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6
A resilient portfolio
through the cycle
Vedanta Resources plc Annual Report FY2016
1
2
3
Vedanta Resources plc is a UK
listed global diversified natural
resources company.
Our core purpose
Vedanta is a globally diversified
natural resources company with
low-cost operations. We empower
our people to drive excellence and
innovation to create value for our
stakeholders. We demonstrate world-
class standards of governance, safety,
sustainability and social responsibility.
Front cover, top: Control room at BALCO power plant.
Front cover, bottom: Shaft headgear at Black Mountain mine.
This page
1: Ingot loading at Jharsuguda.
2: Engineer at Rampura Agucha open cast mine.
3: Engineers at Jharsuguda smelter.
www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
01
A resilient portfolio
through the cycle
We have experienced volatile
markets and significantly
lower commodity prices during
the financial year and the entire
organisation has met these
challenges well.
Anil Agarwal, Chairman
See page 10
Winner of Entrepreneur of the Year award,
sixth annual Asian Awards
1
See page 84
2
See page 36
3
See page 68
Strategic report
Introduction
Highlights
At a Glance
Strategic Overview
Chairman’s Statement
CEO’s Statement
Market Overview
Business Model
Strategic Capabilities & Relationships
Strategic Framework
Key Performance Indicators
Principal Risks
Sustainable Development
Finance Review
Divisional Review
Oil & Gas
Zinc-Lead-Silver India
Zinc International
01
02
04
06
10
12
14
18
20
22
24
26
36
43
56
56
60
64
Iron Ore
Copper India & Australia
Copper Zambia
Aluminium
Power
Directors’ report
Board of Directors
Executive Committee
Corporate Governance Report
Audit Committee Report
Nominations Committee Report
Sustainability Committee Report
Remuneration Committee Report
Directors’ Remuneration Policy Report
Annual Report on Remuneration
Directors’ Report
Directors’ Responsibilities Statement
68
72
76
80
84
88
90
92
104
111
112
116
117
122
129
135
Financial statements
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of
Changes in Equity
Notes to the Financial Statements
Additional information
Five Year Summary
Production and Reserves Summary
Glossary and Definitions
Shareholder Information
Contacts
136
141
142
143
145
146
148
223
227
234
237
IBC
1: Turbine generator at Talwandi Sabo power plant.
2: Children at child care centres.
3: Engineer at ore stock piles at Goa Iron Ore mines.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 02
Highlights
1
Group highlights
Financial highlights
• Revenue of US$10.7 billion and EBITDA1 of
US$2.3 billion, lower than FY2015 primarily due
to lower commodity prices (FY2015 Revenue:
US$12.9 billion, FY2015 EBITDA: US$3.7 billion)
• Adjusted EBITDA margin2 of 28% (FY2015: 38%),
driven by low commodity prices
• Free cash flow3 of US$1.7 billion, up 63% (FY2015:
US$1.0 billion), driven by optimisation of operational,
capital expenditure and working capital initiatives
• Net debt reduced by US$1.1 billion and gross debt
reduced by US$0.4 billion during the year
• Underlying (loss) per share4 of (131.9) US cents
(FY2015: (14.2) US cents)
• Basic loss per share of (665.8) US cents primarily due
to a non-cash impairment of US$3.3 billion (net of tax)
and lower EBITDA, reflecting lower commodity prices
• Covenant modifications on bank loans at Vedanta
Resources plc secured until the period ending
30 September 2018 and complied with as on
31 March 2016
• S&P downgraded issuer credit rating from ‘BB’ to ‘B’
and Moody’s downgraded its corporate family rating
from ‘Ba1’ to ‘B2’ due to weak commodity prices
– S&P subsequently revised the outlook to ‘Stable’
in April 2016
• Hindustan Zinc Limited announced its highest ever
special dividend in Q4 (c. US$1.8 billion including
dividend distribution tax)
• Final dividend of 30 US cents per share
1: Aluminium pot line at Jharsuguda.
Vedanta demonstrated
resilience this year:
delivering healthy EBITDA
margins, strong free cash flow
and lower gross and net debt in
a volatile commodities market.
In India, we achieved record
production in aluminium, zinc,
lead, silver and copper cathodes,
with significant increases in power
generation. We made good
progress on the turnaround of our
Copper business in Zambia and
broke ground at the Gamsberg zinc
deposit in South Africa. With our
combination of low-cost and well-
invested assets, we look forward to
the future with cautious optimism.
Anil Agarwal, Chairman
Business highlights
• Simplification of the Group structure continues to be
a priority
• Record production of zinc, lead and silver at Zinc
India; aluminium, power and copper cathodes at
Copper India
• Commenced ramp-up of capacities at Aluminium,
Power and Iron Ore divisions
• Entire Power portfolio of 9,000MW now operational
• Successful implementation of Mangala Enhanced Oil
Recovery Programme at Cairn India
• Recommenced production at Goa Iron Ore operations,
achieved exit run rate production of 0.8 million tonnes
per month
• Continued ramp-up of production at the Konkola
mines at Copper Zambia
• Strong cost performance, with lower cost of
production across all businesses; cost savings
of c.US$325 million delivered in the year
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
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03
1
2
3
4
Aluminium
Commenced ramp-up
of capacity at the 1.25mt
Jharsuguda Aluminium
smelter.
See page 80
Power
Entire Power portfolio of
9,000MW operational.
See page 84
Iron Ore
Recommenced
production at Goa
Iron Ore operations.
See page 68
Oil & Gas
Successful
implementation of
Mangala Enhanced Oil
Recovery Programme
at Cairn India.
See page 56
Consolidated Group results
(US$ millions, except as stated)
Revenue
EBITDA1
EBITDA1 margin (%)
EBITDA margin excluding custom smelting2 (%)
Operating profit before special items
Loss attributable to equity holders
Underlying attributable loss4
Basic loss per share (US cents)
Loss per share on underlying profit (US cents)
ROCE (excluding project capital work in progress,
exploratory assets and impairment charges) (%)
Total dividend (US cents per share)
FY2016
FY2015
10,737.9
2,336.4
21.8%
27.6%
881.2
(1,837.4)
(364.1)
(665.8)
(131.9)
12,878.7
3,741.2
29.1%
38.0%
1,735.5
(1,798.6)
(38.9)
(654.5)
(14.2)
6.2%
30.0
8.7%
63.0
1 Earnings before interest, taxation, depreciation, amortisation, impairment and other special items.
2 Excludes custom smelting revenue and EBITDA at Copper and Zinc India operations as custom
smelting has different business economics.
3 Free cash flow is cash flow arising from EBITDA after net interest, taxation, sustaining and capital
expansion expenditure, movements in capital creditors and working capital movements. It is
reconciled to EBITDA on page 52 in the Finance Review.
4 Based on profit for the period after adding back special items and other gains and losses, and their
resultant tax and non-controlling interest effects.
1: Employees at BALCO.
2: Employees at Jharsuguda smelter.
3: Control room at iron ore mines.
4: Employee at Rajasthan oil field.
Revenue (US$ billion)
2016
2015
2014
2013
10.7
12.9
12.9
14.6
EBITDA (US$ billion)
2016
2015
2014
2013
2.3
3.7
4.5
4.9
Free cash flow post capex
(US$ billion)
2016
2015
2014
2013
1.7
1.0
1.3
1.5
Dividend per share
(US cents)
2016
2015
2014
2013
30.0
63.0
61.0
58.0
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 04
At a Glance
Vedanta Resources
Listed on LSE
Large, long-life, low-cost, scalable assets
Oil & Gas
See page 56
Zinc-Lead-Silver
See page 60
Iron Ore
See page 68
Copper (India)
See page 72
Aluminium
See page 80
Power
See page 84
Vedanta Limited
(formerly Sesa Sterlite Limited)
Listed on NSE, BSE and NYSE
62.9%
Divisions of Vedanta Limited
Iron Ore
Copper (India)
Power (2,400MW Jharsuguda)
Aluminium (Odisha Aluminium
and Power assets)
Konkola Mines
One of the highest-grade large
copper mines in the world
79.4%
Copper (Zambia)
See page 76
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
05
Businesses
Cairn India
Production volume
204boepd
(average daily gross
operating production)
Cost curve position
1st quartile
Revenue by commodity
(US$ million)
Businesses
Zinc India
(HZL)
Zinc
International
Production volume
889kt
Cost curve position
1st quartile
226kt
2nd quartile
Businesses
Iron Ore India
Production volume1
5.2mt
Cost curve position
1st quartile
1,322 Oil & Gas
2,503 Zinc
350
Iron Ore
4,170 Copper
1,694 Aluminium
708 Power
Revenue by geography
(US$ million)
Businesses
Copper India
Copper Mines
Tasmania
(under care and
maintenance)
Businesses
BALCO
Jharsuguda
and Korba
aluminium
smelters
Production volume
384kt
Copper cathodes
Cost curve position
2nd quartile
Cost curve position
2nd quartile2
Lanjigarh
Alumina
refinery
Production volume
923kt 971kt
Aluminium
Alumina
6,774 India
528 China
1,075 Middle East
449 Europe (inc UK)
902 Far East Asia
91
Africa
725 Asia others
193 Other
EBITDA by commodity
(US$ million)
Businesses
Talwandi Sabo
Power Plant
Jharsuguda
Power Plant
MALCO
HZL Wind
Power
Power sales
12.1 billion kwh
Businesses
Konkola
Copper Mines
(KCM)
Production volume
182kt
Cost curve position
4th quartile
1 Production recommenced in Goa in August 2015.
2 Based on fourth quarter of FY2016 cost.
570 Oil & Gas
1,063 Zinc
73
319
107 Aluminium
196
Iron Ore
Copper
Power
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 06
1
A resilient portfolio through the cycle
Disciplined
2
US$0.6bn
Total capital expenditure
During this period of weak commodity
prices, Vedanta has maintained
a disciplined approach to capital
allocation, prioritising high-return, low-
risk projects to maximise cash flows.
The Group’s well-invested assets are
on track to deliver near-term growth
with marginal incremental capital
expenditure. We retain the option to
fund further growth projects such as
EOR and gas projects at Oil & Gas
business, Lanjigarh Alumina refinery
expansion and the additional 400kt
copper smelter at Copper India.
In FY2016 capex was optimised to
reduced levels of US$0.6 billion,
with most of this invested in high-
return projects such as expansion
at Zinc India, the Mangala EOR
programme at Oil & Gas and
smaller amounts to complete the
Aluminium and Power projects.
Capital investment in Gamsberg,
one of the largest zinc deposits in
the world, was rephased and only
US$16 million was invested in FY2016.
We have also made significant
progress in reducing Gamsberg
capex over the life of the project,
reducing capex by US$200 million
primarily through re-engineering and
renegotiation of contracts, taking
advantage of the current commodity
environment. The project comprises
a 250ktpa mine, propelling Southern
Africa into a leading supplier of
zinc globally. First ground was
broken in July 2015, with initial
production expected in early 2018.
See page 48
1: Engineers at the aluminium pot line.
2: Control room of BALCO power plant.
3: Engineer at the control room at BALCO.
4: Coal handling plant at Jharsuguda.
5: Employees at the control room at Lanjigarh.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
07
3
Efficient
4
5
923kt
Record production of Aluminium
The turnaround plan for KCM in
Zambia is starting to bear fruit. Cost
reduction initiatives are now yielding
results, driving down the cost of
production, and with a focus on
safe production build up, volumes
are now rising. Production of mined
metal at Konkola Deeps is up by
23% compared with last year due
to improved efficiency, equipment
availability and better copper grades.
See page 56
A relentless focus on operational
efficiency has driven down the
cost of production (CoP) across
our businesses, mitigating the
impact of falling commodity
prices throughout the year.
Record full-year aluminium
production reflected the impact
of the Jharsuguda-II and Korba-II
smelters ramping up well, delivering
a record aluminium production of
923kt and a reduction in CoP of 10%
for the year. The Lanjigarh Alumina
refinery also achieved a strong
production of 971kt during the year.
Good progress on the mine expansion
in Rampura Agucha and the Sindesar
Khurd mine and continued higher
volumes from the Rampura Agucha
open pit resulted in record zinc
production, alongside higher volumes
of integrated lead and silver at the
Sindesar Khurd mine. We are one
of the top 20 silver producers in
the world at our current volumes.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 08
1
A resilient portfolio through the cycle
Focused
2
3
US$1.7bn
Free cash flow after
capital expenditure
Several operations have been
restructured to protect free cash
flow. These include the temporary
shutdown of the BALCO rolled
product facility, the temporary
shutdown of one line at the Lanjigarh
Alumina refinery that drove down
aluminium costs, and closure
of the Nchanga underground
operations at Copper Zambia.
See page 56
In line with the Group’s long-term
strategic priority to de-lever and
increase cash flow, Vedanta continued
to make good progress against these
objectives. The focus on optimising
operating and capital expenditure
and working capital management
contributed to strong free cash
flow of US$1.7 billion (after capital
expenditure), during FY2016. This
enabled a reduction of US$1.1 billion in
net debt, as compared to March 2015.
An ambitious target to deliver cost
and marketing savings of US$1.3 billion
was set and these initiatives across the
business delivered US$325 million in
FY2016, through over 900 initiatives
across the businesses, including
consolidation of spend and reduction
of vendors, contract renegotiation
and efficient logistic solutions.
1: Engineer at a laboratory at Lanjigarh.
2: Employees at Lanjigarh.
3: Engineers at Jharsuguda smelting complex.
4: Employees at Ravva offshore oil field.
5: Operators at Konkola underground mine.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
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09
4
Responsible
5
US$3.2bn
Contributed to Exchequer through
indirect taxes, levies and royalties
A key strategic priority and critical
to its license to operate, Vedanta
continues to focus on embedding a
culture of sustainability across the
Group, allocating resources, skills and
financial contributions to support
its people and the communities
where it operates while minimising
its environmental impact.
Health and safety
While our injury rates have declined
over the years, the 12 fatalities
recorded during FY2016 have
heightened Vedanta’s resolve to
create a zero-harm culture across
the organisation and raise the profile
of health and safety by reviewing
safety incidents at Board, business
and operational levels. The business
units have implemented and put
forward behavioural-based and
technical programmes to avoid the
reoccurrence of these incidents.
Further safety investigations and
follow-ups have been improved and
quantitative risk assessments have
been introduced for all critical areas.
Working with local communities
Making a positive contribution to
local communities in India and Africa
remains a high priority for Vedanta
with around 2.25 million beneficiaries
of community development
programmes during FY2016,
supported by over 250 partnerships
with Non-Government Organisations,
local governments, academia and
private hospitals. The Group’s social
investment reached US$37 million
and is aligned with its social vision and
community need based approach.
Minimising environmental impact
Vedanta is committed to managing
its environmental footprint, seeking
to control pollution, reduce water and
energy consumption and protect bio-
diversity around its operating sites.
During FY2016 there were zero higher
category environmental incidents
and all subsidiary businesses have
been assessed with environmental
gaps identified in energy, water
management, greenhouse gas
emissions and biodiversity. The
significant improvements and
adoption of best practices in resource
management, biodiversity and
site closure practices along with
awards like CII – Sustainable Plus
platinum label, National Energy
Conservation Award and Global IOD
Awards for Excellence in Corporate
Governance and Sustainability
are testament to the focus and
improvement Vedanta has made
towards environmental sustainability.
See page 40
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 10
Chairman’s Statement
Anil Agarwal
Our results show that this disciplined
approach and careful balance sheet
management has delivered robust
results. Despite lower revenues
of US$10.7 billion and EBITDA of
US$2.3 billion, driven primarily
by lower commodity prices, we
generated EBITDA margins of
28%. Strong free cash flow2 of
US$1.7 billion enabled us to reduce
net debt by US$1.1 billion and
gross debt by US$0.4 billion.
The Board has recommended a
dividend of 30 US cents per share
this year. Given the ongoing volatility
in the global commodity markets
and our commitment towards
deleveraging the balance sheet,
this is a prudent decision which
supports our efforts to weather
the current commodities cycle and
create shareholder value over the
longer term. I would like to thank the
Board for their continued guidance.
India: we stand ready
With India forecasted to be the
world’s fastest-growing major
economy this year, Vedanta
stands ready to work with the
Government and communities to
support the development of India.
Key to this growth is the development
of the nation’s infrastructure. Roads,
rail, energy, telecommunications,
water and sanitation will be top of
the agenda, all requiring materials
and commodities. As the only
diversified natural resource producer
in the country, Vedanta is uniquely
positioned to support India’s needs.
We see encouraging signs. Oil cess,
a tax on production of crude oil, has
effectively been lowered at current
price levels and export duty on low
grade iron ore has been removed
completely. The Government has
encouraged increased mining
activity, by commencing auctioning
of coal and other mineral blocks.
Vedanta’s Iron Ore operations in Goa
have resumed production, we have
gained approvals to use the power
generated from three units of the
Jharsuguda power plant for captive
use and received environmental
clearance for expansion of Lanjigarh
Alumina refinery capacity to
4mtpa. All are important steps
towards increasing our capacity
from our well-invested assets.
We have made great strides in improving our
operations and optimising our assets, but this
is a journey with no final destination; continuous
improvement is business as usual.
We have experienced volatile
markets and significantly lower
commodity prices during the financial
year and the entire organisation
has met these challenges well.
We have generated strong free
cash flow, reduced our net and
gross debt and delivered strong
EBITDA margins1 during the
year. Our financial performance,
however, has been impacted by low
commodity prices, with revenues
down 17% at US$10.7 billion.
As we close FY2016, there is a clear
sense within Vedanta that we are in
a new phase in our development as
India forges ahead with economic
change. We see a new era dawning,
slowly but nonetheless surely, as
India takes advantage of its rich
human and natural resources
to create economic growth and
employment to the benefit of its
1.2 billion people, who form part of
the largest democracy in the world.
This positive outlook contrasts
with what has been a very tough
year in the commodities space. We
continue to feel the effects of the
downward cycle – but we also know
that history tells us to be patient.
We are optimistic about the longer
term and intend to be in the right
place for when the upturn begins.
FY2016: how we performed
In FY2016, we commenced ramp-
up of capacities at Aluminium,
Power and Iron Ore operations
while maintaining a disciplined
approach to capital expenditure
and focused on optimisation
of costs across our operations,
enabling delivery of strong results.
We had already set in train initiatives
to reduce costs, optimise assets
and address operational issues, and
these continued to gain ground
throughout the year. These steps,
together with minimal additional
capex requirements, helped to
mitigate the effects of a depressed
world market for commodities.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
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11
30 US cents
Dividend per share
Production growth
Copper equivalent (kt)
US$3.7bn
US$2.3bn
+30%1
growth
EBITDA
US$1.5bn
US$0.6bn
US$1.0bn
Capex
6 0 %
+
g r o w t
h
2,000
1,500
1,000
50
0
FY2015
FY2016
FY2017
Aluminium
Copper
Oil & Gas
Power
Zinc Intl
Iron Ore
Zinc India
1 EBITDA potential based on estimated FY2017
production, commodity prices as of 20 April
2016 and Q4 FY2016 costs.
We are strong supporters of the
Government-led ‘Make in India’
campaign, as the country encourages
the manufacture of everything
from smartphones and textiles to
cars and shipping. At Vedanta we
are building on this by promoting
a ‘Find in India, Mine in India, and
Make in India’ mentality, to make
India self-sufficient in the resources
it needs for manufacturing activity,
and generating vital employment
opportunities in the process.
Balancing development with
responsibility
Vedanta is committed to growing
sustainably and creating value
for all our stakeholders.
In India, alleviating climate change
sits alongside the huge challenges of
economic and social development.
At Vedanta, we’re determined to play
our part in the solution. We signed
the Paris Pledge for action and
are currently updating our carbon
strategy, looking for innovative ways
to reduce carbon emissions in our
power plants. I was particularly proud
of the Guinness Book of Records
entry we achieved for planting over
200,000 saplings in one hour at
our Talwandi Sabo power plant.
Indeed, this is part of a much wider
CSR programme – one of the largest
in India – that touches the lives of
more than 2 million people. In many
cases, the Company is a community’s
only source of education, healthcare,
food and general well-being.
In India and all over the world,
the rights and expectations of
communities are rightly gaining
much more attention. Our
philosophy is that Vedanta will
only operate where a community
gives its consent and support.
People and gender diversity
At the close of a demanding year I
would like to record my thanks to the
70,000 people who work with us at
Vedanta. As markets have become
challenging, their commitment,
dedication and sheer hard work
have been ever-more important,
and we again saw those qualities in
every corner of the business. I am
personally driving a work programme
for early career development and
innovation across the Group.
We take our responsibility to our
people very seriously. I am deeply
saddened by the 12 fatalities this
year and it is imperative that
we bring about a considerable
improvement in the area of
safety; both Tom and I share this
determination absolutely, and he
expands on this in his statement.
On a personal note, I would like to
thank my fellow Directors for their
constant guidance and wisdom. We
are committed to advancing gender
diversity across the organisation, and
have made significant progress in
the last couple of years, increasing
gender diversity on our Board,
the Executive Committee, and
across the broader organisation.
We remain very committed to
increasing the representation of
women throughout the Company.
Looking forward
Like any well-run business, we
continue to focus on every
area that is within our control,
while being prepared for what
is beyond our control. We have
made great strides in improving
our operations and optimising our
assets, but this is a journey with
no final destination; continuous
improvement is business as usual.
We will continue to simplify our
corporate structure, building on the
proposed merger of Vedanta Limited
and Cairn India. This will result in
improved financial flexibility to allocate
capital to the highest return projects
and sustain strong dividends, marking
a significant step forward towards
achieving our stated long-term vision
of alignment of interests between
all shareholders for the creation
of long-term sustainable value.
Naturally, we now hope for an
improvement in the dynamics of
the global commodity markets.
Indeed, we are cautiously optimistic
for 2017; based on the visibility we
have now, we believe a recovery
may be emerging, led by zinc.
Meanwhile, in a country where GDP
may double in the decade ahead,
we look forward to playing our part
in unlocking India’s wealth of world-
class energy and mineral resources.
Anil Agarwal
Chairman
12 May 2016
1 Margin excluding custom smelting
revenue and EBITDA at Copper and
Zinc India operations.
2 Free cash flow is cash flow arising from
EBITDA after net interest, taxation,
sustaining and capital expansion
expenditure, movements in capital
creditors and working capital movements.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 12
CEO’s Statement
Tom Albanese
This also plays to our third strength:
our businesses. Our Tier 1 assets,
with long mine lives and continued
strong cash flows, provide
us a buffer against economic
impact, helping to differentiate
us from many of our peers.
Furthermore, underpinning all of our
activities has been an aggressive
cost reduction programme. I
announced this time a year ago the
ambitious goal of delivering savings
of US$1.3 billion over the next four
years. Through a combination of new
business programmes, operational
excellence, modernisation of the
supply chain and innovative ideas
from our 10,000 professionals, we
delivered US$325 million against
that target in the first year.
These programmes have been
strongest where we’ve needed them
most. At Konkola Copper Mines
(KCM) in Zambia, for example, we
conducted a wholesome review,
analysing every contract and
every contractor, applying the
disciplines we needed to become
more commercially competitive.
Similarly, as we increased capacity
at our Aluminium operations, we
systematically drove down the cost
of coal, carbon and conversion,
delivering a 10% lower cost of
production to US$1,572 per tonne in
FY2016. Benefits also came through
some very difficult decisions that we
took during the year regarding over
capacity reductions and shutdowns,
while we were mindful of the impact
these decisions would have on
employees and communities.
Focus on delivery
During the year, Vedanta saw
measurable improvements in
operational delivery. We advanced
production considerably, ramping up
our Aluminium business, restarting
our Iron Ore business, operationalising
the entire 9,000MW of Power
portfolio and making progress in
our Zambian copper facility.
In our Aluminium business, where
markets were particularly weak, we
were already well-placed with re-
engineering and cost reductions. We
received the required approvals to use
power from the 2,400MW Jharsuguda
power plant for captive purposes
and we therefore commenced the
ramp-up at the 1.25mtpa Jharsuguda
smelter. During the year, we also
progressed the commissioning of
our power plants at BALCO and
Talwandi Sabo. This means the
entire 9,000MW capacity Power
portfolio is now fully operational.
Our Tier 1 assets, with long mine lives and
continued strong cash flows, provide us
a buffer against economic impact, helping to
differentiate us from many of our peers.
In FY2016, Vedanta demonstrated
resilience in the face of exceptionally
challenging commodities markets
around the world.
The true measure of a company
is how it performs in adverse
conditions, so while the commodities
sector came under considerable
pressure in FY2016, impacting our
financial performance and resulting
in impairment charges, our diverse
portfolio, and ethos as a low-cost
producer, served us well. Our
employees rose to the challenge,
and the momentum they generated
in the previous year came through,
ensuring a good set of results.
Health and safety
Starting with safety, I remain
unequivocal on the subject of
safety: there is no greater priority,
and no commercial or operational
consideration may ever override
it. When I joined the Company
two years ago as CEO, safety
was the area that I identified as
needing the most improvement.
No personal injury – much less, a
fatality – is ever acceptable and we
have been leading a ‘zero harm’
campaign to bring about a new
culture of safety across the Company.
It was therefore with deep regret
that we recorded 12 fatalities during
FY2016. Zero incidents on our sites
is the only acceptable outcome,
and we are redoubling our efforts
to instil safety awareness, driven
by every leader at every site.
Resilience in a challenging climate
In my 40 years in the mining
business I have seen the commodity
cycle turn many times, although
the severity of this torrid year was
something no one foresaw.
However, we mobilised around
the challenge, aided by three
primary factors. The first was the
resilience of our portfolio, with
assets mainly on first or second
quartile of the global cost curve
and minimal capital requirements.
Secondly, our major capex
programme was largely completed
within the last two years. Our
current requirements are low, with
FY2017 capex expected to be
around US$1 billion, 50% of which
would be across the high return
Zinc projects at Gamsberg and Zinc
India. In turn, this allows us to focus
our efforts on reducing net debt.
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In addition to this, we were able to
resume iron ore production in Goa
after working effectively with the
Government and local stakeholders.
I am pleased to report that operations
were resumed in FY2016, and the
ramp-up efforts are continuing.
At KCM, which had previously
posed a number of operational
issues, we saw volume ramp-ups
alongside cost reductions.
Our other businesses continued
to build on good performances
in FY2016, including the delivery
of cost reductions and the
advancement of key projects such
as the underground development
at HZL, and the first excavation at
Gamsberg, the site of one of the
world’s largest zinc deposits.
At Cairn, we successfully
implemented our enhanced oil
recovery project – the world’s largest
polymer injection oil project.
Progress against our operational
priorities
Two years ago we identified four
operational areas requiring particular
focus in order to achieve the strategic
priorities we had identified for the
Company. I am pleased to report good
progress on three of these, while there
is still work to be done on the fourth.
We received approvals to use
power for captive purposes and
commenced ramp-up of the world-
class Jharsuguda smelter. This
has advanced well and we expect
to increase capacity to around
50% by the end of FY2017.
Secondly, I reported last year that
we were focusing on a turnaround
plan for KCM, which has been losing
money even when copper prices
were much higher. Over the last two
years, we delivered strong volumes at
KCM and stabilised operating costs.
This has protected our cash flows,
despite copper currently trading
at US$1,000 per tonne less than it
was a year ago. I am also greatly
encouraged that further benefits of
this corrective action are continuing
to materialise and we expect to
deliver positive cash flows next year.
Our third priority was to restart
iron ore mining in Goa, and we
enjoyed the full support of state and
Government authorities to bring
this about. Indeed, we were the first
in the industry to resume activities
there, and the ramp-up continues.
Unfortunately, the remaining priority
– to secure a stable local source of
bauxite for our Alumina refinery – was
not accomplished during the reporting
year. We believe that Odisha is
blessed with some of the best bauxite
resources in the world, both in terms
of quality and quantity; however we
continue to explore a number of other
options. Our vision is to operate a fully
integrated aluminium facility, with
world-class technology, and the full
consent of the local communities.
I can, however, report excellent
progress in serving our key facilities
with power. A year ago we were in
the pre-commissioning phase of
two new power plants, at BALCO
and at Talwandi Sabo in Punjab.
Both are now fully online and have
added nearly 2,500MW of new
capacity. Indeed, with total generating
capacity of 9,000MW, Vedanta is
now a larger generator than many
power utilities. We use around two-
thirds of the power we generate
ourselves, and sell the remainder
to state utilities under long-term
arrangements or via retail contracts.
Our focus now
The five strategic priorities we
identified in 2014 remain as valid now
as they were then: to improve our
operations, optimise our assets, build
our reserves and resources, simplify
our business structure and protect
and preserve our license to operate.
As mentioned previously, our
portfolio is very resilient and will
only become more so as we drive
further improvements across our
business. This will leave us well
positioned to take advantage of the
upturn in the cycle when it comes.
One thing you learn in a downturn
is that investments made in good
times need to be carefully managed
when the climate deteriorates. I am
proud of how the Company has
responded, gaining a firmer grip on
costs, driving up efficiencies and
adapting to the world as it is now.
I have heard people say that this
turbulence is the ‘new normal’, but
throughout my four decades of
mining experience, this has always
been the case. Volatility is a continual
‘normal’. We have seen it many times
and we know that low prices serve
as a self-correcting mechanism for
markets, by adjusting supply and
demand – we see this happening now.
Naturally we hope that the worst
is behind us and cautiously
believe that it may be.
Group EBITDA mix (%)
100
80
60
40
20
0
FY2015
FY2016
Zinc-Lead
Aluminium
Iron Ore
Power
Copper
Oil & Gas
Cash flow pre capex and growth capex
growth profile (US$ billion)
3.0
2.5
2.0
1.5
1.0
0.5
0
FY2015
FY2016
FY2017e
Oil & Gas
Zinc
Aluminium and Power
Free cash flow (pre-capex)
Indeed, we are seeing
macroeconomics which suggest that
FY2017 could end with some welcome
positive momentum. At Vedanta, we
now look forward to FY2017 as a very
exciting year ahead, with the ramp-
up of capacities at our Aluminium,
Iron Ore and Power businesses which
should deliver us over 60% growth
in copper equivalent terms and
ramping-up capacities at KCM, which
would drive strong free cash flows.
Tom Albanese
Chief Executive Officer
12 May 2016
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
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Market Overview
The global economy
Commodities market
The global uncertainty and volatility
has significantly impacted the
commodities market. Ongoing supply
increases, high inventories, softening
demand, particularly from the
emerging and developing economies,
have resulted in commodities trading
at historic lows vis-à-vis peaks seen in
2011. Even though supply-side factors
are more profound, demand softening
too has played an important role.
Markets are, however, witnessing
some gradual rebalancing. February
and March 2016 have seen metals
prices recording strong gains. This
was largely driven by improved
market sentiments, falling stocks,
production cuts and few supply
interruptions, among other factors.
China, however, would be key – its
share of world metal consumption
rose above 50% in 2015 and it
accounted for the majority of global
growth over the last 15 years. Gradual
recovery in China could see favourable
terms for the commodities market.
Overall, in the medium term, markets
are expected to tighten largely due
to reduced investment in supply
capacity, rising global demand
and metal specific factors.
Indian economy
During the year, India’s growth story
has shown remarkable resilience.
Numerous policy measures coupled
with the decline in oil prices have
enabled India to become one of the
fastest-growing large economies
in the world. India has registered a
robust and steady pace of economic
growth in FY2016 just as it did in
FY2015. The IMF projects India’s
growth at 7.5% for FY2017.
To create investment and a business-
friendly environment, the Government
of India (GoI) has initiated a series
of policy reforms, which are likely
to prove transformational for
the Indian economy. Focus on
simplification and rationalisation
of regulation, together with policy
measures could prove to be a game-
changer for the Indian economy.
Global economy
The IMF’s latest World Economic
Outlook (WEO) in April 2016 estimates
global growth at a modest 3.2% in
2016, broadly in line with last year. The
recovery is projected to strengthen
in 2017 and beyond, driven by
emerging markets and developing
economies as conditions in distressed
economies start to normalise.
Advanced economies are also
expecting moderate growth for
2016, in line with 2015. These
economies are expected to grow
at 2.4% in 2016, then marginally
higher in 2017. The Eurozone is likely
to see modest growth at 1.5% this
year and 1.6% next year. In Japan,
both growth and inflation are
weaker than expected, with growth
turning slightly negative in 2017.
China, the world’s second largest
economy, continued to be sluggish,
with the IMF predicting growth
rates of 6.5% in 2016, at the lower
end of the official target of China of
6.5-7.0%. This reflects the negative
impact of a weakening property
market and slower industrial activity
as the country continued its transition
to a consumption and services-led
economy, rather than one driven
by manufacturing and exports.
Although the growth rate in emerging
and developing economies slowed
to around 4%, they still account for
the majority of world growth in 2016.
Lower oil prices should support
growth in many oil-consuming
countries as living standards continue
to rise in Asia and Africa in particular.
According to the IMF WEO, India by
contrast remains a bright spot with
strong growth and rising real income.
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Increased public investment in roads
and railways will have a significant
multiplier effect. The infrastructure
sector has been a priority area for the
Government, attracting enhanced
public investment. The National
Investment and Infrastructure
Fund (NIIF) has supported robust
growth in this sector. This special
emphasis on infrastructure is
helping drive demand for aluminium,
zinc, copper and iron ore.
Given that the Government is
committed to sustain the reforms
momentum, it is expected that
private sector investment will
revitalise and further boost
India’s growth prospects.
As a large net importer of crude oil,
the reduction in India’s import bill, by
around 55% compared to FY2014, has
had a positive impact on the Indian
economy and supported a positive
fiscal outcome. The largest impact
of the decline in crude oil prices
over the last two years has been on
inflation – a key economic variable.
Oil & Gas
During 2015, the Brent crude oil
the price averaged US$52/bbl –
its lowest level since 2005, driven
by the advent and resilience of
shale oil production, increased oil
production by OPEC members and
muted demand. Supply continued
to grow faster than demand,
resulting in OECD commercial stock
levels reaching a record high.
The Indian oil & gas market
is characterised by very high
dependence on imports. Imports
represent around 75% of oil
consumption and 40% of demand
for gas. Against this background,
sustained low hydrocarbon prices
have augured well for the Indian
economy. The Government is
aiming to reduce India’s import
dependence by 10% by 2022 and
as one of the largest crude oil
producers in India, supplying 27% of
domestic production, Vedanta is well
positioned to support this objective
of higher domestic production to
reduce the energy import burden.
The Government’s recent policy
reforms in the Indian oil & gas
sector have been encouraging. For
instance, a new exploration and
licensing policy termed ‘Hydrocarbon
Exploration and Licensing Policy’
(HELP) was introduced. The policy
is a fundamental step change in the
Indian oil & gas sector and introduces
a new contractual and fiscal model for
the award of hydrocarbon acreages.
This policy, coupled with the fact
that India is under-explored, offers
significant opportunities for the oil &
gas players to create value through
higher domestic production.
Looking ahead, significant oil price
volatility is expected. According to
the International Energy Agency, 2016
also could be a third successive year
when supply will exceed demand
by 1 mb/d. However, from its historic
low in January 2016, oil prices
rebounded to more than US$45/bbl.
Zinc
The zinc market in FY2016 was
characterised by mine closures and
price-induced output cuts, thus
improving the overall fundamentals of
the metal. With global consumption
expected to grow at a steady rate of
2-3% per annum, meeting this demand
will be a challenge with recent mine
closures and production curtailment,
and no new replacements coming
up in the near future. Zinc treatment
charges (TCs) have fallen from the
2015 benchmark of US$245/t to
US$188/t in 2016, a 23% reduction.
This is also symbolic of the pace
at which the concentrate supply is
depleting. The falling zinc inventory
at the LME warehouses also point
towards a tightening zinc market.
This follows a brief period of
FY2016, which was marked by a
loss in investor confidence in the
base metals complex and a general
retreat in prices. The situation was
compounded by tepid demand in the
Chinese economy and a strong dollar.
Although the overall pace of
consumption in the Chinese economy
has cooled off a bit, demand for zinc is
growing, albeit at a slower pace. Other
zinc-consuming economies such as
the EU and the US are expected to
post higher growth after a dismal
performance in the previous year.
India is also projected to tread an
encouraging growth trajectory (7-8%)
in the near term. Consequently, global
zinc demand should expand this
year, with growth set to accelerate
from last year’s depressed levels.
India’s zinc consumption didn’t
grow significantly this year as the
domestic steel industry suffered,
mainly on cheap imports. However,
the Government’s measures to curb
imports by increasing duty and
implementing a minimum import price
(MIP) will help domestic producers
increase production. The country’s
consumption is expected to grow
by 6-7% in FY2017, which will benefit
us in particular. We had a market
share of 79% in FY2016; this will
be a positive benefit to Vedanta.
The Indian Government’s focus on
upgrading its crumbling infrastructure
has provided the much-needed
impetus to overall economic activity.
As per the Wood Mackenzie Long
Term Outlook published in Q1 2016,
zinc demand is forecast to rebound,
growing by an average annual
rate of 7.0% per annum, lifting
consumption to 900kt in 2020.
The use of galvanised steel in Indian
automobiles has started picking up,
with less than 3% in a typical car to 7%
currently, and is expected to increase
to 20% by 2020. Solar energy is
another avenue which may demand
an additional 50-350t of galvanised
steel/MW of installed capacity.
Lead
Lead fundamentals remained bullish
with lead prices falling the least among
all other base metals in FY2016. Lead
consumption is forecasted to grow
at 2-3% per annum in the long run.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 16
Market Overview continued
ensure that the custom concentrate
market in 2016 remains well supplied,
leading to higher levels of TC/RCs.
Vedanta is one of the major exporters
to China and also holds the highest
market share in India; where demand
is expected to grow at more than
8% as the policy reforms and
various other initiatives taken by
the GoI rejuvenate the economy.
KCM remains one of the leading
copper producers in Zambia;
production for the year was
higher due to the contribution
from Konkola mines. Zambia’s
economic performance is expected
to remain strong in the medium
term, driven by large investments
in infrastructure and a growing
public administration and defence.
Aluminium
Global aluminium consumption rose
by 4% to 56mt in 2015, compared with
2014. This growth was primarily driven
by China where consumption was
up 6.7% in contrast to consumption
in the world outside of China,
which grew by only 1.2% to 27.2mt.
As per CRU’s latest estimates,
primary aluminium global demand
is expected to grow by 3% CAGR
in the period 2015-2020, driven by
the transport sector and aluminium
substitution for other heavier metals.
Supply has grown by 6% to 57.5mt
in 2015; however, production outside
China was flat at 26mt, due to
production cuts. Worldwide supply
is outpacing the demand, which will
continue to put further pressure
on both pricing and premiums.
Specifically, China’s consistently high
production and exports to the rest of
the world is adding to stocks globally.
In India, primary production for
FY2015 stood at 2.4mt and FY2016
will be close to 3.1mt. Demand is likely
to be higher than average at around
8% during 2014-2020, spurred by
large infrastructure investment by
the Government along with increased
investment activity by the private
sector. This includes investment in
electrification driving demand for
wire rods, the automotive sector
driving demand for alloys and the
‘Make in India’ campaign driving more
aluminium consumption generally.
Iron Ore
FY2016 witnessed a significant
decline in prices on the back of
rising supplies from Australia and
Brazil, and slackening demand from
China. Prices are projected to remain
well below levels recorded during
the height of the mining boom.
Given the likelihood that low lead
prices will reduce the availability
of scrap metal, diminishing the
incentive to collect, both primary
and secondary supply will
tighten in the months ahead.
With pollution concerns aggravating in
China, market share for electric is likely
to get a boost, thereby increasing
demand for industrial batteries.
India’s growing telecom industry and
ongoing infrastructure development
will also support industrial battery
demand, as should an expanding
Photovoltaic (PV) market.
The key to this is medium-term
industrial sector growth, estimated
at 5.8% per annum with sustained
investment in the relevant sectors
the key to this growth. India has
the second largest number of
mobile subscribers in the world,
after China, and is currently ranked
sixth in global vehicle production,
suggesting strong demand will
eventually lead to higher prices.
Copper
Global mine production of copper is
estimated to have risen by 3.5% to
19.1mt in 2015 while refined primary
copper production is estimated to
have totalled 18.9mt, 1.8% higher
than the previous year. The main
contributor to growth in world
refined production was China (up by
4%). World copper usage, however,
is estimated to be around 22.8mt,
in line with the previous year. A
stronger US dollar and slower-than-
expected growth in China have
weighed on copper prices in 2015
and at the start of 2016, with prices
dropping to levels below US$4,500.
In concentrates, annual benchmark
settlements for 2016 are slightly
lower, compared with the previous
year, mainly due to uncertainties
surrounding mine projects as prices
continued to fall. However, several
new mine projects commenced
full production in 2015 and further
expected new mine production/
expansion in 2016 will support higher
concentrate availability. Global smelter
production increases during the same
period are not expected to keep pace
with the mine production. This will
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Radical transformation measures
have been introduced by the
Government. The ongoing financial
relief and transformation package
Ujwal Discom Assurance Yojana
(UDAY) for the distribution companies
announced by the Government
is expected to enhance the
financial health of the distribution
companies, and encourage higher
consumer demand on the grid.
Continued focus on efficient
generation, coupled with such macro
factors, are expected to yield better
returns in the medium to long term.
Transmission constraints in the grid
have also dampened the development
of the power market in India in the
past. This is expected to improve in
FY2017, alongside the commissioning
of new transmission projects.
With almost all installed capacity
coming on stream in FY2016 and
improvements in the supply of
local coal, Vedanta’s generation
capacity has increased by around
30% for the coming year.
With more than 9,000MW of
installed capacity spread across
India, including one of the largest
wind installations (273MW),
Vedanta is poised to continue
playing a vital role in the power
story for transforming the nation.
Opportunities for Vedanta
Vedanta is positioned well with a
diversified portfolio of assets spread
across many commodity classes,
enabling it to adjust to economic
cycles and offset market downturns.
With its focus on India and position
as a low-cost producer, Vedanta
faces a more positive environment
locally in the medium term, as India
continues its strong growth and
implements the Government vision
to reduce dependence on imports. In
the long term, Vedanta’s diversified
spread across commodities makes
it well positioned to benefit as
supply and demand fundamentals
gradually get aligned globally.
Sources:
IMG, IEA (International Energy Agency), Wood
Mackenzie, CRU, Resources and Energy
Quarterly, Niti Ayog.
A sustained period of lower prices
over the medium term is expected
to result in the closure of high-cost
capacity as the financial losses of
these companies begin to accumulate.
Although these closures will
provide some support to prices,
new low-cost capacity is being
developed, particularly in Australia
and Brazil, that will constrain
any large increases in prices.
While global iron ore demand is
projected to remain relatively flat,
continued substitution of domestically
produced iron ore in China with
seaborne iron ore is expected
to result in a modest increase in
international trade. Reflecting this,
global iron ore trade is projected
to increase by 1.3% a year between
2015 and 2021, to reach 1.6bt.
Export growth is projected to
come almost entirely from Australia
and Brazil, with import growth
projected to largely come from
China and, to a lesser extent,
the United States and Japan.
Vedanta’s Iron Ore business in Goa
caters primarily to the global seaborne
iron ore trade due to its logistical
proximity to the port along with
inland waterways. Goan low grade
exports are primarily destined for
Chinese steel mills, who are able
to blend the low grades with other
high grade expensive ores from
Brazil and Australia. By contrast,
the Iron Ore business in Karnataka
caters primarily to the domestic steel
industry in the state of Karnataka,
which is located within a radius
of 200 kilometres of the mine.
Power
The Indian power sector has
witnessed substantial growth in the
past decade to meet the growing
demand and as well the large latent
demand. According to the World
Bank, India has been responsible
for 10% of global energy demand
growth since 2000. The Indian power
system is the fifth largest in the
world and India is one of the top five
electricity consumers of the world.
Growth in industrial activities, rapid
urbanisation and rural electrification
is expected to push the total installed
capacity to 562GW by 2030 as per
the Niti Ayog report in April 2015.
To date, demand has, in fact, been
suppressed due to the financially
stretched position of the distribution
companies, who have been unable
to purchase sufficient power to meet
consumer demand and are managing
the situation through power cuts.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
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Business Model
What we do and how we add value
Vedanta operates across the value chain, undertaking
exploration, asset development, extraction, processing
and value addition with a primary focus on upstream
operations. We capitalise on our strategic capabilities
to create value for all our stakeholders: our shareholders;
our employees; our customers; our lenders and the
communities where we operate.
The scale and breadth of our operations underpin the value
we create:
Ø the diversified nature of our business, both in
geographical reach and the range of commodities and
minerals we mine, provides a more balanced exposure
to economic, political and currency risks;
We capitalise on our strategic
capabilities to create value for
all our stakeholders.
Value
generation
We invest selectively
in exploration and
appraisal to extend
mine and reservoir
life and have an
excellent track record
of preserving and
enhancing value
wherever possible.
We develop world-class
assets, using the latest
technology to optimise
productivity and
focus on continuous
improvement to reduce
costs and enhance
access to market.
License to
operate
We invest in local
infrastructure and water
supplies to the benefit
of local businesses
and communities.
See page 38
Growing our assets
generates direct and
indirect employment
through sourcing of
local labour, goods
and services.
See page 44
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Ø our scalable, low-cost, long-life assets deliver strong free
Ø we are committed to sustainable development
cash flows from a well-invested asset base;
Ø our deep operational expertise helps us to optimise
the allocation of our resources for maximum benefit.
We apply standard processes and systems across
the Group, whether in procurement, operations or
maintenance, to maximise productivity efficiently;
in all aspects of our business with a well-developed
sustainability framework which underpins everything
that we do.
We operate low-cost
mines and oil fields,
with a clear focus on
safety and efficiency.
Our diverse portfolio
enables us to optimise
production across
commodity cycles
and capitalise on our
strong position in India
and our proximity to
emerging markets.
We focus on
operational excellence
and high asset
utilisation to deliver
top quartile cost
performance and
strong cash flow,
selectively converting
some of our primary
metals into higher
margin products
such as sheets, rods,
bars and billets in our
Aluminium, Copper
and Zinc businesses.
We supply our
commodities to
customers in a
wide range of
industry sectors
from automotive to
construction, from
energy to consumer
goods. We are the
leading supplier in
India and also export
to global markets.
We manage our long-
life mines and assets as
effectively as possible
to deliver value across
the life cycle and
return them back to
a natural state at the
end of their useful life.
Moving into full production generates value for all
stakeholders:
Ø We provide personal development, training and
healthcare for employees.
Ø We invest in community initiatives around our assets.
Ø We initiate environment projects to minimise the
impact of our operations and increase biodiversity.
Ø We develop close relationships with customers
and suppliers.
Ø We generate a consistent dividend stream for
shareholders and significant tax contributions to
host governments.
As one of India’s leading
producers, we provide
the resources that our
customers then turn
into the products that
India needs to support
its economic and
social development.
See page 14
We work closely with
local communities,
regional governments
and conservation
organisations to
rehabilitate our mines
and restore the natural
habitat, providing a
legacy for the future.
See page 42
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 20
Strategic Capabilities
& Relationships
1
Diversified mix of business –
share of EBITDA FY2016
24% Oil & Gas
46% Zinc
5% Aluminium
8% Power
14% Copper
Iron Ore
3%
Diversified mix of business –
share of EBITDA FY2015
39% Oil & Gas
37% Zinc
11% Aluminium
5% Power
7% Copper
Iron Ore
1%
Vedanta’s economic
contribution (US$ million)
US$10,737.9m
Revenue
9,180.0 Operating costs (excluding
payment to exchequer)
639.7 Employee wages and
765.7
benefits
Payment to providers
of capital
3,195.7 Payment to exchequer
110.6
255.5 Payment to Governments
Dividend
– Income Tax
37.0
Community investments
(140.0) Economic value retained
Strategic capabilities
World-class assets
We have a resilient portfolio of high-
quality assets that deliver value
throughout the commodity cycle.
Our long-life, low-cost assets are cash
generative, with capital expenditure
and operational investment focused
on projects that will improve
efficiency, optimise productivity and
reduce the cost of production. This
year, free cash flow of US$1.7 billion
has been generated, post capital
expenditure of US$0.6 billion, down
by 63% on FY2015. All our major
businesses are now in the 1st or 2nd
quartile of the global cost curve,
with cost reductions and production
increased at Copper Zambia driving
improvement in this segment.
A skilled workforce
At the heart of our 70,000-strong
workforce are the 10,000 skilled
professionals including engineers,
geologists, technicians and
commercial managers. Training and
development is key to recruitment
and retention and we continued to
invest in FY2016, with 1.53 million
training hours undertaken by
employees and contractors during
the year. We are committed to
extending our gender diversity
across the whole organisation.
1: Engineers at the aluminium wire rods facility.
Technology and innovation
We encourage a culture of innovation
both internally and through
collaboration with external networks
to drive productivity and maintain
our competitive position. The CEO
has set up an innovation task force
with the objective of increasing the
number of patent filings, reducing
the cost of production by bringing
in disruptive technology and
focusing in-house technological
innovation in exploration,
processing, waste management
and new product development.
Financial strength
We have a strong financial profile
with cash and liquid investments
of US$8.9 billion and a diversified,
balance debt portfolio. Our strong
cash generation has enabled
us to maintain liquidity while
continuing to reduce our net debt
by US$1.1 billion in FY2016.
License to operate
Our sustainable development model
underpins our license to operate
and is integral to our business.
We are focused on embedding a
culture of sustainability across the
whole Group, promoting a culture of
transparency and integrity, focusing
on protecting the health and safety
of our employees, minimising
our impact on the environment
alongside working with and
investing in our local communities.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
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21
Competitive position on global cost curve
I
II
III
IV
Size of circle denotes
EBITDA contribution
Zinc
India
Oil & Gas
Iron Ore
Zinc
International
Aluminium
Copper
India
Relationships
Governments
Vedanta published its first voluntary
tax transparency report for FY2015,
showing the contributions it makes to
public finances in all the countries it
operates in and we intend to enhance
this going forward by introducing
an external assurance process.
India
India’s Government is focused on
economic growth and job creation,
with major infrastructure investment
programmes, a focus on reducing
imports and increasing manufacturing
through its ‘Make in India’ campaign.
As the largest diversified natural
resources company in India, Vedanta
is well placed to support the
Government’s ambition and is already
benefiting from recent economic
reforms, such as the first coal auctions
following the introduction of the
Mines and Minerals (Development
and Regulation) Act that provides
for the auction of natural resources.
Relationships with state Governments
are equally important and we continue
to work with the Governments of
the states where we operate.
Copper
Zambia
Africa
Vedanta now employs over 15,000
people across Zambia and Southern
Africa and is committed to building
strong relationships with regional
governments. US$3 billion has been
invested in the Konkola copper
mines since its acquisition and it has
recently commenced construction
of the Gamsberg zinc project; one
of the world’s largest undeveloped
zinc deposits which will help unlock
the region’s vast mineral wealth to
the benefit of all stakeholders.
Employees
In addition to investing in training
and development for its 70,000
employees, opportunities for
employee engagement exist at every
level within the Company. These
include Chairman’s workshops,
Chairman and CEO Town Hall
meetings, mentor programmes and
also forums at local levels to cover
issues including welfare, gender
diversity, sustainability and safety.
Customers and suppliers
Relationships are both direct and
indirect through membership of
industry bodies, with Vedanta
aiming to set high standards
for contractual integrity and
quality of product. Supply chain
management is treated as a critical
skill, underpinned by investment
in IT and integrated systems.
Communities
Key to our license to operate is our
relationship with the communities
where we operate, built on dialogue,
mutual respect and free prior informed
consent to access natural resources.
All our businesses formally record
all stakeholder expectations and the
outcomes of their engagements.
During the year 4,100 stakeholder
engagement meetings took place
and more than 250 partnerships
are in place with non-governmental
organisations (NGOs), governments
and government bodies and academic
institutions, delivering community
programmes benefiting over
2.25 million people in India and Africa.
Shareholders
The Company actively engages
with shareholders to listen to their
views, with the executive members
of the Board undertaking an ongoing
schedule of meetings with institutional
investors, analysts and brokers,
including Capital Market Days and
Sustainable Development Days.
Lenders
Vedanta has a balanced debt
portfolio, with a diversified range
of funding sources and a balanced
maturity profile. It maintains close
communications with its lenders,
through meetings, presentations and
ongoing communication throughout
the year, led by the Finance team.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 22
Strategic Framework
Strategy
To deliver growth
and sustainable development
through our diversified portfolio of
large, long-life, low-cost assets.
long-term value
Progress against
strategic priorities
Production growth
and asset optimisation
De-lever the
balance sheet
Simplification of the
Group structure
Protect and preserve
our license to operate
Identify next generation
of resources
What we said we would do
Ø Achieve full capacity across
businesses
Ø Aluminium and Power: ramp-up
pots; secure domestic bauxite and
coal; commence production from
Chotia coal block
Ø Maintain positive free cash flow
despite current market volatility
Ø Reduce net gearing in the medium
term
Ø Efficiently refinance upcoming
debt maturities
Ø Pursue Group simplification
Ø Achieve zero harm
Ø Implement biodiversity
management plans at all sites
Ø Obtain local consent prior to
accessing resources
Ø Zinc India: ramp-up of Rampura
Ø Realise US$1.3 billion of
Agucha underground and Sindesar
Khurd mine
procurement and marketing
synergies over four years
Ø Oil & Gas: ramp-up EOR at
Mangala; increase gas production
Ø KCM: deliver operational
turnaround
Ø Iron Ore: commence operations
at Goa
What we have achieved
Ø Received approval for captive use
Ø Strong free cash flow of
US$1.7 billion
Ø Net debt reduced by US$1.1 billion
Ø Refinancing debt efficiently
Ø Cost savings and marketing
synergies of c.US$325 million
achieved
of power
Ø Cost of production reduced by 10%
to US$1,572/t in FY2016
Ø Received environmental approval
for Lanjigarh Alumina refinery
expansion
Ø Entire 9,000MW portfolio
operational. Additional 2,500MW
operationalised in FY2016
Ø Increasing contribution from
underground mines at Zinc India
Ø Successfully completed Mangala
Enhanced Oil Recovery project;
ramping-up gas production
Ø Ramp-up of volumes and
optimisation of costs at Copper
Zambia
Ø Commenced operations at iron ore
mines in Goa
Ø Optimise oil exploration
activities
Ø Leverage expertise of central
mining exploration group
Ø Identify next generation of
resources at Barmer Hill and
satellite fields
Ø Phased development of
Gamsberg
Ø Announced merger of Vedanta
Ø Working towards achieving
Ø Zinc India: net R&R addition
Limited and Cairn India in
zero harm
of 15mt
June 2015
Ø Achieved water and energy
saving targets
Ø Pre-stripping commenced at
Gamsberg, first ore production
Ø Zero ‘higher category’ (Cat # 4&5)
targeted for 2018
environmental incidents
Ø Dedicated exploration
Ø Businesses are implementing their
cell formed
Biodiversity Management Plans
Ø Social Impact assessment studies
for HZL and Cairn India completed
Ø Around 2.25 million beneficiaries of
our community initiatives
Focus areas
Ø Disciplined ramp-up of new
capacities at Aluminium, Power
and Iron Ore
Ø Reduce net debt
Ø Continued optimisation of opex
and capex
Ø Zinc: ramp-up volumes from
Ø Continued discipline around
Rampura Agucha underground
mines
Ø Oil & Gas: enhance gas production,
EOR at other fields
Ø KCM: ramp-up production,
optimise cost
working capital
Ø Work towards Vedanta Limited
Ø Focus on eliminating fatal
Ø Disciplined approach to
-Cairn India merger
Ø Reducing our environmental
accidents
footprint
Ø Bring all stakeholders on board
prior to accessing resources
exploration
Ø Continue to enhance our
exploration capabilities
Ø Ramp-up Gamsberg to full
production in 9 to 12 months
from first production
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
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23
Progress against
strategic priorities
Production growth
and asset optimisation
De-lever the
balance sheet
Simplification of the
Group structure
Protect and preserve
our license to operate
Identify next generation
of resources
What we said we would do
Ø Achieve full capacity across
businesses
Ø Maintain positive free cash flow
despite current market volatility
Ø Pursue Group simplification
Ø Achieve zero harm
Ø Implement biodiversity
management plans at all sites
Ø Obtain local consent prior to
accessing resources
Ø Optimise oil exploration
activities
Ø Leverage expertise of central
mining exploration group
Ø Identify next generation of
resources at Barmer Hill and
satellite fields
Ø Phased development of
Gamsberg
What we have achieved
Ø Received approval for captive use
Ø Strong free cash flow of
Ø Announced merger of Vedanta
Ø Working towards achieving
Ø Zinc India: net R&R addition
of power
US$1.7 billion
Ø Cost of production reduced by 10%
Ø Net debt reduced by US$1.1 billion
to US$1,572/t in FY2016
Ø Received environmental approval
for Lanjigarh Alumina refinery
Ø Refinancing debt efficiently
Ø Cost savings and marketing
synergies of c.US$325 million
achieved
Limited and Cairn India in
June 2015
zero harm
Ø Achieved water and energy
saving targets
Ø Zero ‘higher category’ (Cat # 4&5)
environmental incidents
Ø Businesses are implementing their
Biodiversity Management Plans
Ø Social Impact assessment studies
for HZL and Cairn India completed
Ø Around 2.25 million beneficiaries of
our community initiatives
of 15mt
Ø Pre-stripping commenced at
Gamsberg, first ore production
targeted for 2018
Ø Dedicated exploration
cell formed
Focus areas
Ø Work towards Vedanta Limited
Ø Focus on eliminating fatal
Ø Disciplined approach to
-Cairn India merger
accidents
Ø Reducing our environmental
footprint
Ø Bring all stakeholders on board
prior to accessing resources
exploration
Ø Continue to enhance our
exploration capabilities
Ø Ramp-up Gamsberg to full
production in 9 to 12 months
from first production
Ø Aluminium and Power: ramp-up
Ø Reduce net gearing in the medium
pots; secure domestic bauxite and
coal; commence production from
Chotia coal block
term
Ø Efficiently refinance upcoming
debt maturities
Ø Zinc India: ramp-up of Rampura
Ø Realise US$1.3 billion of
Agucha underground and Sindesar
Khurd mine
procurement and marketing
synergies over four years
Ø Oil & Gas: ramp-up EOR at
Mangala; increase gas production
Ø KCM: deliver operational
Ø Iron Ore: commence operations
turnaround
at Goa
expansion
Ø Entire 9,000MW portfolio
operational. Additional 2,500MW
operationalised in FY2016
Ø Increasing contribution from
underground mines at Zinc India
Ø Successfully completed Mangala
Enhanced Oil Recovery project;
ramping-up gas production
Ø Ramp-up of volumes and
optimisation of costs at Copper
Ø Commenced operations at iron ore
Zambia
mines in Goa
Ø Disciplined ramp-up of new
Ø Reduce net debt
capacities at Aluminium, Power
Ø Continued optimisation of opex
and Iron Ore
and capex
Ø Zinc: ramp-up volumes from
Rampura Agucha underground
Ø Continued discipline around
working capital
mines
Ø Oil & Gas: enhance gas production,
EOR at other fields
Ø KCM: ramp-up production,
optimise cost
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 24
Key Performance Indicators
Growth
Revenue (US$ million)
EBITDA (US$ million)
2016
2015
2014
2013
2012
10,737.9
12,878.7
12,945.0
14,640.2
14,005.3
2016
2015
2014
2013
2012
2,336.4
3,741.2
4,491.2
4,908.9
4,026.3
Description
Revenue represents the value of
goods and services provided to
third parties during the year.
Commentary
In FY2016, overall revenue was down
17% to US$10.7 billion compared
with US$12.9 billion in FY2015.
The decrease was primarily driven
by lower Brent prices, lower LME
prices, and premiums across metal
businesses. The decrease was partially
offset by an increase in volumes at
Zinc India, Aluminium, Copper India,
and the commissioning of power
units at Talwandi Sabo and BALCO.
Description
Earnings before interest, tax,
depreciation and amortisation
(EBITDA) is a factor of volume, prices
and cost of production. This measure
is calculated by adjusting operating
profit for special items, and adding
depreciation and amortisation.
Commentary
EBITDA for FY2016 was down by
38% at US$2.3 billion. This was
primarily due to the reduction
in Brent and LME prices.
ROCE1 (%)
Free cash flow post capex (US$ million)
2016
2015
2014
2013
2012
6.2
8.7
14.9
17.5
11.3
2016
2015
2014
2013
2012
136
1,705
1,047
1,270
1,516
Description
This represents net cash flow from
operations after investing in expansion
projects. This measure ensures that
profit generated by our assets is
reflected by cash flow in order to
deliver or reinvest for future growth.
Commentary
Generated record free cash flow of
US$1.7 billion which was driven by
strong operations, optimisation of
operational and capital expenditures
and by working capital initiatives.
Description
This is calculated on the basis of
operating profit before special items
and net of tax as a ratio of capital
invested in operations as at the
balance sheet date, and excludes
investment in project capital work
in progress and exploration assets.
The objective is to earn a post-tax
return above the weighted average
cost of capital consistency. To have
consistency in comparison, the effect
of one-time, non-cash impairment
charges have been taken out in
calculating ROCE for FY2016.
Commentary
In FY2016, ROCE without project
work in progress and exploration
assets in FY2016 was at 6.2%
compared to 8.7% in previous year.
1 Pre-exceptional items for FY2015 and FY2016.
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Long-term value
Growth capex (US$ million)
Underlying EPS (US cents)
Dividend (US cents per share)
2016
2015
2014
2013
2012
566
1,531
1,425
2016
(131.9)
2015
(14.2)
2,019
2,398
2014
2013
2012
14.7
2016
2015
2014
2013
2012
134.8
142.0
30
63
61
58
55
Description
This represents the amount
invested in our organic growth
programme during the year.
Commentary
Disciplined capital allocation on
high-return, low-risk projects.
Expansion of capital expenditure
during the year was at the reduced
level US$0.6 billion, with most of this
invested in expansion at Zinc India, the
Mangala EOR programme at Oil & Gas
and marginal amounts to complete
the Aluminium and Power projects.
Description
This represents the net profit
attributable to equity shareholders
and is stated before special items
and their attributable tax (including
taxes classified as special items)
and minority interest impacts.
Commentary
Underlying EPS at (131.9) US cents
per share is lower compared to the
previous year of (14.2) US cents. This
was reflected by weak commodity
prices resulting in lower EBITDA.
Description
Dividend per share is the total of final
dividend recommended by the Board
in relation to the year and interim
dividend paid out during the year.
Commentary
The Board has recommended a
dividend of 30 US cents per share
this year compared to 63 US cents
per share in previous year. This
was a prudent decision in light
of the market volatility and our
commitment towards developing.
Sustainable development
LTIFR (million man hours)
Women in the workforce (%)
CSR footprint (million beneficiaries)
2016
2015
2014
2013
2012
0.461
0.46
0.54
0.55
2016
2015
2014
2013
2012
0.83
9.4
8.6
8.4
8.1
8.2
2016
2015
2014
2013
2012
2.25
4.00
4.10
3.70
3.10
Description
The Lost Time Injury Frequency
Rate (LTIFR) is the number of
lost-time injuries per million man-
hours worked. This includes our
employees and contractors working
in our operations and projects.
Commentary
We are working towards creating
a zero-harm environment and
have seen an overall decline in
incident rate as compared to
the previous year. Further, this
year we have re-established the
LTIFR base performance as per
ICMM reporting guidelines and
are working towards a future
reduction in LTIFR performance.
1 As per revised ICMM definition, LTIFR stands
at 0.50.
Description
The percentage of women in the total
permanent employee workforce.
Commentary
We nurture passionate talent and
provide equal opportunities to men
and women. During the year we
initiated special recruitment drives
to provide career advancement for
women, including planned rotation
through corporate functions which led
to an increase in the ratio of female
employees to 9.4% of total employees
as compared to 8.6% last year.
Description
Total number of beneficiaries through
our community development
programmes across all our operations.
Commentary
To strengthen our license to operate
in host communities we have
redefined the scope of our community
investment and strengthened the
programme objectives to align
strongly with business imperatives and
community needs (derived from our
need assessment conducted last year).
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 26
Principal Risks
The resources sector is currently in the midst of correction, with an extended
period of lower and volatile commodity prices impacting earnings, balance sheets
and investor perceptions. Our businesses are also exposed to a variety of risks
which are inherent to a global natural resources organisation. It is therefore
essential to have necessary systems to manage these risks in place, while
balancing the relative risk reward equation demanded by our stakeholders.
Board Review and Oversight
Executive
Committee
Review
Assurance
Audit
Committee
Board
Executive Risk Reporting
External
Strategic
I d entifi cation
g
in
r
o
t
i
n
o
M
E
v
a
l
u
a
t
i
o
n
Mitigati o n
Financial
Operational
Our management systems,
organisational structures, processes,
standards and code of conduct
together form the system of internal
control that governs how we
conduct the Group’s business and
manage the associated risks. Our risk
management framework is designed
to be simple, consistent and clear for
managing and reporting risks from
the Group’s businesses to the Board.
Risk management is embedded in our
critical business activities, functions
and processes. It helps Vedanta
meet its objectives through aligning
operating controls with mission and
vision. The effective management of
risk is critical to support the delivery
of the Group’s strategic objectives.
The framework helps the organisation
meet its objectives through
alignment of operating controls to
the mission and vision of the Group.
We have a multi-layered risk
management framework aimed at
effectively mitigating the various risks
which our businesses are exposed to
in the course of their operations as
well as in their strategic actions. We
identify risk at the individual business
level for existing operations as well
as for ongoing projects through a
consistently applied methodology.
Formal discussion on risk
management happens in business-
level review meetings at least once
a quarter. The respective businesses
review the risks, change in the
nature and extent of the major risks
since the last assessment, control
measures established for the risk
and further action plans. The control
measures stated in the risk matrix
are also periodically reviewed by
the business management teams
to verify their effectiveness.
Ensuring effective tone at the top
is vital for the risk management
process to function effectively.
These meetings are chaired by
business CEOs and attended by
CXOs, senior management and
concerned functional heads. Risk
officers have been formally nominated
at all operating businesses as well
as Group level whose role is to
create awareness on risks at senior
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27
management level and to develop
and nurture a risk management
culture within the businesses. Risk
mitigation plans form an integral part
of the performance management
process. Structured discussion on
risk management also happens
at SBU levels on their respective
risk matrix and mitigation plans.
Governance of the risk management
framework in the businesses is
anchored with their leadership team.
The Board of Directors has
the ultimate responsibility for
management of risks and for
ensuring the effectiveness of internal
control systems. Such a system
is designed to manage rather
than eliminate the risk of failure to
achieve business objectives, and
can only provide reasonable and
not absolute assurance against
material misstatement or loss. The
Audit Committee aids the Board in
this process by identification and
assessment of any changes in risk
exposure, review of risk control
measures and by approval of remedial
actions, where appropriate.
The Audit Committee is in turn
supported by the Group-level Risk
Management Committee which helps
the Audit Committee in evaluating the
design and operating effectiveness
of the risk mitigation programme and
the control systems. The Group Risk
Management Committee (GRMC)
comprising of the Group CEO, Group
CFO, Director of Finance, Director –
Management Assurance and Group
Head – HSE meets every quarter.
The GRMC discusses key events
impacting the risk profile, emerging
risks and progress against the planned
actions amongst other things.
Materiality and tolerance for risk
are key considerations in our
decision-making. The responsibility
for identifying and managing risk
lies with all the managers and
business leaders in the Group.
The Group’s approach to risk
management, elaborated on in its
risk policy and the risk charter, is
aimed at embedding a risk aware
culture in all decision-making
processes. Accountability for risk
management is clear throughout
the Group and is a key performance
area for line managers.
Our approach to risk management and
systems of internal control is aligned
to the recommendations in the FRC’s
revised guidance ‘Risk management,
internal control and related financial
and business reporting’ (the Risk
Guidance) issued in September 2014.
The Board-level risk appetite has been
defined taking into consideration the
Group risk tolerance level and with
clear link to its strategic priorities. The
risk appetite forms the basis of the
Board’s assessment and prioritisation
of each risk based on its impact
on the business operations. A risk
scale consisting of qualitative and
quantitative factors has been defined
to facilitate a consistent assessment
of the risk exposure across the
Group. This scale is also aligned to
the Board’s overall risk appetite.
As stated above, every business
division in the Group has developed
its own risk matrix of Top 20
risks which gets reviewed at the
business management committee/
business thExCo, chaired by the
CEO. In addition, business divisions
have also developed their own
risk registers depending on the
size of operations and number of
SBUs/locations. These risks get
reviewed in SBU-level meetings.
The principal risks and uncertainties listed in the sections below may threaten the
Group in the following respects.
Terminology
Description
Business model
A business model is the plan implemented by a
company to generate revenue and make a profit
from operations.
Future performance
Ability to deliver a financial plan in the short/
medium term.
Solvency
Liquidity
Health, safety,
environment and
communities
Reputation
Solvency is the ability of a company to meet all its
financial obligations.
Liquidity is a company’s ability to meet its short-term
obligations/liabilities as they fall due.
The Group’s ability to send our employees and
contractors home safe and healthy every day and
work with our communities and partners to achieve
the Group’s sustainable development goals.
The ability to maintain investor confidence and our
social license to operate.
• Vedanta Board-level Sustainability
Committee which looks at
sustainability-related risks. This
committee is headed by a Non-
Executive Director and has the
Group CEO and other business
leaders as its members.
The Board, with the assistance of
management, has carried out a
robust assessment of the principal
risks and uncertainties of the Group
(including those that threaten the
business model, future performance,
solvency or liquidity) and tested
the financial plans for the Group
for each of the principal risks and
uncertainties mentioned below.
The order in which these risks
appear in the section below does
not necessarily reflect the likelihood
of their occurrence or the relative
magnitude of their impact on our
business. Risk direction of each
risk was reviewed based on events,
economic conditions, changes in
business environment and regulatory
changes. While our risk management
framework is designed to help the
organisation meet its objectives,
there can be no guarantee that
our risk management activities
will mitigate or prevent these or
other risks from occurring.
In addition to the above structure,
other key risk governance and
oversight committees include
the following:
• CFO Committee has an oversight
on the treasury-related risks. This
committee comprises of the Group
CFO, Deputy CFO, business CFOs,
Group Treasury Head and Treasury
Heads at respective businesses.
• Group Capex Sub-Committee
which evaluates the risks while
reviewing any capital investment
decisions as well as institutes a risk
management framework in
expansion projects.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 28
Principal Risks continued
Risk
Impact
Direction
Impact
criteria
Mitigation
The team is working on completing the
near-term refinancing, reducing the
cost of borrowing, extending maturity
profile and deleveraging the balance
sheet. The Group also has a track record
of good relations with banks and of
raising borrowings in last few years.
Structured ramp-up of facilities will
give better margins and help in loan
repayments/interest servicing.
Regular discussions are going
on with rating agencies.
The lending banks at Vedanta have
consented to certain changes requested
by the Company to its covenants under
the terms of the relevant debt facilities
effective from 31 March 2016 until the
period ending 30 September 2018.
The Group also generates healthy
cash flows from its current operations
which, together with the available
cash and cash equivalents and
liquid financial asset investments,
provide liquidity both in the short
term as well as in the long term.
We are reviewing our operations
and engaging with all stakeholders
in light of operating challenges.
Several cost-saving initiatives and
restructuring reviews are also under
way at KCM to preserve cash. At
Nchanga, the underground operations
(NUG) were put under care and
maintenance during Q3 FY2016.
To mitigate the impact of the
power tariff hike, the Company
is exploring a range of possible
solutions and is in continued dialogue
with the relevant stakeholders.
Issues of VAT refunds are
being addressed.
Our focus at Konkola is to improve
efficiency, equipment availability,
dewatering and enhance volumes.
We are committed to improving
KCM’s operating performance.
We are engaging with all stakeholders
and Government authorities for a
resolution of pending matters.
Access to capital
The Group may not be able to meet
its payment obligations when due
or be unable to borrow funds in the
market at an acceptable price to fund
actual or proposed commitments. A
sustained adverse economic downturn
and/or suspension of its operation
in any business, affecting revenue
and free cash flow generation, may
cause stress on the Company’s
financing and covenant compliance
and its ability to raise financing at
competitive terms. Any constraints
on upstreaming of funds from the
subsidiaries to the Group may affect the
liquidity position at the Group level.
à Future
Solvency
performance
Liquidity
Reputation
Operational
turnaround
at KCM
Lower production and higher cost at
KCM may impact our profitability. à Business
model
Future
performance
Liquidity
Reputation
ä Achieved æ Not achieved à In progress
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
29
Risk
Impact
Direction
Impact
criteria
Mitigation
Challenges to
operationalise
investments
in Aluminium
business
Some of our projects have been
completed (pending commissioning)
or are nearing completion and may
be subject to a number of challenges
during the operationalisation phase.
These may include challenges
around sourcing raw materials.
Challenges in
production
growth of Iron
Ore business
While Goa iron ore production resumed
in FY2016, the risk around the lifting
of existing mining caps remains.
Extension of
production
sharing contract
of Cairn beyond
2020 or
extension at less
favourable terms
Discovery risk
Cairn India has a 70% participating
interest in Rajasthan Block. The
production sharing contract (PSC)
of Rajasthan Block runs until 2020.
Challenges in the extension of the
production sharing contract of Cairn
(beyond 2020) or extension at less
favourable terms may have implications.
The increased production rates from
our growth-oriented operations
places demand on exploration and
prospecting initiatives to replace
reserves and resources at a pace faster
than depletion. A failure in our ability
to discover new reserves, enhance
existing reserves or develop new
operations in sufficient quantities to
maintain or grow the current level of
our reserves could negatively affect
our prospects. There are numerous
uncertainties inherent in estimating ore
and oil & gas reserves, and geological,
technical and economic assumptions
that are valid at the time of estimation.
These may change significantly when
new information becomes available.
ä Achieved æ Not achieved à In progress
æ Business
model
Future
performance
Liquidity
Reputation
æ Business
model
Future
performance
Liquidity
Reputation
à Business
model
Future
performance
Liquidity
Solvency
à Business
model
Future
performance
We are in the process of commencing
operationalisation of these facilities.
We have received approval to convert
three units at Jharsuguda from IPP
to CPP effective April 2016. Ramp-
up of the first line of 1.25 million
tonnes at Jharsuguda-II smelter
commenced from April 2016. The
remaining two units of the BALCO
power plant have been commissioned
recently. The third unit of TSPL was
also synchronised in Q4 FY2016.
Pot ramp-up activities commenced
at Korba II smelter in April 2016.
We continue our efforts to secure
key raw material linkages for our
Alumina/Aluminium business.
Various infrastructure related
challenges are being addressed.
A strong management team is in
place and continues to work towards
sustainable low cost of production,
operational excellence and securing
key raw material linkages.
Further details in connection
with this are included in the
Aluminium business section.
We have resumed operations at our
major mines. All mining plans have
been approved by the Indian Bureau
of Mines and the state Government
allocations of mining caps are in line
with the Supreme Court directive.
We continue to actively pursue
the lifting of mining caps and
additional allocation of production
from the state Government.
We are in continuous dialogue with
the Indian Government and relevant
stakeholders. The production sharing
contract has certain in-built options for
extension; Cairn has already applied
for an extension and the matter is
being pursued with all stakeholders.
Our strategic priority is to add
to our reserves and resources by
extending resources at a faster rate
than we deplete them, through a
continuous focus on our drilling
and exploration programme.
In order to achieve this we have
developed an appropriate organisation
and allocated adequate financial
resources for exploration. International
technical experts and agencies are
working closely with our exploration
team to build on this target.
We continue to work towards long-term
supply contracts with mines to secure
sufficient supply where required.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 30
Principal Risks continued
Risk
Impact
Direction
Impact
criteria
Mitigation
Transitioning
of zinc and
lead mining
operations from
open pit to
underground
mining
Our zinc and lead mining operations
in India are transitioning from an
open pit mining operation to an
underground mining operation.
Difficulties in managing this transition
may result in challenges in achieving
stated business milestones.
Fluctuation in
commodity
prices
(including oil)
Prices and demand for the Group’s
products are expected to remain
volatile/uncertain and strongly
influenced by global economic
conditions. Volatility in commodity
prices and demand may adversely affect
our earnings, cash flow and reserves.
ä Achieved æ Not achieved à In progress
à Future
Liquidity
performance
à Business
model
Future
performance
Solvency
Liquidity
A strong, separate empowered
organisation is working towards
ensuring a smooth transition from open
pit to underground mining. We are
working with internationally renowned
engineering and technology partners
on this project. There is a strong focus
on safety aspects in the project.
Technical audits are being carried
out by independent agencies.
Reputed contractors have been
engaged to ensure completion of
the project on indicated time lines.
These mines will be developed
using best-in-class technology and
equipment and ensuring the highest
level of productivity and safety.
We have inducted employees/
contractors in our system having
underground mining expertise. We
are also sending our employees
to overseas underground mines
for skill development.
Stage gate process to review risks and
remedy at multiple stages under way.
Robust quality control procedures
have also been implemented to
check safety and quality of services/
design/actual physical work.
Further, additional output from
stage five as well as ramp-up from
some of the mines is expected to
smoothen out this transition.
In order to mitigate the impact of
falling commodity prices, a cost
reduction programme is being pursued.
Optimisation of operations to drive
efficiencies and product mix optimisation
are also being pursued. A structured
cost reduction programme delivering
transformational improvements will reset
our cost base to the lowest possible level.
We continue to focus on manpower
rationalisation and deriving value out of
procurement synergies across locations.
The Group has a well-diversified
portfolio which acts as a hedge against
fluctuations in commodities and delivers
cash flows through the cycle. Vedanta
considers exposure to commodity price
fluctuations to be an integral part of the
Group’s business and its usual policy is
to sell its products at prevailing market
prices and not to enter into price hedging
arrangements other than for businesses
of custom smelting and purchased
alumina, where back-to-back hedging
is used to mitigate pricing risks. In
exceptional circumstances we may enter
into strategic hedging but only with prior
approval of the Executive Committee.
The Group monitors the commodity
markets closely to determine the
effect of price fluctuations on earnings,
capital expenditure and cash flows.
The CFO Committee reviews all
commodity-related risks and suggests
necessary courses of action as needed
by business divisions. Our focus is on
cost control and cost reduction.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
31
Risk
Impact
Direction
Impact
criteria
Mitigation
à Business
model
Future
performance
Solvency
Liquidity
Currency
exchange rate
fluctuations
Our assets, earnings and cash flows are
influenced by a variety of currencies
due to the diversity of the countries
in which we operate. Fluctuations in
exchange rates of those currencies
may have an impact on our financials.
Although the majority of the Group’s
revenue is tied to commodity prices
that are typically priced by reference
to the US dollar, a significant part of its
expenses are incurred and paid in local
currency. Moreover, Group borrowings
are significantly denominated in US
dollars while a large percentage of cash
and liquid investments are held in other
currencies, mainly in the Indian rupee.
Any material fluctuations of these
currencies against the US dollar could
result in lower profitability or in higher
cash outflows towards debt obligations.
Tax-related
matters
Our businesses are in a tax regime
and a change in any tax structure
or any tax-related litigations
may impact our profitability.
à Solvency
Liquidity
Reputation
Vedanta does not speculate in forex.
We have developed robust controls in
forex management to hedge currency
risk liabilities on a back-to-back basis.
The CFO Committee reviews our
forex-related matters periodically and
suggests necessary courses of action
as may be needed by businesses from
time to time, and within the overall
framework of our forex policy.
We seek to mitigate the impact of
short-term movements in currency on
the businesses by hedging short-term
exposures progressively based on their
maturity. However, large or prolonged
movements in exchange rates may
have a material adverse effect on the
Group’s businesses, operating results,
financial condition and/or prospects.
At the time of borrowing decisions,
appropriate sensitivity analysis is
carried out for domestic borrowings
vis-à-vis overseas borrowings.
Notes to the financial statements in
the Annual Report give details of the
accounting policy followed in the
computation of currency translation
impact. We continue to monitor the
currency translation impact and
highlight this separately in the financials
to give an appropriate perspective.
Vedanta has a robust organisation
in place at business and Group level
to handle tax-related matters. We
engage, consult and take opinion
from reputable tax consulting firms.
Reliance is placed on appropriate
legal opinion and precedence.
We continue to take appropriate legal
opinions and actions on the tax matters
to mitigate the impact of these actions
on the Group and its subsidiaries.
Breaches in
information/
IT security
Like many other global organisations,
our reliance on computers and network
technology is increasing. These
systems could be subject to security
breaches resulting in theft, disclosure or
corruption of key/strategic information.
Security breaches could also result
in misappropriation of funds or
disruptions to our business operations.
A cyber security breach could have
an impact on business operations.
ä
Future
performance
Reputation
Appropriate organisation is in
place at respective businesses for
information and IT security.
At Group level, the Chief Information
Security Officer (CISO) focuses on
formulating necessary frameworks,
policies, procedures and for leading
any agreed Group-wide initiatives
to mitigate risks. Various initiatives
have been taken up to increase
IT/cyber security controls.
We seek to manage cyber security
risk through increased standards,
ongoing monitoring of threats and
awareness initiatives throughout the
organisation. An IT system is in place
to monitor logical access controls.
We continue to carry out IT security
reviews by experts periodically and
improve IT security standards.
ä Achieved æ Not achieved à In progress
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 32
Principal Risks continued
Risk
Impact
Direction
Impact
criteria
Mitigation
à Business
model
Future
performance
Reputation
The Company and its business divisions
monitor regulatory and political
developments on continuous basis.
Our focus has been to communicate
our responsible mining credentials
through representations to government
and industry associations.
We continue to demonstrate the
Group’s commitment to sustainability
by proactive environmental, safety
and CSR practices. We continue to
actively engage with local community/
media/NGOs on these matters.
We are SOX and SEC related compliant
organisations. We have an online
portal for compliance monitoring.
Appropriate escalation and review
mechanisms are in place. Competent
in-house legal organisation exists
at all the businesses and the legal
teams have been strengthened
with the induction of senior legal
professionals at all businesses. SOP
has been implemented across the
businesses for compliance monitoring.
The contract management framework
has been strengthened with the
issue of boiler plate clauses across
the Group which will form part
of all contracts. All key contract
types have been standardised. The
involvement of the legal department
in the decision-making process is
being reinforced. A framework for
monitoring against anti bribery and
corruption guidelines is also in place.
Political,
legal and
regulatory risk
We have operations in many countries
around the globe, which have varying
degrees of political and commercial
stability. The political, legal and
regulatory regimes in the countries
we operate in may result in higher
operating costs, restrictions such as
the imposition or increase in royalties
or taxation rates, export duty, impact
on mining rights/bans and change in
legislation pertaining to repatriation
of money. We may also be affected
by the political acts of governments,
including resource nationalisation
and legal cases in these countries
over which we have no control.
ä Achieved æ Not achieved à In progress
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
33
Risk
Impact
Direction
Impact
criteria
Mitigation
à Business
model
Future
performance
HSEC
Reputation
Establishing and maintaining close links
with stakeholders is an essential part of
our journey as a sustainable business.
The CSR approach to community
programmes is governed by two key
considerations: the needs of the local
people and the development plan in line
with the SDGs and also the CSR National
Voluntary Guidelines of the Ministry
of Corporate Affairs, Government
of India as well as Section 135 of the
Companies Act in India. We integrate
CSR objectives with the Sustainable
Development Goals set by the UN.
Our business leadership teams
have periodic engagements with
the local communities to establish
relations based on trust and mutual
benefit. Our businesses seek to
identify and minimise any potentially
negative operational impacts and
risks through responsible behaviour
– acting transparently and ethically,
promoting dialogue and complying
with commitments to stakeholders.
Establishing and maintaining close
links with stakeholders is an essential
part of our journey as a sustainable
business. There are structured
programmes on reducing water,
energy and carbon consumption.
Our focus is on local consent prior
to accessing resources. Structured
community development programmes
continue to operate at various locations.
The Board-level Corporate Social
Responsibility Committee decides the
focus areas of CSR activities, budget
and programmes to be undertaken
by businesses. We help communities
identify their priorities through need
assessment programmes and then
work closely with them to design
programmes that seek to make
progress towards improvement in
quality of life of the local communities.
Further details of the Group’s
CSR activities are included in
the Sustainability section.
Community
relations
The continued success of our existing
operations and future projects are in
part dependent upon broad support
and a healthy relationship with
the respective local communities.
Failure to identify and manage local
concerns and expectations can have
a negative impact on relations with
local communities and therefore affect
the organisation’s reputation and
social license to operate and grow.
ä Achieved æ Not achieved à In progress
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 34
Principal Risks continued
Risk
Impact
Direction
Impact
criteria
Mitigation
Health,
safety and
environment
(HSE)
The resources sector is subject
to extensive health, safety and
environmental laws, regulations and
standards. Evolving regulations,
standards and stakeholder expectations
could result in increased costs,
litigation or threaten the viability
of operations in extreme cases.
à HSEC
Business
model
Reputation
Health, safety and environment (HSE) is
a high priority area for the organisation.
Compliance with international and
local regulations and standards,
protecting our people, communities
and the environment from harm
and our operations from business
interruptions are our key focus areas.
The Vedanta Board-level Sustainability
Committee chaired by a Non-
Executive Director and including the
CEO as a member meets periodically
to discuss HSE performance.
We have appropriate policies and
standards in place to mitigate and
minimise any HSE-related occurrences.
Structured monitoring and a review
mechanism and system of positive
compliance reporting are in place.
The Company has implemented a set
of standards to align its sustainability
framework in line with international
practices. A structured sustainability
assurance programme continues
to operate in the business divisions
covering environment, health, safety,
community relations and human
rights aspects and to embed our
commitment at the operational level.
HSE experts are also inducted from
reputed Indian and global organisations
to bring in best-in-class practices.
The businesses have an appropriate
policy in place for occupational
health-related matters supported by
structured processes, controls and
technology. Our operations ensure
the issue of operational health and
consequential potential risk/obligations
are carefully handled. Depending
on the nature of the exposure and
surrounding risk, our operations have
different levels of processes, controls
and monitoring mechanisms. There is
a strong focus on safety during project
planning/execution with adequate
thrust on contract workmen safety.
Fatal accidents and injury rates
have declined. We are implementing
programmes to eliminate fatalities
and control injuries. Our leadership
remains focused on a zero-harm culture
across the organisation. Consistent
application of ‘Life-Saving’ performance
standards, the introduction of the
making better risk decisions concept,
quantitative risk assessments for critical
risks and the formal identification of
process safety risks with the focus
on the implementation of controls
are central to our improvement
programme. We continue to improve
on our safety investigations and
follow-up processes. Further details
of our HSE-related activities are
included in the Sustainability section.
ä Achieved æ Not achieved à In progress
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
35
Risk
Impact
Direction
Impact
criteria
Mitigation
Talent/skill
shortage risk
The Company’s efforts to continue
its growth and efficient operations
will place significant demand on its
management resources. Our highly
skilled workforce and experienced
management team are critical to
maintaining its current operations,
implementing its development projects
and achieving longer-term growth.
Any significant loss or diminution
in the collective pool of Vedanta’s
executive management or other key
team members could have a material
effect on its businesses, operating
results and future prospects.
Loss of assets
or profit due
to natural
calamities
Our operations may be subject to a
number of circumstances not wholly
within the Group’s control. These include
damage to or breakdown of equipment
or infrastructure, unexpected geological
variations or technical issues, extreme
weather conditions and natural
disasters, any of which could adversely
affect production and/or costs.
à Future
Reputation
performance
à Future
Reputation
performance
The change in carrying value
of assets depends on various
assumptions. The change in any of
those assumptions may impact the
useful life and its carrying value.
æ Reputation
The Group’s
reported
results could
be adversely
affected by the
impairment
of assets
ä Achieved æ Not achieved à In progress
We continue to invest in initiatives
to widen our talent pool. This is a
priority area for the Group. Our senior
leadership is actively involved in
development of the talent pool. We
have a talent management system in
place to identify and develop internal
candidates for critical management
positions and processes to identify
suitable external candidates.
Our performance management system
is designed to provide reward and
remuneration structures and personal
development opportunities to attract
and retain key employees. A structured
programme maps critical positions
and ensures all such positions are
filled with competent resources.
Our progressive HR policies and
strong HR leadership have ensured
that career progression, job
rotation and job enrichment are
focus areas for our businesses.
We have established the Mining
Academy in Rajasthan to develop
an employee pool with enhanced
underground mining skills. We also have
a structured programme to develop a
technically proficient employee pool.
Vedanta has taken appropriate Group
insurance cover to mitigate this risk. We
have appointed an external agency to
review the risk portfolio and adequacy
of this cover and to assist us in our
insurance portfolio. Our underwriters
are reputed institutions and have
capacity to underwrite our risk. There is
an established mechanism of periodic
insurance review in place at all entities.
However, any occurrence not fully
covered by insurance could have an
adverse effect on the Group’s business.
We continue to focus on the capability
building within the Group.
We maintain a close watch on various
business drivers that could impact
impairment assessment. There is
continuous focus, monitoring and
periodic review of our assets.
We also periodically review the
assumptions, carry out testing and
reassess the useful life of these assets
with the help of reputed firms.
Vedanta reviews the carrying value
of its assets and long-term price
assumptions in light of the recent
weakness in commodity and oil prices.
Any impact of changes to these
assumptions on the carrying values
will be a non-cash charge reflected
in the results for FY2016. This non-
cash charge does not affect the cash
generation capability of the business.
With the completion of this review and
subsequent decisions being taken as
a fallout of the same, we expect this
risk to be mitigated to a large extent.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 36
Sustainable Development
Working Together,
Sustainable development: integral
to our business
Sustainable development is a core
element of our guiding strategy and
supports our growth as a diversified
natural resources company. This
includes the activities we undertake
across our operation to ensure the
health and safety of our people, how
we make valuable economic and social
contributions to the communities and
regions where we operate and how we
manage our environmental footprint.
This year we have shown good
progress towards controlling both
leading and lagging safety indicators
and reducing our environmental
impact on air, water and land use.
The significant improvements
and adoption of best practices in
resource management, biodiversity
and site closure practices have been
recognised by awards such as the
Confederation of Indian Industry
(CII) – Sustainable Plus (Platinum
rating), National Energy Conservation
Award and Global IOD Awards for
Excellence in Corporate Governance
and Sustainability. These are
testament to the focus Vedanta has
towards environment sustainability
and the improvements made.
Our core purpose
Vedanta is a globally diversified natural resources company
with low-cost operations. We empower our people to drive
excellence and innovation to create value for our stakeholders.
We demonstrate world-class standards of governance, safety,
sustainability and social responsibility.
Core Values
Trust / Entrepreneurship / Innovation / Excellence / Integrity /
Respect / Care
Sustainability highlights of the year
100%
of sites conduct periodic medical
examinations for employees
(FY2015: 100%)
4,176
village meetings held
(FY2015: 4,635)
1.53 million
Training hours delivered to all staff
(FY2015: 1.23 million)
2.25 million1
beneficiaries of our community
investment (FY2015: 4 million)
US$37 million
invested in community development
(FY2015: US$42 million)
42 million mt
carbon footprint
(FY2015: 39 million mt)
0.462
lost time injury frequency rate
(FY2015: 0.46)
US$3.2 billion
tax payments to exchequers
(FY2015: US$4.6 billion)
2,283
full-time female employees
(FY2015: 2,325)
1 Some beneficiaries may be enrolled in more
than one project.
2 With the new ICMM definition it is 0.50.
0
category 4 or 5 (severe) environmental
incidents (FY2015: 0)
Strategy
Our approach is centred on four
strategic pillars:
50%
Non-hazardous waste recycling rate:
(FY2015: 55%)
23%
Water recycling rate (FY2015: 20%)
42,240
man hours training on Code of
Business Conduct & Ethics
(FY2015: 21,000 man hours)
• Responsible Stewardship |
Safeguarding Synergies
Our stewardship approach to
resources as against an ownership
approach has translated into a
culture of ‘Zero Harm’ which has
been actively propagated across
the organisation.
• Building Strong Relationships |
Aligning Interests
We actively engage with our
stakeholders using systematic
engagement plans to integrate their
priorities in our growth strategy
• Adding and Sharing Value |
Nurturing Interdependencies
Along with being significant
contributors to the national
economy, we make it a point to
be prime-movers of local economy
and investors in priority areas of
the nation.
• Strategic Communications |
Reinforcing Trust
The trust that local communities
and national governments repose
in us is essentially our license to
operate. We continue to reinforce
this trust through strategic and
timely communication.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT Working Together,
Growing Together
www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
37
Embedding sustainability into day-
to-day business requires leadership
from all levels, and ultimate
accountability lies with the Vedanta
Board. The Board oversees and
reviews sustainability performance of
the Group through its Sustainability
Committee and Executive Committee.
The Committees’ Chairmen regularly
update the Board on their progress.
Our policies and guidance notes
are available to all employees
through the corporate website,
subsidiary portals and through
awareness training sessions.
Our model and framework is aligned
to global best practice standards,
including the United Nations
Global Compact’s (UNGC) ten
principles, the International Finance
Corporation, the International
Council on Mining and Metals and
the Organisation for Economic
Co-operation and Development.
Underpinning the governance of
sustainability across the Group is the
Vedanta Sustainability Assurance
Programme (VSAP), an internal
sustainability risk management
tool to ensure compliance with the
Vedanta Sustainable Development
Framework. Over the years the
framework has been unifying our
approach, our diverse geographies
and businesses and bringing us
closer to global standards. This
year we have enhanced support
for the sustainability programme,
implementing a Group-wide SAP
– Environment, Health and Safety
(EHS) IT solution – the first in India
to be implemented on this scale.
Materiality
Each year, we review our sustainability
priorities with our internal and
external stakeholders and update
our materiality matrix to guide our
programmes for the year (for full
details please refer to our online
Sustainable Development Report
2015-16). Overall, our stakeholder
priorities remained consistent with the
previous year. Based on the material
aspect, we identify the sustainability
objectives and targets on which we
report our performance every year.
Sustainable Development Goals
In September 2015, the UN
member states agreed on a set of
17 Sustainable Development Goals
(SDGs), which represent the global
agenda for equitable, socially inclusive,
and environmentally sustainable
economic development until 2030.
Responsible
Stewardship
Value will help us to
maintain a license
to operate
Responsible governance
supports relationship
building
Strategic
Communications
Adding and
Sharing Value
Building Strong
Relationships
Relationships enable us to
contribute to wide society
Visit our interactive online Sustainable Development
Report 2015–16 at sd.vedantaresources.com/
SustainableDevelopment2015-16
we have also prioritised the SDGs
based on our material issues as
well as operational competency
and are now in the process of
chalking out target and action plans
to address the relevant goals.
We strongly feel that natural resources
companies like us have the potential
to become leading partners in
achieving the SDGs. Through our
direct operations, we generate profits,
employment and economic growth in
low-income countries. And through
partnerships with government and
civil society, we ensure that benefits
of mining extend beyond the life of
the mine itself, so that the mining
industry has a positive impact on
the natural environment, climate
change and social capital. This year
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
38
Sustainable Development continued
Responsible stewardship
Objectives and targets FY2016
Status Details on performance FY2016
FY2017 objectives and targets
Occupational health and safety
Achieve zero fatal accidents.
Re-establish LTIFR base
performance as per recently
released ICMM reporting
guidelines and enable future
reduction in LTIFR targets.
Implement safety performance
standards: >75% of critical
elements in the standards to be
implemented across the business.
Implement safety interactions at
two businesses in addition to HZL.
Understanding occupational
health risks – performing a
baseline assessment across
the Aluminium businesses.
Environment
Water savings: 2.39 MCM
Energy savings: 0.88 million GJ
Report on Scope 3 emissions
by FY2016.
æ 12 fatalities (8 in India and
4 in Africa)
ä All businesses updated their
safety KPI definitions as per
ICMM reporting guidelines.
Achieve zero fatal accidents.
Focus on eliminating fatalities and
reducing high potential incidents.
æ All businesses are implementing
the safety performance standards
and audits were initiated this
year. The average score was 51%,
with significant improvements
shown later in the year.
ä Safety interaction was included
as a part of Leadership Safety
Programme i.e. Managing Better
Risk Decisions (MBRD) which
was piloted at Vedanta Ltd –
Jharsuguda and Sterlite Copper.
ä Baseline assessment exercise
has been started at Vedanta
Ltd’s Aluminium operation.
Implement safety performance
standards: >75% of critical
elements in the standards to be
implemented across the business.
Rolling out of Leadership Safety
Programme i.e. Managing Better
Risk Decisions in other businesses.
Performing baseline assessments
for two other businesses.
ä All businesses implemented their
water resource management plan
and planned initiatives leading
to a water saving of 7.16 MCM.
Water savings: 2.1 MCM
ä Internal benchmarking
and technological process
intervention has led to energy
savings of 0.94 million GJ
æ Scope 3 data for business travel,
employee commute, inbound
logistic and outbound logistic
is being tracked on a periodic
basis, however we are working
to increase the robustness of
the data before publishing.
Energy savings : 1.5 million GJ
To realign the Company
Energy & Carbon Policy in
line with COP 21 outcomes.
By FY2016, all sites to have
Biodiversity Management
Plans (BMPs) in place.
Management of tailing and
water storage facility
Exploring opportunities and
areas to increase the fly
ash utilisation rate.
à We have made considerable
progress in this regard. All our
operations now have a formal
BMP in place except Cairn
India, KCM and Sesa Iron Ore,
where work is in progress.
Capacity building (selected
professionals) on Biodiversity
Management including
Ecosystem services.
ä Preliminary Tailing Risk Assessment
completed across the Group.
Independent expert to review
the high priority facilities.
ä Fly ash recycling rate has
improved to 46% from 31%
this year by recycling fly ash in
applications such as road making,
cement and brick making.
To continue exploring opportunities
and areas to increase the fly ash
utilisation rate.
ä Achieved æ Not achieved à In progress
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39
Code of Business Conduct and Ethics
Our Code of Business Conduct and
Ethics (the Code) provides a set of
principles to guide our employees,
while our Sustainable Development
Framework outlines best practice
standards that drive improvement
consistently across all operations.
The Code covers aspects from human
rights, insider trading and political
contributions; to competition, conflicts
of interest and confidentiality. It
provides guidelines for all businesses
to assist employees in meeting
high standards of personal and
professional integrity. Training in our
Code is mandatory for all new hires.
This year we have delivered around
42,200 man hours of training in
human rights as a part of the Code
of Business Conduct and Ethics to
all our employees and contractors.
Under our Whistleblowing Policy,
employees and external stakeholders
are provided a mechanism (freephone
number, email id and an online
reporting portal) to anonymously
report inappropriate behaviour.
Health and safety
Safeguarding the well-being of our
workforce is our highest priority and
our objective is to embed a ’Zero
Harm’ culture in our businesses.
While we recognise that the natural
resources industry is inherently risky,
the drive to embed safety as a key
part of our value system is fiercely
advocated by both our Chairman
and CEO, and will remain top of our
agenda as we continue on the path
to ‘Zero Harm’, one step at a time.
We are saddened and disappointed
to report 12 fatalities – 8 in India
and 4 in Africa – and our LTIFR rose
from 0.46 to 0.50 (per million man
hours worked), although this was
partially as a result of a change in
methodology. This only serves to
increase our determination to succeed
and to integrate safety ownership
into every level of the organisation,
from boardroom to operations.
In addition to practical processes,
such as mandatory report and learn
reviews for high profile incidents,
training and education remain vital
tools for reinforcing and supporting
the ‘Zero Harm’ message. The
business units have implemented
and put forward behavioural-based
and technical programmes such as
implementation of safety standards,
job risk assessment and workshops
introducing the concept of personal
commitment not to ignore any unsafe
act or condition. In FY2016, around
757,700 man hours of safety training
were delivered to employees and
contractors on subjects including
working at height, permit to work,
job safety analysis, first aid, incident
reporting, safe behaviour and falls.
We also focused on building a
strong understanding of Vedanta
Safety Performance Standards
and Incident Investigation among
our people. During the reporting
year, 100% of sites conducted
periodic medical examinations for
all employees and contractors.
1
Gearing up for Zero Harm
Making better risk decisions
Our Safety Leadership Transformation
programme has been piloted
and will empower line leaders
to make better decisions by
foreseeing the risks relevant to
their routine and non-routine work
profile and understanding the
consequences associated with it.
Over 6,000 operational leaders
across all sites from the COO to
supervisors and including key
contractors will be empowered
through the programme. This is an
ongoing programme and leadership
training has already started on this.
Life support during emergencies
Hindustan Zinc Ltd installed ‘refuge
chambers’ in its Rampura Agucha
underground mine to guard the
safety of workers during emergency
situations. A refuge chamber is a
life support solution capable of
providing an oxygen supply and a
CO2 absorbing system for 36 hours.
With this additional capacity, now
there are four refuge chambers
which can accommodate six people
and two chambers which can
accommodate 20 people at the mine.
Tracking vehicles anytime, anywhere
Fleet safety is one of the prime
concerns in the mining industry.
It is vital to monitor vehicle speed
and administer a consequence
management system for the
violators. We have installed GPS
trackers in the heavy motor vehicles
at our Vedanta Ltd – Jharsuguda
business. The tracker provides key
information including the exact
location of the vehicle, speed at
which it is travelling, total distance
covered and speed variation.
Encouraging deeper ownership
Single Point Accountability (SPA)
is one of the driving forces of
safety management at our Vedanta
Ltd – Sterlite Copper business. A
set of protocols, SPA is aimed at
decentralising safety responsibility and
encouraging individual accountability.
Several awareness campaigns as well
as reward mechanisms encourage
employees to embrace SPA.
For more information about our
occupational health and safety
projects initiatives and impacts,
approach and mitigation strategy,
please refer to our online Sustainable
Development Report 2015-16.
1: Ensuring zero-harm culture: BMM, Zinc International.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 40
Sustainable Development continued
Responsible stewardship continued
Environment
The mining of natural resources is
a complex and intensive process
that introduces environmental and
social change and we strive to
maintain the right balance between
economic growth and sustainability.
By adopting world-leading practices,
we aim to reduce and minimise
the environmental impact of our
operations. Our goal is to obtain
ISO 14001 certification at all sites
by this year and as of now 48 out
of 52 operations are certified.
Systems to reduce water and
energy consumption, minimise land
disturbance and waste production,
contain pollution and conduct
successful mine closures are in place.
We are implementing Biodiversity
Action Plans at all our sites and are
also finding new and innovative
ways to recycle waste from our
operations, including fly ash, red
mud, phosphor, gypsum etc.
We are proud to report zero serious
environmental incidents over the
year. We are continuing to implement
our pledge to provide safe access
to water, sanitation and hygiene
for our workforce under the WASH
initiative of the World Business
Council for Sustainable Development
to ensure all employees worldwide
have better working conditions.
In line with our site closure plan
strategy, we are starting the
rehabilitation programme for
the Lisheen mine that ceased
production this year, in consultation
with employees, local authorities
and local environment groups.
Details on high impact environmental
elements such as water, energy and
climate change, biodiversity and
waste management are covered
below, however for more information
about our environmental impact,
approach and mitigation strategy,
please refer to our online Sustainable
Development Report 2015–16.
Biodiversity
Protecting biodiversity is an integral
part of Vedanta’s commitment
to sustainable development. Our
dedicated Biodiversity Policy and
management standard advise how
disruption to wildlife should be
avoided, minimised or compensated
for, from project scoping to site
closure and beyond. Our aim is
to achieve a minimum of No Net
Loss (NNL) of biodiversity and Net
Positive Gain (NPG) of biodiversity
(in case any critical habitat is
present) at all our operations.
Harvesting plants at Gamsberg, South Africa
In continuation of our biodiversity
measures, we relocated close to
80,000 plants to the Gamsberg
Research and Rehabilitation Centre
to help them survive a scant
monsoon and a severe summer.
10,000 of the collected seeds
were donated to SANBI-Karoo
Desert in Worcester. We also
donated plants to SANBI (Karoo
Botanical Gardens – Worcester).
We apply the UN Environment
Programme’s Integrated Biodiversity
Assessment Tool (IBAT) to screen
for risk, followed by site-specific
assessments to identify sensitive
habitats, important bird areas
and key biodiversity hot spots.
The results of risk screening and
assessments are applied to develop
Biodiversity Management Plans
(BMPs) for all our main sites. All
the sites are now implementing
BMPs at their operations.
Water
Our approach is outlined in our
Water Policy and delivered through
our Water Management Standard.
We facilitate the integration of water
management into decision-making
processes for both new and existing
projects, which helps ensure all
necessary measures to avoid, minimise
or, in some cases, compensate
for the impacts of our projects.
The majority of our subsidiary
businesses have a Water Resources
Management Plan in place to
eliminate, minimise, mitigate and
manage impacts on water resources.
Most of our operational processes
have been designed to be ‘zero
discharge’, where the generated
waste water is treated and recycled
for cooling and other applications. In
addition to these initiatives, effluent
and sewage treatment plants are
installed at many locations for
reusing water at primary locations.
This year, total water conservation
levels reached 7.16 million cubic
metres (MCM), against a target
of 2.39MCM for FY2016.
Energy and climate change
Climate change is a growing
concern globally, and recent
record temperature trends will
likely accelerate this concern. As
an extractive industry, we have a
profound responsibility to respond
to the planet’s undisputed warming
and to adapt to future changes.
We feel this will require multiple
solutions, including using innovative
technology to improve energy
efficiency and finding more carbon
neutral solutions. It is vitally important
that every country provides the
right incentives for the development
and communication of climate-
friendly processes and practices.
After the recently concluded Paris
agreement on Climate Change
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41
focus on generating electricity from
waste heat and becoming self-reliant
for our power needs. The Vedanta
businesses have installed in total
139MW capacity waste heat recovery
boilers to enable greater efficiency
in operational energy usage.
Our HZL subsidiaries have installed
wind farms across five states in
India that generate 273.5MW.
All wind power generation has
been registered under the Clean
Development Mechanism (CDM) and
511.4 million units have been sold
to the electricity grid in each state,
an increase of 52.3% compared to
2012. HZL has also installed 200KW
solar capacity on rooftops at the
Udaipur and Chanderia smelters.
We register CDM projects with a
potential CER’s of 1.3 million units
under the UNFCCC framework.
Out of this we have accrued
0.4 million units in 2015-16. These
projects are registered by the UN
Framework Convention on Climate
Change. In FY2016 we accrued
around 0.42 million units.
We calculate and report greenhouse
gas inventory i.e. Scope 1 (process
emissions and other direct emissions)
and Scope 2 (purchased electricity)
as defined under the World Business
Council for Sustainable Development
(WBCSD) and World Resource
Institute (WRI) GHG protocols.
Please refer to our online Sustainable
Development Report 2015–16.
Waste
We have a well-established Resource
Use and Waste Management
Technical Standard and supporting
guidance notes. Our main priority
is to reduce both the quantity and
the toxicity of our waste, followed
by recovery, re-use and recycling,
with disposal in landfill or by
incineration viewed as a last choice.
The main non-hazardous waste
we generate includes fly ash (from
captive and merchant power
plants), red mud (aluminium
refinery waste), jarosite/jarofix
(from zinc smelting), slag, lime grit
(process residues from smelters and
aluminium refineries) and phosphor
gypsum (phosphoric acid plant).
We generated around 11.9 million mt
and recycled/re-used 5.9 million mt
of non-hazardous waste in various
gainful procedures such as brick and
road making, cement manufacturing
and filling of low lying areas etc.
Hazardous waste was stored in a
secure landfill and most of it was
sold to authorised recyclers.
Guinness Book of World Records plantation
record at Mansa, India
Talwandi Sabo Power Limited
(TSPL), a subsidiary of Vedanta,
set a world record by planting
206,000 saplings in one hour on
30 October 2015 in Mansa, Punjab.
Over 5,800 supporters from schools
and surrounding villages and locals
volunteered to make this feat
possible on a 200-acre land area.
Considering the small forest cover
in Punjab, these additional trees
will help improve biodiversity in the
region and specifically in Mansa.
Greenhouse gas emissions (mt. of CO2 equivalent)
Business
Scope 1
Scope 2
Scope 1
Scope 2
FY2016
FY2015
Zinc India
Zinc International
Copper India & Australia
Copper Africa
Aluminium India
Power sector
Oil & Gas sector
Iron Ore business
Others
4,465,507
58,176
157,975
189,676
18,957,341
12,388,002
1,506,798
1,857,613
0
4,379,361
218,265
53,483
607,948
145,311
504,604
107,597
14,865
70,679 19,450,763
8,993,299
17,073
1,401,860
115,943
1,784,050
18,227
9,637
160,924
703,955
472,480
5,460
583,164
2,188
47,387
6,813
39,581,088
1,577,241 36,315,724
1,982,371
(COP 21), we are working to
formulate a Company strategy on
climate change that is aligned with
the Intended National Determined
Contribution (INDC) for the countries
in which we are operating.
Our Energy and Carbon Policy
mandates that all subsidiary
businesses must apply global best
practice to minimise greenhouse
gas (GHG) emissions and energy
use, looking to energy management
standards such as ISO 50001, and
deploying the latest technology to
optimise efficiencies. During FY2016,
we conducted internal benchmarking
on energy consumption among all our
subsidiaries, and we are pleased to
report that we met our energy targets
over the year and saved 0.94 million
GJ, consuming 405 million GJ.
Clean energy
As well as optimising our efficiencies,
we also look to continuously evaluate
our renewable energy portfolio
in a cost effective manner for our
operations. There is a constant
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 42
Sustainable Development continued
Building strong relationships
Objectives and targets FY2016
Status Details on performance FY2016
FY2017 objectives and targets
Community relations and stakeholder engagement
All sites to complete need
assessment and pilot studies on
social audit for Indian business.
ä Need-based assessment
completed for all sites. The
Social Impact assessment was
completed for major Indian
sites – Cairn India and HZL.
ä SAP – Stakeholder & Grievance
Handling system rolled out.
Social Impact assessment studies to
be continued for remaining sites.
Implementation and utilisation rate
for SAP system to be increased.
Roll-out of SAP-based programme
management tool for community
grievance development and
stakeholder engagement.
Capacity building and refresher
course – E-learning module on Code
of Conduct to be implemented.
ä E-learning module on Code
of Conduct launched for
all Indian operations.
Ensuring 100% coverage of Code of
Conduct training for all employees.
ä Achieved æ Not achieved à In progress
Stakeholder engagement
To ensure that we understand
the expectations and align our
interests, we regularly engage with
our stakeholders, both internal and
external, through a variety of different
channels. This communication
dovetails with the fourth pillar of our
Sustainable Development Model
– Strategic Communications. It
helps us create synergies, combat
misrepresentation, mitigate risks
and reinforce our reputation.
Human rights
We consider the respect of
human rights to be a fundamental
responsibility, particularly as the
majority of our operations are in
developing countries. Our policies and
Code of Conduct follow international
good practices such as the UN
Guiding Principles and the OECD
standards. There is zero tolerance
of human rights violations at our
operations and the use of child labour
is a non-negotiable offence, whether
direct or through a contractor.
Human rights training is an integral
part of our Sustainability Framework,
with around 42,200 man hours of
training on human rights and Code
of Conduct given in FY2016. We
support collective bargaining and
recognise unions, with systems for
employee development, remuneration
and grievance redress. As part of the
Supplier Code of Conduct and our
Supplier & Contractor Sustainability
Management Policy we communicate
our requirement for all suppliers
to operate in compliance with all
relevant legislation, follow our policies
while executing work for, or on
behalf of, Vedanta or on our sites,
and adopt ethical good practices
in line with the letter and spirit of
our Supplier Code of Conduct.
The introduction of the Modern
Slavery Act in the UK this year
aims to tackle the issues of slavery
and people trafficking and directs
companies to ensure that these
practices are not taking place,
either in their own businesses or in
their supply chains. We propose to
incorporate our response to this in
our Code of Business Conduct and
Ethics, in our Human Rights Policy
and in the verification and auditing
programme for our supply chain.
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43
1
Our engagement approach
Ask
Our dialogue begins
with questions to
solicit feedback. Our
stakeholders have
access to a number of
platforms to reach out
to Vedanta personnel
and voice concerns.
Answer
We disclose not just
because we want to
be heard, but because
we are answerable.
Equal attention is
laid on providing a
constructive response.
Analyse
We have established
a robust investigation
process for
complaints reported
via the Whistleblowing
Mechanism,
Sustainability
ID and Group
Communications
ID, involving senior
management and
other function
personnel.
Align
We work hand-
in-hand with our
stakeholders such
as Governments,
communities, industry
bodies and NGOs,
and align our goals
and actions with high
priority areas of the
nation. The feedback
of all engagements
becomes part of
our materiality
identification exercise.
Act
There is no stronger
proof of commitment
to the cause than
demonstrable action.
We back our words
with acts that move
the needle towards
promised outcomes.
Each business has developed
stakeholder engagement plans
and these are reviewed and
revised on a regular basis. These
stakeholders include communities,
shareholders, investors, lenders,
NGOs, suppliers, industry bodies
and governments. The feedback
of all these engagements becomes
part of the materiality exercise and
ultimately risk registers at site. The
details on our engagements, material
issues and our progress can be found
in the online Vedanta Sustainable
Development Report 2015-16.
1: Women stakeholder group meeting at Sterlite Copper – Tuticorin village.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 44
Sustainable Development continued
Adding and sharing value
Objectives and targets FY2016
Status Details on performance FY2016
FY2017 objectives and targets
ä As part of the Technical ACT
UP initiative, assessment of 937
eligible employees is complete.
Institutionalising Technical
ACT UP process across
Vedanta Group companies.
Human resources
To include 1,000 eligible employees
for the technical assessment.
Phase II planned, covering the
next 50 high potential stars
for the intensive programme
preparing the next generation
talents for leadership roles.
Continue to focus on diversity with
an objective of hiring 15% of women.
25% women representation at
Vedanta Board level by FY2016.
à Structured programme of
‘Internal Growth Workshops
Initiative’ to identify new leaders
in various functions across Group
companies was initiated. So far
in this programme, 100 new
leaders have been identified
and given significantly higher
roles and responsibilities.
ä More than 15% of women
professionals joined Vedanta.
æ In this regard we have not met
our target for women Directors;
we continue to build on diversity
in leadership roles and have
made a number of senior female
appointments during the year.
ä Achieved æ Not achieved à In progress
We understand that as a global
company we have a broader role in
society than just bringing resources
to market. This is particularly true
in the context of operating in the
developing world. With operations
primarily in India and Africa, we
believe that the Group can and should
add and share value to support the
development of the economies and
communities where we operate.
Whilst we add value by discovering
and processing natural resources
so they can be used to produce the
products society needs, we also
drive economic impact in the form
of payment of taxes and royalties,
employees’ wages and supplier
contracts, in addition to direct
contribution to community projects.
Employees
Around 67,000 people work hard
at Vedanta every day to make
it the success that it is. Every
single employee can expect
to be inspired to meet their
potential; to feel empowered and
united under shared values.
1
Identification of high potential
employees across Vedanta’s
professional population and
development of next-generation
talent. Focus on performance and
measurement of top 150 leaders.
Continue to focus on diversity
with the same objective of
15% of total women hiring at
a lateral and fresher level.
33% women representation at
Vedanta Board level by 2020.
It is beneficial for our business to hire
people who understand the market
and can engage effectively with
contractors and suppliers. Ensuring
managers are from the local area
is particularly important in helping
us relate to the issues faced by
neighbouring communities, to connect
our business and sustainability
strategies. Over the reporting
period, across our business, the total
percentage of senior management
who are locally hired is: India (97%),
Australia (100%), Zambia (63%),
Namibia (100%), Ireland (100%)
and South Africa (56%). We believe
that we must invest in developing
and retaining key talent to drive
innovation and efficiency within the
business. In this regard, our attrition
rate has remained stable and this
year was reported at 5.38%.
With operations across four
continents we work in a diverse
organisation accommodating many
different faiths, nationalities and ages.
One constant area of focus is gender
diversity and this year we initiated
special recruitment drives to provide
career advancement for women,
including planned rotation through
corporate functions which lead to
an increase in the ratio of female
employees to 9.4% of total employees
as compared to 8.6% last year.
1: Flood relief materials distributed by
Sterlite Copper.
2: Beneficiary of the solar light initiative
in Barmer.
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45
Society
We make a direct, positive economic
contribution to national and state
government budgets through the
taxes and royalties we pay. Indirectly,
we contribute towards developing
industry sectors, infrastructure and
skills. We do this in a number of
ways, including through membership
of industry organisations and
international bodies. Protecting the
environment also involves working
closely with host governments and
our investment in environmental
protection and maintenance initiatives
helps support government priorities.
We also make a broader contribution
by providing some 67,000 direct and
indirect employment opportunities
and many times that is through
secondary, supporting industries.
In FY2016, Vedanta contributed
US$3.2 billion to host governments
by way of taxes and royalties. This is
detailed in our first Tax Transparency
Report which reflects our proactive
approach to transparency and greater
accountability to our stakeholders
(for more details please see the
FY2016 Tax Transparency Report).
Shareholders and lenders
Dividend
Since our IPO in December 2003,
we have maintained a progressive
dividend policy. Over the years,
our shareholders have seen a Total
Shareholder Return of over 200%
and we have paid a progressive
dividend that was increased in nine
out of ten years and held constant
for one year. Over the last ten
years, Vedanta has returned US$1.6
billion to shareholders, an average
return of 8% per annum. In FY2016,
the Board proposed a dividend of
30 US cents per equity share.
On 30 March 2016, Hindustan Zinc
Limited declared a special Golden
Jubilee dividend of 1200% i.e. INR24
(US$0.37) on an equity share of INR2
(US$0.03) each. This is the largest
ever dividend paid by any company
in the private sector in Indian history.
2
Our employees are one of our
biggest assets and in addition to
paying US$640 million in wages
and benefits, we also invest in a
number of areas to maintain a happy,
healthy and motivated workforce.
Training and development are key.
Every employee has the ‘right to
grow’ and is part of an appraisal and
reward system benefiting from the
1.53 million man hours of training we
delivered across the Group. Technical
capabilities are essential for our
goal of operational excellence and
around 1,000 employees joined our
Technical ACT UP initiative, following
a technical assessment. Nurturing our
future leaders is also critical to our
future success and we commenced
Phase II of our high potential stars
programme, selecting a further 50
from the next generation of talent
for future leadership roles. So far in
this programme, 100 new leaders
have completed a structured training
programme and are now in higher
roles with broader responsibility.
Communities
Our community investment strategy
focuses on health, education, skills
development and the environment,
with a US$37 million contribution
towards those priorities in FY2016,
building hospitals, schools
and infrastructure, developing
employability skills and supporting
community programmes,
particularly in rural areas.
We are supporting the UN – Women
Empowerment Principles and
Sustainable Development Goals
and have also completed a peer
benchmarking study on our ‘License
to operate’ in partnership with
School of Public and Environment
Affairs (SPEA), Indiana University.
Based on the needs assessments we
conducted last year, two key areas
of focus have been vocational youth
training and education programmes
for women and children. In this
regard, to provide access to higher
education, we run 16 schools and
colleges, most of them close to our
operations, and over 211,520 students
studied here this year. We operate
five centralised kitchens serving
fresh, nutritious and delicious meals
to around 95,000 children every
day to support the Government’s
midday meal programme.
In rural households, due to scant
financial resources, young boys and
girls often lose out on educational
opportunities. Vedanta addresses
this issue by providing scholarships
to girls who opt for higher education.
This year, 724 such scholarships were
granted. In addition to running 16
schools and colleges, we have set up
50 model Angandwadis – child care
centres that now provide support
for over 87,000 children. In line with
the Prime Minister’s Swachh Bharat
vision, we have committed to build
50,000 toilets across Rajasthan.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 46
Sustainable Development continued
Strategic communications
In order to reflect the proactive
communications with stakeholders,
understand their needs, shape their
expectations and share Vedanta’s
intentions, commitments and
actions, we introduced strategic
communications as the fourth pillar of
our sustainable development model.
We are committed to complete
transparency in our communications
with all our stakeholders. The bedrock
of our communication is how we
engage with the communities
and employees in and around
our assets. This ensures harmony
and sustains our social license to
operate. To maintain the open
dialogue, it is equally important
to engage with the influencer
communities which includes media,
the local governments and the socially
relevant investors. The Company
is present across eight countries in
four different continents. All these
regions differ in terms of operational
and geographic challenges,
business environment, economic
development, culture and stakeholder
expectations. Together, we are One
Organisation with One Vision.
Last year a comprehensive branding
exercise was taken up to provide
holistic and authentic ‘One Vedanta’
experience to stakeholders in all
the ways they interact with the
organisation. The logo refresh has
also been adapted by all the divisions/
Group companies to align with the
Company’s goal of being a unifying
brand across its global operations.
Communicating constructively
Communities
Listening to the communities,
understanding their concerns
and resolving issues is key to
pre-empting and avoiding social
conflicts. We have adopted a
dual approach to community
engagement – we undertake focused
CSR activities to create a positive
social impact and ensure that the
benefits of these activities are well
communicated to the community
and the linkage to Vedanta is well
established. We also proactively
engage with the communities to
negate any trust deficit issues.
Transforming the Anganwadi model
Nandghar – the new-gen child care centre
Challenge
In India, the role of Anganwadi (child
care centre) is critical in combating
malnutrition, promoting pre and
post-natal care, immunisation and
early childhood education. Though
the nation is home to over 1.37 million
Anganwadis, their impact is far
from what’s desired. The need of
the hour is to enhance the efficacy
and efficiency of Anganwadis.
Intervention
Project Nandghar is designed
in line with the Prime Minister of
India’s vision of Beti Bachao Beti
Padhao, Digital India, Swachh
Bharat and Skilling India.
With an aim to modernise the
Anganwadi infrastructure in the
country, Vedanta signed an MoU with
the Ministry of Women and Child
Development to construct 4,000
new-age Anganwadis across India.
Our model reimagines existing
Anganwadis and enhances their
role. To be developed in high-
burden districts, they will be called
Nandghars and shall be equipped
with state-of-the-art infrastructure
including access to nutritious
food, clean water, sanitation and
perennial solar power supply.
They will enhance capacity
utilisation of the infrastructure by
being an access point for primary
healthcare and hosting women’s skill
development programmes in the free
hours after the children’s education.
Highlights of Nandghar:
Education
a. Smart Learning kit for children
b. Interactive e-learning
Nutrition
Supplementary nutrition to
be provided to children from
six months to six years, and to
pregnant and lactating mothers
Primary healthcare
Each cluster of 25-30 Anganwadis
to have a Medi-clinic and a
Mobile Medical Unit, which
will provide free OPDs, free
medicines, and diagnostics
for maternal and child care
Livelihoods
a. Hosting women’s skill
development programmes
b. Creation of micro enterprises and
Self Help Groups (SHGs)
Outcome
To date, 100 Nandghars have
become operational. Once all 4,000
Nandghars are constructed, over
400,000 children and women
will benefit every year. With this
endeavour, we hope to significantly
transform the lives of women and
children in rural India and impact
the prosperity of villages at large.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
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47
Promoting use of safe drinking water
Vedanta has signed the WASH pledge
and is committed to provide safe
drinking water to all communities
near its operations. With the
objective of making people aware
about the benefits of safe drinking
water, Cairn India, along with its
partners, organised an awareness
programme at the Kharantiya,
Bodwa and Seoniyala villages of
Barmer District. The programme,
organised at Government schools
in the respective villages, was
attended by students, teachers,
villagers and panchayat members.
Employees
Communication is vital for good
human resource management.
Engaging with the employees
makes them more productive, better
aligned and more committed. It also
manifests in smooth and effective
functioning of the organisation. We
maintain an ongoing communication
with our employees through multiple
programmes at various levels with
multiple communication tools such
as HZL News, Yagna, EZines, internal
newsletters and social media.
Virtual town hall meeting
A virtual town hall meeting was
chaired by Vedanta Resources
Founder and Chairman Anil
Agarwal, where he spoke about
his vision on the Company and
the current market conditions.
The interactive session was held
using a tele-presence and video
conferencing system connecting 30
Vedanta locations in five countries.
More than 5,000 employees from all
Vedanta subsidiaries and businesses
operating in different geographies
participated in the meeting.
Employees were encouraged to ask
questions and the Chairman patiently
and meticulously answered them all.
Other stakeholders
Just like our employees and
communities, we feel other
stakeholders such as civil society,
industry (supplier/customer),
Government and the lending
community like shareholders, investors
and banks play an important role
in shaping our sustainability and
development agenda. In the mining
industry, they are partners in the
process of identifying and resolving
the challenges. We engage with
all these stakeholders in numerous
ways and through various forums.
Sustainable Development Day
Sustainability is at the core of all the
business decisions and processes
at Vedanta Resources. To showcase
the Group’s commitment to safety
and sustainability as a key business
imperative, Vedanta Resources plc,
together with its subsidiaries, hosted
its first Sustainable Development
Day in London in July 2015.
Senior management from Vedanta
Resources provided insights
to socially relevant investors
(SRIs) on how sustainability is
embedded across Vedanta’s
global operations and updated
them on the progress made in
the past year during the event.
The team updated the audience how
Vedanta is putting its sustainable
development model into practice
and also included case studies on
sustainable development initiatives
at Vedanta’s Aluminium, Zinc
International and KCM operations.
This was followed by a Q&A session
which saw an active participation
with investors sharing feedback,
clarifying doubts and offering
suggestions. The entire event was
very well received – the participants
not only recognised the virtue
of organising this event but also
the value of the positive impact
being created by Vedanta.
Leveraging industry platforms
Mining Indaba is the world’s largest
mining investment conference
and Africa’s largest mining event.
Vedanta first attended the Mining
Indaba in 2013 with the objective of
raising awareness about Vedanta in
Africa. Since then, we have enlarged
our presence and visibility at the
conference. It provides us an excellent
platform to engage with multiple
stakeholders such as governments,
investors, financial institutions,
suppliers plus the media, which
augurs well with our goal to expand
our footprint in the continent.
Exchanging ideas with partners
Cairn India organised a CSR Partners’
Conclave at Barmer in March 2016
to encourage partners to showcase
milestone projects. The conclave
featured an interactive cross-
functional session where partners
shared the challenges, lessons learnt
and the best practices. Vibrant
exchanges of ideas, suggestions for
improvement and opportunities to
bring about operational improvements
were the hallmarks of the conclave.
Investors and lenders
Both investors and lenders seek
return on their investment. Volatility
in the commodity markets, increased
competition and the resultant
decrease in profit margin affects
their returns. Thus, it is critical to
communicate with them our plans,
actions, outcomes and prospects,
so that they can make informed
investment decisions. While we
continue to communicate with them
through an array of statutory and
proactive media vehicles, this year
our parent Group has added a new
focused engagement mechanism
to communicate with SRIs – the
Sustainable Development Day.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 48
Finance Review
Key financial priorities: Leading to
a stronger balance sheet
1) Focus on cost savings and
operational efficiency
The Company deployed several
measures to optimise cost spends.
These included clean-sheet-
costing for negotiations, alternate
material, new sources of supply,
tightening efficiency in logistics and
quality control. Strong operational
efficiencies, together with cost-saving
and marketing initiatives, delivered
US$325 million during FY2016.
2) Generate and preserve cash,
optimise capex
In addition to opex and capex
optimisation, the Company remains
focused on generating cash across
its businesses by reducing working
capital through efficient initiatives.
This resulted in the delivery of free
cash flow (FCF) of c.US$1.7 billion
during FY2016, amounting to FCF
yield of 73% of EBITDA during FY2016
(FCF US$1.0 billion, FCF yield 28%
in FY2015). Our priority is to deliver
positive FCF at each segment.
3) Deleveraging, refinancing and
covenant protection
The Company has made progress
by completing refinancing of
US$0.9 billion of the US$1.5 billion
due to mature at Company level
during FY2017. The Company
successfully completed two rounds
of bond buybacks amounting to
US$556 million through tenders
and market purchase routes to
enhance investor confidence.
Furthermore, the Company has
commenced a third bond buyback
programme during April 2016
through a market purchase route.
As at 11 May 2016, US$130 million
worth of bonds have been re-
purchased under this programme.
The Company approached lenders
and secured covenant modifications
on bank loans at Vedanta Resources
plc, to ensure compliance as
on 31 March 2016 in this weak
commodity price environment.
4) Robust capital allocation
The Company has prioritised
capital for high-return, low-risk
projects to preserve cash. The
cash outflow on capex excluding
capital creditors was US$566 million
during FY2016 compared with
US$1,531 million during FY2015.
5) Group structure simplification
A potential merger between
Vedanta Limited and Cairn India was
announced during the year which,
if successfully completed, would
simplify the Group structure.
Consolidated operating profit summary before special items
(in US$ million, except as stated)
Consolidated operating profit before special items
Oil & Gas
Zinc
India
International
Iron Ore
Copper
India/Australia
Zambia
Aluminium
Power
Others
Total Group operating profit before
special items
Executive summary: Stable
performance in a challenging
price scenario
Total revenue for the year was
US$10.7 billion, compared with
US$12.9 billion in the previous year.
The decrease was primarily driven
by lower Brent prices, and lower
LME prices and premia across the
metal businesses. The Company
delivered EBITDA of US$2.3 billion, a
decrease of 38% due to the negative
impact of commodity and Brent
prices, lower premium and higher
profit petroleum. However, some
of the downside was mitigated by
a strong operational performance
at Zinc India, ramp-up in power
units, cost saving and marketing
initiatives across the businesses,
and helped by depreciation of
the operating currencies against
the US dollar. Average adjusted
EBITDA margin for the year
continues to remain strong at 28%.
The special items primarily relates to
asset impairments of US$3.3 billion
net of tax (US$5.2 billion gross of
tax) in FY2016. This largely relates
to the Oil & Gas business which was
adversely impacted by the lower Brent
price, down 28% during the year.
Excluding special items,
profit before tax was lower at
US$226 million, largely due to
lower EBITDA, loss after tax was
US$29 million with attributable
loss after tax of US$393 million.
a) Prices
Operating profit before special items
has been significantly impacted by the
downturn in commodity prices across
Vedanta’s businesses. The Company
considers exposure to commodity
price fluctuations to be an integral
part of the Group’s business and its
usual policy is to sell its products at
prevailing market prices, and not to
enter into price hedging arrangements
other than for businesses of custom
FY2016
(255.9)
886.8
875.1
11.7
10.9
106.9
304.3
(197.4)
4.9
122.2
5.4
FY2015
% change
206.5
1,129.0
1,059.3
69.7
(10.9)
38.4
229.4
(191.0)
275.3
88.0
9.2
–
(21.5)%
(17.4)%
(83.2)%
–
178.4%
32.7%
–
(98.2)%
38.9%
(41.3)%
881.2
1,735.5
(49.2)%
smelting and purchased alumina,
where back-to-back hedging is
used to mitigate pricing risks.
Oil & gas: Average Brent price for
the year was US$47 per barrel, down
by 44%, compared with US$85
per barrel during FY2015, reducing
operating profit by US$737 million.
Zinc, lead and silver: Average zinc
LME prices during FY2016 were
down 16% to US$1,829 per tonne.
Lead LME prices were down 13% to
US$1,768 per tonne, and silver was
down 16% to US$15.2 per ounce.
Together, these reduced operating
profits by US$367 million.
Aluminium: Average aluminium LME
prices were down 16% to US$1,590 per
tonne in FY2016, adversely affecting
operating profit by US$225 million.
Copper: Average copper LME
prices were down 21% to US$5,211
per tonne in FY2016, adversely
affecting Zambian operating
profit by US$146 million.
Others: Pig iron realisation was lower
by 27% in FY2016, adversely affecting
operating profit by US$40 million.
Lower energy prices on the back
of a weaker power market had an
adverse effect of US$34 million.
These negative impacts totalled
US$1,547 million, with a further
US$379 million decrease due
to lower premiums across zinc,
aluminium and copper, and a higher
discount at the Oil & Gas business.
The combined fall in prices and
premiums resulted in an adverse net
price reduction of US$1,926 million.
b) Direct raw material deflation
Key input commodity prices,
including alumina, coal, fuel and iron
ore, softened significantly during
FY2016, contributing US$123 million
to operating profits on our purchases.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
49
Consolidated operating profit bridge before special items
(in US$ million)
Operating profit before special items for FY2015
Market and regulatory: US$(2,167.8) million
a) Prices
LME
Brent
Premium
Power rates
b) Direct raw material deflation/(inflation)
c) Foreign exchange movement
Rupee depreciation
ZAR and NAD depreciation
Kwacha depreciation on local spend
Kwacha depreciation on VAT receivable
EBITDA translation1
d) Profit petroleum to GoI at Cairn
e) Regulatory changes
Operational: US$1,313.5 million
f) Volume
g) Cost-saving initiatives2
Marketing initiatives
h) Depreciation and amortisation
i) Others including one-off expenses, technology and
base change and allied businesses
Operating profit before special items for FY2016
(777.2)
(736.5)
(379.2)
(33.5)
167.4
41.2
29.6
(62.0)
(139.6)
1,735.5
(1,926.4)
123.0
36.6
(186.9)
(214.1)
186.5
264.9
29.8
550.5
281.8
881.2
1 Base year impact due to local functional currency depreciation.
2
In addition to the savings indicated in ‘g’ above, a further c.US$30 million on account of eliminated
capex was also delivered.
Information regarding exchange rates against the US dollar
Indian rupee
South African rand
Zambian kwacha
Average
FY2016
Average
FY2015
% change
(FY2016 vs
FY2015)
As at
31 March
2016
As at
31 March
2015
65.46
13.78
9.71
61.15
11.06
6.45
7%
25%
51%
66.33
14.83
11.24
62.59
12.10
7.59
The Alumina Price Index (API)
reduced from US$334 per mt in
FY2015 to US$271 per mt in FY2016.
Import Coal Index (New Castle)
reduced from US$68 per mt in
FY2015 to US$55 per mt in FY2016
d) Profit petroleum to GoI at Cairn
Profit petroleum outflow increased
by US$187 million, driven by:
US$142 million due to lower
capex and opex spend during
the period; US$45 million due to
provision against past costs.
c) Foreign exchange fluctuation
Most of our operating currencies
depreciated against the US dollar
during FY2016. Weaker currencies are
favourable to Vedanta, given the local
cost base and US dollar-linked pricing
in all our domestic markets. Together,
net of translation, these increased
operating profit by US$69 million.
The sharp depreciation of the
Zambian kwacha adversely impacted
operating profits by US$32 million,
since our VAT receivable from
the Zambian Government is
designated in local currency.
Net of all currency movements
against the US dollar, operating
profits increased by US$37 million.
e) Regulatory
A Renewable Purchase Obligation
(RPO) was introduced in 2010 by
various state electricity regulation
commissions. This made it mandatory
for distribution companies, open
access consumers and captive power
producers to meet at least 5% of
their total annual consumption of
energy through renewable energy
sources. Many companies in India
had previously appealed against the
order. Ultimately, the RPO regulations
were appealed against in the Supreme
Court. The Apex court upheld the
validity of the regulations including
captive power producers by an order
dated 13 May 2015. Consequently, a
provision of US$63 million has been
made for the period FY2013-FY2015
for Vedanta’s Aluminium, Zinc India
and Copper India businesses. In
addition, the RPO impact for the
current period was US$16 million.
Other regulatory levies such as
the increase in the clean energy
cess on coal (US$32 million),
electricity duties on captive power
(US$22 million), increases in royalty
rates including contributions towards
the District Mineral Foundation (DMF)
(US$70 million), increase in profit
petroleum tranche in Rajasthan at
DA2 block (US$8 million) and others
together impacted the operating
profit adversely by US$214 million
during FY2016 compared to FY2015.
f) Volumes
There were higher production
volumes across the businesses,
primarily at Zinc India due to improved
smelter efficiency and liquidation
of inventories, and record annual
production from Aluminium, Power,
and Copper India. These contributed
to increased operating profit, which
was partially offset by lower volumes
in Oil & Gas and Zinc International.
• Zinc India (positive US$154 million):
Integrated zinc, lead and silver
metal production increased year-
on-year by 5%, 33% and 58%
respectively, with improved smelter
efficiency and liquidation of
mined-metal inventories. There was
a record refined integrated silver
production of 13.6 million ounces
due to higher volumes from the
Sindesar Khurd mine.
• Iron Ore (positive US$39 million):
Production and sales restarted in
Goa during the year, after a
suspension of over three years.
• Power (positive US$49 million):
With commissioning of the
remaining units at Talwandi Sabo
and BALCO during 2016, our entire
Power portfolio of 9,000MW
(commercial and captive) is
now operational.
• Cairn India (positive US$2 million):
Production remains stable, primarily
as a result of volume loss due to
natural declines, which was almost
offset by the successful EOR
project at Mangala.
• Zinc International (negative
US$84 million): Production was
affected by the planned closure
of the Lisheen mine in November
2015, a planned maintenance
shutdown and partial industrial
action at Skorpion.
Together, the above factors
impacted operating profit before
special items by US$187 million.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 50
Finance Review continued
g) Cost-saving and marketing
initiatives
Company-wide cost-saving initiatives
and realisation improvements were
launched during FY2016. An idea
bank of 900+ initiatives across
cost and price realisation in our
businesses is being implemented
in various areas including:
• Clean-sheet-based renegotiations
– operations and maintenance
contracts, mining contracts,
capex contracts
• Optimising sourcing mix in key raw
materials
• Logistics: multi-axle trucks,
turnaround time, route optimisation
• Enhanced use of modern tendering
methods like e-auction
• Consolidation of spend and
reduction of vendors
• Developing go-to-market strategies
around value-added products,
customer base, new geography,
long-term vs. short-term contract
mix and expanding demand and
usage of certain base metals with
alternative usage.
These initiatives are ongoing and
have yielded results in FY2016 with
expectations for these initiatives to
yield similar results in the future.
The reported savings are on a
Total Cost of Ownership (TCO)
methodology and do not include
the benefits or extra spend due to
input commodity inflation/deflation,
regulatory or technology changes.
Unit costs across our businesses
have been cut by various cost-saving
initiatives and these contributed
US$265 million. Various marketing
initiatives to improve domestic market
share, realisation of up-charge over
benchmark premiums, and our
product mix all increased operating
profit by US$30 million. (In addition
to the savings above, a further
c.US$30 million savings on account of
eliminated capex were also delivered.)
h) Depreciation and amortisation
Depreciation reduced by
US$146 million during FY2016
compared to FY2015. Of the total
reduction, US$80 million was due to
a full year impact of change in the
useful life of assets across Vedanta’s
businesses effective H2 FY2015. This
was in accordance with the Group’s
accounting policy and was based
on technical studies performed by
an independent external agency.
A lower depreciation charge of
US$28 million in the Oil & Gas business
was primarily due to a reduction in
planned capex spend due to the
optimisation efforts. A depreciation
charge lower by US$26 million in
Skorpion Zinc was due to an increase
in reserves and lower volumes.
Income statement
(in US$ million, except as stated)
Revenue
EBITDA
EBITDA margin (%)
EBITDA margin without custom smelting (%)
Special items
Depreciation
Amortisation
Operating loss
Operating profit without special items
Net interest expense
Other gains/(losses)
Loss before taxation
Profit before taxation without special items
Income tax expense – others
Income tax credit – special items
Effective tax rate without special items (%)1
Loss for the year
Profit for the year without special items
Non-controlling interest
Non-controlling interest without special items
Attributable loss
Attributable loss without special items
Underlying attributable (loss)/profit
Basic (loss)/earnings per share (US cents per
share)
(Loss)/earnings per share without special items
(US cents per share)
Underlying (loss)/earnings per share (US cents
per share)
FY2016
FY2015
% change
10,737.9
2,336.4
21.8%
27.6%
(5,210.1)
(1,108.4)
(346.8)
12,878.7
3,741.2
29.1%
38.0%
(6,744.2)
(1,254.6)
(751.1)
(16.6)%
(37.5)%
–
–
(22.7)%
(11.7)%
(53.8)%
(4,328.9)
(5,008.7)
(13.6)%
881.2
(582.6)
(72.5)
1,735.5
(554.6)
(76.9)
(49.2)%
5.0%
(5.7)%
(4,984.0)
(5,640.2)
(11.6)%
226.1
(255.5)
1,737.4
113.0%
1,104.0
(352.6)
2,205.1
31.9%
(79.5)%
(27.5)%
(21.2)%
(3,502.1)
(3,787.7)
(7.5)%
(29.4)
(1,664.7)
363.5
(1,837.4)
(392.9)
(364.1)
751.4
(1,989.1)
826.1
(1,798.6)
(74.7)
(38.9)
–
(16.3)%
(56.0)%
2.2%
–
–
(665.8)
(654.5)
(142.4)
(27.2)
(131.9)
(14.2)
–
–
–
1 Effective tax rate 22.4% in FY2016 excluding HZL special dividend declared in March 2016.
The capitalisation of power units
at Talwandi Sabo and BALCO, and
aluminium pot ramp-ups at Korba-
II (84 pots) and Jharsuguda-II (82
pots) have contributed to an increase
in depreciation of c.US$25 million.
Amortisation charges were
reduced by US$404 million during
FY2016 compared to FY2015,
driven by impairment in the Oil
& Gas business in March 2015.
i) Others
Current year items includes export
income on the target plus the
scheme recognised pursuant to a
favourable Supreme Court Order
in India (US$33 million) and a
provision write-back at Copper
Zambia (US$29 million), which
contributed US$62 million to
operating profit during FY2016.
Prior year items which did not
recur in FY2016 include an
unsuccessful exploration expense
of US$122 million at Oil & Gas,
provision for Power receivable by
US$46 million and higher spend at
Copper Australia by US$21 million,
which contributed US$189 million to
operating profit bridge over FY2015.
Together with the above one-off items
and other cost deferments not listed
above, partially offset by higher spend
on Enhanced Oil Recovery (EOR) by
US$57 million, contributed higher
operating profit of US$282 million
in FY2016 over the base year.
Revenue
Overall revenue, as explained earlier,
was down 17% to US$10,738 million
compared with US$12,879 million
in FY2015. The table on page 51
indicates the movement by segment.
The impact of LME, premia and
currency movement was 21.9% year-
on-year, which was partly offset by
improved operational performance
of 5.3% resulting in an overall revenue
reduction by 16.6% year-on-year.
EBITDA and EBITDA margin
EBITDA for FY2016 was down by 38%
at US$2,336 million. This was primarily
due to the reduction in Brent and LME
prices (see the ‘operating profit bridge
before special items’ for more details).
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
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51
In FY2016 EBITDA margin was
22%, compared to 29% in FY2015.
Adjusted EBITDA margin – excluding
custom smelting operations – was
28% compared to 38% in FY2015.
The main margin contributors
across key businesses were:
• Oil & Gas (62% to 43%) – driven by
lower Brent, marginally offset by
cost savings.
• Zinc International (31% to 17%) –
lower LME prices and lower
volumes.
• Copper Zambia (0% to -2%) – lower
LME prices and local currency
depreciation impact on VAT
receivable, offset by improved
volume and lower costs.
• Aluminium (20% to 6%) – lower
LME prices and premiums, partially
offset by cost savings and input
commodity deflation.
• Power (26% to 28%) – volume
ramp-up, partially offset by weaker
power rates.
• Zinc India (51% to 47%) – higher
volumes impacted by lower LME,
premia and regulatory headwinds
such as electricity duty, water cess,
Renewable Power Obligation and
the District Mineral Foundation.
• Improvement in smelting margins in
Copper India with higher TC/RCs,
reduced cost per tonne and
improved volumes.
Special items
Special items of US$5,210 million
include a non-cash impairment charge
of US$4,934 million (US$3,031 million
net of tax) relating to the Oil & Gas
business; US$228 million in the Iron
Ore business relating to Liberian
assets, US$18 million relating to
Bellary assets in the Iron Ore business,
US$8 million relating to the Copper
Mine of Tasmania and a US$23 million
charge for the Voluntary Retirement
Scheme across the businesses.
The impairment in Oil & Gas was
triggered by a further weakness
in Brent price. The non-cash
charge includes US$4,801 million
(US$2,932 million net of tax) on
the Rajasthan cash generating unit,
which includes both producing and
exploratory assets and US$133 million
(US$99 million net of tax) on the other
exploratory blocks. Key assumptions
include the short-term oil price of
US$41 per barrel gradually going up to
long-term nominal price of US$70 per
barrel in four years’ time, increasing
at 2.5% per annum. The assumptions
selected were consistent with the
various available analysts’ pricing.
The Iron Ore business impairment
charge of US$228 million arose
on the Liberian assets in view of
uncertainty in the iron ore price.
Consolidated revenue – detail
(in US$ million, except as stated)
Zinc
India
International
Oil & Gas
Iron Ore
Copper
India/Australia
Zambia
Aluminium
Power
Others1
Revenue
FY2016
FY2015
Net revenue
% change
2,502.5
2,111.0
391.5
1,322.3
350.0
4,169.7
3,197.2
972.5
1,694.3
707.5
(8.4)
2,943.9
2,357.0
586.9
2,397.5
326.5
4,777.8
3,700.7
1,077.1
2,081.9
588.1
(237.0)
(15.0)%
(10.4)%
(33.3)%
(44.8)%
7.2%
(12.7)%
(13.6)%
(9.7)%
(18.6)%
20.3%
(96.5)%
10,737.9
12,878.7
(16.6)%
1
Includes port business and eliminations of inter-segment sales which were lower in the current period.
Consolidated EBITDA
The consolidated EBITDA1 by sector is set out in the table below:
(in US$ million, except as stated)
FY2015
% change
Key drivers
EBITDA
margin %
FY2016
EBITDA
margin %
FY2015
Oil & Gas
Zinc
India
International
Iron Ore
Copper
India/
Australia
Zambia
Aluminium
Power
Others2
FY2016
570.4
1,063.1
995.0
68.1
73.4
318.7
336.6
(17.9)
106.7
196.3
7.8
1,476.8
1,373.3
1,192.5
180.8
31.4
277.2
281.0
(3.8)
415.5
153.8
13.2
Brent
(61.4)%
(22.6)%
(16.6)%
(62.3)%
LME
LME &
volume
133.7% Ramp-up
15.0%
19.8%
Volume
–
(74.3)%
–
LME
27.6% Ramp-up
(40.9)%
Total
2,336.4
3,741.2
(37.5)%
43.1%
42.5%
47.1%
17.4%
21.0%
7.6%
10.5%
(1.8)%
6.3%
27.7%
–
21.8%
61.6%
46.6%
50.6%
30.8%
9.6%
5.8%
7.6%
(0.4)%
20.0%
26.2%
–
29.1%
1 Earnings before interest, taxation, depreciation, amortisation/impairment and special items.
2
Includes port business and elimination of inter-segment transactions.
Other special items include a charge
of US$23 million for the Voluntary
Retirement Scheme across the
businesses and US$26 million on
impairment of old idle assets at
Bellary & Copper Mines of Tasmania.
Net interest
Finance costs decreased by 8% to
US$1,280 million in FY2016 (FY2015:
US$1,387 million). This is due to the
benefits of lower cost refinancing, the
previous year impact of unamortised
costs written off and using cash to
repay convertible bonds in the Copper
business during H2 FY2015. The
average borrowing cost of the Group
was 7.3% (7.5% in FY2015). The cost
of rupee borrowing decreased by
c.50 bps during FY2016 compared
with FY2015 while the rates on foreign
borrowings largely remained the same.
Investment revenue in FY2016
decreased to US$698 million (FY2015:
US$833 million), mainly at Zinc India
and Cairn India. This was driven by
significant mark-to-market (MTM)
gains accruing in the previous year in
a falling interest rate environment in
India, where most of the Group’s cash
and investments reside. The average
post-tax return on investment of the
Group was 7.2% (9.3% in FY2015).
The combination of lower finance
costs and lower investment revenues
led to an increase of US$28 million in
net interest expense during FY2016.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
52
Finance Review continued
Other gains and losses
Other gains and losses include the
impact of mark-to-market (MTM)
on foreign currency borrowings,
primarily at Vedanta’s Indian rupee
denominated businesses and the
restatement of MAT credit at the
Oil & Gas business. Depreciation
of the Indian rupee against the
US dollar during FY2016 was 6%
(62.59 to 66.33), against a 4%
fall in FY2015 (60.10 to 62.59).
The resulting MTM cost in FY2016 was
US$73 million (FY2015: US$77 million).
Taxation
The effective tax rate (ETR) in FY2016
(excluding special items) was 113%
compared to 32% during FY2015
driven by significantly higher Dividend
Distribution Tax (DDT) owing to
the special dividend declared by
Zinc India in March 2016. Excluding
incremental DDT, the effective tax rate
was 33% during FY2016. This is driven
by a lower tax rate in Zinc India due to
tax efficient investment income partly
offset by higher ETR in Cairn India
driven by lower deferred tax liability
creation given significantly lower
exploration and development spend.
Special items – tax
Tax special items include a credit
of US$1,903 million relating to the
corresponding non-cash impairment
charge as explained above. In addition,
the tax special items in FY2016 of
US$174 million charge arose in Copper
Zambia on restoration of deferred
tax liabilities on mining operations
at 30%; mineral processing activities
at 35%; and changes in legislation
restricting the use of past losses.
Attributable (loss)/profit
The attributable loss before special
items was US$393 million compared
with a US$75 million loss in the
previous year, mainly due to weak
commodity prices and premiums,
which resulted in lower EBITDA.
Higher tax and net interest expense
were more than offset by lower
depreciation and amortisation, partly
mitigating attributable losses. The
attributable loss (including special
items) of US$1,837 million during
FY2016 (FY2015: US$(1,799) million)
was marginally higher, due to lower
EBITDA driven by weak commodity
prices partially offset by improved
operational performance and
the non-cash impairment in Oil &
Gas and the Iron Ore business.
Earnings per share
Basic EPS for the period was a
loss of 665.8 US cents (FY2015:
(654.5) US cents). Excluding the
impact of special items and other
gains and losses, the underlying
EPS was a loss of 131.9 US cents per
share (FY2015: (14.2) US cents).
Fund flow
The Group generated free cash flow
of US$1.7 billion, net debt reduced by
US$1.1 billion and gross debt reduced
by US$0.4 billion during FY2016.
This was driven by temporary and
sustainable working capital initiatives
and optimisation of opex and capex.
The movement in fund flow in
FY2016 is set out below.
Despite a reduction in EBITDA, free
cash flow post-capex improved
during FY2016 compared to
FY2015. Key drivers were:
(a) Working capital movements:
Temporary (US$902 million) and
sustainable (US$263 million)
working capital initiatives helped
generate cash. The temporary
initiatives included advance from
customers, debtor non-recourse
discounting and creditor payment
cycle; part of these is expected to
unwind in FY2017.
(b) Tax outflow: Lower Minimum
Alternate Tax (MAT) outflow,
primarily at the Oil & Gas business,
driven by lower book profits.
(c) Growth and sustaining capex
Fund flow
(in US$ million, except as stated)
including capital creditors: Efficient
capital allocation by prioritisation
of capital to high-return, low-risk
projects, primarily mining capex at
Zinc India, EOR and gas-related
projects in Oil & Gas, and a
ramp-up at the Aluminium and
Power businesses.
These positive effects were partly
offset with higher net interest due
to significant MTM income on bond
investments which was recognised
in the prior year. These gains
accumulated due to softening interest
rates and hence higher bond prices.
Net debt
We remain focused on optimising
our opex and capex, increasing free
cash flow and reducing net debt. The
increased FCF, as above, together with
cost saving, resulted in reduced net
debt amounting to US$7,329 million
(31 March 2015: US$8,460 million).
The Group’s net gearing has increased
from 41% to 52% with c.9% of this
change relating to the non-cash
impairments in the year and their
corresponding effect on net assets.
Debt maturity profile and refinancing
Gross debt as at 31 March 2016 was
US$16,263 million (31 March 2015:
US$16,668 million). The decrease in
borrowings, used primarily to fund
capital expenditure in Aluminium
and Power projects, was more
than offset by the reduction in
borrowing at our Copper and Iron
EBITDA
Operating exceptional items
Working capital movements
Changes in non-cash items
Sustaining capital expenditure
Movements in capital creditors
Sale of tangible fixed assets
Net interest
Tax paid
Expansion capital expenditure1
(a)
(c)
(b)
(c)
Free cash flow
Acquisition of additional interest in
subsidiaries
Dividend paid to equity
shareholders
Dividend paid to non-controlling
interests
Sale/(purchase) of fixed assets
investments
Other movements2
Movement in net debt
1 On an accrual basis.
2
Includes foreign exchange movements.
H1 FY2016
H2 FY2016
FY2016
FY2015
1,286
0
1,029
13
(87)
(132)
3
(245)
(140)
(432)
1,295
0
(111)
(166)
0
(95)
923
1,050
(23)
136
10
(98)
(78)
7
(245)
(215)
(134)
410
0
0
(159)
0
(42)
209
2,336
(23)
1,165
23
(185)
(210)
10
(490)
(355)
(566)
1,705
0
(111)
3,741
(50)
131
203
(221)
(288)
26
(362)
(602)
(1,531)
1,047
(819)
(171)
(325)
(340)
0
(137)
1,132
–
(258)
(541)
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
53
Ore businesses, and the devaluation
of rupee-denominated borrowing.
Of our total gross debt of
US$16.3 billion (excluding working
capital loans of US$0.4 billion), debt
at our subsidiaries is US$8.5 billion,
with the balance in the holding
company. The total undrawn credit
limit was c.US$1.1 billion (including
US$0.5 billion undrawn committed
term facility) as at 31 March 2016.
The future maturity profile of
debt (in US$ billion) of Vedanta
Resources plc is as mentioned
in the table on this page.
We have been successful in
refinancing our maturing debt
through rollovers, new debt
and repayments from internal
accruals during the year, both at
Vedanta plc and its subsidiaries.
Vedanta plc
The upcoming US$1.5 billion debt
maturing at Vedanta plc is to be
met through repayment of the
intercompany loan by Vedanta
Limited to Vedanta Resources plc
(outstanding as on 31 March 2016:
US$1.9 billion). Of this, US$950 million
has already been repaid in April
2016. The remaining balance will
be settled in early FY2017.
Subsidiary
Of the US$2.3 billion debt maturing
during FY2017 (including a short-term
loan of US$1.2 billion which will be
rolled over in the normal process as in
the past), we have already refinanced
US$0.2 billion in April 2016, committed
a term loan of US$0.5 billion and the
remaining balance of US$0.4 billion
will be met through a mix of various
sources including cash and liquid
investments of US$0.2 billion and
other facilities which are in the
process of being tied up and cash
generation from operations.
Cash and liquid investments were
US$8,937 million at 31 March 2016
(31 March 2015: US$8,210 million). Our
cash and liquid investments portfolio
continues to be conservatively
invested in debt mutual funds, and in
cash and fixed deposits with banks.
Going concern
The Directors have considered the
Group’s cash flow forecasts for the
next 12-month period from the date
Particulars
Debt at
Vedanta
Resources
plc
Debt at
subsidiaries
Total debt
As at
31 March
2015
As at
31 March
2016
FY2017
FY 2018
FY2019 FY2020
FY2021
Beyond
FY 2021
7.8
8.4
16.2
7.5
8.5
16.0
1.5
2.3
3.8
1.0
1.7
2.7
2.6
1.8
4.4
0.4
0.8
1.3
0.1
0.8
0.9
1.9
1.0
2.9
of signing of the financial statements
ending 31 March 2016. Net debt has
decreased by US$1,132 million in the
financial year to US$7,329 million,
with US$1,087 million of undrawn
facilities at the balance sheet date.
Further analysis of net debt is set out
in Note 26 of the condensed financial
statements and details of borrowings
and facilities are set out on page 182.
The Board is satisfied that the Group’s
forecasts and projections, taking
into account reasonably possible
changes in trading performance on
cash flows and forecast covenant
compliance, the transferability of
cash within the Group, the flexibility
the Group has over the timings of
its capital expenditure and other
uncertainties, show that the Group
will be able to operate within the
level of its current facilities for the
foreseeable future. For these reasons
the Group continues to adopt the
going concern basis in preparing its
financial statements. Management
has recently renegotiated certain
financial covenants, which have been
modified until September 2018.
Longer-term viability statement
In accordance with paragraph C2.2
of the UK Corporate Governance
Code, the Directors have assessed
the prospects of the Group’s
viability over a longer period than
the 12 months required by the
going concern assessment.
At Vedanta, the business planning
process covers a one-year detailed
plan with capital allocation and
refinancing plans covering a
longer period of up to three years.
The planning process takes into
consideration key assumptions,
around commodity prices and
exchange rates, cost and supply
parameters for major inputs
such as raw materials, labour and
fuel; refinancing and a range of
assumptions regarding volume ramp
up, regulatory matters and the Group’s
cost-saving programme. To align with
our internal financial modeling period
and taking into account the current
volatility in commodity markets,
Vedanta has considered a three-year
period of assessment appropriate for
the longer-term viability statement.
To assess the Group’s longer-term
viability, additional robust stress
testing has been undertaken, utilising
the models used for the going concern
exercise. The principal risks which
were considered for stress testing,
individually and in combination,
are commodity price movements,
delays in ramping up production
and refinancing risks. These are
considered severe but plausible
and well beyond those expected
in the normal course of business.
The viability of the Group under
these severe but plausible
scenarios remained sound, taking
into consideration the availability
of mitigating actions within
management’s control, in particular
flexibility in capital allocation,
access to lines of credit and
alternative sources of finance.
While it is impossible to foresee
all risks, and the combinations in
which they could manifest, based
on the results of this assessment
and taking into account the Group’s
current position and principal risks,
the Directors have assessed the
prospects of the Group, over the next
three years, and have a reasonable
expectation that the Group will be
able to continue in operation and meet
its liabilities as they fall due over a
period of three years from 1 April 2016.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 54
Finance Review continued
Balance sheet
(in US$ million, except as stated)
Goodwill
Intangible assets
Tangible fixed assets
Other non-current assets
Cash and liquid investments
Other current assets
Total assets
Gross debt
Other current and non-current liabilities
Shareholders’ (deficit)/equity
Non-controlling interests
Total equity
Total liabilities
Covenants
The lending banks of Vedanta
Resources plc have consented to
certain changes requested by the
Company to its covenants under the
terms of the relevant debt facilities
effective from 31 March 2016 until
the period ending 30 September
2018. With this, the Company is
in compliance with its covenants
relating to all facilities for the testing
period ending 31 March 2016.
Credit rating
The downward pressure on metal
and oil prices has impacted the
Company’s credit rating.
The rating agency Standard and
Poor’s (S&P) downgraded the
Company’s rating by three notches
to ‘B‘ from ‘BB’ during the year, with
negative credit watch. Recently,
following the special dividend
declaration by Hindustan Zinc Limited,
S&P removed the Company rating
from ‘Watch Negative’, mainly on
the removal of the refinancing risk.
The Company rating was affirmed
at ‘B’ with ‘Stable’ outlook.
31 March
2016
16.6
92.2
16,647.8
1,862.3
8,936.5
2,763.9
31 March
2015
16.6
101.9
23,352.0
1,807.0
8,209.8
3,501.6
30,319.3
36,988.9
16,263.3
7,203.5
(712.8)
7,565.3
16,667.8
8,063.7
1,603.1
10,654.3
6,852.5
12,257.4
30,319.3
36,988.9
Tangible fixed assets
During the year, we invested
US$751 million in property, plant and
equipment, comprising US$566 million
on our expansion and improvement
projects and US$185 million spent
on sustaining capital expenditure.
Expansion project expenses were
US$198 million in our Oil & Gas
business at Cairn India; US$188 million
at Zinc India; US$43 million in
the Power business (mainly at
Talwandi Sabo); US$108 million
in our Aluminium business; and
US$23 million at Zinc International.
Contribution to Exchequer
We contributed US$3.2 billion to the
Exchequer in FY2016 (US$4.6 billion
in FY2015) through direct and
indirect taxes, levies and royalties.
During the year, the rating
agency Moody’s downgraded
the Company’s corporate family
rating by four notches to ‘B2’ from
‘Ba1’, with outlook negative.
Shareholders’ (deficit)/equity was
US$(713) million at 31 March 2016
compared with US$1,603 million at
31 March 2015. This largely reflected
the impact of the impairments
and other special items of
US$3,473 million; adverse currency
translation impact due to depreciation
of the operating currencies against
US dollar (mainly, the Indian rupee) of
US$379 million; the FY2015 dividend
payment of US$111 million by Vedanta
plc; and attributable loss before
special items of US$393 million.
Non-controlling interests decreased
to US$7,565 million at 31 March 2016
from US$10,654 million at 31 March
2015, due to the attributable loss to
minority shareholders during the
year, impact of the impairments,
foreign currency movements and
dividend payments to minorities.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
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55
Project capex
Capex in progress
Cairn India
Status
Capex
(US$m)
Spent up to
March 2015
Spent in
FY2016
Unspent as
at 31 March
2016
Flexibility in capex dependent on oil
1,378
1,080
price and project return
198
198
71
100
100
(17)1
Total capex in progress – Oil & Gas
Aluminium sector
BALCO – Korba-II 325ktpa smelter
and 1,200MW power plant
(4x300MW)
Smelter: 84 pots capitalised in
September 2014 and further ramp-
up commenced from 22 April.
Power: All four units operational
1,378
1,080
1,872
1818
Jharsuguda 1.25mtpa smelter
Ramp-up commenced: 82 pots
2,920
2,535
34
351
capitalised in December 2015 and
further ramp-up commenced from
1 April
Aluminium sector total
Power sector
Talwandi 1,980MW IPP
Zinc sector
Zinc India (mines expansion)
Zinc International
Gamsberg mining & milling project
Total capex
4,792
4,353
All three units commissioned
2,150
2,011
Phase wise by FY2019
1,500
602
To be completed by FY2018-19
400
5
10,220
8,051
105
43
188
16
550
334
96
710
379
1,619
Capex flexibility
Status
Aluminium sector
Lanjigarh Refinery (Phase II) – 4mtpa
Copper sector
Tuticorin smelter 400ktpa
Iron Ore
Iron Ore Liberia2
Zinc International
Skorpion refinery conversion
Total flexibility capex
1 Overrun due to foreign currency variance.
2 This exploratory asset is currently impaired.
EC awaited
To be completed by FY2018-19
Capex
(US$m)
Spent up to
March 2015
Spent in
FY2016
Unspent as
at 31 March
2016
1,570
809
367
228
156
2,321
129
225
4
1,167
3
3
3
7
16
758
235
0
145
1,138
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 56
Divisional Review
1
Oil & Gas
Our Oil &
Gas division
delivered positive
free cash flow,
maintaining
tight fiscal
discipline.
Against the backdrop
of the lowest Brent
crude prices for over a
decade, we have been
pleased that Rajasthan has
performed strongly, and
that our Mangala EOR –
the world’s largest polymer
programme – is now in
full swing.
Mayank Ashar, CEO, Oil & Gas
Results
During the year we achieved:
Ø Gross average production of 203,703boepd.
Ø Polymer injection in Mangala ramped up to 400kblpd,
with EOR contribution average of 32kboepd in Q4.
Ø Successful execution of 20 well infill programme
in Aishwariya.
Ø RDG average gas production at 27mmscfd
surpasses estimates.
Key metrics
Production – average daily gross
operated production (boepd)
2016
2015
2014
203,703
211,671
218,651
2013
EBITDA (US$ million)
00.0
2016
2015
2014
570
1,477
2013
Direct operating costs (US$/bbl)
00.0
2,347
2016
2015
2014
5.21
5.8
3.9
2013
1 Water flood opex. Blended operating cost
00.0
including EOR was US$6.5/boe.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
57
1
3
7
9 South Africa Block 1
9
2
1 Rajasthan block
2 Ravva (PKGM-1) block
3 Cambay (CB/052) block
4 KG-ONN-2003/1 block
5 KG-OSN-2009/3 block
6 PR-OSN-2004/1 block
7 MB-DWN-2009/1 block
8 SL 2007-01-001 block
4
5
6
8
1: Employees at Mangala processing terminal.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 58
Divisional Review
Oil & Gas
1
Production performance
Unit
FY2016
FY2015
% change
Boepd
Boepd
Boepd
Boepd
Bopd
Mmscfd
Gross production
Rajasthan
Ravva
Cambay
Oil
Gas
Net production – working interest Boepd
Oil
Gas
Gross production
Working interest production
Bopd
Mmscfd
Mboe
Mboe
203,703
169,609
23,845
10,249
196,955
40.5
128,191
125,314
17.3
74.6
46.9
211,671
175,144
25,989
10,538
204,761
41.5
132,663
130,050
15.7
77.3
48.4
(3.8)%
(3.2)%
(8.2)%
(2.7)%
(3.8)%
(2.4)%
(3.4)%
(3.6)%
10.2%
(3.5)%
(3.1)%
Prices
Average Brent prices – US$/barrel
FY2016
FY2015
% change
47.5
85.4
(44.4)%
Operations
Average gross production for FY2016
was 203,703 barrels of oil equivalent
per day (boepd), which was 3.8%
lower than the previous year. This
represents c.25% of the domestic
production in India. Lower reservoir
performance at Bhagyam and a
natural decline in the Mangala and
Aishwariya fields in Rajasthan were
the key reasons. The decline was
partially offset by successful execution
of the Enhanced Oil Recovery
(EOR) project at Mangala, upside
from infill wells at Aishwariya and
reservoir management initiatives at
Bhagyam. Ravva and Cambay block
production declined by 8.2% and 2.7%
respectively, due to natural decline.
Mangala EOR project, the world’s
largest polymer flood, has shown an
exemplary performance. In February
2016, polymer injection ramped
up to our target levels of 400,000
barrels of liquid per day, which along
with production performance has
reduced the risks significantly from
the perspective of surface facilities,
reservoir, polymer availability, and
polymer mixing and transportation
technology. The integrated drilling
programme was completed for all
the 93 new injection wells during
the year as per plan. In October
2015, the central polymer facility
was fully operational with all the four
trains preparing polymer solution.
Gas development in the Raageshwari
Deep Gas (RDG) field in Rajasthan
continues to be a strategic priority.
The Company continues to invest
capex in the project, including further
plans in FY2017. During FY2016,
average gas production from RDG
increased to 27mmscfd, higher than
guidance provided last year, up 68%
year-on-year, with an average Q4
production of 31mmscfd. This was
achieved by a better than expected
performance from the fracked
well, and stabilised compressor
operations that were installed at
the Raageshwari and Viramgam
terminals. In FY2016, the RDG project
has shown robust progress with
significantly higher volume than the
previous year and will be continued in
FY2017 in line with the project plan.
During the year, we commissioned
the Salaya Bhogat Pipeline
(SBPL), the storage terminal
and the marine export facilities
at Bhogat which provides an
opportunity to expand customer
base and realised better pricing.
Prices
According to the International
Energy Agency’s Oil Market Report
(January 2016), 2015 saw one of the
highest volume increases in global oil
production this century. For FY2016,
the Brent crude oil price averaged
US$47.5 per barrel with Q4 FY2016
at US$33.9 per barrel – the lowest
level since 2005. Supply continued
to grow faster than demand. This has
led to a situation where commercial
stock levels within the Organisation
for Economic Co-operation and
Development (OECD) are at a
record high. As a result, crude oil
prices started falling in late FY2015
and weakened further in FY2016.
Lately, in April 2016, the prices have
recovered from record lows due
to the weakening US dollar and
improved global growth sentiment.
Key factors adversely affecting the
oil & gas market include the advent
and resilience of shale oil production;
increased oil production by members
of the Organisation of the Petroleum
Exporting Countries (OPEC); lack of
production cuts (volume consensus)
by OPEC and non-OPEC countries;
and lower gross domestic product
(GDP) growth globally. The decline in
the benchmark Brent price was also
followed by greater incentives for
processing light grades. As a result,
our crudes attracted higher discounts.
1: Employee at Rajasthan oil field.
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59
Due to the current low oil price
environment, the carrying value of
Block KG-ONN-2003/1, Block KG-
OSN-2009/3, South Africa (Block 1)
and Block MB-DWN-2009/1 have
been fully impaired as of March 2016.
Outlook
We remain committed to maintaining
a healthy cash flow post capex from
our Oil & Gas business. In FY2017,
Rajasthan production volumes will
be broadly at FY2016 levels, with
natural declines being offset by
the EOR programme. In line with
global peers, capex for FY2017 has
been reduced to c.US$100 million,
which will be invested 80% on
development (primarily RDG Gas
and Mangala EOR completion
activities) and 20% in exploration.
We will continue investing in pre-
development activities of our
key projects in Core MBA fields,
Barmer Hills and Satellite fields,
to ensure project readiness for
development with the rebound in
oil prices. We maintain the flexibility
to raise our capital investment
as the oil price improves.
Strategic priorities
• Generate healthy cash flows
post capex.
• Consistent cash generation from
core assets with focus on operating
cost and efficient reservoir
management.
• Continue investing in Raageshwari
Deep Gas Project.
• Option for growth by capital
investment in a pipeline of projects
at Barmer Hill, Bhagyam and
Aishwariya EOR to take advantage
of any upswing in oil price.
• Resilience from robust balance sheet
and world-class resource base.
• Capitalise on strengths – geology,
technology, talent pool, strong
partnerships and financial discipline.
Financial performance
(in US$ million, except as stated)
Revenue
EBITDA
EBITDA margin
Depreciation
Acquisition related amortisation
Operating profit
Share in Group operating profit (%)
Capital expenditure
Sustaining
Projects
FY2016
FY2015
% change
1,322.3
570.4
43.1%
544.6
281.7
(255.9)
(29.0)%
214.2
15.8
198.4
2,397.5
1,476.8
61.6%
572.7
697.6
206.5
11.9%
1080.1
–
1,080.1
(44.8)%
(61.4)%
(4.9)%
(59.6)%
–
(80.2)%
–
(81.6)%
Financial performance
Revenue for the year was lower at
US$1,322 million (after profit and
royalty sharing with the Government
of India), driven by weaker crude
prices. As a result, EBITDA for FY2016
was lower by 61% at US$570 million.
The Rajasthan water flood operating
cost was reduced to US$5.2 per
barrel compared to US$5.8 per
barrel in the previous year, which is
one of the lowest in the world. An
increase in polymer injection volumes
lifted blended operating cost to
US$6.5 per barrel during FY2016.
In the Union Budget FY2017, oil
cess, a tax on crude oil production,
has effectively been reduced
at the current price level from
Rs4,500 per tonne to 20% ad
valorem on realised price.
The Company has shown continued
tight fiscal discipline and has actively
renegotiated its existing contracts
to improve prices and contain
activities. The Company has realised
a c.20% cost saving on polymer
through ongoing interventions. We
have also sourced 10MW power
from the open access markets at
25% lower cost. Efficiencies, for
instance, have improved at RDG
gas with a reduction in both days
per frac and also the per frac cost.
and projects in Aishwariya and
offshore fields. This will reverse
itself once price levels move up.
Since the recommencement of
exploration in the Rajasthan block in
2013, the Company has discovered
1.7 billion boe of drilled and tested
HIIP with an additional 0.45 billion boe
drilled but yet to be tested. During this
period, the Company has discovered
2C resources of 200 million boe in
Rajasthan. During FY2016, activity
continued to be focused upon
appraisal of new discoveries and
processing of the new 3D seismic data
over high priority areas, in line with our
re-phased exploration programme.
Earlier in the year, oil was discovered
in volcanic reservoirs, in three zones
in well Raageshwari Deep North and
in two zones in well Raageshwari
Deep Main. The subsurface data
pertaining to the deeper layers
within the volcanic reservoirs in the
Raageshwari area were analysed
during the fourth quarter.
The 3D seismic acquisition programme
continued in Rajasthan, with a total
of 432 km2 acquired during this year.
The processing of newly acquired
3D seismic data is ongoing with
a focus on identifying additional
prospects that will act to replenish
the exploration prospect inventory.
In FY2016, we invested US$214 million
in capital expenditure, which
primarily included Mangala
Polymer Project, Raageshwari
Deep Gas Project, Aishwariya
infill, and exploration (appraisal,
testing and seismic activities).
Krishna-Godavari Basin Onshore
– (BLOCK KG-ONN-2003/1)
Our joint venture partner and
operator ONGC has submitted the
FDP to the management committee
for approval, initiating the JV
approval process for the block.
Exploration and development
In FY2016, the Company started
with working interest 2P reserves of
242mmboe and ended with working
interest 2P reserves of 175mmboe.
Excluding production, our working
interest 2P reserves for the year
declined by approximately 18mmboe
due to project deferrals in the low
oil price scenario. We made some
additions from reservoir performance
Krishna-Godavari Basin Offshore –
(BLOCK KG-OSN-2009/3)
We continue to engage with the
Ministry of Petroleum & Natural Gas
for an extension contingent upon
full life clearances. Phase-I expired
on 8 March 2016. Interpretation
of the new seismic volumes has
resulted in identification of four
prospects and a number of smaller
leads over different play types.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 60
Divisional Review
1
Zinc-Lead-Silver India
Zinc India
continued its
transition to
underground
mining, whilst
delivering
record output.
During the year,
we achieved record
production levels of
integrated zinc, lead
and silver, and delivered
a strong mined metal
production, primarily
on account of conversion
of mined metal inventory
and enhanced smelter
efficiencies.
Sunil Duggal, CEO, Zinc India
Results
During the year we achieved:
Ø Mined metal production of 889kt, with refined metal
production at highest level recorded.
Ø Lowest quartile cost position maintained.
Ø Paid special dividend of US$1.8 billion, the largest single
dividend by any private sector company in India.
Key metrics
Production – zinc mined metal (kt)
2016
2015
2014
2013
Production – refined zinc (kt)
00.0
2016
2015
2014
2013
Production – refined lead (kt)
00.0
2016
2015
2014
889
887
880
759
734
749
145
127
123
2013
Production – saleable silver (moz)
00.0
2016
2015
2014
2013
13.65
10.53
11.24
00.0
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61
R&R (mt)
2016
2015
2014
2013
EBITDA (US$ million)
00.0
2016
2015
2014
2013
00.0
Unit costs (US$ per tonne)
2016
2015
2014
2013
00.0
389.9
375
365
995
1,192
1,145
1,045
1,093
978
3
2
1
4
5
1 Debari smelter
2 Chanderiya smelters
3 Rampura Agucha mine
4 Rajpura Dariba mine and smelters
and Sindesar Khurd mine
5 Zawar mine
1: Chanderiya zinc smelting complex.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
62
Divisional Review
Zinc-Lead-Silver India
1
Production performance
Production (kt)
Total mined metal
Production – zinc
Mined metal content
Refined metal
Integrated
Custom
Production – lead1
Mined metal content
Refined metal
Integrated
Custom
Production – silver (moz)2
Integrated
Custom
FY2016
FY2015
% change
889
744
759
759
–
145
145
140
5
13.65
13.56
0.09
887
774
734
721
13
113
127
105
22
10.53
8.56
1.97
0.2%
(3.9)%
3.4%
5.3%
28.3%
14.2%
33.3%
(77.3)%
29.6%
58.4%
(95.4)%
1 Excluding captive consumption of 7kt vs 8kt in FY2016 vs FY2015.
2 Excluding captive consumption of 1,108 thousand ounces vs 1,293 thousand ounces in
FY2016 vs FY2015.
Prices
Average zinc LME cash settlement prices US$/t
Average lead LME cash settlement prices US$/t
Average silver prices US$/ounce
1,829
1,768
15.2
2,177
2,021
18.1
(15.9)%
(12.5)%
(16.0)%
FY2016
FY2015
% change
Operations
Mined metal production for the
full year was recorded at 889,000
tonnes, in line with the previous year.
Production during the second half
of FY2016 was lower than the first
half of year, due mainly to reduced
output from Rampura Agucha (RA)
open pit, particularly in Q4 FY2016 as
per the mine plan. This was partially
offset by record production from
all the underground mines, and in
particular the Sindesar Khurd (SK)
and Kayad mines, which also resulted
in higher lead and silver volumes.
1: Load-haul-dump unit loading truck at
Hindustan Zinc.
Sindesar Khurd has outperformed
and achieved the target of 3.0 million
tonnes of production in FY2016 ahead
of plan. The current mining run rate
is 3.75 million tonnes per annum,
ahead of schedule. Consequently,
silver production has also benefited
from higher volumes from this
mine and recorded integrated
production of 13.56 ounces, with
a 58% increase year-on-year.
Our Kayad mine surpassed
the targeted production
capacity of 1 million tonnes per
annum during the quarter.
Rampura Agucha mine is in the
midst of transition from open pit to
underground mine production, with
the underground project picking up
pace after a slower than planned ramp
up due to difficult geotech conditions.
The main shaft has reached a depth
of 860 metres (out of a planned
depth of 950 metres) with completion
of the north and south vent work.
We also achieved a record decline
development of 1,425 metres during
the month of March 2016. However,
to de-risk any potential delay in the
development of Rampura Agucha
underground project, the open cast
mine deepening project, referred to as
‘Stage V’, is progressing satisfactorily.
Refined metal production during the
year was the highest ever and higher
than mined metal production primarily
on account of conversion of existing
mined metal inventory and enhanced
smelter efficiencies. Integrated
refined zinc, lead and silver metal
production increased by 5%, 33%
and 58% respectively over FY2015.
Prices
Commodity prices weakened
during FY2016 due to the stronger
US dollar and the slowdown in the
Chinese economy. However, zinc
prices showed a degree of resilience
during the first quarter of the year
and recovered back to US$2,400 per
tonne in May 2015, backed by better
fundamentals – closure of mines
and supply constraints. However,
in line with global commodity
cues, zinc prices fell below $1,600
per tonne during Q3 FY2016, the
lowest in more than six years. LME
zinc prices averaged US$1,829 per
tonne during FY2016 compared
to US$2,177 per tonne in FY2015, a
decrease of 15.9%. Consequently,
the spot prices have recovered
to above US$1,800 per tonne.
Average prices for lead have
weakened by 12.5% due to
subdued Chinese consumption
and lower demand.
Silver’s average price also
reduced significantly, by 16% in
line with the general weakness
in precious metals and on the
back of a stronger US dollar.
Zinc Benchmark Premium (the
average of Shanghai, Zohar &
Singapore) was lower during FY2016
at US$91 per tonne, compared to
US$135 per tonne during FY2015.
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63
Unit costs
The unit cost of zinc production
decreased by 4.4% to US$1,045
per tonne compared to FY2015.
Excluding royalty, there was a 7.4%
decline in cost at US$804 per tonne
which is amongst the lowest quartile
globally. The decrease was due mainly
to higher volumes of integrated
production, better smelter efficiencies,
reduced coal and commodity prices,
higher by-product credit and cost
reduction initiatives. In FY2016, the
unit cost of zinc production post silver
credit was at c.US$500 per tonne
(excluding royalty). The increased
royalty rates impacted the unit cost
of zinc production by c.US$57 per
tonne. This and other regulatory
headwinds, including renewal power
obligations and electricity duty by
US$36 per tonne, were partly offset
by a 7% rupee depreciation during
FY2016. Zinc India’s zinc composite
cost of production remains in the first
quartile on the global cost curves
position, according to the Wood
Mackenzie Report for CY2016. Out of
the total zinc unit cost of production
of US$1,045 per tonne, total
government levies were c.US$277
per tonne primarily due to royalty
and District Mineral Fund (DMF).
With a focused objective of cost
optimisation, the Company has
deployed a clean-sheet-costing
methodology to work on the existing
contracts, and has further negotiated
the cost spend across the businesses.
We have also optimised the transport
routes with faster turnarounds,
exploring alternative ports to optimise
spend. The cost of production
excluding royalty is expected to
remain stable during FY2017 even
as we transition to a higher share of
underground production as a result of
various cost and efficiency initiatives.
On 1 September 2014, the Indian
royalty rates for zinc rose from
8.4% to 10.0%, while lead royalties
increased from 12.7% to 14.5%. These
increased rates are among the highest
in the world, and beyond other base
metals. In addition, an amount equal
to 30% of royalties was provided
with effect from 12 January 2015 to
contribute to the District Mineral
Fund (DMF), and an amount equal
to 2% of royalties for the National
Mineral Exploration Trust (NMET).
Financial performance
EBITDA in FY2016 was
US$995 million, a decrease of
17% compared to FY2015. This
decrease was primarily driven by
lower zinc, lead and silver prices,
and premia, as well as statutory
headwinds in FY2016. However,
these were partially offset by higher
volumes, lower cost of production
and the rupee depreciation.
The decline phase of both Rampura
Agucha and Sindesar Khurd
underground mines are in commercial
production with their operating results
recognised in the income statement.
Unit costs
Unit costs1
Zinc (US$ per tonne)
Zinc (Excluding royalty) (US$ per tonne)
1 With IFRIC 20 impact.
Financial performance
(in US$ million, except as stated)
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating (loss)/profit before special items
Share in Group operating profit (%)
Capital expenditure
Sustaining
Growth
FY2016
FY2015
% change
1,045
804
1,093
868
(4.4)%
(7.4)%
FY2016
2,111.0
995.0
47.1%
119.9
875.1
99.3%
234.9
46.5
188.4
FY2015
% change
2,357.0
1,192.5
50.6%
133.2
1,059.3
61.0%
222.7
56.1
166.6
(10.4)%
(16.6)%
(10.0)%
(17.4)%
5.5%
(17.1)%
13.1%
Projects
The announced mining projects, with
the objective of reaching 1.2 million
tonnes per annum, are progressing
well and we expect to achieve the
target within the next three years.
Zinc India’s transition from open cast
to underground mining continues.
Open cast contributed 60% of
production during FY2016, and
historically it has accounted for about
80% of total metal in concentrate
(MIC) production. Open cast will
now be replaced progressively by
underground mines, and by FY2021 all
our production will be underground.
At Rampura Agucha open cast
mine, work to deepen the pit by
an additional 50 metres (referred
to as ‘Stage V’) is progressing
satisfactorily and has contributed
towards de-risking any potential
delay in the development of Rampura
Agucha underground project.
At Sindesar Khurd, the shaft sinking
project is ahead of schedule and
reached the planned depth of 1.05
km with completion of the main shaft
sinking work where development
of associated infrastructure is
also progressing well ahead of its
timelines. Production from the
shaft is expected to commence
during the second half of FY2018.
At Zawar, the debottlenecking of the
existing mill is progressing well, and
the capacity will increase to 2.7 million
tonnes per annum by year end.
The Company continues to allocate
capex in zinc growth projects.
Exploration
During the year, gross additions
of 25.3mt were made to reserves
and resources (R&R), prior to a
depletion of 10.5mt. As of 31 March
2016, Zinc India’s combined mineral
resources and ore reserves were
estimated to be 389.9 million tonnes,
containing 36.1mt of zinc-lead metal
and 1,007moz of silver. Overall mine
life continues to be over 25 years.
Outlook
In FY2017, mined metal production
is expected to be marginally higher
than FY2016, while refined integrated
zinc metal production will be at a
similar level to FY2016. Integrated
lead and silver production will be
higher on account of greater ore
volumes from the Sindesar Khurd
mine. Significant progress is expected
in terms of mine development and
ore production from the underground
mine projects as we expect about
60% mined metal production from
underground mines in FY2017. Similar
to recent years, quarterly variations
in production are expected due to
waste and ore sequence at Rampura
Agucha open cast mine partly offset
by ramp up of underground mines.
Production during the second half
of the year will be much higher than
the first half; in the first half, Q1 will
be much lower than Q2. Volumes
will gradually ramp up as the year
progresses, as per the mine plan.
The cost of production (excluding
royalties) is expected to remain
stable with various efficiency
improvement programmes and
cost reduction initiatives aided by
a benign commodity environment.
This is despite the additional
regulatory levies and lower average
grades resulting from a change in
the mining mix and transitioning to
more underground production.
Strategic priorities
• To progress the brownfield
expansion of mines to achieve
1.2 million tonnes per annum of
mined zinc-lead.
• Manage smooth transition from
open-pit to underground mining at
Rampura Agucha.
• Achieve the life extension of the
Rampura Agucha open cast mine
Stage V.
• Achieve cost reductions with
various operational and commercial
initiatives.
• Ramp up silver production volumes.
• Continue our focus on adding more
reserves and resources than we
deplete through exploration.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 64
Divisional Review
1
Zinc International
Zinc
International
is poised for the
next exciting
phase of its
development.
The year reflected the
end of an era as we
closed the Lisheen mine in
Ireland and marked a new
beginning as we broke
ground on Gamsberg, the
only active mining project
in South Africa.
Deshnee Naidoo, CEO, Zinc International
Results
During the year we achieved:
Ø Production of 226kt delivered.
Ø Safe, fully costed closure of the Lisheen mine after
17 years of operation.
Ø Pre-stripping and surface work at Gamsberg progressing.
Ø Capex on Gamsberg reduced to US$400 million.
2016
2015
2014
2013
Key metrics
Production – refined zinc (kt)
2016
2015
2014
82
102
125
2013
Production – zinc-lead mined metal (kt)
00.0
2016
2015
2014
144
209
239
2013
EBITDA (US$ million)
00.0
68
2016
2015
2014
2013
00.0
Unit costs (US$ per tonne)
180
213
1,431
1,393
1,167
00.0
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65
8
8 Lisheen mine, Ireland1
1 Lisheen had a safe, detailed and fully
costed closure after 17 years
of operation in November 2015.
6 Skorpion mine,
Namibia
7 Black Mountain mine,
South Africa
6
7
1: Skorpion mine.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
66
Divisional Review
Zinc International
1
Production performance
Total production (kt)
Production – mined metal (kt)
BMM
Lisheen
Refined metal Skorpion
Unit costs
Zinc (US$ per tonne) CoP
FY2016
FY2015
% change
226
63
81
82
312
(27.6)%
59
150
102
6.8%
(46.0)%
(19.6)%
FY2016
1,431
FY2015
% change
1,393
2.7%
1: Engineers at Black Mountain underground mine.
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Financial performance
(in US$ million, except as stated)
Revenue
EBITDA
EBITDA margin
Depreciation
Acquisition related amortisation
Operating profit before special items
Share in Group operating profit (%)
Capital expenditure
Sustaining
Growth
Operations
Total production for FY2016 was 28%
lower than in FY2015, due mainly
to the closure of the Lisheen mine
in Ireland in November 2015 after
17 years in operation, maintenance
shutdown and partial industrial
action at Skorpion. This was partially
offset by higher volumes from
Black Mountain Mines production.
At Skorpion, in Namibia, production
was lower by 20,000 tonnes.
The main causes were temporary
industrial action during Q2 FY2016,
the planned refinery maintenance
extended shutdown in Q3 FY2016,
a slower than anticipated ramp-up
post the shutdown, and a decline in
the mine grade. During Q4 FY2016
Skorpion production volumes
were back to normal, following a
planned maintenance shutdown
in Q3 FY2016, and it recorded
27,000 tonnes in Q4 FY2016.
Production at BMM was 7% higher
due to a 10% increase in mine volume,
supported by a change in mining
method from cut-and-fill to the
more productive longhole mining.
Unit costs
The unit cost of production increased
to US$1,431 per tonne, 2.7% up
from US$1,393 per tonne in FY2015.
This was mainly driven by reduced
volumes at Skorpion and Lisheen,
increased waste stripping at the
Skorpion mine and one-off plant
maintenance costs at the Skorpion
refinery. The increased cost was
largely offset by local currency
depreciation against the US dollar.
FY2016
FY2015
% change
391.5
68.1
17.4%
54.3
2.1
11.7
1.3%
54.5
31.4
23.2
586.9
180.8
30.8%
85.7
25.4
69.7
4.0%
39.7
30.4
9.3
(33.3)%
(62.3)%
(36.6)%
(91.7)%
(83.2)%
37.3%
3.3%
–
Financial performance
EBITDA reduced by 62% to
US$68 million for FY2016, due
mainly to lower commodity prices
as well as lower volumes.
Projects
With the improved outlook on zinc
price and reduction in the project
capex envisaged at the Gamsberg
mine on account of engineering
improvements and renegotiations,
we have decided to now accelerate
the project. Consequently, the
project will see a much higher level
of capital allocation in FY2017.
Pre-start activities at the project site
began in July 2015, by which stage
BMM had obtained all regulatory
and environmental permits in line
with the relevant South African
legislation. Pre-stripping and surface
work to access the ore body is
progressing in line with the re-phased
plan. To date, we have excavated
c.6.5 million tonnes of waste rock.
The first phase of the project is
expected to have a life of mine
of approximately 13 years, and
there is significant potential
for further expansion at the
Gamsberg North deposit.
Gamsberg Phase 1 is expected to
partially replace the production
lost due to the closure of Lisheen,
and restore production to over
300ktpa. The first ore production is
planned for 2018 with 9 to 12-month
ramp-up to full production. The
engineering improvements and
renegotiations resulted in lower
project capex of US$400 million.
The Skorpion refinery conversion
is under Detailed Feasibility Study
(DFS). The basis engineering is
in the final stage of evaluation
and we are currently reviewing
the capex and opex.
We continue to develop the project
using a modular approach, with
project execution carried out in
a phased manner. This allows us
to adapt the capital expenditure
programme and increase the ramp-
up as market conditions improve.
The project IRR remains in mid-teens
despite the current commodity
price scenario, therefore developing
it further remains attractive.
Outlook
In FY2017 production volumes
are expected to be c.170–190kt.
Cost of production is expected
to reduce to c.$1,200–$1,300 per
tonne, with continued focus on
labour and equipment productivity
improvements and cost reduction
initiatives. Given the current economic
climate, the business is in the process
of optimising short-time mine plans
while re-aligning the fixed cost base.
At Skorpion, the high wall pushback
has been deferred in the light of
current market conditions, and plans
are currently underway to review
various future options for mine life
extension. Current reserves are at
5.2 million tonnes (at 9% grade).
At BMM, our focus continues to be
around executing on the Gamsberg
project. Further, near-mine resource
potential is being explored to
extend mine life along with other
changes in the mining method.
Strategic priorities
• Execution of the Gamsberg project
(Phase 1) using a modular approach to
project execution and development.
• Extending the mine life at Skorpion.
• Managing a world-class closure at the
Lisheen mine site.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 68
Divisional Review
1
Iron Ore
Production
ramp-up in
our Iron Ore
division
positions us
well for market
recovery.
We were the first
company to restart
mining operations in
Goa following government
approvals, and both the
Karnataka and Goa mines
are now operational.
We are well positioned
to benefit from our low
cost of production and
continuous efforts to
further optimise costs
in these volatile markets.
Kishore Kumar, CEO, Iron Ore
Key metrics
Production (mt)
2016
2015
0.6
2014
1.5
2013
R&R – India (mt)
2016
2015
2014
00.0
2013
EBITDA (US$ million)
00.0
2016
2015
2014
(24.2)
2013
31.4
00.0
5.2
384
337
431
73.4
Results
During the year we achieved:
Ø Production of 2.2mt in Goa and 30mt in Karnataka.
Ø Record production of pig iron at 654kt.
Ø Government engagement under way to increase mining
cap going forward.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
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69
3
3
Iron Ore project,
Liberia
1
2
1
2
Iron Ore operations – Goa
Iron Ore operations – Karnataka
1: Ammona plant at iron ore facility in Goa.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
70
Divisional Review
Iron Ore
1
Production performance
Production (dmt)
Saleable ore
Goa
Karnataka
Pig iron (kt)
Sales (dmt)
Iron ore
Goa1
Karnataka
Pig iron (kt)
FY2016
FY2015
% change
5.2
2.2
3.0
654
5.3
2.2
3.1
663
0.6
–
0.6
611
1.2
–
1.2
605
–
7.0%
–
9.6%
1
Includes e-auction sales of 1.4 million tonnes during FY2016 and nil in FY2015.
Operations
During August 2015, production
recommenced in Goa after obtaining
all necessary approvals to produce
5.4 million tonnes per annum
of saleable ore. During the year,
production was 2.2 million tonnes with
sales of 2.2 million tonnes. Production
was impacted by a transportation
strike on account of rate negotiations;
these were later resolved in March
2016 and we achieved an exit run rate
of 0.8 million tonnes per month. Sales
include 1.4 million tonnes of traded
ore purchased from the e-auction.
At Karnataka, production was
3.0 million tonnes, achieved by
fully utilising our environment
clearance limit of 2.2 million
tonnes and our opening crude ore
inventory of 0.8 million tonnes.
1: Employees at pig iron facility.
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71
Financial performance
(in US$ million, except as stated)
Revenue
EBITDA
EBITDA margin
Depreciation
Acquisition related amortisation
Operating profit/(loss) before special items
Share in Group operating profit (%)
Capital expenditure
Sustaining
Growth
FY2016
FY2015
% change
350.0
73.4
21.0%
26.8
35.7
10.9
1.2%
13.2
10.3
2.8
326.5
31.4
9.6%
35.8
6.5
(10.9)
(0.6)%
36.9
36.9
–
7.2%
–
–
(25.1)%
–
–
(64.2)%
(72.0)%
–
A rigorous plan is being implemented,
focusing on operational efficiency
and commercial spend reduction.
As part of the Company’s cost
reduction initiatives, logistics
contracts have been optimised across
transportation routes, modes and
rates. Iron ore sourcing from the
nearby mines has been maximised
along with plant team requirements to
reduce the freight cost. Also, a change
in the blend and mix of coking coal has
contributed to better cost efficiency.
In view of the recession in iron
ore prices and industry wide
representation, export duty on less
than 58% Fe has been reduced from
10% to nil effective from 1 March
2016 in the Union Budget FY2017.
During the year, production of
pig iron ramped up from 611,000
tonnes last year to a record
production of 654,000 tonnes,
with available de-bottlenecked
capacity of 785,000 tonnes.
Prices
FY2016 witnessed a significant
decline in prices on the back of rising
supplies from Australia and Brazil,
and slackening demand from China.
Prices for 62Fe grade per tonne
averaged US$42.6 (FOB), down
37% on FY2015. Corresponding
56Fe ore that we produce at Goa
averaged US$32 per tonne in Q4
FY2016. In April 2016, the price has
recovered following lower production
forecast from the majors and uptick
in the China demand scenario.
While global iron ore demand is
projected to remain relatively flat,
continued substitution in China of
domestically produced iron ore with
seaborne stocks is expected to result
in a modest increase in international
trade, some of which is already
seen in April 2016 as mentioned
above. Reflecting this, global iron
ore trade is projected to increase
by 1.3% a year between 2015 and
2021, to reach 1.6 billion tonnes.
Because of its logistical proximity
to the port, along with inland
waterways, Vedanta’s Iron Ore
business in Goa caters primarily to
the global seaborne iron ore trade.
Goan low grade exports are primarily
destined for Chinese steel mills that
are able to blend the low grades
with other high grade expensive
ores from Brazil or within China.
By contrast, the Iron Ore business
in Karnataka caters primarily to
the domestic steel industry in
the state of Karnataka, which is
located within a 200km radius of
the mine. While current exports
are subject to constraints due
to Supreme Court instructions,
the iron ore mine in Karnataka is
logistically well connected to the
port by good rail connections.
While the FOB price for 56Fe grade
was US$32 per tonne for Q4 FY2016,
the realisation for our Goa ore was
lower given the 10% export duty for
part of the period. Karnataka ex-
works realisation was at c.US$14 per
tonne for Q4 FY2016 as domestic
prices are largely determined by the
government mining companies and
local demand and supply factors.
Financial performance
EBITDA in FY2016 increased to
US$73 million compared with
US$31 million in FY2015, primarily
due to the restarting of production
at Goa and volume ramp-up.
Due to considerable recession and
uncertainties in the iron ore price,
acquisition and exploration expenses
of US$228 million incurred at Liberia,
West Africa to date have been
impaired in our books. Further, an
impairment of US$18 million has been
taken towards unused plant and
machinery at Bellary, Karnataka.
Outlook
The Company has been engaging
with respective state governments
to enhance the mining cap in Goa
and Karnataka. The Expert Advisory
Committee (EAC) at Goa has already
recommended to the Supreme
Court a higher cap of 30 million
tonnes, increasing to 37 million
tonnes (conditional on the successful
completion of an environmental
impact assessment) for the future, up
from the current level of 20 million
tonnes applicable to FY2016.
Regarding Karnataka, the Company
already has the mine plan which will
enable a higher production from the
current level of 2.3 million tonnes. We
will follow the approval process for
the same. We are also continuing to
work towards resolving the matter of
duplication of tax (Goa Permanent
Fund & District Mineral Foundation),
which is currently being heard by
the Honourable Supreme Court.
The Company has signed the
MOU with the Government of
Jharkhand on 6 May 2016 for setting
up a 1 million tonne pig iron and
ductile pipe plant in the state.
Strategic priorities
• To enhance environment clearance
limits in Goa (in line with EAC
recommendation) and Karnataka
and ramp-up to full capacity.
• Focused cost reduction through
various operational and commercial
initiatives.
• Continue to work with Government
to remove the duplication of taxes
(Goa Permanent Fund and District
Mineral Foundation).
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 72
Divisional Review
1
Copper India & Australia
Strong
operating
performance
at Copper
India continues.
We saw record
production of copper
cathodes during the year,
despite several outages and
a flooding incident that
temporarily hampered our
progress. Higher volumes,
higher treatment and
refining charges and a
lower cost of production
all contributed to a strong
set of results.
P Ramnath, CEO, Copper India
Key metrics
Production – copper cathodes (kt)
2016
2015
2014
384
362
294
2013
EBITDA (US$ million)
00.0
2016
2015
2014
337
281
197
00.0
2013
Unit costs (US cents per lb)
3.2
4.2
2016
2015
2014
2013
9.7
00.0
Results
During the year we achieved:
Ø Record copper cathode production at Tuticorin at
384,000 tonnes.
Ø Positioned in the second quartile of the cost curve with
improving smelter recovery rates.
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73
5
5 Mt Lyell mine, Australia1
1 Under care and maintenance.
1
2
1 Silvassa refinery
2 Tuticorin smelter
1: Employees at copper cellhouse.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 74
Divisional Review
Copper India & Australia
1
Production performance
Production (kt)
India – cathode
Australia – mined metal content
Prices
Average LME cash settlement prices
(US$ per tonne)
Realised TC/RCs (US cents per lb)
FY2016
FY2015
% change
384
–
362
–
6.1%
–
FY2016
FY2015
% change
5,211
24.1
6,558
21.4
(20.5)%
12.6%
FY2016
FY2015
% change
Unit conversion costs (CoP) – (US cents per lb)
3.2
4.2
(23.8)%
Operations
FY2016 copper cathode production
at Tuticorin was at a record level
of 384,000 tonnes, despite a few
unplanned outages during the year
that included a three-day stoppage
because of a flood incident due
to heavy rains. The smelter is now
producing at a normalised plant
capacity level. FY2015 production
was lower due to the biennial 23 days’
planned maintenance shutdown in Q1
FY2015, therefore the year-on-year
performance is not comparable.
The 160MW power plant at Tuticorin
operated at a plant load factor of
71% (FY2015: 86%). This was lower
than in FY2015 due to less off-take by
Tamil Nadu Electricity Board (TNEB)
due to higher availability of power
from wind generators in the state;
however, we were compensated at
the rate of 20% of realisation, for the
off-take below 85% of the contracted
quantity. The state Government has
also imposed a restriction on the
supply of power outside the state.
1: Copper rods at Tuticorin.
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75
Financial performance
EBITDA for FY2016 was
US$337 million, higher than the
US$281 million in the previous year.
This increase was driven by higher
volumes, higher TCs/RCs and lower
costs of production. In addition, a
one-off benefit of US$25 million
has been recognised on account
of the Target-Plus-Scheme (an
export incentive scheme) that was
operational in FY2005. This incentive
scheme on incremental exports over
the previous year was retrospectively
withdrawn. After several years
of litigation by the exporters, the
Supreme Court ruled in their favour
and the benefit was restored. This
enabled us to recognise the income
which will be collected as a refund
from the Government during FY2017.
Operating profit was US$304 million
in FY2016, a 33% increase on the
previous year’s US$229 million.
A non-cash impairment charge
of US$8 million on idle assets at
Copper Mines of Tasmania was
taken as a consequence of its
extended care and maintenance.
Outlook
Production is expected to
remain above 400kt with over
10 days’ planned maintenance
activities scheduled in FY2017.
Strategic priorities
• To sustain operating efficiencies,
reducing our cost profile.
• Maximising TC/RC.
• Debottleneck existing capacity to
425ktpa and additional 400ktpa
capacity expansion.
Financial performance
(in US$ million, except as stated)
Revenue
EBITDA
EBITDA margin
Depreciation and amortisation
Operating profit before special items
Share in Group operating profit (%)
Capital expenditure
Sustaining
Growth
FY2016
3,197.2
336.6
10.5%
32.3
304.3
34.5%
17.6
14.4
3.2
FY2015
% change
3,700.7
281.0
7.6%
51.6
229.4
13.2%
29.6
29.6
–
(13.6)%
19.8%
(37.4)%
32.7%
(40.5)%
(51.4)%
–
In FY2016, phosphoric acid production
was 199,000 tonnes, 5% higher
compared to 189,000 tonnes
in FY2015.
Our copper mine in Australia
remains under extended care
and maintenance since 2013.
We continue to evaluate various
options for its profitable restart.
Prices
World production of copper is
estimated to have risen 3.5% to 19.1mt
in CY2015 while refined primary
copper production is estimated to
have totalled 18.9mt, 1.8% higher
than the previous year. World copper
usage, however, is essentially static
at around 22.8mt, in line with the
previous year. The copper market
is still in an adjustment phase and
remains over-supplied in the near
term. Demand growth for Chinese
copper has showed a structural
slowdown at 3% in CY2015, compared
to 7% growth in CY2014 and weighed
on copper prices in CY2015 and at
the start of 2016. The average copper
price for the year was US$5,211
per tonne, which is lower by 20.5%
compared with the previous year.
Treatment and refining charges (TC/
RCs) for FY2016 remained strong, due
to increased supply from new copper
mines and smelting disruptions. The
Company realised 24.1 US cents per
lb during FY2016, higher by 12.6%
(FY2015: 21.4 US cents per lb).
In concentrates, annual benchmark
settlements for the year 2016
concluded at 97.35/9.73 TCs/RCs.
This was around a 10% reduction
on the previous year, mainly due
to uncertainties surrounding mine
projects as LME prices continued to
fall. However, several new projects
commenced full production in 2015
and further expected new mine
production/expansion in 2016 will
support higher concentrate availability
in 2016. Global smelter production
increases during the same period
are not expected to keep pace with
the mine production. This will ensure
that the custom concentrate market
in 2016 remains well supplied. The
Company expects to realise over
22 US cents per lb for FY2017.
Unit costs
At the Tuticorin smelter, the cost
of production decreased from 4.2
US cents per lb to 3.2 US cents per
lb, mainly due to higher volumes,
lower input commodity costs
(fuel and power) and higher by-
product credits. We are positioned
in the second quartile of the cost
curve with ever-improving smelter
recovery rates. These improved
credits were due mainly to better
sulphuric acids realisation in the
domestic markets. The sulphuric
acid markets are largely regional
and dependent on local demand-
supply dynamics. The realisation was
healthy during the year due to the
improved market and customer mix.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 76
Divisional Review
1
Copper Zambia
The turnaround
plan for KCM is
making strong
progress.
We saw a much
improved performance
at Konkola, with volumes
rising and costs falling. We
are now targeting higher
integrated and custom
production in the coming
year and focusing on
innovation throughout our
operations to achieve our
long-term vision of 50 years
of probable mine life.
Steven Din, CEO, Copper Zambia
Key metrics
Production – mined metal (kt)
2016
2015
2014
2013
Production – finished copper (kt)
00.0
2016
2015
2014
2013
EBITDA (US$ million)
00.0
2016
(17.9)
2015
(3.8)
2014
2013
00.0
Unit costs (US cents per lb)
123
116
128
182
169
177
156.3
2016
2015
2014
2013
197.9
257.7
238.4
00.0
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
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77
Results
During the year we achieved:
Ø 23% increase in production at Konkola.
Ø Integrated cost of production reduced to US$187/lb.
Ø Cost savings of US$80 million delivered.
3
3 Konkola and Nchanga
copper mines and
Nchanga smelter,
Zambia
1: Employees at Konkola underground mine.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
78
Divisional Review
Copper Zambia
1
Production performance
Production (kt)
Total mined metal
Konkola
Nchanga
Tailings Leach Plant
Finished copper
Integrated
Custom
FY2016
FY2015
% change
123
49
18
55
182
117
64
116
40
24
52
169
117
52
6.0%
22.5%
(25.0)%
5.8%
7.7%
–
23.1%
Unit costs (integrated production)
Unit costs (US cents per lb) excluding royalty
Unit costs (US cents per lb) including royalty
FY2016
FY2015
% change
197.9
261.0
257.7
329.1
(23.2)%
(20.7)%
Operations
In FY2016, mined metal production
of 123,000 tonnes was up 6% year-
on-year.
Increased production was seen at the
Konkola deep underground mine, up
22.5%, driven by improved mining
rates on the southern part of the ore
body, completion of rehabilitation
works on 1-Shaft, and improved grade
factor and concentrator recoveries.
This improvement was offset by a 25%
lower Nchanga production as open-pit
waste stripping was carried out for the
majority of the year at COP F&D and
the underground mine was placed on
care and maintenance in Q3 FY2016
in this low copper price scenario.
1: KDMP shaft.
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79
Financial performance
(in US$ million, except as stated)
Revenue
EBITDA
EBITDA margin
Depreciation and amortisation
Operating (loss)/profit before special items
Share in Group operating profit (%)
Capital expenditure
Sustaining
Growth
FY2016
FY2015
% change
972.5
(17.9)
(1.8)%
179.5
(197.4)
(22.4)%
27.6
27.6
–
1,077.1
(3.8)
(0.4)%
187.2
(191.0)
(11.0)%
57.9
57.9
–
(9.7)%
–
(4.1)%
3.4%
(52.3)%
(52.3)%
–
At the Tailings Leach Plant (TLP),
production at 55,000 tonnes was 5.8%
higher as benefits were realised from
improved plant reliability and higher
throughput of reclaimed dam material.
Integrated Finished Copper
Production, year-on-year, was
stable at 117,000 tonnes with the
difference from mined metal moving
to copper concentrate inventories.
Custom copper volumes at 64,000
tonnes were 23.1% higher year-on-year
due mainly to higher throughput and
availability of third party concentrates.
Unit costs (integrated production)
The unit costs of production,
excluding royalty, were down by
23% to 198 US cents per lb in FY2016
compared to 258 US cents per lb in
FY2015. Excluding the impacts of
increased power tariffs, the unrealised
loss of a depreciating Kwacha on
VAT receivables and other one-off
provisions resulted in a 27% reduction
in unit cost (excluding royalty) to 187
US cents per lb unit cost (excluding
royalty). This was driven by improved
production, sustained cost-saving
initiatives including reducing the fixed
cost, the suspension of the high-
cost underground mine at Nchanga,
the continuous renegotiation of
commercial contracts and alternate
sourcing for major bulk supplies.
On 17 February 2016, the cabinet
of the Government of Zambia
approved a new slab-based royalty
system linked to copper prices.
The Bill was approved by the
Zambian parliament on 11 May
2016 and awaits approval from The
Honourable President of Zambia.
With this approval, the royalty
rates would be effective from
1 April 2016 as referred below:
• 4% LME copper < US$4,500
per tonne;
• 5% LME copper between US$4,500
and US$6,000 per tonne; and
• 6% LME copper > US$6,000.
This is a progressive step taken by the
government of Zambia to support
the mining industry during the low
commodity prices environment,
given high cost structures in Zambia.
The proposal will reduce total cash
cost by US$120 per tonne, at the
spot copper price of c.US$4,800.
Financial performance
Revenue in FY2016 was lower at
US$973 million compared with
US$1,077 million in the previous
year. This was mainly due to lower
metal prices with a partial offset
from increased volume. The EBITDA
loss was reported at US$18 million.
Excluding the impact of Kwacha
depreciation on VAT receivable,
EBITDA was US$44 million.
Outlook
Konkola underground mine
The Konkola underground mine
remains the focused priority for
KCM. Work is under way to improve
operating productivity levels, mobile
fleet utilisation and to progress a
deeper horizontal development level.
Smelter and refinery
Continuous improvement is seen
as we step up production from
third-party concentrates. A planned
shutdown is scheduled in Q2 FY2017
with the intention of improving
feed-rates by around 25%.
Increase in power price has a major
adverse impact on operations at the
refinery. As an alternative to power,
KCM has explored the option to
put oil-fired boilers for electrolyte
heating. This would enable the
refinery to ramp-up to production
capacity and thereby make it viable.
Nchanga operations
At Nchanga, we are focused on
sustaining and improving the
operations at the Tailings Leach
Plant by treating stockpiled
refractory ore and old tailings.
Restart possibilities are being
investigated for the underground
mine and these will be dependent
on the prevailing copper price.
Full-year production is expected to
ramp up during FY2017, to around
200,000–210,000 tonnes with
integrated production of around
130,000–140,000 tonnes. Unit cost
(excluding royalty) is expected to be in
the range of 150–170 US cents per lb.
Our strategic priorities
• A highly productive underground
mine at Konkola with an additional
horizontal development.
• A reliable Tailings Leach facility with
potential to increase recoveries
through the application of thermos-
applications.
• Increased smelter utilisation from
the processing of available third-
party concentrates sourced from
Zambia and the DRC.
• Sustained cost efficiencies through
value-focused initiatives.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 80
Divisional Review
1
Aluminium
Operational
excellence
driving our
Aluminium
business
forward.
We saw many
positives, including
record production, lower
cost of production and
with project approvals
at Jharsuguda and
Lanjigarh, we have
started ramping-up
volumes at noth
Jharsuguda and Balco.
Abhijit Pati, CEO, Aluminium
Key metrics
Production – alumina (kt)
2016
2015
2014
971
977
524
2013
Production – total aluminium (kt)
00.0
2016
2015
2014
923
877
794
2013
EBITDA (US$ million)
00.0
107
2016
2015
2014
415
287
2013
Unit costs – alumina (US$ per tonne)
00.0
2016
2015
2014
315
356
358
2013
Unit costs – hot metal production
(US$ per tonne)
00.0
2016
2015
2014
2013
1,572
1,755
1,658
00.0
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT www.vedantaresources.com
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81
Results
During the year we achieved:
Ø Record production of 923kt.
Ø Approval for expansion of Lanjigarh refinery to
4mtpa received.
Ø Cost of production reduced by 10% to US$1,572.
5
3
1
4
2
1 Lanjigarh alumina refinery
2 500ktpa Jharsuguda smelter
and power plant
3 245ktpa Korba smelter and
power plant
4 1.25mtpa Jharsuguda smelter
5 325ktpa Korba smelter and
power plant
1: Aluminium pot line at Jharsuguda.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
82
Divisional Review
Aluminium
1
Production performance
Production (kt)
Alumina
Aluminium – Jharsuguda-I
– Lanjigarh
Jharsuguda-II1
Aluminium – Korba-I
Korba-II2
Total Aluminium
FY2016
FY2015
% change
971
516
76
257
75
923
977
534
19
253
71
877
(0.6)%
(3.4)%
–
1.6%
5.6%
5.2%
1
2
Including trial run production of 51kt in FY2016 vs 19kt in FY2015.
Including trial run production of 24kt in FY2015.
Prices
Average LME cash settlement prices
(US$ per tonne)
FY2016
FY2015
% change
1,590
1,890
(15.9)%
Unit costs
(US$ per tonne)
Alumina cost (ex Lanjigarh)
Aluminium hot metal production cost
Jharsuguda CoP
BALCO CoP
FY2016
FY2015
% change
315
1,572
1,519
1,659
356
1,755
1,630
1,961
(11.5)%
(10.4)%
(6.8)%
(15.4)%
1: Employee at Aluminium casthouse.
Operations
The Lanjigarh alumina refinery
produced 971,000 tonnes in FY2016.
In order to improve cost efficiencies,
operations at the refinery were
operated for seven months since
September 2015 as a single
stream operation with an annual
capacity of 800,000 tonnes.
In FY2016, production was stable
at the 500kt Jharsuguda-I and
245kt Korba-I smelters. The 1,250kt
Jharsuguda-II smelter produced
76,000 tonnes during FY2016 with 82
pots operational. The 325kt Korba-II
smelter produced 75,000 tonnes with
84 pots operational during the year.
In FY2016, both 300MW CPP units
of the BALCO 600MW power plant
at Korba were commissioned. The
first 300MW CPP unit was capitalised
on 1 December 2015 and the second
300MW CPP unit on 31 March 2016.
Prices
Global Aluminium consumption rose
by 4% to 56mt in CY2015, compared
to CY2014. This growth was primarily
driven by China where consumption
was up 6.7%; in contrast, consumption
outside of China grew by only 1.2%
to 27.2mt. Supply has grown by
6% to 57.5mt in CY2015; however,
production outside China was flat
at 26mt, due to production cuts.
World-wide, supply has outpaced
the demand, which continues to
put pressure on Aluminium price
and premium. Specifically, China’s
consistently high production
backed by subsidised power costs
and Government-aided subsidies
which resulted in higher exports
to the rest of the world leading to
higher stocks across the globe.
Average LME prices for Aluminium
for the year fell to US$1,590 per
tonne, a 15.9% decrease on the
previous year’s average price
level of US$1,890 per tonne.
Aluminium Ingot Benchmark Main
Japanese Port (MJP) premium
during FY2016 was lower at US$119
per tonne compared to US$392 per
tonne during FY2015, thus resulting in
lower realisations for the Company.
Unit costs
The Company has initiated various
cost-saving projects to increase
operational efficiencies and reduce
commercial spend. The initiatives
include opportunistically procuring
the raw materials and using alternative
vendors to reduce the spend;
changing the specification of raw
materials; renegotiating service
contracts; and reducing logistics costs
by optimising rake movements.
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83
FY2016
FY2015
% change
1,694.3
106.7
6.3%
101.8
4.9
0.6%
118.9
11.6
107.3
2,081.9
415.5
20.0%
140.2
275.3
15.9%
142.0
9.5
132.5
(18.6)%
(74.3)%
(27.4)%
–
(16.3)%
22.1%
(19.0)%
Alumina
During FY2017, the Company has
moved to double-stream operation
to support the Aluminium pot
ramp-ups. The main sources of
bauxite will be a mix of mines at
BALCO, and the balance will be
met from laterite mines, other
domestic sources and imports.
Coal
Numerous initiatives are being taken
to meet our coal requirements. We
will source our overall coal mix from
low-cost imports and auctioned
coal to optimise the cost in FY2017.
Imported coal prices softened
by c.20% during FY2016. We are
also looking to optimise our coal
mix further by securing linkage
coal through the auction route.
Strategic priorities
• Full capacity ramp-up at
Jharsuguda-II and Korba-II smelters.
• Laterite mining.
• Hot metal cost reduction by
optimising raw material sourcing,
and through various cost-reduction
initiatives.
• Secure the captive alumina refinery
feed to realise the full potential of
cost efficiencies and to increase
capacity utilisation.
• Lanjigarh refinery expansion
to 6mpta.
During FY2016, the cost of production
of alumina was US$315 per tonne,
11.5% lower than in FY2015. The
COP for H2 FY2016 was US$297 per
tonne with single-stream operation
(US$276 per tonne excluding
high cost bauxite inventory).
In FY2016, total bauxite requirements
of c.3.4 million tonnes were met from
captive mines at BALCO, domestic
sources and imports, approximately
one third each. Higher volumes in
FY2017 will be supported by laterite
mining and increased supply from
BALCO and domestic sources.
The other key raw material, being
coal, was sourced mainly from the
combination of linkage coal allocation
domestic e-auctions/ad-hoc
allocation and imports. This mix was
similar to FY2015, but will however
change in FY2017 due to higher
volumes with increased reliance on
auction and imports given the fixed
quantity of linkage coal allocation.
The cost of production of hot metal
at Jharsuguda-I was US$1,511 per
tonne, lower by 7.3% (FY2015:
US$1,630 per tonne). The decrease
was due to lower alumina prices,
lower coal prices, rupee depreciation
and the implementation of
various cost-saving initiatives.
The cost of production at the
245kt Korba-I decreased by 15%
to US$1,619 per tonne compared
to FY2015. This fall was achieved
through reduced coal prices,
a lower alumina price, rupee
depreciation and by implementing
various cost-saving initiatives.
The high-cost rolled product
facility at BALCO, which produced
approximately 47,000 tonnes in
FY2015, has been temporarily
suspended, resulting in further cost
savings. We continue to sell ingots
and wire rods from BALCO.
Financial performance
FY2016 EBITDA was lower by 74%
at US$107 million, compared with
US$416 million in the previous year.
This was primarily due to lower LME
prices and premia on metals, and
a one-off charge of US$36 million
for prior periods’ Renewable
Power Obligations. These were
partially offset by input commodity
deflation, rupee depreciation
and cost-saving initiatives.
Projects
Lanjigarh refinery
The Company has prospecting
licences for three laterite mines in
Odisha and exploration is in progress.
We expect to start production
towards the end of H1 FY2017.
Financial performance
(in US$ million, except as stated)
Revenue
EBITDA
EBITDA margin
Depreciation and amortisation
Operating profit before special items
Share in Group operating profit (%)
Capital expenditure
Sustaining
Growth
We have received approvals for
expansion of the Lanjigarh refinery
to 4 million tonnes per annum.
Hence, second stream operation
has commenced at the Alumina
refinery from April 2016, thus taking
it to the debottlenecked capacity
of 1.7–2.0 million tonnes per annum
(contingent on bauxite quality).
Further ramp-up to 4 million tonnes
will be considered when we have
further visibility on bauxite sources.
Korba-II smelter
At the 325kt Korba-II smelter, pre-
commissioning activities commenced
for further ramp-up from 22 April
2016 with an additional 18 pots
commissioned by the end of April
2016. With commissioning of the new
600MW CPP units complete, the
270MW CPP unit will be maintained
as a back-up for Aluminium smelters.
Jharsuguda-II smelter
On 27 January 2015, we received
approval from the regulatory authority
(Orissa Electricity Regulatory
Commission) to use the power
generated from three units of the
2,400MW (4 x 600MW) Jharsuguda
power plant for captive use. This has
enabled ramp-up of the 1.25 million
tonnes per annum Jharsuguda-II
smelter. Consequently, we have
recommenced further ramp-up of
the first pot line of 312.5kt since
the FY2016 year end with an
additional 49 pots commissioned
by the end of April 2016.
We have started production
at the Chotia coal mine during
Q4 FY2016 after securing all
the pending approvals.
Outlook
Volume and cost
In FY2017, Aluminium volume is
expected to be in the range of
1.2 million tonnes, by ramping
up the Korba-II smelter and the
progressive ramp-up of three
lines at the 1.25 million tonnes per
annum Jharsuguda-II smelter. With
continued focus on cost reduction,
we expect to achieve hot metal
cost below US$1,400 per tonne.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 84
Divisional Review
1
Power
Our Power
business is
becoming a
significant part
of the portfolio.
With power sales up
23% year-on-year,
we have gone from strength
to strength in power
generation. In March, our
full 9,000MW capacity came
online, making Vedanta one
of the largest generators of
power in India.
Ajay Dixit, CEO, Power
Key metrics
Sales (million kwh)
2016
2015
2014
2013
EBITDA (US$ million)
00.0
2016
2015
2014
00.0
2013
Unit costs (US cents/kwh)
2016
2015
2014
2013
00.0
12,121
9,859
9,374
196
153
168
3.3
3.5
3.7
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Results
During the year we achieved:
Ø New units commissioned at Talwandi Sabo and BALCO
with entire 9,000MW now operational.
Ø Operating units at Talwandi Sabo operated at over
80% availability.
3
2
1 MALCO power plant
2 Jharsuguda smelters
and power plants
3 Talwandi Sabo power plant
Captive thermal power plant
1
1: Turbines at the 2,400MW Jharsuguda power plant.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT
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Divisional Review
Power
1
Production performance
Total power sales (MU)
MALCO and HZL Wind Energy
BALCO 270MW
600MW
Talwandi Sabo (TSPL)
Talwandi Sabo (TSPL) plant availability factor (%)
Jharsuguda 2,400MW
Unit sales and costs
Sales realisation (US cents/kwh)1
Cost of production (US cents/kwh)1
TSPL sales realisation (US cents/kwh)2
TSPL cost of production (US cents/kwh)2
FY2016
FY2015
% change
12,121
816
169
1,025
2,792
80%
7,319
9,859
1,341
89
10
1,213
46%
7,206
22.9%
(39.1)%
89.9%
–
–
1.6%
FY2016
FY2015
% change
4.5
3.3
6.6
5.4
5.3
3.5
7.2
6.4
(15.1)%
(5.7)%
(8.3)%
(15.6)%
1 Excluding TSPL.
2 Volume based on Plant Availability Factor (PAF): FY2016 – 5,751MU and FY2015 – 1,897MU.
Operations
In FY2016, power sales increased
23% year-on-year, due to the
commissioning of additional units
at TSPL and BALCO during the
year. With these units, our entire
9,000MW of power capacity became
operational as of March 2016.
At the Talwandi Sabo power
plant, the second 660MW unit
started commercial production in
December 2015. The two operating
units operated at 80% availability
and supplied 2,792 million units to
the Punjab State Electricity Board
(PSEB). TSPL’s Power Purchase
Agreement with PSEB compensates
according to the availability of the
plant. The third 660MW unit was
synchronised during March 2016 and
is expected to achieve commercial
production during Q1 FY2017.
1: Turbine generator at Talwandi Sabo.
2: Transhipping operations at port.
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Financial performance
(in US$ million, except as stated)
Revenue
EBITDA
EBITDA margin
Depreciation and amortisation
Operating profit before special items
Share in Group operating profit (%)
Capital expenditure
Sustaining
Project
The Jharsuguda 2,400MW power
plant operated at a lower Plant Load
Factor (PLF) of 39% during FY2016,
due to a weak power market and
power evacuation constraints for
open access power sales. During
FY2017, power from one 600MW
unit is being supplied to the grid
and the remaining 1,800MW (3 x
600MW) will supply power to the
Jharsuguda-II smelter, with sales of
surplus power on the open market.
Accordingly, capacity utilisation is
expected to increase significantly.
At BALCO, the first 300MW IPP
unit of the 1,200MW power plant
commenced commercial production
in July 2015, and the second 300MW
IPP unit achieved commercial
production in March 2016.
2
FY2016
FY2015
% change
707.5
196.3
27.7%
74.1
122.2
13.9%
50.1
7.6
42.5
588.1
153.8
26.2%
65.8
88.0
5.1%
142.2
–
142.2
20.3%
27.6%
12.6%
38.9%
(64.8)%
–
(70.1)%
Unit sales and costs
Average power sale prices, excluding
TSPL, were lower in FY2016 at 4.5
US cents per unit compared with
5.3 US cents per unit in the previous
year due to lower demand.
During FY2016, average power
generation costs excluding TSPL
improved, falling to 3.3 US cents
per unit compared with 3.5 US
cents per unit in the previous
year due to a lower coal cost.
Currently, power demand has been
suppressed due to the financially
stretched position of the distribution
companies. With the new initiatives
taken by Government (UJWAL
Discom Assurance Yojna – ‘UDAY’)
to encourage them to restructure
their balance sheets, it is expected
to create new demand for the power,
thereby improving the health of the
power industry. However, TSPL is
not affected currently by sluggish
power demand due mainly to its Case
II business model as compensation
is linked to availability of plant.
Financial performance
EBITDA improved by 28% compared
to FY2015, despite lower demand and
softer power rates. This was due to
additional power sold from the newly
commissioned unit of the Talwandi
Sabo power plant and BALCO.
Outlook
During FY2017, we will continue
to increase capacity utilisation at
Jharsuguda and increase power sales
with newly commissioned power
units at Talwandi Sabo and BALCO.
Strategic priorities
• Tie up all capacities under long or
medium-term open access.
• Achieve over 90% availability.
• Achieve a successful outcome in
regulatory matters.
Port business
The Vizag General Cargo Berth
(VGCB) operation remains stable.
Despite the reduced coal imports
driven by the weaker power market,
dispatch tonnage increased marginally
by 3% to 7.1 million tonnes (FY2015:
6.9 million tonnes) and generated an
EBITDA of US$11 million. VGCB is one
of the deepest coal terminals on the
eastern coast of India, which enables
docking of large Cape-size vessels.
Vedanta Resources plc Annual Report FY2016STRATEGIC REPORT 88
Board of Directors
L-R
Geoffrey Green
Navin Agarwal
Anil Agarwal
Tom Albanese
Euan Macdonald
Deepak Parekh
Aman Mehta
Katya Zotova
Committee membership key
✝ Audit Committee
✜ Nominations Committee
❖ Sustainability Committee
✱ Remuneration Committee
Anil Agarwal, 63✜
Executive Chairman
Background and experience
Mr Agarwal founded the Group
in 1976 and has over three
decades of entrepreneurial
and mining experience. He
has helped to shape the
Group’s strategic vision and,
under his leadership, Vedanta
has grown from an Indian
domestic miner into a global
natural resources group with a
world-class portfolio of large,
diversified, structurally low-cost
assets which are capable of
generating strong cash flow.
Mr Agarwal is also a director of
Sterlite Technologies Limited,
Conclave PTC Limited and the
Anil Agarwal Foundation.
Date of appointment
Mr Agarwal was appointed
to the Board in May 2003
and became the Executive
Chairman in March 2005.
Mr Agarwal is Chairman of the
Nominations Committee.
Navin Agarwal, 55
Executive Vice Chairman
Background and experience
Mr Agarwal has over 25 years of
senior management experience
within the Group and is currently
the Chairman of the Company’s
principal subsidiary Vedanta
Limited and Cairn India Limited.
He is the Chairman of the
Group’s Human Resources
Advisory Committee and has
championed personnel training
and development initiatives
to grow the talent pipeline for
senior management succession
planning within the Group. He
has also been instrumental
in promoting a culture of
continuous improvement
in business processes and
nurtured the Management
Assurance practice across the
Group. He is a member of the
Procurement, Marketing and
Sustainable Development and
Communications Advisory
Committees. Mr Agarwal
was formerly the Chairman
of the Executive Committee
until 31 August 2013.
Date of appointment
Mr Agarwal was appointed to
the Board in November 2004
and became the Executive
Vice Chairman in June 2005.
Aman Mehta, 69✝ ✜ ✱
Senior Independent Director
and Non-Executive Director
Background and experience
Mr Mehta is currently a non-
executive director of Jet
Airways (India) Limited, Tata
Consultancy Services Limited,
PCCW Limited, Wockhardt
Limited, Max India Limited,
Godrej Consumer Products
Limited, Cairn India Limited
and HKT Limited, Hong Kong.
He is also a member of the
Board of Governors of the
Indian School of Business in
Hyderabad, India. Mr Mehta
had a long career spanning
over three decades at Hong
Kong and Shanghai Banking
Corporation (HSBC) where
he held a number of executive
positions such as chairman and
chief executive officer of HSBC
USA Inc, deputy chairman of
HSBC Bank, Middle East and
chief executive officer of HSBC
Asia Pacific, a position he held
until his retirement. He was
also previously a non-executive
director of Raffle Holdings
Ltd, ING Group N.V. and a
director of the Indian Council
for research on international
economic relations. Mr Mehta
has a degree in economics from
Delhi University. His strong
financial background and global
executive experience have
been beneficial in providing
effective oversight through
rigorous challenge to the Board
and the Audit Committee.
Date of appointment
Mr Mehta was appointed
to the Board in November
2004 and is Chairman of
the Audit Committee.
Tom Albanese, 58 ❖
Chief Executive Officer
Background and experience
Mr Albanese is the Chief
Executive Officer of Vedanta
Resources plc, a leading global
diversified resources company
listed on the London Stock
Exchange, with metals and
mining, oil & gas and commercial
power operations primarily in
India and Africa. In addition,
Tom is the Chief Executive
Officer of Vedanta Limited and
Chairman of Konkola Copper
Mines, both subsidiaries of
Vedanta Resources plc. Tom
brings a wealth of mining
experience from Rio Tinto, the
second largest global diversified
mining company, where he was
appointed a member of the Rio
Tinto Board in March 2006 and
Chief Executive for the period
beginning May 2007 to January
2013. From 2009 until June
2015, Tom served on the Board
of Visitors for the Fuqua School
of Business at Duke University
in North Carolina. In August
2013, Tom was appointed
onto the Board of Directors of
Franco Nevada Corporation, a
Toronto-based gold-focused
royalty and metal streaming
company with assets around the
world. In March 2016, Tom was
appointed as Co-Chair of the
Confederation of Indian Industry
(CII) National Committee on
Mining for the year 2016–2017.
Tom was conferred with the
Mining Foundation of the
Southwest 2009 American
Mining Hall of Fame Award,
for his dedication, knowledge,
leadership and inspiration to
his peers in the mining industry.
Tom holds a Bachelor’s degree
in Mineral Economics and a
Master’s in Mining Engineering
from the University of Alaska.
Date of appointment
Mr Albanese was appointed
to the Board in April 2014.
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89
Euan Macdonald, 76 ❖ ✝ ✜ ✱
Non-Executive Director
Background and experience
Mr Macdonald has extensive
corporate and financial
knowledge having previously
spent over 20 years with
SG Warburg, specialising in
emerging market finance. From
1995 to 1999, Mr Macdonald
was chairman of SBC Warburg
India, responsible for the bank’s
activities in India, and from 1999
to 2001 he was executive vice
chairman of HSBC Securities
and Capital Markets, India. As
Chairman of the Remuneration
Committee, Mr Macdonald led
the successful consultation
with the Company’s major
shareholders on executive
remuneration to better
understand and address
shareholder concerns. He has
a degree in economics from
Cambridge University and a
Master’s degree in finance and
international business from
Columbia Business School.
Date of appointment
Mr Macdonald was appointed to
the Board in March 2005 and is
Chairman of the Sustainability
and Remuneration Committees.
Geoffrey Green, 66 ✱
Non-Executive Director
Background and experience
Mr Green was a partner of a
leading international law firm,
Ashurst LLP, from 1983 to
2013 and served as Ashurst’s
senior partner and chairman
of its management board for
ten years until 2008. He was
subsequently appointed as head
of the firm’s expanding Asian
practice from 2009 to 2013,
based in Hong Kong. Mr Green is
currently also the non-executive
chairman of the Financial
Reporting Review Panel, one
of the main subsidiary bodies
of the Financial Reporting
Council. Mr Green has a wealth
of knowledge in respect of
UK corporate governance,
regulatory and strategic
matters, having been an adviser
to several major UK listed
companies and their boards on
a wide variety of corporate and
governance issues. He has a
degree in law from Cambridge
University and qualified as
a solicitor at Ashurst LLP.
Date of appointment
Mr Green joined the Board
in August 2012.
Deepak Parekh, 72 ✝ ✜
Non-Executive Director
Background and experience
Mr Parekh is the chairman
of Housing Development
Finance Corporation, India’s
leading financial services
conglomerate with a
presence in banking, asset
management, life insurance,
general insurance, real estate,
venture funds and education
loans. He is the non-executive
chairman of GlaxoSmithkline
Pharmaceuticals and Siemens,
in India. Mr Parekh also
serves as a director on the
boards of Exide, Mahindra &
Mahindra, Indian Hotels and
the international board of DP
World in the UAE. In addition,
he is on the advisory boards of
several Indian and multinational
corporations. Mr Parekh
was the first international
recipient of the Institute of
Chartered Accounts in England
and Wales outstanding
achievement award in 2010.
Date of appointment
Mr Parekh joined the Board
in June 2013.
Ekaterina (Katya) Zotova, 38
✜ ✱ ❖
Non-Executive Director
Background and experience
Ms Zotova has a wide range
of commercial experience in
the oil & gas industry including
strategy, portfolio management,
finance and mergers and
acquisitions. She is currently a
Principal at L1 Energy LLP. Prior
to this, Ms Zotova was Head of
International Acquisitions and
Divestments for Citigroup’s
oil & gas division focusing
on oil majors and national
oil companies. She has also
previously held a variety of
upstream commercial roles
during a 14-year career at Royal
Dutch Shell including Head
of Portfolio Management for
Upstream International. She has
a summa cum laude degree
in finance and management
from the Academy of National
Economy in Moscow and
an MBA from Rotterdam
School of Management/
Columbia Business School.
Date of appointment
Ms Zotova joined the Board
in August 2014.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 90
Executive Committee
The Executive Committee oversees the Group’s operations
and implementation of the strategic initiatives which are
set by the Board. It is led by Mr Albanese and comprises
of the Executive Vice Chairman and the following
members of senior management:
Tarun Jain
Director of Finance and Director, Vedanta Limited
Mr Jain joined the Group in 1984 and has over 32 years
of executive experience in finance, accountancy, audit,
taxation and corporate governance. He is responsible for
corporate finance, business development and mergers and
acquisitions at Vedanta Limited. Mr Jain is a graduate of the
Institute of Cost and Works Accountants of India and a
fellow of the Institute of Chartered Accountants of India
and the Institute of Company Secretaries of India.
DD Jalan
Chief Financial Officer and Whole Time Director, Vedanta
Limited
Mr Jalan is a Chartered Accountant and has over 38 years
of well-rounded experience in financial management,
corporate negotiation, financial control, business planning,
due diligence, business development, treasury, capital
raising, business restructuring, investor relations,
commercial, taxation, people development and strategic
planning. Prior to joining the Group in 2001, he was
Executive Joint President of Birla Copper at the Aditya
Birla Group. He is a fellow of the Institute of Chartered
Accountants of India. He is also a recipient of the Best
CFO Award from the Institute of Chartered Accountants
of India (ICAI).
Mayank Ashar
Managing Director and Chief Executive Officer of Cairn
India Limited (Cairn India)
Mr Ashar was appointed as the Managing Director and
Chief Executive Officer of Cairn India in November 2014.
He has a wealth of experience spanning over 36 years in
the international oil & gas industry. He has previously held
various senior management and top leadership roles in
global organisations such as British Petroleum, Petro-
Canada and Suncor Energy and was formerly President of
Irving Oil Limited. During his career, Mr Ashar has helped to
deliver industry-leading business results and demonstrated
expertise in driving strategic growth, delivering operational
efficiency and executing large, complex capital-intensive
projects. In recognition of his operational excellence and
large scale project management leadership in the oil
sands with Suncor Energy, Mr Ashar was named as the
Operations Executive of the Year by the Canadian Business
Magazine in 2003. He has a Masters in engineering and an
MBA from the University of Toronto, Canada. He also serves
on the board of directors of Teck Resources Limited.
one of the 100 Most Impactful Leaders in CSR at the World
CSR Congress. Ms Balwani is a director of CMI FPE, and the
Indian subsidiary of the Belgian company CMI. She also
chairs the CSR committee as a board member.
Mukesh Bhavnani
Group Legal Counsel and Chief Compliance Officer
Mr Bhavnani was appointed as Group Legal Counsel and
Chief Compliance Officer in April 2015. Prior to joining
the Group, he was Group General Counsel and Company
Secretary at Bharti Enterprises. He has over 38 years
of senior management experience in legal, compliance,
company secretarial and corporate affairs within
organisations including Essar Group, Sony Entertainment,
Max New York Life, Coca-Cola India and Godrej Group.
Steven Din
Chief Executive Officer and Director, Konkola Copper
Mines (KCM)
Mr Din was appointed Chief Executive Officer of KCM in
May 2014. He has over 20 years of experience in the natural
resources industry, with over 15 years’ experience in African
mining and oil & gas. Prior to joining the Group, Mr Din was
chief executive officer of Essar Minerals in Zimbabwe.
Mr Din spent a large part of his mining career with Rio Tinto
where he was managing director and president for
Simandou in Guinea, managing director of Strategic
Projects for Rio Tinto in Senegal and chief financial officer
and executive director of Palabora Copper Mines in South
Africa and senior vice president and chief financial officer
for Rio Tinto Iron & Titanium based in London.
Dilip Golani
Director, Management Assurance
Mr Golani currently heads the Group’s Management
Assurance function. He previously headed the Sales and
Marketing function at Hindustan Zinc Limited and the
Group Performance Management function. Prior to joining
the Group in April 2000, Mr Golani was part of the Unilever
Corporate Audit team responsible for auditing the Unilever
group companies in Central Asia, Middle East and Africa
region. Earlier, he was responsible for managing operations
and marketing functions for one of the export businesses
at Unilever India. Mr Golani has over 25 years of experience
and previously worked with Union Carbide India Limited
and Ranbaxy Laboratories. Mr Golani has a degree in
mechanical engineering and a postgraduate degree in
industrial engineering and management from NITIE.
Roma Balwani
President – Group Communications, Sustainability and
Corporate Social Responsibility
Ms Balwani was appointed as President – Group
Communications, Sustainability and Corporate Social
Responsibility in April 2014. Prior to joining the Group, she
was Chief Communications Officer at Mahindra & Mahindra
Limited. With over three decades of experience, she has
won several Indian and international awards and accolades
and she speaks at several summits on sustainable
development and communications in India and overseas.
Roma has the distinction of being included in the PR Week
Global Power Book 2015, South East Asia and from the
Holmes Global Report, USA, a recognition in the Global
Influence 100. Recently she received the accolade of being
Akhilesh Joshi
President – Global Zinc Business and Whole Time
Director, Hindustan Zinc Limited (HZL)
Mr Joshi is Head of Zinc operations in India, Africa and
Ireland. He is also Head of Group Exploration and Group
R&D services. He joined Hindustan Zinc Limited in 1976 and
was appointed as Chief Executive Officer and Whole Time
Director of HZL in February 2012. In October 2008, he
became Chief Operating Officer and Whole Time Director
of HZL. Mr Joshi is also the Director of Skill Council for
the Mining Sector. Mr Joshi has a mining engineering
degree from MBM Engineering College, Jodhpur and a
postgraduate diploma in Economic Evaluation of Mining
Projects from School of Mines, Paris. He is a recipient
of many prestigious awards including the Government
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91
in Paris. Mr Cairae holds a graduate degree in Electrical
Engineering from the Indian Institute of Technology (IIT),
Kanpur, and a Masters in Management from the Hautes
Etudes Commerciales (HEC) School of Management, Paris.
P Ramnath
Chief Executive Officer, Vedanta Limited – Copper
Business
Mr Ramnath joined the Company in September 2011 and is
the Chief Executive Officer of Vedanta’s Copper business
in Tuticorin and Silvassa and Fujairah in the UAE and is also
a board member for Malco Energy Limited, a subsidiary
company of Vedanta Resources plc. Prior to joining the
Company, he was the Chief Operating Officer of JK Paper
Ltd. He has over 30 years of experience across many varied
sectors which include chemicals, specialty chemicals,
manufacturing and paper industries, including at Jubilant
Life Sciences Ltd, Praxair India, SNF Ion Exchange Ltd,
Bakelite Hylam Limited and Reliance Industries Limited.
Mr Ramnath holds a Bachelor’s degree in Chemical
Engineering from Osmania University, Hyderabad and
has a postgraduate diploma from the Indian Institute
of Management, Bangalore.
Sunil Duggal
Chief Executive Officer, Hindustan Zinc
Mr Duggal joined the Company in August 2010 and has
been a significant driver of Hindustan Zinc’s growth over
the years. His dedicated efforts on the sustainability front
have created safety awareness and helped build a robust
safety culture. His thrust in adopting best-in-class mining
and smelting techniques, machineries, state-of-the-art
environment friendly technologies, and mechanisation and
automation of operational activities has added great value.
A results-oriented professional with experience of leading
high performance teams, Mr Duggal has worked in
leadership positions for more than 20 years. He has the
ability to keep a level head at all times, nurture and grow
a business, evaluate opportunities and risks, successfully
drive efficiency and productivity whilst reducing costs and
inefficiencies and deliver innovative solutions to challenges.
He is an electrical engineering graduate from Thapar
Institute of Engineering & Technology, Patiala and is an
Alumni of IMD, Lausanne – Switzerland and IIM, Kolkata.
He is also the President of the Indian Lead Zinc
Development Association.
Ajay Kumar Dixit
Chief Executive Officer, Power
Mr Dixit was appointed as CEO, Power for Vedanta Limited
in May 2015. Prior to joining the Company, Mr Dixit worked
at Siemens for almost 35 years, in various profiles in the
industry and energy sectors before taking over as CEO –
Energy sector for South Asia. At Vedanta, he is leading the
power plant units vertical with a capacity of over 9GW and
driving strategies to achieve the full potential of the
business. Mr Dixit is an electrical engineer from Delhi
College of Engineering.
of India’s ‘National Mineral Award, 2006’ for his outstanding
contribution in the field of Mining Technology, Business
Today Group’s ‘Best CEO Award (Core Sector), 2013’ and
‘Lifetime Achievement Award, 2013’ by the Indian Mining
Engineering Journal. He was also presented with a Gold
Medal by the Indian Institute of Metals and was felicitated
by the Institution of Engineers (India) for his contribution to
the field of mining industry in 2013.
Rajagopal Kishore Kumar
Chief Executive Officer, Iron Ore
Mr Kumar joined the Group in April 2003 and has held
various executive roles including Chief Executive Officer of
Sterlite Copper from 2007 to 2008, Chief Executive Officer
of KCM from 2008 to 2011, Chief Executive Officer of Zinc
International from 2011 to 2013 and Chief Executive Officer,
Africa (Base Metals) from 2013 to 2015. He was appointed
as Chief Executive Officer of the Group’s Iron Ore
businesses with effect from February 2015 and is leading
the revival of profitable, low-cost iron ore mining operations
in Goa and Karnataka as well as developing the Liberian
project. Mr Kumar has nearly 32 years of experience and
expertise in accountancy, commerce, marketing, supply
chain management, mergers and acquisitions, human
capital development, business turnaround and policy
advocacy. Prior to joining the Group, Mr Kumar worked
at Hindustan Lever Limited for 12 years.
Abhijit Pati
Chief Executive Officer, Aluminium
Mr Pati was appointed as Chief Executive Officer of
the Group’s Aluminium business in March 2015 and is
responsible for the Jharsuguda Aluminium complex,
Lanjigarh refinery and BALCO. He joined the Group in 2008
and, with his wealth of knowledge over 27 years in the
industry, has been a significant driver of the Company’s
Aluminium growth. Mr Pati is a two-times gold medal
holder and an honours graduate in Chemical Engineering
from the prestigious Calcutta University and holds an MBA
from IMI Delhi.
M Siddiqi
Group Director, Projects
Mr Siddiqi joined the Group in 1991 and, rising through
several operational roles, he led the set-up of the Group’s
large Aluminium and Power projects, including BALCO
smelters and captive power plants. He also played a key
role in setting up the copper smelter at Tuticorin and the
copper refinery at Silvassa. Prior to his appointment as
Group Director of Projects he was Chief Executive Officer
of the Group’s Aluminium division. Prior to joining the
Group, Mr Siddiqi held senior positions in Hindustan Copper
Limited. He has over 38 years of industry experience.
Mr Siddiqi has a mechanical engineering degree from the
Indian Institute of Technology, New Delhi and a PG Diploma
in Management from AIMA, New Delhi.
Samir Cairae
Chief Executive Officer of Diversified Metals (India)
Mr Cairae was appointed as CEO of Diversified Metals
in January 2016. He provides operational and strategic
leadership for Vedanta Limited’s Aluminium, Copper India,
Power and Iron Ore divisions in addition to Commercial and
Asset optimisation functions. Prior to his appointment at
Vedanta, Mr Cairae held various senior leadership positions
in global operations at Lafarge and Schlumberger. He has a
rich and varied experience of a mix of line and corporate
roles in strategy, M&A, industrial operations, in managing
industrial operations and business CEO roles in both growth
and turnaround situations, in India, China, the Philippines
and France and has led complex businesses, including listed
companies. In his last role before joining Vedanta, he was
heading the global industrial function for Lafarge’s 150
cement operations in over 45 countries and was based
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Corporate Governance Report
I have long believed that good governance
equals good business.
Anil Agarwal, Executive Chairman
Dear fellow shareholder,
Earlier in this Annual Report I noted that global resources
companies continued to face some significant challenges
throughout the year and Vedanta Resources plc was no
exception. However, in the last few years we have taken the
view that when we are faced with such challenges that the
best strategy to adopt has been to take a prudent and well
considered approach that keeps both the long-term and
the short-term needs of the business in balance.
As Chairman of the Board, I am committed to Vedanta
Resources plc seeking to operate the highest standards
of corporate governance. I am therefore delighted to
introduce the Company’s 2016 Corporate Governance
Report, where we set out our approach to directing and
controlling the activities of the Group. I believe it is our
governance structures that underpin our ability to deliver
our strategy.
Vedanta business
In furtherance of the Group’s strategy to simplify the Group
structure I can advise that during the year the Group
announced a merger between Cairn India and Vedanta
Limited. This transaction is designed with the objective
of furthering the Group’s strategy while also aligning the
interests between all shareholders for the creation of
long-term sustainable value.
Sustainability and safety
During the year, we have continued to make good progress
on improving the Group’s safety record and reaching a goal
of becoming a zero-harm environment. With this objective
in mind, the Group has made a conscious effort to
strengthen the Sustainable Development Framework
with the release of performance standards on safety and
environment management. Despite all these good initiatives
it is with regret that I announce that there were 12 fatalities
throughout the year. To address the fatalities that
happened during the year we will continue to focus
on the robust implementation of our six safety standards
alongside development for risk awareness and risk
mitigation. In 2016 we will continue our efforts to improve
our safety culture as advancing safety management
remains a key priority for management for the year ahead.
Board composition
As Chairman, I am responsible for leading the Company’s
Board of Directors (the Board or the Directors) and
ensuring that it operates effectively to deliver long-term
value for shareholders. A key part of this role is to ensure
that the Board works collaboratively with the executive
team, providing support and guidance to complement and
enhance the work undertaken, constructively challenging
management where necessary and exercising an
appropriate level of rigorous enquiry and intellectual
debate. This involves having Directors with the right
balance of skills, experience and attributes, including
a broad diversity of perspectives.
Board changes
As discussed last year, Euan Macdonald and Mr Aman
Mehta have served as Non-Executive Directors on the
Board for over nine years and therefore as per the Code’s
requirements they were subject to a particularly rigorous
review during the year to ensure that their tenure had not
impeded their independence.
Euan Macdonald, having served 11 years on the Board,
has decided to step down from the Board following the
conclusion of the Company’s Annual General Meeting in
August 2016. On behalf of the Board, I would like to thank
Mr Macdonald for his significant contribution to the Board
during his tenure. The Board continues to be compliant with
the UK Corporate Governance Code’s independence
recommendations with a total of eight directors, of whom
five are independent.
Following a review by the Board and the Nominations
Committee, the Board, on the recommendation of the
Nominations Committee, on 11 May 2016 decided to appoint
Mr Ravi Rajagopal as a Non-Executive Director effective
from 1 July 2016. Mr Rajagopal will also become a member
of the Audit Committee on the same date. I am very
pleased that we have been able to attract such a high
calibre individual in Mr Rajagopal and look forward to
working with him. The Board, on the recommendation of
the Nominations Committee, has requested that Mr Aman
Mehta be invited to stay as a Non-Executive Director for
a further year. Following the Company’s internal Board
evaluation I can advise that Mr Mehta continues to be
independent and provides informed debate to the Board
and Committee meetings.
Diversity
The Board has previously highlighted that it is an advocate
of diversity in the boardroom and a supporter of Lord
Davies’ target set in 2011, which was 25%, subsequently
revised in 2015 to 33%, of all Board positions being filled
by women by 2020. The Board will endeavour in reaching
the target set by Lord Davies and we have made progress
towards that objective with the appointment of Ms Zotova.
We are aware that we can do more in respect of this and
it remains a key priority of the Board to make further
appointments based on merit taking into account the
diversity and other requirements of the Board and
candidates’ skills and experience.
The Board also recognises the importance of encouraging
diversity in all forms, including gender, as well as developing
employees across the Group to provide for future
succession to management roles. We continue to build on
diversity in leadership roles within the natural resources
sector and have made a number of senior female
appointments during the year, including the Senior Vice
President & Group Taxation Head, General Counsel (Cairn),
Head of Corporate Social Responsibility (HZL), Head of
Communications (Iron Ore Business) and Financial
Controller (Iron Ore Business). Further information on our
progress is given in the Nominations Committee Report
on (pages 111 to 113).
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Talent development and senior management succession
planning
Our people are our biggest asset for the delivery of business
results and long-term shareholder value. As I stated last
year, the continued investment in our people is critical to
our future success, and with this in mind the ‘Leadership
Connect Programme’ was launched where we made
remarkable progress with focus on leadership development
of individuals through assessments and coaching. In line
with our philosophy, the Group initiated ‘Internal Growth
Workshops’ which has focused on promoting internal talent
into leadership roles. The Internal Growth Workshops have
so far identified 100 new leaders who have taken up
significantly higher roles and responsibilities; this includes
13 women professionals across the businesses. In addition,
the Executive team has been significantly strengthened
and strong foundations have been laid to deliver superior
performance for the Group.
Board effectiveness and evaluation
Each year the Board undertakes a formal evaluation of
its effectiveness. This year we undertook this process
internally (see page 101 for further details of the outcome
of the review). The Board evaluation consisted of targeted
questionnaires and any issues raised as a result of the
Board evaluation were addressed and an action plan was
formulated to strengthen our Board processes. Further
information on the processes and outcome of the Board
evaluation is provided within this report on page 101.
Accountability
The Board over the last couple of years has focused on
ensuring that the views presented in our Annual Report
are fair, balanced and understandable and provide the
information necessary for shareholders to assess the
Company’s performance, business model and strategy, and
that the business continues to operate as a going concern.
Annual General Meeting
The Company’s 2016 Annual General Meeting will be held at
3.00pm on 5 August 2016 at Ironmongers’ Hall and I would
encourage you to attend and participate in the meeting.
In this report we provide an overview of the work of the
Board and its Committees and our governance framework,
which incorporates our Code of Conduct and sets the tone
for the way we work both in respect of relationships
between colleagues and with our customers and suppliers.
Yours sincerely,
Anil Agarwal
Executive Chairman
11 May 2016
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Corporate Governance Report continued
Compliance with the UK Corporate Governance Code
The UK Corporate Governance Code (the Code)
Vedanta Resources plc is required, under the UK Listing
Rules, to comply with the UK Corporate Governance Code
(the Code) published by the Financial Reporting Council
(the FRC) for the year ended 31 March 2016. The latest
revision of the Code was published by the FRC in
September 2014, together with Guidance on Risk
Management, Internal Control and Related Financial and
Business Reporting and is applicable to reporting periods
beginning on or after 1 October 2014. The Code is available
on the Financial Reporting Council’s website at
https://www.frc.org.uk/corporate/ukcgcode.cfm
The Company is required to report on how it has applied
the main principles of good governance in relation to
leadership and effectiveness of the Board, remuneration,
accountability and relations with shareholders as set out in
the Code. This Corporate Governance Report provides
details of our approach to governance, our policies,
processes and structures and explains how we have
complied with the main principles of the Code. Further
details of how the Company has applied the provisions of
the Code are also contained in the reports of each Board
Committee and the Directors’ Remuneration Report.
In the latest edition of the Code there is now a requirement
to include additional statements by the Directors in respect
of the longer-term viability of the Company and that the
Company has a robust assessment of the principal risks
facing the Company. These new requirements are
addressed in the new Viability Statement that follows
the Finance Review on page 53.
Disclosures on share capital and related matters as required
by the Disclosure and Transparency Rules (DTR 7.2.6) may
be found in the Directors’ Report on pages 129 to 134.
Statement of compliance with the Code
It is the Board’s view that the Company has, throughout
the financial year ended 31 March 2016, fully complied
with all the provisions of the Code, with the exception
of the following:
Code Provision A.3.1
Mr Anil Agarwal was appointed as Executive Chairman in
2005. Mr Agarwal was the founder of the businesses of
Vedanta Resources and steered the growth of the Group
since its inception in 1976 including the flotation of Vedanta
Resources plc on the London Stock Exchange. This meant
that Mr Agarwal did not meet the independence criteria as
defined in the Code on his appointment in 2005 because
he was previously the Chief Executive and, through Volcan
Investments Limited (Volcan), members of his family have a
controlling interest in the Company. Mr Agarwal is pivotal in
helping to achieve the strategic objectives of Vedanta
through his skills in seeking out value creating acquisitions
and projects. In addition, the fact that he dedicates himself
full time to his role of Executive Chairman enables him to
balance his executive duties with providing leadership to
the Board. As Executive Chairman Mr Agarwal encourages
debate and challenge and sets high ethical standards. For
these reasons the Board is unanimously of the opinion that
his continued involvement in an executive capacity is
important to the success of the Group.
Code Provision B.1.1
Two of the Company’s Non-Executive Directors, Messrs
Aman Mehta and Euan Macdonald have served on the
Board for over nine years and Mr Mehta also serves as a
Non-Executive Director on the Board of Cairn India Limited.
As a consequence, the Board was mindful of the risk of
their independence becoming compromised and
undertook a particularly rigorous assessment of their
independence and potential for conflicts of interest.
Mr Mehta does not have any business relationship with the
Group other than his directorship at Cairn India and
Vedanta Resources plc. As he absents himself from
discussions in the event of any conflict of interest and
continues to actively participate in Board discussions and
provides robust challenge to management, the Board
concluded that his independent judgement was not
compromised and he remained impartial. Mr Macdonald
does not have any business relationship with the Group and
is not involved in any transaction or circumstance that
would interfere with the exercise of his independent
judgement in carrying out the responsibilities of a Director.
Accordingly, the Board is satisfied that the tenure of Messrs
Mehta and Macdonald does not affect their ability to
exercise independent judgement or act in the best interests
of the Group and has determined them to be independent.
Code Provision B.2.1
By virtue of the size of its shareholding in the Company,
Volcan Investments Limited (Volcan) is a controlling
shareholder for the purposes of the Listing Rules and was
required to enter into an agreement with the Company to
ensure compliance with the independence provisions as set
out in the Listing Rules (Relationship Agreement). Under
the Relationship Agreement, Volcan will be consulted on all
appointments to the Board. The Nominations Committee
therefore works collaboratively with Volcan when making
appointments to the Board and, to this extent, differs from
the process set out in Code Provision B.2.1 which stipulates
that the Nominations Committee should lead the process
for Board appointments.
Leadership and the role of the Board
The Company is headed by a strong and effective Board of
Directors which is collectively accountable to shareholders
for promoting the long-term success of the Group through
the creation and delivery of sustainable shareholder value.
The Board does this by setting strategic priorities and risk
appetite, ensuring that adequate resources are available for
the attainment of the Group’s objectives and reviewing
management’s performance in delivering the strategy.
The Board has a scheduled formal programme of meetings
to ensure that it can allocate sufficient time to key areas
which enables the Board to plan meetings appropriately
and to use Board members’ time more effectively. The
Board reviews its schedule of reserved matters regularly.
The formal schedule of reserved matters is replicated in
internal delegation of authorities within the Group that
enables the operating businesses to operate with flexibility
while ensuring that strategic matters are always considered
and decided upon by the Board.
As part of its decision-making processes the Board
considers the long-term consequences of its decisions,
the interests of various stakeholders including employees,
the impact of the Group’s operations on the environment
and the need to maintain high standards of business.
This is achieved through a prudent and robust risk
management framework and internal controls and
strong governance processes.
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95
Corporate governance framework
The relationship between the shareholders, the Board, Board Committees and Management Committees and the reporting
structure as shown below forms the backbone of the Group’s corporate governance framework.
Board of Directors
Executive
Chairman
see page 88
Chief
Executive
Officer
see page 88
Finance
Standing
Committee
see page 98
Board Committees
Chairman’s
Committee
see page 98
Executive
Committee
see page 98
Nominations
Committee
see page 111
Audit
Committee
see page 104
Remuneration
Committee
see page 116
Sustainability
Committee
see page 114
Role of the Board
• Provide entrepreneurial leadership and set strategic direction for
the Group
• Review the Group’s risk environment and set risk appetite
• Approve the Group’s business plans and capital expenditure budgets
• Assess adequacy of financial and human resources to attain strategic
objectives
• Monitor delivery of strategic objectives by management
• Support management in their delivery of objectives
• Provide constructive challenge to management on assumptions
• Provide oversight of risk management and internal control framework
• Engage with and report to shareholders on business performance
• Engage with and report to other stakeholders on their areas of concern
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Corporate Governance Report continued
Compliance with the UK Corporate Governance Code continued
Duties of the Board
The duties of the Board are set out in its terms of reference,
including those matters specifically reserved for decision by
the Board. The Board’s terms of reference include:
• Approval of the Group’s annual and half-year reports and
financial statements;
• Declaration of the interim dividend and the
recommendation of the final dividend;
• Approval of any material restructuring or reorganisation
of the Group;
• Approval of major capital expenditure projects in excess
of defined thresholds;
• Approval of major acquisitions and disposals of assets in
excess of defined thresholds;
• Approval of a variety of major decisions that are
determined by their nature to have a significant likely
impact for the Group; and
• Approval of any appointments to or removals from the
Board of Directors.
The Board’s terms of reference also set out those matters
which must be reported to the Board, such as details of
fatalities within the Group and the adoption or material
amendment to the Group policies relating to business
conduct, environment and health and safety.
Board culture
Debate
• Open discussions
• Consultative processes
• Encouragement to question
• Constructive challenge
• Collective decision-making
High ethical standards
• Supported by sound governance policies such as Code
of Business Conduct and Ethics
Entrepreneurial spirit
• Seeking out new business opportunities and acquisitions
• Underpinned by strong risk management framework and
internal control systems
Professional approach
• Different skill sets of Board members
• Excellent relationships between Board members
Board membership
At the date of this report, the Board is comprised of eight
members. This includes the Executive Chairman, Executive
Vice Chairman, Chief Executive Officer and five
independent Non-Executive Directors. Accordingly, our
Board is comprised of Directors from differing international
backgrounds combined with a wide range of professional
and sector-specific experience. This ensures that we have
a balanced Board with the right skills and experience to
contribute fully to effective decision-making. The Board
regards each of the five Non-Executive Directors as
being fully independent in character and judgement
(see page 99).
The Board has adopted a policy, consistent with the UK
Corporate Governance Code, under which all Directors
must seek re-election by shareholders annually, if they wish
to remain on the Board. The Board believes that annual
re-election promotes and supports accountability to
shareholders. Annual re-election means effectively that
Directors are subject to an annual appraisal. The Board,
on the recommendation of the Nominations Committee,
makes an informed decision as to whether it will endorse a
retiring Director for re-election. Accordingly, Directors are
re-elected by ordinary resolution at the Company’s AGM.
In 2014, the Financial Conduct Authority (FCA) published
amendments to the Listing Rules, which included changes
affecting premium listed companies with a controlling
shareholder. This means that the independent Non-
Executive Directors of the Company must be elected or
re-elected by a majority of votes cast by all shareholders.
Therefore, at the forthcoming Annual General Meeting,
the resolutions for the election or re-election of the
independent Non-Executive Directors will be taken
on a poll and passed only if a majority of votes cast
by independent shareholders in addition to a majority
of the votes cast by all shareholders being in favour.
Division of responsibilities
There is a clear division between the functioning of the
Board in providing effective oversight and the executive
responsibility for the operation of the Company’s business.
The Board has an established policy which prescribes how
it discharges its mandate. This policy sets out the roles and
responsibilities of the Executive Chairman, Executive Vice
Chairman, Chief Executive Officer, Senior Independent
Director and Non-Executive Directors.
The role of the Executive Chairman
The Executive Chairman is responsible for:
• Leading the Board and ensuring that it has the resources
required to function effectively;
• Developing succession plans for Board appointments
for Board approval;
• Helping to identify strategic priorities to enhance
shareholder value;
• Formulating strategic plans for the Board’s consideration
and approval;
• Identifying new business opportunities in line with the
strategic plans approved by the Board;
Board balance
Gender split of Directors
Nationalities of Directors
Board experience
3
5
Executive
Non-Executive
7 Male
1
Female
4
1
1
2
India
US
Netherlands
UK
3 Mining
1
3
1
Oil & gas
Finance and banking
Legal and governance
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97
• Engaging with the Company’s shareholders and other
stakeholders such as governments, communities and
employees to ensure that an appropriate balance is
maintained between the various interests;
• Providing leadership to the senior management team;
• Upholding the highest standards of integrity, probity and
governance at Board level and throughout the Group;
• Facilitating active engagement by all Directors and
fostering an environment in which Non-Executive
Directors can freely provide constructive challenge;
• Evaluating the performance of the Board, Board
Committees and individual Directors and acting on the
results of such evaluation;
• Reviewing the training needs of the Directors for the
fulfilment of their duties; and
• Ensuring that new Directors participate in a full, formal
and tailored induction programme.
The role of the Executive Vice Chairman
The Executive Vice Chairman supports the Executive
Chairman in his leadership of the Board and is
responsible for:
• Supporting the Executive Chairman in ensuring that the
Board functions effectively;
• Supporting the Executive Chairman in identifying new
business opportunities;
• Supporting the development of the Group’s Oil & Gas
strategy;
• Supporting the development of the Group’s corporate
structure to greater align strategic priorities and enhance
shareholder value;
• Guiding the execution of the Group’s HR strategy and
talent management;
• Providing oversight of the development of top talent
throughout the Group; and
The role of the Senior Independent Director
The Senior Independent Director plays a key role in
achieving a balance between the Company’s Executive and
Non-Executive Directors. He is responsible for:
• Providing a channel of communication between the
Executive Chairman and the Non-Executive Directors;
• Acting as an intermediary for shareholders who wish to
raise concerns that they have been unable to resolve
through the normal channels of communication;
• Acting as a sounding board for the Executive Chairman
and serving as an intermediary for the Non-Executive
Directors where necessary;
• Meeting with the Non-Executive Directors at least once a
year to appraise the Executive Chairman’s performance
and on such other occasions as are deemed appropriate;
and
• Availability to meet with a range of shareholders when
requested, to develop a better understanding of their
issues and concerns and reporting the outcomes of such
meetings at subsequent Board meetings.
The role of the Non-Executive Directors
The Non-Executive Directors are responsible for helping to
develop the Company’s strategy and providing rigorous,
objective and constructive challenge to create
accountability and drive performance. Between them the
current Non-Executive Directors have the appropriate
balance of skills, experience, knowledge and independent
judgement gained through experience in a variety of
business factors. The responsibilities of the Non-Executive
Directors include:
• Helping management to develop the Company’s
strategic objectives by drawing on their own business
and commercial experience and challenging
assumptions;
• Strengthening the Group’s procurement capability and
• Scrutinising management’s performance in delivering
focusing management attention on critical areas.
against the strategy;
The role of the Chief Executive Officer
The Chief Executive Officer is responsible for:
• Ensuring effective implementation of Board decisions;
• Developing operational business plans for Board approval;
• Providing leadership to the senior management team for
the delivery of the Group’s operational business plans
following Board approval;
• Providing oversight and management of all of the
Group’s operations, business activities and performance
including environmental, social, governance, health and
safety, sustainability, investor relations and external
communications;
• Managing the Group’s risk profile in line with the risk
appetite set by the Board;
• Ensuring that prudent and robust risk management
and internal control systems are in place throughout
the Group;
• Recommending annual budgets to the Board for
approval;
• Making recommendations to the Remuneration
Committee on remuneration policy and executive
remuneration;
• Supporting the Executive Chairman in maintaining
effective communications with various stakeholders;
• Maintaining a close working relationship with the
Chairman; and
• Leading the Executive Team.
• Satisfying themselves on the integrity of financial
information and ensuring that risk and control systems
are robust; and
• Determining appropriate levels of remuneration,
succession planning and participating in the appointment
of Executive Directors.
The Board considers that each of the Non-Executive
Directors has the following attributes:
• Time to undertake the responsibilities of the role;
• Unquestioned honesty and integrity;
• An ability to provide strategic thought to the relevant
matters;
• An ability to manage and consider materiality and risk
tolerance as key considerations in decision-making; and
• Experience of managing in the context of uncertainty,
and an understanding of the risk environment of the
Group, including the potential for risk to impact on health
and safety, environment, community, reputation,
regulatory market and financial performance.
The Executive Directors bring additional perspectives to
the Board through a deeper understanding of the Group’s
business and day-to-day operations.
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Corporate Governance Report continued
Compliance with the UK Corporate Governance Code continued
Board Committees
The Board delegates certain responsibilities to Board
Committees which operate within their defined terms of
reference. The main Board Committees are the Audit,
Nominations, Remuneration and Sustainability Committees
(together, the Board Committees).
The Board’s four formal committees have formally
delegated duties and responsibilities and their terms of
reference are available on the Company’s website at
www.vedantaresources.com or by request to the Company
Secretary. Each committee’s terms of reference are
reviewed annually to ensure that they comply with current
legal and regulatory requirements, reflect best corporate
practice and improvements in the way the committees are
managed. Each committee’s Chairman reports formally
to the Board after each committee meeting. Additionally,
from time to time, the committees submit reports and
recommendations to the Board on any matter which
they consider significant to the Group.
The Board members are authorised to obtain legal or other
professional advice as necessary at the expense of the
Company, to secure the attendance of external advisers at
their meetings and to seek information from any employee
of the Company in order to perform their duties. Under the
terms of reference of each of the Board Committees only
the members of each committee have the right to attend
committee meetings. However, other Directors,
management and advisers may attend meetings at the
invitation of the Committee chair. The Group Company
Secretary acts as the secretary to the Board, Audit,
Nominations and Remuneration Committees while the
President – Group Communications, Sustainability and
Corporate Social Responsibility acts as the secretary to
the Sustainability Committee.
The Group maintains appropriate Directors’ and Officers’
liability insurance on behalf of, and provides individual
indemnities to, the Directors and Company Secretary,
which complies with the provisions of Section 234 of
the Companies Act 2006.
The Executive Committee
The Executive Committee acts as a conduit between
management and the Board and during the year ended
31 March 2016 comprised of the Executive Vice Chairman,
the Chief Executive Officer and members of senior
management whose biographies are given on pages 90
to 91. The Executive Committee meets monthly and is
responsible for implementing strategic plans formulated
by the Board, allocating resources in line with delegated
authorities and monitoring the operational and financial
performance of the Group. The Executive Committee
therefore has a key role in putting the Board’s plans
and policies into action. The Chief Executive Officer,
Mr Albanese, keeps the Board informed of the Executive
Committee’s activities through his standing reports to
the Board.
The Finance Standing Committee
The Finance Standing Committee is an ad-hoc sub-
committee to which authority is delegated by the Board
for approval of certain matters such as routine bank and
financing issues. It comprises five members: Executive
Chairman, Executive Vice Chairman, Chief Executive
Officer, Chief Financial Officer and Director of Finance.
The Company Secretary provides an update on the Finance
Standing Committee meetings to the Board at the
subsequent Board meeting and the minutes of all Finance
Standing Committee meetings are reviewed by the Board.
Chairman’s Committee
The Chairman’s Committee meets monthly and comprises
of Messrs Anil Agarwal, who chairs the Chairman’s
Committee, Navin Agarwal, Tom Albanese, Tarun Jain and
DD Jalan. The Committee is a management committee
which was established to support the review of businesses
in more detail in order to minimise costs of the functioning
of the Board and ensure that the business of the Board and
its Committees is properly planned and aligned with
management. The Chairman’s Committee provides a forum
for the Chief Executive Officer to report to the Executive
Chairman on the Company’s operational performance and
key issues impacting performance and for the members to
deliberate on how best to align performance with the
strategic objectives set by the Board.
How the Board operates
The Board meets on a regular basis and met formally on
six occasions during the year, of which four were scheduled
Board meetings and two were called at short notice. As
well as formal meetings, written resolutions are passed
with the approval of the whole Board on routine matters
as required in order to facilitate efficient decision making.
In addition, ad-hoc discussions take place between the
Directors on a variety of topics throughout the year. The
Non-Executive Directors, led by the Senior Independent
Director, also met during the year without the Executive
Directors present to appraise the Executive Chairman’s
performance amongst other matters.
Strategy development
During the year, a separate meeting was held by the
Directors to consider and test the long-term strategy of the
Company. At this strategy meeting, the Board considered
its strategic direction in light of external factors such as
regulatory environments and commodity market
developments and agreed its strategic focus and priorities
for the year ahead.
The Executive Chairman, assisted by the Company
Secretary, is responsible for ensuring that the Board
receives accurate, timely and clear information on all
relevant matters in order to make informed decisions and
discharge its duties. Directors are provided with regular
detailed briefings on the Group’s businesses, the markets
within which it operates and the overall economic
environment and updates on fiscal policy changes. Prior to
a Board meeting the Board also routinely receives detailed
information on business and financial performance,
ongoing projects, fundraising initiatives, activities of
the Board Committees and investor relations, with
presentations and verbal updates given by the Executive
Directors and senior management as appropriate.
At the request of the Directors, the Chief Executive Officer
also provides a monthly report to the Board on key
operational issues and other matters of importance
to the Group.
Board activities during the year
• Consolidation and simplification of Group structure; this
was further achieved with the proposed merger between
Cairn India and Vedanta Limited;
• Regularly reviewing strategy in the light of socio-
economic and political developments;
• Consideration of the Group’s Oil & Gas strategy in low oil
price environments;
• Review of the Group’s Aluminium and Power strategy;
• Review of the business turnaround strategy of the
Group’s African Copper business KCM;
• Review of the business of the Group’s Australian Copper
business CMT;
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99
• Review of the Iron Ore operations in Goa;
• Monitoring the Group’s health and safety record and
initiatives to promote a zero-harm environment;
• Reviewing the progress of the Group’s major
The attendance of the Directors at Board meetings held
during the year is shown in the following table and the
Directors’ attendance at Board Committee meetings is
provided in the respective Board Committee reports.
capital projects;
• Monitoring the operational performance of the Group
against the business plan for the year through production
updates from the heads of the operating subsidiaries;
• Sustained operational excellence and cost efficiencies;
• Monitoring the financial performance of the Group
and the financing of debt, currency hedging and
covenant compliance;
• Sustainable development and linkage of initiatives to
license to operate philosophy;
• Coal block auctions by the Government of India;
• Focus on talent management and senior management
succession planning, and further increase diversity of
talent pipeline;
• Review of strategy in respect of the hire of contractors
across the Group;
• Focus on reviewing the composition of the Board and
succession planning for the appointment of Non-
Executive Directors;
• Review of corporate governance updates in relation to
the proposed audit tender and mandatory audit firm
rotation rules by the Competition Commission and the
EU respectively;
• Reviewing project proposals and approving Group
capital expenditure in excess of applicable thresholds;
• Reviewing and approval of the Group’s business plan for
the year ahead;
• Reducing costs, maximising cash flow from operations
and managing the business within prudent funding
constraints;
• Reviewing and approving the Company’s preliminary
announcement of its financial results, the Annual Report
and Accounts and half-year report;
• Receiving updates on major litigation and their impact
on the Group; and
• Ensuring that shareholders, staff and other stakeholders
understand and are aligned with the revised strategy.
Board attendance
The Company requires its Directors to attend all meetings
of the Board and any Board Committees on which they
serve and to devote sufficient time to the Company’s
business. To help enable this, scheduled Board and
Committee meetings are arranged at least a year in
advance to allow Directors to manage other commitments.
If a Director is unable to attend a meeting because of
exceptional circumstances, he or she still receives the
papers and other relevant information in advance of the
meeting and has the opportunity to discuss with the
relevant Chair or the Company Secretary any matters he
or she wishes to raise and to follow up on the decisions
taken at the meeting. The Chairman, Chief Executive and
Company Secretary are always available to discuss issues
relating to meetings or other matters with the Directors.
The Directors are also required to disclose their other time
commitments and seek the agreement of the Executive
Chairman prior to accepting any additional appointments
in order to ensure that they have sufficient time to fulfil their
role as a Director. The Company’s Non-Executive Directors
are expected to spend a minimum of 20 days per annum
on the Company’s business with greater time commitment
during periods of heightened strategic and commercial
activity as set out in their letters of appointment. The
Non-Executive Directors’ letters of appointment are
available on request from the Company Secretary.
Name
Date of appointment
Executive Directors
Anil Agarwal1
Navin Agarwal
Tom Albanese
16 May 2003
24 November 2004
1 April 2014
24 November 2004
Non-Executive Directors
Aman Mehta
Euan Macdonald 23 March 2005
Geoffrey Green
Deepak Parekh2
Katya Zotova
1 August 2012
1 June 2013
1 August 2014
Attendance
at Board
meetings
Percentage
attendance
5/6
6/6
6/6
6/6
6/6
6/6
5/6
6/6
83%
100%
100%
100%
100%
100%
83%
100%
1 Mr Agarwal was unable to attend one meeting of the Board due to a prior
commitment and the meeting being called at short notice.
2 Mr Parekh was unable to attend one meeting of the Board due to a prior
commitment and the meeting being called at short notice.
Board independence
In accordance with the Code, it is the Company’s policy that
at least half the Board excluding the Executive Chairman
comprises of independent Non-Executive Directors to
ensure that an appropriate balance is maintained between
Executive and Non-Executive Directors for effective
governance and no individual or small group of Directors
can dominate the decision-making process. The Board
undertakes an evaluation of each Director’s independence
on appointment, annually prior to recommending their
re-election by shareholders, as well as when any Director’s
circumstances change and warrant a re-evaluation.
During the year, the Board also considered the
independence of Mr Geoffrey Green due to his current role
as Chair of the Financial Reporting Review Panel and
determined that there were no conflicts of interest arising
out of the appointment.
Two of the Company’s Non-Executive Directors, Messrs
Aman Mehta and Euan Macdonald, have served on the
Board for over nine years and their independence was
therefore subject to a particularly rigorous review. As
Mr Mehta also serves as Non-Executive Director on the
Board of Cairn India Limited, the Board considered the
potential conflicts of interest arising from that appointment.
As Mr Mehta absents himself from discussions in the event
of any conflict of interest and continues to actively
participate in Board discussions and provides robust
challenge to management, the Board concluded that his
independent judgement was not compromised and he
remains impartial. Mr Macdonald does not have any
business relationship with the Group and is not involved in
any transaction or circumstance that would interfere with
the exercise of his independent judgement in carrying out
the responsibilities of a Director. Accordingly, the Board
concluded that the tenure of Messrs Mehta and Macdonald
does not materially affect their ability to exercise
independent judgement or act in the best interests
of the Group.
Following the review of the Non-Executive Directors’
independence, the Board has determined that all of the
current Non-Executive Directors are independent and free
from any relationship or circumstance that could affect or
appear to affect their independent judgement.
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Corporate Governance Report continued
Compliance with the UK Corporate Governance Code continued
Board succession planning has been at the forefront of
Board considerations during the year due to Mr Macdonald
and Mr Mehta having served on the Board for over nine
years. Euan Macdonald, having served 11 years on the
Board, has decided to step down from the Board following
the conclusion of the Company’s Annual General Meeting in
August 2016. The Board, on the recommendation of the
Nominations Committee, has appointed Mr Ravi Rajagopal
as a Non-Executive Director effective from 1 July 2016 and
as a member of the Audit Committee effective from the
same date. The Board, on the recommendation of the
Nominations Committee, has invited Mr Aman Mehta to
stay for a further year subject to shareholder approval at
the Company’s 2016 Annual General Meeting.
Directors’ conflicts of interest
The Board has an established procedure for the disclosure
of interests and other related matters in line with published
guidance and the Companies Act 2006. Each Director
must promptly disclose actual or potential conflicts and any
changes to the Board which are noted at each Board
meeting. The Board considers and authorises potential or
actual conflicts as appropriate. Directors with a conflict do
not participate in the discussion or vote on the matter in
question. These procedures have proved to be effective
during the year under review. Related party transactions,
which include those in respect of any Director, are disclosed
in Note 39 on pages 209 to 210.
Mr Geoffrey Green’s consultancy role with Ashurst LLP
finished on 30 April 2015. The fees paid to Ashurst LLP
during the year amounted to US$276,038 (2015:
US$344,179).
As part of our annual review process, during the Board
meeting held on 3 November 2015, we reviewed and
considered all situations entered in the Conflicts Register
and the Board is satisfied that the independence of those
Directors who have external board appointments has not
been compromised.
External appointments
Non-Executive Directors including the Chairman may serve
on a number of other boards provided they continue to
demonstrate commitment to their role. The Nominations
Committee reviews the extent of the Non-Executive
Directors’ other commitments throughout the year.
The Board is satisfied that each Non-Executive Director
commits sufficient time to their duties in relation to
the Company.
The Board is also supportive of the Executive Directors
accepting non-executive directorships of other companies
in order to widen their experience and knowledge for the
benefit of the Company. Accordingly, subject to the
agreement of the Board, Executive Directors are permitted
to accept one external non-executive board appointment
and to retain any fees paid to them.
Directors’ engagement terms
The Board has adopted a policy that Non-Executive
Directors’ terms of engagement should provide for a
maximum initial term of three years terminable at any time
by three months’ written notice from either party. It is the
Board’s policy not to extend the aggregate period of
service for any Non-Executive Director beyond nine years
and any progress to extend a Non-Executive Director’s
service beyond six years will be the subject of a rigorous
review and will take into account the need for progressive
refreshing of the Board. The Chairman and Chief Executive
Officer are employed under service agreements which are
terminable on six months’ written notice for the Chairman
and three months’ written notice for the Chief Executive
Officer by either party. Copies of the letters of appointment
will be on display at the AGM, together with the Executive
Directors’ service agreements and are generally available
at the Company’s registered office.
Relationship Agreement
The Relationship Agreement which had originally been
entered into at the time of admission of the Company’s
shares to the premium listing segment of the Official List
of the Financial Conduct Authority and to trading on the
London Stock Exchange plc’s main market for listed
securities (Listing) in 2003 between the Company and
its majority shareholder, Volcan, and was subsequently
amended in December 2011, was reviewed and updated
again in November 2014 in order to ensure compliance
with the revised Listing Rules for the protection for minority
shareholders which came into force in May 2014.
The principal purpose of the Relationship Agreement
is to ensure that the Group is able to carry on business
independently of Volcan, the Agarwal family and their
associates and that all agreements and transactions
between the Company, on the one hand, and Volcan
and/or any of its respective Group undertakings and/or
persons acting in concert with it or its Group undertakings,
on the other hand, will be at arm’s length and on a normal
commercial basis. Under the terms of the Relationship
Agreement, Volcan, the Agarwal family and their associates
will not take any action that would prevent the Company
from complying with its obligations under the Listing Rules.
Furthermore, the Board and Nominations Committee will
at all times consist of a majority of Directors who are
independent of Volcan and the Agarwal family. While
the Remuneration and Audit Committees shall at all times
comprise solely of Non-Executive Directors, Volcan is
entitled to nominate for appointment as Director such
number of persons as is one less than the number of
Directors who are independent of Volcan, the Agarwal
family and their associates. As the Board is comprised
of a majority of independent Non-Executive Directors
and Vedanta’s ability to operate independently of Volcan
is protected by the Relationship Agreement, the Board
considers that there are adequate safeguards for the
protection of minority shareholder interests.
The Audit Committee is responsible for reviewing matters
arising in relation to the Relationship Agreement and
related party transactions on behalf of the Board. During
the year, there were no contracts of significance between
the Company, or its subsidiary undertakings, and the
controlling shareholder. The Company has complied with
the independence provisions in the Relationship Agreement
and so far as the Company is aware, the controlling
shareholder and any of its associates have complied
with the independence provisions and the procurement
obligation included in the Relationship Agreement.
Induction, training and development
The Board is committed to the ongoing development of
its employees and Directors. On appointment to the Board,
each Director undergoes a comprehensive induction
programme which is tailored to their individual needs
but is intended to provide an introduction to the Group’s
operations and the challenges and risks faced. New
Directors also receive an overview of their duties,
corporate governance policies and Board processes.
To assist Directors in the performance of their duties, there
are procedures in place to provide them with appropriate
and timely information, including receiving information
between meetings regarding Group business development
and financial performance. Where appropriate, additional
training and updates on particular issues are provided.
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101
During the year, the Board received briefings on changes
on narrative reporting and new regulations which included
an update on the Market Abuse Regulations and the
Modern Slavery Act.
Board administration
The Company will review its arrangements for the
administration of Board and committee meetings, including
the Board meeting materials and minutes.
The Directors have access to the advice and services of the
Company Secretary, who is responsible to the Board for
ensuring that Board procedures are followed. The Company
Secretary is also responsible for advising the Board through
the Chairman on governance matters. The Directors also
have access to the Company’s professional advisers whom
they can consult where necessary for the discharge of
their duties.
During the year, the Directors received legal and regulatory
updates on corporate governance developments and
presentations from senior management on the Oil & Gas
and Aluminium businesses. The Chairman also conducts
regular review meetings and workshops with the businesses
on a monthly basis.
Board evaluation
The effectiveness of the Board is of paramount importance
to the overall success of the Group and the Company
undertakes a formal and rigorous annual evaluation of the
Board and its committees. An internal Board evaluation
process was facilitated this year by the Executive Chairman,
supported by the Company Secretary. The process was
carefully structured but pragmatic, designed to bring about
genuine debate of issues that were relevant and assist in
identifying any areas for improvement. It entailed the
completion of tailored questionnaires on the performance
of the Board, its committees and its Executive and Non-
Executive Directors.
The findings from the evaluation exercise were discussed
with the Executive Chairman and reviewed by the whole
Board before a set of actions were agreed. The feedback
from the Directors suggested that the underlying processes
of the Board and its committees were operating well overall
with a collaborative and professional relationship between
the Directors.
The actions which were agreed following the Board and
committee evaluations include:
Board composition
The search for new Non-Executive Directors would
continue as part of the Board succession planning process
to (a) encourage more women on the Board; (b) refresh the
composition of the Board Committees.
Strategic discussion
The Board will dedicate additional time specifically to
consider, develop and test the Group’s strategy, particularly
in light of the difficult operating environments and volatile
markets.
Operational
Management will focus on delivering stability to the Group
in a difficult operating environment through capital
rephrasing, cost management initiatives, exercising financial
and fiscal prudence, continuing the simplification of the
Group’s financial structure and focus on deleveraging, focus
on safety and linkage of corporate social responsibility
initiatives to the Group’s license to operate.
Board orientation and induction
The induction programme for new Directors will be
reviewed and strengthened to provide the Directors with a
better understanding of their role and responsibilities, the
Group’s businesses and the operational challenges faced.
Executive Chairman’s performance
The Executive Chairman’s performance was evaluated by
the Non-Executive Directors, led by the Senior Independent
Director, and the conclusions of the evaluation were fed
back to the Executive Chairman with a number of actions
to be completed over the year ahead.
Accountability
Financial and business reporting
The Directors present a fair, balanced and understandable
assessment of the Company’s position and prospects.
The Group has a comprehensive financial reporting system,
which is reviewed and modified in line with accounting
standards to ensure that all published financial information
is accurate. Vedanta’s financial reporting procedures are
based on five main elements:
1) Financial information supplied by subsidiary companies
and consolidated at central level:
• Management accounts are prepared on a monthly
basis and reviewed by the Executive Committee;
• Management accounts are reviewed by the Board at
least quarterly;
• Performance is monitored against key performance
indicators throughout the financial year and forecasts
are updated as appropriate; and
• Annual operational budgets are prepared by each
operating subsidiary and consolidated into a Group
Budget which is reviewed and approved by the Board.
2) External auditor assurance:
• Full-year audit and interim reviews are carried out on
the published financial statements.
3) Review by the Audit Committee of:
• Year-end reporting plans;
• Legal, tax and accounting issues;
• Consideration of the financial statements and
disclosures in accordance with financial reporting
standards; and
• Going concern and viability statement with supporting
cash flow, liquidity and funding forecasts.
4) The Internal Audit function provides an independent
assurance in respect of processes, physical verification
and management information system accuracy for
operating companies.
5) Review by the Audit Committee and the Board of the
preliminary and half-year announcements, the Annual
Report and Accounts and any other announcements
including financial information.
The responsibilities, processes and information flows for
ensuring that significant risks are recognised and reported
up to the Board are shown below:
The Board
• Sets ‘risk appetite’
• Reviews significant reported risks
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Corporate Governance Report continued
Compliance with the UK Corporate Governance Code continued
The Audit Committee
• Reviews the effectiveness of internal control/risk systems
and reports to the Board
• Reviews the risk matrix, significant risks, status of risks
and mitigating factors
• Considers and approves remedial actions where
appropriate
• Reviews action plans put in place to mitigate risks
• Reviews significant findings reported by the internal
audit function, Management Assurance Services (MAS)
• Reviews internal audit plans
• Assesses the effectiveness of the internal audit function
• Reviews whistleblower reports presented by MAS
• Advises the Board on fair, balanced and understandable
financial statements
Management Assurance Services (MAS)
• Plans and carries out internal audits through
arrangements with leading international accounting and
audit firms
• Recommends improvements to the Group’s internal
control system
• Reviews compliance with Group policies and procedures
• Facilitates the update of the risk matrix
• Reviews findings in respect of the risk management and
internal control framework with senior management and
reports to the Audit Committee
• Investigates whistleblower cases
Risks are continually reviewed with formal discussion on risk
management taking place at business level review meetings
at least once in a quarter. The respective businesses review
the risks, change in the nature and extent of the major risks
since the last assessment, control measures established to
mitigate the risk and further action plans. The control
measures stated in the risk matrix are also periodically
reviewed by the business management teams to verify
their effectiveness.
These meetings are chaired by business chief executive
officers and attended by chief risk officers, senior
management and functional heads. Risk officers have been
formally nominated at all operating businesses as well as
at Group level and whose role is to create awareness of
risks at senior management level and to develop a risk
management culture within the businesses. They play an
important role in ensuring that the organisation sustains
its risk management initiatives and that the Group’s risk
management framework matures and grows with the
organisation. Risk mitigation plans form an integral part
of the key performance indicators for process owners.
The Audit Committee aids the Board in this process by
reviewing the actions taken by management to identify
risks, assess any changes in the Group’s risk exposure,
reviewing risk control measures and by approving remedial
actions, where appropriate.
The head of MAS attends all the Vedanta Executive
Committee and Audit Committee meetings. During the
year, the MAS team supported the respective business
teams at Vedanta Limited and its subsidiaries in their
compliance with the US Sarbanes-Oxley Act 2002
requirements (the Act), including documenting internal
controls as required by section 404 of the Act. The
effectiveness of internal controls is assessed by Vedanta’s
own administration and certified by independent auditors,
as set forth in the Act.
The Audit Committee is in turn supported by the Group
Risk Management Committee (GRMC) which helps the
Audit Committee in evaluating the design and operating
effectiveness of the risk mitigation programme and the
control systems. The Group Risk Management Committee,
comprising of the Group CEO, Group CFO, Director of
Finance, Director of Management Assurance and the Group
Head of HSE, meets every quarter. GRMC discusses key
events impacting the risk profile, emerging risks and
progress against the planned actions amongst other things.
Risk management and internal control
The Board is responsible for setting the Group’s risk
appetite and determining the nature and extent of the risks
it is willing to take to achieve its strategic objectives. The
Directors also have ultimate responsibility for ensuring that
the Group maintains a robust system of internal control to
provide them with reasonable assurance that all information
within the business and for external publication is adequate.
Authority for detailed monitoring of the internal control and
risk management framework is delegated to the Audit
Committee which reports to the Board regularly within the
remit of its role.
The Group’s risk management framework is designed to be
a simple, consistent and clear mechanism for managing and
reporting risks of the Group’s businesses to the Board. Risk
management is embedded in all critical business activities,
functions and processes. The framework helps the
organisation meet its objectives through alignment of
operating controls to the mission and vision of the Group.
Management systems, organisational structures, processes,
standards and code of conduct together form the system
of internal control that govern how the Group conducts its
business and manages the associated risks.
The Group has a multi-layered risk management framework
aimed at effectively mitigating the various risks which its
businesses are exposed to in the course of their operations
as well as in their strategic actions. Risks are identified at
the individual business level for existing operations as well
as for ongoing projects through a consistently applied
methodology, using the Turnbull matrix.
Our approach to risk management and systems of internal
control is aligned to the recommendations in the FRC’s
revised guidance issued in September 2014.
The Board-level risk appetite has been defined taking into
consideration the Group’s risk tolerance level and with clear
linkages to its strategic priorities. The risk appetite forms
the basis of the Board’s assessment and prioritisation of
each risk based on its impact on the business operations.
A risk scale consisting of qualitative and quantitative factors
has been defined to facilitate a consistent assessment of
the risk exposure across the Group. This scale is also
aligned to the Board’s overall risk appetite.
In addition to the above structure, other key risk governance
and oversight committees include the following:
• Group Treasury Risk Management Committee has an
oversight on the treasury-related risks. This committee
comprises of the Group Chief Financial Officer, business
CFOs, Group Head of Treasury and Treasury Heads at
respective businesses.
• Group Capex Sub-Committee which evaluates the
risks while reviewing any capital investment decisions
as well as institutes a risk management framework in
expansion projects.
• Sustainability Committee which reviews sustainability-
related risks. This committee is chaired by a Non-
Executive Director and is attended by the Chief Executive
Officer, and has other business leaders as its members.
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As stated above, every business division in the Group has
developed its own risk matrix of Top 20 risks which is
reviewed at business management committee level. In
addition, business divisions have also developed their own
risk registers depending on size of operations and number
of subsidiary business units/locations. Full details of
principal risks and uncertainties are contained in the
strategic report on pages 26 to 35.
A consistently applied methodology is used to identify risks
to operations and projects at the operating subsidiary level.
MAS have arrangements with leading international
accounting and audit firms excluding the Group’s external
auditor for carrying out internal audits within the Group.
Communications with shareholders
The Company values communication with its shareholders
and actively engages with them on a wide range of issues
to ascertain their views. The Company maintains an
ongoing dialogue and schedule of meetings with
institutional investors, analysts, brokers and fund managers
which is attended by the Chief Executive Officer and
managed by the Investor Relations team. During the year, in
order to further promote engagement with the Company’s
investor community, a Capital Markets Day was held in
London and attended by several members of the Executive
Committee and senior management to provide a corporate
and financial overview of the Group and updates on the key
businesses by the respective business leaders.
This element has been an important component of the
overall internal control process by which the Board obtains
assurance. The scope of work, authority and resources of
MAS are regularly reviewed by the Audit Committee. The
responsibilities of MAS include recommending
improvements in the control environment and reviewing
compliance with the Group’s philosophy, policies and
procedures. The planning of internal audit is approached
from a risk perspective. In preparing the internal audit plan,
reference is made to the Group’s risk matrix, inputs are
sought from senior management, project managers and
Audit Committee members and reference is made to past
audit experience, financial analysis and the current
economic and business environment.
A Sustainable Development Investor Day has been planned
for 2016 to enhance engagement with the Company’s
stakeholders on sustainability and corporate social
responsibility matters.
The main channels of communication with the investment
community are through the Executive Chairman, Chief
Executive Officer, Chief Financial Officer and Director of
Investor Relations. Upon request the Senior Independent
Director and other Non-Executive Directors are available to
meet with major investors to discuss any specific issues.
The Board is also kept abreast of shareholder sentiment
and views on various issues through periodic detailed
investor relations reports to the Board.
Each of the Group’s principal subsidiaries has in place
procedures to ensure that sufficient internal controls are
maintained. These procedures include a monthly meeting of
the relevant management committee and quarterly meeting
of the Audit Committee of that subsidiary. Any adverse
findings are reported to the Audit Committee. The Chairman
of the Audit Committee may request MAS and/or the
external auditor to focus their audit work and report to him
on specific areas of risk identified by the risk management
and internal control framework. At a Group level, the
findings by MAS are presented monthly to the Executive
Committee and to the Audit Committee periodically.
The Executive Committee and Audit Committee regularly
review reports related to the Group’s internal control
framework in order to satisfy the internal control
requirements of the Code (Internal Control: Revised
Guidance for Directors) and section 404 of the Sarbanes-
Oxley Act 2002. Due to the limitations inherent in any
system of internal control, this system is designed to meet
the Group’s particular needs and the risks to which it is
exposed rather than eliminate risk altogether. Consequently
it can only provide reasonable and not absolute assurance
against material misstatement or loss.
In line with best practice, the Board has reviewed the
internal control system in place during the year and up to
the date of the approval of this report. The Board’s review
includes the Audit Committee’s report on the risk matrix,
significant risks and actions put in place to mitigate these
risks. This review ensures that the internal control system
remains effective. Where weaknesses are identified as a
result of the review, new procedures are put in place to
strengthen controls and these are in turn reviewed at
regular intervals. Every risk has an owner who is responsible
for ensuring that controls are put in place to mitigate
the risk.
Routine engagement activities include:
• Press releases to the market and media on key
developments throughout the year;
• Regular meetings between the Chief Executive Officer,
Chief Financial Officer and institutional investors, analysts
and brokers;
• Site visits by institutional investor representatives,
analysts and brokers to the Group’s major operations;
• Ongoing dialogue with shareholders and other interested
parties by email, letters and meetings arranged through
the Investor Relations and Group Communications
teams; and
• A wide range of information on the Company and its
operations which is made available on the Company’s
website, including the Annual Report and Accounts,
half yearly results, sustainability report, market
announcements, press releases, share price and links
to subsidiary company websites.
The Board also welcomes the opportunity to communicate
with the Company’s shareholders at the Annual General
Meeting, leading to full and frank discussions on a variety of
topics of interest to shareholders. All of the Directors attend
the AGM in order to answer questions from shareholders.
The 2016 AGM will be held at 3.00pm on 5 August 2016 at
The Ironmongers’ Hall, Shaftesbury Place, London EC2Y
8AA. Further details are given in the Notice of Meeting
accompanying this Annual Report, including the business
to be considered at the meeting. The notice is sent out at
least 20 business days before the AGM. Voting at the AGM
on all resolutions is by poll on a one share, one vote basis
and the results of votes cast for, against and abstentions
are available on the Group’s website following the meeting.
The Board believes that voting by poll allows the views of
al shareholders to be taken into account regardless of
whether or not they can attend the meeting and
shareholders are actively encouraged to register their
votes electronically in advance of the meeting.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 104
Audit Committee Report
The Audit Committee’s remit falls into four
main areas: financial reporting, risk and
the internal control environment, and oversight
of the external and internal audit processes.
Aman Mehta, Chairman, Audit Committee
Strong corporate governance and risk management is a key
part of Vedanta’s business model and the Board and the
Audit Committee (the Committee) continue to be focused
on maintaining high standards of governance and risk
management across the Group. The Audit Committee
oversees the financial reporting process in order to ensure
that the information provided to its shareholders is fair,
balanced and understandable and allows assessment of
the Company’s position, performance, business model
and strategy.
I am pleased to confirm on behalf of the Committee that
the 2016 Annual Report and Financial Statements are
considered fair, balanced and understandable in terms of
the form and content of the strategic, governance and
financial information presented therein.
Following a competitive tender process, a resolution to
appoint the auditor, Ernst & Young LLP, as auditor of
Vedanta Resources plc for the year ending 31 March 2017
will be proposed at the forthcoming Annual General
Meeting. This follows the mandatory tendering
requirements in the UK in accordance with provisions of the
Competition and Markets Authority (CMA). Deloitte LLP
had been the Group’s auditors since its listing on the
London Stock Exchange in 2003 and will resign as the
Company’s external auditor following the completion of
the external audit of the financial statements for the year
ending 31 March 2016. The Board of Vedanta would like to
thank Deloitte LLP for high quality audit services provided
to the Group.
Membership and attendance
The Audit Committee comprises the following independent
Non-Executive Directors, who met on four occasions during
the year. Meetings are scheduled to allow sufficient time for
discussions of key topics and to enable early identification
and resolution of risks and issues.
Aman Mehta, Chairman
Euan Macdonald
Deepak Parekh
Number of
meetings
attended
Percentage
attendance
4/4
4/4
4/4
100%
100%
100%
Mr Mehta has been Audit Committee Chairman since
24 November 2004. As shown in his biography on page 88,
Mr Mehta has had extensive executive and non-executive
experience with a strong financial background in large
listed companies. The Board is therefore satisfied that
Mr Mehta has recent and relevant financial experience as is
required by the UK Corporate Governance Code. In his role
as Chairman he is supported by Committee members who
bring a wide range and depth of financial and commercial
experience across various industries. The collective
knowledge, skills, experience and objectivity of the
Committee enables us to work effectively and to probe
and challenge management.
Governance
The Audit Committee assists the Board in the discharge
of its responsibility for maintaining and monitoring the
integrity of the Group’s financial statements, assessing the
effectiveness of the Group’s system of risk management
and internal controls and the independence and objectivity
of the external auditor. Whilst the Committee has very
specific responsibilities as set out in its terms of reference,
it serves a much greater purpose in reassuring its
shareholders that their interests are properly protected
in respect of the financial management and reporting,
on which the Committee regularly reports to the Board.
The Committee has delegated responsibility to oversee
the Company’s procedures and systems in relation to
risk management and internal control that is adopted
by the Company.
In order to carry out its duties effectively, the Audit
Committee receives high quality and detailed information
from management and the internal and external auditor
which is reviewed regularly, discussed and challenged by
the Audit Committee as required.
In respect of the year ended 31 March 2016, the Committee
reviewed the Group’s financial results, including significant
financial reporting estimates and judgements, as well as the
financial disclosures in the interim management statements,
monitored the Group’s system of internal control and
management of the Group’s risks and oversaw the
relationship with the external auditor and with the internal
audit function. This year, the Committee put its external
audit out to tender as part of the changes to the Code and
the new FRC requirements and considered the process
through which the Company would make its first long-term
viability statement in the Annual Report and Accounts.
Responsibilities of the Audit Committee
The Board has established formal and transparent
arrangements for considering how they should apply the
corporate reporting, risk management and internal control
principles and for maintaining an appropriate relationship
with the Company’s external auditors.
The Audit Committee’s remit falls into four main areas:
financial reporting, risk and the internal control environment,
and oversight of the external and internal audit processes.
The main responsibilities of the Audit Committee are to:
• Monitor the integrity of the financial statements,
including the Group’s annual and half-year results;
• Where requested by the Board, review the content of the
Annual Report and Accounts and advise the Board on
whether, taken as a whole, it is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s performance,
business model and strategy;
• Establish and review the process by which the Company
makes its viability statement;
• Review the Group’s internal controls and risk
management systems and consider the effectiveness
of these systems;
• Make recommendations to the Board concerning the
appointment of the external auditor;
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• Review the independence of the external auditor;
• Review the scope of internal audit work;
• Develop the Group’s policy in relation to the provision
of non-audit services by the external auditor and
monitoring thereof;
• Discuss with the external auditor the nature and scope
of the audit;
• Approve the remuneration of the external auditor;
• Consider any matters arising in respect of the
Relationship Agreement and related party transactions;
• Monitor the activities and effectiveness of the internal
audit function and consider its reports;
• Review the Group’s arrangements for its employees to
raise concerns through its whistleblowing policy;
• Monitor anti-bribery policies and procedures;
• Review reports from the audit committees of the
Group’s main subsidiary companies confirming that
there are no material adverse issues that are likely to
impact the Group;
• Review annually the Committee’s own performance,
constitution and terms of reference;
• Report to the Board on how the Committee has
discharged its responsibilities;
• Receive reports from management and the external
auditor on accounting, financial reporting, regulatory
and taxation issues;
• Consider impairment reviews performed by
management;
• Review the basis for preparing the Group accounts on
a going concern basis;
• Review, and challenge where necessary, the actions and
judgements of management, in relation to the interim
and annual financial statements before submission to the
Board;
• Review the Company’s plans for business continuity; and
• Review the Company’s plans for the prevention and
detection of fraud, bribery and corruption.
The full terms of reference for the Audit Committee
can be found on the Company’s website at
www.vedantaresources.com and are also available
on request from the Company Secretary.
Operation of the Audit Committee
The Audit Committee meets at least four times a year
based on appropriate times in the financial reporting
calendar. The Executive Directors, Chief Financial Officer,
Director of MAS, other members of the senior management
team and the external auditor regularly attend meetings at
the invitation of the Audit Committee to report on issues
and facilitate discussions with the external auditor. The
Audit Committee meets with representatives from the
external auditor without management being present
bi-annually. The Chairman of the Audit Committee regularly
reports to the Board on the Audit Committee’s activities.
The Committee’s agenda is based on its remit outlined
above as appropriate to the stage in the reporting cycle.
The external auditor attends meetings of the Audit
Committee to ensure effective communication of matters
relating to the audit.
Audit Committee activities during the year
The main areas covered by the Audit Committee during the year are summarised below:
Area of responsibility
Activities
Financial reporting
It is one of the Audit Committee’s key duties to monitor the
integrity of the Company’s financial statements. As part
of this process it reviews in detail the preliminary results
statements, the Annual Report and Accounts and half-year
report. The appropriateness of accounting polices used
is considered, accounting judgements are reviewed and
the external audit findings discussed. Details of financial
reporting procedures in place are given on page 101 of the
Corporate Governance Report.
Internal controls, risk management and governance
Details of the Company’s internal control and risk
management processes are discussed on pages 101 to 103.
The Audit Committee reviews these processes and output
from the regular review of risks carried out during the year
by the internal audit function.
• Review and approval of preliminary announcement,
Annual Report and financial statements;
• Review of key significant issues for year-end audit
(further detail on pages 108 and 109);
• Six-monthly reviews of significant accounting issues and
receipt of reports on key accounting issues;
• Review and approval of the half-year report;
• Discussions on impairment reviews;
• Review of pending tax issues;
• Review of Audit Committee Report for the Annual
Report and Accounts;
• Review of legal cases to ensure appropriate provisions
are made and disclosed;
• Review of the going concern and the viability statement
basis for the preparation of the financial statements
including working capital forecasts, monthly projections
and funding requirements.
• Internal audit review including reviews of the internal
control framework, changes to the control gradings
within the Group and whistleblowing cases;
• Review of the Group’s risk management infrastructure,
risk profile, significant risks, risk matrix and resulting
action plans;
• Review of reports from subsidiary company audit
committees;
• Review of feedback from the performance evaluation
of the Audit Committee;
• Review of new regulatory requirements in respect
of putting the Company’s external audit contract out
to tender;
• Review of the new Code requirements in respect of the
new viability statement;
• Reviewing the Group’s cyber security controls;
• Receiving updates on the implementation of the Vedanta
Code of Business Conduct and Ethics and UK Bribery
Act training across the Group.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 106
Audit Committee Report continued
Area of responsibility
The audit and external auditor
Internal audit
Fraud and whistleblowing
Annual Report review
At the request of the Board, the Audit Committee
considered whether the 2016 Annual Report and Accounts
was fair, balanced and understandable and whether it
provided the necessary information for shareholders and
stakeholders to assess the Company’s performance,
business model and strategy. Such assessments are
provided in the Chairman’s and Chief Executive Officer’s
statements and the strategic report of this Annual Report.
The Audit Committee and the Board are satisfied that the
Annual Report and Accounts meet this requirement as
both positive and negative developments in the year
were considered at length. In justifying this statement
the Audit Committee has considered the robust process
which operates in creating the Annual Report and
Accounts, including:
• Evaluation and verification of the inputs from the
business functions, to include the well-established
financial reporting system within Vedanta to ensure
accuracy and consistency;
• Progress through various levels of review, including
review by the Executive Committee and senior
management across the Group;
• Consideration is given to the completeness of the
information and to ensuring that there are no significant
omissions to enable shareholders to assess the
Company’s performance;
• Management Assurance Services conduct internal audit
reviews with conclusions and recommendations
presented to the Audit Committee;
Activities
• Review of the significant audit risks with the external
auditor during interim review and year-end audit;
• Consideration of external audit findings and review of
significant issues raised;
• Review of key audit issues and management’s report;
• Review of the materiality figure for the external audit;
• Review of the independence of the external auditor and
the provision for non-audit services;
• Performance evaluation of the external auditor and
recommendation for appointment of the external auditor;
• Consideration of the external audit fee;
• Review of the management representation letter;
• Review of the audit plan, scope of the 2016 external
audit of the financial statements and key risk areas for
the 2016 audit;
• Review of the new Code requirements in relation to the
proposed audit tender and mandatory audit firm rotation
rules by the Competition Commission and the EU
respectively;
• External audit re-tender process.
• Review of internal audit observations and monitoring of
implementation of any corrective actions identified;
• Review of the performance of the internal audit function;
• Review of 2015–2016 internal audit plan;
• Review of the Group’s anti-bribery policy and its
implementation.
• Receiving reports on fraud and monitoring the
effectiveness of the whistleblowing policy to ensure
that it remains robust and fit for purpose;
• Review of whistleblower cases.
• Revisions to regulatory requirements are considered
and incorporated;
• Advice is also received by the Audit Committee from
external advisers in order to make the recommendation
to the Board that the Annual Report and Accounts as
a whole is fair, balanced and understandable;
• Members of the Audit Committee receive an advance
draft of the Annual Report, enabling them to assess and
challenge whether the various reports within the Annual
Report are consistent and in line with their understanding
of the business;
• A meeting of the Audit Committee is held to formally
review and sign-off the draft Annual Report; and
• A meeting of the Board is held to review and provide
final sign-off.
Whistleblowing procedure
All Vedanta employees, regardless of position, are expected
to observe high ethical standards. Each employee is
expected to follow the Vedanta Code of Business Conduct
and Ethics, and employees in key positions are required to
complete the Annual Code of Conduct Certification form.
The annual certification process reinforces our commitment
to ethical practices and Code of Business Conduct and
Ethics, promoting an ethical culture.
The Group’s Whistleblower Policy forms part of the Code
of Business Conduct and Ethics and supports the Group’s
aim of working to the highest ethical standards. The policy
allows employees of the Company, its subsidiaries and
all external stakeholders to raise issues of concern
in confidence.
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External auditor
The Audit Committee is pivotal in monitoring the
performance of the external auditor and the Group’s
relationship with the external auditor. Details of how
this is achieved are set out below:
The audit process
A detailed audit plan (the Audit Plan) is prepared by the
external auditor, Deloitte LLP (Deloitte), which is reviewed
by the Audit Committee. The Audit Plan sets out the audit
scope, key audit risks identified, materiality issues, the client
team working on the audit and the audit timetable. The
audit scope covers the significant components of the audit
and audit plans for each component and geographical
location. Each of the key audit risks and the external
auditor’s response on how it will investigate these risks
is considered by the Audit Committee.
Significant issues
The preparation of financial statements requires
management to make judgements, estimates and
assumptions that affect the application of accounting
policies and the reported amount of assets, liabilities,
income, expenses and disclosures of contingent liabilities
at the date of these financial statements and the reported
amount of revenues and expenses for the years presented.
The Committee reviews whether the Group’s accounting
policies are appropriate, and management’s estimate and
judgements applied in the financial statements are
reasonable. The Committee also focused on the disclosures
made in the financial statements. The views of statutory
auditors on these significant issues were also considered
by the Committee.
As per the Whistleblower Policy adopted by various
businesses in the Group, all complaints are reported
to the Director – MAS who is independent of operating
management and the businesses. Dedicated email
addresses and a centralised database have been created to
facilitate the receipt of complaints and for ease of reporting.
The Company has a 24x7 ethics helpline where employees
can place anonymous complaints against ethics violations
as per the policy of the Company. All employees and
stakeholders can register their integrity-related concerns
either by calling on a freephone number or by writing on
the web-based portal. The hotline also provides multiple
local language options.
Following an investigation, established cases are brought
to the Group Ethics Committee for decision making.
This Committee brings uniformity and consistency in the
decision-making process following investigation of the
reported incidents. All cases are taken to their logical
closure. A summary of cases along with the outcome
of the investigations and actions taken is presented
periodically to the audit committees of respective
businesses as well as at Group level.
The Group Ethics Committee is comprised of Mr Akhilesh
Joshi, Mr Dilip Golani, Mr Abhijit Pati, Mr Mukesh Bhavnani,
Ms A Sumathi and Suresh Bose.
Fraud and UK Bribery Act
The Company is committed to the elimination of fraud,
with each suspected case thoroughly investigated and
concluded. The Audit Committee reviews the actions taken
by management in the elimination of fraudulent practices
and to promote ethical working practices.
During the year, the Audit Committee was made aware
that the Government authorities in India, following certain
investigations, have filed a charge sheet in a court in New
Delhi in which an employee of CIL was charge sheeted as
an accused along with employees of some other companies
not connected with the Group. Hearings in that matter are
taking place. Cairn India has in place a comprehensive
compliance programme and controls and follows the
highest levels of integrity in the conduct of its businesses.
Nevertheless, Cairn India has undertaken a further review
of its controls in light of the allegations made on the matter.
Amongst other measures, Cairn India has ensured that its
internal controls such as the Code of Business Ethics,
Anti Bribery Corruption Management Policy and Security
protocols across the organisation are regularly reviewed
and reinforced through mandatory e-learning modules
for all employees and workshops are arranged for senior
management and other employees. Employee
communications on these controls are released periodically
across the organisation, to create further awareness.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 108
Audit Committee Report continued
The significant issues that were considered by the Audit Committee emerging from the audit process are outlined below:
Significant issues
How these issues were addressed
Impairment assessment of:
• Rajasthan producing assets within the Oil & Gas business
• Copper operations in Zambia
• Alumina refinery assets at Lanjigarh
• Iron Ore business at Goa and Karnataka
More information is provided in Note 2(b) and Note 5 to the
financial statements
Impairment assessment of Rajasthan producing assets
within the Oil & Gas business is considered a significant
issue considering the significant decline in the crude oil
prices, prevailing discount of Rajasthan crude and adverse
long-term impact of revise cess charge. The Committee has
reviewed the significant assumptions including the oil price
and the discount rate. An impairment charge of US$1,143.5
million has been recognised against these assets.
Impairment assessment of copper operations in Zambia is
considered a significant issue considering the challenging
price environment, rising electricity costs and other
operational challenges. The significant assumptions of
commodity prices, increase in production and discount
rate were reviewed by the Committee.
The partly complete Lanjigarh refinery expansion
programme within the Aluminium business unit has got
regulatory approvals this year to expand unconditionally
up to 4mtpa. Impairment assessment of Alumina refinery
assets at Lanjigarh is considered a significant issue due to
delays in obtaining local bauxite mining approvals/gaining
access to local bauxite. The significant assumption of timing
of approval/gaining access to local bauxite was put through
a stress test by the Committee and other assumptions of
discount rates and commodity prices were reviewed by
the Committee.
The mining operations at Karnataka and Goa were
resumed towards the end of February 2015 and October
2015 respectively. The significant assumptions of
commodity prices and the cap on mining were reviewed
by the Committee.
The Committee was also informed that the impairment
assessment approach and assumptions are consistent
across all business segments. With the existence of
sufficient headroom over carrying value of assets it was
concluded that no impairment is required for Lanjigarh
assets and Goa and Karnataka Iron Ore assets.
Considering the significant downward pressure on oil
prices, prevailing discount of Rajasthan crude and adverse
long-term impact of revise cess charge, the impairment of
E&E assets is considered a significant issue. The significant
assumptions including for oil prices and the discount rate
were reviewed by the Committee.
An impairment charge of US$3,790.7 million has been
recognised against Oil & Gas and E&E assets primarily
relating to the Rajasthan block.
Considering the suspension of exploration in Liberia, low
iron ore prices, geo-political factors and no plans for any
substantive expenditure resulting in continued uncertainty
in the project, an impairment charge of US$227.6 million
has been recognised.
The Committee reviewed the process and compliance
around the Group’s revenue recognition policy and
its consistent application. The Committee also sought
management’s view on revenue recognition principles.
The Committee was satisfied that the cut-off procedures,
transfer of risks and process followed for the pricing of
goods were consistent and it concluded that these risks
have been mitigated. Further receivable from GRIDCO
(which is under appeal following a tariff determination
assessment by the Orissa Electricity Regulatory
Commission) was assessed by the Committee together
with revenue recognition in terms of the requirements of
IAS 18. The tariff determination basis was also supported
by an opinion from external legal counsel.
Impairment assessment of evaluation and exploration
(E&E) assets:
• Oil & Gas business
• Iron Ore business in Liberia
More information is provided in Note 2(b) and Note 5 to the
financial statements
Revenue recognition across the business:
• Provisional pricing for sale of goods
• Oil & Gas revenue
• Power tariff with GRIDCO
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Significant issues
How these issues were addressed
Litigation, environmental and regulatory risks.
Refer to Note 38 to the financial statements
Taxation.
Additional information on these matters is disclosed in
Note 38 to the financial statements
External audit
As detailed in last year’s Annual Report, in line with the
requirements of the Code, the external audit services for
the financial year ending 31 March 2017 were put up for
tender in 2015. The timing of the competitive tender
process was aligned with the rotation of the external audit
contracts of the Group’s Indian subsidiaries in order to
enhance the effectiveness of the process and smoothen
the transition.
Tender process
• The tender process involved members of the Audit
Committee, Executive Directors, the Chief Financial
Officer and Corporate Secretarial team.
• A request for a proposal document was developed in
consultation with the Chairman of the Audit Committee
and the Chief Financial Officer.
• Access was given to the Data room, wherein access to
the various documents was provided.
• A presentation on various businesses, internal audit, risk
management framework, IT systems and controls was
made by the senior management teams and a site visit
to one of the Zinc locations was organised, to enable the
firms to gain an understanding and gather all the
information required to submit a proposal.
• Following a review and evaluation of submissions by the
tender team, the firms were invited to present to the
Audit Committee, the Chief Financial Officer and other
senior management team members.
Criteria
The Audit Committee’s criteria for evaluation was
developed based on team experience, credentials, audit
quality, industry experience, technical expertise and audit
approach.
Following the conclusion of the formal tender process,
the Board announced its intention to recommend to
shareholders, for approval at the 2016 AGM, the
appointment of Ernst & Young LLP as the Group’s auditor.
Vedanta confirms compliance during the year with the
provisions of the Competition and Markets Authority
Order on mandatory tendering and audit committee
responsibilities.
A comprehensive legal paper was placed before the
Committee for its consideration. The mitigating factors
were discussed by the Committee with senior management.
The Committee also reviewed the probable, possible and
remote analysis carried out by management and disclosure
of contingent liabilities in the financial statements. In
all significant disputes management’s assessment was
supported by legal opinions from external legal counsel.
A comprehensive tax paper outlining taxation disputes in
respect of withholding taxes following past acquisitions,
eligibility of tax incentives and output taxes and other
matters was placed before the Committee for its
consideration. The Committee discussed these tax issues
and reviewed the assessment of probable, possible and
remote analysis and the process followed by management.
The contingent liability disclosure was also reviewed by
the Committee. In certain cases, views of tax experts
supporting management’s assessment was also provided
to the Committee.
Auditor independence
The Audit Committee is responsible for reviewing the
external auditor’s independence and assessing their
continued effectiveness. The Audit Committee and the
Board place great emphasis on the objectivity of the
external auditor. The current external auditor, Deloitte LLP,
has been the Company’s auditor since its listing in 2003.
There are two aspects to the external auditor independence
that the Audit Committee monitors.
First, in accordance with the Auditing Practices Board
Ethical Standards, Deloitte has to implement rules and
requirements such that none of its employees working on
our audit can hold any shares in Vedanta Resources plc.
Deloitte is also required to tell us about any significant facts
and matters that may reasonably be thought to bear on
its independence or on the objectivity of the lead partner
and the audit team. The lead partner must change every
five years.
Secondly, the Committee considers and approves all the
fees that it pays for audit, audit-related and non-audit
services from Deloitte. Deloitte is prohibited from providing
certain services to the Group, such as operational
consulting, internal audit services and strategic planning
support, as it is felt that these types of services could
impede their independence. Furthermore, auditor
independence is also safeguarded by limiting the value
of non-audit services performed by the external auditor.
A key part of ensuring the independence of the external
auditor is to have in place robust policies concerning
matters that may affect their independence. The Company
has in place policies on:
• The independence and objectivity of the external auditor;
• Employment of former employees of the external
auditor; and
• Appointment of the external auditor for non-audit services.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 110
Audit Committee Report continued
Performance of the external auditor
During the year, the Audit Committee reviewed the
effectiveness of Deloitte LLP using a survey comprising
a range of questions covering objectivity, quality and
efficiency. The Audit Committee concluded that the
results of the survey were positive and considered
that they continue to provide a high quality audit.
Appointment of the external auditor
Following a competitive tender process, a resolution to
appoint the auditor, Ernst & Young LLP, as auditor of
Vedanta Resources plc for the year ending 31 March 2017
will be proposed at the forthcoming Annual General
Meeting. This follows the mandatory tendering
requirements in the UK in accordance with provisions of the
Competition and Markets Authority (CMA). Deloitte LLP
had been the Group’s auditors since its listing on the
London Stock Exchange in 2003 and will resign as the
Company’s external auditor following the completion of the
external audit of the financial statements for the year
ending 31 March 2016. The Board of Vedanta would like to
thank Deloitte LLP for high quality audit services provided
to the Group.
Provision of non-audit services by the external auditor
The Group’s policy on the provision of non-audit services
by the external auditor specifies certain services which the
external auditor is prohibited from undertaking in order to
safeguard their objectivity and independence. This includes
work relating to the financial statements that will ultimately
be subject to audit and the provision of internal audit
services. The policy also identifies those services which the
external auditor is permitted to deliver to the Group. These
include tax advisory services, and work on mergers,
acquisitions and disposals. Of the permitted services any
assignment in excess of US$100,000 may only be awarded
to the external auditor with the prior approval of the
Audit Committee.
All other permitted non-audit services and the fees paid
to the external auditor for non-audit work are reported to
the Audit Committee on a six-monthly basis. This report
includes safeguards put into place to ensure that any
threats to the independence of the external auditor are
mitigated. The majority of non-audit services provided
by the external auditor are tax advisory services,
corporate finance matters or transaction related work.
A separate team within Deloitte LLP is used to carry
out non-audit work and overseen by a separate partner.
An analysis of non-audit fees can be found in Note 10
to the financial statements.
The year ahead
In addition, the Audit Committee’s objectives for the
forthcoming year include:
• Implement findings from Board evaluation process; and
• Focus on oversight of anti-bribery policies and
procedures.
Aman Mehta
Chairman, Audit Committee
11 May 2016
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT www.vedantaresources.com
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111
Nominations Committee Report
The Nominations Committee is responsible for
reviewing the composition of the Board to ensure
the right mix of skills, experience, diversity and
independence is present.
Anil Agarwal, Chairman, Nominations Committee
The Committee is primarily responsible for leading the
process for Board appointments and for keeping under
review the balance of skills, experience, independence,
knowledge and diversity, including gender, on the Board
to ensure the orderly evolution of the membership of the
Board and its committees. In identifying and nominating
candidates for approval by the Board, the Committee
continues to take account of the Board’s aims in relation to
diversity, while ensuring that the right people with the right
range of skills and experience are on the Board and in
senior management positions in the coming years.
This Nominations Committee report provides details of the
role and responsibilities of the Nominations Committee and
the work it has undertaken during the year.
Membership and attendance
The Nominations Committee comprises the following
Directors and they met on two occasions during the year.
Anil Agarwal, Chairman
Euan Macdonald
Aman Mehta
Deepak Parekh
Katya Zotova
Number of
meetings
attended
Percentage
attendance
2/2
2/2
2/2
2/2
2/2
100%
100%
100%
100%
100%
The Board considers that the composition and effective
operation of the Board is a critical component for the
delivery of long-term shareholder value. The Nominations
Committee is responsible for reviewing the composition of
the Board to ensure the right mix of skills, experience,
diversity and independence is present. It also plays a key
role in ensuring the development of talent within the Group.
Responsibilities of the Nominations Committee
The responsibilities of the Nominations Committee are set
out in its terms of reference which can be found on the
Company’s website at www.vedantaresources.com and are
also available on request from the Company Secretary. The
main responsibilities of the Nominations Committee are to:
• Review the structure, size and composition of the Board,
including the skills, experience and diversity of its
members and recommend changes to the composition
that are deemed necessary;
• Review the policy in respect of diversity on the Board
and consider Board composition in light of the benefits
of diversity, including gender;
• Consider candidates for appointment as either Executive
or Non-Executive Directors and plan for succession, in
particular to the positions of Chairman and Chief
Executive Officer;
• Prepare a description of the role and capabilities required
for appointments to the Board;
• Identify suitable candidates for appointment to the
Board and its committees and consider the use of
external advisers to facilitate the search for candidates
from a wide range of backgrounds;
• Recommend to the Board whether to reappoint a
Non-Executive Director either at the end of their term of
office or when put forward for re-election, having regard
to their performance and ability to continue to contribute
to the Board. The Nominations Committee will confer
with Volcan in this respect under the terms of the
Relationship Agreement;
• Ensure any appointees have sufficient time to undertake
their role;
• Report formally to the Board on how the Committee has
discharged its responsibilities; and
• Monitor the Group’s compliance with corporate
governance guidelines.
Operation of the Nominations Committee
The Committee is chaired by the Chairman of the Company
and the members of the Committee are all independent
Non-Executive Directors as is a requirement of the Code.
If a matter was to be discussed at the Committee that
concerned the Chairman then he would leave the meeting
and one of the other Directors would chair the meeting.
Other Executive Directors and members of the senior
management team may attend meetings at the invitation
of the Committee as appropriate. The Chairman of the
Nominations Committee provides an update to the Board
in respect of the Committee’s activities.
Nominations Committee performance evaluation
As part of the Board’s annual performance review,
an assessment of the Committee’s performance was
commenced on 11 May 2016, in respect of the year
ended 31 March 2016. The results of the performance
assessment were presented and discussed at the
11 May 2016 Board meeting.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 112
Nominations Committee Report continued
Nominations Committee activities during the year
The focus this year has continued to be on issues of diversity, succession planning and Board composition due to the
Nominations Committee’s awareness of the tenure of its Non-Executive Directors. Both the Nominations Committee and
the Board have discussed at length the need for refreshing of the Board.
The main areas of activity of the Nominations Committee during the year are summarised below:
Area of responsibility
Item
Board composition and succession planning
Governance
Non-Executive Director independence
Recruitment process
When considering new appointments to the Board, the
Nominations Committee reviews the balance of skills,
experience and diversity on the Board to identify those
criteria which are determined to be key to strengthening the
effectiveness of the Board. These criteria form the basis of
the search for new appointments to the Board. During the
year, the Nominations Committee had appointed
independent board recruitment agency, RG Executive
Search, to conduct a global search for new Non-Executive
Directors to succeed Messrs Mehta and Macdonald, who
have served on the Board for over nine years. RG Executive
Search was provided with a brief to identify candidates that
had relevant experience of the extractive industries. The brief
also requested the inclusion of more female candidates on
candidate shortlists to address the lack of gender diversity
on the Board and meet the aspirational target of achieving
33% of women on the Board by 2016. While the Nominations
Committee is committed to addressing the gender
imbalance, the Board is of the view that any appointments
to the Board should be based on merit rather than to fulfil
targets. The appointment of Ms Zotova has gone some way
to addressing the gender imbalance on the Board, however
the Board recognises the fact that more needs to be done.
RG Executive Search has no other connection with the
Group other than to provide recruitment consultancy
services to the Nominations Committee.
The search for additional Board candidates is ongoing and
it is expected that further appointments will be made in
due course.
• Review of skills, experience and diversity and approving
key search criteria for recruitment of new Non-Executive
Directors;
• Continued engagement of search consultancy to aid in
recruitment process;
• Review of candidates and recommendation of the
appointment of a new Non-Executive Director;
• Keeping under review potential candidates to address
gender balance on the Board;
• Review of succession planning for executive management.
• Considering the results of the Nominations Committee’s
annual evaluation;
• Approval of disclosures in the Nominations Committee
report in the Company’s Annual Report.
• Review of the independence of each of the Non-
Executive Directors prior to recommending their
reappointment by shareholders at the Annual
General Meeting.
Succession planning
As part of the Board’s succession planning arrangements,
the Nominations Committee had initiated a review of the
composition of the Board during the year, assisted by an
independent board recruitment agency. The recruitment
agency had identified a shortlist of candidates based on a
job profile that the Nominations Committee had compiled.
Upon the recommendation of the Nominations Committee,
on 11 May 2016 the Board decided to appoint Mr Ravi
Rajagopal as a Non-Executive Director effective from 1 July
2016 and as a member of the Audit Committee effective
from the same date. Euan Macdonald, having served on the
Board for over nine years, has decided to step down from
the Board following the conclusion of the Company’s 2016
Annual General Meeting. The Board, on the
recommendation of the Nominations Committee, has
invited Mr Aman Mehta to serve for a further year subject
to shareholder approval at the Company’s 2016 Annual
General meeting. Tom Albanese, Chief Executive Officer,
has continued the leadership review to assess the current
leadership of the businesses and identify potential
successors as part of a drive to have the right leadership in
place for the delivery of the Group’s strategic objectives.
During the year the Nominations Committee also looked at
the composition of the Sustainability Committee. The Board,
on the recommendation of the Nominations Committee,
decided to appoint Katya Zotova as a member of the
Sustainability Committee effective from 1 December 2015.
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113
The year ahead
The Nominations Committee’s objectives for the coming
year are:
• Review progress made on nurturing talent and improving
the gender balance within the Group;
• Continued focus on succession planning for the Board in
order to ensure a balance of skills, experience and
diversity;
• A commitment to increasing the participation of women
across all levels of the business, not least the Board of
Directors; and
• Appointment of additional Non-Executive Directors to
succeed Messers Mehta and Macdonald.
Anil Agarwal
Chairman, Nominations Committee
11 May 2016
Talent development and senior management succession
planning
Our people are our biggest asset for the delivery of
business results and long-term shareholder value. As I
stated last year, the continued investment in our people
is critical to our future success, and with this in mind the
‘Leadership Connect Programme’ was launched where
we made remarkable progress with focus on leadership
development of individuals through assessments and
coaching. In line with our philosophy, the Group initiated
‘Internal Growth Workshops’ which focused on promoting
internal talent into leadership roles. The Internal Growth
Workshops have so far identified 100 new leaders who have
taken up significantly higher roles and responsibilities; this
includes 13 women professionals across the businesses.
In addition, the Executive team has been significantly
strengthened and strong foundations have been laid
to deliver superior performance for the Group.
Diversity
The Board supports the importance of having diversity of
thought and representation on its Board and it is one of
the Nominations Committee’s tasks to ensure that this is
achieved. Board diversity has been considered from a
number of aspects, including, but not limited to, age, gender,
race and ethnic origin, cultural and educational background.
The Board has a wide range of knowledge and expertise
including mining, oil & gas, corporate finance, banking,
diplomacy and governance and the law. In terms of gender,
the Company’s diversity policy has an aspirational target of
achieving a minimum of 33% women on the Board by 2020
taking into account Lord Davies’ revised recommendations
in 2015. While we have made some progress towards this
target following Ms Zotova’s appointment, we acknowledge
that more needs to be done and this remains a top priority
for the Nominations Committee. The Nominations
Committee is also addressing the lack of gender diversity
across its employee population and feels that it is essential
to overcome the reasons for lack of female representation
to date. These have included the fact that Vedanta operates
within a traditionally male-dominated industry. Furthermore,
due to cultural constraints and the remote geographical
location of some of our operations, we face a number of
challenges in addressing the gender balance within the
Group. Women currently comprise 9% of the overall
employee population within the Group, whereas the
percentage of female representation across the Group’s
professional population is 11%. In order to achieve our target
for women on the Board, we ensure that female candidates
are considered routinely as part of the recruitment process.
We also actively encourage and monitor the progress of
women in senior positions throughout the Group. Initiatives
this year included reviewing the barriers to women with
children in returning to work. By supporting equal
opportunities we will ensure that the pool of women
from which management can be drawn will increase.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 114
Sustainability Committee Report
This report provides details of the role and
responsibilities of the Sustainability Committee
and the work it has undertaken during the year.
Euan Macdonald, Chairman, Sustainability Committee
The resources that are mined not only contribute to the
growth of nations but are essential for developing host
communities. Sustainability is a core element of Vedanta’s
strategy and supports its growth as a diversified natural
resources company. Vedanta’s Sustainable Development
Model and the framework embedded in the operations is
helping the Company ensure a long-term, sustainable
future for our business operations, meeting their growth
targets, and creating long-term value for all stakeholders.
I am saddened to report that we lost 12 of our colleagues
this year. There is no excuse for this and management is
very committed to eliminating fatalities. We have shown
good improvement towards controlling both leading and
lagging indicators, and I assure the Board that we are
committed to do much more to achieve zero fatalities.
Vedanta has implemented and put forward behavioural-
based and technical programmes such as implementation
of safety standards, job risk assessment and training
workshops, personal commitment to not ignore any
unsafe act or condition, among other initiatives, which
I believe will show good results.
This year, the Company maintained its focus on reducing
its environmental impact on air, water and land use. The
significant improvements and adoption of best practices
in resource management, biodiversity and site closure
practices along with awards like CII – Sustainable Plus
platinum label, National Energy Conservation Award
and Global IOD Awards for Excellence in Corporate
Governance and Sustainability are testament to the
focus and improvement Vedanta has towards
environment sustainability.
Vedanta believes in the free, prior and informed consent
right of the community and the Sustainability Committee
believes that transparent communication with civil society
is essential to enlighten all stakeholders on Vedanta’s
business operations and community expectations. I am
delighted to see that the Company, upon the Committee’s
suggestion, is engaging with wider groups both at
corporate and business levels, and organised its maiden
Sustainable Development Day in London, and NGO and
partners meet in India and Africa implementing the local
stakeholder engagement plans at businesses.
I continue to be inspired by the dedicated efforts of the
Vedanta team; listening to their ideas is invaluable.
Vedanta’s success has been built not just by executives in
boardrooms but by talented people across the Group who
are eager to use innovation and technology to showcase
their mettle.
Climate change is a rapidly growing concern globally, and
recent record temperature trends will likely accelerate this
concern. We feel this will require multiple solutions,
including the innovative technology to improve energy
efficiency and find more carbon neutral solutions. It is vitally
important that every country provides the right incentives
for the development and diffusion of climate-friendly
processes and practices. Vedanta has met its energy
savings target this year and is on a continuing journey to
improve all aspects of sustainable development. I look
forward to reviewing the Company’s enhanced approach
toward climate change.
I would also like to welcome Katya Zotova, who joined the
Vedanta Sustainability Committee this year. She brings a
wealth of oil & gas sector experience and her perspective
will be invaluable as we go forward on this journey.
Membership and attendance
The Sustainability Committee comprises the following
Directors and met on four occasions during the year.
Euan Macdonald, Chairman
Tom Albanese
Kishore Kumar
Katya Zotova
Roma Balwani (Member Secretary)
Number of
meetings
attended
Percentage
attendance
4/4
3/4
4/4
1/1
4/4
100%
75%
100%
100%
100%
Responsibilities of the Sustainability Committee
The responsibilities of the Sustainability Committee are set
out in its terms of reference which are available on the
Company’s website www.vedantaresources.com or from
the Company Secretary. The President – Group
Communication, Sustainable Development and CSR acted
as secretary of the Committee and the Group’s subsidiary
companies’ chief executives or their representatives were
invited to attend the meetings.
The main responsibilities of the Sustainability Committee are:
• To advise on sustainability policies and framework,
clearly setting out the commitments of the Group to
manage matters of sustainable development effectively;
• To review and approve targets for sustainability
performance and report to the Board with respect to
their appropriateness and assess progress towards
achieving those targets;
• To recommend initiatives required to institutionalise a
sustainability culture through involvement of leadership,
employees and communities at all levels;
• To review and report to the Board, the performance of
the Group and the Group companies with respect to the
implementation of the Vedanta Sustainability Framework
through the Sustainability Assurance Programme so that
sustainability and reputation related risks are assessed,
controlled and managed effectively; and
• To approve the Sustainable Development Report prior
to publication.
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115
Sustainability Committee activities during the year
The main areas of activity of the Sustainability Committee during the year are summarised below:
Area of responsibility
Sustainability framework
Health and safety
Environment
System development and performance reporting
Item
• Review the progress made on the development of the
sustainability model and framework;
• Review the implementation of the action plan emerging
from Vedanta’s Sustainability Assurance Programme
(VSAP);
• Review and approve sustainable development objectives
and targets;
• Review and approve sustainable development initiatives,
charters and partnerships.
• Review of Group safety incidents and performance;
• Overseeing the implementation of action plans with
respect to fatal accidents;
• Review of Occupational Health & Safety interventions.
• Overseeing the Group’s initiatives for reduction in
specific water and energy consumption;
• Review of carbon benchmarking and RPO obligation;
• Review of fly ash management plan;
• Review of biodiversity initiatives and action plans.
• Review of performance evaluation of the Sustainability
Committee and review of terms of reference;
• Review and approval of Sustainable Development Report
2014–15.
Community relation and engagement
• Review of sustainable development goals and UK
Modern Slavery Act;
• Overseeing the implementation of strategic CSR projects
– Model Anaganwadi etc;
• Review the progress on the Group’s Human Rights
programme and initiatives;
• Review of important stakeholder engagements.
Details on each of the above initiatives can be found in the Company’s Sustainable Development Report 2015–16 and
on the Company’s website at http://sustainabledevelopment.vedantaresources.com.
Euan Macdonald
Chairman, Sustainability Committee
11 May 2016
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 116
Remuneration Committee Report
Business performance for the year was evaluated against
the measures and targets set, and resulted in a bonus
payout of 37.06% of maximum for the Executive Chairman,
Executive Vice Chairman and Group CEO (details are
provided in the relevant part of the Annual Report
on Remuneration).
At the AGM, shareholders will be asked to vote on an
amendment to our share plans. Historically our plans have
contained two overall limits on dilution: one limiting overall
dilution to 10% of share capital in ten years in respect of all
plans; and a second limit operating within this, restricting
dilution under executive plans to 5% in ten years. Given the
wide use of share-based remuneration in the Group the
distinction between executive plans and wider plans is not
a helpful one and we are seeking to remove the inner limit
and simply operate within the 10% limit.
We hope that we will receive your support for this
resolution and for the Annual Report on Remuneration
at the forthcoming AGM.
Yours sincerely,
Euan Macdonald
Chairman of the Remuneration Committee
Dear Shareholder,
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for the year ended
31 March 2016. The report sets out details of the
Remuneration Policy, which received shareholder approval
in 2014 (and is restated here for ease of reference), together
with our Annual Report on Remuneration which details
the remuneration paid to the Directors last year and
the intended application of the policy for the current
financial year.
The mining and oil & gas industries have experienced a
challenging year as commodity prices have remained
depressed. While some individual commodity markets
experienced limited recovery, overall trading conditions
remained difficult. Against this background, Vedanta
Resources’ performance was commendable, with some
significant operational and financial milestones achieved
during the financial year 2015-16; however, the Group’s
overall financial performance was impacted by these
external forces. While we navigated through these tough
market conditions, our management priorities focused
on the need for making the business more efficient
and resilient.
• Financial Performance:
In FY2016, we commenced Iron Ore operations and
continued to expand capacity at Aluminium and Power
while maintaining a disciplined approach to capital
expenditure and focus on cost optimisation across our
operations. These steps, together with a low requirement
for new capital expenditure, helped to mitigate the
effects of a depressed world market for commodities.
Against this backdrop, our results show that this
disciplined approach and careful balance sheet
management has delivered robust results. Despite lower
revenues and EBITDA, driven primarily by lower
commodity prices, we maintained EBITDA margins and
reduced our gearing. Strong generation of free cash flow
enabled us to reduce overall debt levels.
• Stakeholder management and regulatory
development initiatives:
The Board’s executive team led various initiatives aimed
at improvements in the Group’s governance model. We
also continued to make progress on influencing the
regulatory environment in which we operate.
• Sustainability and safety scorecard:
Safety and sustainability remain a key priority for the
Board and the Company as a whole. We continue to
maintain our good track record in managing health and
environment performance. There were no significant
environmental incidents during FY2016 and no significant
health-related observations in the same period. While
the leading indicators such as lost time injuries frequency
rate per million man hours worked have shown an
improving trend, we are committed in our efforts to
achieving our objective of zero-harm, which is an
integral part of our strategic priorities.
Talent development remains an important focus area and
significant initiatives have been taken in this regard.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT
www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
117
Directors’ Remuneration Policy Report
The Company’s Remuneration Policy was put to a vote
at the 2014 AGM and was approved by 99.93% of
shareholders. There is no requirement to vote on the policy
in 2016 unless any changes to the policy are proposed, and
the Committee does not intend to make any such changes
at this time. The policy is set out for information only; the
chart showing remuneration scenarios on page 120 has
been updated to reflect the intended implementation of
the policy for 2016.
Policy overview
The key objective of the Group’s broad remuneration policy
is to ensure that competitive and fair awards are linked to
key deliverables and are also aligned with market practice
and shareholders’ expectations.
The Committee ensures that remuneration policies and
practices are designed to attract, retain and motivate the
Executive Directors and the senior management group,
while focusing on the delivery of the Group’s strategic and
business objectives. The Committee is also focused on
aligning the interests of the Executive Directors and the
senior management group with those of shareholders,
to build a sustainable performance culture.
When setting remuneration for the Executive Directors, the
Committee takes into account the business performance,
developments in the natural resources sector and,
considering that the majority of the Group’s operations are
based in India, similar information for high-performing
Indian companies.
The Committee has set remuneration taking into
consideration both UK and Indian market practice to ensure
it is globally competitive as the Executive Directors are
based in India (with the exception of Mr Anil Agarwal,
who is UK-based), along with the majority of the Group’s
professional management team. The Committee also
considers the inflation rates prevalent in UK and India
in the setting of remuneration.
The Committee recognises that financial performance of
the Company is heavily influenced by macro-economic
considerations such as commodity prices and exchange
rate movements. These factors are therefore taken into
consideration when setting executive remuneration.
How the views of shareholders are taken into account
The Committee considers the AGM to be an opportunity
to meet and communicate with investors and considers
shareholder feedback received in relation to the AGM each
year and guidance from shareholder representative bodies
more generally. This feedback, plus any additional feedback
received during any meetings from time to time, is then
considered as part of the Company’s annual review of
remuneration policy.
In addition, the Committee will seek to engage directly with
major shareholders and their representative bodies should
any material changes be proposed to the remuneration
policy. Details of votes cast for and against the resolution to
approve last year’s remuneration report and any matters
discussed with shareholders during the year are set out in
the Annual Report on Remuneration.
How the views of employees are taken into account
In setting the policy for Executive Directors’ remuneration,
the Committee considers the pay and employment
conditions across the Group, including annual base
compensation increases across the general employee
population and the overall spend on annual bonuses.
Employees may be eligible to participate in the annual
bonus arrangement and receive awards under the ESOP or
LTIP. Opportunities and performance metrics may vary by
employee level with specific business metrics incorporated
where possible.
The Committee does not formally consult with employees
in respect of the design of the Executive Directors’
remuneration policy, although the Committee will keep
this under review.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 118
Directors’ Remuneration Policy Report continued
Summary of the remuneration policy for Directors
The following table sets out the key aspects of the remuneration policy for Directors:
Element of pay
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Base compensation1
Reflects individual’s
experience and role
within the Group.
Reward for
performance of
everyday activities.
Taxable benefits
To provide market
competitive benefits.
The Committee
reviews base
compensation
annually, taking
account of the scale
of responsibilities, the
individual’s experience
and performance.
Changes are
implemented
with effect from
1 April each year.
Base compensation
is paid in cash on
a monthly basis.
Base compensation
is typically set with
reference to a peer
group of UK-listed
mining comparator
companies.
Comparisons
are also made
against positions of
comparable status,
skill and responsibility
in the metals and
mining industries
globally, and in the
manufacturing and
engineering industries
more generally.
Benefits vary by role
and are reviewed
periodically.
Benefits are set
in line with local
market practices.
Pension
To provide for
sustained contribution
and contribute
towards retirement
planning.
Directors receive
pension contributions
into their personal
pension plan or local
provident scheme.
Contribution rates are
set in line with local
market practices.
Business and
individual
performance
are considered
when setting base
compensation.
There is no prescribed
maximum annual
increase. Base
compensation
increases are applied
in line with the annual
review and are
competitive within the
UK and Indian market
and internationally
for comparable
companies. The
Committee is also
guided by the general
increase for the
employee population
but on occasions may
need to recognise,
for example,
development in
role and/or change
in responsibility.
The value of benefits
is based on the cost
to the Company and
is not pre-determined.
n/a
n/a
Annual contribution
of up to 15% of base
compensation for
the Executive Vice
Chairman and 20% of
base compensation
for the Chief
Executive Officer.
The Executive
Chairman does
not receive post-
retirement benefits.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT www.vedantaresources.com
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119
Element of pay
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Annual bonus
Incentivises executives
to achieve specific,
predetermined
goals during the
financial year.
Performance
Share Plan (PSP)
Encourage and
reward strong
performance aligned
to the interests of
shareholders.
Share ownership
guidelines
To increase alignment
between executives
and shareholders.
Up to 150% of base
compensation
per annum.
Up to 150% of base
compensation
per annum.
The bonus is
measured against a
balanced scorecard of
performance metrics.
At least 50% of the
bonus potential will
be based on financial
performance and
the remainder of
the bonus potential
will be based on
operational, strategic
and sustainability
measures.
The Committee has
the ability to adjust
the bonus outturn
if it believes that
the outturn is not
reflective of the
Group’s underlying
performance or
warranted based on
the Health, Safety
and Environment
(HSE) record.
PSP awards
are subject to
a performance
condition based
on relative total
shareholder
return (TSR).
30% of an award will
vest for achieving
median performance,
increasing pro-rata
to full vesting for
the achievement of
stretch performance
targets.
The Committee has
the ability to adjust
the PSP outturn
if it believes that
the outturn is not
reflective of the
Group’s underlying
performance or
warranted based on
the HSE record.
200% of base
compensation for
Executive Directors2
n/a
50% paid in cash
and 50% deferred
into shares which will
vest 40% after the
first year, and 30%
after the second
and third years,
subject to continued
employment.
Determined by the
Committee after
year-end, based on
performance against
the pre-determined
financial and non-
financial metrics.
Not pensionable.
Clawback
provisions apply for
overpayments due
to misstatement
or error and other
circumstances.
Annual grant of
nominal-cost
options which vest
after three years,
subject to Company
performance
and continued
employment. There
is an additional
holding period of two
years post-vesting.
Clawback
provisions apply for
overpayments due
to misstatement
or error and other
circumstances.
Executive Directors
are required to
retain any vested
shares (net of tax)
under the Group’s
share plans until the
guideline is met.
Any new Executive
Director will have a
period of five years
from recruitment
or promotion to the
Board to build up
their shareholding to
the required level.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 120
Directors’ Remuneration Policy Report continued
Element of pay
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Non-Executive
Directors’ fees
To attract and
retain high calibre
Non-Executive
Directors through the
provision of market
competitive fees.
Business and
individual
performance are
considered when
setting fees.
Fees are paid in cash.
Fees are determined
based on the
significant travel and
time commitments,
the risk profile of the
Company and market
practice for similar
roles in international
mining groups.
As for the Executive
Directors, there is no
prescribed maximum
annual increase.
The Committee is
guided by the general
increase for the
employee population
but on occasions may
need to recognise,
for example,
development in
role and/or change
in responsibility.
1 Base compensation includes base salary plus fixed cash allowances and statutory benefits, which are a normal part of the fixed remuneration package for
employees in India.
2 A similar requirement but with a lower salary multiple applies to members of the Executive Committee.
Selection of performance metrics
The annual bonus is based against a balanced scorecard of
financial, operational, sustainability and strategic metrics.
The mix of targets will be reviewed each year by the
Committee to ensure that they remain appropriate to
reflect the priorities for the Group in the year ahead. A
sliding scale of targets is set to encourage continuous
improvement and challenge the delivery of stretch
performance.
The PSP is based on relative TSR performance, which
provides an external assessment of the Company’s
performance against the market. It also aligns the rewards
received by executives with the returns received by
shareholders. A sliding scale of challenging performance
targets is set. The Committee will review the choice of
performance measures and the appropriateness of the
performance targets prior to each PSP grant. The
Committee reserves the discretion to set different targets
for future awards, without consulting with shareholders,
providing that, in the opinion of the Committee, the new
targets are no less challenging in light of the circumstances
at the time than those used previously. The targets for
awards granted under this remuneration policy are set
out for shareholder approval in the Annual Report
on Remuneration.
Remuneration scenarios for Executive Directors
The charts below illustrate how the Executive Directors’ remuneration packages vary at different levels of performance
under the ongoing policy, which will apply from 1 April 2016.
Executive Chairman Total remuneration (£000)
Executive Vice Chairman Total remuneration (£000)
Maximum
26%
37%
37%
£6,555,507
Maximum
30%
35%
35%
£4,068,221
On-target
38%
35%
27%
£4,545,507
On-target
41%
34%
25%
£2,878,467
Minimum
100%
£1,731,507
Minimum
100%
£1,189,733
Total fixed pay
Annual bonus
Performance share plan
Total fixed pay
Annual bonus
Performance share plan
Chief Executive Officer Total remuneration (£000)
Maximum
30%
35%
35%
£4,341,244
On-target
44%
32%
24%
£3,091,244
Minimum
100%
£1,345,000
Total fixed pay
Annual bonus
Performance share plan
Notes
1 Base compensation levels are based on those applying on 1 April 2016 (converted at a rate of INR98.7645 : £1).
2 The value of taxable benefits is based on the cost of supplying those benefits (as disclosed) for the year ending 31 March 2016.
3 The value of pension receivable by the Executive Vice Chairman and Chief Executive Officer in FY2017 is taken to be 15% and 20%
of base compensation respectively.
4 The on-target level of bonus is assumed to be two-thirds of the maximum annual bonus opportunity.
5 The on-target level of the PSP is assumed to be 50% of the face value of the award at grant.
6 Share price movement and dividend accrual have not been incorporated into the values shown above.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT www.vedantaresources.com
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121
Approach to recruitment and promotions
The remuneration package for a new Executive Director –
i.e. base compensation, taxable benefits, pension, annual
bonus and long-term incentive awards – would be set in
accordance with the terms of the Company’s prevailing
approved remuneration policy at the time of appointment
and would reflect the experience of the individual.
The base compensation for a new executive may be set
below the normal market rate, with phased increases over
the first few years, as the executive gains experience in their
new role. Annual bonus potential will be limited to 150% of
base compensation and long-term incentives will be limited
to 150% of base compensation per annum.
In addition, the Committee may offer additional cash and/
or share-based elements when it considers these to be
in the best interests of the Company (and therefore
shareholders) to take account of remuneration relinquished
when leaving the former employer and would reflect the
nature, time horizons and performance requirements
attaching to that remuneration.
For an internal Executive Director appointment, any
variable pay element awarded in respect of the prior role
may be allowed to pay out according to its terms, adjusted
as relevant to take into account the appointment. In
addition, any other ongoing remuneration obligations
existing prior to appointment may continue, provided
that they are put to shareholders for approval at the
earliest opportunity.
For external and internal appointments, the Committee
may agree that the Company will meet certain relocation
expenses and continuing allowances as appropriate.
For the appointment of a new Chairman or Non-Executive
Director, the fee arrangement would be set in accordance
with the approved remuneration policy at that time.
Service contracts for Executive Directors
The Committee reviews the contractual terms for new
Executive Directors to ensure these reflect best practice.
Mr Anil Agarwal is employed under a contract of
employment with the Company for a rolling term but which
may be terminated by not less than six months’ notice.
Provision is made in Mr Anil Agarwal’s contract for payment
to be made in lieu of notice on termination which is equal to
base compensation.
Mr Navin Agarwal has a letter of appointment with the
Company which is a rolling contract and may be terminated
by giving six months’ notice. Mr Navin Agarwal has a service
agreement with Vedanta Limited which expires on 31 July
2018, with a notice period of three months or base
compensation in lieu thereof.
Mr Tom Albanese has a separate letter of appointment with
the Company and Vedanta Limited on a fixed three-year
term which expires on 31 March 2017, but which may be
terminated by not less than three months’ notice. Provision
is made in Mr Albanese’s contract for payment to be made
in lieu of notice on termination which is equal to three
months’ base compensation and benefits.
It is the Group’s policy that the notice period in the
Directors’ service contracts does not exceed 12 months.
Copies of all Executive Directors’ service contracts and the
letters of appointment of the Non-Executive Directors are
available for inspection during normal business hours at the
registered office of the Company, and available for
inspection at the AGM.
Payments for loss of office
The Executive Directors’ service contracts provide for pay
in lieu of notice in respect of base compensation, as set
out above.
The annual bonus may be payable with respect to the
period of the financial year served although it will be
pro-rated for time and paid at the normal payout date. Any
share-based entitlements granted to an Executive Director
under the Company’s share plans will be determined based
on the relevant plan rules.
The default treatment under the PSP is that any
outstanding awards lapse on cessation of employment.
However, in certain prescribed circumstances, such as
death, ill-health, disability, retirement or other
circumstances at the discretion of the Committee, ‘good
leaver’ status may be applied. For good leavers, awards will
normally vest on the original vesting date, subject to the
satisfaction of the relevant performance conditions at that
time and reduced pro-rata to reflect the proportion of the
performance period actually served. However, the
Committee has discretion to determine that awards vest at
an earlier date and/or to disapply time pro-rating, although
it is envisaged that this would only be applied in exceptional
circumstances. Any such incidents, where discretion is
applied by the Committee, will be disclosed in the next
year’s Annual Report on Remuneration.
The default treatment for deferred annual bonus awards
is that any outstanding awards lapse on cessation of
employment. However, in certain ‘good leaver’ circumstances
(as described under the PSP above) awards will normally
vest in full on the original vesting date.
In determining whether an executive should be treated as
a good leaver or not, the Committee will take into account
the performance of the individual and the reasons for
their departure.
In the event of a change of control all unvested awards
under the deferred annual bonus and long-term incentive
arrangements would vest, to the extent that any
performance conditions attached to the relevant awards
have been achieved. The award will, other than in
exceptional circumstances, be pro-rated for the period
of the financial year served.
Letters of appointment for Non-Executive Directors
The Non-Executive Directors have letters of appointment
which may be terminated by either party by giving three
months’ notice. The Non-Executive Directors’ letters of
appointment set out the time requirements expected of
them in the performance of their duties. Non-Executive
Directors are normally expected to spend at least 20 days
per year in the performance of their duties for the
Company. There is no provision in the letters of
appointment of the Non-Executive Directors for
compensation to be paid in the event of early termination.
Legacy arrangements
For avoidance of doubt, in approving this Directors’
Remuneration Policy Report, authority is given to the
Company to honour any commitments entered into with
current or former Directors (such as the vesting of past
share awards) that have been disclosed to and approved by
shareholders in this and previous Remuneration Reports.
Details of any payments to former Directors will be set out
in the Annual Report on Remuneration as they arise.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 122
Annual Report on Remuneration
This part of the report has been prepared in accordance
with Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013 and 9.8.6R of the UK’s Listing Rules. The
Annual Report on Remuneration will be put to an advisory
shareholder vote at the 2016 AGM. The information on
pages 123 to 127 has been audited.
Membership of the Remuneration Committee
The members of the Remuneration Committee who served
during the year, all of whom are independent Non-
Executive Directors, are shown below together with their
attendance at Remuneration Committee meetings:
Name
Euan Macdonald (Chairman)
Aman Mehta
Geoffrey Green
Katya Zotova1
Meetings
attended
Percentage
attendance
4/4
4/4
4/4
3/4
100%
100%
100%
75%
1 Ms Zotova was unable to attend one meeting which was organised at
short notice.
The Committee’s responsibilities are set out in its terms of
reference, which are available on the Company’s website at
www.vedantaresources.com or on request from the
Company Secretary. The Committee’s terms of reference
were reviewed during the year, and no further amendments
have been made in the year ended 31 March 2016.
The Committee’s responsibilities primarily include:
• Setting the Group’s overall policy on executive and senior
management remuneration;
• Determining the remuneration packages for individual
Executive Directors, including base compensation,
performance-based short and long-term incentives,
pensions and other benefits;
• Approving the design and operation of the Company’s
share incentive schemes; and
• Reviewing and determining the terms of the service
agreements of the Executive Directors.
Advisers to the Committee
The Committee retained New Bridge Street (NBS), a
trading name of Aon plc, to provide independent advice
on remuneration matters. NBS is a signatory to the
Remuneration Consultants Group’s Code of Conduct, which
requires its advice to be objective and impartial. NBS does
not provide any other services to the Company. Other pay
information for employees below Board level is provided to
the Company by Aon in India. The Committee considers
that this enables a global perspective to be achieved.
Where relevant, NBS reviews the work of Aon India to
ensure that the advice is appropriate for a UK plc context
and internally consistent. The Committee has reviewed the
operating processes in place at NBS and is satisfied that
the advice it receives is objective and independent. The
Committee considers various external reports from NBS on
remuneration in the UK as well as India to provide detailed
insights that aid remuneration decisions. The fees paid to
NBS in respect of work carried out in 2015-16 were
£127,800. In addition, advisers to the Committee during
the year and their roles are set out below.
• Mr Suresh Bose (Head of Group HR) and Mr Manoj
Kumar Sharma (Group Head of Total Rewards) advise
the Committee on general remuneration policies and
practices followed in India and the global market,
Executive Directors’ remuneration and benefits and
remuneration policy applicable to the wider employee
population within the Group.
• The Executive Directors provide input on remuneration
packages for the senior management group to ensure
parity amongst senior management in different
businesses but at similar roles. Executive Directors may
attend meetings at the invitation of the Committee but
no Director is present during discussions of their own
remuneration.
• Ernst & Young LLP review and confirm the Company’s
TSR performance in respect of the Long-Term Incentive
Plan. Ernst & Young also provide tax and internal audit
services to the Group.
Statement of shareholder voting
At the 2015 Annual General Meeting, a resolution was
proposed to shareholders to approve the Directors’
Remuneration Report for the year ended 31 March 2015.
This resolution was passed with the following votes
from shareholders:
Votes cast in favour
Votes cast against
Total votes cast
Abstentions
Annual Report on
Remuneration
230,735,321 (98.93%)
2,500,000 (1.07%)
233,235,321
90,058
During the year, the Committee wrote to the Company’s
major shareholders to consult on a potential removal of the
inner limit on diluting within our share plans. The majority
of shareholders approached were comfortable with the
proposal, which will be subject to a resolution at the
forthcoming AGM.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT www.vedantaresources.com
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123
Directors’ remuneration earned in 2015-16 (Audited)
The table below summarises Directors’ remuneration received during the year ended 31 March 2016 and the prior year
for comparison.
Executive Directors
Anil Agarwal1
Navin Agarwal2,3,7
Tom Albanese4,7
Non-Executive Directors6
Geoffrey Green
Euan Macdonald
Aman Mehta5
Deepak Parekh
Katya Zotova (appointed 1 August 2014)
Base
compensation
including
salary or fees
£000
Taxable
benefits
£000
Pension
£000
Annual
bonus
£0008
Long-term
incentives
£000
2015-16
2014-15
2015-16
2014-15
2015-16
2014-15
2015-16
2014-15
2015-16
2014-15
2015-16
2014-15
2015-16
2014-15
2015-16
2014-15
1,608
1,608
969
968
1,000
1,000
95
95
140
140
140
140
102
102
112
68
124
129
67
53
90
95
–
–
–
–
–
–
–
–
–
–
–
–
153
153
251
215
–
–
–
–
–
–
–
–
–
–
894
897
533
533
556
372
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£0009
2,625
2,634
1,723
1,707
1,897
1,682
95
95
140
140
140
140
102
102
112
68
Notes
1 Mr Anil Agarwal’s taxable benefits in kind include provision of medical benefits, car and fuel in the UK for business purposes.
2 For the financial year ended 31 March 2016, Mr Navin Agarwal received a Vedanta Limited salary of INR85,618,845 excluding medical and leave travel
allowances, Vedanta Resources plc fees of £85,000, Hindustan Zinc Limited fees of INR300,000 and Commission of INR10,00,000 and Cairn India Limited
fees of INR400,000.
3 Mr Navin Agarwal’s taxable benefits in kind include housing and related benefits, and use of a car and driver.
4 Mr Tom Albanese’s taxable benefits in kind include housing and related benefits, and use of a car and driver in India and medical benefits in UK.
5 The fee paid to Mr Aman Mehta does not include the fees of £85,204 paid by Cairn India Limited.
6 Non-Executive Directors are reimbursed for expenses incurred while on Company business. No other benefits are provided to Non-Executive Directors.
7 All of the Group’s pension schemes are based on cash contribution and do not confirm an entitlement to a defined benefit. Pension contributions are made
into the Deputy Executive Chairman and Chief Executive Officer’s personal pension schemes (or local provident fund) and will become payable on
retirement, normally at age 58. The Executive Chairman does not receive pension benefits.
8 Amounts shown for 2015-16 relate to the payment of the annual bonus for the year ended 31 March 2016. 50% of the annual bonus figures shown in the
table are paid in cash and the balance 50% is deferred in shares. Details of this payment are set out in the relevant sections of the report.
9 The exchange rate applicable as at 31 March 2016 was INR98.7645 to £1, and at 31 March 2015 was INR98.5614 to £1.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 124
Annual Report on Remuneration continued
Annual bonus
The annual bonus for the 2015-16 financial year was based on performance against a balanced scorecard of financial and
sustainability measures and strategic projects. Performance against these targets is set out below:
Factors
Parameters
Financial performance1 EBITDA
Free cash flow2
Sub-total financial
(as per scheme)
Sustainability
Safety
Stakeholder
management
and regulatory
Sustainability and
safety scorecard3
Personal/strategic
objectives
Total
Payout
Weighting
as a
percentage
of total
bonus
30.00%
30.00%
60.00%
7.50%
7.50%
25.00%
100.00%
150.00%
Annual bonus – 2015-16
Actual
achieved
(US$m)
2,336
804
Threshold
performance
hurdle
(33% of
maximum
payable)
On-target
performance
hurdle
(70% of
maximum
payable)
Achievement
Percentage
Payout
(% of
parameter)
Payout
% as per
weightage
3,731
949
70% 100.00%
62.60%
84.66%
73.63%
37.76%
22.66%
Score as per scorecard of the
group under this parameter
Parameters: PSC extension,
divestment of Government
Share, simplification of group
structure, iron ore export duty
and bauxite supply
67.62%
67.62%
5.07%
24.42%
24.42%
30.00%
30.00%
1.83%
7.50%
Payout as a percentage of
maximum payout opportunity
Paid as a percentage of base pay
(calculated as per total score)
37.06%
55.59%
1 For financial performance, a weighted achievement of both the elements is considered for assessing the threshold and for arriving at the payout – 70%
achievement of Business Plan targets is considered as threshold which entails 33% of the payout opportunity with 70% payout for 100% achievement and
stretching to 100% of payout opportunity at 120% achievement of the Targets. For other elements, payout is prorated with respect to performance levels
increasing to full payment at stretch performance.
2 For business performance assessment reported free cash flow of US$1,705 million is adjusted with temporary working capital initiatives of US$826 million
and Buyer’s credit movement of US$76 million.
3 The sustainability as well as safety performance score is the group average score calculated based on the scorecard, which includes resource use and
management, stakeholder engagement and management, compliance and training, incident investigation, fatality and change management.
For determining the bonus, the business performance for the year has been evaluated in terms of the metrics approved for
the year 2015-16. Following evaluation against the set metrics, the achievement of targets is 37.06% of the maximum, and
subsequently a bonus of 55.59% of salary is proposed for the Executive Chairman, Executive Vice Chairman and Group
CEO. The bonus payment in relation to performance in the 2015-16 financial year will be payable 50% in cash and 50% in
shares under the Deferred Share Bonus Plan.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT
www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
125
Performance Share Plan awards granted and vested during the year
The following award was granted to the Executive Directors on 30 December 2015 under the PSP Scheme:
Anil Agarwal
Navin Agarwal
Tom Albanese
Type of award
Nominal-cost option
Nominal-cost option
Nominal-cost option
Basis of award
granted
(% of base
compensation)
Share price
at date of
grant
46%
37%
54%
£2.717
£2.717
£2.717
Number
of shares
over which
award was
at granted
275,000
130,000
200,000
Face value
of award
(£000)
747
353
543
The performance condition attached to the above award is based on Vedanta Resources’ Relative TSR against the
comparator group of industry peers over a three-year period starting from the grant date. 30% of the awards will vest
at median performance, with full vesting for upper quintile performance.
Performance is measured against two comparator groups, reflecting the business mix and a geographic focus of
Vedanta Resources – one which contains other global resources companies and a second which comprises other large
Indian companies.
• Global resources group (75% weighting) – Anglo American, BHP Billiton, Rio Tinto, Glencore Xstrata, Vale, Antofagasta,
Grupo Mexico, Hindalco, Alcoa, Dragon Oil (until delisting), Boliden, First Quantum, Petrofac and Tullow Oil
• Indian companies group (25% weighting) – Reliance Industries Ltd, NMDC Ltd, Coal India Ltd, National Aluminium Co Ltd,
ONGC and Ultratech Cement Limited
Share plan awards
The table below shows the Directors’ interests in the Company’s share plans:
31 March
2015
Number of
shares
Granted
in 2015-16
Number of
shares
Vested in
2015-16
Number of
shares
Lapsed in
2015-16
Number of
shares
31 March
2016
Number of
shares
Exercise
price
US cents
Award price
£
Earliest/
latest
exercise
date
Anil Agarwal
24 September 2012
ESOP1
9,000
17 November 2014
PSP
225,000
–
–
30 December 2015
PSP
4 January 2016
DSBP
–
–
275,000
68,661
Navin Agarwal
24 September 2012
ESOP1
6,120
17 November 2014
PSP
140,000
–
–
30 December 2015
PSP
4 January 2016
DSBP
–
–
130,000
60,362
Tom Albanese
17 November 2014
PSP
170,000
–
30 December 2015
PSP
4 January 2016
DSBP
–
–
200,000
41,939
9,000
–
–
–
6,120
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
225,000
275,000
68,661
–
140,000
130,000
60,362
170,000
200,000
41,939
0.1
0.1
0.1
0
0.1
0.1
0.1
0
0.1
0.1
0
10.56 24 Sep 13–
16 Mar 16
8.09 16 Nov 17–
16 May 18
2.717 29 Dec 18–
29 Jun 19
6.534 22 May 16–
22 May 18
10.56 24 Sep 13–
16 Mar 16
8.09 17 Nov 17–
17 May 18
2.717 30 Dec 18–
30 Jun 19
4.435 12 Aug 16–
12 Aug 18
8.09 17 Nov 17–
17 May 18
2.717 30 Dec 18–
30 Jun 19
4.435 12 Aug 16–
12 Aug 18
Total
550,120
775,962
15,120
0 1,310,962
1 The ESOP 2012 third-year options have vested for Mr Anil Agarwal as well as Mr Navin Agarwal but they have not exercised the same. The time period of
exercise has been extended by one month until mid-June 2016 for all the employees, post which the options will lapse.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 126
Annual Report on Remuneration continued
External appointments
The Board’s policy on external appointments is that an Executive Director may, only with the prior approval of the Board,
accept an appointment external to the Group (other than any appointment as a Non-Executive Director to related parties
or Volcan Investments Limited (Volcan) in the case of Messrs Anil Agarwal and Navin Agarwal) of a publicly listed company
anywhere and that the fees for any such appointment may be retained by the individual.
Mr Tom Albanese is a non-executive director at Franco-Nevada Corporation where he is entitled to retain any remuneration
paid to him. His compensation for this position in 2015 was CA$83,105 (this figure is inclusive of fees earned as well as the
share-based awards granted). None of the other Executive Directors currently receive fees for non-executive appointments
with other companies.
Directors’ interests in ordinary shares
The interests of the Directors in the shares of the Company as at the year end are set out below.
Anil Agarwal1
Anil Agarwal2
Navin Agarwal2,4
Tom Albanese
Geoffrey Green
Euan Macdonald
Aman Mehta
Deepak Parekh
Katya Zotova
Beneficially
owned at
31 March 2015 or
on appointment
Beneficially
owned at
31 March 2016
or on departure
Outstanding
LTIP, ESOP and
DSBP Awards
(not subject to
performance)
Shareholding as
a % of base
compensation3
Shareholding
requirement
met?
187,488,102
123, 240
249,300
82,700
–
–
–
–
187,488,102
123, 240
249,300
82,700
–
–
–
–
–
77,661
66,482
41,939
–
–
–
–
39,993%
88%
28%
n/a
n/a
n/a
n/a
Yes
No
No
n/a
n/a
n/a
n/a
1 Mr Anil Agarwal’s holding of 187,488,102 Vedanta ordinary shares are registered in the name of Volcan Investments Limited, which is a company owned by
a family trust.
2 Mr Anil Agarwal and Mr Navin Agarwal each held nominee shares in direct and indirect subsidiaries. These holdings are non-beneficial.
3 Based on a share price of £3.43 as at 31 March 2016.
4 51,660 shares are held by Navin Agarwal’s son and wife as well, which were purchased from the market in March 2015.
No changes in the above Directors’ interests have taken place between 31 March 2016 and the date of this report.
Payments to past Directors (Audited)
No payments were made to past Executive Directors during the year ended 31 March 2016.
Payments for loss of office (Audited)
No payments were made in respect of loss of office during the year ended 31 March 2016.
Percentage change in remuneration levels
The table below shows the movement in base compensation, taxable benefits and annual bonus for the Executive
Chairman between the 2014-15 and 2015-16 financial years, compared to that for the average employee.
Executive Chairman
Base compensation
Taxable benefits
Bonus
Average per employee
Base compensation
Taxable benefits
Bonus
% change
nil%
–4%
–0.35%
7%
7%
5%
Relative importance of the spend on pay
The table below shows the movement in spend on staff costs between the 2014-15 and 2015-16 financial years, compared
to dividends.
US$ million
Staff costs
Number of staff1
Dividends
1 The number of staff is average number of employees during the year.
2014-15
2015-16
% change
812.6
27,717
171.4
635.8
25,536
110.8
–22%
–7.9%
-35.06%
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT www.vedantaresources.com
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127
Performance graph and Executive Chairman pay
The graph below shows the TSR in respect of the Company over the last five financial years, compared with the TSR for the
FTSE All Share Mining Index. The FTSE All Share Mining Index was chosen as it is the most relevant to compare the
Company’s performance against its peers.
Total shareholder return (£)
500
400
300
200
100
0
31 March 2009
31 March 2010
31 March 2011
31 March 2012
31 March 2013
31 March 2014
31 March 2015
31 March 2016
Vedanta Resources plc
FTSE All Share Mining Index
Source: Thomson Reuters
This graph shows the value, by 31 March 2016, of £100 invested in Vedanta Resources plc on 31 March 2009 compared with the value of £100 invested in the
FTSE All Share Mining Index. The other points plotted are the values at intervening financial year-ends.
The total remuneration figures for the Executive Chairman during each of the last six financial years are shown in the table
below. The Executive Chairman’s remuneration is shown since he is the highest-paid Executive Director. Consistent with
the calculation methodology for the single figure for total remuneration, the total remuneration figure includes the total
annual bonus and long-term incentive award based on that year’s performance. The annual bonus payout and long-term
incentive award vesting level as a percentage of the maximum opportunity are also shown for each of these years.
£000
LTIP/ESOP vesting (%)
Annual bonus (%)
Total remuneration
Year ending 31 March
2010
n/a1
30%
£1,378
2011
2012
2013
2014
20152
20162
40%
43%
£2,066
n/a1
39%
£2,010
36%
40%
£2,556
nil%
44%
£2,376
nil%
37.2%
£2,634
nil%
37.06%
£2,625
1 Due to the timings of long-term incentive grants, there were no awards with performance periods ending during these financial years.
2 The performance achievement regarding the award granted during the year 2015 and 2016 is yet to be evaluated as the performance period has not yet
completed for both the grants.
Remuneration decisions taken in respect of the financial year ending 31 March 2017
Base compensation
In setting base compensation for 2016-17, the Committee considered external market data and the increase in base
compensation for the senior management group and the workforce generally, where the average increase across the
Group will be 7%. However, this increase is very much confined to middle and junior management employees. There will be
no pay increase for other senior executives. Similarly, this increase will not apply to the Executive Directors and, accordingly,
base compensation will be as follows:
Anil Agarwal
Navin Agarwal1
Tom Albanese
Base
compensation
from
1 April 2015
£000
Base
compensation
from
1 April 2016
£000
1,608
968
1,000
1,608
969
1,000
% increase
Nil
Nil
Nil
1 The Base Pay for Mr Navin Agarwal as represented last year was inclusive of pension and other social security benefits, which has been mentioned
exclusive of those elements this year and is in line with the details presented on page 123. There is no change in the base pay, owing to nil increment for
FY2015-16, the incremental change of £1,000, is attributed to exchange rate fluctuation and amendment in sitting fees and commission paid to him from
Cairn India and HZL.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 128
Annual Report on Remuneration continued
Annual bonus awards to be granted in 2016-17
The annual bonus opportunity will be 150% of base compensation for Messrs Anil Agarwal, Navin Agarwal and Tom
Albanese. The annual bonus will be based on the following metrics.
Factor
Parameter
Financial performance (against target)1 EBITDA
Personal objectives
Free cash flow
Sustainability and safety scorecard
Strategic objectives
Weightage
30%
30%
15%
25%
1 For financial performance, a weighted achievement of both the elements is considered for assessing the threshold and for arriving at the payout – 70%
achievement of Business Plan targets is considered as threshold which delivers 33% of the payout opportunity with 70% payout for achievement of the
target performance and stretching to 100% of payout opportunity at 120% achievement of the targets.
The Committee has chosen not to disclose, in advance, the performance targets for the forthcoming year as these include
items which the Committee considers commercially sensitive. Full retrospective disclosure of the targets and performance
against them will be seen in next year’s Annual Remuneration on Report.
PSP awards to be granted in 2016-17
The Executive Directors’ 2016 PSP opportunity will be 150% of base compensation. The 2016-17 award will be subject to the
following performance conditions:
Performance condition
Threshold target (30% vesting)
Stretch target (100% vesting)
End measurement point
Relative TSR vs a bespoke
group of companies
Median
Upper quintile
Final three months of the
performance period i.e. three
months to 31 March 2019
The performance condition attached to the above award is based on Vedanta Resources’ Relative TSR against the
comparator group of industry peers. 30% of the awards will vest at median performance, with full vesting for upper
quintile performance.
As set out within the Remuneration Policy, a holding period will be attached to vested PSP awards, requiring the vested
shares to be held (net of tax) for a further two years.
Non-Executive Directors’ fees
As detailed in the Remuneration Policy, fees for the Non-Executive Directors are determined by the Board, based on
the significant travel and time commitments, the risk profile of the Company and market practice for similar roles in
international mining groups. A summary of current fees is as follows:
Board membership
Non-Executive Director
Senior Independent Non-Executive Director
Committee membership
Audit Committee Chairman
Remuneration Committee Chairman
Nominations Committee Chairman
Sustainability Committee Chairman
Member of Audit Committee
Member of Remuneration Committee
Member of Nominations Committee
Member of Sustainability Committee
2015-16
£000
2016-17
£000
85
18
20
17.5
–
20
10
10
7.5
10
85
18
20
17.5
–
20
10
10
7.5
10
Approval of the Directors’ Remuneration Report
The Directors’ Remuneration Report, including both the Directors’ Remuneration Policy Report and Annual Remuneration
on Report, was approved by the Board on 10 May 2016.
Euan Macdonald
Chairman of the Remuneration Committee
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
129
Directors’ Report
Purpose of the Directors’ report
The Directors are pleased to present their annual report on the business of the Group, together with the financial
statements and auditor’s report, for the year ended 31 March 2016.
The purpose of the Directors’ report is to provide shareholders with certain statutory information about the Company,
its Directors and operations. The strategic report informs shareholders and helps them assess how the Directors have
performed their duty to promote the success of the Company. In addition, as a company listed on the London Stock
Exchange, it is required to provide information which includes, amongst other things, details of the Company’s share
capital, voting rights, rules on Directors’ appointments and significant agreements that alter on change of control.
The table below sets out where key information can be found across the Annual Report in compliance with Listing
Rule 9.8.4.
Subject
Section in the Annual Report
Dividend recommended during the year
See page 171 of the consolidated financial statements
Capital structure (details of the issued share capital)
See page 203 of the consolidated financial statements
Directors
The Vedanta Employee Benefit Trust (the Trust)
Vedanta Resources plc Long-Term Incentive Plan (LTIP)
Greenhouse Gas (GHG) Emissions
Political donations and expenditure
Risk factors and principal risks
Additional unaudited information
See page 96 of the corporate governance report detailing
the Directors who served during the year
Biographical details of the Directors of the Company are set
out on pages 88 to 89
Details of Directors’ interests, including interests in
the Company’s shares, are disclosed in the Directors’
Remuneration Report on page 126
Details of the shares held by the Trust may be found in the
Directors’ report on page 131
Details of the Group’s LTIP are set out on page 195 of the
consolidated financial statements and also on page 125 of
the Annual Report on Remuneration
All disclosures on the Group’s greenhouse gas emissions, as
is required to be disclosed under Schedule 7 of the Large
and Medium-Sized Companies and Groups (Accounts and
Reports) Regulation 2008 (pursuant to the Act, Strategic
Report and Director’s Report Regulations 2013) are
contained in the business review on page 41
Details of any political donations paid during the year are
disclosed in the Directors’ report, which can be found on
page 131
Details on risk factors and principal risks are located in the
strategic report which can be found on page 26
Board statement in respect of Relationship Agreement with
the controlling shareholder
Corporate Governance report (page 100)
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 130
Directors’ Report continued
Strategic report
The strategic report has been prepared in accordance
with the Companies Act 2006 (the Act) which requires
the Company to set out a fair review of the business of
the Group during the financial year, including an analysis
of the position of the Group at the end of the financial
year and the trends and factors likely to affect the future
development, performance and position of the business.
The strategic report can be found on pages 1 to 93.
Corporate governance
In accordance with the Financial Conduct Authority’s
Disclosure and Transparency Rules (DTR) 7.2.1 the
disclosures required by DTR7.2.2R to DTR7.2.5 and DTR7.2.7
may be found in the corporate governance report on pages
92 to 128. The corporate governance report is incorporated
into this Directors’ report by reference. Information referred
to in DTR7.2.6 is located in this Directors’ report.
The strategic report and other sections of this Annual
Report contain forward-looking statements. By their nature,
forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances
that may or may not occur in the future and may be beyond
the Company’s ability to control or predict. Forward-looking
statements and past performance are therefore not
guarantees of future performance. The information
contained in the strategic report has been prepared on
the basis of information and knowledge available to the
Directors at the date of preparation and the Company
does not undertake to update or revise the content
during the year ahead.
Review of business, future developments and important
post balance sheet events
A review of the business and future developments of the
Group is presented in the strategic report. Events since the
balance sheet date are summarised in Note 43 on page 211
of the financial statements.
Greenhouse gas emissions reporting
Disclosures required in respect of carbon dioxide emissions
may also be found in the strategic report on page 41.
Business
Zinc India
Zinc International
Copper India & Australia
Copper Africa
Aluminium India
Power Sector
Oil & Gas Sector
Iron Ore Business
GHG Intensity Ratio
2015-16
2,219
1,701
398
210
11,231
17,546
1,361
5,360
3,903
2014-15
1,926
1,290
350
105
9,622
13,386
541
5,477
2,941
We calculate and report greenhouse gas inventory i.e.
Scope 1 (process emissions and other direct emissions) and
Scope 2 (purchased electricity) as defined under the World
Business Council for Sustainable Development (WBCSD)
and World Resource Institute (WRI) GHG protocols. Our
GHG intensity has increased primarily due to a fall in our
revenue and an increase in our absolute GHG emissions due
to addition and ramping-up of our power plants at TSPL,
Aluminium and Power operations.
Dividends
The Directors recommend a final dividend for the year
ended 31 March 2016 of 30 US cents per ordinary share
(2015: 40.0 US cents per ordinary share). Subject to
shareholders approving this recommendation at the Annual
General Meeting on 5 August 2016, the final dividend will be
paid on 12 August 2016 to shareholders on the register of
members as at 8 July 2016.
Directors
The names, dates of appointment, specific responsibilities
and biographical details of the Company’s current Board
of Directors are shown on pages 88 to 89 and details of the
Directors who held office during the year ended 31 March
2016 are shown in the corporate governance report on
page 96. Details of the remuneration of the Directors,
their interests in the shares of the Company and service
contracts, are contained in the Directors’ Remuneration
Report on pages 116 to 128.
Appointment and replacement of Directors
The Company’s Articles of Association (the Articles) specify
that the minimum number of Directors of the Company,
unless determined by ordinary resolution, shall be two.
There is no limit on the maximum number of Directors.
The Company or the Board may appoint any person to be
a Director. Any Director appointed by the Board shall hold
office only until the next general meeting and is then
eligible for election by the shareholders.
In accordance with the UK Corporate Governance Code,
all Directors will retire and submit themselves for re-election
at the Company’s forthcoming Annual General Meeting.
Details of Directors’ contracts or letters of appointment
are included in the Directors’ Remuneration Policy Report.
The performance of each Director was reviewed and it was
found that each of them continues to make an effective
and valuable contribution to the deliberations of the
Board and demonstrates commitment to the role. The
performance of the Chairman was reviewed by the
Senior Independent Director.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT www.vedantaresources.com
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131
Powers of the Directors
Subject to the provisions of the Act and the Company’s
Articles and to any directions given by special resolution,
the business of the Company is to be managed by the
Board which may exercise all the powers of the Company.
Material shareholdings
As at 31 March 2016 and 7 June 2016, the Company had
received notifications of control of 3% or more over the
Company’s total voting rights and capital in issue as set
out below:
Rights under employee share schemes
The Sanne Trust Company Limited, as Trustee of the
employee trust, held 102,414 shares of the issued share
capital of the Company as at 31 March 2016 on trust for the
benefit of its employees for the deferred share plan. The
voting rights in relation to these shares are exercised by the
Trustee and there are no restrictions on the exercise of the
voting or the acceptance of any offer relating to, those
shares. The Trust agreed to waive its rights to receive
dividends payable on these shares.
Directors’ and officers’ liability insurance and indemnities
The Company purchases and maintains liability insurance
for its Directors and officers and those of the subsidiaries
of the Group, as permitted by the Act. The insurance policy
does not provide cover where the Director has acted
fraudulently or dishonestly. The Company believes that it is
appropriate to provide such cover to protect Directors from
innocent error as the Directors carry significant liability,
under criminal and civil law and under the UK Listing,
Prospectus and Disclosure and Transparency Rules, and
face a range of penalties.
In addition, the Company’s Articles contain an indemnity
provision in favour of the Directors against proceedings
brought by third parties, subject to the Act, to allow the
Company to pay legal defence costs for the Director where
the Director is exonerated.
Employees
Information on the Group’s employees and its policies with
respect to employees can be found in the Sustainable
Development report on pages 44 to 45.
Political donations
It is the Board’s policy that neither Vedanta nor any
of its subsidiary companies outside India may, under any
circumstances, make donations or contributions to political
organisations. Subsidiaries in India may make political
donations or contributions as this is customary in India
and permitted under local legislation. In exceptional
circumstances, if political donations or contributions are
deemed necessary in the United Kingdom and European
Union for legitimate business reasons, they will not be made
without the approval of the Board and shareholders at a
general meeting. Any political donations made in India
will be disclosed in the Company’s Annual Report. The
Company and its subsidiaries did not make any political
donations during the financial year ended 31 March 2016
(2015: Nil).
Research and development
The Group’s business units carry out research and
development activities necessary to further their operations.
Name of holder
Volcan Investments
Limited
Standard Life
Investment
(Holdings Limited)
Nature of
holding
Number of
ordinary shares of
US$0.10 each
Percentage
of total
voting rights
Indirect
187,488,102
69.62%
Indirect
24,193,662
9%
Viktor Falk
Direct
8,340,408
3.096%
1 The voting rights at 31 March 2016 were 269,410,987 ordinary shares (net
of treasury shares and shares held in Global Depositary Receipt).
Articles of Association, share capital and voting rights
The following description summarises certain provisions in
the Company’s Articles of Association (the Articles) and
applicable English law concerning companies. This is a
summary only and the relevant provisions of the Act, or the
Articles, should be consulted if further information is
required. Copies of the Company’s current Articles are
available for inspection at the Company’s registered office
during normal business hours (Saturdays, Sundays and
public holidays excepted). They are also available from
Companies House and the Company’s website at
www.vedantaresources.com.
Amendments to the Articles
The Company’s Articles may be amended only by special
resolution passed by the Company’s shareholders.
Share capital
As at 31 March 2016 the issued share capital of the
Company was comprised of 300,522,798 ordinary shares
of 10 US cents each and 50,000 deferred shares of £1 each.
Rights and obligations attaching to shares
The rights and obligations attaching to the ordinary and
deferred shares are set out in the Articles. Details of the
authorised and issued share capital together with
movements in the Company’s issued share capital during
the year are shown in Note 33 of the financial statements.
6,904,995 ordinary shares of 10 US cents each were issued
on the conversion of certain convertible bonds issued by
one of the Company’s subsidiaries. These 6,904,995
ordinary shares are held through a Global Depository
Receipt and carry no voting rights. Apart from the above,
each ordinary share carries the right to one vote at general
meetings of the Company. Holders of deferred shares are
not entitled to attend, speak or vote at any general meeting
of the Company, nor are they entitled to the payment of
any dividend or to receive notice of general meetings.
Further details of the rights attaching to the deferred
shares are set out in the Articles and summarised in Note
33 of the financial statements.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 132
Directors’ Report continued
Variation of rights
Subject to the provisions of the Act, the rights attached to
any class may be varied with the consent of the holders of
three-quarters in nominal value of the issued shares of the
class or with the sanction of an extraordinary resolution
passed at a separate general meeting of the holders of the
shares of the class.
Deadlines for exercising voting rights
Votes may be exercised at general meetings in relation to
the business being transacted either in person, by proxy or,
in relation to corporate members, by corporate
representative. The Articles provide that forms of proxy
shall be submitted not less than 48 hours before the time
appointed for holding the meeting or adjourned meeting.
Restrictions on voting and the transfer of shares
No member shall be entitled to vote at a general meeting or
at a separate meeting of the holders of any class of shares
in the capital of the Company, either in person or by proxy,
in respect of any share held by him unless all monies
payable by him in respect of that share have been fully paid.
Furthermore, no shareholder shall be entitled to attend or
vote either personally or by proxy at a general meeting or
at a separate meeting of the holders of that class of shares
or on a poll if he has been served with a notice after failing
to provide the Company with information concerning
interests in his shares that is required to be provided under
the Act.
With the exception of restrictions on the transfer of unpaid
shares and ordinary shares held under the Company’s
employee share incentive plans while the shares are subject
to the rules of the plans, there are no restrictions on the
transfer rights attaching to the Company’s ordinary shares
or the transfer of securities in the Company.
No person holds securities in the Company carrying special
rights with regard to control of the Company. The Company
is not aware of any agreements between holders of
securities that may result in restrictions in the transfer of
securities or voting rights.
Issue of shares
The powers of the Company’s Directors are subject to
relevant legislation and, in certain circumstances (including
in relation to the issue or buying back by the Company of
its shares), are subject to authority being given to the
Directors by shareholders in general meeting. At the
Company’s 2016 Annual General Meeting, shareholders
will be asked to renew the Directors’ authority to allot new
securities. Details are contained in the 2016 Notice of
Annual General Meeting (Notice of AGM).
Subject to the provisions of the Act, the Company has
authority under its Articles to allot new shares in the
Company. Such authority would be exercised having
regard to the Statement of Principles published by the
Pre-emption Group.
Shares held in uncertificated form
Subject to the provisions of the Uncertificated Securities
Regulations 2001, the Board may permit the holding of
shares in any class of shares in uncertificated form and the
transfer of title to shares in that class by means of a relevant
system and may determine that any class of shares shall
cease to be a participating security.
Dividends and distributions
Subject to the provisions of the Act, the Company may by
ordinary resolution declare dividends in accordance with
the respective rights of the members, but no dividend shall
exceed the amount recommended by the Board. The Board
may pay interim dividends if it appears to the Board that
they are justified by the profits of the Company available
for distribution. The treasury shares directly held by the
Company are not entitled to receive a dividend.
Dividends may be declared and paid in any currency or
currencies that the Board shall determine. The Board may
also determine the exchange rate and the relevant date for
determining the value of the dividend in any currency.
Dividend waiver
There have been no arrangements applicable under which
a shareholder agreed to waive future dividends during the
year ended 31 March 2016.
Purchase of the Company’s own shares
The Directors had authority, under a shareholders’ resolution
dated 1 August 2015, to make market purchases of up to
approximately 10% of the Company’s ordinary shares.
The authority expires at the conclusion of the Company’s
2016 Annual General Meeting or on 1 October 2016,
whichever is the earlier. A resolution to obtain a further
authority will be proposed at the 2016 Annual General
Meeting. During the year the Company did not purchase
any shares under its previously announced share
buyback programme.
As at 31 March 2016, the Company held a total of
24,206,816 ordinary shares in treasury, equivalent to 8.05%
(2015: 8.07%) of the issued share capital.
Agreements: change of control
There are a number of agreements that take effect, alter or
terminate upon a change of control of the Company such
as commercial contracts, bank loan agreements, and
capital market borrowing. The following are considered to
be significant in terms of their likely impact on the business
of the Group as a whole:
1 The US$1.25 billion 5.50% guaranteed convertible bonds
(current outstanding US$1,131.5 million) issued in July
2009 and the US$883 million 4.0% guaranteed
convertible bonds (current outstanding US$8.1 million)
issued in March 2010, where a change of control gives
investors the option to require the issuer to redeem their
bonds at the principal amount, together with any
accrued and unpaid interest, or convert their bonds at an
adjusted exchange price for a certain period following
the relevant event.
2 The US$750 million 6.75% bonds due in 2016, US$750
million 9.5% bonds due in 2018, US$1,200 million 6%
bonds due in 2019, US$900 million 8.25% bonds due
in 2021 and US$500 million 7.125% bonds due in 2023
where a change of control requires the Company to
make an offer to purchase all of the outstanding bonds
at 101% of the principal amount together with any
accrued and unpaid interest with a rating decline.
3 In the financing arrangements for the acquisition of Cairn
India Limited and various other financing facilities
entered into by the Group where a change of control
gives the majority lenders the right to declare the loans
immediately payable.
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133
All of the Company’s employee share incentive plans
contain provisions relating to a change of control.
Outstanding awards and options would normally vest and
become exercisable on a change of control, subject to the
satisfaction of any performance conditions and pro rata
reduction as may be applicable under the rules of the
employee share incentive plans.
There are no agreements between the Company and any of
its Directors or employees that provide for compensation
for loss of office or employment that occurs because of a
takeover bid.
Disclosure of information to auditors
In accordance with section 418 of the Act, each Director
who held office at the date of approval of this Directors’
report confirms that:
• so far as they are aware, there is no relevant audit
information of which the Company’s auditor is unaware;
and
• he/she has taken all the steps that he/she ought to have
taken as a Director to make himself/herself aware of any
relevant audit information and to establish that the
Company’s auditor is aware of that information.
Appointment of auditor
Following a competitive tender process, a resolution to
appoint the auditor Ernst & Young LLP, as auditor of
Vedanta Resources plc for the year ending 31 March 2017
will be proposed at the forthcoming Annual General
Meeting. This follows the mandatory tendering requirements
in the UK in accordance with provisions of the Competition
and Markets Authority (CMA). Deloitte LLP had been the
Group’s auditor since its listing on the London Stock
Exchange in 2003 and will resign as the Company’s external
auditor following the completion of the external audit of the
financial statements for the year ending 31 March 2016. The
Board of Vedanta would like to thank Deloitte LLP for high
quality audit services provided to the Group.
Policy on derivatives and financial instruments
An explanation of the Group’s financial management
objectives and policies together with details of the Group’s
exposure to price risk, credit risk, liquidity and cash flow
risk and foreign currency risk appears in Note 29 to the
financial statements.
Share allotments
During the year, there has not been any allotment for
cash of equity securities otherwise than to holders of
the Company’s equity shares and which has not been
authorised by the Company’s shareholders.
Share placing
The Company has not participated in any share placing
during the year ended 31 March 2016.
Directors’ emoluments
Details of the Directors’ emoluments and any waiver
are included in the Directors’ Remuneration Report on
page 123.
Long-term incentive scheme
Details of the long-term incentive scheme operated
by the Company are included in the Directors’
Remuneration Report on page 125.
Relationship Agreement with the Company’s controlling
shareholder
Details of the Relationship Agreement between the
Company and its controlling shareholder, Volcan
Investments Limited, are provided on page 100. During
the year, there have been no contracts of significance
between the Company or any of its subsidiaries and the
controlling shareholder.
Going concern
The Directors have considered the Group’s cash flow
forecasts for the next 12-month period from the date of
signing of the financial statements ending 31 March 2016.
Net debt has decreased by US$1,132 million in the financial
year to US$7,329 million, with US$1,093 million of undrawn
facilities at the balance sheet date. Further analysis of net
debt is set out in Note 26 to the condensed financial
statements and details of borrowings and facilities are set
out in Note 24. The Board is satisfied that the Group’s
forecasts and projections, taking into account reasonably
possible changes in trading performance on cash flows and
forecast covenant compliance, the transferability of cash
within the Group, the flexibility the Group has over the
timings of its capital expenditure and other uncertainties,
show that the Group will be able to operate within the level
of its current facilities for the foreseeable future. For these
reasons the Group continues to adopt the going concern
basis in preparing its financial statements. Management has
recently renegotiated certain financial covenants, which
have been modified until September 2018.
Longer-term viability statement
In accordance with paragraph C2.2 of the UK Corporate
Governance Code, the Directors have assessed the
prospects of the Group’s viability over a longer period than
the 12 months required by the going concern assessment.
At Vedanta, the business planning process covers a
one-year detailed plan with capital allocation and
refinancing plans covering a longer period of up to three
years. The planning process takes into consideration key
assumptions around commodity prices and exchange rates,
cost and supply parameters for major inputs such as raw
materials, labour and fuel, refinancing and a range of
assumptions regarding volume ramp up, regulatory matters
and the Group’s cost-saving programme. To align with our
internal financial modelling period and taking into account
the current volatility in commodity markets, Vedanta has
considered a three-year period of assessment appropriate
for the longer-term viability statement.
To assess the Group’s longer-term viability, additional
robust stress testing has been undertaken, utilising the
models used for the going concern exercise. The principal
risks which were considered for stress testing, individually
and in combination, are commodity price movements,
delays in ramping up production and refinancing risks.
These are considered severe but plausible and well beyond
those expected in the normal course of business.
The viability of the Group under these severe but plausible
scenarios remained sound taking into consideration the
availability of mitigating actions within management’s
control, in particular flexibility in capital allocation, access
to lines of credit and alternative sources of finance.
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 134
Directors’ Report continued
While it is impossible to foresee all risks, and the
combinations in which they could manifest, based on the
results of this assessment and taking into account the
Group’s current position and principal risks, the Directors
have assessed the prospects of the Group, over the next
three years, and have a reasonable expectation that the
Group will be able to continue in operation and meet its
liabilities as they fall due over a period of three years from
1 April 2016.
Annual General Meeting
The 13th Annual General Meeting of the Company will be
held on 5 August 2016 at 3.00pm at Ironmongers’ Hall,
Shaftesbury Place, London EC2Y 8AA. The Notice
convening the Annual General Meeting accompanies this
Annual Report and sets out details of the business to be
considered thereof.
Responsibility statement
Each Director confirms to the best of his/her knowledge
that:
• the Group and parent Company accounts, prepared in
accordance with IFRS as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole;
• the strategic report, Directors’ report and governance
report include a fair review of the development and
performance of the business and the position of the
Company and the undertakings included in the
consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face; and
• the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy.
By order of the Board.
Signed on behalf of the Board
Deepak Kumar
Company Secretary
11 May 2016
Vedanta Resources plc
5th Floor
6 St Andrew Street
London EC4A 3AE
Registered in England Number 4740415
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT www.vedantaresources.com
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135
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors are required to prepare the Group financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and Article 4 of the IAS Regulation and have elected
to prepare the parent Company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards and applicable law), including FRS 101 ‘Reduced
Disclosure Framework’. Under company law the Directors
must not approve the accounts unless they are satisfied
that they give a true and fair view of the state of affairs of
the Company and of the profit or loss of the Company for
that period.
In preparing the parent Company financial statements, the
Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether applicable UK Accounting Standards have
been followed, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
In preparing the Group financial statements, International
Accounting Standard 1 requires that Directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the entity’s financial
position and financial performance; and
• make an assessment of the Company’s ability to continue
as a going concern.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and
fair view of the assets, liabilities, financial position and
profit or loss of the Company and the undertakings
included in the consolidation taken as a whole;
• the strategic report includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face; and
• the Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
This responsibility statement was approved by the Board of
Directors on 11 May 2016 and is signed on its behalf by:
Tom Albanese
Chief Executive Officer
11 May 2016
D D Jalan
Chief Financial Officer
11 May 2016
Vedanta Resources plc Annual Report FY2016DIRECTORS’ REPORT 136
Independent Auditor’s Report
To the Members of Vedanta Resources plc
We agreed with the directors’ adoption of the going
concern basis of accounting and we did not identify any
such material uncertainties. However, because not all future
events or conditions can be predicted, this statement is not
a guarantee as to the group’s ability to continue as a going
concern.
Independence
We are required to comply with the Financial Reporting
Council’s Ethical Standards for Auditors and we confirm
that we are independent of the group and we have fulfilled
our other ethical responsibilities in accordance with those
standards. We also confirm we have not provided any of
the prohibited non-audit services referred to in those
standards.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described
below are those that had the greatest effect on our audit
strategy, the allocation of resources in the audit and
directing the efforts of the engagement team.
The risks identified below are the same risks as in the
prior year.
Opinion on financial statements of Vedanta Resources plc
In our opinion:
• the financial statements give a true and fair view of the
state of the group’s and of the parent company’s affairs
as at 31 March 2016 and of the group’s loss for the year
then ended;
• the group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union;
• the parent company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice including FRS
101 “Reduced Disclosure Framework”; and
• the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006 and, as regards the group financial statements,
Article 4 of the IAS Regulation.
The financial statements comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive
Income, the Consolidated and Parent Company Balance
Sheets, the Consolidated Cash Flow Statement, the
Consolidated Statement of Changes in Equity, and the
related notes 1 to 59. The financial reporting framework that
has been applied in the preparation of the group financial
statements is applicable law and IFRSs as adopted by the
European Union. The financial reporting framework that has
been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) including FRS 101 “Reduced
Disclosure Framework”.
Going concern and the directors’ assessment of the
principal risks that would threaten the solvency or
liquidity of the group
As required by the Listing Rules we have reviewed the
directors’ statement regarding the appropriateness of the
going concern basis of accounting contained within note 1
to the financial statements and the directors’ statement on
the longer-term viability of the group contained within the
strategic report on page 53.
We have nothing material to add or draw attention to in
relation to:
• the directors’ confirmation on pages 133 to 134 that they
have carried out a robust assessment of the principal
risks facing the group, including those that would
threaten its business model, future performance,
solvency or liquidity;
• the disclosures on pages 28 to 35 that describe those
risks and explain how they are being managed or
mitigated;
• the directors’ statement in note 1 to the financial
statements about whether they considered it appropriate
to adopt the going concern basis of accounting in
preparing them and their identification of any material
uncertainties to the group’s ability to continue to do so
over a period of at least twelve months from the date of
approval of the financial statements;
• the directors’ explanation on page 133 as to how they
have assessed the prospects of the group, over what
period they have done so and why they consider that
period to be appropriate, and their statement as to
whether they have a reasonable expectation that the
group will be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
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137
Risk
How the scope of our audit responded to the risk
Impairment of property, plant and equipment
(PP&E) assets
The group has recognised PP&E assets with a net book
value of US$16,647.8 million at 31 March 2016 after
recording impairments of US$5,187.0 million in 2016,
principally in relation to Cairn of which US$4,018.3 million
relates to E&E assets (discussed further below) and
US$1,168.7 million to other PP&E.
The assessment of the recoverable amount of PP&E requires
management to exercise judgement around complex areas,
as described in the group’s critical accounting judgements
in note 1 to the financial statements, specifically:
• the Rajasthan producing assets within the Oil & Gas
business following a significant decrease in oil prices;
• the partially complete Lanjigarh expansionary
programme within the Aluminium business unit received
certain clearances in the year, however remained on hold
during the year due to the challenges in obtaining
locally-sourced bauxite;
• the operations in Goa and Karnataka within the Iron Ore
business unit as a result of lower iron ore prices and
statewide production caps in place; and
• the KCM operations in Zambia following lower copper
prices and continuing operational challenges, including
significantly higher electricity prices.
For more information see notes 2b, 5 and 17 in the financial
statements that provide further details and disclosures to
this matter.
Impairment of evaluation and exploration (E&E) assets
Following significant downward pressure on oil, gas and
other commodity prices, which are a key assumption in the
valuation of the recoverable value of E&E assets,
impairment of E&E assets has been a specific area of focus
for the FY16 audit.
The net book value of E&E assets at 31 March 2016 is
US$1,471.4 million after the group has written off E&E assets
totalling US$4,018.3 million in the year, following the low
commodity pricing environment and reassessment of
capital allocation priorities. US$1,180.0 million of net book
value relates to the Rajasthan oil field which is accounted
for as one Cash Generating Unit.
The assessment of the carrying value of E&E assets requires
management to exercise judgement around complex areas,
as described in the group’s critical accounting judgements
in note 1 to the financial statements. Economic value can
often be difficult to determine given the relatively early
stages of development. The areas of judgement include
the group’s intention to proceed with a future work
programme for a prospect or license, the likelihood of
license renewal or extension and the success of drilling
and geological analysis.
For more information see notes 2b, 5 and 17 in the financial
statements that provide further details and disclosures to
this matter.
We have:
• Obtained and assessed the inputs into management’s
assessment as to whether indicators of impairment exist
specifically, in relation to the Rajasthan producing assets,
the Lanjigarh expansionary project, the Iron Ore
operations in Goa and Karnataka and the KCM copper
operations in Zambia;
• obtained and assessed the valuation models used to
determine the higher of value in use or fair value less cost
of disposal of the relevant asset by challenging the key
assumptions made by management in relation to these
models, including:
– the expected timings of approvals and renewal of
licenses, holding discussions with management,
reviewing regulatory approvals and reviewing any
correspondence relating to potential changes in the
economic terms;
– source of reserve and production estimates;
– resources to reserves conversion ratios where
applicable;
– exchange rates; and
– operating and capital expenditure estimates
by reference to independent third party evidence and
consultation with operational management;
• benchmarking and analysis of commodity, oil & gas price
assumptions against forward curves and analyst data;
• recalculated and benchmarked discount rates applied to
third party evidence and involvement of Deloitte
valuation specialists;
• testing the mechanical accuracy of the models used; and
• assessed whether assumptions had been determined
and applied on a consistent basis across the Group.
We evaluated management’s assessment of the
impairment indicators on its E&E assets with reference
to the criteria of IFRS 6 Exploration for and Evaluation
of Mineral Resources and the group’s successful efforts
accounting policy (see page 158). In 2016, the group has
reconsidered its exploration strategy and locations for
future exploration focus in the context of a lower oil and
commodity price environment and the availability of
capital in these circumstances.
Our procedures included understanding the Group’s
ongoing E&E activity, by participating in meetings with
operational and finance management at all key locations
and obtaining evidence including reviewing minutes of
board and executive committee meetings, confirmations of
budget allocation, the results of on-going appraisal activity
and the licensing status to assess E&E assets.
Where indicators of impairment were identified, we
determined whether management provided in full for the
projects that are not expected to proceed or valuations
were performed where the projects are progressing but the
carrying value may not be fully recoverable.
Where valuations were prepared, we challenged the key
assumptions using the same approach as described under
the impairment of PPE assets above.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 138
Independent Auditor’s Report continued
To the Members of Vedanta Resources plc
Risk
How the scope of our audit responded to the risk
Revenue recognition
IAS 18 Revenue and the Group’s revenue recognition policy
permits revenue to be recognised only when the significant
risks and rewards of ownership have transferred from the
seller to the buyer.
The risk is related to:
• the determination of the point of risk and reward transfer,
particularly where this is different to the point of invoicing;
• incorrect valuation of provisionally priced sales (where
the pricing is only finalised based on market prices
subsequent to the balance sheet date);
• the value of regulated sales, and the resulting year-end
receivable of US$98 million, made to the Grid
Corporation of Odisha Limited (“Gridco”) where a
dispute regarding the interpretation of the tariff
agreement is pending appellate tribunal resolution; and
• the calculation of Cairn’s oil & gas sales on an entitlement
basis.
For more information see notes 2a and 4 in the financial
statements that provide further details and disclosures to
this matter.
Litigation, environmental and regulatory risk
As is the norm in extractive industries, there are a
significant number of legal claims in the Group and a risk
exists that the Group may not have adequately provided for
liabilities or disclosed contingent liabilities. The Group has
recognised provisions of US$97 million and disclosed
contingent liabilities of US$889 million in respect of
ongoing legal matters. There is also a risk of the Group’s
reputation being brought into disrepute resulting in financial
and reputational damage.
The Group continues to be involved in a high number
of legal claims. It is not unusual for claims to remain
outstanding for a number of years, with the regulatory
environment becoming increasingly complex and
regulators focusing on the environmental and social
impacts. These ongoing claims, environmental and
regulatory enquiries require management to exercise
judgement in determining the need for a provision or
disclosure. These can give rise to a threat to the future
operations as well as the Group’s current financial
performance and reputation.
For more information see notes 30, 38 and 42 in the
financial statements that provide further details and
disclosures to these matters.
We have reviewed the application of the Group’s revenue
recognition policy and:
• on a sample basis, reviewed the terms of sales
agreements to conclude on the point at which risk and
reward transfer takes place;
• selected sales made pre and post year end, agreeing the
date of revenue recognition to third party support, such
as bills of lading, to confirm they have been recognised in
the correct period;
• recalculated the value of provisional pricing adjustments
and validating the assumptions used to third party data
where possible;
• challenged management in respect of whether the
Gridco trade receivables are recoverable through the
review of state regulatory commission and the appellate
tribunal rulings, and review of the underlying power
purchase agreements, receipts in the year and the
external legal opinions received; and
• reviewed the terms of Cairn’s profit sharing agreements
and tested the underlying cost recovery and profit
petroleum calculations. This included reviewing the ageing
of current unapproved costs and through sample testing
ensuring that costs were in accordance with pre-approved
Operational Committee work orders and prepared in
accordance with requisite approval requirements.
We have:
• reviewed management’s legal paper and challenged their
assessment of the probability of success in these cases,
the magnitude of any potential loss and their conclusions
reached through discussions with the head of legal and
operational management;
• inspected external legal opinions (where considered
necessary) and other evidence that supports factual
information in management’s responses;
• focused our procedures on the terms and conditions of
mining licenses and performed procedures to gain
assurance over the compliance and validity of significant
mining licenses and environmental clearances;
• we have assessed the appropriateness of provisions and
considered the impact of the procedures performed
above on the financial statements and whether the
disclosures therein are in accordance with IAS 37
Provisions, contingent liabilities and contingent assets.
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139
Risk
How the scope of our audit responded to the risk
Taxation
There is a risk that the Group’s aggregated taxation
exposure in all jurisdictions, including the exposure to
withholding taxes following past acquisitions, financing and
transfer pricing arrangements, sales taxes and recognition
of deferred taxation assets and liabilities, may not have
been adequately valued and disclosed in the financial
statements due to the complexities, timescales for
resolution and the need to negotiate with various
tax authorities.
In the prior year, Cairn India received an order from the
Indian Tax Authority for an amount of US$3,277.4 million
relating to withholding taxes not paid on the acquisition of
Cairn India by the previous owner, Cairn Energy plc.
At 31 March 2016, US$620.2 million has been recognised as
a deferred taxation liability, US$1,255.4 million has been
recognised as a deferred taxation asset and US$18.5 million
has been recognised as a net current tax receivable and a
US$361.7 milion non-current tax receivable, with a total tax
credit of US$1,481.9 million recorded in the consolidated
income statement.
For more information see notes 12, 31 and 38 in the financial
statements that provide further details and disclosures to
these matters.
We reviewed the potential taxation exposures within the
Group and, through discussions with the Group’s taxation
department, the tax specialists within the audit team and
review of relevant documentation, including external legal
advice and correspondence with tax authorities, we
evaluated the appropriateness of the provisions raised and
contingent liability disclosures. We have obtained the
forecast utilisation of deferred tax assets, which have been
recognised as part of deferred tax, on a legal entity basis
and independently assessed whether the forecasts support
the recognition of these assets.
We considered, in the context of our tax specialists’ prior
experience of similar issues, the Group‘s exposure to
withholding taxes following past acquisitions, the current
tax exposure following the Group’s internal restructuring,
transfer pricing arrangements and deferred taxation assets
and liabilities recognised to assess whether these matters
were appropriately reflected and disclosed in the financial
statements. We have reviewed the tax disclosures with
reference to IAS 12 Income Taxes.
The description of risks above should be read in conjunction
with the significant issues considered by the Audit
Committee discussed on pages 108 to 109.
These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters.
impact on the current year performance and the cyclical
nature of the mining industry. Profit before tax has been
normalised by adjusting for specific one-off items: the
impairment charges recognised on the PP&E and E&E
assets during the year following a significant decrease in
commodity and oil & gas prices. Normalised profit before
tax is considered a more appropriate and less volatile
measure reflecting the underlying scale of the Group.
Our application of materiality
We define materiality as the magnitude of misstatement in
the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person
would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the
results of our work.
We agreed with the Audit Committee that we would
report to the Committee all audit differences in excess of
US$800,000 (2015: US$1.0 million), as well as differences
below that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
We determined materiality for the group to be US$40
million (2015: US$50 million), which is approximately 5% of
normalised three year profit before tax (2015: 5% of
normalised profit before tax), and below 1% (2015: 1%) of
equity. The use of a normalised three year profit before tax
is a change to our approach last year, when materiality was
based on the normalised 2015 profit before tax only. This
change of approach was determined to be appropriate
given the current volatility in commodity prices and their
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding
of the group and its environment, including group-wide
controls, and assessing the risks of material misstatement
at the group level. Based on that assessment, we focused
our group audit scope primarily on the audit work at 17
locations (2015: 16 locations). 13 of these were subject to
a full audit, whilst the remaining 4 were subject to an audit
of specified account balances where the extent of our
Normalised profit before
tax (%)
Total revenue (%)
Net assets (%)
98% Full scope
2% Specific procedures
96% Full scope
4% Specific procedures
98% Full scope
2% Specific procedures
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 140
Independent Auditor’s Report continued
To the Members of Vedanta Resources plc
testing was based on our assessment of the risks of material
misstatement and of the materiality of the group’s
operations at those locations (2015: 12 and 4 respectively).
An additional location was scoped in in the current year as
a result of the lower materiality.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland),
we are required to report to you if, in our opinion,
information in the annual report is:
• materially inconsistent with the information in the audited
These 17 locations represent the principal business units
and account for 98% (2015: 94%) of the Group’s net assets,
96% (2015: 100%) of the Group’s revenue and 98% (2015:
91%) of the Group’s normalised profit before tax. They were
also selected to provide an appropriate basis for
undertaking audit work to address the risks of material
misstatement identified above. Our audit work at the 17
locations was executed at levels of materiality between
US$18 million and US$22 million (2015: US$22.5 million and
US$27.5 million), as applicable to each individual entity.
At the parent entity level we also tested the consolidation
process and carried out analytical procedures to confirm
our conclusion that there were no significant risks of
material misstatement of the aggregated financial
information of the remaining components not subject to
audit or audit of specified account balances.
The group audit team continued to follow a programme
of planned visits that has been designed so that the Senior
Statutory Auditor or a senior member of the group audit
team visits significant locations where the group audit
scope was focused at least once every five years. At each
six month reporting date we include the component audit
partners and teams in our team briefing, discuss their risk
assessment, and review documentation of the findings from
their work.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with
the Companies Act 2006; and the information given in
the Strategic Report and the Directors’ Report for the
financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting
records
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
• we have not received all the information and explanations
we require for our audit; or
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements are not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to
report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the
Directors’ Remuneration Report to be audited is not in
agreement with the accounting records and returns.
We have nothing to report arising from these matters.
financial statements; or
• apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the group acquired
in the course of performing our audit; or
• otherwise misleading.
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge
acquired during the audit and the directors’ statement
that they consider the annual report is fair, balanced and
understandable and whether the annual report appropriately
discloses those matters that we communicated to the audit
committee which we consider should have been disclosed.
We confirm that we have not identified any such
inconsistencies or misleading statements.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in
accordance with applicable law and International Standards
on Auditing (UK and Ireland). We also comply with
International Standard on Quality Control 1 (UK and
Ireland). Our audit methodology and tools aim to ensure
that our quality control procedures are effective,
understood and applied. Our quality controls and systems
include our dedicated professional standards review team
and independent partner reviews.
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s
members as a body, for our audit work, for this report,
or for the opinions we have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the group’s
and the parent company’s circumstances and have been
consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made
by the directors; and the overall presentation of the
financial statements. In addition, we read all the financial
and non-financial information in the annual report to
identify material inconsistencies with the audited financial
statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we
consider the implications for our report.
Corporate Governance Statement
Under the Listing Rules we are also required to review the
part of the Corporate Governance Statement relating to the
company’s compliance with certain provisions of the UK
Corporate Governance Code. We have nothing to report
arising from our review.
Christopher Thomas (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
11 May 2016
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
141
Consolidated Income Statement
(US$ million except as stated)
Revenue
Cost of sales
Gross profit
Other operating income
Distribution costs
Administrative expenses
Special items
Operating profit/(loss)
Investment revenue
Finance costs
Other gains and (losses) [net]
Profit/(loss) before taxation (a)
Tax credit – special items
Net tax expense – others
Net tax credit/(expense) (b)
(Loss)/profit for the year from continuing
operations (a+b)
Attributable to:
Equity holders of the parent
Non-controlling interests
Profit/(loss) for the year from continuing
operations
Loss per share (US cents)
Basic loss per ordinary share
Diluted loss per ordinary share
Year ended 31 March 2016
Year ended 31 March 2015
Before
special
items
10,737.9
(9,241.1)
1,496.8
101.7
(223.8)
(493.5)
–
881.2
697.8
(1,280.4)
(72.5)
226.1
–
(255.5)
Special
items
Total
Before
special
items
Special
items
Total
–
–
10,737.9
(9,241.1)
12,878.7
(10,463.9)
–
–
12,878.7
(10,463.9)
–
–
–
–
(5,210.1)
(5,210.1)
–
–
–
(5,210.1)
1,737.4
–
1,496.8
101.7
(223.8)
(493.5)
(5,210.1)
(4,328.9)
697.8
(1,280.4)
(72.5)
(4,984.0)
1,737.4
(255.5)
2,414.8
104.0
(245.2)
(538.1)
–
1,735.5
832.6
(1,387.2)
(76.9)
1,104.0
–
(352.6)
–
–
–
–
(6,744.2)
(6,744.2)
–
–
–
(6,744.2)
2,205.1
–
2,414.8
104.0
(245.2)
(538.1)
(6,744.2)
(5,008.7)
832.6
(1,387.2)
(76.9)
(5,640.2)
2,205.1
(352.6)
(255.5)
1,737.4
1,481.9
(352.6)
2,205.1
1,852.5
(29.4)
(3,472.7)
(3,502.1)
751.4
(4,539.1)
(3,787.7)
Note
4
5
6
7
8
12
12
12
9
(392.9)
363.5
(1,444.5)
(2,028.2)
(1,837.4)
(1,664.7)
(74.7)
826.1
(1,723.9)
(2,815.2)
(1,798.6)
(1,989.1)
(29.4)
(3,472.7)
(3,502.1)
751.4
(4,539.1)
(3,787.7)
13
13
(142.4)
(142.4)
(523.4)
(523.4)
(665.8)
(665.8)
(27.2)
(27.2)
(627.3)
(627.3)
(654.5)
(654.5)
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 142
Consolidated Statement of Comprehensive Income
(US$ million)
Loss for the year from continuing operations
Income and expenses recognised directly in equity:
Items that will not be reclassified subsequently to income statement:
Remeasurement of net defined benefit plans
Tax effects on items recognised directly in equity
Total (a)
Items that may be reclassified subsequently to income statement:
Exchange differences arising on translation of foreign operations
Gain in fair value of available-for-sale financial assets (Note 18)
Loss in fair value of cash flow hedges deferred in reserves
Tax effects arising on cash flow hedges deferred in reserves
Gain in fair value of cash flow hedges transferred to income statement
Tax effects arising on cash flow hedges transferred to income statement
Total (b)
Other comprehensive loss for the year (a+b)
Total comprehensive loss for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive loss for the year
Year ended
31 March
2016
Year ended
31 March
2015
(3,502.1)
(3,787.7)
8.0
(2.5)
5.5
(810.2)
2.3
(24.5)
(2.8)
(3.0)
1.6
(836.6)
(831.1)
(14.0)
4.6
(9.4)
(582.0)
2.1
(27.4)
0.8
(17.8)
6.0
(618.3)
(627.7)
(4,333.2)
(4,415.4)
(2,223.6)
(2,109.6)
(2,089.8)
(2,325.6)
(4,333.2)
(4,415.4)
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
143
Consolidated Balance Sheet
(US$ million)
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Financial asset investments
Non-current tax assets
Other non-current assets
Financial instruments (derivatives)
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Financial instruments (derivatives)
Current tax assets
Liquid investments
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Short-term borrowings
Convertible bonds
Trade and other payables
Financial instruments (derivatives)
Retirement benefits
Provisions
Current tax liabilities
Net current assets
Non-current liabilities
Medium and long-term borrowings
Convertible bonds
Trade and other payables
Financial instruments (derivatives)
Deferred tax liabilities
Retirement benefits
Provisions
Non-equity non-controlling interests
Total liabilities
Net assets
As at year
ended
31 March
2016
As at year
ended
31 March
2015
Note
15
16
17
18
19
29
31
20
21
29
22
23
24
28
27a
29
33
30
24
28
27b
29
31
33
30
25
16.6
92.2
16,647.8
6.5
361.7
237.9
0.8
1,255.4
16.6
101.9
23,352.0
4.2
394.0
156.0
0.2
1,252.6
18,618.9
25,277.5
1,365.8
1,344.3
18.3
35.5
8,508.2
428.3
1,605.7
1,839.2
16.6
40.1
7,856.1
353.7
11,700.4
11,711.4
30,319.3
36,988.9
(3,726.6)
(587.2)
(5,876.1)
(67.7)
(4.9)
(132.1)
(17.0)
(3,179.2)
–
(4,730.0)
(45.7)
(12.7)
(140.8)
(74.2)
(10,411.6)
(8,182.6)
1,288.8
3,528.8
(11,949.5)
–
(223.5)
(1.2)
(620.2)
(61.6)
(187.4)
(11.9)
(12,385.6)
(1,103.0)
(194.3)
(0.1)
(2,588.7)
(61.9)
(203.4)
(11.9)
(13,055.3) (16,548.9)
(23,466.9)
(24,731.5)
6,852.4
12,257.4
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 144
Consolidated Balance Sheet continued
(US$ million)
Equity
Share capital
Share premium
Treasury shares
Share-based payment reserve
Convertible bond reserve
Hedging reserve
Other reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Note
35
32
As at year
ended
31 March
2016
As at year
ended
31 March
2015
30.1
201.5
(557.2)
29.9
6.0
(87.7)
(1.4)
(334.0)
30.0
198.5
(556.9)
27.4
38.4
(74.7)
339.9
1,600.5
(712.8)
7,565.2
1,603.1
10,654.3
36
6,852.4
12,257.4
Financial statements of Vedanta Resources plc, registration number 4740415, were approved by the Board of Directors on
11 May 2016 and signed on their behalf by:
Tom Albanese
Chief Executive Officer
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
145
Consolidated Cash Flow Statement
(US$ million)
Operating activities
Loss before taxation
Adjustments for:
Depreciation and amortisation
Investment revenue
Finance costs
Other gains and (losses)
Loss on disposal of property, plant and equipment
Write-off of unsuccessful exploration costs
Share-based payment charge
Impairment of mining reserves and assets
Other non-cash items
Operating cash flows before movements in working capital
Decrease in inventories
(Increase)/decrease in receivables
Increase in payables
Cash generated from operations
Dividends received
Interest income received
Interest paid
Income taxes paid
Dividends paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment and intangibles
Proceeds on disposal of property, plant and equipment
Sale/(purchase) of liquid investments
Net cash used in investing activities
Cash flows from financing activities
Issue of ordinary shares
Purchase of shares under DSBP scheme
Dividends paid to non-controlling interests of subsidiaries
Acquisition of additional interests in subsidiaries/share buyback by subsidiary
Decrease in short-term borrowings
Proceeds from long-term borrowings
Repayment of long-term borrowings
Buyback of convertible bond
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended
31 March
2016
Year ended
31 March
2015
Note
(4,984.0)
(5,640.2)
1,455.2
(697.8)
1,280.4
72.5
1.5
4.5
15.6
5,187.0
2.7
2,337.6
163.7
343.3
657.4
3,502.0
0.3
633.1
(1,268.4)
(354.7)
(110.6)
2,005.7
(832.6)
1,387.2
76.9
4.6
128.7
28.6
6,694.4
40.8
3,894.1
40.0
(134.5)
225.2
4,024.8
0.3
587.7
(1,334.0)
(601.7)
(171.3)
2,401.7
2,505.8
(872.4)
10.0
(999.9)
(2,289.1)
25.7
671.7
(1,862.3)
(1,591.7)
0.1
(0.9)
(325.5)
–
(1,022.1)
2,383.2
(958.0)
(523.6)
0.2
(340.4)
(819.1)
(818.8)
3,748.1
(2,698.0)
–
(446.8)
(928.0)
92.6
(18.0)
353.7
(13.9)
(1.8)
369.4
353.7
26
26
26
26
26
26
23 & 26
428.3
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 146
Consolidated Statement of Changes in Equity
Attributable to equity holders of the Company
Share
capital
(Note 35)
Share
premium
Treasury
shares
Share-
based
payment
reserves
Convertible
bond
reserve
Hedging
reserve
Other
reserves1
Retained
earnings
Total
Non-
controlling
interests
Total
equity
30.0
–
198.5
–
(556.9)
–
27.4
–
38.4
–
(74.7)
–
339.9
–
1,600.5
(1,837.4)
1,603.1
(1,837.4)
10,654.3 12,257.4
(3,502.1)
(1,664.7)
–
–
–
–
–
–
–
–
0.0
3.0
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
(0.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13.1)
15.6
–
–
–
–
(24.6)
(0.1)
(7.7)
–
–
–
–
–
(13.0)
(373.2)
–
(386.2)
(444.9)
(831.1)
(13.0)
(373.2) (1,837.4) (2,223.6)
(2,109.6) (4,333.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
31.9
–
–
–
–
(0.6)
(0.9)
24.6
–
5.1
(31.9)
–
2.9
(2.6)
–
–
–
–
–
–
(0.9)
–
2.9
(2.6)
–
(110.6)
(110.6)
(979.5)
(1,090.1)
13.1
0.1
–
3.2
15.6
3.2
–
–
–
0.1
15.6
3.2
(US$ million)
At 1 April 2015
Loss for the year
Other
comprehensive
loss for the year
Total
comprehensive
loss for the year
Acquisition of
shares under
DSBP scheme
Convertible bond
transfer (Note 28)
Conversion of
bond into equity
Convertible bond
buyback
Transfers1
Dividends paid/
payable (Note 14)
Exercise of LTIP
awards
Recognition of
share-based
payment
(Note 32)
Others3
At 31 March 2016
30.1
201.5
(557.2)
29.9
6.0
(87.7)
(1.4)
(334.0)
(712.8)
7,565.2 6,852.4
(US$ million)
At 1 April 2014
Loss for the year
Other
comprehensive
loss for the year
Total
comprehensive
loss for the year
Convertible bond
transfer (Note 28)
Transfers1
Dividends paid
(Note 14)
Additional
investment in
subsidiary/share
buyback by
subsidiary
Exercise of LTIP
awards
Recognition of
share-based
payment
(Note 32)
Attributable to equity holders of the Company
Share
capital
(Note 35)
Share
premium
Treasury
shares
Share-
based
payment
reserves
Convertible
bond
reserve
Hedging
reserve
Other
reserves1
Retained
earnings
Total
Non-
controlling
interests
Total
equity
29.8
–
198.5
–
(556.9)
–
46.9
–
80.1
–
(50.4)
–
471.6
–
3,790.8 4,010.4
(1,798.6)
(1,798.6)
13,964.4 17,974.8
(3,787.7)
(1,989.1)
–
–
–
–
–
–
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(48.1)
28.6
27.4
–
–
(41.7)
–
–
–
–
–
(24.3)
(266.9)
–
(291.2)
(336.5)
(627.7)
(24.3)
(266.9) (1,798.6) (2,089.8)
(2,325.6) (4,415.4)
–
–
–
–
–
–
–
135.2
41.7
(135.2)
–
–
–
–
–
–
–
–
–
–
(171.3)
(171.3)
(340.4)
(511.7)
(175.0)
(175.0)
(644.1)
(819.1)
48.1
0.2
–
28.6
–
–
0.2
28.6
38.4
(74.7)
339.9
1,600.5
1,603.1
10,654.3 12,257.4
At 31 March 2015
30.0
198.5
(556.9)
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
147
Other reserves comprise1
(US$ million)
At 1 April 2014
Exchange differences on translation of foreign operations
Gain in fair value of available-for-sale financial assets
Remeasurements
Transfer from retained earnings1
At 1 April 2015
Exchange differences on translation of foreign operations
Gain in fair value of available-for-sale financial assets
Remeasurements
Transfer from retained earnings1
Currency
translation
reserve
Merger
reserve2
Investment
revaluation
reserve
(1,612.7)
(263.8)
–
–
–
(1,876.5)
(378.7)
–
–
–
4.4
–
–
–
–
4.4
–
–
–
–
General
reserves
2,078.7
–
–
(4.5)
135.2
–
–
4.0
31.9
Total
471.6
(263.8)
1.4
(4.5)
135.2
339.9
(378.7)
1.5
4.0
31.9
2.6
2,209.4
1.2
–
1.4
–
–
–
1.5
–
–
4.1
At 31 March 2016
(2,255.2)
4.4
2,245.3
(1.4)
1 Transfer to general reserve during the year ended 31 March 2016 and 31 March 2015 includes US$31.9 million and US$30.0 million of debenture redemption
reserve respectively.
2 The merger reserve arose on incorporation of the Company during the year ended 31 March 2004. The investment in Twin Star had a carrying amount
value of US$20.0 million in the accounts of Volcan. As required by the Companies Act 1985, Section 132, upon issue of 156,000,000 ordinary shares to
Volcan, Twin Star’s issued share capital and share premium account have been eliminated and a merger reserve of US$4.4 million arose, being the
difference between the carrying value of the investment in Twin Star in Volcan’s accounts and the nominal value of the shares issued to Volcan.
3 Others: US$3.2 million of tax refund received on appropriatoin of reserves in BALCO.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 148
Notes to the Financial Statements
1. Presentation of financial statements
General information
Vedanta Resources plc (the Company) is a company incorporated and domiciled in the United Kingdom and is a London
listed diversified global natural resources major. The Group produces aluminium, copper, zinc, lead, silver, iron ore, oil & gas
and commercial energy. Vedanta has operations in India, Zambia, Namibia, South Africa, Ireland, Liberia and Australia.
These financial statements are presented in US dollars being the functional currency of the Company and all values are
rounded to one decimal of the nearest million except where other otherwise indicated.
Compliance with applicable law and IFRS
The financial statements have been prepared in accordance with those parts of the Companies Act 2006 applicable to
companies reporting under International Financial Reporting Standards (IFRS), Article 4 of the IAS Regulation and IFRS
as adopted by the European Union and related interpretations.
Basis of preparation
The financial statements have been prepared on a historical cost basis, except for derivative financial instruments,
available-for-sale financial assets, liquid investments and defined benefit pension obligations that have been measured
at fair value as per the principles of Fair value measurement under IFRS 13.
The following standards have been issued but not yet effective up to the date of authorisation of these financial statements
(and in some cases had not yet been adopted by EU):
IFRS 9 – Financial Instruments
In July 2014, the International Accounting Standards Board issued the final version of IFRS 9 – Financial Instruments.
The standard reduces the complexity of the current rules on financial instruments as mandated in IAS 39. IFRS 9 has fewer
classification and measurement categories as compared to IAS 39 and has eliminated the categories of held to maturity,
available for sale and loans and receivables. Further it eliminates the rule based requirement of segregating embedded
derivatives and tainting rules pertaining to held to maturity investments. For an investment in an equity instrument which
is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition, on an individual share-by-share basis,
to present all fair value changes from the investment in other comprehensive income. No amount recognised in other
comprehensive income would ever be reclassified to profit or loss. It requires the entity, which chooses to measure a
liability at fair value, to present the portion of the fair value change attributable to the entity’s own credit risk in the other
comprehensive income. IFRS 9 replaces the ‘incurred loss model’ in IAS 39 with an ‘expected credit loss’ model. The
measurement uses a dual measurement approach, under which the loss allowance is measured as either 12 month
expected credit losses or lifetime expected credit losses. The standard also introduces new presentation and disclosure
requirements. The effective date for adoption of IFRS 9 is annual periods beginning on or after 1 January 2018, though
early adoption is permitted.
IFRS 15 – Revenue from Contracts with Customers
IFRS 15 – Revenue from Contracts with Customers outlines a single comprehensive model for entities to use in accounting
for revenue arising from contracts with customers. The standard replaces most current revenue recognition guidance,
including industry-specific guidance. The core principle of the new standard is for companies to recognise revenue to
depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company
expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures
about revenue, provide guidance for transactions that were not previously addressed comprehensively including service
revenues and contract modifications and improve guidance for multiple-element arrangements. The new standard will
come into effect for the annual reporting periods beginning on or after 1 January 2018 with early application permitted.
IFRS 16 – Leases
IFRS 16 – Leases specifies recognition, measurement and disclosure criteria for leases. The standard provides a single lessee
accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less
or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach
to lessor accounting substantially unchanged from its predecessor, IAS 17. The new standard will come into effect for the
annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted if IFRS 15 – Revenue from
Contracts with Customers has also been applied.
Teh following other standards, improvements and amendments to the standards have been issued up to the date of
authorisation of these financial statements.
• IFRS 14 – Regulatory Deferral Accounts
• Amendments to IAS 1: Disclosure Initiative
• Annual Improvements to IFRSs: 2012-2014 Cycle
• Amendments to IAS 27: Equity method in separate financial statements
• Amendments to IAS 16 and IAS 41: Bearer plants
• Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation
• Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations
• Amendments to IAS 7: Statement of cash flows on disclosure initiative
• Amendments to IAS 12: ‘Income taxes’ on Recognition of deferred tax assets for unrealised losses
• Amendments to IFRS 10, IFRS 12 and IAS 28: Investment entities: Applying the Consolidation Exemption
The Group is evaluating the requirements of these standards, improvements and amendments and has not yet determined
the impact on the consolidated financial statements.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
149
1. Presentation of financial statements continued
Adoption of new and revised standards and pronouncements
The Group has adopted, with effect from 1 April 2015, the following new amendment and pronouncements. Their adoption
has not had any significant impact on the amounts reported in the financial statements.
Amendments to IAS 19: Defined benefit plans: Employee Contributions
Annual improvements to IFRSs: 2010-2012 Cycle
Annual improvements to IFRSs: 2011–2013 Cycle
The Group has not early adopted any other amendments, standards or interpretations that have been issued but are not
yet effective.
Going concern
The financial statements have been prepared in accordance with the going concern basis of accounting. The use of this
basis of accounting takes into consideration the Group’s current and forecast financing position, additional details of which
are provided in the Going Concern section of the Strategic Report.
Parent Company financial statements
The financial statements of the parent Company, Vedanta Resources plc, incorporated in United Kingdom, have been
prepared in accordance with FRS 101 and UK company law. The Company Balance Sheet is presented in Note 46.
2(a) Accounting policies
(i) Basis of consolidation
Subsidiaries
The consolidated financial information incorporates the results of the Company and all its subsidiaries (the Group), being
the companies that it controls. Control is evidenced where the Company has power over the investee, is exposed, or has
rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its
power over the investee. Power is demonstrated through existing rights that give the ability to direct relevant activities,
which significantly affect the entity returns.
The financial statements of subsidiaries are prepared for the same reporting year as the parent Company. Where
necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line
with accounting policies used by the Group.
For non-wholly owned subsidiaries, a share of the profit for the financial year and net assets is attributed to the non-
controlling interests as shown in the consolidated income statement, consolidated statement of comprehensive income
and consolidated balance sheet.
For acquisitions of additional interests in subsidiaries, where there is no change in control, the Group recognises a reduction
to the non-controlling interest of the respective subsidiary with the difference between this figure and the cash paid,
inclusive of transaction fees, being recognised in equity. In addition, upon dilution of controlling interests the difference
between the cash received from sale or listing of the subsidiary shares and the increase to non-controlling interest is also
recognised in equity. The results of subsidiaries acquired or disposed of during the year are included in the consolidated
income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
All inter-company balances and transactions, including unrealised profits arising from intra-Group transactions, have been
eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
Joint arrangements
A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is considered when
there is contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control.
The Group has joint operations within its Oil & Gas segment, the Group participates in several unincorporated joint
operations which involve the joint control of assets used in oil & gas exploration and producing activities. The Group
accounts for its share of assets, liabilities, income and expenditure of joint ventures in which the Group holds an interest,
classified in the appropriate balance sheet and income statement headings. In addition, where the Group acts as operator
to the joint venture, the gross liabilities and receivables (including amounts due to or from non-operating partners) of the
joint operations are included in the Group balance sheet.
(ii) Revenue recognition
Revenue is measured at the fair value of consideration received or receivable and represents the net invoice value of goods
and services provided to third parties after deducting discounts, volume rebates, outgoing sales taxes and duties, and are
recognised when all significant risks and rewards of ownership of the asset sold are transferred to the customer or services
have been provided. This is usually when the title passes to the customer as per the contract.
Certain of the Group’s sales contracts provide for provisional pricing based on the price on the London Metal Exchange
Limited (LME), as specified in the contract, when shipped. Final settlement of the prices is based on the applicable price for
a specified future period. The Company’s provisionally priced sales are marked to market using the relevant forward prices
for the future period specified in the contract with a corresponding adjustment to revenue.
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Notes to the Financial Statements continued
2(a) Accounting policies continued
Revenue from oil, gas and condensate sales represents the Group’s share of oil, gas and condensate production,
recognised on a direct entitlement basis, and tariff income received for third party use of operating facilities and pipelines
in accordance with agreements.
Revenue from holding certificate contracts is recognised when goods have been delivered to a distribution warehouse
or have been identified and kept separately, have been inspected by a nominee of the buyer and cash has been received.
Under these arrangements, revenue is recognised once legal title has passed and all significant risks and rewards of
ownership of the asset sold are transferred to the customer.
Revenue from the sale of power is recognised when the electricity is supplied and measured based on contractually agreed
tariff rates as approved by the electricity regulatory authorities.
Revenues from sale of material by-products are recognised when the significant risks and rewards of ownership of the
goods sold are transferred to the customer.
Dividend income is recognised when the shareholders’ right to receive payment is established.
Interest income is recognised on an accrual basis in the income statement.
(iii) Special items
Special items are those items that management considers, by virtue of their size or incidence (including but not limited to
impairment charges and acquisition and restructuring related costs), should be disclosed separately to ensure that the
financial information allows an understanding of the underlying performance of the business in the year, so as to facilitate
comparison with prior periods. Also tax charges related to Special items and certain one-time tax effects are considered
Special. Such items are material by nature or amount to the year’s result and require separate disclosure in accordance with
IAS 1 paragraph 97. The determination as to which items should be disclosed separately requires a degree of judgement.
(iv) Business combinations
The results of subsidiaries acquired or sold during the year are consolidated for the periods from, or to, the date on which
control passed. Acquisitions are accounted for under the acquisition method. The acquirer’s identifiable assets, liabilities
and contingent liabilities that meet the conditions for recognition are recognised at their fair value at the acquisition date,
except certain assets and liabilities required to be measured as per the applicable standards.
The identifiable assets, liabilities and contingent liabilities of a subsidiary, a joint arrangement or an associate, which can
be measured reliably, are recorded at their provisional fair values at the date of acquisition. The difference between the fair
value of the consideration transferred (including contingent consideration and previously held non-controlling interests)
and the Group’s share of the fair value of the identifiable net assets on acquisition is recognised as goodwill. Goodwill
arising on acquisitions is reviewed for impairment at least annually.
Where the fair values of the identifiable assets and liabilities exceed the cost of acquisition, the surplus is credited to the
income statement in the period of acquisition.
Where it is not possible to complete the determination of fair values by the date on which the first post-acquisition financial
statements are approved, a provisional assessment of fair values is made and any adjustments required to those provisional
fair values, and the corresponding adjustments to purchased goodwill, are finalised within 12 months of the acquisition date.
Any non-controlling interest in an acquiree is measured at fair value or as the non-controlling interest’s proportionate
share of the acquiree’s identifiable net assets, excluding goodwill. This accounting choice is made on a transaction-by-
transaction basis.
Acquisition expenses are charged to the income statement.
If the Group acquires a group of assets or equity in a company that does not constitute a business combination in
accordance with IFRS 3 Business Combinations (2008 revised), the cost of the acquired group of assets or equity
is allocated to the individual identifiable assets acquired based on their relative fair value.
(v) Intangible assets
Intangible assets are measured at cost less accumulated amortisation and accumulated impairment losses, if any. The
Group determines the amortisation period as the period over which the future economic benefits will flow to the Group
after taking into account all relevant facts and circumstances. Amortisation method, residual values and estimated useful
life of intangible assets are reviewed annually or more frequently if events or changes in circumstances indicate a potential
impairment. The Group does not have any indefinite life intangible assets.
Intangible assets arising out of service concession arrangements are accounted for as intangible assets where the
Company has a contractual right to charge users of services when the projects are completed and is measured at the cost
of such construction services completed. Such assets are amortised on a straight line basis over the balance of license
period, usually between 3 to 30 years.
(vi) Property, plant and equipment
Relating to mineral assets – Mining properties and leases
The costs of mining properties and leases, which include the costs of acquiring and developing mining properties and
mineral rights, are capitalised as property, plant and equipment under the heading ‘Mining properties and leases’ in the
year in which they are incurred.
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2(a) Accounting policies continued
When a decision is taken that a mining property is viable for commercial production (i.e. when the Group determines
that the mining property will provide sufficient and sustainable returns relative to the risk and decides to proceed with
the development), all further pre-production primary development expenditure other than land, buildings, plant and
equipment is capitalised as part of the cost of the mining property until the mining property is capable of commercial
production. From that point, capitalised mining properties and lease costs are amortised on a unit-of-production basis
over the total estimated remaining commercial reserves of each property or group of properties.
Exploration and evaluation assets acquired are recognised as assets at their cost of acquisition subject to meeting the
commercial production criteria mentioned above and are subject to impairment review on an annual basis.
Exploration and evaluation expenditure incurred after obtaining the right to mine or the legal right to explore, is capitalised
as property, plant and equipment and stated at cost less any impairment. Exploration and evaluation assets are transferred
to the appropriate category of property, plant and equipment when the technical feasibility and commercial viability has
been determined. Exploration and evaluation assets are assessed for impairment and impairment loss, if any, is recognised
prior to reclassification. Exploration and evaluation expenditure incurred prior to obtaining the mining right or the legal
right to explore is expensed as incurred.
Exploration expenditure includes all direct and allocated indirect expenditure associated with finding specific mineral
resources which includes depreciation and applicable operating costs of related support equipment and facilities and other
costs of exploration activities:
• Acquisition costs – costs associated with acquisition of licenses and rights to explore, including related professional fees.
• General exploration costs – costs of surveys and studies, rights of access to properties to conduct those studies (e.g.
costs incurred for environment clearance, defence clearance, etc.), and salaries and other expenses of geologists,
geophysical crews and other personnel conducting those studies.
• Costs of exploratory drilling and equipping exploratory and appraisal wells.
The stripping cost incurred during the production phase of a surface mine is deferred to the extent the current period
stripping cost exceeds the average period stripping cost over the life of mine and recognised as an asset if such cost
provides a benefit in terms of improved access to ore in future periods and certain criteria are met. Deferred stripping costs
are included in mining properties within property, plant and equipment and disclosed as a part of mining properties. After
initial recognition, the stripping activity asset is depreciated on a unit of production method over the expected useful life of
the identified component of the ore body.
In circumstances where a mining property is abandoned, the cumulative capitalised costs relating to the property are
written off in the period in which it occurs i.e. when the Group determines that the mining property will not provide
sufficient and sustainable returns relative to the risks and the Group decides not to proceed with the mine development.
Commercial reserves are proved and probable reserves as defined by the ‘JORC’ Code and ‘SAMREC’ Code. Changes
in the commercial reserves affecting unit of production calculations are dealt with prospectively over the revised
remaining reserves.
Relating to oil & gas assets – Exploration and evaluation assets and developing/producing assets
For oil & gas assets a successful efforts based accounting policy is followed. Costs incurred prior to obtaining the legal
rights to explore an area are expensed immediately to the income statement. Expenditure incurred on the acquisition of a
license interest is initially capitalised on a license-by-license basis. Costs are held, are not amortised or depreciated, within
exploration and evaluation assets until such time as the exploration phase on the license area is complete or commercial
reserves have been discovered.
Exploration expenditure incurred in the process of determining oil & gas exploration targets is capitalised initially within
property, plant and equipment – exploration and evaluation assets and subsequently allocated to drilling activities (under
oil & gas properties and/or exploration and evaluation assets as appropriate). Exploration drilling costs are initially
capitalised on a well-by-well basis until the success or otherwise of the well has been established. The success or failure
of each exploration effort is judged on a well-by-well basis. Drilling costs are written off on completion of a well unless the
results indicate that hydrocarbon reserves exist and there is a reasonable prospect that these reserves are commercial.
Following appraisal of successful exploration wells, if commercial reserves are established and technical feasibility for
extraction demonstrated, then the related capitalised exploration costs are transferred into a single field cost centre within
property, plant and equipment – development/producing assets (oil & gas properties) after testing for impairment. Where
results of exploration drilling indicate the presence of hydrocarbons which are ultimately not considered commercially
viable, all related costs are written off to the income statement.
All costs incurred after the technical feasibility and commercial viability of producing hydrocarbons has been demonstrated
are capitalised within property, plant and equipment – development/producing assets (oil & gas properties) on a field-by-
field basis. Subsequent expenditure is capitalised only where it either enhances the economic benefits of the development/
producing asset or replaces part of the existing development/producing asset. Any remaining costs associated with the
part replaced are expensed.
Net proceeds from any disposal of an exploration asset are initially credited against the previously capitalised costs. Any
surplus proceeds are credited to the income statement. Net proceeds from any disposal of development/producing assets
are credited against the previously capitalised cost. A gain or loss on disposal of a development/producing asset is
recognised in the income statement to the extent that the net proceeds exceed or are less than the appropriate portion
of the net capitalised costs of the asset.
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Notes to the Financial Statements continued
2(a) Accounting policies continued
Other property, plant and equipment
The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable
purchase taxes, and any directly attributable costs of bringing an asset to working condition and location for its intended
use, including relevant borrowing costs and any expected costs of decommissioning. Expenditure incurred after the
property, plant and equipment have been put into operation, such as repairs and maintenance, are charged to the income
statement in the period in which the costs are incurred. Major shut-down and overhaul expenditure is capitalised as the
activities undertaken improve the economic benefits expected to arise from the asset.
(vii) Assets in the course of construction
Assets in the course of construction are capitalised in the assets under construction account. At the point when an asset is
operating at management’s intended use, the cost of construction is transferred to the appropriate category of property,
plant and equipment and depreciation commences (see below). Costs associated with the commissioning of an asset and
any obligatory decommissioning costs are capitalised where the asset is available for use but incapable of operating at
normal levels until a period of commissioning has been completed. Revenue generated from production during the trial
period is capitalised. Borrowing costs and certain foreign exchange gains or losses are in certain circumstances capitalised
in the cost of the asset under construction. This policy is set out under ‘Borrowing Costs’.
(viii) Depreciation and amortisation
Relating to mining properties
Mining properties and other assets in the course of development or construction, freehold land and goodwill are not
depreciated or amortised. Capitalised mining properties and lease costs are amortised once commercial production
commences, as described in ‘Property, plant and equipment – mining properties and leases’. Leasehold land and buildings
are depreciated on a straight-line basis over the period of the lease or, if shorter, their useful economic life.
Relating to oil & gas assets
All expenditure carried within each field is amortised from the commencement of production on a unit of production basis,
which is the ratio of oil & gas production in the period to the estimated quantities of commercial reserves at the end of the
period plus the production in the period, generally on a field-by-field basis or group of fields which are reliant on common
infrastructure.
Commercial reserves are proven and probable oil & gas reserves, which are defined as the estimated quantities of crude oil,
natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified
degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially
producible. There should be a 50% statistical probability that the actual quantity of recoverable reserves will be more
than the amount estimated as proven and probable reserves and a 50% statistical probability that it will be less.
Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future
field development costs required to access commercial reserves. Changes in the estimates of commercial reserves or
future field development costs are dealt with prospectively.
Others
Other buildings, plant and equipment, office equipment and fixtures, and motor vehicles are stated at cost less
accumulated depreciation and any provision for impairment. Depreciation commences when the assets are ready for their
intended use. Depreciation is provided at rates calculated to write off the cost, less estimated residual value, of each asset
on a straight-line basis over its expected useful life, as follows:
Buildings operations and administration
Plant and machinery
Office equipment and fixtures
Motor vehicles
30–60 years
15–40 years
5–10 years
8–10 years
The Group reviews the residual value and useful life of an asset annually and, if expectations differ from previous estimates,
the change is accounted for as a change in accounting estimate.
Major overhaul costs are depreciated over the estimated life of the economic benefit to be derived from the overhaul.
The carrying amount of the remaining previous overhaul cost is charged to the income statement if the next overhaul
is undertaken earlier than the previously estimated life of the economic benefit.
Property, plant and equipment held for sale or which is part of a disposal group held for sale is not depreciated. Property,
plant and equipment held for sale is carried at the lower of its carrying value and fair value less disposal cost and is
presented separately on the face of the balance sheet.
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2(a) Accounting policies continued
(ix) Impairment
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired.
A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its
carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.
An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.
Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed
collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the consolidated
statements of income. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in the
consolidated statements of comprehensive income is transferred to the consolidated statements of income on recognition
of impairment. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that
are debt securities, the reversal is recognised in the consolidated statements of income. For available-for-sale financial
assets that are equity securities, the change in fair value is recognised directly in the consolidated statements of
comprehensive income.
The allowance accounts in respect of trade and other receivables are used to record impairment losses unless the
Company is satisfied that no recovery of the amount owing is possible; at that point the amounts are considered
irrecoverable and are written off against the financial asset directly.
Non-financial assets
Impairment charges and reversals are assessed at the level of cash-generating units. A cash-generating unit (CGU) is the
smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other
assets or group of assets.
Formal impairment tests are carried out annually for goodwill. In addition, formal impairment tests for all assets are
performed when there is an indication of impairment. The Group conducts an internal review of asset values annually,
which is used as a source of information to assess for any indications of impairment or reversal of previously recognised
impairment losses. External factors, such as changes in expected future prices, costs and other market factors are also
monitored to assess for indications of impairment or reversal of previously recognised impairment losses.
If any such indication exists then an impairment review is undertaken, the recoverable amount is calculated, as the higher
of fair value less costs of disposal and the asset’s value in use.
Fair value less costs of disposal is the price that would be received to sell the asset in an orderly transaction between
market participants and does not reflect the effects of factors that may be specific to the entity and not applicable to
entities in general. Fair value for mineral and oil & gas assets is generally determined as the present value of the estimated
future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and its
eventual disposal, using assumptions that an independent market participant may take into account. These cash flows
are discounted at an appropriate post tax discount rate to arrive at the net present value.
Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued
use of the asset in its present form and its eventual disposal. The cash flows are discounted using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset for which
estimates of future cash flows have not been adjusted. Value in use is determined by applying assumptions specific to
the Group’s continued use and cannot take into account future development. These assumptions are different to those
used in calculating fair value and consequently the value in use calculation is likely to give a different result to a fair
value calculation.
The carrying amount of the CGU is determined on a basis consistent with the way the recoverable amount of the CGU
is determined. The carrying amount includes the deferred tax liability recognised in the fair value of the assets acquired
in a business combination.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the
asset or CGU is reduced to its recoverable amount. An impairment loss is recognised in the income statement.
Any reversal of the previously recognised impairment loss is limited to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined if no impairment loss had previously been recognised.
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Notes to the Financial Statements continued
2(a) Accounting policies continued
Exploration and evaluation assets
In assessing whether there is any indication that an exploration and evaluation asset may be impaired, the Company
considers, as a minimum, the following indications
• the period for which the entity has the right to explore in the specific area has expired during the period or will expire
in the near future, and is not expected to be renewed;
• substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither
budgeted nor planned;
• exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially
viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area;
• sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount
of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale; and
• reserve information prepared annually by external experts.
When a potential impairment is identified, an assessment is performed for each area of interest in conjunction with
the group of operating assets (representing a cash-generating unit) to which the exploration and evaluation assets
is attributed. Exploration areas in which reserves have been discovered but require major capital expenditure before
production can begin, are continually evaluated to ensure that commercial quantities of reserves exist or to ensure that
additional exploration work is under way or planned. To the extent that capitalised expenditure is no longer expected
to be recovered, it is charged to the income statement.
(x) Non-current assets held for sale and discontinued operations
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This condition is regarded as met only when a sale is highly probable from
the date of classification, management are committed to the sale and the asset is available for immediate sale in its present
condition. Non-current assets are classified as held for sale from the date these conditions are met and are measured at the
lower of carrying amount and fair value (less costs to sell). Any resulting impairment loss is recognised in the income
statement as a special item. On classification as held for sale the assets are no longer depreciated.
(xi) Government grants
Government grants relating to property, plant and equipment are treated as deferred income and released to the income
statement over the expected useful lives of the assets concerned. Other grants are credited to the income statement as
and when the related expenditure is incurred.
(xii) Inventories
Inventories and work-in-progress are stated at the lower of cost and net realisable value.
Cost is determined on the following basis:
• Purchased copper concentrate is recorded at cost on a first-in, first-out (FIFO) basis; all other materials including stores
and spares are valued on weighted average basis; except at Cairn where stores and spares are valued on a FIFO basis.
• Finished products are valued at raw material cost plus costs of conversion, comprising labour costs and an attributable
proportion of manufacturing overheads based on normal levels of activity; and by-products and scrap are valued at net
realisable value.
• Net realisable value is determined based on estimated selling price, less further costs expected to be incurred to
completion and disposal.
(xiii) Taxation
Tax expense represents the sum of tax currently payable and deferred tax.
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax is provided, using the balance sheet method, on all temporary differences at the balance sheet date between
the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Exceptions to this
principle are:
• tax payable on the future remittance of the past earnings of subsidiaries where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future;
• deferred income tax is not recognised on the impairment of goodwill which is not deductible for tax purposes or on the
initial recognition of an asset or liability in a transaction that is not a business combination which, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
• deferred tax assets are recognised only to the extent that it is more likely than not that they will be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the balance sheet date. Tax relating to items recognised directly in equity is recognised in equity and not in the
income statement.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and is adjusted to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.
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2(a) Accounting policies continued
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income
tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same
taxation authority.
Deferred tax is provided on temporary differences arising on acquisitions that are categorised as Business Combinations.
Deferred tax is recognised at acquisition as part of the assessment of the fair value of assets and liabilities acquired. Any
deferred tax is charged or credited in the income statement as the underlying temporary difference is reversed.
(xiv) Retirement benefit schemes
The Group operates or participates in a number of defined benefits and contribution schemes, the assets of which are
(where funded) held in separately administered funds.
For defined benefit schemes the cost of providing benefits under the plans is determined each year separately for each
plan using the projected unit credit method by independent qualified actuaries.
Actuarial gains and losses arising in the year are recognised in other comprehensive income and are not recycled to the
income statement.
Net interest is calculated by applying a discount rate to the net defined benefit liability or asset. Defined benefit costs are
split into current service cost, past service cost, net interest expense or income and remeasurement.
Current service cost and past service costs is recognised within cost of sales and administrative expenses. Net interest
expense or income is recognised within finance costs.
For defined contribution schemes, the amount charged to the income statement in respect of pension costs and other
post-retirement benefits is the contributions payable in the year.
(xv) Share-based payments
Certain employees (including Executive Directors) of the Group receive part of their remuneration in the form of share-
based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-
settled transactions’).
The cost of equity-settled transactions with employees is measured at fair value at the date at which they are granted. The
fair value of share awards with market-related vesting conditions are determined with the assistance of an external valuer
and the fair value at the grant date is expensed on a straight-line basis over the vesting period based on the Group’s
estimate of shares that will eventually vest. The estimate of the number of awards likely to vest is reviewed at each balance
sheet date up to the vesting date at which point the estimate is adjusted to reflect the current expectations.
(xvi) Provisions for liabilities and charges
Provisions are recognised when the Group has a present obligation (legal or constructive), as a result of past events, and it
is probable that an outflow of resources, that can be reliably estimated, will be required to settle such an obligation. If the
effect of the time value of money is material, provisions are determined by discounting the expected future cash flows to
net present value using an appropriate pre-tax discount rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability. Unwinding of the discount is recognised in the income
statement as a finance cost. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current
best estimate.
(xvii) Restoration, rehabilitation and environmental costs
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused
by the development or ongoing production of a mine or oil fields. Costs arising from the decommissioning of plant and
other site preparation work are provided for based on their discounted net present value, with a corresponding amount
being capitalised at the start of each project. The amount provided for is recognised, as soon as the obligation to incur
such costs arises. These costs are charged to the income statement over the life of the operation through the depreciation
of the asset and the unwinding of the discount on the provision. The cost estimates are reviewed periodically and are
adjusted to reflect known developments which may have an impact on the cost estimates or life of operations. The cost of
the related asset is adjusted for changes in the provision due to factors such as updated cost estimates, new disturbance
and revisions to discount rates. The adjusted cost of the asset is depreciated prospectively over the lives of the assets to
which they relate. The unwinding of the discount is shown as a finance cost in the income statement.
Costs for restoration of subsequent site damage which is caused on an ongoing basis during production are provided for at
their net present values and charged to the income statement as extraction progresses. Where the costs of site restoration
are not anticipated to be significant, they are expensed as incurred.
(xviii) Operating leases
Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made
on such a basis.
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Notes to the Financial Statements continued
2(a) Accounting policies continued
(xix) Finance leases
Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or,
if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of
the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges
are charged to the income statement, unless they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the Group’s policy on borrowing costs.
The Group has reviewed the terms and conditions of the lease arrangements and determined that all risks and rewards
of ownership lie with the Group and has therefore accounted for the leases as finance leases.
(xx) Foreign currency translation
The functional currency for each entity in the Group is determined as the currency of the primary economic environment
in which it operates. For all principal operating subsidiaries, the functional currency is the local currency of the country in
which it operates with the exception of KCM and Cairn which has a US dollar functional currency as that is the currency
of primary economic environment in which it operates. In the financial statements of individual Group companies,
transactions in currencies other than the functional currency are translated into the functional currency at the exchange
rates ruling at the date of transaction. Monetary assets and liabilities denominated in other currencies are translated into
the functional currency at exchange rates prevailing on the balance sheet date.
All exchange differences are included in the income statement, except, where the monetary item is designated as an
effective hedging instrument of the currency risk of designated forecast sales, where exchange differences are recognised
in equity and exchange differences on foreign currency borrowings relating to asset under construction, and for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs
on those foreign currency borrowings.
For the purposes of consolidation, the income statement items of those entities for which the US dollar is not the functional
currency are translated into US dollars at the average rates of exchange during the period. The related balance sheets are
translated at the rates ruling at the balance sheet date. Exchange differences arising on translation of the opening net
assets and results of such operations, and on foreign currency borrowings to the extent that they hedge the Group’s
investment in such operations, are reported in other comprehensive income and accumulated in equity.
On disposal of entities with a different functional currency to the Company’s functional currency, the deferred cumulative
exchange differences recognised in equity relating to that particular operation are reclassified to the income statement.
(xxi) Financial asset investments
Financial asset investments are classified as available for sale under IAS 39 and are initially recorded at cost and then
remeasured at subsequent reporting dates to fair value. Unrealised gains and losses on financial asset investments are
recognised directly in equity. On disposal or impairment of the investments, the gains and losses in equity are recycled
to the income statement.
Investments in unquoted equity instruments that do not have a market price and whose fair value cannot be reliably
measured are measured at cost.
Investments in equity instruments are recorded in non-current assets unless they are expected to be sold within one year.
(xxii) Liquid investments
Liquid investments represent short-term investments that do not meet the definition of cash and cash equivalents for one
or more of the following reasons:
• they have a maturity profile greater than 90 days;
• they may be subject to a greater risk of changes in value than cash;
• they are held for investment purposes.
The value of trading investments incorporates any dividend and interest earned on the held for trading investments.
(xxiii) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand, short-term deposits with banks and
short-term highly liquid investments that are readily convertible into cash which are subject to insignificant risk of changes
in value and are held for the purpose of meeting short-term cash commitments.
(xxiiii) Trade receivables
Trade receivables are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable
amounts. An allowance for impairment of trade receivables is made where there is an event, which based on previous
experience, is an indication of a reduction in the recoverability of the carrying value of the trade receivables.
(xxv) Trade payables
Trade payables are stated at their nominal value.
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2(a) Accounting policies continued
(xxvi) Bills of exchange payable
The Group enters into arrangements whereby financial institutions make direct payments to suppliers for raw materials
and project materials. The financial institutions are subsequently repaid by the Company at a later date providing working
capital timing benefits. These are normally settled up to 12 months (for raw materials) and up to 36 months (for
project materials). Where these arrangements are for raw materials with a maturity of up to 12 months, the economic
substance of the transaction is determined to be operating in nature and these are recognised as Bills of exchange (under
trade and other payables). Where these arrangements are for project materials with a maturity up to 36 months, the
economic substance of the transaction is determined to be financing in nature, and these are classified as projects buyers’
credit within borrowings in the statement of financial position.
(xxvii) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
(xxviii) Borrowings
Interest bearing loans and overdrafts are recorded at the proceeds received. Finance charges, including premiums payable
on settlement or redemption and direct issue costs, are accounted for on an accruals basis and charged to the income
statement using the effective interest method. They are netted against the carrying amount of the instrument to the extent
that they are not settled in the period in which they arise.
(xxix) Convertible bonds
Convertible bonds denominated in the functional currency of the issuing entity are accounted for as compound
instruments. The equity components and the liability components are separated out on the date of the issue. The equity
component is recognised in a separate reserve and is not subsequently remeasured. The liability component is held at
amortised cost. The interest expense on the liability component is calculated by applying the effective interest rate, being
the prevailing market interest rate at the date of issuance for similar non-convertible debt. The difference between this
amount and interest paid is added to the carrying amount of the liability component.
Convertible bonds not denominated in the functional currency of the issuing entity or where a cash conversion option
exists, are split into two components: a debt component and a component representing the embedded derivative in the
convertible bond. The debt component represents a liability for future coupon payments and the redemption of the
principal amount. The embedded derivative, a financial liability, represents the value of the option that bondholders have
to convert into ordinary shares. At inception the embedded derivative is recorded at fair value and the remaining balance,
after deducting a share of issue costs, is recorded as the debt component. Subsequently, the debt component is measured
at amortised cost and the embedded derivative is measured at fair value at each balance sheet date with the change in the
fair value recognised in the income statement. The embedded derivative and the debt component are disclosed together
and the current/non-current classification follows the classification of the debt component which is the host contract.
(xxx) Borrowing costs
Borrowing costs directly relating to the acquisition, construction or production of a qualifying capital project under
construction are capitalised and added to the project cost during construction until such time that the assets are substantially
ready for their intended use in accordance with the Group policy which is when they are capable of commercial production.
Where funds are borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs
incurred. Where surplus funds are available out of money borrowed specifically to finance a project, the income generated
from such short-term investments is also capitalised to reduce the total capitalised borrowing cost.
All other borrowing costs are recognised in the income statement in the period in which they are incurred.
Capitalisation of interest on borrowings related to construction or development projects is ceased when substantially all
the activities that are necessary to make the assets ready for their intended use are complete or when delays occur outside
of the normal course of business.
(xxxi) Available for sale financial assets
Listed equity shares and debt instruments held by the Group that are traded in an active market are classified as being
available for sale (AFS) financial assets and are stated at fair value. Unrealised gains and losses on financial asset
investments are recognised directly in equity. On disposal or impairment of the investments, the gains and losses in
equity are recycled to the income statement. Dividends received from investees accounted for as equity instruments
are recognised in the income statement when the right to receive the payment is established.
(xxxii) Financial instruments fair valued through profit and loss
Held for trading financial assets
Financial assets are classified as held for trading if they have been acquired principally for the purpose of selling in the near
term. The change in fair value of trading investments incorporates any dividend and interest earned on the held for trading
investments and is accounted for in the income statement.
Derivative financial instruments
In order to hedge its exposure to foreign exchange, interest rate and commodity price risks, the Group enters into forward
contracts, option contracts, swap contracts and other derivative financial instruments. The Group does not hold derivative
financial instruments for speculative purposes.
Derivative financial instruments are initially recorded at their fair value on the date of the derivative transaction and are
re-measured at their fair value at subsequent balance sheet dates. The resultant gains or losses are recognised in the
income statement unless these are designated as effective hedging instruments.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 158
Notes to the Financial Statements continued
2(a) Accounting policies continued
(xxxiii) Hedge accounting
The Group designates certain hedging instruments, which include derivatives and non-derivatives in respect of foreign
currency risk, as either fair value hedges or cash flow hedges. Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recorded in the income statement. The hedged item is recorded at fair value and
any gain or loss is recorded in the income statement and is offset by the gain or loss from the change in the fair value
of the derivative.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in equity.
This includes certain non-derivative liabilities that are designated as hedge of the foreign currency risk on future, highly
probable, forecast sales. Amounts deferred in equity are recycled to the income statement in the periods when the hedged
item is recognised in the income statement.
The gain or loss on hedging instruments relating to the effective portion of a net investment hedge is recognised in equity.
The ineffective portion is recognised immediately in the income statement. Gains or losses accumulated in equity are
reclassified to the income statement on disposal of the foreign operations to which they relate.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
qualifies for hedge accounting. Any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity
until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss
recognised in equity is transferred to the income statement.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of the host contracts and the host contracts are not carried at fair
value with unrealised gains or losses recognised in the income statement.
(xxxiv) Held-to-maturity financial assets
Financial instruments with fixed or determinable payments and fixed maturity dates that the Group has the positive intent
and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are measured
at amortised cost using the effective interest method.
2(b) Critical accounting judgement and estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates
and assumptions, that affect the application of accounting policies and the reported amounts of assets, liabilities, income,
expenses and disclosures of contingent assets and liabilities at the date of these consolidated financial statements and the
reported amounts of revenues and expenses for the years presented. Actual results may differ from these estimates under
different assumptions and conditions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and future periods affected. The Group considers the following areas as the
key sources of estimation uncertainty:
(i) Oil & gas reserves
Oil & gas reserves are estimated on a proved and probable entitlement interest basis. Proven and probable reserves are
estimated using standard recognised evaluation techniques. The estimate is reviewed regularly. Future development costs
are estimated taking into account the level of development required to produce the reserves by reference to operators,
where applicable, and internal engineers.
Net entitlement reserves estimates are subsequently calculated using the Group’s current oil price and cost recovery
assumptions, in line with the relevant agreements.
Changes in reserves as a result of factors such as production cost, recovery rates, grade of reserves or commodity prices
could impact the depreciation rates, carrying value of assets and environmental and restoration provisions.
(ii) Carrying value of exploration and evaluation fixed assets
Where a project is sufficiently advanced the recoverability of IFRS 6 Exploration assets are assessed by comparing the
carrying value to higher of fair value less cost of disposal or value in use. Change to the valuation of exploration assets is an
area of judgement. Further details on the Group’s accounting policies on this are set out in the accounting policy above.
The amounts for exploration and evaluation assets represent active exploration projects. These amounts will be written off
to the income statement as exploration costs unless commercial reserves are established or the determination process is
not completed and there are no indications of impairment. The outcome of ongoing exploration, and therefore whether the
carrying value of exploration and evaluation assets will ultimately be recovered, is inherently uncertain.
Details of impairment charge and the assumptions used are disclosed in Note 5.
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2(b) Critical accounting judgement and estimation uncertainty continued
(iii) Carrying value of developing/producing oil & gas assets
Management perform impairment tests on the Group’s developing/producing oil & gas assets where indicators of
impairment are identified in accordance with IAS 36.
The impairment assessments are based on a range of estimates and assumptions, including:
Estimates/assumptions
Basis
Future production
proved and probable reserves, resource estimates and, in certain cases, expansion projects
Commodity prices management’s best estimate benchmarked with external sources of information, to ensure
they are within the range of available analyst forecast
Discount to price
management’s best estimate based on historical prevailing discount
Extension of PSC
assumed that PSC for Rajasthan block would be extended until 2030 on the same commercial terms
Discount rates
cost of capital risk-adjusted for the risk specific to the asset/CGU
Other key assumptions in the impairment models based on management expectations are that government approval will
be received for new projects and projects will be successfully implemented as planned.
Any subsequent changes to cash flows due to changes in the above mentioned factors could impact the carrying value of
the assets.
Details of impairment charge and the assumptions used are disclosed in Note 5.
(iv) Mining properties and leases
The carrying value of mining property and leases is arrived at by depreciating the assets over the life of the mine using the
unit of production method based on proved and probable reserves. The estimate of reserves is subject to assumptions
relating to life of the mine and may change when new information becomes available. Changes in reserves as a result of
factors such as production cost, recovery rates, grade of reserves or commodity prices could thus impact the carrying
values of mining properties and leases and environmental and restoration provisions.
Management performs impairment tests when there is an indication of impairment. The impairment assessments are based
on a range of estimates and assumptions, including:
Estimates/assumptions
Basis
Future production
proved and probable reserves, resource estimates (with an appropriate conversion factor)
considering the expected permitted mining volumes and, in certain cases, expansion projects
Commodity prices management’s best estimate benchmarked with external sources of information, to ensure they
are within the range of available analyst forecast
Exchange rates
Discount rates
management’s best estimate benchmarked with external sources of information
cost of capital risk-adjusted for the risk specific to the asset/CGU
Details of impairment charge are disclosed in Note 5.
(v) Useful economic lives and impairment of other assets
Property, plant and equipment other than mining properties, oil & gas properties, and leases are depreciated over their
useful economic lives. Management reviews the useful economic lives at least once a year and any changes could affect
the depreciation rates prospectively and hence the asset carrying values. The Group also reviews its property, plant and
equipment, including mining properties and leases, for possible impairment if there are events or changes in circumstances
that indicate that carrying values of the assets may not be recoverable. In assessing the property, plant and equipment for
impairment, factors leading to significant reduction in profits such as changes in commodity prices, the Group’s business
plans and changes in regulatory environment are taken into consideration. The carrying value of the assets of a cash-
generating unit (CGU) is compared with the recoverable amount of those assets, that is, the higher of fair value less costs
of disposal and value in use. Recoverable value is based on the management estimates of commodity prices, market
demand and supply, economic and regulatory climates, long-term plan, discount rates and other factors. Any subsequent
changes to cash flow due to changes in the above mentioned factors could impact the carrying value of the assets.
(vi) Assessment of impairment at Lanjigarh Refinery
During the year, the Group has received the necessary approvals for expansion of the Lanjigarh refinery to 4 million tonnes
per annum (mtpa). Approval for expansion from 4mtpa to 6mtpa is dependent upon certain conditions.
Accordingly, second stream operation has commenced in Alumina refinery from April 2016 thus, taking it to the
debottlenecked capacity of 1.7–2.0mtpa (contingent on bauxite quality). Further ramp up to 4mtpa will be considered after
tying up the local bauxite sources. The Group has considered the delay in tying up local bauxite sources as an indication
of impairment. Hence, the Group has reviewed the carrying value of its property, plant and equipment at Lanjigarh as at
balance sheet date, estimated the recoverable amounts of these assets and concluded that there was no impairment
because the recoverable amount (estimated based on fair value less cost of disposal) exceeded the carrying amounts.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 160
Notes to the Financial Statements continued
2(b) Critical accounting judgement and estimation uncertainty continued
The key assumptions and estimates used in determining the fair value less cost of disposal of these assets were:
• The State of Odisha has abundant bauxite resources and under the terms of the Memorandum of Understanding (MOU)
with the Government of Odisha, management is confident that bauxite will be made available in the short to medium
term. The Company has entered into agreements with various suppliers internationally and domestically to ensure the
availability of bauxite to run its refinery. In the initial years, the Company has assumed that bauxite will be purchased
from third party suppliers in India and other countries, until the bauxite is sourced from own mines.
• The State of Odisha has taken certain measures including reservation of areas for mining operations or undertaking
prospecting and constitution of Ministerial Committee for formulation of policy for supply of ores to Odisha based
industries on long-term basis. GOI has amended the existing MMDR Act. The major change is in the process of grant
of concessions i.e. from first come, first served basis to more transparent process of auction and to expedite the
grant process.
• Management expects that the conditions for construction of the Alumina refinery beyond 4mtpa will be fulfilled and it is
assumed that the final unconditional approval for the expansion of the refinery would be received for commencement of
production by fiscal 2020.
• The Government of Odisha has cancelled all the old reservations for mine allotment and has formed a more transparent
process of auction of mines under the MMDR Act, which will improve the chances of local bauxite availability.
Management expects that the mining approvals for various local bauxite mines will be received. The Group carries out
impairment assessment for carrying value of these assets, every half year and challenges these assumptions.
The Group has carried out a sensitivity analysis on the key variables including delay in obtaining bauxite mining approval,
appreciation of rupee against US dollar, discount rate and London Metal Exchange aluminium prices. The most significant
variable is the estimated timeframe for obtaining regulatory approval for the mining and/or gaining access to local bauxite.
The sensitivity analysis indicates that even if regulatory approvals for mines/access to local bauxite are delayed by a year,
the recoverable amount is still expected to exceed the carrying value and costs. As at 31 March 2016 the carrying amount
of property, plant and equipment related to Alumina refinery operations at Lanjigarh and related mining assets is
US$1,079.0 million (31 March 2015: US$1,165 million).
(vii) Assessment of impairment of Karnataka and Goa iron ore mines
Karnataka mining
The mining ban in Karnataka was lifted on 17 April 2013 and the mining operations resumed in December 2013. The mining
operations were suspended since August 2014 pending environment clearances. On execution of Mining Lease Deed and
final forest clearance, the operations were resumed towards the end of February 2015. Currently the permissible extraction
capacity is fixed at 2.29mtpa which is based on lowest of Reserves and Resources (R&R) capacity, dumping capacity and
road capacity as assessed by Indian Council of Forestry Research and Education. Subsequently, based on reassessment
of R&R and other factors, the modified mining plan has been submitted to Indian Bureau of Mines in March 2016 for
enhancement of production to 6mtpa. Management has estimated the recoverable amounts of these assets considering
the increase in the extraction capacity in FY2017.
A delay of one year in increase in the allocated capacity would result in reduction in the recoverable amount by
approximately 1% and the recoverable amount would continue to be sufficiently in excess of the carrying value.
The carrying value of assets as at 31 March 2016 is US$145.6 million (31 March 2015: US$168.1 million).
Goa mining
The Ministry of Environment and Forest revoked its earlier order which had kept the environment clearances for iron ore
mines in Goa in abeyance. The State Government has issued a mining policy and has lifted the ban on iron ore mining in
Goa. The Group has been allocated with an interim annual mining quantity of 6.9 million tonnes per annum (mtpa) (out of
the total interim mining cap of 20mtpa for FY2016) of saleable ore.
The Expert Committee, constituted by the Supreme Court of India for conducting the Macro-Environmental Impact
Assessment study on the ceiling of annual extraction of iron ore mining in Goa has recommended the enhancement of the
mining cap to 30mtpa. This has been recommended to be further enhanced to 37mtpa after the review of the Macro-
Environmental Impact Assessment and augmenting the carrying capacity. The report is pending for consideration of the
Supreme Court. Post the Supreme Court clearance, the State Government will allocate the limits. It has been assumed that
the allocation will be made based on the proportionate share of the current EC limits.
The mining operations resumed in October 2015. Management has estimated the recoverable amounts of these assets
considering the mining cap of 30mtpa in FY2017 and 37mtpa from FY2018 and onwards.
A delay of one year in increase in the mining cap to 30mtpa and 37mtpa would result in a reduction in the recoverable
amount by approximately 4% and the recoverable amount would continue to be sufficiently in excess of the carrying value.
The carrying value of assets as at 31 March 2016 is US$643.9 million (31 March 2015: US$736.3 million).
Management has reviewed the carrying value of Karnataka and Goa mining assets as at the balance sheet date, estimated
the recoverable amounts of these assets and concluded that there was no impairment as the recoverable amount
(estimated based on fair value less costs of disposal) exceeded the carrying amounts.
The Group has also carried out a sensitivity analysis on key variables including delay in increase in the mining cap,
movement in iron ore prices, discount rate and appreciation of rupee against US dollar. Based on the sensitivity analysis,
the recoverable amount is still expected to exceed the carrying value.
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2(b) Critical accounting judgement and estimation uncertainty continued
(viii) Assessment of impairment at Western Cluster Limited (WCL)
The project in Liberia is at exploratory stage and considering the low iron ore prices and volatility, geo-political factors and
no immediate plans for any substantive expenditure, the Group has impaired these assets fully.
Details of impairment charge are disclosed in Note 5.
(ix) Assessment of impairment at Konkola Copper Mines (KCM)
The KCM operations in Zambia have experienced the challenging price environment, rising electricity cost and other
operational challenges. Due to these factors, the Group has reviewed the carrying value of its property, plant and
equipment at KCM as at balance sheet date, estimated the recoverable amounts of the assets and concluded that there
was no impairment because the recoverable amount (estimated based on fair value less costs of disposal) exceeded the
carrying amounts.
The Group has also carried out a sensitivity analysis on key variables like movement in copper prices, discount rate
and increase in production. Based on the sensitivity analysis, the recoverable amount is still expected to exceed the
carrying value.
The carrying value of assets as at 31 March 2016 is US$1,744.9 million (31 March 2015: US$2,010.3 million).
(x) Restoration, rehabilitation and environmental costs
Provision is made for costs associated with restoration and rehabilitation of mining sites as soon as the obligation to incur
such costs arises. Such restoration and closure costs are typical of extractive industries and they are normally incurred at
the end of the life of the mine. The costs are estimated on an annual basis on the basis of closure plans and the estimated
discounted costs of dismantling and removing these facilities and the costs of restoration are capitalised as soon as the
obligation to incur such costs arises. A corresponding provision is created on the liability side. The capitalised asset is
charged to the income statement over the life of the operation through the depreciation of the asset and the provision is
increased each period via unwinding the discount on the provision. Management estimates are based on local legislation
and/or other agreements. The actual costs and cash outflows may differ from estimates because of changes in laws and
regulations, changes in prices, analysis of site conditions and changes in restoration technology.
(xi) Provisions and liabilities
Provisions and liabilities are recognised in the period when it becomes probable that there will be a future outflow of funds
resulting from past operations or events that can be reasonably estimated. The timing of recognition requires the
application of judgement to existing facts and circumstances which may be subject to change especially when taken in the
context of the legal environment in India. The actual cash outflows may take place over many years in the future and hence
the carrying amounts of provisions and liabilities are regularly reviewed and adjusted to take into account the changing
circumstances and other factors that influence the provisions and liabilities. This is set out in Note 30.
(xii) Contingencies and commitments
In the normal course of business, contingent liabilities may arise from litigation, taxation and other claims against the Group.
Where it is management’s assessment that the outcome cannot be reliably quantified or is uncertain, the claims are
disclosed as contingent liabilities unless the likelihood of an adverse outcome is remote. Such liabilities are disclosed in the
notes but are not provided for in the financial statements.
While considering the possible, probable and remote analysis of taxation, legal and other claims, there is always a certain
degree of judgement involved pertaining to the application of the legislation which in certain cases is supported by views
of tax experts and/or earlier precedents in similar matters. Although there can be no assurance regarding the final outcome
of the legal proceedings, the Group does not expect them to have a materially adverse impact on the Group’s financial
position or profitability. These are set out in Note 38 and Note 42.
(xiii) The HZL and BALCO call options
The Group had exercised its call option to acquire the remaining 49% interest in BALCO and 29.5% interest in HZL. The
Government of India has, however, contested the validity of the options and disputed their valuation performed in terms of
the relevant agreements, the details of which are set out in Note 39. In view of the lack of resolution on the options, the
non-response to the exercise and valuation request from the Government of India, the resultant uncertainty surrounding
the potential transaction and the valuation of the consideration payable, the Group considers the strike price of the options
to be at fair value, accordingly, the value of the option would be nil, and hence, the call options have not been recognised in
the financial statements.
3. Segment information
The Group is a diversified natural resources group engaged in exploring, extracting and processing minerals and oil & gas.
We produce zinc, lead, silver, copper, aluminium, iron ore, oil & gas and commercial power and have presence across India,
South Africa, Namibia, Ireland, Australia and Liberia. The Group is also in the business of port operations in India.
The Group’s reportable segments defined in accordance with IFRS 8 are as follows:
• Zinc-India
• Zinc-International
• Oil & Gas
• Iron Ore
• Copper-India/Australia
• Copper-Zambia
• Aluminium
• Power
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 162
Notes to the Financial Statements continued
3. Segment information continued
The components not meeting the quantitative threshold for reporting are being reported as ‘Others’.
Management monitors the operating results of reportable segments for the purpose of making decisions about resources
to be allocated and for assessing performance. Segment performance is evaluated based on the EBITDA of each segment.
Business segment financial data includes certain corporate costs, which have been allocated on an appropriate basis.
Inter-segment sales are charged based on prevailing market prices.
The following tables present revenue and profit information and certain asset and liability information regarding the
Group’s reportable segments for the years ended 31 March 2016 and 31 March 2015. Items after operating profit are not
allocated by segment.
(a) Reportable segments
Year ended 31 March 2016
(US$ million)
REVENUE
Sales to external
customers
Inter-segment
sales3
Segment
revenue
Segment result
EBITDA1
Depreciation
and
amortisation2
Special items
(Note 5)
Operating loss
Investment
revenue
Finance costs
Other gains
and (losses)
(net)
LOSS BEFORE
TAXATION
Segments
assets
Unallocated
assets
TOTAL ASSETS
Segment
liabilities
Unallocated
liabilities
TOTAL
LIABILITIES
Other segment
information
Additions to
property,
plant and
equipment
and intangible
assets
Depreciation
and
amortisation
Impairment
losses
(Note 5)
Zinc-
India
Zinc-
International Oil & Gas
Iron Ore
Copper-
India/
Australia
Copper-
Zambia Aluminium
Power
Total
reportable
segment
Elimination/
Others
Total
operations
2,111.0
391.5
1,322.3
341.8
3,196.8
966.7
1,692.3
691.7
10,714.1
23.8
10,737.9
–
–
–
8.2
0.4
5.8
2.0
15.8
32.2
(32.2)
–
2,111.0
391.5
1,322.3
350.0 3,197.2
972.5
1,694.3
707.5
10,746.3
(8.4)
10,737.9
995.0
68.1
570.4
73.4
336.6
(17.9)
106.7
196.3
2,328.6
7.8
2,336.4
(1,455.2)
(5,210.1)
(4,328.9)
697.8
(1,280.4)
(72.5)
(4,984.0)
8,034.7
544.3
7,391.5
1,432.2
1,351.8 2,208.7
5,915.1
3,205.9
30,084.2
88.1
30,172.3
147.1
30,319.4
(1,290.4)
(191.7) (1,018.2)
(1,213.7)
(766.5) (1,461.0)
(6,912.8) (3,324.2)
(16,178.5)
(56.0) (16,234.5)
(7,232.4)
(23,466.9)
239.9
58.5
214.3
14.8
18.4
27.6
119.6
50.3
743.4
7.3
750.7
(119.9)
(56.4)
(826.3)
(62.5)
(32.3)
(179.5)
(101.8)
(74.1)
(1,452.8)
(2.4)
(1,455.2)
(4,934.2)
(245.2)
(7.6)
(5,187.0)
1 EBITDA is a non-IFRS measure and represents operating profit/(loss) before special items, depreciation, amortisation, interest and tax.
2 Depreciation and amortisation is also provided to the chief operating decision maker on a regular basis.
3 Transfer prices for inter-segment sales are on an arm’s length basis in a manner similar to transactions with third parties. However, inter-segment sales
at BALCO amounting to US$6.6 million for the year ended 31 March 2016 (31 March 2015: Nil), is at cost.
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163
3. Segment information continued
Year ended 31 March 2015
Zinc-
India
Zinc-
International Oil & Gas
Iron Ore
Copper-
India/
Australia
Copper-
Zambia Aluminium
Power
Total
reportable
segment
Elimination/
Others
Total
operations
(US$ million)
REVENUE
Sales to external
customers
2,357.0
586.9
2,397.5
311.4 3,682.7
883.5
2,078.1
552.8
12,849.9
28.8
12,878.7
Inter-segment
sales3,4
Segment
revenue
Segment result
EBITDA1
Depreciation
and
amortisation2
Special items
(Note 5)
Operating loss
Investment
revenue
Finance costs
Other gains
and (losses)
(net)
LOSS BEFORE
TAXATION
Segments
assets5
Unallocated
assets
TOTAL ASSETS
Segment
liabilities5
Unallocated
liabilities
TOTAL
LIABILITIES
Other segment
information
Additions to
property,
plant and
equipment
and intangible
assets
Depreciation
and
amortisation
Impairment
losses
(Note 5)
–
–
–
15.1
18.0
193.6
3.8
35.3
265.8
(265.8)
–
2,357.0
586.9 2,397.5
326.5 3,700.7
1,077.1
2,081.9
588.1
13,115.7
(237.0)
12,878.7
1,192.5
180.8
1,476.8
31.4
281.0
(3.8)
415.5
153.8
3,728.0
13.2
3,741.2
(2,005.7)
(6,744.2)
(5,008.7)
832.6
(1,387.2)
(76.9)
(5,640.2)
7,356.8
694.1
12,948.8
1,924.3
1,357.8
2,387.1
6,304.6
3,584.7
36,558.2
58.4
36,616.6
372.3
36,988.9
(277.9)
(253.0) (3,105.7) (1,329.8) (1,286.6) (1,474.2)
(5,171.6) (2,388.5)
(15,287.3)
(113.9)
(15,401.2)
(9,330.3)
(24,731.5)
217.7
34.4
1,079.6
42.1
29.7
58.2
148.9
140.3
1,750.9
1.1
1,752.0
(133.2)
(111.1) (1,270.3)
(42.3)
(51.6)
(187.2)
(140.2)
(65.8)
(2,001.7)
(4.0)
(2,005.7)
–
– (6,642.1)
–
–
(52.3)
–
–
(6,694.4)
–
(6,694.4)
1 EBITDA is a non-IFRS measure and represents operating profit/(loss) before special items, depreciation, amortisation, interest and tax.
2 Depreciation and amortisation is also provided to the chief operating decision maker on a regular basis.
3 Transfer prices for inter-segment sales are on an arm’s length basis in a manner similar to transactions with third parties. However, inter-segment sales at
BALCO amounting to US$6.6 million for the year ended 31 March 2016 (31 March 2015: Nil), is at cost.
4 Previous year amounts have been reclassified to ensure consistency.
5 During the year ended 31 March 2016, consequent to certain power facilities at a subsidiary being commissioned for the generation and sale of commercial
power, assets (US$349.2 million) and liabilities (US$48.6 million) in respect of capital work-in-progress for the previous year relating to the generation
and sale of commercial power has been reclassified from the ‘Aluminium’ segment to the ‘Power’ segment as this more accurately reflects the
segment breakdown.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 164
Notes to the Financial Statements continued
3. Segment information continued
(b) Geographical segmental analysis
The Group’s operations are located in India, Zambia, Namibia, South Africa, Liberia, Ireland, Australia and UAE. The
following table provides an analysis of the Group’s sales by region in which the customer is located, irrespective of the
origin of the goods.
(US$ million)
India
China
Far East Asia
Middle East
Europe
Africa
Asia Others
UK
Others
Total
Year ended
31 March
2016
Percentage
Year ended
31 March
2015
Percentage
6,773.9
527.9
902.5
1,075.1
345.3
91.1
725.3
103.9
192.9
63.1%
4.9%
8.4%
10.0%
3.2%
0.8%
6.8%
1.0%
1.8%
7,872.0
1,314.2
1,168.4
1,143.7
643.3
192.3
118.9
2.2
423.7
61.1%
10.2%
9.1%
8.9%
5.0%
1.5%
0.9%
0.0%
3.3%
10,737.9
100.0%
12,878.7
100.0%
The following is an analysis of the carrying amount of non-current assets, and additions to property, plant and equipment,
analysed by the country in which the assets are located. No material non-current assets are located in the United Kingdom
and no significant additions to property, plant and equipment have been made there.
(US$ million)
Australia
India
Zambia
Namibia
Ireland
South Africa
Sri Lanka
Other
Total
Carrying amount of
non-current assets1
Additions to property,
plant and equipment
As at
31 March
2016
As at
31 March
2015
Year ended
31 March
2016
Year ended
31 March
2015
4.4
14,752.9
1,863.3
119.7
6.7
254.0
–
–
13.4
20,996.2
1,905.4
128.5
37.7
335.9
–
213.6
2.6
651.7
27.6
35.4
–
23.1
7.3
3.0
3.8
1,635.7
58.2
21.5
12.7
5.9
2.7
11.5
17,001.0 23,630.7
750.7
1,752.0
1 Non-current assets do not include deferred tax assets, non-current tax assets and derivative assets.
Information about major customer
Included in revenue from the Oil & Gas segment are revenues of US$663.1 million (year ended 31 March 2015:
US$1,393.2 million), which arose from sales to the Group’s largest customer; sales to this customer were more than 10% in
the previous year. No customer contributed 10% or more to the Group’s revenue during the year ended 31 March 2016.
4. Total revenue
(US$ million)
Revenue from sales of goods
Other operating income
Investment revenue
Total
Year ended
31 March
2016
Year ended
31 March
2015
10,737.9
101.7
697.8
12,878.7
104.0
832.6
11,537.4
13,815.3
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
165
5. Special items
(US$ million)
Impairment of oil & gas assets1a
Impairment of mining reserves and assets
Iron ore1b
Copper1c,d
Total impairment charge
Voluntary retirement schemes (redundancy costs)2
Provision for receivables7
Provision for investment in coal blocks3
Acquisition and restructuring related costs4
Provision for contractor dispute5
Special tax item6
Year ended 31 March 2016
Year ended 31 March 2015
Tax effect
of special
items/
special tax
items
Special
items
Special
items
after tax
Special
items
(4,934.2)
1,903.3
(3,030.9)
(6,642.1)
(245.2)
(7.6)
(5,187.0)
(23.1)
–
–
–
–
–
–
–
1,903.3
7.9
–
–
–
–
(173.8)
(245.2)
(7.6)
(3,283.7)
(15.2)
–
–
–
–
(173.8)
–
(52.3)
(6,694.4)
–
(36.6)
(5.4)
0.4
(8.2)
–
Tax effect
of special
items/
special tax
items
2,138.0
–
–
–
2,138.0
–
12.5
1.8
–
–
52.8
Special
items
after tax
(4,504.1)
–
(52.3)
(4,556.4)
–
(24.1)
(3.6)
0.4
(8.2)
52.8
Special items
(5,210.1)
1,737.4
(3,472.7)
(6,744.2)
2,205.1
(4,539.1)
1a During the year ended 31 March 2016, the Group has recognised impairment charge on its oil & gas assets of US$4,934.2 million mainly relating to
Rajasthan block, triggered by the significant fall in the crude oil prices, prevailing discount of Rajasthan crude and adverse long-term impact of revised
cess. Of this charge, US$1,143.5 million has been recorded against oil & gas properties and US$3,790.7 million against exploratory and evaluation assets.
The valuation remains dependent on price and further deterioration in long-term prices may result in additional impairment.
For oil & gas properties, CGUs identified are on the basis of a production sharing contract (PSC) level as it is the smallest group of assets that generates
cash inflows that are largely independent of the cash inflows from other assets or group of assets.
The recoverable amount of the CGU, US$2,204.0 million (March 2015: US$5,825.5 million), was determined based on the fair value less costs of disposal
approach, a level-3 valuation technique in the fair value hierarchy, as it more accurately reflects the recoverable amount based on our view of the
assumptions that would be used by a market participant. This is based on the cash flows expected to be generated by the projected oil or natural gas
production profiles up to the expected dates of cessation of production sharing contract (PSC)/cessation of production from each producing field based
on current estimates of reserves and risked resources. Reserves assumptions for fair value less costs of disposal discounted cash flow tests consider all
reserves that a market participant would consider when valuing the asset, which are usually broader in scope than the reserves used in a value-in-use test.
Discounted cash flow analysis used to calculate fair value less costs of disposal uses assumption for oil price of US$41 per barrel for FY2017 (March 2015:
US$70 per barrel) and the long-term nominal price of US$70 per barrel (March 2015: US$84 per barrel) derived from a consensus of various analyst
recommendations. Thereafter, these have been escalated at a rate of 2.5% per annum. The cash flows are discounted using the post-tax nominal discount
rate of 11.00% (March 2015: 10.32%) derived from the post-tax weighted average cost of capital.
The impairment loss relates to the Oil & Gas business reportable segments, however this has been shown as special items and does not form part of the
segment result for the purpose of segment reporting.
During the year ended 31 March 2015, the Group has recognised impairment charge on oil & gas assets of US$6,642.1 million mainly relating to Rajasthan
block and Sri Lanka block, triggered by the significant fall in the crude oil prices. Of this charge, US$2,162.1 million has been recorded against oil & gas
properties and US$4,480.0 million against exploratory and evaluation assets. The impairment charge of US$4,480.0 million also includes US$778.1 million
impairment charge relating to exploratory wells in Sri Lanka, as the development of hydrocarbons in the said block is not commercially viable at the
current prices.
1b During the year ended 31 March 2016, the Group has recognised US$227.5 million impairment charge in respect of the exploratory assets in West Africa
(Western Cluster, Liberia) on account of low iron ore prices, geo-political factors and no plans for any substantive expenditure resulting in continued
uncertainty in the project and relates to US$17.7 million impairment charge in the carrying amount of idle assets grouped under assets under construction
at Bellary, Karnataka in India.
1c During the year ended 31 March 2016, the Group has recognised US$7.6 million impairment charge relating to its operation in the Copper Mines of Tasmania
Pty Ltd, Australia on account of extended care and maintenance, lower copper prices and continued uncertainty in start-up of operations.
1d During the year ended 31 March 2015, the Group has recognised US$52.3 million impairment charge relating to underground assets in Nchanga in Konkola
Copper Mines Plc on account of suspension of operations and the fall in the copper prices. Of this charge, US$47.2 million has been recorded against
mining property and leases and US$5.1 million against plant and equipment.
2 US$23.1 million incurred under a Group-wide voluntary retirement initiative across various Group entities.
3 Relates to provision recognised in respect of expenditure incurred on cancelled coal blocks allotted to Company’s subsidiaries, pursuant to the order of the
Supreme Court of India.
4 Acquisition related costs include reversal of excess provision for costs of Group simplification and restructuring and other acquisition related costs
classified as special items in previous year.
5 Relates to a provision recognised following a dispute with a mining contractor at KCM Zambia.
6 As a result of amendments to the Zambian Mining Tax regime, effective from 1 January 2015, the tax rate on integrated mining operations (excluding
custom smelting mineral processing activities) was reduced from 30% to 0%. The deferred tax liability in relation to mining operations was therefore
reversed during the year ended 31 March 2015, resulting in a net credit to the income statement of US$52.8 million. Consequent to the subsequent
amendments to the Zambian Mining Tax regime, effective from 1 July 2015 the tax rate on mining operations has been restored from 0% to 30%. Further,
the set off of carried forward losses relating to mining operations has been restricted to a maximum of 50% of the income for the year. Accordingly, a total
deferred tax charge of US$173.8 million resulting from the amendments has been recognised under ‘Special tax items’ during the year ended 31 March
2016, increase as compared to reversal in previous year is mainly on account of restriction placed on maximum loss which can be set off in a particular year.
In respect of iron ore mining at Goa, the Supreme Court has ruled that, out of the sale proceeds of inventory of excavated ore lying unsold, the leaseholder
would be paid only the average cost of excavation. However, the carrying value includes the amortisation based on the fair value of mining reserves
determined at the time of acquisition. Consequently, the excess of the carrying value of receivables over the net realisable value has been written off.
7
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS
166
Notes to the Financial Statements continued
6. Investment revenue
(US$ million)
Interest income on loans and receivables
Interest income on cash and bank balances
Change in fair value of financial assets held for trading realised and unrealised
Dividend income on financial assets held for trading
Dividend income on available for sale investment
Foreign exchange gain on cash and liquid investments
7. Finance costs
(US$ million)
Interest on loans, overdrafts and bonds (a)
Coupon interest on convertible bonds (Note 28)
Accretive interest on convertible bonds (Note 28)
Total interest charge on convertible bonds (b)
Other borrowing and finance costs (c)
Total interest cost (a+b+c)
Unwinding of discount on provisions (Note 30)
Net interest on defined benefit arrangements (Note 33)
Capitalisation of borrowing costs (Note 17)1
Gain on buy back of convertible bond
Year ended
31 March
2016
Year ended
31 March
2015
26.4
124.6
541.3
0.3
0.1
5.1
697.8
29.3
139.9
656.9
0.3
–
6.2
832.6
Year ended
31 March
2016
Year ended
31 March
2015
1,101.3
62.4
28.7
91.1
160.3
1,352.7
13.5
10.4
(75.6)
(20.6)
1,116.8
86.8
76.6
163.4
194.1
1,474.3
36.8
9.2
(133.1)
–
1,280.4
1,387.2
1 All borrowing costs are capitalised using rates based on specific borrowings with the interests ranging between 1.9% to 12.2% per annum.
8. Other gains and (losses) (net)
(US$ million)
Gross foreign exchange losses
Qualifying exchange losses capitalised (Note 17)
Net foreign exchange gains and losses
Change in fair value of financial liabilities measured at fair value
Net (loss)/gain arising on qualifying hedges and non-qualifying hedges
9. Loss for the year has been stated after charging/(crediting):
(US$ million)
Depreciation and amortisation
Costs of inventories recognised as an expense
Auditor’s remuneration for audit services
Research and development
Net loss/(profit) on disposal of property, plant and equipment
Provision for receivables
Impairment of mining reserves and assets
Impairment of oil & gas assets
Staff costs
Foreign exchange gains and losses1
Year ended
31 March
2016
Year ended
31 March
2015
(103.7)
10.1
(93.6)
(0.9)
22.0
(72.5)
(80.8)
14.4
(66.4)
(1.1)
(9.4)
(76.9)
Year ended
31 March
2016
Year ended
31 March
2015
1,455.2
3,708.0
2.4
0.8
1.5
–
252.8
4,934.2
639.7
106.1
2,005.7
3,905.0
2.5
0.8
4.6
80.4
52.3
6,642.1
812.8
82.8
1
Includes foreign exchange losses on non-operational monetary items of US$93.6 million (31 March 2015: US$66.4 million), and on operational monetary
items of US$17.6 million (31 March 2015: US$22.6 million). It also includes foreign exchange gain on cash and liquid investments of US$5.1 million
(31 March 2015: US$6.2 million).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
167
10. Auditor’s remuneration
The table below shows the fees payable globally to the Company’s auditor, Deloitte LLP, for statutory external audit and
audit related services, as well as fees paid to other accountancy firms for statutory external audit and audit related services
in each of the two years ended 31 March:
(US$ million)
Fees payable to the Company’s auditor for the audit of Vedanta Resources plc annual accounts
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Fees payable to the Company’s auditor and their associates for other services to the Group
Other services pursuant to legislation1
Tax services2
Corporate finance services3
Other services4
Total non-audit fees
Total fees paid to the Company’s auditor
Audit fees payable to other auditors of the Group’s subsidiaries
Non-audit fees payable to other auditors of the Group’s subsidiaries
Total fees paid to other auditors
Year ended
31 March
2016
Year ended
31 March
2015
0.6
1.8
2.4
1.4
0.4
0.7
0.2
2.7
5.1
0.3
0.2
0.5
0.6
1.9
2.5
1.4
0.4
0.5
0.2
2.5
5.0
0.4
0.1
0.5
1 Other services pursuant to legislation principally comprise assurance services, being quarterly reviews of the Group’s subsidiaries’ results and the half year
review of the Group’s results.
2 Tax services principally comprise certification and assurance services as required by Indian and overseas tax regulations.
3 Corporate finance services principally comprise Group simplification and other acquisition related certifications. These assurance-related services are
ordinarily provided by the auditor.
Includes certification related services.
4
11. Employee numbers and costs
Average number of persons employed by the Group in the year
Class of business
Zinc
– India
– International
Iron Ore
Copper
– India/Australia
– Zambia
Aluminium
Power
Oil & Gas
Other
Costs incurred during the year in respect of employees and Executive Directors
(US$ million)
Salaries and wages
Defined contribution pension scheme costs (Note 33)
Defined benefit pension scheme costs (Note 33)
Share-based payments charge
Year ended
31 March
2016
Year ended
31 March
2015
6,780
4,935
1,845
3,034
8,273
1,058
7,215
5,266
334
1,527
321
7,428
5,439
1,989
3,465
8,710
1,185
7,525
5,932
358
1,684
140
25,535
27,717
Year ended
31 March
2016
Year ended
31 March
2015
575.8
30.1
18.2
15.6
639.7
733.8
30.7
19.7
28.6
812.8
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 168
Notes to the Financial Statements continued
12. Tax
(US$ million)
Current tax:
UK Corporation tax
Foreign tax
– India
– Zambia
– Australia
– Africa and Europe
– Other
Deferred tax: (Note 31)
Deferred tax impact on impairment of oil & gas assets (Note 5)
Deferred tax charge/(reversal) due to change in tax regime in Zambia (Note 5)
Deferred tax others
Net tax credit1
Effective tax rate2
Year ended
31 March
2016
Year ended
31 March
2015
1.5
(19.3)
538.5
0.0
0.0
4.5
(7.8)
562.7
1.0
(0.1)
22.1
4.4
536.7
570.8
(1,903.3)
173.8
(289.1)
(2,138.0)
(52.8)
(232.5)
(2,018.6)
(2,423.3)
(1,481.9)
(1,852.5)
29.7%
32.8%
Includes tax credit on special items and tax credit – special items of US$1,737.4 million during the year ended 31 March 2016 (31 March 2015: US$2,205.1 million).
1
2 Effective tax rate excluding special items, tax credit on special items, and dividend distribution tax of 3.1% during the year ended 31 March 2016 (31 March
2015: 25.7%).
The deferred tax expense recycled from equity to the income statement is US$1.6 million (2015: US$6.0 million).
Tax expense
(US$ million)
Tax effect of special items (Note 5)
Special tax item – deferred tax charge/(reversal) due to change in tax regime in Zambia (Note 5)
Net tax credit – special items
Tax expense – others
Net tax (credit)/expense
Deferred tax recognised in the income statement:
(US$ million)
Accelerated capital allowances (including fair value adjustments)
Unutilised tax losses1
Other temporary differences2
Year ended
31 March
2016
Year ended
31 March
2015
(1,911.2)
173.8
(2,152.3)
(52.8)
(1,737.4)
255.5
(2,205.1)
352.6
(1,481.9)
(1,852.5)
Year ended
31 March
2016
Year ended
31 March
2015
(1,281.6)
(479.7)
(257.3)
(2,634.1)
440.2
(229.4)
(2,018.6)
(2,423.3)
1 US$236.8 million has been reclassified from unutilised tax losses to other temporary differences for the year ended 31 March 2015.
2
Includes MAT credit (net) US$175.7 million for the period ended 31 March 2016 (31 March 2015: US$321.2 million).
No deferred tax has been recognised in respect of temporary differences associated with investments in subsidiaries where
the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such
differences will not reverse in the foreseeable future. The aggregate amount of temporary differences associated with such
investments in subsidiaries is represented by the contribution of those investments to the Group’s retained earnings and
amounted to US$7,098.1 million (2015: US$5,768.3 million).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
169
12. Tax continued
A reconciliation of income tax expense applicable to accounting profit/(loss) before tax at the Indian statutory income tax
rate to income tax expense/(credit) at the Group’s effective income tax rate for the year ended 31 March 2016 is as follows:
(US$ million)
Accounting loss before tax
At Indian statutory income tax rate of 34.61% (2015: 33.99%)
Unrecognised tax losses
Disallowable expenses/other permanent differences
Dividend distribution tax
Non-taxable income
Impact of tax rate difference
Impact of change in tax regime1
Tax holiday and similar exemptions
Adjustments in respect of previous years
At effective income tax rate of 29.7% (2015: 32.8%)
Year ended
31 March
2016
Year ended
31 March
2015
(4,984.0)
(5,640.2)
(1,724.9)
224.2
(72.0)
248.5
(111.4)
67.5
201.9
(311.0)
(4.7)
(1,917.1)
107.6
86.5
68.1
(73.0)
118.8
(52.8)
(238.8)
48.2
(1,481.9)
(1,852.5)
1
Includes US$173.8 million (31 March 2015: US$(52.8) million) due to change in tax regime in Zambia (Note 5) and US$28.1 million due to change in Indian
statutory rate from 33.99% to 34.61%.
Certain businesses of the Group within India are eligible for specified tax incentives in the form of tax exemptions. Most of
such tax exemptions are relevant for the companies operating in India. These are briefly described as under:
The location-based exemption
In order to boost industrial and economic development in undeveloped regions, provided certain conditions are met,
profits of newly established undertakings located in certain areas in India may benefit from a tax holiday. Such a tax holiday
works to exempt 100% of the profits for the first five years from the commencement of the tax holiday, and 30% of profits
for the subsequent five years. This deduction is available only for units established up to 31 March 2012. However, such
undertaking would continue to be subject to the Minimum Alternative tax (MAT).
The Group has such types of undertakings at Haridwar and Pantnagar, which are part of Hindustan Zinc Limited (Zinc
India). In the current year, Haridwar and Pantnagar units are eligible for deduction at 30% and 100% of taxable profits
respectively. For the next financial year, both would be eligible for deduction at 30% of taxable profits.
Sectoral benefit – power plants
To encourage the establishment of certain power plants, provided certain conditions are met, tax incentives exist to
exempt 100% of profits and gains for any 10 consecutive years within the 15-year period following commencement of the
power plant’s operation. The Group currently has total operational capacity of 8.4GW of thermal based power generation
facilities and wind power capacity of 274MW. However, such undertakings generating power would continue to be subject
to the MAT provisions.
The Group has power plants which benefit from such deductions, at various locations of Hindustan Zinc Limited (where
such benefits have been drawn), Talwandi Sabo Power Limited, Vedanta Limited and Bharat Aluminium Company Limited
(where no benefit has been drawn).
Sectoral benefit – oil & gas
Provided certain conditions are met, profits of newly constructed industrial undertakings engaged in the oil & gas sector
may benefit from a deduction of 100% of the profits of the undertaking for a period of seven consecutive years. This
deduction is only available to blocks licensed prior to 31 March 2011. However, such businesses would continue to be subject
to the MAT provisions.
In the Group, Cairn India Limited benefits from such deductions. Current year is the last year for claiming such benefit.
In addition, the subsidiaries incorporated in Mauritius are eligible for tax credit to the extent of 80% of the applicable tax
rate on foreign source income.
The total effect of such tax holidays and exemptions was US$311.0 million for the year ended 31 March 2016 (31 March 2015:
US$238.8 million).
13. Earnings per share
Basic earnings per share (EPS) amounts are calculated by dividing net profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Weighted average number of treasury shares, 24,231,160 (2015: 24,206,816), outstanding during the year are excluded from
the total outstanding shares for the calculation of EPS.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 170
Notes to the Financial Statements continued
13. Earnings per share continued
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders by the
weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options and
the Group’s convertible bonds). The following reflects the income and share data used in the basic and diluted earnings per
share computations:
(US$ million)
Net loss attributable to equity holders of the parent
Loss per share based on loss for the year
Basic/diluted loss per share on loss for the year
(US$ million except as stated)
Loss for the year attributable to equity holders of the parent (US$ million)
Weighted average number of shares of the Company in issue (million)
Loss per share on loss for the year (US cents per share)
Year ended
31 March
2016
Year ended
31 March
2015
(1,837.4)
(1,798.6)
Year ended
31 March
2016
Year ended
31 March
2015
(1,837.4)
276.0
(1,798.6)
274.8
(665.8)
(654.5)
The effect of 6.8 million (2015: 4.0 million) potential ordinary shares, which relate to share option awards under the LTIP
scheme, on the attributable loss for the year is anti-dilutive and thus these shares are not considered in determining diluted
loss per share.
The loss for the year would be decreased if holders of the convertible bonds in Vedanta exercised their right to convert
their bond holdings into Vedanta equity. The impact on loss for the year of this conversion would be the reduction in
interest payable on the convertible bond.
The adjustment in respect of convertible bonds has an anti-dilutive impact on earnings and is thus not considered in
determining diluted EPS.
Loss per share based on underlying loss for the year (non-GAAP)
Underlying earnings is an alternative earnings measure, which the management considers to be a useful additional measure
of the Group’s performance. The Group’s underlying loss is the loss for the year after adding back special items, other
losses/(gains) [net] (Note 8) and their resultant tax (including taxes classified as special items) and non-controlling interest
effects. This is a non-GAAP measure.
(US$ million)
Loss for the year attributable to equity holders of the parent
Special items
Other (gains)/losses [net]
Tax and non-controlling interest effect of special items (including taxes classified as
special items) and other losses/(gains)
Underlying attributable loss for the year
Basic/diluted loss per share on underlying loss for the year (non-GAAP)
(US$ million except as stated)
Underlying loss for the year (US$ million)
Weighted average number of shares of the Company in issue (million)
Loss per share on underlying loss for the year (US cents per share)
Note
5
Year ended
31 March
2016
Year ended
31 March
2015
(1,837.4)
5,210.1
72.5
(1,798.6)
6,744.2
76.9
(3,809.3)
(5,061.4)
(364.1)
(38.9)
Year ended
31 March
2016
Year ended
31 March
2015
(364.1)
276.0
(131.9)
(38.9)
274.8
(14.2)
The effect of 6.8 million (2015: 4.0 million) potential ordinary shares, which relate to share option awards under the LTIP
scheme, on the underlying attributable loss for the year is anti-dilutive and thus these shares are not considered in
determining diluted underlying loss per share.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
171
14. Dividends
(US$ million)
Amounts recognised as distributions to equity holders:
Equity dividends on ordinary shares:
Final dividend for 2014-15: 40.0 US cents per share (2013-14: 39.0 US cents per share)
Interim dividend paid during the year: Nil (2014-15: 23.0 US cents per share)
Proposed for approval at AGM
Equity dividends on ordinary shares:
Final dividend for 2015-16: 30.0 US cents per share (2014-15: 40 US cents per share)
15. Goodwill
(US$ million)
Cost (gross carrying amount)
Accumulated impairment losses
Net carrying amount at 31 March
Year ended
31 March
2016
Year ended
31 March
2015
110.6
–
110.6
107.5
63.8
171.3
82.8
110.8
Year ended
31 March
2016
Year ended
31 March
2015
16.6
–
16.6
16.6
–
16.6
Goodwill is allocated for impairment testing purposes to the following cash-generating units (CGUs). The allocation of
goodwill to CGUs is as follows:
• US$12.2 million Copper India.
• US$4.4 million arising on acquisition of Goa Energy Limited.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
The Company has undertaken an impairment review of goodwill of US$16.6 million as at 31 March 2016. The carrying
amount of goodwill allocated to the relevant cash-generating unit is considered to be insignificant in comparison with the
total carrying value of the cash-generating unit. The carrying amount of goodwill was evaluated using the higher of fair
value less cost of disposal (FVLCD) or value in use based on discounted future cash flows of the entities to which the
goodwill pertains and comparing this to the total carrying value of the relevant cash-generating units. It was determined
that the carrying amount of goodwill is not impaired and nor was impairment indicated following a reasonably possible
change in a key assumption.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 172
Notes to the Financial Statements continued
16. Intangible assets
Intangible assets include Port concession rights to operate a general cargo berth for handling coal at the outer harbour of
the Visakhapatnam port on the east coast of India, rights to use treated water from a sewage treatment plant at Zinc India
operations and software licenses.
(US$ million)
Cost
As at 1 April 2014
Addition
Foreign exchange differences
As at 1 April 2015
Addition
Foreign exchange differences
As at 31 March 2016
Accumulated amortisation
As at 1 April 2014
Charge for the year
Foreign exchange differences
As at 1 April 2015
Charge for the year
Foreign exchange differences
As at 31 March 2016
Net book value
As at 1 April 2014
As at 1 April 2015
As at 31 March 2016
Port
concession
rights1
Others2
Total
99.9
0.8
(4.0)
96.7
0.0
(5.2)
91.5
3.5
3.6
0.2
7.3
3.5
(0.4)
10.4
96.4
89.4
81.1
14.8
4.7
(0.9)
18.6
2.8
(1.6)
19.8
2.6
3.9
(0.4)
6.1
3.2
(0.6)
8.7
12.2
12.5
11.1
114.7
5.5
(4.9)
115.3
2.8
(6.8)
111.3
6.1
7.5
(0.2)
13.4
6.7
(1.0)
19.1
108.6
101.9
92.2
1 Vizag General Cargo Berth Private Limited (VGCB), a special purpose vehicle, was incorporated for the coal berth mechanisation and upgrades at
Visakhapatnam port. VGCB is owned by Vedanta Limited and Leighton Welspun Contractors Private Limited (Leighton) in the ratio of 99.99:0.01 as on
31 March 2016 (99.99:0.01 as on 31 March 2015). Leighton has agreed to sell its shares in VGCB to Vedanta Limited. The project is to be carried out on a
design, build, finance, operate, transfer basis and the concession agreement between Visakhapatnam port and VGCB was signed in June 2010. In October
2010, VGCB was awarded with the concession after fulfilling conditions stipulated as a precedent to the concession agreement. Visakhapatnam port has
provided, in lieu of license fee an exclusive license to VGCB for designing, engineering, financing, constructing, equipping, operating, maintaining, and
replacing the project/project facilities and services. The concession period is 30 years from the date of the award of the concession. The capacity of the
upgraded berth would be 10.18mmtpa and that the Vishakhapatnam port would be entitled to receive 38.10% share of the gross revenue as royalty. VGCB
is entitled to recover a tariff from the user(s) of the project facilities and services as per its tariff notification. The tariff rates are linked to the Wholesale
Price Index (WPI) and would accordingly be adjusted as specified in the concession agreement every year. The ownership of all infrastructure assets,
buildings, structures, berths, wharfs, equipment and other immovable and movable assets constructed, installed, located, created or provided by VGCB at
the project site and/or in the port’s assets pursuant to concession agreement would be with VGCB until expiry of this concession agreement. The cost of
any repair, replacement or restoration of the project facilities and services shall be borne by VGCB during the concession period. VGCB has to transfer all
its rights, titles and interest in the project facilities and services free of cost to Visakhapatnam port at the end of the concession period.
2 Others include right to use of sewage treatment plant at Zinc India which is amortised over 25 years. The carrying value was US$7.7 million as on 31 March
2016 (31 March 2015: US$7.7 million). It also includes software licenses which are amortised over a period of three years.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
173
17. Property, plant and equipment
(US$ million)
Cost
At 1 April 2014
Additions
Transfers
Unsuccessful
exploration costs
Disposals
Foreign exchange
differences
At 1 April 2015
Additions
Transfers
Unsuccessful
exploration costs
Disposal4
Foreign exchange
differences
Mining
property
and leases
Leasehold
land and
buildings
Freehold
land and
buildings
Plant and
equipment1
Assets
under
construction
Oil & Gas
properties
Exploratory
and
evaluation
assets
Others
Total
1,174.3
44.2
134.7
9,934.5
212.3
996.5
6,257.5
372.8
(1,291.4)
8,237.0
865.0
533.7
10,273.8
204.2
(439.7)
154.6
16.6
0.2
39,366.6
1,752.0
–
3,174.4
25.8
66.0
–
(7.2)
160.5
11.1
–
–
(0.7)
3,125.7
121.1
11.7
–
(490.4)
168.5
0.1
(4.2)
–
(7.5)
(133.3)
(2.4)
(62.5)
(390.8)
(226.3)
–
(0.3)
–
(37.4)
–
(0.6)
–
–
–
(128.7)
–
–
(0.3)
(128.7)
(46.5)
(1.9)
(24.0)
(841.2)
1,290.4
20.8
333.7
10,715.1
129.0
1,313.0
5,112.0
249.7
(1,673.8)
9,635.7
134.5
–
9,907.7
79.9
–
147.1
15.6
19.6
40,102.2
750.7
–
(152.6)
(3.4)
(93.3)
(551.8)
(278.7)
–
(0.1)
–
(184.1)
–
–
–
–
–
(4.5)
–
–
–
(4.5)
(682.1)
–
(32.8)
(1,112.6)
At 31 March 2016
2,615.5
153.5
1,551.5
11,421.2
3,409.2
9,770.2
9,983.1
149.5
39,053.7
Accumulated
depreciation,
amortisation and
impairment
At 1 April 2014
Charge for the year
Impairment of assets
(Note 5)
Disposal4
Foreign exchange
differences
At 1 April 2015
Charge for the year
Impairment of assets
(Note 5)
Disposal4
Foreign exchange
differences
1,629.6
103.6
47.2
(2.0)
(82.9)
1,695.5
155.9
–
(490.4)
(60.1)
At 31 March 2016
1,300.9
58.2
1.8
–
–
(0.3)
59.7
1.7
–
(6.6)
(0.5)
54.3
198.9
45.9
3,203.9
544.4
28.8
–
3,157.4
1,258.1
14.3
–
32.0
44.4
8,323.1
1,998.2
–
(0.2)
5.1
(23.2)
(15.5)
(123.2)
229.1
35.4
3,607.0
433.6
–
–
7.6
(173.6)
(26.2)
(198.5)
–
–
–
28.8
–
17.6
–
–
2,162.1
–
4,480.0
–
–
(0.1)
6,694.4
(25.5)
–
(0.7)
(17.4)
(240.0)
6,577.6
817.9
4,493.6
–
58.9
4.0
16,750.2
1,448.5
1,143.5
–
4,018.3
–
–
–
5,187.0
(670.6)
–
–
(23.9)
(309.2)
238.3
3,676.1
46.4
8,539.0
8,511.9
39.0 22,405.9
Net book value
At 1 April 2014
At 1 April 2015
At 31 March 2016
1,544.8
1,430.2
1,314.6
102.3
108.8
99.2
975.4
1,061.3
1,313.2
6,730.6
7,108.1
7,745.1
6,228.7
5,083.2
3,362.8
5,079.6
3,058.1
1,231.2
10,259.5
5,414.1
1,471.2
122.6
88.2
110.5
31,043.5
23,352.0
16,647.8
1 Plant and equipment include refineries, smelters, power plants and related facilities. Other tangible fixed assets include office equipment and fixtures,
and light vehicles. At 31 March 2016, land with a carrying value of US$132.5 million (31 March 2015: US$125.9 million) was not depreciated.
2 During the year ended 31 March 2016, interest and foreign exchange losses capitalised was US$85.7 million (31 March 2015: US$147.5 million).
3 Certain property, plant and equipment are pledged as collateral against borrowings, the details related to which have been described in Note 24
on Borrowings.
4 Subsequent to end of life of mines in Lisheen, US$585.0 million has been removed from gross block and US$580.7 million from accumulated depreciation.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 174
Notes to the Financial Statements continued
18. Financial asset investments
Financial asset investments are required to be classified and accounted for as either available-for-sale or fair value through
profit or loss. The Group only has financial asset investments classified as available-for-sale.
Available-for-sale investments
(US$ million)
At 1 April
Movements in fair value
Exchange difference
At 31 March
Year ended
31 March
2016
Year ended
31 March
2015
4.2
2.3
–
6.5
1.7
2.1
0.4
4.2
Financial assets investment represents quoted investments in equity shares that present the Group with an opportunity for
returns through dividend income and gains in value. These securities are held at fair value based on market prices. These
are classified as non-current as on 31 March 2016.
19. Other non-current assets
(US$ million)
Deposits, advances and other receivables due after one year
20. Inventories
(US$ million)
Raw materials and consumables
Work-in-progress
Finished goods
As at
31 March
2016
As at
31 March
2015
237.9
156.0
As at
31 March
2016
852.4
385.3
128.1
As at
31 March
2015
975.8
486.0
143.9
1,365.8
1,605.7
Inventories with a carrying amount of US$758.1 million (2015: US$801.8 million) have been pledged as security against
certain bank borrowings of the Group.
Inventory held at net realisable value amounted to US$142.8 million (2015: US$154.3 million). The write down of inventories
amounted to US$53.7 million (2015: US$50.6 million).
21. Trade and other receivables
(US$ million)
Trade receivables
Amounts due from related parties (Note 39)
Prepayments
Deposits with Governments
Other receivables
As at
31 March
2016
As at
31 March
2015
406.6
2.7
34.4
277.8
622.8
555.0
4.9
31.0
281.3
967.0
1,344.3
1,839.2
The credit period given to customers ranges from zero to 90 days. Other receivables primarily include excise balances,
customs balances, advances to suppliers and claims receivables.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
175
22. Liquid investments
(US$ million)
Bank deposits1
Other investments
As at
31 March
2016
530.3
7,977.9
As at
31 March
2015
1,850.1
6,006.0
8,508.2
7,856.1
1
Includes US$28.2 million (2015: US$29.8 million) of bank deposits at Jharsuguda Aluminium that is restricted in use as it relates to security deposits as
directed by courts in relation to a relief claim filed by a vendor (Note 38).
Bank deposits are made for periods of between three months and one year depending on the cash requirements of the
companies within the Group and earn interest at the respective deposit rates.
Other investments include mutual fund investments which are recorded at fair value with changes in fair value reported
through the income statement. Liquid investments do not qualify for recognition as cash and cash equivalents due to their
maturity period and risk of change in value of the investments.
23. Cash and cash equivalents
(US$ million)
Cash at bank and in hand
Short-term deposits1
As at
31 March
2016
As at
31 March
2015
217.2
211.1
211.6
142.1
428.3
353.7
1
Includes US$44.8 million (2015: US$66.5 million) of cash held in short-term deposit accounts that is restricted in use as it relates to unclaimed dividends,
closure costs and future redundancy payments.
Short-term deposits are made for periods of between one day and three months, depending on the immediate cash
requirements of the Group, and earn interest at the respective short-term deposit rates.
24. Borrowings
(US$ million)
Bank loans
Bonds
Other loans
Total
Borrowings are repayable as:
Within one year (shown as current liabilities)
More than one year
Total
As at
31 March
2016
11,587.9
4,074.6
13.6
As at
31 March
2015
11,474.9
4,075.4
14.5
15,676.1
15,564.8
3,726.6
11,949.5
3,179.2
12,385.6
15,676.1
15,564.8
At 31 March 2016, the Group had available US$1,087.3 million (2015: US$1,208.2 million) of undrawn committed borrowing
facilities in respect of which all conditions precedent had been met. The Group facilities are subject to certain financial
and non-financial covenants. During the current year ended 31 March 2016, the Group has agreed with the lenders for
a moratorium period for testing of certain financial covenants and relaxed level for others. Certain of these financial
covenants will be reset to their original levels beginning March 2019. The primary covenants which must be complied
with include fixed charge cover ratio, net borrowing to EBITDA ratio, total net assets to borrowings ratio and net interest
expense to EBITDA ratio. The principal loans held by Group companies at 31 March 2016 were as follows:
Vedanta Resources plc
Long-term bonds
In July 2008, the Company issued US$500.0 million bonds bearing a coupon rate of 8.75% and US$750.0 million bonds
bearing a coupon rate of 9.50%. US$500.0 million bonds due in January 2014 were duly paid. US$750.0 million bonds are
due for repayment in July 2018. As at 31 March 2016, the amount outstanding is US$750.0 million (2015: US$750.0 million).
In July 2011, the Company issued US$750.0 million bonds bearing a coupon rate of 6.75% and US$900.0 million bonds
bearing a coupon rate of 8.25%. The same is due for repayment in June 2016 and June 2021 respectively. Out of
US$750.0 million bond due in June 2016, US$7 million has been bought back in December 2015. As at 31 March 2016,
the amount outstanding is US$1,643.0 million (2015: US$1,650.0 million).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 176
Notes to the Financial Statements continued
24. Borrowings continued
In June 2013, the Company issued US$1,200 million bonds bearing a coupon rate of 6% and US$500.0 million at a coupon
rate of 7.125%. The same is due for repayment in January 2019 and May 2023. As at 31 March 2016, the amount outstanding
is US$1,700.0 million (2015: US$1,700.0 million).
All the above bonds are issued in the United States of America (USA) pursuant to Rule 144A of US Securities Act of 1933
(Securities Act) and outside of the USA in compliance with Regulations pursuant to the Securities Act. The bonds are
unsecured and are currently rated BB (-) by Standard & Poor’s and Ba3 by Moody’s.
Term loan
In December 2010, the Company availed a facility from the ICICI Bank for US$180.0 million bearing an interest rate of three
month GBP LIBOR plus 385 basis points. The first instalment of US$90.0 million due in December 2014 was duly repaid
and the balance US$90.0 million was duly repaid in December 2015.
In January 2011, the Company availed a facility from ICICI Bank for US$150.0 million bearing an interest rate of three month
US$LIBOR plus 389 basis points. The same is repayable as US$75.0 million in January 2016 and the balance
US$75.0 million in January 2017. US$75.0 million facility has been duly repaid in January 2016. As at 31 March 2016, the
amount outstanding is US$75.0 million (2015: US$150.0 million).
In July 2011, the Company availed a facility from ICICI Bank for US$500.0 million bearing an interest rate of three month
US$LIBOR plus 390 basis points. The same is repayable as US$250.0 million in January 2018 and the balance
US$250.0 million in July 2018. As at 31 March 2016, the amount outstanding is US$500.0 million (2015: US$500.0 million).
In March 2013, the Company entered into a three-year facility agreement with Deutsche Bank as an agent for an amount of
US$185.0 million bearing an interest rate of US$LIBOR plus 315 basis points. The same has been duly repaid in March 2016.
In March 2013, the Company entered into two facility agreements with ICICI Bank for an amount of US$170.0 million and
US$180.0 million. The loans bear interest rates of US$LIBOR plus 430 basis points and US$LIBOR plus 427 basis points
respectively. Of the said loan US$170.0 million is repayable in three annual instalments beginning April 2018 (the first
instalment being 20% and the balance two instalments being 40% each) and US$180.0 million facility is repayable in three
equal annual instalments beginning February 2017. As at 31 March 2016, the amount outstanding is US$350.0 million (2015:
US$350.0 million).
In April 2013, the Company entered into a Standby Letter of Credit agreement arranged by Axis Bank for an amount of
US$150 million bearing an interest rate at three month US$LIBOR plus 290 basis points. The facility is repayable in two
equal annual instalments in April 2017 and April 2018. As at 31 March 2016, the amount outstanding is US$148.5 million
(2015: US$148.5 million).
In October 2013, the Company entered into a syndicated facility agreement with Standard Chartered Bank as facility agent
for borrowing up to US$500 million bearing an interest rate of US$LIBOR plus 357 basis points. The same is repayable as
two equal instalments of US$250.0 million each in October 2017 and January 2018. As at 31 March 2016, the amount
outstanding is US$500.0 million (2015: US$500.0 million).
In November 2013, the Company entered into a two-year Revolving Credit Facility arranged by The Royal Bank of Scotland
and Standard Chartered Bank for borrowing up to US$100 million at an interest rate of US$LIBOR plus 250 basis points.
The same was duly repaid in August 2015.
In December 2013, the Company entered into a facility agreement with Bank of India for borrowing up to US$100 million at
an interest rate of US$LIBOR plus 357 basis points. The same is repayable in two equal instalments of US$50.0 million each
in October 2017 and January 2018. As at 31 March 2016, the amount outstanding is US$100.0 million (2015:
US$100.0 million).
In March 2014, the Company has entered into a US$500 million syndicated facility agreement with Axis Bank as the lead
arranger. The facility bears an interest rate of US$LIBOR plus 352 basis points. The facility was fully drawn in September
2014. The same is repayable as US$100.0 million in December 2018, US$150.0 million in March 2019 and US$250.0 million
in September 2019. As at 31 March 2016, the amount outstanding is US$500.0 million (2015: US$500.0 million).
In March 2015, the Company entered into a facility agreement with State Bank of India for US$350 million. Out of said
facility US$100 million bears an interest rate of US$LIBOR plus 370 basis points and is repayable in March 2020.
US$250.0 million bears an interest rate of US$LIBOR plus 403 basis points repayable in two instalments of US$100 million
and US$150 million in June 2021 and June 2022 respectively. As at 31 March 2016, the amount outstanding is
US$350.0 million (2015: US$25.0 million).
In January 2016, the Company entered into a facility agreement with State Bank of India for US$300.0 million. Out of which
US$120.0 million bears an interest rate of US$LIBOR plus 450 basis points and is repayable in February 2022. Balance
US$180.0 million bears an interest rate of 454 basis points. As at 31 March 2016, the amount outstanding is
US$300.0 million.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
177
24. Borrowings continued
Twin Star Mauritius Holdings Limited (TMHL)
Term loan
In May 2013, the Group tied up a term loan facility of US$1,200 million borrowed by TMHL through a syndicate of banks
with Standard Chartered Bank (SCB) as facility agent to partly refinance US$2,664 million drawn to meet the funding
requirements for the acquisition of 28.5% stake in Cairn India Limited in December 2011. The facility bears an interest rate
of LIBOR plus 275 basis points and is due for repayment in four equal annual instalments starting June 2015. The facility of
US$2,664 million due for repayment as US$1,350.0 million in June 2013 and US$1,314.4 million in December 2014 was fully
prepaid in June 2013. The first instalment due in June 2015 has been duly repaid. As at 31 March 2016, the amount
outstanding is US$900.0 million (2015: US$1,200.0 million).
In August 2014, the Group tied up a US$500 million facility with Standard Chartered Bank and First Gulf Bank PJSC of
which $250 million is under a commodity murabaha structure (Islamic financing) and balance US$250 million is under a
conventional loan structure. Out of the said facility US$287.5 million bears an interest rate of LIBOR plus 275 basis points
with an average maturity of about five years from the date of first drawdown in August 2014 and balance amount of
US$212.5 million bears an interest rate of LIBOR plus 340 basis points with an average maturity of about six years from the
date of first drawdown in August 2014. US$25.0 million has been duly repaid during the current year. As at 31 March 2016,
the amount outstanding is US$475.0 million (2015: US$500.0 million).
Vedanta Limited
Term loan
In March 2014, Jharsuguda Aluminium had availed a facility of US$287.5 million from Axis Bank at an average interest rate
of bank base rate plus 25 basis points per annum. In May 2014, the said facility was further enhanced by US$32.0 million.
The same was down sold to the following banks:
a) Axis Bank – US$39.9 million at an average interest rate of bank base rate plus 25 basis points per annum. The facility is
secured by first charge by way of mortgage/pledge of movable/immovable all present and future fixed assets of the
Aluminium division for the project. The same was repayable as US$32.0 million in February 2017 and US$7.9 million in
February 2018. As at 31 March 2015, the amount outstanding was US$39.9 million and the same has been duly prepaid.
b) Bank of India – US$79.9 million at an average interest rate of bank base rate plus 25 basis points per annum. The facility
is secured by first charge by way of mortgage/pledge of movable/immovable all present and future fixed assets of the
Aluminium division for the project. The same was repayable as US$32.0 million in February 2017, US$32.0 million in
February 2018 and US$15.9 million in February 2019. As at 31 March 2015, the amount outstanding was US$79.9 million
and the same has been duly prepaid.
c) Corporation Bank – US$79.9 million at an average interest rate of bank base rate plus 25 basis points per annum. The
facility is secured by first charge by way of mortgage/pledge of movable/immovable all present and future fixed assets
of the Aluminium division for the project. The same was repayable as US$12.0 million in February 2017, US$27.9 million in
February 2018 and US$40.0 million in February 2019. As at 31 March 2015, the amount outstanding was US$79.9 million
and the same has been duly prepaid.
d) Syndicate Bank – US$79.9 million at an average interest rate of bank base rate plus 25 basis points per annum. The
facility is secured by first charge by way of mortgage/pledge of movable/immovable all present and future fixed assets
of the Aluminium division for the project. The same was repayable as US$12.0 million in February 2017, US$27.9 million in
February 2018 and US$40.0 million in February 2019. As at 31 March 2015, the amount outstanding was US$79.9 million
and the same has been duly prepaid.
e) Vijaya Bank – US$39.9 million at an average interest rate of bank base rate plus 25 basis points per annum. The facility
is secured by first charge by way of mortgage/pledge of movable/immovable all present and future fixed assets of the
Aluminium division for the project. The same was repayable as US$7.9 million in February 2017, US$16.0 million in
February 2018 and US$16.0 million in February 2019. As at 31 March 2015, the amount outstanding was US$39.9 million
and the same has been duly prepaid.
During the year, Jharsuguda Aluminium has acquired a facility for US$301.5 million from Axis Bank at an average rate of
bank base rate plus 30 basis points per annum. The same is down sell to the following banks:
a) Axis Bank – US$150.8 million at an average interest rate of bank base rate plus 30 basis points per annum. The facility is
secured by first pari passu charge by way of i) a first pari passu charge by way of hypothecation on the entire moveable
fixed assets (including WIP) of the project, both present and future ii) mortgage by deposit of documents of title of the
land pertaining to the fixed assets. The aforesaid mortgages/charges shall in all respects rank pari passu inter se
amongst the rupee lenders and amongst all existing lenders and future lenders having first charge on the security
without any preference or priority to one over the other or others. The same is repayable in quarterly instalments till
December 2030. As at 31 March 2016, the amount outstanding is US$150.0 million.
b) State Bank of Hyderabad – US$30.2 million at an average interest rate of bank base rate plus 5 basis points per annum.
The facility is secured by a first pari passu charge by way of hypothecation on the entire moveable fixed assets (including
WIP) of the project, both present and future; and mortgage by deposit of documents of title of the land pertaining to the
fixed assets. The same is repayable in quarterly instalments till December 2030. As at 31 March 2016, the amount
outstanding is US$30.0 million.
c) Vijaya Bank – US$75.4 million at an average interest rate of bank base rate plus 15 basis points per annum. The facility is
secured by a first pari passu charge by way of hypothecation on the entire moveable fixed assets (including WIP) of the
project, both present and future; and mortgage by deposit of documents of title of the land pertaining to the fixed
assets. The same is repayable in quarterly instalments till December 2030. As at 31 March 2016, the amount outstanding
is US$75.0 million.
d) State Bank of Patiala – US$45.2 million at an average interest rate of bank base rate plus 15 basis points per annum. The
facility is secured by a first pari passu charge by way of hypothecation on the entire moveable fixed assets (including
WIP) of the project, both present and future; and mortgage by deposit of documents of title of the land pertaining to
the fixed assets. The same is repayable in quarterly instalments till December 2030. As at 31 March 2016, the amount
outstanding is US$45.0 million.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 178
Notes to the Financial Statements continued
24. Borrowings continued
In July 2014, Jharsuguda Aluminium has availed a facility of US$753.8 million from State Bank of India (SBI) at a floating
interest rate of SBI base rate plus 30 basis points. The facility is secured by creating first pari passu charge by way of
hypothecation of the movable fixed assets and mortgage on immovable fixed assets of the Aluminium division, both
present and future. The same is repayable in quarterly instalments up to December 2022. As at 31 March 2016, the amount
outstanding is US$716.1 million (2015: US$692.2 million).
In April 2014, Jharsuguda Aluminium has availed a facility of US$301.5 million from Bank of Baroda at a floating interest rate
of bank base rate plus 10 basis points. The facility is secured by creating first pari passu charge by way of hypothecation of
the movable fixed assets and mortgage on immovable fixed assets of the Aluminium division, both present and future. The
same is repayable in quarterly instalments up to December 2020. As at 31 March 2016, the amount outstanding is
US$268.3 million (2015: US$316.3 million).
In April 2014, Jharsuguda Aluminium has availed a facility of US$301.5 million from Bank of India at a floating interest rate
of bank base rate plus 15 basis points. The facility is secured by creating first pari passu charge by way of hypothecation of
the movable fixed assets and mortgage on immovable fixed assets of the Aluminium division, both present and future. The
same is repayable in quarterly instalments up to September 2020. As at 31 March 2016, the amount outstanding is
US$257.0 million (2015: US$304.4 million).
In April 2014, Jharsuguda Aluminium has availed a facility of US$75.4 million from State Bank of Bikaner & Jaipur at a
floating interest rate of bank base rate plus 5 basis points. The facility is secured by creating first pari passu charge by way
of hypothecation of the movable fixed assets and mortgage on immovable fixed assets of the Aluminium division, both
present and future. The same is repayable in quarterly instalments up to December 2020. As at 31 March 2016, the amount
outstanding is US$67.1 million (2015: US$79.1 million).
In April 2014, Jharsuguda Aluminium has availed a facility of US$154.6 million from Syndicate Bank at a floating interest rate
of bank base rate. The facility is secured by creating first pari passu charge by way of hypothecation of the movable fixed
assets and mortgage on immovable fixed assets of the Aluminium division, both present and future. The same is repayable
in quarterly instalments up to December 2020. As at 31 March 2016, the amount outstanding is US$137.5 million (2015:
US$162.1 million).
In April 2014, Jharsuguda Aluminium has availed a facility of US$150.8 million from Union Bank of India at a floating interest
rate of bank base rate plus 25 basis points. The facility is secured by creating first pari passu charge by way of
hypothecation of the movable fixed assets and mortgage on immovable fixed assets of the Aluminium division, both
present and future. The same is repayable in quarterly instalments up to December 2020. As at 31 March 2016, the amount
outstanding is US$133.4 million (2015: US$157.4 million).
In December 2013, Jharsuguda 2,400MW power plant has availed a facility of US$59.4 million from Canara Bank at an
interest rate of 9.75% per annum. In August 2014, this facility has further been enhanced by US$90.5 million. The facility
is secured by way of mortgage and charge on all the immovable properties, both present and future, of Jharsuguda
2,400MW power plant except IPP Agricultural Land and a second charge by way of pledge on all the movable fixed assets
of the Power division. The loan is repayable in 16 quarterly instalments from end of quarter starting after the moratorium
period up to December 2018. As at 31 March 2016, the amount outstanding is US$103.6 million (2015: US$149.8 million).
In March 2016, Jharsuguda Aluminium has availed a facility of US$188.4 million from State Bank of India at a floating
interest rate of bank base rate plus 20 basis points. The facility is secured by aggregate of the net fixed assets of the
Aluminium division and the Lanjigarh Expansion project reduced by the outstanding borrowings having first pari passu
charge on the fixed assets of the Aluminium division and the Lanjigarh Expansion Project. The same is repayable in
quarterly instalments up to March 2025. As at 31 March 2016, the amount outstanding is US$188.4 million.
In November 2015, Iron Ore Sesa has availed a facility of US$72.4 million from Corporation Bank at a floating interest rate
of 9.65%. The facility is secured by creating first pari passu charge by way of hypothecation of the movable fixed assets and
mortgage on immovable fixed assets of the Aluminium division, both present and future. The same is repayable in quarterly
instalments up to December 2020. As at 31 March 2016, the amount outstanding is US$67.1 million (2015: US$36.0 million).
Short-term loans
In January 2015, Jharsuguda Aluminium availed a short-term borrowing facility in the form of export packing credit
from Bank of America at an average rate 9.30% per annum. These loans were obtained to meet the working capital
requirements. The same is repayable in June 2016. As at 31 March 2016, the amount outstanding is US$95.0 million (2015:
US$32.0 million).
In October 2014, Jharsuguda Aluminium availed a short-term borrowing facility in foreign currency in the form of pre
shipment/export packing credit from Bank of America at an average rate of LIBOR plus 65-70 basis points. These loans
were obtained to meet the working capital requirements. This was repayable as US$32.6 million in April 2015 and
US$14.6 million in May 2015. The same has been duly repaid.
Iron Ore Sesa obtained a short-term borrowing facility in foreign currency in the form of pre shipment/export packing
credit from various banks at an average rate of 9.39%. These loans were obtained to meet the working capital requirements
of the Iron Ore. As at 31 March 2016, the amount outstanding is US$57.4 million (2015: US$36.0 million).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
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179
24. Borrowings continued
Non-convertible debentures (NCDs)
In October 2008, Jharsuguda Aluminium has issued NCDs of US$66.6 million to the Life Insurance Corporation of India at
a rate of 11.5% per annum. These NCDs are secured and have the first pari passu charge over the identified assets (including
land and buildings) of the issuer to the extent of 1.33 times of the issued amount. These NCDs are repayable in three equal
annual instalments starting October 2013. The first two instalments due for repayment of US$22.2 million each were paid in
October 2013 and October 2014 respectively. The balance instalment of US$22.2 million was due for repayment in October
2015 and the same has been duly repaid.
In December 2012, April 2013, July 2013 and August 2016 Vedanta Limited had issued NCDs in three tranches for
US$75.4 million, US$376.9 million, US$180.9 million and US$301.5 million with an interest rate of 9.24%, 9.10%, 9.17% and
9.70% per annum respectively. Out of the total NCDs US$180.9 million are secured by way of mortgage on the immovable
property of Vedanta Limited situated at Sanaswadi in the state of Maharashtra and also by way of pledge on the movable
fixed assets of Jharsuguda Aluminium division with a security cover of 1.25 times on the face value of outstanding NCDs
at all time during the tenure of the NCDs. The balance NCDs of US$753.8 million are secured by way of mortgage on the
immovable property of Vedanta Limited situated at Sanaswadi in the state of Maharashtra and also by way of pledge on
the movable fixed assets of Jharsuguda 2,400MW power plant with a security cover of 1.25 times on the face value of
outstanding NCDs at all time during the tenure of the NCDs. Of the total outstanding NCDs, US$75.4 million is repayable
in December 2022, US$376.9 million in April 2023, US$180.9 million in July 2023 and US$301.5 million in August 2020. All
NCDs, except for US$301.5 million issued in August 2016, have put and call option respectively at the end of five years from
the respective date of allotment. As at 31 March 2016, the amount outstanding is US$934.7 million (2015: US$671.0 million).
In October, November and December 2012, Vedanta Limited had also issued NCDs in three tranches for US$75.4 million
each per tranche with an interest rate of 9.24%, 9.40% and 9.40% per annum respectively. These NCDs are secured by way
of mortgage on the immovable property of Vedanta Limited situated at Sanaswadi in the state of Maharashtra and also by
way of pledge on the movable fixed assets of Jharsuguda 2,400MW power plant with a security cover of 1.25 times on the
face value of outstanding NCDs at all time during the tenure of the NCDs. Of the total outstanding NCDs, US$75.4 million is
repayable in October 2022, US$75.4 million in November 2022 and US$75.4 million in December 2022. The NCDs have put
and call option respectively at the end of five years from the respective date of allotment of the NCDs. As at 31 March 2016,
the amount outstanding is US$226.1 million (2015: US$239.6 million).
In October 2014, Iron Ore Sesa has also issued NCDs of US$226.1 million with an interest rate of 9.36% per annum. These
NCDs are secured by way of mortgage on the immovable property of Vedanta Limited situated at Tuticorin in the state of
Tamil Nadu and also by way of first ranking pari passu charge over ‘movable fixed assets’ in relation to Vedanta Limited’s
Iron Ore Sesa business (pig iron and met coke assets) and power plant assets located in Goa and the Copper plant assets
located at Tuticorin with a security cover of 1.25 times on the face value of outstanding NCDs at all times during the tenure
of the NCDs. These NCDs are redeemable in two instalments as US$147.0 million in October 2017 and US$79.1 million in
December 2017. As at 31 March 2016, the amount outstanding is US$226.1 million (2015: US$239.7 million).
External commercial borrowing
During the year ended 31 March 2015, Jharsuguda Aluminium External Commercial Borrowing from Axis Bank of
US$500.0 million was refinanced by ICICI Bank and SCB at an interest rate of US$LIBOR plus 170 basis points (prior to
refinancing at an interest rate of US$LIBOR plus 400 basis points) having a subservient charge on all present and future
movable assets of the Aluminium division. The repayment is to be made in three equal instalments starting from April 2015.
The first instalment of US$200.0 million has been duly repaid. As at 31 March 2016, the amount outstanding is
US$300.0 million (2015: US$500.0 million).
During the year ended 31 March 2013, a part of intercompany borrowing from Welter Trading Limited was refinanced
through Axis Bank. This has been further refinanced from Standard Chartered Bank for US$44.5 million at an interest
rate of US$LIBOR plus 129 basis points (prior to refinancing at an interest rate of US$LIBOR plus 360 basis points) having
a subservient charge on all present and future movable assets of Jharsuguda Aluminium. The entire loan was repayable
in July 2015 and the same has been duly repaid.
Project buyers’ credit
Jharsuguda Aluminium had extended credit terms relating to purchases of property, plant and equipment bearing an
average interest rate of LIBOR plus 24-55 basis points. These are secured by all of the fixed assets of Jharsuguda Aluminium,
immovable or movable, present and future, on a pari passu basis with other term lenders and with priority over other
creditors. Project buyers’ credit have an average maturity of May 2015. As at 31 March 2015, the amount outstanding was
US$2.0 million and the same has been duly repaid.
Commercial papers
During the year, Jharsuguda 2,400MW power plant has issued commercial paper to various asset management companies
bearing an average coupon rate of 9.6% for funding project payables. As at 31 March 2016, the amount outstanding is
US$395.7 million (2015: US$180.5 million).
During the year, Iron Ore Sesa has issued commercial papers for periods ranging up to one year bearing an average interest
rate of 9.5%. These commercial papers are used to meet working capital requirements of the Iron Ore division and are
repayable in the next financial year. As at 31 March 2016, the outstanding balance was US$112.3 million (2015:
US$380.2 million).
During the year, Vedanta Limited has issued commercial paper to various asset management companies bearing an
average coupon rate of 9.19% and are repayable in the next financial year. As at 31 March 2016, the amount outstanding
is US$392.0 million.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 180
Notes to the Financial Statements continued
24. Borrowings continued
KCM
A term loan facility of US$820 million (2015: US$820 million) has been obtained by KCM from Standard Bank. The term
loan facility is made up of three tranches: US$300 million (‘Facility A’), US$120 million (‘Facility A1’) and US$400 million
(‘Facility B’) drawn down on various dates with the last amount drawn in June 2014. The facility was restructured in 2014.
The facility was repayable in 16 quarterly instalments starting in June 2015. But during this year we restructured the loan
again with Standard Bank and got a moratorium period for testing of financial covenants. First testing will be done on
30 September 2017. The loan is secured against the fixed assets of KCM and a corporate guarantee from Vedanta
Resources plc for the amount equivalent to the total outstanding loan. Interest is payable quarterly at LIBOR plus 350 basis
points for Facility A and A1 and US$LIBOR plus 300 basis points for Facility B. The facility is repayable in tranches with
Facility A and A1 in 11 quarterly instalments commencing from 30 September 2016 and Facility B is repayable in 14 quarterly
instalments commencing from 31 March 2017. As at 31 March 2016, the amount outstanding is US$569.1 million (2015:
US$710.9 million).
A general short-term banking facility incorporating multiple sub-facilities amounting to US$30 million (31 March 2015:
US$50 million) was provided by Stanbic Bank. The facility was revolved on 1 June 2011. Interest is payable monthly at three
month US$LIBOR plus 350 basis points. The facility is repayable strictly on demand. The tenure for the facility is 12 months.
The amount drawn as at 31 March 2016 under this facility is US$14 million (2015: US$27.8 million).
A general short-term banking facility incorporating multiple sub-facilities amounting to US$50 million (2015: US$50 million)
was provided by Standard Chartered Bank. The facility was revolved on 26 May 2011. The facility bears an interest rate of
US$LIBOR plus 300 basis points. The facilities are repayable strictly on demand. The tenure for the facility is 12 months.
As at 31 March 2016, the amount outstanding is US$50.0 million (2015: US$50.0 million).
A general short-term banking facility incorporating multiple sub-facilities amounting to US$40 million (2015: US$40 million)
was provided by Barclays Bank Zambia Plc. The facility bears an interest rate of three month US$LIBOR plus 250 basis
points payable monthly. The facilities are repayable strictly on demand. The tenure for the facility is 12 months. As at
31 March 2016, the amount outstanding is US$32.81 million (2015: US$13.8 million).
BALCO
NCDs
In November 2008, BALCO issued NCDs of US$75.4 million to the Life Insurance Corporation of India at a rate of 12.25%
per annum. These NCDs are secured and have the first pari passu charge on the fixed assets of BALCO including land and
buildings. These NCDs were repayable in three equal instalments in November 2013, November 2014 and November 2015.
All three instalments have been duly repaid.
In May 2013, BALCO issued NCDs of US$75.4 million to Kotak Mahindra Bank, Axis Bank Limited and Wipro Limited at an
interest rate of 8.58% per annum (Series–I) and 8.60% per annum (Series–II). These NCDs are secured and have the first
pari passu charge on the fixed assets of BALCO. These NCDs are repayable in two equal instalments in November 2015 and
May 2016. The first instalment has been duly repaid. As at 31 March 2016, the amount outstanding is US$37.7 million (2015:
US$79.9 million).
In August 2014, BALCO issued NCDs of US$75.4 million to banks and financial institutions arranged by Deutsche Bank at
an interest rate of 10.25% per annum. These NCDs are secured and have the first pari passu charge on the fixed assets of
BALCO. These NCDs are repayable in August 2017. As at 31 March 2016, the amount outstanding is US$75.4 million (2015:
US$79.9 million).
Project buyers’ credit
BALCO has extended credit terms relating to the purchase of property, plant and equipment at an average interest rate of
US$LIBOR plus 107 basis points. Project buyers’ credits have an average maturity of November 2016. As at 31 March 2016,
the amount outstanding is US$58.1 million (2015: US$59.6 million).
External commercial borrowings
In August 2011, BALCO has obtained an External Commercial Borrowing loan from State Bank of India, London of
US$200 million at an interest rate of six month US$LIBOR plus 290 basis points secured by first pari passu charges on all
the fixed assets (excluding land) of BALCO projects both present and future along with secured lenders. The above loan
is repayable in three equal annual instalments starting August 2016. As at 31 March 2016, the amount outstanding is
US$200.0 million (2015: US$200.0 million).
In September 2015, BALCO has also obtained an External Commercial Borrowing loan from ICICI Bank Dubai of
US$50.0 million at an interest rate of three month US$LIBOR plus 240 basis points secured by first pari passu charge
on all movable fixed assets including plant and machinery related to 1,200MW Power project and 3.25 LTPA Smelter
projects both present and future along with secured lenders. The facility is repayable as US$13.0 million in August 2019,
US$14.0 million in August 2020 and US$23.0 million in August 2021. As at 31 March 2016, the amount outstanding is
US$50.0 million.
Rupee term loan
During the year, BALCO has availed rupee term loan of US$75.4 million from Dena Bank at pricing of bank base rate plus
50 basis points. The facility is secured against movable fixed assets (excluding coal block assets) of BALCO. The facility has
a maturity of eight years and is repayable in 28 quarterly instalments post moratorium period of one year. As at 31 March
2016, the amount outstanding is US$75.4 million.
During the year, BALCO has availed rupee term loan of US$45.2 million from State Bank of India at pricing of bank base
rate plus 50 basis points. The facility is secured against movable fixed assets (excluding coal block assets) of BALCO.
The facility has a maturity of eight years and is repayable in 28 quarterly instalments post moratorium period of one year.
As at 31 March 2016, the amount outstanding is US$45.2 million.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
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181
24. Borrowings continued
During the year, BALCO has availed rupee term loan of US$22.6 million from State Bank of Mysore at pricing of bank base
rate plus 50 basis points. The facility is secured against movable fixed assets (excluding coal block assets) of BALCO. The
facility has a maturity of eight years and is repayable in 28 quarterly instalments post moratorium period of one year. As at
31 March 2016, the amount outstanding is US$22.6 million.
During the year, BALCO has availed rupee term loan of US$30.2 million from State Bank of Patiala at pricing of bank base
rate plus 50 basis points. The facility is secured against movable fixed assets (excluding coal block assets) of BALCO. The
facility has a maturity of eight years and is repayable in 28 quarterly instalments post moratorium period of one year. As at
31 March 2016, the amount outstanding is US$30.2 million.
During the year, BALCO has availed rupee term loan of US$22.6 million from South Indian Bank at pricing of bank base rate
plus 25 basis points. The facility is secured against movable fixed assets (excluding coal block assets) of BALCO. The facility
has a maturity of eight years and is repayable in 28 quarterly instalments post moratorium period of one year. As at
31 March 2016, the amount outstanding is US$22.6 million.
During the year, BALCO has availed rupee term loan of US$45.0 million from UCO Bank at pricing of bank base rate plus
50 basis points. The facility is secured against movable fixed assets (excluding coal block assets) of BALCO. The facility has
a maturity of eight years and is repayable in 28 quarterly instalments post moratorium period of one year. As at 31 March
2016, the amount outstanding is US$45.0 million.
Commercial paper
In March 2016, BALCO has issued commercial paper bearing an average coupon rate of 9.89% per annum to various asset
management companies for the funding of project loan repayment and other payables. As at 31 March 2016, the amount
outstanding is US$79.1 million (2015: US$317.1 million).
Talwandi Sabo
NCDs
In December 2010 and January 2011, Talwandi Sabo has issued NCDs of US$226.13 million to ICICI Bank at a rate of 9.8%
per annum. These NCDs are secured by first pari passu charge on the assets of Talwandi Sabo both present and future,
with an unconditional and irrevocable corporate guarantee by Vedanta Limited. These NCDs have tenure of 13 years and
are repayable in 12 equal instalments after 10 years after allotment. These NCDs have a call option, five years after
allotment. The call option has been exercised and the NCDs have been duly repaid.
In September 2014 (four tranches), November 2014, March 2015 and April 2015, Talwandi Sabo has also issued NCDs of
US$226.1 million in five tranches of US$18.1 million, US$27.1 million, US$30.2 million, US$49.0 million and US$101.8 million
respectively at an interest rate of 9.60% per annum, 9.70% per annum, 9.27% per annum, 8.91% and 8.91% per annum
respectively, to various asset management companies for fresh project funding and repayment of loan. These NCDs
are secured by first pari passu charge on the assets of Talwandi Sabo both present and future, with an unconditional
and irrevocable corporate guarantee by Vedanta Limited. These NCDs are repayable in tranches as US$18.1 million,
US$27.1 million, US$30.2 million in November 2017 and balance US$150.8 million in April 2018. As at 31 March 2016,
the amount outstanding is US$226.1 million (2015: US$131.8 million).
Term loan
In September 2014, Talwandi Sabo has availed a rupee term loan facility of US$75.4 million from Kotak Mahindra Bank
Limited at an interest rate of 10.10% per annum. The facility is secured by first pari passu charge on the assets of Talwandi
Sabo both present and future, with an unconditional and irrevocable corporate guarantee by Vedanta Limited. The facility
is repayable as first 50% of the loan amount in 24 equal quarterly instalments starting from December 2015 and balance
50% of the loan amount in March 2021. As at 31 March 2016, the amount outstanding is US$68.7 million (2015:
US$79.9 million).
In December 2015, Talwandi Saboo has availed a rupee term loan facility of US$301.5 million from the State Bank of India
at an interest rate of SBI base rate plus 50 basis points (which is at present effective 9.80% per annum). The facility is
secured by pari passu charge on the assets of Talwandi Sabo both present and future, with an unconditional and
irrevocable corporate guarantee by Vedanta Limited. The facility is repayable in 48 quarterly instalments starting in
June 2018. As at 31 March 2016, the amount outstanding is US$283.4 million.
Project buyers’ credit
Talwandi Sabo has accessed buyers’ credit in respect of purchase of capital goods at an average rate of six month
US$LIBOR plus 136 basis points. The average maturity of the project buyers’ credit is May 2017. As at 31 March 2016,
the amount outstanding is US$165.6 million (2015: US$177.1 million).
Commercial paper
During the year, Talwandi Sabo has issued commercial paper to various asset management companies for the funding of
project loan repayment bearing an average coupon rate of 9.5% per annum. As at 31 March 2016, Talwandi Sabo had an
outstanding balance of US$361.1 million (2015: US$417.0 million).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 182
Notes to the Financial Statements continued
24. Borrowings continued
VGCB
NCDs
In May 2013, VGCB has issued NCDs of US$47.9 million to IDFC Limited at a rate of 9% per annum to refinance the existing
term loan from Axis Bank. These NCDs are secured by 1.1 times on the face value of outstanding debentures, by way
of charge on the fixed assets of VGCB at all time during the currency of the debentures. Debentures have tenure of
three years with put and call option at the end of the second year. During this year, the call and put option has been
exercised on US$33.9 million bonds and has been duly repaid. As at 31 March 2016, the amount outstanding is
US$11.3 million (2015: US$47.9 million).
Project buyers’ credit
VGCB has accessed buyers’ credit in respect of purchase of capital goods at an average rate of six month US$LIBOR plus
145 basis points. The average maturity of the project buyers’ credit is May 2017. As at 31 March 2016, the amount
outstanding is US$18.3 million (2015: US$18.3 million).
25. Non-equity non-controlling interests
As at 31 March 2016, non-equity non-controlling interests amounts to US$11.9 million, being deferred shares in KCM held by
ZCCM. The deferred shares have no voting rights or rights to KCM’s dividends, but are entitled on a winding up to a return
of up to US$0.99 per share once all of KCM’s ordinary shares have received a distribution equal to their par value and any
share premium created on their issue and which remains distributable to them.
The deferred shares are held at historic cost, being the fair value attributed to them at the time of initial acquisition of KCM
in the year ended 31 March 2005. They are classified as non-current liabilities as they are repayable only on the winding up
of KCM, for an amount different than the pro rata share of net assets upon liquidation. The shares have been valued at
US$0.99 per share, which is the maximum amount payable to the deferred shareholders. These deferred shares have not
been discounted as the effect would not be material.
26. Movement in net debt1
(US$ million)
At 1 April 2014
Cash flow
Other non-cash changes3
Foreign exchange differences
At 1 April 2015
Cash flow
Other non-cash changes3
Foreign exchange differences
Cash
and cash
equivalents
Liquid
investments
Total cash
and liquid
investments
369.4
(13.9)
–
(1.8)
8,568.5
(671.7)
250.8
(291.5)
8,937.9
(685.6)
250.8
(293.3)
Debt due
within
one year
Debt
carrying
value
(4,358.5)
818.8
294.8
65.7
Debt due after one year
Debt
carrying
value
Debt–
related
derivatives2
(12,512.7)
(1,050.1)
(46.7)
120.9
13.8
–
(16.1)
–
Total net
debt
(7,919.5)
(916.9)
482.8
(106.7)
353.7
7,856.1
8,209.8
(3,179.2) (13,488.6)
(2.3)
(8,460.3)
92.6
–
(18.0)
999.9
59.4
(407.2)
1,092.5
59.4
(425.2)
1,022.1
(2,280.6)
123.9
(901.6)
2,195.6
245.1
–
0.3
–
1,213.0
(25.3)
(56.2)
At 31 March 2016
428.3
8,508.2
8,936.5
(4,313.8)
(11,949.5)
(2.0)
(7,328.8)
1 Net debt being total debt reduced by cash and cash equivalents and liquid investments, as carried at fair value under IAS 32 and 39.
2 Debt-related derivatives exclude derivative financial assets and liabilities relating to commodity contracts and forward foreign currency contracts.
3 Other non-cash changes comprises of mark to market of embedded derivatives, interest accretion on convertible bonds and amortisation of borrowing
costs for which there is no cash movement and reclassification between debt due within one year and debt due after one year. It also includes
US$59.5 million (2015: US$250.8 million) of fair value movement in investments.
27. Trade and other payables
(a) Current trade and other payables
(US$ million)
Trade payables
Bills of exchange
Accruals and deferred income
Advance from customers1
Dividend payable to NCI
Dividend tax payable
Other trade payables2
Non-interest bearing trade payables are normally settled on 60 to 90-day terms.
Interest bearing trade and other payables amount to US$1,500.0 million (2015: US$1,567.5 million).
As at
31 March
2016
2,155.8
1,500.0
38.3
396.8
536.3
311.2
937.7
As at
31 March
20153
2,258.9
1,512.4
22.8
–
–
–
935.9
5,876.1
4,730.0
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
183
27. Trade and other payables continued
Bills of exchange are interest-bearing liabilities and are normally settled within a period of 12 months. These represent
arrangements whereby operational suppliers of raw materials are paid by financial institutions, with the Company
recognising the liability for settlement with the institutions at a later date.
The fair values of the trade and other payables are not materially different from the carrying values presented.
(b) Non-current trade and other payables
(US$ million)
Advance from customers1
Other trade payables2
As at
31 March
2016
As at
31 March
2015
150.5
73.0
223.5
–
194.3
194.3
1 Advances from customers include amounts received under long-term supply agreements. The advance payment plus a fixed rate of return will be settled
by supplying copper over a period up to 24 months under an agreed delivery schedule as per the terms of the respective agreements. As these are
contracts that the Group expects, and has the ability, to fulfil through delivery of a non-financial item, these are recognised as advances from customers
and will be released to the income statement as copper is delivered under the agreements. The portion of the advance that is expected to be settled within
the next 12 months has been classified as a current liability.
2 Other trade payables primarily comprise amounts withheld as retentions, payable to suppliers of capital projects after satisfactory completion of
contractual commissioning period, which are payable after the completion of commissioning. The fair value of the non-current trade payables are not
materially different from the carrying values presented.
3 Prior year trade and other payables of US$331.6 million have been reclassified from accruals to trade and other payables to better reflect the nature of
these costs.
28. Convertible bonds
(US$ million)
A. VRJL
B. VRJL II
As at
31 March
2016
579.9
7.3
587.2
As at
31 March
2015
1,096.4
6.6
1,103.0
A. Vedanta Resource Jersey Limited (VRJL) issued 5.5% US$1,250 million guaranteed convertible bonds on 13 July 2009.
The bonds are first convertible into exchangeable redeemable preference shares to be issued by VRJL, which will then
be automatically exchanged for ordinary shares of Vedanta Resources plc. The bondholders have the option to convert
at any time from 24 August 2009 to 6 July 2016. Conversion options exercised before 15 August 2012 were convertible
at US$36.48 per share. Conversion options exercised on or after 15 August 2012 were convertible at US$35.58 per share.
If the notes have not been converted, they will be redeemed at the option of the Company at any time on or after 28 July
2012 subject to certain conditions, or be redeemed at the option of the bondholders on or after 13 July 2014.
If the notes have not been converted, they will be redeemed at the option of the issuer on or at any time after 28 July
2013, subject to the conditions as part of the issue. Bondholders had exercised put option on 14 July 2014, accordingly
bonds with a face value US$113.8 million (9.1% of total face value) were redeemed during the year ending 31 March 2015.
During the year, in October 2015, the Company received notice from bondholders with a face value of US$3 million to
exercise the option to convert the bonds into equity shares of Vedanta Resources plc in accordance with the provisions
of the Offer circular dated 9 July 2009. During the year ended 31 March 2016 US$3 million of bonds were converted into
93,341 equity shares of Vedanta Resources plc. The carrying value of bond on the date of conversion was US$2.9 million.
During the year, in January 2016 and February 2016, the Company bought back the convertible bonds of a face value
of US$549.3 million and carrying value of US$541.6 million from market for a consideration of US$522.4 million.
The buyback consideration including buyback cost of US$1.2 million has been split between the liability and equity.
Accordingly, US$2.6 million has been debited to convertible bond reserve and net gain of US$20.7 million has been
recognised in the income statement.
(US$ million)
Opening liability
Effective interest cost
Conversion of convertible bonds
Repayment of convertible bonds
Buy back of convertible bonds
Coupon interest paid/accrued
Closing liability
Year ended
31 March
2016
Year ended
31 March
2015
1,096.4
90.1
(2.9)
–
(541.6)
(62.1)
1,177.1
97.3
–
(113.8)
–
(64.2)
579.9
1,096.4
The interest charged for the year is calculated by applying an effective interest rate of 8.2% (March 2015: 8.7%).
The fair value of the convertible bond as at 31 March 2016 is US$573.1 million (March 2015: US$1,056.9 million).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS
184
Notes to the Financial Statements continued
28. Convertible bonds continued
B. Vedanta Resource Jersey II Limited (VRJL-II) issued 4.0% US$883 million guaranteed convertible bonds on 30 March
2010. The bonds are first convertible into exchangeable redeemable preference shares to be issued by VRJL-II, which
will then be automatically exchanged for ordinary shares of Vedanta Resources plc. The bondholders have the option
to convert at any time from 10 May 2010 to 23 March 2017. Conversion options exercised before 15 August 2012 were
convertible at US$51.9251 per share. Conversion options exercised on or after 15 August 2012 are convertible at
US$50.646 per share, as per the terms of offering circular.
If the notes have not been converted, they will be redeemed at the option of the Company at any time on or after
14 April 2013 subject to certain conditions, or be redeemed at the option of the bondholders on or after 29 April 2013
to 30 March 2015.
Bondholders exercised the put option in March 2015, resulting in redemption of US$65.1 million bonds during the year
ending 31 March 2015. The maturity of the remaining bonds is March 2017.
At the inception the net proceeds of the convertible issue was split between the liability element and a derivative
component, representing the fair value of the embedded option to convert the liability into equity of the Company.
The latter was not recorded within equity due to the existence of partial cash settlement terms within the bond which
prevent the adoption of compound financial instrument accounting.
(US$ million)
Opening liability
Effective interest cost
Repayment of convertible bonds
Coupon interest paid/accrued
Closing liability
Year ended
31 March
2016
Year ended
31 March
2015
6.6
1.0
–
(0.3)
7.3
65.7
8.9
(65.1)
(2.9)
6.6
The interest charged for the year is calculated by applying an effective interest rate of 15.1% (2015: 15.0%).
The fair value of the convertible bond as at 31 March 2016 was US$7.3 million (March 2015: US$7.8 million).
C. Vedanta Limited issued 4% US$500 million convertible bonds (denominated in US dollars) on 29 October 2009 which
were due on 30 October 2014. The bonds are convertible into American Depository Share (ADS) to be issued by
Vedanta Limited. The bondholders have the option to convert at any time before 29 October 2014 at a conversion ratio
of 42.8688 for every US$1,000 of principal which is equal to a conversion price of US$23.33 per ADS. Pursuant to the
effectiveness of Group simplification scheme in August 2014 conversion rate has changed to 25.7213 ADSs for every
US$1,000 principal amount of notes which is equal to a conversion price of approximately US$38.88 per ADS. Vedanta
has the option (subject to the terms of the bond) to redeem the convertible bond at any time after 4 November 2012.
Vedanta Limited had also issued 5% US$500 million convertible bonds (denominated in US dollars) on 30 October 2009
and due on 31 October 2014. The bonds are convertible into ordinary shares of Vedanta Limited. The bondholders
have the option to convert at any time after 10 December 2009 and before 24 October 2014 at a conversion ratio of
13837.6384 for every US$100,000 principal. Vedanta Limited has the option (subject to certain conditions) to redeem the
convertible bond at any time after 30 October 2012. As the functional currency of Vedanta Limited is INR, the conversion
of the convertible bonds (which are denominated in US dollars) would not result in the settlement and exchange of a fixed
amount of cash in INR terms, for a fixed number of its shares respectively. Accordingly, the convertible bond must be
separated into two component elements: a derivative component consisting of the conversion option (carried at fair
value) and a liability component consisting of the debt element of the bonds. Further details of the accounting for such
instruments are provided in the Group accounting policies (note 2a).
These convertible bonds were repaid during the year ended 31 March 2015.
The following table shows the movements in the Vedanta Limited bonds during the year on an aggregated basis:
(US$ million)
Opening liability
Effective interest cost
Coupon interest paid
Repayment of FCCBs
Closing liability
Year ended
31 March
2016
Year ended
31 March
2015
–
–
–
–
–
678.7
57.2
(19.8)
(716.1)
–
The interest charged for the year is calculated by applying an effective interest rate of nil (March 2015: 12.7%) for 4%
US$500 million convertible notes and nil (March 2015: 19.1%) for 5% US$500 million convertible notes.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS
www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
185
28. Convertible bonds continued
Summary of convertible bond movements:
Opening liability
Effective interest cost
Coupon interest paid/accrued
Repayment of bonds
Conversion of convertible bonds
Buy back of convertible bonds
Closing liability
Year ended
31 March
2016
Year ended
31 March
2015
1,103.0
91.1
(62.4)
–
(2.9)
(541.6)
1,921.5
163.4
(86.8)
(895.1)
–
–
587.2
1,103.0
29. Financial instruments
The accounting classification of each category of financial instruments, and their carrying amounts, are set out below:
(US$ million)
Financial assets
At fair value through profit or loss
– Held for trading (Note 22)
At fair value through profit or loss/designated for hedging
Financial instruments (derivatives)
Loan and receivables
Bank deposits (Note 22)
Cash and cash equivalents
– Trade and other receivables
– Other non-current assets
Available-for-sale investments
– Financial asset investments held at fair value
Total
Financial liabilities
At fair value through profit or loss/designated for hedging
– Financial instruments (derivatives)
Financial liabilities at amortised cost
– Trade and other payables
– Borrowings1
Total
As at
31 March
2016
As at
31 March
2015
7,977.9
6,006.0
19.1
16.8
530.3
428.3
854.7
69.2
1,850.1
353.7
1,132.6
129.8
6.5
4.2
9,886.0
9,493.2
(68.9)
(45.8)
(4,921.6)
(16,263.3)
(4,808.2)
(16,667.8)
(21,253.8)
(21,521.8)
1
Includes amortised cost liability portion of convertible bonds US$587.2 million (2015: US$1,103.3 million).
IFRS 13 requires additional information regarding the methodologies employed to measure the fair value of financial
instruments which are recognised or disclosed in the financial statements. These methodologies are categorised per
the standard as:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets
or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 186
Notes to the Financial Statements continued
29. Financial instruments continued
The below table summarises the categories of financial assets and liabilities measured at fair value:
(US$ million)
Financial assets
At fair value through profit or loss
– Held for trading
– Financial instruments (derivatives)
Available-for-sale investments
– Financial asset investments held at fair value
Total
Financial liabilities
At fair value through profit or loss/designated for hedging
– Financial instruments (derivatives)
Total
Financial assets
At fair value through profit or loss
– Held for trading
– Financial instruments (derivatives)
Available-for-sale investments
– Financial asset investments held at fair value
Total
Financial liabilities
At fair value through profit or loss/designated for hedging
– Financial instruments (derivatives)
Total
As at 31 March 2016
Level 1
Level 2
6,840.7
3.2
1,137.2
15.9
6.5
–
6,850.4
1,153.1
(2.1)
(2.1)
(66.8)
(66.8)
As at 31 March 20151
Level 1
Level 2
6,725.3
–
1,130.8
16.8
4.2
–
6,729.5
1,147.6
–
–
(45.8)
(45.8)
1 Held for trading disclosure at 31 March 2015 has been restated to appropriately disclose the bonds valued using inputs other than quoted price as Level 2
rather than Level 1.
There were no transfers between Level 1 and Level 2 during the year. No financial assets or liabilities that are measured at
fair value were Level 3 fair value measurements.
The fair value of borrowings is US$15,118.2 million (2015: US$16,457.7 million), classified under Level 2 of fair value hierarchy.
For all other financial instruments, the carrying amount is either the fair value, or approximates to the fair value.
The fair value of financial asset investments represents the market value of the quoted investments and other traded
instruments. For other financial assets the carrying value is considered to approximate to fair value.
The fair value of financial liabilities is the market value of the traded instruments, where applicable. Otherwise fair value
is calculated using a discounted cash flow model with market assumptions, unless the carrying value is considered to
approximate to fair value.
The fair value of the embedded derivative liability of the convertible bond has been calculated using the Black-Scholes
model with market assumptions.
Derivative instruments and risk management
The Group’s businesses are subject to several risks and uncertainties including financial risks.
The Group’s documented risk management policies act as an effective tool in mitigating the various financial risks to which
the businesses are exposed in the course of their daily operations. The risk management policies cover areas such as
liquidity risk, commodity price risk, foreign exchange risk, interest rate risk, credit risk and capital management (the latter
covered in Note 34).
Risks are identified through a formal risk management programme with active involvement of senior management
personnel and business managers at both the corporate and individual subsidiary level. Each operating subsidiary
in the Group has in place risk management processes which are in line with the Group’s policy. Each significant risk has
a designated ‘owner’ within the Group at an appropriate senior level. The potential financial impact of the risk and its
likelihood of a negative outcome are regularly updated. The risk management process is coordinated by the Management
Assurance function and is regularly reviewed by the Group’s Audit Committee. The Audit Committee is aided by the CFO
Committee and the Risk Management Committee, which meets regularly to review risks as well as the progress against the
planned actions. Key business decisions are discussed at the monthly meetings of the CFO Committee and Executive
Committee. The overall internal control environment and risk management programme including financial risk
management is reviewed by the Audit Committee on behalf of the Board.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
187
29. Financial instruments continued
Treasury management
Treasury management focuses on capital protection, liquidity maintenance and yield maximisation. The treasury policies
are approved by the Board and adherence to these policies is strictly monitored at the Executive Committee meetings.
Day-to-day treasury operations of the subsidiary companies are managed by their respective finance teams within the
framework of the overall Group treasury policies. Long-term fund raising including strategic treasury initiatives are handled
by a central team while short-term funding for routine working capital requirements is delegated to subsidiary companies.
A monthly reporting system exists to inform senior management of investments, debt, currency, commodity and interest
rate derivatives. The Group has a strong system of internal control which enables effective monitoring of adherence to
Group policies. The internal control measures are supplemented by regular internal audits.
The investment portfolio is independently reviewed by CRISIL Limited and our portfolio has been rated as ‘Very Good’,
meaning highest safety.
The Group uses derivative instruments as part of its management of exposure to fluctuations in foreign currency exchange
rates, interest rates and commodity prices. The Group does not acquire or issue derivative financial instruments for trading
or speculative purposes. The Group does not enter into complex derivative transactions to manage the treasury and
commodity risks. Both treasury and commodities derivative transactions are normally in the form of forward contracts and
interest rate and currency swaps and these are subject to the Group guidelines and policies.
Commodity risk
The Group is exposed to the movement of base metal commodity prices on the London Metal Exchange. Any decline in the
prices of the base metals that the Group produces and sells will have an immediate and direct impact on the profitability of
the businesses. As a general policy, the Group aims to sell the products at prevailing market prices. The commodity price risk
in the import of copper concentrate and alumina is hedged on back-to-back basis ensuring no price risk for the business.
Entities with integrated operations aim to achieve the monthly average of the commodity prices for sales realisation.
Hedging is used primarily as a risk management tool to secure future cash flows in cases of high volatility by entering into
forward contracts or similar instruments. The hedging activities are subject to strict limits set out by the Board and to a
strictly defined internal control and monitoring mechanism. Decisions relating to hedging of commodities are taken at the
Executive Committee level and with clearly laid down guidelines for their implementation by the subsidiaries.
Whilst the Group aims to achieve average LME prices for a month or a year, average realised prices may not necessarily
reflect the LME price movements because of a variety of reasons such as uneven sales during the year and timing
of shipments.
The Group is also exposed to the movement of international crude oil price and the discount in the price of Rajasthan crude
oil to Brent price.
Copper
The Group’s custom smelting copper operations at Tuticorin is benefited by a natural hedge except to the extent of a
possible mismatch in quotational periods between the purchase of concentrate and the sale of finished copper. The
Group’s policy on custom smelting is to generate margins from TC/RCs, improving operational efficiencies, minimising
conversion cost, generating a premium over LME on sale of finished copper, sale of by-products and from achieving import
parity on domestic sales. Hence, mismatches in quotational periods are managed to ensure that the gains or losses are
minimised. The Group hedges this variability of LME prices through forward contracts and tries to make the LME price a
pass-through cost between purchases of copper concentrate and sales of finished products, both of which are linked to the
LME price.
TC/RCs are a major source of income for the Indian copper smelting operations. Fluctuations in TC/RCs are influenced by
factors including demand and supply conditions prevailing in the market for mine output. The Group’s Copper business has
a strategy of securing a majority of its concentrate feed requirement under long-term contracts with mines.
KCM is largely an integrated copper producer and whenever hedging is done it is with an intention to protect the Group
from price fluctuations in copper. KCM also does hedging for its custom smelting operations in line with the Group’s policy
on custom smelting at Tuticorin, as explained above.
Aluminium
The requirement of the primary raw material, alumina, is partly met from own sources and the rest is purchased primarily
on negotiated price terms. Sales prices are linked to the LME prices. At present the Group on selective basis hedges the
aluminium content in imported alumina to protect its margins.
The Group also enters into hedging arrangements for its aluminium sales to realise month of sale LME prices.
Zinc and lead
The sales prices are linked to the LME prices. The Group also enters into hedging arrangements for its zinc and lead sales
to realise month of sale LME prices.
Iron ore
The Group sells its iron ore production from Goa on the prevailing market prices and from Karnataka through e-auction
route as mandated by State Government of Karnataka in India.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 188
Notes to the Financial Statements continued
29. Financial instruments continued
Provisionally priced financial instruments
On 31 March 2016, the value of net financial liabilities linked to commodities (excluding derivatives) accounted for on
provisional prices was a liability of US$416.3 million (2015: liability of US$689.9 million). These instruments are subject to
price movements at the time of final settlement and the final price of these instruments will be determined in the financial
year beginning 1 April 2016.
Set out below is the impact of a 10% increase in LME prices on profit/(loss) for the year and total equity as a result of
changes in value of the Group’s commodity financial instruments as at 31 March 2016:
(US$ million except as stated)
Commodity price sensitivity
Copper
Zinc
Lead
(US$ million except as stated)
Commodity price sensitivity
Copper
Zinc
Lead
Closing LME as at
31 March 2016
US$
Effect on profit/(loss)
of a 10% increase in the
LME 31 March 2016
(US$ million)
Effect on total equity
of a 10% increase in the
LME 31 March 2016
(US$ million)
4,855.5
1,785.0
1,704.5
(44.5)
0.2
0.6
(44.5)
0.2
0.6
Closing LME as at
31 March 2015
US$
Effect on profit/(loss)
of a 10% increase in the
LME 31 March 2015
(US$ million)
Effect on total equity
of a 10% increase in the
LME 31 March 2015
(US$ million)
6,050
2,075
1,808
(62.2)
0.2
–
(62.2)
0.2
–
The above sensitivities are based on volumes, costs, exchange rates and other variables and provide the estimated impact
of a change in LME prices on profit and equity assuming that all other variables remain constant. A 10% decrease in LME
prices would have an equal and opposite effect on the Group’s financial instruments.
Further, the impact of a 10% increase in closing copper LME for provisionally priced copper concentrate purchased at
Vedanta Limited Copper division custom smelting operations is US$50.0 million (2015: US$69.2 million), which is pass
through in nature and as such will not have any impact on the profitability.
Financial risk and sensitivities
The Group’s Board approved financial risk policies comprise liquidity, currency, interest rate and counterparty risk. The
Group does not engage in speculative treasury activity but seeks to manage risk and optimise interest and commodity
pricing through proven financial instruments.
(a) Liquidity
The Group requires funds both for short-term operational needs as well as for long-term investment programmes mainly
in growth projects. The Group generates sufficient cash flows from the current operations which together with the available
cash and cash equivalents and liquid financial asset investments provide liquidity both in the short term as well as in the
long term. Anticipated future cash flows, together with undrawn fund based committed facilities of US$1,087.3 million, and
cash and liquid investments of US$8,936.5 million as at 31 March 2016, are expected to be sufficient to meet the liquidity
requirement of the Group in the near future.
The Group’s current corporate family ratings from Standard & Poor’s and Moody’s are B and B2 respectively, with Stable
outlook from Standard & Poor’s and Negative outlook from Moody’s. These ratings reflect the rating agencies’ actions
during the year on the companies in the resource sector taking into consideration current market conditions. The Group
strives to maintain a healthy liquidity, gearing ratio and retains flexibility in the financing structure to alter the ratio when
the need arises (see Note 34 for further details).
The maturity profile of the Group’s financial liabilities based on the remaining period from the balance sheet date to the
contractual maturity date is given in the table below. The figures reflect the contractual undiscounted cash obligation of
the Group:
At 31 March 2016
(US$ million)
Payment due by period
Trade and other payables
Bank and other borrowings1
Convertible bonds1
Derivative liabilities
Total
< 1 year
1–2 years
2–5 years
> 5 years
Total
4,885.5
4,711.2
595.5
67.8
–
3,434.4
–
1.1
29.9
7,645.5
–
–
6.2
3,388.3
–
–
4,921.6
19,179.4
595.5
68.9
10,260.0
3,435.5
7,675.4
3,394.5
24,765.4
1
Includes contractual interest payment based on interest rate prevailing at the end of the reporting period.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
189
29. Financial instruments continued
At 31 March 2015
(US$ million)
Payment due by period
Trade and other payables
Bank and other borrowings1
Convertible bonds1
Derivative liabilities
Total
< 1 year
1–2 years
2–5 years
> 5 years
Total
4,509.0
4,171.8
65.8
45.8
229.3
2,981.0
1,161.5
–
63.0
8,730.4
–
–
6.9
3,476.1
–
–
4,808.2
19,359.3
1,227.3
45.8
8,792.4
4,371.8
8,793.4
3,483.0 25,440.6
1
Includes contractual interest payment based on interest rate prevailing at the end of the reporting period.
At 31 March 2016, the Group had access to funding facilities (both fund based and non-fund based) of US$18,140.7 million,
of which US$1,087.3 million is fund based and US$716.2 million is non-fund based, was not yet drawn, as set out below.
(US$ million)
Funding facilities
Less than 1 year
1–2 years
2–5 years and above
Total
Total facility
Drawn
Undrawn
6,104.2
2,642.7
9,393.8
4,310.0
2,642.7
9,384.5
1,794.2
–
9.3
18,140.7
16,337.2
1,803.5
At 31 March 2015, the Group had access to funding facilities (both fund based and non-fund based) of US$18,981.5 million of
which US$1,208.2 million was fund based and US$969.7 million was non-fund based, was not yet drawn, as set out below.
(US$ million)
Funding facilities
Less than 1 year
1–2 years
2–5 years and above
Total
Total facility
Drawn
Undrawn
5,270.9
3,265.4
10,445.2
3,189.5
3,265.4
10,348.7
2,081.4
–
96.5
18,981.5
16,803.6
2,177.9
‘Fund based’ facilities represent contractual agreements for financial institutions to provide cash, such as cash credit limits
and term loans, whereas ‘non-fund based’ facilities only give rise to an obligation to provide cash in certain circumstances,
such as bank guarantees and letters of credit.
(b) Foreign currency
The Group’s presentation currency is the US dollar. The majority of the assets are located in India and the Indian rupee is
the functional currency for the Indian operating subsidiaries. Exposures on foreign currency loans are managed through
the foreign exchange hedging policy, which is reviewed periodically to ensure that the risk from fluctuating currency
exchange rates is appropriately managed. Natural hedges available in the business are identified at each entity level and
hedges are placed only for the net exposure. Short-term net exposures are hedged progressively based on their maturity.
Longer exposures beyond one year for trade and other current account transactions are reviewed and hedges taken
accordingly. However, all new exposures on account of long-term borrowing are being hedged.
The carrying amount of the Group’s financial assets and liabilities in different currencies are as follows:
(US$ million)
US$
INR
Kwacha
AUD
CAD
EURO
ZAR
NAD
Others
Total
At 31 March 2016
At 31 March 2015
Financial
assets
Financial
liabilities
Financial
assets
Financial
liabilities
1,260.9
8,524.6
0.8
0.4
–
46.6
18.3
5.0
29.4
12,519.9
8,502.5
120.9
9.3
0.1
47.4
18.6
5.0
30.1
1,362.1
8,019.4
1.3
0.7
–
75.6
14.8
9.8
9.5
14,216.3
7,151.8
38.9
9.7
0.3
59.0
21.8
23.2
0.8
9,886.0
21,253.8
9,493.2
21,521.8
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 190
Notes to the Financial Statements continued
29. Financial instruments continued
The Group’s exposure to foreign currency arises where a Group company holds monetary assets and liabilities denominated
in a currency different to the functional currency of that entity with USD (US dollar) being the major foreign currency
exposure of the Group’s main operating subsidiaries. Set out below is the impact of a 10% change in the US dollar on
profit/(loss) and equity arising as a result of the revaluation of the Group’s foreign currency financial instruments:
(US$ million)
INR
Kwacha
(US$ million)
INR
Euro
31 March 2016
Effect of 10%
strengthening of
US dollar on net
earnings
Effect of 10%
strengthening of
US dollar on total
equity
(191.1)
(10.1)
(230.2)
(10.1)
31 March 2015
Effect of 10%
strengthening of
US dollar on net
earnings
Effect of 10%
strengthening of
US dollar on total
equity
(192.3)
0.7
(236.1)
0.7
Closing
exchange
rate
66.3329
7.5811
Closing
exchange
rate
62.5908
0.9271
The sensitivities are based on financial assets and liabilities held at 31 March 2016 where balances are not denominated in
the functional currency of the respective subsidiaries. The sensitivities do not take into account the Group’s sales and costs
and the results of the sensitivities could change due to other factors such as changes in the value of financial assets and
liabilities as a result of non-foreign exchange influenced factors. A 10% depreciation of the US dollar would have an equal
and opposite effect on the Group’s financial instruments.
(c) Interest rate risk
At 31 March 2016, the Group’s net debt of US$7,328.8 million (2015: US$8,460.3 million net debt) comprises cash, cash
equivalents and liquid investments of US$8,936.5 million (2015: US$8,209.8 million) offset by debt of US$16,263.3 million
(2015: US$16,667.8 million) and debt derivative liability of US$2.0 million (2015: liability of US$2.3 million).
The Group is exposed to interest rate risk on short-term and long-term floating rate instruments and on the refinancing of
fixed rate debt. The Group’s policy is to maintain a balance of fixed and floating interest rate borrowings and the proportion
of fixed and floating rate debt is determined by current market interest rates. As at 31 March 2016, 48.0% (2015: 50.2%) of
the total debt was at a fixed rate and the balance was at a floating rate. The USD floating rate debt is linked to US dollar
LIBOR and INR floating rate debt to Bank’s base rate. The Group also aims to opt for a higher proportion of long-term debt
to fund growth projects to extend its maturity profile. The Group invests cash and liquid investments in short-term deposits
and debt mutual funds, some of which generate a tax-free return, to achieve the Group’s goal of maintaining liquidity,
carrying manageable risk and achieving satisfactory returns.
Floating rate financial assets are largely mutual fund investments which have debt securities as underlying assets. The
returns from these financial assets are linked to market interest rate movements; however the counterparty invests in the
agreed securities with known maturity tenure and return and hence has manageable risk. Additionally, the investments
portfolio is independently reviewed by CRISIL Limited, and our investment portfolio has been rated as ‘Very Good’,
meaning highest safety.
The exposure of the Group’s financial assets to interest rate risk is as follows:
At 31 March 2016
At 31 March 2015
(US$ million)
Financial assets
Derivative assets
Floating
rate
financial
assets
6,334.0
–
Fixed rate
financial
assets
2,601.8
–
Total financial assets
6.334.0
2,601.8
Non-
interest
bearing
financial
assets
924.6
19.1
943.7
Floating
rate
financial
assets
5,419.6
–
Fixed rate
financial
assets
2,820.1
–
5,419.6
2,820.1
Equity
investments
4.2
–
4.2
Non-
interest
bearing
financial
assets
1,232.5
16.8
1,249.3
Equity
investments
6.5
–
6.5
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
191
29. Financial instruments continued
The exposure of the Group’s financial liabilities to interest rate risk is as follows:
(US$ million)
Financial liabilities
Derivative liabilities
At 31 March 2016
At 31 March 2015
Floating
rate
financial
liabilities
8,454.3
–
Fixed rate
financial
liabilities
9,294.2
–
Non-
interest
bearing
financial
liabilities
3,436.4
68.9
Floating
rate
financial
liabilities
8,711.9
2.3
Fixed rate
financial
liabilities
9,506.7
–
Non-
interest
bearing
financial
liabilities
3,257.4
43.5
Total financial liabilities
8,454.3
9,294.2
3,505.3
8,714.2
9,506.7
3,300.9
The weighted average interest rate on the fixed rate financial liabilities is 8.15% (2015: 8.3%) and the weighted average
period for which the rate is fixed is 2.4 years (2015: 3.0 years).
Considering the net debt position as at 31 March 2016 and the investment in bank deposits, corporate bonds and debt
mutual funds, any increase in interest rates would result in a net loss and any decrease in interest rates would result in a net
gain. The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and
non-derivative instruments at the balance sheet date.
The below table illustrates the impact of a 0.5% to 2.0% change in interest rate of borrowings on profit/(loss) and equity
and represents management’s assessment of the possible change in interest rates.
At 31 March 2016
(US$ million)
Change in interest rates
0.5%
1.0%
2.0%
At 31 March 2015
(US$ million)
Change in interest rates
0.5%
1.0%
2.0%
Effect on
loss for the
year
Effect on
total equity
42.3
84.5
169.1
42.3
84.5
169.1
Effect on
loss for the
year
Effect on
total equity
41.5
82.9
165.9
41.5
82.9
165.9
(d) Credit risk
The Group is exposed to credit risk from trade receivables, cash and cash equivalents, liquid investments and other
financial instruments.
The Group has clearly defined policies to mitigate counterparty risks. Cash and liquid investments are held primarily in debt
schemes of mutual funds, bonds and bank deposits with good credit ratings. Defined limits are in place for exposure to
individual counterparties in case of mutual fund houses and banks.
The large majority of receivables due from third parties are secured. Moreover, given the diverse nature of the Group’s
businesses, trade receivables are spread over a number of customers with no significant concentration of credit risk. During
the year ended 31 March 2016 no single customer accounted for 10% or more of the Group’s net sales or for any of the
Group’s primary businesses. During the year ended 31 March 2015, other than the exception of a single customer in our Oil
& Gas business, no single customer accounted for 10% or more of the Group’s net sales or for any of the Group’s primary
businesses. The history of trade receivables shows a negligible provision for bad and doubtful debts. Therefore, the Group
does not expect any material risk on account of non-performance by any of our counterparties.
The Group’s maximum gross exposure to credit risk at 31 March 2016 is US$9,886.0 million (2015: US$9,493.2 million).
Of the year end trade and other receivable balance the following, though overdue, are expected to be realised in the
normal course of business and, hence, are not considered impaired as at 31 March 2016:
(US$ million)
Less than 1 month
Between 1–3 months
Between 3–12 months
Greater than 12 months
Total
2016
49.8
74.3
98.1
86.3
308.5
2015
39.1
49.1
40.3
62.5
191.0
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 192
Notes to the Financial Statements continued
29. Financial instruments continued
Receivables amounting to Nil (31 March 2015: US$43.8 million), of the Power division of the Group have been impaired
primarily as a result of an ongoing dispute in relation to a tariff agreement with a power supply company.
Derivative financial instruments
The fair value of all derivatives is separately recorded on the balance sheet within other financial assets (derivatives) and
other financial liabilities (derivatives), current and non-current. In addition, the derivative component of certain convertible
bonds is shown as part of the overall convertible bond liability (Note 28). Derivatives that are designated as hedges are
classified as current or non-current depending on the maturity of the derivative.
Embedded derivatives
Derivatives embedded in other financial instruments or other contracts are treated as separate derivative contracts, when
their risks and characteristics are not closely related to those of their host contracts.
Cash flow hedges
The Group also enters into forward exchange and commodity price contracts for hedging highly probable forecast
transactions and accounts for them as cash flow hedges and states them at fair value. Subsequent changes in fair value are
recognised in equity until the hedged transactions occur, at which time the respective gains or losses are transferred to the
income statement.
The fair value of the Group’s open derivative positions at 31 March 2016, recorded within financial instruments (derivative), is
as follows:
(US$ million)
Current
Cash flow hedges
– Commodity contracts
– Forward foreign currency contracts
Hedge of net investment in foreign operations
Fair value hedges
– Commodity contracts
– Forward foreign currency contracts
– Other (foreign currency swap)
Non-qualifying hedges
– Commodity contracts
– Forward foreign currency contracts
– Interest rate swap
– Other (foreign currency swap)
Total
Non-current
Fair value hedges
– Forward foreign currency contracts
Total
Grand total
As at 31 March 2016
As at 31 March 2015
Liability
Asset
Liability
Asset
(0.9)
(8.3)
–
–
(37.4)
–
(1.2)
(19.7)
–
(0.2)
(67.7)
(1.2)
(1.2)
(68.9)
0.2
5.5
–
0.1
1.3
–
2.9
8.3
–
0.0
18.3
0.8
0.8
19.1
–
(0.6)
–
(1.7)
(20.1)
(2.2)
(1.5)
(11.2)
(8.2)
(0.2)
(45.7)
(0.1)
(0.1)
(45.8)
2.5
–
7.9
3.8
1.6
–
0.8
0.0
–
–
16.6
0.2
0.2
16.8
The majority of cash flow hedges taken out by the Group during the year comprises commodity contracts and foreign
currency forward contracts for firm future commitments.
The cash flows related to the majority of cash flow hedges above are expected to occur during the year ended 31 March
2017 and consequently may impact the income statements for that year depending upon the change in the commodity
prices and foreign exchange rate movements.
Non-qualifying hedges
The majority of these derivatives comprise interest rate swaps and foreign currency forward contracts which are economic
hedges but which do not fulfil the requirements for hedge accounting of IAS 39 Financial Instruments: Recognition and
Measurement.
Fair value hedges
The fair value hedges relate to foreign currency forward contracts taken to hedge currency exposure on purchase of raw
materials and capital imports.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
193
29. Financial instruments continued
Hedging reserve reconciliation
(US$ million)
At 1 April 2014
Amount recognised directly in equity
Amount transferred to income statement
Changes in non-controlling interests
Exchange difference
At 1 April 2015
Amount recognised directly in equity
Amount transferred to income statement
Exchange difference
At 31 March 2016
30. Provisions
(US$ million)
At 1 April 2014
(Released)/charged to income statement
Unwinding of discount
Cash paid
Change in estimates
Exchange differences
At 1 April 2015
Charged to income statement
Unwinding of discount (note 7)
Cash paid
Exchange differences
At 1 April 2016
Current 2016
Non-current 2016
Current 2015
Non-current 2015
Hedging
reserves
Non-
controlling
interests
(50.4)
(17.1)
(7.4)
(3.9)
4.1
(74.7)
(17.2)
(0.8)
5.0
(87.7)
(37.2)
(9.5)
(4.4)
3.9
2.5
(44.7)
(10.1)
(0.7)
2.9
Total
(87.6)
(26.6)
(11.8)
–
6.6
(119.4)
(27.3)
(1.5)
7.9
(52.6)
(140.3)
Restoration,
rehabilitation
and
environmental
KCM copper
price
participation
Other
Total
306.5
(26.9)
31.8
(7.5)
(66.1)
(12.9)
224.9
3.4
10.3
(43.9)
(3.0)
191.7
17.5
174.2
191.7
37.3
187.6
224.9
89.3
(1.4)
5.0
(1.0)
–
–
91.9
–
2.5
–
7.6
102.0
102.0
–
102.0
91.6
0.3
91.9
28.9
0.9
–
(1.4)
–
(1.0)
27.4
1.7
0.7
(0.7)
(3.3)
25.8
12.6
13.2
25.8
11.9
15.5
27.4
424.7
(27.4)
36.8
(9.9)
(66.1)
(13.9)
344.2
5.1
13.5
(44.6)
1.3
319.5
132.1
187.4
319.5
140.8
203.4
344.2
Restoration, rehabilitation and environmental
The provisions for restoration, rehabilitation and environmental liabilities represent the management’s best estimate of
the costs which will be incurred in the future to meet the Group’s obligations under existing Indian, Australian, Zambian,
Namibian, South African and Irish law and the terms of the Group’s mining and other licenses and contractual arrangements.
These amounts, calculated by considering discount rates within the range of 2% to 9%, become payable on closure of mines
and are expected to be incurred over a period of one to 15 years. Within India, the principal restoration and rehabilitation
provisions are recorded within Cairn India where a legal obligation exists relating to the oil & gas fields, where costs are
expected to be incurred in restoring the site of production facilities at the end of the producing life of an oil field. The Group
recognises the full cost of site restoration as a liability when the obligation to rectify environmental damage arises.
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused
by the development or ongoing production from a producing field.
KCM copper price participation
During the year ended 31 March 2013, the Group and ZCCM-IH agreed a final settlement for the copper price participation
liability. The total amount to be paid is US$119.7 million to be settled in 16 instalments with the first instalment starting on
31 December 2012 and last instalment on 30 September 2016. The total liability that remains outstanding is US$102.0 million
as at 31 March 2016. The liability recognised has been discounted at 11.00% to take into account the expected timings of the
various payments and recognised as a liability of US$94.4 million (2015: US$91.9 million).
Other
Other includes provision on post retirement medical benefits. The expected period of utilisation is 18 years.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 194
Notes to the Financial Statements continued
31. Deferred tax
The Group has accrued significant amounts of deferred tax. The majority of the deferred tax liability represents accelerated
tax relief for the depreciation of capital expenditure and the depreciation on fair value uplifts created on acquisitions, net of
losses carried forward by Vedanta Limited (post the reorganisation) and MAT credits carried forward in Cairn India and
Hindustan Zinc.
The amounts of deferred taxation on temporary differences, provided and not provided, in the accounts are as follows:
Provided – deferred tax liabilities/(assets)
(US$ million)
Accelerated capital allowances
Unutilised tax losses
Other temporary differences
Disclosed as:
Deferred tax liability
Deferred tax asset
Unrecognised deferred tax assets
(US$ million)
Unutilised business losses
Unabsorbed depreciation
Capital losses
Total
As at
31 March
2016
2,164.2
(749.8)
(2049.6)
As at
31 March
2015
3,478.3
(445.1)
(1,697.1)
(635.2)
1,336.1
620.2
(1,255.4)
2,588.7
(1,252.6)
(635.2)
1,336.1
As at
31 March
2016
(585.2)
(203.2)
(42.4)
As at
31 March
2015
(342.2)
(116.6)
(12.8)
(830.8)
(471.6)
The above relates to the tax effect on US$1,239.0 million (2015: US$1,088.3 million) of unutilised tax losses of the Company,
VRP, VRHL and VRJ2 which have no expiry period; US$986.4 million (2015: US$827.2 million) unutilised tax losses of Twin
Star Mauritius Holdings Limited; US$110.6 million unutilised tax losses of Westglobe Ltd (WL); which are subject to the
Mauritius tax regime and can be carried forward for a period of five years; US$54.9 million of unutilised tax losses and
non-refundable R&D tax credits of Copper Mines of Tasmania, which can be carried forward indefinitely under the
Australian tax regime; US$515.4 million of unutilised tax losses of Konkola Copper Mines which can be carried forward for
10 years under the Zambian tax regime and US$297.7 million (2015: US$344.3 million) of unabsorbed depreciation for
Malco Energy Limited (MEL); US$250.8 million of unutilised tax losses and unabsorbed depreciation for Talwandi Sabo
Power Ltd (TSPL); US$143.0 million of unutilised capital losses of Hindustan Zinc Ltd (HZL); US$40.7 million of unutilised
capital losses of Vedanta Ltd (VEDL); US$41.1 million of unutilised tax losses and unabsorbed depreciation for Vizag
General Cargo Berth Pvt Ltd (VGCB) which are subject to the Indian tax regime. Pursuant to the Indian tax regime,
unutilised business tax losses expire eight years from the period in which the losses arise and unabsorbed depreciation can
be carried forward indefinitely. No deferred tax asset has been recognised on these unutilised tax losses and tax credits as
there is no evidence that sufficient taxable profit will be available in the future against which they can be utilised by the
respective entities.
Deferred tax asset
(US$ million)
At 1 April
Reclassification
Credited to income statement
Credited/(charged) directly to equity
Foreign exchange differences
At 31 March
As at
31 March
2016
1,252.6
(10.1)
96.8
1.3
(85.2)
As at
31 March
2015
1,223.7
–
45.8
(0.3)
(16.6)
1,255.4
1,252.6
The Group has US$2,274.6 million of unutilised tax losses in Vedanta Limited, BALCO, KCM and MAT credits of
US$1,966.8 million carried forward in Hindustan Zinc, Vedanta Limited and Cairn India which are subject to the Indian tax
regime. Under the Indian tax regime, unutilised tax losses expire eight years from the period in which the losses arise and
unabsorbed depreciation can be carried forward indefinitely. MAT credits expire 10 years from the period in which the
credits arise.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
195
31. Deferred tax continued
Deferred tax assets in the Group have been recognised to the extent there are sufficient taxable temporary differences
relating to the same taxation authority and the same taxable entity which are expected to reverse.
Deferred tax liability
(US$ million)
At 1 April
Reclassification
Credited to income statement1
Charged/(credited) directly to equity
Foreign exchange differences
At 31 March
As at
31 March
2016
2,588.7
(10.1)
(1,921.8)
2.5
(39.1)
As at
31 March
2015
4,960.1
–
(2,377.5)
(6.5)
12.6
620.2
2,588.7
1
Including deferred tax credit of US$1,903.3 million (2015: US$2138.0 million) related to impairment of Oil & Gas assets at Cairn (Note 5).
32. Share-based payments
Employee share schemes
The Group aims to provide superior rewards for outstanding performance and a high proportion of ‘at risk’ remuneration
for Executive Directors. Three employee share schemes were approved by shareholders on Listing. In 2014, the Board
introduced a Performance Share Plan (PSP) which is the primary arrangement under which share-based incentives are
provided to the Executive Directors and the wider management group. In 2015, the Board also introduced a Deferred Share
Bonus Plan (DSBP).
The Vedanta Resources Long-Term Incentive Plan (the LTIP) and Employee Share Ownership Plan (the ESOP) and
Performance Share Plan (the PSP)
The maximum value of shares that can be conditionally awarded to an Executive Director in a year is 150% of annual salary.
In respect of Mr Navin Agarwal and Mr Tom Albanese, salary means the aggregate of their salary payable by Vedanta and
their CTC payable by Vedanta Limited. The maximum value of shares that can be awarded to members of the wider
management group is calculated by reference to the grade average CTC and individual grade of the employee. The
performance conditions attaching to outstanding awards are as follows:
• PSP – measured in terms of Total Shareholder Return (TSR) (being the movement in a company’s share price plus
reinvested dividends) – is compared over the performance period with the performance of the companies as
defined in the scheme from the grant date. The extent to which an award vests will depend on the Company’s
TSR rank against a group or groups of peer companies at the end of the performance period and as moderated
by the Remuneration Committee.
The vesting schedule is shown in the table below, with adjusted straight-line vesting in between the points shown and
rounding down to the nearest whole share.
Vedanta’s TSR performance against comparator group
Below median
At median
At or above upper quartile
(% of award
vesting)
–
30
100
• The performance condition is measured by taking the Company’s TSR over the three months immediately preceding the
date of grant and over the three months immediately preceding the end of the performance period, and comparing its
performance with that of the comparator group or groups. The information to enable this calculation to be carried out
on behalf of the Remuneration Committee (the Committee) is provided by the Company’s advisers. The Committee
considers that this performance condition, which requires that the Company’s total return has outperformed a group of
industry peers, provides a reasonable alignment of the interests of the Executive Directors and the wider management
group with those of the shareholders.
• Initial awards under the PSP were granted on 17 November 2014, 1 January 2015 and subsequently on 30 December
2015. The exercise price of the awards is 10 US cents per share and the performance period is three years, with no
re-testing being allowed.
• ESOP – measured in terms of business performance set against business plan for the financial year comprising
operational deliverables, enabler parameters and sustainability performance specific to each company. The vesting
schedule is graded over three years and varies from company to company with a minimum vesting of 30% triggering
at either 80% or 85% business score. In another tranche, the vesting schedule is staggered over a period of three
years from the date of grant, with 70% vesting based on the achievement of business performance and the remaining
30% based on continued employment with the Group until the end of the third year.
• Initial awards under ESOP were granted on 24 September 2012 with further awards being made on 16 May 2013.
The exercise price of the awards is 10 US cents per share and the performance period is one year.
• The exercise period is six months from the date of vesting.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 196
Notes to the Financial Statements continued
32. Share-based payments continued
• LTIP – measured in terms of Total Shareholder Return (TSR) (being the movement in a company’s share price plus
reinvested dividends) – is compared over the performance period with the performance of the companies as defined in
the scheme from the grant date. The extent to which an award vests will depend on the Company’s TSR rank against a
group of peer companies (Adapted Comparator Group) at the end of the performance period and as moderated by the
Remuneration Committee. The vesting schedule is shown in the table below, with adjusted straight-line vesting in
between the points shown and rounded down to the nearest whole share.
Vedanta’s TSR performance against adapted comparator group
Below median
At median
At or above upper quartile
(% of award
vesting)
–
40
100
The performance condition is measured by taking the Company’s TSR over the four weeks immediately preceding
the date of grant and over the four weeks immediately preceding the end of the performance period, and comparing its
performance with that of the comparator group described above. The information to enable this calculation to be carried
out on behalf of the Remuneration Committee (the Committee) is provided by the Company’s advisers. The Committee
considers that this performance condition, which requires that the Company’s total return has outperformed a group of
companies chosen to represent the mining sector, provides a reasonable alignment of the interests of the Executive
Directors and the wider management group with those of the shareholders.
Initial awards under the LTIP were granted on 26 February 2004. As on 31 March 2015 the awards outstanding are
the awards issued on 1 August 2011, 1 October 2011, 1 January 2012 and 1 April 2012. The exercise price of the awards
is 10 US cents per share and the performance period is three years, with no re-testing being allowed.
• The Vedanta Resources Deferred Share Bonus Plan (the DSBP) – In 2015, Vedanta introduced the DSBP, with initial
awards being made in May 2015 and August 2015. Under the plan, a portion of the annual bonus is deferred into shares
and the awards granted under this scheme are not subject to any performance conditions only on service conditions
being met. The vesting schedule is staggered over a period of two or three years. In case of DSBP, the shares are
purchased from open market and allotted to employees, officers and Directors. As on 31 March, the options outstanding
under the DSBP scheme are 231,437.
In general, the awards will be settled in equity. The awards are accounted for in accordance with the requirements applying
to equity-settled share-based payment transactions. The fair value of each award on the day of grant is equal to the
average of the middle market quotations of its share price for five dealing days before the grant date.
Further details on these schemes are available in the Remuneration Report of the Annual Report.
The details of share options for the year ended 31 March 2016 and 31 March 2015 are presented below:
Year of
grant
Exercise date
2011
2011
2011
2012
2012
2012
2013
2014
2015
2015
1 July 2014–1 January 2015
1 August 2014–1 February 2015
1 October 2014–1 April 20151
1 January 2015–1 July 20151
1 April 2015–1 September 20151
24 September 2013–24 March 20161
16 May 2014–16 November 2016
17 November 2017–17 May 2018
1 January 2018–1 July 2018
30 December 2018–30 June 2019
Exercise
price
US cents
per share
1 April
2015
Options
outstanding
Options
granted
during the
year
–
600
10
–
118,527
10
–
5,000
10
–
7,000
10
–
97,800
10
–
10
368,952
–
10 1,302,785
–
10 5,335,500
–
10
21,500
– 5,484,575
10
Options
lapsed
during
the year
owing to
performance
conditions
–
–
(1,800)
(4,200)
(58,190)
–
–
–
–
–
Options
lapsed
during the
year
–
(15,120)
–
–
(37,850)
(19,515)
(159,288)
(677,171)
–
(65,733)
Options
exercised
during the
year
Options
outstanding
at 31 March
2016
(600)
(103,407)
–
–
–
(274,687)
(361,500)
–
–
3,200
2,800
1,760
74,750
781,997
– 4,658,329
21,500
–
5,418,842
–
7,236,164 5,506,075
(974,677)
(64,190)
(740,194) 10,963,178
1 The exercise period of the schemes expiring before 31 March 2016 has been extended up to June 2016.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
197
32. Share-based payments continued
Year of
grant
Exercise date
2011
2011
2011
2011
2011
2012
2012
2012
2013
2014
1 January 2014–1 July 2014
1 April 2014–1 October 2014
1 July 2014–1 January 2015
1 August 2014–1 February 2015
1 October 2014–1 April 2015
1 January 2015–1 July 2015
1 April 2015–1 September 2015
24 September 2013–24 March 2016
16 May 2014–16 October 2016
17 November 2017–17 May 2018
Exercise
price
US cents
per share
1 April
2014
Options
outstanding
Options
granted
during the
year
Options
lapsed
during the
year
Options
lapsed
during
the year
owing to
performance
conditions
Options
exercised
during the
year
Options
outstanding
at 31 March
2015
2,700
10
67,500
10
10
16,500
10 2,185,550
5,000
10
7,000
10
10
97,800
10 2,380,748
10 3,754,550
10
–
–
–
–
–
–
–
–
–
– 5,485,000
(1,620)
–
(41,380)
–
(5,000)
(6,900)
(77,550) (1,365,934)
–
–
–
(1,080)
(26,120)
(4,000)
(623,539)
–
–
–
(41,238) (1,586,513) (384,045)
(363,869)
–
–
–
(188,047) (1,899,849)
–
(149,500)
–
–
600
118,527
5,000
7,000
97,800
368,952
1,302,785
– 5,335,500
8,517,348 5,485,000
(461,335) (4,902,196) (1,402,653) 7,236,164
In the year ended 31 March 2016, 974,677 options lapsed in total and 740,194 options exercised. As at 31 March 2016, 10,963,178
options remained outstanding and 82,510 options were exercisable at the year end. The weighted average share price for the
share options exercised during the year ended 31 March 2016 was GBP4.1 (year ended 31 March 2015: GBP8.9). The weighted
average maturity period for the options outstanding as on 31 March 2016 is 31 months (31 March 2015: 33 months).
All share-based awards of the Group are equity-settled as defined by IFRS 2 ‘Share-based Payment’. The fair value of these
awards has been determined at the date of grant of the award allowing for the effect of any market-based performance
conditions. This fair value, adjusted by the Group’s estimate of the number of awards that will eventually vest as a result of
non-market conditions, is expensed on a straight-line basis over the vesting period.
The fair values were calculated using the Stochastic valuation model with suitable modifications to allow for the specific
performance conditions of the respective schemes. The inputs to the model include the share price at date of grant,
exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. A progressive
dividend growth policy is assumed in all fair value calculations. Expected volatility has been calculated using historical
return indices over the period to date of grant that is commensurate with the performance period of the award. The
volatilities of the industry peers have been modelled based on historical movements in the return indices over the period to
date of grant which is also commensurate with the performance period for the option. The history of return indices is used
to determine the volatility and correlation of share prices for the comparator companies and is needed for the Stochastic
valuation model to estimate their future TSR performance relative to the Company’s TSR performance. All options are
assumed to be exercised immediately after vesting.
The assumptions used in the calculations of the charge in respect of the PSP/ESOP awards granted during the year ended
31 March 2016 and 31 March 2015 are set out below:
Number of instruments
Exercise price
Share price at the date of grant
Contractual life
Expected volatility
Expected option life
Expected dividends
Risk free interest rate
Expected annual forfeitures
Fair value per option granted
Year ended 31 March 2016
PSP December 2015
Year ended 31 March 2015
PSP November 2014
5,484,575
US$0.10
GBP2.72
3 years
55.9%
3 years
9.93%
0.91%
10% p.a.
GBP1.95/GBP0.79
5,485,000
US$0.10
GBP8.09
3 years
35.5%
3 years
4.62%
0.90%
10% p.a.
GBP6.98/GBP3.00
The Group recognised total expenses of US$15.6 million and US$28.6 million related to equity-settled share-based
payment transactions in the year ended 31 March 2016 and 31 March 2015 respectively.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 198
Notes to the Financial Statements continued
33. Retirement benefits
The Group operates pension schemes for the majority of its employees in India, Australia, Africa and Ireland.
(a) Defined contribution schemes
Indian pension schemes
Central Recognised Provident Fund
The Central Recognised Provident Fund relates to all full-time Indian employees of the Group. The amount contributed
by the Group is a designated percentage of 12% of basic salary less contributions made as part of the Pension Fund (see
below), together with an additional contribution of 12% (limited to a maximum contribution of 30% in case of the Iron Ore
segment) of the salary of the employee.
The benefit is paid to the employee on their retirement or resignation from the Group.
Superannuation
Superannuation, another pension scheme applicable in India, is applicable only to executives in grade M4 and above.
However, in case of the Cairn India Group and Iron Ore segment, the benefit is applicable to all executives. In Cairn India,
it is applicable from the second year of employment. Certain companies hold policies with the Life Insurance Corporation
of India (LIC), to which they contribute a fixed amount relating to superannuation, and the pension annuity is met by the
LIC as required, taking into consideration the contributions made. Accordingly, this scheme has been accounted for on
a defined contribution basis and contributions are charged directly to the income statement.
Pension Fund
The Pension Fund was established in 1995 and is managed by the Government of India. The employee makes no
contribution to this fund but the employer makes a contribution of 8.33% of salary each month subject to a specified
ceiling per employee. This must be provided for every permanent employee on the payroll.
At the age of superannuation, contributions cease and the individual receives a monthly payment based on the level of
contributions through the years, and on their salary scale at the time they retire, subject to a maximum ceiling of salary
level. The Government funds these payments, thus the Group has no additional liability beyond the contributions that it
makes, regardless of whether the central fund is in surplus or deficit.
Australian Pension Scheme
The Group also operates defined contribution pension schemes in Australia. The contribution of a proportion of an
employee’s salary into a superannuation fund is a compulsory legal requirement in Australia. The employer contributes
9.5% of the employee’s gross remuneration where the employee is covered by the industrial agreement and 12.5% of the
basic remuneration for all other employees, into the employee’s fund of choice. All employees have the option to make
additional voluntary contributions.
Zambian Pension Scheme
The KCM Pension Scheme is applicable to full-time permanent employees of KCM (subject to the fulfilment of certain
eligibility criteria). The management of the scheme is vested in the trustees consisting of representatives of the employer
and the members. The employer makes a monthly contribution of 5% to the KCM Pension Scheme and the member makes
monthly contribution of 5%.
All contributions to the KCM Pension Scheme in respect of a member cease to be payable when the member attains
normal retirement age of 55 years, or upon leaving the service of the employer, or when the member is permanently
medically incapable of performing duties in the service of the employer. Upon such cessation of contribution on the
grounds of normal retirement, or being rendered medically incapable of performing duties, or early voluntary retirement,
the member is entitled to receive his accrued pension. The member is allowed to commute his/her accrued pension subject
to certain rules and regulations.
The Group has no additional liability beyond the contributions that it makes. Accordingly, this scheme has been accounted
for on a defined contribution basis and contributions are charged directly to the income statement.
Skorpion Zinc Provident Fund, Namibia
The Skorpion Zinc Provident Fund is a defined contribution fund and is compulsory to all full-time employees under the
age of 60. Company contribution to the fund is a fixed percentage of 9% per month of pensionable salary, whilst the
employee contributes 7% with the option of making additional contributions, over and above the normal contribution,
up to a maximum of 12%.
Normal retirement age is 60 years and benefit payable is the member’s fund credit which is equal to all employer and
employee contributions plus interest. The same applies when an employee resigns from Skorpion Zinc. The Fund provides
disability cover which is equal to the member’s fund credit and a death cover of two times annual salary in the event of
death before retirement. Current membership total is 908.
The Group has no additional liability beyond the contributions that it makes. Accordingly, this scheme has been accounted
for on a defined contribution basis and contributions are charged directly to the income statement.
Black Mountain Mining (Pty) Limited, South Africa pension and provident funds
Black Mountain Mining (Pty) Ltd has two retirement funds, both administered by Alexander Forbes, a registered financial
service provider. Both funds form part of the Alexander Forbes umbrella fund and are defined contribution funds.
Membership of both funds is compulsory for all permanent employees under the age of 60.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
199
33. Retirement benefits continued
Lisheen Mine, Ireland Pension Funds
Lisheen Pension Plan is for all employees. Lisheen pays 5% and employees pay 5% with the option to make Additional
Voluntary Contributions (AVCs) if desired. Executive contributions are 15% by Lisheen and a minimum of 5% by the
employee with the option to make AVCs if desired. Death benefit is three times salary for employees and four times salary
for executives. Pension and life cover ceases at 65. On wind up of the pension schemes, the benefits will be paid out to the
remaining members in accordance with the scheme rules and Irish Revenue tax regulations.
The Group has no additional liability beyond the contributions that it makes. Accordingly, this scheme has been accounted
for on a defined contribution basis and contributions are charged directly to the income statement.
(b) Defined benefit schemes
India
The Gratuity schemes are defined benefit schemes which are open to all Group employees in India who have a minimum
of five years of service with their employing company. These schemes are funded in some subsidiaries. Based on actuarial
valuation, a provision is recognised in full for the projected obligation over and above the funds held in scheme. In case
where there is no funding held by the scheme, full provision is recognised in the balance sheet. Under these schemes,
benefits are provided based on final pensionable pay.
The assets of the schemes are held in separate funds and a full actuarial valuation of the schemes is carried out on an
annual basis.
Vedanta Limited
The Iron Ore, Aluminium and Copper divisions of Vedanta Limited contributed to the LIC Fund based on an actuarial
valuation every year. Vedanta Limited’s Gratuity scheme is accounted for on a defined benefit basis. The latest actuarial
valuation was performed as at 31 March 2016 using the projected unit credit actuarial method.
BALCO
All employees who are scheduled to retire on or before 31 March 2016 are being paid by BALCO. The Gratuity scheme
is accounted for as a defined benefit scheme for all employees scheduled to retire after 31 March 2016. A provision is
recognised based on the latest actuarial valuation which was performed as at 31 March 2016 using the projected unit
actuarial method. At that date the fund was in deficit.
HZL
HZL contributes to the LIC fund based on an actuarial valuation every year. HZL’s Gratuity scheme is accounted for on a
defined benefit basis. The latest actuarial valuation was performed as at 31 March 2016 using the projected unit actuarial
method. At that date the fund was in deficit.
MEL
MEL contributed to the LIC fund based on an actuarial valuation every year. The MEL Gratuity scheme is accounted for on
a defined benefit basis. The latest actuarial valuation was performed as at 31 March 2016 using the projected unit credit
actuarial method.
TSPL
TSPL contributes to the LIC based on an actuarial valuation. Liabilities with regard to the Gratuity scheme are fully provided
in the balance sheet and are determined by actuarial valuation as at the balance sheet date and as per gratuity regulations
for TSPL. The latest actuarial valuation was performed as at 31 March 2016 using the projected unit actuarial method.
Cairn
Cairn contributes to the LIC fund based on an actuarial valuation every year. Cairn India Group’s Gratuity scheme is
accounted for on a defined benefit basis. The latest actuarial valuation was performed as at 31 March 2016 using the
projected unit actuarial method. At that date the fund was in deficit.
Zambia
Specified permanent employees of KCM are entitled to receive medical and retirement severance benefits. This comprises
two months’ basic pay for every completed year of service with an earliest service start date of 1 July 2004. Under this
scheme, benefits are provided based on final pensionable pay and a full actuarial valuation of the scheme is carried out
on an annual basis. The accruals are not contributed to any fund and are in the form of provisions in KCM’s accounts.
On the death of an employee during service, a lump sum amount is paid to his or her dependants. This amount is equal to
60 months’ basic pay for employees who joined before 1 April 2000 and 30 months’ basic pay for employees who joined
on or after 1 April 2000. For fixed term contract employees, the benefit payable on death is 30 months’ basic pay.
As at 31 March 2016, membership of pension schemes across Vedanta Limited, BALCO, HZL, TSPL, KCM and Cairn stood
at 22,534 employees (31 March 2015: 24,456). The deficits, principal actuarial assumptions and other aspects of these
schemes are disclosed in further detail in notes (d) and (e) below.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 200
Notes to the Financial Statements continued
33. Retirement benefits continued
(c) Pension scheme costs
Contributions of US$66.5 million and US$nil in respect of defined benefit schemes were outstanding and prepaid
respectively as at 31 March 2016 (2015: US$74.6 million and US$nil respectively).
Contributions to all pension schemes in the year ending 31 March 2017 are expected to be around US$5.0 million
(actual contribution during the year ended 31 March 2016: US$9.7 million).
(US$ million)
Defined contribution pension schemes
Defined benefit pension schemes
Total expense
Year ended
31 March
2016
Year ended
31 March
2015
30.1
18.2
48.3
30.7
19.7
50.4
(d) Principal actuarial assumptions
Principal actuarial assumptions used to calculate the defined benefit schemes’ liabilities are:
MALCO
BALCO
Sterlite Copper
HZL
KCM
Jharsuguda
Aluminium
Iron Ore Sesa
Cairn
TSPL
Particulars
Mar 16
Mar 15
Mar 16
Mar 15
Mar 16
Mar 15
Mar 16
Mar 15
Mar 16
Mar 15
Mar 16
Mar 15
Mar 16
Mar 15
Mar 16
Mar 15
Mar 16
Mar 15
Discount rate 8.0%
Salary
7.8% 8.0% 9.0% 8.0%
7.8% 8.0%
7.8% 24.0% 22.5% 8.0%
7.8% 8.0%
7.8% 8.0%
7.8% 8.0%
7.8%
increases
5.5% 5.0% 5.0% 5.0% 5.5% 5.3% 5.5% 5.5% 5.0% 5.0% 6.0% 6.0%
7.0%
7.0% 10.0% 10.0% 5.5% 5.5%
Actual
number of
employees
71
76 2,498 3,059
1,067
1,078 4,646 5,286
7,230
7,281
2,393
2,738 2,860
3,821
1,482
1,569
238
211
In India, the mortality tables used assume that a person aged 60 at the end of the balance sheet date has a future life
expectancy of 19 years.
Assumptions regarding mortality for Indian entities are based on mortality table of ‘Indian Assured Lives Mortality
(2006-2008)’ published by the Institute of Actuaries of India.
Assumptions regarding mortality for KCM are based on World Health Organisation Life Tables for 1999 applicable to
Zambia which has been taken as a reference point. Based on this a mortality table which is appropriate for the workers
of Konkola Copper Mines plc has been derived.
(e) Balance sheet recognition
(US$ million)
MALCO
& TSPL
BALCO
Sterlite
Copper
HZL
KCM
Jhar-
suguda
Alumin-
ium
Iron
Ore
Sesa
Cairn
Total
MALCO
& TSPL
BALCO
Sterlite
Copper
HZL
KCM
Jhar-
suguda
Alu-
minium
Iron
Ore
Sesa
Cairn
Total
31 March 2016
31 March 2015
Fair value of
pension
scheme
assets
Present value
of pension
scheme
liabilities
Deficit in
pension
scheme
recognised
in balance
sheet
Deferred tax
Net pension
liability
0.1
–
2.9
27.6
–
1.6
5.6
5.7
43.5
0.3
–
2.5
26.8
–
1.5
9.0
4.9
45.0
(0.2)
(15.3)
(3.6)
(29.5)
(45.6)
(1.8)
(5.2)
(8.8) (110.0)
(0.3)
(20.8)
(3.5)
(35.8)
(39.8)
(2.4)
(9.3)
(7.7)
(119.6)
(0.1)
0.0
(15.3)
5.3
(0.7)
0.2
(1.9)
0.6
(45.6)
15.8
(0.2)
0.1
0.4
(0.2)
(3.1)
1.0
(66.5)
22.8
(0.1)
(10.0)
(0.5)
(1.3)
(29.8)
(0.1)
0.2
(2.1)
(43.7)
–
–
–
(20.8)
7.1
(1.0)
0.3
(9.0)
3.1
(39.8)
13.5
(0.9)
0.3
(0.3)
0.1
(2.8)
1.0
(74.6)
25.4
(13.7)
(0.7)
(5.9)
(26.3)
(0.6)
(0.2)
(1.8) (49.2)
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
201
33. Retirement benefits continued
(f) Amounts recognised in income statement in respect of defined benefit pension schemes:
(US$ million)
MALCO
& TSPL
BALCO
Sterlite
Copper
HZL
KCM
Jhar-
suguda
Alumin-
ium
Iron
Ore
Sesa
Cairn
Total
MALCO
& TSPL
BALCO
Sterlite
Copper
HZL
KCM
Jhar-
suguda
Alu-
minium
31 March 2016
31 March 2015
4.0
8.4
0.3
0.5
0.1
0.1
1.0
0.1
7.8
0.1
0.5
10.4
0.0
1.6
0.2
0.2
2.0
0.5
6.2
6.4
0.3
0.0
Iron
Ore
Sesa
0.6
0.2
Cairn
Total
0.6
10.5
0.3
9.2
Current
service cost 0.0
0.4
0.2
1.4
0.0
1.3
0.1
0.3
Net interest
cost
Total charge
to income
statement
0.0
1.7
0.3
1.7
12.4
0.4
0.6
1.1
18.2
0.1
2.1
0.4
2.5
12.6
0.3
0.8
0.9
19.7
(g) Amounts recognised in the Statement of Comprehensive Income:
31 March 2016
31 March 2015
MALCO
& TSPL
BALCO
Sterlite
Copper
HZL
KCM
Jhar-
suguda
Alumin-
ium
Iron
Ore
Sesa
Cairn
Total
MALCO
& TSPL
BALCO
Sterlite
Copper
HZL
KCM
Jhar-
suguda
Alu-
minium
Iron
Ore
Sesa
Cairn
Total
(0.1)
0.5
0.0
(2.0)
(6.7)
0.5
(0.2)
(0.1)
(8.1)
0.1
3.7
0.5
6.2
2.8
0.6
0.4
(0.1)
14.2
–
–
–
0.1
–
0.0
(0.2)
–
(0.1)
(0.1)
–
–
–
–
–
(0.1)
–
(0.2)
(0.1)
0.5
0.0
(1.9)
(6.7)
0.5
(0.4)
(0.1)
(8.0)
–
3.7
0.5
6.2
2.8
0.6
0.3
(0.1)
14.0
(US$ million)
Actuarial
gains/
(losses) on
defined
benefit
obligation
Actuarial
(gains)/
losses on
plan asset
Remeasure-
ment of the
net defined
benefit
liability
(asset)
(h) Movements in the present value of defined benefit obligations
The movement during the year ended 31 March 2016 of the present value of the defined benefit obligation was as follows:
31 March 2016
31 March 2015
MALCO
& TSPL
BALCO
Sterlite
Copper
HZL
KCM
Jhar-
suguda
Alumin-
ium
Iron
Ore
Sesa
Cairn
Total
MALCO
& TSPL
BALCO
Sterlite
Copper
HZL
KCM
Jhar-
suguda
Alu-
minium
Iron
Ore
Sesa
Cairn
Total
(0.2)
(20.8)
(3.4)
(35.8)
(39.8)
(2.4)
(9.5)
(7.7)
(119.6)
(0.1)
(21.2)
(3.5)
(29.4)
(35.5)
(1.7)
(9.8)
(7.5) (108.7)
(US$ million)
At 1 April
Current
service cost
(0.0)
(0.4)
(0.2)
(1.4)
(4.0)
(0.3)
(0.5)
(1.0)
(7.8)
(0.1)
(0.5)
(0.2)
(2.0)
(6.2)
(0.3)
(0.6)
(0.6)
(10.5)
Gratuity
benefits
paid
Interest cost
of scheme
liabilities
Remeasure-
ment gains/
(losses)
Exchange
difference
0.0
7.1
0.2
7.2
3.2
0.5
3.8
0.4
22.4
–
5.7
0.9
4.4
4.3
0.2
1.0
0.6
17.1
(0.0)
(1.3)
(0.3)
(2.6)
(8.4)
(0.2)
(0.6)
(0.4)
(13.8)
(0.1)
(1.6)
(0.3)
(2.6)
(6.6)
(0.1)
(0.9)
(0.3)
(12.5)
(0.1)
0.5
0.0
(2.0)
(6.7)
0.5
(0.2)
(0.1)
(8.1)
0.1
(3.7)
(0.5)
(6.2)
(2.8)
(0.6)
(0.5)
(0.0)
(14.2)
0.1
(0.4)
0.1
5.2
10.0
0.1
1.9
(0.1)
16.9
0.5
0.2
–
7.0
0.1
1.3
0.1
9.2
At 31 March
(0.2)
(15.3)
(3.6) (29.4)
(45.7)
(1.8)
(5.1)
(8.9) (110.0)
(0.2) (20.8)
(3.4)
(35.8)
(39.8)
(2.4)
(9.5)
(7.7) (119.6)
(i) Movements in the fair value of plan assets
(US$ million)
At 1 April
Contributions received
Benefits paid
Remeasurements
Interest income
Foreign exchange differences
At 31 March
As at
31 March
2016
As at
31 March
2015
45.0
9.7
(12.2)
0.1
3.4
(2.5)
43.5
45.8
4.0
(6.6)
0.2
3.3
(1.7)
45.0
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 202
Notes to the Financial Statements continued
33. Retirement benefits continued
(j) Five year history
Defined benefit pension plan
(US$ million)
Experience losses arising on scheme liabilities
Difference between expected and actual return on plan assets
Fair value of pension scheme assets
Present value of pension scheme liabilities
Deficits in the schemes
As at
31 March
2016
As at
31 March
2015
As at
31 March
2014
As at
31 March
2013
As at
31 March
2012
(8.1)
0.1
43.5
(110.0)
(66.5)
(14.2)
0.2
45.0
(119.6)
(74.6)
(5.0)
0.8
45.8
(108.7)
(62.9)
(6.9)
0.6
46.2
(112.9)
(66.7)
(7.0)
–
47.8
(106.9)
(59.1)
(k) Sensitivity analysis
Below is the sensitivity analysis determined for significant actuarial assumptions for the determination of defined benefit
obligations and based on reasonably possible changes of the respective assumptions occurring at the end of the reporting
period while holding all other assumptions constant.
(US$ million)
Discount rate
Increase by 0.50%
Decrease by 0.50%
Salary increase
Increase by 0.50%
Decrease by 0.50%
Increase/
(decrease)
in defined
benefit
obligation
(2.0)
2.4
2.0
(1.9)
The above sensitivity analysis may not be representative of the actual benefit obligation as it is unlikely that the change
in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
(l) Risk analysis
The Group is exposed to a number of risks in the defined benefit plans. The most significant risks pertaining to defined
benefits plans and management estimation of the impact of these risks are as follows:
Investment risk
Most of the Indian defined benefit plans are funded with Life Insurance Corporation of India. The Group does not have any
liberty to manage the fund provided to Life Insurance Corporation of India.
The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to
Government of India bonds for the Group’s Indian operations. If the return on plan asset is below this rate, it will create
a plan deficit.
Interest risk
A decrease in the interest rate on plan assets will increase the plan liability.
Longevity risk/life expectancy
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan
participants both during and at the end of the employment. An increase in the life expectancy of the plan participants will
increase the plan liability.
Salary growth risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants.
An increase in the salary of the plan participants will increase the plan liability.
34. Capital management
The Group’s objectives when managing capital are to safeguard continuity, maintain a strong credit rating and healthy
capital ratios in order to support its business and provide adequate return to shareholders through continuing growth.
The Group sets the amount of capital required on the basis of annual business and long-term operating plans which include
capital and other strategic investments. The funding requirement is met through a mixture of equity, internal accruals,
convertible bonds and other long-term and short-term borrowings.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
203
34. Capital management continued
The Group monitors capital using a gearing ratio, being the ratio of net debt as a percentage of total capital.
(US$ million)
Total equity
Net debt
Total capital
Gearing
As at
31 March
2016
6,852.4
7,328.8
As at
31 March
2015
12,257.4
8,460.3
14,181.2
20,717.7
51.7%
40.8%
The increase in the gearing ratio compared to the 2015 ratio is primarily due to a decrease in total equity pursuant to the
impairment charge on oil & gas assets of US$3,030.9 million (net of deferred tax of US$1,903.3 million) (Note 5).
35. Share capital
Authorised
Ordinary shares of 10 US cents each
Deferred shares of £1 each
Ordinary shares issued and fully paid
Ordinary shares of 10 US cents each
Deferred shares of £1 each
At 31 March 2016
At 31 March 2015
Number US$ million
Number
US$ million
400,000,000
50,000
40.0
–
400,000,000
50,000
400,050,000
40.0
400,050,000
40.0
–
40.0
At 31 March 2016
At 31 March 2015
Number US$ million
Number
US$ million
300,522,798
50,000
300,572,798
30.1
–
30.1
299,868,180
50,000
299,918,180
30.0
–
30.0
During the year ended 31 March 2016, the Company issued 561,277 shares at face value of 10 US cents per share to the
employees pursuant to the Vedanta LTIP and ESOP schemes (2015: 1,686,045 shares) and 93,341 shares were issued on
the conversion of a convertible bond issued by one of the Group’s subsidiaries.
The holders of deferred shares do not have the right to receive notice of any general meeting of the Company nor the right
to attend, speak or vote at any such general meeting. The deferred shares have no rights to dividends and, on a winding-up
or other return of capital, entitle the holder only to the payment of the amounts paid on such shares after repayment to
the holders of ordinary shares of the nominal amount paid up on the ordinary shares plus the payment of £100,000 per
ordinary share. Of the 50,000 deferred shares, one deferred share was issued at par and has been fully paid, and 49,999
deferred shares were each paid up as to one-quarter of their nominal value.
As on 31 March 2016, 6,904,995 ordinary shares which were issued on the conversion of certain convertible bonds issued
by one of the Group’s subsidiaries are held through a Global Depositary Receipts and carry no voting rights.
At 31 March 2016, the total number of treasury shares held was 24,309,230 (2015: 24,206,816).
36. Non-controlling interests (NCI)
The Group consists of a parent Company, Vedanta Resources plc, incorporated in UK and a number of subsidiaries held
directly and indirectly by the Group which operate and are incorporated around the world. Note 44 to the financial
statements lists details of the interests in the subsidiaries.
Non-controlling interests that are material to the Group relate to Hindustan Zinc Limited (HZL), Cairn India Limited (Cairn)
and Vedanta Limited.
As at 31 March 2016, NCIs hold an economic interest of 59.20%, 62.36% and 37.15% respectively in HZL, Cairn and Vedanta
Limited. The respective NCI holdings in 2015 were 59.20%, 62.36% and 37.15% respectively.
Principal place of business of HZL, Cairn and Vedanta Limited is in India (refer to Note 44).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 204
Notes to the Financial Statements continued
36. Non-controlling interests (NCI) continued
The table below shows details of non-wholly owned subsidiaries of the Group that have material non-controlling interests:
(US$ million)
Particulars
Profit/(loss)
attributable
to NCI
Equity
attributable
to NCI
Dividends
paid/payable
to NCI
Year ended 31 March 2016
Year ended 31 March 2015
HZL
Cairn
Vedanta
Limited
Others1
Total
HZL
Cairn
Vedanta
Limited2
Others1
Total
706.8
(1,982.9)
342.6
(731.2)
(1,664.7)
813.8
(2,608.9)
74.7
(268.7)
(1,989.1)
3,344.9
4,756.3
2,257.0
(2,793.0)
7,565.2
4,310.9
6,903.6
2,199.9
(2,760.1)
10,654.3
(825.7)
(55.3)
(98.5)
–
(979.5)
(107.8)
(165.4)
(67.2)
–
(340.4)
1 Others consist of investment subsidiaries of Vedanta Limited and other individual non-material subsidiaries.
2 For principal activities, country of incorporation and the immediate holding company of the above subsidiaries refer to Note 44.
Summarised financial information in respect of the Group’s subsidiaries that have material non-controlling interests is set
out below. The summarised financial information below is on a 100% basis and before inter-company eliminations:
(US$ million)
Particulars
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Particulars
Revenue
Profit/(loss) for the year
Other comprehensive income/(loss)
As at 31 March 2016
As at 31 March 2015
HZL
Cairn
2,346.8
5,591.8
(2,266.8)
(21.6)
3,516.9
5,128.4
(746.2)
(272.0)
Vedanta
Limited
11,541.6
3,586.3
(5,238.0)
(3,814.6)
HZL
Cairn
2,193.2
5,305.9
(267.9)
(22.1)
10,407.1
3,794.8
(957.4)
(2,148.3)
Vedanta
Limited
11,502.0
1,614.8
(3,576.3)
(3,732.2)
5,650.2
7,627.1
6,075.3
7,209.1
11,096.2
5,808.3
Year ended 31 March 2016
Year ended 31 March 2015
HZL
Cairn
2,132.4
1,193.9
1.9
1,322.3
(3,179.8)
0.1
Vedanta
Limited
4,541.0
922.1
(27.5)
HZL
Cairn
2,385.8
1,360.8
(5.7)
2,397.5
(4,193.4)
–
Vedanta
Limited
5,290.4
199.1
(37.2)
The effect of changes in ownership interests in subsidiaries that did not result in a loss of control is as follows:
(US$ million)
Changes in NCI due to buyback and investment
Changes in NCI due to buyback and investment
Year ended 31 March 2016
HZL
–
Cairn
–
Vedanta
Limited
–
Others
–
Total
–
Year ended 31 March 2015
HZL
Cairn
Vedanta
Limited
(197.2)
(531.5)
(83.3)
Others
167.9
Total
(644.1)
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
205
37. Joint arrangements
Joint operations
The Group’s principal license interests in the Oil & Gas business are joint operations. The principal license interests are as
follows:
Oil & Gas blocks/fields
Area
Operated blocks
Ravva block
CB-OS/2 – Exploration
CB-OS/2 – Development and production
RJ-ON-90/1 – Exploration
RJ-ON-90/1 – Development and production
PR-OSN-2004/1
KG-OSN-2009/3
MB-DWN-2009/11
South Africa Block1
Relinquished block
SL 2007-01-0012
Non-operated block
KG-ONN-2003/13
Krishna Godavari
Cambay Offshore
Cambay Offshore
Rajasthan Onshore
Rajasthan Onshore
Palar Basin Offshore
Krishna Godavari Offshore
Mumbai Deep Water
Orange Basin South Africa Offshore
North West Sri Lanka Offshore
Krishna Godavari Onshore
Participating
interest
22.50%
60.00%
40.00%
100.00%
70.00%
35.00%
100.00%
100.00%
60.00%
100.00%
49.00%
Intended to be relinquished in the next year.
1
2 Relinquished on 15 October 2015.
3 Operatorship has been transferred to Oil and Natural Gas Corporation (ONGC) with effect from 7 July 2014.
38. Commitments, guarantees and contingencies
Commitments
The Group has a number of continuing operational and financial commitments in the normal course of business including:
• exploratory mining commitments;
• oil & gas commitments;
• mining commitments arising under production sharing agreements; and
• completion of the construction of certain assets.
(US$ million)
Capital commitments contracted but not provided
Commitments primarily related to the expansion projects:
HZL
Jharsuguda Aluminium
Jharsuguda 2,400MW power plant
BALCO
Talwandi Sabo
Sterlite Copper
Cairn
BMM
Others
Total
As at
31 March
2016
As at
31 March
2015
1,289.3
1,973.7
As at
31 March
2016
As at
31 March
2015
296.7
470.2
32.3
47.8
71.8
207.1
41.5
58.1
5.5
274.4
508.6
33.7
69.5
96.1
220.8
602.0
–
–
1,231.0
1,805.1
Guarantees
Companies within the Group provide guarantees within the normal course of business. Guarantees have also been provided
in respect of certain short-term and long-term borrowings.
A summary of the most significant guarantees is set out below:
As at 31 March 2016, US$384.6 million of guarantees were advanced to banks, suppliers etc. in the normal course of
business (2015: US$365.4 million). The Group has also entered into guarantees and bonds advanced to the customs
authorities in India of US$154.8 million relating to the export and payment of import duties on purchases of raw material
and capital goods including export obligations (2015: US$228.9 million).
Cairn PSC guarantee to Government
The Group has provided a parent Company guarantee for the Cairn India Group’s obligation under the Production Sharing
Contract (PSC).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 206
Notes to the Financial Statements continued
38. Commitments, guarantees and contingencies continued
Cairn India have provided various other guarantees under the Cairn India Group’s bank facilities for the Cairn India
Group’s share of minimum work programme commitments of US$13.1 million outstanding as of 31 March 2016 (2015:
US$15.6 million).
Export obligations
The Indian entities of the Group have export obligations of US$2,200.5 million (2015: US$2,688.0 million) on account of
concessional rates of import duty paid on capital goods under the Export Promotion Capital Goods Scheme and under
the Advance License Scheme for import of raw material laid down by the Government of India.
In the event of the Group’s inability to meet its obligations, the Group’s liability would be US$349.1 million (2015:
US$429.1 million), reduced in proportion to actual exports, plus applicable interest.
Contingencies
MEL claims with Tamil Nadu Electricity Board (TNEB)
TNEB is claiming US$16.3 million from MEL for an electricity self-generation levy for the period from May 1999 to June
2003. This claim has arisen since the commissioning of MEL’s captive power plant in 1999. The Company has sought an
exemption from the application of this levy from the Government of Tamil Nadu. The application is under consideration.
Meanwhile, the Madras High Court has in its recent order, remitted back the case to the State of Tamil Nadu, to take a
decision afresh on the representation for grant of tax exemption on consumption of electricity and directed to pass a
detailed speaking order. MEL has accordingly represented before the Government of Tamil Nadu Energy Secretary,
Government of Tamil Nadu vide his letter dated 20 March 2013 denied the exemption citing various reasons and asked
MEL to remit US$15.7 million. MEL moved to the High Court of Madras and a stay was granted on the same.
HZL: Department of Mines and Geology
The Department of Mines and Geology of the State of Rajasthan issued several show cause notices in August, September
and October 2006 to HZL, totalling US$53.3 million. These notices alleged unlawful occupation and unauthorised mining
of associated minerals other than zinc and lead at HZL’s Rampura Agucha, Rajpura Dariba and Zawar mines in Rajasthan
during the period from July 1968 to March 2006. HZL believes that the claim becoming an obligation of the Company is
unlikely and thus no provision has been made in the financial statements. HZL has filed writ petitions in the High Court of
Rajasthan in Jodhpur and has obtained a stay in respect of these demands.
Richter and Westglobe: income tax
The Group through its subsidiaries Richter Holdings Limited (Richter) and Westglobe Limited (Westglobe) in 2007
acquired the entire stake in Finsider International Company Limited based in the United Kingdom. In October 2013, the
Indian Tax Authorities (Tax Authorities) have served an order on Richter and Westglobe for alleged failure to deduct
withholding tax on capital gain on the indirect acquisition of shares in April 2007. The Tax Authorities determined the
liability for such non-deduction of tax as US$132.1 million in the case of Richter and US$88.0 million in the case of
Westglobe, comprising tax and interest. Being aggrieved, Richter and Westglobe filed appeals before the first appellate
authority. Writ petitions were filed in the High Court of Karnataka challenging the constitutional validity of retrospective
amendments made by the Finance Act 2012 and in particular the imposition of obligations to deduct tax on payments
made against an already concluded transaction. These Writs are pending for disposal before Division Bench. The hearing
of the said Writ is due on 10 June 2016. Richter and Westglobe believe that they are not liable for such withholding tax and
intend to defend the proceedings.
Cairn India: income tax
In March 2014, Cairn India received a show cause notice from the Indian Tax Authorities (Tax Authorities) for not deducting
withholding tax on the payments made to Cairn UK Holdings Limited (CUHL) UK, for acquiring shares of Cairn India
Holdings Limited (CIHL), as part of their internal reorganisation. The Tax Authorities have stated in the said notice that a
short-term capital gain has accrued to CUHL on transfer of the shares of CIHL to Cairn India, in financial year 2006-2007,
on which tax should have been withheld by the Company. Pursuant to this various replies were filed with the Tax
Authorities.
After hearings, the Income Tax Authority, during March 2015, have issued an order by holding Cairn India as ‘assessee in
default’ and asked to pay such demand totalling US$3,089.7 million (including interest of US$1,544.8 million). Cairn India has
filed its appeal before the Appellate Authority CIT (Appeals) and filed a fresh Writ petition before Delhi High Court wherein
it raised several points for assailing the aforementioned order. The hearing of the said Writ is due on 4 August 2016.
The Company has issued a Notice of arbitration to the Government of India by invoking Bilateral Investment Promotion
Treaty between the UK and India.
Vedanta Limited: contractor claim
Shenzhen Shandong Nuclear Power Construction Co. Limited (SSNP) subsequent to terminating the EPC contract invoked
arbitration as per the contract alleging non-payment of their dues towards construction of a 210MW co-generation power
plant for 6mtpa expansion project, and filed a claim of US$248.1 million. SSNP also filed a petition under Section 9 of the
Arbitration and Conciliation Act, 1996 before the Bombay High Court praying for interim relief. The Bombay High Court
initially dismissed their petition, but on a further appeal by SSNP, the Division Bench of the Bombay High Court directed
Jharsuguda Aluminium to deposit a bank guarantee for an amount of US$27.8 million as a security, being a prima facie
representation of the claim, until arbitration proceedings are completed. Jharsuguda Aluminium has deposited a bank
guarantee of equivalent amount. Management is of the opinion that this claim is not valid under the terms of the contract
with SSNP and it is unlikely that SSNP can legally sustain the claim and, accordingly, no provision is considered necessary.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
207
38. Commitments, guarantees and contingencies continued
Ravva joint venture arbitration proceedings: Base Development Cost
In case of Cairn, Ravva joint venture had received a claim from the Ministry of Petroleum and Natural Gas, Government
of India (GOI) for the period from 2000 to 2005 for US$129.0 million for an alleged underpayment of profit petroleum
to the Indian Government, out of which, the Group’s share will be US$29.0 million plus potential interest at applicable rate
(LIBOR plus 2% as per PSC). This claim relates to the Indian Government’s allegation that the Ravva JV had recovered
costs in excess of the Base Development Costs (BDC) cap imposed in the PSC and that the Ravva JV had also allowed
these excess costs in the calculation of the Post Tax Rate of Return (PTRR). Joint venture partners initiated the arbitration
proceedings and Arbitration Tribunal published the Award on 18 January 2011 at Kuala Lumpur, allowing claimants
(including the Group) to recover the development costs spent to the tune of US$278.0 million and disallowed over run of
US$22.3 million spent in respect of BDC along with 50% legal costs reimbursable to the joint venture partners. The High
Court of Kuala Lumpur dismissed Government of India’s application of setting aside the part of the Award on 30 August
2012 with costs. However, GOI appealed before the Court of Appeal against the High Court’s order and the Court of Appeal
dismissed the GOI’s appeal on 27 June 2014. However, GOI still preferred to challenge the same before the Federal Court,
Kuala Lumpur and their Leave to Appeal is pending. GOI has also issued Show Cause Notice on this matter which Cairn
has replied to and also filed an application for enforcement of Award before Delhi High Court as an abundant caution.
Ravva joint venture arbitration proceedings: ONGC Carry
Cairn is involved in a dispute against GOI relating to the recovery of contractual costs in terms of calculation of payments
that contractor party was required to make in connection with the Ravva field.
The Ravva production sharing contract obliges the contractor party to pay proportionate share of ONGC’s exploration,
development, production and contract costs in consideration for ONGC’s payment of costs related to construction and
other activities it conducted in Ravva prior to the effective date of the Ravva production sharing contract (the ONGC
Carry). The question as to how the ONGC Carry is to be recovered and calculated, along with other issues, was submitted
to an international arbitration Tribunal in August 2002 which rendered a decision on the ONGC Carry in favour of the
contractor party whereas four other issues were decided in favour of GOI in October 2004 (Partial Award).
The GOI then proceeded to challenge the ONGC Carry decision before the Malaysian courts, as Kuala Lumpur was the seat
of the arbitration. The Federal Court of Malaysia, which adjudicated the matter on 11 October 2011, upheld the Partial Award.
Per the decision of the Arbitral Tribunal in the Partial Award, the contractor party and GOI were required to arrive at a
quantification of the sums relatable to each of the issues under the Partial Award. Also, the arbitral Tribunal retained the
jurisdiction for determination of any remaining issues in the matter.
Pursuant to the decision of the Federal Court, the contractor party approached the Ministry of Petroleum and Natural Gas
(MoPNG) to implement the Partial Award while reconciling the statement of accounts as outlined in the Partial Award in
2004. GOI failed to implement the Partial Award by way of reconciling accounts as provided in the Partial Award ever since
the Federal Court of Malaysia adjudicated in Cairn and other joint operator partners’ favour.
However, the MoPNG on 10 July 2014 proceeded to issue a show cause notice alleging that since the Partial Award has not
been enforced, profit petroleum share of GOI has been short-paid. MoPNG threatened to recover that amount from the
sale proceeds payable by the oil marketing companies to the contractor party. The contractor party replied to the show
cause notice taking various legal contentions. On 9 March 2015 a personal hearing took place between MoPNG and the
contractor party, whereby the contractor party expressed their concerns against such alleged unilateral recoveries and
filed further written submissions on 12 March 2015.
As the Partial Award did not quantify the sums, therefore, the contractor party approached the same arbitral Tribunal
to pass a final award in the subject matter since it had retained the jurisdiction to do so. The Arbitral Tribunal has been
reconstituted and the determination of final award is sub-judice before it. While Cairn does not believe the GOI will
be successful in its challenge, if the arbitral award is reversed and such reversal is binding, Cairn could be liable for
approximately US$63.9 million.
Proceedings related to the imposition of entry tax
BALCO and Vedanta Limited have challenged the constitutional validity of the local statute in Chattisgarh and Orissa
respectively, levying entry tax on the entry of goods brought into the States from outside and other notifications, as being
in violation of certain provisions of the Indian Constitution. The challenges are pending in the Supreme Court to be heard
by a Constitution Bench taking into account diverse opinion of various High Courts and the same is listed on 11 May 2016.
BALCO paid the entry tax of US$30.6 million under protest to the state government of Chhattisgarh until 31 March 2015.
Vedanta Limited was directed by the Supreme Court on 3 February 2010 to deposit a sum of US$0.6 million and a further
amount on a monthly basis until the matter is actually disposed. These amounts have been paid under protest. In a related
matter in respect of challenging the levy of entry tax on imported goods, the Supreme Court on 9 April 2013 directed 50%
of the entry tax amount accrued until 30 September 2012. The amount of US$21.0 million (as on 31 March 2015) has been
deposited in accordance with the order of the Supreme Court. Total claims from Vedanta Limited are of US$112.5 million
(2015: US$103.3 million).
Additionally, for entry tax in SEZ, GOO has finally come out with SEZ policy 2015 exempting entry tax levy on SEZ
operations which were recently notified in December 2015. We have applied for the issuance of an eligibility certificate
to IPICOL for availing entry tax exemption; however, an operational guideline is pending to be issued by the industry
department. The declaration of SEZ policy being a recent development after the filing of a petition before court, hence
Vedanta is trying to bring out the same before the Court by filing an affidavit separately for appreciation of the court in
the coming hearing.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 208
Notes to the Financial Statements continued
38. Commitments, guarantees and contingencies continued
TSPL
TSPL has entered into a long-term Power Purchase Agreement (PPA) with Punjab State Power Corporation Limited
(PSPCL) for supply of power. Due to delay in fulfilment of certain obligations by PSPCL as per the PPA, other related
reasons and force majeure events, there has been a delay in implementation/completion of the project as compared to the
PPA timelines. TSPL has received notices of claims from PSPCL seeking payment of Liquidated Damages (LD) maximum of
US$50.9 million each for delay in commissioning of Unit I, II and III, totalling US$152.9 million.
During the year, PSPCL invoked the Performance Bank Guarantee of US$24.1 million to recover the LD on account of delay
in COD of Unit I. TSPL filed a petition at Punjab State Electricity Regulatory Commission (PSERC) for adjudication of above
dispute. TSPL had also filed a civil writ petition before the High Court of Punjab and Haryana against the bank guarantee
invocation, which was disposed with a direction to refer the matter to PSERC for adjudication while granting stay. Further,
PSERC vide order dated 22 October 2014 directed the matter to be settled through arbitration and allowed the stay on
encashment of the bank guarantee until further orders. PSPCL has preferred an appeal in Appellate Tribunal for Electricity
(APTEL) against the PSERC order and APTEL had, on 12 May 2015, disposed the matter with a direction that the matter will
be heard by way of arbitration. The arbitration proceedings are in the early stages. The Group has been legally advised by
its advisers who have opined that such claims for LD from PSPCL are unsustainable. Recently, Appellate Tribunal for
Electricity has, in a separate petition, before it by TSPL has adjudicated that coal is an absolute obligation of PSPCL and it
needs to enter into a Fuel Supply Agreement and assign to TSPL. In light of the delay by PSPCL in entering into the Fuel
Supply Agreement, the claims of PSPCL are further unsustainable.
Miscellaneous disputes – Vedanta Limited, HZL, MEL, BALCO, Cairn, Lisheen, VRJL and VRJII
The Group is subject to various claims and exposures which arise in the ordinary course of conducting and financing
its business from the income tax, excise, indirect tax authorities and others. These claims and exposures mostly relate
to the assessable values of sales and purchases or to incomplete documentation supporting the companies’ returns
or other claims.
The approximate value of claims against the Group companies excluding claims shown above total US$1,182.3 million (2015:
US$1,005.0 million), of which US$14.9 million (2015: US$29.3 million) is included as a provision in the balance sheet as at
31 March 2016 (including claims of US$646.3 million in respect of income tax assessments out of which US$2.1 million is
included as a provision in the balance sheet as at 31 March 2016).
The Group considers that it can take steps such that the risks can be mitigated and that there are no significant unprovided
liabilities arising.
Operating lease commitments: as lessee
Operating leases are in relation to the office premises, office equipment and other assets, some of which are cancellable
and some are non-cancellable. There is an escalation clause in the lease agreements during the primary lease period. There
are no restrictions imposed by lease arrangements and there are no sub leases. There are no contingent rents. The total of
the future minimum lease payments under non-cancellable leases are as follows:
(US$ million)
Particulars
Within one year of the balance sheet date
Within two to five years from the balance sheet date
Total
As at
31 March
2016
As at
31 March
2015
3.9
0.4
4.3
4.9
5.6
10.5
Lease payments recognised as expenses during the year ended 31 March 2016, on non-cancellable leases, is US$8.1 million
(31 March 2015: US$3.9 million).
39. Related party transactions
The information below sets out transactions and balances between the Group and various related parties in the normal
course of business for the year ended 31 March 2016.
Sterlite Technologies Limited (STL)
(US$ million)
Sales to STL
Recovery of expenses
Purchases
Net interest received
Net amounts receivable at year end
Net amounts payable at year end
Dividend income
Year ended
31 March
2016
Year ended
31 March
2015
140.4
0.2
1.1
0.2
0.2
1.4
0.0
126.0
0.0
2.9
0.6
3.7
–
–
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
209
39. Related party transactions continued
Sterlite Technologies Limited is related by virtue of having the same controlling party as the Group, namely Volcan.
Pursuant to the terms of the Shared Services Agreement dated 5 December 2003 entered into by the Company and STL,
the Company provides various commercial services in relation to STL’s businesses on an arm’s length basis and at normal
commercial terms. For the year ended 31 March 2016, the commercial services provided to STL were performed by certain
senior employees of the Group on terms set out in the Shared Services Agreement. The services provided to STL in this
year amounted to US$0.02 million (2015: US$0.02 million).
Vedanta Foundation
During the year US$0.5 million was paid to the Vedanta Foundation (2015: US$0.7 million).
The Vedanta Foundation is a registered not-for-profit entity engaged in computer education and other related social and
charitable activities. The major activity of the Vedanta Foundation is providing computer education for disadvantaged
students. The Vedanta Foundation is a related party as it is controlled by members of the Agarwal family who control
Volcan. Volcan is also the majority shareholder of Vedanta Resources plc.
Sesa Goa Community Foundation Limited
Following the acquisition of erstwhile Sesa Goa Limited, the Sesa Goa Community Foundation Limited, a charitable
institution, became a related party of the Group on the basis that key management personnel of the Group have significant
influence on the Sesa Goa Community Foundation Limited. During the year ended 31 March 2016, US$0.4 million (2015:
US$0.4 million) was paid to the Sesa Goa Community Foundation Limited.
Sterlite Iron and Steel Limited
(US$ million)
Loan balance receivable
Net amount receivable at year end (including interest)
Net interest received
Year ended
31 March
2016
Year ended
31 March
2015
0.7
1.8
0.1
1.1
1.8
0.2
Sterlite Iron and Steel Limited is a related party by virtue of having the same controlling party as the Group, namely Volcan.
Vedanta Medical Research Foundation
(US$ million)
Donation
Year ended
31 March
2016
Year ended
31 March
2015
2.7
0.7
Vedanta Medical Research Foundation is a related party of the Group on the basis that key management personnel of the
Group exercise significant influence.
Volcan Investments Limited
(US$ million)
Net amount receivable at the year end
Recovery of expenses
Dividend paid
Year ended
31 March
2016
Year ended
31 March
2015
0.2
0.3
75.0
0.4
0.3
115.6
Volcan Investments Limited is a related party of the Group by virtue of being an ultimate controlling party of the Group.
A bank guarantee has been provided by the Group on behalf of Volcan in favour of Income tax department, India as
collateral in respect of certain tax disputes of Volcan. The guarantee amount is US$17.3 million (2015: US$18.4 million).
Ashurst LLP
(US$ million)
Services received during the year
Year ended
31 March
2016
Year ended
31 March
2015
0.1
0.4
Ashurst LLP is a related party of the Group on the basis that an independent Director of the Group was a partner in the
legal firm Ashurst LLP during the year ended 31 March 2016. It ceased to be a related party from 1 May 2015 onwards.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 210
Notes to the Financial Statements continued
39. Related party transactions continued
Employees Provident Fund Trust
Details of transactions during the year with post-retirement trusts:
(US$ million)
BALCO Employees Provident Fund Trust
Hindustan Zinc Ltd. Employee Contributory Provident Fund Trust
Sesa Group Employees Provident Fund
Sesa Resources Limited Employees Provident Fund
Sesa Mining Corporation Limited Employees Provident Fund
Remuneration of key management personnel
(US$ million)
Short-term employee benefits
Post-employment benefits
Share-based payments
Year ended
31 March
2016
Year ended
31 March
2015
1.7
5.0
2.4
0.3
0.3
2.2
5.2
2.6
0.3
0.4
Year ended
31 March
2016
Year ended
31 March
2015
20.0
0.9
2.3
23.2
15.9
0.8
2.5
19.2
Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the Group, directly or indirectly, including any Director (whether executive or otherwise).
Other related party1
(US$ million)
Salary paid
Interest bearing salary advance2
1 Close relative of the Executive Chairman.
2 Since repaid.
Year ended
31 March
2016
Year ended
31 March
2015
1.1
–
1.0
1.5
In addition to the above, sitting fees and commission of US$34,371 (2015: US$39,250) was also paid.
40. Share transactions – call options
(a) HZL
Pursuant to the Government of India’s policy of divestment, in April 2002 the Company acquired 26% equity interest in HZL
from the Government of India. Under the terms of the Shareholder’s Agreement (SHA), the Group had two call options
to purchase all of the Government of India’s shares in HZL at fair market value. The Group exercised the first call option on
29 August 2003 and acquired an additional 18.9% of HZL’s issued share capital. The Company also acquired an additional
20% of the equity capital in HZL through an open offer, increasing its shareholding to 64.9%. The second call option
provides the Group the right to acquire the Government of India’s remaining 29.5% share in HZL. This call option is subject
to the right of the Government of India to sell 3.5% of HZL shares to HZL employees. The Group exercised the second call
option on 21 July 2009. The Government of India disputed the validity of the call option and has refused to act upon the
second call option. Consequently, the Company invoked arbitration which is in the early stages. The next date of the
hearing is scheduled for 20 August 2016. Meanwhile, the Government of India, without prejudice to the position on the put/
call option issue, has received approval from the Cabinet for divestment and the Government is looking to divest through
the auction route.
(b) BALCO
Pursuant to the Government of India’s policy of divestment, in March 2001 the Company acquired 51% equity interest
in BALCO from the Government of India. Under the terms of the SHA, the Group has a call option to purchase the
Government of India’s remaining ownership interest in BALCO at any point from 2 March 2004. The Group exercised this
option on 19 March 2004. However, the Government of India has contested the valuation and validity of the option and
contended that the clauses of the SHA violate the (Indian) Companies Act, 1956 by restricting the rights of the Government
of India to transfer its shares and that as a result such provisions of the SHA were null and void. In the arbitration filed
by the Group, the arbitral tribunal by a majority award rejected the claims of the Group on the grounds that the clauses
relating to the call option, the right of first refusal, the ‘tag-along’ rights and the restriction on the transfer of shares violate
the (Indian) Companies Act, 1956 and are not enforceable. The Group has challenged the validity of the majority award
in the High Court of Delhi and sought for setting aside the arbitration award to the extent that it holds these clauses
ineffective and inoperative. The Government of India also filed an application before the High Court of Delhi to partially set
aside the arbitral award in respect of certain matters involving valuation. The matter is currently scheduled for hearing by
the Delhi High Court on 28 July 2016. Meanwhile, the Government of India, without prejudice to its position on the put/call
option issue, has received approval from the Cabinet for divestment and the Government is looking to divest through the
auction route.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
211
40. Share transactions – call options continued
On 9 January 2012, the Group offered to acquire the Government of India’s interests in HZL and BALCO for the INR
equivalent of US$2,356.5 million and US$271.1 million, respectively. This offer was separate from the contested exercise of
the call options, and the Group proposed to withdraw the ongoing litigations in relation to the contested exercise of the
options should the offer be accepted. To date, the offer has not been accepted by the Government of India and, therefore,
there is no certainty that the acquisition will proceed.
The Group continues to include the shareholding in the two companies HZL and BALCO, in respect of which the Group has
a call option as non-controlling interest.
41. Konkola Copper Mines: value added tax
In earlier years, Zambia Revenue Authority (ZRA) had raised an assessment demand related to output tax amounting to
K4.71 billion (US$600 million at the time). The assessment covered the years 2011, 2012 and the first quarter of 2013 and
claimed non-submission of documentary evidence as required under Rule 18 of the Value Added Tax Rules to prove an
export and claim it as zero rated sales. As a consequence, all sales of products that were zero rated in the returns became
standard rated by this assessment. After a series of deliberations, submission of the requisite documents by KCM, followed
by an independent audit by ZRA, the assessment demand has now been set aside.
Additionally, KCM has US$129 million receivable on account of value added tax on inputs that are receivable from the
Zambian Government. KCM has submitted all the requisite documents and is in full compliance as per the previous Rule 18.
There are precedents where other companies have received refunds of such amounts from the Government on submission
of documents. Further, effective February 2015, Rule 18 has been amended by allowing exporters to submit transit
documents issued by the customs authority in the country of transit of the goods instead of import certificates from the
country of destination, as proof of export for purposes of VAT zero rating.
The discharge of assessment demand and amendment to Rule 18 will make it easier to collect the refunds. The Group
believes that it will receive a refund of the entire amount and there is no objective evidence of uncertainty around
collectability.
42. Cairn merger update
The Board of Directors of the Company and Cairn India Limited at their respective meetings held on 14 June 2015 had
approved the Scheme of Arrangements (the Scheme) between the Company and Cairn India Limited and their respective
shareholders and creditors, subject to regulatory and other approvals. On 10 September 2015, BSE Limited and the
National Stock Exchange of India Limited has issued the ‘No adverse observation’ letter to the Scheme.
43. Subsequent events
In March 2016, the Company has announced a third bond buyback programme through market purchase route. Post the
balance sheet date and up to the date of approval of the financial statements it has bought back bonds worth
US$129.7 million.
44. List of subsidiaries
The financial statements comprise the financial statements of the following subsidiaries:
Subsidiaries
Principal activities
Direct subsidiaries of the
parent Company
The Company’s economic
percentage holding
31 March
2016
31 March
2015
Country of
incorporation
Immediate
holding
company
Immediate percentage
holding
31 March
2016
31 March
2015
Vedanta Resources
Holding company
100.00% 100.00%
Holding Limited (VRHL)
United
Kingdom
VR plc
100.00% 100.00%
Vedanta Resources
Investment company
100.00% 100.00%
Jersey (CI)
VR plc
100.00% 100.00%
Jersey Limited (VRJL)
Vedanta Resources
Jersey II Limited
(VRJL-II)
Investment company
100.00% 100.00%
Jersey (CI)
VR plc
100.00% 100.00%
Vedanta Finance
Investment company
100.00% 100.00%
Jersey (CI)
VR plc
100.00% 100.00%
(Jersey) Limited (VFJL)
Vedanta Jersey
Investment company
100.00% 100.00%
Jersey (CI)
VR plc
100.00% 100.00%
Investments Limited
(VJIL)
Indirect subsidiaries of
the parent Company
Vedanta Limited
Copper smelting,
iron ore mining,
aluminium mining,
refining and
smelting, power
generation
62.85%
62.85%
India
Twin Star
46.53%
46.53%
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 212
Notes to the Financial Statements continued
Subsidiaries
Principal activities
The Company’s economic
percentage holding
31 March
2016
31 March
2015
Country of
incorporation
Bharat Aluminium
Company Limited
(BALCO)
Aluminium mining and
32.05%
32.05%
India
smelting
Immediate percentage
holding
31 March
2016
31 March
2015
51.00%
51.00%
Immediate
holding
company
Vedanta
Limited
Copper Mines of
Copper mining
62.85%
62.85%
Australia
MCBV
100.00% 100.00%
Tasmania Pty Limited
(CMT)
Fujairah Gold FZC1
Gold and silver
processing
62.85%
62.85%
Hindustan Zinc Limited
Zinc and mining and
40.80%
40.80%
(HZL)
smelting
UAE
India
Monte Cello BV (MCBV) Holding company
62.85%
62.85% Netherlands
MEL
97.96%
–
Vedanta
Limited
Vedanta
Limited
64.92%
64.92%
100.00% 100.00%
Monte Cello Corporation
Holding company
100.00% 100.00%
Curacao
Twin Star
100.00% 100.00%
NV (MCNV)
Konkola Copper Mines
Copper mining and
79.42%
79.42%
Zambia
VRHL
79.42%
79.42%
PLC (KCM)
smelting
Sesa Resources Limited
Iron ore
62.85%
62.85%
(SRL)
Sesa Mining Corporation
Iron ore
62.85%
62.85%
Limited
India
India
Vedanta
Limited
100.00% 100.00%
SRL
100.00% 100.00%
Thalanga Copper Mines
Copper mining
62.85%
62.85%
Australia
MCBV
100.00% 100.00%
Pty Limited (TCM)
Twin Star Holdings
Limited (Twin Star)
Holding company
100.00% 100.00%
Mauritius
VRHL
100.00% 100.00%
MALCO Energy Limited
Power generation
62.85%
62.85%
India
(MEL)
Vedanta
Limited
100.00% 100.00%
Richter Holding Limited
Investment company
100.00% 100.00%
Cyprus
VRCL
100.00% 100.00%
(Richter)
Westglobe Limited
Investment company
100.00% 100.00%
Mauritius
Richter
100.00% 100.00%
Finsider International
Company Limited
Investment company
100.00% 100.00%
Vedanta Resources
Investment company
100.00% 100.00%
Finance Limited (VRFL)
United
Kingdom
United
Kingdom
Richter
60.00%
60.00%
VRHL
100.00% 100.00%
Vedanta Resources
Investment company
100.00% 100.00%
Cyprus
VRFL
100.00% 100.00%
Cyprus Limited (VRCL)
Welter Trading Limited
Investment company
100.00% 100.00%
Cyprus
VRCL
100.00% 100.00%
(Welter)
Lakomasko B.V.
Investment company
62.85%
62.85% Netherlands
THL Zinc Ventures
Investment company
62.85%
62.85%
Mauritius
THL Zinc
Holding B.V.
Vedanta
Limited
100.00% 100.00%
100.00% 100.00%
Holding company
62.85%
62.85%
Mauritius
BFM 100.00% 100.00%
Limited
Twin Star Energy
Holdings Limited
(TEHL)
THL Zinc Limited
Investment company
62.85%
62.85%
Mauritius
Sterlite (USA) Inc.
Investment company
62.85%
62.85%
Talwandi Sabo Power
Power generation
62.85%
62.85%
Limited
Konkola Resources plc2 Holding company
–
100.00%
USA
India
United
Kingdom
THL Zinc
Ventures Ltd
100.00% 100.00%
Vedanta
Limited
Vedanta
Limited
VRHL
100.00% 100.00%
100.00% 100.00%
–
100.00%
Twin Star Mauritius
Holdings Limited
(TMHL)
Holding company
62.85%
62.85%
Mauritius
TEHL
100.00% 100.00%
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
213
Subsidiaries
Principal activities
The Company’s economic
percentage holding
31 March
2016
31 March
2015
Country of
incorporation
Immediate
holding
company
Immediate percentage
holding
31 March
2016
31 March
2015
THL Zinc Namibia
Mining and exploration
62.85%
62.85%
Namibia
THL Zinc Ltd
100.00% 100.00%
Holdings (Pty) Limited
(VNHL)
Skorpion Zinc (Pty)
Acquisition of
62.85%
62.85%
Namibia
VNHL
100.00% 100.00%
Limited (SZPL)
immovable and
movable properties
Namzinc (Pty) Limited
Mining
62.85%
62.85%
Namibia
SZPL
100.00% 100.00%
(SZ)
Skorpion Mining
Mining
Company (Pty) Limited
(NZ)
62.85%
62.85%
Namibia
SZPL
100.00% 100.00%
Amica Guesthouse (Pty)
Accommodation and
62.85%
62.85%
Namibia
SZPL
100.00% 100.00%
Ltd
catering services
Rosh Pinah Healthcare
Leasing out of
43.37%
43.37%
Namibia
SZPL
69.00%
69.00%
(Pty) Ltd
medical equipment
and building and
conducting services
related thereto
Black Mountain Mining
Mining
43.13%
43.13% South Africa
THL Zinc Ltd
74.00%
74.00%
(Pty) Ltd
THL Zinc Holding BV
Investment company
62.85%
62.85% Netherlands
Vedanta
Limited
100.00% 100.00%
Lisheen Mine
Partnership
Mining partnership
62.85%
62.85%
Ireland
VLML
50.00%
50.00%
firm
Pecvest 17 Proprietary
Investment company
62.85%
62.85% South Africa
THL Zinc Ltd
100.00% 100.00%
Ltd.
Vedanta Lisheen
Holdings Limited
(VLHL)
Investment company
62.85%
62.85%
Ireland
THL Zinc
Holding BV
100.00% 100.00%
Vedanta Exploration
Exploration company
62.85%
62.85%
Ireland
VLHL
100.00% 100.00%
Ireland Limited
Vedanta Lisheen Mining
Mining
Limited (VLML)
62.85%
62.85%
Ireland
VLHL
100.00% 100.00%
Killoran Lisheen Mining
Mining
62.85%
62.85%
Ireland
VLHL
100.00% 100.00%
Limited
Killoran Lisheen Finance
Investment company
62.85%
62.85%
Ireland
VLHL
100.00% 100.00%
Limited
Lisheen Milling Limited Manufacturing
62.85%
62.85%
Vizag General Cargo
Berth Private Limited
Paradip Multi Cargo
Berth Private Limited
Infrastructure
62.85%
62.85%
Infrastructure
46.51%
46.51%
Sterlite Ports Limited
Investment company
62.85%
62.85%
(SPL)
Maritime Ventures
Private Limited
Infrastructure
62.85%
62.85%
Sterlite Infraventures
Investment company
62.85%
62.85%
Limited
Ireland
India
India
India
India
India
Bloom Fountain Limited
Investment company
62.85%
62.85%
Mauritius
(BFM)
VLHL
100.00% 100.00%
Vedanta
Limited
Vedanta
Limited
Vedanta
Limited
99.99%
99.99%
74.00%
74.00%
100.00% 100.00%
SPL
100.00% 100.00%
Vedanta
Limited
Vedanta
Limited
100.00% 100.00%
100.00% 100.00%
Western Cluster Limited Mining company
62.85%
62.85%
Liberia
BFM 100.00% 100.00%
Sesa Sterlite Mauritius
Investment company
100.00% 100.00%
Mauritius
VRHL
100.00% 100.00%
Holdings Limited
Vedanta Finance UK
Investment company
100.00% 100.00%
Limited
United
Kingdom
Welter
100.00% 100.00%
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 214
Notes to the Financial Statements continued
Subsidiaries
Principal activities
The Company’s economic
percentage holding
31 March
2016
31 March
2015
Country of
incorporation
Immediate
holding
company
Immediate percentage
holding
31 March
2016
31 March
2015
Valliant (Jersey) Limited Investment company
100.00% 100.00%
Jersey (CI)
VRJL-II
100.00% 100.00%
Cairn India Limited
Oil & gas exploration,
37.64%
37.64%
India
TMHL
34.43%3
39.41%
and production
Cairn India Holdings
Investment company
37.64%
37.64%
Jersey
Limited
Cairn Energy Holdings
Investment company
37.64%
37.64%
Scotland
Limited
Cairn Energy
Hydrocarbons Ltd
Exploration and
production
37.64%
37.64%
Scotland
Cairn Exploration (No.7)
Exploration and
37.64%
37.64%
Scotland
Limited4
production
Cairn Exploration (No.6)
Exploration and
37.64%
37.64%
Scotland
Limited2
production
Cairn Exploration (No.2)
Exploration and
37.64%
37.64%
Scotland
Limited
production
Cairn Energy Gujarat
Exploration and
37.64%
37.64%
Scotland
Block 1 Limited
production
Cairn Energy Discovery
Exploration and
37.64%
37.64%
Scotland
Limited
production
Cairn Energy Australia
Investment company
37.64%
37.64%
Australia
Pty Limited
Cairn Energy India Pty
Exploration and
37.64%
37.64%
Australia
Limited
production
CIG Mauritius Holdings
Investment company
37.64%
37.64%
Mauritius
Private Limited
CIG Mauritius Private
Investment company
37.64%
37.64%
Mauritius
Limited
Cairn Lanka Private
Exploration and
37.64%
37.64%
Sri Lanka
Limited
production
Cairn South Africa Pty
Exploration and
37.64%
37.64% South Africa
Limited
production
Cairn India
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
Cairn Energy
Australia Pty
Limited
Cairn India
Limited
CIG Mauritius
Holding Private
Limited
CIG Mauritius
Pvt Ltd
Cairn Energy
Hydrocarbons
Limited
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
1 Pursuant to additional capital infusion in FG by MEL during the year ended 31 March 2016. Immediate percentage holding as of 31 March 2015 was 98% held
by CMT.
2 Dissolved during the year ended 31 March 2016.
3 Pursuant to transfer of 4.98% of TMHL holdings in Cairn India to Vedanta Limited.
4 Dissolved subsequently on 19 April 2016.
The Group owns directly, or indirectly through subsidiaries, more than half of the voting power of all of its subsidiaries as
mentioned in the list above, and has power over the subsidiaries, is exposed or has rights, to variable returns from its
involvement with the subsidiaries and has the ability to affect those returns through its power over the subsidiaries.
45. Ultimate controlling party
At 31 March 2016, the ultimate controlling party of the Group was Volcan, which is controlled by persons related to the
Executive Chairman, Mr Anil Agarwal. Volcan is incorporated in the Bahamas, and does not produce Group accounts.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
215
46. Company balance sheet
(US$ million)
Fixed assets
Tangible assets
Investments in subsidiaries
Investment in preference shares of subsidiaries
Financial asset investment
Current assets
Debtors due within one year
Debtors due after one year
Investments
Cash at bank and in hand
Creditors: amounts falling due within one year
Trade and other creditors
External borrowings
Loan from subsidiary
Derivative liability
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Loan from subsidiary
External borrowings
Net assets
Capital and reserves
Called up share capital
Share premium account
Share-based payment reserve
Convertible bond reserve
Other reserves
Treasury shares
Profit and loss account
Equity shareholders’ funds
Note
31 March
2016
31 March
2015
48
49
50
51
52
52
53
54
54
54
54
0.2
1,226.3
4.7
0.1
0.3
1,226.3
1.7
0.1
1,231.3
1,228.4
505.5
4,683.9
28.1
0.6
422.7
5,066.8
33.2
0.1
5,218.1
5,522.8
(104.3)
(742.7)
(600.3)
–
(97.2)
(270.4)
–
(2.0)
(1,447.3)
(369.6)
3,770.8
5,153.2
5,002.1
6,381.6
55
55
(278.0)
(4,220.0)
(1,430.2)
(4,345.7)
(4,498.0)
(5,775.9)
504.1
605.7
56
56
56
56
56
56
56
56
30.1
201.5
29.9
10.8
(2.2)
(490.6)
724.6
30.0
198.5
27.4
38.4
(2.2)
(490.6)
804.2
504.1
605.7
The financial statements of Vedanta Resources plc, registration number 4740415, were approved by the Board of Directors
on 11 May 2016 and signed on its behalf by:
Tom Albanese
Chief Executive Officer
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 216
Notes to the Financial Statements continued
47. Company accounting policies
Basis of accounting
Vedanta Resources plc (the Company) has transitioned from UK Generally Accepted Accounting Practice (UK GAAP) to
Financial Reporting Standard 101 ‘Reduced disclosure framework’ (FRS 101), for all periods presented. The Company meets
the definition of a qualifying entity under FRS 101 issued by the Financial Reporting Council. Accordingly, in the year ended
31 March 2016 the Company has changed its accounting framework from pre-2015 UK GAAP to FRS 101 and has, in doing
so, applied the requirements of IFRS 1.6–33 and related appendices.
These financial statements have been prepared in accordance with FRS 101.
The Company balance sheet and related notes have been prepared under the historical cost convention and in accordance
with Financial Reporting Standards 100 ‘Application of financial reporting requirements’ (FRS 100) and FRS 101.
As permitted by section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as
part of these financial statements. The (loss)/profit after tax for the year of the Company amounted to US$(8.0) million
(2015: profit US$284.7 million).
These financial statements are presented in US dollars, being the functional currency of the Company.
The change in the basis of preparation has not materially altered the recognition and measurement requirements previously
applied in accordance with UK GAAP. Consequently, the principal accounting policies are unchanged from the prior year.
The change in basis of preparation has enabled the Company to take advantage of all the available disclosure exemptions
permitted by FRS 101 in the financial statements because the Group presents the exempted information in the consolidated
Group financial statements. There have been no other material amendments to the disclosure requirements previously
applied in accordance with UK GAAP, except disclosure of the related party transactions.
Significant accounting policies
Investments in subsidiaries
Investments in subsidiaries represent equity holdings in subsidiaries except preference shares, valued at cost less any
provision for impairment. Investments are reviewed for impairment if events or changes in circumstances indicate that the
carrying amount may not be recoverable.
Investment in preference shares of subsidiaries
Investments in preference shares of subsidiaries are stated at fair value. The fair value is represented by the face value of
the preference shares as the investments are redeemable at any time for their face value at the option of the Company.
Cash and cash equivalents
Cash in the balance sheet comprises of cash at bank and cash in hand.
Financial asset investments
Financial asset investments are classified as available for sale under IAS 39 and are initially recorded at cost and then
remeasured at subsequent reporting dates to fair value. Unrealised gains and losses on financial asset investments are
recognised directly in equity. On disposal or impairment of the investments, the gains and losses in equity are recycled
to the income statement.
Currency translation
Transactions in currencies other than the functional currency of the Company, being US dollars, are translated into US
dollars at the spot exchange rates ruling at the date of transaction. Monetary assets and liabilities denominated in other
currencies at the balance sheet date are translated into US dollars at year end exchange rates, or at a contractual rate
if applicable.
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and provision for impairment.
Deferred taxation
Deferred taxation is provided in full on all timing differences that result in an obligation at the balance sheet date to pay
more tax, or a right to pay less tax, at a future date, subject to the recoverability of deferred tax assets. Deferred tax assets
and liabilities are not discounted.
Share-based payments
The cost of equity-settled transactions with employees is measured at fair value at the date at which they are granted. The
fair value of share awards with market-related vesting conditions are determined by an external valuer and the fair value at
the grant date is expensed on a straight-line basis over the vesting period based on the Company’s estimate of shares that
will eventually vest. The estimate of the number of awards likely to vest is reviewed at each balance sheet date up to the
vesting date at which point the estimate is adjusted to reflect the current expectations. No adjustment is made to the fair
value after the vesting date even if the awards are forfeited or not exercised. Amounts recharged to subsidiaries in respect
of awards granted to employees of subsidiaries are recognised as intercompany debtors until repaid.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
217
47. Company accounting policies continued
Borrowings
Interest bearing loans are recorded at the net proceeds received i.e. net of direct transaction costs. Finance charges,
including premiums payable on settlement or redemption and direct issue costs, are accounted for on accruals basis and
charged to the profit and loss account using the effective interest method and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they arise.
Convertible bonds
The convertible bond issued by VRJL and VRJL-II (Note 54) are accounted for as a compound instrument. The gross
proceeds (net of issue costs) were lent to the Company by VRJL and VRJL-II. The equity component has been recognised
in a separate reserve of the Company and is not subsequently remeasured. The recognition of the equity component by
the Company acts to reduce the payable to VRJL and VRJL-II which arises once the gross proceeds are borrowed. The
liability component is held at amortised cost. The interest expensed on the liability component is calculated by applying an
effective interest rate. The difference between interest expensed and interest paid is added to the carrying amount of the
liability component.
The bonds are first convertible into preference shares of the issuer having a principal value of $100,000 per preference
share, which are exchanged immediately for ordinary shares of the Company.
Financial instruments
The Company has elected to take the exemption provided in paragraph 8 of FRS 101 in respect of these parent Company
financial statements. Full disclosures are provided in Note 29 to the financial statements of the Group for the period ended
31 March 2016.
Derivative financial instruments
Derivative financial instruments are initially recorded at their fair value on the date of the derivative transaction and are
re-measured at their fair value at subsequent balance sheet dates.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the profit and
loss account. The hedged item is recorded at fair value and any gain or loss is recorded in the profit and loss account and
is offset by the gain or loss from the change in the fair value of the derivative.
Derivative financial instruments that do not qualify for hedge accounting are marked to market at the balance sheet date
and gains or losses are recognised in the profit and loss account immediately.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
qualifies for hedge accounting.
Cash flow statement
The Company’s individual financial statements are outside the scope of FRS 1 ‘Cash flow statements’ because the Company
prepares publicly available Group financial statements, which include a consolidated cash flow statement. Accordingly, the
Company does not present an individual Company cash flow statement.
Financial guarantees
Guarantees issued by the Company on behalf of other Group companies are designated as ‘Insurance Contracts’.
Accordingly, these are shown as contingent liabilities (Note 57).
Debtors
Debtors are stated at their nominal value as reduced by appropriate allowance for estimated irrecoverable amounts.
An allowance for impairment for debtors is made where there is an indication of a reduction in the recoverability of the
carrying value of the debtor.
Creditors
Creditors are stated at their nominal value.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 218
Notes to the Financial Statements continued
48. Company tangible fixed assets
(US$ million)
Cost
At 1 April 2014
Additions
At 31 March 2015
Additions
At 31 March 2016
Accumulated depreciation
At 1 April 2014
Charge for the period
At 31 March 2015
Charge for the period
At 31 March 2016
Net book value
At 1 April 2014
At 31 March 2015
At 31 March 2016
49. Investments in subsidiaries
(US$ million)
Cost
At 1 April 2014
At 1 April 2015
At 31 March 2016
2.3
0.0
2.3
0.0
2.3
1.6
0.4
2.0
0.1
2.1
0.7
0.3
0.2
1,061.8
1,226.3
1,226.3
At 31 March 2016, the Company held 157,538,524 shares in Vedanta Resources Holdings Limited (VRHL) (March 2015:
157,538,524 shares), being 100% of VRHL’s issued equity share capital. The Company also held one deferred share in VRHL
(March 2015: one). At 31 March 2016, the Company held two shares in Vedanta Finance Jersey Limited (VFJL) (March 2015:
two), two shares in Vedanta Resources Jersey Limited (VRJL) (March 2015: two), two shares in Vedanta Resources Jersey II
Limited (VRJL-II) (March 2015: two), two shares in Vedanta Jersey Investment Limited (VJIL) (March 2015: two), being 100%
of its issued equity share capital.
VRHL is an intermediary holding company incorporated in the United Kingdom (Note 44) and registered in England and
Wales. VFJL, VRJL, VJIL and VRJL-II are companies, registered and incorporated in Jersey, established to raise funds for
the Vedanta Group.
50. Investment in preference shares of subsidiaries
(US$ million)
Fair value
At 1 April 2015
Additions
Disposal
At 31 March 2016
At 1 April 2014
Additions
Disposal
At 31 March 2015
1.7
3.0
–
4.7
1.7
–
–
1.7
As at 31 March 2016, the Company held 47 preference shares in Vedanta Resources Jersey Limited (VRJL) (31 March 2015:
17 preference shares).
During the year, VRJL received notice from the bondholders to exercise the option to convert US$3,000,000 bonds into
equity shares of the Company in accordance with the provisions of the Offer circular and accordingly 30 preference shares
with a nominal value of US$100,000 each were issued by VRJL to the Company.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
219
51. Financial asset investment
(US$ million)
Fair value
At 1 April 2015
Fair value movement
At 31 March 2016
At 1 April 2014
Fair value movement
At 31 March 2015
0.1
–
0.1
0.1
–
0.1
The investment relates to an equity investment in the shares of Victoria Gold Corporation. At 31 March 2016, the investment
in Victoria Gold Corporation was revalued and no gain or loss (2015: no gain/loss) was recognised in equity.
52. Company debtors
(US$ million)
Amounts due from subsidiary undertakings
Prepayments and accrued income
Other taxes
Total
Debtors due within one year
Debtors due after one year
Total
31 March
2016
5,188.4
0.5
0.5
31 March
2015
5,485.6
3.5
0.4
5,189.4
5,489.5
505.5
4,683.9
422.7
5,066.8
5,189.4
5,489.5
Amounts due from subsidiary undertakings
At 31 March 2016, the Company had loans due from VRHL of US$1,737.4 million (2015: US$1,507.5 million) which represented
the funds being loaned to other Group companies for funding the subsidiaries. Out of the total loan, US$579.2 million bears
interest at six month US$LIBOR plus 350 basis points, US$500 million at 5.8%, US$31.2 million at 5.9%, US$47 million at
9.7%, and US$580.0 million at US$LIBOR plus 367 basis points.
At 31 March 2016, the Company had a loan of US$3,069.6 million (2015: US$3,590.5 million) from Vedanta Resources
Jersey II Limited. Out of the total loan US$119.2 million bears interest at US$LIBOR plus 357 basis points, US$1,413.0 million
at 7.45%, US$1,200 million at 6.50%, US$107.4 million at LIBOR plus 300 basis points, US$60 million at 3.15%,
US$63.1 million at 7.25% and US$106.9 million at six month US$LIBOR plus 430 basis points.
In addition to the loans, the Company was owed US$372.1 million of accrued interest from VRHL and Vedanta Resources
Jersey II Limited (2015: US$323.3 million) and US$9.3 million (2015: US$64.3 million) other receivables from Group companies.
53. Company current asset investments
(US$ million)
Bank term deposits
Total
54. Company creditors: amounts falling due within one year
(US$ million)
Accruals
External borrowings
Loan from subsidiary
Derivative liability
Total
31 March
2016
31 March
2015
28.1
28.1
33.2
33.2
31 March
2016
31 March
2015
(104.3)
(742.7)
(600.3)
–
(97.2)
(270.4)
–
(2.0)
(1,447.3)
(369.6)
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 220
Notes to the Financial Statements continued
54. Company creditors: amounts falling due within one year continued
The external borrowings as at 31 March 2016 represent 6.75% non-convertible bond of US$750 million repayable in June
2016. During the year, the Company bought back US$7 million worth of these bonds from open market. As at 31 March
2016, loans from subsidiaries included a loan of US$1,140.3 million from VRJL relating to its issue of US$1,250 million
convertible bonds (bond issued in July 2009). In March 2015, as the final maturity was in July 2016, the above loan was
classified in amounts falling due after one year and during the year the same was transferred from amounts due after one
year to amounts falling due within one year (2015: US$1,110.5 million). During the year, the Company bought back from the
market these bonds of face value of US$549.3 million for a consideration of US$522.4 million. The carrying value of this
bond as on 31 March 2016 is US$533.5 million and accrued coupon interest is US$6.5 million. On maturity of these bought
back convertible bonds, there will not be any cash exchange between the Company and its subsidiary, VRJL, but a set off
of the Company’s bought back amount of the bond and inter-co liability towards this convertible bond. Accordingly, the
carrying value of the bought back bond amount along with accrued interest i.e. US$540 million has been reduced from the
inter-co loan outstanding amount of US$1,140.3 million from the subsidiary, VRJL.
During the year ended 31 March 2016, interest was charged at the effective interest rate of 8.2% (March 2015: 8.27%).
55. Company creditors: amounts falling due after one year
(US$ million)
Loan from subsidiary
External borrowings
Total
31 March
2016
31 March
2015
(278.0)
(4,220.0)
(1,430.2)
(4,345.7)
(4,498.0)
(5,775.9)
Loans from subsidiaries include a loan of US$22.2 million due to Richter Holdings Limited and US$255.8 million to Vedanta
Finance UK Limited. As at 31 March 2015, the loan from subsidiaries included US$1,110.5 million due to VRJL (as discussed in
Note 54).
Of the US$1,250 million non-convertible bond issued during 2008, US$500 million was repaid in January 2014 and the
remaining US$750 million 9.5% bonds are due for repayment in July 2018.
In July 2011, the Company issued US$750 million, 6.75% bonds due June 2016, and US$900 million, 8.25% bonds due June
2021. As at 31 March 2015, the outstanding amount under this facility was US$1,650.0 million. During the year, the Company
bought back US$7 million 6.75% bonds due June 2016 from the open market, and the outstanding amount of US$743
million has been shown under creditors falling due within one year and balance US$900 million in creditors falling due after
one year.
In April 2013, the Company entered into a Standby Letter of Credit agreement arranged by Axis Bank for an amount of
US$150 million at a commission of 1% per annum payable quarterly. The facility is funded by Bank of India to the extent of
US$148.5 million and bears interest rate at three month US$LIBOR plus 290 basis points. The facility is repayable in two
equal annual instalments starting April 2017. As at 31 March 2016, the outstanding amount under this facility is
US$148.5 million.
In June 2013, the Company issued US$1,200 million, 6.00% bonds due January 2019, and US$500 million, 7.125% bonds
due May 2023.
In December 2013, the Company entered into a facility agreement with Bank of India for borrowing up to US$100 million
at an interest rate of US$LIBOR plus 357 basis points repayable to the extent of 50% in October 2017 and the balance in
January 2018. As at 31 March 2016, the outstanding amount under this facility is US$100 million.
In March 2015, the Company entered into a facility agreement with State Bank of India for borrowing up to US$350 million.
US$100 million is repayable in March 2020 and bears interest at a rate of US$LIBOR plus 370 basis points. US$250 million
bears interest at a rate of US$LIBOR plus 403 basis points repayable in two instalments, being US$100 million and
US$150 million at the end of 72 and 84 months respectively after initial utilisation. As at 31 March 2016, the outstanding
amount under this facility is US$350 million.
In January 2016, the Company entered into a facility agreement with State Bank of India for borrowing up to US$300
million. US$120 million is repayable in February 2022 and bears interest at a rate of US$LIBOR plus 450 basis points.
US$180 million is repayable in February 2023 and bears interest at a rate of US$LIBOR plus 460 basis points. As at
31 March 2016, the outstanding amount under this facility is US$300 million.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
221
56. Company reconciliation of movement in equity shareholders’ funds
(US$ million)
Equity shareholders’ funds at
1 April 2015
Loss for the year
Dividends paid (Note 14)
Exercise of LTIP awards (Note 32)
Recognition of share-based
payments (Note 32)
Gift to Employee Benefit Trust
Exercise of conversion of bonds
Convertible bond transfer (Note 28)
Equity shareholders’ funds at
31 March 2016
Share
capital
(Note 35)
Share
premium
Share-based
payment
reserve
Convertible
bond
reserve
Treasury
shares
Retained
earnings
Other
reserves
Total
30.0
–
–
0.1
–
–
0.0
–
198.5
–
–
–
–
–
3.0
–
27.4
–
–
(13.1)
15.6
–
–
–
38.4
–
–
–
–
–
(0.1)
(27.5)
(490.6)
–
–
–
–
–
–
–
804.2
(8.0)
(111.3)1
13.1
–
(0.9)
–
27.5
(2.2)
–
–
–
–
–
–
–
605.7
(8.0)
(111.3)1
0.1
15.6
(0.9)
2.9
–
30.1
201.5
29.9
10.8
(490.6)
724.6
(2.2)
504.1
1 Total dividends of US$111.3 million includes a dividend of US$0.7 million paid to a separate investment trust which is consolidated in the Group’s financial
statements with that element of dividends paid by the Company being eliminated (refer Note 14).
(US$ million)
Equity shareholders’ funds at
1 April 2014
Profit for the year
Dividends paid (Note 14)
Exercise of LTIP awards (Note 32)
Recognition of share-based
payments (Note 32)
Convertible bond transfer (Note 28)
Equity shareholders’ funds at
31 March 2015
Share
capital
(Note 35)
Share
premium
Share-based
payment
reserve
Convertible
bond
reserve
Treasury
shares
Retained
earnings
Other
reserves
29.8
–
–
0.2
–
–
198.5
–
–
–
–
–
46.9
–
–
(48.1)
28.6
–
80.1
–
–
–
–
(41.7)
(490.6)
–
–
–
–
–
601.0
284.7
(171.3)
48.1
–
41.7
(2.2)
–
–
–
–
–
Total
463.5
284.7
(171.3)
0.2
28.6
–
30.0
198.5
27.4
38.4
(490.6)
804.2
(2.2)
605.7
57. Company contingent liabilities
• The Company has guaranteed US$1,250 million convertible bonds issued by VRJL (2015: US$1,250 million), of the above
US$113.8 million was repaid pursuant to exercise of put option during the year ended 31 March 2015. During the year, the
Company bought back US$549.3 million of these bonds from open market. See Note 28 to the financial statements for
further details on the convertible bonds.
• The Company has given a corporate guarantee to Konkola Copper Mines for an amount of US$897 million.
• The Company has guaranteed US$883 million convertible bonds issued by VRJL-II (2015: US$883 million). During the year
ended 31 March 2015 and 31 March 2014, US$65.1 million and US$809.8 million respectively was repaid to the bondholders
on exercise of put option. See Note 28 to the financial statements for further details on the convertible bonds.
• The Company has guaranteed US$170 million for a loan facility entered by Valliant Jersey Limited with ICICI Bank and
US$180 million for loan facility entered by Vedanta Finance Jersey Limited with ICICI Bank.
• The Company has guaranteed US$500 million for a syndicated facility agreement entered by Welter Trading Limited
with Standard Chartered Bank as facility agent.
• The Company has guaranteed US$500 million for a loan facility entered by Monte Cello NV with ICICI Bank.
• The Company has guaranteed US$150 million for a loan facility entered by Twin Star Holdings Limited with ICICI Bank.
During the year ended 31 March 2016, US$90 million was repaid under this facility.
• The Company has guaranteed US$80 million for a revolving credit facility entered by Twin Star Holdings Limited with
National Bank of Abu Dhabi PJSC.
• The Company has guaranteed US$500 million for a syndicated facility entered by Twin Star Holdings Limited with Axis
Bank as lead arranger and facility agent.
• The Company has guaranteed US$1,200 million for a syndicated facility entered by Twin Star Mauritius Holdings Limited
with Standard Chartered Bank as facility agent. During the year ended 31 March 2016, US$300 million was repaid under
this facility.
• The Company has guaranteed US$500 million for a loan facility entered by Twin Star Mauritius Holdings Limited with
Standard Chartered Bank and First Gulf Bank PJSC of which US$250 million is under a commodity murabaha structure
(Islamic financing) and the balance US$250 million is under a conventional loan structure. During the year ended
31 March 2016, US$25 million was repaid under this facility.
• The Company has guaranteed US$1,250 million for a loan facility entered by its subsidiaries THL Zinc Limited with Cairn
India Holdings Limited (intercompany loan).
• The Company has guaranteed US$900 million for a loan facility entered by its subsidiaries Twin Star Mauritius Holdings
Limited with Fujairah Gold FZC (intercompany loan).
• The Company has provided a guarantee for the Cairn India Group’s obligation under the Production Sharing Contract (PSC).
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS 222
Notes to the Financial Statements continued
58. Related party transactions
During the year the Company entered into transactions, in the ordinary course of business, with other related parties. The
Company has taken advantage of the exemption under paragraph 8(k) of FRS 101 not to disclose transactions with wholly
owned subsidiaries. Transactions entered into and trading balances outstanding at 31 March with other related parties are
as follows:
(US$ million)
Name of company
Vedanta Limited
Konkola Copper Mines Plc
Relationship
Subsidiary
Subsidiary
Nature of transaction
Management fees charged
Management and guarantee fees
charged
Management fees charged
Management fees charged
Subsidiary
Cairn India Limited
Related party
Sterlite Technologies Limited
Holding company Dividend paid
Volcan Investments Limited
Subsidiary
Vedanta Limited
Subsidiary
Vedanta Limited
Subsidiary
Vedanta Limited
Konkola Copper Mines Plc
Subsidiary
Copper Mines of Tasmania Pty Limited Subsidiary
Subsidiary
Fujariah Gold FZC
Subsidiary
Vedanta Lisheen Holdings Limited
Subsidiary
Namzinc Pty Limited
Subsidiary
Black Mountain Mining (Pty) Limited
Subsidiary
Western Cluster Limited
Subsidiary
Twin Star Mauritius Holdings Limited
Subsidiary
Twin Star Energy Holdings Limited
Subsidiary
THL Zinc Limited
Subsidiary
THL Zinc Ventures Limited
Related party
Ashurst LLP (was related up to
Receipt of service
Payment of expenses
Recovery against share option expense
Recovery against share option expense
Recovery against share option expense
Recovery against share option expense
Recovery against share option expense
Recovery against share option expense
Recovery against share option expense
Recovery against share option expense
Reimbursement of expenses
Reimbursement of expenses
Reimbursement of expenses
Reimbursement of expenses
Receipt of service
30 April 2016)
Outstanding balances
(US$ million)
Name of company
Relationship
Nature of transaction
Subsidiary
Subsidiary
Subsidiary
Related party
Vedanta Limited
Konkola Copper Mines Plc
Cairn India Limited
Sterlite Technologies Limited
Copper Mines of Tasmania Pty Limited Subsidiary
Subsidiary
Fujariah Gold FZC
Subsidiary
Vedanta Lisheen Holdings Limited
Subsidiary
Namzinc Pty Limited
Subsidiary
Black Mountain Mining (Pty) Limited
Subsidiary
Western Cluster Limited
Subsidiary
Twin Star Mauritius Holdings Limited
Subsidiary
Twin Star Energy Holdings Limited
Subsidiary
THL Zinc Limited
Subsidiary
THL Zinc Ventures Limited
Subsidiary
Monte Cello BV
(Payable)/Receivable
Receivable
Receivable
Receivable
Receivable
Receivable
(Payable)/Receivable
Receivable/(Payable)
Receivable
Receivable
Receivable
Receivable
Receivable
Receivable
(Payable)
2016
5.0
2.8
6.5
0.0
75.0
0.4
0.1
11.3
1.5
0.1
0.4
0.0
0.0
0.7
0.0
0.0
0.0
0.0
0.0
0.1
2016
(3.9)
2.3
1.2
0.0
0.7
0.6
(0.0)
0.0
1.0
0.2
0.0
0.0
0.0
0.0
(1.0)
2015
5.0
2.3
15.5
0.0
115.6
0.4
0.4
22.9
1.4
0.0
0.2
0.6
0.6
1.1
0.2
0.0
0.0
–
–
0.4
2015
29.1
7.2
2.7
0.0
0.6
0.2
0.2
(0.0)
0.3
0.2
0.0
0.0
–
–
(1.0)
59. Company share-based payment
The Company had certain LTIP awards outstanding as at 31 March 2016. See Note 32 to the financial statements for further
details on these share-based payments.
Vedanta Resources plc Annual Report FY2016FINANCIAL STATEMENTS www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
223
Five Year Summary
Summary consolidated income statement
(US$ million except as stated)
Revenue
EBITDA
Depreciation and amortisation
Special items
Operating profit
Share in consolidated profit of associate
Profit before interest and taxation
Net finance (costs)/investment revenues
Profit before taxation
Net tax credit/(expense)
Profit after taxation
Non-controlling interests
Profit attributable to equity shareholders in parent
Dividends
Retained (loss)/profit
Basic earnings per share (US cents per share)
On profit for the financial year
On underlying profit for the financial year
Dividend per share (US cents per share)
1 Restated, refer Note 1.
(US$ million except as stated)
Goodwill
Intangible assets
Property, plant and equipment
Financial asset investments
Total
Stocks
Debtors
Cash and liquid investments
Total
Short-term borrowings
Other current liabilities
Total current liabilities
Net current assets
Total assets less current liabilities
Long-term borrowings
Other long-term liabilities
Provisions and deferred tax assets
Total long-term liabilities
Equity non-controlling interests
Non-equity non-controlling interest
Year ended
31 March
2016
Year ended
31 March
2015
Year ended
31 March
20141
Year ended
31 March
2013
Year ended
31 March
2012
10,737.9
12,878.7
12,945.0
14,640.2
14,005.3
2,336.4
(1,455.2)
(5,210.1)
3,741.2
(2,005.7)
(6,744.2)
4,491.2
(2,203.1)
(138.0)
(4,328.9)
–
(5,008.7)
–
2,150.1
–
4,908.9
(2,337.2)
(41.9)
2,529.8
–
4,026.3
(1,408.4)
(230.2)
2,387.7
92.2
(4,328.9)
(655.1)
(5,008.7)
(631.5)
2,150.1
(1,032.0)
2,529.8
(806.1)
2,479.9
(734.5)
(4,984.0)
1,481.9
(5,640.2)
1,852.5
(3,502.1)
1,664.7
(1,837.4)
(110.6)
(3,787.7)
1,989.1
(1,798.6)
(171.3)
1,118.1
(128.7)
989.4
(1,185.4)
(196.0)
(162.5)
1,723.7
(46.1)
1,677.6
(1,515.6)
162.0
(153.5)
(1,948.0)
(1,969.9)
(358.5)
8.5
1,745.4
(516.7)
1,228.7
(1,168.9)
59.8
(144.0)
(84.2)
(665.8)
(131.9)
30.0
(654.5)
(14.2)
63.0
(71.7)
14.7
61.0
59.4
134.8
58.0
21.9
142.2
55.0
31 March
2016
16.6
92.2
16,647.8
6.5
31 March
2015
31 March
2014
31 March
2013
31 March
2012
16.6
101.9
23,352.0
4.2
16.6
108.6
31,043.5
1.7
16.6
–
33,132.6
2.4
16.6
–
34,141.8
209.6
16,763.1
23,474.7
31,170.4
33,151.6
34,368.0
1,365.8
1,344.3
8,936.5
1,605.7
1,839.2
8,209.8
1,742.5
1,739.9
8,937.9
1,965.6
1,706.0
7,981.7
1,704.1
1,795.9
6,885.3
11,646.6
11,654.7
12,420.3
11,653.3
10,385.3
(4,313.8)
(6,097.8)
(3,179.2)
(5,003.4)
(4,358.5)
(4,931.5)
(4,400.1)
(4,810.2)
(4,151.6)
(3,995.6)
(10,411.6)
(8,182.6)
(9,290.0)
(9,210.3)
(8,147.2)
1,288.8
3,528.8
3,541.9
2,639.8
2,415.0
19,907.7
28,806.3
36,084.3
36,751.4
37,330.9
(11,949.5)
(224.7)
(869.2)
(13,488.6)
(194.4)
(2,854.0)
(12,512.7)
(230.7)
(5,354.2)
(12,192.7)
(260.2)
(5,417.6)
(12,803.8)
(196.1)
(6,356.0)
(13,043.4)
(7,565.3)
(11.9)
(16,537.0) (18,097.6)
(13,964.4)
(10,654.3)
(11.9)
(11.9)
(17,870.5) (18,899.5)
(13,768.9)
(14,467.7)
(11.9)
(11.9)
Net assets attributable to the equity holders of the parent
(712.8)
1,603.1
4,010.4
4,401.3
4,650.6
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION 224
Five Year Summary continued
Turnover
(US$ million)
Zinc
India
International
Oil & Gas
Iron Ore
Copper
India/Australia
Zambia
Aluminium
Power
Other
Group
EBITDA
(US$ million)
Zinc
India
International
Oil & Gas
Iron Ore
Copper
India/Australia
Zambia
Aluminium
Power
Other
Group
EBITDA margin
(%)
Zinc
India
International
Oil & Gas
Iron Ore
Copper
India/Australia
Zambia
Aluminium
Power
Group
2016
2015
2014
2013
2012
2,502.5
2,943.9
2,856.8
3,060.5
3,206.8
2,111.0
391.5
1,322.3
350.0
4,169.7
3,197.2
972.5
2,357.0
586.9
2,397.5
326.5
4,777.8
3,700.7
1,077.1
2,195.4
661.4
3,092.8
267.1
4,676.2
3,404.8
1,271.4
2,263.3
797.2
3,223.4
442.5
5,733.9
3,991.1
1,742.8
2,316.1
890.7
882.5
1,690.9
5,915.0
4,205.2
1,709.8
1,694.3
707.5
(8.4)
2,081.9
588.1
(237.0)
1,785.4
621.7
(355.0)
1,837.8
669.0
(326.9)
1,873.5
458.3
(21.7)
10,737.9
12,878.7
12,945.0
14,640.2
14,005.3
2016
1,063.1
995.0
68.1
570.4
73.4
318.7
336.6
(17.9)
106.7
196.3
7.8
2015
2014
2013
2012
1,373.3
1,358.4
1,477.0
1,192.5
180.8
1,476.8
31.4
277.2
281.0
(3.8)
415.5
153.8
13.2
1,145.0
213.4
2,347.0
(24.2)
354.2
1,182.5
294.5
2,440.3
84.9
476.4
197.9
156.3
287.3
168.4
0.1
219.1
257.3
202.6
228.5
(0.8)
1,610.8
1,244.8
366.0
713.0
721.4
685.9
298.0
387.9
182.5
122.0
(9.3)
2,336.4
3,741.2
4,491.2
4,908.9
4,026.3
2016
42.5
47.1
17.4
43.1
21.0
7.6
10.5
(1.8)
6.3
27.7
21.8
2015
46.6
50.6
30.8
61.6
9.6
5.8
7.6
(0.4)
20.0
26.2
29.1
2014
47.5
52.2
32.3
75.9
(9.1)
7.6
5.8
12.3
16.1
27.2
34.7
2013
48.3
52.2
36.9
75.7
19.2
8.3
5.5
14.8
11.0
34.2
33.5
2012
50.2
53.7
41.1
80.8
42.7
11.6
7.1
22.7
9.7
26.6
28.7
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
225
Production
(‘000 tonnes)
Aluminium
BALCO
Jharsuguda Aluminium1
Copper
Sterlite Copper
KCM
Iron Ore (wmt)
Zinc total
HZL
Skorpion
Zinc and Lead MIC
BMM
Lisheen
(million boe)
Oil & Gas – gross production
Oil & Gas – working interest
1
Including trial run production of 51kt in 2016.
Cash costs of production
(US cents/lb)
Aluminium – BALCO Plant-I
BALCO Plant-I (other than Alumina)
Aluminium – BALCO Plant-II
BALCO Plant-II (other than Alumina)
Aluminium – Jharsuguda Aluminium
Copper – Sterlite Copper
Copper – KCM
Zinc including royalty – HZL
Zinc without royalty – HZL
Zinc COP – Skorpion
Zinc COP – BMM
Zinc COP – Lisheen
Oil & Gas (Opex) (US$/boe)
Cash costs of production in INR
(INR/mt)
Aluminium – BALCO Plant-I
BALCO (other than Alumina)
Aluminium – BALCO Plant-II
BALCO (other than Alumina)
Aluminium – Jharsuguda Aluminium
Copper – Sterlite Copper
Zinc including royalty
Zinc without royalty
2016
923
332
592
566
384
182
5,630
841
759
82
144
63
81
2015
877
324
553
531
362
169
667
836
734
102
209
59
150
74.6
46.9
77.3
48.4
2016
73.5
46.7
81.4
54.3
68.9
5.7
197.9
47.4
36.5
73.8
62.7
56.7
6.5
2015
86.4
55.1
98.4
66.9
73.9
6.4
257.7
49.6
39.4
70.1
74.3
52.8
6.2
2014
794
252
542
471
294
177
1,577
874
749
125
239
67
172
79.8
50.1
2014
80.8
49.1
72.6
9.7
238.4
44.7
37.4
56.7
52.2
50.1
4.1
2013
774
247
527
569
353
216
4,212
822
677
145
280
87
193
74.9
46.7
2013
86.2
52.8
84.8
8.7
255.1
44.5
37.1
54.5
54.3
42.8
3.5
2012
676
246
430
526
326
200
15,598
904
759
145
299
85
214
20.5
12.1
2012
87.2
53.3
99.2
0.0
236.8
45.8
37.8
57.8
63.8
41.9
4.4
2016
106,013
67,413
117,497
78,378
99,408
8,203
68,408
52,629
2015
2014
2013
2012
116,448
74,258
132,675
90,147
99,676
8,639
66,805
53,071
107,728
65,430
–
–
96,893
12,994
59,561
49,834
103,526
63,433
–
–
101,779
10,704
53,446
44,550
92,143
56,344
–
–
104,892
(3)
48,423
40,003
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION 226
Five Year Summary continued
Capital expenditure
(US$ million)
Sustaining
Expansion
Total capital expenditure
Net cash/(debt)
(US$ million)
Zinc
India
International
Oil & Gas
Iron Ore
Copper
India/Australia
Zambia
Aluminium
Power
Other
Group
Gearing
(%)
Gearing
Group free cash flow
(US$ million)
Group free cash flow after capital creditors
Group free cash flow after project capex
Capital employed
(US$ million)
Capital employed
ROCE
(%)
ROCE
1 Before impairment.
2016
184.9
565.8
750.7
2015
221.4
1,530.8
2014
321.6
1,424.7
2013
390.2
2,019.1
2012
386.2
2,398.2
1,752.2
1,746.3
2,409.3
2,784.4
2016
2015
2014
2013
2012
5,414.5
5,073.3
4,513.6
4,243.7
3,779.9
5,317.7
96.8
3,239.7
(459.4)
(494.4)
132.2
(626.6)
4,936.6
136.7
2,856.9
(634.3)
(705.0)
32.5
(737.5)
4,344.6
169.0
3,911.9
(512.1)
(882.3)
(159.0)
(723.3)
4,044.8
198.9
3,102.4
(744.2)
(1,244.0)
(492.8)
(751.2)
3,573.8
206.1
1,552.7
(563.6)
(588.0)
120.6
(708.6)
(4,131.0)
(1,801.8)
(9,096.4)
(4,068.2)
(1,576.6)
(9,406.4)
(3,204.0)
(737.0)
(11,009.5)
(4,311.9)
(696.2)
(8,965.4)
(4,082.4)
(1,156.3)
(9,006.7)
(7,328.8)
(8,460.3)
(7,919.5)
(8,615.6) (10,064.4)
2016
51.7
2015
40.8
2014
30.6
2013
31.4
2012
35.3
2016
2015
2014
2013
2012
2,270.6
2,578.0
2,695.0
3,534.7
2,533.8
1,704.8
1,047.3
1,269.9
1,515.6
135.6
20161
20151
2014
2013
2012
22,019.4
25,271.9
25,894.3
27,476.7
28,483.9
20161
6.2
20151
8.7
2014
14.9
2013
17.5
2012
11.3
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
227
Production and Reserves Summary
Copper
Copper production summary
Facility
Tuticorin
Silvassa
KCM
Product
Copper anode
Sulphuric acid
Phosphoric acid
Copper cathode
Copper rods
Copper cathode
Copper rods
Copper cathode
Copper mining summary
Mine
Type of mine
Mt Lyell (CMT)
Konkola (KCM)
Underground
Underground
Copper mine resource and reserve summary
Mine
Type of mine
Mt Lyell (CMT)
Konkola (KCM)
Underground
Underground
Resources are additional to reserves.
Aluminium, alumina and bauxite
Aluminium production summary
Company
BALCO
Jharsuguda Aluminium
Alumina production summary
Company
Jharsuguda Aluminium
Bauxite production summary
Company
BALCO – Mainpat
BALCO – Bodai Daldali
Year ended
31 March
2016
mt
Year ended
31 March
2015
mt
387,016
361,839
1,070,786 1,006,692
189,353
194,019
53,400
168,353
116,939
168,923
198,779
201,864
68,685
182,183
142,115
181,673
Ore mined
Copper concentrate
Copper in concentrate
31 March
2016
mt
31 March
2015
mt
–
4,737,667
–
5,615,327
31 March
2016
mt
–
238,492
31 March
2015
mt
–
214,095
31 March
2016
mt
–
67,501
31 March
2014
mt
–
64,592
Resources
Reserves
Measured
and
indicated
million
mt
29.9
160.2
Copper
grade
%
1.08
1.97
Inferred
million
mt
21.7
315.0
Proved and
probable
reserves
million
mt
–
255.2
Copper
grade
%
1.06
3.18
Copper
grade
%
–
1.29
Year ended
31 March
2016
mt
Year ended
31 March
2015
mt
331,618
591,725
323,921
553,338
Year ended
31 March
2016
mt
Year ended
31 March
2015
mt
970,893
976,915
Year ended
31 March
2016
mt
Year ended
31 March
2015
mt
455
1,033,300
–
860,710
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION 228
Production and Reserves Summary continued
Bauxite mine resource and reserve summary
Mine
BALCO
Mainpat
Bodai-Daldali
Total BALCO
MALCO
Kolli Hills and Yercaud
Resources are additional to reserves.
Zinc and lead
Zinc and lead production summary
Company
HZL
Zinc
Lead
Zinc and lead mining summary
a) Metal mined and metal concentrate
Measured
and
indicated
million
mt
7.3
3.7
11.0
0.8
Resources
Aluminium
grade
%
Inferred
million
mt
Aluminium
grade
%
Reserves
Proved and
probable
reserves
million
mt
Aluminium
grade
%
0.8
0.7
1.5
46.3
47.2
46.7
46.7
47.8
47.1
44.0
4.2
1.9
6.1
0.2
44.5
45.7
44.9
43.0
Year ended
31 March
2016
mt
Year ended
31 March
2015
mt
758,938
144,919
733,803
127,143
Mine
Type of mine
Ore mined
Zinc concentrate
Lead concentrate
Bulk concentrate
31 March
2016
mt
31 March
2015
mt
31 March
2016
mt
31 March
2015
mt
31 March
2016
mt
31 March
2015
mt
31 March
2016
mt
31 March
2015
mt
Rampura Agucha1 Open cut
Rampura Agucha Underground
Underground
Rajpura Dariba
Underground
Sindesar Khurd
Underground
Zawar
5,241,214 5,823,320
223,521
573,284
668,777
2,969,587
1,910,055
1,349,850 1,056,000
1,179,362
1,279,420
109,631
98,693
–
59,054
176,761
–
43,359
126,952
–
15,784
92,611
–
10,647
61,630
–
8,941
–
102,987
–
9,832
–
74,186
Total
10,452,949 9,362,659
1,415,177
1,449,731
218,026
170,970
111,928
84,018
1
Includes development ore MT from Kayar.
b) Metal in concentrate (MIC)
Mine
Type of mine
Rampura Agucha Open cut and underground
Rajpura Dariba
Sindesar Khurd
Zawar
Underground
Underground
Underground
Total
Zinc concentrate
Lead concentrate
31 March
2016
mt
588,188
31,793
91,016
33,275
31 March
2015
mt
656,472
25,363
65,071
27,424
31 March
2016
mt
63,165
7,327
49,232
24,929
31 March
2015
mt
58,680
5,387
32,409
16,277
744,272
774,330
144,653
112,753
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
229
Zinc and lead mine resource and reserve summary
Zinc India
Mine
Rampura Agucha
Rajpura Dariba
Zawwar
Kayad
Sindesar Khurd
Bamnia Kalan
Total
Measured
and
indicated
million
mt
14.8
22.8
26.2
1.7
23.6
5.4
94.4
Resources are additional to reserves.
Zinc International
Mine
Skorpion
BMM
– Deeps
– Broken Hill
– Swartberg
– Gamsberg
Measured
and
indicated
million
mt
2.1
11.2
–
25.9
97.9
Resources are additional to reserves.
Zinc production summary
Company
Skorpion
Zinc and lead mining summary
a) Metal mined and metal concentrate
Mine
Skorpion
BMM
Lisheen
Total
Type of mine
Underground
Underground
Underground
Resources
Reserves
Zinc
grade
%
Lead
grade
%
Inferred
million
mt
Zinc
grade
%
Lead
grade
%
Proved and
probable
reserves
million
mt
Zinc
grade
%
Lead
grade
%
15.2
6.9
4.7
12.3
4.7
4.5
7.0
Zinc
grade
%
9.59
2.70
–
0.48
6.20
2.0
2.3
1.8
1.8
2.8
1.6
2.2
37.9
26.6
56.1
0.4
52.7
14.7
188.4
9.4
6.7
4.8
7.6
3.9
3.7
5.7
2.3
1.9
2.6
1.3
2.1
1.8
2.2
51.1
9.3
9.5
3.9
33.2
–
107.1
14.0
6.3
3.4
13.4
4.7
–
9.5
Resources
Reserves
Lead
grade
%
–
3.00
–
2.25
0.54
Inferred
million
mt
1.4
–
–
3.3
64.4
Zinc
grade
%
9.14
–
–
0.40
7.81
Proved and
probable
reserves
million
mt
5.2
6.9
–
2.6
53.2
Lead
grade
%
–
–
–
2.28
0.52
Zinc
grade
%
9.00
2.81
–
0.60
6.63
1.8
1.6
1.7
1.8
3.2
–
2.2
Lead
grade
%
–
3.00
–
3.20
0.51
Year ended
31 March
2016
mt
Year ended
31 March
2015
mt
82,029
102,188
Ore mined
Zinc concentrate
Lead concentrate
31 March
2016
mt
31 March
2015
mt
1,241,327
1,579,633
752,749
1,344,272
1,437,562
1,362,776
31 March
2016
mt
–
59,006
135,611
31 March
2015
mt
–
54,445
244,354
31 March
2016
mt
–
48,091
14,371
31 March
2015
mt
–
45,129
30,956
3,573,709 4,144,610
194,617
298,799
62,462
76,085
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION 230
Production and Reserves Summary continued
b) Metal in concentrate (MIC)
Mine
BMM
Lisheen
Total
Type of mine
Underground
Underground
Iron ore
Iron ore production summary
Company
Vedanta Limited
Saleable iron ore
Goa
Karnataka
Orissa
Dempo
Iron ore resource and reserve summary
Mine
Iron Ore Sesa
Zinc in concentrate
Lead in concentrate
31 March
2016
mt
29,272
71,825
31 March
2015
mt
27,022
130,897
31 March
2016
mt
34,114
8,726
31 March
2015
mt
32,142
19,265
101,097
157,919
42,840
51,407
Year ended
31 March
2016
million
dmt
Year ended
31 March
2015
million
dmt
5.2
2.0
3.0
–
0.2
0.3
–
0.3
–
–
Resources
Reserves
Measured
and
indicated
million
mt
161.9
Iron ore
grade
%
50.7
Inferred
million
mt
28.2
Iron ore
grade
%
54.5
Proved and
probable
reserves
million
mt
193.6
Iron ore
grade
%
55.4
Comprises mines that Vedanta Limited owns or has rights to.
During the year ended 31 March 2016, the Group recognised an impairment charge in respect of the exploratory assets
in West Africa (Western Cluster, Liberia) on account of low iron ore prices, geo-political factors and no plans for any
substantive expenditure resulting in continued uncertainty in the project. Therefore, the Company did not get certification
of reserves and resources for the current period.
Cairn India
Cairn India Group’s gross reserve estimates are updated at least annually based on the forecast of production profiles,
determined on an asset-by-asset basis, using appropriate petroleum engineering techniques. The estimates of reserves and
resources have been derived in accordance with the Society for Petroleum Engineers ‘Petroleum Resources Management
System (2007)’. The changes to the reserves are generally on account of future development projects, application of
technologies such as enhanced oil recovery techniques and true up of the estimates. The management’s internal estimates
of hydrocarbon reserves and resources at the period end, based on the current terms of the PSCs, are as follows:
Particulars
Rajasthan MBA fields
Rajasthan MBA EOR
Rajasthan Block other fields
Ravva fields
CBOS/2 fields
Other fields
Total
Gross proved and
probable hydrocarbons
initially in place
(mmboe)
Gross proved and
probable reserves
and resources
(mmboe)
Net working interest
proved and probable
reserves and resources
(mmboe)
31 March
2016
31 March
2015
31 March
2016
31 March
2015
31 March
2016
31 March
2015
2,208
–
4,189
706
215
481
7,799
2,208
–
3,833
684
220
481
7,426
496
225
471
39
23
74
545
226
505
47
24
74
1,328
1,421
347
158
330
9
9
36
889
382
158
353
11
9
36
949
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
231
Cairn India Group’s net working interest proved and probable reserves is as follows:
Proved and probable
reserves
Proved and probable
reserves (developed)
Reserves as of 1 April 20141
Additions/revision during the year
Production during the year
Reserves as of 31 March 20152
Additions/revision during the year
Production during the year
Reserves as of 31 March 20163
Gas
(bscf)
Oil
(mmstb)
Oil
(mmstb)
261.98
5.63
47.67
219.94
71.26
20.79
5,72
86.33
(13.83)
45.91
(24.96)
6.32
160.20
55.05
144.73
168.22
25.66
47.67
146.21
44.42
45.91
Gas
(bscf)
18.27
11.38
5.72
23.93
10.85
6.32
28.46
Includes probable oil reserves of 84.23mmstb (of which 32.08mmstb is developed) and probable gas reserves of 51.70bscf (of which 9.15bscf is developed).
1
Includes probable oil reserves of 67.81mmstb (of which 23.43mmstb is developed) and probable gas reserves of 62.71bscf (of which 7.03bscf is developed).
2
3 Includes probable oil reserves of 40.05mmstb (of which 27.31mmstb is developed) and probable gas reserves of 29.80bscf (of which 5.81bscf is developed).
mmboe = million barrels of oil equivalent
mmstb = million stock tank barrels
bscf = billion standard cubic feet
1 million metric tonnes = 7.4mmstb
1 standard cubic metre = 35.315 standard cubic feet
MBA = Mangala, Bhagyam & Aishwarya
EOR = Enhanced Oil Recovery
Source of information
In respect of all businesses, the information has been certified by a geologist on behalf of Group management.
Basis of preparation
Ore reserves and mineral resources reported herein comply with the ‘Australasian Code for Reporting of Identified Mineral
Resources and Ore Reserves’, other than those relating to Konkola Copper Mines plc (KCM) which complies with the South
African Code for Reporting of Mineral Reserves and Mineral Resources (the SAMREC Code). The former code is prepared
by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of
Geoscientists, and Minerals Council of Australia, and is commonly referred to as the ‘JORC Code’. As at the date of this
document, the editions of the JORC and SAMREC Codes in force are dated December 2004 and March 2000, respectively.
The JORC and SAMREC Codes recognise a fundamental distinction between resources and reserves.
The terms and definitions in the SAMREC Code are consistent with those used in the JORC Code with minor differences in
terminology – the JORC Code uses the term Ore Reserve whilst the SAMREC Code uses the term Mineral Reserve. For the
purposes of ore and mineral resources reported herein, the term ore resources have been used throughout.
Oil & gas reserves and resources have been prepared according to the Petroleum Resources Management Systems (PRMS)
approved in March 2007 by the Society of Petroleum Engineers, the World Petroleum Council, the American Association of
Petroleum Geologists, and the Society of Petroleum Evaluation Engineers.
Mineral resources are based on mineral occurrences quantified on the basis of geological data and an assumed cut-off
grade, and are divided into Measured, Indicated and Inferred categories reflecting decreasing confidence in geological
and/or grade continuity. The reporting of resource estimates carries the implication that there are reasonable prospects for
eventual economic exploitation. An Ore or Mineral Reserve is the economically mineable part of a Measured or Indicated
Mineral Resource. It includes the effect of dilution and losses which may occur when the material is mined. Appropriate
assessments, which may include feasibility studies, need to have been carried out and include consideration of and
modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and
governmental factors.
These assessments demonstrate at the time of reporting that extraction could be reasonably justified. Ore Reserves are
sub-divided in order of decreasing confidence into Proved Ore Reserves and Probable Ore Reserves.
The Measured and Indicated mineral resources have been reported as being inclusive of those mineral resources modified
to produce the ore reserves, in addition to the ore reserves. The resource and reserve estimates provided herein comply
with the resource and reserve definitions of the JORC Code, other than those relating to KCM which comply with the
SAMREC Code.
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION 232
Glossary and Definitions
5S
A Japanese concept laying emphasis on housekeeping and
occupational safety in a sequential series of steps as Sort
(Seiri); Set in Order (Seiton); Shine (Selso); Standardise
(Seiketsu); and Sustain (Shitsuke)
CII
Confederation of Indian Industries
CLZS
Chanderiya lead and zinc smelter
Adapted Comparator Group
The new comparator group of companies used for the
purpose of comparing TSR performance in relation to
the LTIP, adopted by the Remuneration Committee on
1 February 2006 and replacing the previous comparator
group comprising companies constituting the FTSE
Worldwide Mining Index (excluding precious metals)
AE
Anode effects
AGM or Annual General Meeting
The Annual General Meeting of the Company which is
scheduled to be held at 3.00pm, UK time, on 5 August 2016
Aluminium Business
The Aluminium business of the Group, comprising of its
fully integrated bauxite mining, alumina refining and
aluminium smelting operations in India, and trading through
the Bharat Aluminium Company Limited and Jharsuguda
Aluminium (a division of Vedanta Limited), in India
Articles of Association
The Articles of Association of Vedanta Resources plc
Attributable Profit
Profit for the financial year before dividends attributable to
the equity shareholders of Vedanta Resources plc
BALCO
Bharat Aluminium Company Limited, a company
incorporated in India
BMM
Black Mountain Mining Pty
Board or Vedanta Board
The Board of Directors of the Company
Board Committees
The committees reporting to the Board: Audit,
Remuneration, Nominations, and Health, Safety and
Environment, each with its own terms of reference
Businesses
The Aluminium Business, the Copper Business, the Zinc,
Lead, Silver, Iron Ore, Power and Oil & Gas business together
Cairn India Group
Cairn India Limited and its subsidiaries
Capex
Capital expenditure
Capital employed
Net assets before net (debt)/cash
Cash tax rate
Current taxation as a percentage of profit before taxation
Cents/lb
US cents per pound
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CO2
Carbon dioxide
CMT
Copper Mines of Tasmania Pty Limited, a company
incorporated in Australia
Combined Code or the Code
The Combined Code on Corporate Governance published
by the Financial Reporting Council in June 2008 and
updated from time to time.
Company financial statements
The audited financial statements for the Company for the
year ended 31 March 2016 as defined in the Independent
Auditor’s Report on the individual Company Financial
Statements to the members of Vedanta Resources plc
Company or Vedanta
Vedanta Resources plc
Convertible bonds
$1,250 million 5.5% guaranteed convertible bonds due 2016,
issued by a wholly owned subsidiary of the Company,
Vedanta Resource Jersey Limited (VRJL) and guaranteed
by the Company, the proceeds of which are to be applied
for to support its organic growth pipeline, to increase its
ownership interest in its subsidiaries and for general
corporate purposes
$883 million 4.0% guaranteed convertible bonds due 2017,
issued by a wholly owned subsidiary of the Company,
Vedanta Resource Jersey II Limited (VRJL-II) and
guaranteed by the Company, the proceeds of which
are to be applied for to refinance debt redemptions
and for general corporate purposes
Copper Business
The Copper business of the Group, comprising:
• a copper smelter, two refineries and two copper rod
plants in India, trading through Vedanta Limited, a
company incorporated in India;
• one copper mine in Australia, trading through Copper
Mines of Tasmania Pty Limited, a company incorporated
in Australia; and
• an integrated operation in Zambia consisting of three
mines, a leaching plant and a smelter, trading through
Konkola Copper Mines PLC, a company incorporated
in Zambia
CREP
Corporate responsibility for environmental protection
CRISIL
CRISIL Limited is a rating agency incorporated in India
CRRI
Central Road Research Institute
CSR
Corporate social responsibility
CTC
Cost to company, the basic remuneration of executives in
India, which represents an aggregate figure encompassing
basic pay, pension contributions and allowances
CY
Calendar year
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION www.vedantaresources.com
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233
DDT
Dividend distribution tax
Deferred shares
Deferred shares of £1.00 each in the Company
Executive Committee
The Executive Committee to whom the Board has
delegated operational management. It comprises of
the Executive Directors and the senior management
of the Group
DFS
Detailed feasibility study
Executive Directors
The Executive Directors of the Company
DGMS
Director General of Mine Safety in the Government of India
Expansion capital expenditure
Capital expenditure that increases the Group’s operating
capacity
Directors
The Directors of the Company
DMF
District Mineral Fund
DMT
Dry metric tonne
Dollar or $
United States dollars, the currency of the United States
of America
DRs
Depositary receipts of 10 US cents, issuable in relation
to the $725 million 4.6% guaranteed convertible bonds
due 2026
EAC
Expert advisory committee
Financial statements or Group financial statements
The consolidated financial statements for the Company and
the Group for the year ended 31 March 2016 as defined in
the Independent Auditor’s Report to the members of
Vedanta Resources plc
Free Cash Flow
Cash flow arising from EBITDA after net interest, taxation,
sustaining and capital expansion expenditure, movements
in capital creditors and working capital movements
FY
Financial year i.e. April to March
GAAP, including UK GAAP and Indian GAAP
Generally Accepted Accounting Principles, the common
set of accounting principles, standards and procedures that
companies use to compile their financial statements in their
respective local territories
EBITDA
Earnings before interest, taxation, depreciation, goodwill
amortisation/impairment and special items
GDP
Gross domestic product
EBITDA interest cover
EBITDA divided by gross finance costs excluding accretive
interest on convertible bonds, unwinding of discount on
provisions, interest on defined benefit arrangements less
investment revenue
EBITDA margin
EBITDA as a percentage of turnover
EBITDA margin excluding custom smelting
EBITDA margin excluding EBITDA and turnover from
custom smelting of Copper India, Copper Zambia and
Zinc India businesses
Economic holdings or economic interest
The economic holdings/interest are derived by combining
the Group’s direct and indirect shareholdings in the
operating companies. The Group’s economic holdings/
interest is the basis on which the attributable profit and
net assets are determined in the consolidated accounts
E&OHSAS
Environment and occupational health and safety
assessment standards
E&OHS
Environment and occupational health and safety
management system
EPS
Earnings per ordinary share
ESOP
Employee share option plan
ESP
Electrostatic precipitator
Gearing
Net debt as a percentage of capital employed
GJ
Giga joule
Government or Indian Government
The Government of the Republic of India
Gratuity
A defined contribution pension arrangement providing
pension benefits consistent with Indian market practices
Gross finance costs
Finance costs before capitalisation of borrowing costs
Group
The Company and its subsidiary undertakings and, where
appropriate, its associate undertaking
HIIP
Hydrocarbons initially in place
HSE
Health, safety and environment
HZL
Hindustan Zinc Limited, a company incorporated in India
IAS
International Accounting Standards
ICMM
International Council on Mining and Metals
IFRIC
IFRS Interpretations Committee
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION 234
Glossary and Definitions continued
IFRS
International Financial Reporting Standards
INR
Indian rupees
Interest cover
EBITDA divided by finance costs
Iron Ore Sesa
Iron Ore division of Vedanta Limited, comprising of iron ore
mines in Goa and Karnataka in India
ISO 9001
An international quality management system standard
published by the International Organisation for
Standardisation
ISO 14001
An international environmental management system
standard published by the International Organisation
for Standardisation
LME
London Metals Exchange
London Stock Exchange
London Stock Exchange plc
Lost time injury
An accident/injury forcing the employee/contractor
to remain away from his/her work beyond the day of
the accident
LTIFR
Lost time injury frequency rate: the number of lost time
injuries per million man hours worked
LTIP
The Vedanta Resources Long-Term Incentive Plan or
Long-Term Incentive Plan
MALCO
The Madras Aluminium Company Limited, a company
incorporated in India
Jharsuguda 2,400MW Power Plant
Power division of Vedanta Limited, comprising of a
2,400MW power plant in Jharsuguda in Odisha in India
Management Assurance Services (MAS)
The function through which the Group’s internal audit
activities are managed
Jharsuguda Aluminium
Aluminium division of Vedanta Limited, comprising of
aluminium refining and smelting facilities at Jharsuguda
and Lanjigarh in Odisha in India
MAT
Minimum alternative tax
MBA
Mangala, Bhagyam, Aishwarya
KCM or Konkola Copper Mines
Konkola Copper Mines PLC, a company incorporated
in Zambia
MIC
Metal in concentrate
KDMP
Konkola deep mining project
MIS
Management information system
Key Result Areas or KRAs
For the purpose of the remuneration report, specific
personal targets set as an incentive to achieve short-term
goals for the purpose of awarding bonuses, thereby linking
individual performance to corporate performance
KLD
Kilo litres per day
KPIs
Key performance indicators
Kwh
Kilowatt hour
Kwh/d
Kilowatt hour per day
LIBOR
London inter bank offered rate
LIC
Life Insurance Corporation
Listing or IPO (Initial Public Offering)
The listing of the Company’s ordinary shares on the London
Stock Exchange on 10 December 2003
Listing particulars
The listing particulars dated 5 December 2003 issued by
the Company in connection with its Listing or revised listing
filed in 2011
Listing Rules
The listing rules of the Financial Services Authority, with
which companies with securities that are listed in the UK
must comply
MOEF
The Ministry of Environment & Forests of the Government
of the Republic of India
mt or tonnes
Metric tonnes
MU
Million units
MW
Megawatts of electrical power
NCCBM
National Council of Cement and Building Materials
Net (debt)/cash
Total debt after fair value adjustments under IAS 32 and 39,
cash and cash equivalents and liquid investments
NGO
Non-governmental organisation
NIHL
Noise induced hearing loss
Non-Executive Directors
The Non-Executive Directors of the Company
NMET
National Mineral Exploration Trust
OECD
Organisation for Economic Co-operation and Development
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235
OHSAS 18001
Occupational Health and Safety Assessment Series
(standards for occupational health and safety
management systems)
SA 8000
Standard for Social Accountability based on international
workplace norms in the International Labour Organisation
(ILO) conventions and the UN’s Universal Declaration of
Human Rights and the Convention on Rights of the Child
Oil & Gas business
The Group’s subsidiary, Cairn India Limited is involved in
the business of exploration, development and production
of oil & gas
SBU
Strategic Business Unit
ONGC
Oil and Natural Gas Corporation Limited, a company
incorporated in India
OPEC
Organisation of the Petroleum Exporting Countries
Ordinary shares
Ordinary shares of 10 US cents each in the Company
PBT
Profit before tax
PFC
Per fluorocarbons
PHC
Primary health centre
PPE
Personal protective equipment
Senior management group
For the purpose of the remuneration report, the key
operational and functional heads within the Group
SEWT
Sterlite Employee Welfare Trust, a long-term investment
plan for Sterlite senior management
The Share Option Plan
The Vedanta Resources Share Option Plan, a closed plan
approved by shareholders on Listing in December 2003
and adopted to provide maximum flexibility in the design
of incentive arrangements over the long term
SHGs
Self help groups
SID
Senior Independent Director
SO2
Sulphur dioxide
Provident Fund
A defined contribution pension arrangement providing
pension benefits consistent with Indian market practices
Special items
Items which derive from events and transactions that need
to be disclosed separately by virtue of their size or nature
PSC
A ‘production sharing contract’ by which the Government
of India grants a license to a company or consortium of
companies (the Contractor) to explore for and produce
any hydrocarbons found within a specified area and for a
specified period, incorporating specified obligations in
respect of such activities and a mechanism to ensure an
appropriate sharing of the profits arising there from (if
any) between the Government and the Contractor
Recycled water
Water released during mining or processing and then
used in operational activities
Relationship Agreement
The agreement dated 5 December 2003 between the
Company, Volcan Investments Limited and members of
the Agarwal family that regulates the ongoing relationship
between them, the principal purpose of which is to ensure
that the Group is capable of carrying on business
independently of Volcan, the Agarwal family and their
associates
Return on Capital Employed or ROCE
Profit before interest, taxation, special items, tax effected
at the Group’s effective tax rate as a percentage of
Capital Employed
The Reward Plan
The Vedanta Resources Share Reward Plan, a closed plan
approved by shareholders on Listing in December 2003
and adopted for the purpose of rewarding employees who
contributed to the Company’s development and growth
over the period leading up to Listing in December 2003
RO
Reverse osmosis
SPM
Suspended particulate matter. Fine dust particles
suspended in air
Sterling, GBP or £
The currency of the United Kingdom
Sterlite Copper
Copper Division of Vedanta Limited comprising of a copper
smelter, two refineries and two copper rod plants in India
STL
Sterlite Technologies Limited, a company incorporated
in India
Superannuation Fund
A defined contribution pension arrangement providing
pension benefits consistent with Indian market practices
Sustaining capital expenditure
Capital expenditure to maintain the Group’s operating
capacity
TCM
Thalanga Copper Mines Pty Limited, a company
incorporated in Australia
TC/RC
Treatment charge/refining charge being the terms used
to set the smelting and refining costs
TGS
Tail gas scrubber
TGT
Tail gas treatment
TLP
Tail Leaching Plan
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION 236
Glossary and Definitions continued
tpa
Metric tonnes per annum
TPM
Tonnes per month
Water used for primary activities
Total new or make-up water entering the operation and
used for the operation’s primary activities; primary activities
are those in which the operation engages to produce
its product
TSPL
Talwandi Sabo Power Limited, a company incorporated
in India
WBCSD
World Business Council for Sustainable Development
ZCCM
ZCCM Investments Holdings plc, a company incorporated
in Zambia
ZCI
Zambia Copper Investment Limited, a company
incorporated in Bermuda
ZRA
Zambia Revenue Authority
TSR
Total shareholder return, being the movement in the
Company’s share price plus reinvested dividends
Turnbull Guidance
The revised guidance on internal control for directors on
the Combined Code issued by the Turnbull Review Group
in October 2005
Twin Star
Twin Star Holdings Limited, a company incorporated
in Mauritius
Twin Star Holdings Group
Twin Star and its subsidiaries and associated undertaking
Underlying EPS
Underlying earnings per ordinary share
Underlying profit
Profit for the year after adding back special items and other
gains and losses and their resultant tax and non-controlling
interest effects
US cents
United States cents
Vedanta Limited (formerly known as Sesa Sterlite
Limited/Sesa Goa Limited)
Vedanta Limited, a company incorporated in India engaged
in the business of copper smelting, iron ore mining, aluminium
mining, refining and smelting and energy generation
VFD
Variable frequency drive
VFJL
Vedanta Finance (Jersey) Limited, a company incorporated
in Jersey
VGCB
Vizag General Cargo Berth Private Limited, a company
incorporated in India
Volcan
Volcan Investments Limited, a company incorporated in the
Bahamas
VRCL
Vedanta Resources Cyprus Limited, a company
incorporated in Cyprus
VRFL
Vedanta Resources Finance Limited, a company
incorporated in the United Kingdom
VRHL
Vedanta Resources Holdings Limited, a company
incorporated in the United Kingdom
VSS
Vertical Stud Söderberg
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
237
Shareholder Information
Shareholder interests as at 31 March 2016
Number of shareholders:
Number of shares in issue:
By size of holding
2016
2015
2,158
300,522,798
500 and under
501 to 1,000
1,001 to 10,000
10,001 to
100,000
100,001 to
1,000,000
Over 1,000,000
Shareholders %
Shares %
2016
52.13
13.30
21.83
8.34
3.38
1.02
2015
52.58
13.78
21.53
7.71
3.31
1.09
2016
0.08
0.07
0.51
2.13
7.88
89.32
2015
0.09
0.08
0.56
2.08
7.41
89.77
100.00
100.00
100.00
100.00
Annual General Meeting
The AGM will be held on 5 August 2016 at 3.00pm at
Ironmongers’ Hall, Shaftesbury Place, London EC2Y 8AA.
The Notice of Annual General Meeting and the Form of
Proxy are enclosed with this Report. The Notice of Annual
General Meeting can also be found on the Vedanta Group
website (www.vedantaresources.com).
Electronic shareholder communications
Vedanta Resources plc uses its website
(www.vedantaresources.com) as its primary means of
communication with its shareholders provided that the
individual shareholder has agreed or is deemed to have
agreed that communications may be sent or supplied in
that manner. Electronic communications allow shareholders
to access information instantly as well as helping Vedanta
Resources plc reduce its costs and its impact on the
environment. Shareholders can sign up for electronic
communications via Computershare’s Investor Centre
website at www.investorcentre.co.uk. Shareholders that
have consented or are deemed to have consented to
electronic communications can revoke their consent
at any time by contacting the Company’s Registrar.
Company website
The Company’s half year and annual reports and
results announcements are available on the website at
www.vedantaresources.com. Shareholders can also access
the latest information about the Company and press
announcements as they are released, together with details
of future events and who to contact for further information.
Registrar
For information about the AGM, shareholdings and
dividends and to report changes in personal details,
shareholders should contact:
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
United Kingdom
Telephone: +44 (0) 870 707 1388
Email:
web.queries@computershare.co.uk
Computershare provide a free self-service website, Investor
Centre, through which you can view your share balance,
change your address, view your dividend payment and tax
information and update your payment instructions. For
further information, visit www.investorcentre.co.uk.
Beware of share fraud
Shareholders should be very wary of any unsolicited calls
or correspondence offering to buy or sell shares at a
discounted price. These calls are typically from fraudsters
operating ‘boiler rooms’. Boiler rooms use increasingly
sophisticated means to approach investors and often leave
their victims out of pocket. If you are concerned that you
may have been targeted by fraudsters please contact the
FCA Consumer Helpline on 0800 111 6768.
Currency option and dividend mandate
Shareholders wishing to receive their dividend in UK
pounds sterling should complete and return to the Registrar
a Currency Election Form. In order for the Currency Option
and Dividend Mandate to be effective for the 2016 final
dividend, the completed forms must be received by the
Registrar by 11 July 2016.
The Registrar can also arrange for the dividend to be paid
directly into a shareholder’s UK bank account. To take
advantage of this facility, please contact Computershare
who will provide a Dividend Mandate Form. Please
complete and return the form to the Registrar by 11 July
2016. This arrangement is only available in respect of
dividends paid in UK pounds sterling. Consequently, you
may only take advantage of this arrangement if you have
also completed a Currency Election Form and returned
it to the Registrar by 11 July 2016. If you have already
completed and returned a Currency Election Form and/or
a Dividend Mandate Form, you need take no further action.
Currency election and dividend mandate forms are also
available online through the Investor Centre service
www.investorcentre.co.uk.
Financial calendar
Dividend payments
Ex-dividend date
Record date
2015 final ordinary dividend payable 12 August 2016
7 July 2016
8 July 2016
Other dates
Annual General Meeting
2017 half year results announced
5 August 2016
5 November 2016
Cautionary statement about forward-looking statements
Certain statements made in this document constitute “forward-looking statements”. In this context, forward-looking statements can be identified by the use of
words such as “expects”, “anticipates”, “intends”, “plans”, “predicts”, “assurance”, “assumes”, “aim”, “hope”, “risk”, “estimates”, “believes”, “seeks”, “may”, “should”
or “will” or the negative thereof or other similar expressions that are predictive or indicative of future events. All statements other than statements of historical
facts included in this document, including, without limitation, those regarding the Group’s expectations, intentions and beliefs concerning, amongst other
things, the Group’s results of operations, financial position, growth strategy, prospects, dividend policy and the industries in which the Group operates, are
forward-looking statements.
Forward–looking statements, by their nature, involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the
Group and its Directors, which may cause the actual results, performance, achievements, dividends of the Group or industry results to be materially different
from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements contained
in this document speak only as of the date of this document. As such, forward-looking statements are no guarantee of future performance.
Except as required by applicable regulations or by law, the Group does not undertake to publicly update any forward-looking statement whether as a result
of new information or future events and expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking
statements contained in this document to reflect any changes in its expectations or any change in events, conditions or circumstances on which any such
statement is based.
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION 238
Notes
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION www.vedantaresources.com
http://sustainabledevelopment.vedantaresources.com
239
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION 240
Notes
Vedanta Resources plc Annual Report FY2016ADDITIONAL INFORMATION Contacts
Investor Relations
For investor enquiries, please contact:
Mr Ashwin Bajaj
Director, Investor Relations
Vedanta Resources plc
16 Berkeley Street
London
W1J 8DZ
Telephone: +44 (0) 20 7659 4732 (London)
+91 22 6646 1531 (Mumbai)
Email: ir@vedanta.co.in
Registered office
Vedanta Resources plc
5th Floor
6 St Andrew Street
London
EC4A 3AE
Company Secretary
Deepak Kumar
Head office
16 Berkeley Street
London
W1J 8DZ
Telephone: +44 (0) 20 7499 5900
Fax: +44 (0) 20 7491 8440
Registered number
4740415
Auditors
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
Solicitors
Ashurst LLP
Broadwalk House
5 Appold Street
London
EC2A 2HA
Latham & Watkins LLP
99 Bishopsgate
London
EC2M 3XF
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Vedanta Resources plc
5th Floor, 16 Berkeley Street
London W1J 3DZ
Tel: +44 (0) 20 7499 5900
Fax: +44 (0) 20 7491 8440
vedantaresources.com