Sterlite Industries (India)

1.  In accordance with the Accounting Standards (AS-28) on ‘Impairment
 of Assets’ issued by the Institute of Chartered Accountants of India,
 during the year the Company has reassessed its fixed assets and is of
 the view that no further impairment/reversal is considered to be
 necessary in view of its expected realisable value.
 
 2.  India Foils Limited (IFL) is in the process of hiving off its
 business. Based on the offer received and guarantees extended by the
 Company to the banks, an additional provision of Rs. 52.79 crore has
 been made in the accounts.  During the year, the Company has paid Rs.
 44.50 crore to IFL against the provisions to meet out part of its
 liabilities.  The net provision against the guarantees is Rs. 84.29
 crore as at 31 March 2008.
 
 3.  Arising from the Announcement of the Institute of Chartered
 Accountants of India (ICAI) on 29 March 2008, the Company has chosen to
 early adopt ‘Accounting Standard – 30, Financial Instruments:
 Recognition and Measurement’ in its entirety, read with limited
 revisions in various other Accounting Standards, as published by ICAI.
 Accordingly all the financial assets and financial liabilities and
 derivatives have been remeasured at their respective fair values as
 against cost or market value whichever is lower, as on 1 April 2007 as
 well as on 31 March 2008. Coterminous with this, in the spirit of
 complete adoption, the Company has also implemented the consequential
 limited revisions in view of AS – 30 to ‘Accounting Standard – 11’ on
 ‘The Effects of Changes in Foreign Exchange Rates’ and ‘Accounting
 Standard – 13’ on ‘Accounting for Investments’ as have been announced
 by the ICAI. As a result, during the year, the Company has changed the
 designation and measurement of all its significant financial assets and
 liabilities. The effect of above change in accounting policy has
 resulted as under:
 
 i) The resulting gain (as adjusted for the related tax expense) as at 1
 April 2007 amounting to Rs. 45.38 crore has been adjusted against
 opening balance of general reserves other than covered by (ii) below in
 accordance with transitional provisions.
 
 ii) The portion of the loss on the hedging instrument amounting to Rs.
 17.46 crore (Dr) that is determined to be an effective cash flow hedge
 has been recognised directly in the hedging reserve account.
 
 iii) The resulting gain on fair valuation of investment available for
 sale amounting to Rs. 8.72 crore has been transferred to investment
 revaluation reserve account.
 
 iv) Investment being higher by Rs. 71.47 crore, unsecured loans being
 lower by Rs. 46.75 crore, profits for the year (after tax) higher by
 Rs. 54.25 crore and the aggregate reserves being higher by Rs. 90.89
 crore.
 
 4. In terms of Scheme of Arrangement (Scheme) as approved by the
 Hon’ble High Court of Judicature at Mumbai, vide its order dated 19
 April 2002 the Company during 2002-2003 reduced its paid-up share
 capital by Rs. 10.03 crore. There are 192,040 equity shares of Rs. 2 /-
 each pending clearance from NSDL/CDSL. A Special Leave Petition filed
 in the Hon’ble Supreme 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.
 
 5.  Pursuant to the adoption of Accounting Standards as prescribed by
 Companies (Accounting Standards) Rules, 2006 issued by Ministry of
 Corporate Affairs vide notification number GSR 739 (E) dated 7 December
 2006, as required by Accounting Standard – 11 on ‘The Effect of Changes
 in Foreign Exchange Rates’, the Company has recognised net gain arising
 on account of foreign exchange difference amounting to Rs. 4.48 crore
 in the profit and loss account relating to acquisition of fixed assets.
 Had there been no change, the same would have been adjusted against the
 carrying amount of fixed assets. Consequently, profit before tax is
 higher to that extent.
 
 6. The debentures referred to in Schedule 3 of balance sheet at A are
 due for redemption as follows: 7.87% debentures on 10 April 2010 of Rs.
 40 crore; 8% debentures on 10 April 2013 of Rs. 60 crore.
 
 7. The Company had received show cause notice under FERA and FEMA for
 transactions amounting to Rs. 500.65 crore for non-submission of
 documents. The Company has submitted all documents for Rs. 496.65 crore
 and alternate documents will be submitted for the balance amount. The
 Company envisages no liability to arise on this account.
 
 8. During the year, the Company had issued 150,000,000 American
 Depository Shares (ADS) at US.44 per share, representing 150,000,000
 underlying equity shares of Rs. 2 each. As a result, the issued,
 subscribed and paid-up equity share capital of the Company has
 increased by Rs. 30.00 crore and security premium by Rs. 8,177.14 crore
 before adjusting ADS issue expenses (net of recoveries). The
 underwriting discounts, commissions and expenses for the issue
 amounting to Rs. 156.21 crore (net of recovery of Rs. 39.29 crore from
 depository) has been adjusted to securities premium account. The net
 proceeds amounting to Rs.  8,050.93 crore will be used for general
 corporate purposes, including capital expenditures and working capital,
 reduction of debt and for possible acquisitions of complementary
 businesses and consolidation of the ownership of our subsidiaries, as
 mentioned in ADS offering document. Till 31 March 2008, the Company has
 utilised Rs. 2,096 crore towards the above said purposes. Pending
 utilisation for the stated purpose, the balance ADS proceeds have been
 invested temporarily in mutual funds in India.
 
 9.  The Company offers equity-based award plans to its employees,
 officers and Directors through its parent company Vedanta Resources
 plc, based on the performance conditions as set out in the scheme, duly
 approved by the Board of Directors of the Company on 24 December 2003
 and by the shareholders of the Company on 20 January 2004. The
 performance condition attached 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 or such period as the
 Board may determine with the performance of the companies as defined in
 the scheme from the date of grant. The exercise price of the awards is
 10 US cents per share. During the year, the Company has issued awards
 of its parent company Vedanta Resources plc in November 2007 where
 Vedanta’s TSR will be compared over a three year period in terms of the
 scheme. The parent company Vedanta, on the basis of number of shares
 allotted to the Company employees, charged a sum of Rs. 5.01 crore
 (previous year Rs. 4.56 crore) being the proportionate cost which is
 charged to the profit and loss account under the head personnel
 expenses.
 
 10. Net exchange gain amounting to Rs. 251.82 crore (previous year Rs.
 40.88 crore) related to procurement of raw material has been accounted
 under raw material consumption. Net exchange differences pertaining to
 sales, loans, capital goods, professional fees, services etc amounting
 to Rs. 45.91 crore (previous year exchange loss of Rs. 78.37 crore) is
 disclosed under schedule 17 of financial statement.
 
 11. Contingent liabilities
 
                                                As at        As at
                                                31/3/08     31/3/07
 
 Particulars                               (Rs. in crore) (Rs. in crore)
 
 a) Estimated amount of contracts 
    remaining to be executed on
    capital account and not provided 
    for (net of advances)                        17.64        52.03
   (cash outflow is expected on execution 
    of such capital contracts, on 
    progressive basis)
 
 b) Disputed liabilities in appeal:
 i) Income tax (no cash outflow is expected 
    in the near future)                           5.03        39.50
 ii)  Sales tax (relating to sale value)          3.78         3.78
 iii) Excise duty (net of modvatable excise
      duty on interunit transfers)               45.96        34.68
 
 (Mainly on account of difference in valuation 
  of intermediate products meant for captive 
  consumption at other locations and clearance 
  of intermediate products to other locations 
  on job basis. No cash outflow is expected in 
  the near future) 
 
 iv) Service tax (on account of credit taken on 
     outward freight paid to goods transport
     agent and no outflow is expected in 
     the near future)                            15.73          -
 
 12. The figures of the previous year have been recast, rearranged and
 regrouped wherever considered necessary. The previous year’s figures
 are strictly not comparable as the Company has transferred power
 transmission line division during the previous year.