MANAGEMENT DISCUSSION AND ANALYSIS

GROWTH

Organic Growth

With strong commodity demand in countries where we operate and leading market shares across most of our businesses in India, we have once again successfully delivered significant organic growth and expanded our assets and resource base across our businesses. We continue to build and operate assets with a low cost base, which ensures we remain competitive through business cycles.

We have already invested Rs. 21,731 Crore of our Rs. 32,602 Crore capital expenditure ("capex") programme, and are reaching an inflection point as free cash flow post expansion capital expenditure turns positive. We expect strong free cash flow going forward as our existing organic growth programme nears completion, and projects continue to ramp-up.

During FY 2011-12, we have spent Rs. 7,439 Crore in organic growth capex across our businesses, mostly in Aluminium and Power. During the year we delivered record production of refined zinc-lead, silver, copper, aluminium and power.

Significant increases in capacity

> Record silver production of 242 MT during the year, up 35% driven by the ramp up of the silver-rich Sindesar Khurd Zinc-Lead mine in Rajasthan, India and commissioning of the new 350 tpa silver refinery. During the year, we achieved our targeted capacity of 500 MT for silver.

> The new 100 kt Dariba lead smelter in Rajasthan, India was commissioned, resulting in a record production of lead in Q4 of 37 kt at Zinc India. Development of the 1 mtpa underground Kayar zinc-lead mine has commenced, and commissioning is expected in FY 2013-14.

> First metal tapping at the 325 ktpa BALCO-III Aluminium smelter in Korba is expected in the third quarter of FY 2012-13.

> The first 300 MW unit of the 1,200 MW captive power plant at Bharat Aluminium Company (BALCO) will be synchronized shortly. Environmental clearance for the 211 mt BALCO coal block has been received, and we expect to obtain the second stage forest clearance and start coal production in FY 2012-13.

> The second and third units of the 2400 MW power plant project at Jharsuguda were commissioned during the year. Three units are now operational, with the fourth unit generating under trial run.

> The 150 MW wind power expansion project was completed at Zinc India, taking our green energy power generation capacity at HZL to 274 MW.

Acquisitions

Over the years, Sterlite has supplemented organic growth with selective acquisitions. Our strategy has been to acquire assets that provide significant potential for further growth and value creation. Consistent with this approach, we successfully completed the acquisitions of Zinc International Business.

Successful integration of Zinc International

The Zinc International assets acquired from Anglo American plc in FY 2010-2011 have been successfully integrated. We delivered strong operational performance with a total full year production of 444 kt of refined zinc and zinc-lead metal in concentrate (MIC) from the Lisheen mine in Ireland, the Skorpion mine in Namibia and the Black Mountain Mine (BMM) in South Africa. The acquisition also included the Gamsberg deposit in South Africa which is one of the largest undeveloped zinc deposits in the world. With an estimated zinc resource deposits of 186 mt, this deposit has the potential to deliver over 400 ktpa with a mine life of more than 20 years, and a feasibility study is underway to scope the project.

LONG – TERM VALUE

Group Structure

This has been an important year for Sterlite in creating long-term value for shareholders. In line with our stated strategy to unlock value for shareholders, we announced a merger of Sesa Goa and Sterlite, and a consolidation and simplification of the Group. As part of this consolidation, Sesa Goa and Sterlite will merge to form a new company to be called Sesa Sterlite Ltd. Additionally, Vedanta Resources' stake in Vedanta Aluminium and Cairn India will move to Sesa Sterlite. The new entity, Sesa Sterlite, will be one of the world's largest diversified natural resources companies, with exposure to base metals, bulk commodities and oil and gas. This consolidation will remove all cross-holdings within the Group, create a more efficient capital structure by better aligning assets and liabilities, enhance visibility of earnings and cash flows, and generate capital, tax and operational synergies. We believe the simplified and more efficient structure will unlock and create significant value for shareholders. The transaction is expected to be completed in CY 2012, and is subject to regulatory and shareholder approvals.

Optimise Returns

We aim to optimise our costs through a culture of continuous improvement and maintain our position as a low cost producer in all our businesses. During the year, we maintained our low cost base across our portfolio.

During FY 2011-12, our exploration activities resulted in the successful addition of reserves and resources at our Zinc business

Key achievements include:

- 1.4 million tons contained metal added, to R&R in Zinc India, prior to depletion of 0.8 million tons, which was around 1.75 times more than we mined during the year.

SUSTAINABILITY

During the year we rolled out our new Sustainability Framework including sustainability policies, technical and management standards, across the Group companies, with a particular focus on ensuring all new projects are to be carried out as per the standards.

RESPONSIBLE STEWARDSHIP

Within our sustainability framework, responsible stewardship is the foundation pillar that defines how we operate. All the businesses in the Group are required to have management systems in place to achieve our goals. Our major plants have systems certified to ISO 9001, 14001 and OHSAS 18001.

PERFORMANCE HIGHLIGHTS

Health and Safety

Health and Safety remains a key priority and whilst we work in an inherently risky business, it is with regret that we have to report the loss of 3 employees and 13 contractors during the year. Under the leadership of Group Sustainability Committee we have renewed our management commitment to a structured programme to reduce fatalities by eliminating unsafe conditions through our business. Quarterly results show that we are making progress but more needs to be done. Our Lost Time Injury Frequency Rate (LTIFR) continues to fall - it is down 39%over the last five years but we continue to seek ways to drive this further.

Environment

During the year, HZL added another 103 MW to its existing 171 MW wind power generation capacity, making Sterlite one of the largest wind power producers in India.

Our integrated carbon strategy is beginning to yield results. To date, we have registered five Clean Development Mechanism (CDM) projects, which have enabled us to accrue 233,896 Certified Emission Reductions (CERs) or carbon credits. We also sold 150,783 CERs.

Waste Management

We are committed to minimising the impact of waste from our operations, using water and energy more efficiently and recycling wherever possible. During the year, 1.8 million tonnes of fly ash was used in cement, brick manufacturing and raising of ash pond dyke height. Energy efficiency initiatives by subsidiary companies saw significant reductions in energy consumption and good progress was made in reducing water consumption.

Building Strong relationships

We engage with a large number of different stakeholders on a regular basis through our investor relations, human resources, community relations and government relations departments.

Our engagement process uses a three-pronged approach - keeping the stakeholders informed, engaging with them and forging partnerships to address their needs and concerns.

Throughout the year over 1,800 stakeholder engagement meetings took place, with community leaders, Non Governmental Organisations (NGOs), governments and government bodies, academic institutions and private hospitals and 97 partnerships are now in place. We have always placed great importance on supporting local communities and the number of villages we cover in India are 546.

ADDING AND SHARING VALUE

How we contribute to the lives of the people we affect, is important to maintaining our social licence to operate over the long term and thus making our business sustainable.

As a significant employer we are committed to the development and well-being of our workforce. Our current employee attrition rate is low and stable at around 6.6% and employees benefited from over 26,375 man days of training, over 16 hours on average per employee.

Our community investment was Rs. 57.58 Crore this year, reaching 1.6 million people and providing support for schools, hospitals, health centers and farmers.

The Group's principal commodities, aluminium, copper, zinc and lead are priced with reference to London Metal Exchange (LME) prices. The following section describes the pricing trends of significant commodities in our portfolio for FY 2011-12.

COPPER

LME prices decreased from US$9,336 per tonne at the beginning of FY 2011-12 to US$8,480 per tonne at the year end. However, the average LME copper price for FY 2011-12 was US$8,475 per tonne, 4.1% above the average for FY 201011. LME prices reached a low point of US$6,785 per tonne in October 2011, and a high point of US$9,827 per tonne in August 2011. The increase in the average price was driven by the demand recovery in developed countries, Chinese imports and supply concerns.

ALUMINIUM

LME prices decreased from US$2,590 per tonne at the beginning of FY 2011-12 to US$2,099 per tonne at the year end. However, the average LME aluminium price for FY 2011-12 was US$2,313 per tonne, 2.5% above the average for FY 2010-11. LME prices reached a low point of US$1,945 per tonne in December 2011, and a high point of US$2,772 per tonne in April 2011. The price strength was maintained mainly due to rising energy prices and tighter aluminium fundamentals.

ZINC AND SILVER

LME prices decreased from US$2,341 per tonne at the beginning of FY 2011-12 to US$2,003 per tonne at the year end. However, the average LME Zinc prices for FY 2011-12 was US$2,098 per tonne, 4.0% lower than the average for FY 201011. LME prices reached a low point of US$1,750 per tonne in October 2011, and a high point of US$2,244 per tonne in May 2011. Supply growth continued to run ahead of demand, leading to weaker prices.

EXCHANGE RATES

We are exposed to exchange rate transaction risk on foreign currency as most of our businesses in India have income and expenditure in Indian rupees. The rupee: US$ exchange rate at the beginning of the year was 44.7 Indian rupees per US$ which closed at 51.2 Indian rupees per US$ at the year end. The average exchange rate for the year FY 201112 was 47.9 Indian rupees per US$, a 5% increase against 45.6 Indian rupees per US$ for FY 2010-11.

BUSINESS OVERVIEW

Fiscal 2012 was a year of mixed fortunes due to the significant change and volatility in the global economy. The Euro-Zone crisis downgrade of sovereign credit ratings of various Euro-zone countries, sluggish growth in many industrialised countries including USA, political unrest on the African continent and the resulting escalation in crude oil prices had all dampened the growth euphoria. Despite these challenges commodity prices generally averaged higher than during FY 2010-2011. Demand for commodities in 2012 will be supported by improving global economic growth particularly in Chinese and emerging markets, which are expected to remain relatively robust. The global developments constrained the Indian growth story, with India's GDP expected to grow by 6.9% during Fy 2011-12. India is expected to maintain its robust economic growth over the long term, due to its domestic market size and demographic advantage.

Revenues for the year were Rs. 40,967 Crore, an increase of 35.4%, driven by higher volumes as several of our growth projects commenced operations and ramped up production, and the successful integration of the Zinc International business acquired in second half of FY 2011. In line with the increased revenues, EBITDA for the year was up 26.3% at Rs. 10,169 Crore.

The cost reduction measures through our improvements in operational efficiencies and higher volumes have softened the impact of higher input prices.

We have delivered excellent progress in executing our project led organic programme. Our focus on continued asset optimisation and reduction of controllable costs remains key to delivering excellent results and long term value.

PERFORMANCE COPPER

Key achievements

> Achieved highest ever Copper recovery of 98.28%

> Achieved zero cost of production

> Mechanical completion of first 80 MW unit of the captive power plant at Tuticorin

> Improved EBITDA margin

Strategic priorities

> Commissioning of captive power plant

> Continue to retain and further sharpen cost efficiency

> Secure approval to implement 400 kt smelter project

> Improve by-product and brcious metal realization

> Continue to drive operational excellence initiatives

Market overview

Global refined copper production in 2011 was reported as 19.6 mt, an increase of about 3% over the 2010 figure of 19 mt despite uncertain macroeconomic conditions in 2011. Global refined consumption exceeded supply by about 93,000 tonnes. Global mine production growth slowed to 0.6% in 2011, hampered by falling copper grades and labour disputes. Global copper consumption is estimated to increase by about 4% during 2012.

China, with the biggest consumption of copper in the world (with 40% consumption of total copper produced), remains the brferred destination for the exports. In the first half of the year, the spot concentrates market was dominated by the impact of the Japanese tsunami on smelter production, which drove spot treatment and refining charges to high levels and resulted in a mid-year benchmark settlement of U$85 per tonne and 8.5 cents/lb. However, growing rates of mine supply disruption during the second half tightened the market and generated a sharp decline in spot treatment and refining charges. 2012 annual copper concentrate TC/RC settlement were in the range of 15.4 to 16.3 cents/lb against 14.4 cents/lb in 2011.

Similar to the brvious year, overall Indian copper consumption grew by 6% in FY 2011-12, constrained by increased imports of finished electrical machinery. We sold 61% of production in the Indian local market and the remaining 39% was exported to China and South East Asia. Growth in the power sector in India, and increased spending on infrastructure including housing, continued to drive the growth of copper consumption. Over the medium- to long-term it is expected to grow at about 7-8% per annum.

Operations

Production of cathodes at our Copper India business was 326 kt in FY 2011-12, up 7.2% year on year due to improved operational performance and also reflecting the impact in the brvious year of a 22 day bi-annual maintenance shutdown undertaken and of a temporary shutdown due to a High Court order in September 2010.

Mined metal production at our Australian mines was flat at 23 kt in FY 2011-12.

Benefiting from improved by-product sales of sulphuric acid and improved operational performance, Copper business performed well delivering a reduction in unit conversion cost from 4.0 US cents per lb to a zero cost per lb during FY 2011-12. Sulphuric acid sales were up 14.2% over the brvious year. Treatment and refining charges (TC/RCs) received in FY 2011-12 were higher at 14.5 US cents per lb compared with 11.9 US cents per lb in FY 2010-11.

The unit cost of production at our Australian operations, including TC/ RCs and freight, in FY 2011-12 was 233 US cents per lb up from 191 US cents per lb in FY 2010-11, mainly due to higher mining costs.

EBITDA for FY 2011-12 was Rs. 1,498 Crore , up 44 % over the brvious year (FY2010-11: Rs. 1,043 Crore). This was primarily due to higher TC/ RC realisations, higher volumes and better margins on acid sales.

In reference to the Special Leave Petition filed by the Company in the Honourable Subrme Court, the Company is in the process of progressively complying with all the improvement measures suggested by the Tamil Nadu Pollution Control Board . The smelter continues to operate at its rated capacity. The matter is being heard by the Subrme Court.

ASARCO filed a suit in the US Courts against Sterlite for the alleged breach of the Purchase and Sale Agreement signed in May 2008. The Court ruled in February 2012 that ASARCO is entitled to net incidental damages of US$82.75 million after adjustment of US$50 million paid to ASARCO in December 2009.

Projects

160 MW captive power plant

The first 80 MW unit of the captive power plant at Tuticorin is mechanically completed and commissioning is expected by Q1 FY 2012-13. The second unit is expected to be commissioned during the second quarter of FY 2012-13.

400 ktpa copper smelter

We have received Ministry of Environment and Forests (MoEF) clearance for the 400 ktpa copper smelter expansion project at Tuticorin. A Writ Petition challenging the clearance issued by MoEF is being heard at Madras High Court. Activities have been put on hold. The copper smelter expansion project is being rescheduled while we await the decision of the High Court and consent from the State Pollution Control Board.

Outlook

Once the power plant at Tuticorin is commissioned, it is expected that the cost of power incurred in smelting and refining will come down substantially and will reduce gross cost of production by 3cents/lb approximately.

Performance - Zinc, Lead & Silver

Market overview

Zinc:

Strong demand created by growth from emerging economies more than offset weaker demand from developed economies, leading to global zinc demand growth of 4% in 2011 reaching 12.5 mt. Growth focussed on near term demand is at a similar level of 4-5% on the back of strong demand from emerging economies. It is brdicted that shortly the net surplus position may turn into a net deficit position. Closure of several mines at the end of their mine life may significantly impact the supply/demand equation. It is brdicted that this could happen in 2014-15.

Zinc India operations continues to demonstrate healthy growth in zinc consumption largely driven by consumption in galvanizing/ construction sector/ infrastructure sector. The near term demand growth focus in India remains at a robust level of 6-7% per annum with the potential to reach much higher levels considering India's quite low per capita consumption of zinc.

Lead:

Driven by demand essentially arising from emerging economies, global lead consumption in 2011 increased by 4% to around 9.8 mt whereas the total refined lead supply for the calendar year 2011 was 9.9 mt, a modest surplus.

We expect strong growth in lead consumption to continue as demand for automation, power back-up and the other applications are expected to be strong, particularly in the emerging economies. The market is expected to be in balance in 2012.

In FY 2011-12, the lead consumption in India registered a growth of 11%, essentially driven by strong growth in automation sector.

Silver:

India is the 4th largest consumption centre for silver. In 2012, the demand for silver globally is expected to increase by 4%, driven by growth in consumption in fabrication, industrial applications, coins and as an investment asset.

It is estimated that demand for silver in India will grow by 3-4% in FY 2011-12

KEY ACHIEVEMENTS

> Highest ever refined zinc and lead production of 759 kt and 99 kt, respectively

> Record silver metal production of 242 MT, up 35% over brvious year

> Maintained lowest quartile cost position

> FY 2011-12 gross addition of 27 mt to Reserves and Resources

> Commissioned 100 ktpa lead smelter at Dariba increasing total refined lead capacity to 185 ktpa

> 350 tonne per annum (tpa) silver refinery taking total silver refining capacity to 518 tpa

STRATEGIC PRIORITIES

> Continue to focus on adding resources

> Achieving 1 mt capacity operations

> Realizing full potential of SK Mine and silver production capability

> Rampura Agucha underground mine development

OPERATIONS

Refined zinc production for the year was a record 759 kt, an increase of 6.6% over the brvious year's production of 712 kt. The production increase was primarily due to higher utilisation of new-generation smelters in Rajasthan despite the ramp-down of the high cost Vizag smelter in Q4. Refined lead production volume improved by 56% during the year due to volume contribution from the newly commissioned 100 kt Dariba lead smelter.

PROJECTS

During the year, we commissioned the Dariba lead smelter and a 350 MT silver refinery, both of which are performing well. Sindesar Khurd mine achieved a 1.8 mtpa run-rate towards the end of Q4 FY 2011-12. The progress of underground mine development work at the Rampura Agucha mine and the greenfield Kayar mine is as planned.

EXPLORATION

We continue to meet success in our exploration activities and during the year we added 27.1 million tonnes to our Reserves and Resources (R&R), prior to depletion of 8 million tonnes. With a total R&R of 332.3 million tonnes containing 35 million tonnes of Zinc Lead and 912 million ounces of silver as on March 31, 2012, we continue to maintain our prominent position with over 25 years of remaining mine life.

In line with the Company's growth vision, we continue to invest our resources in identifying new world-class resources. A total of 94,250m of drilling was completed at various exploration sites in FY 2011-12. During the year, we performed systematic greenfield exploration over 4,500 sq km and applied for new Reconnaissance Permits for around 18,700 sq km.

OUTLOOK

In line with the mine plan, mined metal production in FY 2012-13 is expected to be slightly higher than this financial year Production in first half of FY 2012-13 is expected to be marginally lower than that last year, but will be more than made up in the second half of FY 2012-13. The SK mine is expected to deliver volumes near its capacity of 2.0 mtpa in FY 2012-13. Total integrated silver production is projected to be around 350 tonnes in FY 2012-13.

Average Cost of Production for FY 2012-13 is expected to be in line with this year however there could be quarterly variations in line with the mine plan.

ZINC- LEAD- SILVER ZINC INTERNATIONAL

KEY ACHIEVEMENTS

> Integration successfully completed

> Stable operating performance, higher volume over brvious period

> Mine life extended at all three locations

STRATEGIC PRIORITIES

> Feasibility of Gamsberg project in South Africa

> Work on other satellite opportunities at all locations

> Increase in mine life through extensive exploration program

OPERATIONS

The increase in production level is the highlight of the first complete year of operations post the acquisition of these assets during FY 2010-11. Total production of zinc and lead metal-inconcentrate and zinc metal was 444 kt, comprising 299 kt of zinc and lead metal-in-concentrate at Lisheen and BMM and 145 kt of refined zinc at Skorpion. This compared well with last year's production of 434 kt.

The unit cost of production in FY 2011-12 rose by 4% to 52.9 cents/ lb compared with 50.7 cents/lb in FY2010-11, primarily due to higher energy costs and lower by-product credit.

EBITDA for the FY 2011-12 was Rs. 1,753 Crore . Prior year performance is not comparable as the acquisition was completed over the period from December 2010 to February 2011.

EXPLORATION

We have extended the life at all three of our mines during the year. Mine life increased to 2017 at Skorpion with some additional work to be done to convert resources to reserves. Gross addition of more than 2 mt to R&R was made at Black Mountain mine, extending the mine life. Similarly, Lisheen mine life was extended by one year to approximately three years now.

A feasibility study is underway as the first step towards the development of the Gamsberg project. The Gamsberg project contains the largest undeveloped zinc deposit in the world. With an estimated 186 mt deposit, this discovery has the potential to deliver over 400 ktpa over a mine life of more than 20 years.

OUTLOOK

In FY 2012-13, production at Zinc-International is expected to be impacted by a fall in grades, which will lead to lower production by about 5-7%. Success in enhancing resource position and ongoing exploration work has significantly enhanced the value of the assets as compared with the data available at the time of acquisition.

Performance - Aluminium

> Value added product volume increase of 4% from 229 kt to 238 kt

Key Achievements

> Value added product volume increase of 4% from 229 kt to 238 kt

STRATEGIC PRIORITIES

> Further improve operating efficiencies to optimise costs, including logistics costs

> Expedite development of captive coal block

> Secure captive bauxite mine

> Enhance prices achieved for value added products, enhancing operating margins

> Complete ongoing expansion projects

> Secure additional coal blocks under the new policy expected to be announced soon

MARKET OVERVIEW

Due to a rise in CT Pitch and CP Coke prices globally and additional cost brssures due to the increase in the cost of coal used for CPPs. Almost 50% of global capacity is said to be operating with cash costs higher than current aluminium prices, resulting in the announcement of significant closures by the marginal cost smelters.

The global aluminium industry recorded a 7.8% growth in production and a 9.3% growth in consumption during CY 2011.

In the longer term, the fundamentals of the aluminium industry remain strong, with aluminium demand forecast to grow by almost 6% in the current decade. The robust growth is expected to be driven by emerging economies and a growing perception among end users in developed markets of aluminium's advantages. The underlying factors that are driving strong demand growth for structural commodities remain unchanged, as continued urbanisation and industrialisation in large, populous nations such as China and India drive demand for aluminium.

India is relatively insulated from the economic fluctuations in mature economies and is projected to become the second largest consumer of aluminium in Asia during CY 2012, with the electrical sector the main driver of demand.

As one the largest producer of aluminium in India, we are well positioned to cater to its growing demand for aluminium. In addition to the electrical sector, the automotive and construction sectors are also projected to undergo a healthy growth in demand.

As per forecast, the primary aluminium demand in India is expected to reach 6 million tonnes by 2025, which equates to 4.1 kg of per capita aluminium consumption in 2025. When compared to the current per capita aluminium consumption of around 1.5 kg and aluminium demand of 1.8 million tonnes, this underscores the immense potential for demand growth in India.

OPERATIONS

Production of aluminium in FY 2011-12 was 246 kt tonnes, in line with the corresponding prior period. Operations at the Korba smelter were stable and it continued to operate at its rated capacity.

The Operating costs at the Korba smelter were higher at $ 1,997 per MT, primarily due to higher coal, carbon and alumina costs.

EBITDA for FY 2011-12 was Rs. 374 Crore , 39.3% lower than achieved in FY 2010-11. EBITDA fell due to the low LME prices during the second half of the year and higher costs.

PROJECTS

The first unit of the 1,200 MW (4x300 MW) captive thermal power plant at Korba, Chhattisgarh is expected to be synchronised in Q1 FY 2012-13.

The 211 mt coal block at the Bharat Aluminium Company (BALCO) received approval from the Environment Appraisal Committee (EAC) in November. We are in the process of obtaining 2nd stage forest clearance. We expect to commence production of coal in FY 2012-13.

The first metal tapping from the 325 ktpa aluminium smelter at Korba is scheduled by Q3 FY 2012-13.

OUTLOOK

We expect our existing facilities to operate at close to their rated capacity in the coming year. The resultant increased volumes, combined with the expected higher proportion of value added products and further improvement in operating costs should provide improved returns.

VEDANTA ALUMINIUM LIMITED (VAL)

KEY ACHIEVEMENTS

> Highest ever Alumina production - up by 31.3% to 928 kt

> Record Aluminium production of 430 kt

> Value added product volume increase of 71% from 96 kt to 165 kt

STRATEGIC PRIORITIES

> Further improve operating efficiencies to optimise costs, including logistics costs

> Secure captive bauxite mine

> Enhance prices achieved for value added products, enhancing operating margins

> Complete ongoing expansion projects

> Secure additional coal blocks under the new policy expected to be announced soon

OPERATIONS

Production of aluminium in FY 2011-12 was 430 kt tonnes, an increase of 11% compared with the corresponding prior period. This increase is primarily attributable to the production from the Jharsuguda 500 ktpa aluminium smelter. Following a serious setback of power outages experienced in June, the Jharsuguda smelter has fully stabilized, with most of its key parameters including power consumption almost reaching normal operating levels. The remaining pots and ongoing operational improvements are expected to further enhance the operating efficiencies.

The Lanjigarh alumina refinery produced 928 kt of alumina in FY 2011-12, an increase of 31.3% compared with 707 kt in FY 2010-11.

Total sales of aluminium were 11.4% higher at 430 kt in FY 2011-12. Sales of aluminium in the domestic market increased 16.4% to 259 kt in FY 2011-12. Sales of value added products increased by 71 % compared with last year. The share of value added products was 38% of total sales in FY 2011-12, significantly higher compared with 25 % in FY 2010-11. We continue to focus on increasing our domestic sales, as our sales in the domestic market are higher than our exports.

A full year unit cost of production of US$2,188 per tonne as compared with US$1,940 in FY2011 is a resultant of a very high operating cost, in H1 due to power outage and subsequent normalization of operating performance resulting in Q4 COP of US$1,930 at VAL.

EBITDA for FY 2011-12 was Rs. 563 Crore, 21% lower than achieved in FY 2010-11. EBITDA fell due to the pot outage incident in the Jharsuguda unit during June 2011, low LME prices during the second half of the year and higher costs.

PROJECTS

Further construction at the Lanjigarh Alumina refinery project is on hold while we continue to work on completing the 1.25 mt smelter expansions at Jharsuguda.

OUTLOOK

We expect our existing facilities to operate at close to their rated capacity in the coming year. The resultant increased volumes, combined with the expected higher proportion of value added products and further improvement in operating costs should provide improved returns.

Performance - Power

KEY ACHIEVEMENTS

> Record sales of 7,579 million units, up 183% from brvious year

> Commissioned two 600 MW units in the independent power plant (IPP) at Jharsuguda and the fourth unit has been synchronized

> 150 MW wind power project commissioned, taking green power generation capacity to 274 MW

STRATEGIC PRIORITIES

> Commission the fourth unit of the 2,400 MW project at Jharsuguda by Q1 FY 2012-13

> Power sales and transmission strategy

> Coal Sourcing

> Develop Sterlite Energy Limited ( SEL) captive coal block

> Complete 1,980 MW project at Talwandi Sabo power project with minimal time/ cost overrun

MARKET OVERVIEW

The Indian power sector has achieved a compound annual growth of 7.6% in its installed capacity since the end of the GoI’s tenth five year plan, to achieve an installed capacity of 190.6 GW at the end of February 2012.

Of this, 65.4% rebrsented thermal capacity, while 11.7% was from renewable energy sources. Despite the market growth, power supply has lagged behind demand, with supply falling short of India’s peak energy demand for FY 2011-12 by 12.1%, as anticipated by the Central Electricity Authority (CEA). Per capita consumption of electricity in the country of about 814 kwh in 2011 was only about 24% of the world’s average, highlighting the growth prospects for the future.

Coal deficits and higher costs due to imports has adversely impacted the industry in recent years. However, the Government of India’s efforts to ensure a minimum of 80% of fuel supply to power producers is expected to improve the performance of the power sector.

OPERATIONS

Power sales were 7,578 million units during FY 2011-12, compared with 2,680 million units during the corresponding prior period, as the three 600 MW units at the Jharsuguda 2,400 MW power plant came into operation. During Q4, the third 600 MW unit started commercial production and the fourth 600 MW unit was synchronised.

Average power sales prices in FY 2011-12 were Rs. 3.39 per unit compared with Rs. 3.38 per unit in FY 2010-11.

Average power generation costs in FY 2011-12 were Rs. 2.40 per unit compared with Rs. 1.77 per unit in FY 2010-11.

With the commissioning of the 150 MW of our wind power generation capacity in FY 2011-12, we have now reached a total of 274 MW, making us one of the largest wind power producers in India.

FINANCIAL PERFORMANCE

EBITDA in FY 2011-12 was Rs. 686 Crore , higher than the EBITDA of Rs. 335 Crore in FY 2010-11. EBITDA rose primarily due to higher volumes partially offset by a marginal fall in power tariffs and higher operating costs, primarily coal.

PROJECTS

Talwandi Sabo IPP:

Work at the 1,980 MW power project at Talwandi Sabo is progressing as scheduled. The first unit of the 660 MW is expected to be commissioned during Q4 FY 2012-13. In view of the current environment of coal and power tariff, we have decided to drop the expansion plan of the fourth unit.

Jharsuguda IPP

Transmission lines are being set up to enhance existing transmission capacity to meet the requirements for the new units being commissioned and are expected to be completed by Q3 FY 2012-13.

OUTLOOK

We plan to complete the ongoing projects on schedule and to continue our focus on improving coal logistics and expediting coal block development at SEL.