NOTES

1. COMPANY OVERVIEW

Sterlite Industries (India) Limited (SIIL) is engaged in non-ferrous metals in India. SIIL was incorporated on September 8, 1975 under the laws of the Replublic of India and has its registered office at Tuticorin, Tamilnadu. SIIL's shares are listed in National Stock Exchange and Bombay Stock Exchange in India. In 2007, SIIL completed its initial public offering of American Depository Shares, or ADS, each rebrsenting four equity shares, and listed its ADSs on the New York Stock Exchange. In July 2009, SIIL completed its follow-on offering of ADS.

SIIL is a majority-owned subsidiary of Twin Star Holdings Limited ("Twin Star") which is in turn a wholly-owned subsidiary of Vedanta Resources Plc ("Vedanta"), a public limited company incorporated in the United Kingdom and listed on the London Stock Exchange Plc. Twin Star held 54.64% of SIIL's equity as at March 31, 2012.

The Company's copper business is principally one of custom smelting and includes a copper smelter, a refinery, a phosphoric acid plant, a sulphuric acid plant, a copper rod plant and two captive power plants at Tuticorin, Tamilnadu and a refinery and two copper rod plants at Silvassa in the Union Territory of Dadra and Nagar Haveli.

2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES:

(a) Basis of Accounting :

The Financial Statements are brpared as a going-concern under historical cost convention on an accrual basis and in accordance with the Companies Act, 1956 except those items covered under 'Accounting Standard - 30" on "Financial instruments : Recognition and Measurement" which have been measured at their fair value . Accounting policies not stated explicitly otherwise are consistent with generally accepted accounting principles.

(b) Use of Estimates:

The brsentation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and the estimates are recognised in the period in which the results are known/materialized.

(c) Borrowing Cost:

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

(d) Fixed Assets:

Fixed Assets are stated at cost (net of Modvat/Cenvat/Value Added Tax) less accumulated debrciation and impairment loss.

(e) Expenditure During Construction Period:

All br-operative project expenditure (net of income accrued) incurred upto the date of commercial production is capitalised.

(f) Debrciation:

(i) Debrciation has been provided on Fixed Assets on straight line method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956, except in respect of additions arising on account of Insurance spares, on additions/extensions forming an integral part of existing plants and on the revised carrying amount of the assets identified as impaired on which debrciation has been provided over residual life of the respective fixed assets.

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

(iii) Fixed Assets where ownership vests with the Government/Local authorities are amortised at the rates of debrciation specified in Schedule XIV to the Companies Act, 1956.

(g) Intangible Assets:

Intangible Assets are stated at cost of acquisition less accumulated amortisation. Technical know-how is amortised over the useful life of the underlying plant. Amortisation is done on straight line basis. Software is amortised on Straight Line basis over the useful life of the asset or 5 years which ever is earlier.

(h) Investments:

(i) Investments are classified as investments in Subsidiaries (valued at cost), Associates (valued at cost except for investments in redeemable cumulative brference shares of associate which are at amortised cost), Available for Sale, Held for Trading and Held To Maturity within the meaning of Accounting Standard 30 on "Financial Instruments: Recognition and measurement" read with the limited revisions of Accounting Standard 21 on Consolidated Financial Statements & Accounting Standard 23 on Accounting for Investments in Associates.

(ii) Investments are recorded as Long Term Investments unless they are expected to be sold within one year. Investments in subsidiaries and associates are valued at cost except for investments in redeemable cumulative brference shares of associate which are at amortised cost less any provision for impairment. Investments are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable.

(iii) Investments classified as Available for Sale are initially recorded at cost and then remeasured at subsequent reporting dates to fair value. Unrealised gains/losses on such investments are recognised directly in Investment Revaluation Reserve Account. At the time of disposal, derecognition or impairment of the investments, cumulative gain or loss brviously recognised in the Investment Revaluation Reserve Account is recognised in the Statement of Profit and Loss.

(iv) Investments classified as Held for Trading that have a market price are measured at fair value & gain/loss arising on account of fair valuation is routed through Statement of Profit and Loss and those that do not have a market price and whose fair value cannot be reliably measured are carried at cost.

(v) Investments classified as Held to Maturity are measured at amortised cost using an effective interest rate method.

(i) Inventories:

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

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

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

(j) Premium on Redemption of Debentures:

Premium on redemption of debentures is provided for on an accrual basis and charged to Statement of Profit and Loss using an effective interest rate method.

(k) Foreign Currency Transactions:

(i) Transactions denominated in foreign currencies are normally recorded at the exchange rate brvailing on the date of the transaction.

(ii) Monetary items denominated in foreign currencies at the year end are restated at year end rates. In case of monetary items which are hedged by derivative instruments, the valuation is done as per 'Accounting Standard - 30", Financial Instruments: Recognition and Measurement" read with accounting policy on derivative instruments. The fair value of foreign currency contracts are calculated with reference to current forward exchange rates for the contracts with similar maturity profile.

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

(iv) Any income or expense on account of exchange difference either on settlement or on translation is recognised in the Statement of Profit and Loss except in respect of long term Foreign Currency monetary Items which are not covered by Accounting Standard (AS 30) on "Financial instruments; Recognition and Measurement" relatable to acquisition of debrciable fixed assets, such difference is adjusted to the carrying cost of the debrciable fixed assets. In respect of other long term Foreign Currency Monetary items, the same is transferred to "Foreign Currency Monetary Translation Difference Account" and amortised over the balance period of such long term Foreign Currency Monetary items but not beyond March 31, 2020.

(l) Issue expenses:

Expenses of Debenture/Bond/Floating Rate Note issues are charged to Statement of Profit and Loss using an effective interest rate method. Expenses related to equity & equity related instruments are adjusted against the security brmium account.

(m) Employee Benefits:

(i) Short term employee benefits are recognised as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered. Provision for compensated absences to employees is on actual basis for the portion of accumulated leave which an employee can encash.

(ii) Post employment and other long term employee benefits are recognised as an expense in the Statement of Profit and Loss for the year in which the employee has rendered services. The expense is recognised at the brsent value of the amounts payable determined using actuarial valuation techniques. Actuarial gains and losses in respect of post employment and other long term benefits are charged to the Statement of Profit and Loss.

(n) Revenue Recognition:

(i) Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection. Revenue from operations includes sale of goods, services, scrap, excise duty, export incentives and are net of sales tax/Value Added Tax, rebates and discounts. Dividend income is recognised when right to receive the payment is established by the Balance Sheet Date. Interest income is recognised on time proportion basis taking into account the amount outstanding and rate applicable.

(o) Export incentives:

Duty drawback is recognised at the time of exports and the benefits in respect of advance license received by the company against export made by it are recognised as and when goods are imported against them.

(p) Import of copper concentrate and sale of copper and slime:

In accordance with the brvailing international market practice, purchase of Copper Concentrate and sale of Copper and Slimes are accounted for on provisional invoice basis pending final invoice in terms of Purchase Contract/Sales Contract respectively. The cases where quotational period price are not finalised as at the year end are restated at forward LME/LBMA rates as on the date of year end and adjustments are made based on the metal contents as per laboratory assessments done by the company pending final invoice.

(q) Derivative Instruments:

In order to hedge its exposure to foreign exchange, interest rate and commodity price risks, the company enters into forward, option, swap contracts and other derivative financial instruments. The company neither hold nor issue any derivative financial instruments for speculative purposes.

Derivative financial instruments are initially recorded at their fair value on the date of the derivative transaction and are re-measured at their fair value at subsequent balance sheet dates.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. The hedged item is recorded at fair value and any gain or loss is recorded in the Statement of Profit and Loss and is offset by the gain or loss from the change in the fair value of the derivative.

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and are determined to be an effective hedge are recorded in Hedging Reserve account. Any cumulative gain or loss on the hedging instrument recognised in Hedging Reserve is kept in Hedging Reserve until the forecast transaction occurs. Amounts deferred to Hedging Reserve are recycled in the Statement of Profit and Loss in the periods when the hedged item is recognised in the Statement of Profit and Loss or when the portion of the gain or loss is determined to be an in-effective hedge.

Derivative financial instruments that do not qualify for hedge accounting are marked to market at the balance sheet date and gains or losses are recognised in the Statement of Profit and Loss immediately. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in Hedging Reserve is transferred to net profit or loss for the year Sterlite Industries (India) Limited Annual Report 2011-12

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the Statement of Profit and Loss.

(r) Convertible notes:

Convertible notes issued in foreign currency are convertible at the option of the holder into ordinary shares of the Company as per the terms of the issue. Conversion option which is not settled by exchanging a fixed amount of cash for a fixed number of shares is accounted for separately from the liability component as derivative and initially accounted for at fair value. The liability component is recognized initially at the difference between the fair value of the note and the fair value of the conversion option. Directly attributable costs are allocated to the liability component and the conversion option in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest rate method. The conversion option is subsequently measured at fair value at each reporting date, with changes in fair value recognized in the Statement of Profit and Loss. The conversion option is brsented together with the related liability.

(s) Taxation:

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

(t) Impairment of Assets:

The carrying amount of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is recognised in the Statement of Profit and Loss where the carrying amount of an asset exceeds its recoverable amount. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

(u) Provision, Contingent Liabilities and Contingent assets:

Provisions involving substantial degree of estimation in measurement are recognised when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the Financial Statements. Contingent Assets are neither recognised nor disclosed in the financial statements.

(v) Segment Reporting:

The Company identifies primary business segment based on the different risks and returns, the organization structure and the internal reporting systems. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the Board of Directors in deciding how to allocate resources and in assessing performance.

The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment results, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.

Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.

Revenue, expenses, assets and liabilities which relates to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / results / assets / liabilities"

(w) Cash Flow Statement:

Cash flows are reported using indirect method, whereby profit/(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

3. Share Capital

i) Other disclosures

(a) The company has one class of equity shares having a par value of per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation of company, the holders of equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all brferential amounts, in proportion to their shareholding.

b) ADS shareholders do not have right to attend the General meeting in person and also do not have right to vote. They are rebrsented by depository, CITI Bank N.A. New York.

(c) For terms of conversion of 4% Convertible Senior Notes of $1000 each, Refer Note no.5(c)

ii) In terms of Scheme of Arrangement (Scheme) as approved by the Hon'ble High Court of Judicature at Mumbai, vide its order dated April 19, 2002 the company during 2002-2003 reduced its paid up share capital by Rs. 10.03 Crore. There are 3,75,544 equity shares of Rs. 1 each (Previous year 3,75,544 equity shares of Rs. 1 each) pending clearance from NSDL/CDSL. A Special Leave Petition filed in the Hon'ble Subrme Court of India against the judgement of Hon'ble High Court of Mumbai by SEBI and Department of Company Affairs has been inter-alia dismissed. The Company has filed application in Hon'ble High Court of Mumbai to cancel these shares, the decision on which is pending.

4. LONG TERM BORROWINGS

a) Debentures are Secured by first charge on Pari passu basis in favour of the Trustees for the Debentures on the Immovable properties situated at Tuticorin in the State of Tamilnadu, at Lonavala and at Pune in the State of Maharastra,Chinchapada in the Union Territory of Dadra anc Nagar Haveli and Mouje Chatrai of Kalol Taluka, District Gandhi Nagar,Gujarat. 8.24% debentures will be redeemed on April 10, 2013.

b) The amount outstanding in brvious year were repayable in two installments of Rs. 1.56 Crores each on May 2012 & August 2012.

c) In Financial Year 2009-10, US$500 Million was raised by issue of 4% Convertible Notes of $1,000 each. Subject to certain exceptions, the note holders have an option to convert these Convertible Notes into ADSs (each ADS rebrsents four equity shares) at any time prior to business day immediately brceding the maturity date at a conversion rate of 42.8688 ADSs per $1,000 principal amount of notes which is equal to a conversion price of approximately $23.33 per ADS . The conversion price could be subject to adjustments should certain events occur Further, at any time after November 4, 2012, company have a right to redeem in whole or parts of the Convertible Notes, subject to meeting certain conditions. The amount which the company is required to pay contractually on October 30, 2014 is US$500 Million, unless the notes are converted, redeemed or purchased and cancelled.

As per AS 30 at inception, the issue proceeds of the same has been allocated to the conversion option (which is an embedded derivative) with the residual value allocated to the Notes to establish its initial carrying cost. Subsequently, the conversion option has been measured at fair value through profit and loss with changes in fair value to be recognised in the Statement of Profit and Loss, and the Notes been carriec at amortised cost . As on March 31, 2012, conversion option amounting to Rs. 30.18 Crore (Previous year Rs. 275.71 Crore) is included above.

5. SHORT TERM BORROWINGS

a) Secured by way of first charge by hypothecation on the entire stock of raw materials ,work in process and all Semi-finished, finished, Manufactured articles together with all Stores, components and spares, both brsent and future book debts, outstanding monies, receivables, claims and bills arising out of sale etc. and such charge in favor of the banks ranking paripasu inter se, without any brferences or priority to one over other(s) in any manner

b) Maximum amount outstanding at any time during the year was Rs. 2,477.58 Crore (Previous year Rs. 2,474.54 Crore)

6. TRADE PAYABLES

The Company has not received any intimation from "Suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures relating to amount unpaid as at year end together with interest paid/payable under this Act have not been given.

7. SHORT TERM PROVISIONS

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

Final price payable on purchase of copper concentrate for which the quotational period price was not finalised as on March 31, 2011, a provision of Rs. 152.77 Crore based on forward LME rate of copper and LBMA rate of brcious metals was made. As against it, during the year Rs. 167.32 Crore has been incurred towards final price settlement. The balance amount of Rs. 14.55 Crore has been debited to Statement of Profit and Loss under cost of materials consumed. Liability recognised under this class for the year is Rs. 219.51 Crore which is outstanding as on March 31, 2012. Actual outflow is expected on finalisation of quotational period price in the next Financial Year.

8. EXCEPTIONAL ITEMS

In March 2010, ASARCO had filed a complaint against the Company and Sterlite (USA) Inc., the wholly owned sudsidiary of the company, in the Bankruptcy Court of the Southern District of Texas, for the alleged breach of the Purchase and Sale Agreement signed in May 2008. The Bankruptcy court of Southern District of Texas, had issued the final judgment on February 27, 2012 to pay incidental damages of USD 132.50 Million. This amount shall be reduced by USD 50 Million paid to Asarco in December 2009, making Asarco entitled for a net amount of USD 82.75 Million. The Court has also rejected Company's application of refund of USD 50 Million paid earlier by the Company. The Company in the interim has recognised Rs. 423.32 Crore (being the USD 82.75 Million) as exceptional item during the year ended March 31, 2012, while disputing the same. Based on the legal advice received, the Company has treated these expenses as deductible in computing the tax expense for the year.

9. In accordance with the Accounting Standards (AS-28) on "Impairment of Assets" , during the year the company has carried out a review to identify whether the recoverable value of any fixed assets is lower than its book value and accordingly no provision is created during the current year.

10. Arising from the Announcement of the Institute of Chartered Accountants of India (ICAI) on March 29, 2008, the Company has, since 2007-08, chosen to early adopt Accounting Standard (AS) 30, Financial Instruments: Recognition and Measurement. Coterminous with this, in the spirit of complete adoption, as have been announced by the ICAI, the Company has also implemented the consequential limited revisions in view of AS-30 to certain Accounting Standards. Accordingly,

(i) Current investments which under AS-13 Accounting for Investments are carried at the lower of cost and fair value, have been accounted for at fair value resulting the profit before tax being higher by Rs. NIL Crore (Previous year higher by Rs. 90.12 Crore).

(ii) Non-current investments which under AS-13 Accounting for Investments are carried at cost, have been accounted for at fair value resulting in investment and investment revaluation reserve higher by at Rs. 11.59 Crore (Previous year Rs. 19.75 Crore).

(iii) In case of 4 % Convertible Senior Notes, issued in October 2009, the conversion option has been measured at the fair value through Statement of Profit and Loss and the Notes carried at amortised cost. If AS 30 had not been adopted for this transaction, other income would have been lower by Rs. 245.53 Crore (Previous Year Rs. 314.11 Crore), finance costs would have been lower by Rs. 120.99 Crore (Previous year Rs. 93.48 Crore) and profit after tax would have been lower by Rs. 84.13 Crore (Previous year Rs. 147.35 Crore) for the Year ended March 31, 2012.forming part of Financial statements for the year ended March 31, 2012

11. The Company offers equity-based award plans to its employees, officers and directors through its parent, Vedanta Resources Pic. [The Vedanta Resources Long-Term Incentive Plan (the "LTIP")].

The LTIP is the primary arrangement under which share-based incentives are provided to the defined management group. The maximum value of shares that can be awarded to members of the defined management group is calculated by reference to the balance of basic salary and share-based remuneration consistent with local market practice. The performance condition attaching to outstanding awards under the LTIP is that of Vedanta's performance, measured in terms of Total Shareholder Return (" TSR") compared over a three year period with the performance of the companies as defined in the scheme from the date of grant.

Under this scheme, initial awards under the LTIP were granted in February 2004 and subsequently further awards were granted in the respective years. The awards are indexed to and settled by Vedanta shares. The awards provide for a fixed exercise price denominated in Vedanta's functional currency at 10 US cents per share, the performance period of each award is three years and the same is exercisable within a period of six months from the date of vesting beyond with the option lapse. Under the scheme, Vedanta is obligated to issue the shares. Further, in accordance with the terms of agreement between Vedanta and SIIL, on the grant date fair value of the awards is recovered by Vedanta from SIIL.

Amount recovered by Vedanta and recognised by the company in the statement of Profit and Loss for the financial year ended March 31, 2012 was Rs. 7.79 Crore (Prevoius Year Rs. 6.36 Crore). The Company considers these amounts as not material and accordingly has not provided further disclosures.

12. The employees' gratuity fund scheme is, managed by Life Insurance Corporation of India (LIC), a defined benefit plan. The brsent value of obligation is determined based on actuarial valuation using projected unit credit method, which recognize each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for short term compensated absences is recognised on actual basis for the portion of accumulated leave which an employee can encash.

13. The Company (SIIL) entered into Joint venture agreement with Orissa Mining Corporation Limited (OMCL) and incorporated South West Orissa Bauxite Mining Private Limited (SWOBM) with equity contribution of Rs. 0.05 Crore in the ratio of 74 (SIIL):26 (OMCL). SWOBM was incorporated on July 15, 2009 to carry on the business of raising and mining bauxite and alumina bearing ore from the bauxite mines in the State of Orissa. As per JV agreement dated October 05, 2004 and subsequent amendment thereto in 2009, said Company was to enter into Raising contract agreement with OMCL, the lessee of Niyamgiri Mines to raise bauxite from said mines. Since Ministry of Environment & Forests (MoEF) has not granted approval for forest diversion, no mining activity has been undertaken and accordingly the raising contract agreement has not been entered into.

14. The scheme of amalgamation (the Scheme) between Sterlite Opportunities and Ventures Limited (SOVL) and Sterlite Industries (India) Limited (the Company) and their respective shareholder and creditors with effect from April 1, 2011 as the appointed date has been approved by the Honorable High Court, Madras vide its order dated March 29, 2012. Upon necessary filing with the Registrar of Companies on April 19, 2012, the scheme has become effective. Consequent to the merger, Current year figures are not strictly comparable with the Previous year figures.

SOVL was an investment company, holding 64.92% equity share capital of Hindustan Zinc Limited. Consequently, in respect of the merger of SOVL with the Company:

a) In terms of the Scheme approved by the Hon'ble High Court, the entire business and the whole of the undertaking of SOVL, as a going concern stands transferred to and vested in the Company with effect from April 01, 2011 being the Merger Appointed Date.

b) As SOVL was a wholly owned subsidiary of the Company, no consideration was payable pursuant to amalgamation of SOVL with the Company

c) Accounting for Amalgamation: The amalgamation of SOVL with the Company is accounted for on the basis of the Pooling of Interest Method as envisaged in the Accounting Standard (AS)-14 on Accounting for Amalgamations specified in the Companies (Accounting Standard) Rules 2006 and in terms of the scheme, as below, All assets and liabilities of SOVL were recorded at their respective book values under the respective accounting heads of the Company. The intercompany balances and transactions stood cancelled. The difference, being the excess of the book value of the investment of the Company in the equity shares of SOVL over the net assets of SOVL transferred to the Company and any other outstanding inter-company balances (including loans & advances) amounting to Rs. 606.12 Crore have been adjusted against the General Reserve Account.

15. The Board of Directors of the Company in its meeting held on February 25, 2012 has approved the scheme of Amalgamation and Arrangement (the Scheme) to merge into Sesa Goa Limited ('SGL') with the appointed date as April 1, 2011, subject to necessary approvals from various statutory authorities and the Jurisdictional Hon'ble High Court. The Company shall be merged into Sesa Goa, and Sesa Goa would be the surviving company of the Merger. Upon effectiveness of the Scheme, every shareholder of Company, holding 5 (Five) fully paid-up equity shares of Rs. 1/- each shall be entitled to receive 3 (Three) fully paid-up equity shares of Rs. 1/- each in the Sesa Goa Limited and every person holding American Depository Shares or Foreign Currency Convertible Bonds, in the Company shall be entitled to receive American Depository Shares or Foreign Currency Convertible Bonds in the Sesa Goa Limited issued on the similar terms and conditions and having proportionate underlying equity shares of the Sesa Goa Limited, issued based on the aforementioned share exchange ratio for and in exchange of the existing underlying equity shares under the American Depository Shares and Foreign Currency Convertible Bonds of the Company.

16. Vedanta Aluminum Limited (VAL), an associate of the Company, is in the process of expanding its alumina refinery and its aluminium smelter in the state of Orissa. Ministry of Environment and Forests ("MoEF") has rejected the forest clearance for Niyamgiri Mining lease of Orissa Mining Corporation (OMC) which is one of the sources of supply of bauxite to the alumina refinery of VAL. OMC has filed a petition in the Hon'ble Subrme Court which is yet to be heard. MoEF has also denied VAL's application for expansion of alumina refinery, which was challenged by VAL before the Hon'ble Orissa High Court. The Hon'ble Orissa High Court has upheld the order of the MoEF. VAL in terms of MOEF directive is proceeding for a public hearing for the refinery expansion. The company has put the expansion activity on hold. The management of the Company has evaluated and considered good, its loans granted and investment made in VAL, aggregating Rs. 10,570 Crore.

17. SOVL (merged with the Company) had two call options upon expiry of five year period from April 2002, i.e on or after April 2007 to acquire further shares if any held by the Government of India. SOVL exercised the first call option on August 29, 2003 and acquired an additional 18.92% of HZL's issued equity share capital increasing its shareholding to 64.92%. The second call option was exercised by SOVL on July 21, 2009. The matter is under arbitration.

18. General expenses include donations aggregating to Rs. 5.00 Crore (Previous Year Rs. 0.10 Crore) made during the year to Public Political Awareness Trust, an indirect contribution to political party.

19. In response to the various writ petitions filed in the year 1996-1998 challenging the environment clearances for setting up of the copper smelter at Tuticorin, the Madras High Court by its order dated September 28, 2010 ordered the closure of the smelter at Tuticorin. The Company had filed Special Leave Petition (SLP) in the Subrme Court of India against the impugned order of Madras High Court and the Hon'ble Subrme Court stayed the order of the High Court. The Hon'ble Subrme Court in subsequent hearings directed Tamilnadu Pollution Control Board (TNPCB) to issue directions to implement the improvement measures suggested by National Environmental Engineering Research Institute (NEERI), Central Pollution Control Board (CPCB) and them. The Company is in the process of complying with the improvement measures suggested. The matter was last heard on March 28, 2012 and listed for further hearing on May 9, 2012. Interim stay order granted by the Hon'ble Subrme Court continues and the unit continues to operate at rated capacity.

20. The Central Excise Department had issued certain ex-parte demand in June 2010 for Rs. 315.00 Crore in respect of non return of Job-work challans within stipulated time. Company had challenged the same by filing a Writ Petition in High Court. The High Court has disposed of the Petition directing the Department to investigate the matter afresh and then proceed in the matter. Thereafter the Department has issued a show cause notice dated September 09, 2011 asking the Unit to reverse an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the Cenvat credit account. The same was contested by the Company. The Company has received a favourable decision and the demand under the notice has been dropped. In addition, the Department had also alleged violation of Advance license conditions for the period 2005-2009. No show cause notice in this regard has been served on the Company. The Company has obtained a Writ for stay on recoveries / further proceedings from the Honourable Madras High Court, Madurai Bench in this matter. The Company has also been legally advised that the alleged charges are not legally sustainable and there is no financial liability on the Company.

21. Net loss/(gain) on foreign currency transactions and translations amounting to Rs. 626.43 Crore [includes Rs. 456.28 Crore (Previous year Rs. (96.63) Crore) considered as cost of material consumed] ( Previous year Rs. (113.59) Crore) charged to the Statement of Profit and Loss.

22. The Revised Schedule VI has become effective from April 1, 2011 for the brparation of financial statements. This has significantly impacted the disclosure and brsentation made in the financial statements. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.

For and on behalf of the Board of Directors

Navin Agarwal

Executive Vice Chairman

M. S. Mehta

Chief Executive Officer

D. D. Jalan

Whole Time Director & Chief Financial Officer

Rajiv Choubey

Company Secretary

Place: Mumbai

Dated: April 25, 2012