc.

Number of complaints resolved 3182

Complaints Pending as at 31 March 2006 14

Number of share transfers pending for approval as at 31 March 2006 Nil




Management (“the Code”). This Code is a

comprehensive Code applicable to all Directors,

Executive as well as Non-Executive as well as

members of Senior Management. The Code while

laying down, in detail, the standards of business

conduct, ethics and governance, centers around the

following theme –

“The Company’s Board of Directors and Senior

Management are responsible for and are

committed to setting the standards of conduct

contained in this Code and for updating these

standards, as appropriate, to ensure their

continuing relevance, effectiveness and

responsiveness to the needs of local and

international investors and all other stakeholders as

also to reflect corporate, legal and regulatory

developments. This Code should be adhered to in

letter and in spirit.”

A copy of the Code has been put on the Company’s

website www.sterlite-industries.com.

The Code has been circulated to all the members of

the Board and Senior Management and the

compliance of the same has been affirmed by them.

A declaration signed by the Managing Director is

given below:

I hereby confirm that:

The Company has obtained from all the members of

the Board and Senior Management, affirmation

that they have complied with the Code of Business

Conduct and Ethics for Directors and Senior

Management in respect of the financial year 2005-

06.

Kuldip Kumar Kaura

Managing Director

General Body MeetingsLocation, date and time of the Annual General

Meetings (AGM) and Extra-Ordinary General

Meetings (EOGM) held during the preceeding three

years are as follows:

* During the financial year 2005-06 no Extra-Ordinary General Meeting of the Company was held.

Year Meeting Location Date Time

2004-05 AGM B-10 Waluj MIDC Industrial Area, 3 September, 2005 11.30 am

Waluj, Dist. Aurangabad – 431 133.

Maharashtra

2003-04 AGM -do- 28 September, 2004 3.00 pm

2003-04 EOGM -do- 20 January, 2004 11.00 am

2002-03 AGM -do- 23 September, 2003 10.30 am

2002-03 EOGM -do- 20 March, 2003 10.00 am



Postal BallotsDuring the financial year 2005–06, pursuant to

Section 192A of the Companies Act, 1956, the

shareholders of the Company had approved by

means of Postal Ballot as follows:

a) Shifting of the Registered Office (SpecialResolution)The Company proposed at its Board Meeting held

on 16 November 2005 for shifting of the registered

office from B-10/4, Waluj MIDC Industrial Area,

Waluj, Dist. Aurangabad – 431 133 in the State of

Maharashtra to ‘SIPCOT Industrial Complex,

Madurai Bypass Road, T.V.Puram P.O, Tuticorin-628

002 in the State of Tamil Nadu and decided to pass

the resolution by resorting to postal ballot and send

the notice along with the explanatory statement

and the forms to the shareholders requesting them

to send their assent or dissent in writing on the

postal ballot form before the close of business

hours of 13 January 2006.

Mr. Upendra Shukla was appointed as a Scrutinizer

and the result was declared on 16 January 2006 as

follows:

1. Number of votes cast 89727819 (99.94%)

for the resolution

2. Number of votes cast 34920 (0.04%)

against the resolution

3. Number of invalid votes 15328 (0.02%)

b) Sub-Division and Bonus sharesThe Company proposed at its Board Meeting held

on 10 February 2006 the following:

Ordinary Resolution for Sub-Division of equity

share of Rs.5/- (Rupees Five only) each into

equity shares of Rs.2/- (Rupees Two only) each.

Ordinary Resolution for increase in the

authorised share capital from Rs.90 crore to

Rs.150 crore.

Ordinary Resolution for alteration of

Memorandum of Association.

Special Resolution for alteration of Articles of

Association

Ordinary Resolution for issue of bonus shares in

the ratio of 1:1 i.e. (1 (one) bonus equity share

credited as fully paid up for every 1 (i.e. one fully

paid bonus shares held by the members)

It was decided to pass the resolution by resorting to

postal ballot and send the notice along with the

explanatory statement and the forms to the

shareholders requesting them to send their assent

or dissent in writing on the postal ballot form

before the close of business hours of 27 March

2006.

Mr. Upendra Shukla was appointed as a Scrutinizer

and the result was declared on 29 March 2006 as

follows:



c) Change in Object Clause The Board of Directors at its meeting held on 31

May 2006 proposed to amend the Object Clause of

the Memorandum of Association of the Company

as the Company proposes to commence business in

generation and distribution of power, subject to

approval of the members in pursuance to Section

17 of the Companies Act, 1956 by way of a Special

Resolution through Postal Ballot pursuant to

Section 192A of the Companies Act, 1956.

Disclosuresi) Disclosures on materially significant related

party transactions

None of the transactions with any of the related

parties were in conflict with the interest of the

Company. Attention of Members is drawn to the

disclosures of transactions with the related parties

set out in Notes on Accounts – Schedule ‘ 19’,

forming part of the Annual Report.

ii) Details of Non Compliance by the Company,

Penalties and Strictures imposed on the Company

by Stock Exchange, SEBI or any Statutory

Authorities related to Capital Market.

Strictures/Penalties imposed on the Company by

SEBI/Stock Exchange during the last three years:

1. SEBI had filed a petition in the High Court of

Judicature at Bombay challenging the

Company’s Scheme of Arrangement. This petition

was set aside by the Division Bench of the High

Court of Judicature at Bombay vide its Order

dated 15 July 2002. SEBI and Union of India have

filed a Special Leave Petition in the Supreme

Sr. No. Particulars No. of shares voted for %

1 Ordinary Resolution for sub-division of Equity 9,45,61,680 99.99

shares of Rs.5/-(Rupees Five only) each into

Equity shares of Rs.2/- (Rupees Two only).

2 Ordinary Resolution for increasing the Authorised 9,45,59,000 99.99

Share Capital from Rs.90 crores to Rs.150 crores.

3 Ordinary Resolution for alteration of 9,36,23,751 99.99

Memorandum of Association.

4 Special Resolution for alteration of 9,36,23,282 99.99

Articles of Association.

5 Ordinary Resolution for Issue of bonus shares in 9,45,62,243 99.99

the ratio of 1:1 ie (1 (one) bonus equity share

credited as fully paid up for every 1

(i.e. one fully paid bonus shares held by the members).



Court in August 2002. During the year, the

Supreme Court of India disposed off the appeal

filed by SEBI.

2. During the process of Open Offer for acquisition

of Hindustan Zinc Limited 20% Equity Shares of

(HZL) from the public shareholders, there was

delay in receipt of the approval from the RBI and

consequently, delay in payment to nine non-

resident shareholders.

SEBI had passed an Order dated June 12, 2003

under SEBI (Substantial Acquisition of Shares and

Takeovers) Regulations, 1997 (“Takeover Code”)

on Sterlite Opportunities and Ventures Limited

(SOVL) (as acquirer), Sterlite Optical Technologies

Limited (SOTL) and the Company (as persons

acting in concert) directing the payment of

interest @ 10% per annum, for alleged delay in

payment of consideration amount to (9) non

resident shareholders due to delay in receipt of

approval of the Reserve Bank of India. SOVL,

SOTL and the Company had filed an appeal

against the SEBI Order before ‘Securities

Appellate Tribunal’ (SAT). SAT vide order dated

February 11, 2005 has upheld the appeal and set

aside the impugned Order of SEBI.

3. The Securities and Exchange Board of India (SEBI)

had issued notice to the Company for alleged

violation of the provisions of sub regulations (2)

and (4) of Regulation 6 (for the year 1997), sub

regulation [3] of Regulation 7 (for the year 2000)

and sub regulation (3) of Regulation 8 of the

SEBI (Substantial Acquisition of Shares and

Takeover) Regulations, 1997. The Company

contested the matter before the Adjudicating

Officer of SEBI stating that the relevant

information was furnished but the Company was

unable to produce the proof thereof, after

five/seven years. The Adjudicating Office held the

Company liable for non-compliance of these

provisions and the Company was directed to pay

a token penalty of Rs.100000/- for non-

compliance of the aforesaid regulations, which

has been since paid.

4. SEBI barred the Company from accessing the

Indian Capital Market for Equity/Debt issue for a

period of two years from April 19, 2001. The

matter relates to alleged price manipulation

during an open offer for the acquisition of shares

in Indian Aluminium Company Limited made by

the Company. The Company appealed against

the SEBI Order before the Securities Appellate

Tribunal (SAT).

The SAT vide its order dated October 22, 2001 set

aside the earlier SEBI order. SEBI has preferred

an appeal against the SAT order in the High

Court of Judicature at Bombay and the same is

pending.

Means of communicationTHE QUARTERLY RESULTS of the Company are

published in Economic Times / Business Standard

and Aurangabad edition of Dainik Lokmat / Sakal

(Marathi), as per the requirements of the Listing

Agreement. These results are also put on the

Company’s website at www.sterlite-industries.com.

Official news releases, detailed presentations made

to media, analysts, institutional investors, etc are

also displayed on the Company’s website.



General shareholder information1. Annual General Meeting

2. Profile of Directors Retiring by Rotation/ eligible

for re-appointment Information in cases of

appointment or re-appointment of Directors as

required under listing agreement is given as under:

Mr. Dwarka Prasad Agarwal

Mr. Dwarka Prasad Agarwal retires by rotation at

the ensuing Annual General Meeting and is eligible

for re-appointment. Mr. Agarwal is the founder of

Sterlite Foundation which is a social and charitable

organisation working for the upliftment of the

economically weaker section of the society. He is

also on the Board of following other companies.

1. Nagreeka Exports Limited

2. Optical Link Limited

3. Sterlite Paper Limited

4. Sterlite Iron and Steel Company Limited

5. Sterlite Telecables Limited

6. Sterlite Telelink Limited

7. Sterlite Telecom Limited

8. Sterlite Energy Private Limited

9. Duratube Limited

10. Twinstar International Limited

11. Volcan Investments Limited

Mr. Ishwarlal Patwari

Mr. Ishwarlal Patwari retires by rotation at the

ensuing Annual General Meeting and is eligible for

re-appointment. Mr. Patwari is a Fellow Member of

The Institute of Chartered Accountants of India. He

has over 48 years of experience in industrial

matters. He is also on the Board of following other

companies.

1. Nagreeka Exports Limited

2. Nagreeka Synthetics Private Limited

Mr. Berjis Desai

Mr. Berjis Desai has an experience in the legal

profession. He holds a Bachelors Degree in Science

and also a Bachelors Degree in Law from the

University of Mumbai. Mr. Desai is specialised in

mergers and acquisitions, securities, financial and

international business laws and international

commercial arbitration.

Mr. Desai is also on the Board of several other

companies:

1. Praj Industries Limited

2. Onward Technologies Limited

3. Adlabs Films Limited

Day, Date and Time Wednesday, 20th September, 2006 at 11.00 am

Venue Registered office: B-10/4, Waluj, MIDC Industrial Area, Waluj, District

Aurangabad 431 133, Maharashtra.

Agenda 1) Adoption of audited accounts

2) Declaration of dividend

3) Re-appointment of directors

4) Re-appointment of auditors



4. Emcure Pharmaceuticals Limited

5. Centrum Fiscal Private Limited

6. Watson Wyatt India Private Limited

7. 3D Plm Software Solutions Limited

8. Isagro (Asia) Agrochemicals Private Limited

9. Vadhvan Port Private Limited

10. Business Asia Consulting Private Limited

11. Centrum Fiscal Private Limited

12. Sea freight Private Limited

13. Ferrari Express (I) Private Limited

14. Agribuys.Com. (India) Private Limited

15. Chanchill Studfarm Private Limited

16. Capricorn Agrifarms & Developers

Private Limited

17. Jakari Express Private Limited

18. Jakari Holdings Private Limited

19 Capricorn Plaza Private Limited

20 Capricorn Lifestyle Private Limited

21 Capricorn Group Private Limited

22. Cashtech Solutions India Private Limited

23. Capricorn Castle Private Limited

24. Capricorn Residency Private Limited

3. Financial Calendar

Financial year ending : March 31 of each year

First Quarter Results : End of July 2006

Half Yearly Results : Mid of November 2006

Third Quarter Results : End of January 2007

Fourth Quarter Results : End of May 2007

4. Book closure dates

20th September, 2006 (both days inclusive).

5. Dividend paymentThe dividend warrants will be posted on or after

20th September, 2006 within statutory time limit.

6. Listing of shares on stock exchangesThe Company’s equity shares are listed with:

Bombay Stock Exchange Limited (BSE)

Phiroze Jeejeebhoy Towers,

Dalal Street, Fort,

Mumbai - 400 001.

National Stock Exchange of India Limited (NSE)

“Exchange Plaza”

Bandra – Kurla Complex

Bandra (East)

Mumbai – 400 051.

1. The Company has paid all applicable listing fees

to the above exchanges till date.

2. The Company has applied for delisting of shares

from ‘The Calcutta Stock Exchange Association Ltd.’

and the same is awaited.

7. Stock code

Equity shares physical scrip code

BSE : 500900

NSE : STER / EQ

Equity Shares (Demat form)

ISIN No : INE268A01023 (Old)

INE268A01031

(New after sub-division)

Depositories Connectivity : NSDL & CDSL

Sterlite AW 1-68_R1 22/08/2006 7:17 PM Page 63

Tuesday, 12th September, 2006 to Wednesday,


8. Stock price dataStock price data for the year 1 April 2005 to 31 March 2006 was as detailed below

Source: Daily stock price from BSE website: www.bseindia.com and monthly statistics report from NSE.

Market capitalisation

The market capitalisation of Company’s shares was Rs. 19,548 crores as per the closing price quoted at BSE

as at 31 March 2006.

9. Stock performanceThe performance of the Company’s share related to the BSE sensitive index is given in the chart below:

Year Month The Stock Exchange, The National Stock

Mumbai Exchange Ltd.

High Low High Low

2005 April 738.00 574.90 735.00 555.55

May 625.00 572.00 623.00 563.00

June 660.00 580.00 650.00 580.25

July 709.00 610.00 709.00 600.00

August 788.95 654.90 798.90 650.00

September 980.00 735.00 982.50 735.00

October 900.00 691.50 900.00 688.00

November 894.00 732.00 894.80 730.00

December 1049.90 834.00 1050.00 830.05

2006 January 1374.70 1042.00 1372.85 1043.00

February 1495.50 1265.00 1495.00 1265.00

March 1769.70 1308.20 1768.25 1307.00



10. Registrar and Transfer AgentSharepro Services (India) Private Limited

(Unit: Sterlite Industries (India) Limited)

Satam Estate, 3rd Floor, Above Bank of Baroda,

Chakala, Andheri (East), Mumbai - 400 099

Tel: 022 - 2821 5168, 2832 9828/2114

Fax: 022 - 2837 5646

E-mail: [email protected]

City office

912, Raheja Centre, Free Press Journal Road,

Nariman Point, Mumbai - 400 021.

Tel: 022 – 2288 1568/9, 2282 5163

Fax: 022 – 2282 5484

11. Share/Debenture Transfer SystemThe Company’s shares being traded in compulsory

demat mode are transferred through the depository

system. The Company has entered into agreements

with both the depositories viz. National Securities

Depository Limited (NSDL) & Central Depository

Services (India) Limited (CDSL). Sharepro Services

(India) Private Limited has Registrars and Transfer

Agents. Share/Debenture Transfer Committee

approves the physical transfers received every

week. Physical shares sent for transfer are duly

transferred within 10-12 days of receipt of

documents, if found in order. Transfer deeds under

objection are returned within 7 days.

12. Distribution of Share holding as at 31 March 2006:Equity Shareholding

Shareholding pattern as on 31 March 2006

No. of equity shares Number of share holders % No. of shares %

Less than 5000 31,069 99.36 46,55,761 4.17

5001 - 10000 60 0.19 4,35,105 0.39

10001 - 20000 35 0.11 5,01,927 0.45

20001 – 30000 19 0.06 4,68,847 0.42

30001- 40000 9 0.03 31,63,29 0.28

40001 – 50000 11 0.04 49,89,28 0.44

50001 – 100000 18 0.06 12,13,128 1.09

100001 – above 48 0.15 10,36,48,444 92.76

Total 31,269 100 11,17,38,469 100

Sl. No. Category No. of shares held % to total shareholding

1 Promoters 8,76,08,425 78.40

2 Banks, Financial Institutions 25,681 0.02

3 Insurance Companies 30,17,712 2.70

4 Mutual Funds 20,22,365 1.81

5 Foreign Institutional Investors 72,67,476 6.50

6 Non Resident Indians 2,17,042 0.19

7 Corporates 24,86,343 2.23

8 Residential Individuals / Trust 81,91,905 7.34

9 Foreign Companies (Others) 9,01,310 0.81

10 Total 11,17,38,469 100



SIIL Shareholding Pattern

13. Dematerialization of shares and liquidityThe Company’s equity shares are compulsorily

traded in the electronic form w.e.f. May 31, 1999.

Requests for dematerialisation of shares are

processed and confirmed within 15 days of receipt

by NSDL and CDSL. As at 31 March 2006, 31.49% of

total equity capital was held in Electronic form with

National Securities Depository Ltd. (NSDL) and

Central Depository Services (India) Ltd. (CDSL).

14. Outstanding GDRs / ADRs / Warrants orany convertible instruments, conversiondate and likely impact on equityAs of 31 March 2006, the Company has allotted

40,99,400 equity shares of Rs.5/- each pursuant to

conversion of 50,000 FCCB’s. There are no

outstanding FCCB’s as on 31 March 2006. Moreover

there are no other outstanding instruments, which

are convertible into equity shares of the Company.

15. Plant locationDivision location

Copper Anodes (Smelter), Refinery and Continuous

Cast Copper Rods: Tuticorin (Tamil Nadu)

Copper Cathodes (Refinery), Continuous Cast

Copper Rods: Chinchpada (Silvassa)

Continuous Cast Copper Rods: Piparia (Silvassa)

Power Transmission Line Aluminium Conductor:

Rakholi (Silvassa)

Continuous Cast Copper Rods: Lonavala

(Maharashtra)

Aluminium Alloy Sheets & Foils: Sanaswadi, Dist.

Pune (Maharashtra)

Power Transmission Line Aluminium Conductor:

Karanjawane, Dist. Pune (Maharashtra)

16. Addresses for correspondencei) Registrar and Transfer Agents

(For share, debenture transfer lodgement, general

investors query)

M/s. Sharepro Services (India) Private Limited

Satam Estate, 3rd Floor, Above Bank of Baroda.

Chakala, Andheri (East), Mumbai - 400 099

Tel: 022 - 2821 5168, 2832 9828 / 2114

Fax: 022 - 2837 5646

E-mail: [email protected]

912, Raheja Centre, Free Press Journal Road,

Nariman Point, Mumbai – 400 021

Tel: 022 – 2288 1568/9, 2282 5163, 2288 4527

Fax: 022 – 2282 5484

ii) Company

(For unresolved shareholder complaints, queries etc.)

Sterlite Industries (India) Limited

Secretarial Dept

Solitaire Corporate Park, Business Square Center

C wing, 2nd Floor, Andheri Kurla Road

Chakala, Andheri (East), Mumbai – 400 093

Tel : 6643 4500

Fax : 6643 4551

email : [email protected]

For and on behalf of the Board

Place: Mumbai Anil Agarwal




To

The Member of

Sterlite Industries (India) Limited

We have examined the compliance of conditions of corporate governance by Sterlite Industries (India)

Limited, for the financial year ended March 31, 2006, as stipulated in clause 49 of listing agreement of said

company with the stock exchange(s)

The compliance of conditions of corporate governance is responsibly of the management. Our examination

was limited to the review of the procedures and implementation thereof, adopted by the company for

ensuring the compliance of the conditions of the corporate governance. It is neither an audit nor expression

of opinion on the financial statement of the company.

In our opinion and to the best of our information and according to the explanations given to us and the

representation made by the directors and the management, we certified that the company has complied in

all material respect with the conditions of corporate governance as stipulated in clause 49 in above

mentioned of listing agreement.

We state that such compliance is neither an assurance as to future viability of the company nor the

efficiency or effectiveness with which the management has conducted the affairs of the company.

For Chaturvedi & Shah For Das & Prasad

Chartered Accountants Chartered Accountants

R. Koria B. N. Agarwala

Partner Partner

Membership No. 35629 Membership No. 11709

Place: Mumbai

Dated: 31 May 2006

Certificate onCorporate governance


68 Financials Sterlite Annual Report 2005-06

Auditors’ Report 69

Balance Sheet 72

Profit and Loss Account 73

Schedules 74

Cash Flow Statement 96

Section 212 97

Balance Sheet Abstract 98

Consolidated Accounts 99


To the Members ofSterlite Industries (India) Limited

We have audited the attached Balance Sheet of 'STERLITE INDUSTRIES

(INDIA) LIMITED', as at 31st March, 2006 and also the Profit and Loss

Account and Cash Flow Statement for the year ended on that date annexed

thereto. These financial statements are the responsibility of the Company's

Management. Our responsibility is to express an opinion on these financial

statements based on our audit.

We conducted our audit in accordance with auditing standards generally

accepted in India. These Standards require that we plan and perform the

audit to obtain reasonable assurance about whether the financial

statements are free from material misstatement. An audit also includes

examining, on a test basis, evidence supporting the amounts and disclosures

in the financial statements. An audit also includes assessing the accounting

principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation. We believe that our

audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditor's Report) Order, 2003 as

amended by Companies (Auditor's Report) (Amendment) Order, 2004

issued by Central Government of India in terms of Section 227 (4A) of

the Companies Act 1956, we give in the Annexure hereto a statement

on the matters specified in the paragraphs 4 and 5 of the said order.

2. Attention is invited to the note no. 16 of Schedule 19 regarding the nonprovision for permanent diminution in value of investment in India FoilsLimited (IFL) and losses on loans given to IFL and guarantees given by thecompany for the loans taken by IFL from banks and financial institutions,for the reasons explained there in, the ultimate effect of which on theprofits of the company could not be determined.

3. Subject to as mentioned in 2 above and further to our comments in the

Annexure referred to in paragraph 1 above, we state that:

a) We have obtained all the information and explanations which to

the best of our knowledge and belief were necessary for the

purpose of our audit.

b) As explained in note no. 12 of schedule 19, cheque of Rs. 1098.89

Crores to Government of India to buy the Government's 49% stake

in Bharat Aluminium Company Limited has not been encashed till

the date of adoption of accounts by the board of directors of

Sterlite Industries (India) Limited, the payment has not been

reflected in the financial statements of the Company for the year

ended 31 March 2006. Having regard to this, in our opinion, proper

books of account, as required by law, have been kept by the

company, so far as appears from our examination of such books.

c) The Balance Sheet and Profit & Loss Account and Cash Flow

Statement dealt with by this report are in agreement with the

books of account.

d) In our opinion the Balance Sheet and the Profit & Loss Account

and Cash Flow Statement complies with the mandatory

Accounting Standards referred to in Section 211 (3C) of the

Companies Act, 1956.

e) On the basis of the written representations received from the

Directors as on 31st March, 2006, and taken on record by the

Board of Directors, we report that none of the directors is

disqualified as on 31st March, 2006 from being appointed as a

director in terms of clause (g) of sub-section (1) of Section 274 of

the Companies Act, 1956.

f) In our opinion and to the best of our information and according

to explanations given to us, the accounts read together with the

notes thereon, in particular note no. 11 of Schedule 19, regarding

change in accounting policy of cost / income and gain / losses

arising on account of commodity hedging transactions, wherein

the company has adopted the principles enumerated in the

International Financial Reporting System “Financial Instruments:

Recognition and Measurement” in the absence of a specific

accounting standard in India, particularly changes in fair value of

hedged items, give the information required by the Companies Act,

1956, in the manner so required and give a true and fair view in

conformity with the accounting principles generally accepted in

India: -

i) in so far as it relates to Balance Sheet, of the state of affairs

of the Company as at 31st March, 2006;

ii) in so far as it relates to the Profit & Loss Account, of the Profit

of the Company for the year ended on that date; and

iii) in so far as it relates to the Cash Flow Statement, of the Cash

Flow for the year ended on that date.




Partner PartnerMembership No. 35629 Membership No. 11709

Place: Mumbai

Dated: 31st May, 2006

Auditors’ Report

69Financials Sterlite Annual Report 2005-06

STERLITE INDUSTRIES (INDIA) LIMITED

As required by the Companies (Auditor's Report) Order, 2003 as amended by Companies (Auditor's Report) (Amendment) Order, 2004 issued by Central

Government of India in terms of Section 227 (4A) of the Companies Act 1956, and on the basis of such checks as we considered appropriate, we

further report that:-

(i) (a) The company has generally maintained proper records showing

full particulars including quantitative details and situation of

fixed assets.

(b) As explained to us, the fixed assets have been physically verified

by the management in accordance with a phased programme of

verification, which in our opinion, is reasonable, considering the

size and nature of its business. No material discrepancies were

noticed on such verification as compared with the available

records.

(c) As per the information and explanation given to us, during the

year, the company has not disposed off any substantial part of

fixed assets and going concern status of the company is not

affected.

(ii) (a) As explained to us, inventories have been physically verified by

the management at reasonable intervals.

(b) In our opinion and according to the information and

explanations given to us, the procedure of physical verification

of inventories followed by the management is reasonable and

adequate in relation to the size of the Company and the nature

of its business.

(c) According to the information and explanations given to us and

on the basis of our examination of inventory records, we are of

the opinion that the company is maintaining proper records of

inventory. As explained to us, discrepancies noticed on physical

verification of the inventories between the physical inventories

and book records were not material, having regard to the size of

the operations of the Company, and the same have been properly

dealt with.

(iii) (a) According to the information and explanations given to us, there

is one company covered in the register maintained under section

301 of the Companies Act, 1956, to which the company has

granted loans. The maximum amount involved during the year

was Rs. 7.50 Crores and the year-end balance of loans granted to

such party was Nil.

(b) In our opinion, the rate of interest and terms and conditions of

above loans are not, prima facie, prejudicial to the interest of the

company.

(c) The parties have repaid the principal amounts as stipulated and

have been regular in the payment of interest.

(d) There is no overdue amount of loan granted to companies, firms

or other parties listed in the registers maintained under section

301 of the Companies Act, 1956.

(e) According to the information and explanations given to us, the

Company has not taken loan from companies, firms and other

parties covered in the register maintained under section 301 of

the Companies Act, 1956, hence clause 4 (iii) (f) and (g) of the

Companies (Auditor's Report) Order, 2003 as amended by

Companies (Auditor's Report) (Amendment) Order, 2004 are not

applicable to the company.

(iv) In our opinion and according to the information and explanations

given to us there are adequate internal control procedure

commensurate with the size of the company and the nature of its

business for the purchase of inventories and fixed assets and for sale

of goods and services. We have not observed any continuing failure to

correct major weakness in the internal control.

(v) (a) According to information and explanations given to us, we are of

the opinion that particulars of contracts or arrangements

referred to in section 301 of the Companies Act, 1956 have been

entered into a register required to be maintained under that

section.

(b) Each of these transactions, made in pursuance of contracts or

arrangements entered in the register maintained u/s.301 of the

Companies Act, 1956, and aggregating during the year to

Rs.5,00,000/- or more in respect of each party, have been made

at prices which are reasonable. The company has not made

similar transactions with any other party.

(vi) The Company has not accepted any deposit from the public and hence

directives issued by the Reserve Bank of India and the provisions of

section 58A and 58 AA of the Companies Act, 1956 and rules framed

thereunder are not applicable for the year under audit.

(vii) In our opinion, the Company has an internal audit system

commensurate with its size and nature of its business.

(viii) We are informed by the management that Central Government has

prescribed the maintenance of Cost Records under section 209 (1) (d)

of the Companies Act, 1956, in respect of manufacture of copper,

aluminium conductors and sulphuric acid. We have broadly reviewed

the accounts and records of the company in this connection and are

of the opinion that, prima facie; prescribed accounts and records have

been made and maintained. We have not, however, made a detailed

examination of the records with a view to determine whether they are

accurate.

(ix) (a) According to the records of the company, the company has

generally been regular in depositing with appropriate authorities

undisputed statutory dues, including Provident Fund, Employees

State Insurance, Income-tax, Sales-tax, Wealth tax, Service Tax,

Custom Duty, Excise Duty, Cess and any other statutory dues

except Investor Education and Protection Fund.

(b) According to the information and explanations given to us, no

undisputed amounts payable in respect of such statutory dues,

except Rs.0.63 Crores in respect of Investor Education and

Protection Fund, as at 31st March 2006 for a period of more than

six months from the date they became payable, which is held in

abeyance due to pending legal case.

Annexure to the Auditors’ Report(Referred to in paragraph 1 of our report of even date)



(c) According to the information and explanations given to us, the disputed statutory dues aggregating to Rs. 106.06 Crores, that have not been

deposited on account of matters pending before appropriate authorities are as under:

(x) The company neither has accumulated losses nor it has incurred any

cash losses during the current financial year and the immediately

preceding financial year.

(xi) Based on our audit procedures and information and explanations

given by the management, we are of the opinion that the company

has not defaulted in repayment of dues to financial institutions,

banks or debenture holders.

(xii) According to the information and explanations given to us, the

company has not granted loans and advances on the basis of security

by way of pledge of shares, debenture and other securities.

(xiii) In our opinion, the company is not a chit fund, a nidhi or a mutual

benefit society. Therefore, the provisions of clause 4 (xiii) of the

Companies (Auditor's Report) Order 2003 is not applicable to the

Company.

(xiv) The company has maintained proper records of transactions and

contracts in respect of trading in securities and timely entries have

been made therein. The investments are held by the Company in its

own name except bad deliveries pending rectification written off in

the accounts.

(xv) According to the information and explanations given by the

management, the company has given guarantees for loan taken by

others from banks and financial institutions as mentioned in note no

25 (f) read with note no. 16 (a) of Schedule 19, without stipulating

any terms and conditions and we are unable to comment whether the

same are prejudicial to the interest of the company.

(xvi) According to the information and explanations given to us, no term

loans raised during the year.

(xvii) On the basis of review of utilization of funds, which is based on

overall examinations of the balance sheet of the company as at 31st

March 2006, related information as made available to us and as

represented to us by the management, we are of the opinion that, the

funds raised on short term basis by way of borrowing from banks and

financial institutions, have not been, prima facie, utilized for long

term purposes.

(xviii) During the year the company has not made any preferential

allotment of shares to parties and companies covered in the register

maintained under section 301 of the Companies Act, 1956.

(xviii) The following short term privately placed secured debentures have

been repaid prior to creation of security in favour of debenture

holders:- Outstanding at the beginning of year - Rs. 35 Crores, Issued

during the year - Rs.3020.12 Crores, Repaid during the year - Rs.3026

Crores. For balance amount of Rs. 29.12 Crores security is yet to be

created.

(xx) We have verified the end use of moneys raised by right issues of

equity shares and the same has been disclosed in the note no. 15 of

schedule 19 “Notes forming part of accounts”

(xxi) According to the informations and explanations given to us, no fraud

on or by the company has been noticed or reported during the year.




Partner PartnerMembership No. 35629 Membership No. 11709

Place: Mumbai

Dated: 31st May, 2006

Name of the Statute Nature of the Dues Amount Forum where dispute is pending

Central Excise Act, 1944 Excise Duty 94.64 CESTAT

Tamilnadu General Sales Tax, 1959 Sales Tax 0.60 Sales Tax Appellate Tribunal (Additional Bench)

Tamilnadu General Sales Tax, 1959 Sales Tax 1.60 Deputy Commercial Tax Officer, Tuticorin

Central Sales Tax Act, 1956 Sales Tax 2.10 Deputy Commercial Tax Officer, Tuticorin

Tamilnadu Tax and Consumption or

Sale of Electricity Act, 2003 Generation Tax 6.95 Madras High Court, Chennai

Custom Act, 1962 Custom Duty 0.17 CESTAT

Total 106.06

(Rs in Crore)



Balance Sheet As at March 31, 2006(Rs in Crores)

Schedule As at As at

March 31, 2006 March 31, 2005

I. SOURCES OF FUNDS

1. Shareholders' Funds

Share Capital 1 77.75 76.77

Reserves & Surplus 2 4,044.66 3,502.97

4,122.41 3,579.74

2. Loan Funds

Secured Loans 3 125.92 626.91

Unsecured Loans 4 1,908.87 1,812.59

2,034.79 2,439.50

3. Deferred Tax Liability 327.41 308.99

(Net) (Refer Note No 30 of Schedule No. 19)

Total 6,484.61 6,328.23

II. APPLICATION OF FUNDS

1. Fixed Assets 5

Gross Block 2,596.96 2,294.66

Less: Depreciation and Impairment 857.89 732.88

Net Block 1,739.07 1,561.78

Capital Work-in-Progress 71.00 253.30

1,810.07 1,815.08

2. Investments 6 2,671.78 2,986.33

3. Current Assets, Loans & Advances

Interest Accrued on Investments 2.15 6.60

Inventories 7 1,019.18 571.67

Sundry Debtors 8 575.80 409.47

Cash and Bank Balances 9 793.77 615.41

Loans & Advances 10 1,252.05 498.52

3,642.95 2,101.67

Less: Current Liabilities & Provisions: 11

Current Liabilities 907.87 460.91

Provisions 732.66 114.62

1,640.53 575.53

Net Current Assets 2,002.42 1,526.14

4. Miscellaneous Expenditure 0.34 0.68

(to the extent not written off or adjusted)

Total 6,484.61 6,328.23

Notes forming part of Accounts 19

As per our report of even date For and on behalf of the Board

For Chaturvedi & Shah For Das & Prasad Navin Agarwal Tarun Jain K. K. KauraChartered Accountants Chartered Accountants Executive Vice Chairman Whole Time Director Managing Director & CEO

R. Koria B. N. Agarwala D. D. Jalan S VaradharajanPartner Partner Chief Financial Officer Company SecretaryPlace : MumbaiDated : 31st May, 2006






Profit and Loss Account For the year ended March 31, 2006(Rs in Crores)

Schedule Year ended Year ended March 31, 2006 March 31, 2005

I. INCOMETurnover 7,923.10 4,279.05 Less: Excise Duty Recovered on Sales 419.20 287.40 Net Turnover 7,503.90 3,991.65 Other Income 12 115.98 115.44Variation in Stock 13 253.42 113.19Total 7,873.30 4,220.28

II. EXPENDITUREPurchases – 131.82 Manufacturing and other expenses 14 6,702.14 3,472.18 Personnel 15 46.47 44.30 Selling & Distribution 16 81.60 54.59 Administration & General 17 122.31 75.81 Interest & Finance charges 18 120.37 102.66

7,072.89 3,881.36 Less: Pre operative expenses of projects (net) 6.58 5.95

7,066.31 3,875.41806.99 344.87

Depreciation 128.23 114.06 Profit before Extraordinary Items and Tax 678.76 230.81 Extraordinary Items:Advances to Subsidiary Written off – 82.30 Impairment of Fixed Assets and Capital Work in progress – 45.30 Unrecoverable loans written off – 34.83

– 162.43 Less : Transferred from General Reserve – (18.00)PROFIT BEFORE TAXATION 678.76 86.38 Provision for current taxation(Including Wealth Tax Provision of Rs. 0.13 Crores, Previous Year Rs. 0.11 Crores) 148.34 14.27 Provision for Deferred taxation 18.42 (34.31)Provision for Fringe benefit tax 0.88 – PROFIT AFTER TAXATION 511.12 106.42 Income Tax Provision related to earlier years (written back)/provided (4.08) – Balance brought forward from last Year 587.21 548.65 AMOUNT AVAILABLE FOR APPROPRIATION 1,102.41 655.07 APPROPRIATIONSGeneral Reserve 52.00 30.00 Dividend on

Preference Shares 0.22 0.22 Income Tax on Dividend 0.03 0.03

Proposed Dividend Equity Shares 69.84 32.93 Income Tax on Proposed Dividend 9.79 4.62

Short Provision of Dividend of earlier year 0.05 –Short Provision for tax on Dividend of earlier year 0.01 0.06 Balance carried to the Balance Sheet 970.47 587.21 Total 1,102.41 655.07 Earning(in Rs) before extra ordinary items per Share of Rs.2/-each(Basic) 9.23 5.50Earning(in Rs) after extra ordinary items per Share of Rs. 2/-each (Basic) 9.23 2.33Earning(in Rs) before extra ordinary items per Share of Rs.2/-each(Diluted) 9.23 5.54Earning(in Rs) after extra ordinary items per Share of Rs.2/-each(Diluted) 9.23 2.33 Notes forming part of Accounts 19

(Refer Note No 29of Schedule 19



Schedules forming part of the Balance Sheet(Rs in Crores)

As at As at March 31, 2006 March 31, 2005

Authorised60,00,00,000 Equity Shares of Rs. 2/- each. 120.00 60.00

(Previous Year 12,00,00,000 Equity shares of Rs. 5/- each)3,00,00,000 Preference Shares of Rs.10/- each 30.00 30.00

150.00 90.00 Issued, Subscribed & Paid up11,17,38,469 (Previous Year 10,97,85,589 ) Equity Shares of Rs. 5/- each fully paid up. 55.87 54.89

Less: Unpaid Allotment Money/Calls in Arrears (other than Directors) (Current Year Rs.11,790) – –(Previous year Rs.11,790)

55.87 54.89 2,18,75,000 1% Cumulative Redeemable Preference Shares of Rs. 10/- each fully paid up. 21.88 21.88 Total 77.75 76.77Notes : 1 Of the above equity shares :

(a) 2,10,000 Equity Shares were allotted as fully paid up pursuant to a contract without payment being received in cash before buy back andextinguishment of shares.

(b) 4,28,24,788 Equity Shares were allotted as fully paid up Bonus Shares by way of capitalisation of General Reserve and Share Premium before buyback and extinguishment of shares.

(c) 27,33,675 Equity Shares were allotted pursuant to scheme of Amalgamation without payment being received in cash before buy back andextinguishment of shares.

(d) 40,99,400 Equity Shares (Previous Year 21,46,520) were allotted as fully paid upon conversion of 50,000 Foreign Currency Convertible Bonds(Previous Year 26,300).

2 Of the above equity shares, 8,58,65,830 Equity Shares are held by company's holding company and by fellow subsidiary of the company.

3 Refer Note No. 8 of Schedule 19 in respect of reduction of Issued, Subscribed and Paid up capital.

4. The Authorised Share Capital of the company has increased from Rs. 90 crores to Rs. 150 Crores and the nominal value of each equity share has beenreclassified from Rs. 5/- each to Rs. 2/- each with effect from 29th March 2006 pursuant to special resolution passed by postal ballot. The correspondingeffect of the same to the Issued, Subscribed and Paid up Equity Share Capital is effective from 12th May 2006 (the 'Record Date'), when these sharesare subdivided from Rs. 5/- each fully paid up to Rs. 2/- each fully paid up. On the same record date the company has issued bonus shares in the ratio

each amounting to Rs. 111.74 Crores as against the existing 11,17,38,469 Equity shares of Rs. 5/- each amounting to Rs. 55.87 Crores.

5 (a) 1% Cumulative Redeemable Preference Shares of Rs. 21.88 Crores are redeemable on expiry of 3 years from the date of allotment i.e. 4th March, 2004with a call option to the company to redeem the same at any time after expiry of 12 months from the date of allotment at the following terms :

i) Redemption premium Rs. 74.25 per share if redeemed after 12 months but before 24 months from the date of allotment

ii) Redemption premium Rs. 78.50 per share if redeemed after 24 months but before 36 months from the date of allotment

iii) Redemption premium Rs. 82.75 per share if redeemed at redemption date.

(b) Redemption premium on preference shares as mentioned above will be paid out of the share premium account and hence no provision has beenconsidered necessary.

1 SHARE CAPITAL

Capital Reserve:As per last Balance Sheet 2.26 2.26 Preference Share Redemption Reserve:As per last Balance Sheet 55.00 55.00 Debenture Redemption Reserve:As per last Balance Sheet 17.90 52.50 Less :- Transferred to General Reserve – 34.60

17.90 17.90 Share Premium Account:As per last Balance Sheet 2,734.82 664.58 Add: Received during the Year 106.43 2,070.24

2,841.25 2,734.82 Less: Unpaid Share Premium 0.03 0.03

2,841.22 2,734.79 General Reserve:As per last Balance Sheet 105.81 59.21 Add : Transferred from Debenture Redemption Reserve – 34.60

105.81 93.81 Less : Transferred to Profit & Loss Account – 18.00

105.81 75.81 Add: Transferred from Profit & Loss Account 52.00 30.00

157.81 105.81 Profit & Loss Account 970.47 587.21 Total 4,044.66 3,502.97

2 RESERVES & SURPLUS



of 1 : 1. Hence, post sub-divisioning and bonus issue, the Issued, Subscribed and Paid up Equity Share Capital is 55,84,94,411 Equity Shares of Rs. 2/-

Schedules forming part of the Balance Sheet

Notes :

1. Debentures referred at A above are secured by a first charge on pari passu basis in favour of the Trustees for the Debentures on the immovable

properties situated at Tuticorin in the State of Tamilnadu; Lonawala and Pune in the State of Maharashtra, Chinchpada in the UT of Dadra and Nagar

Haveli and Mouje Chatral of Kalol Taluka, District Gandhinagar, Gujarat.

2. Foreign Currency Loans referred at (B) above were secured by a first charge on a pari passu basis on all the Company's immovable properties situated

at Tuticorin in the State of Tamilnadu, and Silvassa in the UT of Dadra & Nagar Haveli and further secured by hypothecation of moveable properties at

the above places.

3. Working Capital Loans from Banks are secured by a first charge by way of hypothecation of Company's present and future inventories and book debts.

These loans are further secured by a second charge on all the immovable properties of the Company.

(Rs in Crores)As at As at

March 31, 2006 March 31, 2005

(A) Redeemable Non Convertible Debentures 100.00 113.33

(B) Foreign Currency Loans – 389.78

(C) Working Capital Loans from Banks 25.92 123.80

Total 125.92 626.91

3 SECURED LOANS

A. Deferred Sales Tax Liabilities 67.74 52.37

B. Loans from Banks/Financial Institutions

(i) Floating Rate Notes Due 2007 (134 FRNs @ US$1,00,000 each) 59.78 58.63

(ii) Foreign Currency Loans 636.42 405.12

(iii) 1% Foreign Currency Convertible Bonds – 103.69

(iv) Redeemable Non convertible Debentures 29.12 35.00

(v) Rupee Loans 12.38 15.68

C. Buyer's Credit 1,103.43 1,142.10

Total 1,908.87 1,812.59

Note:

1) Amount due within one year Rs.1221.99 Crores (Previous Year Rs. 1180.69 Crores).

4 UNSECURED LOANS

Nature of Fixed Assets GROSS BLOCK DEPRECIATION Net Block "Impair- NET BLOCKBefore Imp- -mentairment Loss Loss

As at Additions/ Deductions As at Upto For the Deductions/ As at As at As at As at As at 01.4.2005 Adjustments 31.3.2006 31.3.05 Year Adjustments 31.3.2006 31.3.2006 31.3.2006 31.3.2006 31.3.05

Tangible Fixed AssetsLand 40.28 0.72 - 41.00 2.29 0.27 - 2.56 38.44 - 38.44 37.99Buildings 131.94 18.54 1.02 149.46 19.84 3.57 0.23 23.18 126.28 3.50 122.78 108.60Buildings (Leasehold) 6.85 - - 6.85 2.31 0.10 - 2.41 4.44 - 4.44 4.54Plant & Machinery 2,049.68 262.20 6.34 2,305.55 620.91 117.83 2.54 736.21 1,569.34 60.56 1,508.78 1,368.21Furniture & Fixtures 12.31 1.02 0.12 13.21 4.91 0.74 0.03 5.63 7.58 - 7.58 7.40Data Processing Equipment 16.65 1.15 0.13 17.67 10.72 2.50 0.11 13.11 4.56 – 4.56 5.93Office Equipments 5.52 0.92 0.12 6.32 1.82 0.28 0.03 2.07 4.25 - 4.25 3.70Electrical Fittings 24.54 15.91 – 40.45 4.23 1.81 - 6.04 34.41 – 34.41 20.31Vehicles 6.89 3.25 0.98 9.16 1.79 0.78 0.30 2.27 6.89 - 6.89 5.10Intangible Fixed AssetsTechnical Know-how* - 7.29 - 7.29 - 0.35 - 0.35 6.94 - 6.94 - Total 2,294.66 311.00 8.71 2,596.96 668.82 128.23 3.23 793.83 1,803.13 64.06 1,739.07 1,561.78 Previous Year 2,127.45 177.19 9.98 2,294.66 560.57 114.06 5.81 668.82 1,625.84 64.06 1,561.78 Capital Work-in Progress 71.00 253.30

* Other than internally generated.

Notes: 1) Land includes lease hold land of Rs.31.80 Crores (Previous year Rs.31.08 Crores ).

2) Buildings (free-hold) include (a) Cost of Shares of Rs. 750 in Co-op.housing society, (b) Cost of shares of Rs. 750 in Co-operative societies representing possession of officepremises, (c) a residential flat in the joint names of the Company and one of its Directors.

3) Plant and Machinery include Rs.3.73 Crores and Rs. 1.68 Crores being the amount spent for laying water pipe line and power line respectively, the ownership of whichvests with the State Government Authorities.

4) Addition to Fixed Assets and Capital Work in Progress includes Rs. 1.26 Crores (Previous year Rs. 1.29 Crores) on account of Exchange Difference during the year.

5) Capital Work in progress is net of provision for Impairment of Rs.17.20 Crores (Previous year Rs. 17.20 Crores)

5 FIXED ASSETS




As at As at

March 31, 2006 March 31, 2005

LONG TERM INVESTMENTS (TRADE):Subsidiary CompaniesUnquoted Fully Paid-Up:in Equity Shares

11,25,18,495 The Bharat Aluminium Co. Ltd of Rs. 10/- each 553.18 553.18 (11,25,18,495)

40 Monte Cello Corporation BV, The Netherlands 125.23 125.23 (40) (Net of provision for diminution in value of investment of Rs.79 Crores)

50,000 Sterlite Paper Limited of Rs. 10/- each – – (50,000) (including 6 shares of Rs. 10/- each fully paid up, held jointly with nominees)

(Net of Provision for diminution in value of investments of Rs.0.05 Crores)25,50,000 Sterlite Opportunities & Ventures Limited of Rs. 10/- each (including 6 shares of Rs. 10/- each 51.05 51.05

fully paid up held jointly with nominees)(25,50,000)

1,00,000 Equity shares of Rs.5/- each of Sterlite Copper Limited * 0.05 0.05 (1,00,000) (including 12 shares of Rs. 5/- each fully paid up, held jointly with nominees)

* Under LiquidationTotal 729.51 729.51 In Debentures

1,05,16,00,000 Zero percent Optionally Fully convertible debentures of Sterlite Opportunities 1,051.60 1,095.60 (1,09,56,00,000) & Ventures Limited of Rs. 10/- each.

1,051.60 1,095.60Associate Companies:Unquoted Fully Paid-Up:In Equity Shares

1,44,53,485 Equity Share of RS. 10 each of Vedanta Alumina Ltd. (Company under the same management) 165.69 165.69 (1,44,53,485) (including 6 shares of Rs. 10/- each fully paid up, held jointly with nominees)

165.69 165.69 OthersQuoted Fully Paid-Up:In Equity Shares

8,52,370 Equity shares of Rs. 5/- each of Sterlite Optical Technologies Limited 5.16 5.16 (8,52,370) ( Including 12 shares of Rs.5/- each fully paid up, held jointly with nominees)

Unquoted Fully Paid-Up:In Preference Shares

24,00,000 8% Cumulative Redeemable Preference shares in India Foils Ltd of Rs 100/- each * 24.00 24.00 (24,00,000)

29.16 29.16* As legally advised not considered as company under the same management. Long Term investments (Other than Trade)Government & other securities - Unquoted7 Years National Savings Certificates (Current Year Rs.10,000/-, Previous year Rs.10,000/-) – – In UnitsUnquoted Fully Paid - Up:

100 UTI Master gain of Rs. 10/- each (Current Period Rs.1,000/-, Previous year Rs.1,000/-) – – (100)

Quoted Fully Paid - Up:46,01,726 Morgan Stanley Growth Fund of Rs. 10/- each 4.52 4.52

(46,01,726)Total 4.52 4.52 Current InvestmentQuoted fully paid up equity shares

1,162 Equity shares of Rs. 10/- each of Indian Aluminium Co.Ltd * - 0.01 (1,162)

* Bad deliveries now written offIn UnitsQuoted fully paid up:

Nil ING Vysya Select Debt Fund of Rs.10/- each - 17.50 (1,70,83,838)

Nil Prudential ICICI Mutual Fund of Rs.10/- each - 20.00 (1,21,85,834)

Nil SBI Magnum Institutional Income Fund of Rs.10/- each - 10.30 (96,67,005)

6 INVESTMENTS






As at As at

March 31, 2006 March 31, 2005

Nil Principal Mutual Fund of Rs.10/- each - 20.00 (1,94,23,133)

Nil Kotak Mutual Fund of Rs.10/- each - 20.95 (1,57,05,488)

1,50,00,000 JM Fixed Maturity Fund-YSA2 - Growth Option 15.00 - (Nil)

2,50,00,000 Kotak Cash Plus - (Growth) 25.0 - (Nil)

9,81,91,819 Reliance Liquid Fund - Treasury Plan (Institutional Plan Daily Dividend) 150.02 - (Nil)

24,99,59,254 Reliance Liquidity Fund - Dividend Plan (Daily Dividend Reinvestment) 250.03 - (Nil)

4,98,500 Chola Liquid - Daily Dividend Reinvestment 0.50 - (Nil)

8,97,577 Reliance Liquid Fund - Cash Plan - Daily Dividend Option 1.00 - (Nil)

1,01,830 Birla Cash Plus - Instl - Daily Dividend - Reinvestment 0.11 - (Nil)

4,99,890 Principal Cash Management Fund - Liquid Option Dividend Reinvestment Daily 0.50 - (Nil)

Unquoted pass through certificatesIL&FS Trust Company Limited (Series A8 & A1-1) of HDFC Bank Limited - 323.09 Mortgage Backed Loan Receivable Securitisation Trust (Series XXVI) - 100.00 Mortgage Backed Loan Receivable Securitisation Trust (Series XXV) - 400.00 Unquoted commercial paperABN Amro Securities (India) Private Limited - 50.00 Unquoted Bonds

200 7.7% IDBI BONDS of Rs.10,00,000/- each 19.79 -(NIL) 500 7.70% BANK OF MAHARASHTRA BONDS of Rs. 10,00,000/- each 49.66 -

(NIL) 800 7.50% IDBI BONDS of Rs. 10,00,000/- each 80.04 -

(NIL) Unquoted non convertible debentures

1000 7.65% HDFC NCD of Rs. 10,00,000/- each 99.65 (NIL)

Grand Total 2,671.78 2,986.33

6 INVESTMENTS (Contd.)

As at As at

March 31, 2006 March 31, 2005

Book Value Market Value Book Value Market Value

Aggregate Value of:Quoted Investments 451.84 470.33 98.44 104.45 Unquoted Investments 2,219.94 – 2887.89 –

Mutual Fund UnitsABN AMRO Floating Rate Fund - Institutional Plan (Daily Dividend Option) 10 8,34,97,200 83.50ABN AMRO Floating Rate Fund - Institutional Plus Plan (Daily Dividend Option) 10 9,70,13,916 97.01ABN AMRO Cash Fund - Institutional Plan (Daily Dividend Option) 10 16,22,61,167 162.26ABN AMRO Cash Fund - Institutional Plan (Growth Option) 10 4,84,09,740 50.00ABN AMRO Cash Fund - Institutional Plus Plan (Daily Dividend Option) 10 16,46,10,464 164.6ABN AMRO Long Term Floating Rate Fund - Institutional Plan (Weekly Dividend Option) 10 2,00,00,000 20.00Alliance Cash Manager Instnl - Daily (D) 10 19,80,84,853 198.09Alliance Cash Manager Instnl (G) 10 8,83,83,351 97.85Birla Bond Plus - Institutional Growth 10 2,38,61,345 30.03Birla Cash Plus - Institutional Premium Plan - Daily Dividend 10 33,42,91,168 335.02Birla Floating Rate Fund - Long Term Plan (Dividend) 10 1,92,57,387 20.06Birla Floating Rate Fund - Long Term Plan (Growth) 10 1,81,59,202 20.00Birla Floating Rate Fund - Short Term Plan (Dividend) 10 5,31,35,477 55.13Birla Floating Rate Fund - Short Term Plan (Growth) 10 5,05,65,626 55.50Birla Sun Life Cash Manager - Plan A(Institutional Daily Dividend) 10 23,24,79,564 232.50Birla Sun Life Cash Manager - Dividend Reinvestment 10 12,38,768 1.24

Face Value Units purchased and sold AmountRs. Nos. Cost (Rs. in Crores)

Note:1. The Following Current Investments were purchased and sold during the year

Sterlite AW 69-124-R2 07/09/2006 2:15 PM Page 77


Chola Fixed Maturity Plan - Series 1 (Quarterly Plan - I) - Cumulative Option 10 2,50,13,618 25.01Chola Fixed Maturity Plan - Series 2 (Quarterly Plan - I) - Dividend Payout Option 10 1,01,21,000 10.12Chola FMP - Series 1 (Quarterly Plan - II) - Dividend Payout Option 10 1,00,00,000 10.00Chola Liquid Fund - Daily Dividend Reinvestment Plan 10 12,09,78,976 121.19Chola Short Term Floating Rate Fund - Dividend-Daily 10 6,27,27,294 62.75Chola Liquid Fund - INSTITUTIONAL Plus - Cumulative 10 47,32,207 6.44DEUTSCHE FIXED TERM FUND SERIES 3 - GROW 10 2,00,00,000 20.00Deutsche Fixed TERM Fund Series 7 - Dividend 10 2,00,00,000 20.00DEUTSCHE FIXED TERM FUND SERIES 2 - DEUTSCHE FIXED TERM FUND SERIES 2 (DIVIDEND) 10 1,50,04,553 15.00Deutsche Floating Rate Fund - . (Growth Plan) 10 7,36,67,633 79.01Deutsche Floating Rate Fund - Dividend Plan (Weekly Dividend) 10 92,73,452 9.53Deutsche Insta Cash Plus Fund - Institutional Plan (Daily Dividend) 10 9,90,93,697 99.29Deutsche Insta Cash Plus Fund - Institutional Plan (Growth) 10 10,39,34,342 108.00DSP Merrill Lynch Liquidity Fund - Daily Dividend 10 6,96,79,674 69.75DSP Merrill Lynch Liquidity Fund - Daily Dividend - Inst. Plus Plan 10 3,67,926 36.80DSP Merrill Lynch Floating Rate Fund - Daily Dividend 10 1,99,47,140 20.00DSP Merrill Lynch Liquidity Fund- Institutional Plan - Daily Dividend 10 34,12,817 341.35DSP Merrill Lynch Liquidity Fund - Growth 10 93,57,471 17.55DSP Merrill Lynch Liquidity Fund - Daily - Regular - Dividend 10 22,357,642 22.38DSP Merrill Lynch Liquidity Fund - Daily - Regular - Dividend 1 1,000 132,274 13.23GCF - Plan C (Daily Dividend) 10 8,00,00,000 80.00GCF - Plan C (Growth) 10 19,67,11,884 206.60GFRF - Plan C (Growth) 10 6,14,81,301 64.64GFRF Long Term - Plan B (Dividend Monthly) 10 8,99,32,902 90.31GFRF Long Term - Plan B (Growth) 10 4,82,50,439 50.00Grindlays Cash Fund - Super Inst Plan C - Dividend Daily 10 5,00,10,859 50.01Grindlays Dynamic Bond Fund - GDBF (Growth) 10 1,21,75,918 15.00Grindlays Super Saver Income Fund - GSSIF - ST Plan A (Growth) 10 1,11,66,418 15.03Grindlays Super Saver Income Fund - GSSIF (Growth) 10 63,53,846 10.00Grindlays Cash Fund - Super Institutional Plan - Growth 10 73,24,123 9.25GSSIF-ST - Plan C (Dividend) 10 1,51,74,718 15.19HDFC Cash Management Fund - Savings Plan - Daily Dividend Option 10 21,48,89,299 228.56HDFC Cash Management Savings Plus - Dividend Plan 10 12,03,68,073 120.58HSBC Cash Fund - Institutional Plus (Dividend Option - Daily) 10 3,99,77,613 40.00HSBC Cash Fund - Institutional Plus (Growth) 10 4,79,27,151 50.00HSBC Floating Rate Fund - Long Term Plan - Institutional Option (Dividend - Weekly) 10 5,02,00,409 50.31HSBC Floating Rate Fund - Long Term Plan - Institutional Option (Growth) 10 4,88,22,273 50.01HSBC Floating Rate Fund - Short Term Plan - Institutional Option (Growth) 10 1,20,81,413 12.40ING Vysya Floating Rate Fund - Daily Dividend Option 10 3,40,75,060 34.10ING Vysya Floating Rate Fund - Growth Plan 10 5,73,36,592 59.01ING Vysya Liquid Fund - Institutional Daily Dividend Option 10 5,00,67,403 50.11ING Vysya Liquid Fund - Institutional Growth Option 10 5,65,38,180 59.00ING Vysya Liquid Fund - Super Institutional Daily Dividend Option 10 22,78,47,750 227.90ING Vysya Select Debt Fund - Growth Option 10 4,17,43,292 43.50ING Vysya Liquid Fund - Institutional Plan - Growth 10 3,04,13,427 37.06JM Floater Fund - Long Term Plan - PREMIUM Dividend Plan 10 9,30,93,551 93.35JM Floater Fund - Long Term Plan - PREMIUM Growth Plan 10 2,43,54,541 25.00JM G-Sec Fund - Regular Plan-Growth Plan - Growth Option 10 1,00,97,563 20.02JM High Liquidity Fund - - Premium Plan - Daily Dividend Option 10 15,85,20,755 158.52JM High Liquidity Fund - Super Institutional Plan- Daily Dividend 10 16,59,76,139 166.25JM High Liquidity Fund - Super Institutional Plan- Growth 10 2,39,27,108 25.00Kotak Flexi - Debt (Growth) 10 2,41,28,783 25.02Kotak Flexi - Debt scheme-Dividend 10 3,38,63,004 34.34Kotak Floater Short Term - (Growth) 10 4,58,32,875 50.00Kotak Floater Short Term - (Weekly Dividend) 10 5,02,71,905 50.30Kotak FMP Series XVII - - (Dividend) 10 1,50,00,000 15.00Kotak Liquid - Institutional Premium Plan - (Daily Dividend) 10 5,20,84,952 63.69Kotak Liquid - Institutional Premium Plan - (Daily Dividend) 10 18,83,44,674 230.31Kotak Liquid - Institutional Premium Plan - (Growth) 10 14,38,09,047 192.37LICMF Floating Rate Fund - Growth 10 4,28,72,423 45.01LICMF Floating Rate Fund - Short Term Plan - Dividend 10 9,92,53,767 99.98LICMF Liquid Fund - Dividend 10 37,09,93,422 405.90LICMF Liquid Fund - Growth 10 5,85,33,615 70.01Principal Cash Management - Liquid Option (Insti Premium - Daily Dividend) 10 44,80,31,550 448.06Principal Cash Management - Liquid Option (Insti Premium - Growth) 10 2,42,53,478 25.00Principal Floating Rate Fund - FMP - Insti. Weekly Dividend 10 6,03,86,203 60.45Principal Floating Rate Fund - SMP - Insti. Daily Dividend 10 7,61,34,943 76.14Principal Floating Rate Fund - SMP - Insti. Growth 10 6,01,83,016 62.15Principal Income Fund - Growth Plan (Institutional – Growth) 10 89,50,308 10.00Principal Short Term Plan - Institutional – Growth Plan 10 88,69,416 10.00Prudential ICICI Floating Rate Fund - Plan D 10 32,02,00,000 320.20Prudential ICICI Floating Rate Plan - - Option C - Daily Dividend Option 10 12,16,02,392 121.62Prudential ICICI Floating Rate Plan - D - Dividend Daily 10 4,89,00,000 48.90Prudential ICICI FMP-Yearly -Series 25 10 2,50,19,807 25.02Prudential ICICI Liquid Plan - Dividend (Institutional Plus - Daily) 10 54,53,99,317 646.38Prudential ICICI Liquid Plan - Dividend (Super Institutional Plus - Daily) 10 2,77,00,000 27.70Prudential ICICI Liquid Plan - Growth Option (Institutional Plus - Growth) 10 9,63,93,987 157.35Prudential ICICI Long Term Floating Rate Plan - Prudential ICICI Long Term Floating Rate Plan B (Growth) 10 2,39,76,491 24.70Prudential ICICI Long Term Plan - Growth Option 10 2,83,67,587 40.00Prudential ICICI Liquid Plan Institutional Plus - Daily Dividend Option 10 1,98,20,276 23.49Reliance Fixed Maturity Fund - Series II - Monthly Plan VI - Dividend 10 14,93,42,825 149.34

Face Value Units purchased and sold AmountRs. Nos. Amount

(Rs. in Crores)




As at As at

March 31, 2006 March 31, 2005

Raw Materials 397.61 216.62 Work-in-Process 496.41 305.24 Finished Goods 90.94 28.69 Stores, Spares, Packing Materials & Others 34.22 21.12 Total 1,019.18 571.67

7 INVENTORIES (As taken, valued & certified by the Management)

Reliance Fixed Maturity Fund- Annual Plan-3-Series-2 - Annual Plan-3 (Dividend Option) 10 1,14,00,000 11.40Reliance Fixed Maturity Fund- Monthly Pln -V-Series-2 - Monthly Plan -V (Dividend Option) 10 7,90,47,976 79.05Reliance Fixed Maturity Fund- Series 2 - Monthly Plan-IV (Dividend Option) 10 7,87,91,117 78.79Reliance Fixed Maturity Fund Series-II Monthly Plan- IX - Monthly Plan (Dividend Option) 10 5,00,00,000 50.00Reliance Fixed Maturity Fund Series-II Monthly Plan-VII - Monthly Plan (Dividend Option) 10 14,99,66,103 149.97Reliance Fixed Maturity Fund Series-II Monthly Plan-VIII - Monthly Plan (Dividend Option) 10 19,21,64,204 192.16Reliance Fixed Maturity Fund--Monthly Plan-3 - Monthly Plan-III (Dividend Option) 10 3,00,00,000 30.00Reliance Fixed Maturity Fund-Quarterly Plan-2-Series-II - Quarterly Plan-2 (Dividend Plan) 10 4,04,72,400 40.47Reliance Fixed Maturity Fund-Series-2 - Quarterly Plan-I (Dividend Option) 10 4,00,00,000 40.00Reliance Liquid Fund - Cash Plan (Daily Dividend Option) 10 13,73,94,946 154.70Reliance Liquid Fund - Institutional Plan (Daily Dividend Option) 10 40,08,184 6.12Reliance Liquid Fund - Institutional Plan (Growth Option) 10 2,30,74,164 37.40Reliance Liquid Fund - Treasury Plan (Retail Plan Monthly Dividend) 10 2,78,12,572 40.00Reliance Liquidity Fund - Dividend Plan (Daily Dividend Reinvestment) 10 25,37,53,662 253.80Reliance Short Term Fund - Growth Plan 10 94,17,642 11.01Reliance Liquid Fund - Treasury Plan - INSTITUTIONAL - Growth 10 9,22,628 1.50Sahara Liquid Fund - Dividend 10 5,91,87,465 60.60Sahara Liquid Fund - Variable Pricing - Daily Dividend option 10 2,92,099 29.91Sahara Liquid Fund Fixed Price - Dividend 10 2,69,603 27.60SBI Magnum Institutional Income Fund - Savings - Dividend 10 16,89,01,072 169.45SBI Magnum Institutional Income Fund - Savings - Growth 10 1,75,38,786 18.80Standard Chartered Liquidity Manager (SCLM) - A (Dividend Daily) 10 18,36,95,775 183.71Standard Chartered Liquidity Manager - Daily Dividend 10 3,85,07,686 38.79Tata Dynamic Bond Fund B - Growth 10 90,89,587 10.00Tata Floating Short Term Institutional Plan (Dividend) 10 15,93,89,376 159.56Tata Floating Short Term Institutional Plan (Growth) 10 4,94,68,909 51.13Tata Liquid Super High Investment Fund - Daily Dividend 10 6,97,098 72.99Tata Liquid Super High Investment Plan - Appreciation 10 4,10,137 50.00Tata Short Term Bond Fund - App Option 10 1,25,43,174 15.02Tata Short Term Bond Fund - Reg Income Option 10 1,37,65,509 15.00Tata Super High Investment Plan - Daily 10 11,52,981 128.50Templeton Floating Rate Income Fund - Short Term Plan (Dividend Option) 10 3,26,04,148 32.67Templeton Floating Rate Income Fund - Short Term Plan (Growth Option) 10 2,01,63,973 24.25Templeton India Short-Term Income Plan - Growth 10 3,22,577 40.03Templeton India Treasury Management - Institution - Daily 10 3,99,997 40.00UTI - FLOATING RATE STP - DIVIDEND 10 45,88,62,104 462.47UTI - FLOATING RATE STP - GROWTH 10 5,44,31,692 59.00UTI- Liquid Fund - Cash Plan (INST - Income) 10 17,85,098 181.34UTI- Liquid Fund - Cash Plan (INST Growth) 10 3,07,418 33.50UTI MMF - Daily Dividend 10 8,77,73,687 152.95UTI-Fixed Maturity Plan Yearly Series - July 2005 - Growth Option 10 2,00,00,000 20.00PASS THROUGH CERTIFICATES IL&FS Trust Company Ltd.(Series A8 & A1) of HDFC Bank Lts. Mortgage Backed Loan Receivable Securatisation Trust 100 1,99,60,803 199.6NON CONVERTIBLE DEBENTURESNABARD 5.90% DOM 11/07/08 100 75,00,000 76.82RABO IND NCD 6.16% 100 50,00,000 50.34IL&FS 5.95% DOM 16/03/06 100 25,00,000 25.26CERTIFICATE OF DEPOSITSState Bk of Indore CD-22/09/2006 100 60,00,000 57.46State Bank of Patiala CD 15/09/2006 100 30,00,000 28.79Karnataka Bank CD MAT-01/08/2006 100 60,00,000 57.97UTI Bank CD DOM-26/10/2006 100 25,00,000 23.81BONDS7.10% power Grid Corporation Bonds 1,000,000 50 4.667.10% power Grid Corporation Bonds 1,000,000 50 4.707.10% power Grid Corporation Bonds 1,000,000 50 4.747.10% power Grid Corporation Bonds 1,000,000 50 4.767.67% Infrastructure Development Finance Company Bonds 1,000,000 50 4.997.50% HDFC Bonds 1,000,000 50 4.987.80% HUDCO Bonds 1,000,000 250 24.374% TATA POWER CO. LTD Bonds 1,000,000 50 4.997.27% FCI Bonds 1,000,000 50 4.777.65% HDFC Bonds 1,000,000 50 4.977.39% power Grid Corporation Bonds 1,000,000 50 5.007.39% power Grid Corporation Bonds 1,000,000 50 4.997.39% power Grid Corporation Bonds 1,000,000 50 4.977.39% power Grid Corporation Bonds 1,000,000 50 4.967.39% power Grid Corporation Bonds 1,000,000 50 4.947.39% power Grid Corporation Bonds 1,000,000 50 4.93

Face Value Units purchased and sold AmountRs. Nos. Amount

(Rs. in Crores)




As at As at

March 31, 2006 March 31, 2005

Unsecured, Considered Good (Unless otherwise stated) & Subject to confirmation(a) Due for a period exceeding 6 months

(i) Considered Good 24.10 6.21 (ii) Considered Doubtful 0.12 0.12

Less: Provision for doubtful debts (0.12) – (0.12)(b) Others Considered Good* 551.70 403.26 * Includes Rs. 1.12 crores (Previous Year Rs. 1.09 crores) due from Subsidiary Company and Rs. 1.45 crores (Previous Year Rs. NIL) due form Ararahat Gold Recovery Company, a company under the same management (Maximum amount outstanding during the year Rs. 1.45 crores).Total 575.80 409.47

8 SUNDRY DEBTORS

Cash on hand 0.10 0.08 Balance with Scheduled Banks in:(i) Current Accounts including Cheques in hand 55.44 18.22 (ii) Deposit Accounts 730.11 589.83 (iii) Dividend/Debenture/ Debenture Interest Accounts* 8.11 7.27

Balance with Non-Scheduled Banks 0.01 0.01 (American Express Bank having the Closing balance of Rs. 0.01 Crores & Maximum Balance outstanding during the year Rs. 0.01 Crores)*Includes Fixed deposit of Rs. 2.83 Crores under lien with bank

Total 793.77 615.41

9 CASH AND BANK BALANCES

Subsidiary Companies 584.09 * 82.88 Advances recoverable in cash or in kind or for value to be received

– Considered Good** 285.73 303.46 – Considered Doubtful 12.89 13.66 Less: Provision for Doubtful Advances 12.89 13.66

285.73 303.46 Balances with Central Excise Authorities 52.14 99.81 Income Tax - Advance Tax and Tax Deducted at Source (Net) 135.91 12.37 Commodity Hedging Receivable (Refer Note No. 11 of Schedule 19) 194.18 – Total 1,252.05 498.52

* Includes Rs. 500 crores towards advance against Share Application money paid to Bharat Aluminium Company Limited.** Includes Rs. NIL (Previous year Rs.1.47 crores) due from Konkola Copper Mines Plc,a company under the same management (Maximum amount

outstanding during the year Rs 1.47 Crores)

10 LOANS & ADVANCES (Unsecured & considered good unless otherwise stated)

1. Current Liabilities :Acceptances – 66.46 Sundry Creditors(i) Small scale industrial undertaking(s)* 0.50 0.29 (ii) Others** 722.81 723.31 259.04 Other Liabilities 164.46 107.05 Interest accrued but not due on Loans 11.60 20.41 Investor Education and Protection Fund***(a) Unclaimed Dividend 3.28 2.47 (b) Unclaimed Matured Debentures 3.67 3.48 (c) Interest Accrued on (a) and (b) above 1.55 8.50 1.71

907.87 460.91

*Small scale industrial undertakings to whom amounts are due have been determined based on the information available with the company and are asfollows :

Pan Asian Environmental Services, P. S. Rajan Enterprises, Raveendran Contractors, Alpha Pneumatics Pvt. Ltd., Mil Industries Ltd., Kumar & Kumar Associates,Madras Hardtools Agencies (P) Ltd., Sharda Ceramics, Filaments & Winding (India) Pvt. Ltd., Karthik Engineering Works, Uniflow, Samrudhi Wood Industries,Ghanshyam Wood Industries, Pratik Wood Industries, Sadashiv Wood Industries, Patidar Wood Industries, Umiya Vijay Saw Mill, Shree Packaging

** Includes dues to Subsidiaries Rs 103.63 Crores (Previous Year Rs.50.45 Crores)

*** These figures do not include any amounts, due and outsanding, to be credited to Investor Education and Protection Fund except Rs.0.63 Crore (Previous year Rs. 0.63 crores) which is held in abeyance due to pending legal case.

11 CURRENT LIABILITIES & PROVISIONS




As at As at

March 31, 2006 March 31, 2005

2. Provisions :Provision for Current Tax and Fringe Benefit Tax 149.21 14.28 Proposed Dividend on Preference Shares and Tax thereon 0.13 0.13 Proposed Dividend on Equity Shares 69.84 32.93 Provision for Tax on Proposed Dividend 9.79 4.62 Provision For Other Staff Benefit Schemes 3.91 3.87 Commodity Hedging payable (Refer Note No. 11 of Schedule 19) 77.78 – Other Provisions * 422.00 58.79

732.66 114.62 Total 1,640.53 575.53

* The company has recognised liability based on substantial degree of estimation for :-

(i) Excise duty payable on clearance of goods lying in stock as on 31 st March,2005 of Rs.1.95 Crores as per the estimated pattern of despatches. As against

it, during the year Rs. 1.99 Crores has been incurred for clearance of such goods. The additional amount of Rs. 0.04 Crores has been charged off to Profit

and loss account. Liability recognised under this class for the year is Rs.9.47 Crores which is outstanding as on 31st March 2006. Actual outflow is

expected in the next financial year.

(ii) Final price payable on purchase of copper concentrate for which the quotational period price was not finalised as on 31.03.2005, a provision of Rs.55.35

Crores based on closing LME rate of copper and LMBA rate of precious metals was made. As against it, during the year Rs. 56.23 Crores has been incurred

towards final price settlement. The additional amount of Rs. 0.88 Crores has been charged to Profit and loss account. Liability recognised under this

class for the year is Rs. 412.53 Crores which is outstanding as on 31st March 2006. Actual outflow is expected on finalisation of quotational period price

in the next financial year.

11 CURRENT LIABILITIES & PROVISIONS (Contd.)

(Rs in Crores)Year ended Year ended

March 31, 2006 March 31, 2005

Dividend from Subsidiary – 5.63 Dividend on Long term Investments – 0.94 Current Investments 29.53 7.18 Profit on Sale of : Long Term Investments (net) – 0.48

: Current Investments (net) 12.18 26.03 Interest on

Current Investments 24.25 34.78 Others 38.67 24.17

(Tax Deducted at Source Rs.5.02 Crores, Previous Year Rs. 6.27 Crores)Unclaimed Liabilities written back (Net) 1.61 11.54 Miscellaneous Income 9.74 4.69 Total 115.98 115.44

12 OTHER INCOME

Closing Stock:Work-in-Process 496.41 305.24 Finished Goods 90.94 28.69

587.35 333.93Opening Stock:Work-in-Process 305.24 180.35 Finished Goods 28.69 40.39

333.93 220.74 Variation in Stock: 253.42 113.19

13 VARIATION IN STOCK

Schedules forming part of the Profit and Loss Account



Schedules forming part of the Profit and Loss Account(Rs in Crores)

Year ended Year ended

March 31, 2006 March 31, 2005

Raw materials consumed 6,329.87 3,226.48 Stores & Spares 55.69 40.58 Power, Fuel & Water 229.88 137.29 Machinery Repairs 30.55 28.33 Building Repairs 0.71 1.16 Other Repairs 1.42 0.24 Carriage Inward 5.88 3.10 Excise Duty 9.55 2.50 Other Manufacturing Expenses 38.59 32.50 Total 6,702.14 3,472.18

14 MANUFACTURING & OTHER EXPENSES

Salaries, Wages, Bonus & Commission 38.79 34.51 Contribution to Provident Fund, ESIC and other Funds 2.24 2.90 Employees' Welfare & Other Amenities 5.18 5.81 Gratuity 0.26 1.08 Total 46.47 44.30

15 PERSONNEL

Packing Expenses 18.32 13.52 Carriage Outward 51.99 29.69 Commission & Brokerage 4.18 7.68 Other Expenses 7.11 3.70 Total 81.60 54.59

16 SELLING & DISTRIBUTION

On Debentures and Fixed Loans * 35.00 38.89 Others 71.74 47.61 Bank charges 13.63 16.16

120.37 102.66

*Net of Derivative Income of Rs. 0.71 Crores (Previous Year Rs. 2.97 Crores).

18 INTEREST & FINANCE CHARGES

Rent 0.65 0.36 Rates & Taxes 1.14 0.98 Insurance 4.76 4.72 Conveyance & Travelling Expenses 6.11 5.11 Loss on sale/discarding of Fixed Assets (net) 3.17 8.58 Foreign Exchange Difference (net)* 58.48 7.42 Directors' Sitting Fees 0.01 0.02 Bad Debts and Advances :– For the year 0.83 –– Less : Adjusted against Provision for Doubtful Debts and Advances 0.76 0.07 – Provision for doubtful debts/advances – 1.34 Provision for diminution in the value of long term investments – 0.05 General Expenses 47.57 46.78 Misc. Expenditure Written Off 0.34 0.45 Investments written off 0.01 – Total 122.31 75.81

* Includes derivatives loss of Rs. 10.39 Crores (Previous year Rs 1.05 Crores).

17 ADMINISTRATION & GENERAL



Schedule forming part of the Accounts

1. Statement of significant accounting policies

(a) Basis of AccountingThe Financial Statements are prepared as a going-concern under historical cost convention on an accrual basis except those with significantuncertainty and in accordance with the Companies Act, 1956. Accounting policies not stated explicitly otherwise are consistent with generallyaccepted accounting principles.

(b) Use of EstimatesThe presentation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilitieson the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between theactual results and the estimates are recognised in the period in which the results are known/materialized.

(c) Borrowing CostBorrowing Cost attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets upto the datewhen such assets are ready for intended use. Other borrowing costs are charged as expense in the year in which they are incurred.

(d) Fixed AssetsFixed Assets are stated at cost (net of modvat/cenvat/Value Added Tax) less accumulated depreciation and impairment loss.

(e) Expenditure During Construction PeriodAll pre-operative project expenditure (net of income accrued) incurred upto the date of commercial production is capitalised.

(f) Depreciation (i) Depreciation has been provided on Fixed Assets on straight line method at the rates and in the manner specified in Schedule XIV to the

Companies Act, 1956 except in respect of additions arising on account of translation of foreign currency liabilities for acquisition of fixedassets, Insurance spares, on additions/extensions forming an integral part of existing plants and on the revised carrying amount of the assetsidentified as impaired on which depreciation has been provided over residual life of the respective fixed assets.

(ii) Amortisation of leasehold land and buildings has been done in proportion to the period of lease.

(iii) Fixed Assets where ownership vests with the Government/Local authorities are amortized at the rates of depreciation specified in Schedule XIVto the Companies Act, 1956.

(g) Intangible AssetsIntangible Assets are stated at cost of acquisition less accumulated amortisation. Technical know-how is amortised over the useful life of theunderlying plant. Amortisation is done on straight line basis.

(h) InvestmentsLong term investments are carried at cost. Current investments are carried at the lower of costs and quoted\fair value. Provision for diminution inthe value of long term investments is made only if such a decline is other than temporary in the opinion of the Management.

(i) Inventories(i) Inventories are valued at lower of cost or net realisable value except for scrap and by-products which are valued at net realisable value.

(ii) Cost of inventories of finished goods and work-in-process includes material cost, cost of conversion and other costs.

(iii) Cost of inventories of raw material and material cost of finished goods and work-in-process is determined on First In First Out (FIFO) basisexcept stores and spare parts which are valued at weighted average cost.

(j) Premium on Redemption of DebenturesPremium on redemption of debentures is provided for on a pro-rata basis over the tenure of the debentures.

(k) Foreign Currency Transactions (i) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction.

(ii) Monetary items denominated in foreign currencies at the year end are restated at year end rates. In case of monetary items which are coveredby forward exchange contracts, the difference between the year end rate and rate on the date of the contract is recognised as exchangedifference and the premium paid on forward contracts has been recognised over the life of the contract.

(iii) Non monetary foreign currency items are carried at cost.

(iv) Any income or expense on account of exchange difference either on settlement or on translation is recognised in the Profit and Loss accountexcept in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

(l) Issue ExpensesExpenses of Debenture / Bond / FRN etc issues pertaining to the projects are considered as pre-operative expenditure. Expenses of Debenture/ Bond/FRN issues relating to other uses incurred upto March 31, 2003 are amortised over a period of ten years/tenure of the instruments and the expensesincurred after March 31, 2003 are charged to Profit & Loss Account in the year in which they are incurred.

(m) TurnoverTurnover includes sale of goods,services,scrap,excise duty,export incentives and are net of sales tax/Value Added Tax, rebates and discounts.

(n) Employee Retirement Benefits Contribution to Provident Fund and Superannuation Fund are accounted on actual liability basis. Gratuity and leave encashment liabilities areaccounted for on the basis of actuarial valuation.

19 NOTES FORMING PART OF THE ACCOUNTS




(o) Export incentivesDuty drawback is recognised at the time of exports and the benefits in respect of advance license received by the company against export madeby it are recognised as and when goods are imported against them.

(p) Import of copper concentrate and export of slimeIn accordance with the prevailing international market practice, purchase of Copper Concentrate and export of Slimes are accounted for onprovisional invoice basis pending final invoice in terms of Purchase Contract/Sales Contract respectively.The cases where quotational period priceare not finalised as at the year end are restated at LME/LMBA rates as on the date of year end and adjustments are made based on the metalcontents as per laboratory assessments done by the company pending receipt of final invoice.

(q) Derivative Instruments

(i) Commodity HedgingIn order to hedge its exposure to commodity price risk, the company enters into forward, option, swap contract and other appropriatederivative instruments. The company does not hold commodity derivative instruments for speculative purposes. The derivative instrumentsdescribed above are used only for the purpose to manage exposure to commodity price risk. The cost / income and gain / losses arising on thisaccount are adjusted to the consumption of raw material.

The commodity derivative instruments are initially recorded at their cost, if any, on the date of the derivative transactions and re-measuredat their fair value at subsequent balance sheet dates.

The change in fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Profit and Loss Account. Thechange in fair value of hedged items are presented as Hedge Receivable or Payable as the case may be and such gain or loss is recorded inProfit and Loss Account and is offset by the gain or loss from the change in fair value of the derivative.

In case of cashflow hedge the change in the carrying amount of cashflow hedge is accounted as hedge receivable/payable. The accumulativechanges in fair value for cashflow hedge is transferred to Profit and Loss Account upon crystalisation of forecasted transactions.

Hedge accounting is discontinued when the hedging instrument expires or is sold, determined or exercised, or no longer qualified for hedgeaccounting. If a hedge transaction is no longer expected to occur, the net cumulative gain or loss recognized as hedge receivable or payableis transferred to Profit and Loss account.

(ii) Financial DerivativesFinancial derivatives contracts are accounted on the date of their settlement and realized gain / loss in respect of settled contracts arerecognized in the profit and loss accounts.

(r) Provision for Current and Deferred taxProvision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.Deferred tax resulting from “timing differences” between book and taxable profit is accounted for using the tax rates and laws that have beenenacted or substantively enacted as on the balance sheet date. The deferred tax asset is recognised and carried forward only to the extent thatthere is reasonable/virtual certainty that asset will be realised in future.

(s) Impairment of AssetsAn asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the Profit and LossAccount in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there hasbeen a change in the estimate of recoverable amount.

(t) Provision, Contingent Liabilities and Contingent assetsProvisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past eventsand it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes. ContingentAssets are neither recognised nor disclosed in the financial statements.

2. Capital Work-In-Progress Includes

3. In accordance with the Accounting Standards (AS-28) on “Impairment of Assets” issued by the Institute of Chartered Accountants of India, during theyear the company has reassessed its fixed assets and is of the view that no further impairment/reversal is considered to be necessary in view of itsexpected realisable value.

19 NOTES FORMING PART OF THE ACCOUNTS (Contd.)

(Rs in Crores)

Current Year Previous year

a. Advances for Capital expenditure 22.85 2.69b. Pre-operative expenditure as follows:-

Opening Balance 18.70 11.33Add: Pre-operative expenditure transferred from

Profit & Loss Account 6.58 5.95Interest, commitment & finance charges – 9.93

25.28 27.21Less: Capitalised during the year 24.90 8.51

0.38 18.70




6. The expense on account of exchange difference on outstanding forward exchange contracts to be recognised in the Profit & Loss Account of subsequentaccounting year aggregate to Rs.2.9 Crores (Previous Year Rs.15.58 Crores ).

7. General Expenses includes contribution of Rs. 0.25 Crores (Previous year Rs. 5.86 crores) to Public and Political awareness trust.

8. In terms of Scheme of Arrangement (Scheme) as approved by the Hon'ble High Court of Judicature at Mumbai, vide its order dated 19th April, 2002the company during 2002-2003 reduced its paid up share capital by Rs. 10.03 Crores. There are 82,246 equity shares of Rs. 5/- each(Previous Year 87,974)pending clearance from NSDL/CDSL. A Special Leave Petition filed in the Hon'ble Supreme Court of India against the judgement of Hon'ble High Courtof Mumbai by SEBI and Department of Company Affairs has been inter-alia dismissed. The Company has filed application in Hon'ble High Court ofMumbai to cancel these shares, the decision on which is pending.

9. In Accordance with the amendments to Clause 32 of Listing Agreement, Advance(s) in the nature of Loan is/are as under : (As Certified by the Management)

(a) Loans & Advances in the nature of Loans


Name of the Company Balance as at 31st Maximum Amount Balance as at 31stMarch, 2006 Outstanding March, 2005

during the Year

Monte Cello BV Subsidiary 46.68 48.07 45.79India Foils Limited Associate 27.64 27.64 27.64

b. None of the loanees have made, per se, investment in the shares of the company.

i. The above loans & advances to subsidiary fall under the category of loans & advances in the nature of loans where there is no repaymentschedule. The loan is free of interest.

ii. Inter Corporate Deposits are not considered as they are repayable on demand and interest is charged at market rate.

iii. As per the Company's policy, loan to employees are not considered in (a) above.

(Rs in Crores)


(a) Statutory Auditors:Audit fees 0.28 0.28Other services - Tax Audit fees 0.07 0.07Others 0.13 0.12Out of pocket expenses 0.03 0.06

0.51 0.53(b) Cost Auditors:

Cost Audit fees (Rs. 30,000/-) (Previous year Rs.16,530/-) – –Out of Pocket expenses(Rs. 30,840/-) (Previous year Rs.1900) – –

– –

4. Payment to Auditors comprise of

A. Remuneration to Executive Directors(i) Salary 5.60 3.14(ii) Contribution to Provident Fund 0.73 0.54(iii) Other Benefits 0.31 0.22

6.64 3.90Computation of net profit in accordance with section 309(5) of the Companies Act, 1956 Profit before taxation 678.76 86.38Add : Depreciation as per Accounts 128.23 114.06Loss on sale of assets 3.17 8.58Impairment charged to profit and loss account – 27.30Investments written off 0.01 - Bad debts written off 0.07 - Managerial Remuneration to:Vice Chairman, Managing Director and Wholetime Director. 6.64 3.98

816.88 240.30Less: Depreciation under Companies Act, 1956 128.23 114.06Profit on sale of investments 12.18 26.51Net Profit for the year 676.47 99.73Commission to : Commission maximum as per terms of appointment/ special resolution 40.59 5.98

B. Commission to Non-Executive Directors as determined by the Board 0.30 0.08

5. Managerial Remuneration

(Rs in Crores)




10. In connection with a guarantee facility obtained by Sterlite Opportunities & Ventures Limited (SOVL) from ICICI Bank in favour of trustees for Securednon- convertible debentures of Rs. 250 Crores issued by SOVL during the financial year 2003-04 the company granted an option to the ICICI Bank torequire the company to purchase all the receivables under the guarantee agreement that arise during the currency of the facility. The outstandingbalance of the above Non Convertible Debentures as at 31st March, 2006 is Rs. 10.35 Crores .

11. Copper, Aluminium and Precious Metals are internationally traded commodities and prices draw reference from quotations on the London MetalExchange (LME) / London Metal Bullion Association (LMBA). The company faces commodities price risk arising from the time lag and quantity differencebetween the purchase of Copper Cocentrate, Aluminium and sale of Copper Cathod/Rod, Precious Metals and Aluminium Conductors (AAC/ACSR), whichis being managed effectively. This is done by hedging exposures in respective commodity exchanges through future contracts in the exchange or by theuse of other appropriate derivative instrument.

In the absence of a specific accounting standard governing commodity hedge accounting in India, the company has adopted the principles enumeratedin the International Financial Reporting System - "Financial Instruments : Recognition and Measurement " to capture the real essence of commodityhedge transactions in the books of account . The earlier accounting practice was to recognise the gain/loss on account of commodity hedge transactionsonly when the underlying transactions are settled .

Accordingly, the hedged items and the commodity derivative instruments which are designated as fair value hedges are remeasured at their fair valueas on the balance sheet date and change in their value are accounted to the profit and loss account.The changes in the fair value of hedged items areaccounted as hedge receivable or payable as the case may be . This change in accounting policy has resulted into increase in loans and advances by Rs. 157.24 Crores and provisions by Rs. 77.78 Crores and decrease in raw material consumption by Rs. 153.35 Crores and consequential increase in theprofit by an equal amount.

12. The company has received a letter dated 1st march 2006 bearing reference F.No. 31(4)/2006-Met.1 from the Government of India wherein theGovernment made an offer to allow the company to buy the Government's 49% stake in Bharat Aluminium Company limited at a specified pricesuggested by the Government. In response to this letter and subsequent discussions held with the Government officials, the company has given a chequefor Rs. 1098,89,75,408.20 on 30th March 2006 and has requested the Government to transfer the shares to the company. The amount paid by thecompany is subject to final determination by an arbitrator in respect of the interest claim. Upto the date of adoption of accounts by the Board, theGovernment has not encashed the cheque and therefore above has not been considered in the Financial Statements of the company for the year ended31st March 2006.

13. (a) The Debentures referred to in Schedule 3 of Balance Sheet at A are due for redemption as follows:

7.87% debentures on 10th April, 2010 of Rs.40 Crores ; 8% debentures on 10th April, 2013 of Rs.60 Crores.

(b) The Debentures referred to in Schedule 4 of Balance Sheet at B(iii)are MIBOR linked and are due for repayment as follows :

Rs. 28.12 Crores on 07.04.2006 and Rs. 1 Crore on 19.06.2006

14. The company had received show cause notice under FERA and FEMA for transactions amounting to Rs.500.65 crores for non submission of documents.The company has submitted all documents for Rs. 496.65 Crores and alternate documents will be submitted for the balance amount.The companyenvisages no liability to arise on this account.

15. During the year 2004-05,the company issued 3,58,60,049 equity shares of Rs.5 each at a premium of Rs.545 aggregating to Rs.1972.30 Crores on Rightsbasis to existing share holders.In terms of Clause no. 6.5.7.1 of SEBI (Disclosure and Investor Protection) Guidelines, 2000 (as amended) proceeds ofRights Issue has been utilised as under :

16. The company in earlier years gave loans of Rs. 27.64 Crores to M/s. India Foils Limited (IFL) and invested Rs. 24 Crores in Cumulative Preference sharesof IFL . It has also given a guarantee of Rs. 182 Crores for the loans taken by IFL from banks and Financial Institutions. The accumulated losses of IFLhave exceeded the net worth of the company and the company is a sick company within the meaning of section 3 (1) (o) of the Sick Company (SpecialProvision) Act, 1985. In view of the ongoing business and financial restructing including disinvestments initiated, by IFL/its promoters, the amount ofpermanent diminution in the value of the investments and losses on account of loans and guarantees as mentioned above cannot be quantified at thisstage. In view of this no provisions are made in the books of accounts for the above loans, investment and guarantees.


(Rs in Crores)

Utilisation Planned Actual Utilisation Till 31.03.2006 Till 31.03.2005

Investment in BALCO 900.00 500.00 – Reduction in Term loans 520.00 88.33 75.00 Reduction in Current liabilities 551.00 375.89 375.89 Rights Issue expenses 1.30 1.19 1.19

1972.30 965.41 452.08

As at 31.3.2006 As at 31.3.2005 Presented in Balance Sheet as

Mutual Funds 440.06 88.75 Investments - Schedule 6 Pass Through Certificates - 823.09 Investments - Schedule 6 Commercial Papers - 50.00 Investments - Schedule 6 Bank Deposits 566.83 558.38 Cash & Bank balances – Schedule 9

1006.89 1520.22

Balance amount of Rs. 1006.89 (Previous Year Rs.1520.22 Crores) is lying in the following forms as at Balance sheet date







Licenced Capacity Installed Capacity

Description Unit Current Year Previous Year Current Year Previous Year

A. Capacity1 Continuous Cast Copper Rod MT N.A. N.A. 240,000 196,000 2 Copper Cathodes MT N.A. N.A. 300,000 165,000 3 Aluminium Cold Rolled Products MT N.A. N.A. 20,000 20,000 4 Phosphoric Acid MT N.A. N.A. 180,000 180,000 5 Sulphuric Acid MT N.A. N.A. 1,068,000 1,050,000 6 Power Transmission Line -Aluminium conductor MT N.A. N.A. 95,480 73,000

N.A. - Delicensed vide notification No. 477(E) dated 27th July, 1991

B. Production Quantity Quantity1 Continuous Cast Copper Rod * MT 166,497 125,406 2 Copper Cathodes ** MT 273,048 171,992 3 Power Transmission Line Aluminium MT 60,777 50,026

Conductors(AAC/ACSR)Current Year 93500 KM, Previous Year 63318 KM

4 Sulphuric Acid*** MT 844,376 546,647 5 Phosphoric Acid MT 171,893 104,902

* Includes 336 MT ( Previous year 2802 MT) produced on job work.** Includes 167473 MT (Previous year 123279 MT) used for captive consumption*** Includes 466210 MT (Previous year 288754 MT) used for captive consumption

17. Details regarding licenced and installed capacity and actual production (As certified by the management)

Current Year Previous Year

Description Unit Quantity Value Quantity Value

A. Opening stockContinuous Cast Copper Rod MT 188 6.96 968 15.97 Copper Cathodes MT 443 7.83 206 3.34 Power Transmission Line Aluminium MT 515 5.03 774 7.62Conductors(AAC/ACSR)Current Year 535 KM, Previous Year 2544 KMSulphuric Acid MT 5,706 0.78 10,775 0.62 Phosphoric Acid MT 5,158 8.05 9,499 12.84 Others 0.04 –

28.69 40.39B. Closing Stock

Continuous Cast Copper Rod MT 329 8.58 188 6.96 Copper Cathodes MT 546 13.90 443 7.83 Power Transmission Line Aluminium MT 4,330 50.96 515 5.03 Conductors/ (AAC/ACSR) Current Year 5634 KM, Previous Year 535 KMSulphuric Acid MT 14,432 1.89 5,706 0.78Phosphoric Acid MT 8,734 15.57 5,158 8.05 Others 0.04 0.04

90.94 28.69C. Turnover

Continuous Cast Copper Rod MT 166,356 3,674.79 123,384 2,146.64 Copper Cathodes MT 105,268 2,095.63 48,476 755.15 Power Transmission Line Aluminium MT 56,962 649.41 50,285 509.03Conductors/ (AAC/ACSR) Current Year 88401 KM, Previous Year 65327 KMSulphuric Acid MT 369,440 58.40 262,962 41.24Phosphoric Acid MT 168,317 311.74 109,243 182.46Gold KG - - 2,100 123.65Anode Slime - 929.69 - 347.39Export Benefits 182.25 * 143.86Services 6.08 10.15Others 15.11 19.48

7,923.10 4,279.05* Includes Rs. 100.49 Crores under the Target Plus and DFCE Scheme of Foreign Trade Policy 2004-09.

18. Quantitative information in respect of opening stock, closing stock, Turnover and consumption of raw materials (As certified by management)(Rs in Crores)







Description Unit Quantity Value Quantity Value

D. Raw material ConsumedCopper Concentrate DMT 928,381 5,573.78 597,927 2,690.91Aluminium (sheets/wire rod) MT 50,258 476.40 38,752 350.34 Rock Phosphate MT 577,005 187.06 347,602 105.53 Others 92.62 79.70

6,329.87 3,226.48E. Purchases

Gold KG - - 2,100 126.46 Rock Phosphate MT - - 17,924 5.36

- 131.82


Description (Rs. in Crores) % of total (Rs. in Crores) % of total

consumption consumption

Indigenous 446.27 7% 379.71 12%Imported 5,883.60 93% 2,846.77 88%

6,329.87 3,226.48

23. Value of raw materials consumed

Indigenous 44.66 80% 30.15 74%Imported 11.03 20% 10.43 26%

55.69 40.58

24. Value of components, stores & spares parts consumed

Current year Previous year

Raw materials 6,154.49 2,803.58 Stores & Spares 17.12 12.49 Capital Goods 6.55 17.65

19. CIF Value of Imports

Year to which Dividend relates 31st March, 31st March, 2006 2005

Number of Shareholders 1 1 Number of Shares held 80,743,150 45,027,057 Amount Remitted-Gross (Rs. in Crores) 24.22 13.51

22. Particulars of dividend paid to non resident shareholders

Technical Service Charges 4.25 2.42 Technical Know-how 7.37 - Interest 72.93 67.05 Professional Fees 28.28 22.48 Others 1.32 5.36

114.15 97.31

20. Expenditure in foreign currency

(a) FOB Value of Exports 4,238.21 1,654.19 (b) Management Fees 5.90 8.98 (b) Others - 2.61

4,244.11 1,665.78

21. Earning in foreign currency

(Rs in Crores)





Particulars As at31st As at31st March, 2006 March, 2005

(a) Estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances) 99.79 14.63 (Cash outflow is expected on execution of such capital contracts, on progressive basis.)

(b) Disputed liabilities in appeal:(i) Sales Tax (relating to sale value) 3.70 3.70

(No cash outflow is expected in the near future)(ii) Excise Duty ( net of modvatable excise duty on interunit transfers) 13.19 39.78

(Mainly on account of difference in valuation of intermediate products meant for captive consumption at other locations and clearance of intermediate products to other locations on job basis. No cash outflow is expected in the near future).

(iii) FERA/FEMA (relating to non submission of documents) 1.17 1.29

(c) Unexpired Letters of Credit 684.23 552.15 (These are established in favour of vendors but cargo/material under the aforesaid Letter of Credit are yet to be received as on year end date. Cash outflow expected on the basis of payment terms as mentioned in Letter of Credit).

(d) Bank Guarantees 247.23 299.22 (Bank guarantees are provided under contractual/legal obligation. No cash outflow is expected)

(e) Bill Discounted 169.06 14.33 (No cash outflow is expected)

(f) The Company has given Corporate Guarantees to Banks/Financial Institutions on behalf of M/s Madras Aluminium Company Limited, Vedanta Alumina Limited, CMT and India Foils Limited. The outstanding amount is Rs. 673.41 Crores (Previous Year Rs. 413.04 Crores) on this account as on year end.

(g) Estimated cost of variation in copper and precious metals quantity due to adjustments done based on metal contents as per laboratory assessments pending receipt of final invoice amounts to Rs.26.99 Crores (Previous year Rs.18.34 Crores).

25. Contingent Liabilities

26. Disclosure on Financial and Derivatives Instrumentsa) Derivative contracts entered into by the company and outstandings as on 31st March 2006

(i) For Hedging Currency and Interest Rate Related Risks : - Nominal amounts of derivatives contracts entered into by the company and outstanding as on 31st March 2006 amounts to Rs. 1568.34 Crores.

Category wise break up is given below

b) All derivative and Financial instruments acquired by the company are for hedging purposes only.c) Unhedged foreign currency exposure as on 31st March 2006 is as under:-

Payable 1499.46Receivable 242.61

Note:Since the above disclosure became mandatory from 31.03.2006 the previous year's figures has not been disclosed.

(Rs in Crores)

(Rs in Crores)

(Rs in Crores)

Sr. No. Particulars As at 31.3.20061 Interest Rate Swaps 94.61 2 Options 361.34 3 Forex Forward Cover 1,112.39

1,568.34

(ii) For hedging commodity related risks :- Category wise break up is given below.

Particulars Purchases SalesForwards / FuturesCopper (MT) 40000 17475Gold (Oz) 10398 74305Silver (Oz) 6172 55828Aluminium(MT) 3450 500




27. Segment Information as per Accounting Standard 17 on Segment Reporting for the year ended 31st March, 2006

I) Information about Primary Business Segments.

(Rs in Crores)

Business Segments

Particulars Copper Aluminium Others Unallocated Eliminations Grand Total

Current Previous Current Previous Current Previous Current Previous Current Previous Current Previous

Year Year Year Year Year Year Year Year Year Year Year Year

Revenue

External Turnover 6,954.05 3,454.02 652.22 511.39 316.83 313.64 - - - - 7,923.10 4,279.05

Inter-Segment Turnover 65.53 39.54 - - - - - - (65.53) (39.54) - -

Gross Turnover 7,019.58 3,493.56 652.22 511.39 316.83 313.64 - - (65.53) (39.54) 7,923.10 4,279.05

Less : Excise Duty

Recovered on Sales 348.20 229.22 67.72 54.99 3.28 3.19 - - - - 419.20 287.40

Total Revenue 6,671.38 3,264.34 584.50 456.40 313.55 310.45 - - (65.53) (39.54) 7,503.90 3,991.65

Results

Segment Result 647.66 266.71 53.31 14.08 9.42 (22.77) - - - - 710.39 258.02

Unallocated Expenses - - - - - - 27.25 39.99 - - 27.25 39.99

Operating Profit/(loss) 647.66 266.71 53.31 14.08 9.42 (22.77) (27.25) (39.99) - - 683.14 218.03

Less: Interest Expenses (net) - - - – - - 120.37 102.66 - - 120.37 102.66

Add : Other Income 8.50 5.22 3.30 0.60 0.15 0.04 104.04 109.58 - - 115.99 115.44

Less: Income Tax

(including Deferred Tax) - - - - 167.64 (20.04) - - 167.64 (20.04)

Less: Impairment &

Extraordinary Items - 4.00 - 23.30 - - - 117.13 - - - 144.43

Net Profit/(Loss) 656.16 267.93 56.61 (8.62) 9.57 (22.73) (211.22) (130.16) - - 511.12 106.42

Other Information

Segment Assets 3,383.31 2,815.72 372.13 224.76 337.50 274.06 - - - - 4,092.94 3,314.54

Unallocated Corporate Assets - - - - - - 4,032.20 3,589.22 - - 4,032.20 3,589.22

Total Assets 8,125.14 6,903.76

Segment Liabilities 1,281.21 369.51 50.97 94.04 21.50 15.07 - - - - 1,353.68 478.62

Unallocated Corporate liabilities - - - - 2,649.05 2,845.40 - - 2,649.05 2,845.40

Total Liabilities 4,002.73 3,324.02

Capital Expenditure 93.04 78.37 27.66 13.34 4.99 14.05 3.01 4.24 - - 128.70 110.00

Depreciation 108.83 95.28 3.78 4.72 14.25 12.90 1.37 1.16 - - 128.23 114.06

Non-cash Expenditure

(excl. depreciation) 0.37 0.92 0.05 - - - - 0.92 - - 0.42 1.84

Note:

(a) The Company has disclosed business segment as primary segment. Segments have been identified and reported taking into account, the different risks

and returns, the organization structure and the internal reporting systems. The main business segment are i) Copper which consist of manufacturing of

copper cathode and continuous cast copper rod and ii) Aluminium which consists of manufacturing of power transmission line aluminium conductor

and aluminium foils. Other business segment comprise of Phosphoric Acid and Trading of Gold.

(b) Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segments and amount allocated on a

reasonable basis. Unallocated expenditure consist of common expenditure incurred for all the segments and expenses incurred at corporate level. The

assets and liabilities that can not be allocated between the segments are shown as unallocated corporate assets and liabilities respectively.

( c) The change in accounting policy as enumerated in note no. 11 of Schedule 19 has resulted into increase in profit by Rs. 153.06 Crores in the Copper

segment and Rs. 0.29 Crores in the Aluminium segment for the current year and consequential increase in net current assets by equal amount.





28. Related Party disclosures

List of related parties and relationships

Geographical Segment Current year Previous year

Revenue by geographical segment- Turnover

India 3,660.17 2,610.96

Outside India 4,262.93 1,668.09

Total 7,923.10 4,279.05

Carrying Amount of Segment Assets

India 7,953.22 6,733.51

Outside India 171.91 171.01

Total 8,125.13 6,903.76

Capital Expenditure

India 128.70 110.00

Outside India – –

Total 128.70 110.00

II. Information about secondary segment

i) Entities Controlling the Company (Holding Companies) iv) Associates

Twinstar Holding Limited India Foils Limited

Vedanta Resources Holdings Limited Vedanta Alumina Limited

Vedanta Resources Plc.

Volcan Investments Limited

ii) Fellow Subsidiary v) Key Managerial Personnel

The Madras Aluminum Company Limited Shri Anil Agarwal

Konkola Copper Mines Plc Shri Navin Agarwal

Ararahat Gold Recovery Company Shri Tarun Jain

iii) Subsidiaries Shri K. K .Kaura

Bharat Aluminium Company Limited Shri D. D. Jalan

Sterlite Paper Limited

Copper Mines of Tasmania Pty Limited vi) Relatives of Key management Personnel

Thalanga Copper Mines Pty Limited Shri Dwarka Prasad Agarwal Relative of Shri Anil Agarwal and

Shri Navin Agarwal

Montecello BV Smt. Rajni Jain Relative of Shri Tarun Jain

Sterlite Opportunities & Ventures Limited

Sterlite Copper Limited vii) Others

Hindustan Zinc Limited Vedanta Foundation

(Rs in Crores)





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xii) Details of Major Transactions with related parties :


1) Proceed of Rights Issue

Twinstar Holdings Limited – 1,964.39

– 1,964.39

2) Advances Recoverable in Cash or in Kind

(a) Given/(Received) During the year

(i) Bharat Aluminium Co. Ltd. (Advance against Share Application Money) 500.00 –

(ii) Vedanta Resources Plc 1.69 –

(iii) Ms. Rajni Jain (1.50) –

500.19 –

(b) Balance as at 31.03.2006

(i) Bharat Aluminium Co. Ltd. (Advance against Share Application Money) 500.00

(ii) Konkola Copper Mines Plc - 1.47

(iii) Monte Cello BV 46.68 45.79

(iv) Sterlite Paper Limited 36.78 36.57

(v) Sterlite Opportunities and Ventures Limited 0.62 0.29

(vi) Vedanta Resources Plc 1.69 -

(vii) India Foils Limited 27.64 27.64

(viii) Ms. Rajni Jain - 1.50

613.41 113.26

3) Investments / (Redemption) made during the year

(i) Sterlite Opportunities and Ventures Limited (44.00) 247.00

(ii) Vedanta Alumina Limited - 165.59

(44.00) 412.59

4) Purchase/ (Sales) of Fixed Assets

(i) Vedanta Alumina Limited (0.62) -

(ii) Sterlite Paper Limited 0.09 -

(0.53) -

5) Creditors

(i) Vedanta Resources Plc 44.61 23.11

(ii) Copper Mines of Tasmania Pty Limited 85.91 50.15

(iii) Bharat Aluminium Co. Ltd. 17.72 -

(iv) Konkola Copper Mines Plc 0.05 –

148.30 73.26

6) Debtors

(i) Copper Mines of Tasmania Pty Limited 1.12 1.09

(ii) Thalanga Copper Mines Pty Limited - 1.09

(iii) Ararahat Gold Recovery Company 1.45 –

2.57 2.18

7) Income

(a) Sales

Madras Aluminium Company Limited 0.09 0.06

0.09 0.06

(b) Rent Income


0.15 0.15

(c) Management Consultancy Services :

(i) Copper Mines of Tasmania Pty Limited 4.45 4.49

(ii) Thalanga Copper Mines Pty Limited – 4.49

(iii) Konkola Copper Mines Plc – 1.02

(iv) Ararahat Gold Recovery Company 1.45 –

5.90 10.00

(d) Dividend Income

Bharat Aluminium Company Limited – 5.63

– 5.63

(Rs in Crores)








8) Expenditure (a) Purchases

(i) Copper Mines of Tasmania Pty Limited 550.16 301.80(ii) Thalanga Copper Mines Pty Limited 71.56 105.29 (iii) Madras Aluminium Company Limited 25.28 66.57 (iv) Bharat Aluminium Company Limited 137.48 25.73 (v) Hindustan Zinc Limited 0.08 –

784.55 499.39(b) Remuneration/Sitting Fees:

(i) Mr. Navin Agarwal 3.01 2.61 (ii) Mr. K. K. Kaura 1.90 0.75 (iii) Mr. Tarun Jain 1.73 1.53 (iv) Mr. D. D. Jalan 0.76 -

7.40 4.89 (c) Allocation of Corporate Expenses

(i) Hindustan Zinc Limited (11.14) (12.35)(ii) Bharat Aluminium Company Limited (9.23) (10.49)(iii) Madras Aluminium Company Limited (1.61) (1.83)

(21.98) (24.67)(d) Management Consultancy Services

Vedanta Resources Plc 22.31 22.48 22.31 22.48

(e) InterestBharat Aluminium Company Limited - * – *Rs.31,347 (Previous Year Rs. 3847)

- – (f) Power Charges

Madras Aluminium Company Limited 1.25 1.39 1.25 1.39

(g) Recovery of deputed employees remuneration (i) Hindustan Zinc Limited (18.07) (6.91)(ii) Bharat Aluminium Company Limited (25.24) (13.86)(iii) Madras Aluminium Company Limited (2.96) (0.98)(iv) Konkola Copper Mines (4.73) - (v) Vedanta Alumina Limited (0.77) (3.94)(vi) Ararahat Gold Recovery Company (0.76) -

(52.53) (25.69)9) Dividend paid

(i) Twinstar Holdings Limited 24.22 13.51 (ii) Madras Aluminium Company Limited 1.54 1.53

25.76 15.0410) Guarantees

(i) Copper Mines of Tasmania Pty Limited 81.41 93.23 (ii) India Foils Limited 182.00 182.00 (iii) Madras Aluminium Company Limited 110.00 110.00 (iv) Vedanta Alumina Limited 300.00 27.81

673.41 413.04 11) Option seller obligation guarantee facility

Sterlite Opportunities and Ventures Limited 10.35 12.00 10.35 12.00

(Rs in Crores)




Net Profit after tax (Before extra ordinary items) 511.12 250.85 Less: Dividend on preference shares and tax thereon 0.25 0.25 Profit before extra ordinary item attributable to equity share holders for Basic EPS 510.87 250.60 Less : Extra ordinary items – 144.43 Profit after extra ordinary item attributable to equity share holders for Basic EPS 510.87 106.17 Profit before extra ordinary item attributable to equity share holders for Basic EPS 510.87 250.60 Add : Interest and premium expense recognised on Foreign Currency Convertible Bonds net of tax – 2.60 Profit before extra ordinary item attributable to equity share holders for Diluted EPS 510.87 253.20 Less : Extra ordinary items – 144.43 Profit after extra ordinary item attributable to equity share holders for Diluted EPS 510.87 108.77 Weighted Average no. of equity shares outstanding during the year :-

for Basic EPS Nos. 55,34,14,569 45,55,69,573 for Diluted EPS Nos. 55,34,14,569 45,74,40,053 Basic EPS - before extraordinary items Rs. 9.23 5.50

- after extraordinary items Rs. 9.23 2.33

Diluted EPS - before extraordinary items Rs. 9.23 5.54 - after extraordinary items Rs. 9.23 2.33

Nominal Value per Share Rs. 2/- 2/-

Reconciliation between number of shares used for calculating basic and diluted earning per sharea Number of Shares used for calculating Basic EPS 55,34,14,569 45,55,69,573 b Add :Potential Equity Shares (Foreign Currency Convertible Bonds) – 1,870,480 c Number of shares used for calculating Diluted EPS 55,34,14,569 45,74,40,053

Note: In compliance with the Accounting Standard-20 " Earnings Per Share", the earning per share for current and previous year has been calculatedafter considering the increase in outstanding number of equity and potential equity shares due to split of equity shares of Rs. 5/- each into Rs. 2/- each and issue of bonus shares in the ratio of 1 : 1 after 31st March, 2006 but before the Financial Statements approved by the Boardof Directors.

(Rs in Crores)29. Earning Per Share (EPS)

As at 31st March, As at 31st March,2006 2005

LiabilitiesRelated to Fixed Assets 335.44 314.52 AssetsProvision for Doubtful Advances 4.38 4.22 Others 3.65 1.31 Total 8.03 5.53 Deferred Tax Liability (Net) 327.41 308.99

30. Deferred Taxation

31. The figures of previous year have been recast, rearranged and regrouped wherever considered necessary.






Cash Flow Statement For the year ended March 31, 2006




(Rs in Crores)

Year ended Year ended March 31, 2006 March 31, 2005

A. CASH FLOW FROM OPERATING ACTIVITIESNet profit after tax as per P&L Account 511.12 106.42Adjusted for Provision for Taxation 167.64 (20.04)Extra ordinary items - 144.43

678.76 230.81 Adjusted for :- Depreciation 127.99 113.93 - Dividend Income (29.53) (13.75)- Interest Income (62.92) (51.21)- Interest & Borrowing Costs 120.37 94.92 - Provision for doubtful debts/advances 0.07 1.34 - Sundry Liabilities written back (1.61) (11.54)- Loss/ (Profit) on Sale of Investment (Net) (12.18) (26.51)- Loss/ (Profit) on Sale / Discarding of Assets (Net) 3.17 8.58 - Provision for diminution in value of investments/Investments written-off 0.01 0.05 - Exchange difference 0.04 (20.92)- Miscellaneous Expenses Written Off 0.34 0.45

145.75 95.34 Operating profit before working capital changes 824.51 326.15 Adjusted for:- Trade and other receivables (293.52) (304.18)- Inventories (447.51) (197.33)- Trade payables 905.25 (72.30)

164.22 (573.81)Cash generation from operations 988.73 (247.66)Interest paid (net) (129.18) (110.41)Direct taxes paid / TDS deducted/Refund received (133.75) 10.14 Net cash flow from/(used in) from Operating Activities 725.80 (347.93)

B. CASH FLOW USED IN INVESTING ACTIVITIESPurchase of Fixed Assets & Capital Work in Progress (138.90) (136.94)Sale of Fixed Assets 2.31 7.89 Purchase of Investments (12046.18) (12736.13)Sale of Investment 12328.94 11388.76 Investment in subsidiaries (456.00) - Movement of loans (1.30) 127.87 Interest Received 67.37 45.35 Dividend Received on Investments 29.53 13.75 Net cash flow used in Investing Activities (214.23) (1289.45)

C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from issue of share capital including share premium * - 1972.30 Proceeds from long term loan 16.68 331.65 Repayment of long term loans * (194.74) (453.94)Short term loans (Net) (142.44) 252.73 Effect of exchange rate change on foreign currency EURO Convertible Bonds/FRNs 24.30 13.87 Dividend paid (37.01) (27.71)Net Cash flow from/(used in) from Financing Activities (333.21) 2088.90 Net Increase/(decrease) in cash and cash equivalent 178.36 451.52 Opening balance of cash and cash equivalent 615.41 163.89 Closing balance of Cash and cash equivalent 793.77 615.41

* The conversion of 50,000 Foreign currency convertible bonds (Previous Year 26300) into Equity shares have been excluded in view of para 40 of Accounting Standard 3-"Cash Flow Statement " Notes:1) The above Cash Flow Statement has been prepared under the " Indirect Method " as set out in Accounting standard-3 "Cash Flow Statement"

issued by the Institute of Chartered Accountants of India.

2) Figures in the brackets indicate outflows.



Section 212

Bharat Sterlite Hindustan Monte Copper Thalanga Sterlite Sterlite

Aluminium Opportunities Zinc Ltd. Cello BV Mines of Copper Paper Copper

Sl. Company and Ventures Tasmania Mines Limited Ltd.

No. Particulars Ltd. Ltd. Pty. Ltd. Pty. Ltd.

1 Financial year of the Subsidiary 31-03-2006 31-03-2006 31-03-2006 31-03-2006 31-03-2006 31-03-2006 31-03-2006 31-03-2006

Company ended on

2 Shares of the Subsidiary Company

held on the above date and extent

of holding

a) Equity shares 11,25,18,495 25,50,000 27,43,15,331 40 2 5,78,240 50,000 50,000

b) Extent of Holding 51% 100% 64.92% 100% 100% 100% 100% 100%

3 The net aggregate amount of the

Subsidiaries profit/(loss) so far as

it is concerned with the members

of Sterlite Industries (India) Limited

(i) Not dealt within the holding (Refer Note (Refer Note (Refer Note

company's accounts No.1) No. 2) No. 2)

a) For the financial year of Profit Profit Profit Loss Profit Profit Loss (Loss)

the Subsidiary (In Crores) Rs . 85.94 Rs. 47.17 Rs. 955.96 Euro 0.05 A$ .0012 A$ 0.001 Rs. 0.7571 –

b) For the previous financial

years of the subsidiary/

since it became the Profit Profit Profit Profit (Loss) Profit (Loss) (Loss)

Holding company's Rs.125.17 Rs.8.71 Rs. 707.85 Euro 2.33 A$ 5.61 A$ 9.8 Rs.132.05 Rs. 0.011

subsidiary (in Crores)

(i) Dealt within the holding

company's accounts

a) For the financial year of

the Subsidiary (In Crores ) Nil Nil Nil Nil Nil Nil Nil Nil

b) For the previous financial

years of the subsidiary/ since it

became the Holding

subsidiary (in Crores) company's Nil Nil Nil Nil Nil Nil Nil Nil

4 Material changes, if any, between

the end of the financial year of the

subsidiary company and that of

the Holding Company NA NA NA NA NA NA NA NA

Notes: 1. Hindustan Zinc Ltd. is a subsidiary of Sterlite Opportunities & Ventures Ltd., which is 100% subsidiary of the Company.

2. Copper Mines of Tasmania Pty Ltd. and Thalanga Copper Mines Pty. Ltd. are subsidiary companies of Monte Cello B V which is 100%

subsidiary of the Company

Statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies



Balance Sheet AbstractBalance Sheet Abstract and Company’s General Business Profile

Public Issue

Bonus Issue

3 1 0 3

Registration No.

Balance Sheet Date

I. Registration Details

II. Capital Raised during the year (Amount in Rs. Thousands)

Total Liabilities

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

2 0 0 6

Date Month Year

Private Placement

Paid-up Equity Share CapitalSources of Funds

Total Assets

Paid-up PreferenceShare Capital

IV. Performance of the Company (Amount in Rs. Thousands)

Product Description ITC Code No. (ITC Code)

V. Generic names of Three Principal Products / Services of Company (As per monetary terms)

Net Fixed Assets Investments

Turnover

Profit after Tax

Other Income

Dividend Rate (%)

Application of Funds

2 1 8 3 3

– Basic

Earning per share (Rs.)

– Diluted

Continuos Cast Copper Rod 7 4 0 7 . 1 0

Aluminium Conductors (AAC/ASCR) 7 6 1 4 . 1 0

Copper Cathode 7 4 0 3 . 1 1

Phosphoric Acid 2 8 0 9

Net Current Assets Misc. Expenditure

Accumulated Losses

Rights Issue

State Code 1 1

N I L

8 1 2 5 1 4 0 08 1 2 5 1 4 0 0

2 1 8 7 5 0

1 9 0 8 8 6 9 3

5 5 8 6 9 2

4 0 4 4 6 6 5 7

2 6 7 1 7 7 7 4

3 4 1 3

1 8 1 0 0 6 1 0

2 0 0 2 4 2 9 5

N I L

1 1 5 9 8 7 9

6 2 . 5

0 9 . 2 3

7 9 2 3 0 9 7 6

Total Expenditure Profit before Tax 6 7 8 7 5 4 67 3 6 2 5 7 9 6

5 1 1 1 1 7 0

0 9 . 2 3

N I LN I L

N I L

Reserves & Surplus Unsecured Loans

1 2 5 9 1 7 1Secured Loans

For and on behalf of the Board

Navin Agarwal Tarun Jain K. K. KauraExecutive Vice Chairman Whole Time Director Managing Director & CEO

Place : Mumbai D. D. Jalan S VaradharajanDated :31st May, 2006 Chief Financial Officer Company Secretary



Auditors' Report to the Board of Directors of Sterlite Industries (India) Limited on the Consolidated Financial Statements of Sterlite Industries (India)

Limited, it's Subsidiaries and an associate company

We have audited the attached Consolidated Balance Sheet of SterliteIndustries (India) Limited, it's subsidiaries and an associate company, as atMarch 31st 2006, the Consolidated Profit and Loss Account andConsolidated Cash Flow Statement for the year ended on that date. TheseFinancial Statements are the responsibility of Company's management andhave been prepared by the management on the basis of separate financialstatements and other financial information regarding components. Ourresponsibility is to express an opinion on these financial statements basedon our audit.

1. We conducted our audit in accordance with the generally acceptedauditing standards in India. These standards require that we plan andperform the audit to obtain reasonable assurance whether the financialstatements are prepared, in all material respects, in accordance with anidentified financial reporting framework and are free of materialmis–statements. An audit includes, examining on a test basis, evidencesupporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating theoverall financial statements. We believe that our audit provides areasonable basis for our opinion.

2. We did not audit the financial statements of Copper Mines of TasmaniaPty Limited, Thalanga Copper Mines Pty. Limited, Bharat AluminiumCompany Limited, Sterlite Paper Limited, Sterlite Opportunities andVentures Limited, Sterlite Copper Limited and Hindustan Zinc Limited,the Subsidiary Companies, whose financial statements reflect totalassets of Rs. 11,714.97 Crores as at March 31st 2006 and total revenuesof Rs. 6,663.40 Crores and net cash flows of Rs. 102.77 Crores for theyear ended on that date. These financial statements have been auditedby other auditors whose reports has been furnished to us, and ouropinion, in so far as it relates to the amounts included in respect ofthese subsidiaries, is based solely on the report of the others auditors.

3. Financial statements of Monte Cello BV has not been audited in viewof the statutory size exemption under Article 396, Title 9, Book 2 of theDutch Civil Code. The financial statements of this subsidiary reflectingthe total assets of Rs. 95 Crores as at March 31st, 2006 and totalRevenues of Rs. Nil and net cash flows of Rs. 0.02 Crores for the yearended on that date have been certified by Management and furnishedto us, and our opinion, in so far as it relates to the amounts includedin respect of the subsidiary, is based solely on these certified financialstatements.

4. The financial statements of Vedanta Alumina Limited, an associatecompany, have been audited by other auditor whose report has beenfurnished to us and insofar as it relates to the amounts included inrespect of this associate, is based solely on the report of the otherauditors.

5. Attention is invited to following notes in Schedule 20: -

5.1 Note no. 16 regarding the non provision for permanent diminution invalue of investment in India Foils Limited (IFL) and losses on loans givento IFL and guarantees given by the company for the loans taken by IFLfrom banks and financial institutions, for the reasons explained there in,the ultimate effect of which on the profit of the company could not bedetermined.

5.2 Note No. 20 with regard to long term investment, by Hindustan ZincLimited, in equity shares of a power company being classified asintangible assets and amortized. This treatment is in preference torequirements of Accounting Standard 13 “Accounting for Investment”and Schedule XIV of the Companies Act, 1956. This has resulted in profitfor the year being lower by Rs.4.67 Crores, investment being lower by

Rs.98.41 Crores and reserves and surplus being lower by Rs.23.70 Crores.

5.3 Note no.7 regarding the consolidation of the financial statements ofcertain subsidiary companies with different accounting policies.

6. We further report that, without considering items mentioned atparagraph 5.1 and 5.3 above the effect of which could not bedetermined, had the observation made in paragraph 5.2 above beenconsidered, the profit after minority interest for the year would havebeen Rs. 1640.84 Crores (as against the reported figure of Rs. 1636.17Crores), investment would have been Rs. 2593.59 Crores (as against thereported figure of Rs. 2495.18 Crores), minority interest have been Rs.1696.39 Crores (as against the reported figure of Rs. 1694.75 Crores).

7. We report that the Consolidated Financial Statement have beenprepared by the Company in accordance with the requirements ofAccounting Standard (AS) - 21 “Consolidated Financial Statements”and Accounting Standard (AS) - 23 “Accounting for Investments inAssociates in Consolidated Financial Statements”, issued by theInstitute of Chartered Accountants of India and on the basis of theseparate audited / certified financial statements of the Company, itssubsidiaries and its associate included in the Consolidated FinancialStatements.

8. Subject to our comments in paragraph 5 above, with consequentialaggregate effects to the extent possible quantified in paragraph 6above, we report that: -

Based on our audit and on the consideration of reports of otherauditors on separate financial statements and on the other financialinformation of the components and to the best of our information andaccording to the explanations given to us, we are of the opinion thatthe attached consolidated financial statements read together withnotes thereto, in particular note no. 23 of Schedule 20, regardingchange in accounting policy of cost / income and gain / losses arisingon account of commodity hedging transactions, wherein the companyhas adopted the principles enumerated in the International FinancialReporting System “Financial Instruments: Recognition andMeasurement” in the absence of a specific accounting standard inIndia, particularly changes in fair value of hedged items, give true andfair view in conformity with the accounting principles generallyaccepted in India: -

a) In case of the Consolidated Balance Sheet, of the consolidatedstate of affairs of the Company and its Subsidiaries as at March31st, 2006,

b) In case of the Consolidated Profit and Loss Account, of theconsolidated profit of the Company and its subsidiaries for theyear ended on that date and

c) In case of the Consolidated Cash Flow Statement, of theConsolidated Cash Flows of the Company and its subsidiaries forthe year then ended.

For Chaturvedi & Shah For Das & PrasadChartered Accountants Chartered Accountants

R. Koria B. N. AgarwalaPartner PartnerMembership No. 35629 Membership No. 11709

Place: MumbaiDated: 31st May, 2006

Consolidated Auditors’ Report



Consolidated Balance Sheet As at March 31, 2006(Rs in Crores)

Schedule As at As at

March 31, 2006 March 31, 2005

I. SOURCES OF FUNDS

1. Shareholders' Funds

Share Capital 1 77.75 76.77

Reserves & Surplus 2 5,997.14 4,269.03

Deferred Government grant 3 0.25 0.26

6,075.14 4,346.06

2. Minority Interest 1,694.75 1,137.92

3. Loan Funds

Secured Loans 4 2,414.53 3,110.95

Unsecured Loans 5 2,750.76 2,220.02

5,165.29 5,330.97

4. Deferred Tax liability (Net) 751.07 509.75

(Refer Note No. 9 of Schedule No. 20)

Total 13,686.25 11,324.70

II. APPLICATION OF FUNDS

1. Fixed Assets 6

Gross Block 11,439.95 8,154.19

Less: Depreciation and Impairment 3,651.27 3,177.59

Net Block 7,788.68 4,976.60

Capital Work-in-Progress 761.05 2,835.26

8,549.73 7,811.86

2. Investments

In Associates 165.32 165.67

In Others 2,329.86 1,683.40

2,495.18 1,849.07

3. Current Assets, Loans & Advances

Interest Accrued on Investments 2.34 7.85

Inventories 7 1,950.67 1,035.64

Sundry Debtors 8 1,347.50 720.25

Cash and Bank Balances 9 1,115.31 834.22

Loans & Advances 10 1,626.36 896.62

6,042.18 3,494.58

Less: Current Liabilities & Provisions 11

Current Liabilities 1,891.80 1,337.45

Provisions 1,519.50 514.26

3,411.30 1,851.71

Net Current Assets 2,630.88 1,642.87

4. Miscellaneous Expenditure 12 10.46 20.90

(to the extent not written off or adjusted)

Total 13,686.25 11,324.70












Consolidated Profit and Loss Account For the year ended March 31, 2006(Rs in Crores)

Schedule Year ended Year ended March 31, 2006 March 31, 2005

I. INCOMETurnover 14,272.39 7,964.87 Less: Excise Duty Recovered on Sales 1,145.24 712.40 Net Turnover 13,127.15 7,252.47 Other Income 13 336.32 297.22 Variation In Stock 14 412.35 61.65 Total 13,875.82 7,611.34

II. EXPENDITUREPurchases 51.49 131.82Manufacturing and other expenses 15 9,078.25 4,922.15Personnel 16 451.77 409.36 Selling & Distribution 17 256.64 174.14Administration & General 18 268.06 182.09Interest & Finance charges 19 235.30 134.31

10,341.51 5,953.87Less: Pre operative expenses of projects (net) 254.53 43.13

10,086.98 5,910.74 3,788.84 1,700.60

Depreciation & Amortisation 526.94 297.70Profit before extraordinary items and tax 3,261.90 1,402.90Extraordinary items:Voluntary retirement scheme 10.10 28.69Advances to Subsidiary Written off – 82.30 Impairment of Fixed Assets and Capital Work in progress – 45.30 Unrecoverable loans written off – 34.83

– 162.43 Less :Transferred from General Reserve – 18.00

– 144.43 PROFIT BEFORE TAXATION 3,251.80 1,229.78Provision for Current taxation (Including Wealth Tax Provision of Rs. 0.13 Crores Previous Year Rs.0.14 Crores) 821.67 266.67

– Deferred taxation 219.74 48.06 – Fringe Benefit Tax 3.45 –

Mat Credit entitlement (21.24) – PROFIT AFTER TAXATION 2,228.18 915.05Income Tax Provision related to earlier years provided/(written back) (7.08) 0.55

2,235.26 914.50Less - Minority Interest in Income 599.09 292.33 Less : Minority's Share in the proposed dividend of subsidiary & tax thereon 42.25 29.58 262.75

556.84 1,678.42 651.75

Add - Share in the Profit/(Loss) of Associates (0.35) (0.02)Balance at the beginning of the year 764.98 574.65 AMOUNT AVAILABLE FOR APPROPRIATION 2,443.05 1,226.38 APPROPRIATIONSGeneral Reserve 928.44 387.07 Dividend on Preference Shares 0.22 0.22Income Tax on Preference Dividend 0.03 0.03 Proposed Dividend onEquity Shares of the Company 69.84 32.93 Income Tax on Proposed Dividend 9.79 11.35 Proposed Dividend to Minority Equity Shareholder ofSubsidiary company and Tax thereon 42.25 29.58 Short Provision of Dividend of earlier year 0.05 – Short Provision for tax on Dividend 0.01 0.21 Balance carried to the Balance Sheet 1,392.42 764.99 Total 2,443.05 1,226.38 Earning(in Rs) before extra ordinary items per Share of Rs.2/-each(Basic) 29.68 17.22 Earning(in Rs) after extra ordinary items per Share of Rs. 2/-each(Basic) 29.55 13.65 Earning(in Rs) before extra ordinary items per Share of Rs.2/-each(Diluted) 29.68 17.21 Earning(in Rs) after extra ordinary items per Share of Rs.2/-each(Diluted) 29.55 13.65


(Refer NoteNo 37 of

Schedule 20


Schedules forming part of the Consolidated Balance Sheet(Rs in Crores)

As at As at March 31, 2006 March 31, 2005

Authorised60,00,00,000 Equity Shares of Rs. 2/- each. 120.00 60.00

(Previous Year 12,00,00,000 Equity shares of Rs. 5/- each)3,00,00,000 Preference Shares of Rs.10/- each 30.00 30.00

150.00 90.00 Issued, Subscribed & Paid up11,17,38,469 (Previous Year 10,97,85,589 ) Equity Shares of Rs. 5/- each fully paid up. 55.87 54.89

Less: Unpaid Allotment Money/Calls in Arrears (other than Directors) (Current Year Rs.11,790) – –(Previous year Rs.11,790)

55.87 54.89 2,18,75,000 1% Cumulative Redeemable Preference Shares of Rs. 10/- each fully paid up. 21.88 21.88

Total 77.75 76.77

Notes :

1. Of the above equity shares :

(a) 2,10,000 Equity Shares were allotted as fully paid up pursuant to a contract without payment being received in cash before buy back and extinguishment of shares.

(b) 4,28,24,788 Equity Shares were allotted as fully paid up Bonus Shares by way of capitalisation of General Reserve and Share Premium before buy back and

extinguishment of shares.

(c) 27,33,675 Equity Shares were allotted pursuant to scheme of Amalgamation without payment being received in cash before buy back and extinguishment of share

(d) 40,99,400 Equity Shares (Previous Year 21,46,520) were allotted as fully paid upon conversion of 50,000 Foreign Currency Convertible Bonds (Previous Year 26,300).

2. Of the above equity shares, 8,58,65,830 Equity Shares are held by company's holding company and by fellow subsidiary of the company.

3. Refer Note No. 21 of Schedule 20 in respect of reduction of Issued, Subscribed and Paid up capital.

4. The Authorised Share Capital of the company has increased from Rs. 90 crores to Rs. 150 Crores and the nominal value of each equity share has been reclassified from

Rs. 5/- each to Rs. 2/- each with effect from 29th March 2006 pursuant to special resolution passed by postal ballot. The corresponding effect of the same to the Issued,

Subscribed and Paid up Equity Share Capital is effective from 12th May 2006 (the 'Record Date'), when these shares are subdivided from Rs. 5/- each fully paid up to Rs. 2/-

each fully paid up. On the same record date the company has issued bonus shares in the ratio of 1 : 1 . Hence, post sub-divisioning and bonus issue, the Issued, Subscribed

and Paid up Equity Share Capital is 55,86,92,346 Equity Shares of Rs. 2/- each amounting to Rs. 111.74 Crores as against the existing 11,17,38,469 Equity shares of Rs. 5/-

each amounting to Rs. 55.87 Crores.

5. (a) 1% Cumulative Redeemable Preference Shares of Rs. 21.88 Crores are redeemable on expiry of 3 years from the date of allotment i.e.4th March, 2004 with a call option

to the company to redeem the same at any time after expiry of 12 months from the date of allotment at the following terms :

i) Redemption premium Rs. 74.25 per share if redeemed after 12 months but before 24 months from the date of allotment

ii) Redemption premium Rs. 78.50 per share if redeemed after 24 months but before 36 months from the date of allotment

iii) Redemption premium Rs. 82.75 per share if redeemed at redemption date.

(b) Redemption premium on preference shares as mentioned above will be paid out of the share premium account and hence no provision has been considered necessary.

1 SHARE CAPITAL

Capital Reserve:As per last Balance Sheet 2.26 2.26 Preference Share Redemption Reserve:As per last Balance Sheet 55.00 55.00 Debenture Redemption Reserve:As per last Balance Sheet 17.90 52.50 Less :- Transferred to General Reserve – 34.60

17.90 17.90 Share Premium Account:As per last Balance Sheet 2,769.09 698.85 Add: Received during the Year 106.43 2,070.24

2,875.52 2,769.09 Less: Unpaid Share Premium 0.03 0.03

2,875.49 2,769.06General ReserveAs per Last Balance Sheet 692.28 288.61 Add : Transferred from Debenture Redemption Reserve – 34.60

692.28 323.21 Less : -Transferred to Profit and Loss Account – 18.00

692.28 305.21 Add :- Transferred from Profit & Loss Account 928.45 387.07

1,620.73 692.28 Foreign Currency Translation Reserve (27.04) (32.46)Profit & Loss Account 1,392.42 764.99 Add: Adjustment on account of Foreign Subsidiary 60.38 –

1,452.80 764.99 Total 5,997.14 4,269.03

2 RESERVES & SURPLUS



Schedules forming part of the Consolidated Balance Sheet

Notes :

1. Out of Debentures referred at A above:

(i) Rs. 100 crores are secured by a first charge on pari passu basis in favour of the Trustees for the Debentures on the immovable properties situated at Tuticorin

in the State of Tamilnadu; Lonawala and Pune in the State of Maharashtra, Chinchpada in the UT of Dadra & Nagar Haveli and Mouje Chatral of Kalol Taluka,

District Gandhinagar, Gujarat.

(ii) Rs. 9.00 Crores of Sterlite Opportunities and Ventures Limited are secured by a first pari-passu mortgage over freehold land in Gujarat and unconditional and

irrevocable guarantee of ICICI Bank Limited.

2. Out of Foreign Currency Loan at B above:

(i) Rs. 389.78 crores were secured by a first charge on a pari passu basis on all the Company's immovable properties situated at Tuticorin in the State of

Tamilnadu, and Silvassa in the UT of Dadra & Nagar Haveli and further secured by hypothecation of moveable properties at the above places.

(ii) Rs. 546.88 crores of Hindustan Zinc Limited were secured by hypothecation of fixed assets of Chanderiya Lead Zinc smelter, Debari Zinc Smelter and Vizag

Zinc Smelter and movable assets excluding inventories and debtors of Chanderiya Lead Zinc smelter, Debari Zinc smelter, Vizag Zinc smelter, Zawar mines,

Rajpura Dariba mines and Rampura Agucha mines.

(iii) Rs. 1.05 crores of Bharat Aluminium Company Limited are secured by hypothecation of stock of raw materials, stock-in-process, semi-finished, finished

products, consumable stores and spares, bills receivables, book debts and all other movables both present and future.The charges ranks pari passu among

banks under the multiple banking arrangements, both for fund based as well as non fund based facilities.

3. The Term Loans at C above amounting to Rs.1590.35 crores of Bharat Aluminium Company Limited are secured by first exclusive charge on movable properties,

present and future, tangible or intangible, and assets other than current assets and charge on immovable properties.

4. The Working Capital Loans at D above of the company amounting to Rs. 25.92 crores are secured by a first charge by way of hypothecation of the Company's

present and future inventories and book debts. These loans are further secured by a second charge on all the immovable properties of the Company.

5. The Buyer's credit at E above of Bharat Aluminium Company Limited amounting to Rs.688.21 crores are having first pari passu charge with other term lenders,

on entire fixed assets, immovable and movable, present and future- charge yet to be created.

Notes :

1) Amount due within one year Rs. 1355.82 crores (Previous year 1230.69 crores).


March 31, 2006 March 31, 2005

Grants-in-aid received from Government of India towards setting up of pilot plant and

research facilities for testing of Bauxite

As per Last Balance Sheet 0.26 0.27

Less : Transferred to profit and loss account 0.01 0.01

Total 0.25 0.26

3 DEFERRED GOVERNMENT GRANT

(A) Redeemable Non Convertible Debentures 109.00 125.33

(B) Foreign Currency Loan 1.05 936.66

(C) Term Loans from Banks/Financial Institutions (Rupee Loans): 1,590.35 1,200.00

(D) Working Capital Loans from Banks 25.92 133.80

(E) Buyer's Credit 688.21 715.16

Total 2,414.53 3,110.95

4 SECURED LOANS

A. Deferred Sales Tax Liabilities 67.74 52.37

B. Loans from Banks/Financial Institutions

(i) Floating Rate Notes Due 2007 (134 FRNs @ US$1,00,000 each)" 59.78 58.63

(ii) Foreign Currency Loans 1,194.05 405.12

(iii) 1% Foreign Currency Convertible Bonds – 103.69

(iv) Redeemable Non convertible Debentures 29.12 35.00

(v) Rupee Loans 12.38 65.67

C. Others 284.26 357.44

D. Buyer's Credit 1,103.43 1,142.10

Total 2,750.76 2,220.02

5 UNSECURED LOANS






Nature of Fixed Assets GROSS BLOCK DEPRECIATION & AMORTISATION Net Block Impair- NET BLOCKBefore Imp- -mentairment Loss Loss

As at Additions/ Deductions/ As at Upto For the Deductions/ As at As at As at As at As at 01.4.2005 Adjustments Adjustments 31.3.2006 31.3.05 Year Adjustments 31.3.2006 31.3.2006 31.3.2006 31.3.2006 31.3.05

Goodwill on consolidation 1,052.53 – – 1,052.53 – – – – 1,052.53 79.00 973.53 973.53 Land 94.16 0.64 – 94.80 20.54 2.57 – 23.11 71.69 – 71.69 73.62Buildings 427.77 521.50 1.36 947.91 117.98 26.14 0.35 143.77 804.14 3.50 800.64 306.29Buildings(leasehold) 6.86 – – 6.86 2.31 0.10 – 2.41 4.45 – 4.45 4.55 Plant & Machinery 5,907.65 2,730.12 9.87 8,627.90 2,440.28 445.62 13.96 2,871.94 5,755.96 60.57 5,695.39 3,406.80Plant & Machinery (Leased) 2.32 – 0.13 2.19 1.78 0.21 – 1.99 0.20 – 0.20 0.54Furniture & Fixtures 34.34 3.67 6.39 31.62 14.41 2.03 0.28 16.16 15.46 – 15.46 19.93Data Processing Equipment 16.68 1.15 0.13 17.70 10.75 2.50 0.11 13.14 4.56 – 4.56 5.93Office Equipments 50.77 13.30 0.60 63.47 24.34 3.72 0.06 28.00 35.47 – 35.47 26.43Electrical Fittings 24.54 15.91 – 40.45 4.23 1.81 – 6.04 34.41 – 34.41 20.31Vehicles 18.29 5.03 1.40 21.92 8.60 1.76 0.56 9.80 12.12 – 12.12 9.69Mine reserve and development 378.03 6.82 17.63 367.22 334.74 1.96 – 336.70 30.52 – 30.52 43.29Railway Siding 9.69 14.85 – 24.54 6.30 0.55 – 6.85 17.69 – 17.69 3.39Rehabilitation Asset* 18.00 – 0.98 17.02 4.85 3.14 0.40 7.59 9.43 – 9.43 – Asset Retired from Active use 30.78 9.50 23.53 16.75 28.78 0.40 13.44 15.74 1.01 – 1.01 2.00Intangible AssetsInvestment in Shares 98.41 – – 98.41 19.02 4.67 – 23.69 74.72 – 74.72 79.39Computer Software 1.37 – – 1.37 0.46 0.46 – 0.92 0.45 – 0.45 0.91Technical Knowhow – 7.29 – 7.29 – 0.35 – 0.35 6.94 – 6.94 – Total 8,172.19 3,329.78 62.02 11,439.95 3,039.37 497.99 29.16 3,508.20 7,931.75 143.07 7,788.68 4,976.60 Previous Year 6,682.87 1,523.22 51.90 8,154.19 2,771.36 307.29 44.13 3,034.52 5,119.67 143.07 4,976.60 – Capital Work in Progress 761.05 2,835.26

* The opening Gross Block and Accumulated Depreciation of "Rehabilitation Assets" in respect of Copper Mines of Tasmania Pty Limited have been reclassified.

Notes:

1) Land includes leasehold land of Rs. 64.91 crores (Previous Year Rs. 64.20 crores).

2) In case of HZL, title deeds are still to be executed in respect of 10.63 acres of free hold land at Vishakapatnam.

3) In case of BALCO transfer of some of title deeds is pending in respect of certain flats, buildings and land.

4) Some land & quarters of BALCO including 40 nos. quarters at Bidhan Bagh Unit and 300.88 acres of land at Korba and Bidhan Bagh have been unauthorisedly occupied for

which evacuation efforts are in progress.

5) Buildings (free-hold) include (a) Cost of Shares of Rs. 750 in Co-op.housing society, (b) Cost of shares of Rs. 750 in Co-operative societies representing possession of office

premises, (c) a residential flat in the joint names of the Company and one of its Directors.

6) Gross block of buildings of HZL includes Rs.1.03 crores wherein bifurcation of the cost between land and building is not ascertained (previous year Rs. 1.03 crores).

7) Plant and Machinery include Rs.3.73 crores and Rs. 1.68 crores being the amount spent for laying water pipe line and power line respectively, the ownership of which vests

with the State Government Authorities.

8) Plant and machinery of Balco includes capital expenditure of Rs. 25.16 crores pertaining to Captive Power Plant which has been installed at the premises of National Thermal

Power Corporation Ltd. in view of convenience of operations."

9) Additions to Gross Block and Capital work in progress includes Rs. 39.3 crores (Previous year gain of Rs.21.29 crores) on account of exchange difference during the year

10) Additions to Gross block is net of Rs. 14.67 crores (Previous year Rs. 11.55 crores) and Deduction to Gross block includes Rs. 18.74 crores and Depreciation is net of Rs.28.95

crores (Previous year Rs. 9.59 crores) on account of translation of fixed assets and depreciation to date respectively of foreign subsidiaries, the effect of which is considered

in Foreign currency translation reserve.

11) Capital work in progress is net of provision for impairment of Rs. 147 crores (Previous year Rs. 147 crores).

12) In BALCO, depreciation for the year includes Rs. 50.81 Crores (Previous year Rs. 0.93 Crores) pertaining to trial run period transferred to fixed assets till the date of commercial

produciton.

6 FIXED ASSETS


March 31, 2006 March 31, 2005

(As taken, valued & certified by the Management) Raw Materials 716.17 235.33 Work-in-Process 909.85 572.74 Finished Goods 149.10 73.86 Stores, Spares, Packing Materials & Others 179.94 158.36 Less : Provision for obsolescence 4.39 4.65

175.55 153.71 Total 1,950.67 1,035.64

7 INVENTORIES



As at As at

March 31, 2006 March 31, 2005

Unsecured (Unless otherwise stated, Subject to confirmation) (a) Due for a period exceeding 6 months:

– considered good 23.98 6.64 – considered doubtful 1.48 1.50

(b) Others - considered good * 1,323.52 713.61 1,348.98 721.75

Less :- Provision for Doubtful Debts 1.48 1.50 Total 1,347.50 720.25

* Includes secured debtors of Rs. 499.81 crores (Previous year 228.83 crores)

8 SUNDRY DEBTORS

Advances recoverable in cash or in kind or for value to be received– Considered Good* 644.65 542.22 – Considered Doubtful 17.66 17.41

662.31 559.63 Less: Provision for Doubtful Advances 17.66 17.41

644.65 542.22 Balances with Central Excise Authorities– Considered Good 93.69 108.98 – Considered Doubtful 0.69 0.69

94.38 109.67 Less : Provision for Doubtful Advances 0.69 0.69

93.69 108.98 Income Tax - Advance Tax and Tax Deducted at Source (Net) 693.84 245.42Commodity Hedging Receivable (Refer Note No.23 of Schedule 20) 194.18 – Total 1,626.36 896.62 * Includes secured advances of Rs. 25.98 crores (Previous year 27.78 crores)

10 LOANS & ADVANCES (UNSECURED & CONSIDERED GOOD UNLESS OTHERWISE STATED)

1. Current Liabilities Acceptances – 66.46 Sundry Creditors(i) Small scale industrial undertaking(s) 0.90 1.20(ii) Others 1,390.77 1,391.67 771.89Other Liabilities 467.30 460.57 Investor Education and Protection Fund (a) Unclaimed Dividend 3.60 2.71 (b) Unclaimed Matured Deposits 0.08 0.08 (c) Unclaimed Matured Debentures 3.67 3.48 (d) Interest Accrued on (a) to (c) above 1.55 1.71 Interest accrued but not due on Loans 23.93 29.35

1,891.80 1,337.45 2. Provisions

Provision for Current Tax 808.84 257.65 Provision for Dividend on Preference Shares & Tax thereon 0.12 0.13 Proposed Dividend Equity Shares 69.84 32.93 Provision for Tax on Proposed Dividend 9.79 11.35 Provision for Dividend to Minority Equity Shareholder of Subsidiary and Tax thereon 42.25 29.58 Provision for Staff Benefit Schemes 64.35 80.18 Provision for Rehabilitation 24.53 43.65 Other Provisions * 422.00 58.79Commodity Hedging payable (Refer Note No. 23 of Schedule 20) 77.78 –

1,519.50 514.26 Total 3,411.30 1,851.71

11 CURRENT LIABILITIES & PROVISIONS

Cash in hand 0.77 0.41 Balance with Scheduled Banks in:(i) Current Accounts includes Cheques in Hand 110.05 31.86 (ii) Deposit Accounts 766.70 683.57 (iii) Dividend/Debenture/Debenture Interest Accounts 8.12 7.27 Balance with Non Scheduled Banks 229.67 111.11 Total 1,115.31 834.22

9 CASH AND BANK BALANCES





Schedules forming part of the Consolidated Balance Sheet

Schedules forming part of the Consolidated Profit and Loss AccountYear ended Year ended

March 31, 2006 March 31, 2005

Dividend on : Long term investments – 0.94 : Current Investments

45.81 11.69 Profit on Sale of : Long Term Investments (net) – 0.48

: Current Investments (net ) 29.02 28.33 Profit on sale/discarding of Fixed Assets (net) 3.18 – Interest onCurrent investments 24.25 57.20 Others 87.76 63.12 Unclaimed Liabilities written back (Net) 36.65 59.28 Deferred government grant transferred 0.01 0.01 Wheeled Power 54.78 2.17 Miscellaneous Income 54.86 74.00 Total 336.32 297.22

13 OTHER INCOME


March 31, 2006 March 31, 2005

Share/Floating Rate Note issue Expenditure 0.36 0.70 Voluntary Retirement Scheme Expenditure 10.10 20.20

10.46 20.90

* The company has recognised liability based on substantial degree of estimation for :- (i) Excise duty payable on clearance of goods lying in stock as on 31 st March,2005 of Rs.1.95 Crores as per the estimated pattern of despatches. As against

it, during the year Rs. 1.99 Crores has been incurred for clearance of such goods. The additional amount of Rs. 0.04 Crores has been charged off to Profitand loss account. Liability recognised under this class for the year is Rs.9.47 Crores which is outstanding as on 31st March 2006. Actual outflow isexpected in the next financial year.

(ii) Final price payable on purchase of copper concentrate for which the quotational period price was not finalised as on 31.03.2005, a provision of Rs.55.35Crores based on closing LME rate of copper and LMBA rate of precious metals was made. As against it, during the year Rs. 56.23 Crores has been incurredtowards final price settlement. The additional amount of Rs. 0.88 Crores has been charged to Profit and loss account. Liability recognised under thisclass for the year is Rs. 412.53 Crores which is outstanding as on 31st March 2006. Actual outflow is expected on finalisation of quotational period pricein the next financial year.

12 MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted)

Closing Stock:Work-in-Process 909.85 572.74 Finished Goods 149.10 73.86

1,058.95 646.60 Opening Stock:Work-in-Process 572.74 418.61 Finished Goods 73.86 166.34

646.60 584.95 Variation In Stock 412.35 61.65

14 VARIATION IN STOCK

Raw materials consumed 6,518.85 2,973.35 Stores & Spares 428.12 368.25 Power, Fuel & Water 1,225.56 761.19 Machinery Repairs 198.92 154.14 Building Repairs 20.43 16.57 Other Repairs 15.76 6.38 Carriage Inward 40.21 90.53 Excise Duty 24.56 (0.20)Rehabilitation and Redundancy (9.79) 1.37 Mining Expenses 148.53 156.27 Tolling charges 81.70 146.46 Royalty 274.46 151.87 Other Manufacturing Expenses 110.94 95.97 Total 9,078.25 4,922.15

15 MANUFACTURING & OTHER EXPENSES


Schedules forming part of the Consolidated Profit and Loss Account

Schedule forming part of the Consolidated Accounts

(Rs in Crore)Year ended Year ended

March 31, 2006 March 31, 2005

Salaries, Wages, Bonus & Commission 356.10 325.63 Contribution to Provident Fund, ESIC and other Funds 27.13 21.05 Employees' Welfare & Other Amenities 56.66 50.37 Gratuity 11.88 12.31 Total 451.77 409.36

16 PERSONNEL

On Debentures and Fixed Loans 118.30 60.72 Others 101.53 56.14 Bank charges 15.47 17.45

235.30 134.31

19 INTEREST & FINANCE CHARGES

Packing Expenses 21.17 16.68 Carriage Outward 195.66 118.10 Commission & Brokerage 4.27 7.68 Other Expenses 35.54 31.68 Total 256.64 174.14

17 SELLING AND DISTRIBUTION

Rent 1.56 0.84 Rates & Taxes 7.77 3.95 Insurance 20.89 18.34 Conveyance & Travelling Expenses 12.63 14.87 Loss on sale/discarding of Fixed Assets (net) – 2.52 Directors' Sitting Fees 0.03 0.04 Bad Debts and Advances :For the year 0.85 0.06 Less : Adjusted against Provision for Doubtful Debts and Advances 0.76 –

0.09 0.06 Provision for doubtful debts/advances 0.44 2.28 General Expenses 150.88 140.98 Foreign Exchange Difference (net) 73.11 (2.25)Provision for Diminution in Value of Current Investment 0.32 – Misc. Expenditure Written Off 0.34 0.46 Total 268.06 182.09

18 ADMINISTRATION & GENERAL

1. Statement of significant accounting policies

(a) Basis of Consolidation(I) The Consolidated financial Statements relate to Sterlite Industries (India) Limited ('the company'), its subsidiary companies and its associate

company. The Consolidated financial statements have been prepared on the following basis :

(i) The financial statements of the company and its subsidiary companies have been combined on a line-by-line basis by adding together thevalue of like items of assets, liabilities, income and expenses after fully eliminating intra-group balances and intra-group transactionsresulting in unrealised profit or loss.

(ii) The consolidated financial statements have been prepared using uniform accounting policies for like transactions and other events insimilar circumstances with certain exceptions mentioned in Note 7 below and are presented to the extent possible, in the same manner asthe company's separate financial statements.

(iii) The excess of cost to the company of its investment in the subsidiary companies over the net assets is recognised in the financial statementsas Goodwill, which is not being amortised.

(iv) Minority Interest's share of net profit of Consolidated financial statements for the year is identified and adjusted against the income ofthe group in order to arrive at the net income attributable to shareholders of the company.

(v) Minority Interest's share of net assets of consolidated subsidiaries is identified and presented in the consolidated balance sheet separate

20 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS





from liabilities and the equity of the company's shareholders.

(vi) In case of associate where the company directly or indirectly through subsidiaries holds more than 20% of equity Investments in associateare accounted for using equity method in accordance with Accounting Standard (AS) 23 - "Accounting for Investments in associates inConsolidated Financial Statements" issued by the Institute of Chartered Accountants of India.

(vii) The Company accounts for its share in the change in the net assets of the associate, post acquisition, after eliminating unrealised profitsand losses resulting from transaction between the company and its associate to the extent of its share, through its profit and loss accountto the extent such change is attributable to the associates' profit and loss account and through its reserves for the balance, based onavailable information.

(viii)The difference between the cost of investment in the associate and the share of net assets at the time of acquisition of shares in theassociate is identified in the financial statements as Goodwill or Capital Reserve as the case may be.

(II) Financial Statements of Foreign Subsidiaries - Monte Cello BV, Thalanga Copper Mines Pty Limited and Copper Mines of Tasmania Pty Limitedhave been converted in Indian Rupees at following Exchange Rates:-

(i) Revenue and Expenses : At the Average of the year.(ii) Assets and Liabilities : At the end of the year.

The resultant translation exchange difference has been transferred to Foreign Currency Translation Reserve.

(b) Investments other than in subsidiaries and associates have been accounted as per Accounting Standard 13 on Accounting for Investments.

(c) Other significant accounting Policies:These are set out in the notes to accounts under significant accounting Policies for financial statements of the respective companies - SterliteIndustries (India) Limited (SIIL), Copper Mines of Tasmania Pty Limited (CMT), Thalanga Copper Mines Pty Limited (TCM), Monte Cello BV, BharatAluminium Company Limited (BALCO), Sterlite Paper Limited, Sterlite Opportunities and Ventures Limited (SOVL), Sterlite Copper Limited (SCL),Hindustan Zinc Limited (HZL).

2. Following Subsidiary Companies and Associate company have been considered in the preparation of Consolidated Financial Statements:

Subsidiaries

3. Financial statements of Monte Cello BV have not been audited in accordance with the Statutory size exemption under Article 396, Title 9,Book 2, ofthe Dutch civil code.

4. The carrying amount of investment is net of capital reserve arising on acquisition of associate Rs. 13.52 crores (Previous year Rs.13.52 crores).

5. In relation to the net asset deficiency of CMT as at 31 March 2006, the directors of CMT note that total liabilities include a loan of Rs. 283.87 Crorespayable to Monte Cello Corporation NV, CMT's parent entity. In addition, CMT has obtained a letter of financial support from the company, the parententity of Monte Cello Corporation NV, confirming that it accepts responsibility of providing, and undertakes to provide, sufficient financial assistanceto CMT as and when it is needed to enable it to continue its operations and fulfill all of its financial obligations now and in the future. This undertakingis provided for a minimum period of eighteen months from 31 March 2006. As a result of the confirmation of financial support from the company, thedirectors of CMT believe that it has the ability to pay its debts as and when they fall due.

6. Thalanga Copper Mines Pty Ltd. and Copper Mines of Tasmania Pty Ltd. have recast their accounts for the year ended 31st March 2005. For the purposeof consolidated accounts the effect of such recast in previous year has been adjusted against the balance of Profit and Loss account carried to BalanceSheet.

Associate

20 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (CONTD.)

Name of the Company Country of Basis of Subsidiary % Voting power heldIncorporation by the parent

Copper Mines of Tasmania Pty Limited^ Australia Shareholding 100Thalanga Copper Mines Pty Limited^ Australia " 100Monte Cello BV Netherland " 100Bharat Aluminium Company Limited India " 51Sterlite Paper Limited India " 100Sterlite Opportunities and Ventures Limited India " 100Sterlite Copper Limited* India " 100Hindustan Zinc Limited** India " 64.92

^ 100% subsidiary of Monte Cello BV.

* The company has gone into Members' Voluntary winding up proceedings with effect from 31st August 2005 pending liquidators final settlement.

** Consequent to the shares purchase and shareholder's agreement entered between Government of India and Sterlite Opportunity and Ventures Limited(SOVL), HZL is the subsidiary of SOVL.

Name of Company Country of % Voting power held Incorporation by the parent

Vedanta Alumina Limited India 29.43






7. (i) In respect of following items Accounting Policies followed by the subsidiary companies are different than that of the company:

(ii) The financial statements of Copper Mines of Tasmania Pty Ltd. And Thalanga Copper Mines Pty Ltd. have been prepared in accordance with the

Corporation Act 2001, accounting standards and urgent issues group interpretations and comply with the other requirement of the law. Accounting

standards include Australian equivalents to International Financial Standards. The Financial statements of those foreign subsidiaries reflect total

income of Rs. 620.11 Crores and total expenditure of Rs. 534.14 Crores for the year ended 31.03.2006 and total assets of Rs. 608.10 Crores and

total Liabilities of Rs. 592.47 Crores as on 31.03.2006. The proportion of income, expenditure, assets and liabilities are 4.47%, 5.04%, 3.56% and

5.41% respectively to the Consolidated financial Statements.

8. (i) The company in earlier years gave loans of Rs. 27.64 Crores to M/s. India Foils Limited (IFL) and invested Rs. 24 Crores in Cumulative Preference

shares of IFL . It has also given a guarantee of Rs. 182 Crores for the loans taken by IFL from banks and Financial Institutions. The accumulated

losses of IFL have exceeded the net worth of the company and the company is a sick company within the meaning of section 3 (1) (o) of the Sick

Company (Special Provision) Act, 1985. In view of the ongoing business and financial restructuring including disinvestments initiated, by IFL/its

promoters, the amount of permanent diminution in the value of the investments and losses on account of loans and guarantees as mentioned above

cannot be quantified at this stage. In view of this no provisions are made in the books of accounts for the above loans, investment and guarantees.


Item Particulars (Rs. in Crores) Proportion to the Item

(a) Depreciation BALCO has charged depreciation on certain assets at

following rates as against Schedule XIV rates of The

Companies Act 1956, followed by the company:

(i) Medical/Office Equipment, Air Conditioners, 20% 1.07 0.20%

Furniture and Electrical Appliances.

(ii) Personal Computer and Electronic Equipment. 33.33% 1.08 0.20%

(iii) Leasehold land including land development expenses. Over 20 Years 0.47 0.09%

(iv) Red Mud Pond and Ash Dyke. Over technically 1.78 0.34%

estimated life

(v) Development of Mines. Over 5 Years 0.06 0.01%

BALCO has charged depreciation on written down value 117.91 22.38%

method at the rates specified in Schedule XIV of the

Companies act , 1956 in respect of all fixed assets relating to

the new plant capitalised in current year as against the straight

line method followed by the company.

HZL has charged depreciation on certain assets at following

rates as against Schedule XIV rates of The Companies

Act 1956, followed by the company :

Individual items of Plant & Machinery and vehicles 100% 0.03 0.01%

costing upto Rs. 25,000/-

(b) Fixed Assets For the purpose of depreciation, in case of HZL additions/ Additions 625.31 18.78%

disposals are reckoned on the first day and last day of

quarter respectively

Disposals 27.93 45.03%

(c) Inventory BALCO and HZL has determined Cost of Inventory as per 793.42 40.67%

Weighted average method as against FIFO method being

followed by the company.

HZL determines value of stock in progress at cost or 291.64 32.05%

net realisable value whichever is lower.

(d) Interest and In case of SOVL, debenture placement fees is being expensed 0.05 0.02%

Finance charges over the tenor of the balance debentures under effective

interest method as against the same is charged to the

Profit and loss account in the year in which it is

incurred by the company.




10. Capital Work-in-Progress includes :

11. In accordance with the Accounting Standards (AS-28) on “Impairment of Assets” issued by the Institute of Chartered Accountants of India, during the

year the company has reassessed its fixed assets and is of the view that no further impairment/reversal is considered to be necessary in view of its

expected realisable value.

12. Payment to Auditors comprise of:

(Rs in Crores)

(Rs in Crores)


a. Advances for Capital expenditure 75.22 40.33 b. Pre–operative expenditure as follows:-

Opening Balance 144.34 27.22 Add: Pre–operative expenditure transferred fromProfit & Loss Account 254.53 43.13 Foreign Exchange difference 38.05 (20.00)Interest, commitment & finance charges 103.01 123.56

539.93 173.91 Less: De–subsidiarisation of Vedanta Alumina Limited – 10.18

539.93 163.73 Less: Capitalised during the year 482.93 19.39

57.00 144.34


(a) Statutory Auditors:Audit fees 1.14 0.91 Other services – Tax Audit fees 0.26 0.27 Others 0.16 0.17 Out of pocket expenses 0.19 0.13

1.75 1.48 (b) Cost Auditors:

Cost Audit fees 0.01 0.01 0.01 0.01

13. Managerial Remuneration :

A. Remuneration to Executive Directors

(i) Salary 5.80 3.80

(ii) Contribution to Provident Fund 0.75 0.64

(iii) Other Benefits 0.32 0.32

6.87 4.76

(The above remuneration includes Rs. 0.23 Crores approved by Board of Directors of Hindustan Zinc Limited and

is subject to approval by its shareholders at the ensuing annual general meeting.)

B. Commission to Non-Executive Directors as determined by the Board 0.30 0.08


March 31, 2006 March 31, 2005

LiabilitiesRelated to Fixed Assets 889.41 582.31 Others 0.69 0.86 AssetsProvision for doubtful advances 8.78 8.62 Payment for VRS 22.38 47.94 Unabsorbed Depreciation 89.48 – Others 18.39 16.86 Total (139.03) (73.42)Deferred tax liability (net) 751.07 509.75

(ii) On account of non payment of dividend by India Foils Limited(IFL), the investment by the company in Cumulative Preference Share of IFL carries

voting rights as stipulated under section 87 (2) (b) of the Companies Act, 1956. As these voting rights are temporary in nature till the dividend is

paid and / or the shares are redeemed or disinvested, IFL has not been considered as an associate for the consolidated accounts of the company.

9. Breakup of deferred tax liability arising out of timing difference are:





14. In case of BALCO payments under the voluntary retirement scheme (upto March 31, 2003) is amortised over a period of sixty months. The unamortised

balance is shown as miscellaneous expenditure. Subsequent years payment is written off in the year of disbursement. In case of HZL, the same are

charged to Profit and Loss account.

15. In accordance with the Hon’ble Supreme Court’s directives, BALCO had made an advance payment of Rs. 6.14 crores to the workmen during the period

of strike from March 2, 2001 to May 8, 2001. The Hon’ble Supreme Court has not issued any further direction in this matter.

16. BALCO is yet to execute an agreement for the purchase of 171.44 acres of Korba Super Thermal Power Station land for captive power plant and 34.74

acres land for captive power plant staff quarters. This land was transferred at the time of takeover of captive power plant from National Thermal Power

Corporation of India.

17. BALCO has not made any provision for claims recoverable from Madhya Pradesh Electricity Board (MPEB)/Chhatisgarh State Electricity Board (CSEB)

amounting to Rs.10.08 crores (Previous year Rs. 10.08 crores), which are disputed by them. The company is also disputing the claim for Electricity

duty/surcharge made by MPEB/CSEB amounting to Rs. 13.41 crores (Previous year Rs. 21.28 crores). The net amount recoverable/payable can only be

ascertained on settlement of the disputes.

18. Consequent to the abandonment of the Gandhamardhan Bauxite Project, based on the approval of the Ministry of Mines vide its Letter

No.21/1/2000–MET 1 dated 9 June 2000 and the approval of the Company Law Board vide its Letter No.41/1/2001 CL III dated 16 February 2001, the

BALCO had, during the year 2000-01 reduced its paid up share capital by Rs. 23.80 crores.

19. In HZL, matured fixed deposits of Rs. 0.08 crores due for transfer to Investor Education and Protection Fund have not been transferred in view of pending

legal litigation between the beneficiaries.

20. In HZL, intangible assets represents Rs.98.41 crores (Previous year Rs. 98.41 crores) being long term investment in equity shares of Andhra Pradesh Gas Power

Corporation Limited, Hyderabad, which entitles the company to draw power in Andhra Pradesh for its Vishakapatnam unit. This has been amortised as a fixed

asset. Amortisation for the year is Rs. 4.67 crores (Previous year Rs. 4.67 crores), cumulative Rs.23.7 crores (Previous year Rs.19.03 crores).

21. In terms of Scheme of Arrangement (Scheme) as approved by the Hon'ble High Court of Judicature at Mumbai, vide its order dated 19th April, 2002

the company during 2002-2003 reduced its paid up share capital by Rs. 10.03 Crores. There are 82,246 equity shares of Rs. 5/- each(Previous Year 87,974)

pending clearance from NSDL/CDSL. A Special Leave Petition filed in the Hon'ble Supreme Court of India against the judgement of Hon'ble High Court

of Mumbai by SEBI and Department of Company Affairs has been inter-alia dismissed. The Company has filed application in Hon'ble High Court of

Mumbai to cancel these shares, the decision on which is pending.

22. (a) The Debentures referred to in Schedule 4 of Balance Sheet at A are due for redemption as follows:

7.87% debentures on 10th April, 2010 of Rs.40 Crores ; 8% debentures on 10th April, 2013 of Rs.60 Crores; 7% debentures on 9th July, 2006 Rs.

3.00 crores; on 9th July, 2007 Rs. 3.00 crores; on 9th July, 2008 Rs. 3.00 crores. .

(b) The Debentures referred to in Schedule 5 of Balance Sheet at B (iv) are MIBOR linked and are due for repayment as follows:

Rs. 28.12 Crores on 07.04.2006 and Rs. 1 Crore on 19.06.2006

23. Copper, Aluminium and Precious Metals are internationally traded commodities and prices draw reference from quotations on the London Metal

Exchange (LME) / London Metal Bullion Association (LMBA). The company faces commodities price risk arising from the time lag and quantity difference

between the purchase of Copper Concentrate, Aluminium and sale of Copper Cathode/Rod, Precious Metals and Aluminium Conductors (AAC/ACSR),

which is being managed effectively. This is done by hedging exposures in respective commodity exchanges through future contracts in the exchange or

by the use of other appropriate derivative instrument.

In the absence of a specific accounting standard governing commodity hedge accounting in India, the company has adopted the principles enumerated

in the International Financial Reporting System - "Financial Instruments : Recognition and Measurement " to capture the real essence of commodity

hedge transactions in the books of account . The earlier accounting practice was to recognise the gain/loss on account of commodity hedge transactions

only when the underlying transactions are settled.

Accordingly, the hedged items and the commodity derivative instruments which are designated as fair value hedges are remeasured at their fair value

as on the balance sheet date and change in their value are accounted to the profit and loss account.The changes in the fair value of hedged items are

accounted as hedge receivable or payable as the case may be . This change in accounting policy has resulted into increase in loans and advances by Rs.

157.24 Crores and provisions by Rs. 77.78 Crores and decrease in raw material consumption by Rs. 153.35 Crores and consequential increase in the profit

by an equal amount.

24. In BALCO, in respect of all fixed assets relating to the new plant capitalised in the current year, depreciation has been provided on the written down

value method at the rates specified in Schedule XIV of the Companies Act, 1956 as against the erstwhile policy of straight line method for existing fixed

assets. Consequently the depreciation charge for the year ended March 31, 2006 is higher by Rs. 74.67 Crores, inventory is higher by Rs 17.17 Crores

and the profit before taxation is lower by Rs 57.50 Crores.

25. In HZL, the accounting policy relating to valuation of ore has been changed from Re. 1/- per MT to lower of cost and net realisable value resulting in

an increase in profit before tax for the year by Rs. 6.87 Crores.

26. The company has received a letter dated 1st march 2006 bearing reference F.No. 31(4)/2006-Met.1 from the Government of India wherein the






The Company’s interests in the assets employed in these joint ventures are included in the balance sheet under the following classifications:


(Rs in Crores)

Current Year Highway Reward Exploration Reward Deeps Total

& conviction

Current assets

Cash 0.36 1.19 – – 1.55

Other – – – – –

Total Current Assets 0.36 1.19 – – 1.55

Fixed Assets

Plant and equipment – at WDV – – – – –

Mine Development at WDV – – – – –

Freehold land – 1.59 – – 1.59

Total non-current assets – 1.59 – – 1.59

Share of Assets employed in Joint Venture 0.36 2.78 – – 3.14

Previous Year Highway Reward Exploration Reward Deeps Total

& conviction

Current assets

Cash 0.03 1.90 – – 1.93

Other – – – 10.19 10.19

Total Current Assets 0.03 1.90 – 10.19 12.12

Fixed Assets

Plant and equipment – at WDV 0.14 0.04 – 0.17 0.35

Mine Development at WDV – – – 4.44 4.44

Freehold land – 1.68 – – 1.68

Total Fixed Assets 0.14 1.72 – 4.61 6.47

Share of Assets employed in Joint Venture 0.17 3.62 – 14.80 18.59

Government made an offer to allow the company to buy the Government's 49% stake in Bharat Aluminium Company limited at a specified price

suggested by the Government. In response to this letter and subsequent discussions held with the Government officials, the company has given a cheque

for Rs. 1098,89,75,408.20 on 30th March 2006 and has requested the Government to transfer the shares to the company. The amount paid by the

company is subject to final determination by an arbitrator in respect of the interest claim. Upto the date of adoption of accounts by the Board, the

Government has not encashed the cheque and therefore above has not been considered in the Financial Statements of the company for the year ended

31st March 2006.

27. The company had received show cause notice under FERA and FEMA for transactions amounting to Rs.500.65 crores for non submission of documents.

The company has submitted all documents for Rs. 496.65 Crores and alternate documents will be submitted for the balance amount.The company

envisages no liability to arise on this account.

28. BALCO has export obligations of Rs. 4743.98 crores (Previous year Rs. 3677.56 crores) against the import licenses taken for import of capital goods under

Export Promotion Capital Goods Scheme.

29. Thalanga Copper Mines Pty Limited has entered into various joint venture operations for the purposes of mining and processing of copper concentrate

and exploration for copper and other base metals. The companies participating interest in these joint ventures and entitlement to output is detailed

below. At the 31 March 2006 a formal Joint Venture agreement had not been signed by both Thalanga Copper Mines Pty Ltd and BML Holdings Pty

Ltd for the Reward Deeps project. The joint ventures reporting date is 30 June. The company's interests in the assets employed in these joint ventures

are included in the Balance sheet, under the following classifications:

Highway : 70.00%

Reward : 68.85%

Exploration : 70.00%

Reward Deeps : 70.00%




30. During the year 2004-05,the company issued 3,58,60,049 equity shares of Rs.5 each at a premium of Rs.545 aggregating to Rs.1972.30 Crores on Rights

basis to existing share holders.In terms of Clause no. 6.5.7.1 of SEBI ( Disclosure and Investor Protection) Guidelines ,2000 (as amended) proceeds of

Rights Issue has been utilised as under :

31. "(i) In HZL, the non fund based facility of Rs. 100 Crores from bank is secured by pledge of specific investments and a subservient charge on the entirecurrent assets, present and future. "

(ii) In BALCO, the non fund based facility from banks Rs 214.23 Crores is secured by charge on current assets and lien on fixed deposit amounting Rs 2 Crores.

32. The expense on account of exchange difference on outstanding forward exchange contracts to be recognised in the Profit & Loss Account of subsequentaccounting year aggregate to Rs.2.90 Crores (Previous Year Rs.15.58 Crores).

33. General Expenses includes contribution of Rs. 0.25 Crores (Previous year Rs. 5.86 crores) to Public and Political Awareness trust.

34. Disclosure on Financial and Derivatives Instruments

Derivative contracts entered into by the company and outstandings as on 31st March 2006

(a) (i) For Hedging Currency and Interest Rate Related Risks : - Nominal amounts of derivatives contracts entered into by the company and outstanding as on 31st March 2006 amounts to Rs. 3,465.49 Crores

Category wise break up is given below

Sr. No. Particulars Rs in Crores1 Interest Rate Swaps 710.98 2 Options 798.52 3 Forward Contracts 1,955.99 Total 3,465.49

(ii) For hedging commodity related risks :- Category wise break up is given below.

Particulars Purchases SalesForwards / FuturesCopper (MT) 40,000 17,475 Gold (Oz) 10,398 74,305 Silver (Oz) 6,172 55,828 Aluminium (MT) 3,450 500

(b) All derivative and Financial instruments acquired by the company are for hedging purposes only.

(c) Unhedged foreign currency exposure as on 31st March 2006 is as under:-

Rs. In CroresPayable 2,064.33 Receivable 321.23

Note: Since the above disclosure became mandatory from 31.03.2006, hence the previous year's figures has not been disclosed.



(Rs in Crore)

Actual utilisation

Utilisation Planned Till 31.03.2006 Till 31.03.2005

Investment in BALCO 900.00 500.00 –

Reduction in Term loans 520.00 88.33 75.00

Reduction in Current liabilities 551.00 375.89 375.89

Rights Issue expenses 1.30 1.19 1.19

1,972.30 965.41 452.08

Balance amount of Rs. 1006.89 (Previous Year Rs.1520.22 Crores) is lying in the following forms as at Balance sheet date

As at As at Presented in

31.3.2006 31.3.2005 Balance Sheet as:

Mutual Funds 440.06 88.75 Investments Schedule

Pass Through Certificates – 823.09 Investments Schedule

Commercial Papers – 50.00 Investments Schedule

Bank Deposits 566.83 558.38 Cash & Bank balances -

Schedule 9

1,006.89 1,520.22




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ses

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at

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The

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ts a

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t ca

n no

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gmen

ts a

re s

how

n as

una

lloca

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corp

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e as

sets

and

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spec

tive

ly.

(c)

The

chan

ge in

acc

ount

ing

polic

y as

enu

mer

ated

in :-

(i)N

ote

no. 2

3 of

Sch

edul

e 20

has

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d in

to in

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se in

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fit

by R

s. 15

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in t

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d Rs

. 0.2

9 Cr

ores

in t

he A

lum

iniu

m s

egm

ent

for

the

curr

ent

year

and

con

sequ

enti

al in

crea

se in

net

curr

ent

asse

ts b

y eq

ual a

mou

nt.

(ii)

Not

e no

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of S

ched

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20 h

as r

esul

ted

in d

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ase

in A

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iniu

m s

egm

ent

prof

it b

y Rs

.57.

50 C

rore

s w

ith

corr

espo

ndin

g de

crea

se in

Seg

men

tal a

sset

s.

(iii)

Not

e no

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of S

ched

ule

20 h

as r

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ted

in in

crea

se in

pro

fit in

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by R

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corr

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g in

crea

se in

Seg

men

tal a

sset

s.






Schedule forming part of the Consolidated Accounts19 NOTES FORMING PART OF THE ACCOUNTS (Contd.)

(Rs in Crore)Current Year Previous year

Geographical SegmentRevenue by geographical segmentIndia 9,008.25 6,071.01 Outside India 5,264.14 1,893.86 Total 14,272.39 7,964.87 Carrying Amount of Segment AssetsIndia 16,279.64 12,513.11 Outside India 817.91 663.30 Total 17,097.55 13,176.41 Capital ExpenditureIndia 1,255.51 3,107.84 Outside India 15.77 10.93 Total 1,271.28 3,118.77

II) Information about secondary segment

36. Related Party disclosures

List of related parties and relationships

i) Entities Controlling the Company (Holding Companies) ii) Associates

Twinstar Holding Limited Monte Cello NV

Vedanta Resources Holdings Limited Henry Davis York

Vedanta Resources Plc. India Foils Limited

Volcan Investments Limited Vedanta Alumina Limited

iii) Fellow Subsidiary

The Madras Aluminum Company Limited

Konkola Copper Mines Plc

Ararahat Gold Recovery Company

iv) Key Managerial Personnel v) Relatives of Key management Personnel

Mr. Anil Agarwal

Mr. Navin Agarwal Mr. Dwarka Prasad Agarwal Relative of Mr. Anil Agarwal and Mr. Navin Agarwal

Mr. Tarun Jain Smt. Rajni Jain Relative of Mr. Tarun Jain

Mr. K. K. Kaura

Mr. M. S. Mehta

Mr. D. D. Jalan

Mr. T. L. Palani Kumar vi) Others

Vedanta Foundation




(Rs

in C

rore

)

Hold

ing

Com

pani

es

Fello

w S

ubsid

iary

As

soci

ates

Ke

y M

anag

eria

l Per

sonn

el

Rela

tives

of K

ey

Othe

rs

Tota

l

Man

agem

ent P

erso

nnel

Curr

ent Y

ear

Prev

ious

Yea

rCu

rren

t Yea

rPr

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us Y

ear

Curr

ent Y

ear

Prev

ious

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ear

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Prev

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r

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ares

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ed-

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39

-

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-

-

-

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1,96

4.39

2a

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ors

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as a

t 31s

t Mar

ch, 2

006

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1.45

-

2.

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-

-

4.32

12

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bAd

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es R

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le in

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h or

in K

ind

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n/(re

ceiv

ed) d

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69

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0)-

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19

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nce

as a

t 31s

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ch, 2

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1.69

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4 27

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3 30

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ts m

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ar-

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16

5.59

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16

5.59

4a)

Cred

itors

Bala

nce

as a

t 31s

t Mar

ch, 2

006

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123

.11

8.69

-

0.

01

-*-

-

-

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-

-

53

.31

23.1

1

b) L

oans

Rec

eive

d

Bala

nce

as a

t 31s

t Mar

ch, 2

006

-

-

-

-

283.

8735

7.04

-

-

-

-

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28

3.87

35

7.04

5Pu

rcha

se/ (

Sale

s) of

Fix

ed A

sset

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(1

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70

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gRe

cove

ry o

f dep

uted

em

ploy

ees r

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9Gu

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00

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* 10

702

** 10

000

vii)

Tran

sact

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Durin

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ar w

ith re

late

d pa

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s





1) Proceeds of Rights Issue

Twinstar Holdings Limited – 1,964.39

- 1,964.39

2) a) Debtors

Balance as at 31st March, 2006

(i) India Foils Limited 2.74 12.56

(ii) Ararahat Gold Recovery Company 1.45 –

(iii) Vedanta Alumina Limited 0.13 –

4.324.32 12.5612.56

b Advances Recoverable in Cash or in Kind

Given / (Received) during the year

(i) Ms.Rajni Jain (Received during the year) (1.50) –

(ii) Vedanta Resources Plc 1.69 –

(iii) Konkola Copper Mines Plc – 1.47

0.19 1.47

Balance as at 31st March 2006

(i) Ms.Rajni Jain - 1.50

(ii) Vedanta Resources Plc 1.69 -

(iii) India Foils Limited 27.64 27.64

(iv) Konkola Copper Mines Plc - 1.47

29.33 30.61

3) Investments made during the year

Vedanta Alumina Limited - 165.59

- 165.59

4) a) Creditors

(i) Vedanta Resources Plc 44.61 23.11

(ii) Konkola Copper Mines Plc 0.05 –

(iii) Madras Aluminium Company Limited 8.64 -

(iv) Henry Davis York 0.01 -

53.31 23.11

b Loans received

Balance as at 31st March, 2006

Montecello NV 283.87 357.04

283.8 357.04

5) Purchase/ (Sales) of Fixed Assets

Vedanta Alumina Limited (1.44) (0.05)

(1.44) (0.05)

6) Income :

(a) Sales :

(i) Madras Aluminium Company Limited 0.14 1.23

(ii) India Foils Limited 151.02 109.70

(iii) Vedanta Alumina Limited 0.13 -

151.29 110.93

(b) Rent Income


0.15 0.15

(c) Management Consultancy Services :

(i) Konkola Copper Mines Plc - 1.02

(ii) Vedanta Resources Plc - 0.15

(iii) Ararahat Gold Recovery Company 1.45 -

1.45 1.17

(Rs in Crore)xii) Details of Major Transactions with related parties :






7) Expenditure :(a) Purchases :


35.12 88.83 (b) Remuneration/Sitting Fees:

(i) Mr. Navin Agarwal 3.01 2.61

(ii) Mr. K K Kaura 1.90 1.30

(iii) Mr. Tarun Jain 1.73 1.53

(iv) Mr. M S Mehta 0.23 -

(vi) Mr. D. D. Jalan 0.76 -

7.63 5.44 (c) Allocation of Corporate Expenses :

Madras Aluminium Company Limited (1.61) (1.83)

(1.61) (1.83)(d) Management Consultancy Services :

Vedanta Resources Plc 22.31 22.48

22.31 22.48 (e) Power Charges


1.25 1.39 (f) Legal advice

Henry Davis York 0.70 3.55

0.70 3.55 (g) Recovery of deputed employees remuneration

(i) Madras Aluminium Company Limited (3.62) (1.53)

(ii) Vedanta Alumina Limited (0.77) (3.94)

(iii) Ararahat Gold Recovery Company (0.76) –

(iv) Konkola Copper Mines Plc (4.73) -

(v) India Foils Limited - (0.01)

(9.88) (5.48)8) Dividend paid

(i) Twinstar Holdings Limited 24.22 13.51

(ii) Madras Aluminium Company Limited 1.54 1.53

25.76 15.04 9) Guarantees

(i) Madras Aluminium Company Limited 110.00 110.00

(ii) Vedanta Alumina Limited 300.00 27.81

(iii) India Foils Limited 182.00 182.00

592.00 319.81

(Rs in Crores)

(Rs in Crores)

xii) Details of Major Transactions with related parties (Contd.) :

37. Earning per Share (EPS)


Net profit after Tax (Before Extra ordinary items net of tax) 1684.77 814.35

(As per Consolidated Profit & Loss Account)

Less : Dividend on Preference Shares and Tax Thereon (0.25) (0.25)

Less : Dividend to Minority Shareholders of Subsidiary & Tax Thereon (42.25) (29.58)

Profit before Extra Ordinary item attributable to Equity Shareholders for Basic Earning per Share 1642.27 784.52

Less: Extra Ordinary items (net of tax) 6.70 162.62

Profit after Extra Ordinary item attributable to Equity Shareholders for Basic Earning per Share 1,635.57 621.90

Profit before Extra Ordinary item attributable to Equity Shareholders for Basic Earning per Share 1,642.27 784.52

Earnings attributable to dilutive potential equity shares net of tax – 2.60

Profit before Extra Ordinary items attributable to equity share holders for Diluted EPS 1,642.27 787.12

Less : Extraordinary items attributable to equity shareholders for Diluted EPS 6.70 162.62

Profit after Extra Ordinary items attributable to equity share holders for Diluted EPS 1,635.57 624.50






37. Earning per Share (EPS)


Weighed average No. of equity shares outstanding during the year :

for Basic Earning per Share Nos. 553,414,569 455,569,573

for Diluted Earning per Share Nos. 553,414,569 457,440,053

Basic EPS - before extraordinary items Rs. 29.68 17.22


Diluted EPS - before extraordinary items Rs. 29.68 17.21


Nominal Value per Share Rs. 2/- 2/-

Reconciliation between number of shares used for calculating basic and diluted earning per share

(i) Weighted Average no. of shares used for calculating Basic earning per share 553,414,569 455,569,573

(ii) Add : Potential Equity Shares (Foreign Currency convertible bonds ) - 1,870,480

(iii) Weighted Average no. of shares used for calculating Diluted earning per share 553,414,569 45,74,40,053

Note: In compliance with the Accounting Standard-20 " Earnings Per Share", the earning per share for current and previous year has been calculated

after considering the increase in outstanding number of equity and potential equity shares due to split of equity shares of Rs. 5/- each into

Rs. 2/- each and issue of bonus shares in the ratio of 1 : 1 after 31st March, 2006 but before the Financial Statements approved by the Board

of Directors.

(Rs in Crore)38. Contingent Liabilities

As at 31.03.06 As at 31.03.05

(a) Estimated amount of contracts remaining to be executed on

Capital Account and not provided for (net of advances) 630.39 781.29

(b) Disputed liabilities in appeal:

(i) Sales Tax 35.84 10.97

(ii) Excise Duty 13.19 3.98

(iii) FERA/FEMA (Non submission of documents) 1.17 1.29

(iv) Property tax – 0.19

(c) Claims against the Company not acknowledged as debts 83.73 81.58

(d) Unexpired Letters of Credit 684.23 552.15

(These are established in favour of vendors but cargo/material under the aforesaid Letter of

Credit are yet to be received as on year end date. Cash outflow expected on the basis of

payment terms as mentioned in Letter of Credit).

(e) Bank Guarantees 359.33 353.20

(Bank guarantees are provided under contractual/legal obligation. No cash outflow is expected)

(f) Bill Discounted (No cash outflow is expected) 169.06 14.33

(g) Custom Duty Bond taken for Project Import 81.92 81.92

(h) Claim for compensation ( CLZS) Land of HZL Not Ascertainable Not Ascertainable

(i) In July 2005, it was reported that the Highway Road passing beside the mine was showing signs of cracking at some areas. To mitigate further risks

to the users the cracks were repaired and a detour was constructed. Monitoring of the movements of the road is occurring. A geotechnical

consultant has been appointed to submit a report on the cause and potential rectification. The Department of Main Roads has not formally

submitted any claim.

(j) An accident occurred on 17th August 2004, which resulted in a fatal injury to an employee of the mining contractor,Faminco Mining Services. The

outcome of the inquest into this matter has not yet been finalised. TCM's liability is limited by the insurance excess payable of Rs. NIL (Previous

Year Rs. 0.34 crores).

(k) In January 2006, SV Partners made a claim against TCM acting as liquidators of Faminco Mining Services Pty Ltd (Faminco) (in liquidation). TCM

had previously been a party to a mining agreement with Faminco. SV partners allege that a reduction by Faminco in its balance account was a

preferential payment to the Company as a creditor and therefore recoverable. TCM has obtained release from all contractual obligations form

Faminco. TCM has responded to SV partners on this issue and refuted SV Partners' claim that the payment was a preference payment. To date, TCM




has not received any further communication from SV Partners with regard to the claim. The contingent liability is of Rs. 1.12 Crores (Previous Year

Rs. NIL).

(l) A claim lodged by a contractor’s employee against the Copper Mines of Tasmania Pty Ltd. for claim relating to a mining accident. The claim is not

covered by insurance. CMT has disclaimed liability and is defending the action. Legal advice indicates that it is unlikely that any significant liability

will arise. The contingent liability is of Rs. 0.64 crores (Previous year Rs. 0.67 crores).

(m) A claim lodged by a contractor’s employee against CMT for a claim relating to an accident while working on site. A claim has also been made under

Workers Rehabilitation and Compensation Act 1998 (Tas) against CMT. Lawyer appointed by insurance company are handling these matters. The

maximum liability to the company is restricted to the deductible under the policy. Workplace Standards – Tasmania have issued summons to CMT

with the charge of failing to provide a safe place of work to above person. The company has entered “Not Guilty” plea. It is unlikely that major

liability would arise to the company. Estimated liability is Rs. 0.80 crores (Previous year Rs. 0.84 crores).

(n) In September 2003, Tailings dam pipe lines ruptured and discharged a maximum of 4000 cubic metres of tailings (of which an estimate of 2,300

cubic metres entered in unnamed creek which is a tributary of Queens river). The Director of Environmental Management has issued a summons

alleging certain breaches of EPN 308/1 and the EPMC Act. CMT has entered “Not Guilty” plea and defending the case. It is unlikely that major

liability would arise to CMT. Estimated liability is Rs. 0.24 crores (Previous year Rs. 0.37 crores).

(o) The Company has given Corporate Guarantees to Banks/Financial Institutions on behalf of M/s Madras Aluminium Company Limited, India Foils

Limited, Vedanta Alumina Limited and CMT . The outstanding amount is Rs. 673.41 crores ( Previous year Rs.413.04 crores) on this account at year

end.

(p) CMT has given a bank indemnity guarantee amounting to Rs. 1.21 crores (Previous year Rs. 1.06 crores) from ANZ in favour of Aurora Energy Pty

Ltd in lieu of advance payment for monthly charges for power consumption.

(q) CMT has given a bank indemnity guarantee amounting to Rs. 15.94 crores from ANZ in favour of The Department of Infrastructure, Energy and

Resources as a security against rehabilitation liability provided in the accounts (Rs. 21.65 crores as at 31 March 2006).

(r) Estimated cost of variation in copper and precious metals quantity due to adjustments done based on metal contents as per laboratory

assessments pending receipt of final invoice amounts to Rs.26.99 Crores (Previous year Rs. 18.34 Crores).

39. The figures of previous year have been rearranged, recast and regrouped wherever considered necessary.






Consolidated Cash Flow Statement For the year ended March 31, 2006




(Rs in Crores)Year ended Year ended

March 31, 2006 March 31, 2005 A. CASH FLOW FROM OPERATING ACTIVITIES

Net profit after tax as per P&L Account 2,228.18 914.50 Adjusted for Provision for Taxation 1,023.62 315.28 Share in Profit/ (Loss) of Associate Company (0.35) (0.02)Extra-ordinary items 10.10 154.53

3,261.55 1,384.29– Depreciation & Amortisation (Net) 472.89 296.64 – Dividend Income (45.81) (8.70)– Interest Income (112.02) (112.57)– Interest & Borrowing Costs 198.22 134.31 – Foreign Exchange ( Profit ) / Loss* 10.82 (18.97)– Provision for doubtful debts/advances 0.51 2.28 – Loss / (Profit) on Sale of Investment (net) (45.82) (27.78)– Loss/ (Profit) on Sale / Discarding of Assets (Net) (3.19) 2.52 – Provision for diminution in value of investment 0.01 0.05 – Sundry Liabilities writtenback (1.61) (11.54)– Deferred government grant transferred (0.01) (0.01)– Share of Company in (Profit)\Loss of Associates 0.35 0.02 – Miscellaneous Expenses written off 0.34 0.45 – Bad debts and advances written off 0.01 0.07

474.69 256.77 Operating profit before working capital changes 3,736.24 1,641.06 Adjusted for:– Trade and other receivables (385.13) (445.22)– Inventories (918.24) (180.18)– Trade payables 469.47 (23.59)

(833.90) (648.99)Cash generation from operations 2,902.34 992.07 Interest paid (net) (229.37) (259.13)Direct taxes paid / TDS deducted/Refund received (693.75) (241.25)Net cash flow from Operating Activities 1,979.22 491.69

B. Cash flow from Investing ActivitiesPurchase of Fixed Assets & Capital Work in Progress (1,189.81) (2,895.83)Sale of Fixed Assets 11.52 16.05 Purchase of Investments (19,711.31) (12,112.70)Sale of Investment 19,110.40 11,389.99 Movement in Loans (1.30) (40.81)Interest Received 117.51 130.70 Dividend Received on Investments 45.81 12.64 Net cash flow used in Investing Activities (1,617.18) (3,499.96)

C. Cash flow from Financing ActivitiesProceeds from issue of share capital – 1,972.30 including share premium**Proceeds from Long term Loans 144.66 814.28 Repayment of Long Term Loans** (328.35) (339.56)Short Term Loans (Net) 151.67 418.77 Effect of Exchange Rate change on foreign currency EURO Convertible Bonds/FRNs 24.30 11.09 Dividend paid (73.23) (62.95)Net Cash flow from Financing Activities (80.95) 2,813.93 Net Increase/(decrease) in cash and cash equivalent 281.09 (194.34)Cash and cash equivalent at the beginning of the year 834.22 1,033.98 Less: On de-subsidiarisation of Vedanta Alumina Limited – (5.42)Cash and cash equivalent at the end of the year. 1,115.31 834.22

* Includes exchange difference on account of translation of foreign subsidiary company's financial statements. ** The conversion of 50,000 Foreign currency convertible bonds (Previous Year 26300) into Equity shares have been excluded in view of para 40 of Accounting

Standard 3-"Cash Flow Statement "

Notes:1) The above Cash Flow Statement has been prepared under the " Indirect Method " as set out in Accounting standard-3 "Cash Flow Statement" issued by the

Institute of Chartered Accountants of India.

2) Figures in the brackets indicate outflows.



Directors’ report · · 2013-01-29Directors’ report To the members, ... convertible bonds...

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Transcript of Directors’ report · · 2013-01-29Directors’ report To the members, ... convertible bonds...