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Vedanta Ltd.

BSE: 500295 | NSE: VEDL |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE205A01025 | SECTOR: Mining & Minerals

BSE Live

Jun 16, 16:00
264.30 -6.70 (-2.47%)
Volume
AVERAGE VOLUME
5-Day
496,769
10-Day
605,803
30-Day
864,040
1,054,264
  • Prev. Close

    271.00

  • Open Price

    268.30

  • Bid Price (Qty.)

    264.30 (45)

  • Offer Price (Qty.)

    264.00 (199)

NSE Live

Jun 16, 16:01
264.35 -6.60 (-2.44%)
Volume
AVERAGE VOLUME
5-Day
8,509,403
10-Day
10,101,253
30-Day
17,774,486
13,188,440
  • Prev. Close

    270.95

  • Open Price

    269.75

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    264.35 (16288)

Annual Report

For Year :
2019 2018 2017 2016 2015 2014 2013 2012 2011

Chairman's Speech

Dear Shareholders, 2011-12 was a landmark year in the Company''s journey towards its vision, as it made significant strides towards becoming a diversified global resource champion. Significant acquisitions a substantial interest in oil & gas, an eco-friendly power generation facility for domestic consumption and a major offshore iron ore asset and the announcement of merger of Sterlite Industries (India) Limited, coupled with the integration of varied commodity businesses, copper, zinc and aluminium, herald a diversified natural resources company with a global footprint. Diversity in commodities, exposure to diverse geographies and currency, large scale operations and thereby access to significant organic growth, are key success factors of global large diversified resource majors, enabling them to deliver consistent higher shareholder value at reduced risk. The proposed Sesa Sterlite will be one among the largest global diversified resource companies. The Indian iron ore mining industry, in 2011-12, has been severely affected by events related to regulation, policy and other environmental concerns, which have also impacted our Company. Despite all round best efforts put in by teams, the Company''s performance has been under pressure as compared to the last year. Specifically, the closure of Orissa operations by us since December 2010, the ban on mining in Karnataka, and logistics constraints in Goa led to a decline in overall volumes during the year, in comparison with previous years. While, internal systems and processes continue to be robust absorbing external shocks to reflect a creditable business performance, overall performance has been impacted by the above constraints. Some other adverse impacts were higher duties on the export of ore, increasing interest costs and exchange losses. The impact was also felt by our other businesses; the pig iron business recorded lower production and consequently lower sales than last year, on account of low availability of high grade iron ore from Karnataka. During the year, the industry in India as a whole, as our Company, was gripped in a seemingly ceaseless national debate on issues related to illegal mining practices, which split over into all aspects of the business. Heightened social activism led to holdups in regular activities, resulting in increased levels of engagement with stakeholders during the year, to reinforce and reiterate responsible mining practices that are followed by our Company. The Company and its teams worked tirelessly to mitigate the impacts, to ensure the continuity of operations and to reassure our stakeholders; responding proactively to all agencies. The Company looks ahead to a hopeful early resolution of these challenges. While we anticipate fair weather and a regulated climate soon, we continue to work on furthering our internal systemic robustness and strengthening processes to handle such future challenges, if any, and gearing ourselves up towards our growth aspirations. Business Environment Despite being under a shadow in the wake of the 2008 financial crisis, the fiscal crisis in Europe and dimming growth prospects, the global GDP is estimated to have expanded at a rate of 3.9% in 2011. China and India exhibited moderate growth of around 9.2% and 7.2% in 2011 respectively. Despite the uncertainties on the economic front, global steel output in 2011 increased to 1.53 bt from 1.43 bt in 2010 and the global seaborne iron ore trade increased from 986 mt in 2010 to 1,090 mt in 2011 (an increase of 11%) on the back of sustained and robust demand from China. The outlook for the Chinese economy and its metal consumption is currently unclear as China transitions from an investment-led growth economy to a consumption-led economy. While the demand growth for metal consumption in China is expected to slow over the coming decade, particularly on a higher base, longer term demand fundamentals for metals remain robust. The absolute quantum of the Chinese demand growth is expected to remain at healthy levels considering the base effect. To put it into perspective, 10% growth in Chinese steel demand would roughly add an equivalent of the entire annual Indian apparent steel demand at current levels. Extensive urbanisation of China over the last few decades has added about 15 million persons to urban population every year and has been the driver of the economic and social transformation in the country. Despite this scale of urbanisation, it has been concentrated towards the Eastern region of China. Overall levels of urbanisation in China still remain at levels far below those of Brazil (87%), US (82%) and Japan (68%). Overall levels of urbanisation in China still remain at levels far below those of Brazil (87%), US (82%) and Japan (68%). The automobile penetration level, one of the major drivers of steel demand elsewhere, is below the US level. India''s consumption of world metals, in the last decade, still constitutes only 3%, up from 2% in 1990s, despite growth seen in the Indian economy. India''s per capita apparent steel consumption at 51 kg remains far lower than China''s 454 kg and South Korea''s 1,082 kg per capita consumption. Coupled with current levels of urbanisation (29%), this is an indicator of a healthy long-term demand scenario. Iron ore seaborne supply may continue to be tight for some years to come. With limited additions, in a timely manner, in seaborne capacity and with Chinese domestic iron ore production flattening, market looks likely to remain tight in 2015. Cost inflation pressures and grade depletion are structural challenges for the industry. Execution risk around new projects means high-cost Chinese domestic ore will be needed to balance the market for the next few years, setting a high floor to prices. Notwithstanding the multiple cost and regulatory pressures such as multi-fold increases in the export duty, the strategic positioning of Sesa as a low-cost producer, coupled with accessibility to ports and strong customer relations, remains the key to mitigating downside risks and exploiting opportunities. Iron ore prices are expected to remain range-bound at current levels. While the year-end prices remained at a level lower than those experienced during the early part of the year, on an overall basis, the average prices remain range-bound averaging similar levels as seen in FY 2011. Performance Sesa continues to focus on improving internal operational efficiencies, while aspiring to achieve higher performance levels. However, during the year, volumes were under pressure. Iron ore production and sales were 13.8 and 16.0 mt in 2011-12 compared to 18.8 and 18.1 mt (17.4 and 16.4 mt excluding Orissa) in the previous year. External sales revenue from iron ore decreased by 3%, from Rs 8,387 crores in 2010-11 to Rs 8,112 crores in 2011-12. The pig iron business'' sales volume decreased by 6% to 250,571 tonnes in 2011-12, while sales revenue grew, fuelled by better prices, by 8% to Rs 720 crores in 2011-12. Sales and production volume of metallurgical (met) coke were at similar levels as last year, at 251,264 tonnes and 256,575 tonnes respectively in 2011-12. External sales revenue increased by 24% to Rs 200 crores in 2011-12. Sesa''s net income from operations fell by 10% to Rs 8,310 crores in 2011-12. Operating cash profit (PBDT) declined by 43% to Rs 3,235 crores in 2011-12. PAT (including associate income) decreased 36% to Rs 2,696 crores, and diluted earnings per share were Rs 31.01 in 2011-12. With effect from December 8, 2011, Cairn India Limited (CIL) became an associate company and accordingly, the Company''s share of profits in CIL, attributable to the period after acquisition till March 31, 2012, have been recognised in the consolidated financial results. Gross addition of over 257 mt over the last 4 years; drilling more than 200,000 metres. Growth Notwithstanding our disappointment of not being able to sustain the continued strong performance levels in light of adverse extraneous factors, our commitment and drive for growth was underscored by our strong performance on resource addition. Exploration, which is the pillar of strength for our growth strategy added 68 mt of additional resources during the year, about 5 times what we have extracted during the year. I would like to congratulate our exploration team who through their stupendous efforts have added over 257 mt over the last 4 years drilling more than 200,000 metres. As on March 31, 2012, the Company''s total reserves and resources in India were 374 mt, excluding resource base at Liberia. While we are currently constrained in our efforts to increase our iron ore capacities, I am pleased to inform that we are on the verge of successfully commissioning the expansions of our pig iron and met coke facilities along with a sinter plant, while the associated power plant is already commissioned. The enhanced pig iron capacity of 625 ktpa makes us the largest low phosphorous pig iron facility in the country and the addition of the sinter plant gives us the ability to utilise iron ore fines, giving us a strong cost advantage. Long Term Value As stated earlier, we have taken significant steps towards the creation of a global resource champion during the year. Sesa Goa Limited, along with its subsidiary, Sesa Resources Limited, acquired 20% of the share capital of Cairn India Limited for Rs 13,075 crores. Cairn India is a unique oil and gas exploration and production platform with the second largest oil reserves in India. Its key producing asset, representing 25% of India''s total oil production, has been substantially de-risked. It is a low operating cost, long life asset with the ability to increase its production plateau and has a proven management team. Taking the Company''s iron ore business truly global, we acquired 51% stake in Western Cluster Limited in Liberia, with a potential iron ore resource of over 1 bt, for Rs 411 crores. Western Cluster Project presents an excellent opportunity for developing a large integrated mining operation and establishes our presence in Liberia and the upcoming iron ore hub in West Africa. The Company also announced the intended merger of Sterlite Industries (India) Limited with Sesa Goa Limited. This merger will foster the creation of one of the world''s largest diversified natural resources company and the merged entity will have exposure to zinc-lead-silver, iron ore, oil & gas, copper, aluminium and commercial power with assets located in India, Australia, Liberia, South Africa, Namibia, Ireland and Sri Lanka. Sustainability Sesa remains committed to sustainable development, which focuses on maintaining a pre- eminent position in health, safety and environment practices, and in contributing to the development of communities where it operates. Health and safety are always a priority for Sesa. The Company continues to take a proactive role in providing employees a safe working environment through responsibility, training, monitoring and implementing the best safety practices across all locations. Over the years, Sesa has been implementing a total quality approach to its operations, and in this process, many units have been certified for 5S Workplace Management System. In 2011-12, Sesa''s overall Lost Time Injury Frequency Rate (LTIFR) reduced from 0.86 in 2010-11 to 0.81 per million man hours worked. I am also happy to report that the pig iron division (PID) maintained its zero-accident record for the last two years and our shipbuilding division achieving a zero-accident record for Our development initiatives have impacted about 4 lakh lives in and around the areas in which we operate. 2011-12. The Company has an integrated approach to the management of health, safety and environment systems in all its units, which are certified for ISO 9001:2008, ISO 14001: 2004 and OHSAS 18001:2007. During the year, Sesa has been certified for SA 8000 for all its units on a standalone basis. Our community development work, through the Sesa Community Development Foundation, Mineral Foundation of Goa and other specific need-based initiatives, continues to focus on social projects in line with our overall sustainability objectives. Our development initiatives have impacted about 4 lakh lives in and around the areas in which we operate. Further details on health, safety and environment and corporate social responsibility are outlined under the management discussion and analysis. Outlook As stated earlier, the longer term perspective of the iron ore market remains stable with a gradual move towards equilibrium. Consensus expectations indicate a global deficit in iron ore continuing for the next two years, followed by pressure on prices as new mining capacities are added. Cost pressures, especially related to capital expenditure, uncertainty of imposition of fresh taxation by regulators and project delays could potentially constrain the speed at which new supply is added, which could be additional buoyancy for prices. On the cost front, royalty rates, railway and road freight and export duties are expected to exert pressure on the Company, while volumes would continue to be challenged by uncertainties in policy decisions and hurdles in logistics. We continue to remain cautiously optimistic of overcoming such obstacles. The following will continue to be our strategic thrust areas for the year 2012-13. Safety: Safety will continue to be paramount and at the forefront of all our operations. Our focus in 2012-13 will be to improve on the currently stellar safety performance in the pig iron and met coke businesses by further reducing near misses and incidents, and to work consistently and intensively to duplicate this performance in the iron ore (and associated) divisions. Production: With a focus on enhancing operational efficiencies, we will continuously strive to restore performance levels to better the best performance in previous years. We look forward to Karnataka operations resuming to full-blown levels in the near term. The commissioning of our met coke and pig iron expansions take our capacities to 560 and 625 ktpa respectively and we look forward to full capacity utilisation rates during the year. Cost Reduction and Process Optimisation: With increasing pressures from external factors pushing costs up, we look forward to initiating newer avenues to contain costs, with more and more technology interventions to improve efficiencies, simplify processes and ease inflationary impacts. People Best Practices: We will continue our focus on people development, learning and other engagement initiatives towards making our organisation an exemplary workplace. Stakeholder Perception: Our resolve to partner with our communities remains steadfast, as ever, and we are actively engaging with all stakeholders. Corporate Governance In 2009-10, Sesa was subjected to investigation by the Serious Fraud Investigation Office (SFIO), Ministry of Corporate Affairs, New Delhi. On May 26, 2011, the Company received a copy of the report by the SFIO on the investigation into Sesa''s affairs pursuant to section 235 of the Indian Companies Act. Certain allegations are made in the SFIO''s report relating to under invoicing in iron ore exports, over-invoicing in coal imports, higher commission to erstwhile principal shareholder Mitsui, over-invoicing of iron ore to erstwhile subsidiary, Sesa Industries Limited, and other violations under the Indian Companies Act, during the period from 2001 to 2008. The report has recommended, inter alia, that action be taken against the directors of Sesa Goa Limited during the aforementioned period. In response to the report received from SFIO, Sesa filed a few representations to the Secretary, Ministry of Corporate Affairs, with a copy to the SFIO, explaining in detail Sesa''s position on the allegations in the SFIO report and denying the allegations made therein. No further communication has been received till the time of writing this. Acknowledgement I would like to take this opportunity to thank all our employees, my colleagues on the executive team of Sesa, the Group Management and the Board of Directors for their unwavering support and would like to use the opportunity to welcome our colleagues in Western Cluster Limited, Liberia and GEPL into our family. We announced that Mr. A K Rai, Executive Director has retired from the Board with effect from August 1, 2011, after serving the Company for 36 years. Further, Mr. P G Kakodkar, Non-Executive Director, also stepped down from the Board with effect from October 25, 2011. On behalf of the Board of Directors, I would like to take this opportunity to thank Mr. Rai and Mr. Kakodkar for their substantial contributions to Sesa. I thank our shareholders for reposing faith in our business in adverse times. These are tough times and call for tougher people. Let me reassure our shareholders that we are geared up to face challenges as they arise and that we shall all exert our efforts together, exercise our individual talent and team synergies, to propel our Company forward and deliver the goals we have set ourselves for this year. P. K. Mukherjee Managing Director May 7, 2012