Hindalco Industries

The Directors are pleased to present the 49th Annual Report along with
 the audited annual accounts for the year ended 31st March, 2008.
 
 Your company has taken various strategic initiatives during the year to
 strengthen the financials. Some of the key initiatives are :
 
 1.  Completion of acquisition of Novelis Inc., the world’s leading
 producer of aluminium rolled products, on 15th May 2007.
 
 2.  Completion of merger of Indian Aluminium Company with your company.
 
 3.  Acquition of entire shareholding of Alcan Inc in Utkal Alumina
 International Ltd. (Utkal). Consequently, Utkal is now a wholly owned
 subsidiary of the company.
 
 4.  Execution of Integration process with Novelis with your company. We
 began with cultural integration, followed by finance and technology,
 and marketing is under progress.
 
 Financial Performance
 
 Your company’s consolidated revenues crossed 15 USD billion mark during
 the year registering a year-on- year growth of 211% to Rs. 60,013
 crores from Rs. 19,316 Crores. The consolidated EBIDTA was at Rs. 7,291
 Crores.
 
 The Chairman’s letter to shareholders and the Management’s Discussion &
 Analysis, which form a part of this Annual Report, provide the
 strategic direction and a more detailed analysis on the performance of
 individual businesses and their outlook.
 
                                                         Rs. in Million
 Financial Results 
 for the year ended               Standalone          Consolidated
                              31.03.08   31.03.07  31.03.08    31.03.07
 
 Net Sales & Operating 
 Revenue                       192,010    183,130   600,128     193,161
 
 Profit Before Tax              30,256     35,046    29,855      36,616
 
 Provision for Current Tax       6,063      9,841     9,713       9,942
 
 Provision for Deferred Tax        876       (551)     (738)       (478)
 
 Provision for Fringe
 Benefits Tax                      114        113       123         121
 
 Tax Adjustment for earlier 
 years (Net)                    (5,407)        -     (5,481)         -
 
 Profit before Minority 
 Interest                       28,609      25,643   26,238       27,031
 
 Minority Interest                 -           -      2,206          161
 
 Share in (Profit)/ Loss 
 of Associates                     -           -        159           12
 
 Net profit                     28,609      25,643   23,873       26,858
 
 Appropriations
 
 Debenture Redemption Reserve       50         187       50          187
 
 Special Reserve                   -            -         9           13
 
 Dividend on Preference Shares
 (Current Year Rs. 0.24 Mio, 
 Previous Year Nil)
 
 Dividend Tax on Preference Shares
 (Current Year  Rs. 0.04 Mio, 
 Previous Year Nil)
 
 Interim Dividend on Equity Shares  -         1,773       -        1,773
 
 Tax on Interim Dividend            -           249       -          249
 
 Proposed Dividend on Equity 
 Shares                           2,269          -      2,285         16
 
 Tax on Proposed Dividend           386          -        392          6
 
 Transfer to General Reserve     25,611      24,434    25,629     25,496
 
 Post the acquisition of Novelis effective May 15, 2007, Hindalco is now
 a global player with a strong presence in five continents and with a
 product portfolio which is a natural hedge against the volatility of
 aluminium prices. The improved results came on the back of strong
 operational focus and increase in capacities in fast growing markets of
 Asia and South America. Total shipments increased from 3113 kt to 3150
 kt. Novelis countered inflation and challenging market conditions in
 certain geographies with portfolio optimisation, price increases,
 working capital improvements and reduction in corporate costs.  The
 Company’s exposure to contracts with metal price ceilings reduced
 during the year. The benefits can be seen in increased revenues and
 stronger cash flows.
 
 The integration activities are proceeding smoothly and the acquisition
 is expected to significantly enhance shareholder value.
 
 Dividend
 
 The Directors have recommended a dividend of Rs. 1.85 per share (Last
 Year Rs.1.70 per share). This will be paid in line with the applicable
 regulations. The total outgo including tax on dividend would be Rs.
 2654.8 million (Last Year: Rs. 2022.2 million).
 
 Growth plans underway in Aluminium
 
 Your Company is aggressively pursuing various brownfield and greenfield
 growth opportunities in Aluminium as described below:
 
 Brownfield Expansions
 
 Muri
 
 The expansion of the Muri Alumina refinery from 110,000 tpa to 450,000
 tpa is under commissioning in a phased manner. The production from the
 expanded facility is being ramped up progressively and has reached
 180,000 tpa now. It will reach its full capacity during FY09.
 
 Hirakud
 
 Phase II of the expansion of the smelting capacity from 100,000 tpa to
 143,000 tpa is on track. Its capacity has touched 110,000 tpa in Q4FY08
 and will scale upto 143,000 tpa by August 2008.
 
 Greenfield Projects
 
 Aditya Aluminium, the integrated aluminium project, encompassing 1 to
 1.5 million tpa alumina refinery, 260,000 to 359,000 tpa aluminium
 smelter and 750 to 900 MW captive power plant is progressing as
 planned. The smelter is expected to be commissioned by October 2011 and
 the refinery by January 2013.
 
 Mahan Aluminum project with a smelter capacity of 359 ktpa and CPP of
 900 mw is on schedule. The smelter is expected to roll on by July 2011.
 
 Jharkhand project with a smelter capacity of 359 ktpa and CPP of 900
 mw, tubed coal mine has been allotted jointly with Tata Power. The
 approximate date of commissioning is June 2012.
 
 Utkal Alumina Refinery with a capacity of 1.5 mtpa construction is
 currently underway. Bauxite mining activities will start by March 2009.
 The commissioning of the plant is expected by January 2011.
 
 Finance
 
 Utilisation of Right issue proceeds
 
 The Company has issued equity shares of Re. 1/- each on rights basis at
 a price of Rs 96 per share in the ratio of 1:4 in February, 2006
 aggregating to 231,882,222 shares (including 361,191 shares allotted by
 the Company during the year, earlier kept in abeyance at the time of
 Company’s rights issue due to court cases.) against a total amount
 receivable of Rs 22,261 million (spreading over a two year period with
 two call notices), the Company has received Rs 22,195 million till 31st
 March, 2008. Out of this, an amount of Rs 366 million has been spent on
 associated expenses of the rights issue and Rs 3,935 million has been
 utilized towards subscription to shares of a subsidiary of the Company.
 The balance amount has been invested temporarily in liquid funds.
 
 Preferential Issue
 
 As per approval of shareholders in the Extra Ordinary General Meeting
 held on 28 March 2007, the Company has allotted 67,500,000 equity
 shares of face value of Re 1/- each on a preferential basis to
 Promoters / Promoter Group at a price of Rs 173.87 each, fully paid on
 11th April, 2007. Further 80,000,000 warrants were also allotted on a
 preferential basis to the Promoters / Promoter Group entitling them to
 apply for and obtain allotment of one equity share at a price of Rs
 173.87 per share against each such warrant at any time after the date
 of allotment but on or before the expiry of 18 months from the date of
 allotment in one or more trenches. The Company has received 10% amount
 against each such warrant.
 
 Financing
 
 The Company met all its obligation on payment of interest and repayment
 of principal.
 
 The acquisition of Novelis was funded by a temporary loan of USD 3.1
 Billion repayable on November 10, 2008 from consortium of banks. This
 loan was drawn by a subsidiary of the company secured by Hindalco´s
 corporate guarantee. The company is evaluating various option including
 an equity rights issuance for take out financing.
 
 Consolidated Financial Statements
 
 In accordance with Accounting Standards 21 , 23 and 27 issued by the
 Institute of Chartered Accountants of India, your Company is presenting
 its consolidated financial statements. These Consolidated Financial
 Statements form part of the Annual Report.
 
 Corporate Governance
 
 The Securities and Exchange Board of India (SEBI) has prescribed
 corporate governance standards. Your Directors reaffirm their
 commitment to these standards and this annual report carries a section
 on Corporate Governance.
 
 Directors’ Responsibility Statement
 
 Your Directors affirm that the audited accounts containing financial
 statements for the financial year 2007-08 are in full conformity with
 the requirements of the Companies Act, 1956. They believe that the
 financial statements reflect fairly, the form and substance of
 transactions carried out during the year and reasonably present the
 Company’s financial condition and results of operations. These
 statements are audited by the statutory auditors M/s. Singhi & Co.
 
 Your Directors further confirm that:
 
 1) In the presentation of the Annual Accounts, applicable Accounting
 Standards have been followed.
 
 2) That the accounting policies are consistently applied and
 reasonable, prudent judgment and estimates are made so as to give a
 true and fair view of the state of affairs of the Company at the end of
 the Financial Year.
 
 3) The Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities.
 
 4) The Directors have prepared the Annual Accounts on a going concern
 basis.
 
 Your Company’s internal Auditors have conducted periodic audits to
 provide reasonable assurance that established policies and procedures
 have been followed.
 
 Subsidary Companies
 
 A wholly owned subsidiary company namely A V Minerals (Netherlands)
 B.V. has been incorporated in Netherlands in April 2007. The entire
 holding in A V Metals Inc., a subsidiary of the Company in Canada has
 been transferred in May 2007 to A V Minerals (Netherlands) B.V.
 
 On 15th May, 2007, the Company acquired Novelis Inc., the world’s
 largest aluminium rolled product manufacturer through its indirect
 wholly-owned subsidiary A V Metals Inc. (Acquisition Sub) pursuant to a
 plan of arrangement (Arrangement) entered into on 10th February, 2007
 and approved by the Ontario Superior Court of Justice, Canada on 14th
 May, 2007. A V Aluminum Inc is a wholly owned subsidiary of A V Metals
 Inc which in turn is a wholly owned subsidiary of A V Minerals
 (Netherlands) B.V.
 
 Indian Aluminium Company, Limited ceased to be a susbsidary of your
 company as it merged with your company. The amalgamation was made
 effective on 25th March, 2008 with appointed date as 1st April, 2007.
 
 The Company has acquired the shareholding of Alcan Inc. consisting of
 78,564,384 equity shares of Rs 10/- each in Utkal Alumina International
 Limited (Utkal). Consequently, Utkal is now a wholly owned subsidiary
 of the Company.
 
 The Company has entered into a joint venture partnership with Almex USA
 Inc. (Almex), for the manufacture of high strength aluminium alloys for
 applications in the aerospace, sporting goods and surface transport
 industries. The joint venture has been named Hindalco-Almex Aerospace
 Limited. The Company has 70 per cent equity participation, with Almex
 holding the balance 30 per cent in the JV.
 
 The Company has formed a joint venture company namely Tubed Coal Mines
 Ltd with The Tata Power Company Ltd as per the condition of allotment
 letter of Ministry of Coal for the purpose of exploration of the Coal
 block allotted by the Government in the State of Jharkhand. Hindalco
 holds 60% stake in the Joint venture and balance 40% is held by The
 Tata Power Company Ltd.
 
 The Company has formed a joint venture company namely East Coast
 Bauxite Mining Company Private Limited with Orissa Mining Corporation
 Limited to mine bauxite in the State of Orissa. Hindalco holds 74%
 stake in the Joint venture and balance 26% is held by Orissa Mining
 Corporation Limited.
 
 The performance of the subsidiaries is covered elsewhere in this annual
 report.
 
 Your company has applied to the Central Government for grant of an
 exemption to your Company under Section 212(8) of the Companies Act,
 1956, from attaching a copy of the Balance Sheet, Profit and Loss
 Account, Report of the Board of Directors and the Report of the
 Auditors to all the Subsidiary Companies.  Subject to receipt of the
 approval, aforesaid documents are not being attached with the financial
 statements of your company. These documents can be requested by any
 member, investor of the company / subsidiary company. Further, in line
 with the Listing Agreement and in accordance with the Accounting
 Standard 21 (AS-21), Consolidated Financial Statements prepared by the
 Company include financial information of its subsidiaries.
 
 Employee Stock Option Scheme
 
 As mentioned last year, to share value created by the employees and to
 promote the culture of employee ownership in your company, the
 “Employee Stock Option Scheme - 2006” (ESOS-2006), was introduced in
 the last year.
 
 In terms of ESOS-2006, the ESOS Compensation Committee has on 23rd
 August 2007 and 25, January 2008 granted 29,73,390 Stock Options to the
 Employees of the Company, including Managing Director in two tranches.
 The options will vest in 4 equal annual installments after one year of
 the grant and shall be exercisable within a period of 5 years from the
 date of vesting.
 
 Details of the options issued during ESOS-2006, as also disclosure in
 compliance with Clause 12 of Securities and Exchange Board of India
 (Employees Stock Option Scheme) Guidelines 1999, are set out in
 Annexure A to this report.
 
 Particulars as per Section 217 of the Companies Act, 1956
 
 The information relating to the conservation of Energy, Technology
 Abosorption and Foreign Exchange Earnings and Outgo required under
 section 217 (1)(e) of The Companies Act, 1956, is set out in a separate
 statement attached to this report (Annexure B).
 
 In accordance with the provisions of sections 217 (2A), read with the
 Companies (Particulars of Employees) Rules, 1975, the names and other
 particulars of employees are to be set out in the directors report, as
 an addendum thereto. However, as per the provisions of section 219 (1)
 (b)(iv) of the Companies Act, 1956, the report and accounts, as therein
 set out, are being sent to all members of the company excluding the
 aforesaid information about employees. Any member, who is interested in
 obtaining such particulars about employees, may write to the Company
 Secretary at the Registered Office of the company.
 
 Directors
 
 In accordance with Article 146 of the Articles of Association of the
 Company, Mr. M. M. Bhagat, Mr. C. M. Maniar and Mr. S. S. Kothari
 retire from office by rotation, and being eligible, offer themselves
 for reappointment.
 
 Awards & Recognitions
 
 Several accolades have been conferred upon your Company, in recognition
 of its contribution in diverse fields. A selective list:
 
 Hirakud
 
 Hirakud Smelter - National Energy Conservation Award - First Prize
 2007.
 
 Hirakud Smelter - National Safety Award for performance year 2005
 (presented in Oct 07) by Ministry of Labour & Employment, Govt of
 India.
 
 Hirakud Power - CII - Orissa Award for Best Practices in Environment,
 Safety, Health for the year 2007.
 
 Hirakud Smelter was awarded the State level Safety Award for Best
 Occupational Healthcare 2006 - presented in February 2008 at
 Bhubaneswar.
 
 Muri
 
 Muri Alumina Plant selected for CII’s National Award for Excellence in
 Water Management 2007 for both Within & Beyond the Fence 2007.
 
 Belur
 
 Belur Plant was selected for the National Safety Award for outstanding
 performance in Industrial Safety as Runners Up for the performance year
 2005 in achieving the Lowest Average Frequency Rate (presented in
 October 2007, by the Ministry for Labour & Employment, Govt of India.
 
 Belur Plant was a winner of the GreenTech Environmental Gold Award in
 the Metals & Mining Sector for its outstanding achievement in
 Environment Management during 2007 - 2008.
 
 Belur Sheet Plant was adjudged the Winner of the “ CII – Eastern Region
 Energy Conservation Award for 2007 – 2008 “.
 
 Alupuram
 
 Alupuram Complex awarded the Outstanding Safety Performance Award 2007
 in the small scale Engineering Industrial category.
 
 Talabira
 
 Talabira Coal Mines won a host of Safety Awards, namely, First in
 Working Face and Maintenance of Dozer & Payloader and Second in Dust
 Suppression at the Annual Coal Mines Safety Fortnight 2008 organised by
 Directorate of Mines Safety, Bhubaneswar and Chaibasa Region.
 
 Durgmanwadi & Kasarsada Mines
 
 Durgmanwandi and Kasarsada Bauxite Mines have earned a host of awards
 during the Mines Environment & Mineral Conservation Week programmes,
 including Special Prize for being ranked First for 3 consecutive years
 in Overall Performance along with other prizes for Safety and other
 mining operations.
 
 Renukoot
 
 World Environment Foundation awarded “Golden Peacock Award-2007” to
 Renukoot unit for remarkable achievements in the field of occupational
 health and safety.
 
 Renukoot unit won the “Safety Innovation Award-2007” for excellence in
 the field of occupational health.  The award was given by “The
 Institute of Engineers India”.
 
 Renukoot unit has been awarded “Second Prize” of National Energy
 Conservation Award 2007 by Government of India, Ministry of Power and
 Energy.
 
 Chief Commissioner, Central Excise, Lucknow Zone awarded Renukoot unit
 with commendation certificate for revenue performance in large scale
 manufacturing category and service tax category.
 
 Renukoot unit has been awarded “Silver Trophy” of Rajiv Gandhi National
 Quality Award-2007 by Bureau of Indian Standard in large scale
 manufacturing industries-metallurgy category.
 
 CII’s National Award for Excellence in Water Management, (Beyond the
 fence), 2007 was awarded for Rural Development work.
 
 Environmental Protection and Pollution Control
 
 Your Company is committed to sustainable development. Your company is a
 signatory to the Global Compact and subscribes to the principle of
 triple-bottom line accountability.
 
 A separate chapter in this report deals at length with your Company’s
 initiatives and commitment to environment conservation.
 
 Auditors
 
 The observations made in the Auditors’ Report are self-explanatory and
 do not call for any further comments under Section 217 (3) of the
 Companies Act, 1956.
 
 M/s. Singhi & Company, Chartered Accountants and Auditors of the
 Company, retire, and being eligible, offer themselves for appointment.
 
 Appreciation
 
 Your Directors place on record their sincere appreciation for the
 assistance and guidance provided by the Honourable Ministers,
 Secretaries and other officials of the Ministry of Mines, Ministry of
 Coal, the Ministry of Chemicals and Fertilizers and various State
 Governments. Your Directors thank the Financial Institutions and Banks
 associated with your Company for their support as well.
 
 Your Company’s employees are instrumental in your Company scaling new
 heights, year after year. Their commitment and contribution is deeply
 acknowledged.
 
 Your involvement as Shareholders is greatly valued. Your Directors look
 forward to your continuing support.
 
                                        For and on behalf of the Board
 
 Mumbai
 Dated the 20th Day of June,2008                    Chairman