Sterlite Industries (India) Limited - Sterlite Industries India Ltd.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion of our business, financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. Some of the statements in the following discussion are forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth under “Item 3. Key Information — D. Risk Factors” and elsewhere in this annual report. Overview We are a non-ferrous metals and mining company with operations in India and Australia. We also have a minority interest in Vedanta Aluminium, an alumina refining and aluminum smelting company, and are developing a commercial power generation business in India that leverages our experience in building and managing captive power plants used to support our copper, zinc and aluminum businesses. We have experienced significant growth in recent years through various expansion projects which have expanded our copper smelting business, by acquiring our zinc and aluminum businesses in 2002 and 2001, respectively, through the Government of India privatization programs and by successfully growing our acquired businesses. We believe our experience in operating and expanding our business in India will allow us to continue to capitalize on attractive growth opportunities arising from India’s large mineral reserves, relatively low cost of operations and large and inexpensive labor and talent pools. 65
Our net sales and operating income decreased from Rs. 246,414 million and Rs. 75,153 million in fiscal 2008 to Rs. 212,192 million ($4,171.3 million) and Rs. 42,247 million ($830.5 million) in fiscal 2009, representing decreases of 13.9% and 43.8%, respectively. The following tables are derived from our selected consolidated financial data and set forth: • the net sales for each of our business segments as a percentage of our net sales on a consolidated basis; • the operating income for each of our business segments as a percentage of our operating income on a consolidated basis; and • the segment profit, calculated by adjusting operating income for depreciation, depletion and amortization, voluntary retirement scheme expenses, impairment of assets and guarantees, impairment of investments and loans and gain on sale of real estate, as applicable, for each of our business segments as a percentage of our segment profit on a consolidated basis. Year Ended March 31, 2007 2008 2009 Net Sales: Copper 47.8% 51.3% 54.9% Zinc 35.6 31.7 26.3 Aluminum 16.6 16.9 18.4 Power (1) — — 0.4 Corporate and others (1) — 0.1 — Total 100.0% 100.0% 100.0% Operating income: Copper 18.4% 14.7% 25.0% Zinc 67.3 70.8 59.5 Aluminum 14.3 15.4 15.1 Power (1) — — 0.4 Corporate and others (1) — (0.9) (0.0) Total 100.0% 100.0% 100.0% Segment profit: (2) Copper 17.9% 15.2% 25.0% Zinc 66.1 67.1 55.3 Aluminum 16.0 17.2 17.8 Power (1) — — 1.6 Corporate and others (1) — 0.5 0.3 Total 100.0% 100.0% 100.0% Notes: (1) The corporate and other segment includes the results from the power segment for the periods prior to the year ended March 31, 2009. (2) Segment profit is calculated by adjusting operating income for depreciation, depletion and amortization, voluntary retirement scheme expenses, guarantees, impairment of investments and loans and gain on sale of real estate, as applicable. Segment profit is not a recognized measurement under US GAAP. Our segment profit may not be comparable to similarly titled measures reported by other companies due to potential inconsistencies in the method of calculation. We have included our segment profit because we believe it is an indicative measure of our operating performance and is used by investors and analysts to evaluate companies in our industry. Our segment profit should be considered in addition to, and not as a substitute for, other measures of financial performance and liquidity reported in accordance with US GAAP. We believe that the inclusion of supplementary adjustments applied in our presentation of segment profit are appropriate because we believe it is a more indicative measure of our baseline performance as it excludes certain charges that our management considers to be outside of our core operating results. In addition, our segment profit is among the primary indicators that our management uses as a basis for planning and forecasting of future periods. The following table reconciles operating income to segment profit for the periods presented: 66
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Yes Yes No No (Mark One) UNITED
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TABLE OF CONTENTS PAGE ITEM 4. INFO
Page 5 and 6:
• Part I — Item 6. Directors, S
Page 7 and 8:
Refined Copper Consumption Global c
Page 9 and 10:
Indian Copper Market Background The
Page 11 and 12:
The following table sets forth the
Page 13 and 14:
Market Outlook Global Zinc Outlook
Page 15 and 16:
Notwithstanding the rise in aluminu
Page 17 and 18:
Market Outlook Global Aluminum Outl
Page 19 and 20:
Consumption Although electricity ge
Page 21 and 22:
Power Trading Power trading takes p
Page 23 and 24: In addition, we are expanding our a
Page 25 and 26: • India’s economic growth and p
Page 27 and 28: We utilize project monitoring and a
Page 29 and 30: Seeking further growth and acquisit
Page 31 and 32: Our Production Process Our copper b
Page 33 and 34: The following map shows the locatio
Page 35 and 36: The principal deposits in the Mt. L
Page 37 and 38: consists of a 400,000 tpa copper sm
Page 39 and 40: Once processed at the Tuticorin fac
Page 41 and 42: Lead-Zinc Mines HZL sources all of
Page 43 and 44: Principal Facilities Overview The f
Page 45 and 46: Mines Rampura Agucha The Rampura Ag
Page 47 and 48: The gross book value of the Rajpura
Page 49 and 50: Summary of Mine Reserves The follow
Page 51 and 52: The following table sets out HZL’
Page 53 and 54: Market Share and Competition HZL is
Page 55 and 56: Additional Supply of Alumina The ad
Page 57 and 58: Bauxite Mines Chhattisgarh Mines Th
Page 59 and 60: Fabrication Facility The fabricatio
Page 61 and 62: Other Raw Materials BALCO also uses
Page 63 and 64: 1,250,000 tpa Aluminum Smelter Veda
Page 65 and 66: Sterlite Energy — Talwandi Sabo I
Page 67 and 68: Call Option Over Shares in BALCO On
Page 69 and 70: mineral development on the forest,
Page 71 and 72: Water (Prevention and Control of Po
Page 73: The employer is responsible for ded
Page 77 and 78: • Power. Our commercial power gen
Page 79 and 80: Copper The net sales of our copper
Page 81 and 82: Year Ended March 31, 2007 2008 2009
Page 83 and 84: In addition, the Finance Act (2 of
Page 85 and 86: Power Business We expect our future
Page 87 and 88: Results of Operations Overview Cons
Page 89 and 90: • Pursuant to the approval of the
Page 91 and 92: Aluminum Net sales to external cust
Page 93 and 94: the selling and distribution expens
Page 95 and 96: • Aluminum production increased f
Page 97 and 98: We currently expect capital expendi
Page 99 and 100: Besides existing facilities, we had
Page 101 and 102: Energy is in the process of obtaini
Page 103 and 104: Contractual Obligations The followi
Page 105 and 106: SFAS No. 161, “Disclosures about
Page 107 and 108: ITEM 6. DIRECTORS, SENIOR MANAGEMEN
Page 109 and 110: ITEM 19. EXHIBITS The following exh
Page 111 and 112: 4.15 Rs. 7,000 million Rupee Term F
Page 113 and 114: 4.41 Rs. 10,000 million Loan Agreem
Page 115 and 116: Exhibit 12.3 Certification of Chief
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