A RESILIENT PORTFOLIO THROUGH THE CYCLE Vedanta Limited Annual Report OUR PRESENCE India Africa 6 23 15 4 3 1 2 5 24 26 25 27 14 14 20 13 13 23. Iron Ore project, Liberia 7 1. Debari smelter 24. Skorpion mine, Namibia 12 2. Chanderiya smelters 25. Black Mountain mine, South Africa 3. Rampura Agucha mine 26. Gamsberg, South Africa (Under development) 16 4. Rajpura Dariba mine & smelters 27. South Africa Block 1 and Sindesar Khurd mine 17 5. Zawar mine 21 18 6. Talwandi Sabo power project 8 Ireland 7. Silvassa refinery 9 8. Iron ore operations – Goa 19 9. Iron ore operations – Karnataka 10. Tuticorin smelter 28 11. MALCO power plant 11 12. Lanjigarh alumina refinery 13. Jharsuguda smelters 10 & power plants 14. Korba smelters & power plants 15. Rajasthan block 28. Lisheen mine, Ireland1 22 19 16. Ravva (PKGM-1) block Zinc-Lead-Sliver 17. KG-ONN-2003/1 block 18. KG-OSN-2009/3 block Australia Oil & Gas 19. PR-OSN-2004/1 block Iron Ore 20. Cambay (CB/052) block Copper 21. MB-DWN-2009/1 block 22. SL 2007-01-001 block Aluminium Power Captive thermal power plant 2 29. Mt. Lyell mine, Australia 29 1 Lisheen had safe, detailed and fully-costed closure after 17 years of operation in November 2015 2 Under care and maintenance OUR ASSETS O&G ZLS Fe Cu Oil & Gas Zinc-Lead-Silver Iron Ore Copper Cairn India is one of India’s largest World’s second largest integrated Vedanta is the largest producer Smelting and mining operations private sector oil and gas zinc-lead producer exporter of iron ore in the private across India and Australia companies sector in India Operators of the world’s largest Largest custom copper smelter Interest in seven blocks in India, zinc mine at Rampura Agucha, Iron ore deposit in Liberia and copper rods producer in India and one in South Africa India Contributes to ~27% of India’s One of the largest silver producers current domestic crude oil globally with an annual capacity of production 16 moz CONTENTS COMPANY OVERVIEW Vedanta at a Glance 2 Vedanta Limited (formerly Sesa Sterlite Limited) FY 2015-16 in Review 4 Chairman’s Statement 6 is one of the world’s largest global diversified Chief Executive Officer’s Statement 8 Business Model 10 natural resource majors, with operations across A Resilient Portfolio Through the Cycle 12 zinc-lead-silver, oil & gas, iron ore, copper, Strategic Framework 18 Key Performance Indicators 20 aluminium and commercial power. Profiles of the Board of Directors 22 Profiles of the Executive Committee 24 Awards 27 MANAGEMENT REVIEW Our vision Market Overview 30 Management Discussion and Analysis 36 To be a world class, diversified resources Sustainable Development and Corporate 70 Social Responsibility company, providing superior returns to our Business Responsibility Report 86 shareholders with high quality assets, low-cost STATUTORY REPORTS operations and sustainable development. Directors’ Report 106 Report on Corporate Governance 148 FINANCIAL STATEMENTS STANDALONE Independent Auditors’ Report 168 Balance Sheet 174 Statement of Profit and Loss 175 Cash Flow Statement 176 Notes 178 CONSOLIDATED Independent Auditors’ Report 224 Balance Sheet 228 Statement of Profit and Loss 229 Cash Flow Statement 230 Notes 232 Salient features of Financial Statement of 294 Subsidiaries/Associated/Joint Ventures Al Pwr Aluminium Power The largest aluminium producer in Power portfolio of 9 GW India with a capacity of 2.3 mtpa 3.6 GW of commercial power Strategically located large-scale generation capacity, balance for assets with integrated power from captive usage captive power plants in states of Chhattisgarh and Odisha One of the largest producers of Online annual report wind power in India ar2016.vedantalimited.com Vedanta Limited 2 Annual Report 2015–16 VEDANTA AT A GLANCE COMMODITY 27% O&G CONTRIBUTION TO INDIA’S CRUDE OIL PRODUCTION PG 42 OIL & GAS 79% ZLS MARKET SHARE IN INDIA’S ZINC INDUSTRY PG 46 ZINC-LEAD- SILVER 36% MARKET SHARE IN INDIA’S Fe COPPER INDUSTRY PG 52 47% IRON ORE MARKET SHARE IN INDIA’S PRIMARY Cu ALUMINIUM INDUSTRY PG 54 COPPER `160Cr INVESTED IN SOCIAL INITIATIVES Al PG 56 55,000 ALUMINIUM EMPLOYEES (DIRECT AND INDIRECT) Pwr `20,600Cr PG 59 PAID TO THE EXCHEQUER POWER A Resilient Portfolio Through the Cycle COMPANY MANAGEMENT STATUTORY FINANCIAL OVERVIEW REVIEW REPORTS STATEMENTS 3 BUSINESSES PRODUCTION EBITDA (` in Crore) COST CURVE VOLUME POSITION Cairn India 204 k boepd 3,504 1st Quartile (Average daily gross production) Zinc India (HZL) 889 kt 6,484 1st Quartile Zinc International 226 kt 380 2nd Quartile Iron Ore India 5.2 mt 402 1st Quartile Production recommenced in Goa in August 2015 Copper India 384 kt 2,205 2nd Quartile Copper Mines (Copper cathodes) of Tasmania (under care and maintenance) Aluminium smelters at 923 kt 661 2nd Quartile Jharsuguda and Korba (Aluminium) (BALCO), Lanjigarh 971 kt alumina refinery (Alumina) Based on Q4 FY 2015-16 cost Power plants at 12.1 bn kwh 1,299 Talwandi Sabo, (Power Sales) Jharsuguda, MALCO and HZL wind Power Vedanta Limited 4 Annual Report 2015–16 FY 2015-16 IN REVIEW Vedanta has produced a robust set of results in a volatile market and the fundamentals of our Iron ore mine, Goa business remain strong. GROUP HIGHLIGHTS Financial highlights Free cash flow post growth capex at` 11,572 Crore, driven by operating performance and working capital initiatives Net debt reduced by ` 6,254 Crore; cash and cash equivalents of ` 52,666 Crore Revenues at ` 63,931 Crore, EBITDA at ` 15,012 Crore EBITDA margin of 30%1 Attributable PAT (pre-exceptional) at ` 2,910 Crore Exceptional items include a non-cash impairment charge of ` 12,304 Crore largely relating to impairment of Cairn India acquisition goodwill Contribution of c. ` 20,600 Crore to the Indian Exchequer during the year, in the form of taxes, duties, royalties and profit petroleum 1 Excludes custom smelting at Zinc and Copper India operations Operational highlights Record annual production of zinc, lead, silver, aluminium, power and copper cathodes Commenced ramp-up of capacities at Aluminium, Power and Iron Ore businesses Entire power portfolio of 9,000 MW operational in March 2016 Successful ramp-up of Mangala Enhanced Oil Recovery Program Achieved exit run rate production of 0.8 mt per month at Goa Iron Ore operations Strong cost performance, with lower cost of production across all businesses Offshore operations, Ravva A Resilient Portfolio Through the Cycle COMPANY MANAGEMENT STATUTORY FINANCIAL OVERVIEW REVIEW REPORTS STATEMENTS 5 Navin Agarwal CHAIRMAN KEY HIGHLIGHTS Vedanta has delivered strong operational performance in FY 2015-16 with relentless `63,931Cr focus on cost discipline and improved REVENUE productivity across all our operations that enabled us to deliver strong earnings and record cash flow. As a result, your company reduced debt and strengthened its ability `15,012Cr to withstand volatility in the tough and EBITDA challenging commodities market during the year. Vedanta achieved all of this while maintaining a disciplined approach to capital expenditure and cost optimisation. `11,572Cr FREE CASH FLOW POST I am proud of the significant progress that GROWTH CAPEX we have made in improving our operational efficiency and optimising costs. This is part of a continuous journey and we will take further 1.75Mn steps over the coming year, leveraging the PEOPLE BENEFITED THROUGH adoption of new technologies and encouraging COMMUNITY DEVELOPMENT a culture of innovation among our people. PROGRAMMES Community school run by Sesa Iron Ore, Goa Vedanta Limited 6 Annual Report 2015–16 CHAIRMAN’S STATEMENT Our total capital expenditure reduced significantly and our operations generated record free cash WE ARE COMMITTED flow of` 11,572 Crore after growth capex. During TO DELIVERING the period, we evaluated our operating cost VALUE FOR OUR structures that resulted in significant efficiency improvements; and we delivered US$ 250 mn this SHAREHOLDERS, year against our stated target of delivering EMPLOYEES, US$ 1.3 bn cost savings over four years. COMMUNITIES Vedanta is consistently one of the largest AND OTHER contributors to the exchequer – to the tune STAKEHOLDERS of ` 20,600 Crore in FY 2015-16. During the year, we invested ` 160 Crore in our extensive Navin Agarwal CSR programmes across our global business CHAIRMAN locations, partnering with over 200 NGOs, local governments, hospitals and academic institutions on socio-economic development projects that Dear Shareholders, benefited around 1.75 mn people. Vedanta has delivered strong operational performance At Vedanta, we believe in supporting in FY 2015-16 with relentless focus on cost discipline developmental goals of local communities and governments. Our Nandghar project is an and improved productivity across all our operations extension of this belief, which will enable women that enabled us to deliver strong earnings and record and children to have a facility for education and cash flow. As a result, your Company reduced debt entrepreneurship opportunities at their doorsteps. We will construct 4,000 modern Anganwadis and strengthened its ability to withstand volatility in the (state-of-the-art facilities) over three years. These tough and challenging commodities market during the facilities will be built with innovative technology, solar panels, toilets, and will provide safe drinking year. Vedanta achieved all of this, while maintaining a water, e-learning and healthcare. In the first phase, disciplined approach to capital expenditure and cost 25 lakh community members will benefit from optimisation. this project. I am confident that we are creating need-based programmes for community wellbeing, thus contributing to Vedanta’s efforts towards nation- building. We are committed to India’s focus on The health and safety of our employees continues alleviating climate to be at the top of our agenda. However, change.