rInvestors approve Sesa, Sterlite mergeNew natural resources giant is formed with Rs 1,24,000-crore market cap BS Reporter / Mumbai Jun 26, 2012, 00:23 IST
Four years after investors shot down restructuring of Vedanta Resources Plc, Anil Agarwal, executive chairman of the Vedanta Group, is second time lucky, as he has managed to convince shareholders to approve the merger of Sesa Goa Ltd and Sterlite Industries India Ltd, two group companies.
The new entity, Sesa-Sterlite, with a market capitalisation of Rs 1,24,000 crore, will be in top 10 Indian companies. | | | | |
In a court-convened meeting on June 19, the shareholders of Sesa Goa voted in favour of the merger of the two companies. In an announcement to the stock exchanges on Monday, Sesa Goa said the shareholders had given their nod to the merger. “Of the members present and validly voting, 91.7 per cent in numbers representing 79.12 per cent of votes in value voted in favour of the resolution approving the scheme.”

REATING A GIANT
Vedanta said it is simplifying its business by merging its Indian subsidiaries | How the Sesa-Sterlite merged entity stacks up among India’s largest companies | Companies | M-Cap (in Rs crore) | TCS | 2,37,927.02 | Reliance Ind | 2,34,273.32 | ONGC | 2,33,521.83 | Coal India | 2,12,735.00 | ITC | 1,95,499.09 | SBI | 1,41,918.25 | Infosys | 1,41,742.53 | HDFC Bank | 1,26,455.22 | NTPC | 1,25,578.36 | Sesa-Sterlite* | 1,24,000.00 | Bharti Airtel | 1,17,229.44 | * Merged entity |
Also, shareholders of Sterlite Industries voted in favour of the merger on June 21 in Tuticorin. Sterlite said that 92 per cent of the total value of votes were in favour of the merger. Timeline | August 2010: Vedanta agrees to buy majority stake in Cairn India | December 8, 2011: The Cairn India buy finally gets completed after sorting out regulatory issues and that related to ONGC | February 25, 2012: Vedanta announces group restructure; Sesa-Sterlite to be the holding company which includes 38.3 per cent of Cairn India as well | April 24, 2012: The Competition Commission of India approves the merger | June 25, 2012: The shareholders of Sesa Goa and Sterlite Industries approve of the merger | The company expects to complete the merger process in the current calendar year itself |
As per section 391 of the Companies Act, 75 per cent of shareholders present in person or proxy need to vote in favour for a resolution to be passed.
Now the companies will apply for legal approvals of the merger. Vedanta expects the entire merger process to be completed in the current calendar year itself. Companies that will be merged to form Sesa-Sterlite FY11-12 ( Rs Crore) | Companies | Net sales | Reported profit after tax | Market cap | Sterlite Industries | 40,966.77 | 4,827.92 | 33,494.36 | Hindustan Zinc | 11,255.14 | 5,526.04 | 50,112.06 | Sesa Goa | 8,274.53 | 2,695.50 | 16,156.57 | Cairn India ( 38.8 %) | 4,601.93 | 3,079.84 | 24,132.01 | Total | 65,098.37 | 16,129.30 | 123,895.00 | Compiled by BS Research Bureau Source: Capitaline |
This is the second time Vedanta is trying to restructure its business. The first time, in 2008, was met with a fierce resistance from shareholders because of the valuation of Konkola Copper Mines, a Zambia-based copper mining and smelting subsidiary of Vedanta. The restructuring back then was shelved.
The Sesa-Sterlite merger will create the world’s seventh largest metal company and the 10th largest Indian company, in terms of market cap. Vedanta’s Agarwal in February had said: “There was absolutely necessary not to have two holding companies. Therefore, in the new structure, Sesa-Sterlite will be the operating company with all assets within them. Only the Konkola Copper Mines (will) remain directly under Vedanta.”
With this merger, Sesa-Sterlite will house oil, aluminium, alumina, power, iron ore, lead, zinc, copper and silver businesses of Vedanta.
According to Vedanta, “In the 12 months to December 2011, Sesa Sterlite would have generated revenues of Rs 66,431 crore and earnings before interest, taxes, depreciation and amortisation (Ebitda) of Rs 24,953 crore, combined with a strong balance sheet with net debt of Rs 36,936 crore and net debt/Ebitda of 1.5 times.”
As per analysts, the market cap of the combined entity will be over Rs 1,00,000 crore, or close to 25 per cent higher than the market cap of the companies individually.
In an Emkay Research report dated February 27, two days after the restructuring announcement, Jagdish Agarwal, Goutam Chakraborty and Prince Poddar wrote they expected the new entity to have a profit after tax of Rs 10,920 crore in 2012-13.
In the new Sesa-Sterlite entity, Vedanta will hold 58.3 per cent stake. As per the swap ratio announced by Vedanta in February, Sterlite shareholders will get three shares of Sesa Goa for every five shares. Barring Konkola Copper Mines, all other group companies — Cairn India Ltd, Vedanta Aluminium Ltd, Bharat Aluminium Co Ltd, Madras Aluminium Co Ltd and Hindustan Zinc Ltd — will become subsidiaries of Sesa-Sterlite.
With this merger, the debt of the London-listed Vedanta Resources will fall by 61 per cent to $3.8 billion, as it gets transferred to the new entity. The net debt in Sesa-Sterlite will be $7.5 billion.
This mega debt in the books of Sesa-Sterlite was the main reason for some investor backlash. Apparently, a few investors were unhappy with the debt of Vedanta Aluminium getting transferred into the new company as it is a loss-making unit.

Why investors should vote against Sesa-Sterlite merger by Sunainaa Chadha Jun 15, 2012

Just days before shareholders of Sesa Goa meet to consider the merger with Sterlite, advisory firm IIAS has recommended stakeholders of both firms to vote against the merger on grounds of a huge debt burden.
The merger will result in formation of a new entity called Sesa Sterlite, which could demand a valuation of more than $20 billion post the consolidation.The new entity will also get 70.5 percent of Vedanta Aluminium (an unlisted loss-making entity) from the parent company Vedanta Resources, who will in turn get 72 million shares of Sesa Sterlite. Vedanta Aluminium will subsequently be merged in Sesa Sterlite. What this means is that Sterlite will be servicing the debts taken by on Vedanta to acquire the stake from Cairn.
High transfer of debt to the new entity
The shareholder activist advisory firm has warned that minority investors stand to lose out. It points out that before the merger shareholders of Sterlite and Sesa Goa did not hold any debt of Vedanta Aluminium, Cairn India or Malco, but after the merger revenue may rise 35 percent, but the total debt would rise by 400 percent!. “Additional debt of VAL and Cairn India (total of Rs 50,000 crore) will be transferred to the combined new entity, without fully resolving issues with regard to mining, resulting in the proposal being detrimental to minority shareholders of Sesa Goa and Sterlite,” it said.
Moreover, Vedanta Aluminum’s mining assets are locked in disputes and litigations with the Indian government. According to the firm, the consolidation of VAL with Sesa Goa and Sterlite would only be favourable to minority shareholders after the necessary clearances and mining approvals have been obtained.
While the merger will help Vedanta save around Rs 1,000 crore every year and Sesa Sterlite will be used as a vehicle for further mergers and acquisitions, the restructuring was necessary to prevent the parent company from breaching a debt covenant, which would have been triggered had commodity prices slipped further, a Firstpost story noted earlier. Even IIAS argues that pre restructuring, Sesa Goa and Sterlite collectively are net cash companies. Post the consolidation of VAL, Cairn India and MALCO, the new entity will have gross debt of Rs 66700 crore.
Vedanata Alumunium’s net losses increased to Rs 2620 crore in GY12 from Rs 960 crore in the tyear-ago period. This means that the company will be largely dependent on external funding including debt and inter corporate deposits to finance its operations.
Operational hurdles in VAL
That’s not all, Vedanta has been marred with operational issues for the last two years. In August 2010, the ministry of environment and forest denied a forest clearance for Niyamgiri Mines to Orissa Mining Corporation which is one of the prime source to supply bauxite to VAL.This has resulted in the production cost increasing to $2,100 per tonne vis-à-vis $1,600 per tonne. Given its operational losses, the company’s not going into profit mode for the next couple of years and its massive debt is sure to be serviced by Sesa and Sterlite.
Templeton, which owns a 13 percent stake in Sesa Goa, and is the second largest shareholder in the company after the founders, is also trying to block a planned merger between Sesa Goa and Sterlite Industries, said an Economic Times report earlier this week.
Templeton is worried about VAL’s huge debt burden of Rs 27,564 crore and the uncertainties shrouding the aluminum project. “At the current market price of Sesa Goa and Sterlite, there is an arbitrage opportunity compared to the merger swap ratio of 0.60. The fact that shareholders are not taking the opportunity is a reflection that they are not convinced about the merger, ” said the ET Now report.
Last week, IIAS had asked shareholders of Infosys to vote against a resolution seeking the reappointment of its statutory auditors, while some shareholder of Mahindra Satyam protested against the share swap ratio they were offered in the proposed merger with Tech Mahindra.
It is clear that shareholders no longer prefer to remain mum on issues of corporate governance and feel that they must start asking tough questions. Even the Ministry of Corporate Affairs is planning a new set of regulations relating to corporate governance.

NEWS
Sesa Goa, Sterlite tank up to 9 pc on merger plan
February 27, 2012 | PTI
MUMBAI: Shares of Sesa Goa and Sterlite Industries tumbled by up to 9 per cent today, couple of days after announcement of merger of the two companies by the parent Vedanta group. Shares of Sesa Goa plunged 8.9 per cent to touch a low of Rs 207.10 on the BSE. Similarly, Sterlite shares went down by 4 per cent to Rs 113.90 in morning trade. "Fall in the stocks is because of the swap ratio adjustment. Here, the fall is steep for Sesa Goa because it is adjusting to the new share swap ratio," Ashika Stock Brokers Research Head Paras Bothra said.
NEWS
Sesa-Sterlite merger will create more value for shareholders: Anil Agarwal, Vedanta Group
February 27, 2012 | ET Now
In an interview with ET Now , Anil Agarwal , Chairman , Vedanta Group , talks about the merger of Sterlite Industries with Sesa Goa and how the restructuring of the company will play out in the market. Excerpts: ET Now: What is the rationale behind this restructuring? Anil Agarwal: For the past 15 years we have been building the company. As and when resources were there, we acquired Madras Aluminium, Bharat Aluminium , Sesa Goa and Hindustan Zinc.
NEWS
Brokerage view: Sesa Goa upgraded to 'underperform' on merger plan
February 27, 2012 | Economictimes.com and Agencies
NEW DELHI: Brokerage firm CLSA in a report said the merger of Sterlite Industries with Sesa Goa has been broadly done in a fair manner and the new 'Sesa Sterlite' entity should benefit from tax efficiency across profit-making iron ore/copper business. "The restructuring is EPS dilutive (9-19%) for Sesa Goa over Fy13-14 and slightly value dilutive for both Sesa and Sterlite. We upgrade Sesa from 'Sell' to underperform with a target price of Rs 230," said the CLSA report.
NEWS
Azko Nobel is the game-changer in coatings industry: Amit Jain, MD, AkzoNobel India
February 27, 2012 | Satish John , ET Bureau
Amit Jain , managing director of AkzoNobel's Indian entity, is extremely bullish. He's doing the rounds in Mumbai, meeting institutional investors and explaining the benefits of the recent merger of three unlisted group firms with the listed Indian subsidiary of AkzoNobel (formerly ICI). In an interview with Satish John, he lays bare the details of the merger. Excerpts: AkzoNobel's former avatar ICI India was on a perpetual restructuring mode. After Akzo acquiring ICI and the latest merger of three subsidiaries, is the restructuring mode now completed?
NEWS
Sterlite shareholders to benefit the most from Sesa-Sterlite merger: Vallabh Bhanshali, Enam Securities
February 27, 2012 | ET Now
In an interview with ET Now, Vallabh Bhanshali, Chairman, Enam Securities Pvt Ltd, talks about the proposed restructuring of Sesa Goa and Sterlite Industries and shares his views on the Indian markets. Excerpts: ET Now: The proposed restructuring of Sesa Goa and Sterlite Industries is a very clean and strong restructuring exercise which will take care of lots of long term structural issues. After the restructuring to your mind will Sterlite Industries as a stock get re-rated?
NEWS
Merger Impact: Market dumps Sesa Goa, stock down 10%
February 27, 2012 | Economictimes.com and Agencies
NEW DELHI: Shares of Sesa Goa fell more than 10% on Monday after parent Vedanta Resources decided to merge the company with group firm Sterlite Industries and set a swap ratio of three Sesa Goa shares for every five Sterlite shares. "Fall in the stocks is because of the swap ratio adjustment. Here, the fall is steep for Sesa Goa because it is adjusting to the new share swap ratio," Ashika Stock Brokers Research Head Paras Bothra said. According to the deal, Vedanta Aluminium along with the Madras Aluminium Company will also be consolidated into Sesa Sterlite.
NEWS
Vedanta set to merge Sterlite, Sesa Goa to cut debt
February 26, 2012 | ET Bureau
MUMBAI: Metal maven Anil Agarwal chose a weekend to announce the formation of a much speculated organisational rejig that combines his flagship Indian companies - Sesa Goa and Sterlite Industries - into a new single entity, Sesa Sterlite, and thus enabling in one stroke the cut in debt exposure of its parent, the LSE-listed Vedanta Resources plc. When this merger is concluded, the company which has interests ranging from...
NEWS
Vedanta's merger of Sesa Goa, Sterlite to create USD 20 bn entity
February 25, 2012 | PTI
MUMBAI: In a major revamp, billionaire Anil Agarwal-led metal and mining major Vedanta Resources today decided to merge Sterlite Industries with Sesa Goa to create USD 20 billion controlling entity for simplying its group structure. Merger of Sterlite Industries and Sesa Goa will lead to a new entity, Sesa Sterlite which will be the seventh largest natural resources company in the world. The decision to synergise activities in oil exploration, mining and non-ferrous metal will save the group Rs 1,000 crore per annum, its Chairman Anil Agarwal told reporters after meetings of the boards of the merging entitites here.
NEWS
AkzoNobel's shareholders oppose move to hike foreign promoter stake
January 11, 2012 | Satish John , ET Bureau
MUMBAI: A group of minority shareholders of AkzoNobel, including Asian Paints, have objected to a proposal under which the listed firm will absorb three unlisted group companies at a higher valuation, thereby increasing foreign promoter's share holding. In a concerted move, the institutional investors such as ICICI Prudential, LIC, SBI Mutual Fund , Bajaj Allianz, among others, have informed AkzoNobel, (formerly ICI) about their discomfort over the valuation given to the three companies controlled by Akzo's foreign parent, though the listed firm has a market cap of over 2,000 crore and cash in hand of about 1,000 crore.
Templeton opposes Vedanta firms' merger plans: repor

Templeton Asset Management Ltd is trying to block a planned merger between Sesa Goa and Sterlite Industries, both of which are controlled by miner Vedanta Resources, a business daily reported on Saturday, citing unnamed sources.
Sesa Goa has called a shareholders meeting on June 19 to vote on the merger, while Templeton is trying to muster support to block the resolution, the newspaper said, adding that the fund was in talks with other institutional holders in Sesa Goa. In February, Vedanta Resources said it was simplifying its business structure by merging its Indian subsidiaries into a single unit to cut costs, and it planed to issue American Depositary Shares in the combined firm.
Templeton, which owns a 13% stake in Sesa Goa, is the second largest shareholder in the company after the founders, and is the largest institutional investor in the Indian miner.
Templeton is worried about the huge debt burden of another Vedanta unit, which is also to be merged into Sesa Goa, also has concerns about an aluminium project belonging to that unit, the paper said. It said Templeton would need over 25% of the votes to block the resolution.
"(It's only) Templeton, not all shareholders have issues. We have always ensured that the interests of all shareholders are protected and the merger will only enhance the medium and long-term value of their investments," the paper quoted an email reply from Sesa Goa as saying.
Templeton was not immediately available for comment. A Vedanta group spokesman in New Delhi declined to comment.

Vedanta Resources plc
16 Berkeley Street
London W1J 8DZ
Tel: +44 (0) 20 7499 5900
Fax: +44 (0) 20 7491 8440 www.vedantaresources.com NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN,
INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION
25 February 2012
ALL-SHARE MERGER OF SESA GOA AND STERLITE INDUSTRIES,
AND VEDANTA GROUP CONSOLIDATION
Sterlite Industries (India) Ltd (“Sterlite” together with its subsidiaries), Sesa Goa Ltd (“Sesa Goa” together with its subsidiaries) and Vedanta Resources Plc (“Vedanta” together with its subsidiaries, the “Group”) today announced a recommended merger of Sesa Goa and Sterlite and the proposed consolidation and simplification of the Group structure.
Transaction highlights
Merger of Sterlite into Sesa Goa (proposed new name “Sesa Sterlite”), 3 Sesa Goa shares to be issued for every 5 existing Sterlite shares
Vedanta Aluminium Ltd (“VAL”) and The Madras Aluminium Company Ltd (“MALCO”) to be 100% consolidated into Sesa Sterlite
Transfer of Vedanta’s direct holding of 38.8% in Cairn India Limited (“Cairn India”) to Sesa
Goa, together with the associated debt of $5.9 billion, at cost. Post the transfer, Sesa Sterlite will have a 58.9% shareholding in Cairn India
Creating Sesa Sterlite, a global diversified natural resources major
Creation of Sesa Sterlite: India’s natural resources champion and expected to be seventh largest global diversified natural resources major by EBITDA1
World-class, low cost assets in close proximity to high-growth markets
Growth capital largely invested, capacity expected to double in the next three years2
Greater scale and diversification reduces volatility of earnings for Sesa Sterlite
Cash generative business supported by a strong balance sheet
Sesa Sterlite will be listed in India, with American Depositary Shares (“ADS”) listed on the
New York Stock Exchange (“NYSE”)
1 Ranked by EBITDA in the twelve months ended December 2011 from public filings
2 All metal and power capacities rebased to copper equivalent (defined as production multiplied by commodity price divided by copper price) using commodity prices as at 14 February 2012
Vedanta Resources plc Page 2 of 11
All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation
Consolidating and simplifying the Group structure in line with stated strategy
Significant synergies expected – generating cost savings c.INR 1,000 crore (c.$200 million) per annum
Earnings accretive for Sesa Goa, Sterlite and Vedanta shareholders immediately post completion Post consolidation Vedanta will own a 58.3% shareholding in Sesa Sterlite
The Group’s 79.4% shareholding in Konkola Copper Mines Plc (“KCM”) will continue to be directly held by Vedanta
Anil Agarwal, Chairman of Vedanta, said:
“Sesa Sterlite will be one of the largest global diversified natural resources majors, supporting country’s industrial growth. This transaction is a natural evolution, leading to simplification of the
Group’s structure. Sesa Sterlite will be the principal operating company in the group and with its high quality assets, growth projects and strong management, it is well placed to create value for all shareholders.” M.S. Mehta, Group CEO, said:
“This consolidation will create value for all shareholders. It will lead to a simpler and more efficient structure and will facilitate more flexible allocation of capital. Our shareholders will benefit from unparalleled growth across metals, mining and oil & gas, besides, the increased synergy.” P.K. Mukherjee, Managing Director of Sesa Goa, said:
“This is a positive and big step forward for Sesa Goa. In addition to being part of a much larger group with an increasingly global shareholder base, we will benefit from diversification, whilst increased scale will reduce volatility of earnings and cash flows through the commodity cycle. This will support our growth strategy and also enable us to benefit from the attractive growth projects in oil & gas, zinc-lead-silver, aluminium and power within the Group.”
Vedanta Resources plc Page 3 of 11
All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation
Transaction Rationale
The consolidation is expected to create the world’s seventh largest global diversified natural resources major by EBITDA3. Sesa Sterlite is expected to have a world-class, low cost asset base in close proximity to high growth markets. Increased diversification is expected to reduce volatility of earnings through commodity cycles, lowering the cost of capital and enhancing value.
The consolidation and simplification of the Group structure is consistent with the Group’s strategy. The elimination of cross holdings is expected to benefit the Group through superior capital structure, increased flexibility to allocate capital, broader access to capital markets and enhanced visibility of earnings and cashflow.
The consolidation is expected to lead to significant operational, capital and corporate synergies, including economies of scale, leveraging technical expertise, more efficient movement of Group cash, improved allocation of capital and corporate cost savings including tax efficiencies.
These synergies are expected to generate cost savings of c.INR 1,000 crore (c.$200 million) per annum. The consolidation is expected to be earnings accretive to Sesa Goa, Sterlite and Vedanta shareholders immediately post completion.
Group structure diagrams can be found on the Sterlite (www.sterlite-industries.com), Sesa Goa
(www.sesagoa.com) and Vedanta (www.vedantaresources.com) websites
Sesa Sterlite – the world’s seventh largest diversified natural resources major by EBITDA4
Sesa Sterlite will have exposure to zinc-lead-silver, iron ore, oil & gas, copper, aluminium and commercial power with assets located in India, Australia, Liberia, South Africa, Namibia, Ireland and Sri Lanka. This world class asset base will benefit from the previously announced capex programme that is largely invested, with capacity expected to double in the next three years5.
In the 12 months to December 2011, Sesa Sterlite would have generated revenues of INR 66,431 crore ($14.2 billion) and EBITDA of INR 24,953 crore ($5.3 billion), combined with a strong balance sheet with net debt of INR 36,936 crore ($7.5 billion) and net debt/EBITDA of 1.5 times.
A summary of Sesa Sterlite’s operations and assets:
● Zinc-Lead- Silver and Copper (HZL, Zinc International, Copper - India, CMT)
3 Ranked by EBITDA in the twelve months ended December 2011 from public filings
4 Ranked by EBITDA in the twelve months ended December 2011 from public filings
5 All metal and power capacities rebased to copper equivalent (defined as production multiplied by commodity price divided by copper price) using commodity prices as at 14 February 2012
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All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation
The group’s zinc business is the largest and amongst the lowest cost zinc-lead producers globally, operating the Rampura Agucha Mine, the world’s largest zinc mine on production basis, with further growth potential from the Gamsberg project in South Africa, one of the largest undeveloped zinc deposits in the world. The Copper – India’s, Tuticorin Smelter is amongst the lowest quartile cash cost custom copper smelters in the world.
The Group produced 825 kilotonnes (“kt”) of zinc-lead, 304 kt of copper and 4.8 million ounces
(“Moz”) of silver in the financial year ended 31 March 2011 from its Indian and international operations. The Group’s current zinc-lead capacity is c.1.5 million tonnes per annum (“mtpa”) and silver capacity will be 16 Moz by end of the year, making it a leading Silver producer globally. ● Aluminium and Commercial Power (Sterlite, VAL, BALCO, MALCO)
The group’s aluminium business is strategically well-located in the bauxite and coal reserve rich region of India.
The aluminium and power business produced 641 kt of aluminium and 1,879 million units
(“mu”) of power in the financial year ended 31 March 2011. Following the completion of scheduled expansion projects, the aluminium business will have a smelting capacity of 2.3 mtpa with integrated power and the power capacity will increase to 8,600 MW, of which commercial power will be 3,900 MW.
● Iron Ore (Sesa Goa, Western Cluster Limited)
Sesa Goa is India’s largest private sector iron ore producer-exporter, with 18.8 million tonnes
(“mt”) produced in the financial year ended 31 March 2011. Group’s Iron Ore capacity is expected to increase significantly post completion of scheduled investment in India and
Liberia, part of the emerging iron ore hub in West Africa, with a low cost profile and long-life assets. ● Oil and Gas (Cairn India)
Sesa Sterlite will own 58.9% of Cairn India, one of the largest private sector oil & gas companies in India and among the top 20 independent exploration and production companies globally with the market cap of approximately $15 billion. Cairn India was the fastest growing exploration & production company in Asia in 2011. The company has a diversified asset base with 10 blocks; 1 in Rajasthan, 3 on west coast of India and 5 on east coast of India including 1 in Sri Lanka. The Rajasthan block in the Barmer basin has an estimated gross in place resource of approximately 6.5bn barrels of oil equivalent. Cairn India’s gross operated production last quarter (Q3 FY 2011-12) was approximately 170 kboepd, contributing to approximately 20% of
India's domestic crude oil production. Subject to obtaining approval from its joint venture partner and the Government of India, Cairn India plans to ramp up the gross operated production to 260,000+ boepd which based on 2011 figures would be equivalent to approximately 30% of India’s current crude oil production.
● Management
The Board of Sesa-Sterlite will have a majority of independent directors. The management team of Sesa-Sterlite will include members of the current management team.
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All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation
Proposed Transaction Steps
● Sterlite will merge into Sesa Goa to create Sesa Sterlite, through the issue of Sesa Goa shares to shareholders of Sterlite via a scheme of arrangement under Indian law (see below). Sterlite shareholders as of the record date, to be determined after obtaining all necessary approvals, are expected to receive 3 Sesa Goa shares for every 5 existing Sterlite shares. Sesa Goa also intends to establish an ADS facility comparable to Sterlite’s current ADS. This would allow holders of
Sterlite’s ADS as of the record date to receive Sesa Goa ADS with appropriate adjustments to reflect the foregoing exchange ratio. The merger is subject to compliance with all applicable laws, including the legal requirements of all the jurisdictions in which the distribution is made, and the rules and regulations of all applicable stock exchanges. Each Sterlite ADS currently represents four equity shares of Sterlite.
● Consolidation of VAL, via the merger of Ekaterina Limited (a Mauritius holding company for
Vedanta’s 70.5% shareholding in VAL) into Sesa Sterlite and the issue of 72.3 million Sesa Goa shares to Vedanta after obtaining all necessary approvals. Based on Sesa Goa’s closing price on
24 February 2012 of INR 227 per share, the equity value of VAL equates to INR 2,332 crore
($473 million).
● MALCO to merge into Sesa Sterlite, through the issue of 78.7 million Sesa Goa shares to shareholders of MALCO as of the record date, to be determined after obtaining all necessary approvals. Based on Sesa Goa’s closing price on 24 February 2012 of INR 227 per share the value of MALCO equates to INR 1,790 crore ($363 million) including the value of MALCO’s existing 3.6% shareholding in Sterlite. As part of the merger MALCO’s existing shareholding in
Sterlite will be cancelled by Sesa Sterlite.
● Post the merger of Sesa Goa and Sterlite, Sterlite Energy Limited and VAL’s Aluminium business will be merged into the consolidated Sesa Sterlite. As wholly-owned subsidiaries no shares will be issued in consideration of the mergers.
● All the transaction steps described above will be effected via schemes of arrangement under
Indian and Mauritian law and are inter-conditional. The schemes of arrangement are expected to close by 31 December 2012.
After obtaining all necessary approvals, the shares to be issued by Sesa Goa shall be listed on the Bombay Stock Exchange (“BSE”) and National Stock Exchange of India (“NSE”) where the existing shares of Sesa Goa are currently listed, and its ADS shall be listed on the NYSE, which will be consistent with Sterlite’s existing listing arrangements.
Sterlite’s outstanding convertible bonds will become convertible into Sesa Goa ADS from the effective date of the schemes of arrangement in accordance with the terms of the convertible bonds and the trust deed governing the convertible bonds.
● Vedanta will transfer its 38.8% direct shareholding in Cairn India to a wholly-owned subsidiary of Sesa Goa at a nominal consideration of $1, together with the associated acquisition debt of $5.9bn (through the transfer of companies in which such debt and shareholdings are held). The debt will continue to be guaranteed by Vedanta. This transfer is not inter-conditional on the merger of Sesa, Sterlite, MALCO and VAL.
Recommendations and Fairness Opinions
The Boards, including the independent directors, of Vedanta, Sterlite, Sesa Goa, VAL and
MALCO have approved the proposed consolidation and recommended the consolidation as being in the interest of their respective shareholders.
Vedanta Resources plc Page 6 of 11
All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation
Independent valuers, Grant Thornton India LLP and KPMG India Private Limited, have provided to the Boards of Sesa Goa, Sterlite, MALCO and VAL their recommendation on the exchange ratios for consideration by the respective Boards.
The Board of Sesa Goa has received opinions from Citigroup Global Markets India Private
Limited on fairness, from a financial point of view, to Sesa Goa of the share exchange ratios for the merger of Sterlite into Sesa Goa, merger of MALCO into Sesa Goa, consolidation of VAL into Sesa Goa (by way of merger of the holding company owning Vedanta’s 70.5% stake in
VAL) and of the consideration to be paid by Sesa Goa’s subsidiary for acquisition of companies owning Vedanta’s 38.8% shareholding in Cairn India.
The Board of Sterlite has received opinions, from DSP Merrill Lynch Limited on the fairness, from a financial point of view, to Sterlite Industries of the share exchange ratio for the merger of Sterlite into Sesa Goa.
Approvals
Approvals will be sought from:
● Shareholders and creditors of Sesa Goa, Sterlite, VAL and MALCO.
● BSE and NSE.
● Competition Commission of India.
● Foreign Investment Promotion Board, India.
● Jurisdictional High Courts at Mumbai (Goa Bench) and Madras in India and the Supreme
Court of Mauritius.
● Regulatory and other approvals as may be required.
● Shareholders of Vedanta for the merger of Sesa Goa and Sterlite, the consolidation of MALCO and VAL into Sesa Sterlite and transfer of Vedanta’s direct shareholding of 38.8% in Cairn
India to Sesa Goa as these transactions constitute a Class 1 transaction pursuant to the Listing
Rules of the UK Listing Authority. Vedanta will send a circular to its shareholders in due course, which will include further details of these transactions together with a notice of the
Vedanta general meeting at which shareholder approval for these transactions will be sought.
Vedanta Resources plc Page 7 of 11
All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation
Conference calls for analysts and shareholders including dial in details
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Vedanta Resources plc Page 8 of 11
All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation
Contacts
Vedanta Resources plc
Sterlite Industries (India) Limited
Ashwin Bajaj
Senior Vice President – Investor Relations
Tel: +91 22 6646 1531 ir@vedanta.co.in Sheetal Khanduja
AGM – Investor Relations
Tel: +91 22 6646 1531
Sterlite.ir@vedanta.co.in
Sesa Goa Limited
Swapnil Patil
AGM - Investor Relations
Tel: +91 832 6713 662 sesa.ir@vedanta.co.in Mohamed Tariq Mujahid
Tel: +91 832 6713 724 sesa.ir@vedanta.co.in UK Media
RLM Finsbury
+44 20 7251 3801
James Murgatroyd
+44 7768 254 911
Gordon Simpson
+44 7778 739 237
Joint Corporate Brokers and Joint Financial Advisors
J.P.Morgan Cazenove
Joe Seifert
Charles Pretzlik
Tel: +44 20 7588 2828
Morgan Stanley & Co. International plc
Alastair Cochran
Tom Perry
Tel: +44 20 7425 8000
Vedanta Resources plc Page 9 of 11
All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation
About Vedanta
Vedanta is a London listed FTSE 100 diversified global natural resources major. The Group produces aluminium, copper, zinc, lead, silver, iron ore, oil & gas and commercial energy. Vedanta has operations in India, Zambia, Namibia, South Africa, Liberia, Ireland, Australia and Sri Lanka.
With an empowered talent pool globally, Vedanta places strong emphasis on partnering with all its stakeholders based on the core values of entrepreneurship, excellence, trust, inclusiveness and growth. For more information, please visit www.vedantaresources.com.
About Sterlite
Sterlite is one of India’s largest non-ferrous metals and mining companies. The company produces aluminium, copper, zinc, lead, silver, and commercial energy and has operations in India,
Australia, Namibia, South Africa and Ireland. The company has a strong organic growth pipeline of projects. Sterlite is listed on the BSE and NSE in India and the NYSE in the United States. For more information, please visit www.sterlite-industries.com.
About Sesa Goa
Sesa Goa is India’s largest producer- exporter of iron ore in the private sector. The company is a majority owned and controlled subsidiary of Vedanta, the London listed FTSE 100 diversified global natural resources major. For more than five decades, Sesa Goa has been involved in iron ore exploration, mining, beneficiation and exports. Sesa Goa has iron ore mining operations in Goa and Karnataka. In August 2011 Sesa Goa acquired a 51% stake in Western Cluster Limited, a
Liberia based company engaged in developing the Western Cluster, a network of iron ore deposits in west Africa, into a large integrated iron ore project. Sesa Goa is also involved in the manufacturing of pig iron and metallurgical coke, with a 0.28 mtpa metallurgical coke plant and a
0.25 mtpa pig iron plant in Goa in India. For more information, please visit www.sesagoa.com.
Additional Information
Gross assets as of 30 September 2011 and profit before tax (“PBT”) as of 31 March 2011: Cairn India gross assets $10.7 billion and PBT $1.5 billion, Sesa Goa gross assets $3.9 billion and PBT $962 million, Sterlite gross assets $16.4 billion and PBT $1.7 billion, VAL gross assets $6.5 billion and
PBT $(206) million and MALCO gross assets $0.2 billion and PBT $26 million.
Additional information on the consolidation can be found in the presentation dated 25 February
2012 posted on Vedanta’s website at www.vedantaresources.com.
Sterlite’s filings with the Securities and Exchange Commission (SEC) are also available to the public from commercial document-retrieval services or from the website maintained by the SEC at www.sec.gov. Vedanta Resources plc Page 10 of 11
All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation
Disclaimer
This press release contains “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended. In this context, forward-looking statements often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “should” or “will.”
The forward—looking statements contained herein, including statements regarding the proposed consolidation, the ability to obtain the various approvals required for the consolidation, the impact of the consolidation on the combined business, the listing of Sesa Sterlite equity shares on the BSE and NSE and the listing of Sesa Sterlite ADS on the NYSE, by their nature address matters that are, to different degrees, uncertain. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. In particular, there can be no assurance that the consolidation will be consummated on the terms described in this press release or at all or will have the financial or operational impact on shareholders as described in this press release (including anticipated synergies), Sesa Sterlite’s equity shares will be listed on the BSE or NSE or Sesa Sterlite’s ADS will be listed on the NYSE. Additional factors that could cause Sterlite and its subsidiaries’ results to differ materially from those described in the forwardlooking statements can be found in the 2011 Annual Reports on Form 20-F of Sterlite, filed with the
SEC. We do not undertake to update our forward-looking statements.
The forward-looking statements in this press release speak only as at the date of this press release.
Save as required by the requirements of the Financial Services Authority or the London Stock
Exchange plc or otherwise arising as a matter of law or regulation, each of Vedanta, Sterlite and
Sesa Goa expressly disclaims any obligation or undertaking to disseminate after publication of this press release any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
The Sesa Sterlite securities to be issued in the proposed consolidation have not been and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.
This press release is not an offer for sale of or solicitation of an offer to buy any securities in the
United States or any other jurisdiction. This press release appears for information purposes only and does not constitute an invitation or offer to sell, dispose, acquire, purchase or subscribe for any securities of any company mentioned herein and neither this press release nor anything herein forms the basis for any contract or commitment whatsoever.
Certain information in this press release, in particular the Sesa Sterlite revenues and EBITDA for the 12 months to December 2011 and the net debt as at 31 December 2011, is based upon unaudited management accounts and estimates.
Unless otherwise indicated, all references in this press release to “US dollars”, “US$” and “$” are to the lawful currency of the United States and all references to “INR” are to “Indian Rupee”, the lawful currency of India. For the purposes of this press release and unless otherwise stated, for the convenience of the reader, the US dollar to INR exchange rate of 1:49.2, the rate quoted by the
Reserve Bank of India on 22 February 2012, has been applied for translation of certain amounts from INR to US dollar. Such translations should not be considered as a representation that such
Vedanta Resources plc Page 11 of 11
All-Share Merger of Sesa Goa and Sterlite Industries, and Vedanta Group Consolidation currencies could have been or could be converted into US dollars or INR (as the case may be) at any particular rate, the rate stated or at all.
Investors should seek their own tax advice.
J.P. Morgan Limited, which conducts its UK investment banking activities as J.P. Morgan
Cazenove and is authorised and regulated in the United Kingdom by the Financial Services
Authority, is acting as corporate broker and financial advisor for Vedanta and no one else in connection with the consolidation and this announcement and will not be responsible to anyone other than Vedanta for providing the protections afforded to its clients nor for providing advice in connection with the consolidation or any matter referred to herein.
Morgan Stanley & Co. International plc ("Morgan Stanley") is acting as corporate broker and financial advisor to Vedanta and is advising no one else in connection with the consolidation and will not be responsible to any person other than Vedanta for providing the protections afforded to the clients of Morgan Stanley, nor for providing advice in relation to the consolidation, the contents of this announcement or any other matters referred to herein.

Vedanta's merger of Sesa Goa and Sterlite: 10 quick facts
Mumbai: London Stock Exchange-listed Vedanta Resources on Saturday announced that it will merge all its Indian firms, including Sterlite Industries and Sesa Goa, into a single entity.

1. Vedanta Resources, which is listed in London, will merge all of its Indian holdings, particularly Sterlite Industries and Sesa Goa, into a single entity.

2. Vedanta will hold 58.3 per cent in the new company.

3. The merge will entail a share swap in the 3:5 ratio, wherein five shares of Sterlite will fetch three shares of Sesa Goa.

4. The new entity, to be named Sesa-Sterlite, will have a market capitalization of about $22 billion, four billion more than the sum of the individual firms’ market cap.

5. The merged company will have consolidated net profit of $2.5 billion.

6. Unlisted Vedanta Aluminium, Madras Aluminium and Vedanta's 38.8 per cent holding in oil and gas producer Cairn India will also be transferred to Sesa Sterlite, whose stake in the company will go up to 58.9 per cent. Cairn India’s debt of $5.9 billion will also be transferred to Sesa-Sterlite.

7. Vedanta Resources will also issue American Depository Shares (ADS) in the new company that will be listed on the New York Stock Exchange.

8. The restructuring does not include Vedanta’s African business – it holds a 79.4 per cent stake in Konkola Copper Mines Plc in Zambia.

9. Sesa Goa is India’s largest privately-held producer and exporter of iron ore, Sterlite Industries is India’s largest non-ferrous metals and mining company.

10. The restructuring will come into effect only after some minority shareholders and regulators in India and the UK give it their stamp of approval.
Vedanta to merge Sesa Goa, Sterlite Industries

Vedanta acquired Cairn India from UK oil and gas group Cairn last year for $8.7 billion, increasing the complexity of its structure and saddling the group with heavy debts. Its annual debt servicing burden is $500 million at the group level - but that will drop to $180 million as a result of the overhaul, as much of the Cairn debt passes to the subsidiary holding that stake.
"The restructuring was necessary, especially after the acquisition of Cairn India, because it was a large acquisition and they needed to do things in a much more organised way in India," said Jagannadham Thunuguntla, head of research at SMC Investments and Advisors in New Delhi.
As a first step, Vedanta said it would merge non-ferrous metals producer Sterlite Industries into sister concern and iron ore miner Sesa Goa to create Sesa Sterlite, the eventual umbrella unit for other subsidiaries.
The boards of the companies have approved the issue of three shares of Sesa Goa for every five shares held in Sterlite.
Continuing the changes, Vedanta's unlisted unit Vedanta Aluminium, along with Madras Aluminium, will be transferred to Sesa Sterlite, now the key operating unit.
Vedanta's 38.8 per cent holding in oil and gas producer Cairn India will be transferred to Sesa Sterlite, along with related debt of $5.9 billion. Sesa Goa already holds 20 per cent in Cairn India directly and the group plans to spend $6 billion over the next three years to double production from Cairn's India block.
Over $20 billion valuation
The combined entity Sesa Sterlite is estimated to be valued over $20 billion, Vedanta Chairman Anil Agarwal, told reporters.
At current valuations, Sesa Sterlite would be in the top 15 companies by market capitalisation in India, Vedanta said, and the world's seventh largest diversified miner by core profit.
Agarwal, who quit school at 15, is estimated to be worth $6.4 billion and was the 14th richest Indian on Forbes magazine's list of the world's wealthiest people in 2011. Raised in Patna, Agarwal began his business in Mumbai in 1976 as a scrap dealer.
"This transaction is a natural evolution, leading to simplification of the Group's structure," Agarwal said.
The simplified structure should also help the group continue to grow into new areas, and he told reporters the company was looking to acquire coal assets in Latin America and was awaiting the coal block auctions to be offered by India's government.
The group's holding in Hindustan Zinc and Bharat Aluminium Co Ltd, in which the government also holds a minority share, will remain unchanged, but Vedanta is negotiating to buy the shares it does not already own. Vedanta said it had made a fresh cash offer last month, but had not yet received a reply from the government.
Vedanta, which will own 58.3 per cent in Sesa Sterlite post-restructuring, now controls about 55 per cent each in Sterlite Industries and Sesa Goa.
Zambia
The only one of Vedanta's assets to remain out of the Sesa Sterlite holding company will be its Zambian copper operation and one-time IPO candidate, Konkola, where it said there were no cross-shareholdings and therefore no simplification needed.
Rumours of changes to Vedanta's structure have lifted the stock this week, as investors welcome the possible change, but there is no guarantee of success. This is the group's second effort to overhaul its structure. A similar exercise in 2008 was aborted after investors opposed the plan.
On Saturday, Vedanta sought to reassure its minority shareholders by saying the restructuring will be earnings-accretive in the first year itself, and said the response from investors so far had been positive.
The group expects cost savings of $200 million a year from the restructuring, Deputy Chairman Navin Agarwal told analysts, adding the transaction was expected close in 2012.
Company officials however said they were targeting to complete the consolidation within 6 months.
Ratings agency Standard & Poor's said ahead of Saturday's announcement, the group's restructuring would improve its ability to service its debt obligations, but may take time to implement as it is subject to approval from a number of minority shareholders and regulators in Britain and India.

Coimbatore, Feb 25:
The UK-based Vedanta Resources Plc will merge its Indian firms — Sesa Goa and Sterlite Industries — into a single entity Sesa Sterlite and also offload debt of $9 billion (Rs 45,000 crore) on it. Under the merger, three Sesa Goa shares will be issued for five Sterlite shares.
Vedanta will also transfer to the new entity its share holding of 38.8 per cent in Cairn India along with a debt of $5.9 billion. Sesa Goa will pay a nominal consideration of $1 for Cairn India acquisition. After the transfer, Sesa Sterlite will have a 58.9 per cent shareholding in Cairn India. There will not be an open offer for Cairn India shareholders as there is no change in promoters.
Two unlisted companies — Vedanta Aluminium and Madras Aluminium — will be merged with Sesa Sterlite. The entire deal is expected to be completed in five-six months after receiving shareholders, creditors and various regulatory approvals in the UK and India.
Post the all-share deal, Vedanta Resources will own a 58.3 per cent in Sesa Sterlite, while the promoter (Anil Agarwal family) will hold 63 per cent in Vedanta Resources. Vedanta Resources holds 54.6 per cent in Sterlite and 55.10 per cent in Sesa Goa.
Vedanta Resources will continue to hold 79.4 per cent shareholding in Konkola Copper Mines in Zambia. Sesa Sterlite is expected to generate a revenue of Rs 66,431 crore and EBITDA (earning before interest, tax and depreciation and amortisation) of Rs 24,953 crore. Attributable net income works out to Rs 10,971 crore. The gross debt on books will amount to Rs 66,717 crore and net debt Rs 36,936 crore. Given the average cost of funds at eight per cent, the total interest outgo is expected at Rs 4,000 crore a year.
Economies of scale
Mr Anil Agarwal, Chairman, Vedanta Resources, said the merger will result in a saving of Rs 1,000 crore a year on account of economies of scale, leverage of technical expertise, better capital allocation and cash management and tax efficiencies resulting in cost savings.
“The reorganisation will lead to creation of seventh largest global diversified natural resources major with a potential to leap forward once the synergies are tapped to the optimal,” he said.
On transfer of Vedanta Aluminium debt of $4 billion, Mr Agarwal said: “It should be viewed in totality as we are also transferring an asset worth $10 billion. Once the problem in getting bauxite from captive sources is resolved, the company will become our flagship and the cherished asset of the country.”
Mr M.S. Mehta, Group CEO, said the consolidation will create value for all shareholders and lead to a simpler and more efficient structure. It will facilitate more flexible allocation of capital.
Mr Jagannatham Tunnuguntla, Head of Research, SMC Global Securities, said that the merger appears to be in favour of Sterlite holders. On Vedanta Aluminium, he felt it could cause concern among shareholders, due to its huge debt. Vedanta Plc will be clear beneficiary as it can pass on the debt to Sesa Sterlite. Sesa Sterlite is expected to have market cap upwards of $20 billion (about Rs 1 lakh crore).
Sesa Sterlite: How Vedanta pushed its dirt on to Sesa Goa’s rug

The much-awaited restructuring in the Vedanta Group was announced over the weekend. Contrary to market expectation, Sterlite will now be merged with Sesa Goa in the ratio of three shares of Sesa Goa for every share of Sterlite.
The merger will result in formation of a new entity called Sesa Sterlite, which could demand a valuation of more than $20 billion post the consolidation.

The merger will result in formation of a new entity called Sesa Sterlite, which could demand a valuation of more than $20 billion post the consolidation. Reuters
The new entity will also get 70.5 percent of Vedanta Aluminium (an unlisted loss-making entity) from the parent company Vedanta Resources, who will in turn get 72 million shares of Sesa Sterlite. Vedanta Aluminium will subsequently be merged in Sesa Sterlite.
Vedanta Resources will also transfer its 94.8 percent holding in another unlisted company Malco to Sesa Sterlite and get 79 million shares in return.
Vedanta Resources would also transfer its 38.8 percent stake in Cairn India, but this comes with a baggage of $5.9 billion of debt.
Sesa Sterlite would thus end up holding Sterlite’s copper business, a power plant with a capacity of 2,400 mw thorugh Sterlite Energy, the operation of Vedanta Aluminium, mining operations of Sesa Goa, 58.8 percent in oil producing company Cairn India, 64.9 percent in the erstwhile public sector Hindustan Zinc and 100 percent stake in its overseas zinc assets, 51 percent in Balco and copper mines in Tasmania.
While there is no doubt that the restructuring would simplify the existing structure, the move has been necessitated to benefit the parent company, Vedanta Resources. As had been pointed out by Firstpost, the restructuring was necessary to prevent the parent company from breaching a debt covenant, which would have been triggered had commodity prices slipped further.
By this move Vedanta Resources has not only pushed the dirt under Sesa Goa’s rug, but is now ready to take some more debt from the market to buy out the Indian government’s stake in Hindustan Zinc and also for its expansion plans.
According to the company chairman, the merger will help Vedanta save around Rs 1,000 crore every year and Sesa Sterlite will be used as a vehicle for further mergers and acquisitions. Speaking to CNBC-TV18, Agarwal said the new structure will enhance shareholder value.
The move will, however, have a negative impact on the Indian companies, especially Sesa Goa. The Indian company will now have to service the high level of debts taken by the parent to acquire Cairn India as well as end up with incubating the loss-making Vedanta Aluminium. There will, however, be a cost saving to the tune of Rs 1,000 crore on account of accumulated losses of Vedanta Aluminium. The parent company will not be taking any hit on its books despite the losses incurred in Vedanta Aluminium. Moreover, the merger of Sesa Goa and Sterlite will help the parent company recover all its investments even though Sesa Sterlite will have to bear the burden of servicing its debt.
The fact that the market has not liked the restructuring plan can be seen from the sharp drop in the price of Sesa Goa, which is down 8 percent at Rs 209 while Sterlite is trading 1 percent lower at Rs 117.90. The sharp movement in prices has taken away most of the arbitrage opportunity that was present in the price differences over Friday.
Nomura Equity Research in their report on the event have pointed out that valuation of the merged entity, Sesa Sterlite will be in the range of Rs 63,700 crore to Rs 76,100 crore. This works out to a share price of Rs 210 to Rs 251 per share.
\

Shareholders of Vedanta Resources Units Approve Merger
By Abhishek Shanker - Jun 25, 2012 4:15 PM GMT+0530 * Facebook Share * * LinkedIn * Google +1 * 0 Comments * * Print * QUEUE
Q
Sesa Goa Ltd. (SESA) and Sterlite Industries (India) Ltd. (STLT) shareholders approved a plan to combine the units of Vedanta Resources Plc (VED) into a new company.
The proposal won the required majority at the voting held on June 19 and June 21, Sesa Goa and Sterlite said today in separate statements. Sesa is India’s largest iron ore exporter, while Sterlite is the nation’s largest copper producer.
Billionaire Anil Agarwal’s Vedanta Resources said on Feb. 25 it will combine the listed units to reduce its debt following its $8.67 billion purchase of oil producer Cairn India Ltd. (CAIR) Investors will get three Sesa shares for five of Sterlite and Vedanta will transfer for $1 to the new company its holding in Cairn India, including a $5.9 billion debt.
Shares of Panaji, Goa-based Sesa rose 0.3 percent to 187.35 rupees at the close in Mumbai. Sterlite gained 0.5 percent to 99.15 rupees. The benchmark Sensitive Index fell 0.5 percent.
Vedanta plans to complete the merger by end of this year, it said today in a statement.
Vedanta, with no previous experience in oil and gas projects, is trying to boost its finances and ratings after buying Cairn India and gaining access to the nation’s biggest onshore oilfield. Unprofitable Vedanta Aluminium Ltd., owned 70.5 percent by Vedanta, will be consolidated into the new company, according to the Feb. 25 statement.

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Merger Impact: Market dumps Sesa Goa, stock down 10%
NEW DELHI: Shares of Sesa Goa fell more than 10% on Monday after parent Vedanta Resources decided to merge the company with group firm Sterlite Industries and set a swap ratio of three Sesa Goa shares for every five Sterlite shares.
"Fall in the stocks is because of the swap ratio adjustment. Here, the fall is steep for Sesa Goa because it is adjusting to the new share swap ratio," Ashika Stock Brokers Research Head Paras Bothra said.
According to the deal, Vedanta Aluminium along with the Madras Aluminium Company will also be consolidated into Sesa Sterlite. "Vedanta will also transfer its 38.8% holding in Cairn India to Sesa Sterlite. The parent company's debt which will thus be lowered by 61% and Sesa Sterlite will take on debt of $5.9 billion," according to a ET report.
As on September 2011, Sesa Goa's consolidated debt stood at Rs 4,371.5 crore, which is 0.3 times its shareholders equity. Sterlite Industries debt stood at Rs 14,942.8 crore. As a result of the merger, the debt of the combined entity would be approximately Rs 68,000 crore.
The boards of the two companies have approved the issue of three shares of Sesa Goa for every five shares held in Sterlite.
However, Anil Agarwal, Chairman, Vedanta Group in an interview with ET Now said the minority shareholders will get benefited the most in the long-run on account of diversification benefits provided by the newly formed entity.
Shares in Sterlite Industries pared early morning gains of 6% and was trading lower after its parent said it would merge the company with sister concern Sesa Goa to create 'Sesa Sterlite'.
"Prima facie, this merger ratio appears to be slightly in favour of Sterlite shareholders. And it appears that the merger ratio is slightly detrimental to Sesa Goa shareholders," Jagannadham Thunuguntla Strategist & Head of Research SMC Global said.
CLSA in a recent report said the restructuring has been broadly done in a fair manner. The new structure is vastly cleaner and the elimination of cross-holdings with improved cash fungibility is positive.
"The restructuring is EPS dilutive for Sesa and slightly value dilutive for both Sesa and Sterlite. We upgrade Sesa from Sell to underperform with a target price of Rs 230," said the CLSA report.
Shares in Sterlite Industries closed 2.5% lower at Rs 115.65. The stock has hit a high of Rs 125.35 and a low of Rs 113.90 in trade today.
Shares of Sesa Goa dropped 10.45% to Rs 203.60. The stock hit a low of Rs 202.10 and a high of Rs 218 in trade today.
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Technical Analysis: Ranajit Kumar Saha, Sr. Manager - Technical Research, Microsec Capital
Sterlite Industries Ltd:
After making a high of 138.70 on 17th February, Sterlite Industries Ltd. has given a correction of almost 18% in last five trading sessions. Now the stock is expected to get a strong support at 109.
The immediate crucial resistance of the Sterlite is at 130. A breach of 130 is likely to take the stock higher to 139 and then 150. We recommend holding long positions in the stock with a stop loss of 109.
Sesa Goa Ltd
The short term crucial support of Sesagoa Ltd. is at 185. If it breaches 185, it may further go down to 168. However, the stock has made a gap between 223 and 217 today. So there is a possibility that it may test the level of 223 in the extreme short term.

October 14, 2012:
The problems relating to the iron ore business may matter less to Sesa Goa’s prospects in the days ahead. With the Vedanta group deciding to restructure its holdings in mining and metals, Sesa Goa will soon be transformed into Sesa-Sterlite, with the merger of Sterlite Industries, and will house the group’s stakes in Cairn India, Vedanta Aluminium’s Indian projects and Balco. Vedanta proposes to issue three Sesa Goa shares for every five Sterlite Industries shares held. Post-merger, the iron ore business may bring in only 10-11 per cent of the entity’s combined profits, estimate analysts.
The merger seems to be quite a mixed bag, though it may shield Sesa to some extent from the risks of regulatory intervention in the iron ore mining business. Vedanta Aluminium, for instance, brings with it the risks of prodigious debt and the unavailability of bauxite for the refinery. Both Hindustan Zinc and Cairn India may churn out substantial cash, but cannot redeploy this in Sesa-Sterlite’s businesses as they remain separately listed companies.
Sesa’s MD, P.K. Mukherjee, is confident that the merged entity can handle the debt efficiently. “Considering the intrinsic value of the assets of the merged entity Sesa-Sterlite, the debt would be negligible,” he said. Sesa-Sterlite is expected to generate a revenue of Rs 66,431 crore and EBITDA (earning before interest, tax and depreciation and amortisation) of Rs 24,953 crore. Attributable net income works out to Rs 10,971 crore. Gross debt on the books will amount to Rs 66,717 crore and net debt Rs 36,936 crore. Given the average cost of funds at eight per cent, the total interest outgo is put at Rs 4,000 crore a year.
A recent Barclays Research report on the Indian metals and mining sector trimmed the price target for the Sesa Goa stock, noting that earnings uncertainty was high on account of the recent mining ban in Goa as well as the impending merger.
It said: “After the proposed merger with Sterlite Industries, Sesa Goa’s debt profile is likely to change significantly. Moreover, uncertainties with regard to the aluminium business in Vedanta Aluminium will prevail. Cash fungibility issues will remain as Cairn India and HZL will be separately listed entities.”
Is the company merely trading in old problems in iron ore mining for some new ones?
Keywords: Sesa-Sterlite merger, iron ore, mining, Goa, Vedanta group, metals and mining sector
Sesa Goa investors vote on Vedanta merger

MUMBAI:
While debt on Vedanta will fall by about 61% to $3.8 billion, the move is also expected to shift losses from Vedanta Aluminium, one of the subsidiaries, onto the books of Sesa Sterlite.
"There were questions on Vedanta Aluminium and its impact on Sesa," said one group official. "Shareholders were concerned about the debt impact. The company board provided answers on the benefits of a diversified business as compared to a single business," he said, asking not to be named as he is not authorised to speak.
Sesa, India's largest iron ore exporter is currently grappling with a restricted mine production and high export duties, apart from slowing demand from a large consuming market like China. The Supreme Court-ordered ban on iron ore production in Karnataka and investigations into rampant illegal mining in Goa have restricted mineral production.
This is the second time that Vedanta Resources is attempting to restructure its corporate frame. The first exercise in 2008 was shot down by shareholders on the grounds that it was beneficial to the promoters and adversely affected minority shareholders.
Vedanta had earlier said that the merger will simplify the group's structure and cut costs. It will also bring down the debt servicing liability to $180 million, from $500 million. There would be a cost saving of 1,000 crore annually, Vedanta had said. Vedanta will conduct a similar EGM on June 21 to seek approval from shareholders of Sterlite Industries at Tuticorin in Tamil Nadu.
Shares of both Sesa Goa and Sterlite were down on the BSE on Tuesday. While Sesa Goa fell 3.01% to 177, and Sterlite was down 1.62% at 94.3. In comparison, the broader index was up 0.9%.
Post the merger, Vedanta will hold 58.3% stake in Sesa Sterlite. As per the scheme, Sterlite shareholders will get three shares of Sesa Goa for every five shares held. Cairn India, Hindustan Zinc, Balco, Vedanta Aluminum, Madras Aluminum, Talwandi Sabo Power and Australian Copper Mines will become subsidiaries of Sesa Sterlite after the restructuring.

Analysis of Vedanta’s Restructuring Plan
The Facts * Vedanta Resources, Which is listed in London Stock Exchange, would merge the two of its Indian subsidiaries; Sesa Goa and Sterlite Industries into a single entity named Sesa Sterlite. * The new Entity would be world’s seventh largest Integrated Mining Company. * The merger of Sterlite Industries into Sesa Goa would be done by a share swap ratio of 5:3 i.e. Sterlite shareholders are expected to receive 3 Sesa Goa shares for every 5 existing Sterlite shares. * Consolidation of Vedanta Aluminium (VAL), via the merger of Ekaterina Ltd (a Mauritius holding company for Vedanta's 70.5% shareholding in VAL) into Sesa Sterlite and the issue of 72.3 million Sesa Goa shares to Vedanta after obtaining all necessary approvals. * Merger of Madras Aluminium (MALCO) into Sesa Sterlite, through the issue of 78.7 million Sesa Goa shares to shareholders of MALCO as of the record date, to be determined after obtaining all necessary approvals. As part of the merger MALCO's existing shareholding in Sterlite will be cancelled by Sesa Sterlite. * Post the merger of Sesa Goa and Sterlite, Sterlite Energy Limited and VAL's Aluminium business will be merged into the consolidated Sesa Sterlite. As wholly-owned subsidiaries no shares will be issued in consideration of the mergers. * Vedanta will transfer its 38.8% direct shareholding in Cairn India to a wholly-owned subsidiary of Sesa Goa at a nominal consideration of $1, together with the associated acquisition debt of $5.9bn (through the transfer of companies in which such debt and shareholdings are held). The debt will continue to be guaranteed by Vedanta. This transfer is not inter-conditional on the merger of Sesa, Sterlite, MALCO and VAL.

On the face of it
The restructuring plan has been announced on 25th February. The swap ratio of merger of Sterlite Industries into Sesa Goa favors the Sterlite shareholders. This is because five shares in Sterlite are worth Rs 593 at current market prices, while three shares in the Sesa Goa are valued at Rs 680.

Debt Concerns
Sesa and Sterlite have combined debt levels of Rs 20,000 crore. Including Cairn India, debt levels for the combined entity are likely to tip over the Rs 50,000 crore -mark. To service this will require a steady stream of cash.
Because of the consolidation of Vedanta Aluminum (VAL) via the merger of Ekaterina Ltd into Sesa Sterlite, the shareholders of the new merged entity i.e. Sesa Sterlite will have to bear the entire debt of VAL which is approximately Rs. 4,100 cr and on the top of it VAL is pure loss making entity of the group.

The Major Bottleneck of the Deal
The minority shareholders in Sesa Goa and Sterlite—Franklin Resources (9.79%), Templeton Emerging Markets (2.44%) and Vanguard Group (1.46%)—have told the management of Vedanta Resources that they are uncomfortable with the transfer of the R48,500 crore of debt from Vedanta to the new merged company. This deal may not go through if these minority share holders are not on board with the management of Vedanta.

The Future out look
The consolidation and simplification of the Group structure is consistent with the Group's strategy. The elimination of cross holdings is expected to benefit the Group through superior capital structure, increased flexibility to allocate capital, broader access to capital markets and enhanced visibility of earnings and cashflow. The consolidation is expected to lead to significant operational, capital and corporate synergies, including economies of scale, leveraging technical expertise, more efficient movement of Group cash, improved allocation of capital and corporate cost savings including tax efficiencies. Increased diversification is expected to reduce volatility of earnings through commodity cycles, lowering the cost of capital and enhancing value in the long run.

Introduction Vedanta
Vedanta Resources plc is a global diversified metals and mining company headquartered in London, United Kingdom. It is the largest mining and non-ferrous metals company in India and also has mining operations in Australia and Zambia.Its main products are copper, zinc, aluminium, lead and iron ore. It is also developing commercial power stations in India in Orissa (2,400 MW) and Punjab (1,980 MW).
It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.
History
The company was founded by Anil Agarwal in Mumbai in 1976. It was first listed on the London Stock Exchange in 2003 when it raised $876 million through an Initial Public Offering. Meanwhile in 2006 it acquired Sterlite Gold, a gold mining business. It raised an additional $2bn through an ADR issue in 2007. In 2008 it bought certain of the assets of Asarco, a copper mining business, out of for $2.6bn. In December 2011 it announced the US$8.67 billion acquisition of Cairn India, a subsidiary of Cairn Energy, heralding its foray in the oil sector.

Vedanta Resources plc is a globally diversified natural resources group with revenues in excess of US$ 11 billion. We are proud to be the first Indian manufacturing company to be listed on the London Stock Exchange. Our experienced workforce of over 31,000 people is distributed among our operating locations in India, Zambia, Namibia, South Africa, Liberia, Ireland and Australia.
The principal members of our consolidated group of companies are as follows:
COPPER BUSINESS
Sterlite Industries (India) Ltd. Vedanta has 58.0% share in Sterlite Industries India Ltd. (“Sterlite”), India’s largest diversified metals and mining company. Sterlite is listed on the Bombay and New York Stock Exchanges and the National Stock Exchange of India. Its primary businesses are: Copper, Zinc, Lead, Silver, Aluminium and Power. Sterlite has custom copper-smelting operations in Southern India with a capacity of 400ktpa of copper cathodes and a copper rod plant at Silvassa. Konkola Copper Mines. KCM has fully integrated copper operations in Zambia with several mines at Konkola and Nchanga, a tailings leach plant and smelter at Nchanga, and a refinery at Nkana. Two new copper concentrators are being constructed at Nchanga, and the Konkola Deep Mine Project is expected to ramp-up ore production and integrated copper capacity to 400+ktpa of copper post completion of the Bottom Shaft Loading project. KCM has substantial high grade reserves and resources including the Konkola underground mine, which has a 3.55% grade. Vedanta has a 79.4% shareholding in KCM, and the remainder is owned by ZCCM, a Zambian Government investment vehicle. Copper Mines of Tasmania Pty Ltd. Sterlite owns 100% of the Mount Lyell copper mine in Tasmania, Australia, which supplies approximately 8% of Sterlite India’s copper concentrate requirements. ZINC BUSINESS Hindustan Zinc Limited. HZL has fully integrated zinc-lead-silver operations in India, with four zinc-lead mines in the state of Rajasthan at Rampura Agucha, Sindesar Khurd, Raipura Dariba and Zawar supplying concentrate to its zinc and lead smelters at Chanderiya, Dariba, Debari and Vizag. HZL is India’s leading zinc producer with over 80% domestic market share and also operates multiple captive coal-fired power plants and 171MW of wind power plants. HZL is listed on the Bombay and National Stock Exchanges, and Sterlite owns 64.9% of its share capital. Zinc International. Sterlite Industries owns the Skorpion mine in Namibia (100%), Lisheen mine in Ireland (100%) and 74% of Black Mountain Mining in South Africa, which includes the Black Mountain mine and Gamsberg project. These assets were acquired from Anglo American’s Zinc business during FY 2010–11. ALUMINIUM BUSINESS Bharat Aluminium Company Ltd. Sterlite owns 51.0% of BALCO, a leading Indian aluminium producer with operations in the state of Chhattisgarh. BALCO currently has 245ktpa smelting capacity, 810MW power generation facilities and capabilities to produce ingots and other value-added products. BALCO has a 325ktpa smelter project, a 1,200MW power plant project, and rights to a coal block of 211.0mt for captive usage. Vedanta Aluminium Ltd. Vedanta owns 70.5% of the share capital of VAL, with Sterlite owning the remaining 29.5%, resulting in an effective stake of 87.5%. VAL is based in Eastern India and operates a 1mtpa alumina refinery at Lanjigarh. At Jharsuguda, VAL operates a 500ktpa aluminium smelter and an associated 1,215MW captive power plant. VAL also has a 1.25mtpa aluminium smelter project at Jharsuguda. IRON ORE BUSINESS Sesa Goa Ltd. Sesa Goa is India’s largest private sector producer-exporter of iron ore, with mining and processing facilities located in the states of Goa and Karnataka. As of 31 March 2011, Sesa Goa has proved and probable reserves of an estimated 306mt of iron ore. Sesa Goa also manufactures pig iron and metallurgical coke. Vedanta owns 55.1% of Sesa Goa, which is listed on the Bombay and National stock exchanges of India. Sesa Goa owns 100% of Sesa Resources Ltd. (formerly known as VS Dempo), an iron ore mining and processing company based at Goa. POWER BUSINESS Sterlite Energy Ltd. Sterlite Energy is 100% owned by Sterlite Industries and has two major power plant projects for power generation – the 2,400MW power plant at Jharsuguda, Orissa of which two units were operational at the end of FY 2010–11, and the 2,640MW power plant at Talwandi Sabo, in Punjab. Madras Aluminium Company (MALCO). MALCO is a power generation company with a 100MW power plant located in Southern India and is 94.8% owned by Vedanta. Hindustan Zinc Limited. Hindustan Zinc has 273M of wind power generational capacity, making it one of the largest providers of wind power in India.
Competitive strength
A leading diversified and the largest non-ferrous metals and mining company in India Vedanta is a leading diversified and the largest non-ferrous metals and mining company in India based on revenue. We have substantial market share across the copper, zinc and aluminium markets in India. We are India’s largest iron ore producer-exporter by volume in the private sector. Specifically, * Sterlite is the leading custom copper smelter in India based on production volume in fiscal 2008, and according to International Copper Promotion Council, India had a 42.6% primary market share by sales volume in India in fiscal 2008; * HZL is India’s only integrated zinc producer, had a 79.7% market share by volume in India in fiscal 2008, according to ILZDA, and was the world’s fifth largest zinc mining company in 2007 based on mine production and is one of the top ten lead mining companies by production volumes worldwide, according to Brook Hunt; * Vedanta, through its subsidiaries BALCO and MALCO, is the second largest primary producer of aluminium in India with a 31.0% primary market share by volume in India in fiscal 2008, according to AAI. BALCO was the fastest growing primary producer of aluminium in India in fiscal 2007 based on quantity of aluminium produced as a result of the ramp-up in production at its 245,000 tpa Korba aluminium smelter. BALCO’s 245,000 tpa Korba smelter was in the lowest cost quartile in terms of all aluminium smelters operations worldwide in 2007, according to Brook Hunt; and * Sesa Goa was India’s largest producer-exporter of iron ore in the private sector by volume in fiscal 2007, according to the Federation of Indian Mineral Industries. Sesa Goa accounted for approximately 10.5% of India’s total iron ore exports and 1.4% of the world trade in iron ore in fiscal 2007, according to the Goa Mineral Ore Exporters’ Association. It has operations in the States of Goa, Karnataka and Orissa and, being strategically located in India, is well positioned to benefit from the continued growth of the Asian economies, including China. Our acquisition of Sesa Goa has further diversified our business and allowed us to participate in the strong growth in the iron ore sector.
High quality assets and resources making us a low-cost producer We believe that our business has assets of global size and scale. Our costs of production in our Indian copper, zinc and aluminium businesses are competitive with those of leading metals and mining companies in the world, which we believe is enabled by our high quality assets, operational skills and experience and the integrated nature of our operations. Specifically:

* Sterlite’s Tuticorin smelter was one of the top ten custom copper smelters worldwide in 2007, according to Brook Hunt, and the largest in India by production volume in fiscal 2008. In 2007, Sterlite’s Tuticorin smelter was also in the lowest cost quartile in terms of all copper smelting operations worldwide and its Tuticorin and Silvassa refineries had the seventh and eighth lowest costs of production, respectively, of all copper refining operations worldwide, according to Brook Hunt. Brook Hunt projects that we will be the world’s eighth largest refined copper producer on a production volume basis in 2008. * HZL’s operations are fully integrated with its own mining and captive power generation capacities. HZL was the world’s fifth largest zinc mining company in 2007 based on mine production and is also one of the top ten lead mining companies by production volume worldwide, according to Brook Hunt. HZL’s largest zinc mine, Rampura Agucha, was ranked third in the world in 2007 in terms of contained zinc deposits on a production basis and the fourth largest on a reserve basis, according to Brook Hunt. HZL was in the lowest cost quartile in terms of all zinc mining operations worldwide in 2007 and the fourth largest producer of zinc worldwide and HZL’s Chanderiya smelter was the third largest smelter on a production basis worldwide in 2007, according to Brook Hunt. Brook Hunt projects that HZL will be the world’s largest integrated zinc mining and smelting company on a production volume basis in 2008. * Our aluminium business’ operations are fully integrated with respect to their power requirements through their captive power plants. BALCO’s 245,000 tpa Korba smelter was in the lowest quartile in terms of all aluminium smelter operations in 2007, according to Brook Hunt. BALCO recently received a coal block allocation of 211.0 million tonnes for use in its captive power plants. In March 2007, Vedanta Aluminium began the progressive commissioning of a 1.4 mtpa greenfield Lanjigarh alumina refinery project and an associated 90 MW captive power plant. The Lanjigarh alumina refinery has started production from a single stream operation and produced 267,000 tonnes of alumina in fiscal 2008.
We are seeking to further lower our costs across all of our operations. Factors contributing to our success in lowering our costs of production include: * our focus on continually reducing manufacturing costs and seeking operational efficiency improvements; * our building and managing captive power plants to supply a substantial majority of the power requirements of our operations; and * our access to relatively large and inexpensive labour and talent pools in India and Zambia.
We view strict cost management and increases in productivity as fundamental aspects of our day-to-day operations and continually seek to improve efficiency. Industry-leading growth profile We possess a strong portfolio of greenfield and brownfield projects that we intend to pursue: * Copper segment: KCM is expanding its smelting and mining capacities. KCM is constructing a new 300,000 tpa smelter at Nchanga, which we expect to commission in mid-2008. KCM is developing the KDMP, which is expected to increase KCM’s Konkola mine copper ore output to 7.5 mtpa and be completed in 2010. * Zinc segment: In April 2008, HZL announced $900 million of expansion projects to increase its total lead-zinc capacity to 1,065,000 tpa with fully integrated mining and captive power generation capacities. These projects include: * establishing two brownfield smelters which are expected to increase the production capacities of zinc and lead by approximately 210,000 tonnes and 100,000 tonnes, respectively, at Rajpura Dariba in the State of Rajasthan, both of which are expected to be completed by mid-2010; * expanding ore production capacity at the Rampura Agucha mine from approximately 5 mtpa to 6 mtpa and at the Sindesar Khurd mine from approximately 0.3 mtpa to 1.5 mtpa. HZL is expected to start mining activity at the Kayar mine, which is expected to have a production capacity of approximately 0.3 mtpa. These projects are expected to be completed by early 2012; * setting up a captive power plant with a capacity of 160 MW at Rajpura Dariba, which is expected to be completed by mid-2010; and * increasing silver production from the current levels of approximately 100 to 120 tpa to approximately 500 tpa, primarily from the Sindesar Khurd mine where silver occurs at approximately 200 parts per million (“ppm”). * Aluminium segment: Vedanta Aluminium is building a greenfield 500,000 tpa aluminium smelter, together with an associated 1,215 MW captive power plant, in Jharsuguda in the State of Orissa, in two phases of 250,000 tpa each. Commissioning of the first phase commenced in May 2008, a year ahead of schedule, and will be progressively commissioned during fiscal 2009. Work has commenced on the second phase and we expect it to begin commissioning in 2010. * Power segment: We are executing our plan to enter the commercial power generation business with Sterlite Energy’s construction of a 2,400 MW thermal coal-based power facility (comprising four units of 600 MW each) in Jharsuguda in the State of Orissa. The project is expected to be progressively commissioned from December 2009. We have obtained coal block allocations of 112.2 million tonnes from the Ministry of Coal to support this facility. In addition, BALCO entered into a memorandum of understanding in October 2006 with the Government of Chhattisgarh, India and the CSEB to build a thermal coal-based 1,200 MW power facility, along with an integrated coal mine, in the State of Chhattisgarh.

ideally positioned to capitalise on India’s growth and resource potential We believe that our experience operating and expanding our business in India will allow us to capitalise on attractive growth opportunities arising from factors including: * India’s large mineral reserves. According to the IBM 2005, the total copper ore, lead-zinc ore, bauxite and iron ore resources of India are estimated at 1.4 billion tonnes, 0.6 billion tonnes, 3.3 billion tonnes and 25.2 billion tonnes, respectively. According to the Geological Survey of India 2008, the total coal resources of India are 264.5 billion tonnes as of 1 April 2008. According to CRISIL Research, India’s bauxite reserves are the fifth largest in the world with total recoverable reserves estimated at 2,600 million tonnes, and according to the Energy Information Administration, a statistical agency of the United States government, India has the fourth largest coal reserves in the world as of 2007. In addition, according to Indian Steel Alliance, India has the sixth largest iron ore reserves in the world. * India’s economic growth and proximity to other growing economies. India is one of the fastest growing large economies in the world with a 9.6% increase in real GDP from fiscal 2006 to 2007 and a 9.0% increase in real GDP from fiscal 2007 to 2008, according to the Central Statistical Organisation Ministry of Statistics and Programme Implementation. This growth has been driven primarily by significant increases in industrial production and investments in infrastructure. We believe that our focus on the metals and power segments will allow us to directly benefit from this growth. In addition, India is strategically located close to other growing economies in China, Southeast Asia and the Middle East. * India’s large and inexpensive labour and talent pools. India has, compared to other industrialised nations, low labour costs and a large and skilled labour pool, including many well-educated professionals.
According to Brook Hunt, the demand for copper, zinc and aluminium in India is expected to grow from 458,000 tonnes, 428,000 tonnes and 1.1 million tonnes in 2006 to 982,000 tonnes, 824,000 tonnes and 2.5 million tonnes in 2015, representing CAGR of 8.8%, 7.5% and 9.6%, respectively. According to CRU, demand for iron ore in India is expected to grow from 71.2 million tonnes in 2007 to 129.0 million tonnes in 2012, representing a CAGR of 11.4%. Entrepreneurial management team with outstanding track record Our senior management has significant experience in all aspects of our business and has transformed Vedanta into a leading metals and mining company that is listed on the LSE and included in the FTSE 100 Index. Mr. Anil Agarwal, our founder, remains involved in overseeing our business as our Executive Chairman. Our experienced and focused management and dedicated project execution teams have a proven track record of: * successfully implementing capital-intensive projects to increase our production capacities: * increasing the lead metal capacity of HZL’s lead-zinc smelter at Chanderiya from 35,000 tpa to 85,000 tpa in February 2006; * increasing the copper anode capacity of Sterlite’s Tuticorin copper smelter from 180,000 tpa to 300,000 tpa in 2005 and then to 400,000 tpa in November 2006; * completing brownfield expansions with the addition of HZL’s two hydrometallurgical zinc smelters with 170,000 tpa capacity each, together with coal-based captive power plants of 154 MW and 80 MW at Chanderiya in the State of Rajasthan in May 2005 and December 2007, respectively. The capacities of both smelters were increased to 210,000 tpa through de-bottlenecking in April 2008; * increasing the capacity of the Rampura Agucha lead-zinc mine and processing plant from 2.4 mtpa to 5.0 mtpa of ore to supply the brownfield zinc smelter expansion at Chanderiya in the State of Rajasthan between 2003 and 2008; and * expanding the Korba facility by adding a 245,000 tpa aluminium smelter to bring the total installed capacity to 345,000 tpa of aluminium in November 2006; * selecting attractive acquisition opportunities and successfully improving the operations and profitability of acquired businesses: * on 5 November 2004, we acquired a 51.0% ownership interest in KCM through our wholly-owned subsidiary, VRHL, and on 9 April 2008, we acquired an additional 28.4% ownership interest in KCM following the exercise of our call option, increasing the Group’s ownership interest to 79.4%; and * on 23 April 2007, we acquired a 51.0% ownership interest in Sesa Goa through our acquisition of Finsider International Company Limited (“Finco”) and further acquired a 0.2% ownership interest in Sesa Goa through an open offer in September 2007, increasing the Group’s ownership interest to 51.2%.
We utilise project monitoring and assurance systems to facilitate timely execution of our projects. In addition, we have established relationships with leading domestic and international vendors that support our expansion projects. Since the UK listing of Vedanta, we have spent $4,476.8 million through fiscal 2008 on our expansion projects in our copper, zinc, aluminium and commercial power generation businesses. We acquired our zinc business through our acquisition of HZL and our main aluminium business through our acquisition of BALCO. In both instances, we have been successful at increasing production levels from the existing assets by improving operational efficiencies, lowering the costs of production by commissioning captive power plants and growing the businesses through capacity expansions, specifically:

* increasing HZL’s production from 172,140 tonnes of zinc ingots and 214,447 tonnes of zinc mined metal content when we acquired HZL in 2002 to 218,862 tonnes of zinc ingots and 551,295 tonnes of zinc mined metal content in fiscal 2008, representing an increase of 27.1% and 157.1%, respectively, by increasing the production of HZL’s original two hydrometallurgical zinc smelters, one lead-zinc smelter and three lead-zinc mines; and * increasing the production of BALCO’s original aluminium smelter from 89,164 tpa when we acquired management control of BALCO in 2001 to 109,279 tpa in fiscal 2008, representing an increase of 22.6%.
Ability and capacity to finance world-class projects through strong cash flow and prudent financial policies We have generated strong cash flows in recent years due to our substantial volume growth, robust commodity prices and our cost reduction measures as illustrated by our improved cash flow from operating activities of $2,232.9 million in fiscal 2008 compared with $632.2 million in fiscal 2006. Moreover, we have a strong balance sheet which will enable us to finance future expansion projects. We believe that holding substantial cash and current assets and maintaining low leverage are important for providing sufficient liquidity and meeting the cash outflow requirements of our capacity expansion projects.

Current Employees:
Over 31,000 worldwide Geographical Locations:
Australia
India
Liberia
Namibia
South Africa
United Kingdom
Zambia

Operations:
India – Aluminium, Copper, Zinc, Iron Ore, Power
Australia - Copper
Zambia - Copper
Namibia - Zinc
South Africa - Zinc
Liberia – Iron Ore
Ireland - Zinc Summary Financials (Year ended 31 March 2011): Revenue: | US$11.4 bn | EBITDA: | US$3.6 bn | Free Cash Flow: | US$2.4 bn | Net Assets: | US$13.7 bn | Basic EPS : | (US cents) 283.2 | Full Year Dividend : | (US cents) 52.5 | Return on Capital Employed*: | 21% |
*(Excluding project capital work in progress)
Our values: Entrepreneurship
We foster an entrepreneurial spirit throughout our businesses and value the ability to foresee business opportunities early in the cycle and act on them swiftly. Whether it be developing organic growth projects, making strategic acquisitions or creating entrepreneurs from within, we ensure an entrepreneurial spirit at the heart of our workplace. Our ability to translate an idea into reality within the shortest possible timeframe is critical to our rapid growth and diversification into new areas and commodities. People are our most important asset we actively encourage them to seek new opportunities and pursue their goals. We have fostered this entrepreneurial spirit amongst the individuals and communities who form a part of our entire value chain. Growth
We continue to deliver industry-leading growth and generate significant value for our shareholders. Moreover, our organic growth pipeline is unrivalled and we are confident that we will continue to deliver significant growth for shareholders in the future. We have pursued growth across all our businesses and into new areas, always on the basis that value must be delivered. We do not believe that we are the only beneficiary of our growth as we see growth as a means to increase the wealth and prosperity of our society at large. We clearly recognise the benefits that our growth brings to our key stakeholders and the communities in which we operate. Our growth and the products we supply has enabled us to significantly enhance the lives of and helped to raise living standards significantly. Excellence
Achieving excellence in all that we do is our way of life. We consistently deliver projects ahead of time at industry-leading costs of construction and within budget. We are constantly focused on achieving a top decile cost of production in each of our businesses. To achieve this, we follow a culture of best practice benchmarking. Equally important to us is achieving excellence in health, safety and environmental standards and practices. It is our people who make all this possible, we would not have been able to achieve our growth and expansion without their commitment & zeal for excellence. Trust
The trust that our stakeholders place in us is key to our success. We recognise that we must responsibly deliver on the promises we make to earn that trust. We constantly strive to meet stakeholder expectations . We always behave in a manner that is consistent and upholds our code of conduct. We continuously work to improve ourselves and enhance our ability to perform at all times. We actively foster a culture of mutual trust in our interactions with our stakeholders and encourage an open dialogue which ensures mutual respect. We believe that this is part of being a good corporate citizen. Sustainability
We practice sustainability within the framework of well defined governance structures and policies and with the demonstrated commitment of our management and employees. We aim to contribute to the social and economic welfare of the communities where we work and to protect and conserve the environment. We aim to minimise damage to the environment from our projects. We fully recognise the importance of including local communities and other key stakeholders in our development strategy to ensure that our impact is positive. Rather than simply providing aid, we aim to create sustainable livelihood opportunities – improving the quality of life for society and contributing to the basics of life. We believe that the principles of sustainable development are a key component of conducting business in a responsible manner and it is a primary aim of Vedanta to operate as a good corporate citizen.