We Are...
GROWING
RESPONSIBLY
VEDANTA RESOURCES LIMITED
INTEGRATED REPORT
AND ANNUAL ACCOUNTS
2018-19
Growing Responsibly
Vedanta Resources Limited is a globally diversified natural resources company with interests in zinc-lead-silver,
oil & gas, aluminium, power, iron ore, steel and copper. We strive to make a positive all-round impact on the
communities in which we operate, both as an employer and a contributor, and to leave a legacy of pride.
STRATEGIC REPORT
2-3
4-5
Who We Are
Vedanta at a Glance
6-7
8-9
10-13
Highlights 2018-19
Investment Case
CEO’s Statement
GROWING RESPONSIBLY
14-15
16-17
18-19
20-21
22-23
Aluminium
Electrosteel
Oil & Gas
Copper
Zinc
OUR INTEGRATED APPROACH
24
26-27
28-29
30-33
34-37
38-45
46-49
50-51
Materiality Matrix
Our Six Capitals and Stakeholder Value Creation
Our Business Model
Strategic Framework and Focus Areas
Key Performance Indicators
Opportunities and Risks
Stakeholder Engagement
Awards and Accolades
MANAGEMENT REVIEW
Market Review
52-58
Sustainability and CSR
60-74
Non-financial Information Statement
75
Finance Review
76-82
Divisional Review
84-127
GOVERNANCE
128-131
132-136
137-140
141-142
143-146
147
148-151
152-154
Board of Directors
Introduction to Governance
Accountability
Sustainability Committee
Directors’ Report
Remuneration Committee Report
Directors’ Remuneration Policy Report
Annual Report on Remuneration
FINANCIAL STATEMENTS
Consolidated financials
155-163
164
165
166
167
168
169
170-262
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Other Reserve
Notes to the Financial Statements
ADDITIONAL INFORMATION
Five Year Summary
263-266
Production and Reserves Summary
267-271
Other Information
272-273
Glossary and Definitions
274-278
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
01
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS We Are...
Committed to give back to the
stakeholders who play a vital role
in powering our growth. Reducing
the social and economic divide
by generating economic value,
distributing wealth, investing in
employees and enhancing standard
of living are all key elements of our
sustainability framework.
Forward-looking statements
Certain statements in this document constitute ‘forward-looking statements’ which involve known and unknown risks
and opportunities, other uncertainties and important factors that could turn out to be materially different following the
publication of actual results.
These forward-looking statements speak only as of the date of this document. The Company undertakes no obligation
to update publicly, or release any revisions, to these forward-looking statements, to reflect events or circumstances after
the date of this document, or to reflect the occurrence of anticipated events.
02
INTEGRATED REPORTVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 INTEGRATED REPORT
MANAGEMENT REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
Main picture: Off shore facility of Oil & Gas
Inset: Diversity and inclusion are our core values
03
Operating responsibly and ethically is an integral part of Vedanta’s core values. We deliver on our commitments to all internal and external stakeholders by demonstrating these values through our actions, processes, systems and interactions. We constantly learn as we develop, and never stop looking to improve our operations. Throughout our successful expansion over the last three decades into many locations around the world, we have operated with integrity and uncompromised business ethics. WHAT WE DOWe supply natural resources that help the world grow, focusing on the core product portfolio above. Our strategic capabilities and alliances are singularly focused on creating and preserving value for our wide stakeholder groups and our customers.The Company has a portfolio of world-class, low-cost, scalable assets that consistently generate strong profitability and robust cash flows. We also enjoy industry-leading market shares across our core divisions.As India’s only diversified natural resources group, we are uniquely placed to make a ‘home-grown’ contribution to the nation's growth and to assist in its process of modernisation.CORE PURPOSE AND VALUESSince we first introduced Vedanta Values, they have become a vital part of our culture and an essential underpinning of our growth and success. Every person at Vedanta understands what is important – how we work together as a team and how ‘growth and sustainable development’ are at the centre of what we do. These are universal values, which guide us as we expand into new markets and countries.Our people are empowered to drive excellence and innovation and we demonstrate world-class standards of governance, safety, sustainability and social responsibility. Our business was built with a simple mission envisioned by the Group’s Chairman, Anil Agarwal, “To create a leading global natural resource company.”We also play an increasingly significant role in the society as we continue to create jobs, supporting our host communities through our various social programmes in the areas of childcare, health, education and women empowerment, generating value along our entire supply chain and contributing to the nation’s exchequer.REPORTING THEMEIn keeping with these values, our theme for this 2019 integrated report is 'Growing Responsibly'. It builds on the previous year’s theme of growth, but also emphasises our commitment to sustainability – to the ecosystems we rely on, to our business and to our stakeholders, including employees and contractors, customers, communities, suppliers and to our host countries. This focus is in keeping with the scale of our operations and the expectations our stakeholders have from the organisation. It seeks to highlight our commitment to global movement to minimising ecological footprints, upholding human rights, and aligning business decision-making to the long term societal needs.INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Vedanta at a Glance
Building a world-class
portfolio
Large and diversified asset base of long-life, low-cost assets
ZINC | LEAD | SILVER
OIL & GAS
ALUMINIUM
Businesses
• Zinc India (HZL)
• Zinc International
Business
• Cairn India
Business
• Aluminium smelters at Jharsuguda and Korba
(BALCO), and Alumina refinery at Lanjigarh
Production volume
Zinc India (HZL)
894kt
Silver: 21.8 million ounces
Production volume
Average Daily Gross Operated Production
189kboepd
Production volume
Aluminium
1,959kt
1,501kt
Alumina
EBITDA (US$ million)
1,100
EBITDA (US$ million)
316
Zinc International
148kt
79% share of India’s
zinc market
EBITDA (US$ million)
Zinc India:
1,516
100
Zinc International
Asset highlights
• The world’s largest integrated zinc-lead
producer
• The world’s second largest zinc mine at
Rampura Agucha, India
• 9th largest silver producer in the world
• Developing the largest undeveloped zinc
deposit in the world at Gamsberg
• Zinc India has R&R of 403 million tonnes
with mine life of ~25 years
• Zinc International has R&R of more than
434 million tonnes, supporting mine life
in excess of 30 years
Asset highlights
• Largest private sector oil & gas producer
in India
• Operator of 25% of India’s crude oil
production
• Executing one of the largest polymer EOR
projects in the world
• Footprint over a total acreage of c. 50,000
square kilometres
• Gross proved and probable reserves and
resources of 1,195 mmboe
Application areas
• Galvanising for the infrastructure and
construction sectors
Application areas
• Crude oil is used by hydrocarbon refineries.
• Natural gas is mainly used by the
• Die-casting alloys, brass, oxides and chemicals
fertiliser sector
Asset highlights
• Largest installed aluminium capacity in India:
2.3 million tonnes per annum (mtpa)
• Strategically located large-scale assets with
integrated power and an alumina refinery
• 37% market share among domestic primary
aluminium producers
Application areas
• Primary use in automotive, building &
construction, transportation and electrical
industries
• Product portfolio includes ingots, wire rods,
billets, primary foundry alloys and rolled
products
04
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT POWER
IRON ORE & STEEL
COPPER
Business
• Power plants at Talwandi Sabo, Jharsuguda
and Korba
Businesses
• Iron Ore India
• Electrosteel Steels Ltd.
Sales volume
c. 14bn kWh
EBITDA (US$ million)
219
Production volume
Pig Iron
686kt
1.2mn tonnes
Steel
Business
• Copper India
• Copper Zambia
Production volume
Copper India
Copper Zambia
90kt
90kt Integrated
87kt Custom
Copper Zambia
EBITDA (US$ million)
Iron Ore
EBITDA (US$ million)
Copper India
90
113
Electrosteel
(36)
(63)
Copper Zambia
Asset highlights
• One of India’s largest power generators with
9GW diversified power portfolio
Asset highlights
Iron Ore
• Karnataka iron ore mine with R&R of 81 million
• TSPL is the largest thermal power producer in
tonnes, and life of 18 years
Asset highlights*
• One of the largest copper producers in India
• Konkola Copper Mines is among the top five
highest grade mines with c. 2.99% (KDMP)
the state of Punjab
• 3.3GW of commercial power generation
capacity, with balance for captive usage
• Leading producers of wind power in India;
96% thermal power and 4% from renewable
energy sources
• Value added business: 3 blast furnaces (0.8mtpa),
2 coke oven batteries (0.5mtpa) and 2 power
plants (60MW)
Steel
• Acquired in June 2018 under IBC process for an
integrated iron ore and steel business
• Design capacity of 2.5mtpa;
• Largely long steel product
* NB: The copper plant at Tuticorin has not been
operational since March 2018
Application areas
• 63% is for captive use while 37% is used for
commercial purposes; of which c. 95% is
backed by long term Power Purchase
Agreements with Indian distribution companies
Application areas
• Construction, infrastructure, transport, energy,
packaging, appliances and industry
• Product portfolio includes pig iron, billets,
TMT bars, wire rods and ductile iron pipes
Application areas
• Used for making cables, transformers,
castings, motors, castings and alloy-based
products
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 05
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Highlights 2018-19
FINANCIAL HIGHLIGHTS
• Revenue at US$14.0 billion, 8% lower y-o-y
(FY2018: US$ 15.3 billion) driven mainly by shutdown
of Tuticorin smelter partially offset by Aluminium
business ramp up and ESL acquisition
• EBITDA at US$3.4 billion, 14% lower y-o-y
(FY2018: US$ 4.0 billion)
• Robust adjusted EBITDA◊ margin of 29% (FY2018: 35%)
• ROCE◊ at 9.6% in FY2019 (FY2018: 14.3%)
• Free cash flow (FCF)◊ post-capex of US$1.2 billion
(FY2018: US$0.9 billion)
• Gross debt at US$16.0 billion (FY2018: US$15.2 billion),
due to ESL acquisition and temporary borrowing at
Zinc India
• Net debt◊ at US$10.3 billion (FY2018: US$9.6 billion),
primarily due to ESL acquisition
Zinc International
• Commercial production commenced at Gamsberg in
March 2019
Oil & Gas
• Average gross production of 189kboepd for FY2019, up
2% y-o-y
• 11 development drilling rigs as at March 2019, 99 wells
drilled and 33 wells hooked up during FY2019 in Rajasthan
• Production Sharing Contracts (PSC) of Rajasthan and
Ravva block extended for 10 years, subject to conditions
• Revenue sharing contract signed for 41 OALP blocks
Aluminium
• Record aluminium production at 1,959kt, up 17% y-o-y
• Record alumina production from Lanjigarh refinery at
1,501kt, up 24% y-o-y
• Strong financial position with cash equivalents, liquid
• Q4 FY2019 hot metal cost of production significantly
investments and structured investments of US$5.7 billion
(FY2018: US$5.6 billion)
• S&P affirmed the ratings at B+ while revising the outlook to
Negative in March 2019
• Moody’s affirmed the Corporate Family ratings at Ba3
while revising the outlook to Negative in February 2019
• Highest ever contribution to the exchequer of c. US$6.2
billion in FY2019
• In December 2018, the Group purchased an economic
interest through a structured investment in the equity
shares of Anglo-American Plc, from Volcan Investments
Limited for a total consideration of US$541 million. As of
March 31, 2019 , the transaction was positively marked to
market by US$137 million.
BUSINESS HIGHLIGHTS
Zinc India
• Record underground mined metal production at 936kt,
up 29% y-o-y. Total mined metal production marginally
down 1% y-o-y, post closure of open-cast operations
• Record lead metal production at 198kt, up 18% y-o-y
• Record refined silver production at 21.8 million ounces,
up 22% y-o-y
lower at US$1,776 per tonne, lower by 12% q-o-q
Power
• Record PFA of 88% at the 1,980MW TSPL plant in FY2019
Iron Ore
• Goa operations remain suspended due to state-wide
directive from the Hon’ble Supreme Court; engagement
continues with the government for a resumption of
mining operations
• Production of saleable ore at Karnataka at 4.1 million
tonnes, up 89% y-o-y
Steel
• Record annual steel production at 1.2 million tonnes for
FY2019, up 17% y-o-y
• Achieved hot metal production run-rate of c. 1.5mtpa
in FY2019
Copper Zambia
• Integrated metal production at 90kt, up 7% y-o-y
• Custom production at 87kt, down 22% y-o-y
Copper India
• Due legal process being followed to achieve a sustainable
restart of the operations
Above: Employees at
Gamsberg
Left: Employee at
operational site,
Hindustan Zinc Limited
06
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT Above: HZL Employees
Right: Employee at operational
site, Cairn Oil & Gas
CONSOLIDATED GROUP RESULTS
Particulars
Net Sales/Income from Operations
EBITDA
EBITDA Margin (%)
Adjusted EBITDA margin(1) (%)◊
Operating Profit before special items
Profit/(loss) attributable to equity holders of the parent
Underlying attributable profit/(loss)◊
ROCE (%)◊
1. Excludes custom smelting at Copper India, Copper Zambia and Zinc India Operations.
REVENUE (US$ billion)
EBITDA (US$ billion)
.
3
5
1
.
0
4
1
5
.
1
1
0
4
.
4
3
.
2
.
3
(US$ million, unless stated)
FY2019
FY2018
% Change
14,031
3,393
24%
29%
1,911
(237)
(226)
9.6%
15,294
3,963
26%
35%
2,692
239
166
14.3%
(8)
(14)
(29)
-
-
RETURN ON CAPITAL
EMPLOYED (ROCE) (%)
.
3
4
1
8
.
2
1
6
9
.
FY17
FY18
FY19
FY17
FY18
FY19
FY17
FY18
FY19
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 07
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Investment Case
Delivering returns and creating value
Our investment case is focused on delivering sustainable long term returns and
creating value for our stakeholder. Natural resources constitute an important
engine of growth for any economy and being India’s only diversified natural
resources company, we are very well placed to make a significant contribution
to the nation’s growth.
LARGE, LOW-COST AND DIVERSIFIED
ASSET BASE WITH AN ATTRACTIVE
COMMODITY MIX
Vedanta’s large-scale, diversified asset portfolio,
with attractive cost positions in many of our core
businesses, positions the Company well to deliver
strong margins and free cash flows through the
commodity cycle. Vedanta has an attractive
commodity mix, due to its focus on base metals and
oil – commodities with strong fundamentals and
leading demand growth.
This fiscal year, markets have seen an upturn in
the second half, driven by improved demand and
continuing supply side constraints, which has benefited
the commodities sector; in particular, Vedanta’s core
commodities including zinc, aluminium and oil & gas.
IDEALLY POSITIONED TO CAPITALISE
ON INDIA’S GROWTH POTENTIAL
India is Vedanta’s main market and one which has
huge growth potential since current per capita metal
consumption in India is significantly lower than the
global average.
India’s GDP is estimated to grow by 7.3% in 2019
and 7.5% in 2020. Urbanisation and industrialisation,
supported by government initiatives on infrastructure
and housing, continue to drive strong economic
growth and generate demand for natural resources.
India currently has a resources import bill of US$465
billion, which offers huge opportunities for a diversified
player such as Vedanta. The Indian government
has recently announced various policy measures to
support the metals, mining and oil sectors further
making India an attractive operational ground.
We are uniquely positioned to benefit from India’s
growth due to:
• A diversified portfolio of established operations in
India;
• A strong market position being India’s largest base
metals producer and largest private sector oil
producer; and
• An operating team with an extensive track record of
executing growth in India
DEMAND 2019–2030 CAGR
■ India Demand ■ Global Demand
%
6
7
.
%
3
7
.
%
8
2
.
%
4
.
1
r
e
p
p
o
C
i
i
m
u
n
m
u
A
l
%
3
6
.
%
0
6
.
%
2
5
.
%
7
4
.
%
5
.
1
%
7
.
1
d
a
e
L
c
n
Z
i
%
0
.
1
l
a
o
C
t
e
M
%
5
0
.
e
r
O
n
o
r
I
%
8
3
.
l
e
k
c
N
i
%
5
2
.
%
2
2
.
%
2
2
.
%
4
0
.
l
a
o
C
l
a
m
r
e
h
T
%
4
0
.
s
a
G
&
l
i
O
Source: Wood Mackenzie
Commodity Demand Potential 2019
ALUMINIUM
CONSUMPTION
(kg/capita)
COPPER
CONSUMPTION
(kg/capita)
ZINC
CONSUMPTION
(kg/capita)
OIL
CONSUMPTION
(boe/capita)
.
4
4
3
.
2
8
9
4
.
.
5
4
.
2
3
.
6
8
7
.
1
1
.
3
.
4
0
9
.
1
.
5
0
2
.
1
India
Global
China
India
Global
China
India
Global
China
India
Global
China
Source: Wood Mackenzie, IMF, IHS Markit, BMI, BP Energy Outlook 2019
Note: All commodities demand corresponds to primary demand
India's Growth Potential
GDP
(Nominal at $PPP)
$10.5tn
C A G R 9 . 0 %
$29.4tn
2018
2030
C A G R 7 . 9 %
$19,429
Per capita income
(Nominal at $PPP)
$7,759
Population
Urbanisation
2018
2030
C A G R 0 . 9 %
1.4bn
1.5bn
2018
2030
. 4 %
1
C A G R
34%
40%
2018
2030
Source: IHS Markit, United Nations World Urbanization Prospects: The 2018 Revision
08
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT
WELL-INVESTED ASSETS DRIVING CASH FLOW GROWTH
Growth Capex (US$ bn)
A significant proportion of our capital
investment programme has been completed,
and we are now ramping up production to
take advantage of our expanded capacity. We
have already started seeing the results of our
investments, with Zinc India and Aluminium
delivering record production in the past
year, and we expect our Zinc International
Gamsberg project to provide further impetus
to our Zinc business going forward. In the Oil
& Gas business, we have begun to implement
our growth projects with gross capex of
over US$ 3.2 billion, and this will enable us
to increase volumes in the near term. These
increases in production are leading to strong
cash flow generation.
OPERATIONAL EXCELLENCE AND TECHNOLOGY DRIVING EFFICIENCY
AND SUSTAINABILITY
We are consistently striving to improve
our operations, integrate our businesses
through the value chain and optimise our
performance through operational efficiencies
and innovative technological solutions.
We also employ these tools to ensure we
operate sustainably and we are focused
on delivering a positive impact for all our
stakeholders and, more broadly, society
as a whole.
STRONG FINANCIAL PROFILE
Our operational performance, coupled with
a strong focus on optimisation of capital
allocation, has helped strengthen Vedanta’s
financial profile. In FY2019, our operational
excellence, supported by the robust price
environment, has helped us to deliver:
• Revenues of US$14.0 billion and EBITDA of
US$3.4 billion
• Strong ROCE of 9.6%
• Refinancing and extension of our debt
maturities through proactive liability
management exercises
• Strong and robust FCF◊ of US$1.2 billion
• Cash equivalents, liquid investments and
structured investments of US$5.7 billion
1
.
1
.
8
0
7
.
0
2017
2018
2019
FCF Post Capex (US$ bn)
5
.
1
2
.
1
.
9
0
2017
2018
2019
ROCE (%)
%
3
4
1
.
%
8
.
2
1
%
6
9
.
2017
2018
2019
PROVEN TRACK RECORD
Our management team has a diverse and
extensive range of sector and global experience,
which ensures that operations run efficiently
and responsibly. We have taken a disciplined
approach to development, growing our
production steadily across our operations
with an ongoing focus on operational
efficiency and cost savings. Since 2003,
our assets have delivered an average of 15%
CAGR production growth.
Production Volumes (kt)
FY2017
FY2018
FY2019
1500
1000
500
0
Oil & Gas
Underground mine
Zinc Production
Open-cast mine
Zinc Production
Aluminium production
Jharsuguda
Aluminium production,
BALCO
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 09
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS CEO’s Statement
We Are...
Registering a steady sustainable performance
and setting a solid base for FY2020
I am pleased to table my first
report to all our shareholders and
other stakeholders for the year
ending 31 March 2019. It was a
year that saw the setting of new
production records across some
of our businesses, commissioning
of a new zinc mine, efficiencies to
mitigate cost pressures, growth
projects being on track, an
increase in our oil reserves and
mineral resources and reserves
and a healthy dividend to
shareholders.
10
10
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT What I’ve found since joining, is a company
with a strong purpose of giving back for
the greater good, a track record of
achievement, coupled with an equally
strong sense of selflessness. Vedanta has
always recognised that business and
people are interdependent. We regard
supporting our local communities,
respecting our environments and sharing
the collective fruits of our work as
imperatives for our social licence to
operate. This is an area where we recognise
we need to improve and communicate
better and these will receive added
attention during the forthcoming year.
As we look forward to the year ahead, our
three key businesses are well positioned. In
the case of our Zinc, Lead and Silver
business, we will see the benefit of
increased volumes and therefore lower
costs, augmented by our newly
commissioned mine in South Africa. In Oil
& Gas, we are India’s largest private
producer of crude, and rank with the
world’s lowest-cost producers with a
production, development and exploration
pipeline. In aluminium we offer India’s
largest production capacity, supported by
our own captive power generation and we
are increasingly integrating backwards for
our own alumina.
We continue to consolidate our position
as one of the largest diversified natural
resource businesses in the world,
positioned in commodities that have a
growing demand in the largest, most stable
and fastest growing democracies in the
world. We operate long-life, high-growth,
low-cost assets, and deliver consistent
returns through the cycle. This set of
strengths, together with our focused
growth strategy, excellent talent, hunger
for technology and modernisation, and an
anchor shareholder who is committed to
the long term, all combine to create a truly
inspirational company.
SAFETY & SUSTAINABILITY
A life lost at work is a life too many and
we are deeply saddened to report that
we recorded fourteen fatal accidents in
the Group.
Above: Our diverse workforce at Jharsuguda
Right: Facility at Lanjigarh
‘Zero harm’ is our non-negotiable safety
tenet across all our operations at Vedanta,
and we are determined to bring about a
clear and measurable improvement in our
safety record, and are ramping up a range
of actions to achieve this. These include
strengthening compliance and
accountability; instilling a new culture of
care in the field; and ensuring transparent
reporting of incidents, near-misses and
high impact potential incidents and
consequence management.
For FY2020, we have also enhanced safety
scorecards with the three focus areas of
‘Visible Felt Leadership’, managing safety
critical tasks and better management of
business partners. We have seen some
improvement in the fourth quarter ended
31 March 2019, with no fatal accidents
across the businesses, however, we also
recognise that ‘zero harm’ is a journey
and we continue to monitor this as a
high priority.
Our initiatives on water, energy and carbon
management progressed well during the
year. We recycled 92% of the high-volume-
low-effect-wastes such as fly ash, slag,
red-mud and jarosite. We had set ourselves
a target of reducing our greenhouse gas
intensity by 16% by FY2020, against the
baseline year of 2012. By the end of this
year, we were on track to achieving our
target and had reduced our GHG emission
intensity by 14.5%.
We have strengthened our efforts on
tailings dam management. We apply
stringent steps to comply with all local
environmental standards, ensuring that the
water contained in this waste is treated and
made safe before it can be discharged into
local drainage systems. We have worked
with independent industry experts to
provide long term monitoring and advice
"Our key strategic
priority is focusing on
ethics, governance
and our social
licence to operate
where we will
continue our journey
towards zero harm
by ensuring greater
levels of safety; an
even gentler impact
on our environments
and resources; and
even greater inroads
into delivering
healthcare,
education, skills and
quality of life where it
is needed in our
communities."
Srinivasan Venkatakrishnan
Chief Executive Officer
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS CEO’s Statement
Continued
on the safe design, construction and
operation of all our tailings facilities. I am
happy to share that these efforts are
resulting in further advances towards
making our operations sustainable. For
example, at Zinc India, instead of disposing
of tailings in land-hungry surface pits, we
have found a way to turn them into paste
and use them for backfilling of empty
underground voids. We have also
rehabilitated one retired tailing dam into a
haven of over 1.5 million trees, and another
into a vibrant football academy for India’s
most promising young talent.
INDIA’S GROWTH: WE STAND READY
I believe there is no more exciting economy
in the world than our own here in India. It is
a nation teeming with opportunity and
potential, as the country looks to
modernise, expand and accommodate the
rising aspirations of a growing population.
Indeed, in just a decade from now, India is
expected to be home to 1.5 billion people
and have an economy worth US$6 trillion.
This presents Vedanta, as India’s only
diversified natural resources group, with a
unique opportunity to provide the vital
commodities the country needs for
infrastructure development, asset-creation,
mobility, housing, consumer goods and
general consumption.
The demand potential for our metals
such as aluminium, zinc and steel,
therefore, is immense.
Companies such as Vedanta will also be
instrumental in addressing a major national
mineral deficit: India currently imports
around 80% of its oil and mineral needs.
We stand ready to supply the ‘home-
grown’ products that the nation requires.
POLICY AND REGULATION
Against this backdrop, we were naturally
pleased to see a renewed focus by the
government of India on the mining sector
as an engine of economic growth.
Its National Mineral Policy (NMP), launched
during the year, aims to increase mineral
production in India by 200% and to reduce
India’s trade deficit in minerals by 50% in
the next seven years. NMP introduces a
more effective and meaningful policy, with
more transparency and better regulation
enforcement. A pro-growth ambition
requires a pro-business environment, and
the NMP will encourage private sector
participation in exploration.
We have offered our suggestions to NITI
Aayog in its deliberations on a new pathway
for the regulatory framework for mining.
In a similar vein, we welcomed landmark
policy reforms in the Oil & Gas sector,
aimed at raising domestic output and
cutting imports, while also providing a
smooth transition to cleaner fuels.
In South Africa, the revised Mining Charter
III, announced by the Minister for Mineral
Resources, addressed the needs of the
country and provided very welcome
certainty to the sector, and we support the
efforts of the government in this regard. As
evidenced during the formal inauguration
of our Gamsberg mine by His Excellency,
Cyril Ramaphosa, the President of the
Republic, our project is in keeping with the
spirit of the Charter.
BUSINESS PERFORMANCE &
GROWTH OPPORTUNITIES
The year saw our three large businesses
Zinc, Aluminium and Oil & Gas – which
together represent 90% of the Group’s
EBITDA, achieve significant milestones
which give us a strong base for the
near-term targets we have set for
these businesses.
Zinc: We are pleased with the transition
Zinc India has made from open-cast to fully
underground mining, with the latter
increasing by 29% y-o-y. The increased
silver production at our Sindesur Kurd mine
has resulted in the business now being
ranked 9th in the elite club of top 10 silver
producers with a record production of
21.8 million ounces during the year, up
22% y-o-y.
We now look to build on that success in
FY2020 to achieve the mined metal design
capacity of 1.2 million tonnes and further
ramp up the silver production. We are
expecting these volume increases to
also translate to unit cost reductions in
the business.
The Company achieved a significant
milestone in December 2018, when our
flagship Gamsberg project in South Africa
shipped out its first parcel of concentrate. It
is now ramping up to its target MIC
capacity of 250,000 tonnes. This new-age
fully automated and digital mine will be a
catalyst for the region’s development and a
significant contributor to Vedanta’s
earnings over the next 9-12 months.
Certainly, in FY2019 we took a step towards
becoming the largest producer of the zinc
in the world.
Oil & Gas: We continue to make progress
on the various growth projects in the Oil &
Gas business. We now have 11
development drilling rigs deployed, drilled
99 wells and hooked up 33 wells in
Rajasthan during the year. We are aiming to
grow this production base using better well
reservoir management, enhanced recovery
technologies that we have already
successfully piloted, bringing on line more
new wells, augmenting our surface
infrastructure to appropriate levels and
adding further gas and off-shore
production. We are keeping a careful lid on
our lifting and discovery costs, which are
some of the most competitive globally.
We won 41 blocks under the government’s
new OALP and are excited by the potential
it offers to make Vedanta an even more
significant contributor to India’s domestic
oil & gas production. The discovery of oil &
gas in the two fields in the KG basin
enhances our position.
During the year, we also received an
extension of the Production Sharing
Contract for the Rajasthan block till 2030
subject to certain conditions. We have now
committed to a gross capex of US$3.2
billion and we are partnering with
international oil service providers to
achieve our objective.
Aluminium: Despite cost pressures seen in
the first half of FY2019, we are very
encouraged by the many structural
changes we have put in place in the
Aluminium business to reduce the overall
cost of production – increased Bauxite
sourcing reducing our dependence on
imported alumina, improved volumes from
our alumina refinery, better coal availability,
linkage and coal stock on hand and more
efficient logistics. The business exited the
year with coal linkage at 72% of its
consumption and indigenous bauxite
sourcing to address more than one-third of
our yearly requirement. With this and the
proposed ramp up of alumina refinery, I am
certain that our target of Aluminium COP
of US$1,500 per tonne is achievable in the
near term.
Steel: We are also pleased with the
acquisition of ESL, which we completed
in June 2018. The year has been
transformational for them with production
ramping up to 1.2 million tonnes for the
year and with an exit run rate of c. 1.5
million tonnes and EBITDA margins of
US$115 per tonne.
Copper Zambia: The business continues
to focus on process stabilisation. The
turnaround actions required are
understood and under way, and although
there is much to be done, it remains a
world-class asset with a 50-year mine life.
It remains an integral part of our vision for
the future. We are equally focused on
enhancing the margins by optimising our
cost through our cost programme
"NATSUNGE - Let us Preserve”
At KCM, in line with our commitment to
contribute towards the growth of the
economy and sustainability, we undertake
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT We are pleased to report a healthy resources and reserves base across our businesses
as follows:
• Expanding our reserves and
resource base
Focused exploration to augment our
long-life, low-cost assets by improving
our land positions, growing our reserves
and resource positions in our businesses
by more than offsetting depletion and
bringing on stream more discoveries.
• Continued track record of delivering
value adding growth
Continuing to build on the track record
of our three key businesses whereby
the project pipeline is strong and
projects are stress tested to deliver at
least 20%+ returns off conservative
price assumptions.
• Strict capital allocation and balance
sheet focus
As managers of the business, we will
follow strict capital allocation whilst
keeping the balance sheet in sharp
focus. Balance sheet is proactively
managed with businesses having to earn
their capital before spending.
• Delivering the best out of our assets
with the best teams and means
Our business CEOs will remain focused
on operational delivery and having
the right management and teams
in place to deliver. Asset planning,
execution, operational excellence,
cost control and reduction, productivity
enhancements, improving realisations,
risk mitigation, use of technology,
innovation and digitalisation will all help
us sweat our assets better to deliver
enhanced performance.
Together with our Chairman, the Board,
all our colleagues and business partners,
I thank all our loyal shareholders for
their continuing support and look
forward to delivering another year of
value adding growth.
Srinivasan Venkatakrishnan
Chief Executive Officer
Business
Zinc India
Reserves and Resources
403 million tonnes
Zinc International 434 million tonnes
Oil & Gas
1,195 mmboe gross proved and probable reserves and resources
Copper Zambia
509 million tonnes
to constructively engage with all key
stakeholders such as government, local
communities, suppliers, employees and
the shareholders in a respectful manner.
RESOURCES AND RESERVES
As a natural resource’s company, we are
clear that the greatest value adding growth
can come from our existing land positions.
We are therefore sharply focused on the
areas of exploration and conversion of
resources to reserves, to more than offset
depletion and create a long runway for our
assets.
PEOPLE
Good results are, of course, the product of
great people, and the energies and talents
of our 88,500+ employees across locations
truly came to the fore during the year.
During the year we were also pleased to
announce a number of new appointments
as we strengthened our leadership in the
business units. Ajay Kapur was appointed
as the CEO of our Aluminium and Power
business, Christopher Sheppard as the
CEO of KCM, Pankaj Malan as Deputy CEO
of ESL and Pankaj Kumar, CEO of Sterlite
Copper. Since the year-end, Ajay Dixit has
been appointed as the CEO of our Oil &
Gas business.
The new leadership team is excited to take
Vedanta forward on its journey to deliver
the best from its assets and create value
added growth. Importantly, it is well
supported by a deep bench-strength of
talent that will see the new leaders
emerge to fill the succession pipeline
for later years.
I also express my sincere thanks to
Mr. Kuldip Kaura for his valuable
contribution to Vedanta as interim CEO
and for a seamless handover.
OUTLOOK
Looking ahead to FY2020, we have in place
the building blocks to enhance our
performance in the three key businesses.
We are excited by the prospects ahead
which include a ramp up in zinc, lead and
silver production from Hindustan Zinc, the
benefit of a full year’s production from our
Gamsberg Zinc mine, increased
production from our Oil & Gas business as
the first phase of our projects come on
stream and embedding the structural
changes to our cost structure in our
Aluminium business while improving
volumes. For our Iron Ore business in Goa,
we will continue to engage with and
encourage the Central and State
Governments to resume production given
the benefits to all stakeholders. We regret
the tragic loss of thirteen lives in the
demonstrations in Tuticorin and we will
continue to engage with the government,
the relevant authorities, the courts and all
stakeholders to enable the safe and
supported restart of operations at the
copper smelter at Tuticorin.
In our markets, we expect base metals
prices to remain stable and to inch higher
to catch up with demand supply inventory
dynamics. The refined metal market for
aluminium and zinc remains in short supply
and hence we expect favourable
conditions. Also, as the only diversified
natural resources company in India, we
expect to benefit from economic
development in this region. The various
policy moves in India are encouraging.
The approval of the National Mineral Policy
(NMP), 2019 is an important milestone in
the liberalisation of the mines and minerals
sector in India. The new licensing policy for
awarding the oil blocks is also a positive
move to develop this sector.
OUR STRATEGIC FOCUS AREAS FOR
FY2020 WILL CONTINUE TO BE:
• Ethics, governance and our social
licence to operate
Here we will continue our journey
towards 'zero harm' by ensuring greater
levels of safety; an ever-gentler impact
on our environments and resources;
and even greater inroads into delivering
healthcare, education, skills and
quality of life where it is needed in
our communities.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Growing Responsibly
Aluminium
Strengthening the
business through structural
cost reduction measures
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INTEGRATED REPORTVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 INTEGRATED REPORT
MANAGEMENT REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
Vedanta is the largest aluminium producer
in India with a capacity of 2.3 million tonnes
per annum (mtpa) and holds a 37% market
share. It benefits from strategically located
large-scale assets in the states of Chhattisgarh
and Odisha, with integrated power from
captive power plants.
Since the first hot metal tapping in March 2008, the
aluminium smelting unit at Jharsuguda has come a long way
to establish itself as the world’s largest single-location smelter.
With an installed capacity of 1.75mtpa, backed by two
smelters – 0.5mtpa and 1.25mtpa (SEZ) – and two power
plants with a combined capacity of 3,615MW, it boasts a
run rate of over 1.3mtpa. BALCO operates through its
plant at Korba in Chhattisgarh with a smelter capacity of
0.57mtpa and power generation capacity of 2,010MW.
The state-of-the-art alumina refinery at Lanjigarh feeds the
aluminium smelters at Jharsuguda and BALCO and forms a
crucial link in the value chain. It is one of the world’s largest,
one-site integrated alumina refining complexes with a current
capacity of ~2mtpa that can be ramped up to 6mtpa.
The production capability of the smelter and refinery has
been significantly enhanced in the last few years. With the
ramp up of both smelters, aluminium production has more
than doubled from ~0.8 million tonnes in 2014 to ~1.96 million
tonnes in 2019. Alumina production has increased from ~0.9
million tonnes in FY2016 to 1.5 million tonnes in FY2019 due to
debottlenecking of the refinery operations.
With the boost in production capability, both raw material
security and backward integration take on the utmost
importance for stable operations at optimal cost. All the
assets have been configured to be fully integrated operations
– from bauxite ore reserves, secured coal and energy sources,
and captive alumina refinery and power plants.
37% MARKET SHARE
2.3mtpa
capacity
FY2019 was a transformational year in this direction. On the
alumina front, it was an exceptional year for Lanjigarh refinery
with the unit achieving its highest-ever production of 1.5 million
tonnes, 24% higher than FY2018. Production loss mapping
across various stages of the refinery and relentless focus on
plant maintenance helped to improve productivity significantly.
On the refinery feedstock, multiple bauxite sources were
reduced to three to four sustainable sources, selected due to
geological similarities, supplemented with the advent of a fresh
supply of locally sourced bauxite meeting around 1/3rd of our
requirement. With a strong national mineral policy focusing on
increased production to feed the ‘Make in India’ initiative, we
expect further growth in bauxite production and the auction of
bauxite blocks as per the MMDR Act 2015. This will ensure
sustainable refinery operations at the optimal cost structure.
The efforts on improvement in operational efficiency, coupled
with robust bauxite sourcing, resulted in a substantial reduction
in captive alumina cost from US$358 per tonne in Q2 FY2019 to
US$290 per tonne in Q4 FY2019.
Power is another key input in the Aluminium production
process. Significant strides have been made to improve the
coal security for our captive power plants. With our Chotia
mines operational and Tranche IV sourcing, our coal security
increased to 72% from 49% in the last two quarters.
With strong bauxite supply and coal linkages to back the
raw material needs, the focus will be on further improving
our operational and supply chain efficiencies, driving
profitability and growth in the business and achieving the goal
of US$1,500 per tonne for cost of production. These milestone
strides take Vedanta closer to fulfil its vision of being the largest
low-cost manufacturer of aluminium.
Main Picture: Aluminium smelter at BALCO
Inset: Employees at operational site, BALCO
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151515
Growing Responsibly
Electrosteel
Electrosteel Steels (ESL):
A turnaround success story
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INTEGRATED REPORTVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 INTEGRATED REPORT
MANAGEMENT REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
Vedanta has long used its experience to identify
the unfulfilled potential in other businesses.
Hindustan Zinc, BALCO and Cairn Oil & Gas are
all examples of enterprises that have achieved
exceptional growth since their acquisition by
Vedanta.
In June 2018, Vedanta acquired a 90% stake in ESL, a primary
producer of steel and downstream value-added products.
The business was acquired under the Insolvency and
Bankruptcy Code (IBC) 2016, in line with the Resolution Plan
approved by Honourable National Company Law Tribunal
(NCLT), Kolkata. The acquisition was made for a consideration
of c. US$0.8 billion, paid upfront for a 90% stake. Following
the deal, the company was delisted from the Indian Stock
Exchange and is now owned by Vedanta Limited through
Vedanta Star Limited.
ESL’s manufacturing facility is a greenfield integrated steel
plant located near Bokaro, Jharkhand, India, which has a
current capacity of 1.5mtpa and the potential to increase to
2.5mtpa. It consists primarily of two sinter plants, a coke oven,
two basic oxygen furnaces, a steel melting shop, a wire rod
mill, a bar mill, a power plant and a ductile iron pipe plant.
Prior to the acquisition, the production capacity for the
business was about 1mtpa, with around 22% of its output
comprised of primary products such as pig iron and billets.
This was mainly due to a sub-optimal use of assets, weak
liquidity and limited working capital that resulted in an
inadequate availability of resources.
Since June 2018, in the 10 months of Vedanta’s ownership in
FY2019, the business has seen consequential improvements
leading to a healthy financial position. There have been
significant gains in operational efficiencies, such as a
substantial reduction in the coke rate at blast furnaces 2 & 3 by
about 3% and 7%, respectively y-o-y; optimisation of the coal
mix and iron ore blending; and improved yields of the finishing
mill to 96.7% (from 95.9% in FY2018).
Initiatives on commercial excellence by leveraging Vedanta’s
strong market presence, as well as best practices using the
broader technical experience and expertise of the Group, have
yielded exceptional results. This has been well supplemented
by an internal cost optimisation drive and focus on value-
added products. Consistent and reliable execution of the
business strategy by encouraging partnership through
leadership further accelerated the turnaround.
With operations completely revamped, FY2019 has seen record
production levels. The business achieved a run rate of
c. 1.5mtpa in Q4 FY2019. The production ramp up and other
operational efficiencies have resulted in a record EBITDA
margin for the business, improving from US$53 per tonne in
FY2018 to US$122 per tonne in Q4 2019.
These achievements, underpinned by a strong emphasis on
safety practices, position ESL well to become a significant
player in the Indian steel sector.
POTENTIAL TO INCREASE TO
2.5mtpa
capacity
Main picture: ESL’s operating facility
Inset: DI pipes produced by ESL
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Growing Responsibly
Oil & Gas
Fuel for change:
Growing to meet India’s demand
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INTEGRATED REPORTVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 INTEGRATED REPORT
MANAGEMENT REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
An essential element in any nation’s prosperity is
its ability to create its own energy.
And yet, 80% of oil consumed in India is currently imported.
As one of the world’s fastest growing economies, this
dependence on imports needs to be reduced in order to
foster sustainable growth.
At Vedanta, we are passionate believers in India’s potential,
and in our position to help the nation achieve it. Indeed, our
vision is to contribute half of the total oil produced in India.
Over the next few years, we aim to increase production from
today’s 200kboepd to 300kboepd. This will lay the
foundations to achieve 500kboepd in the long term, with
reserves of three billion barrels of oil equivalent.
Main picture: Mangla Processing Terminal, Barmer
Inset: Employees at operational site, MPT, Barmer
Our targets are unashamedly ambitious, but we
have a robust road map and are focusing our
energies and resources on two fronts:
MAJOR CAPEX INVESTMENT
We intend to increase volumes from our prolific operating
blocks through gross capex investment of over US$3.2
billion, awarded on an integrated basis in partnership with
global oil field service companies. This includes investment
of US$2.8 billion in development projects to add reserves of
around 400 million barrels. These projects comprise a rich
portfolio of enhanced oil recovery, tight oil, tight gas and
facility upgrade activity. Execution has already started on the
ground, meaning we can look forward to a quantum leap in
volumes in the near term. In addition, we are allocating
exploration capex of US$400 million in the prolific Barmer
Basin and KG offshore. The target is to add over one billion
barrels of oil equivalent to our resource base.
SCALING UP BASIN EXPLORATION
We intend to increase significantly our exploration efforts
across the basins in India through participation in the OALP
and DSF (Discovered Small Fields) rounds, initiated by the
Government of India. The acquisition of 41 blocks in the
OALP bid has established Cairn as one of the largest private
acreage holders in the country, with a ten-fold jump in
acreage from ~ 5,000 to ~ 55,000 sq. km. These blocks have
prospective resource bases of ~1.4 – 4.2 billion boe. Over the
next 2-4 years, we have a work programme commitment of
US$550 million, comprising seismic acquisition and the
drilling of over 150 exploratory wells.
LONG TERM VISION TO ACHIEVE
500
kboepd
production
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Growing Responsibly
Copper
The Tuticorin smelter:
State-of-the-art and ready-to-serve
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INTEGRATED REPORTVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 The Tuticorin copper smelter, operated by
Vedanta’s Sterlite Copper business, is located in
Thoothukudi in the state of Tamil Nadu.
It ranks as one of the largest custom copper smelters in India
and is among the most prolific producers of copper rods in
the country. With a design capacity of 400,000 tonnes, the
business held a 33% market share of the country’s refined
copper demand of around 675,000 tonnes in FY2018. The
facilities include a custom smelter, a refinery, a phosphoric
acid plant, a sulphuric acid plant and a copper rod plant.
The plant is equipped with comprehensive air pollution
control measures and robust solid waste management
systems and facilities. It has also been able to claim ‘zero liquid
discharge’ since inception; all the effluent is treated and
recycled back into operations. The solid waste from effluent
treatment plants is disposed in secure landfill, designed in
accordance with Central Pollution Control Board guidelines.
The smelter’s water consumption is the second lowest in the
world at 6.0m^3/mt of cathode. With a 20% reduction in
specific water usage since FY2014, it has been recognised
over recent years for its excellence in water efficiency by
FICCI, UNESCO, CII and other organisations. Emissions of
sulphur dioxide are well below the prescribed standards and
are at par with several European and Japanese smelters. With
the continuous endeavour to conserve energy, the plant ranks
at No. 7 in energy intensity among global smelters.
DESIGN CAPACITY OF
400,000
tonnes
The business has spent over US$74.5 million on environmental
mitigation. In particular, flue gas desulphurisation units with
bag filters and modern technology-based reverse osmosis
plants and evaporators are among several state-of-the-art
environmental protection measures.
Since March 2018, the plant has been shut by order of the Tamil
Nadu State Government. The Company challenged the closure
order through an appeal before the National Green Tribunal
(NGT). Following the appeal, a three-member independent
committee, set up by the NGT, set aside an order for closure by
the Tamil Nadu Pollution Control Board. The NGT ruled that the
order for closure by the Tamil Nadu Government was 'non-
sustainable' and 'unjustified'. The matter is currently being
heard before the Madras High Court as per the directions of
the Supreme Court.
Reaffirming the commitment to the local people of
Thoothukudi, the Company has announced an INR 100-crore
investment in social infrastructure plans. The vision includes a
clean and green community with the planting of one million
trees, high-quality education delivered through a fine and
well-equipped school, a world-class hospital, a desalination
plant and youth development schemes.
The Company remains continuously engaged with the local
community and would like to prosper with them.
Main picture: Copper rods
Inset: Thoothukudi copper smelter
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Growing Responsibly
Zinc
HZL: Partnering the state
to manage its sewage
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INTEGRATED REPORTVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 INTEGRATED REPORT
MANAGEMENT REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
Hindustan Zinc, India’s largest integrated zinc-
lead-silver producer, is proud to be a corporate
citizen of Udaipur, which has been shortlisted as
one of India’s ‘Smart Cities’.
The Company has always maintained high environmental
standards, pioneering the adoption of clean, green
technology in running its operations. In particular, saving
water has been a special focus area.
In 2014, the Company commissioned a 20 million litre per day
(MLD) sewage treatment plant (STP) to ensure Udaipur’s lake
remained free of sewage inflow pollution. The plant, which
was the first of its kind to be built by an innovative public-
private partnership, also developed an alternative source of
potable water.
In June 2017, the plant’s success led to an agreement to build
a second STP project – with double the capacity at 40 MLD.
The development was greeted with widespread local approval
and today, 25 MLD of this extra capacity will be commissioned
by Q1 FY2020. Two further decentralised sewage treatment
plants, with a combined capacity of 15 MLD, will complete
the project.
The STP is a fully automatic plant and uses hydraulics to
minimise power consumption. The entire system is
environmentally friendly with no hazardous waste generated
during treatment. In total, the plant will treat 60 million of
Udaipur’s 70 million litres of daily sewage, conserving water
and taking crucial steps towards 'zero-discharge' into the
locality’s lakes.
STP TO TREAT
60 million
of Udaipur's 70 million litres of
daily sewage
Main picture: Dariba Smelting Complex at night
Inset: CSR Initiative at HZL
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Materiality Matrix
Identifying material concerns
Continuous engagement with our internal and external stakeholders enables us to identify the relevant issues for each group and to take
the temperature on the expectations they have of the Company. The views of our stakeholders serve as important input to our
management group, to help it identify the material issues for the Company.
The materiality matrix compiled from the results of this engagement is presented below:
Critical importance
High importance
Average importance
Low importance
Policies and actions to restrict
unethical business practices
Leadership development and
talent management
Public policy and advocacy
Local hiring and
content
Rights of indigenous peoples and
human rights
Disclosure on slavery and human
trafficking
Diversity and equal opportunity
Employee health, safety and
well-being
Transparency in reporting on
revenue and production figures
Broader economic benefit to host
country
Community engagement and
development initiatives
Labour rights and industrial
relations
Responsible supply chain
management
Ethics and integrity – compliance
with Code of Conduct
Community health and safety
Environmental management
(water management, waste
management, air emissions and
quality control, biodiversity
management, environmental
incidents management)
Energy management and climate
change
Mine and site closure plans
Employee retention
Tax transparency and reporting
Above: Community health initiative at Vedanta
Right: Building talent through teamwork at BALCO
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT
During the year,
we continued our
efforts to improve
our systems and their
performance in all the
key issues identified
in the matrix through
our Sustainability
Framework.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Our Six Capitals and Stakeholder Value Creation
Growing responsibly
The capitals we draw upon
to operate and create
sustainable value
26
INTEGRATED REPORTVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Left: Building a culture of best practices at HZL
OUR SIX CAPITALS
CREATING VALUE FOR ALL OUR
STAKEHOLDERS
FINANCIAL CAPITAL
INTELLECTUAL CAPITAL
We are focused on optimising capital
allocation and maintaining a strong
balance sheet while generating strong free
cash flows. We also review all investments,
taking into account the Group’s financial
resources with a view to maximising returns
to shareholders.
As a relatively young company, we are keen
to embrace technological developments
and encourage innovation. We encourage
our people to nurture and implement
innovative ideas which will lead to
operational improvements across
our operations.
NATURAL CAPITAL
India and Africa have favourable geology
and mineral potential, and these regions
provide us with world-class mining assets
and extensive reserves and resources.
Additionally, operating our mines requires
a range of resources, including water and
energy which we aim to use prudently
and sustainably.
SOCIAL AND RELATIONSHIP CAPITAL
We aim to forge strong partnerships by
engaging with our key stakeholders,
including shareholders and lenders,
suppliers and contractors, employees,
governments, communities and civil
society. These relationships help maintain
and strengthen our licence to operate.
HUMAN CAPITAL
MANUFACTURED CAPITAL
We invest in best-in-class equipment
and machinery to ensure we operate
as efficiently and safely as possible,
both at our current operations and in
our expansion projects. This also
supports our strong and sustainable
cash flow generation.
We have employees drawn from across
the world, and their diverse skills and
experience contribute across our
operations. The mining and plant
operations require specialised skills for
which we employ qualified technical,
engineering and geology experts. In
addition, we create a culture which
nurtures safety, innovation, creativity
and diversity, which helps us to meet
our business goals while also enabling
our employees to grow personally
and professionally.
For shareholders
A return on investment
For employees
A safe and inclusive work
environment
For communities
Investment in health, education
and local businesses
For governments
Generating economic value
For suppliers, customers
and service providers
Building long term partnerships
For civil society
Delivering sustainable growth
Further Information on our stakeholders
See pages 47-49
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
2727
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Our Business Model
Value creation model
Our business model provides an overview of how Vedanta employs the six capitals
to create long -term, sustainable value for its key stakeholders. It is based on the
International Integrated Reporting Council’s Integrated Reporting framework
INPUTS
Financial Capital
Net worth
US$5.3 billion
Gross debt
US$16.0 billion
Capex ◊
US$1.1 billion
Cash and cash equivalents
US$5.7 billion
Natural Capital
R&R - Zinc India
403 million tonnes,
containing 34.6 million tonnes
of zinc-lead metal and 965
million ounces of silver
R&R - Zinc International
R&R - O&G
434 million tonnes,
containing 24.4 million tonnes
of zinc-lead metal
1,195 mmboe gross
proved and probable reserves
Energy consumption:
554 million GJ
Water consumed
278.6 million m3
Coal used:
32 million tonnes
Human and Intellectual Capital
No. of employees, including
contractors
HSE employees including
contractors
88,979
Technology used
O&G
• World’s largest Enhanced
Oil Recovery polymer flood
project in Mangala Field
• New-age technology of
High Density Multi Stage
Fracturing in horizontal
transverse wells – first
in India
1,322
Zinc International
•
'Smart Ore' a digital
concept providing end
to end solution of mine
performance and mine
condition
Safety training (hrs)
1.46 million
No. of geologists, including
contractors
224
Zinc India
• Autonomous machines for
24x7 mining at SK mine &
Remote controlled LHD for
ore hauling
Aluminium
• Parameters defined for
Category 'A' pots based
on power consumption,
Fe content
Social and Relationship Capital
Community investment
US$45 million
Rated by two global rating
agencies – Moodys and S&P
Strong network of
25
global and domestic
relationship banks
Manufactured Capital
PP&E
US$17.7 billion
• Expansion of smelting/
mining capacities in Zinc
India and Zinc International
• Debottlenecking of
smelters at Zinc and
Alumina refinery
• Oil & gas projects in
progress to increase
production volumes
28
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT
OUTPUTS
Financial Capital
Turnover
US$14.0 billion
EBITDA
US$3.4 billion
Adjusted EBITDA margin◊
29%
Natural Capital
Water recycled
24%
Water savings
3 million m3
High-volume-low-effect
Waste recycled %
92%
ROCE
9.6%
FCF post capex◊
US$1.2 billion
GHG emitted
58.6 million tCO2e
Fly ash utilisation rate
110%
Human and Intellectual Capital
Total remuneration wages &
incentives paid
US$576 million
Diversity ratio
10.36%
LTIFR
Attrition rate
5.86%
0.47
per million man hours
worked
Social and Relationship Capital
Dividends royalty and
taxes paid to governments
c. US$6.2 billion
No. of people reached by
our CSR programmes
3.1 million
Youth provided with
vocational skills to find
employment
3,600+
No. of Nand Ghars
(women-child welfare
centres)operational
502
Manufactured Capital
Record production at
Aluminium, ESL business
and Zinc India underground
mines
Production target for three
main businesses
Zinc India
Zinc
c. 1.0mtpa
Silver
750-800 tonnes
Zinc International
Scorpion and BMM
>170kt
Gamsberg
180-200kt
Oil & Gas
Gross volume
200-220kboepd
Aluminium
Alumina
1.7-1.8mtpa
Aluminium
1.9-1.95mtpa
WHAT WE DO
We operate across the mining value chain
focusing on low-life and low-cost assets in India
and Africa
Explore
We invest selectively in exploration
and appraisal to extend mine and
reservoir life.
Develop
We develop world-class assets, using
the latest technology to optimise
productivity.
Extract
We operate low-cost mines and oil
fields, with a clear focus on safety and
efficiency.
Process
We focus on operational excellence and
high asset utilisation to deliver top
quartile cost performance and strong
cash flow.
Market
We supply our commodities to customers
in a wide range of industry sectors from
automotive to construction, from energy
to consumer goods.
Restore
We manage our long-life assets as
effectively as possible and return them
to a natural state at the end of their
useful life.
Strategic framework
See pages 30-33
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
29
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Strategic Framework and Focus Areas for Short and Long Term
Framing our strategy while addressing the material concerns of our stakeholders
Strategic priorities
FY2019 update
Objectives for FY2020
Continued focus on
world-class ESG performance
Description: We operate as a
responsible business, focusing on
achieving ‘zero harm, zero discharge
& zero wastage’, and so minimising
our environmental impact. We
promote social inclusion across our
operations to promote inclusive
growth. We put management systems
and processes in place to ensure our
operations create sustainable value
for all our stakeholders.
• 14 fatalities occurred in the fiscal year
• Average score of 61% achieved in six safety performance standards
• LTIFR reported at 0.47
• Achieved water savings of 3 million cubic metres
• Achieved c. 14.5% reduction in GHG intensity over baseline of 2012
• Achieved energy saving of 1.6 million GJ
• Audits completed on our tailing management practices; recommendations under
consideration
• Completed baseline and social impact assessments in all businesses
• ~110% of the generated fly ash is being utilised
• 358 Nand Ghars constructed this year, taking the total to 502
• 100% of new hires trained on Code of Conduct training
• On gender diversity, 12.5% of Vedanta board is female
• Focus on right management in place in each SBU with 41 SBUs in place, each is led by
SBU president. SBU Management-in-place is regularly reviewed by Group Chairman and
Group ExCo
KPIs
• LTIFR
• CSR footprint
• Gender diversity
Risks
(HSE)
• Health, safety and environment
• Tailings dam stability
• Managing relationship with
stakeholders
• Regulatory and legal risk
Augment our Reserves &
Resources (R&R) base
Description: We look at ways to
expand our R&R base through
targeted and disciplined exploration
programmes. Our exploration teams
aim to discover mineral and oil
deposits in a safe and responsible
way, to replenish the resources that
support our future growth.
Delivering on growth
opportunities
Description: We are focused on
growing our operations organically by
developing brownfield opportunities
in our existing portfolio. Our large
well diversified and long-life asset
portfolio offers us attractive growth
opportunities, which are evaluated
based on our return criteria for long-
term value enhancement of the
Company.
Zinc India
• During the year, gross additions of 5.4 million tonnes were made to Reserve & Resource
(R&R), prior to depletion of 13.8 million tonnes
• O&G: start exploration in 41 blocks awarded through first round
• Total 2P+2C Reserves &
• Health, safety and environment
auctions under OALP
Resources in O&G
(HSE)
• O&G: further appraisal at KG Basin to establish its size and
• Total R&R in Zinc India & ZI
• Discovery risk
• Combined R&R were estimated to be 403 million tonnes, containing 34.6 million tonnes
commerciality
• Regulatory and legal risk
of zinc-lead metal and 965 million ounces of silver
• Overall mine life continues to be more than 25 years
Zinc International
• Combined mineral resources and ore reserves estimated at 434 million tonnes,
containing 24.4 million tonnes of metal
Oil & Gas
• PSC extension (subject to conditions) received in Rajasthan taking our probable reserve
base (2P reserves) to 567 mmboe
• Awarded integrated contracts for exploration in the prolific Barmer Basin, Ravva and KG
offshore with a target to add over 1 billion barrels of oil equivalent to our resource base
• Announced gas and oil discovery in the first and second exploratory well in KG Basin in
the east coast of India
• Acquired 41 blocks in OALP Round I bid spread over an acreage of c. 50,000 sq. km
with a prospective resources base of ~1.4 – 4.2 bn boe, establishing Vedanta as one of
the largest private acreage holders in the country
Copper Zambia
• Increased mineral resource by 4.6Mt at Luano deposit
• Established first digital model of the Nampundwe pyrite deposit
Zinc India
• Ramp up of underground mines delivered mined metal production at 936kt, 29% higher
y-o-y and offsetting the closure of open-cast operations last year
• The announced mining projects are nearing completion and expected to reach 1.2
million MT per annum of mined metal capacity in FY2020
Zinc International
• Achieved the milestone of Gamsberg zinc project commissioning; despatched first
shipment in December 2018
• 41mt rock moved during the year, including pre-stripping and healthy stockpile of 1.0mt
built for smooth feed to plant
Oil & Gas
• Integrated contracts have been awarded to global oilfield service providers such as
Halliburton, Schlumberger, Petrofac and GE-Baker Hughes, to be executed in a span
ranging from one to three years to achieve a near-term target of 300kboepd
• Gas production ramp up through early production facility commenced; peak rate of 90
mmscfd expected in Q1 FY2020
• Revenue-sharing contracts for 41 exploration blocks awarded through OALP 1, and two
discovered small satellite fields secured in DSF (Discovered Small Fields) round-II
ESL
• Completed the acquisition of ESL to further our plans on iron ore business
Copper Zambia
• Initaited projects for Cobalt/Copper separation, Heap Leach, Elevated Temperature
Leach Phase-II, Permanent Cathode and New Refinery at Nchanga
30
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
• Achieve score >75% in ten safety performance standards
• Zero fatal accidents and an LTIFR of 0.30
• Achieve water saving of 3.5 million cubic metres
• Achieve fly ash utilisation of 80%
• Reduce our GHG emissions intensity by 16% from a 2012 baseline
by 2020
• Achieve energy savings of 1.95 million GJ
• Third-party review of tailings/ash dyke management system and
development of site specific improvement plan (India operations)
• Ensure alignment of all BU plans with issues identified during
baseline surveys
• 1,200 Nand Ghars to be constructed in FY2020
• Roll out of employee engagement platform across the Group
• A standard online community grievance record/redressal software
• Continue to focus on Code of Conduct training for all professional
(NIVARAN) across the Group
employees, including new hires
• Achieve 33% female representation at Vedanta Board-level by 2020.
• Diversity % improvement in our campus hiring programme by 5%
• Ensuring right ExCo & succession for each business
• On O&G: high ranked prospects are being taken up for drilling of
wells across our assets
• Participate and fulfil the government’s vision of tripling the
mineral sector output over seven years as announced under
New Mineral Policy
• On metals: continue to build R&R base and generate new green field
targets for our commodities/metals
• Revenue
• ROCE
• FCF post-capex◊
• Growth capex◊
• Major project delivery
• Cairn-related challenges
• Regulatory and legal risk
• Ramp up underground mines to 1.2 million tonnes MIC per annum
• Planning for the next phase of expansion from 1.2 to 1.35mtpa
mined metal capacity announced in April 2018 is underway
Zinc India
design capacity
Zinc International
• Ramp up Phase-I production in H1 of FY2020
• Carry out a project study for Swartberg Phase-II and Gamsberg
Phase-II to extend the life of the Black Mountain complex
• Complete the feasibility study for an integrated smelter-refinery with
250ktpa metal production
Oil & Gas
• Evaluate further opportunities to expand the exploration portfolio
through OALP and other opportunities
• Execute growth projects within schedule and cost
Copper Zambia
• Focus would be on capital ranking of the projects and early
execution for long term value creation
INTEGRATED REPORT Strategic priorities
FY2019 update
Objectives for FY2020
KPIs
Risks
Continued focus on
world-class ESG performance
• 14 fatalities occurred in the fiscal year
• Average score of 61% achieved in six safety performance standards
Description: We operate as a
responsible business, focusing on
achieving ‘zero harm, zero discharge
& zero wastage’, and so minimising
our environmental impact. We
promote social inclusion across our
operations to promote inclusive
growth. We put management systems
and processes in place to ensure our
operations create sustainable value
for all our stakeholders.
• LTIFR reported at 0.47
• Achieved water savings of 3 million cubic metres
• Achieved c. 14.5% reduction in GHG intensity over baseline of 2012
• Achieved energy saving of 1.6 million GJ
• Audits completed on our tailing management practices; recommendations under
consideration
• Completed baseline and social impact assessments in all businesses
• ~110% of the generated fly ash is being utilised
• 358 Nand Ghars constructed this year, taking the total to 502
• 100% of new hires trained on Code of Conduct training
• On gender diversity, 12.5% of Vedanta board is female
• Focus on right management in place in each SBU with 41 SBUs in place, each is led by
SBU president. SBU Management-in-place is regularly reviewed by Group Chairman and
Group ExCo
• Achieve score >75% in ten safety performance standards
• Zero fatal accidents and an LTIFR of 0.30
• Achieve water saving of 3.5 million cubic metres
• Achieve fly ash utilisation of 80%
• Reduce our GHG emissions intensity by 16% from a 2012 baseline
by 2020
• Achieve energy savings of 1.95 million GJ
• Third-party review of tailings/ash dyke management system and
development of site specific improvement plan (India operations)
• Ensure alignment of all BU plans with issues identified during
baseline surveys
• 1,200 Nand Ghars to be constructed in FY2020
• Roll out of employee engagement platform across the Group
• A standard online community grievance record/redressal software
(NIVARAN) across the Group
• Continue to focus on Code of Conduct training for all professional
employees, including new hires
• Achieve 33% female representation at Vedanta Board-level by 2020.
• Diversity % improvement in our campus hiring programme by 5%
• Ensuring right ExCo & succession for each business
• LTIFR
• CSR footprint
• Gender diversity
• Health, safety and environment
(HSE)
• Tailings dam stability
• Managing relationship with
stakeholders
• Regulatory and legal risk
Augment our Reserves &
Resources (R&R) base
Zinc India
• During the year, gross additions of 5.4 million tonnes were made to Reserve & Resource
auctions under OALP
(R&R), prior to depletion of 13.8 million tonnes
• O&G: further appraisal at KG Basin to establish its size and
• Combined R&R were estimated to be 403 million tonnes, containing 34.6 million tonnes
commerciality
Resources in O&G
• Total R&R in Zinc India & ZI
(HSE)
• Discovery risk
• Regulatory and legal risk
• O&G: start exploration in 41 blocks awarded through first round
• Total 2P+2C Reserves &
• Health, safety and environment
• On O&G: high ranked prospects are being taken up for drilling of
wells across our assets
• Participate and fulfil the government’s vision of tripling the
mineral sector output over seven years as announced under
New Mineral Policy
• On metals: continue to build R&R base and generate new green field
targets for our commodities/metals
• Revenue
• ROCE
• FCF post-capex◊
• Growth capex◊
• Major project delivery
• Cairn-related challenges
• Regulatory and legal risk
Zinc India
• Ramp up underground mines to 1.2 million tonnes MIC per annum
design capacity
• Planning for the next phase of expansion from 1.2 to 1.35mtpa
mined metal capacity announced in April 2018 is underway
Zinc International
• Ramp up Phase-I production in H1 of FY2020
• Carry out a project study for Swartberg Phase-II and Gamsberg
Phase-II to extend the life of the Black Mountain complex
• Complete the feasibility study for an integrated smelter-refinery with
250ktpa metal production
Oil & Gas
• Evaluate further opportunities to expand the exploration portfolio
through OALP and other opportunities
• Execute growth projects within schedule and cost
Copper Zambia
• Focus would be on capital ranking of the projects and early
execution for long term value creation
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
31
Description: We look at ways to
expand our R&R base through
targeted and disciplined exploration
programmes. Our exploration teams
aim to discover mineral and oil
deposits in a safe and responsible
way, to replenish the resources that
support our future growth.
Delivering on growth
opportunities
Zinc India
Description: We are focused on
growing our operations organically by
developing brownfield opportunities
in our existing portfolio. Our large
well diversified and long-life asset
portfolio offers us attractive growth
opportunities, which are evaluated
based on our return criteria for long-
term value enhancement of the
Company.
of zinc-lead metal and 965 million ounces of silver
• Overall mine life continues to be more than 25 years
• Combined mineral resources and ore reserves estimated at 434 million tonnes,
containing 24.4 million tonnes of metal
Zinc International
Oil & Gas
• PSC extension (subject to conditions) received in Rajasthan taking our probable reserve
base (2P reserves) to 567 mmboe
• Awarded integrated contracts for exploration in the prolific Barmer Basin, Ravva and KG
offshore with a target to add over 1 billion barrels of oil equivalent to our resource base
• Announced gas and oil discovery in the first and second exploratory well in KG Basin in
the east coast of India
• Acquired 41 blocks in OALP Round I bid spread over an acreage of c. 50,000 sq. km
with a prospective resources base of ~1.4 – 4.2 bn boe, establishing Vedanta as one of
the largest private acreage holders in the country
Copper Zambia
• Increased mineral resource by 4.6Mt at Luano deposit
• Established first digital model of the Nampundwe pyrite deposit
• Ramp up of underground mines delivered mined metal production at 936kt, 29% higher
y-o-y and offsetting the closure of open-cast operations last year
• The announced mining projects are nearing completion and expected to reach 1.2
million MT per annum of mined metal capacity in FY2020
• Achieved the milestone of Gamsberg zinc project commissioning; despatched first
• 41mt rock moved during the year, including pre-stripping and healthy stockpile of 1.0mt
Zinc International
shipment in December 2018
built for smooth feed to plant
Oil & Gas
• Integrated contracts have been awarded to global oilfield service providers such as
Halliburton, Schlumberger, Petrofac and GE-Baker Hughes, to be executed in a span
ranging from one to three years to achieve a near-term target of 300kboepd
• Gas production ramp up through early production facility commenced; peak rate of 90
mmscfd expected in Q1 FY2020
• Revenue-sharing contracts for 41 exploration blocks awarded through OALP 1, and two
discovered small satellite fields secured in DSF (Discovered Small Fields) round-II
• Completed the acquisition of ESL to further our plans on iron ore business
ESL
Copper Zambia
• Initaited projects for Cobalt/Copper separation, Heap Leach, Elevated Temperature
Leach Phase-II, Permanent Cathode and New Refinery at Nchanga
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Strategic Framework
Continued
Strategic priorities
FY2019 update
Objectives for FY2020
KPIs
Risks
Optimise capital allocation
and maintain strong
balance sheet
Description: Our focus is on
generating strong business cash
flows and maintaining strict capital
discipline in investing in profitable high
IRR projects. Our aim is to maintain a
strong balance sheet through proactive
liability management. We also review
all investments (organic & acquisitions)
based on our strict capital allocation
framework, with a view to maximising
returns for shareholders.
Operational excellence
Description: We strive for all-round
operational excellence to achieve
benchmark performance across
our business by debottlenecking
our assets to enhance production,
supported by improved digital and
technology solutions. Our efforts are
focused on enhancing profitability by
optimising our cost and improving
realisation through the right marketing
strategies.
• FCF improvement from US$0.9 billion to US$1.2 billion, up 29% y-o-y
• Net debt◊ (Refer note 22(b) of the financial statements) increased from US$9.6 billion to
• Generate healthy free cash flow from our operations
• Disciplined capex across projects to generate healthy ROCE
US$10.3 billion, primarily due to Electrosteel acquisition
• ND/EBITDA at 3.0x on a consolidated basis
• Improve credit ratings
• Reduce working capital
• FCF post-capex◊
• ND◊/EBITDA (Consol)
• EPS (before exceptional
items)
• Interest cover ratio
• Dividend
• Access to capital
• Fluctuation in commodity
prices (including oil) and
currency exchange rates
• Regulatory and legal risk
• Tax related matters
Zinc India
• Achieve significantly higher production for both mined and finished
• Adj. EBITDA margin
• EBITDA
• FCF post-capex◊
• ROCE◊
• Fluctuation in commodity
prices (including oil) and
currency exchange rates
• Health, safety and environment
(HSE)
• Tailings dam stability
• Loss of assets or profit due to
natural calamities
metal at c. 1.0 million tonnes
• Ramp up silver production to 750-800 tonnes
• Achieve cost of production for zinc as < 1,000/mt
• Debottleneck and expand smelting capacity to maintain mines/
smelter synergies at higher levels of production
Zinc International
• Production of Scorpion @ 110kt & BMM at 60kt
• Gamsberg production to ramp up to 180-200kt
• For FY2020, with the surge in drilling activities and well hook up,
production volumes to be 200-220 kboepd
• Control opex at c. $7.5/boe
Oil & Gas
Aluminium
• Production at Lanjigarh refinery of 1.7-1.8 million tonnes, with
aluminium production at smelters remaining stable at 1.9-1.95mtpa
• Reduce the aluminium COP, with a target of $1725-1775/T
• Improve coal linkage security further and ensure better
materialisation and continued production at our Chotia mines
• Enhance our raw material security of bauxite & alumina
Copper & Iron ore
of operations
• Engage with government and relevant authorities to enable restart
• Successful implementation of vendor partnering model, increase
production of underground mine at Konkola with an additional,
deeper horizontal development, refocus and strengthen industrial
architecture & infrastructure to delivery stability in short term and
growth in long term
Steel
• Achieve full-year production to rated capacity of c. 1.5mtpa
Zinc India
• Underground mined metal production at 936kt, up 29%; total mined metal production
down 1%, despite closure of open-cast operations
• Record refined lead metal production at 198kt, up 18%
• Record silver production at 21.8 million ounces, up 22%
• Underground crusher and production shaft were commissioned for 3.75mtpa at
Sindesar Khurd
• New mills commissioned at SK and Zawar taking milling capacity to 6.2mtpa and
4.7mtpa, respectively
• At RA mines, the second paste fill plant was commissioned ahead of schedule during Q4
Zinc International
• Pre-stripping of Pit 112 completed as per mine plan
Oil & Gas
• 11 development drilling rigs as on March 2019, 99 wells drilled and 33 wells hooked up in
Rajasthan during the year
• Production from the offshore assets stood at a combined 32,881boepd, higher by
19% y-o-y, supported by gains from the Cambay infill campaign
• Gas production increased by 37% to 63.5 Mmscfd due to debottlenecking of
existing facilities
• Signed an agreement with GSPL India Gasnet Limited for constructing eighteen-inches
diameter pipeline connecting Raageshwari Gas Terminal to Pali and thereon connecting
Mehsana to Bhatinda to Palanpur
• 4 wells were fracked in RDG field, including the hi-way frack technique enabling
connection to more reservoirs, leading to improved production and recovery of the field
• Proactive geo-steering with the state-of-art LWD tools having advanced bed boundary
detection capabilities was used. Successfully placed 370m lateral section in FM3 clean
oil zone, which resulted in well going online with production ~ 10kboepd
• Volume enhancement through e-line campaign with innovative paraphernalia of
advanced robotic tools in Ravva
• Completed well preparations works for the CB/OS-2 drilling campaign with rigless
intervention methods for the side-track wells leading to significant saving of rig time and
lower cost
Aluminium
• Record aluminium production at the smelters at 1,959kt, up 17% y-o-y
• Record alumina production from Lanjigarh refinery at 1,501kt, up 24% y-o-y due to
debottlenecking of the refinery
• Locally sourced bauxite of ~1.3 MT during the year; alumina CoP flat y-o-y at US$322/T
despite higher caustic and imported bauxite cost
• 3.2mtpa of coal linkages added during FY2019 from Tranche IV auctions, taking our coal
security to 72%
• Significant improvement in coal materialisation in Q4 FY2019, resulting in no power
imports from the grid in last 4 months of FY2019
• FY2019 exit CoP for aluminium was less than $1,800 per tonne
Steel
• Record steel production at 1.2mtpa, up 17% y-o-y, as a result of improved plant
availability and optimum utilisation. Exited with a run rate of c. 1.5mtpa
• FY2019 EBITDA margin of 19% was among the sector leaders in India
Copper and Iron Ore
• Karnataka production at 4.1 million tonnes, up 89% y-o-y
• Continued engagement with the government and local communities to restart
operations at Goa and Tuticorin
• Copper Zambia: Focussed approach on industrial architecture, process stabilisation
and growth projects to drive all of KCM’s strategic business priorities with clear
understanding of turnaround actions. Cost programme 'NATSUNGE - Let us Preserve'
underway to enhance the margins by optimising the cost
32
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT Strategic priorities
FY2019 update
Objectives for FY2020
KPIs
Risks
• FCF improvement from US$0.9 billion to US$1.2 billion, up 29% y-o-y
• Net debt◊ (Refer note 22(b) of the financial statements) increased from US$9.6 billion to
US$10.3 billion, primarily due to Electrosteel acquisition
• ND/EBITDA at 3.0x on a consolidated basis
• Generate healthy free cash flow from our operations
• Disciplined capex across projects to generate healthy ROCE
• Improve credit ratings
• Reduce working capital
• FCF post-capex◊
• ND◊/EBITDA (Consol)
• EPS (before exceptional
items)
• Interest cover ratio
• Dividend
• Access to capital
• Fluctuation in commodity
prices (including oil) and
currency exchange rates
• Regulatory and legal risk
• Tax related matters
• EBITDA
• Adj. EBITDA margin
• FCF post-capex◊
• ROCE◊
• Fluctuation in commodity
prices (including oil) and
currency exchange rates
• Health, safety and environment
(HSE)
• Tailings dam stability
• Loss of assets or profit due to
natural calamities
Zinc India
• Achieve significantly higher production for both mined and finished
metal at c. 1.0 million tonnes
• Ramp up silver production to 750-800 tonnes
• Achieve cost of production for zinc as < 1,000/mt
• Debottleneck and expand smelting capacity to maintain mines/
smelter synergies at higher levels of production
Zinc International
• Production of Scorpion @ 110kt & BMM at 60kt
• Gamsberg production to ramp up to 180-200kt
Oil & Gas
• For FY2020, with the surge in drilling activities and well hook up,
production volumes to be 200-220 kboepd
• Control opex at c. $7.5/boe
Aluminium
• Production at Lanjigarh refinery of 1.7-1.8 million tonnes, with
aluminium production at smelters remaining stable at 1.9-1.95mtpa
• Reduce the aluminium COP, with a target of $1725-1775/T
• Improve coal linkage security further and ensure better
materialisation and continued production at our Chotia mines
• Enhance our raw material security of bauxite & alumina
Copper & Iron ore
• Engage with government and relevant authorities to enable restart
of operations
• Successful implementation of vendor partnering model, increase
production of underground mine at Konkola with an additional,
deeper horizontal development, refocus and strengthen industrial
architecture & infrastructure to delivery stability in short term and
growth in long term
Steel
• Achieve full-year production to rated capacity of c. 1.5mtpa
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
33
Optimise capital allocation
and maintain strong
balance sheet
Description: Our focus is on
generating strong business cash
flows and maintaining strict capital
discipline in investing in profitable high
IRR projects. Our aim is to maintain a
strong balance sheet through proactive
liability management. We also review
all investments (organic & acquisitions)
based on our strict capital allocation
framework, with a view to maximising
returns for shareholders.
Description: We strive for all-round
operational excellence to achieve
benchmark performance across
our business by debottlenecking
our assets to enhance production,
supported by improved digital and
technology solutions. Our efforts are
focused on enhancing profitability by
optimising our cost and improving
realisation through the right marketing
strategies.
Operational excellence
Zinc India
• Underground mined metal production at 936kt, up 29%; total mined metal production
down 1%, despite closure of open-cast operations
• Record refined lead metal production at 198kt, up 18%
• Record silver production at 21.8 million ounces, up 22%
• Underground crusher and production shaft were commissioned for 3.75mtpa at
• New mills commissioned at SK and Zawar taking milling capacity to 6.2mtpa and
Sindesar Khurd
4.7mtpa, respectively
• At RA mines, the second paste fill plant was commissioned ahead of schedule during Q4
Zinc International
• Pre-stripping of Pit 112 completed as per mine plan
Oil & Gas
Rajasthan during the year
• 11 development drilling rigs as on March 2019, 99 wells drilled and 33 wells hooked up in
• Production from the offshore assets stood at a combined 32,881boepd, higher by
19% y-o-y, supported by gains from the Cambay infill campaign
• Gas production increased by 37% to 63.5 Mmscfd due to debottlenecking of
existing facilities
• Signed an agreement with GSPL India Gasnet Limited for constructing eighteen-inches
diameter pipeline connecting Raageshwari Gas Terminal to Pali and thereon connecting
Mehsana to Bhatinda to Palanpur
• 4 wells were fracked in RDG field, including the hi-way frack technique enabling
connection to more reservoirs, leading to improved production and recovery of the field
• Proactive geo-steering with the state-of-art LWD tools having advanced bed boundary
detection capabilities was used. Successfully placed 370m lateral section in FM3 clean
oil zone, which resulted in well going online with production ~ 10kboepd
• Volume enhancement through e-line campaign with innovative paraphernalia of
advanced robotic tools in Ravva
• Completed well preparations works for the CB/OS-2 drilling campaign with rigless
intervention methods for the side-track wells leading to significant saving of rig time and
lower cost
Aluminium
• Record aluminium production at the smelters at 1,959kt, up 17% y-o-y
• Record alumina production from Lanjigarh refinery at 1,501kt, up 24% y-o-y due to
debottlenecking of the refinery
• Locally sourced bauxite of ~1.3 MT during the year; alumina CoP flat y-o-y at US$322/T
despite higher caustic and imported bauxite cost
• 3.2mtpa of coal linkages added during FY2019 from Tranche IV auctions, taking our coal
• Significant improvement in coal materialisation in Q4 FY2019, resulting in no power
imports from the grid in last 4 months of FY2019
• FY2019 exit CoP for aluminium was less than $1,800 per tonne
security to 72%
Steel
• Record steel production at 1.2mtpa, up 17% y-o-y, as a result of improved plant
availability and optimum utilisation. Exited with a run rate of c. 1.5mtpa
• FY2019 EBITDA margin of 19% was among the sector leaders in India
Copper and Iron Ore
• Karnataka production at 4.1 million tonnes, up 89% y-o-y
• Continued engagement with the government and local communities to restart
operations at Goa and Tuticorin
• Copper Zambia: Focussed approach on industrial architecture, process stabilisation
and growth projects to drive all of KCM’s strategic business priorities with clear
understanding of turnaround actions. Cost programme 'NATSUNGE - Let us Preserve'
underway to enhance the margins by optimising the cost
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Key Performance Indicators
GROWTH
REVENUE
(US$ BILLION)
.
3
5
1
.
0
4
1
5
.
1
1
EBITDA
(US$ BILLION)
0
4
.
4
3
.
2
.
3
FCF POST CAPEX◊
(US$ BILLION)
5
.
1
2
.
1
.
9
0
FY17
FY18
FY19
FY17
FY18
FY19
FY17
FY18
FY19
Description
Revenue represents the value of goods sold
and services provided to third parties during
the year.
Commentary
FY2019, consolidated revenue was at US$14.0
billion compared with US$15.3 billion in
FY2018. This decrease was mainly on account
of shutdown of Tuticorin smelter, lower zinc
volumes, lower custom volumes at Copper
Zambia and lower metal prices. This was
partially offset by ramp up of volumes at
Aluminium, volume addition from ESL
acquisition and improved oil prices.
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.
Description
This represents net cash flow from operations
after investing in growth projects. This
measure ensures that profit generated by our
assets is reflected by cash flow, in order to
delever or maintain future growth or
shareholder returns.
Commentary
EBITDA for FY2019 was at US$3.4 billion, 14%
lower y-o-y. This was mainly on account of
shutdown of Tuticorin smelter, input
commodity inflation, lower metal prices, and
higher cost of production which was partially
offset by ramp up of volumes at Aluminium,
volume addition from ESL acquisition,
improved oil prices and currency
depreciation.
Commentary
We generated FCF ◊ of US$1.2 billion in
FY2019, driven by active working capital
management and disciplined capital
allocation.
34
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT GROWTH
RETURN ON CAPITAL
EMPLOYED (ROCE)◊
(%)
%
3
4
1
.
%
8
.
2
1
%
6
9
.
ADJUSTED EBITDA MARGIN◊
(%)
NET DEBT◊/EBITDA
(CONSOLIDATED)
INTEREST COVER
%
6
3
%
5
3
%
9
2
0
3
.
7
.
2
4
.
2
2
.
4
.
8
3
8
3
.
FY17
FY18
FY19
FY17
FY18
FY19
FY17
FY18
FY19
FY17
FY18
FY19
Description
This is calculated on the basis of
operating profit, before special
items and net of tax outflow, as a
ratio of average capital
employed. The objective is to
earn a post-tax return
consistently above the weighted
average cost of capital.
Commentary
ROCE down by c. 4.7%, primarily
owing to closure of Tuticorin
smelter, inflation in input
commodity prices leading to
increase in cost of production
and higher depreciation charge
partially offset by volume growth
in Aluminium, volume addition
due to ESL acquisition and
currency depreciation.
Description
Adjusted EBITDA margin is
calculated by excluding EBITDA
and turnover from custom
smelting of Copper India,
Copper Zambia and Zinc India
operations.
Commentary
Adjusted EBITDA margin for
FY2019 was 29% (FY2018: 35%).
Description
This ratio represents the level of
leverage of the Company. It
represents the strength of the
balance sheet of Vedanta
Resources Limited. Net debt is
calculated in the manner as
defined in Note 22(b) of the
financial statements.
Commentary
Net debt◊/EBITDA ratio as at
31 March 2019 was at 3.0x,
compared to 2.4x as at 31 March
2018. The net debt is higher
primarily due to ESL acquisition.
Description
The ratio is a representation of
the ability of the Company to
service its debt. It is computed as
a ratio of EBITDA divided by gross
finance costs (including
capitalised interest) less
investment revenue.
Commentary
The interest cover for the
Company continues to be stable
at c. 4 times
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
35
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Key Performance Indicators
Continued
LONG TERM VALUE
GROWTH CAPEX◊
(US$ BILLION)
1
.
1
7
.
0
.
8
0
DIVIDEND
(US CENTS)
5
6
5
6
5
5
FY17
FY18
FY19
FY17
FY18
FY19
Description
This represents the amount invested in our
organic growth programme during the year.
Commentary
Our stated strategy is of disciplined capital
allocation on high-return, low-risk projects.
Expansion capital expenditure during the year
stood at US$1.1 billion, with the majority
invested in projects at Zinc India, the
Gamsberg project at our Zinc International
business, growth projects at Oil & Gas and
ramping up our Aluminium capacities.
RESERVES AND RESOURCES (R&R)
Description
Dividend per share is the total of the final
dividend recommended by the Board in
relation to the year, and the interim dividend
paid out during the year.
Commentary
The Board has recommended a total
dividend of 65 US cents per share this year
compared with 65 US cents per share in the
previous year.
Zinc India (million tonnes)
Zinc International (million tonnes)
Oil & Gas (mmboe)
4
0
4
1
1
4
3
0
4
4
3
4
3
7
2
,
1
3
6
2
,
1
5
9
1
,
1
KCM (million mt)
3
1
7
1
9
6
9
0
5
8
8
2
4
0
3
FY17
FY18
FY19
FY17
FY18
FY19
FY17
FY18
FY19
FY17
FY18
FY19
Description
Reserves and resources are based on specified guidelines for each commodity and region.
Commentary
Zinc India
During the year, gross additions of 5.4 million tonnes were made to reserves and resources, prior to depletion of 13.8 million tonnes. Overall mine
life continues to be more than 25 years.
Zinc International
During the year, gross additions of 130.39 million tonnes were made to reserves and resources, prior to depletion. Zinc International is further
pleased to announce the declaration of a maiden resource at its Big Syncline project, located on its Black Mountain mining licence in South Africa.
Resource estimation was carried out by SRK Consulting (UK) and resulted in an inferred resource of 151.7 million tonnes grading 3.6% (zinc and
lead). The majority of the resource is accessible through open-cast operations at low stripping ratios . Overall mine life is more than 30 years.
Oil & Gas
During FY2019, the gross proven and probable reserves and resources were depleted by 68 mmboe primarily due to production during the year.
Copper Zambia
During the year, the total reserved and resourced of KCM decreased from 691 million tonnes to 509 million tonnes.
36
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT SUSTAINABLE DEVELOPMENT
LTIFR
(MILLION MAN HOURS)
7
4
0
.
9
3
0
.
4
3
0
.
GENDER DIVERSITY
(%)
.
6
0
1
.
4
0
1
1
.
9
CSR FOOTPRINT
(MILLION BENEFICIARIES)
.
4
3
1
.
3
2
.
2
FY17
FY18
FY19
FY17
FY18
FY19
FY17
FY18
FY19
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
This year the LTIFR was 0.47. Safety remains
the key focus across businesses.
Description
The percentage of women in the total
permanent employee workforce.
Commentary
We provide equal opportunities to men and
women. During the year, the ratio of female
employees was at 10.4% of total employees.
Description
The total number of beneficiaries through our
community development programmes across
all our operations..
Commentary
We benefited around 3.1 million people this
year through our community development
projects comprising community health,
nutrition, education, water and sanitation,
sustainable livelihood, women empowerment
and bio-investment.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
37
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Opportunities and Risks
Opportunities
We proactively work to
minimise our risks by
accepting and eliminating
them while identifying and
taking advantage of
opportunities. Our strategic
priorities and strong
opportunity management
culture give us a competitive
edge in identifying
opportunities and making
the best of them.
Above: An employee at the Mangala Processing Terminal, Barmer
POSITIVE MARKET FUNDAMENTALS
The commodities market is fundamentally
on an uptick, underpinned by a supply-
demand deficit in most of the
commodities. Most base metals prices
face upside risks from the possibility of
tighter than expected environmental
policies and a slower than expected easing
of commodity-specific supply bottlenecks.
Additionally, a stable global growth is
expected that will lead to higher demand
for metals and oil.
Vedanta’s diversified portfolio and
attractive basket of commodities position
us well to take advantage of this projected
uplift in demand and a resulting
improvement in price outlook.
INDIA-LED GROWTH
India is the primary market for Vedanta. The
Indian economy remains one of the fastest
growing in the world supported by strong
macroeconomic fundamentals and policy
changes, attributable to the sustained rise
in consumption and a gradual revival in
investments, especially with a greater focus
on infrastructure development. Together
with the economic reforms and supportive
policies of the government, the growth
path for the economy is healthy. This is also
supported by urbanisation plans of the
country and positive demographic factors
such as an increasing workforce.
As India’s only diversified natural resources
group, we are uniquely placed to take
advantage of this domestic growth.
A PORTFOLIO OF DIVERSIFIED
LOW-COST ASSETS WITH LONG
ASSET LIFE
Vedanta has a portfolio of world-class,
low-cost, scalable assets that consistently
generate strong profits and robust cash
flows enjoying industry-leading market
shares across our core divisions. The long
asset life of this scalable diversified
portfolio provides a strong base of
opportunities for Vedanta. The many
brownfield opportunities being explored
in each of the businesses are indicative of
this position.
UNDER-UTILISED RESOURCES IN
INDIA WITH SIGNIFICANTLY LOW PER
CAPITA CONSUMPTION
India has a huge underutilised potential of
rich and diverse resources which can be
tapped with Vedanta’s extensive
exploration plans. This has been very
strongly supported by the recent policy
reforms of the government. Additionally,
the per capita consumption of metals in
India is significantly lower than global
averages, providing ample opportunities
for growth.
TECHNOLOGICAL ADVANCEMENT
AND DIGITALISATION
New technological and digital advances
have helped in improving productivity and
reducing costs, and so improving
profitability for the Company.
38
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT Risks
RISK GOVERNANCE FRAMEWORK
BOARD OF
DIRECTORS
AUDIT COMMITTEE
GRMC
EXCO
BUSINESS UNIT MANAGEMENT TEAMS
GROUP RISK MANAGEMENT FRAMEWORK
EXTERNAL
STRATEGIC
E V A L UATE
M
I
T
I
G
A
T
E
Y
F
I
T
N
E
D
I
MON I T O R
FINANCIAL
OPERATIONAL
PRINCIPAL RISKS AND UNCERTAINTIES
As a global natural resources company, our businesses are exposed to a
variety of risks. It is therefore essential to have in place the necessary
systems and a robust governance framework to manage risk, while
balancing the risk-reward equation expected by stakeholders.
Our risk management framework is designed to be simple & consistent, and provide clarity
on managing and reporting risks to the Board. Together, our management systems,
organisational structures, processes, standards and Code of Conduct and Ethics form the
system of internal control that governs how the Group conducts its business and manages
the associated risks. The Board has ultimate responsibility for the management of risks and
for ensuring the effectiveness of internal control systems. The Board’s review includes the
Audit Committee’s report on the risk matrix, significant risks and the mitigating actions we
put in place. Any weaknesses identified by the review are addressed by enhanced
procedures to strengthen the relevant controls, and these are reviewed at regular intervals.
The Audit Committee is in turn assisted
by the Group-level Risk Management
Committee in evaluating the design
and effectiveness of the risk mitigation
programme and control systems.
The Group Risk Management Committee
(GRMC) meets every quarter and
comprises the Group Chief Executive
Officer, Group Chief Financial Officer,
Non-Executive Director and Director-
Management Assurance. The Group
Head-Health, Safety, Environment &
Sustainability is invited to attend these
meetings. GRMC discusses key events
impacting the risk profile, principal risks
and uncertainties, emerging risks and
progress against planned actions.
Since it is critical to the delivery of the
Group’s strategic objectives, risk
management is embedded in business-
critical activities, functions and processes.
The risk management framework helps the
Company by aligning operating controls
with the objectives of the Group. It is
designed to manage rather than eliminate
the risk of failure to achieve business
objectives and provides reasonable and
not absolute assurance against material
misstatement or loss. Materiality and risk
tolerance are key considerations in our
decision-making. The responsibility for
identifying and managing risk lies with
every manager and business leader.
In addition to the above structure, other key
risk governance and oversight committees
in the Group include the following:
• Finance Standing Committee (FSC)
having oversight on treasury related
risks. The FSC comprises of CEO,
Non-Executive Director, Group CFO.
• Board-level Sustainability Committee,
which reviews sustainability related risks.
• Group Project/Capex Council which
evaluates the risks while reviewing any
capital investment decisions as well as
institutes risk management framework
in projects.
In addition to the above, there are various
group level councils such as Procurement
Council, Tax Council, HSE Council, Insurance
Council, CSR Committee, etc. who work
towards identifying various risks in the Group
and work towards mitigating them.
The Group has a consistently applied
methodology for identifying risks at the
individual business level for existing
operations and for ongoing projects.
The Group’s risk appetite is set by the Board.
It has been defined taking into consideration
the Group’s risk tolerance level and is clearly
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
39
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS
Opportunities and Risks
Continued
linked to its strategic priorities. The risk
appetite forms the basis of the Board’s
assessment and prioritisation of each risk
based on its likely impact on the business
operations. A risk scale aligned to the Board’s
overall risk appetite and consisting of
qualitative and quantitative factors has been
defined to facilitate a consistent assessment
of the risk exposure across the Group.
performance management process.
Structured discussions on risk
management also happen at business level
with regard to their respective risk matrix
and mitigation plans. The leadership team
in the businesses is accountable for
governance of the risk management
framework and they provide regular
updates to the GRMC.
The governance framework continues to
operate in the same manner post delisting
of the Company. At a business level, formal
discussions on risk management occur at
review meetings at least once a quarter.
The respective businesses review their
major risks, and changes in their nature and
extent since the last assessment and
discuss the control measures which are in
place and further action plans. The control
measures stated in the risk matrix are also
periodically reviewed by the business
management teams to verify their
continued effectiveness. These meetings
are chaired by the respective business
CEOs and attended by CXOs, senior
management and appropriate functional
heads. Risk officers have been formally
nominated at each of the operating
businesses as well as at Group level, whose
role is to create awareness of risks at senior
management level and to develop and
nurture a risk management culture. Risk
mitigation plans form an integral part of the
Each of the businesses has developed its
own risk matrix, which is reviewed by their
respective management committee/
executive committee, chaired by their CEOs.
In addition, each business has developed its
own risk register depending on the size of its
operations and number of SBUs/locations.
Risks across these risk registers are
aggregated and evaluated and the Group’s
principal risks are identified based on the
frequency, and potential magnitude and
impact of the risks identified.
This element is an important component of
the overall internal control process, from
which the Board obtains assurance. The
scope of work, authority and resources of
Management Assurance Services (MAS) are
regularly reviewed by the Audit Committee.
The responsibilities of Management
Assurance Services (MAS) include
recommending improvements in the control
environment and reviewing compliance with
our philosophy, policies and procedures.
The planning of internal audits is
approached from a risk perspective. In
preparing the internal audit plan, reference
is made to the risk matrix, and inputs
are sought from senior management,
business teams and members of the
Audit Committee. In addition, we make
reference to past audit experience, financial
analysis and the current economic and
business environment.
Each of the principal subsidiaries has
procedures in place 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
look at certain areas identified by risk
management and the internal control
framework. The findings by MAS are
presented monthly to the Executive
Committee and to the Audit Committee
periodically. 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 to eliminate risk altogether.
Therefore, it can only provide reasonable
and not absolute assurance against material
misstatement or loss.
Vedanta’s principal risks and uncertainties as set out below may impact the following areas of the Group’s business:
Area
Business model (BM)
Impact
Ability to conduct our operations across the value chain in order to generate
revenue and make profit from operations
Future performance (FP)
Ability to deliver on our financial plans in short/medium term
Solvency (S)
Liquidity (L)
Ability to meet all our financial obligations
Ability to meet our short-term obligations/liabilities as they fall due
Health, safety, environment and communities (HSEC) 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
Reputation (R)
Ability to maintain investor confidence and our social licence to operate
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. The risk direction of each risk has been reviewed based on events, economic conditions,
changes in business environment and regulatory changes during the year. While Vedanta’s risk management framework is designed to
help the organisation meet its objectives, there can be no guarantee that the Group’s risk management activities will mitigate or prevent
these or other risks from occurring.
40
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT The Board, with the assistance of management, carries out periodic and robust assessments of the principal risks and uncertainties of the
Group and tests the financial plans for each of risks and uncertainties mentioned below
Financial risks
Impact
Fluctuation in commodity prices
(including oil) and currency
exchange rates
Prices and demand for the Group's
products may remain volatile/uncertain
and could be influenced by global
economic conditions. Volatility in
commodity prices and demand may
adversely affect our earnings, cash flow
and reserves.
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.
Impact criteria: BM, FP, S, L
Access to capital
The Group may not be able to meet its
payment obligations when due or may 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 ability to raise financing at
competitive terms.
Risk has been increased compared to last
year, due to increased credit spreads with
tighter liquidity and other external factors.
Impact criteria: FP, S, L, R
Major project delivery
Shortfall in achievement of expansion
projects stated objectives leading to
challenges in achieving stated business
milestones – existing & new growth
projects.
Mitigation
Risk direction
• The Group has a well-diversified portfolio which acts as a hedge against
fluctuations in commodities and delivers cash flows through the cycle
• Pursue low-cost production, allowing profitable supply throughout the
commodity price 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. Strategic hedge, if any, is taken after appropriate deliberations
& due approval from ExCo
• Our forex policy prohibits forex speculation
• Robust controls in forex management to hedge currency risk liabilities on a
back-to-back basis
• Finance standing committee reviews all forex and commodity-related risks
and suggests necessary courses of action as needed by business divisions
• 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
• Notes to the financial statements in the Annual Report give details
of the accounting policy followed in calculating the impact of
currency translation
• A focused team continues to work on proactive refinancing initiatives
with an objective to contain cost and extend tenor
• The team is actively building the pipeline for long term funds for near-to
medium-term requirements both for refinancing and growth capex
• Track record of good relations with banks, and of raising borrowings in
last few years
• The Group’s structured investments, including the Volcan transaction, are
exposed to underlying equity price variance of Anglo shares. For further
details on the Volcan transaction refer note 35 of the financial statement
• Regular discussions with rating agencies to build confidence in operating
performance
• Business teams ensure continued compliance with the Group’s treasury
policies that govern our financial risk management practices
• Enlisting internationally renowned engineering and technology partners on
all projects
• Empowered organisation structure has been put in place to drive growth
projects
• Strong focus on safety aspects in the project
• Geo-technical audits are being carried out by independent agencies
• Reputable contractors are engaged to ensure completion of the project on
Impact criteria: BM, FP, L, R
indicated time lines
• Mines being developed using best-in-class technology and equipment
and ensuring the highest level of productivity and safety
• Stage gate process to review risks and remedy at multiple stages on
the way
• Robust quality control procedures have also been implemented to check
safety and quality of services/design/actual physical work
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
41
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Opportunities and Risks
Continued
Sustainability risks
Impact
Mitigation
Risk direction
Health, safety and environment (HSE)
The resources sector is subject to extensive
health, safety and environmental laws,
regulations and standards. Evolving
requirements and stakeholder expectations
could result in increased cost or litigation
or threaten the viability of operations in
extreme cases.
• HSE is a high priority area for Vedanta. Compliance with international and
local regulations and standards, protecting our people, communities and
the environment from harm and our operations from business
interruptions are key focus areas
• Policies and standards are in place to mitigate and minimise any
HSE-related occurrences. Safety standards issued/continue to be issued
to reduce risk level in high-risk areas. Structured monitoring and a review
mechanism and system of positive compliance reporting are in place
Emissions and climate change: Our
global presence exposes us to a number of
jurisdictions in which regulations or laws
have been, or are being, considered to limit
or reduce emissions. The likely effect of
these changes could be to increase the
cost for fossil fuels, impose levies for
emissions in excess of certain permitted
levels, and increase administrative costs for
monitoring and reporting. Increasing
regulation of Greenhouse Gas (GHG)
emissions, including the progressive
introduction of carbon emissions trading
mechanisms and tighter emission
reduction targets, is likely to raise costs and
reduce demand growth.
• The Company has implemented a set of standards to align its
sustainability framework with international practice. A structured
sustainability assurance programme continues to operate in the business
divisions covering environment, health, safety, community relations and
human rights aspects, and is designed to embed our commitment at
operational level
• All businesses have appropriate policies in place for occupational
health-related matters, supported by structured processes, controls and
technology
• Strong focus on safety during project planning/execution, and contract
workmen safety
• Building safety targets into performance management to incentivise safe
behaviour and effective risk management
• A 'Leadership in Action' programme has been launched for identification
of critical risks to identify critical risk controls and to measure, monitor
and report the control effectiveness
• Leadership remains focused on a zero-harm culture across the
organisation
Impact criteria: BM, HSEC, R
• Carbon forum with business representation monitors developments and
Tailings dam stability
A release of waste material leading to loss
of life, injuries, environmental damage,
reputational damage, financial costs and
production impacts. A tailings dam failure
is considered to be a catastrophic risk – i.e.
a very high severity but very low frequency
event that must be given the highest
priority.
Impact criteria: BM, FP, HSEC, R
sets out defensive policies, strategy and actions
• Defined targets and action plans in place to reduce the carbon intensity
of our operations. This includes reducing emission intensity, increasing
renewable mix and green cover at locations. New Emission norms for
thermal power plants will require capex – working towards the same
• Institutionalise systems to manage carbon risks and opportunities across
the business over the life cycle of its products
• Engage with stakeholders in creating awareness and developing climate
change solutions
• The Risk Management Committee included tailings dams on the Group
Risk Register with a requirement for annual internal review and three-
yearly external review
• Operation of tailings dams is executed by suitably experienced
personnel within the businesses
• Vedanta is currently reviewing approach to tailings dam management,
particularly upstream raised dams, in the wake Brumadihno in Brazil
• Golder Associates has been engaged to review tailings dam operations,
including improvement opportunities/remedial works required and the
application of Operational Maintenance and Surveillance (OMS) manuals
in all operations. This is an oversight role in addition to technical design
and guidance arranged by respective business units. Technical
guidelines are also being developed
• Those responsible for dam management received training from Golders
Associates and will receive on-going support & coaching from
international consultants
• Management standard implemented with business involvement
• System of monitoring of tailings dams instituted
42
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT Impact
Mitigation
Risk direction
Managing relationship with
stakeholders
The continued success of our existing
operations and future projects are in part
dependent on broad support and a healthy
relationship with our respective local
communities. Failure to identify and
manage local concerns and expectations
can have a negative impact on relations
and therefore affect the organisation's
reputation and social licence to operate
and grow.
• CSR approach to community programmes is governed by the following
key considerations: the needs of the local people and the development
plan in line with the new Companies Act in India; CSR guidelines; UN
Millennium Development Goals (UNMDG); CSR National Voluntary
Guidelines of the Ministry of Corporate Affairs, Government of India; and
the UN’s sustainable development goals
• Our BU teams are proactively engaging with communities and
stakeholders through a proper and structured engagement plan, with
the objective of working with them as partners
• Business ExCos factor in these inputs, and then decide upon focus areas
of CSR and budgets while also aligning with strategic business priorities
• At KCM, in line with our commitment to contribute towards the growth of
Risk has been increased compared to last
year, due to community-related incidents at
some of our facilities.
the economy and from sustainability perspective, we undertake to
constructively engage with all key stakeholders such as the Zambian
Government, local communities, suppliers, employees and the
shareholders in an optimal & productive manner
• All BUs follow well-laid processes for recording and resolving all
Impact criteria: BM, FP, HSEC, R, S, L
community grievances
• Every business has a dedicated Community Development Manager, who
is a part of the BU Exco. They are supported with dedicated teams of
community professionals, totalling nearly 110 people
• Our business leadership teams have periodic engagements with the
local communities to build 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
• Periodic meetings with existing and potential SRI Investors, lenders and
analysts, as well as hosting a Sustainable Development Day in London,
helps in two-way engagement and understanding the material issues for
stakeholders
• CSR communication and engagement with all stakeholders – within &
outside communities
Operational risks
Impact
Mitigation
Risk direction
Challenges in Aluminium and
Power business
Our projects have been completed and
may be subject to a number of challenges
during operationalisation phase. These
may also include challenges around
sourcing raw materials and infrastructure-
related aspects and concerns around ash
utilisation/evacuation.
• Global uncertainties reflected as fall in Aluminium LME prices.
• Continue to pursue new coal linkages to ensure coal security. Operations
at Chotia coal mines also started.
• Local sourcing of Bauxite from Odisha.
• Jharsuguda facilities have ramped up satisfactorily.
• New Ash Dyke being built in Jharsuguda.
• Dedicated teams working towards addressing the issue of new emission
norms for power plants.
• Global technical experts have been inducted to strengthen operational
Impact criteria: BM, FP, S, L, R
excellence.
• Continuous focus on plant operating efficiency improvement
programme to achieve design parameters, manpower rationalisation,
logistics and cost reduction initiatives.
• Continuous augmentation of power security and infrastructure.
• Strong management team continues to work towards sustainable
low-cost of production, operational excellence and securing key raw
material linkages.
• Talwandi Saboo (TSPL) power plant matters are being addressed
structurally by a competent team.
Operational turnaround at KCM
Lower production and higher cost at KCM
may impact our profitability.
Risk has been increased compared to last
year, due to challenging external &
operating environment.
• Management team reviewing operations and engaging with all
stakeholders in light of operating challenges.
• Focus at Konkola is to stabilise infrastructure framework, improve
operational efficiency, equipment availability, dewatering and
developments aiming to enhance volumes. Committed to improving
KCM operating performance.
• To improve performance, KCM team is working on stabilisation of
business partnering model with outsourced contractors.
Impact criteria: BM, FP, S, L, R
• Several cost-saving initiatives and restructuring reviews under way at
KCM to preserve cash.
• Process improvement actions put in place through focused operating
teams to improve production performance.
• Working on the optimised engineering design for accelerated
dewatering and development to increase production from Konkola mine.
• All environmental projects are being monitored closely for timely closure.
• Concentrate sourcing tie-ups with high grade mines being pursued.
• VAT refunds are being pursued.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
43
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Opportunities and Risks
Continued
Impact
Mitigation
Risk direction
Discovery risk
Increased production rates from our
growth-oriented operations place 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.
Impact criteria: BM, FP
Breaches in IT/cybersecurity
Like many 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 cybersecurity
breach could have an impact on business
operations.
Impact criteria: FP, R
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.
Impact criteria: FP, R
Cairn-related challenges
Cairn India has 70% participating interest in
Rajasthan Block. The production sharing
contract (PSC) of Rajasthan Block runs till
2020. The Government of India has
granted its approval for ten-year extension
at less favourable terms, pursuant to its
policy for extension of Pre-NELP
Exploration Blocks, subject to certain
conditions. Ramp up of production vs
envisaged may have impact on profitability.
Impact criteria: BM, FP, L, S
• Dedicated exploration cell with continuous focus on enhancing
exploration capabilities
• Appropriate organisation and adequate financial allocation in place for
exploration
• Strategic priority is to add to our reserves and resources by extending
resources at a faster rate than we deplete them, through continuous
focus on drilling and exploration programme
• Exploration Executive Committee (ExCo) has been established to
develop and implement strategy and review projects group wide
• Exploration-related systems being strengthened and standardised group
wide and new technologies being utilised wherever appropriate
• International technical experts and agencies are working closely with our
exploration teams to enhance our capabilities
• Group-level focus on formulating necessary frameworks, policies and
procedures in line with best practices and international standards
• Implementation and adoption of various best-in-class tools and
technologies for information security to create a robust security posture
• Special focus to strengthen the security landscape of plant technical
systems (PTS) through various initiatives
• Adoption of various international standards relating to Information
Security, Disaster Recovery & Business Continuity Management, IT Risk
Management and setting up internal IT processes and practices in line
with these standards
• Periodic assessment of entire IT systems landscapes and governance
framework from vulnerability and penetration perspective through
reputed expert agencies and addressing the identified observations in a
time-bound manner
• Vedanta has taken appropriate group insurance cover to mitigate this risk
• An external agency reviews the risk portfolio and adequacy of this cover
and assists us in our insurance portfolio
• Our underwriters are reputed institutions and have capacity to
underwrite our risk
• 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
• Continuous monitoring and periodic review of security function
• Continue to focus on capability building within the Group
• Ongoing dialogue with the government and relevant stakeholders to
address the conditions prescribed
• The applicability of the Pre-NELP Extension Policy to the RJ Block is
currently sub judice
• The growth projects are being implemented through an Integrated
Contracting approach. Contracts have built in mechanism for risk
and reward
• Project management committee & project operating committee is being
put in place to provide support to the outsourcing partner and address
issues on time to enable better quality control as well as timely execution
for growth projects
• Third party is engaged to conduct a study on growth projects with key
objectives of providing assurance on project delivery, highlight risks,
identify areas needing management intervention and suggest
opportunities to deliver the outcome
44
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT Compliance risks
Impact
Regulatory and legal risk
We have operations in many countries
around the globe. These may be impacted
because of legal and regulatory changes in
the countries in which we operate resulting
in higher operating costs, and restrictions
such as the imposition or increase in
royalties or taxation rates, export duty,
impacts on mining rights/bans, and
change in legislation.
Impact criteria: BM, R
Mitigation
Risk direction
• The Group and its business divisions monitor regulatory developments
on an ongoing basis
• Business-level teams identify and meet regulatory obligations and
respond to emerging requirements
• Focus has been to communicate our responsible mining credentials
through representations to government and industry associations
• Continue to demonstrate the Group's commitment to sustainability by
proactive environmental, safety and CSR practices. Ongoing
engagement with local community/media/NGOs
• SOX compliant subsidiaries
• Common compliance monitoring system being implemented in group
companies. Legal requirements and a responsible person for
compliance have been mapped in the system
• Legal counsels within the Group continues to work on strengthening
the compliance and governance framework and the resolution of
legal disputes
• Competent in-house legal organisation is in place at all the businesses
and the legal teams have been strengthened with induction of senior
legal professionals across all group companies
• Standard operating procedures (SOPs) have been implemented across
our businesses for compliance monitoring
• 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 also been standardised
• Framework for monitoring performance against anti-bribery and
corruption guidelines is also in place
Tax-related matters
Our businesses are in a tax regime and
changes in any tax structure or any
tax-related litigation may impact our
profitability.
Impact criteria: FP, L, R
• Tax Council reviews all key tax litigations and provides advice to
the Group
• Continue to engage with concerned authorities on tax matters
• Robust organisation in place at business and group-level to handle
tax-related matters
• Continue to consult and obtain opinion from reputable tax consulting
firms on major tax matters to mitigate the tax risks on the group and its
subsidiaries
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
45
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Stakeholder Engagement
WE AIM TO FORGE
STRONG RELATIONSHIPS
WITH OUR KEY
STAKEHOLDERS AND
UPHOLD HUMAN RIGHTS
WHEREVER WE OPERATE,
AS WE MAINTAIN OUR
SOCIAL LICENCE TO
OPERATE.
46
INTEGRATED REPORTVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Our approach
At Vedanta we are committed to constructive dialogue with our key stakeholders. We believe that open, ongoing and
systemic communication is key to building successful relationships with our stakeholders. This also helps us to identify
their material issues, and foresee emerging risks, opportunities and challenges.
Our social responsibility performance standards help ensure effective engagement with relevant stakeholders across
multiple industries and geographies; provide adequate grievance mechanisms to help resolve situations of potential
conflict; and develop specialised standards for potentially vulnerable communities such as indigenous peoples. The
standards follow five principles of engagement:
ASK
ANSWER
ANALYSE
ALIGN
ACT
Our dialogue begins
with questions that
solicit feedback. Our
stakeholders have
access to a number of
platforms to reach out
to Vedanta personnel
and voice concerns.
We disclose not just
because we want to be
heard, but because we
are responsible. We aim
to provide a
constructive response
to feedback received.
We have established a
robust investigation
process for complaints
reported via the
whistleblowing
mechanism, sustainability
ID and group
communications ID,
involving senior
management and
relevant personnel.
We work hand-in-hand
with stakeholders and
align our goals and
actions with their
high-priority areas. The
feedback from all our
engagement becomes
part of our materiality
identification process.
We back up our words
with demonstrable
actions that move the
needle towards promised
outcomes.
Our key stakeholders
Local
Community
Governments
Employees
Vedanta
Industry
(suppliers, customers,
peers & media)
Shareholders,
Investors &
Lenders
Civil Society
Left: HZL Samadhan Project
Right top: Investing in the future of children through CSR initiatives
Right bottom: Access to affordable and quality healthcare
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
47
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Stakeholder Engagement
Continued
The table below sets out how we engaged with our stakeholders during the year to address their concerns and meet their expectations.
Stakeholder
Types of Engagement
Key Expectations
Initiatives in FY2019
Local Community
Community group
meetings, village council
meetings, community
needs/social impact
assessments, public
hearings, grievance
mechanisms, cultural
events, engaging
philanthropically with
communities via the
Vedanta Foundation.
• Needs- based community
• Completed baseline,
development projects
• Increasing reach of
community development
programmes
• Improved grievance
mechanism for
community
need, impact and SWOT
assessments in all BUs
• US$45 million invested in
Social Investment
• 3.1 million beneficiaries of
community development
programmes
• Community grievance
process followed at all
operations
Employees
Shareholders, Investors & Lenders
Chairman’s workshops,
Chairman’s/CEO’s town hall
meetings, feedback
sessions, performance
management systems,
various meetings at plant
level, V-Connect mentor
programme, event
management committee
and welfare committee,
women’s club.
• Improved training
• 1.46 million man-hours of
on safety
• Increased opportunities
for career growth
training on safety
• 23% of all new hires
are women
• Increasing the gender
• Identification of top talents
diversity of the workforce
and future leaders
through workshops
Regular updates, investor
meetings, Sustainability Day
for investor interaction, site
visits, AGM and conference,
quarterly results calls,
dedicated contact channel
– ir@vedanta.co.in and
sustainability@vedanta.co.in
• Consistent disclosure on
economic, social, and
environmental
performance
• US$14.0 billion in revenue
• Sustainability assurance
audits conducted through
Vedanta Sustainability
Assurance Programme
(VSAP)
• Bi-weekly Investor
Briefings and Pro-active
engagement with the
investment community
on ESG topics
48
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
INTEGRATED REPORT Stakeholder
Civil Society
Types of Engagement
Key Expectations
Initiatives in FY2019
Partnerships with and
membership of international
organisations, working
relationships with
organisations on specific
projects, engagement with
international, national, and
local NGOs, conferences
and workshops, dedicated
contact channel –
sustainability@vedanta.co.in.
• Expectation of being
• Membership of
aligned with the global
sustainability agenda
• Compliance with Human
Rights
international organisations
including the United
Nations Global Compact,
TERI, CII, The World
Business Council for
Sustainable Development
(WBCSD), and Indian
Biodiversity Business
Initiative (IBBI)
• Focus towards
implementing Sustainable
Development Goals
• Compliance to the
Modern Slavery Act
Customer satisfaction
surveys, scorecards,
in-person visits to
customers, supplier, and
vendor meetings.
• Consistent
• Hotline service and email
implementation of the
code of business conduct
& ethics
• Ensuring contractual
integrity
ID to receive whistle-
blower complaints
Industry
(Suppliers, Customers, Peers, Media)
Governments
Participation in government
consultation programmes,
engagement with national,
state, and regional
government bodies
at business and
operational level.
• Compliance with laws
• Contributing towards the
economic development of
the nation
• US$45 million invested in
community development
• US$6.2 billion in payments
to the exchequer
For more information on our activities during the year,
please see our Sustainability section on pages 60-74
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
49
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Awards and Accolades
S No.
Name of Awards
Category/Recognition
Recipient (Business Unit)
Operational Excellence
1
IMC RBNQA National Quality Award
Manufacturing Excellence
Quality Circle Conventions
Improvement Projects
Safety award by Oil Industry Safety
Directorate (OISD)
FTSE4Good Emerging Index Series
Individual category
Cairn Oil & Gas
Sectorial leadership in Environmental,
Social and Governance (ESG)
performance
HZL
Sustainable Development & CSR
5
ET 2 Good 4 Good Rating
CSR Activities
Dainik Jagran Award
FICCI CSR Award
Poverty Eradication
Private Sector Companies with turnover
of INR 3001 Crores per annum and above
BALCO
BALCO
BALCO
BALCO
Nand Ghar
Sustainability Award 4.0
Sustainable Business practices
BALCO
CII-ITC Sustainability Award 2018
FICCI Corporate Social Responsibility Award
2017 – 2018
CII - ITC Sustainability Awards 2018
Dow Jones Sustainability Index
Significant Achievement for impactful
CSR programmes and initiatives across
all assets
Cairn Oil & Gas
Health, Water and Sanitation category
Cairn Oil & Gas
For Corporate Excellence
• Outstanding Accomplishment Award
• Commendation for Significant
Achievement in CSR
• Excellence in Environment Management
HZL
Ranked 1st in the Environmental Category
for Metals & Mining Industry
HZL
Greentech Safety Award
Gold/Safety Management
Vedanta Limited, Lanjigarh
India Green Manufacturing Award
India CSR Leadership Award 2019
Resource Conservation and Green
Manufacturing Processes
‘Aajeevika Skill Development’ initiatives
including Dhokra Art and Tribal Painting
Vedanta Limited, Lanjigarh
Vedanta Limited, Lanjigarh unit
ET Now CSR Leadership Awards
Sports Development
Vedanta Football & Nand Ghar
Golden Bird award
Environment Excellence
Shrishti Good Green Governance Award
Environment
Apex India CSR Excellence Award 2018
Gold Award
TSPL
TSPL
TSPL
AON Hewitt Best Employer Award
‘Commitment to Engagement’ (2017-2018)
Vedanta Limited, Jharsuguda
‘National Best Employer Brands 2018’
HR practices and exemplary use of
marketing communication for Human
Resource Development
Vedanta Limited, Jharsuguda
Human Resources
CII HR Excellence Award
22
ET HR Talent Management Leadership
Award
Great Place to Work Certification
ET Now Dream Companies to Work For
HR Initiatives
Leadership Development Program
BALCO
BALCO
Employer-of-Choice and Workplace
quality recognition
Employer-of-Choice and Workplace
quality recognition
Cairn Oil & Gas
Cairn Oil & Gas
HZL
‘Significant Achievement in HR Excellence’
during 9th CII-HR Excellence Award 2018-19
HR practices
CII National HR Excellence Award
Strong Commitment to HR Excellence
Vedanta Limited, Lanjigarh unit
The Employer Branding Awards
National Best Employer Brand
Sterlite Copper
50
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
2
3
4
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
23
24
25
26
27
28
INTEGRATED REPORT S No.
Name of Awards
Category/Recognition
Recipient (Business Unit)
Smart logistics Summit & Awards 2019
‘Smart Exporter Metals’
Vedanta Limited, Jharsuguda
Innovation & Technology
7th International Bauxite –Alumina &
29
Aluminium Conference & Exhibition
Improvement Projects
INCAL
Improvement Projects
Indian Institute of Metals – Non-Ferrous Best
Performance Award 2018
For best quality, registering highest
product development and environmental
performance during 2017 - 18
QualTech Award 2018
Improvement Category
SECONA Shield Awards 2018
Innovative Practices & Technology
30
31
32
33
34
Energy Conservation
35
CII National Energy Conservation Award
Energy
36
37
38
39
Clean Energy Management Insight Award
Gold in SEEM National Energy Management
Awards 2017
Spreading awareness about ISO 50001
Energy Management System
‘Industries Captive Power Plant’
19th National Award for Excellence in Energy
Management 2018
Energy Efficient Unit
Golden Bird award
Energy Efficiency
Industry Achiever/National Contributor
40
1st Edition of CNBC Awaaz Rajasthan Ratna
Award
‘The Best Company in Mining Sector’ in
the state of Rajasthan
Power - Thermal & Hydro Best Project
category
Most Outstanding Project in the
Geotechnical Engineering Project
Division
BALCO
BALCO
HZL
Sesa Goa Iron ore Value
Addition Business unit
Vedanta Sesa Goa Iron Ore –
Security Team
BALCO
BALCO
Chanderiya Smelting Complex
(HZL)
Sesa Goa Iron ore - Value
Addition Business unit
HZL
TSPL
Gamsberg Business Partner,
VZI
41
42
Dun & Bradstreet Infra Awards 2018
South African Institution of Civil
Engineering, Awards for the Most
Outstanding Civil Engineering
Achievements of the Year
Business Awards
43
Best Environment Practices by SKOCH
Leadership Award for Energy
44
45
5th CII Environmental Best Practices Award
2018
46
‘Dun & Bradstreet Corporate Award 2018’
47
Recognised for the ‘Best Investor Relations
Program’ (nominated by the sell-side) and
for hosting the “Second Best Analyst Day”
(overall) by Institutional Investor Magazine’s
2018 all-Asia (ex-Japan) Executive
Team rankings.
7th FICCI Safety Systems Excellence Award
Platinum Prize
Bhagyam field, Cairn Oil & Gas
Natural gas recovery zero flaring during
frack well milling operation project under
the category – ‘most innovative
environmental project’
Cairn Oil & Gas
Natural gas recovery zero flaring during
frack well milling operation project under
the category – ‘most innovative
environmental project’
Cairn Oil & Gas
Under ‘Non-Ferrous & Precious Metals’
category for their role as ‘Champions of
Change’ in transformation of the Country
HZL
Basic Materials industry
Vedanta Limited
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
51
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Market Review
GLOBAL ECONOMY AND
COMMODITY MARKETS
After strong growth in 2017 and early 2018,
global economic activity slowed notably in
the second half of last year, reflecting a
confluence of factors affecting major
economies. China’s growth declined
following a combination of required
regulatory tightening to rein in shadow
banking and due to increase in trade
tensions with the United States. The euro
area economy lost more momentum than
expected as the consumer and business
confidence weakened. Trade tensions
increasingly took a toll on business
confidence with financial conditions
tightening for both emerging and
advanced economies, weighing on
global demand.
As a result, global growth is now
projected to slow from 3.6% in 2018 to
3.3% in 2019 as per IMF. The current
forecast envisages that global growth will
level off in the first half of 2019 and then
firm up after that. The projected pickup in
the second half is predicted due to an
ongoing build-up of policy stimulus in
China, recent improvements in global
financial market sentiment and a gradual
stabilisation of conditions in the stressed
emerging markets.
Commodity prices rebounded in the first
quarter of 2019 from a decline in the fourth
quarter of 2018, which had followed an
even steeper decline in the preceding
quarters. The price increase reflected
supply concerns, progress in trade
negotiations between US and China and
fiscal stimulus in China. Metal prices are
expected to continue rebounding from
2018 troughs. Most base metal prices face
upside risks from the possibility of tighter
than expected environmental policies and
slower than expected easing of
commodity- specific supply bottlenecks.
Oil prices have risen significantly since the
start of the year amid a production cut by
OPEC and other producers and supply
disruptions elsewhere.
OPPORTUNITIES FOR VEDANTA
Improved momentum for emerging and
developed economies is projected to
continue into 2020, primarily reflecting
developments in economies currently
experiencing macroeconomic distress.
Growth prospects for advanced
economies are likely to plateau somewhat
over the medium term, sustained by an
increase in the relative size of economies
such as China and India, which are
projected to enjoy robust growth. This
stable global growth is expected to lead to
higher demand for metals and oil.
At the same time supply-side dynamics on
zinc are expected to keep its price stable to
higher. The zinc market is going through a
cyclical shortage with refined metal
expected to stay in short supply over the
next two to three years as smelters are at
full capacity and Chinese smelting
capacities are restrained. With no new
projects coming online, the market could
possibly see concentrate supply issues in
the medium term. All this provides Vedanta,
as a large zinc producer, with a favourable
market as we ramp up production.
Recent developments for the alumina
refinery companies, bringing the price
ofalumina down, provide Vedanta with a
cost advantage in its aluminium business.
As we ramp up our refinery, in the interim
period where we remain dependent on
imported alumina supply, lower alumina
costs will help us keep our aluminium costs
under control.
Thus, Vedanta’s diversified portfolio and
attractive basket of commodities position
us well to take advantage of this projected
uplift in demand, and the resulting
improvement in price outlook.
Below: We focus on implementing
new technologies at our site locations
The backdrop of
positive Indian
economic growth,
combined with
supportive government
policies, will strengthen
commodity demand in
India going forward and
support domestic
production.
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THE INDIAN ECONOMY
India is Vedanta’s main market and one that
we believe has huge growth potential.
According to the latest IMF Report, India’s
growth is projected to rise to 7.3% in 2019
and 7.5% in 2020, supported by the
continued recovery of investment, and
robust consumption amid a more
expansionary stance of monetary policy
and some expected impetus from fiscal
policy. Over the medium term, the IMF
expects growth to stabilise at just under
7.75%, based on continued implementation
of structural reforms and easing of the
infrastructure bottleneck.
The government has been proactive in
introducing major policy reforms for the
technology and manufacturing sectors,
and in our specific areas of operation we
have seen the National Mineral Policy 2019,
HELP (Hydrocarbon Exploration and
Licencing Policy) and OALP. The
government’s focus on rural development
and job creation, well supported by
initiatives such as Make in India and Digital
India, have also provided impetus to the
economic growth of the country. External
confidence in the Indian economy has also
been boosted by structural reforms to
improve the ease of doing business,
strengthen the banking system and
improve the capital markets.
In the oil sector, the Hydrocarbon
Exploration and Licensing Policy (HELP),
aimed at enhancing domestic oil & gas
production, has brought substantial
investment into the sector and generated
sizeable employment opportunities since
its implementation. The OALP, a critical part
of the HELP, enables contractors to explore
conventional as well as unconventional oil
& gas resources on a revenue-sharing basis
with marketing and pricing freedom for the
crude oil and natural gas produced.
Vedanta Limited won 41 out of 55 oil & gas
exploration blocks offered in OALP-1
bidding in 2018.
Foreign Direct Investment (FDI) in the
mining sector, the exploration of metal and
non-metal ores and the approval of the
MMDR Bill (2011) will provide a more
supportive legislative environment for
investment and technology going forward.
In addition, in the Union Budget 2018-19,
the government added a surcharge of 10%
on aggregate duties of customs on
imported goods to strengthen the
domestic mining industry.
This backdrop of positive Indian economic
growth, combined with supportive
government policies, will strengthen
commodity demand in India going forward
and support domestic production.
Vedanta, as one of the country’s largest
natural resources companies, is uniquely
positioned to leverage India’s growth
potential by catering to that demand
across its diversified portfolio of
commodities. With such a large domestic
market, everything we produce in India, we
would like to sell in India.
OPPORTUNITIES FOR VEDANTA
India-focused growth agenda
The Indian economy remains one of the
fastest growing in the world, supported by
strong macroeconomic fundamentals and
policy changes. This growth could be
attributed to the sustained rise in
consumption and a gradual revival in
investments, especially with a greater focus
on infrastructure development. Together
with economic reforms, these augur well
for a healthy growth path for the economy.
Positive demographic factors such as an
increasing workforce and urbanisation are
driving a greater need for infrastructure
development. Looking ahead, we expect
tosee continued focus in the infrastructure,
transportation and power sectors. This will
lead to a rising demand for domestically
produced metals. Additionally, there is
huge scope of growth in India’s
significantly low per-capita consumption
of all metals including zinc, aluminium,
steel and copper when compared to the
global average. Indeed, oil consumption in
India is less than one-third that of the
global per capita figure, providing
immense opportunities for growth to the
domestic producers.
POLICY SUPPORT
The Indian Government has recently
announced various policy measures to
support the metals, mining and oil sectors.
The Union Cabinet approved the National
Mineral Policy (NMP) 2019, which aims to
bring more effective regulation while
addressing the issues of those affected by
mining. The policy is progressive and seeks
to liberalise the sector by opening up
opportunities to the private sector that
were previously reserved for state-owned
enterprises. The policy measures envisage
that mineral production in India will grow
by 200% and the trade deficit in minerals
will reduce by 50% in the next seven years.
Furthermore, efforts will be made to
benchmark royalties and taxes (which are
high in India) with mining jurisdictions
elsewhere in the world in order to attract
more investment and guarantees that
statutory clearances are granted in a
timely manner.
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ZINC
Investments in infrastructure drive
zinc demand
In a year of volatility, zinc prices fell by
approximately 17% to end the year at
US$2,922 per tonne, after peaking at
US$3,540 per tonne in February 2018.
Macro-economic factors including fears of
a trade war and a slowdown in global
economic growth contributed to this fall.
However, in Q4 the apparent easing of
trade tensions, and production disruptions
as a result of floods in Australia
accompanied by steep drawdowns in
inventories helped prop up zinc prices.
Price increases since then have largely
reflected robust demand from China,
which accounts for half of global
consumption. Against the backdrop of
rapidly growing zinc ore production,
smelter capacity constraints have driven
refining fees (zinc concentrate treatment
charges) to near record highs.
Products & customers
Vedanta is the largest zinc producer in
India, with a 79% market share in FY2019.
Between 70-74% of the refined zinc
produced is sold in the Indian market,
primarily to steel companies, with the rest
being exported to mainly Asian countries
and the Middle East to increase the
customer portfolio in special high-grade
and value-added products. Over 70% of
Indian zinc consumption is used for
galvanising steel, predominantly in the
construction and infrastructure sectors.
We also produce zinc for use in die-casting
alloys, brass oxides and chemicals. This
year we have successfully launched and
supplied EPG (electro-plating galvanising)
and HZDA (Hindustan Zinc die-casting
alloy). Our focus is on increasing the supply
of value-added products to 25% of total
zinc sales in FY2020, from 16% in FY2019.
Vedanta Zinc’s international operations
produce refined zinc, which is sold within
Africa and exported to Europe and China;
and concentrate, which is exported to
traders and refiners internationally.
Market drivers & opportunities
Zinc market fundamentals remain robust
with global zinc consumption expected to
grow by 1.5% to 14.5 million tonnes in 2019,
while smelter supply will increase to 14
million tonnes and mine supply will likely be
13.9 million tonnes. The growth in
consumption in 2019 will mainly come from
China and India, as the consumption rate is
expected to be low in the US, Europe and
Japan due to weak demand, trade tensions
and a slowdown in the automotive sector.
International trade talks will also have a
significant bearing on investor sentiment
and consequently on zinc prices going
forward. Despite a fundamentally tight zinc
metal market, prices may struggle if trade
tensions continue.
Primary zinc consumption in India has
been steady for the last two years and we
may see a rise in consumption of 3-4%
going forward. Steel demand in India is
forecast to increase at 6.5% CAGR until
2030. Indian zinc demand is expected to
mirror this growth trajectory on the back of
growth in its major end-use sectors, i.e.
automotive, construction, infrastructure
and railways. The Government’s plan to
spend US$1.5 trillion on infrastructure over
the next decade, in the form of new and
upgraded railway stations, new airports,
road projects, smart cities, electrification
projects, renewable energy installations
and investment in transmission corridors,
will provide a long term boost to Indian
zinc demand.
As most of our zinc is produced and sold in
the Indian market, ongoing investment by
the Indian government will be the main
opportunity for Vedanta going forward.
The International Zinc Association is
working with government departments to
increase zinc consumption in automobiles
and railways, thereby bringing more safety
and sustainability to the sectors.
LEAD
Demand continues to grow but the
outlook is less certain
In line with zinc and other base metals, the
lead price was volatile during the year in
response to developments in the trade
dispute between the US and its trading
partners. The price dropped from around
US$2,544 per tonne in early January 2018
and ended the calendar year at US$2,009
per tonne. Fundamentally, the lead market
was favourable with stocks dropping to
record lows and limited supply. Lead prices
are projected to gradually increase over the
remainder of 2019. More stringent
environmental regulations in China
restricting the recycling of lead scrap
materials, which accounts for more than
two-fifths of total refined production,
presents an upside risk to the forecast.
Over the medium term, a shift towards
electric vehicles is likely to depress
demand for lead, which is heavily used in
batteries for internal combustion engine
vehicles but not in electric vehicles.
Products & customers
In India, Vedanta owns and operates a fully
integrated zinc-lead production facility and
is one of the world's largest integrated
zinc-lead producers by volume of those
producing only primary metals. The main
use for our lead is in lead acid batteries,
mainly serving the automotive and
telecoms sectors. India consumes around
1.1 million tonnes of lead annually, which
includes both primary and secondary lead.
HZL has a 57% market share of domestic
primary lead consumption. HZL’s domestic
lead supplies increased by 12% in FY2019
against market growth of an estimated 3%.
Market drivers & opportunities
Demand for lead is expected to increase
by 2% this year primarily due to growth in
Asia, and especially China. HZL is poised
to expand its supply base to more
end-users, tapping the growth that will be
driven by growing production in the
automotive sector.
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MANAGEMENT REVIEW In 2018, we saw an increase in the pace of
implementation of the Open Acreage
Licensing Policy (OALP) in the Indian oil &
gas sector, with the launch of the second
and third rounds offering 14 and 23 blocks,
respectively. In addition, to boost domestic
production and provide greater energy
security, the Government has introduced a
range of new policies aimed at facilitating
business and attracting investment.
While global demand is expected to
stagnate due to the global economic
slowdown and mounting trade tensions,
Indian demand is projected to show robust
growth, thereby presenting opportunities
in the oil & gas value chain.
As a result of the 2018 award of 41 OALP
blocks, Vedanta has expanded its footprint
to all the major sedimentary basins of India.
With a strengthened growth pipeline in
exploration and development, the
Company is well positioned to meet this
increased Indian demand by producing
half of the country’s crude oil in the
coming years.
SILVER
OIL & GAS
Demand hit as China reduces
subsidies
In a challenging environment, the silver
price averaged US$15.7 per ounce in CY
2018. Preliminary estimates point towards a
slight increase in total supply in 2018
whereas demand contracted by 3%,
primarily due to lower demand from
investors. A slowing Chinese economy,
coupled with rising US interest rates, an
equity market bull run, and global trade
tensions affected the price of many
commodities, including gold and silver.
Products & customers
Hindustan Zinc is India’s only primary silver
producer and ranks 9th globally in terms of
the top silver producing companies. We
cater to markets including the industrial
sector (electrical contacts, solder and
alloys, and pharmaceuticals), and the
jewellery and silverware manufacturing
segment. Our focus is to improve
penetration in the domestic market by
increasing value-added products such as
silver nitrate and silver powder.
Market drivers & opportunities
Silver prices are projected to remain
broadly unchanged in 2019 according to
the World Bank’s commodity outlook.
Jewellery demand and silverware
fabrication are rising moderately whereas
industrial demand for silver, which
accounts for more than half of total
demand, remains weak. Tariffs on solar
imports to the United States led to a
reduced use of silver in solar panels in
2018, and this trend is expected to persist.
The use of silver in photovoltaics is
expected to decline as it is one of the most
expensive components.
Indian demand is projected to show
robust growth
We saw a year marked by supply-demand
fluctuations in 2018, leading to higher than
usual volatility and uncertainty in the oil &
gas markets. The year saw unprecedented
production from the US, production cuts
announced by the Organisation of the
Petroleum Exporting Countries (OPEC) and
US sanctions imposed on Iran and
Venezuela. After peaking at US$85 per bbl,
Brent averaged US$70.7 per bbl in CY2018.
Products & customers
Vedanta is the largest private sector
producer of crude oil in India. Our crude is
sold to hydrocarbon refineries and our
natural gas is used by the fertiliser industry
and the power generation sector in India.
Market drivers & opportunities
The shale gas revolution will continue to
disrupt the oil & gas sector. The US closed
out 2018 as the world’s largest producer of
crude oil and is projected to become a net
exporter by 2020. Robust shale growth will
take US production to an average of 12.4
million bpd in 2019 and 13.2 million bpd in
2020, which will exert downward pressure
on oil prices.
India currently meets 83% of its oil
consumption and 46% of its gas
consumption through imports. The Indian
government projects a 10% reduction in
India’s imports of oil & gas by 2022. India
remains underexplored, with only 7 of the
26 sedimentary basins currently producing
oil & gas. Further, re-assessment of India’s
resource base has increased the country’s
total hydrocarbon resources (in place) by
close to 50%, of which approximately 71%
remain undiscovered, providing significant
growth opportunities.
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ALUMINIUM
Expanding capacities in smelters
and refinery
We saw an eventful year in 2018 in the
global aluminium industry, with the
imposition of US tariffs on imported
aluminium, sanctions on Rusal, production
disruptions at Alunorte’s Brazil operations
and weaker domestic demand growth in
China. As a result, aluminium prices were
extremely volatile. Prices on the London
Metal Exchange fell 23% in the second half
to US$1,800 per tonne from US$2,290 per
tonne in May 2018.
Sanctions imposed on the Russian
aluminium producer Rusal in April 2018
were lifted in January 2019. A production
embargo on the world’s largest alumina
refinery, Alunorte in Brazil (which accounts
for 10 percent of global alumina supply
excluding China), due to alleged
environmental breaches was lifted
although the resumption of full production
is still awaiting federal court approval.
Aluminium production and smelter
capacity is expanding cautiously in China
where environmental curbs are a little
less stringent than expected. Aluminium
prices may remain range bound in 2019,
depending on the utilisation of
capacities in China.
Products and consumers
Vedanta has the largest integrated smelter
in India with 2.3mtpa proposed capacity
and is the market leader in primary
aluminium with a 37% market share.
Our product range includes ingots, primary
foundry alloys, wire rods, billets and rolled
products.
POWER
In FY2019, 30% of our sales were to the
Indian market, specifically for use in the
construction, electrical and transportation
industries. This was lower than in previous
years as India saw a surge in imported
aluminium in 2018.
Growth in Indian demand driving
capacity increases
Vedanta operates a 9GW diversified
power portfolio in India consisting of 96%
thermal power and 4% from renewable
energy sources.
Vedanta boosted its sales to Japan and
South-East Asia in 2018. International sales
to our established customer base in other
key Asian, European and North and South
American markets also grew, increasing by
30% to 1.3 million tonnes this year.
Market drivers and opportunities
The domestic demand for aluminium in
India is expected to benefit from the
infrastructure projects prioritised by the
government. The automotive and food
packaging industries are also expected
to rapid urbanisation should augment
consumer demand; yet another positive
for the sector. Moreover, the per capita
aluminium consumption is far below the
global average. This offers huge
potential, given our demographic and
economic outlook.
With a production capacity of 2.3 million
tonnes, Vedanta is in pole position to take
advantage of these opportunities
India is the third largest electricity producer
in the world. The electricity generation
target for conventional sources for the year
2018-2019 has been fixed at 1,265 billion
units (BU), which represents growth of
4.87% over the previous year (2017-2018).
Between 2010 and 2018 electricity
production in India grew at a CAGR of
5.69%, driven by government initiatives and
schemes to increase electrification across
rural India. Since last April all villages in
India have had an electricity connection.
Products and consumers
Of Vedanta’s power portfolio, 37% is used
for commercial power while 63% is for
captive use. Nearly 95% of the power
generated for commercial purposes is
backed by long term Power Purchase
Agreements with local Indian
distribution companies.
Market drivers and opportunities
Demand for power in India is expected to
grow rapidly from 691TWh in 2007 to
1,894.7TWh by 2022, at a CAGR of 7%,
driven predominantly by the expansion in
industrial activities, a growing population,
rising per capita incomes, policy support
and increasing electricity penetration. The
government has also been supportive of
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MANAGEMENT REVIEW
growth in the power sector, delicensing the
electrical machinery industry and allowing
100% Foreign Direct Investment (FDI).
From April 2000 to June 2018, total FDI in
the sector was US$14.18 billion of which
US$6.84 billion was invested in
non-conventional sources. In the wake
of surging domestic coal production,
the country’s power sector is becoming
increasingly stable. In addition, in February
2018 the government permitted
commercial mining for thermal coal, which
will improve India’s self-sufficiency and
reduce coal and logistics costs.
As of December 2018, India had total
installed capacity of 349GW, of which
thermal constituted 223GW, nuclear 7GW,
hydro 45GW and renewables 74GW. Total
captive power installed capacity stood at
84GW. India currently has a demand/
supply gap of around 7.5% and is targeting
an additional 58GW of conventional power
by 2022. The target for renewable energy
has also been increased to 175GW by 2022,
of which 100GW will be produced through
solar power. Vedanta’s power portfolio is
well positioned to capitalise on India’s
growing demand for power.
IRON ORE
Iron ore prices lift in the last quarter
of 2018
The Platts 62% Fe CFR North China Index –
the price at which most iron ore across the
globe is sold – rallied by 9% y-o-y in Q4 to
average US$71.4 a tonne. The price, which
was sluggish over 2018 compared to rising
steel and high-grade iron ore prices, has
increased owing to various factors
including a delay in implementing China’s
winter production cuts, temporary
weather-related disruptions in Australia and
safety outages in Brazil. The price was also
supported by falling steel margins, which
reduced the incentive to use high-grade
ores in steel production.
Products and consumers
Iron ore is a key ingredient in steel, whicWh
is ultimately used in the construction,
infrastructure and automotive sectors.
Our iron ore mining operations ceased
in Goa from March 2018, pursuant to
the Supreme Court order. Meanwhile,
the permitted mining capacity at
Karnataka has recently been increased
to 4.5 million tonnes from the previous
2.29 million tonnes.
Market drivers and opportunities
Unexpected events impacted the sector
during the year. The major tropical cyclone
‘Veronica’ hit Australia, knocking six to eight
million tonnes off BHP Group's production,
while Rio Tinto is expected to lose about
14 million tonnes of output. The loss of
these exports came at a time when the
market was having to reassess the
longer-term impact of Vale's safety issues.
The tailings dam breach is expected to
have a major impact on the use of tailings
dams in Brazil, with tighter restrictions on
wet beneficiation and prolonged licensing
processes as a result. Weather-related
disruptions may cause a short price spike,
but Vale’s safety issues appear to be almost
structural. This means the supply gap will
have to be met by other producers. India's
exports almost doubled in March, but only
to 1.3 million tonnes. This provides a huge
opportunity to players who can step in and
ramp up quickly.
In addition, world steel production is
forecast to continue increasing by 1.8%
annually from 1,689 million tonnes in 2017
to 1,780 million tonnes in 2020, led by
growth in India and other emerging
markets. Production in China – which
represents half of world production – is
expected to taper in 2020, driven by an
expected slowdown in economic growth,
which will offset higher infrastructure
investment. This growth in steel production
in India represents an opportunity for
Vedanta to grow its domestic iron ore sales.
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Market Review
Continued
Market drivers and opportunities
The construction sector has been
identified as a pan-India steel demand
driver, on the back of strong infrastructure
development and housing demand; in
particular, for affordable housing. Projects
such as industrial corridors (connecting
existing industrial cities and developing
manufacturing sectors) and Sagarmala
(connecting states through waterways) will
increase India’s connectivity, reducing the
costs of transportation across Indian states.
The Smart Cities initiatives will further
boost urban infrastructure investment.
There are currently 99 smart cities planned
across India.
In addition, the outlook for India’s
manufacturing sector, which has been
lagging behind the service sector as a
growth driver, should improve. Firstly, the
Make in India initiative, which aims to
transform India into a global design and
manufacturing hub, will support the
further development of steel. Secondly,
many states are expected to develop
automotive and ancillary industries, to be a
global auto hub for small cars with a focus
on exports. Finally, some states are also
expected to strengthen their mechanical
machinery sectors.
All these factors point to a high potential for
steel demand growth in India. The speed
with which this potential can be realised
will depend on whether India can
successfully implement both its reform
agenda and infrastructure plans.
STEEL
Construction sector boosting steel
demand
Global crude steel production reached
1,808.6 million tonnes for the year 2018,
up by 4.6% compared to 2017. India’s
crude steel production was 106.5 million
tonnes, up by 4.9% on 2017, meaning that
India has replaced Japan as the world’s
second largest steel producing country.
While the steel demand recovery seen in
2017 continued in 2018, risks have
increased. Rising trade tensions and
volatile currency movements are increasing
uncertainty. As a result, steel prices are
expected to experience volatility in 2019.
But India’s steel demand is expected to
move back to a higher growth track,
supported by improving investment and
infrastructure programmes.
India’s steel use per capita for finished
steel products stood at 66.2kg, way below
the world average of 212.3kg, suggesting a
huge unrealised potential for steel
demand growth. Recently, India has been
trying to unleash this through an extensive
reform agenda and an ongoing push for
infrastructure development. These factors,
along with favourable demographics,
are improving the macroeconomic
fundamentals.
India was a net exporter of steel in the last
two financial years. However, the country
witnessed a change in the current financial
year with imports exceeding exports
during the period April to December 2018.
Products and consumers
Vedanta Limited completed the acquisition
of Electrosteel Steels Limited (ESL), an
integrated steel plant, on 4 June 2018. ESL
saw production increase by approximately
17% in FY2019 compared to FY2018. Wire
rod, TMT and DI pipe products were sold in
India, mainly to the construction,
infrastructure and automotive sectors.
COPPER
Consumption in India and China
fuelling demand
Refined copper consumption grew by 2.9%
in 2018 while demand in China, the largest
consumer of copper increased by 4.9%.
However, the tariff dispute between China
and the US, and the falling GDP in China,
led to increased market uncertainty and
falling copper prices during the year.
On the supply side, India faced a crunch in
the availability of refined copper due to
Vedanta’s Tuticorin smelter closure.
Chinese smelter output increased by 4.2%
in 2018, despite the closure of some
smelters for maintenance during Q4. In
Chile, new environmental regulations led to
smelters closing for maintenance, resulting
in a further supply crunch.
Products and consumers
Refined copper is predominantly used in
manufacturing cables, transformers and
motors as well as castings and alloy-based
products.
The Tuticorin smelter closure affected our
production in India. In FY2019, we
produced approximately 90kt of cathode.
Market drivers and opportunities
In the coming year, copper consumption
in India and China is expected to increase
by 11.8% and 1.6%, respectively. This rise is
driven by population growth, urbanisation,
the rise of the middle class and the
evolution of electric vehicles (EVs) and is
supported by government measures and
initiatives. Another major driver of
Chinese demand is the ban on Category 7
scrap imports.
On the supply side, there could be further
disruptions in copper production due to
the smelter upgrades in Chile following
the introduction of new environmental
regulations.
Our ability to take advantage of these
opportunities is largely dependent on the
re-opening of our smelter at Tuticorin.
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MANAGEMENT REVIEW Vedanta, as one of
the country’s largest
natural resources
companies, is
uniquely positioned
to leverage India’s
growth potential.
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Sustainability & CSR
Growing responsibly
We Are...
Growing together
with everyone
60
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 INTEGRATED REPORT
MANAGEMENT REVIEW GOVERNANCE
FINANCIAL STATEMENTS
KEY STATISTICS*
3.1 million
Community beneficiaries of Vedanta’s social
activities
(2018: 3.36 million)
58.6 million TCO2e
Carbon footprint
(2018: 52.3 million TCO2e)
24%
Water recycling rate
(2018: 27%)
14
Fatalities
(2018: 9)
3 million m3
of water saved
(target: 4 million m3)
0.47
LTIFR
(2018: 0.34)
1.6 million GJ
of energy conserved
(target: 2 million GJ)
US$45 million
Community investment
(2017: US$39 million)
*Due to its recent acquisition, numbers from Electrosteel
Steels Limited (ESL) have not been included in the HSE &
Sustainability numbers for FY2018-19. They will be included
from next year’s reporting cycle.
61
We believe that with our thrust and focus on
sustainability, we can advance both our
business outcomes and those of the people,
host communities and the environments
surrounding us.
Over the years, Vedanta has grown to become one of the
largest diversified natural resources company in the world.
Our Group has interests in zinc-lead-silver, oil & gas,
aluminium, power iron ore, steel and copper. All are mature,
high-performing businesses in their own right with
well-developed governance, HSE and community relations
management systems.
Throughout our growth journey, we have remained focused
on safety and sustainability, alongside our commercial goals
of increasing volumes, becoming the lowest-cost producer,
and improving margins. As a Group, we have sought to
embed a standardised, high-performance sustainability
culture across all our businesses while giving each the
autonomy to make day-to-day decisions. Against this
backdrop, we introduced the Vedanta Sustainability
Framework (VSF) in 2011. Its goal has always been to ensure
that each business integrates our sustainability principles
into their operational and decision-making structures.
Main picture: Green cover at Cairn operations
Inset: Project Samadhan at HZL – Promoting integrated farming
systems and livestock development
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Sustainability & CSR
Growing responsibly
To enhance our governance on
sustainability, the Company has a
Board-level committee for sustainability.
The Charter for the committee requires it
to ensure that the Group performance is in
alignment with the polices, standards, and
guidelines drafted in the Vedanta
Sustainability Framework. It is also
expected to advice the Board on emerging
sustainability trends so that the Company
can strategically address the issues in its
long term planning.
Our central oversight bodies, including the
Board and Group executive committees,
set performance expectations that include
sustainability metrics, and ensure that we
comply with global environmental social
governance (ESG) considerations. Based
on this guidance, the individual businesses
set their own strategy, technology
deliverables, production outcomes,
sustainability measures and other goals.
We are driven to achieve world-class ESG
performance and this ensures that
sustainability issues are central to Group-
level decision-making.
During the year, we have continued to
make progress against our priorities and
achieve positive results in some areas,
while reviewing how we operate in others
and taking steps to improve outcomes for
our stakeholders.
(including community engagement &
development initiatives, and human
rights) (Page 68); and
• People management for talent retention,
diversity of our workforce and providing
equal opportunities to all (Page 73)
Our sustainability roadmap sets out our
targets and tracks performance on the key
material issues.
We will be updating our materiality matrix
at the beginning of FY2020.
RESPONDING TO MATERIAL
CONCERNS
Our continuous engagement with internal
and external stakeholders enables us to
keep a finger on the pulse of the
expectations they have. Their views
(see Page 47) serve as valuable input to our
management group and help it to define
the material issues for the Company.
While we continue our efforts to improve
our systems and their performance in all
the key issues identified, based on the
external and internal stakeholder feedback,
the following areas have emerged as being
the most material in the last year
demanding either management or
stakeholder attention:
• The safety of our workforce (Page 64)
• Environmental management (Page 65)
• Retaining our social licence to operate
Below: Our employee from Cairn Oil & Gas interacting with the local community
62
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW OUR SUSTAINABILITY ROADMAP
Objectives and targets FY2019
Status Performance
Target FY2020
The safety of our workforce
Achieve a score >75% in six safety performance
standards
Average score achieved was 61%
Zero fatal accidents and an LTIFR of 0.30
14 fatalities; 0.47 LTIFR
Environment management
Achieve water saving of 4 million m3
Achieve fly ash utilisation of 75%
3 million m3
110%*
Continue our reduction in GHG intensity and formalise
our target
14.5% reduction; on-track to achieve target
Achieve 2 million GJ in energy savings
1.6 million GJ
Develop our capability and strengthen tailing
management practices across the Group
Audits completed; recommendations under
consideration
Retaining our social licence to operate
Complete the baseline and social impact assessments
in all businesses
Completed
Achieve score >75% in ten
safety performance standards
Zero fatal accidents and an
LTIFR of 0.30
Achieve water savings of 3.5
million m3
Achieve fly-ash utilisation of
80%
Reduce our GHG emissions
intensity by 16% from a 2012
baseline by 2020
Achieve energy savings of
1.95 million GJ
Third-party review of tailings/
ash dyke management
system and development of
site specific improvement
plan (India operations)
Ensure alignment of all BU
plans with issues identified
during baseline surveys
250 Nand Ghars to be constructed in FY2019, and
planning for additional 1,000 to be completed
358 Nand Ghars constructed. Planning for
additional 1,287 completed
1,200 Nand Ghars to be
constructed in FY2020.
Develop a standard policy on employee engagement
for the Group
Under progress
People and diversity
Continue to focus on Code of Conduct training for all
professional employees, including new hires
100% of new employees trained; existing
employees are given online training annually
Achieve 33% female representation at Vedanta
Board-level by 2020.
Work in progress. 12.5% of the Vedanta Board
is female
Focus on anchoring and engagement of high-potential
employees through our flagship programme
V-Connect
Initiative is directly anchored by the business
leadership team through their respective HR
teams. It is ensured that our professional
population is anchored by senior leaders across
the BUs
Roll out of employee
engagement platform across
the Group
A standard on-line community
grievance record/redressal
software (NIVARAN) across
the Group
Continue to focus on Code of
Conduct training for all
professional employees
including new hires
Achieve 33% female
representation at Vedanta
Board-level by 2020.
Diversity % improvement in
our campus hiring
programme by 5%
Focus on Right Management in Place in each SBU
There are 41 SBUs in place, each is led by SBU
president. SBU Management-in-place is regularly
reviewed by Group Chairman and Group ExCo
Ensuring Right ExCo &
succession for each business
1
The number exceeds 100% as we were able to utilise our legacy fly-ash waste for internal infrastructural development projects.
Achieved
In progress/Partially achieved
Not achieved
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
63
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Sustainability & CSR
Continued
A STRUCTURED APPROACH TO
SUSTAINABILITY
The Vedanta Sustainability Framework is
central to our sustainability agenda, and is
focused on our four strategic pillars:
1. Responsible stewardship
We are committed to safeguarding our
resources by monitoring, managing and
improving the Group’s health, safety and
environmental performance. Our vision
for ‘Zero Harm, Zero Waste, Zero
Discharge’ is the desired outcome of this
approach.
Focus areas: Code of Conduct, ethics,
health, safety & environment
2. Building strong relationships
We maintain an open and continuous
dialogue with our stakeholders. Our goal
is to ensure that we align our business
planning, community relations and CSR
programmes with stakeholders’ needs,
maintaining and strengthening our social
licence to operate.
Focus areas: stakeholder engagement
and management, human rights,
neighbourhood dialogue
3. Adding and sharing value
We drive economic empowerment and
generate shared value through
significant and relevant investment in
local communities and national
economies.
Focus areas: employees, communities,
business investments
4. Strategic communications
We are committed to transparent and
timely disclosure that builds trust. We
believe that clear and regular
communication and dialogue with all our
stakeholders helps to create a positive
environment for successful operations.
LTIFR
4
5
0
.
6
4
0
.
6
4
0
.
9
3
0
.
4
3
0
.
7
4
0
.
FY13-14 FY14-15 FY15-16 FY16-17
FY17-18 FY18-19
FATALITIES
9
1
2
1
8
9
7
4
1
FY13-14 FY14-15 FY15-16 FY16-17 FY17-18 FY18-19
RESPONSIBLE STEWARDSHIP
It is critically important to us that we take
care of the health and safety of our
workforce. We also seek to tread as lightly
as we can to minimise our environmental
impacts on those who live around us, and
to protect natural resources.
The safety of our workforce
Despite our continued efforts to improve
the safety systems across the Group,
this year saw the tragic loss of 14 of our
colleagues in work-related accidents.
Alongside identifying root causes,
plugging existing gaps, training the
workforce and management in identifying
safety hazards and making better risk
decisions, our leadership team has put its
own roles and responsibility under a
microscope. A key area of focus has been
the practice of Visible Felt Leadership on
safety, which requires all leaders to spend
more time on the shop floor, identifying
and correcting unsafe acts. In addition,
the team will shift its attention to
monitoring leading indicators, such as
time-spent-on-field, safety interactions,
checking and managing critical safety
risks, and proactively engaging with
long term business partners on their
safety performance.
Below: Safety is paramount at each step
We are driven to
achieve world-class
ESG performance and
this ensures that
sustainability issues are
central to Group-level
decision-making.
64
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW Chetna – a programme to raise safety
consciousness
We are determined that if any safety
incident occurs, we learn from it and use its
lessons to prevent any repetition.
An analysis of past incidents revealed that
many could have been avoided if workers
had been more aware of their surroundings
and practised safe behaviours. BALCO
launched ‘Project Chetna’ (Project
Awareness) to coach, assist and train the
workforce in recognising warning signals,
remaining focused on their task, and
applying known, safe behaviours that can
help prevent accidents.
The programme has trained over 1,600
employees and 1,100 contract workers, and
made safe actions and safe behaviours
clearer. As a result of this focus, the LTI
frequency rates have nearly halved from
the previous year.
Daily ‘visual management’ making
issues visible
At the Lanjigarh refinery, the team has
adopted a concept from the automotive
industry. They now have a visual
management system, with the idea of
making key business processes
literally visible.
This approach helps management teams
to identify any bottlenecks that need to be
resolved and eliminated in order to run a
successful refinery. A key part of this
approach is to resolve problems and
barriers in a structured manner.
All sections in the plant area are assigned
boards that detail:
• the safety measures required
• focus areas for safety interactions
• places where housekeeping inspections
will occur
• the high-risk tasks for the day and their
corresponding control measures
The boards also cover all the actions being
undertaken during the day, with a specific
focus of identifying any unplanned
activities and/or risks in the operational
area that may impact the refinery. They
also flag up any maintenance activities
that may need to be performed over the
next 24 hours.
The final assessment involves identifying
risks that the section may generate due
to its activities at the ‘one-week-out’
stage, enabling advance planning to
mitigate them.
This approach has allowed the plant
managers to systematically identify and
address risks to the plant and eliminate
safety hazards. As a result, the plant has
seen record month-on-month production,
coupled with zero-LTIs in over 28 million
working-hours.
This approach underlines the overall
philosophy of the Group when it comes to
running safe operations. While our safety
performance standards outline the
expectations and help set out guidelines to
prepare standard operating procedures, it
is practices such as these above that are
helping businesses implement safe
working conditions.
Additional practices such as Visible Felt
Leadership, improving the management of
safety critical tasks, and increasing
awareness, training, and accountability of
our business partners will help the Group
to deliver on its commitment of ‘zero harm’.
Statistics for health and safety
• 1.57 million man-hours of HSE training
delivered
• There were 110 LTIs and 14 fatalities
in FY2019
Managing our environmental
performance
Vedanta is committed to minimising the
Group’s environmental footprint. To do this
we have embedded efficiency goals across
the organisation focused on lowering our
airborne emissions, reducing our waste
and effluent volumes, and optimising the
use of energy and water. We have also
taken measures to protect the biodiversity
of our operational regions.
The Vedanta Sustainability Framework
(VSF) comprises comprehensive policies
and standards on water, energy and
carbon, waste and biodiversity. The
framework, combined with objectives and
targets on energy, GHG, and waste and
water management, ensures that each of
our businesses follows the same high
standards of environmental management.
Tailings dam management
Tailings dams and ash ponds are inherent
in mining operations. However, as the
recent Vale disaster in Brazil has
demonstrated, if breached they can
pose a significant threat to neighbouring
communities as well as damage the
environment.
At Vedanta, our principal concern is the
safety of the people who live downstream
from our dams. Over the last 18 months the
Company has taken active measures to
improve the management of our dams and
ponds. These started with an independent
assessment, and over the last year we have
brought onboard the global experts Golder
Associates to review the integrity of our
dam structures and their associated
management practices. The review has
been completed at all our dam locations
and we are now reviewing the
recommendations for implementation.
The Company has also introduced a
Tailings Dam Management Standard to
ensure that all our Group companies follow
consistent international best practices.
Learnings from the review were also
supplemented by measures to prepare the
dams for the monsoon season, which
could experience overflow conditions in
the event of heavy rainfall.
Other steps we have taken to improve
oversight include daily/weekly checks
(as required); revising the risk matrix;
introducing online surveillance systems;
conducting liquefaction analysis;
enhanced training for all key personnel;
improved documentation; quarterly
dam-state reviews by senior
management; and developing a
closure plan for all facilities.
Although there is still much to do, we
believe we have initiated a structured
management approach that will minimise
the risk of a future dam breach.
Water management
Managing water effectively is critical, both
for our operations and for the communities
who live near us. By understanding how we
source and use this resource, our
businesses can de-risk their operations
from unplanned stoppages caused by
supplies drying up.
Last year, we performed a water-risk
assessment at 25 of our most significant
business locations. This determined the
risk based on water-stress information
available in global and public databases
and from site-specific measurements.
The approach evaluated physical, social/
regulatory, economic and business risks
related to water. In addition to
understanding each location’s risk, our
goal is to standardise this risk assessment
across our Group companies.
Our findings confirmed how our operations
in the high water-stress regions of India
(Rajasthan, Punjab, Tamil Nadu) had a
greater risk of shortages over a period of
time than our businesses in other locations.
This is because of competitive pressures
for water usage in those regions. Each of
our businesses has started to put in place
appropriate mitigation measures to
counter these risks.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
65
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Sustainability & CSR
Continued
The road to improved water
management at KCM
The Konkola mines of KCM have a
70-year legacy of discharging high-TDS
water into the local river. The practice,
which existed before KCM became
part of the Vedanta group has been a
sore point with local communities
and has been a cause for
environmental concern.
In 2017, KCM implemented a water
management programme to
permanently bring the operations to
zero water and zero tailings discharge.
This programme is supported by
specialist consultants and has regulatory
approval from the Zambia Environmental
Management Agency (ZEMA). The
programme is being implemented under
the guidance of ZEMA and local
communities and a governance
committee has been formed, including
the ZEMA Director General and the CEO
of KCM.
The programme to address
environmental concerns and bring KCM
to a zero discharge site includes:
• A Tailings Dam Water Recycling
Project to recycle water back to
the plant
• De-silting works at the Pollution
Control Dam (PCD)
• De-silting works of other streams
• Installation of a catchment pond
immediately downstream of the
Tailings Leach Plant
• Installation of online monitoring
equipment for discharge control
• Following remediation, a review and
Environmental Impact Assessment of
off-site areas to consider further
remediation options
• Installation of solar powered
community water boreholes including
a water reticulation piping network for
local communities to ensure a
continuous supply of drinking water.
As of FY2018-19, progress has been
made on several of these sub-projects
and we are confident that we will have a
zero discharge plant in the near future.
Total water consumption (million m3)
Water recycled/reused (million m3)
Water recycled (%)
FY2019
FY2018
FY2017
278.6
67.58
24.25
280.01
277.60
74.40
26.60
66.81
24
Energy and carbon management
Our energy and carbon management adopts a two-pronged approach: improving energy
and process efficiency, and diversifying our energy portfolio to include renewable energy.
We are committed to invest in new technologies and processes to enhance our energy
efficiency.
Energy consumption (million GJ)
FY2019
FY2018
FY2017
Direct energy consumption
Indirect energy consumption
Total energy consumption
485.38
68.40
425.5
21.12
553.78
446.62
413.39
14.61
428
Climate-related business risk
Climate change continues to pose an ever-greater risk to the planet. India, which has set
ambitious targets to reduce its carbon intensity by 33-35% by 2030, and to source 40% of
its electricity from non-fossil sources, continues to push ahead to meet those targets.
Vedanta’s continuing commitment to decrease our climate change impact is delivering
measurable results. Last year, we said we expected to reduce our GHG intensity by about
16%, from a 2012 baseline, by 2020. We are on-track to meeting this target. By FY2018-19
we had achieved a reduction of 14.5%.
GHG emissions (million tCO2e)
FY2019
FY2018
FY2017
Scope 1 (direct)
Scope 2 (indirect)
Total
54.40
4.22
58.62
51
1.2
52.2
51.7
1.4
53.1
Improving efficiencies in the aluminium potline at Jharsuguda
The smelting process to produce aluminium is executed in pots. In Smelter 1 there are 600
pots in the pot room. Smelting is a continuous process and cannot be stopped and started
frequently. The rectifier, which provides DC power to the potline for the electrolysis
process, is therefore key to the smelting process.
The rectifier converts AC current to DC. During the project initiation phase, the rectifier
conversion ratio was measured at 98.32% efficiency. The target set by the team was to
drive efficiency up to 98.50% as this could result in substantial cost and energy savings.
Through observation, data and experience, the team identified that some initial quick-wins
could be achieved by modifying specific processes, such as cleaning of the heat
exchanger in the rectifier units, optimisation of the de-mineralised water-flow, and the
cooler slot.
Outcome
These operational and process improvements, such as scheduled calibrations, changing
nuts and bolts during overhaul, and dismantling electrolysis plates, led to enhanced
efficiency of 98.5%, and savings of:
Energy saving
Coal consumption reduction
Carbon dioxide reduction
6.9 million units per annum
4,800 tonnes
7,040 tonnes
66
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW Innovating to use smelter waste in
cement and highway construction
For several years, we have also partnered
with reputable R&D organisations and
corporates to use slag in cement and
highway construction. This has received
approval by Bureau of Indian Standards
and the Indian Road Congress. In FY2019,
over 300,000 mt of slag was used in
cement manufacturing and road
construction. This freed up several
hectares of land for alternative uses,
replaced virgin red ochre and limestone
and reduced CO2 emissions. Similarly,
based on studies conducted by various
government organisations, Jarosite and
Jarofix have been determined to be
commercially viable for usage in cement
industry and road construction. In FY2019,
over 13,000mt of Jarosite was used in the
cement industry while over 70,000mt of
Jarosite and Jarofix was used in road
construction projects.
Recycle – Waste to wealth
Our ancillary product plant at the Dariba
Smelting Complex is an important ‘waste
to wealth’ initiative that generates value
from certain recycling activities. The plant
treats smelting residues to produce key
consumables such as copper sulphate,
zinc sulphate and potassium antimony
tartarate, which will be recycled back into
beneficiation and smelting processes.
Following its success, a new ancillary unit,
expected in H1 FY2020, is under
construction at the Chanderiya lead zinc
smelter to treat all smelting process
residue, including work-in-progress
material such copper dross, purification
cake, antimony dust and cadmium sponge.
Below: Geotextile laid on dump slopes for dump
stabilisation at Codli mine
Air quality
We are committed to identifying and managing our airborne emissions. We monitor
particulate matter (PM) and SOx as part of our ambient air quality process. We also monitor
as applicable lead and fluoride emissions from our operations.
Stack emissions (in MT)
Particulate matter
Sox
2018-19
2017-18
2016-17
10,106
8,837
11,056
243,472
191,751
178,324
Waste
To comply with our ‘Resource Use and Waste Management’ technical standard, we first
reduce our waste, in quantity as well as quality (reducing the toxicity), and then recover and
recycle where possible (either in-house or through authorised recyclers). The final stage is
disposal in landfill or by incineration, using authorised, licenced and secured landfills.
Non-hazardous, High-Volume and Low-Effect wastes such fly ash, red mud and phospho-
gypsum are the predominant wastes generated from our operations. Hazardous waste
includes used/spent oil, waste refractories, aluminium dross, spent pot lining and residual
sludge from smelters.
High-Volume-Low-Effect Waste recycling
(million MT)
Generated
5
2
.
1
1
■ Fly-Ash ■ Slag ■ Jarosite ■ Red-mud
2
6
0
.
2
5
0
.
5
7
.
1
Recycled
9
3
.
2
1
9
4
0
.
8
7
0
0
.
6
0
0
.
HINDUSTAN ZINC: COMMITTED TO ACHIEVE ZERO WASTE
Responsible waste management is a fundamental priority across all Vedanta businesses.
At Hindustan Zinc this requires particular management focus since the refined metal is
only around 8% of the lead-zinc mineral ore.
The business applies the ‘4R’ waste strategy – reduce, re-use, recycle, & reclaim – and
disposes any residual waste through most eco-friendly avenues available.
Reduce – Fumer: preventing waste at source
In recent years, Hindustan Zinc has been converting Jarosite, a major waste from zinc
smelters, into a non-hazardous material by using state-of-the- art 'Jarofix' technology. We
are now about to go a step further by adopting ‘Fumer’ technology, stopping the
generation of jarosite at the source itself, and recovering metals from waste while
generating slag to be used by cement industry.
The first zinc Fumer project, scheduled for FY2020 at Chanderiya, will have a waste
treatment capacity of 160,000 mt per annum. The project will advance our goal of zero
solid waste and will reduce our land requirement for Jarofix storage by one hectare
annually. Fumer plants are also planned at other smelters in Chanderiya and Dariba.
Re-use – Turning tailings into fillings
Tailings are the materials left over from separating the valuable fractions of ore from
uneconomic waste. They are usually managed through surface disposal in lined pits,
but these require huge land areas.
However, instead of disposing of tailings, we have started a unique trend in mining in India
with the successful commissioning of ‘paste-fill’ plants at our Sindesar Khurd and Rampura
Agucha mines. Mining operations require filling of stopes/voids to ensure stability and to
control subsidence. Traditionally this has been executed by using hydraulic filling with
cement, but a new concept is to use paste-fill technology in which the tailings are modified
into a semi-solid paste which is then used to fill the empty underground voids. The paste
filling process is fast and uses almost all the tailings, minimising the need for surface disposal.
With the successful commissioning of paste fill-plants at Sindesar Khurd and Rampura
Agucha, along with the existing facility at Rajpura Dariba Mine, we will reuse more than 60%
of our tailings and avoid surface disposal. This will increase the life of the tailing dams and
saving hectares of additional land required for expansion of these dams.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
67
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Sustainability & CSR
Continued
Reclaim – Wastelands hosting
solar farms
Wherever we need to occupy land for
mining and smelting waste, we are
ensuring it is put to maximum use. We have
used the Jarosite pond at the Debari
smelter, the old tailing dam at the Dariba
mine and the waste dump at Rampura
Agucha to double up as solar farms. We
have installed 38MW of solar generation
there that would otherwise require an
additional footprint of 190 acres.
In addition:
• We have rehabilitated an old tailing dam
after stabilising the tailings and then
planted more than 150,000 trees over a
38-hectare area. This first of its kind
project was undertaken jointly by HZL,
Dept. of Bio Technology (GoI), NEERI and
the Nagpur & Swedish International
Development Agency.
• We also have initiated ‘Zinc Football’- a
unique programme in India. At the heart
of this initiative is the Zinc Football
Academy at Zawar, a residential
world-class football coaching facility.
This facility was converted from old
tailing dams, and today gives hand-
picked kids, chosen from 4,000 aspiring
footballers from all over Rajasthan,
opportunities and guidance to be
developed into professional footballers
alongside their academic education.
STATISTICS FOR ENVIRONMENT
Successes
• We recycled 92% of High-volume and
low-effect waste in sustainable
applications
• Our GHG intensity reduction target, from
a 2012 baseline is 14.5% against an
expectation of 16%, by 2020
Work in progress
• We saved 3 million m3 of water against
targeted savings of 4 million m3
• We conserved 1.6 million GJ of energy
against targeted savings of 2 million GJ
BUILDING STRONG RELATIONSHIPS
Human Rights
We regard upholding human rights as a
fundamental responsibility, and this is
brought into particularly sharp focus
given that most of our operations are
performed in developing countries. It is a
material consideration across all our
business decisions.
Our Human Rights Policy is aligned with the
UN’s Guiding Principles on Business and
Human Rights, and includes strict
prohibition of child or forced labour –
either directly, or through contract labour.
These are non-negotiable offences at
Vedanta and we have mandatory
systems in place to enforce this policy at
all our operations. Further, we carry out
periodic inspections of our remote mine
locations and require proof of age for all
contract workers.
Additionally, our Code of Business
Conduct and Ethics underpins our
approach to protect the fundamental rights
of all our direct and indirect employees,
communities and immediate supply chain.
We uphold our workers’ right to freedom of
association. The collective bargaining
agreements are based on transparent and
fair discussions between the management
and union representatives. Vedanta’s
Suppliers’ Code of Conduct is
Below: Captive Power Plant at Chanderiya Smelting Complex
implemented as part of the terms and
conditions of supplier contracts across the
Group and all new suppliers are required to
sign, endorse and practise this Code.
We also operate a Supplier & Contractor
Sustainability Management Policy. Both the
Code and the Policy clearly communicate
our expectations of suppliers: to comply
with all relevant legislation and follow our
policies while executing work for Vedanta,
or on our behalf.
Adding and sharing value
Our operations are mainly located in the
emerging economies of India, South Africa,
Namibia and Zambia. We believe that we
have an important role to play in
developing societies and communities
where we operate, enabling them to share
in the value we collectively create.
Our approach
We are committed to giving back to the
stakeholders who play a vital role in
powering our growth. Reducing the social
and economic divide through generating
economic value, distributing wealth,
investing in employees and enhancing
standards of living are all key elements of the
Vedanta Sustainability Framework. We not
only drive economic growth through taxes,
royalties, wages and supplier contracts, but
our operations also help to provide the
products these communities need to further
their development; for example, through
infrastructure and housing.
Communities
Vedanta works towards a larger goal of
creating enduring value for the
communities from where it operates.
Proactive engagement with communities
helps to resolve concerns they may have
about our operations. It also allows us to
understand their expectations of the
Company, and so help us develop a
comprehensive engagement strategy.
This strategy includes creating
opportunities for employment, using
the services of local vendors, and
implementing focused CSR and
community development activities.
Collectively, these actions allow us to
create a positive social impact. In some
instances, like at Tuticorin, local
stakeholders have sought to withdraw
their social licence to operate, resulting in
a stoppage of our operations. When we
encounter such situations, our teams
have taken a step back and sought to
understand the root cause of the
discontent. Steps have been taken to
modify our response and engagement
with the communities – with increased
stakeholder interactions, review of our
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MANAGEMENT REVIEW policies and procedures, and where
required, steps to respond to
stakeholder concerns.
The majority of our initiatives are identified,
developed and carried out in collaboration
with local government bodies and
community organisations. They are also
in alignment with the needs of the
communities, and the Company has
committed to align its CSR activities to
the priorities of its neighbourhood
communities & also national/international
priorities, including the Sustainable
Development Goals. Almost all our
programmes, follow a bottom-up
community engagement approach.
This collaborative approach ensures
community ownership, suitable project
design, effective delivery and post-project
sustainability. Apart from communities,
we also strongly believe in partnering with
government agencies, corporates, civil
society organisations & community-based
organisations to carry out durable and
meaningful interventions. This ‘4Ps’
model (public-private-people-partnership)
has inspired us to participate in
ambitious long term projects such as the
Nand Ghar initiative.
All our CSR programmes are governed by
the Vedanta CSR Policy, and Corporate
Technical Standards that are part of the
Vedanta Sustainability Framework.
Further, in order to benefit from diverse
perspectives, and in keeping with a culture
of collective leadership, Vedanta has
formed a CSR council. The council is led
by a senior business leader comprises of
CSR Heads & CSR executives from the
different Business Units. The council is
responsible for governance, synergy and
cross-learning across the Group CSR efforts.
It meets every month and reviews the
performance, spends and outcome of CSR
programmes for all Business Units. The
council is instrumental in implementing
improvement projects to create a seamless
enabling eco-system for Business Units to
carry out best-in-class community
development programmes.
Vedanta has a strong Board CSR
Committee, which includes senior
Independent Directors. The Committee
provides strategic direction for CSR
activities, and approves its plans and
budgets. It also reviews progress and
guides the CSR teams towards running
well-governed and impactful
community programmes.
In FY2019, Vedanta spent US$45 million
on social investments and CSR activities.
This is 15% more than the previous year’s
US$39 million. This money is spent across
Above: Nand Ghar – Supporting early
childhood education
1,201 villages, benefiting nearly 3.1 million
people.
Project updates
1. Nand Ghar and Children’s Well-being
Projects
The importance of education for social
growth and upliftment is undisputable
and for Vedanta this is a very important
pillar of its work with communities. Our
various education and childcare
initiatives have reached over 155
thousand children.
500 Nand Ghars: Preparing India’s
future
Vedanta’s Nand Ghar ‘anganwadis’ have
been designed to support the Indian
Government’s Integrated Child
Development Services (ICDS), a flagship
programme for child and maternal health.
These rural child-health centres provide
a community social hub and access to
services that every young child needs.
They provide early years education,
nutritious food, safe play areas and
television for interactive learning, and are
equipped with rooftop solar panels for
24x7 electricity, water purifiers and
clean lavatories.
Healthcare services are also delivered by
a visiting mobile health van, and
importantly the centres also give local
women access to a range of
opportunities to learn new skills.
During FY2019, Vedanta opened its 500th
centre, at Chaksu Block in Jaipur, and as
of this writing we have built 502
operational Nand Ghars across
Rajasthan, Uttar Pradesh and Madhya
Pradesh, transforming the anganwadi
landscape of India. The initiative is
delivering impact at scale, with more
than 17,000 children receiving pre-
school learning with advanced teaching
methods, and over 11,000 enjoying
nutritious meals every day.
While this 500th is a major milestone,
we have greater ambitions: Vedanta is
working to open 4,000 Nand Ghars
across India. The project ultimately aims
to impact 85 million children and 20
million women across 1.37 million
anganwadis in the country.
Our Founder and Chairman Anil Agarwal
said, “We strongly believe that a nation
can only progress by investing in the
future of women and children. This
initiative addresses issues relating to
pre-primary education, healthcare,
nutrition for children, and economic
empowerment for women in rural India.”
As part of the Khushi initiative, HZL, in
partnership with Government of
Rajasthan strengthens the functioning of
3,089 ICDS centres (called Anganwadis)
in the five Districts of Hindustan Zinc’s
presence, reaching over 60,000 children
and caters to the health, nutrition and
pre-school needs of children in the
formative 0-6-year age group. The
project also conducts periodic
assessments to track developmental
metrics of the children. This year an
average increase of 11% in children’s
learning capability was identified
through these standardised
assessments. Attendance also saw an
increase with the average attendance
increasing from 44% two years ago to
60% now.
Vedanta Limited Jharsuguda initiated a
project called ‘Vedanta Vidyarthi Vikas
Yojana (VVVY)’ in the year 2009 to
strengthen the education standards of
secondary school students through
remedial coaching classes. Since the
beginning of the project, quality
education has been provided to the
students of standards 8 to 10. Significant
work has been undertaken to improve
the quality of education provided and
this has improved the pass percentage
of children in their school exams. To
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Continued
date, 3,975 students have been enrolled
under VVVY project. 1,346 students
appeared in matriculation examination
and 1,130 students have successfully
passed with good marks.
At KCM, the childcare programme is
implemented in partnership with NGOs
and community as implementing
partners in order to build their capacity
and promote community ownership of
the project. The early learning and
nutrition programme has benefited a
total of 657 children to date. Additionally,
the company also provides scholarships
to bright students in its areas of
operation in order to develop young
people to take up careers in mining in
future. The company provides
scholarships to pupils at secondary and
tertiary levels, which has benefited over
1,000 students. The students study for
degree programmes in the fields of;
metallurgy, mining, engineering
and medicine.
Konkola Copper Mines: Empowering
children through education
Konkola Copper Mines (KCM), the largest
copper producer in Zambia is
committed to bringing about social and
economic empowerment in the region.
One of the company's initiatives is
providing support to local schools
through infrastructure development to
enhance the learning environment.
For the last four years, KCM has been
working on a school improvement
programme at Shimulala, situated on the
outskirts of Chingola town in the copper
belt region of Zambia. The programme
included constructing a classroom block
and toilet facilities. transforming it from
being a wood ,mud, and grass thatched
structure. The school now provides
high-school education and has qualified
as an examination centre for Grades
seven (7) and nine (9). This development
has put an end to the 10 kilometres
distance, many students had to travel to
Above: Grooming young minds for
tomorrow – KCM supported Ndeleni ECCED
centre, Chingola
Above: Developing communities through women empowerment
sit for examinations at another school,
an ordeal which negatively affected girls,
who consequently dropped out
of school.
Another major contribution from KCM
has been the installation of a solar-
powered borehole, which provides piped
water to students and surrounding
communities. Jennifer Kapitiya is a
16-years-old grade nine student at
Shimulala primary school who has
decided to return to her former school
because of improved water and
sanitation conditions. “My elder brother
and I left the school because of poor
quality of water, we used to experience
diarrhoea regularly. Last year, I came
back because we have clean water and
I will write my exams here,” she said
As a result of all these initiatives,
enrolment, retention and the pass rate
for the school has improved, with the
school recording a 100% pass rate for
two consecutive years. In particular, girls’
enrolment and retention, has improved
spectacularly.
2. Women’s empowerment
Women's empowerment is all about
equipping and enabling women to make
life-determining decisions. Vedanta
recognises this need for empowering
women and is running several projects to
help communities take a step towards a
more equitable future. The programmes
are associated with around 40,000
women (up from 28,000 last year) and
amongst them 3,600 women have
started/revamped their own micro
enterprises. One of our interventions in
this area is the Subhalaxmi Cooperative
Society in Jharsuguda, which has
emerged as a model community-based
organisation. The cooperative has
successfully completed 10 years of
empowering women since its inception
and is currently touching the lives of
3,793 members in 71 villages. The
cooperative, aided by this programme,
has been able to generate funds of `2.52
crore and there has been a significant
increase in the income of its members.
HZL is running a similar programme
called Sakhi which started three years
ago and now has 1,922 SHGs connecting
the company with 23,954 women. The
total savings accumulated through this
project are now at `6.22 crore and the
total loans disbursed amount to `17.13
crore. This money is used by members for
household consumption, agriculture and
health & sanitation. 492 women have
used the loans to create new enterprises
or expand existing enterprises.
3. Healthcare
There is a great disparity in the quality
and coverage of medical treatment in
India. The majority of the rural population
lack basic primary healthcare and given
that most of our operations are also in
rural areas enabling rural communities to
have access to affordable and quality
healthcare is an important focus for us.
The Vedanta Hospital at Lanjigarh
continues to provide much needed
healthcare to thousands in the District of
Kalahandi, Odisha. This year, the hospital
has seen a total footfall of 67,425
patients, of which nearly a third were
new patients – a testament to the
effectiveness of the services provided.
A further 12,988 patients were treated
through the Lanjigarh team’s Mobile
Health Van programme.
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MANAGEMENT REVIEW VMRF
BALCO has established the Vedanta
5. Skilling the youth
To maximise the output from the
immense demographic dividend India
has, it is imperative that the youth are
trained in skills suited for the current
economic scenario. With the aim of
channelling this untapped potential the
company is running a lot of skill
development initiatives providing
training to more than 3,000 youths.
BALCO in partnership with IL&FS is
providing training to youth in five
different potentially high employment
trades – Hospitality, Welding Assistant,
Industrial stitching, Fitter Fabrication and
Electrician. The institute has provided
assured employment opportunities to
7,800 students since the inception of its
operations. In Thoothukudi, Sterlite
Copper through its Tamira Muthukkal
project has provided vocational training
to 2,000 youth and currently covers 500
more beneficiaries helping them gain
skills, thus increasing their employability.
A few other programmes run by HZL,
also aim to improve the skills of the youth
of Rajasthan and increase their
employability. HZLs Skilling and
Entrepreneurship centres provide
training to youth to become Domestic
Electricians, Security Guards, General
duty assistants, Sales entry and Data
entry operators and in Micro Finance
work. Currently, 160 students are being
trained and the plans are to train 700
youths each year. Through other
initiatives like the Mining academy,
ITI training at Maruti, Business Process
Outsourcing (BPO) training, the
company has been able to train 559
youths this year.
KCM implements a livestock-based
Sustainable Livelihood Programme that
aims to build capacity of small-scale
farmers through training and provision of
livestock for rearing and income
generation. The project has benefited
over 1,539 households with 4,196
livestock placed in three districts. KCM
partners with NGOs, government
departments and community in
implementing the programme.
Another programme – the Leather
Cluster Project has been developed for
purpose of empowering youth and
women through training, provision of
equipment and setting up workshops for
entrepreneurship and income
generation. To ensure project success,
KCM has partnered with the community,
a region body called Africa Leather &
Leather Products Initiative and
government Ministry of Commerce
and Trade.
KCM also implements an adult literacy
programme, which has benefited over
300 adult learners who have
successfully obtained a grade 12
certificate. KCM implements its
education programme in collaboration
with the Ministry of Education. Under this
programme, the company provides the
financial support and teaching aids while
government covers infrastructure and
human resources.
6. Environment protection &
restoration
In our operations we make it a priority to
operate in harmony with the natural
environment. The company is
committed to safeguarding the
environment and makes extensive
efforts to protect and restore nature.
Pasumai Thoothukudi, an initiative by
Sterlite, launched on the World Forest
Day with a vision of developing a green
belt in Thoothukudi is an illustration of
the significance of this commitment for
the company. The Company aims to
plant 1 million trees by the culmination of
the programme.
Medical Research Foundation (VMRF),
a voluntary, non-profit organisation to
prevent, control and eradicate cancer
and illnesses related to it. BALCO
Medical Centre, a state-of-the-art
oncology facility in Naya Raipur, is its first
flagship initiative. As the first super-
specialty hospital with the capability to
treat cancer, BALCO Medical Centre’s
genuinely colossal impact is validated by
the reception it received from the people
and the milestones achieved – over
4,000 patients were served, more than
230 patients underwent radiation, 250+
surgeries were performed and over
1,000 chemotherapies were carried out.
KCM implements the Clean Water
Project for over 8,000 people in
neighboring local communities as one of
its key CSR initiatives. The programme is
implemented in partnership with local
organisation called Davis & Shirtliff and
local Community Development
Committees who are trained in handling
the facilities and manage it as part of
entrepreneurship.
4. Agriculture and animal husbandry
In much of rural India, the communities
continue to rely heavily on agriculture and
animal husbandry. We therefore follow a
livelihood development approach of
integrating agriculture, dairy, water
management, technology, farmer’s
organisations and market outreach. To
increase the income of farming
community in Barmer through
productivity enhancement of agriculture
and livestock, project Unnati, a Cairn CSR
initiative, was set up. More than 10,000
farmers have benefited through various
interventions like horticulture
demonstrations, construction &
renovation of traditional water harvesting
structures like KHADIN. Project
SAMADHAN by HZL aims to improve the
returns from Agriculture & Livestock for
about 30,000 families. By the end of this
year, the project had successfully worked
with 8,660 farmers on agriculture-related
activities and 8,944 farmers on livestock-
related activites.
In Jharsuguda, to secure economic
prosperity among identified households
of Siripali village, project Jeevika
Samriddhi was launched. The project
aims to augment irrigation infrastructure,
promotion of advanced agriculture,
application of bio-fertiliser and
pesticides and making farming a
remunerative profession. 111 farmers are
benefiting from this project and because
of this project, the irrigation potential of
the village has increased by 21.34%.
Above: Working for the sustainable livelihood of the community, Chililabombwe
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Tree planting activities at Nchanga
KCM believes that tree plantation is the
key to mitigate climate change and
boost biodiversity. With this conviction,
the business has been actively planting
trees in its working areas and
surrounding communities since 2007,
with the count now exceeding one lakh .
Nchanga Business Unit in Chingola has
been one of the leading locations for the
drive with many projects underway.
Prominent among these is the Green
Energy (Pongamia) project which
commenced in 2016 with 2500 trees of
16 different varieties of Pongamia ,
planted in TD2 area, which contains
residue tailings with no nutrients to
support vegetation growth. These trees
species will be used for remediation of
overburden sites as well as generation of
the Green Energy in Zambia once
commercialised on a 50ha land.
As on date, more than 35,000 trees have
been planted at Muntimpa tailings dam
(TD5), overburden dumps and other areas
in the plant. In FY2019, KCM has planted
more than 1,000 species of Eucalyptus,
Acacia Pine and a few other varieties at
the site. which has gone a long way in
preventing gully formation, reducing dam
water levels, serving as wind breakers and
providing dam wall stability.
Tree planting has also been embedded
in its community relations activities and
various types of trees including fruit
trees are planted partnering with the
communities on a yearly basis.
7. Sports & culture
Sports, at an individual level, helps build
character, benefits health and for
talented individuals becomes a source of
livelihood. However, it is at a societal
stage where sports can have a value-
altering effect which can lead to a more
tolerant and inclusive society. Vedanta
identifies this dual impact that can be
achieved through sports and thus its
sports initiatives are focused on two
main objectives; Sports for all and Sports
for excellence. Vedanta through its
football initiatives in Rajasthan’s by
Hindustan (Zinc Football Initiative (ZF)),
and in Goa by the Iron Ore Business
(Sesa Football Academy (SFA)),
established on a reclaimed mine has
taken great strides in getting closer to
reaching these objectives. Zinc Football
trains around 2,000 young people, both
girls and boys in its 64 Zinc Football
schools. Sesa Goa also has four similar
centres training 500 children on a
weekly basis. These centres enable the
game to reach the masses and help
create a culture of sports in the country.
Both academies have their centres of
excellence with state-of-the-art
infrastructure that have not just
developed players for their respective
state teams but also contributed to the
national setup with seven alumni of SFA
playing for the Indian national team and
eight playing in the elite Indian Super
League. The second edition of ‘Vedanta
Women’s Football League’ saw the
involvement of 160 female football
professionals and provided a platform
for them to showcase their talents.
KCM Sponsors 2 local football clubs
namely; Nchanga Rangers and Konkola
Blades Football Club in Chingola and
Chililabombwe. KCM football clubs
works in collaboration with the Football
Association of Zambia (FAZ) who
administers football in the country.
The clubs are run through employee
volunteerism and participation from
the community.
Additionally, the Company also promotes
the preservation of cultural heritage
through cultural dance events and
support to traditional ceremonies in
collaboration with the Cultural Heritage
committees and the National Arts
Council. KCM uses the platforms to
sensitise the community regarding
social, environment, safety, health and
security issues that are affecting the
Company and the community.
8. Community infrastructure
Infrastructure development provides
impetus for economic growth and it is no
different for the villages in our operational
areas. It not only helps elevate the quality
of life in the villages, but also forms the
foundation for socio-economical
upliftment. The company recognises this
need and therefore is aiding the
operational villages in developing basic
infrastructure, such as school toilets,
drinking water projects, sports infra, local
drains and community centres, as per
local needs.
Clean drinking water for
communities
KCM has strongly committed to Water
Sanitation and Health (WASH) pledge and
contributes significantly to promoting
universal and equitable access to safe
and affordable drinking water.
Water quality has been a lingering issue in
the Chingola region. A study on
Sustainable Livelihood Baseline Report
Chingola & Nampundwe (December
2012), conducted by Village Water,
Zambia found that most of the people in
rural parts of Chingola get their drinking
water from unprotected wells which are
not safe; causing health issues like
diarrhoea, especially among the children.
Above: Chingola peri-urban solar powered
borehole: Harvesting the sunlight
Above: Zinc Football Academy – Building character and fueling excellence
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KCM has implemented a project aimed at
bringing clean water to more than 8,000
inhabitants in five peri-urban areas of
Chingola to support national efforts of
maintaining high health standards in
communities. The water facilities
comprise of boreholes, purification plants
and 21 water distribution points aiming at
alleviating problems of water in the areas
and improving sanitation and hygiene.
The water from the facilities meets World
Health Organisation (WHO) standards
and has been certified fit for drinking by
the Zambia Bureau of Standards (ZABS).
The Project is modelled on shared use of
water facilities and the Company has
partnered with the government in this
for promoting community development.
During the implementation period, KCM
worked with a local water solutions
provider Davis & Shirtliff and Community
leaders organisations).
The facility at Shimulala and Kalilo
communities has enabled running water
in two health posts, which has
significantly improved the delivery of
health services in the areas. The nurse in
charge of Kalilo Health Centre on the
outskirts of Chingola Lesser Silungwe
says that there is a sudden inundation of
people seeking health services, especially
pregnant women. In her words, “Women
were not coming to give birth here
because of the requirement to bring with
them some water. But suddenly we have
seen numbers increase from seven
women to an average of 27 in a month.
All this is attributed to the availability of
the clean water provided by KCM.
The water borehole has had an
overwhelmingly positive impact on
our operations at the clinic.”
The water facility has also been extended
to a local school in Shimulala area. This
has helped the students to access water
within the school premises and has
improved pupil retention especially
girl students.
This conscious effort of KCM focuses to
uplift people’s standards of living
anchored on four pillars of the Company’s
corporate social responsibility (CSR),
which are education, health, sustainable
livelihoods and sport. Not only has the
project been of tremendous benefit to
the communities, it has also helped build
trust between the company and the
local community, significantly improving
our social licence to operate.
Above: Nurturing young talent for future leaders
Statistics for community projects
•
In FY2019, we invested US$45 million in
social investment programmes
• 1,201 villages benefiting from our CSR
programmes
• There are 3.1 million beneficiaries of our
community development programmes
• Innovation
We encourage innovation that leads to zero
harm, zero waste and zero discharge, and
we are committed to optimising the use of
our natural resources, improving
efficiencies and maximising recoveries of
by-products.
PEOPLE AND CULTURE
Vedanta has always aspired to build a
culture that demonstrates world-class
standards in safety, environment and
sustainability. People are our most valuable
asset and we are committed to providing
all our employees with a safe and healthy
work environment.
Our culture exemplifies our core values and
nurtures innovation, creativity and diversity.
We align our business goals with individual
goals and enable our employees to grow
on a personal as well as professional front.
The Vedanta values that drive the
organisational culture are:
• Trust
We actively foster a culture of transparency
in our interactions and encourage an
open dialogue which ensures mutual
trust and respect.
• Care
We are committed to our triple bottom line
of ‘People, Planet and Prosperity’ to create
a sustainable future in a `zero harm, zero
waste & zero discharge’ environment
for our communities.
• Integrity
We engage ethically and transparently with
all our stakeholders, taking accountability
for our actions. We maintain the highest
standards of professionalism and
stringently comply with all international
policies and procedures.
• Entrepreneurship
People are at the heart of everything we do.
We create an enabling environment to
support them in pursuing their goals.
• Respect
We place an emphasis on human rights
and respect the principle of free, prior,
informed consent, while our engagements
with stakeholders give local communities
the opportunity to voice their opinions
and concerns.
• Excellence
Our primary focus is on delivering
performance of the highest standard. We
are constantly looking at ways to reduce
costs and increase production in our
businesses through benchmarking best
practices and employee participation.
DIVERSITY
Diversity remains a strong focus. We are
committed to providing equal
opportunities to our employees regardless
of their race, nationality, religion, gender,
orientation or age. We are pleased with our
progress to date on gender diversity, and
women now represent 10.36% of our total
workforce. We have set ourselves a target
to reach over 33% women at senior levels
by 2020 and aim to achieve 20% female
representation among our employees.
We are also focused on increasing the mix
of geographies and nationalities in our
workforce. Since most of our operations
are in remote areas, we place a strong
emphasis on recruiting employees from
among the local population.
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We are an equal opportunity employer, and
a meritocracy – all our decisions regarding
employees are based on their contribution,
attitude and potential.
RECRUITMENT
Our recruitment programme includes a
wide range of initiatives to support us in
hiring skilled professionals across different
functions and businesses.
Right management in place (RMIP)
To re-emphasise the Group’s philosophy of
empowering the SBUs, we have reviewed
our existing business and SBU structures,
and followed a rigorous assessment
process to ensure we have right talent in
the right positions. The RMIP process also
ensures that we have filled all the critical
roles within our structures and any gaps in
the management team are supported by
strategic plans to fill vacancies. Our
approach to recruitment is focused on
hiring diverse, high-quality talent. We
operate our businesses with global best
practices and are benchmarked to global
standards. Therefore, where needed, we
also hire expats and specialists with global
experiences to manage such operations.
Vedanta Leadership Development
Programme (VLDP)
VLDP is our flagship programme which
aims to build organisational capability
through developing talented individuals
from premier management and
technology institutes. It is a tailored
programme which focuses on nurturing
these bright young minds to act as
catalysts to steer our business to the next
level of growth by implementing
transformational new-age ideas. The
programme includes induction sessions,
cross-functional projects in significant
roles, job rotation, development
opportunities, and the right mentoring to
ensure these individuals get an in-depth
knowledge of our operations and
recognise their areas of interest for a
suitable role.
TALENT MANAGEMENT AND
DEVELOPMENT
Internal growth workshops
We have always aimed to design an
organisation which is spearheaded by our
'leaders from within'. Recognising internal
talent and promoting them to leadership
roles has been the driving factor in our
journey of rapid growth. Aligned with this
philosophy, the Group conducts
‘Chairman's Internal Growth Workshops’
which enable our young leaders to fulfil
their potential through development
Above: Continuing our journey of developing 'Leaders from within'
technology. This enables functions, teams
and individuals to track performance on a
regular basis, evaluate efficiency through
advanced analytics and implement
proactive decisions towards achieving
Vedanta’s objectives. We foster a culture of
safety and sustainability to achieve our
ultimate vision of ‘zero harm, zero waste &
zero discharge’. To enhance our safety
performance in the workplace and
strengthen our existing Safety
Management System, a safety competency
assessment process was completed
mid-year by all employees.
Employee Stock Option Scheme
(ESOS) 2018
Employee stock options are a significant
component of our long term incentives.
They enable our employees to share in the
success of the Company, encouraging
high-growth performance and reinforcing
employee pride with a focus on ownership.
The scheme was launched after obtaining
statutory approvals, including shareholders’
approval in 2016. In 2018, 35% of the
workforce participated in this scheme with
a focus on our young and senior leaders,
employees driving strategic projects and
high-impact task force members.
opportunities and provide us with a talent
pipeline enabled to fill critical roles across
the Group. These workshops have resulted
in the development of 600+ high-potential
new leaders across the Group’s businesses
who are given significantly elevated roles
and responsibilities.
Leadership and talent analytics
We have partnered with experts to evaluate
our existing talent management practices
and implement best-in-class new initiatives
for talent development. We are focusing on
employing digital channels to run
accelerated growth drives, workshops,
in-house learning modules and other
development opportunities.
3600 feedback
At Vedanta we promote growth and
nurturing of our internal talent pool by
encouraging internal dialogue between
senior leaders and their young mentees
and peers. For this reason, we have
launched 3600 feedback for our ExCo
leaders in collaboration with an external
partner. We believe that this will help to
fast-track the assessment and
development of leaders and we aim to
extend this to cover all our professionals in
due course.
PERFORMANCE MANAGEMENT & TOTAL
REWARDS
V-Perform: One performance system
for one Vedanta
Our focus is to constantly improve the level
of automation in all our operations.
V-Perform is a pan-Vedanta initiative to
standardise the Performance Management
System (PMS) and process across all
Vedanta Group companies by leveraging
74
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW GROUP NON-FINANCIAL INFORMATION STATEMENT
We aim to comply with the new Non-Financial Reporting requirements contained in sections 414CA and 414CB of the Companies Act
2006. During the year ended 31 March 2019, the Company was a traded company. The Company delisted from the Official List of the
London Stock Exchange on 1 October 2018 and was subsequently re-registered as a private limited company.
The below table, and information it refers to, is intended to help stakeholders understand our position on key non-financial matters.
Reporting
requirement
Policies and standards
which govern our approach
Risk management and
additional information
Environmental matters
Employees
Human Rights
Social matters
Anti-corruption and
anti-bribery
Policy embedding, due
diligence and outcomes
Description of principle
risks and impact of
business activity
Description of the
business model
Non-financial key
performance indicators
Resposible Sterwardship, page 64
Energy and carbon management,
page 66
Sustainability report
People and culture, page 73
• HSE Policy
• Biodiversity Policy
• Energy & Carbon Policy
• Water Management Policy
• HSE Policy
• HIV/AIDS Policy
• Code of Business Conduct
and Ethics
• Policy on Prevention and
Prohibition of Sexual
Harassment
• Insider Trading Prohibition
Policy
• Human Rights Policy
• Supplier and Contractor
Sustainability Management
Policy
Human rights, page 68
Code of conduct and ethics and
whistle-blower arrangements, page
140
• Social Policy
• Supplier and Contractor
Sustainability Management
Policy
• Supplier Code of Conduct
• Corporate Social
Responsibility Policy
• Code of Business Conduct
and Ethics
• Supplier code of conduct
• Insider Trading Prohibition
Policy
Adding and sharing Value page 64
Operational risks, pages 43
Board fraud and UK Bribery Act,
page 140
Code of conduct and ethics and
whistle-blower arrangements,
page 140
Risk overview, pages 41
Investment cases for creating value,
pages 08
Market review, page 52
Principle risks and uncertainties,
page 39
Risk management and internal
control framework, page 39
Risk management and internal
control framework, page 39
Creating value for all our
stakeholders, page 46
Opportunities for Vedanta, pages 38
Our business model, pages 28
Key performance indicators, pages 34
Operational review, various
throughout pages 84
Alternative performance
measures, page 272
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
75
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Finance Review
Growth projects on track, strong base for future
Executive summary: We had a strong
operational and financial performance in
FY2019. During the year, we completed the
acquisition of ESL, which will complement
our iron ore business through vertical
integration. Our ramp-up plans for growth
projects are all on track and with that we
have a firm base for an even stronger
performance next year.
In FY2019 we recorded an EBITDA of
US$3,393 million, 14% lower y-o-y but with
a robust margin of 29%. (FY2018: US$3,963
million, margin 35%).
Production volumes contributed to an
increase in EBITDA of US$148 million,
which was primarily on account of ramp up
of volumes at aluminium and volume
addition from ESL acquisition. However,
this was partially offset by lower volumes at
Zinc India and at Zinc International.
Market factors resulted in a net fall in
EBITDA of US$244 million compared to
FY2018. This was mainly driven by input
raw material inflation and lower commodity
prices. This decrease was partially offset by
depreciation of operating currencies.
During FY2019, gross debt increased to
US$16.0 billion (FY2018: US$15.2 billion),
primarily due to the acquisition debt for
Electrosteel Steels and temporary
borrowings at Zinc India.
"We recorded a strong
operational and financial
performance in FY2019"
Arun Kumar GR
Whole-Time Director &
Chief Financial Officer
CONSOLIDATED OPERATING PROFIT SUMMARY BEFORE SPECIAL ITEMS
Consolidated operating profit before special items
Zinc
–India
–International
Oil & Gas
Aluminium
Power
Iron Ore
Steel
Copper
India/Australia
Copper Zambia
Others
Total Group operating profit before special items
CONSOLIDATED OPERATING PROFIT BRIDGE BEFORE SPECIAL ITEMS
Operating profit before special item for FY2018
Market and regulatory: US$ (244) million
a) Prices, premium/discount
b) Direct raw material inflation
c) Foreign exchange movement
d) Profit petroleum to GOI at Oil & Gas
e) Regulatory changes
Operational: US$ (76) million
f) Volume
g) Cost and marketing
h) Others
Depreciation and amortisation
Operating profit before special items for FY2019
Net debt◊ increased to US$10.3 billion as at
31 March 2019 from US$9.6 billion as at
31 March 2018, primarily due to the
acquisition debt for ESL in FY2019.
In April 2019, to proactively refinance our
near-term maturities, we raised US$1 billion
through bonds in two tranches at a
blended average cost of 8.75% and
average maturity of 5.8 years. This will
extend the average maturity of the
outstanding debt at VRL to c. 4 years.
The balance sheet of Vedanta Limited, the
Indian listed subsidiary of Vedanta
Resources continues to remain strong with
cash equivalents, liquid investments and
structured investment, net of the deferred
consideration payable for such investment
of c. US$5.6 billion and Net Debt◊ to EBITDA
ratio at 1.1x, which is the lowest among
Indian peers.
CONSOLIDATED OPERATING
PROFITS BEFORE SPECIAL ITEMS
Operating profit before special items
decreased by US$781 million in FY2019 to
US$1,911 million . This was mainly on
account of shutdown of the Tuticorin
smelter, input commodity inflation, lower
metal prices, higher cost of production and
a higher depreciation charge. This was
partially offset by ramp up of volumes at
aluminium, volume addition from ESL
acquisition, improved oil prices and
currency depreciation.
(US$ million, unless stated)
FY2019
FY2018
% change
1,287
1,248
39
489
76
133
55
85
(222)
(57)
(165)
8
1,911
1,861
1,669
192
388
157
183
(21)
-
98
137
(39)
26
2,692
(31)
(25)
(80)
26
(52)
(28)
-
-
-
-
-
(68)
(29)
(US$ million)
2,692
(91)
(344)
164
13
14
148
(224)
(250)
(211)
1,911
76
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW
a) PRICES, PREMIUM/DISCOUNT
Commodity price fluctuations have a
significant impact on the Group’s business.
During FY2019, we saw a net negative
impact on EBITDA of US$91 million due to
commodity price fluctuations.
Zinc, lead and silver
Average zinc LME prices during FY2019
dropped to US$2,743 per tonne, down 10%
y-o-y; lead LME prices decreased to
US$2,121 per tonne, down 11% y-o-y; and
silver prices decreased to US$15.4 per
ounce, down 9% y-o-y. The collective
impact of these price fluctuations lowered
EBITDA by US$289 million.
Aluminium
Average aluminium LME prices decreased
to US$2,035 per tonne in FY2019, down
1% y o y, this had a negative impact of
US$ 33 million on EBITDA.
Oil & Gas
The average Brent price for the year was
US$70.4 per barrel, higher by 22%
compared with US$57.5 per barrel during
FY2018, this was further supported by a
lower discount to Brent during the year
(FY2019: 6.1%; FY2018: 12.3%). These
positively impacted EBITDA by
US$ 241 million
b) DIRECT RAW MATERIAL INFLATION
Prices of key raw materials such as
imported alumina, thermal coal, carbon
and caustics have increased significantly
in FY2019 and this had an adverse impact
on EBITDA of US$344 million.
c) FOREIGN EXCHANGE
FLUCTUATION
Our main operating currencies (the Indian
rupee and South African rand) both
depreciated against the US dollar during
FY2019. Depreciation of these currencies
is favourable to the Group’s operating
profit, given the local cost base and
predominantly US dollar-linked revenues.
However, the depreciation of the Zambian
kwacha is unfavourable to the group;
considering the Value Added Tax (VAT)
receivables at Copper Zambia in
local currency.
These currency movements at an
aggregate increased EBITDA by US$164
million compared to FY2018.
d) PROFIT PETROLEUM TO GOI AT
OIL & GAS
The profit petroleum outflow to the
Government of India (GOI), as per the
production sharing contract (PSC),
reduced by US$13 million. The reduction
was primarily due to the higher recovery of
capital expenditure over the previous year.
Information regarding key exchange rates against the US dollar:
Average
year ended
31 March
2019
Average year
ended
31 March
2018
69.89
13.76
11.04
64.45
13.00
9.54
As at
31 March
2019
As at
31 March
2018
% change
8
6
16
69.17
14.48
12.19
65.04
11.83
9.50
Indian rupee
South African rand
Zambian Kwacha
e) REGULATORY
During FY2019, regulatory changes had a
cumulative positive impact on the Group
EBITDA of US$14 million.
f) VOLUMES
Higher volumes contributed to an increase
in EBITDA of US$148 million, generated
through these key Group businesses:
Aluminium (positive US$70 million)
In FY2019, the Aluminium business
achieved record production of 1.96 million
tonnes , up 17% y-o-y due to the ramp up of
the Jharsuguda smelters. This volume
increase had a positive impact on EBITDA
of US$70 million.
Electrosteel (positive US$113 million)
Vedanta Limited completed the acquisition
of 90% of the share capital of ESL on
4 June 2018. This acquisition had a positive
impact on EBITDA of US$113 million.
Power (positive US$22 million)
The power business generated contributed
positively to EBITDA by US$29 million . This
was mainly due to TSPL, which was
impacted by a fire incident in the coal
conveyor in Q1 FY2018.
Zinc India (negative US$73 million)
The integrated zinc metal production stood
at 696kt, lower by 12% , although this was
offset by record lead and silver production
of 198kt and 21.8 million ounces,
respectively. This had a cumulative
negative impact on EBITDA of US$73
million.
g) COST AND MARKETING
Higher costs resulted in a fall in EBITDA by
US$224 million over FY2018, primarily due
to volume led absorption at Zinc India and
Zinc International and purchase of power
from external sources in aluminium due to
coal supply disruption during FY2019.
h) OTHERS
This primarily includes the reduction in
EBITDA due to the shutdown of the
Tuticorin smelter.
Depreciation and amortisation:
Depreciation and amortisation increased
by US$211 million against the previous year.
This was mainly due to reversal of
previously recorded impairment at Oil &
Gas business in Q4 FY2018, higher charge
due to higher ore production at Zinc
businesses and capitalisation of costs at
Gamsberg, and acquisition of ESL partially
offset by depreciation of the India rupee.
Above right: Lab Activities at Gamsberg
Above left: Integrated facility at Jharsuguda
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
77
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS
Finance Review
Continued
INCOME STATEMENT
Particulars
Revenue
EBITDA◊
EBITDA margin (%)
EBITDA margin without custom smelting (%)◊
Special items
Depreciation and amortisation
Operating profit
Operating profit without special items
Net interest expense
Interest cost-related special items
Other gains/(losses) special items
Other gains/(losses)
Profit before taxation
Profit before taxation without special items
Income tax expense
Income tax (expense) (special items)
Effective tax rate without special items (%)
Profit for the year
Profit for the year without special items
Non-controlling interest
Non-controlling interest without special items
Attributable (loss)/profit
Attributable (loss)/profit without special items
Underlying attributable (loss)/profit
(US$ million, unless stated)
FY2019
FY2018
% Change
14,031
3,393
24%
29%
38
(1,482)
1,949
1,911
(787)
9
-
(75)
1,096
1,049
(656)
(16)
62
424
393
661
646
(237)
(253)
(226)
15,294
3,963
26%
35%
683
(1,271)
3,375
2,692
(774)
(108)
11
(16)
2,488
1,902
(675)
(338)
35
1,475
1,227
1,236
1,064
239
163
166
(8)
(14)
-
-
(94)
17
(42)
(29)
2
-
-
-
(56)
(45)
(3)
(95)
-
(71)
(68)
(46)
(39)
-
-
-
CONSOLIDATED REVENUE
Revenue for FY2019 decreased by 8% to US$14,031 million (FY2018: US$15,294 million). This was mainly on account of shutdown of
Tuticorin smelter, lower zinc volumes, lower custom volumes at Copper Zambia and lower metal prices. This was partially offset by
ramp up of volumes at aluminium, volume addition from ESL acquisition and improved oil prices.
Particulars
Zinc
India
International
Oil & Gas
Aluminium
Power
Iron Ore
Steel
Copper
India/Australia
Zambia
Others 1
Total
1)
Includes port business, ASI and eliminations of inter-segment sales.
(US$ million, unless stated)
FY2019
FY2018
Net revenue
% change
3,347
2,955
392
1,892
4,183
934
416
600
2,622
1,537
1,085
37
14,031
3,889
3,354
535
1,480
3,545
877
485
5,111
3,828
1,283
(93)
15,294
(14)
(12)
(27)
28
18
6
(14)
-
(49)
(60)
(15)
-
(8)
78
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW
CONSOLIDATED EBITDA
The consolidated EBITDA by segment is set out below:
Particulars
Zinc
-India
-International
Oil & Gas
Aluminium
Power
Iron Ore
Steel
Copper
-India/Australia
-Zambia
Others 1
Total
FY2019
FY2018
%
change
Key drivers
(US$ million, unless stated)
EBITDA
margin %
FY2019
EBITDA
margin %
FY2018
1,616
1,516
100
1,100
316
219
90
113
(99)
(36)
(63)
38
3,393
2,122
1,902
220
849
414
258
48
-
235
162
73
37
3,963
(24)
(20) Lower volumes and lower LME
(55) Lower sales, lower LME and higher COP
(30)
(24) Record volume offset by higher COP
(15) One time gains in FY2018
87 Higher Iron Ore Karnataka volumes
Improved Oil Prices
-
-
- Shutdown of Tuticorin smelter
-
3
Lower Custom volumes, kwacha depreciation
(14) EBITDA margin◊
Adjusted EBITDA margin◊
48
51
25
58
8
23
22
19
(4)
(2)
(6)
-
24
29
55
57
41
57
12
252
10
-
5
4
6
-
26
35
Includes port business, ASI and elimination of inter-segment transactions.
1.
2. Excluding one-offs
EBITDA AND EBITDA MARGIN
EBITDA for the year was US$3,393 million, 14% lower y-o-y. This was mainly on account of shutdown of Tuticorin smelter, input commodity
inflation, lower metal prices and higher cost of production partially offset by ramp up of volumes at aluminium, volume addition from ESL
acquisition, improved oil prices and currency depreciation.
We maintained a robust Adjusted EBITDA margin of 29% for the year (FY2018: 35%)
SPECIAL ITEMS (INCLUDING INTEREST COST RELATED, AND OTHERS)
In FY2019 special items included:
• A reversal of previously recorded non-cash impairment charge of US$38 million relating to the KG ONN block, in the Oil & Gas business.
• Special items related to interest cost is a credit of US$9 million in FY2019, this pertains to a reversal of charge relating to arbitration of a
historical vendor claim pursuant to Supreme Court Order in Aluminium business.
Further analysis of special items is set out in notes 6 and 8 of the financial statements.
NET INTEREST
The blended cost of borrowings was 7.45% for FY2019 compared to with 7.15% in FY2018.
Finance cost excluding special items for FY2019 was at US$1,267 million, 2% higher y-o-y compared to US$1,239 million in FY2018 mainly
because of higher gross debt due to ESL acquisition, temporary borrowings at Zinc India and higher average borrowing cost in line with
market trends partially offset by higher capitalisation during the year and rupee depreciation.
Investment income for FY2019 stood at US$480 million, 3% higher y-o-y compared to US$465 million in FY2018. This was mainly due to
mark to market gains on a treasury investment made by Vedanta Limited’s overseas subsidiary through a purchase of an economic interest
in a structured investment in Anglo American Plc from its parent, Volcan Investments Limited. This was partially offset by a lower
investment corpus and rupee depreciation.
The higher finance cost was partially offset by higher investment revenue and this led to a net increase of US$13 million in net interest
expense (excluding special items) during the period.
OTHER GAINS/(LOSSES) EXCLUDING SPECIAL ITEMS
Other gains/(losses) excluding special items for FY2019 amounted to US$(75) million, compared to US$(16) million in FY2018. This was
mainly on account of significant depreciation of the Indian rupee against the US dollar.
TAXATION
Effective tax rate (before special items) for FY2019 was 62%, compared to 35% in FY2018.
The effective tax rate (ETR) was higher in FY2019 due to a change in the profit mix across the businesses, together with depreciation of the
rupee impacting tax WDV of Oil & Gas assets, whose functional currency is USD. Further the tax charge for FY2019 includes US$121.0 million
(FY2018: US$ nil million) representing reversal of deferred tax assets on carry forward losses not expected to be utilised during the
statutory permitted period and US$158 million (FY2018: US$63 million) of dividend distribution tax on dividends paid by subsidiaries.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
79
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS
Finance Review
Continued
ATTRIBUTABLE PROFIT/(LOSS)
Attributable loss before special items was US$(253) million in FY2019 compared to an attributable profit of US$163 million in FY2018.
This was mainly on account of lower EBITDA , higher depreciation and a higher effective tax rate.
FREE CASH FLOW POST-CAPEX◊
The Group generated free cash flow (FCF)◊ post-capex of US$1,190 million (FY2018: US$925 million). This was driven mainly by working
capital initiatives and disciplined capital expenditure.
FUND FLOW MOVEMENT IN NET DEBT◊
Fund flow and movement in net debt◊ in FY2019 are set out below.
Details
EBITDA
Operating exceptional items
Working capital movements
Changes in non-cash items
Sustaining capital expenditure
Movements in Capital Creditors
Sale of property, plant and equipment
Net interest (including interest cost-related special items)
Tax paid
Expansion capital expenditure
Free cash flow (FCF) post capex◊
Dividend paid to equity shareholders
Dividend paid to non-controlling interests
Tax on dividend from Group companies
Acquisition of subsidiary
Other movements3
Movement in net debt
(US$ million, unless stated)
FY2019
FY2018
3,393
–
279
33
(435)
107
18
(738)
(386)
(1,081)
1,190
(113)
(1,028)
(161)
(707)1
115
3,963
33
(627)
28
(385)
42
10
(821)
(498)
(820)
925
(164)
(1,414)
(69)
(240)2
(122)
(704)
(1,084)
Includes cost of acquisition of ESL US$788 million net of cash related to the acquired company US$81 million.
Includes net debt on acquisition of ASI US$72 million and acquisition expenses of US$7million
1
2
3. Includes foreign exchange movements.
DEBT, MATURITY PROFILE AND REFINANCING
The Gross debt increased from US$15.2 billion in FY2018 to US$16.0 billion mainly on account of acquisition of Electrosteel Steels Limited
(ESL) and temporary borrowing at Zinc India.
During FY2019, Net debt◊ increased from US$9.6 billion to US$10.3 billion y-o-y. This was primarily on account of the acquisition of ESL
during FY2019.
Our total gross debt of US$16.0 billion comprises:
• US$12.6 billion as term debt (March 2018: US$11.3 billion);
• US$2.9 billion of short-term borrowings (March 2018: US$2.7 billion)and;
• US$0.5 billion of working capital loans (March 2018: US$0.7 billion).
Gross debt as at 31 March 2018 also included preference shares issued pursuant to the Cairn merger of US$0.5 billion which were
redeemed during FY2019.
The maturity profile of term debt of the Group (totalling US$12.6 billion) is summarised below:
Particulars
Debt at Vedanta Resources
Debt at subsidiaries
Total term debt¹
1. Term debt excluding preference shares.
As at
31 March
2018
As at
31 March
2019
5.9
5.4
11.3
6.3
6.3
12.6
FY2020
FY2021
FY2022
FY2023
0.8
1.2
2.0
0.2
1.3
1.5
1.5
1.7
3.2
2.0
0.4
2.4
FY2024 &
beyond
1.8
1.7
3.5
80
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW Term debt at our subsidiaries was US$6.3 billion, with the balance at Vedanta Resources Limited. The total undrawn fund-based credit limit
was c. US$1.0 billion as at 31 March 2019.
In April 2019, to proactively refinance our near-term maturities, we raised US$1 billion through bonds in two tranches at a blended
average cost of 8.75% and average maturity of 5.8 years. This will extend the average maturity of the outstanding debt at VRL to c. 4 years.
The Company intends to use the net proceeds primarily to repay near term debt maturities of the Company.
Cash equivalent, liquid investments and structured investments stood at US$5.7 billion at 31 March 2019 (31 March 2018: US$5.6 billion).
The 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 of signing the financial
statements for the year ending 31 March 2019. The Board is satisfied that the forecasts and projections show that the Group will be able to
operate within the level of its current facilities for the foreseeable future. This takes into account the effect of reasonably possible changes
in trading performance on cash flows and forecast covenant compliance; the transferability of cash within the Group; the flexibility that the
Group has over the timings of its capital expenditure; and other uncertainties. For these reasons, the Group continues to adopt the ‘going
concern’ basis in preparing its financial statements.
COVENANTS
The Group is in compliance with its covenants relating to all facilities for the testing period ending 31 March 2019.
CREDIT RATING
Moody’s revised the outlook on ratings for Vedanta Resources Limited to Negative from Stable while affirming the corporate family rating
at Ba3 in February 2019. This was on account of expectation of weaker earnings on account of downside risk to commodity prices and
increased risk of movement of funds outside Vedanta to support Volcan interests following recent structured investment.
S&P affirmed the ratings at B+ while revising the Outlook to Negative in March 2019 on account of weaker operating performance due to
commodity slowdown, which along with higher debt due to ESL acquisition and debt for privatisation of Vedanta Resources Limited could
keep its metrics weaker than required for current rating levels.
BALANCE SHEET
Goodwill
Intangible assets
Property, plant and equipment
Exploration and Evaluation Assets
Other non-current assets
Cash, liquid investments and Financial asset investment net of related liabilities
Other current assets
Total assets
Gross debt
Other current and non-current liabilities
Net assets
Shareholders’ (deficit)
Non-controlling interests
Total equity
(US$ million, unless stated)
31 March
2019
31 March
2018
12
108
17,322
404
2,671
5,688
3,576
29,781
(15,980)
(8,548)
5,253
(928)
6,181
12
123
15,401
2,326
2,179
5,606
3,591
29,238
(15,194)
(7,504)
6,540
(330)
6,870
5,253
6,540
Shareholders’ (deficit) was US$(928) million at 31 March 2019 compared with US$(330) million at 31 March 2018. This mainly reflects the
attributable loss for FY2019 and dividend pay-out of US$113 million (US cents 41 per share).
Non-controlling interests decreased to US$6,181 million at 31 March 2019 (from US$6,870 million at 31 March 2018) mainly driven by the
profit attributable to Non-controlling interests for the year offset by dividend payments during the year.
PROPERTY, PLANT AND EQUIPMENT (INCLUDING EXPLORATION AND EVALUATION ASSETS)
As at March 31, 2019, PPE was at US$17,726 million (FY2018: US$17,727 million). Investment of $1,081 million on expansion projects and
US$435 million on sustaining capital expenditure and the acquisition of Electrosteel Steels Limited was offset by depreciation expense
during the period and the restatement of rupee-denominated assets caused by rupee depreciation.
CONTRIBUTION TO THE EXCHEQUER
The Group contributed c. US$6.2 billion to the exchequer in FY2019 compared to US$5.4 billion in FY2018 through direct and indirect
taxes, levies, royalties and dividend. This was the highest ever contribution made by Vedanta Resources Limited.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Finance Review
Continued
PROJECT CAPEX◊
Capex in progress
Status
Total capex3
Cumulative
spend up to
March 20184
Spent in
FY20194
(US$ million)
Unspent
as at
31 March
20195
Cairn India1
Mangala infill, Liquid handling, Bhagyam &
Aishwariya EOR, Tight oil & gas etc.
Aluminium Sector
Jharsuguda 1.25mtpa smelter
Zinc India
1.2mtpa mine expansion
Others
Zinc International
Gamsberg mining Project2
Copper India
Tuticorin smelter 400ktpa
Line 3: fully capitalised
Line 4: fully capitalised
Line 5: Six sections capitalised
Phase-wise by FY2020
Completed Capitalisation
Project is under force majeure
Avanstrate
Furnace Expansion and Cold repair
Completed
Capex flexibility
Metals and Mining
Lanjigarh Refinery (Phase II) – 5mtpa
Zinc India (1.2mtpa to 1.35mtpa mine expansion) Subject to board approval
Skorpion refinery conversion
Under evaluation
Currently deferred till pit 112 extension
2,481
183
469
1,829
2,920
2,846
2,076
218
400
717
48
1,570
698
156
1,265
64
241
189
3
836
-
14
69
304
60
123
9
38
21
1
-
5
507
94
36
519
7
713
697
142
1. Capex approved for Cairn represents Net capex, however Gross capex is US$3.2 bn.
2. Capital approved US$400 million excludes interest during construction (IDC).
3. Based on exchange rate prevailing at time of approval.
4. Based on exchange rate prevailing at the time of incurrence.
5. Unspent capex represents the difference between total projected capex and cumulative spend as at March 31, 2019.
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW
We continue to
consolidate our
position as one of
the largest diversified
natural resource
businesses in
the world.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Zinc India
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW THE YEAR IN SUMMARY
The year witnessed continued ramp up of
our underground mines, which delivered
mined metal production at 936kt. This was
29% higher y-o-y; virtually overcoming the
closure of open-cast operations in the
previous year. Lead and silver metal
production reached new records of 198kt
and 21.8 million ounces respectively.
Hindustan Zinc was ranked 9th in the elite
club of top 10 silver producers globally
published by Washington-based Silver
Institute for calendar year 2018.
The ramp up to 1.2 million tonnes per
annum (mtpa) mined metal capacity by
FY2020 is on track as capital projects
approach completion.
SAFETY
However, we were deeply saddened to
report seven fatalities at our Rajapura
Dariba, Zawar mines, Chanderia Smelter
and Debari smelting complex during the
year. The root causes of these tragic
incidents have been thoroughly
investigated and the resulting learnings,
which include, among other making better
risk decisions and providing better
supervision during all activities have been
shared and implemented across Zinc India
to prevent such tragedies in the future.
Our business had seen improving safety
performance in the last five year, where our
LTIFR had decreased by 24%. However, this
year has ran counter to that trend and
during FY2019, the lost time injury
frequency rate increased to 0.63
(FY2018: 0.27).
Specific initiatives have been introduced to
instill a culture of safety. These include
forming a Safety Innovation Cell and a
Fatality and Serious Injury Prevention
Programme subcommittee, as well as
themed drives on reducing man-machine
interactions; mine fire safety; a mining-
mate competency assessment; a safety
maturity assessment; and a second party
safety audit.
We also collaborated with global safety and
protection experts Du Pont on our
‘Aarohan’ journey to excel in our process
safety management. Together we have
developed a structured programme aimed
at mitigating the risks of serious injuries and
fatalities in our processes.
6
34
1
5
2
1 Debari smelter
2 Chanderiya smelters
3 Rampura Agucha mine
4 Rajpura Dariba mine and smelters
and Sindesar Khurd mine
5 Zawar mine
6 Pantnagar silver refinery
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
85
"The year witnessed a continued ramp up of underground mines, virtually overcoming the closure of open cast operations. HZL was ranked 9th in the elite club of top 10 silver producers."Sunil DuggalCEO, Hindustan Zinc LimitedINTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Zinc India
ENVIRONMENT
Over the reporting year, the business
improved its hazardous waste recycling,
which rose to 52% from 42% in FY2018.
Our water recycling rate remained
consistent at 35% (FY2018: 35%).
With the success of implementing the 20
million litres per day (MLD) sewage
treatment plant (STP), Phase-II of 40MLD
STP is under commissioning, of which
25MLD will be commissioned in Q1 FY2020.
On completion, it will reduce our fresh water
intake at our operational sites.
Solar power projects of 22MW were
commissioned during the year, and we
intend to further enhance our solar energy
footprint in the coming year.
We are also committed to the Science
Based Target initiative, to reduce by 2026
our absolute Scope 1 and 2 GHG emissions
by 14%, and absolute Scope 3 GHG
emissions by 20%, measured against the
2016 base-year.
Our sustainability activities received several
endorsements during the year, including the
CII-ITC Sustainability Award (‘Outstanding
Accomplishment’), as well as awards for
Sustainable Business of the Year and the
Sustainability Disclosure Leadership Award
from the World CSR Day. Zinc India’s
sustainability performance was ranked No.5
in the Dow Jones Sustainability Index (Metal
and Mining) globally and No. 1 globally in the
Environment category. We were also
selected as an Index Constituent of the
Emerging Index ‘FTSE4Good’ series 2018.
PRODUCTION PERFORMANCE
Production (kt)
FY2019
FY2018
% change
Total mined metal
Underground mines
Open cast mines
Refinery metal production
Refined zinc – integrated
Refined lead – integrated1
Production – silver (million ounces)2
936
936
-
894
696
198
21.8
947
724
223
960
791
168
17.9
(1)
29
-
(7)
(12)
18
22
1. Excluding captive consumption of 6,534 tonnes in FY2019 vs. 6,946 tonnes in FY2018.
2. Excluding captive consumption of 1,099 thousand ounces in FY2019 vs. 1,171 thousand ounces in FY2018.
PRICES
Average zinc LME cash settlement prices US$/tonne
Average lead LME cash settlement prices US$/tonne
Average silver prices US$/ounce
2,743
2,121
15.4
3,057
2,379
16.9
(10)
(11)
(9)
FY2019
FY2018
% change
UNIT COSTS
Unit costs (US$ per tonne)
Zinc (including royalty)
Zinc (excluding royalty)
FINANCIAL PERFORMANCE
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating profit before special items
Share in Group EBITDA (%)
Capital expenditure
Sustaining
Growth
FY2019
FY2018
% change
1,381
1,008
1,365
976
1
3
(US$ million, unless stated)
FY2019
FY2018
% change
2,955
1,516
51
268
1,248
45
520
155
365
3,354
1,902
57
233
1,669
48
465
106
359
(12)
(20)
-
15
(25)
12
46
2
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
Above: Employees working in HZL Underground Mine
MANAGEMENT REVIEW PRODUCTION
REFINED ZINC/LEAD
(kt)
4
0
9
1
6
8
1
1
8
0
6
9
4
9
8
15
16
17
18
19
PRODUCTION
SALEABLE SILVER
(million oz)
25.000000
8
.
1
2
9
.
7
1
.
6
4
1
.
6
3
1
.
6
8
15
16
17
18
19
EBITDA
(US$ million)
3
9
1
,
1
5
9
9
2
0
9
,
1
3
2
4
,
1
6
1
5
,
1
15
16
17
18
19
OPERATIONS
Mined metal production for FY2019 was
936,000 tonnes compared to 947,000
tonnes in the prior year. The FY2019
production was entirely from underground
mines, which ramped up strongly by 29%,
driven by a 27% increase in ore production
and better grades. Therefore, despite the
closure of open-cast operations, total
mined metal production declined only
marginally from the year before.
Integrated metal production was 894,000
tonnes in line with mined metal production,
7% lower than the previous year’s record
production of 960,000 tonnes. Integrated
zinc production was lower by 12%, in line
with the availability of zinc mined metal and
the higher lead ratio in ore. Integrated lead
and silver production stood at a record
198,000 tonnes and 21.8 million ounces,
higher by 18% and 22%, respectively. This
was driven by higher lead mined metal
production and retrofitting of a pyro-
metallurgical smelter to produce more lead
and better silver grades. This smelter was
retrofitted during the year to produce more
lead metal, in the light of the higher
availability of lead mined metal, leading to
higher lead production.
Hindustan Zinc was ranked 9th in the elite
club of top 10 silver producers globally
published by Washington based Silver
Institute for calendar year 2018. Further
during the year we received environment
clearance to increase silver production
from 600 tonnes per annum (tpa) to 800
tpa at the Pantnagar plant.
PRICES
FY2019 was a turbulent year for base
metals, caused by uncertainty from
international trade disputes, a slowdown in
manufacturing activity and the negative
impact of a stronger dollar. The average
zinc price during the year was US$2,743
per tonne, 10% lower than the previous
year’s average of US$3,057.
Zinc market fundamentals remain robust
with global zinc consumption expected to
grow by 1.5% to 14.5 million tonnes in the
calendar year 2019, with smelter supply
increasing to 14 million tonnes and mine
supply likely to be 13.9 million tonnes
(source: Wood Mackenzie). According to
demand-supply fundamentals, the zinc
price should improve since metal stocks
are at an all-time low and may continue to
remain so.
In a challenging environment, silver prices
declined by 9% against the prior year,
slipping to US$15.4 per ounce in FY2019.
A slowing Chinese economy, coupled with
rising US interest rates, an equity market
bull run and global trade tensions all took
their toll on the price performance.
Unit costs
Zinc’s cost of production (excluding
royalty) for FY2019 was US$1,008 per
tonne, higher by 3% y-o-y. Production cost
was impacted by higher mine
development, input commodity inflation
and Long term Wage Settlement (LTS)
related expense but was partly offset by
higher acid credits and rupee depreciation.
Including royalties, the total cost of zinc
production increased to US$1,381 per
tonne, 1% higher y-o-y.
Of this figure, government levies amounted
to US$389 per tonne (FY2018: US$423 per
tonne). This comprised mainly of royalty
payments, the clean energy cess,
electricity duty and other taxes.
FINANCIAL PERFORMANCE
Revenue for the year was US$2,955 million,
down 12% y-o-y, primarily on account of
lower zinc metal production and lower LME
prices, partially offset by record lead and
silver volumes. EBITDA in FY2019
decreased to US$1,516 million, down 20 %
y-o-y. The decrease was primarily driven by
lower volumes and higher cost of
production.
Projects
The mining projects we announced are
progressing in line with the expectation of
reaching 1.2 million tonnes per annum of
mined metal capacity in FY2020. Capital
mine development increased by 12% to
43km in FY2019.
At the Rampura Agucha underground
mine, the ventilation system was
commissioned earlier in the year, liberating
the mine from ventilation issues for its
lifetime. The commissioning of the
mid-shaft loading system in October 2018
allowed waste hoisting to be carried out
through the shaft ahead of schedule,
leading to improved ore production. The
second paste fill plant was completed
ahead of schedule in Q4 FY2019. The full
shaft commissioning is expected to
complete by Q2 FY2020, synchronising
with the completion of the crusher and
conveyor system.
In a similar story to zinc and other base
metals, the lead price was volatile during
the year, rising and falling in response to
developments in international trade
disputes between the US and its trading
partners. Lead averaged US$2,121 per
tonne in FY2019, down 11% y-o-y.
During the year, Sindesar Khurd received
environment clearance to produce 6.0
million tonnes of ore and 6.5 million tonnes
of ore beneficiation. The new 1.5mtpa mill
was commissioned smoothly and began
production in Q3 FY2019, taking the total
milling capacity to 6.2mtpa. The
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87
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Zinc India
underground crusher and production shaft
were commissioned during Q4 FY2019 and
ore hoisting from the shaft is expected to
start in Q1 FY2020. The second paste fill
plant is under mechanical completion and
expected to commission in Q1 FY2020.
With a substantial improvement in
infrastructure, Zawar has reached a
run-rate of c. 3.5mtpa. The new 2.0 mtpa
mill was commissioned in Q4 FY2019,
taking the total milling capacity at Zawar to
4.7mtpa. Meanwhile, the dry tailing plant is
under execution and expected to
commission in Q2 FY2020.
The Rajpura Dariba mine has received
environmental clearance to increase ore
production from 0.9 to 1.08 mtpa and is
seeking regulatory approval for further
expansion to 2.0mtpa. The ore production
run-rate is already at 1.2 mtpa following the
major infrastructure enhancement. During
the year, orders were placed for a new 1.5
mtpa mill and paste fill plant; these are
expected to complete in FY2020.
OTHER PROJECTS
The Fumer project at Chanderiya is
expected to commission in Q1 FY2020.
The 22MW solar plant was completed
during Q3 FY2019 at Rampura Agucha
taking the total solar capacity there to
38MW.
OUTLOOK
Mined metal production, and finished
metal production is expected to around 1
million tonnes. The cost of production
excluding royalty is expected to be
< US$1,000 per tonne. The project capex
for the year will be in the range of US$350
to US$400 million.
The 25MLD Sewage Treatment Project at
Udaipur will be commissioned in Q1
FY2020, taking the total capacity to
45MLD. This will play a key role in improving
water availability at Dariba and treat over
half of Udaipur’s sewage.
Further in line with the structural growth in
mined metal production and with improved
silver grades, we can expect to deliver
significant growth in silver volumes. The
silver volumes for FY2020 is in the range of
750 tonnes to 800 tonnes.
STRATEGIC PRIORITIES
Our focus and priorities will be to:
• Ramp up underground mines to 1.2 mtpa
design capacity
• Debottleneck and expand smelting
capacity to maintain mines/smelter
synergies at higher levels of production
• Use advanced technology, automation
and digitalisation to structurally reduce
cost of production by improving
equipment productivity, metal recoveries
and operational efficiency
• Increase R&R through higher exploration
activity and new mining tenements.
EXPLORATION
Successful exploration in FY2019 added to
reserves and resources (R&R), providing
opportunities for extended mine life and
production growth. Across all the sites,
surface drilling increased to 181km and
underground drilling of 26km was achieved
during the year.
In comparison with the previous
year’s mineral resource and ore
reserve statements:
There is an overall net depletion of
13.1 million tonnes of ore reserves to
92.6 million tonnes, and a net 4.7 million
tonnes increase of exclusive mineral
resources to 310.3 million tonnes.
Total contained metal in ore reserves is
7.2 million tonnes of zinc, 2.1 million tonnes
of lead and 280 million ounces of silver.
The exclusive mineral resource contains
18.5 million tonnes of zinc, 6.8 million
tonnes of lead and 685 million ounces
of silver.
At current mining rates, the R&R underpins
a mining life of more than 25 years.
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MANAGEMENT REVIEW
Below: Zinc processing plant at Dariba, HZL
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Zinc International
90
90
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW been shared across the business and our
control of critical risks related to equipment
selection and business partner onboarding
have been strengthened. Lost time injuries
have shown an increase from 16 to 23 for
the year, with the frequency rate also
showing an increase to 1.89 (FY2018: 1.36).
This is largely due to an increase in activity
at Gamsberg. Injury severity rates continue
to decrease year on year.
The business has taken steps in driving
safety as the Number One Value across the
business. The value will strengthen
partnerships with our employees and
business partners in achieving zero harm.
Dust control remains a main focus area in
order to reduce lead and silica dust
exposures of employees, which will also
further sustain the number of employees
withdrawn over the last few years (from 25
in FY2016 to 7, 8 and 8 over the last three
years). Participation in the VCT drive for HIV/
Aids programmes for both employees and
business partners was well attended, with
2,767 tests conducted during FY19.
THE YEAR IN SUMMARY
FY2019 was a milestone year for Zinc
International. We ramped up production
from Pit 112 at Skorpion and completed our
flagship Phase-I Gamsberg project.
As per the mine plan, we have substantially
completed pre-stripping of Pit 112 and will
be able to access the ore body and fully
ramp up production in FY2020.
Gamsberg operation was commissioned
during the middle of FY2019 with trial
production starting in November 2018,
followed by the first shipment of
concentrate in December 2018. Gamsberg
was formally inaugurated by the President
of South Africa, Mr. Cyril Ramaphosa, and
Vedanta Chairman, Mr. Anil Agarwal, on
28 February 2019. Ramp up to full capacity
of 4mtpa of ore is expected in 3-6 months.
With further ramp-up of Gamsberg Phase-I
and the Skorpion Zinc Pit 112 expansion,
Zinc International is expected to produce
more than 350,000 tonnes next year.
SAFETY
With deep sorrow, we reported a fatality at
Gamsberg project during the year, which
occurred in the construction phase at the
concentrator plant. The lessons learned,
following a thorough investigation, have
2
1
3
1
Gamsberg, South Africa
(under development)
2 Skorpion mine, Namibia
3 Black Mountain mine,
South Africa
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
91
"Gamsberg is now ramping up to its target ore throughput capacity of 4mtpa to produce 250ktpa metal. With Gamsberg Phase-II mega pit production, we are expected to produce combined 450ktpa metal."Deshnee NaidooCEO, Zinc International and CMTINTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Zinc International
ENVIRONMENT
During the period, Skorpion Zinc reported
one category 3 environmental incident
involving tailings overflow from one pond
due to a failed pump. The incident had a
limited environmental impact and is being
consistently and closely monitored.
Remedial actions include drilling of 4 – 6
boreholes for the recovery of contaminants
and monitoring purposes. The pond is also
being rehabilitated.
Gamsberg complied with the Biodiversity
Offset Agreement requirement on total
hectares of sensitive plant communities
impacted by securing four properties
measuring 21,900ha. The proclamation of
Gamsberg Nature reserve was also gazetted
on 26 November 2018.
.
PRODUCTION PERFORMANCE
Production (kt)
FY2019
FY2018
% change
Total production (kt)
Production– mined metal (kt)
BMM
Gamsberg*
Refined metal Skorpion
* Includes trial run production of 10 KT
UNIT COSTS
Zinc (US$ per tonne) unit cost
FINANCIAL PERFORMANCE
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating profit before special items
Share in Group EBITDA (%)
Capital expenditure
Sustaining
Growth
148
157
65
17
66
72
-
84
(5)
(10)
-
(22)
FY2019
FY2018
% change
1,912
1,603
19
(US$ million, unless stated)
FY2019
FY2018
% change
392
100
25
61
39
3
196
73
123
535
220
41
28
192
6
238
65
173
(27)
(55)
-
-
(80)
-
(18)
12
(29)
Below: Lab activities at BMM Plant
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW PRODUCTION
REFINED ZINC
(Kt)
2
0
1
2
8
5
8
4
8
6
6
15
16
17
18
19
PRODUCTION
ZINC/LEAD MINED METAL
(Kt)
9
0
2
4
4
1
0
7
2
7
2
8
15
16
17
18
19
EBITDA
(US$ million)
1
8
1
8
3
1
8
6
0
2
2
0
0
1
15
16
17
18
19
OPERATIONS
During FY2019, total production stood at
148,000 tonnes, 5% lower y-o-y. This was
due to lower production at Skorpion
because of a two-week strike in March
2019, as well as lower zinc grades at
Skorpion (7.6% vs 8.2%) and lower
production at BMM due to lower than
planned grades and hence lower
recoveries. This was partially offset by
the commencement of production
from Gamsberg.
Skorpion’s production was 66,000 tonnes,
down 22% y-o-y, due to the planned
shutdown of the acid plant during Q1
FY2019, and lower than planned zinc
grades. Furthermore, the mining business
partner’s employees embarked on an
illegal strike from 22 February to 6 March
2019. The employees cited unresolved
labour matters with their employer. The
strike action lasted 14 days and had a
severe negative impact on mining activities
and the lead time to re-establish mining
operations. This resulted in the depletion of
run of mine ore inventory, with the
consequent effect of a temporary closure
of the refinery while re-establishing mining
buffers. Skorpion took this opportunity to
bring forward the annual shutdown
previously scheduled in Q2 FY2020. The
operations restarted in the second half of
April 2019.
At BMM, production was 10% lower than
the previous year. This decrease was
primarily due to lower than planned grades
and hence lower recoveries.
UNIT COSTS
The unit cost of production increased by
19% to US$1,912 per tonne, up from
US$1,603 in the previous year. This was
mainly driven by lower production at both
Skorpion Zinc and BMM, higher
amortisation of stripping costs of Pit 112 at
Skorpion Zinc, higher TCRCs and annual
inflation partially offset by local currency
depreciation, sulphur efficiencies, lower
oxide consumption at Skorpion Zinc and
higher copper credit at BMM.
FINANCIAL PERFORMANCE
During the year, revenue decreased by 27%
to US$392 million, driven by lower sales
volumes compared to FY2018 and lower
price realisations. The same factors, along
with higher cost of production resulted in a
decrease in EBITDA to US$100 million,
down 55% from US$220 million in FY2018.
PROJECTS
Gamsberg mining is continuing as per plan.
During the year, 41mt waste and ore has
been moved including pre-stripping and a
healthy stockpile of 1.0mt has been built up
for smooth feed to plant. Post-trial
production, the concentrator plant has
been progressively ramping up.
The focus for Gamsberg has been to fully
commission the plant, including all
automation and achieve an 80% plant
runtime, which has been successfully
achieved in March 2019. This was despite
the stoppage of work and retraining of all
employees and business partners following
the fatality at Gamsberg in May 2018 as well
as commissioning issues which have since
been resolved.
In the case of Pit 112 at Skorpion Zinc over
75% of waste pre-stripping has been
completed and mining will come to end by
Q3 FY2020 with a stockpile built up to feed
plant for next 12 months.
We are at an advanced stage in concluding
feasibility for Gamsberg Phase-II to
increase Gamsberg production capacity
from existing 250 thousand tonnes per
annum (ktpa) to 450ktpa. Indicative
investments in this project is expected to
be around US$300 million.
EXPLORATION
During the year, we made gross additions
of 130.39 million tonnes of ore and 4 million
tonnes of metal to reserves and resources
(R&R), after depletion.
As at 31 March 2019, Zinc International’s
combined mineral resources and ore
reserves were estimated at 434 million
tonnes, containing 24.4 million tonnes of
metal. The reserves and resources support
a mine life of more than 30 years.
Zinc International is further pleased to
announce the declaration of a maiden
resource at its Big Syncline project, located
on its Black Mountain mining licence in
South Africa. Resource estimation was
carried out by SRK Consulting (UK) and
resulted in an inferred resource of 151.7
million tonnes grading 3.6% (zinc and lead).
The majority of the resource is accessible
through open-cast operations at low
stripping ratios.
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Zinc International
OUTLOOK
In FY2020, we expect production volumes
to be in the range of 180-200kt from
Gamsberg, while the volumes from
Skorpion and BMM will be greater than
170kt. The cost of production excluding
Gamsberg is expected to be around
US$1,400 per tonne due to Skorpion’s Zinc
production ramp up due to access to high
grade ore from Pit 112 , while the cost of
production Gamsberg is forecasted to be
around US$1000 per tonne.
STRATEGIC PRIORITIES
Our focus and priorities will be to:
• Ramp up of Gamsberg Phase-I
production in H1 of FY2020
• Complete the approval of Gamsberg
Phase-II
• Complete the feasibility study for an
integrated smelter-refinery with 250ktpa
metal production
94
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW Above: We believe in participative learning
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
95
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Oil & Gas
96
96
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW SAFETY
There were eleven lost time injuries (LTIs) in
FY2019. The frequency rate stood at 0.31
(FY2018: 0.19), amid a significant increase in
activity due to development projects.
At the same time, we were proud that our
safety philosophy and management
systems were recognised with awards
conferred by a number of external bodies:
• Cairn Oil & Gas was recognised in the
CII-ITC Sustainability Awards 2018
• Raageshwari Gas Terminal has been
awarded ‘Sword of Honour’ from British
Safety Council for excellence in HSE
management
• Bhagyam field received the Platinum
prize in the seventh FICCI Safety
Systems Excellence Awards 2018
(large-scale mining sector category)
• Cairn Oil & Gas won three awards in the
International Fire and Security Exhibition
and Conference (IFSEC) India
• Raageshwari Gas Terminal and CB/OS-2
asset were certified for ‘5S' by the
Quality Circle Forum of India (QCFI)
• Ravva asset achieved a Five Star Rating
in the CII-Southern Region Award for
HSE Excellence
THE YEAR IN SUMMARY
During FY2019, we delivered a strong
operational and financial performance in
addition to execution of key contracts
across our portfolio of development
opportunities which are expected to add
significant volumes going forward.
In pursuit of our vision to contribute 50% of
India’s domestic crude oil production, we
continue to invest in growth projects in
order to monetise the resource base. The
Oil & Gas business has a rich project
portfolio comprising enhanced oil
recovery, tight oil, tight gas, satellite field
development, facility upgradation and
exploration and appraisal prospects. Most
of the projects are being executed under
an Integrated Development strategy
involving leading global oilfield service
companies and are on track to deliver
expected volume additions. 11
development drilling rigs are currently
deployed; 99 wells drilled & 33 wells
hooked up during FY2019 in Rajasthan. We
are ramping up well drilling and hook up to
add volumes.
Further, in order to add additional resource
base, we entered into Revenue Sharing
Contract for 41 exploration blocks through
OALP-1 and also secured two discovered
small fields in DSF Round-II. The new
blocks are expected to add significant
resource potential to our portfolio.
7
1
1
3
3
2
2
4
4
5
5
6
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 South Africa Block 1
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"Revenue sharing contract signed for 41 exploration blocks through OALP-1 and these new blocks are expected to add significant resource potential to our portfolio."Ajay Kumar DixitCEO, Oil & GasINTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Oil & Gas
ENVIRONMENT
Our Oil & Gas business is committed to
protecting the environment, minimising
resource consumption and driving towards
our goal of ‘zero discharge’. Our progress
was recognised in the fifth CII
Environmental Best Practices Award 2018
for Natural Gas Recovery, for zero flaring
during frac well milling in gas operations.
At the Rajasthan asset, our operations at the
Mangala, Bhagyam and Aishwarya fields
were recognised as ‘Noteworthy Water
Efficient Units’, in the ‘within fence category’
of the National Award for Excellence in
Water Management 2018 by CII.
PRODUCTION PERFORMANCE
Gross Operated production
Rajasthan
Ravva
Cambay
Oil
Gas
Net production – working interest*
Oil
Gas
Gross production
Working interest production
Unit
FY2019
FY2018
% change
Boepd
Boepd
Boepd
Boepd
Bopd
Mmscfd
Boepd
Bopd
Mmscfd
Mmboe
Mmboe
188,784
155,903
14,890
17,991
178,207
63.5
119,798
114,214
33.5
68.9
43.7
185,587
157,983
17,195
10,408
177,678
47.4
118,620
114,774
23.1
67.7
43.3
2
(1)
(13)
73
0
34
1
0
45
2
1
*Includes net production of 119boepd from the KG-ONN block, which is operated by ONGC. Cairn holds a 49% stake.
.
PRICES
Average Brent prices – US$ per barrel
70.4
57.5
22
FY2019
FY2018
% change
FINANCIAL PERFORMANCE
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating profit before special items
Share in Group EBITDA (%)
Capital expenditure
Sustaining
Growth
(US$ million, unless stated)
FY2019
FY2018
% change
1,892
1,100
58
611
489
32
480
11
469
1,480
849
57
461
388
21
137
10
127
28
30
-
33
26
-
-
6
-
Below: Employees at the Mangala Processing
Terminal, Barmer
98
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW PRODUCTION –
AVERAGE DAILY GROSS
Operated production(boepd)
1
7
6
,
1
1
2
3
0
7
,
3
0
2
6
2
9
9
8
1
,
7
8
5
5
8
1
,
4
8
7
,
8
8
1
15
16
17
18
19
EBITDA
(US$ million)
7
7
4
,
1
0
0
1
,
1
9
4
8
0
7
5
7
9
5
15
16
17
18
19
OPERATIONS
Average gross production across our
assets was 2% higher y-o-y at
188,784boepd. Production from the
Rajasthan block was 155,903boepd, 1%
lower y-o-y. The natural reservoir decline
has been managed with gains accruing
from the new wells brought online.
Production from the offshore assets stood
at a combined 32,881boepd, higher by 19%
y-o-y, due to the gains from the Cambay
infill campaign.
Production details by block are
summarised below.
RAJASTHAN BLOCK
Gross production from the Rajasthan block
averaged 155,903boepd in FY2019, 1%
lower y-o-y. This decrease was primarily
due to natural decline from the fields but
was partially offset by the gain realised
from new wells brought online as part of
Mangala infill, Bhagyam & Aishwariya EOR
campaign, production optimisation
activities and augmentation of liquid
handling capacity at the Mangala
Processing Terminal (MPT).
At Rajasthan, 99 wells have been drilled
as part of the growth projects, of these
33 wells have been brought online
during FY2019.
Gas production from Raageshwari Deep
Gas (RDG) averaged 51.3 million standard
cubic feet per day (mmscfd) in FY2019,
with gas sales, post captive consumption,
at 35.6mmscfd.
The Government of India, acting through
the Directorate General of Hydrocarbons,
Ministry of Petroleum and Natural Gas, has
granted its approval for a ten-year
extension of the PSC for the Rajasthan
block, RJ-ON-90/1, subject to certain
conditions, with effect from 15 May 2020.
The applicability of the Pre-NELP extension
policy to the RJ Block PSC is currently
sub-judice.
RAVVA BLOCK
The Ravva block produced at an average
rate of 14,890boepd, lower by 13% y-o-y.
This was primarily due to natural field
decline, although this was partially offset by
production optimisation measures. The
Government of India, acting through the
Directorate General of Hydrocarbons,
Ministry of Petroleum and Natural Gas, has
granted its approval for a ten-year
extension of the PSC for the Ravva block,
subject to certain conditions.
CAMBAY BLOCK
The Cambay block produced at an
average rate of 17,991boepd in FY2019,
up by 73% y-o-y, supported by the gains
realised from the infill wells campaign
completed in Q1 FY2019.
PRICES
Brent crude oil averaged US$70.4/bbl,
compared to US$57.5/bbl in the previous
financial year. The oil price rallied in the first
half, owing to the high compliance on the
production cut by OPEC and other
producers, as well as sanctions on Iran
imposed by the US and a steep decline in
production from Venezuela. This rally saw
crude oil hitting a four-year high in early
October to touch US$86.29/bbl.
In the latter half of the year, oil prices
declined due to the US Government's
waivers to eight major importers of Iranian
crude, leading to an oversupply in the
market. However, the oil price started to
rebound in last quarter owing to the
production cut by OPEC and other
producer countries.
FINANCIAL PERFORMANCE
Revenue for FY2019 was 28% higher y-o-y
at US$1,892 million (after profit and royalty
sharing with the Government of India),
supported by a recovery in oil price
realisation. EBITDA of FY2019 was higher at
US$1,100 million, up 30% y-o-y in line with
the higher revenue.
The Rajasthan water flood operating cost
was US$5.1 per barrel in FY2019 compared
to US$4.6 per barrel in the previous year,
primarily driven by increased interventions
and production enhancement initiatives.
Overall, the blended Rajasthan operating
costs increased to US$7.6 per barrel
compared to US$6.6 per barrel in the
previous year, due to the ramp-up in
polymer injection volumes and the
increase in commodity prices.
A. GROWTH PROJECTS
DEVELOPMENT
The Oil & Gas business has a robust
portfolio of development opportunities
with the potential to deliver incremental
volumes. In order to execute these
projects on time and within budget,
we have devised an integrated project
development strategy, with an in-built risk
and reward mechanism. This new strategy
is being delivered in partnership with
leading global oilfield service companies.
Major contracts have been awarded and
execution has started.
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional review
Oil & Gas
I) MANGALA INFILL, ENHANCED OIL
RECOVERY (EOR) AND ALKALINE
SURFACTANT POLYMER (ASP)
The field is currently under full field
polymer injection. In addition, to
increase the ultimate oil recovery and
support production volumes, we are
executing a 45-well infill drilling
campaign in the field.
The valuable learnings, gained from the
successful implementation of the
Mangala polymer EOR project, are
being leveraged to enhance production
from the Bhagyam and Aishwariya
fields. Till March 2019, 73 wells have
been drilled under enhanced oil
recovery projects across Mangala,
Bhagyam and Aishwariya, of these
33 wells are online.
Going forward, the Alkaline surfactant
polymer (ASP) project at Mangala will
enable incremental recovery from the
prolific Mangala field. The project entails
drilling wells and developing
infrastructure facilities at the Mangala
Processing Terminal. The contract for
drilling has already been awarded, while
the contract for the surface facility will
be awarded by Q1 FY2020.
II) TIGHT OIL & GAS PROJECTS
a) Tight oil: Aishwariya Barmer Hill
(ABH)
Aishwariya Barmer Hill (ABH) is the
first tight oil project to monetise the
Barmer Hill potential, and drilling started
in Q1 FY2019. Currently three rigs are
operational, and 20 wells had been
drilled by March 2019. Initial
deliverability from the two wells is in
line with expectations. We have
successfully drilled the longest lateral
well of 1,355m using advanced
geo-steering technology.
b) Tight gas: Raageshwari deep
gas (RDG) development
The RDG project is being executed
through an integrated development
approach to ramp up overall Rajasthan
gas production to ~150mmscfd, and
condensate production of 5kboepd.
The project entails developing surface
facilities and the drilling and completion
of 42 wells. The early production facility
is under commissioning and the
construction of the terminal is
progressing to plan. Up to March 2019,
six wells had been drilled.
III) OTHER PROJECTS
a) Satellite field development
An integrated contract for the
development of satellite fields is
under award.
b) Surface facility upgradation
The Mangala Processing Terminal (MPT)
facility upgradation is progressing as
per plan to handle incremental liquids.
Phase-I of the intra-field pipeline
augmentation project was
commissioned in Q4 FY2019 and the
balance scope of Phase-I to be
commissioned by Q1 FY2020.
IV) RAVVA DEVELOPMENT
An integrated contract for drilling
development wells is under award.
B. EXPLORATION AND APPRAISAL
RAJASTHAN – (BLOCK RJ-ON-90/1)
RAJASTHAN EXPLORATION
The Group is reactivating its oil & gas
exploration efforts in the prolific Barmer
Basin, which provides access to multiple
play types with oil in high permeability
reservoirs, tight oil and tight gas. We have
engaged global partners to reveal the
full potential of the basin and establish
>1 billion boe of prospective resources.
We have awarded an integrated contract
for a drilling campaign of 7-18 exploration
and appraisal wells to build on the resource
portfolio, with well-spud expected by
Q1 FY2020.
TIGHT OIL APPRAISAL
The contract for the appraisal of four fields
(Vijaya & Vandana, Mangala Barmer Hill,
DP and Shakti) has been awarded, and will
include the drilling of 10 new wells. This will
also involve multi-stage hydraulic fracturing
and extended testing. Rigs are under
mobilisation and drilling is expected to
begin in Q1 FY2020.
KRISHNA-GODAVARI BASIN
OFFSHORE
Oil discovery was notified in the second
exploratory well (H2), and a further
appraisal will now be required to
establish its size and commerciality of
the oil discovery.
The first exploration well drilled in the
block (A3-2) was a gas discovery.
Evaluations are ongoing.
RAVVA
In order to increase the reserve and
resource base, an integrated contract for
drilling exploratory wells is under award.
OPEN ACREAGE LICENSING POLICY
(OALP)
Under the Open Acreage Licensing Policy
(OALP), revenue-sharing contracts have
been signed for 41 blocks. These comprise
33 onshore and 8 offshore blocks with a
potential of ~1.4 - 4.2 billion boe of resource,
and are located primarily in established
basins, including some optimally close to
existing infrastructure. We have issued a
global tender, inviting bids for an end-to-
end integrated contract.
DISCOVERED SMALL FIELDS (DSF2)
Discovered Small Fields (DSF2) provide
synergy with existing oil & gas blocks in the
vicinity. These blocks were assessed based
on the resource potential and proximity to
infrastructure in prioritised sedimentary
basins across India. Two discovered small
fields named as Hazarigaon and Kaza gas
fields, located in Assam and Krishna
Godavari basins, respectively, have been
awarded under DSF2.
OUTLOOK
Vedanta’s Oil & Gas business now has a
robust portfolio comprising a number of
exploration blocks with promising
prospects, a large pool of development
projects and prolific producing fields.
Our energies are focused across these
opportunities, and as we execute our
development projects we expect to
deliver a progressive increase in
production volumes.
The closure of growth projects contracts
with global vendors took longer than
envisaged impacting near-term volumes.
We have however locked in contracts at
attractive prices and returns. For FY2020,
with the increase in drilling activities and
wells hook up, we expect the production
volumes to be in the range of 200-220
kboepd. Opex during the year is expected
to be c. US$7.5/boe.
STRATEGIC PRIORITIES
Our focus and priorities will be to:
• Continue to progress towards ‘zero harm,
zero waste and zero discharge’
• Continue to operate at a low cost-base
and generate free cash flow post-capex
• Execute growth projects within schedule
and cost
• Continue progress on execution of
projects to achieve targeted production
of 270-300kboepd
• Evaluate further opportunities to expand
the exploration portfolio through OALP
and other opportunities
100 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW
Above: Cairn offshore rig Suvali
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 101
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Aluminium
102
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW THE YEAR IN SUMMARY
In FY2019, the aluminium smelters
achieved an all-time-high production of
1.96 million tonnes (including trial run).
Despite some headwinds facing cost of
production – mainly input commodity
inflation, global disruptions in alumina
supply and temporary coal disruptions in
the domestic market – we were supported
by higher alumina production volumes at
Lanjigarh and rupee depreciation. We are
focusing on optimising our controllable
costs and improving our price realisation to
improve profitability in a sustainable way.
The cost of production for Q4 FY2019 was
US$1,776 per tonne, on account of
structural improvements in the cost due to
increased local bauxite supply, ramped up
alumina volume and improved coal
materialisations.
We also achieved record production of
1.5 million tonnes at the alumina refinery
through debottlenecking. We continue to
explore the feasibility of expanding the
refinery’s capacity, growing through a
phased programme and subject to
bauxite availability.
SAFETY
We experienced 15 lost time injuries during
the year (FY2018: 22), and the frequency
rate decreased to 0.23 from 0.39. We have
delivered specialist skill and competency
training in areas such as crane and lifting
operations, vehicles and driving. Root
cause analysis training was also given to
the heads of department and maintenance
heads, in order to investigate the injuries
and high-potential incidents in order to
avoid these lapses in the future.
Focusing on building a culture of care,
a programme of ‘Visible Felt Leadership’
has been launched, with management at
plants spending more time on the
shop-floor to pre-empt and address
safety issues.
At BALCO, in order to increase safety
awareness and to interact with business
partners, workers and their families,
programmes such as care-drives (seven in
number) and ‘Suraksha ki goth’ have been
organised within the plant. Additionally,
the Company has kick-started a training
programme on practising life-saving
behaviours. About 8,000 employees
and business partners have received
this training.
In a significant achievement, the Lanjigarh
refinery achieved zero-LTIs for the third
consecutive year, and we seek to replicate
its success across the business.
3
1
2
Lanjigarh Alumina refinery
1
2 Jharsuguda smelter
3 Korba smelter
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 103
"In FY2019, we achieved record production of Alumina and an all‑time‑high production of Aluminium"Ajay KapurCEO – Aluminium & PowerINTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Aluminium
ENVIRONMENT
The review of our tailings dam and ash pond
structures was completed by Golder
Associates and we are studying
recommendations to increase the
structures’ stability.
Separately, we recycled 14% of the water we
used in the year (FY2018: 11%) and our
BALCO operations saw a marginal
improvement in their specific water
consumption of 0.72 m3/MT (FY2018: 0.74
m3/MT). In Lanjigarh, as part of waste
management, 101%1 of fly ash and 97% of
lime grit was recycled.
1. The number exceeds 100% as we were able to utilise
our legacy fly-ash waste for internal infrastructural
development projects
PRODUCTION PERFORMANCE
Production (kt)
FY2019
FY2018
% change
Production (kt)
Alumina – Lanjigarh
Total aluminium production
Jharsuguda I
Jharsuguda II1
BALCO I
BALCO II2
Including trial run production of 60.5kt in FY2019 vs. 61.8kt in FY2018
1.
2. Including trial run production of nil in FY2019 vs. 16.1kt in FY2018
PRICES
1,501
1,959
545
843
260
311
1,209
1,675
440
666
259
310
24
17
24
27
-
-
Average LME cash settlement prices (US$ per tonne)
2,035
2,046
(1)
FY2019
FY2018
% change
UNIT COSTS
Alumina cost (ex-Lanjigarh)
Aluminium hot metal production cost
Jharsuguda CoP
BALCO CoP
FINANCIAL PERFORMANCE
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating profit before special items
Share in Group EBITDA (%)
Capital expenditure
Sustaining
Growth
Below: Smelter at Jharsuguda
(US$ per tonne)
FY2019
FY2018
% change
322
1,940
1,938
1,945
326
1,887
1,867
1,923
(2)
3
4
1
(US$ million, unless stated)
FY2019
FY2018
% change
4,183
316
8
240
76
9
182
100
82
3,545
414
12
257
157
10
218
105
113
18
(24)
-
(7)
(52)
(17)
(5)
(28)
104 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW TOTAL ALUMINIUM
PRODUCTION
(kt)
9
5
9
,
1
5
7
6
,
1
3
1
2
,
1
3
2
9
7
7
8
15
16
17
18
19
EBITDA
(US$ million)
6
1
4
4
1
4
4
4
3
6
1
3
7
0
1
15
16
17
18
19
In FY2019, the CoP of hot metal at
Jharsuguda was US$1,938 per tonne, up by
4% from US$1,867 in FY2018. The
equivalent CoP figure at BALCO increased
to US$1,945 per tonne, up by 1% from
US$1,923 in FY2018.
This was primarily driven by volatility in
global alumina prices due to supply
disruptions and input commodity inflation
(mainly carbon). The global alumina price
indices generally traded higher than prices
in the past years. The power cost was
higher due to disruptions in domestic coal
supply from Coal India, resulting in
procurement of coal from alternative
sources at higher prices and power import
from the grid. CoP was partially offset by
higher Lanjigarh alumina production and
currency depreciation.
The cost of production for Q4 FY2019 was
US$1,776 per tonne, significantly lower
compared to previous quarters on account
of structural improvements in the cost due
to increased local bauxite supply from
OMC meeting over 50% of our Q4 FY2019
requirements, increase captive alumina
production from the Lanjigarh refinery.
The peak run rate at Lanjigarh refinery
during the year was 1.8 mtpa.
Coal materialisation improved significantly
in Q4 FY2019, resulting in no power
imports from the grid in last four months
of FY2019. We have further secured
3.2 million tonnes of coal in the Tranche IV
auction and materialisation started in
March 2019. This will further improve
coal availability and therefore help drive
costs down.
FINANCIAL PERFORMANCE
During the year, revenue increased by 18%
to US$4,183 million, driven by volume ramp
up at Jharsuguda. EBITDA was lower at
US$316 million (FY2018: US$414 million),
mainly due to increase in cost of
production partially offset by a write back
of liability pursuant to a settlement
agreement with a contractor at BALCO.
OPERATIONS
ALUMINA REFINERY: LANJIGARH
At Lanjigarh, production was 24% higher
y-o-y at 1,501,000 tonnes, primarily through
plant debottlenecking. We continue to
evaluate the possible expansion of the
refinery, subject to bauxite availability.
Aluminium smelters
We ended the year with record production
of 1.96 million tonnes (including trial run).
Production from the Jharsuguda I smelter
was 24% higher y-o-y. This was primarily
due to lower volumes in 2018 due to pot
outage incident in Q1 that affected 228
pots of the Jharsuguda I smelter. These
pots were fully restored by Q3 FY2018.
Production from the Jharsuguda II smelter
was 27% higher y-o-y. This was mainly
driven by production stabilisation from the
ramp-ups in the previous year. We continue
to evaluate Line 4 of Jharsuguda II smelter.
The BALCO I & II smelters continued to
show consistent performance.
Coal linkages
We continue to focus on ensuring the
long term security of our coal supply, and
at competitive prices. We added 3.2mtpa
of coal linkages during FY2019 from
Tranche IV auctions. The materialisation of
Tranche IV began in March 2019. We have
also operationalised the captive coal block,
Chotia, at our BALCO operations. This
takes our coal security to 72% of our
requirements
PRICES
Average LME prices for aluminium in
FY2019 stood at US$2,035 per tonne,
which was almost flat y-o-y. Prices were
volatile throughout the year driven by
global uncertainties, fuelled by sanctions
against Rusal and US-China trade war
concerns.
UNIT COSTS
During FY2019, the cost of production
(CoP) of alumina was flat y-o-y at US$322
per tonne. Benefits from increase in
locally-sourced bauxite from Odisha
Mining Corporation (OMC), improved plant
operating parameters and rupee
depreciation were offset by input
commodity inflation (mainly caustic soda
and imported bauxite).
In FY2019, the total bauxite requirement of
about 4.4 million tonnes was met by
captive mines (10%), OMC (31%), domestic
sources (20%) and imports (39%). In the
previous year, the bauxite supply mix was
captive mines (29%), domestic sources
(41%) and imports (30%).
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 105
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Aluminium
STRATEGIC PRIORITIES
Our focus and priorities will be to:
• Deliver Lanjigarh refinery production at
1.7-1.8 million tonnes and stable
aluminium production
• Enhance our raw material security of
•
•
•
bauxite & alumina
Improve coal linkage security, better
materialisation and continued
production at our Chotia mines
Improve our plant operating parameters
across locations
Improve realisations by improving our
value-added product portfolio
OUTLOOK
VOLUME AND COST
In FY2020, we expect production at our
Lanjigarh refinery of around 1.7-1.8 million
tonnes, with aluminium production at
smelters remaining stable.
As input commodity prices continue to be
volatile, we are looking at ways to optimise
our controllable costs, while also increasing
the price realisation in order to improve
profitability in a sustainable way.
The global alumina price indices
remained volatile during FY2019 and
peaked in the middle of the year but have
since lowered in recent months. We expect
the global alumina supply to improve as
new refinery volumes enter production and
expect prices to remain stable for the
forthcoming year.
At our power plants, we are also
working towards reducing GCV losses
as well as improving plant operating
parameters which should deliver higher
plant load factors (PLFs) and a reduction
in non-coal costs.
The hot metal cost of production for
FY2020 is expected to be in the range of
US$1,725 – 1,775 per tonne.
We aim to increase our value-added
production to 60% of our total sales
for FY2020.
106 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 107
Above: Employees at integrated facility, Jharsuguda
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Power
108 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW THE YEAR IN SUMMARY
FY2019 was a significant year for the
Talwandi Saboo (TSPL) power plant, where
we achieved plant availability of c. 88%.
However, the plant load factors for the
Jharsuguda and BALCO IPP were impacted
by domestic coal shortages.
SAFETY
We report with deep regret a fatality during
the year, as the result of a vehicle accident
at our BALCO IPP. After a thorough
investigation, the lessons learned were
shared for implementation across all our
businesses. To enhance safety, a
segregated pedestrian pathway has been
completed throughout the coal truck
movement area, designed to reduce the
risk of accidents to passing pedestrians.
3
2
1
Jharsuguda power plant
1
2 Korba power plant
3 Talwandi Sabo Power plant
Captive thermal power plant
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 109
"Record plant availability of 88% at TSPL in FY2019."Ajay KapurCEO – Aluminium & PowerINTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS
Divisional Review
Power
ENVIRONMENT
One of the main environmental challenges
for power plants is the management and
recycling of fly ash. At our BALCO IPP, 100%
of the fly ash was utilised at both the power
plants, up from 62% and 58%, respectively
in the previous year. The plant also saw a
significant reduction in auxiliary power
consumption at 7.82% (FY2018: 8.14%).
A similar downward trend was achieved in
BALCO IPP’s specific water consumption
at 2.20 m3/MwH (FY2018: 2.8 m3/MwH).
PRODUCTION PERFORMANCE
Total power sales (MU)
Jharsuguda 600MW
BALCO 600MW*
MALCO#
HZL wind power
TSPL
TSPL – availability
FY2019
FY2018
% change
13,515
1,039
2,168
-
449
9,858
88%
11,041
1,172
1,536
4
414
7,915
74%
22
(11)
41
-
9
25
# continues to be under care and maintenance since 26 May 2017 due to low demand in Southern India.
* we have received an order dated 1 January 2019 from CSERC for Conversion of 300MW IPP to CPP. During the Q4
FY2019, 184 units were sold externally from this plant.
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
FY2019
FY2018
% change
4.8
4.1
5.9
4.4
4.5
3.6
5.5
3.9
8
15
7
12
1. Power generation excluding TSPL.
2. TSPL sales realisation and cost of production is considered above, based on availability declared during the
respective period.
FINANCIAL PERFORMANCE
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating profit before special items
Share in Group EBITDA (%)
Capital expenditure
Sustaining
Growth
1. Excluding one-offs
(US$ million, unless stated)
FY2019
FY2018
% change
6
(15)
-
15
(28)
934
219
24
86
133
6
4
4
-
877
258
251
75
183
7
2
2
-
Below: Power Plant at Jharsuguda
110
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW
SALES
(Million kWh)
5
1
5
3
1
,
6
1
9
,
2
1
1
2
1
,
2
1
1
4
0
,
1
1
9
5
8
9
,
15
16
17
18
19
EBITDA
(US$ million)
6
9
1
4
5
1
8
5
2
5
4
2
9
1
2
15
16
17
18
19
FINANCIAL PERFORMANCE
EBITDA for the year was 15% lower y-o-y
at US$219 million mainly due to an increase
in the cost of production due to higher coal
prices owing to supply disruption in the
domestic market. Further, the EBITDA
for FY2018 included a one-off revenue
recognition of US$35 million and
US$22 million at BALCO and at Jharsuguda
IPP’s, respectively.
OUTLOOK
During FY2020, we will remain focused on
maintaining the plant availability of TSPL
above 80% and achieving higher plant load
factors at the BALCO and Jharsuguda IPP’s.
STRATEGIC PRIORITIES
Our focus and priorities will be to:
• Resolve pending legal issues and
recover aged power debtors
• Achieve high PLFs for the Jharsuguda
and BALCO IPP
• Improve power plant operating
parameters to deliver higher PLFs/
availability and reduce the non-coal cost
OPERATIONS
During FY2019, power sales were 13,515
million units, 22% higher y-o-y. Power sales
at TSPL were 9,858 million units with 88%
availability. At TSPL, the Power Purchase
Agreement with the Punjab State Electricity
Board compensates us based on the
availability of the plant.
The 600MW Jharsuguda power plant
operated at a lower Plant Load Factor (PLF)
of 15% in FY2019.
The 600MW BALCO IPP operated at a PLF
of 53% in FY2019. We have received an
order dated 1 January 2019 from CSERC for
the conversion of 300MW capacity from
an Independent Power Plant (IPP) to a
Captive Power Plant (CPP).
The MALCO plant continues to be under
care and maintenance, effective from
26 May 2017, due to low demand in
Southern India.
UNIT SALES AND COSTS
Average power sale prices, excluding TSPL,
increased by 8% to US cents 4.8 per kWh.
This was mainly due better prices in the
open access market.
During the year, the average generation
cost was higher at US cents 4.1 per kWh
(FY2018: US cents 3.6 per kWh), driven
mainly by an increase in coal prices owing
to supply disruptions.
TSPL’s average sales price was higher at
US cents 5.9 per kWh (FY2018: US cents
5.5 per kWh), and power generation cost
was higher at US cents 4.4 per kWh
(FY2018: US cents 3.9 per kWh) driven
mainly increased coal prices.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
111
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Iron Ore
112
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW THE YEAR IN SUMMARY
Operations in Goa continued to be
suspended in FY2019, and remain so, due
to a state-wide directive from the Supreme
Court. We continue to engage with the
government to secure a resumption of
mining operations.
Production of saleable ore at Karnataka was
4.1 million tonnes, in line with the increase
in the mining cap for the state of Karnataka.
SAFETY
In continuing our journey to ‘zero harm’, the
lost time injury frequency rate (LTIFR) was
0.30 (FY2018: 0.12). During the year,
we initiated new safety practices in our
organisations including ‘one man, one
lock’; deployment of trained rescue teams
for work at height and confined space;
training in making better risk decisions
(MBRD); crane lifting and rigger training;
and continuing a grid ownership concept
for improving EHS culture on the ground.
We also launched a dedicated safety app
for real-time reporting of safety issues as
well as tracking business leaders’ time
on-field, which has proved highly
successful. Across all the sites, scores have
improved against the Vedanta
Sustainability Audit Programme (VSAP) and
Vedanta Safety Standards (VSS).
1
2
1
Iron Ore operations,
Goa
2 Iron Ore operations,
Karnataka
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 113
"Record production of 4.1 million tonnes at Karnataka. We continue to engage with the government for resumption of mining operations in Goa."Naveen SinghalCEO, Sesa Goa – Iron Ore BusinessINTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Iron Ore
ENVIRONMENT
We recycle and reuse all of the wastewater
we generate in the Iron Ore business, with
the exception of blow down from the power
plant which is treated and discharged
according to consent conditions. We have
also installed five fog cannon systems for
dust suppression and have installed a bag
filter at the charging car of the coke oven.
Our Iron Ore Karnataka business has started
biodiversity studies, which are currently in
the Phase-II stage. We have planted around
32,000 plants and also desilted around 1.17
lakh m3 in 29 check dams and village ponds
round our business area.
PRODUCTION PERFORMANCE
Production (dmt)
Saleable ore
Goa
Karnataka
Pig iron (kt)
Sales (dmt)
Iron ore
Goa
Karnataka
Pig iron (kt)
FINANCIAL PERFORMANCE
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating profit before special items
Share in Group EBITDA (%)
Capital expenditure
Sustaining
Growth
FY2019
FY2018
% change
4.4
0.2
4.1
686
3.8
1.3
2.6
684
7.1
4.9
2.2
646
7.6
5.4
2.2
645
(38)
(95)
89
6
(49)
(77)
19
6
(US$ million, unless stated)
FY2019
FY2018
% change
416
90
22
35
55
3
1
1
-
485
48
10
69
(21)
1
11
11
-
(14)
87
(49)
(92)
(92)
-
Below: Employees at operational site, Sesa Iron Ore
114
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW OPERATIONS
At Goa, production and sales volumes were
lower than the prior year due to the mine
closure. This was pursuant to the Supreme
Court judgement dated 7 February 2018
directing all companies in Goa to stop
mining operations with effect from
16 March 2018. We continue to engage
with the government for a resumption of
mining operations.
FINANCIAL PERFORMANCE
In FY2019, revenue decreased to
US$416 million, 14% lower y-o-y mainly due
to lower sales at Iron Ore Goa resulting
from the mine closure partially offset by
increase in sales volume at Karnataka and
pig iron prices during the year. EBITDA
increased to US$90 million compared with
US$48 million in FY2018. This was mainly
due to higher volumes at Karnataka.
At Karnataka, production was 4.1 million
tonnes, 89% higher y-o-y due to an
increase in the annual mining allocation.
Sales in FY2019 were 2.6 million tonnes,
19% higher y-o-y due to an increase in
production, but partially offset by muted
e-auction sales.
Production of pig iron increased by 6% to
686,000 tonnes in FY2019, mainly lower
metallurgical coke availability due to
weather-related supply disruptions in
Australia in Q1 FY2018, and a local
contractors’ strike in Q2 FY2018.
OUTLOOK
The production from Iron Ore Karnataka
is expected to be 4.5 WMT (wet million
tonnes).
STRATEGIC PRIORITIES
Our focus and priorities will be to:
• Bring about a resumption of mining
operations in Goa through continuous
engagement with the government and
the judiciary
• Increase our footprint in iron ore by
continuing to participate in auctions
across the country, including Jharkhand
PRODUCTION
(Mt)
.
9
0
1
2
.
5
1
.
7
.
4
4
.
6
0
15
16
17
18
19
EBITDA
(US$ million)
2
2
3
,
1
3
3
4
5
3
1
4
8
5
0
0
4
15
16
17
18
19
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 115
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Steel
116
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW THE YEAR IN SUMMARY
Vedanta Limited completed the acquisition
of 90% of the share capital of ESL on
4 June 2018. ESL is an integrated steel plant
(ISP) in Bokaro, Jharkhand, with a design
capacity of 2.5mtpa. Its current operating
capacity is 1.5mtpa with a diversified
product mix of wire rod, rebar, DI pipe
and pig iron.
FY2019 was a transformational year for
Electrosteel Steels Limited (ESL). The
business achieved record production, sales
volume, EBITDA, EBITDA margin and free
cash flow generation. Indeed, FY2019
EBITDA margin of 19% was among the
sector leaders in India.
SAFETY
Since the acquisition by Vedanta,
we have started to implement the best
safety practices of the Vedanta Group to
work towards achieving ‘zero harm’.
These include:
• Training and awareness programmes for
making better risk decisions (MBRD)
• Implementation of eight Vedanta
safety standards
• Launch of Vedanta Sustainability Audit
Programme (VSAP)
• Focusing on Visual Felt Leadership (VFL)
We regard any safety incident as
unacceptable and preventable and continue
to work towards our zero harm goal.
1
1
1 Electrosteel Steels plant, Bokaro
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
117
"Record production of 1.2 million tonnes during FY2019."PANKAJ MALHANDeputy Chief Executive Officer – Electrosteel BusinessINTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Steel
PRODUCTION PERFORMANCE
ENVIRONMENT
Alongside zero harm, a main priority for ESL
is to achieve ‘zero waste and zero discharge’.
In line with this, we have started on a journey
to achieve no discharges of water.
Production (kt)
Pig iron
Billet
TMT bar
Wire rod
Ductile iron pipes
PRICES
Pig iron
Billet
TMT
Wire rod
DI pipe
UNIT COSTS
Steel (US$ per tonne)
FINANCIAL PERFORMANCE
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating profit before special items
Share in Group EBITDA (%)
Capital expenditure
Sustaining
Growth
* Financial numbers are for a period of 10 months post acquisition
Below: TMT Bars produced by Electrosteel Steels Limited
FY2019
FY2018
% change
1,199
142
39
441
427
150
1,025
179
50
300
365
130
17
(21)
(21)
47
17
15
(US$ per tonne)
FY2019
FY2018
% change
404
486
564
638
593
359
447
515
558
598
13
9
10
14
(1)
(US$ per tonne)
FY2019
FY2018
% change
457
456
1
(US$ million, unless stated)
FY2019*
600
113
19
28
85
3
15
15
-
118
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW OPERATIONS
ESL’s manufacturing facility is a greenfield
integrated steel plant located near Bokaro,
Jharkhand, India, which has a current
capacity of 1.5mtpa and the potential to
increase to 2.5mtpa. It primarily consists of
one sinter plant, a vertical coke oven plant,
two blast furnaces, an oxygen plant, a lime
calcination plant, a steel melting shop, a
wire rod mill, a bar mill, a captive power
plant and a ductile iron pipe plant.
PRICES
Average sales realisation increased 12%
y-o-y from US$510 to US$572 per tonne in
FY2019. Prices of iron and steel are
influenced by several macro-economic
factors. These include government spend
on infrastructure, the emphasis on
developmental projects, demand-supply
forces, the Purchasing Managers’ Index
(PMI) in India and production and inventory
levels across the globe specially China.
UNIT COSTS
Coal prices and iron ore prices were higher
by 15% and 50%, respectively over FY2018
despite of which, the cost of production
stood flat at US$457 per tonne in FY2019.
This was managed through improvement
in key operational metrics which includes
optimisation of lower grade iron ore fines,
improvement in coke rate consumption,
higher PCI consumption in blast furnaces,
lower consumption of pellets,
improvements in mill yields, commercial
excellence and tight control over costs.
FINANCIAL PERFORMANCE
Since its acquisition by Vedanta with effect
from June 2018, ESL has generated EBITDA
of US$113 million. Prudent cost
management and improvisation of key
matrices played a pivotal role for this
turnaround story.
OUTLOOK
Hot metal production is expected to be
c. 1.5mtpa in FY2020 and expected EBITDA
margin is US$130 – US$140 per tonne.
STRATEGIC PRIORITIES
Our focus and priorities will be to:
• Obtain clean Consent to Operate and
environmental clearance
• Debottleneck the blast furnace, steel
melting shop & roll capacity, improving
production volume
• Raw material securitisation through long
term contracts
• Re-branding of value-added products
and enter the retail market for TMT
• Embark on the expansion journey from
1.5 to 2.5mtpa
• Ensure zero harm and zero discharge,
fostering a safety-centric culture
• Focus on waste-to-wealth through
maximising revenue from
secondary products
Since June 2018, post Vedanta’s acquisition
of ESL, the business has seen significant
improvements leading to a healthy financial
position. There have been significant gains
in operational efficiencies, such as a
substantial reduction in the coke rate at
blast furnaces 2 & 3 by about 3% and 7%,
respectively y-o-y; optimisation of the coal
mix and iron ore blending; and improved
yields of the finishing mill to 96.7% (from
95.9% in FY2018).
Prior to the acquisition, the saleable
production for the business was about
1mtpa. This was mainly due to a sub-
optimal use of assets, weak liquidity and
limited working capital that resulted in an
inadequate availability of resources. In
FY2019, we achieved record saleable
production of 1.2mtpa as a result of
operational excellence and restarting of
350 m3 blast furnace 3 in August 2018.
In line with our stated priorities to stabilise
production and ramp up to 1.5mtpa, we
achieved a hot metal production run-rate
of c. 1.5mtpa in FY2019.
The priority remains to enhance production
of Value-added Products (VAPs), i.e. TMT
bar, wire rod and DI pipe, and to minimise
the production of Non-value-added
Products (NVAPs) i.e. Pig iron and billets.
During the year, we shifted c. 21%
production of NVAPs to higher margin
VAPs. TMT bar and wire rod production
increased by 47% and 17%, respectively
y-o-y, driven mainly by improving yields at
the steel melting shop, higher availability of
hot metal and better efficiency at the mills.
Our Consent to Operate (CTO) for the steel
plant at Bokaro, which was valid until
December 2017, was not renewed by the
State Pollution Control Board (PCB). This
was followed by the Ministry of
Environment, Forests and Climate Change
revoking the Environmental Clearance (EC).
Both the directions have since been stayed
by the Hon’ble High Court of Jharkhand
until the next hearing date, which is due on
25 July 2019.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 119
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Copper – India/Australia
120 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW SAFETY
The lost time injury frequency rate (LTIFR)
was 0.15 (FY2018: 0.08). The primary
reason for the increase was the significant
decline in man-hours due to plant closure.
THE YEAR IN SUMMARY
The copper smelter plant at Tuticorin was
under shutdown for the whole of FY2019.
We continue to engage with the
government and relevant authorities to
enable the restart of operations at
Copper India.
We continued to operate our refinery and
rod plant at Silvassa, catering to the
domestic market.
1
2
1 Silvassa refinery
2 Tuticorin smelter
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 121
"We continue to engage with government and relevant authorities to enable the restart of operations at Copper India."PANKAJ KUMARChief Executive Officer – Sterlite CopperINTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Copper – India/Australia
PRODUCTION PERFORMANCE
ENVIRONMENT
Copper Mines of Tasmania continued in care
and maintenance awaiting a decision on
restart. Meanwhile, a small dedicated team is
maintaining the site and there were no
significant safety or environmental
incidents during the year. The site retained
its ISO accreditation in safety, environment
and quality management systems and the
opportunity of a lull in production was
used to review and further improve
these systems.
Production (kt)
India – cathode
PRICES
FY2019
FY2018
% change
90
403
(78)
Average LME cash settlement prices (US$ per tonne)
6,337
6,451
(2)
FY2019
FY2018
% change
FINANCIAL PERFORMANCE
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating profit before special items
Share in Group EBITDA (%)
Capital expenditure
Sustaining
Growth
(US$ million, unless stated)
FY2019
FY2018
% change
1,537
(36)
(2)
21
(57)
(1)
37
28
9
3,828
162
4
25
137
4
84
34
50
(60)
-
-
(17)
-
-
(55)
(17)
(81)
Below: Employee at operational Site,
Sterlite Copper
122
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW OPERATIONS
The Tamil Nadu Pollution Control Board
(TNPCB) vide order, dated 9 April 2018,
rejected the consent renewal application of
Vedanta Limited for its copper smelter
plant at Tuticorin. It directed Vedanta not to
resume production operations without
formal approval/consent (vide order dated
12 April 2018), and directed the closure of
the plant and the disconnection of
electricity (vide order dated 23 May 2018).
PRICES
Data from the International Copper Study
Group showed refined output and demand
growth estimates for 2019 indicating a
market deficit of 280kt. Wood Mackenzie
reported that the world refined copper
production for CY2019 will be 23.90 million
tonnes against 23.54 million tonnes in
CY2018, while refinery consumption is
estimated to be around 24.18 million tonnes
against 23.68 million tonnes in CY2018.
Average LME copper prices decreased by
2% compared with FY2018.
FINANCIAL PERFORMANCE
During the year, EBITDA was US$(36)
million and revenue was US$1,537 million,
a decrease of 60% on the previous year’s
revenue of US$3,828 million. The reduction
in revenue and EBITDA was mainly due to
the shutdown of the Tuticorin smelter.
OUTLOOK
To be advised following the restart of
Tuticorin.
STRATEGIC PRIORITIES
Our focus and priorities will be to:
• Engage with the government and
relevant authorities to enable the restart
of operations at Copper India
• Sustain operating efficiencies, reducing
our cost profile
• Continuously upgrade technology to
ensure high-quality products and
services that sustain market leadership
and surpass customer expectations
The Government of Tamil Nadu also issued
an order dated 28 May 2018 directing the
TNPCB to permanently close and seal the
existing copper smelter at Tuticorin; this
was followed by the TNPCB on 28 May
2018. Vedanta Limited filed a composite
appeal before the National Green Tribunal
(NGT) against all the above orders passed
by the TNPCB and the Government of
Tamil Nadu. In December 2018, NGT set
aside the impugned orders and directed
the TNPCB to renew the CTO.
However, in February 2019, the Hon’ble
Supreme Court set aside NGT’s order on
the grounds of maintainability and left it
open for Vedanta Limited to file a writ
petition before the Madras High Court
against all the above orders. Hon’ble
Supreme Court has further left it open for
Vedanta Limited to apply for interim reliefs
considering that the plant has been shut
down since 09 April 2018, and to apply
before the Chief Justice of the High Court
for an expeditious hearing.
Vedanta Limited duly filed writ petitions
before the Madras High Court on
22 February 2019, which heard our
miscellaneous petitions seeking interim
relief on 1 March 2019. The court directed
the TNPCB and the Government of Tamil
Nadu to file their counters and scheduled
them for further hearing on 23 April 2019.
On 23 April 2019, the matter was posted for
further hearing on 11 June 2019.
Meanwhile, the Company’s Silvassa
refinery and rod plant continues to operate
as usual, enabling us to cater to the
domestic market.
Our copper mine in Australia has remained
under extended care and maintenance
since 2013. However, we continue to
evaluate various options for its profitable
restart, given the government’s current
favourable support and prices.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 123
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Copper Zambia
124
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW Mr. Christopher Sheppard was appointed
as the CEO of KCM in March 2019. He will
provide leadership in delivering KCM’s
vision of over 50 years of sustainable
mining operations in Zambia. With over
35 years of mining experience behind him,
he will be steering all of KCM’s strategic
business priorities.
THE YEAR IN SUMMARY
Copper Zambia had another challenging
year in terms of production, but we are now
turning the corner with an approach
focusing on industrial architecture, process
stabilisation and growth projects to drive all
of KCM’s strategic business priorities. The
turnaround actions required are
understood and under way, and although
there is much to be done, it remains a
world-class asset with a 50-year mine life. It
remains an integral part of our vision for the
future. We are confident that the new
approach and re-engineering of design
parameters will secures our 50-year vision
for mining at KCM.
At the Konkola underground mine, we are
focusing on infrastructure reliability,
stabilisation of partnering approach and
accelerated dewatering and development
rates for Konkola’s growth vision. Sustained
process controls are steadily delivering
results at the Tailings Leach Plant (TLP).
1
1
Konkola and Nchanga copper
mines and Nchanga smelter,
Zambia
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 125
"We are committed to contribute towards the growth of the economy and sustainability in Zambia and we undertake to constructively engage with all key stakeholders such as government, local communities, suppliers, employees and the shareholders in a respectful manner."CHRISTOPHER SHEPPARDChief Executive OfficerCopper ZambiaINTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Divisional Review
Copper Zambia
SAFETY
We deeply regret that there were four fatal
accidents at the Konkola underground
mine and one at the Nchanga underground
mine during FY2019. Incidents were
thoroughly investigated, and the lessons
learned have been actioned for
implementation with the rest of the
organisation. Our LTIFR for the year was
0.56 (FY2018: 0.30)
KCM continued driving its renowned safety
programme 'Chingilila', envisioned to train
mine captains to become safety
ambassadors who regularly visit every
working area to improve the safety
awareness in the field and in the workplace.
In over 400 leaders were trained in
Company safety procedures and practices.
During the year, the British Safety Council
audited our OHS management system,
which again showed an improvement in
reporting near-misses and we expect to
improve the Corrective Action Preventive
Action (CAPA) closure rate.
ENVIRONMENT
Improving our water management practices
remains a top priority for the business.
During the year, we successfully reduced
our specific water consumption from 171 to
160 m3/T for the business. Further
improvement projects are under way which
will not only improve the current
performance but will start to set standards
for the industry in water and air quality.
PRODUCTION PERFORMANCE
Production (kt)
Total mined metal
Konkola
Nchanga
Tailings leach plant
Finished copper
Integrated
Custom
UNIT COSTS (INTEGRATED PRODUCTION)
Unit costs (US cents per lb) excluding royalty
Unit costs (US cents per lb) including royalty1
1. Including sustaining capex and interest cost
FINANCIAL PERFORMANCE
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortisation
Operating loss before special items
Share in group EBITDA (%)
Capital expenditure
Sustaining
Growth
FY2019
FY2018
% change
91
30
13
49
177
90
87
91
37
13
41
195
84
111
-
(20)
(1)
19
(9)
7
(22)
FY2019
FY2018
% change
276.2
366.2
239.1
314.8
16
16
(US$ million, unless stated)
FY2019
FY2018
% change
1,085
(63)
(6)
102
(165)
(2)
36
36
-
1,283
73
6
112
(39)
2
24
24
-
(15)
-
(9)
-
49
49
Below: Employees on site at the Nchanga East
Mill Concentrator, KCM
126
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
MANAGEMENT REVIEW OPERATIONS
Mined metal production in FY2019 was
91,000 tonnes, flat y-o-y. Custom volumes
decreased to 87,000 tonnes, 22% lower
compared FY2018 mainly due to lower
concentrate availability in the market and
introduction of a 5% import duty on
concentrates from 1st January 2019.
Konkola
At Konkola, production decreased to
30,000 tonnes, down 20% y-o-y, due to
poor performance from one of the
business partner at Shaft 3 area, shaft’s
structural maintenance for improving the
hoisting capacities and reliability and lower
equipment availability than planned
resulting in lagging developments and
consequently the lower production. A new
business partner with better mining
expertise has already been identified and
productive engagement is on with the
partners with a targeted resource
mobilisation by Q1 FY2020.
Nchanga
At Nchanga, production was at 13,000
tonnes, down 1% y-o-y, primarily due to
heavy monsoon impacting feeds from
open-pits and temporary suspension of
Nchanga underground operations from Q4
FY2019 due to low availability of acid as a
result of rationalised operations at our
Nchanga smelter following the introduction
of an import duty on copper concentrates.
Tailings Leach Plant
TLP’s production stood at 49,000 tonnes,
up 19% y-o-y, mainly due to improved
feed-grades and higher copper recoveries
as a result of consistent pumps and plant
availability and stabled process controls
partially offset by temporary suspension of
Nchanga underground operations from Q4
FY2019.
Smelter and refinery
Production of finished copper (excluding
TLP) decreased to 41,000 tonnes in FY2019
compared to 43,000 tonnes in FY2018.
Custom volumes decreased to 87,000
tonnes, 22% lower compared FY2018
mainly due to lower concentrate availability
in the market and introduction of a 5%
import duty on concentrates from 1st
January 2019.
UNIT COSTS (INTEGRATED
PRODUCTION)
In FY2019, the unit cost of production
(excluding royalties) increased by 16% to US
cents 276.2 per lb on y-o-y basis as a result
of significant depreciation of Kwacha
against the US dollar, higher waste
stripping costs planned for enhanced ore
exposure at open-pit, additional cost
incurred on sourcing acid for TLP ramp-up,
focused preventive maintenance
programmes akin to improved plant
availabilities, lower cobalt credits as a result
of current mining sequence and a one-off
credit related to Energy Regulation Board
(ERB) tariff provision in FY2018.
FINANCIAL PERFORMANCE
Revenue in FY2019 was lower at US$1,085
million compared with US$1,283 million in
the previous year. This was mainly due to
lower metal prices and reduction in custom
sales volumes. EBITDA for the year stood at
US$(63) million compared with US$73
million in FY2018. This was mainly due to
incremental process improvement cost,
significant depreciation of the Kwacha
against US dollar lower cobalt credits and a
one-off credit related to Energy Regulation
Board (ERB) tariff provision in FY2018.
OUTLOOK
Full-year production for FY2020 is
expected to reach 90-100 kt from
integrated production with equivalent
contribution from custom production.
Integrated C1 cost for FY2020 is expected
at US cents 240-250 pound.
Konkola underground mine
The Konkola underground mine remains a
key priority. The operational philosophy
re-designed to include industrial
architecture, contractor partnering,
accelerated dewatering & development
under a reliable life of mine plan, is central
to the ramp-up plan. A feasibility study to
develop a deeper flat level is under way as
part of the 'dry mine' project.
Nchanga operations
At Nchanga, the focus continues to be
plant reliability at the TLP, and on driving
productivity in the open-cast mines
through right balance between waste and
ore excavation.
Smelter and refinery
A 35-days-planned, biennial maintenance
shutdown is scheduled in June-July 2019 as
part of preventive maintenance
programme to improve the plant reliability
and improved feed rates of above 80
tonnes per hour (tph). We are equally
focused to improve the capacity re-build
for our 500 tpd sulphur burning plant to
support leaching operations.
OUR STRATEGIC PRIORITIES
Our focus and priorities will be to:
• Deliver volume growth through
successful implementation of vendor
partnering model
• Increase production of underground
mine at Konkola with an additional,
deeper horizontal development
• Refocus and strengthen industrial
architecture & infrastructure to delivery
stability in short term and growth in
long term
• Improve equipment availability and
reliability
• Ensure a reliable Tailings Leach facility
with the potential to increase recoveries
• Reduce the cost base through the
contractor business-partnering model
and value-focused initiatives
• Strengthen the team expertise with
strong mining, maintenance and health
& safety specialists
PORT BUSINESS
Vizag General Cargo Berth (VGCB)
During FY2019, VGCB operations showed a
decrease of 8% in discharge and 5% in
dispatch compared to FY2018. This was
mainly driven by lower availability of railway
rakes in the region.
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 127
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS
Board of Directors
ANIL AGARWAL, 66
Executive Chairman | N*
NAVIN AGARWAL, 58
Executive Vice Chairman
Date of Appointment
Mr. Agarwal was appointed to the Board in May 2003 and became
the Executive Chairman in March 2005.
Date of Appointment
Mr. Agarwal was appointed to the Board in November 2004 and
became the Executive Vice Chairman in June 2005.
Background
Mr. Agarwal founded the Group in 1976. In over three decades,
the Group, under his leadership and with his strategic guidance,
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. His entrepreneurial
style of identifying and turning around companies has led the
Group’s expansive and profitable growth. He is also known for
his commitment to ensuring that the growth and profitability of
the Group aids the eradication of poverty through development
initiatives within the communities in which Vedanta operates.
Current Positions
• Director of Sterlite Technologies Limited and Chairman Emeritus
of Vedanta Limited
Previous Experience
• Chairman of Vedanta Limited
Background
Mr. Agarwal has been associated with the Group since its
inception and has over 35 years of strategic executive experience.
He has been instrumental in leading the growth of the Group
through organic projects and acquisitions. He plays a pivotal role
in providing direction for development of the top leadership talent
at the Group. He is credited with creating a culture of business
excellence and delivering superior benchmark performance
through application of advanced technology and global best
practices. He has led Vedanta’s evolution to the highest standards
of corporate governance and enhanced engagement with key
stakeholders.
Current Positions
• Executive Chairman of Vedanta Limited
Previous Experience
• Chairman of the Vedanta’s Executive Committee
•
Chairman of Cairn India Limited
Strategy
Mining/
Energy
Financial
Board
Governance
Executive
Compensation
Indian
Business
Experience
Director
Anil Agarwal
Navin Agarwal
Srinivasan Venkatakrishnan
Deepak Parekh
Geoffrey Green
Ravi Rajagopal
Katya Zotova
Edward T Story
UK
market
Sustainability
Government
Relations
Communication
128
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
GOVERNANCE SRINIVASAN VENKATAKRISHNAN, 58
Chief Executive Officer | S
Date of Appointment
Mr. Venkatakrishnan was appointed to the Board in August 2018.
Background
Mr. Venkatakrishnan (Venkat) has extensive global leadership
experience at major natural resources companies. He has a
strong track record and achieved significant success, delivering
major projects on time and on budget improving productivity,
strengthening the balance sheet, reducing operating and overhead
costs, and improving overall safety and sustainability performance.
Current Positions
• Whole–time Director and Chief Executive Officer of
Vedanta Limited
Previous Experience
• Chief Executive Officer of AngloGold Ashanti Limited
• Chief Financial Officer of AngloGold Ashanti Limited
Chief Financial Officer of Ashanti Goldfields Limited
•
Qualifications and Awards
Mr. Venkatakrishnan is a qualified Chartered Accountant who holds
a Bachelor's degree from the University of Madras.
Key to committees
* Committee Chairman/Chair
A Audit Committee
R Remuneration Committee
N Nominations Committee
S Sustainability Committee
DEEPAK PAREKH, 74
Independent Non-Executive Director and Senior
Independent Director | A, N, R
Date of Appointment
Mr. Parekh joined the Board in June 2013.
Background
Mr. Parekh has a diversity of both executive and non-executive global
experience across a number of sectors, including financial services,
infrastructure, pharmaceuticals, electronics and leisure.
Current Positions
• Chairman of Housing Development Finance Corporation, India’s
leading financial services conglomerate
• Non-executive Chairman of BAE Systems (Services) Pvt. Ltd. and
Siemens, in India
• Director of Indian Hotels Company Limited, National Investment
and Infrastructure Fund (NIIF), Fairfax Holdings Corporation and
DP World
Previous Experience
• Various directorships, including GlaxoSmithKline Pharmaceuticals
Limited and Mahindra & Mahindra Limited
Qualifications and Awards
Mr. Parekh was a recipient of the Padma Bhushan in 2006, Knight
in the Order of the Legion of Honour by the French Republic in
2010 and Bundesverdienstkreuz –Cross of the Order of Merit by
the Federal Republic of Germany in 2014. He was also the first
international recipient of the ICAEW outstanding achievement
award in 2010.
BOARD BALANCE
NON-EXECUTIVE
DIRECTOR TENURE
INTERNATIONAL
EXPERIENCE
GENDER DIVERSITY
Non-executive Directors
Executive
5
3
0-3 Years
4-6 Years
7-9 Years
2
2
1
Male
Female
7
1
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 129
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS
Board of Directors
Continued
GEOFFREY GREEN, 69
Independent Non-Executive Director | R*, A
EKATERINA (KATYA) ZOTOVA, 41
Independent Non-Executive Director | S*, N, R
Date of Appointment
Mr. Green was appointed to the Board in August 2012.
Date of Appointment
Ms. Zotova was appointed to the Board in August 2014.
Background
Mr. Green has a wealth of knowledge in respect of UK corporate
governance, regulatory and strategic matters, with many years
of legal and commercial experience advising major UK listed
companies on corporate and governance issues, mergers &
acquisitions and corporate finance.
Current Positions
• Non-executive Chairman of the Financial Reporting Review
Panel, one of the main subsidiary bodies of the Financial
Reporting Council
Previous Experience and Positions
• Partner at Ashurst LLP
• Senior partner and Chairman of Ashurst’s management Board for
10 years
• Head of Ashurst’s Asian practice based in Hong Kong, responsible
for leading the firm’s strategy and business development for
the region
Qualifications
Mr. Green has a degree in law from Cambridge University and
qualified as a solicitor at Ashurst LLP.
Background
Ms. Zotova has a wide range of commercial experience in the oil &
gas industry, including strategy, portfolio management, corporate
finance and mergers & acquisitions.
Current Positions
•
Senior external advisor to McKinsey & Company
Previous Experience
• Principal at L1 Energy LLP/Pamplona Capital where she was
responsible for major merger & acquisition transactions
• Head of International Acquisitions and Divestments for
Citigroup’s oil & gas investment banking division where she
worked directly with oil majors and national oil companies
• A variety of finance, business development and mergers &
acquisitions roles during her 14 year career at Royal Dutch Shell
including Head of Portfolio Management for Upstream
International
Qualifications
Ms. Zotova 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.
130 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
GOVERNANCE RAVI RAJAGOPAL, 64
Independent Non-Executive Director | A*, S
EDWARD T. STORY, 75
Independent Non-Executive Director | A
Date of Appointment
Mr. Rajagopal was appointed to the Board in July 2016.
Date of Appointment
Mr. Story was appointed to the Board in June 2017.
Background
Mr. Rajagopal has substantial international executive experience
having worked in a variety of senior finance and operational roles
at a number of global companies.
Background
Mr. Story brings to the Board over 50 years of global executive
experience in the oil and gas industry.
Current Positions
• Chairman of Fortis Healthcare Limited
• Chairman, JM Financial Services, Singapore and senior advisor
to JM Financial Services
• Independent Director and Chair of the Audit Committee of Airtel
Africa, a subsidiary of Bharti Airtel
• Trustee of the Science Museum Foundation, UK
Previous Experience
• Member of Diageo’s India Advisory Board, which he formed in
2008 and led until 2015
• CFO for Europe and Group Financial Controller at Diageo PLC
• A variety of senior roles across Diageo Group from 1997,
Current Positions
• President and Chief Executive Officer of SOCO International PLC,
an international oil and gas exploration and production company
listed on the London Stock Exchange with operations in Vietnam
and Egypt
Previous Experience
• Senior executive positions at various international oil and gas
companies such as Snyder Oil Corporation, Conquest
Exploration Company, Superior Oil Company, Exxon Corporation
and Esso Standard Oil
• A Non-Executive Director of Cairn Energy PLC
• A Non-Executive Director of Cairn India Limited
including group controller at Diageo PLC, CFO for Europe and
global head of M&A
Qualifications
• Mr. Story holds a Bachelor of Science degree from Trinity
• Business responsibility for Diageo plc’s spirits business across
sub-Saharan Africa
• Progressively senior roles from 1979 across five different
businesses for ITC India (a BAT plc associate in India)
• Nominee non-executive director of United Spirits, India until
October 2016
Qualifications
Mr. Rajagopal has a degree in Commerce from Madras University
and is a fellow of the Institute of Chartered Accountants of
India and the Cost and Works Accountants of India. He has also
completed the Advanced Management Program at Harvard
Business School.
University, San Antonio, Texas, a Master’s degree in Business
Administration from the University of Texas and an honorary
Doctorate degree by the Institute of Finance and Economics
of Mongolia
Key to committees
* Committee Chairman/Chair
A Audit Committee
R Remuneration Committee
N Nominations Committee
S Sustainability Committee
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 131
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTS Introduction to Governance
The Board is responsible for the long term success of the
Group and good governance plays a key role in the delivery of
shareholder value. Further to the Company’s delisting from the
Official List of the London Stock Exchange, the Board remains
committed to maintaining the highest standards of corporate
governance and ethical business practices. The spirit of good
governance guides how we do business and underpins how
we serve our stakeholders.
LEADERSHIP
The Company’s Board of Directors provides entrepreneurial
leadership for the Group and strategic direction to
management. It is collectively responsible for promoting the
long term success of the Group through the creation and
delivery of sustainable shareholder value.
In this section, you will find information about the Vedanta
Board and its Committees, areas of focus for the Board and
the division of responsibilities.
The reporting structure, as shown below, between the Board,
Board Committees and Management Committees forms the
backbone of the Group’s Corporate Governance framework.
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 conduct its business ethically. This is achieved through
a prudent and robust risk management framework, internal
controls and strong governance processes.
The Board of Directors
Comprises of eight Directors including the Executive
Chairman, Executive Vice Chairman, Chief Executive Officer
and five Non-Executive Directors.
Board Committees
The Board delegates certain responsibilities to committees
which operate within their defined terms of reference.
The Board has four established committees (together,
the Board Committees), namely Audit, Remuneration,
Sustainability and Nominations Committees.
Executive Chairman
Audit Committee
Board
Sustainability Committee
Oversees the Group’s financial reporting,
the efficacy of the internal control and risk
management framework and scrutinises
the work of the internal and external
auditors.
Nominations Committee
Reviews the size, structure and
composition of the Board and its
Committees to ensure that the appropriate
balance of skills, experience, diversity and
independence are present; and leads the
Board appointment process.
• Set the values and vision of the Group
• Determine strategic priorities and risk
appetite
• Review the delivery of strategy by
management and provide challenge
or support as necessary
• Oversee the Group’s internal controls
and risk management framework
• Monitor the Group’s risk environment
and tolerances
• Stakeholder engagement
• Financial and performance reporting
Chief Executive Officer
Oversees the Group’s management of
sustainability matters including HSE,
employment practices, sustainable
development, engagement with the
communities in which the Group
operates, human rights and land access.
Remuneration Committee
Reviews and recommends to the Board
the executive remuneration policy and
determines the remuneration packages
of each of the Executive Directors.
Ethics Committee
Executive Committee
Operating Businesses
Finance Standing Committee
Executive Committees of the Group’s
operating businesses
132
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
GOVERNANCE Each Board Committee has formally delegated duties
included in its terms of reference, which are available on
the Company’s website at www.vedantaresources.com/
boardcommittees. The Board Committees’ terms of reference
are reviewed regularly to ensure that they comply with
current legal and regulatory requirements, reflect corporate
best practice and facilitate the effective operation of the
relevant Board Committee. The Chair of each of the Board
Committees reports formally to the Board on their respective
Committee’s activities following each meeting. Additionally,
from time to time, the Board Committees submit reports and
recommendations to the Board on any matter which they
consider significant to the Group.
the Head of HSE and Sustainability attends the Sustainability
Committee meetings to formally record each meeting.
At the invitation of the Audit Committee, the Executive
Directors, Chief Executive Officer, Chief Financial Officer,
Director, MAS and other members of the senior management
team regularly attend Audit Committee meetings to report
on issues and facilitate discussions with the external auditor.
The external auditor attends Audit Committee meetings
to ensure effective communication of matters relating
to the external audit of the Group’s full year and interim
financial statements. The Audit Committee also meets with
representatives from the external auditor without management
being present bi-annually.
Only the members of each Board Committee have the right
to attend its meetings. Other Directors, management and
advisers may attend meetings at the invitation of the relevant
Board Committee Chair. The Group Company Secretary
acts as Secretary to the Board, Audit, Nominations and
Remuneration Committees and attends all their meetings while
All Board Committees 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.
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,
and Non-Executive Directors which are summarised below.
The role of the Executive Chairman
• Leads the Board and ensures that it
discharges its responsibilities effectively
• Develops succession plans for Board
•
appointments for approval by the Board
Identifies strategic priorities and new
business opportunities to enhance
shareholder value
• Promotes the highest standards of
integrity, probity and governance
• Chairs the Board meetings and facilitates
the active engagement of all Directors
The role of the Executive
Vice Chairman
• Supports the Executive Chairman
in executing the overall vision and
strategy of the Group
The role of the Chief Executive Officer
• Ensures effective implementation of Board
decisions
• Develops operational business plans for the
• Leads the Group’s principal
Board’s approval
subsidiary, Vedanta Limited, as its
Chairman
• Enhances and sustains the Group’s
overall HSE, people, digital and
technology, ethics and compliance
practices at global standards
• Oversees stakeholder engagement
• Provides leadership to the senior management
team for the delivery of the Group’s operational
business plans following Board approval
• Provides oversight and management of all
of the Group’s operations and performance
including environmental, social, governance,
health and safety and sustainability
• Oversees the Directors’ induction,
in India and globally
• Manages the Group’s risk profile in line with the
performance and ongoing development
• Engages with the Company’s
stakeholders to ensure that an
appropriate balance is maintained
between the various interests
• Ensures effective execution of
growth projects to deliver value
• Provides mentoring to some of
the key corporate functions like
the people function, management
assurance and investor relations
including key leadership
development
risk appetite set by the Board
• Ensures that prudent and robust risk
management and internal control systems are
in place throughout the Group
• Recommends annual budgets to the Board for
approval
• Supports the Executive Chairman in
maintaining effective communications with
various stakeholders
• Leads the Executive Committee
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. Collectively, the current Non-Executive
Directors have the appropriate balance of expertise and
independent judgement, together with a good understanding
of the Group’s risk environment to enable them to provide
effective oversight in the context of uncertainty and
volatile markets.
MANAGEMENT COMMITTEES
The Executive Committee
The Executive Committee supports the Chief Executive Officer
in the day-to-day running of the Group and meets monthly.
It is responsible for implementing the strategy adopted by the
Board, allocating resources in line with delegated authorities,
managing risk and monitoring the operational and financial
performance of the Group. Authority is delegated by the
Executive Committee to the respective Chief Executive Officer
of each of the Group’s businesses. The Group Chief Executive
Officer 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 has delegated authority
from the Board for approval of certain matters including
approval of financing arrangements and corporate guarantees
below the financial threshold for Board approval. It comprises
of the Executive Chairman, Executive Vice Chairman,
133
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Introduction to Governance
Continued
Chief Executive Officer, Chief Financial Officer and Director of
Vedanta Limited. The Company Secretary updates the Board
on the activities of the Finance Standing Committee at the
subsequent Board meeting and the minutes of all Finance
Standing Committee meetings are reviewed by the Board.
Key matters reserved for Board consideration
The duties of the Board are set out in its terms of reference,
including those matters specifically reserved for its
consideration. 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.
The formal schedule of reserved matters is replicated in
internal delegation of authorities within the Group to provide
the businesses with flexibility to operate whilst ensuring
that strategic matters are always considered and decided
by the Board. The Board reviews its schedule of reserved
matters regularly.
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GOVERNANCE Board focus during the year
Governance and Risk
• Reviewed the Group’s progress on compliance with the Modern Slavery Act;
• Approval of the Company’s Diversity & Inclusion Policy and review of the
progress made towards the Group’s diversity goals;
• Approval of the Payments to Governments’ and Tax transparency reports;
• Reviewed the findings of the Board and Board Committee evaluation and
agreed appropriate actions;
• Convened the Company 2018 Annual General Meeting and approved the
business to be considered at the meeting;
• Received updates from each of the Board Committees; and
• Approved changes to the Finance Standing Committee’s terms of reference.
Strategy
• Considered new business
opportunities, including the
submission of bids by the Group
for steel assets such as Electrosteel
Steels Limited and Essar Steel
Limited under the Indian Insolvency
and Bankruptcy Code
• Considered and approved the
takeover offer by Volcan Investments
Limited for the minority interest in
the shares of the Company and the
subsequent re-registration of the
Company, a related party transaction
for which Messrs Anil and Navin
Agarwal did not participate in the
approval of the transaction due to
the conflict of interest
• Approved the purchase by Cairn
India Holdings Limited, a wholly
owned subsidiary of Vedanta
Limited, of an economic interest
in the upside of an investment in
Anglo American PLC held by Volcan
Investments Limited, which was a
related party transaction. Due to
conflicts of interest, Messrs Anil and
Navin Agarwal did not participate in
the approval of the transaction
• Approval of a parent company
guarantee and the entering into
revenue sharing contracts with the
Government of India in respect of
the 41 exploration blocks in India
awarded to the Group pursuant to
the Open Acreage Licensing Policy
• Discussed the impact of the closure
of some of the Group’s businesses
and the actions being taken to
address the issue
• Reviewed HSE goals and
performance across the Group
with focus on the actions taken to
address the number of fatalities
within the Group
Operational and financial performance
• Approved the Group’s Business Plan
FY2019-2020
• Reviewed the Group’s operational
performance, including safety and
environment across its businesses,
through updates from the Chief Executive
Officer at each scheduled Board meeting
• Review of KCM’s performance and
business turnaround plan
• Received updates on the Cairn India tax
litigation with the Government of India
• Reviewed the fatal incidents across the
Group and received updates on corrective
actions taken to prevent recurrences
• Reviewed the Group’s financial
performance and debt management
initiatives through updates from the
Chief Financial Officer at each scheduled
Board meeting
• Reviewed and approved changes to the
Group’s financial covenants in respect of
its financing facilities
• Reviewed the Company’s credit rating
• Approved the going concern statement
and Viability Statement for inclusion
in the Company’s Annual Report and
Accounts FY2018
• Approved the Group’s Annual Report and
full- and half-year financial results
• Declared the Company’s dividends
• Reviewed the Group’s Treasury position,
considered Management’s liability
management proposals and approved
interim financial statements for the
issuance of a bond by a wholly owned
Group subsidiary and approval of the
bond issuance
• Approved amendments to the
Company’s Articles of Association
following the delisting and the subsequent
re-registration of the Company
• Approved the cancellation of
Treasury shares
• Approved various corporate guarantees
in respect of financing facilities to
Group companies including the roll-over
of KCM’s guarantees
135
Board
focus during
the year ended
31 March 2019
Stakeholder feedback
• Received regular investor
relations updates with
feedback from bondholders
and other stakeholders
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Introduction to Governance
Continued
The balance of skills, experience, knowledge and
independence of the Directors on the Board is kept under
regular review. This section includes information about the
induction and development of the Directors.
BOARD BALANCE
The majority of the Board is comprised of independent
Non-Executive Directors for effective governance. This ensures
that an appropriate balance is maintained between Executive
and Non-Executive Directors and that no individual or small
group of Directors can dominate the decision-making process.
The Board regards each of the five Non-Executive Directors
as being fully independent in character and judgement and
free from any relationship or circumstance that could affect or
appear to affect their independent judgement.
The Board operates in an open and collaborative manner
to support and constructively challenge management to
deliver operational success. The Directors harness their
collectively wide-ranging expertise and experience to shape
decision-making.
BOARD INDUCTION
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, challenges and risks. Newly appointed
Directors also receive an overview of their duties, corporate
governance policies and Board processes. During the
year, Mr. Srinivasan Venkatakrishnan joined the Board and
completed an induction including site visits to a number of the
Group’s major businesses.
ONGOING BOARD TRAINING AND DEVELOPMENT
The Board is committed to the continuing development
of its Directors and they are offered training as required to
assist them in the performance of their duties. There are also
procedures in place to provide the Directors with appropriate
and timely information, including receiving information
between meetings regarding Group business development
and financial performance. The Directors have access to
the Company’s professional advisers, where necessary, as
well as to the Company Secretary, who is responsible for
ensuring that Board procedures are followed. The Company
Secretary is also responsible for advising the Board on
governance matters.
BOARD EVALUATION
The effectiveness of the Board is crucial to the overall
success of the Group and the Board continuously assesses
its effectiveness. The Board and its Committees also provide
feedback to Management during the year.
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GOVERNANCE Accountability
Effective risk management is central to achieving our strategic objectives. This section includes information about the
responsibilities and focus of the Audit, Remuneration and Sustainability Committees.
RAVI RAJAGOPAL
Chairman
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.
• Review and approval of preliminary
announcement, Annual Report and
financial statements
• Review of key significant issues for
year-end audit (further details on
pages 138-139)
• 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 and the
financial exposure to the Group
• Review of Audit Committee Report for the
Annual Report and Accounts FY2018
• Review of legal cases and the associated
risks arising to ensure that appropriate
provisions are made and disclosed
• Review of the going concern basis for the
preparation of the financial statements
including working capital forecasts,
monthly projections and funding
requirements
• Review of the Group’s Viability Statement
for the year ended 31 March 2018
Internal audit
• 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 2018-2019 internal audit plan
• Approval of the 2019-2020 Internal
Audit Plan
• Review of the Group’s Anti-Bribery Policy
and its implementation
Audit
Committee
focus during
the year ended
31 March 2019
Fraud and whistleblowing
• Receiving reports on
fraud and monitoring
the effectiveness of the
whistle-blower policy to
ensure that it remains
robust and fit for purpose
AUDIT COMMITTEE
Current composition
Ravi Rajagopal (Chairman)
Geoffrey Green
Deepak Parekh
Edward T. Story
Internal controls, risk management and
governance
The Audit Committee reviews internal control and
risk management processes and output from the
regular review of risks carried out during the year
by the internal audit function.
• Internal audit review including reviews of
the internal control framework, changes to
the control gradings within the Group and
whistle-blower cases
• Review of past project capex overruns
and controls in place to minimise future
occurrences
• Review of the Group’s risk management
infrastructure, risk profile, significant risks,
risk matrix and resulting action plans
• Review of the KCM business and grading
improvement plan
• Review of reports from subsidiary
company Audit Committees and the
Risk Management Committee
• Review of feedback from the performance
evaluation of the Audit Committee
• Reviewing the Group’s cyber security
controls
• Received updates on upcoming corporate
governance developments and considered
the reporting framework following the
delisting of the Company from the London
Stock Exchange
The audit and external auditor
• Review of the significant audit risks with the
external auditor during the interim review
and year-end audit
• Consideration of external audit findings and
a 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 of non-audit
services including non-audit fees paid to the
external auditor
• Review of the external auditor’s performance
and making recommendations in respect of
the re-appointment of the external auditor
• Review of the management representation
letter
• Review of the audit plan, scope of the 2019
external audit of the financial statements
and key risk areas for the 2019 audit
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Continued
Audit Committee Expertise
The Directors who serve on the Audit Committee have the
necessary qualifications and bring a wide range and depth of
financial and commercial experience across various industries.
Their collective knowledge, skills, experience and objectivity
enables the Audit Committee to work effectively to
challenge management.
Financial Reporting
The Audit Committee oversees the integrity of the Company’s
financial reporting process in order to ensure that the
information provided to the Company’s stakeholders is fair,
balanced and understandable and provides the information
necessary for stakeholders to assess the Company’s position
and performance, business model and strategy. The Audit
Committee reviewed and challenged the key accounting and
other judgements presented by management throughout
the year and for the preparation of the Annual Report and
Accounts FY2019. As a result, and as supported by the high
standard of reporting by management, the Audit Committee
concluded that it has discharged its responsibilities effectively.
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.
Significant issues
How these issues were addressed
Annual Report and Accounts FY2019 Review
A detailed audit plan (the Audit Plan) was prepared by
the external auditor, EY which was 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 was considered by the
Audit Committee.
Significant issues considered by the Audit Committee
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 Audit Committee reviews whether the
Group’s accounting policies are appropriate, and management’s
estimate and judgements applied in the financial statements are
reasonable. The Audit Committee also reviewed the disclosures
made in the financial statements. The views of the statutory
auditor on these significant issues were also considered by the
Audit Committee.
The significant issues that were considered by the Audit
Committee in relation to the financial statements are
outlined below:
Impairment/reversal of impairment
assessment of
• Rajasthan Oil & Gas block including
exploration and evaluation assets
• Copper operations in Zambia
• Copper operations in India
More information is provided in Note 2(c)
and Note 6 to the financial statements
Given the progress on key growth projects expected to result in the enhanced recovery of
resources in a commercially viable manner leading to a higher forecast of oil production and
adoption of integrated development strategy for various projects leading to savings in cost,
the Rajasthan oil & gas block including exploration and evaluation assets was considered
for reversal of previously recognised impairment in the year ending 31 March 2018 and the
impairment reversal was accounted for. In the current year, the Committee reviewed the
significant assumptions including the oil price, discount to price and other key assumptions.
Based on this review, the Committee was satisfied that there was no indication that the assets
may be impaired or that the previously recorded impairment charge may reverse.
The impairment assessment of copper operations in Zambia is considered a significant
issue considering the delay in production ramp up and other operational challenges. The
significant assumptions of commodity prices, increase in production and discount rate were
reviewed by the Committee.
The Committee was briefed that Vedanta Limited’s application for renewal of Consent to
Operate (CTO) for its existing copper smelter was rejected by the Tamil Nadu Pollution
Control Board (TNPCB) in April 2018. Subsequently the Government of Tamil Nadu issued
directions to close and seal the existing copper smelter plant permanently. The Committee
was also briefed on subsequent legal developments.
Additionally, the Committee was informed that the High Court of Madras in a Public Interest
Litigation held that the application for renewal of the Environmental Clearance (EC) for
the Expansion Project shall be processed after a mandatory public hearing and in the
interim ordered the Company to cease construction and all other activities on the site with
immediate effect. SIPCOT has cancelled the land allotted for the proposed Expansion Project
and TNPCB issued an order directing the withdrawal of the Consent to Establish (CTE) which
was valid till 31 March 2023.
The Committee was further briefed about the state of compliances and the actions taken by
the Company.
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, including the sensitivity carried out under various
scenarios, it was concluded that no impairment is required for Zambia copper operations and
copper operations in India.
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
GOVERNANCE Significant issues
How these issues were addressed
Revenue recognition across the
business
• Provisional pricing for sale of goods
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.
• Oil & Gas revenue
• Power tariff with Grid Corporation of
Odisha Limited (GRIDCO)
• Power Purchase Agreement with
Punjab State Power Corporation
Limited (PSPCL)
Litigation, environmental and
regulatory risks
Additional information on these matters
is disclosed in Note 33 to the financial
statements
Taxation
Additional information on these matters
is disclosed in Note 33 to the financial
statements
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.
The Committee reviewed the developments in the various disputes with GRIDCO and
PSPCL. The receivables were reviewed for recoverability together with revenue recognition in
terms of the requirements of IFRS 15. The assessment was supported by legal opinion from
external legal counsel, wherever required.
The Committee considered the revenue recognition and recoverability of receivables to be
fairly stated in the financial statements.
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
cases, 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.
Recoverability of various tax balances
Refer Note 11and 34(ii) to the financial
statements
The Committee reviewed the recoverability of deferred tax assets and other income tax
receivables and the Zambian Revenue Authority (KCM VAT) receivables, and accepted
management’s assessment of the recoverability of these balances.
Disclosure of special items
Refer Note 6 to the financial statements
The Committee reviewed each of the items classified as special items and the related disclosures
to ensure that the separate disclosure of these items in the financial statements was appropriate.
Risk management and internal control framework
Vedanta’s risk management framework serves to identify, assess and report on the principal and emerging risks facing the
Group’s businesses in a consistent manner. The Group’s organisational structures, policies and procedures, standards and Code
of Business Conduct and Ethics together form the system of internal control that governs how the Group conducts its business
and manages the associated risks. 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
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, MAS
• Reviews internal audit plans
• Assesses the effectiveness of the internal audit function
• Reviews whistleblower reports presented by MAS
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 updating of the risk matrix
• Discusses findings in respect of the risk management and internal control framework with senior management and
reports to the Audit Committee
• Presents the findings of these audits to the Executive Committee, with each Business Executive Committee made
responsible for closing any findings
• Investigates whistleblower cases
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Accountability
Continued
The responsibilities, processes and information flows for ensuring that significant risks are recognised and reported up to the
Board are shown below:
During the year, the MAS team supported the respective
business teams at Vedanta Limited and its subsidiaries
towards compliance with the US Sarbanes-Oxley Act 2002
requirements (the Act), including documenting internal
controls as required by section 404 of the Act. KCM is
excluded from the scope 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.
Vedanta’s risk management framework serves to identify,
assess and respond to the principal and emerging risks
facing the Group’s business and is designed to be simple and
consistent and provide clarity on managing and reporting
risks to the Board. The Group’s management systems,
organisational structures, processes, standards and Code
of Business Conduct and Ethics together form the system
of internal control that governs how the Group conducts its
business and manages the associated risks.
The Audit Committee reviewed the internal control system in
place during the year and up to the date of this Report to ensure
that it remains effective. The review included a report on the
risk matrix, significant risks and actions put in place to mitigate
these risks. Any weaknesses identified by the review were
addressed by enhanced procedures to strengthen the relevant
controls and these are in turn reviewed at regular intervals.
During the year, the Committee continued to monitor the
market conditions, risks and uncertainties relevant to the Group,
reviewed the risk management framework and reported to the
Board on relevant risks affecting the Group. The Committee
received regular updates from management confirming that
risks relevant to the Group were appropriately categorised to
ensure that the Committee understood the potential impact to
the Group and adequate resources were allocated to manage
the risks. The Committee has reviewed the Principal Risks and
Uncertainties for the Group disclosed in the Annual Report and
Accounts 2019 and consider them to be appropriate.
Fraud and UK Bribery Act
The Board has a zero-tolerance policy for corruption.
Vedanta’s Code of Business Conduct and Ethics contains
guidelines for conducting the Company’s business with the
highest standards of business ethics.
Vedanta also maintains a Supplier Code of Conduct which
ensures that all its suppliers and service providers are also
operating with the highest standards on business ethics.
The Group’s whistle-blower policy encourages employees of
the Company, its subsidiaries and all external stakeholders
to raise concerns about suspected wrong doing within the
Group in confidence. The whistle-blower policy also covers
the requirements of the UK legislation in respect of slavery and
human trafficking reporting.
The Audit Committee regularly reviews the Group’s
whistle-blower arrangements and monitors the outcome
of investigations, ensuring that all reported whistle-blower
incidents are appropriately investigated and actioned.
External auditor independence and provision of non-audit
services by the external auditor
EY is the Company’s external auditor. The Audit Committee is
responsible for reviewing the external auditor’s independence
and assessing their ongoing effectiveness. The objectivity of
the external auditor is a crucial aspect in providing external
assurance and such objectivity and independence is
maintained through the following:
In accordance with the Auditing Practices Board Ethical
Standards, EY has rules in place to ensure that none of its
employees working on Vedanta’s audit hold any shares in
the Company. EY is also required to inform the Company
of any significant facts and matters that may reasonably be
thought to bear on its independence or on the objectivity of
the Audit Engagement Partner and the audit team. The lead
partner must rotate every five years. The Company’s Audit
Engagement Partner is currently Mirco Bardella, who was
appointed with effect from 5 August 2016.
External auditor remuneration
The Audit Committee is responsible for determining the
external auditor’s remuneration on behalf of the Board.
The Audit Committee considers and approves all the fees
that the Company pays for audit, audit-related and non-audit
services performed by EY.
Non-audit services
The Group’s policy on the provision of non-audit services
by the external auditor specifies the services which the
external auditor is permitted to undertake. It also specifies
non-audit services which EY is prohibited from undertaking in
order to safeguard their objectivity as such services present
a high risk of conflict and could undermine the external
auditor’s independence.
Prohibited non-audit services include work relating to the
financial statements that will ultimately be subject to audit,
certain tax, consultancy and advisory services and the provision
of internal audit services amongst others. The policy also
identifies those services which the external auditor is permitted
to deliver to the Group. These include work on mergers &
acquisitions, regulatory reviews, any certification required
under loan agreements or bond covenants, assurance opinion
on bond issuance work and assurance work in respect of
compliance and corporate governance amongst others.
The external auditor’s independence is also safeguarded by
limiting the aggregate value of non-audit services performed by
EY. Under the Company’s Non-Audit Services Policy, a cap for
non-audit services will be set at 70% of the average audit fees
based on a three-year average and will first be applied from the
fourth year commencing on 1 April 2020. The Audit Committee
monitors all non-audit services each year to ensure that they are
in compliance with the requirements. Of the permitted services,
any assignment in excess of US$30,000 is only awarded to the
external auditor with the prior approval of the Audit Committee.
All permitted non-audit services and the fees paid to the
external auditor for non-audit work are reported to the Audit
Committee. A breakdown of the non-audit fees paid to EY is
disclosed in Note 37 to the financial statements.
Permitted non-audit work is only undertaken by the external
auditor, where, it is more efficient or prudent to engage them
because of their knowledge and experience with the Group
and/ or for reasons of confidentiality.
140 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
GOVERNANCE KATYA ZOTOVA
Chair
Sustainability framework
• Review of the Sustainability
Committee performance and Terms
of Reference
• Review and approve annual HSE and
sustainability targets
• Periodical review of HSE
programmes and performance
• Review VSAP score and VSF
implementation for the Group
• Review sustainability issues
significant to the Group and its
stakeholders
Environment
• Review of the corrective action
implementation plan following the
third party tailing dam assessment by
Golders Associates and preparation
by the businesses for the monsoons
• Review of the Group’s resource
conservation targets and
achievements
• Review of the high potential incidents
within the Group and remedial action
taken
• Review of progress on KCM’s water
and tailings management
Sustainability
Committee
focus during the
year ended
31 March 2019
SUSTAINABILITY COMMITTEE
Current composition
Katya Zotova (Chair)
Ravi Rajagopal
Srinivasan Venkatakrishnan
Deshnee Naidoo
Sunil Duggal
Health and safety
• Review of the Group’s safety performance
particularly in light of the fatalities during
the year and the implementation of
remedial actions and controls to address
the issues including the leadership
response to improve safety performance
• Review progress on implementation of the
safety performance standards
• Review of progress on the safety standard
implementation at BALCO mines
Community relations and engagement
• Review of the Group’s stakeholder
engagement strategy
• Review of management’s initiatives in
improving stakeholder communications
on HSE and sustainability
• Review of the Group’s Social Licence
to Operate
• Review of the background in respect of
social and regulatory matters at Vedanta
Limited’s copper business which led to the
closure of this businessE
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INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Investor relations and stakeholder engagement
The Company is committed to maintaining strong
relationships with its shareholders and bondholders as well as
other stakeholders.
SHAREHOLDERS
Vedanta Resources Limited (and its subsidiaries) is wholly
owned by Volcan Investments Limited and its subsidiary,
Volcan Investments Cyprus Limited. Vedanta Resources
Limited operates on a stand-alone, arms-length basis while
maintaining a collaborative strategic relationship with Volcan.
BONDHOLDERS
As at 31 March 2019, the Company had US$4.2bn of listed
bonds outstanding. A regular dialogue is maintained with the
Company’s bondholders through biannual financial results
on the Company’s website, together with live broadcasts
via teleconference calls. Bond investors also meet with
the Company’s investor relations team at various events
such as bond conferences to discuss financial results
and other matters.
CREDIT RATING AGENCIES
As at 31 March 2019, Vedanta Resources had a credit rating
of B+ (negative outlook) from S&P and BA3 (negative outlook)
from Moodys. The Company maintains regular dialogue with
both agencies to provide current and potential investors with
an independent assessment of the Company’s credit profile
and to support any future debt issuances.
STAKEHOLDER ENGAGEMENT
The Board remains committed to its responsibilities to a
broad range of stakeholders and incorporates this into its
decision-making process. The Group is working to continually
improve its own engagement with its various stakeholders.
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
GOVERNANCE 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 2019.
Information required by Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008 as amended to be included in the Directors’ Report but, which is instead included in the Strategic Report or elsewhere in
the Annual Report, is set out in the table below.
Review of the business and future developments of the business of the Company
Strategic Report on pages 2–127
Employment policies and employee involvement
Strategic Report on pages 60–75
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 2 to 127.
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 AND FUTURE DEVELOPMENTS
A review of the business and future developments of the
Group is presented in the Strategic Report on pages 2 to 127.
DIVIDENDS
The Directors recommend a final dividend for the year
ended 31 March 2019 of 65.0 US cents per ordinary share
(2018: A second interim dividend of 41.0 US cents per
ordinary share was paid in lieu of a final dividend).
DIRECTORS
The Directors as at the date of this Report are set out on
pages 128 to 131.
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 147 to 154.
DIRECTORS’ AND OFFICERS’ INDEMNITY
The Company had in place qualifying third party indemnity
provisions for the benefit of its Directors and officers during
the year which remain in force as at the date of this report.
MATERIAL INTEREST IN SHARES
The shares of Vedanta Resources Limited are held by Volcan
Investments Limited and its wholly owned subsidiary, Volcan
Investments Cyprus Limited as follows:
Volcan Investments Limited: 187,488,092 shares – 65.73%
Volcan Investments Cyprus Limited: 97,758,606
shares – 34.27%
SHARE CAPITAL
As at 31 March 2019 the issued share capital of the Company
was comprised of 285,246,698 ordinary shares of US$0.10
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 issued
share capital together with movements in the Company’s
issued share capital during the year are shown in Note 30 of
the financial statements.
During the year, 22,502,483 ordinary shares held in treasury
were cancelled and the nominal share capital reduced
accordingly. A further 1,704,333 shares, which had previously
been purchased under Vedanta’s Buyback Programme were
held by an independent company, Gorey Investments Limited
(Gorey) and were treated in the consolidated accounts of
Vedanta as treasury shares. These shares were transferred to
Volcan as per the terms of the takeover offer.
6,904,995 ordinary shares of 10 US cents each which were
previously issued on the conversion of certain convertible
bonds issued by one of the Company’s subsidiaries and held
through a global depository receipt (GDRs) carried no voting
rights. These GDRs were also redeemed and the underlying
shares were transferred to Volcan under the terms of the
takeover offer.
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 30 of the
financial statements.
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 25 to the
financial statements.
EMPLOYEES
Information on the Group’s employees and its policies with
respect to employees can be found in the Sustainability Report
section of the Strategic Report on page 60 to 75. In summary,
the Group’s commitment to communication and dialogue with
employees continues. The existence of a Group-wide intranet
enables engagement and communication with employees
throughout the Group. It also helps management to share
information, ideas and opportunities quickly and to achieve
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Continued
a common awareness on the part of all employees of the
financial and economic factors affecting the performance
of the Company. Employees have opportunities to voice
their opinions and ask questions through the Group intranet
and engage in question and answer sessions with the
Executive Chairman.
SLAVERY AND HUMAN TRAFFICKING STATEMENT
The Group has published its slavery and human trafficking
statement for the year ended 31 March 2019 in accordance
with s54 of the Modern Slavery Act 2015 which can be found
on www.vedantaresources.com The statement outlines
the steps taken by the Group to address the risk of slavery
and human trafficking occurring within its operations and
supply chains.
DIVERSITY & INCLUSION POLICY
The Board has formalised its approach to diversity and
inclusion with its approval of the Group’s Diversity and
Inclusion Policy. The policy reinforces the Group’s commitment
to promoting an inclusive environment, in which every
member of its workforce feels valued and respected, with a
zero tolerance of discrimination and harassment. While our
commitment extends to embracing diversity in all its forms,
including but not limited to, age, gender, ethnicity, abilities,
sexual orientation and religious beliefs, the Group’s is
specifically focussing on improving the gender balance.
The objective of the Diversity and Inclusion Policy is to have
a workforce which is representative of the countries and
communities in which we operate and where every individual
is valued, respected and empowered to utilise their different
abilities and experiences to realise their full potential.
GENDER DIVERSITY
The Company currently has one woman on its Board (13%)
while its two principal listed subsidiaries in India, Vedanta
Limited and Hindustan Zinc Limited, have two female
Directors each on their Boards, 20% and 43%, respectively.
A number of the Company’s business and functional heads
are women including in roles such as CEO, Africa Base Metals,
Director-Investor Relations, Head- Group HR and Head of Tax,
to name a few.
The Board is driving the efforts to address gender imbalances
across the Group in a holistic way by addressing the barriers
to female progression in a heavily male dominated industry.
Our Group companies have adopted path breaking initiatives
for redressing gender imbalance. We have well defined
diversity hiring targets, as we hire from the market and
premiere colleges across the globe. Our empanelled search
firms are necessarily mandated to present diverse slates
for staffing and recruitment. Internally, we ensure that the
interview panels have the right diversity mix, ensuring fairness
in our selection practices.
We also encourage the concept of ‘second career opportunity’
for women returning from sabbaticals and career breaks
due to maternity or other family commitments. From time to
time, hiring initiatives are launched, targeting this particular
talent pool. Family friendly policies including enhanced
maternity leave, paternity and adoption leave, benchmarked
against global best practice, have been rolled out across
our businesses in India, in excess of legal requirements and
encourage the return of women to work.
PROGRESS ON MEASURABLE OBJECTIVES
WOMEN IN SENIOR
MANAGEMENT
WOMEN RECRUITED DURING
THE YEAR
TOTAL FULL TIME FEMALE
EMPLOYEES ACROSS THE
GROUP
FY2018-19
FY2017-18
6.51%
6.2%
23.1%
20.87%
10.6%
11%
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 and Accounts.
The Company’s subsidiary, Vedanta Limited purchased
electoral bonds valued at US$10million during the financial
year ended 31 March 2019 (2018: Nil).
GOING CONCERN
The Directors have considered the Group’s cash flow forecasts
for the next 12-month period, from the date of signing the
financial statements ending 31 March 2019. The Board is
satisfied that the Group’s forecasts and projections show that
the Group will be able to operate within the level of its current
facilities for the foreseeable future. This takes into account
reasonably possible changes in trading performance on cash
flows and forecast covenant compliance; the transferability of
cash within the Group; the flexibility that the Group has over
the timings of its capital expenditure; and other uncertainties.
For these reasons, the Group continues to adopt the going
concern basis in preparing its financial statements.
POST BALANCE SHEET EVENTS
Details of significant events since the balance sheet date are
disclosed in Note 36 to the financial statements.
Every year, we recruit a large number of graduate engineer
trainees, management trainees and associates for Vedanta
Leadership Development Program, across the globe, at the
entry level and we endeavour to appoint at least 50% female
candidates through campus recruitment. This provides us with
a strong and solid base for developing future home grown
diverse leaders at Vedanta. During the year, 23.1% of the
recruitment across the Group comprised of women.
RESEARCH AND DEVELOPMENT
The Group’s business units carry out research and
development activities necessary to further their options.
AGREEMENTS: CHANGE OF CONTROL
There are a number of agreements that take effect, alter
or terminate upon a change of control of the Company,
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GOVERNANCE (defined as a transfer of 35% shareholding) 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$400million 8% bonds due in 2023; US$600million
9.25% bonds due in 2026; US$670 million 8.25% bonds
due 2021; US$1,000 million 6.375% bonds due in
2022, US$500 million 7.125% bonds due in 2023 and
US$1,000 million 6.125% bonds due in 2024 where a
change of control together with a rating decline requires
the Company to make an offer to purchase all of the
outstanding bonds at 101% of the principle amount
together with any accrued and unpaid interest.
2.
Under various other financing facilities entered into by
the Group where a change of control gives the majority
lenders the right to declare the loans payable.
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.
GREENHOUSE GAS (GHG) EMISSIONS REPORTING
Climate change is recognised as a global risk. Since the Paris
accord, significant efforts are made by global communities
to mitigate and adapt climate change impacts. Last year,
at Vedanta, we had formulated a Carbon Forum, under
the leadership of our Power business head, to develop
strategies and actions to manage climate related business
risk. The forum is comprised of the chief operating officers
of our businesses. The Group now has a Climate related Risk
Management Policy and Strategy in place. In addition to the
Carbon Forum, climate related business risk is on the Group
level risk register which enables us to review the progress
made on climate related risk at the highest risk committee
level of the organisation.
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. The increase in GHG
emissions during the year was due to the acquisition of the
steel business, Electrosteel Steels Limited and the ramp-up in
our Aluminium and Power businesses. The relative increase in
GHG emissions in the power sector was higher compared to
revenue generated, resulting in overall higher GHG intensity.
GHG EMISSIONS (TONNES OF CO2e)
Business
Zinc India
Zinc International
Oil & Gas
Iron Ore
Ports
Copper India & Australia
Copper Zambia
Aluminium
Power
Steel
Total
FY2019
FY2018
Scope 1
3,957,640
146,548
1,658,183
1,951,258
376
30,571
155,840
Scope 2
879,141
508,921
Scope 1
4,830,185
87,919
118,000
1,550,610
265
6,248
48,600
4,683
1,837,129
-
624,738
150,306
33,166,782
2,655,128
30,889,044
13,342,185
3,795,249
777
11,168,053
-
-
Scope 2
154,564
594,167
84,980
18,428
11,641
87,591
4,780
237,024
7,451
-
58,204,632
4,221,764
51,137,984
1,200,626
*The inclusion of Electrosteel Steels Limited, has contributed to the significant increases in GHG emissions during the year.
The GHG intensity ratio below expresses Vedanta’s annual GHG emissions in relation to the Group’s consolidated revenue.
GHG INTENSITY RATIO (TONNES OF CO2e/MN US$)
Business
Zinc India
Zinc International
Oil & Gas
Iron Ore
Ports
Copper India & Australia
Copper Zambia
Aluminium
Power
Steel
Consolidated Group
FY2018-19
FY2017-18
1,637
1,672
939
4,691
179
52
148
8,564
14,286
6,325
4,449
1,480
1,276
1,105
3,806
406
186
121
8,676
12,760
-
3,382
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Continued
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 he/she is aware, there is no relevant audit
information of which the Company’s auditor is unaware
• 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
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN
RESPECT OF THE STRATEGIC REPORT, DIRECTORS’
REPORT AND FINANCIAL STATEMENTS
The Directors are responsible for preparing the Strategic
Report, Directors’ Report and the financial statements in
accordance with UK law and regulations.
The Directors are required by the UK Companies Act 2006
to prepare financial statements for each financial year that
give a true and fair view of the financial position of the Group
and the parent company and the financial performance and
cash flows of the Group and parent company for that period.
Under that law they have elected to prepare the consolidated
financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union
(EU) and applicable law and have elected to prepare the parent
company financial statements in accordance with applicable
United Kingdom law and United Kingdom accounting
standards (United Kingdom generally accepted accounting
practice), including FRS 101’Reduced Disclosure Framework).
Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs and of the profit or loss
of the Group and 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 judgments and accounting estimates that are
reasonable and prudent
• State whether Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’ has been followed, subject to any
material departures disclosed and explained in the financial
statements
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business
• 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 Group’s financial position
and financial performance
• Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
parent company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
parent 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.
Having made the requisite enquiries, so far as the Directors
are aware, there is no relevant audit information (as defined
by Section 418(3) of the Companies Act 2006) of which the
Company’s auditors are unaware, and the Directors have taken
all the steps they ought to have taken to make themselves
aware of any relevant audit information and to establish that
the Company’s auditors are aware of that information.
The Directors are also responsible for preparing a Strategic
Report and Directors’ Report that comply with that law
and those regulations. 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.
The Directors confirm that to the best of their knowledge:
• The consolidated financial statements, prepared in
accordance with IFRS as adopted by the EU and in
accordance with the provisions of the Companies Act 2006,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group
• The parent company financial statements, prepared in
accordance with United Kingdom generally accepted
accounting practice, give a true and fair view of the assets,
liabilities and financial position of the Company
• The annual report and financial statements, including the
Strategic Report and Directors’ Report, includes a fair review
of the development and performance of the business and
the position of the Group, together with a description of the
principal risks and uncertainties that they face
In preparing the Group financial statements, IAS 1 requires
that the Directors:
Signed on behalf of the Board
• Properly select and apply accounting policies
• Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information
Deepak Kumar
Company Secretary
20 May 2019
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GOVERNANCE Remuneration Committee Report
Dear Shareholders,
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 March 2019.
Upon contract closure of Tom Albanese, Kuldip Kaura served
as Chief Executive Officer from 1st September 2017 till 30
August 2018. Srinivasan Venkatakrishnan joined the Company
as Chief Executive Officer and a member of the Board on
31 August 2018.
BUSINESS PERFORMANCE AT A GLANCE
We had a strong operational and financial performance in
FY2019. During the year, we completed the acquisition of ESL
which complements our Iron Ore business through vertical
integration. Our ramp-up plans for growth projects are all on
track and with that we have a firm base for an even stronger
performance next year.
A synopsis of the business performance is outlined below:
FINANCIAL & OPERATIONAL PERFORMANCE:
In FY2019 we recorded an EBITDA of US$3,393 million,
14% lower y-o-y but with a robust margin of 29%.
(FY2018: US$3,963 million, margin 35%).
Production volumes contributed to an increase in EBITDA
of US$148 million, which was primarily on account of ramp
up of volumes at aluminium and volume addition from ESL
acquisition. However, this was offset by lower volumes at Zinc
India and at Zinc International.
Copper India operations remained closed for the year which
had an EBITDA impact of $231mn y-o-y.
Market factors resulted in a net fall in EBITDA of US$244
million compared to FY2018. This was mainly driven by input
raw material inflation primarily Alumina and Coal driven by
global factors and lower commodity prices. This decrease was
partially offset by currency depreciation.
In April 2019, to proactively refinance our near-term maturities,
we raised US$1 billion through bonds in two tranches at a
blended average cost of 8.75% and average maturity of 5.8
years. This will extend the average maturity of the outstanding
debt at VRL to c. 4 years
During FY2019 gross debt increased to US$16.0 billion,
(FY2018: US$15.2 billion) primarily due to the acquisition debt
for Electrosteel Steels and temporary borrowings at Zinc India.
Net debt increased to US$10.3 billion as at 31 March 2019
from US$9.6 billion as at 31 March 2018, primarily due to the
acquisition debt for ESL in FY2019
In addition to the financial performance of the group, we also
achieved significant strategic milestones during the financial
year 2019 that will fuel the growth in the coming years and
create value for the organisation.
SUSTAINABILITY AND SAFETY SCORECARD:
The philosophy of a sustainable development agenda is
at the core of Vedanta’s strategic priorities and governs
every business decision. Employee safety and achieving
zero harm remained our number one priority. However, our
lost time injury rate increased by 35% from 0.34 to 0.46.
We also deeply regret the 14 fatalities at our operations.
For this reason, fatality prevention remains the centre point
of our focus. Our GHG intensity reduced by 14.5% from
the 2012 baseline. This is in line with our expectations of
reducing GHG intensity by 16% by 2020. We achieved water
savings of 3 million m3 against a target of 4 million m3 and
energy savings of 1.6 million GJ against target of 2 million
GJ. Additionally, fly ash utilisation increased to 111% during
the fiscal year against a target of 75%. We continue to
remain focused on reducing our environmental footprint and
improving our resource efficiency
During the year, the Remuneration Committee took up various
matters pertaining to the remuneration of the Executive
Directors of the Company, which included determining the
remuneration for the year 2018-19, approving the annual
bonus to be paid to the executives and the long term incentive
design and grant of awards.
The Remuneration Policy along with the Annual Report on
Remuneration, which provides details of the remuneration
earned by Directors in the past financial year has been
produced in the relevant sections of the report.
Yours sincerely,
Geoffrey Green
Chairman of the Remuneration Committee
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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
investor expectations.
The Committee recognises that the 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.
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 the strategic goals of the Company
and the interest of the investors 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 majority of the Executive Directors are based
in UK with the exception of Mr Navin Agarwal, who is India
based, along with the majority of the Group’s professional
management team. The Committee also considers the
inflation rates prevalent in the UK and India in the setting
of remuneration.
HOW THE VIEWS OF INVESTORS ARE TAKEN INTO
ACCOUNT
The Committee will seek to engage directly with the investors
and their representative bodies should any material changes
be proposed to the Remuneration Policy.
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 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.
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GOVERNANCE 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
Base compensation1 Reflects individual’s
experience and role
within the Group
Reward for
performance of
everyday activities
Taxable benefits
To provide
market-competitive
benefits
Operation
Maximum opportunity
Performance measures
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
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
Annual contribution
of up to 20% of base
compensation
N.A.
N.A.
Pension
To provide
for sustained
contribution and
contribute towards
retirement planning
Directors receive pension
contributions into their personal
pension plan or local provident
scheme or cash in lieu of pension
contribution
Annual bonus
Incentivises
executives to
achieve specific,
predetermined
goals during the
financial year
Up to 150% of base
compensation per annum
Contribution rates are set in line
with local market practices
This is a cash payment which is
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
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 theoutturn is not
reflective of the Group’s
underlying performance
or warranted based on
the Health, Safety and
Environment (HSE) record
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Continued
Element of pay
Long Term Incentive
Plan (LTIP)2
Purpose and link
to strategy
Encourage and
reward strong
performance
aligned to the long
term interests of the
Company
Operation
Maximum opportunity
Performance measures
Up to 150% of base
compensation per annum.
Annual grant of conditional cash
award units which vest after three
years, subject to performance and
continued employment
Clawback provisions apply
for overpayments due to
misstatement or error and other
circumstances
Performance conditions are
focused on the delivery of
increased value over the
medium to long term.
100% of the award is linked
to Financial, operational
& strategic performance
parameters including Total
Shareholder Return (TSR) at
Vedanta Limited level.
30% of the award will vest
for achieving threshold
performance, increasing
pro-rata to full vesting for
the achievement of stretch
performance targets.
The Committee has the
ability to adjust the LTIP
outturn if it believes that
the outturn is not reflective
of the Group’s underlying
performance or warranted
based on the HSE record.
Business and individual
performance are
considered
Non-Executive
Directors’ fees
To attract and
retain high-calibre
Non-Executive
Directors through
the provision of
market-competitive
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.
Additional fees may
be paid if there is a
material increase in time
commitment and the Board
wishes to recognise this
additional workload.
1
2
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.
LTIP is Vedanta Resources Limited Conditional Cash Award which is a cash-based plan and the vesting is subject to performance against pre-determined
targets upon completion of the performance period and sustained employment with the company.
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 LTIP is measured against financial and strategic
metrics. One of the key metric for the LTIP was relative TSR
performance. Owing to delisting of Vedanta Resources
PLC, the cash units were linked to Vedanta Limited, being
the major operating arm of the company, however other
financial/strategic metrics are at company-level performance.
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 grant. The Committee reserves the discretion
to set different targets for future awards, 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.
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 remuneration
policy at the time of appointment and would reflect the
experience of the individual.
150 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
GOVERNANCE 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 pay-out 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 LTIP is that any outstanding
awards lapse on cessation of employment. However, in certain
prescribed circumstances, such as death, 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 dis-apply time pro-rating, although it is envisaged
that this would only be applied in exceptional circumstances.
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.
LETTERS OF APPOINTMENT FOR NON-EXECUTIVE
DIRECTORS
The Non-Executive Directors have letters of appointment
which may be terminated by either party 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.
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 long term
based elements when it considers these to be in the best
interests of the Company to take account of remuneration
relinquished when leaving the former employer and
would reflect the nature, time horizons and performance
requirements attached 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.
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 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 contact
of employment with Vedanta Limited which expires on 31
July 2023, with a notice period of three months or base
compensation in lieu thereof.
Mr Srinivasan Venkatakrishnan has been appointed as
Executive Director and CEO of Vedanta Resources effective 31
August 2018. He is on a fixed three-year term which expires on
31 August 2021 with a notice period of three months or base
compensation in lieu thereof.
It is the Group’s policy that the notice period in the Directors’
service contracts does not exceed 12 months.
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MEMBERSHIP OF THE REMUNERATION COMMITTEE
The members of the Remuneration Committee all of whom are
independent Non-Executive Directors served during the year.
in the UK as well as India to provide detailed insights that aid
remuneration decisions. In addition, advisers to the Committee
during the year, and their roles, are set out below.
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.
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 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
• The Group Chief Human Resources Officer advised the
Committee during the year 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
• New Bridge Street reviewed and confirmed the Company’s
TSR performance in respect of the performance share plan
152
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
GOVERNANCE Single total figure for remuneration
The table below summarises Directors’ remuneration received during the year ended 31 March 2019 and the prior year
for comparison.
Base compensation
including salary
or fees
£000
Taxable
Benefits
£000
Pension
£000
Annual
bonus
£0008
Long term
incentives
£0009
Total
£00010,11
Executive Directors
Anil Agarwal 1
Navin Agarwal 2,3,7
Srinivasa Venkatakrishnan 4, 5, 7
Non-Executive Directors6
Geoffrey Green
Ed Story
Deepak Parekh
Katya Zotova
Ravi Rajagopal
2018/19
2017/18
2018/19
2017/18
2018/19
2018/19
2017/18
2018/19
2017/18
2018/19
2017/18
2018/19
2017/18
2018/19
2017/18
1656
1608
1080
1101
587
115
115
95
79
133
125
123
122
115
111
112
123
206
119
64
1016
1029
652
710
-
1670
1044
833
646
153
177
146
4455
3804
2924
2754
796
115
115
95
79
133
125
123
122
115
111
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.
Mr Navin Agarwal is based out of India and is drawing the majority of his remuneration in INR. For the financial year ended 31 March 2019, Mr Navin
Agarwal received a Vedanta Limited salary of INR 89,598,663 excluding medical and leave travel allowances, Vedanta Resources Limited fees of
£85,000, Hindustan Zinc Limited fees of INR 200,000 & Commission of INR 1,500,000.
3.
Mr Navin Agarwal’s taxable benefits in kind include housing and related benefits and use of a car and driver.
4.
Mr Srinivasan Venkatakrishnan’s taxable benefits in kind include housing and related benefits, and Medical benefits in UK
5.
In addition to the above remuneration paid to Srinivasan Venkatakrishnan the company also paid GBP 255,394, GBP 752,705 and GBP 459,429 as part
of Buy-out awards under Cash Bonus, Deferred Cash Bonus and Long Term Incentive Plan awards respectively which were forfeited by his previous
employer at the time of leaving. This was part of the contract terms as approved by the committee at the time of joining
6.
Non-Executive Directors are reimbursed for expenses incurred while on Company business. No other benefits are provided to Non-Executive Directors
7.
8.
9.
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
the retirement, normally at age 58. The Executive Chairman does not receive pension benefits.
Amounts shown in the table relate to the payment of the annual bonus made to the Executive Directors during the year. The exchange rate used is for
the period of reporting The Annual Bonus for FY2019 is yet to be determined which will be tabled for approval of the Board.
The Amount shown here pertains to the Performance Share Plan (PSP) 2015 and PSP 2016. The Performance Period for PSP 2015, PSP 2016 and
PSP 2017 came to an early closure on 3rd September 2018 owing to delisting of Vedanta Resources Plc. Upon testing of TSR achievement as per the
scheme rules, the EDs were eligible for vesting of 63.75%, 35% and 0% for PSP 2015, PSP 2016 & PSP 2017 respectively against the grant made to them.
10. NIC Contribution as per the statutory requirement is made for all Executive and Non-Executive Directors
11. The exchange rate applicable as at 31 March 2018 was INR85.4732 to £1 & USD 1.3262 to £1 and at 31 March 2019 was INR 91.7384 to £1 &
USD 1.3126 to £1
Voluntary Disclosures – Chief Executive (Non-Board position)
Kuldip Kaura was appointed as the Interim Chief Executive Officer (CEO) of the company effective 1st September 2017 till the joining of Srinivasan
Venkatakrishnan on 31 August 2018. Kuldip Kaura was not a member of the Board of the Company, consequently, the following disclosures have been made
voluntarily to demonstrate the remuneration arrangements that the Committee believe were appropriate for the CEO, including the variable pay mechanisms
designed to motivate the CEO to implement the Group’s strategy effectively.
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Continued
Single total figure for remuneration for erstwhile CEO
The table below summarises Directors’ remuneration received during the year ended 31 March 2019 and the prior year
for comparison.
CEO (Not on the Board)
Kuldip Kaura 1
Base compensation
including salary
or fees
£000
2018/19
2017/18
528
524
Taxable
benefits
£000
27
57
Pension
£000
Annual
bonus
£0002
Long term
incentives
£000
296
-
Total
£0003,4
851
580
1.
The Remuneration for Mr Kuldip Kaura as appended above is for the period for which he was the Interim CEO for the Company i.e. from 1 April, 2018
to 30th August 2018. His Base compensation includes an amount of USD 400,000 which is paid by Vedanta Limited. The Taxable benefits in kind for
Mr. Kaura include Accommodation and provision of medical benefits in UK
2.
Amounts shown in the table relate to the payment of the annual bonus made during the year. The exchange rate used is for the period of reporting.
The Annual Bonus for FY2019 is yet to be determined which will be tabled for approval of the Board.
3. NIC Contribution as per the statutory requirement is made
4.
The exchange rate applicable as at 31 March 2018 was INR85.4732 to £1 & USD 1.3262 to £1 and at 31 March 2019 was INR91.7384 to £1 &
USD 1.3126 to £1.
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.
None of the other Executive Directors currently receive fees for Non-Executive appointments with other companies.
Payments to past Directors
No payments were made to past Executive Directors during the year ended 31 March 2019
Payments for loss of office
No payments were made in respect of loss of office during the year ended 31 March 2019.
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 the 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
2018-19
£000
2019-20
£000
85
18
20
20
-
20
10
10
7.5
10
85
18
20
20
-
20
10
10
7.5
10
Approval of the Directors’ Remuneration Report
The Directors’ Remuneration Report, including both the Directors’ Remuneration Policy Report and the Annual Report on
Remuneration, was approved by the Board on 20 May 2019.
Geoffrey Green
Chairman of the Remuneration Committee
154
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
GOVERNANCE Independent Auditor’s Report
to the members of Vedanta Resources Limited
OPINION
In our opinion:
• Vedanta Resources Limited’s group financial statements and parent company financial statements (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 2019 and of the group’s
profit for the year then ended;
• the group financial statements have been properly prepared in accordance with 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.
WHAT WE HAVE AUDITED
We have audited the group and parent company financial statements of Vedanta Resources Limited for the year ended 31
March 2019 which comprise:
Group
the Consolidated Income Statement;
Parent company
the Company Balance Sheet;
the Consolidated Statement of Comprehensive Income;
the Company Statement of Changes in Equity;
the Consolidated Statement of Financial Position;
the related notes 1 to 12 to the Company financial statements,
including a summary of significant accounting policies.
the Consolidated Cash Flow Statement;
the Consolidated Statement of Changes in Equity; and
The related notes 1 to 40 to the group financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and
International Financial Reporting Standards (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, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report below. We are independent of the group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are authorised for issue.
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to the members of Vedanta Resources Limited
OVERVIEW OF OUR AUDIT APPROACH
Improper
revenue
recognition
Recoverability
of disputed
receivables
KEY AUDIT
MATTERS
INCLUDED IN
OUR AUDIT
REPORT
Recoverability
of PP&E and
E&E assets
Claims and
exposures
relating to
taxation and
litigation risk
Economic interest
purchase from a
related party
Materiality
Audit scope
What has changed
• Overall group materiality of $68m which represents
approximately 2% of EBITDA.
• EBITDA represents an earnings-based measure for
determining materiality and we consider this to be the most
relevant performance measure to the users of the financial
statements.
• We performed an audit of the complete financial information
of eleven components and audit procedures on specific
balances for a further four components.
• The components where we performed full or specific audit
procedures accounted for 97% of EBITDA, 94% of revenue
and 97% of total assets.
• For the remaining 51 components in the group we have
performed limited procedures appropriate to respond to the
risk of material misstatement.
• We have obtained an understanding of the entity-level
controls of the group which assists us in identifying and
assessing risks of material misstatement due to fraud or error,
as well as assisting us in determining the most appropriate
audit strategy.
• Misstatement of CWIP balances is no longer considered
a key audit matter due to the change in the associated
risk profile. In prior audit periods this risk arose due to the
many significant CWIP projects that the company had.
However, many of these projects have been brought into
commercial production, thereby reducing the opportunity to
override any controls over the CWIP process.
• Related party transactions continue to be an area of audit
focus, however, for the current year, we have classified the
structured investment transaction between CIHL and its
ultimate parent Volcan Investments Limited as a key audit
matter due to the complexity relating to the valuation of the
instrument and the importance of the appropriate disclosure.
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Key observations
communicated to the Audit
Committee
Revenue recognition
Refer to the Audit Committee Report (page 137); Accounting policies (page 174); and Note 5 of the Consolidated Financial Statements
(page199)
For the year ended 31 March 2019 the
group recognised total revenue of $14,031
million (2018: $15,294 million).
Revenue recognition has been identified
as a key audit matter due to the diverse
and complex revenue streams across
the Group.
We have identified the following key areas
for consideration:
• Complex calculation of power tariff
agreements with Grid Corporation of
Odisha Limited (“GRIDCO”) and Punjab
State Power Corporation Limited
(“PSPCL”).
We performed our audit procedures across the group’s
revenue streams considering the revenue recognition policies.
Our procedures were performed mainly by the component
teams under the direction and supervision of the group audit
engagement team.
The procedures performed to address this key audit
matter include:
• Performed walk throughs of the revenue recognition
processes at each full and one specific scope
component and assessed the design effectiveness of key
controls.
• For the components referred to above, tested the controls,
including IT controls, over the revenue recognition process
to confirm operating effectiveness.
Based on the procedures
performed we consider
revenue to be fairly stated
in the financial statements
and appropriately disclosed
in accordance with IFRS 15.
• Complexity associated with the
calculation of profit petroleum within the
Vedanta Limited Oil and Gas division.
• Cut-off: the variety of terms that define
when title, risk and rewards are transferred
to the customer, as well as the high value
of the transactions, give rise to the risk
that revenue is not recognised in the
correct period.
• Measurement: at the end of each
reporting period there are a number of
contracts that are either provisionally
priced or subject to hedging
arrangements through forward contracts.
These calculations are based on
estimations and susceptible to potential
manipulation.
The level of risk has remained consistent
with the prior year, but we note that
additional work has been performed on
ensuring that the new accounting
standards have been appropriately
implemented.
• Inspected the term of all the agreements to assess the
reasonability of the inputs used in the calculation of
the power tariff in respect of the revenue recognised
for GRIDCO and PSPCL Other procedures relating to
the revenue of the Power division are mentioned in the
recoverability of disputed receivables key audit matter
section.
• Inspected the terms of all the Vedanta Oil and Gas profit
sharing agreements and tested the underlying cost recovery
and profit petroleum calculation used by management.
• Selected a sample of sales across the group made pre and
post year- end, agreeing the date of revenue recognition to
third party support, such as bills of lading, to confirm sales
are recognised according to contract conditions.
• Examined invoice samples with complex shipping terms to
ensure that revenue has been recognised appropriately.
• Ensured that the impact of applying IFRS 15 has been
appropriately accounted for within the financial statements,
including in the relevant disclosures.
• Re-calculated the provisional pricing adjustments and
validated the prices used to third party data.
• For the zinc and lead price forwards taken out during the
year we tested any resulting realised and unrealised loss,
including the agreement of market forward rates used in
determining the unrealised fair value loss at year end.
We performed audit procedures over this risk area in ten full
scope components and one specific scope component, where
revenue was present, which covered 94% of the revenue
balance impacted by this risk.
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to the members of Vedanta Resources Limited
Risk
Our response to the risk
Key observations
communicated to the Audit
Committee
Recoverability of Property, Plant & Equipment and Exploration & Evaluation assets
Refer to the Audit Committee Report (page 137); Accounting policies (page 174-176); and Note 16 of the Consolidated Financial
Statements (page 207)
We are satisfied that the
impairment reversal in
relation to the Oil and Gas
CGU is fairly stated and
that there are no further
impairments or impairment
reversals at any CGUs in the
group.
We conclude that the
related disclosures as per
IAS 36 are appropriately
presented in the financial
statements.
At 31 March 2019 the carrying value of
Property, Plant and Equipment (PP&E)
was $17,726 million (2018: $17,727
million), which includes $404 million of
Evaluation and Exploration (E&E) assets
(2018: $2,326 million).
The recoverability of PP&E and E&E assets
has been identified as a key audit matter
due to:
• The significance of the carrying value of
the assets being assessed.
• The size of recent impairment charges
and reversals.
• The recent challenges in respect of the
group’s license to operate in certain
jurisdictions.
• Our assessment that the recoverable
amount of the group’s Cash Generating
Units (“CGUs”) involves significant
judgements about the future cash flow
forecasts and the discount rate that is
applied.
We focused our effort on those CGU’s
with impairment and impairment reversal
indicators. The key judgements centred
on forecast production profiles, forecast
volumes, prices and discount rate
assumptions.
An impairment reversal trigger was
identified at the Vedanta Limited Oil and
Gas division namely in the Krishna Godavari
(KG) block.
The commencement of commercial
production and certainty over development
activities have led to an impairment reversal
being recorded. An impairment reversal test
resulted in an impairment reversal of $38m
(pre-tax).
Although the magnitude of impairment and
impairment reversals recognised in the year
is reduced, the level of risk has remained
consistent with the prior year.
In addressing this key audit matter procedures were
performed by both our group and component teams.
Macroeconomic assumptions and consistency of approach
were ensured by the group team with location specific inputs
addressed by component teams.
The procedures performed to address this key audit
matter include:
• Critically assessed through an analysis of internal and
external factors impacting the entity, whether there were
any indicators of impairment (or reversal of impairment) in
line with IAS 36 for PP&E and IFRS 6 for E&E assets across
the Group.
• Specifically, in relation to the CGUs where impairment and
impairment reversal indicators were identified, we have
obtained and evaluated the valuation models used to
determine the recoverable amount by challenging the key
assumptions used by management including:
– Considering forecasted and achieved volumes in relation
to asset development plans.
– Critically assessing management’s forecasting accuracy
by comparing prior year forecasts to actual results and
assessing the potential impact of any variances.
– Corroborating the price assumptions used in the models
against the analysts’ consensus.
– Testing the appropriateness of the weighted average cost
of capital, used to discount the impairment models, by
engaging our internal valuations experts.
– Testing the integrity of the models alongside their clerical
accuracy.
• We assessed the competence and objectivity of the
Group’s external experts, to satisfy ourselves that they are
appropriate in their roles within the estimation process.
We performed audit procedures over this risk area in thirteen
components (full and specific scope), which covered 97%
of the risk amount. Impairment triggers were identified in
two locations (Vedanta Limited Copper and KCM) where
full impairment tests were prepared and audit procedures
were performed over these valuation models. An impairment
reversal trigger was identified at the KG Block only; a full
impairment reversal test was carried out accordingly.
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VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Risk
Our response to the risk
Key observations
communicated to the Audit
Committee
Recoverability of disputed receivables
Refer to the Audit Committee Report (page 137); Accounting policies (page 186); and Note 18 of the Consolidated Financial Statements
(page 208)
Based on the procedures
performed we consider
the disputed receivables
to be fairly stated and
appropriately disclosed in
the financial statements.
At 31 March 2019 the value of disputed
receivables related to power contracts,
to which we identified additional risk, was
$505 million (2018: $402 million).
There are entities within the group that
have a significant value of receivables for
which the recovery is subject to increased
risk due to disagreements over the
quantification or timing of the balance.
Some of these balances are subject to
litigation. The risk is specifically related to
PSPCL (TPSL) and GRIDCO (Vedanta
Limited Power). These receivables also have
long outstanding elements of their balance.
The level of risk has remained consistent
with the prior year.
Our procedures were performed mainly by the component
teams under the direction and supervision of the group audit
engagement team.
The procedures performed to address this key audit
matter include
• Assessed the recoverability of the GRIDCO and PSPCL
receivables by:
– Inspecting the relevant state regulatory commission,
appellate tribunal and Supreme Court rulings.
– Examining the underlying power purchase agreements.
– Held inquiries with the company legal department on
developments and expected timing of resolution of the
disputes.
– Inspecting external legal opinions in respect of the merits
of the cases.
– Challenged management on the penalty provision, the
classification of the receivables and the discounting of
the non-current portion.
– Critically assessed the independence, objectivity and
competence of relevant legal professionals to ensure the
validity and accuracy of the legal opinions obtained.
We performed audit procedures over this risk area in three full
scope components, which covered 100% of the risk amount.
Claims and exposures relating to taxation and litigation
Refer to the Audit Committee Report (page 137); Accounting policies (page 183); and Note 33 of the Consolidated Financial Statements
(page 237)
We are satisfied that the
accounting treatment in
respect of potential tax
exposures and legal cases
is appropriate based on our
procedures performed.
We conclude that the
related disclosures are
appropriately presented in
the financial statements.
The Group has disclosed in note 33
contingent liabilities $2,914 million for tax
and legal claims (2018: $3,618 million) of
which $1,827 million (2018: $2,704 million)
relates to income tax matters.
Our procedures were performed centrally where cases
impacted a number of components. For location specific
issues, component teams undertook the majority of the
procedures under the direction and supervision of the Group
audit engagement team.
Taxation and litigation exposures have
been identified as a key audit matter due
to the large number of complex tax and
legal claims across the group, particularly in
relation to the operations located in India.
There is significant judgment required by
management in assessing the exposure of
each case, and thus a risk exists that such
cases may not be adequately provided for,
or disclosed appropriately.
There have been no significant
developments during the current year
regarding the ongoing tax litigations that
are present within the group.
The procedures performed to address this key audit
matter include:
• Obtained the Group legal and tax summary and critically
assessed management’s position through discussions
with the Heads of Legal, and of Tax and operational
management, on both the probability of success in
significant cases, and the magnitude of any potential loss.
• Inspected external legal opinions (where considered
necessary) and other evidence to corroborate
management’s assessment of the risk profile in respect of
legal claims.
• Engaged internal tax specialists to technically appraise the
tax positions taken by management with respect to local
tax issues.
We consider this risk as a key audit matter
because of the potential financial impact on
the financial statements.
• Ensured that management’s assessment is consistent
across the group for similar cases, or that differences in
positions are adequately justified.
Additionally, the treatment of taxation
and litigation cases require significant
judgement due to the complexity of the
cases, timescales for resolution, and the
need to negotiate with various authorities
and other parties.
The level of risk has remained consistent
with the prior year.
• Assessed the relevant disclosures made within the financial
statements to ensure they appropriately reflect the facts and
circumstances of the respective tax and legal exposures, and
are in accordance with the requirements of IAS 37.
We performed audit procedures over this risk area in
eleven full scope components, which covered 91.5% of the
risk amount.
159
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Independent Auditor’s Report continued
to the members of Vedanta Resources Limited
Risk
Our response to the risk
Key observations
communicated to the Audit
Committee
Economic interest purchase from a related party
Refer to the Audit Committee Report (page 137); Accounting policies (page 172-192); and Note 35 of the Consolidated Financial
Statements (page 244)
The Group, has purchased from Volcan (its
ultimate parent company) the economic
interests in a structured investment. The
Group has disclosed the nature of the
structured investment in note 35.
We considered this to be a key audit matter
due to the complexity involved regarding
the valuation of this instrument and the
fact that this is a related party transaction
gives rise to the risk that the transaction is
not recorded and disclosed appropriately
by management.
As the transaction occurred during the
year, this is a new area of audit focus.
Our procedures were performed by the group audit
engagement team.
The procedures performed to address this key audit
matter include:
• Obtained and reviewed the valuation report of third party
experts engaged by management to determine the fair
value of the instrument. We have also evaluated the
experience and competence of the experts used.
• Engaged our EY Valuations team to evaluate the valuation
methodology as well as corroborate the significant
assumptions used, in the valuation of this instrument.
• Reviewed the board minutes of all group entities involved
in the transaction, for evidence of approval of the related
party transaction.
• Challenged management on Volcan’s financial ability to
meet it’s obligations under the contract and read financial
information to assess Volcan’s financial position.
• Assessed the adequacy of the related disclosures in the
financial statements regarding this transaction.
We performed audit procedures over the entire transaction.
We are satisfied that
the investment has
been accounted for
appropriately.
We have evaluated the
valuation of the instrument
and have found the
fair value to be within a
reasonable range.
We have also ensured that
all the required disclosures
have been included in the
31 March 2019 financial
statements.
In the prior year, our auditor’s report included a key audit
matter in relation to Accounting for assets under construction.
In the current year, we no longer consider this risk to be a key
audit matter due to:
• The reduced quantity of projects in the under-construction
stage thereby reducing the opportunity for management
to override any controls over the capital work in progress
process.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality
and our allocation of performance materiality determine our
audit scope for each entity within the Group. Taken together,
this enables us to form an opinion on the consolidated
financial statements. We take into account size, risk profile,
the organisation of the group and effectiveness of group-wide
controls, changes in the business environment and other
factors such as recent internal audit results when assessing
the level of work to be performed at each entity.
The group has decentralised processes and controls over
the key areas of our audit focus with responsibility lying with
component management for the majority of estimation
processes and significant risk areas. We have tailored our
audit response accordingly and thus for the majority of our
focus areas, audit procedures were undertaken directly by the
component audit teams, including testing on the verification
of operational data and other routine processes, under the
direction and supervision of the group engagement team.
In assessing the risk of material misstatement to the Group
financial statements, and to ensure we had adequate
quantitative coverage of significant accounts in the financial
statements, of the 66 reporting components of the group, we
selected 16 components covering entities within India, Zambia
and South Africa, which represent the principal business units
within the group.
Of the 16 components selected, we performed an audit of the
complete financial information of eleven components (“full
scope components”) which were selected based on their size
or risk characteristics. For four components (“specific scope
components”), we performed audit procedures on specific
accounts within that component that we considered had the
potential for the greatest impact on the significant accounts
in the financial statements either because of the size of these
accounts or their risk profile. There was one component were
review scope procedures were performed.
The reporting components where we performed audit
procedures accounted for 96% (2018: 94%) of the group’s
EBITDA, 94% (2018: 91%) of the group’s revenue and 97%
(2018: 92%) of the group’s total assets. For the current year, the
full scope components contributed 93% (2018: 94%) of the
group’s EBITDA, 90% (2018: 91%) of the group’s revenue and
90% (2018: 90%) of the group’s total assets. The specific scope
component contributed 3% (2018: 0%) of the group’s EBITDA,
4% (2018: 0%) of the group’s revenue and 7% (2018: 2%) of
the group’s total assets. The audit scope of these components
may not have included testing of all significant accounts of the
component but will have contributed to the coverage of the
specified significant accounts tested for the group.
Of the remaining 51 components that together represent 3%
of the group’s EBITDA, none are individually greater than 2%
of the group’s EBITDA. For these components, we performed
other procedures, including analytical reviews, consolidation
adjustment audit procedures and in some instances
completed statutory financial statement audits. This ensured
we responded appropriately to any potential risks of material
misstatement to the group financial statements.
We have obtained an understanding of the entity level controls
of the group as a whole which assisted us in identifying and
assessing risks of material misstatement due to fraud or error,
as well as assisting us in determining the most appropriate
audit strategy.
160 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS
The charts below illustrate the coverage obtained from the work performed by our audit teams.
EBITDA
REVENUE
TOTAL ASSETS
Full
Other
Specific
(%)
93
4
3
Full
Other
Specific
(%)
90
6
4
Full
Other
Specific
(%)
90
7
3
* Investments in companies within the Group have been eliminated in the calculation of the coverage of total assets.
CHANGES FROM THE PRIOR YEAR
Scoping is consistent with the prior year with the following
exception: Electrosteel Steels Limited, which was acquired
in the current year, has been designated as a new specific
scope component for purposes of the 2019 audit, due to
its contribution to specific accounts within the financial
statements as well as the associated risk attached to
those accounts.
INTEGRATED TEAM STRUCTURE
The overall audit strategy is determined by the senior statutory
auditor, Mirco Bardella. The senior statutory auditor is based
in the UK however, since group management and many
operations reside in India, the group audit team includes
members from both the UK and India. The senior statutory
auditor visited India twice during the current year’s audit and
members of the group audit team in both jurisdictions work
together as an integrated team throughout the audit process.
Whilst in India, he focused his time on the significant risk and
judgement areas of the audit, interactions with management
and group and component teams. During the current year
audit, Mr Bardella reviewed key working papers and met with
key representatives of the integrated and Indian component
audit teams for certain full scope components, to discuss the
audit approach and issues arising from their work.
INVOLVEMENT WITH COMPONENT TEAMS
It was concluded that audit procedures on 11 full scope
components would be performed directly by the component
audit teams and the procedures on 1 full scope component,
the parent company, would be performed by the group audit
team. For the 4 specific scope components, where the work
was performed by component auditors, we determined the
appropriate level of involvement to enable us to determine that
sufficient audit evidence had been obtained as a basis for our
opinion on the Group as a whole. In addition, the integrated
group team also included key members of certain full scope
components ensuring knowledge was transferred effectively
through the team. The work on specific scope components
was either performed by the group audit team directly or by a
component team and reviewed by the group audit team.
During the current year the Senior Statutory Auditor and
senior members of the audit team visited KCM in Zambia
and the various component audit teams in India. These visits
involved key members of the group audit team meeting with
local management and discussing the audit approach with
the component teams together with any issues arising from
their work. The primary team interacted regularly with the
component teams where appropriate during various stages of
the audit, reviewed key working papers and were responsible
for the scope and direction of the audit process. The group
audit team participated in key discussions, via conference
calls with all full and specific scope entities. This, together
with the additional procedures performed at group level,
gave us appropriate evidence for our opinion on the group
financial statements.
OUR APPLICATION OF MATERIALITY
The scope of our work is influenced by materiality. We apply
the concept of materiality in planning and performing the
audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
As we develop our audit strategy, we determine materiality at
the overall level and at the individual account level (referred to
as our ‘performance materiality’).
Materiality
$68million
Performance materiality
$34 million
Reporting threshold
$3.4 million
161
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
Independent Auditor’s Report continued
to the members of Vedanta Resources Limited
MATERIALITY
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users
of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Group to be $68 million
(2018: $81 million), which is 2% (2018: 2%) of EBITDA.
The lower materiality threshold was due to a decrease in
group EBITDA to $3,393 million (2018: $4,051 million) driven
by lower commodity prices and higher costs of production
compared to the prior year. Our materiality amount provides a
basis for determining the nature and extent of risk assessment
procedures, identifying and assessing the risk of material
misstatement and determining the nature and extent of further
audit procedures. Materiality is assessed on both quantitative
and qualitative grounds. With respect to disclosure and
presentational matters, amounts in excess of the quantitative
thresholds above may not be adjusted if their effect is not
considered to be material on a qualitative basis.
We believe that EBITDA provides us with an earnings-based
measure that is significant to users of the financial statements
on which we could set our materiality. EBITDA is a key
performance indicator for the group and is also a key metric
used by the group in the assessment of the performance
of management. We also noted that market and analyst
commentary on the performance of the group uses EBITDA
as a key metric. We therefore considered EBITDA to be the
most appropriate performance metric on which to base
our materiality calculation as we considered that to be the
most relevant performance measure to the stakeholders
of the entity.
We determined materiality for the Parent company to be
$14.86 million (2018: $13.1 million), which is 1% (2018:
1%) of Equity.
During the course of our audit, we reassessed initial materiality
due to changes in the group’s forecasted EBITDA, resulting in a
marginally lower materiality.
PERFORMANCE MATERIALITY
The application of materiality at the individual account
or balance level. It is set at an amount to reduce to
an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements
exceeds materiality.
We set our performance materiality at 50% of our planning
materiality, calculated as $34m (2018: $41m). This was
based upon our overall risk analysis, our assessment of the
group’s control environment, the short reporting cycle and the
number and amounts of individual misstatements (corrected
and uncorrected) identified in the prior periods as well as the
nature of misstatements.
Audit work at component locations for the purpose of
obtaining audit coverage over significant financial statement
accounts is undertaken based on a percentage of total
performance materiality. The performance materiality set for
each component is based on the relative scale and risk of the
component to the group as a whole and our assessment of the
risk of misstatement at that component. In the current year,
the range of performance materiality allocated to components
was $6.7m to $20.1m (2018: $6.8m to $22.0m).
REPORTING THRESHOLD
An amount below which identified misstatements are
considered as being clearly trivial.
We agreed with the Audit Committee that we would report
to them all uncorrected audit differences in excess of $3.4m
(2018: $4.1m), which is set at 5% of planning materiality,
as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above
and in light of other relevant qualitative considerations in
forming our opinion.
OTHER INFORMATION
The other information comprises the information included in
the annual report other than the financial statements and our
auditor’s report thereon. The directors are responsible for the
other information.
Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion, based on the work undertaken in the
course of the audit:
• 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; and
• the Strategic Report and Directors’ Report have been
prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY
EXCEPTION
In the light of the knowledge and understanding of the group
and the parent company and its environment obtained
in the course of the audit, we have not identified material
misstatements in the Strategic Report or the Directors’ Report.
162
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• 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; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities
statement set out on page 146, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view,and for such internal
control as the directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group and parent company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at https://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
USE OF OUR REPORT
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.
Mirco Bardella (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
20 May 2019
Notes:
1. The maintenance and integrity of the Vedanta Resources Limited web site is the responsibility of the directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
163
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
Consolidated Income Statement
for the year ended March 31, 2019
Year ended 31 March 2019
Year ended 31 March 2018*
Before Special
items
Special items
(Note 6)
Total
Before Special
items
Special items
(Note 6)
14,031
(11,532)
2,499
229
(276)
(541)
-
1,911
480
(1,267)
(75)
1,049
(656)
393
(253)
646
393
-
-
-
-
-
-
38
38
-
9
-
47
(16)
31
16
15
31
14,031
(11,532)
2,499
229
(276)
(541)
38
1,949
480
(1,258)
(75)
1,096
(672)
424
(237)
661
424
15,294
(12,062)
3,232
154
(277)
(417)
-
2,692
465
(1,239)
(16)
1,902
(675)
1,227
163
1,064
1,227
-
33
33
-
-
-
650
683
-
(108)
11
586
(338)
248
76
172
248
(US$ million)
Total
15,294
(12,029)
3,265
154
(277)
(417)
650
3,375
465
(1,347)
(5)
2,488
(1,013)
1,475
239
1,236
1,475
Revenue
Cost of sales
Gross profit
Other operating income
Distribution costs
Administrative expenses
Impairment reversal /(charge)
[net], loss on PP&E
Operating profit
Investment revenue
Finance costs
Other gains and (losses) [net]
Profit before taxation (a)
Note
5
6
7
8
9
Net tax expense (b)
11(a)
Profit for the year from
continuing operations (a+b)
Attributable to:
Equity holders of the parent
Non-controlling interests
Profit for the year from
continuing operations
* Restated refer Note 1(b)
164
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income
for the year ended March 31, 2019
Profit for the year from continuing operations
Items that will not be reclassified subsequently to income statement:
Remeasurement of net defined benefit plans (note 27)
Tax effects on net defined benefit plans
Loss on fair value of financial asset investment (note 17)
Total (a)
Items that may be reclassified subsequently to income statement:
Exchange differences arising on translation of foreign operations
Gain on fair value of available-for-sale financial assets (note 17)
Gains/ (losses) of cash flow hedges recognised during the year
Tax effects arising on cash flow hedges
(Gains)/ losses on cash flow hedges recycled to income statement
Tax effects arising on cash flow hedges recycled to income statement
Total (b)
Other comprehensive (loss)/ income for the year (a+b)
Total comprehensive (loss)/ income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive (loss)/ income for the year
* Restated refer Note 1(b)
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018*
424
1,475
(6)
4
(6)
(8)
(608)
-
16
(7)
(28)
9
(618)
(626)
(202)
(484)
282
(202)
1
1
-
2
58
14
(62)
24
55
(19)
70
72
1,547
271
1,276
1,547
165
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Consolidated Statement of Financial Position
for the year ended March 31, 2019
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Exploration and evaluation assets
Leasehold land
Financial asset investments
Non-current tax assets
Other non-current assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Financial instruments (derivatives)
Current tax assets
Short-term investments
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Borrowings
Trade and other payables
Financial instruments (derivatives)
Retirement benefits
Provisions
Current tax liabilities
Net current liabilities
Non-current liabilities
Borrowings
Trade and other payables
Financial instruments (derivatives)
Deferred tax liabilities
Retirement benefits
Provisions
Non equity non-controlling interests
Total liabilities
Net assets
Equity
Share capital
Share premium
Treasury shares
Share-based payment reserve
Hedging reserve
Other reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
* Restated refer Note 1(b)
Note
14
15
16
16
17
11(d)
18
11(c)
19
18
25
20
21
22(a)
24
25
27
26
22(a)
24
25
11(c)
27
26
23
30
30
29
31
As at
31 March 2019
(US$ million)
As at
31 March 2018*
12
108
17,322
404
63
707
504
1,010
778
20,908
2,060
1,504
11
1
4,164
1,133
8,873
29,781
5,456
6,878
66
17
38
61
12,516
3,643
10,524
244
14
776
71
371
12
12,012
24,528
5,253
29
202
-
-
(98)
(97)
(964)
(928)
6,181
5,253
12
123
15,401
2,326
57
25
521
659
917
20,041
2,038
1,527
24
2
4,808
798
9,197
29,238
5,460
6,078
22
18
22
54
11,654
2,457
9,734
118
18
749
62
351
12
11,044
22,698
6,540
30
202
(558)
13
(93)
155
(79)
(330)
6,870
6,540
Financial Statements of Vedanta Resources Limited (formerly Vedanta Resources plc) with registration number 4740415 were
approved by the Board of Directors on 20 May 2019 and signed on their behalf by
Srinivasan Venkatakrishnan
Chief Executive Officer
166
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS
Consolidated Cash Flow Statement
for the year ended March 31, 2019
Operating activities
Profit before taxation
Adjustments for:
Depreciation and amortisation
Investment revenues
Finance costs
Other (gains) and losses (net)
Loss /(Profit) on disposal of PP&E
Write-off of unsuccessful exploration costs
Share-based payment charge
Impairment (reversal)/ charge (net), loss on PP&E
Other non-cash items
Operating cash flows before movements in working capital
Increase in inventories
Increase in receivables
Increase in payables
Cash generated from operations
Dividend 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
Proceeds from redemption of short-term investments
Purchases of short-term investments
Purchases of financial asset investments
Net cash (used in)/ from 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
Share purchase by subsidiary
Sale of treasury shares
Exercise of stock options in subsidiary
Repayment of working capital loan (net)
Proceeds from other short-term borrowings
Repayment of other short-term borrowings
Buyback of non-convertible bond
Proceeds from medium and long term borrowings
Repayment of medium and long term borrowings
Net cash from/ (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 the year
Cash and cash equivalents at end of the year
Consideration paid for business acquisition (net of cash and cash equivalents acquired)
3(a) & 3(b)
Note
Year ended
31 March 2019
(US$ million)
Year ended
31 March 2018
1,096
2,488
1,482
(480)
1,258
75
9
7
18
(38)
-
3,427
(10)
(335)
577
3,659
6
159
(1,278)
(547)
(113)
1,886
(1,327)
18
12,588
(11,949)
(254)
(752)
(1,676)
1
-
(1,028)
(21)
19
1
(90)
1,324
(2,433)
-
2,855
(461)
167
377
(42)
798
22(b)
22(b)
17 & 22(b)
22(b)
22(b)
22(b)
22(b)
22(b)
22(b)
21 & 22(b)
1,133
1,271
(465)
1,347
5
(1)
-
19
(650)
10
4,024
(355)
(607)
247
3,309
4
224
(1,312)
(567)
(164)
1,494
(1,104)
10
16,863
(13,422)
-
(134)
2,213
0
(2)
(1,414)
(31)
-
5
(612)
1,115
(4,362)
(1,129)
3,640
(1,817)
(4,607)
(900)
16
1,682
798
167
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Consolidated Statement of Changes in Equity
for the year ended March 31, 2019
Attributable to equity holders of the parent
Share capital
(Note 30)
Share
premium
Treasury
Shares
Share-based
payment
reserves
Hedging
reserve
Other
reserves
Retained
earnings
30
202
(558)
13
(93)
155
(79)
-
(5)
-
(237)
(242)
-
(US$ million)
Total equity
Non-
controlling
Interests
6,870
6,540
661
424
(379)
(626)
Total
(330)
(237)
(247)
At 1 April 2018
Profit/(loss) for the year
Other comprehensive loss for
the year
Total comprehensive income/
(loss) for the year
Transfers
Dividends paid (note 13)
Sale/cancellation of treasury
shares
Exercise of stock options
Recognition of share-based
payment
Non-controlling interest on
business combination (Note 3(a))
Change in fair value of put option
liability/conversion option asset/
derecognition of non controlling
interest
Other changes in non-controlling
interests**
-
-
-
-
-
(2)
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
557
1
-
-
-
-
-
-
-
-
-
-
-
(19)
6
-
-
-
-
(5)
(242)
(237)
(484)
282
(202)
-
-
-
-
-
-
-
-
(10)
10
-
-
-
-
-
-
-
-
-
(113)
(536)
18
-
-
(113)
(1,008)
(1,121)
19
1
6
-
-
-
-
19
1
6
29
29
(15)
(15)
5
(10)
-
(12)
(12)
3
(9)
(98)
(97)
(964)
(928)
6,181
5,253
At 31 March 2019
29
202
** Includes purchase of shares by Vedanta Limited through ESOP trust for its stock options and share based payment charge by subsidiaries.
For the year ended 31 March 2018*
Attributable to equity holders of the parent
Share capital
(Note 30)
Share
premium
Treasury
Shares
Share-based
payment
reserves
Hedging
reserve
Other
reserves
Retained
earnings
(US$ million)
Total equity
Non-
controlling
Interests
Total
30
202
(558)
28
(91)
140
(160)
(409)
At 1 April 2017
Profit for the year
Other comprehensive income/
(loss) for the year
Total comprehensive income/
(loss) for the year
Acquisition of shares under DSBP
scheme
Transfers
Dividends paid/ payable (Note 13)
Exercise of stock options
Recognition of share-based
payment
Non-controlling interest on
business combination (Note 3(b))
Recognition of put option
liability/conversion option asset/
derecognition of non controlling
interest
Other changes in non-controlling
interests**
-
-
-
-
-
-
0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1)
-
-
1
-
-
-
-
-
-
-
-
-
-
(27)
12
-
-
-
-
(2)
(2)
-
-
-
-
-
-
-
-
-
34
34
-
(19)
-
-
-
-
-
-
239
-
239
32
6,424
1,236
40
6,015
1,475
72
239
271
1,276
1,547
(2)
19
(164)
26
-
-
(3)
-
-
-
(3)
-
(164)
(828)
(992)
0
12
-
-
-
17
0
12
17
(15)
(15)
(22)
(37)
(22)
(22)
3
(19)
At 31 March 2018
30
202
(558)
13
(93)
155
(79)
(330)
6,870
6,540
* Restated refer Note 1(b)
** Includes purchase of shares by Vedanta Limited through ESOP trust for its stock options and additional stake purchased during the year in erstwhile Cairn
India Limited and share based payment charge by subsidiaries
168
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Other Reserves Comprise
Currency
translation reserve
Merger
reserve(2)
Financial asset
investment
revaluation reserve
At 1 April 2017
Exchange differences on translation of foreign
operations
Gain on fair value of available-for-sale financial assets
Remeasurements
Transfer from/(to) retained earnings(1)
At 1 April 2018
Exchange differences on translation of foreign
operations
Loss on fair value of financial asset investments
Remeasurements
Transfer from/(to) retained earnings(1)
At 31 March 2019
(2,168)
26
-
-
-
(2,142)
(238)
-
-
-
(2,380)
4
-
-
-
-
4
-
-
-
-
4
7
-
7
-
-
14
-
(3)
-
-
11
Other
reserves(3)
2,297
-
-
1
(19)
2,279
-
-
(1)
(10)
2,268
(US$ million)
Total
140
26
7
1
(19)
155
(238)
(3)
(1)
(10)
(97)
(1) Transfer to other reserve during the year ended 31 March 2019 includes US$ Nil million of legal reserve (31 March 2018: US$4 million) and withdrawal
of US$12 million from debenture redemption reserve (31 March 2018: US$23 million of debenture redemption reserve). Further, US$2 million has been
transferred to Capital redemption reserve on account of reduction in share capital due to cancellation of treasury shares.
(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 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 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) Other reserves includes legal reserves of US$4 million (31 March 2018: US$4 million), debenture redemption reserve of US$144 million (31 March 2018
US$156 million) and balance mainly includes general reserve and capital redemption reserve. Debenture redemption reserve is required to be created under
the Indian Companies Act from annual profits until such debentures are redeemed. Legal reserve is required to be created by Fujairah Gold by appropriation
of 10 % of profits each year until the balance reaches 50% of the paid up share capital. This reserve is not available for distribution except in circumstances
stipulated by the Articles of Incorporation. Under the erstwhile Indian Companies Act, 1956, general reserve was created in relation to Group’s Indian
subsidiaries through an annual transfer of net income to general reserve at a specified percentage in accordance with applicable regulations. The purpose of
these transfers is to ensure that the total dividend distribution is less than total distributable reserves for that year. The said requirement was dispensed with
w.e.f. 1 April 2013 and there are no restrictions of use of these reserves.
169
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Notes to the Financial Statements
for the year ended 31 March 2019
GROUP OVERVIEW:
Vedanta Resources Limited ((“Vedanta” or “VRL” or “Company”)
formerly known as Vedanta Resources plc or “VRPLC”) is a
company incorporated and domiciled in the United Kingdom.
Vedanta and its consolidated subsidiaries (collectively, the
“Group”) is a diversified natural resource group engaged in
exploring, extracting and processing minerals and oil and gas.
The Group engages in the exploration, production and sale of
zinc, lead, silver, copper, aluminium, iron ore and oil & gas and
have a presence across India, South Africa, Namibia, Ireland,
Australia, Liberia and UAE. The Group is also in the business of
commercial power generation, steel manufacturing and port
operations in India and manufacturing of glass substrate in
South Korea and Taiwan.
Buy back and delisting of Vedanta Resources plc Shares
On 31 July 2018, Volcan Investments (“Volcan”) and Vedanta
announced that they had reached agreement on the terms
of a recommended cash offer (the “Offer”) by Volcan for the
remaining issued and to-be-issued share capital of Vedanta
not currently owned by Volcan.
The Volcan Offer was declared unconditional in all respects on
3 September 2018 and Volcan announced that Vedanta had
applied for its shares to be cancelled from listing on the Official
List of the UK Listing Authority and to trading on the main
market for listed securities of the London Stock Exchange,
such cancellation took effect on 1 October 2018.
At the General Meeting of Vedanta shareholders held on 1
October 2018, the resolution put to shareholders in relation
to the re-registration of VRPlc as a private limited company
was duly passed on a poll. Re-registration of VRPlc as a private
limited company became effective on 29 October 2018
pursuant to which the name has been changed to Vedanta
Resources Limited.
Following the delisting of the Company’s shares from the
Official list of the London Stock Exchange, 6,904,995
ordinary shares of US 10 Cents each, which were issued
on the conversion of certain convertible bonds issued by
one of Vedanta’s subsidiaries and held through a global
depositary receipt (GDR), were redeemed and the GDR
listing was cancelled.
Details of Group’s various businesses are as follows.
The Group’s percentage holdings in each of the below
businesses are disclosed in note 39.
• Zinc India business is owned and operated by Hindustan
Zinc Limited (“HZL”).
• Zinc international business is comprised of Skorpion mine
and refinery in Namibia operated through THL Zinc Namibia
Holdings (Proprietary) Limited (“Skorpion”), Lisheen mine
in Ireland operated through Vedanta Lisheen Holdings
Limited (“Lisheen”) (Lisheen mine ceased operations in
December 2015) and Black Mountain Mining (Proprietary)
Limited (“BMM”), whose assets include the operational Black
Mountain mine and the Gamsberg mine project located in
South Africa.
• The Group’s oil and gas business is owned and operated
by Vedanta Limited (prior to merger this was owned and
operated by erstwhile Cairn India Limited) and its subsidiary,
Cairn Energy Hydrocarbons Limited and consists of
exploration and development and production of oil and gas.
• The Group’s iron ore business is owned by Vedanta Limited,
and by two wholly owned subsidiaries of Vedanta Ltd.
i.e. Sesa Resources Limited and Sesa Mining Corporation
Limited and consists of exploration, mining and processing
of iron ore, pig iron and metallurgical coke and generation
of power for captive use. Pursuant to Honourable Supreme
Court order, operations in the state of Goa are currently
suspended. The Group’s iron ore business includes Western
Cluster Limited (“WCL”) in Liberia which has iron ore assets
and is wholly owned by the Group. WCL’s assets include
development rights to Western Cluster and a network of
iron ore deposits in West Africa. WCL’s assets have been fully
impaired.
• The Group’s copper business comprises three operations
divided into two segments, namely (i) Copper India/Australia,
comprising Vedanta Limited’s custom smelting operations in
India (including captive power plants at Tuticorin in Southern
India) and (ii) Copper Zambia comprising Konkola Copper
Mines plc’s (“KCM”) mining and smelting operations in
Zambia.
• The Group’s copper business in India has received an order
from Tamil Nadu Pollution Control Board (“TNPCB”) on 09
April 2018, rejecting the Group’s application for renewal
of consent to operate under the Air and Water Acts for the
400,000 tpa copper smelter plant in Tuticorin for want of
further clarification and consequently the operations were
suspended. The Group has filed an appeal with TNPCB
Appellate authority against the said order. During the
pendency of the appeal, TNPCB through its order dated 23
May 2018 ordered for disconnection of electricity supply
and closure of our copper smelter plant. Post such order, the
state government on 28 May 2018 ordered the permanent
closure of the plant. (Refer Note 2(c)(I)(x))
• In addition, the Group owns and operates the Mt.
Lyell copper mine in Tasmania, Australia through its
subsidiary, CMT and a precious metal refinery and copper
rod plant in Fujairah, UAE through its subsidiary Fujairah
Gold FZC. The operations of Mt Lyell copper mine were
suspended in January 2014 following a mud slide incident
170
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS and were put into care and maintenance since 09 July 2014
following a rock fall incident in June 2014.
• Furthermore, the Group’s Zambia operations (i.e. KCM) is
largely an integrated copper producer with various facilities
at Konkola, Nchanga, Nkana and Nampundwe, Zambia
including mines, concentrators, smelters, acid plants, a
tailings leach plant (“TLP”) and a refinery.
• The Group’s Aluminium business is owned and operated by
Vedanta Limited and by Bharat Aluminium Company Limited
(“BALCO”). The aluminium operations include a refinery and
captive power plant at Lanjigarh and a smelter and captive
power plants at Jharsuguda both situated in the State of
Odisha in India. BALCO’s partially integrated aluminium
operations are comprised of two bauxite mines, captive
power plants, smelting and fabrication facilities in central
India.
• The Group’s power business is owned and operated by
Vedanta Limited, BALCO, and Talwandi Sabo Power Limited
(“TSPL”), a wholly owned subsidiary of Vedanta Limited,
which are engaged in the power generation business
in India. Vedanta Limited power operations include a
thermal coal- based commercial power facility of 600
MW at Jharsuguda in the State of Odisha in Eastern India.
BALCO power operations included 600 MW (2 units of
300 MW each) thermal coal based power plant at Korba,
of which a unit of 300 MW was converted to be used for
captive consumption vide order from Central Electricity
Regulatory Commission (CERC) dated 1 January 2019.
Talwandi Sabo Power Limited (“TSPL”) power operations
include 1,980 MW (three units of 660 MW each) thermal
coal- based commercial power facilities. Power business
also includes the wind power plants commissioned by HZL
and a power plant at MALCO Energy Limited (“MEL”) (under
care and maintenance) situated at Mettur Dam in State of
Tamil Nadu in southern India.
• The Group’s other activities include Electrosteel Steels
Limited (“ESL”) acquired on 4 June 2018. ESL is engaged in
the manufacturing and supply of billets, TMT bars, wire rods
and ductile iron pipes in India.
• The Group’s other activities also include Vizag General
Cargo Berth Private Limited (“VGCB”) and Maritime Ventures
Private Limited (“MVPL”). Vizag port project includes
mechanisation of coal handling facilities and upgradation
of general cargo berth for handling coal at the outer
harbour of Visakhapatnam Port on the east coast of India.
MVPL is engaged in the business of rendering logistics
and other allied services inter alia rendering stevedoring,
and other allied services in ports and other allied sectors.
VGCB commenced operations in the fourth quarter of fiscal
2013. The Group’s other activities also include AvanStrate
Inc. (“ASI”). ASI is involved in manufacturing of glass
substrate in South Korea and Taiwan.
171
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 1. BASIS OF PREPARATION AND BASIS OF MEASUREMENT
OF FINANCIAL STATEMENTS
a) Basis of preparation
The consolidated 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) and IFRS as adopted by
the European Union and related interpretations.
These financial statements have been prepared in
accordance with the accounting policies, set out below and
were consistently applied to all periods presented unless
otherwise stated.
These financial statements are approved for issue by the Board
of Directors on 20 May 2019.
Certain comparative figures appearing in these consolidated
financial statements have been regrouped and/or reclassified
to better reflect the nature of those items.
These financial statements are presented in US dollars being
the functional currency of the Company and all values are
rounded off to the nearest million except where otherwise
indicated. Amounts less than US$0.5 million have been
presented as “0”.
b) Restatement/Reclassification
(i) The Group has revised the presentation of forward premium
relating to derivative instruments to present it along with
the mark-to-market gain/loss on these instruments, as these
more appropriately reflect the substance of the forward
premiums on derivative transactions. As a result of the change,
forward premium expense amounting to US$103 million has
been reclassified from ‘Finance cost’ to ‘Cost of sales’ (31
March 2019 : US$40 million and 31 March 2018 : US$88
million) and ‘Other gains and losses’ (31 March 2019 : US$9
million and 31 March 2018 : US$15 million). The net cash
inflow from operating activities in the consolidated cash flow
statement remains unchanged.
(ii) The classification of export incentives from government has
also been revised to present it under ‘other operating income’,
as the revised classification is more appropriate. As a result of
the change, export incentives amounting to US$66 million has
been reclassified from ‘revenue’ to ‘other operating income’ for
the comparative year ended 31 March 2018.
(iii) In the comparative period, the Group acquired equity stake
in AvanStrate Inc. (ASI). As permitted by IFRS 3, the Group
had used provisional fair values that were determined as at 31
March 2018 for consolidation. In the current year, these fair
values were finalised. Hence, the comparative year amounts
have been restated accordingly. Please refer note 3(b) for
further details.
None of the above had any effect on the equity as at
01 April 2017.
c) Basis of Measurement
The consolidated financial statements have been prepared
on a going concern basis using historical cost convention
and on an accrual method of accounting, except for certain
financial assets and liabilities which are measured at fair value
as explained in the accounting policies below.
d) Parent Company financial statements
The financial statements of the parent company, Vedanta
Resources Limited, incorporated in the United Kingdom, have
been prepared in accordance with FRS 101 and UK company
law. The Company financial statements and associated notes
have been presented separately.
2(a) ACCOUNTING POLICIES
(i) Basis of consolidation
Subsidiaries:
The consolidated financial statements incorporate the results
of the Company and all its subsidiaries (the “Group”), being the
entities that it controls. Control is evidenced where the Group
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 Company. Where necessary,
adjustments are made to the financial statements of
subsidiaries to align the accounting policies in line with
accounting policies of the Group.
For non-wholly owned subsidiaries, a share of the profit/
(loss) 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 statement of financial position.
Liability for put option issued to non-controlling interests
which do not grant present access to ownership interest to
the Group is recognised at present value of the redemption
amount, and is reclassified from equity. At the end of each
reporting period, the non-controlling interests subject to
put option is derecognised and the difference between the
amount derecognised and present value of the redemption
amount, which is recorded as a financial liability, is accounted
for as an equity transaction.
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.
Similarly, 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 off 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.
Intra-Group balances and transactions, and any unrealised
profits arising from intra-Group transactions, are
eliminated. 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. Investments in joint arrangements
172
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 are classified as either joint operations or joint venture.
The classification depends on the contractual rights and
obligations of each investor, rather than the legal structure of
the joint arrangement. A joint operation is a joint arrangement
whereby the parties that have joint control of the arrangement,
have rights to the assets, and obligations for the liabilities,
relating to the arrangement. A joint venture is a joint
arrangement whereby, the parties that have joint control of the
arrangement have rights to the net assets of the arrangement.
The group has both joint operations and joint ventures.
Joint operations
The Group has Joint operations within its Oil and gas segment.
It participates in several unincorporated joint operations
which involve the joint control of assets used in oil and gas
exploration and producing activities. The Group accounts
for its share of assets, liabilities, income and expenditure
of joint operations in which the Group holds an interest.
Liabilities in unincorporated joint operations where the
Group is the operator, is accounted for at gross values
(including share of other partners) with a corresponding
receivable from the venture partners. These have been
included in the consolidated financial statements under the
appropriate headings.
Details of joint operations are set out in note 38.
Joint Venture
The Group accounts for its interest in joint venture using the
equity method, after initially being recognised at cost in the
consolidated statement of financial position. Goodwill arising
on the acquisition of joint venture is included in the carrying
value of investments in joint venture.
Investments in associates:
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in
the financial and operating policy decisions of the investee,
but is not control or joint control over those policies.
Investments in associates are accounted for using the equity
method. Goodwill arising on the acquisition of associates is
included in the carrying value of investments in associate.
Equity method of accounting
Under the equity method of accounting applicable for
investments in associates and joint ventures, investments
are initially recorded at the cost to the Group and then, in
subsequent periods, the carrying value is adjusted to reflect
the Group’s share of the post-acquisition profits or losses of
the investee, and the Group’s share of other comprehensive
income of the investee, other changes to the investees net
assets and is further adjusted for impairment losses, if any.
Dividend received or receivable from associate and joint
ventures are recognised as a reduction in carrying amount of
the investment.
The consolidated income statement and consolidated
statements of comprehensive income include the Group’s
share of investee’s results, except where the associate
is generating losses, share of such losses in excess of
the Group’s interest in that associate are not recognised.
Losses recognised under the equity method in excess of the
Group’s investment in ordinary shares are applied to the other
components of the Group’s interest that forms part of Group’s
net investment in the investee in the reverse order of their
seniority (i.e. priority in liquidation).
If the Group’s share of losses in an associate or joint venture
equals or exceeds, its interests in the associate or joint venture,
the Group discontinues the recognition of further losses.
Additional losses are provided for, only to the extent that the
Group has incurred legal or constructive obligations or made
payments on behalf of the associate/joint venture.
Unrealised gains arising from transactions with associates are
eliminated against the investment to the extent of the Group’s
interest in these entities. Unrealised losses are eliminated in
the same way as unrealised gains, but only to the extent that
there is no evidence of impairment of the asset transferred.
Accounting policies of associates have been changed
where necessary to ensure consistency with the policies
adopted by the Group.
The carrying amount of equity accounted investments are
tested for impairment in accordance with the policy described
in note 2 (a)(x) below.
(ii) Business combinations
Business combinations are accounted for under the
acquisition method. The acquiree’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.
Excess of fair value of purchase consideration and the
acquisition date non-controlling interest over the acquisition
date fair value of identifiable assets acquired and liabilities
assumed is recognised as goodwill. Goodwill arising on
acquisitions is reviewed for impairment annually. Where the
fair values of the identifiable assets and liabilities exceed the
purchase consideration, the Group re-assesses whether it
has correctly identified all of the assets acquired and all of
the liabilities assumed and reviews the procedures used to
measure the amounts to be recognised at the acquisition
date. If the reassessment still results in an excess of the fair
value of net assets acquired over the aggregate consideration
transferred, then the surplus is credited to the consolidated
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 value is made
and any adjustments required to those provisional fair values
are finalised within 12 months of the acquisition date.
Those provisional amounts are adjusted through goodwill
during the measurement period, or additional assets or
liabilities are recognised to reflect new information obtained
about facts and circumstances that existed as of the
acquisition date that, if known, would have affected the
amounts recognised at that date. These adjustments are
called as measurement period adjustments. The measurement
period does not exceed twelve months from 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 net identifiable assets. This accounting choice is
made on a transaction by transaction basis.
173
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Acquisition expenses are charged to the income statement.
If the Group acquires a group of assets in a company that does
not constitute a business combination in accordance with IFRS
3 Business Combinations, the cost of the acquired group of
assets is allocated to the individual identifiable assets acquired
based on their relative fair value.
(iii) Revenue recognition
Sale of goods/ rendering of services (Revenue from
contracts with customers)
The Group’s revenue from contracts with customers comprises
is mainly from the sale of copper, aluminium, iron ore, zinc,
oil and gas, power, steel, glass substrate and port operations.
Revenue from contracts with customers is recognised when
control of the goods or services is transferred to the customer
which usually is on delivery of the goods to the shipping
agent at an amount that reflects the consideration to which
the Group expects to be entitled in exchange for those goods
or services. Revenue is recognised net of discounts, volume
rebates, outgoing sales taxes/ goods and service tax and other
indirect taxes excluding excise duty. Revenues from sale of
by-products are included in revenue.
Certain of the Group’s sales contracts provide for provisional
pricing based on the price on the London Metal Exchange
(LME) and crude index, as specified in the contract. Revenue in
respect of such contracts is recognised when control passes
to the customer and is measured at the amount the entity
expects to be entitled – being the estimate of the price
expected to be received at the end of the measurement
period. Post transfer of control of goods, provisional pricing
features are accounted in accordance with IFRS 9 ‘Financial
Instruments’ rather than IFRS 15 and therefore the IFRS 15
rules on variable consideration do not apply. These ‘provisional
pricing’ adjustments i.e. the consideration received post
transfer of control are included in total revenue from
operations on the face of the Consolidated Income Statement
and disclosed by way of note to the financial statements.
Final settlement of the price is based on the applicable
price for a specified future period. The Group’s provisionally
priced sales are marked to market using the relevant forward
prices for the future period specified in the contract and is
adjusted in revenue.
Revenue from oil, gas and condensate sales represent
the Group’s share of oil, gas and condensate production,
recognised on a direct entitlement basis, when control is
transferred to the buyers. Direct entitlement basis represents
entitlement to variable physical volumes of hydrocarbons,
representing recovery of the costs incurred and a stipulated
share of the production remaining after such cost recovery.
The stipulated share of production is arrived at after reducing
government’s share of profit petroleum which is accounted for
when the obligation in respect of the same arises.
A contract asset is the right to consideration in exchange
for goods or services transferred to the customer. If the
Group performs part of its obligation by transferring goods
or services to a customer before the customer pays
consideration or before payment is due, a contract asset is
recognised for the earned consideration when that right is
conditional on Group’s future performance.
A contract liability is the obligation to transfer goods or
services to a customer for which the Group has received
consideration from the customer. If a customer pays
consideration before the Group transfers goods or services
to the customer, a contract liability is recognised when the
payment is received. Contract liabilities are recognised as
revenue when the Group performs under the contract.
The Group does not expect to have any contracts where the
period between the transfer of the promised goods or services
to the customer and payment by the customer exceeds one
year. As a consequence, the Group does not adjust any of the
transaction prices for the time value of money.
Interest income
Interest income from debt instruments is recognised using
the effective interest rate method. The effective interest rate is
the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the gross
carrying amount of a financial asset. When calculating the
effective interest rate, the Group estimates the expected
cash flows by considering all the contractual terms of the
financial instrument (for example, prepayment, extension,
call and similar options) but does not consider the
expected credit losses.
Dividends
Dividend income is recognised in the consolidated income
statement only when the right to receive payment is
established, provided it is probable that the economic benefits
associated with the dividend will flow to the Group, and the
amount of the dividend can be measured reliably.
(iv) 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 years. 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 IFRS. The determination as
to which items should be disclosed separately requires a
degree of judgement.
Revenue from sale of power is recognised when delivered
and measured based on rates as per bilateral contractual
agreements with buyers and at a rate arrived at based on the
principles laid down under the relevant Tariff Regulations as
notified by the regulatory bodies, as applicable.
Where the Group acts as a port operator, revenues relating
to operating and maintenance phase of the port contract are
measured at the amount that Group expects to be entitled to
for the services provided.
(v) Property, plant and equipment (PP&E)
Mining properties and leases
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
return relative to the risks and the Group decided to proceed
with the mine development), all further pre-production primary
development expenditure other than that on land, buildings,
plant, equipment and capital work in progress is capitalised
as property, plant and equipment under the heading “Mining
174
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 properties and leases” together with any amount transferred
from “Exploration and evaluation” assets. The costs of mining
properties and leases include the costs of acquiring and
developing mining properties and mineral rights.
Exploration and evaluation assets
Exploration and evaluation expenditure incurred prior to
obtaining the mining right or the legal right to explore are
expensed as incurred.
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. When the benefit from the
stripping costs are realised in the current period, the stripping
costs are accounted for as the cost of inventory. If the costs
of inventory produced and the stripping activity asset are
not separately identifiable, a relevant production measure
is used to allocate the production stripping costs between
the inventory produced and the stripping activity asset.
The Company uses the expected volume of waste compared
with the actual volume of waste extracted for a given value
of ore/mineral production for the purpose of determining the
cost of the stripping activity asset.
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, ‘MORC’ code or ‘SAMREC’
Code. Changes in the commercial reserves affecting unit of
production calculations are dealt with prospectively over the
revised remaining reserves.
Oil & gas assets- (developing/producing assets)
For oil and 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
consolidated income statement.
All costs incurred after the technical feasibility and
commercial viability of producing hydrocarbons has been
demonstrated are capitalised within property, plant &
equipment - development/producing assets 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 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 consolidated 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.
Exploration and evaluation expenditure incurred after
obtaining the mining right or the legal right to explore, are
capitalised as exploration and evaluation assets (property,
plant and equipment) and stated at cost less impairment, if
any. 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 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
licences 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.
Exploration expenditure incurred in the process of determining
oil and gas exploration targets is capitalised within “exploration
and evaluation assets “and subsequently allocated to drilling
activities. 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 & equipment - development/
producing assets (oil and 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.
Expenditure incurred on the acquisition of a licence interest is
initially capitalised on a licence-by-licence basis. Costs are held
undepleted, within exploration and evaluation assets until such
time as the exploration phase on the licence area is complete
or commercial reserves have been discovered.
Net proceeds from any disposal of an exploration asset are
initially credited against the previously capitalised costs.
Any surplus/ deficit is recognised in the income statement.
175
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 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.
It also includes the initial estimate of the costs of dismantling
and removing the item and restoring the site on which it is
located. If significant parts of an item of property, plant and
equipment have different useful lives, then they are accounted
for as separate items (major components) of property, plant
and equipment. All other expenses on existing property, plant
and equipment, including day-to-day repair and maintenance
expenditure and cost of replacing parts, are charged to the
consolidated income statement for the period during which
such expenses are incurred.
Gains and losses on disposal of an item of property, plant
and equipment computed as the difference between the net
disposal proceeds and the carrying amount of the asset is
included in the consolidated income statement when the asset
is derecognised. Major inspection and overhaul expenditure is
capitalised, if the recognition criteria are met.
(vi) Assets under construction
Assets under construction are capitalised in the assets under
construction account. At the point when an asset is capable
of operating in the manner intended by management,
the cost of construction is transferred to the appropriate
category of property, plant and equipment. Costs associated
with the commissioning of an asset and any obligatory
decommissioning costs are capitalised until the period of
commissioning has been completed and the asset is ready for
its intended use.
(vii) Depreciation, depletion and amortisation expense
Mining properties and other assets in the course of
development or construction, freehold land and goodwill are
not depreciated or amortised.
Relating to mining properties
The capitalised mining properties are amortised on a
unit-of-production basis over the total estimated remaining
commercial proved and probable reserves of each property
or Group of properties and are subject to impairment review.
Costs used in the unit of production calculation comprise
the net book value of capitalised costs plus the estimated
future capital expenditure required to access the commercial
reserves. Changes in the estimates of commercial reserves or
future capital expenditure are dealt with prospectively.
Leasehold land and buildings are depreciated on a straight-line
basis over the period of the lease or, if shorter, their
useful economic life.
Oil & gas assets
All expenditures carried within each field are amortised from
the commencement of production on a unit of production
basis, which is the ratio of oil and 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 and 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.
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 the commercial
reserves. Changes in the estimates of commercial reserves or
future field development costs are dealt with prospectively.
Other Assets
Depreciation on Property, plant and equipment is calculated
using the straight-line method (SLM) to allocate their cost,
net of their residual values, over their estimated useful
lives (determined by the management) as given below.
Management’s assessment takes into account, inter alia, the
nature of the assets, the estimated usage of the assets, the
operating conditions of the assets, past history of replacement
and maintenance support.
Estimated useful life of assets are as follows:
Buildings operations and administration
Plant and machinery
Railway Sidings
Office equipment
Furniture and fixtures
Vehicles
3-60 years
15-40 years
15 years
3–6 years
8-10 years
8-10 years
Major inspection and overhaul costs are depreciated over the
estimated life of the economic benefit to be derived from such
costs. 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.
The Group reviews the residual value and useful life of an asset
at least at each financial year end and, if expectations differ
from previous estimates, the change is accounted for as a
change in accounting estimate.
The Group has reassessed the economic lives of commercial
thermal power plants to be the lower of its technical useful life
or the term of the power purchase agreement. This has had no
material impact on these financial statements.
(viii) Intangible assets
Intangible assets acquired separately are measured on
initial recognition at cost. Subsequently, intangibles assets
are measured at cost less accumulated amortisation and
accumulated impairment losses, if any.
The Group recognises port concession rights as “Intangible
Assets” arising from a service concession arrangement, in
which the grantor controls or regulates the services provided
and the prices charged, and also controls any significant
residual interest in the infrastructure such as property, plant
and equipment, irrespective whether the infrastructure is
existing infrastructure of the grantor or the infrastructure
is constructed or purchased by the Group as part of the
service concession arrangement. Such an intangible asset is
recognised by the Group initially at cost determined as the
fair value of the consideration received or receivable for the
construction service delivered and is capitalised when the
project is complete in all respects. Port concession rights are
amortised on straight line basis over the balance of license
176
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 period. The concession period is 30 years from the date
of the award. Any addition to the port concession rights
are measured at fair value on recognition. Port concession
rights also include certain property, plant and equipment in
accordance with IFRIC 12 ”Service Concession Arrangements”.
Intangible assets are amortised over their estimated useful
life on a straight line basis Software is amortised over the
estimated useful life ranging from 0 – 5 years. Amounts paid
for securing mining rights are amortised over the period of
the mining lease ranging from 16-25 years. Technological
know-how and acquired brand are amortised over the
estimated useful life of ten years.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are
recognised in the consolidated income statement when the
asset is derecognised.
The amortisation period and the amortisation method are
reviewed at least at each financial year end. If the expected
useful life of the asset is different from previous estimates,
the change is accounted for prospectively as a change in
accounting estimate.
(ix) Non-current assets held for sale
Non-current assets and disposal groups are classified as held
for sale if their carrying amount will be recovered through
a sale transaction rather than through continuing use.
This condition is regarded as met only when the sale is highly
probable and the asset (or disposal group) is available for
immediate sale in its present condition. Management must be
committed to the sale which should be expected to qualify for
recognition as a completed sale within one year from the date
of classification.
Non-current assets and disposal groups classified as held for
sale are not depreciated and are measured at the lower of
carrying amount and fair value less costs to sell. Such assets
and disposal groups are presented separately on the face of
the consolidated statement of financial position.
(x) Impairment
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.
The Group assesses at each reporting date, whether there
is an indication that an asset may be impaired. 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. Internal and external factors, such as worse economic
performance than expected, 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 or in case of goodwill where
annual testing of impairment is required 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 and 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 value is net of deferred tax
liability recognised in the fair value of assets acquired in the
business combination.
If the recoverable amount of an asset or CGU is estimated
to be less than it’s carrying amount, the carrying amount
of the asset or CGU is reduced to its recoverable amount.
An impairment loss is recognised in the consolidated
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 except if
initially attributed to goodwill.
Exploration & evaluation assets:
In assessing whether there is any indication that an exploration
and evaluation asset may be impaired, the Group considers, as
a minimum, the following indicators:
• the period for which the Group 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 Group 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.
177
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 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 consolidated income statement.
(xi) Financial Instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
(a) Financial Assets – Recognition
All financial assets are recognised initially at fair value plus, in
the case of financial assets not recorded at fair value through
profit or loss, transaction costs that are attributable to the
acquisition of the financial asset. Purchases or sales of financial
assets that require delivery of assets within a time frame
established by regulation or convention in the market place
(regular way trades) are recognised on the trade date, i.e., the
date that the Group commits to purchase or sell the asset.
For purposes of subsequent measurement, financial assets are
classified in four categories:
Debt instruments at amortised cost
A ‘debt instrument’ is measured at amortised cost if both the
following conditions are met:
a) The asset is held within a business model whose objective is
to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates
to cash flows that are solely payments of principal and interest
(SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the Effective
Interest Rate (EIR) method. Amortised cost is calculated by
taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the EIR. The EIR
amortisation is included in interest income in consolidated
income statement. The losses arising from impairment are
recognised in consolidated income statement.
Debt instruments at fair value through other
comprehensive income (FVOCI)
A ‘debt instrument’ is classified as at the FVOCI if both of the
following criteria are met:
a) The objective of the business model is achieved both
by collecting contractual cash flows and selling the
financial assets, and
b) The asset’s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are
measured initially as well as at each reporting date at fair value.
Fair value movements are recognised in other comprehensive
income (OCI). However, interest income, impairment losses
and reversals and foreign exchange gain or loss are recognised
in the consolidated income statement. On derecognition
of the asset, cumulative gain or loss previously recognised
in other comprehensive income is reclassified from the
equity to consolidated income statement. Interest earned
whilst holding fair value through other comprehensive
income debt instrument is reported as interest income using
the EIR method.
Debt instruments at fair value through profit or loss (FVTPL)
FVTPL is a residual category for debt instruments. Any debt
instrument, which does not meet the criteria for categorisation
as at amortised cost or as FVOCI, is classified as at FVTPL.
In addition, the Group may elect to designate a debt
instrument, which otherwise meets amortised cost or FVOCI
criteria, as at FVTPL. However, such election is allowed
only if doing so reduces or eliminates a measurement
or recognition inconsistency (referred to as ‘accounting
mismatch’). The Group has not designated any debt
instrument as at FVTPL.
Debt instruments included within the FVTPL category are
measured at fair value with all changes being recognised in
consolidated income statement.
Equity instruments
All equity investments in scope of IFRS 9 are measured at
fair value. Equity instruments which are held for trading
and contingent consideration recognised by an acquirer
in a business combination to which IFRS 3 applies are
classified as at FVTPL. For all other equity instruments, the
Company may make an irrevocable election to present in
other comprehensive income subsequent changes in the fair
value. The Group makes such election on an instrument-by-
instrument basis. The classification is made on initial
recognition and is irrevocable.
If the Group decides to classify an equity instrument as at
FVOCI, then all fair value changes on the instrument, excluding
dividends, are recognised in the OCI. There is no recycling
of the amounts from OCI to profit and loss, even on sale of
investment. However, the Group may transfer the cumulative
gain or loss within equity. For equity instruments which are
classified as FVTPL, all subsequent fair value changes are
recognised in the consolidated income statement.
(b) Financial Asset - Derecognition
The Group derecognises a financial asset when the contractual
rights to cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial
asset in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred.
(c) Impairment of financial assets
In accordance with IFRS 9, the Group applies expected
credit loss (“ECL”) model for measurement and recognition of
impairment loss on the following financial assets:
i) Financial assets that are debt instruments, and are measured
at amortised cost e.g., loans, debt securities and deposits
ii) Financial assets that are debt instruments and are
measured as at FVOCI
178
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 iii) Trade receivables or any contractual right to receive cash
or another financial asset that result from transactions that are
within the scope of IFRS 15.
All financial liabilities are recognised initially at fair value, and in
the case of financial liabilities at amortised cost, net of directly
attributable transaction costs.
The Group follows ‘simplified approach’ for recognition of
impairment loss allowance on trade receivables, contract
assets and lease receivables. The application of simplified
approach does not require the Group to track changes in
credit risk. Rather, it recognises impairment loss allowance
based on lifetime ECLs at each reporting date, right from its
initial recognition.
The Group’s financial liabilities include trade and
other payables, loans and borrowings including bank
overdrafts, financial guarantee contracts and derivative
financial instruments.
The measurement of financial liabilities depends on their
classification, as described below:
At each reporting date, for recognition of impairment loss on
other financial assets and risk exposure, the Group determines
whether there has been a significant increase in the credit
risk since initial recognition. If credit risk has not increased
significantly, 12-month ECL is used to provide for impairment
loss. However, if credit risk has increased significantly, lifetime
ECL is used. If, in a subsequent period, credit quality of the
instrument improves such that there is no longer a significant
increase in credit risk since initial recognition, then the Group
reverts to recognising impairment loss allowance based
on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all
possible default events over the expected life of a financial
instrument. The 12-month ECL is a portion of the lifetime ECL
which results from default events that are possible within 12
months after the reporting date.
ECL is the difference between all contractual cash flows that
are due to the Group in accordance with the contract and all
the cash flows that the entity expects to receive, discounted at
the original EIR.
ECL impairment loss allowance (or reversal) during the
year is recognised as income/expense in profit or loss.
The consolidated statement of financial position presentation
for various financial instruments is described below:
i) Financial assets measured at amortised cost: ECL is
presented as an allowance, i.e., as an integral part of
the measurement of those assets in the balance sheet.
The Company does not reduce impairment allowance from
the gross carrying amount.
ii) Debt instruments measured at FVOCI: Since financial assets
are already reflected at fair value, impairment allowance is
not further reduced from its value. Rather, ECL amount is
presented as ‘accumulated impairment amount’ in the OCI.
For assessing increase in credit risk and impairment loss, the
Group combines financial instruments on the basis of shared
credit risk characteristics with the objective of facilitating an
analysis that is designed to enable significant increases in
credit risk to be identified on a timely basis.
The Group does not have any purchased or originated
credit-impaired (POCI) financial assets, i.e., financial assets
which are credit impaired on purchase/origination.
(d) Financial liabilities – Recognition & Subsequent
measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, or as loans
and borrowings, payables, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through
profit or loss. Financial liabilities are classified as held for
trading if they are incurred for the purpose of repurchasing in
the near term. This category also includes derivative financial
instruments entered into by the Group that are not designated
as hedging instruments in hedge relationships as defined by
IFRS 9. Separated embedded derivatives are also classified
as held for trading unless they are designated as effective
hedging instruments.
Gains or losses on liabilities held for trading are recognised in
the consolidated income statement.
Financial liabilities designated upon initial recognition at fair
value through profit or loss are designated as such at the
initial date of recognition, and only if the criteria in IFRS 9 are
satisfied. For liabilities designated as FVTPL, fair value gains/
losses attributable to changes in own credit risk are recognised
in OCI. These gains/ losses are not subsequently transferred to
profit or loss. However, the Group may transfer the cumulative
gain or loss within equity. All other changes in fair value of such
liability are recognised in the consolidated income statement.
The Group has not designated any financial liability as at fair
value through profit or loss.
Financial liabilities at amortised cost (Loans and Borrowings
and Trade and Other payables)
After initial recognition, interest-bearing loans and borrowings
and trade and other payables are subsequently measured
at amortised cost using the EIR method. Gains and losses
are recognised in consolidated income statement when
the liabilities are derecognised as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is included as
finance costs in the consolidated income statement.
(e) Financial liabilities – Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference
in the respective carrying amounts is recognised in the
consolidated income statement.
179
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 (f) Embedded Derivatives
An embedded derivative is a component of a hybrid
(combined) instrument that also includes a non-derivative host
contract – with the effect that some of the cash flows of the
combined instrument vary in a way similar to a stand-alone
derivative. An embedded derivative causes some or all of the
cash flows that otherwise would be required by the contract
to be modified according to a specified interest rate, financial
instrument price, commodity price, foreign exchange rate,
index of prices or rates, credit rating or credit index, or other
variable, provided in the case of a non-financial variable
that the variable is not specific to a party to the contract.
Reassessment only occurs if there is either a change in the
terms of the contract that significantly modifies the cash flows
that would otherwise be required or a reclassification of a
financial asset out of the fair value through profit or loss.
If the hybrid contract contains a host that is a financial asset
within the scope of IFRS 9, the Group does not separate
embedded derivatives. Rather, it applies the classification
requirements contained in IFRS 9 to the entire hybrid
contract. Derivatives embedded in all other host contracts
are accounted for as separate derivatives and recorded
at fair value if their economic characteristics and risks are
not closely related to those of the host contracts and the
host contracts are not held for trading or designated at fair
value though profit or loss. These embedded derivatives are
measured at fair value with changes in fair value recognised
in Consolidated Income Statement, unless designated as
effective hedging instruments.
(g) Equity instruments
An equity instrument is any contract that evidences a
residual interest in the assets of an entity after deducting all
of its liabilities. Equity instruments issued by the Group are
recognised at the proceeds received, net of direct issue costs.
(h) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net
amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to settle
on a net basis or to realise the asset and settle the liability
simultaneously.
(i) Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
In order to hedge its exposure to foreign exchange, interest
rate, and commodity price risks, the Group enters into
forward, option, swap contracts and other derivative financial
instruments. The Group does not hold derivative financial
instruments for speculative purposes.
Such derivative financial instruments are initially recognised
at fair value on the date on which a derivative contract
is entered into and are subsequently re-measured at fair
value. Derivatives are carried as financial assets when the
fair value is positive and as financial liabilities when the fair
value is negative.
Any gains or losses arising from changes in the fair value
of derivatives are taken directly to consolidated income
statement, except for the effective portion of cash flow
hedges, which is recognised in OCI and later reclassified to
consolidated income statement when the hedge item affects
profit or loss or treated as basis adjustment if a hedged
forecast transaction subsequently results in the recognition of
a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
• Fair value hedges when hedging the exposure to changes
in the fair value of a recognised asset or liability or an
unrecognised firm commitment
• Cash flow hedges when hedging the exposure to variability
in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability or a highly
probable forecast transaction or the foreign currency risk in
an unrecognised firm commitment
• Hedges of a net investment in a foreign operation
At the inception of a hedge relationship, the Group formally
designates and documents the hedge relationship to
which the Group wishes to apply hedge accounting.
The documentation includes the Group’s risk management
objective and strategy for undertaking hedge, the hedging/
economic relationship, the hedged item or transaction, the
nature of the risk being hedged, hedge ratio and how the
entity will assess the effectiveness of changes in the hedging
instrument’s fair value in offsetting the exposure to changes in
the hedged item’s fair value or cash flows attributable to the
hedged risk. Such hedges are expected to be highly effective
in achieving offsetting changes in fair value or cash flows
and are assessed on an ongoing basis to determine that they
actually have been highly effective throughout the financial
reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are
accounted for, as described below:
(i) Fair value hedges
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recognised in consolidated
income statement immediately, together with any changes
in the fair value of the hedged asset or liability that are
attributable to the hedged risk.
When an unrecognised firm commitment is designated as a
hedged item, the subsequent cumulative change in the fair
value of the firm commitment attributable to the hedged
risk is recognised as an asset or liability with a corresponding
gain or loss recognised in consolidated income statement.
Hedge accounting is discontinued when the Company
revokes the hedge relationship, the hedging instrument or
hedged item expires or is sold, terminated, or exercised or no
longer meets the criteria for hedge accounting.
(ii) Cash flow hedges
The effective portion of the gain or loss on the hedging
instrument is recognised in OCI in the cash flow hedge
reserve, while any ineffective portion is recognised
immediately in the consolidated income statement.
Amounts recognised in OCI are transferred to consolidated
income statement when the hedged transaction affects
profit or loss, such as when the hedged financial income or
financial expense is recognised or when a forecast sale occurs.
When the hedged item is the cost of a non-financial asset
or non-financial liability, the amounts recognised in OCI are
transferred to the initial carrying amount of the non-financial
asset or liability
180 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 If the hedging instrument expires or is sold, terminated
or exercised without replacement or rollover (as part of
the hedging strategy), or if its designation as a hedge is
revoked, or when the hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss previously
recognised in OCI remains separately in equity until the
forecast transaction occurs or the foreign currency firm
commitment is met.
(iii) Hedges of a net investment
Hedges of a net investment in a foreign operation, including
a hedge of a monetary item that is accounted for as part
of the net investment, are accounted for in a way similar
to cash flow hedges. Gains or losses on the hedging
instrument relating to the effective portion of the hedge
are recognised in OCI while any gains or losses relating to
the ineffective portion are recognised in the consolidated
income statement. On disposal of the foreign operation, the
cumulative value of any such gains or losses recorded in
equity is reclassified to the consolidated income statement (as
a reclassification adjustment).
(j) Financial guarantees
Financial guarantees issued by the Group on behalf of related
parties are designated as ‘Insurance Contracts’. The Group
assesses at the end of each reporting period whether its
recognised insurance liabilities (if any) are adequate, using
current estimates of future cash flows under its insurance
contracts. If that assessment shows that the carrying
amount of its insurance liabilities is inadequate in the light
of the estimated future cash flows, the entire deficiency is
recognised in consolidated income statement.
(xii) Leases
Determining whether an arrangement contains lease
At inception of an arrangement, the Group determines
whether the arrangement is or contains a lease.
The arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset
or assets and the arrangement conveys a right to use the
asset or assets, even if that right is not explicitly specified in
an arrangement.
At inception or on reassessment of an arrangement that
contains lease, the Group separates payments and other
consideration required by the arrangement into those for the
lease and those for other elements on the basis of their relative
fair values. If the Group concludes for a finance lease that it
is impracticable to separate the payments reliably, then an
asset and a liability are recognised at an amount equal to the
fair value of the underlying asset; subsequently the liability is
reduced as payments are made and an imputed finance cost
on the liability is recognised using the Group’s incremental
borrowing rate.
Group as a lessee
A lease is classified at the inception date as a finance lease
or an operating lease. A lease that transfers substantially all
the risks and rewards incidental to ownership to the Group is
classified as a finance lease.
Finance leases are capitalised at the commencement of
the lease at the inception date fair value of the leased
property or, if lower, at the present value of the minimum
lease payments. Lease payments are apportioned between
finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are recognised in finance
costs in the consolidated income statement, unless they are
directly attributable to qualifying assets, in which case they
are capitalised in accordance with the Group’s policy on the
general borrowing costs. Contingent rentals are recognised as
expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset.
However, if there is no reasonable certainty that the Group
will obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the
asset and the lease term.
Operating lease payments are recognised as an expense in the
consolidated income statement on a straight-line basis over
the lease term.
Group as a lessor
Leases in which the Group does not transfer substantially all
the risks and rewards of ownership of an asset are classified
as operating leases. Rental income from operating lease
is recognised on a straight-line basis over the term of the
relevant lease. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount
of the leased asset and recognised over the lease term on the
same basis as rental income. Contingent rents are recognised
as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all
of the risks and rewards of ownership transfer from the Group
to the lessee. Amounts due from lessees under finance leases
are recorded as receivables at the Group’s net investment in
the leases. Finance lease income is allocated to accounting
periods so as to reflect a constant periodic rate of return on
the net investment outstanding in respect of the lease.
(xiii) 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 in Oil and Gas business 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 a
weighted average basis (except in copper business where
FIFO is being followed); 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 for
completion and disposal.
(xiv) Government grants
Grants and subsidies from the government are recognised
when there is reasonable assurance that (i) the Group will
comply with the conditions attached to them, and (ii) the
grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognised
as income on a systematic basis in the consolidated income
181
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 statement over the periods necessary to match them with the
related costs, which they are intended to compensate.
Government grants relating to tangible fixed assets are
deducted in calculating the carrying amount of the assets and
recognised in the consolidated income statement over the
expected useful lives of the assets concerned as a reduced
depreciation expense.
When loans or similar assistance are provided by governments
or related institutions, with an interest rate below the current
applicable market rate, the effect of this favourable interest
is regarded as a government grant. The loan or assistance
is initially recognised and measured at fair value and the
government grant is measured as the difference between the
initial carrying value of the loan and the proceeds received.
The loan is subsequently measured as per the accounting
policy applicable to financial liabilities.
(xv) Taxation
Tax expense represents the sum of current tax
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 reporting date
and includes any adjustment to tax payable in respect of
previous years.
Subject to the exceptions below, deferred tax is provided,
using the balance sheet method, on all temporary differences
at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes and on carry forward of unused tax credits and
unused tax losses:
• 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 initial recognition
as well as 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, and at the time of the transaction, affects
neither the accounting profit nor taxable profit (tax loss) ;
and
• Deferred tax assets (including MAT credit entitlement) 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 reporting date. Tax relating to items recognised
outside consolidated income statement is recognised
outside consolidated income statement (either in other
comprehensive income or equity).
The carrying amount of deferred tax assets (including MAT
credit entitlement) is reviewed at each reporting 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.
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.
Subsequently deferred tax is charged or credited in the
income statement/other comprehensive income as the
underlying temporary difference is reversed.
(xvi) 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 by actuarial valuation each
year separately for each plan using the projected unit credit
method by third party qualified actuaries.
Remeasurement including, effects of asset ceiling and
return on plan assets (excluding amounts included in
interest on the net defined benefit liability) and actuarial
gains and losses arising in the year are recognised in full in
other comprehensive income and are not recycled to the
consolidated income statement.
Past service costs are recognised in the consolidated income
statement on the earlier of:
• the date of the plan amendment or curtailment, and
• the date that the Group recognises related restructuring
costs
Net interest is calculated by applying a discount rate to the
net defined benefit liability or asset at the beginning of the
period. Defined benefit costs are split into current service
cost, past service cost, net interest expense or income
and remeasurement, and gains and losses on curtailments
and settlements.
Current service cost and past service costs are recognised
within cost of sales and administrative expenses and
distribution expenses. Net interest expense or income is
recognised within finance costs.
For defined contribution schemes, the amount charged to the
consolidated income statement in respect of pension costs
and other post-retirement benefits is the contributions payable
in the year, recognised as and when the employee renders
related service.
(xvii) 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 of share awards at the date at which
they are granted. The fair value of share awards is determined
with the assistance of an external valuer and the fair value at
182
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 the grant date is expensed on a proportionate 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.
Contingent assets are not recognised but disclosed in
the financial statements when an inflow of economic
benefit is probable.
The Group has significant capital commitments in relation
to various capital projects which are not recognised in the
consolidated statement of financial position.
The resultant increase in equity is recorded in share-based
payment reserve.
In case of cash-settled transactions, a liability is recognised
for the fair value of cash-settled transactions. The fair value
is measured initially and at each reporting date up to and
including the settlement date, with changes in fair value
recognised in employee benefits expense. The fair value
is expensed over the period until the vesting date with
recognition of a corresponding liability. The fair value is
determined with the assistance of an external valuer.
(xviii) Provisions, contingent liabilities and contingent
assets
The assessments undertaken in recognising provisions and
contingencies have been made in accordance with the
applicable IFRS.
Provisions represent liabilities for which the amount or timing
is uncertain. 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 consolidated income statement as a finance
cost. Provisions are reviewed at each reporting date and are
adjusted to reflect the current best estimate.
A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain
future events beyond the control of Group or a present
obligation that is not recognised because it is not probable
that an outflow of resources will be required to settle the
obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognised
because it cannot be measured reliably. The Group does not
recognise a contingent liability but discloses its existence in
the consolidated financial statements.
In the normal course of business, contingent liabilities may
arise from litigation and other claims against the Group.
There are certain obligations which management has
concluded, based on all available facts and circumstances,
are not probable of payment or are very difficult to quantify
reliably, and such obligations are treated as Contingent
liabilities and disclosed in the notes but are not reflected
as liabilities in the financial statements. Although there can
be no assurance regarding the final outcome of the legal
proceedings in which the Group is involved, it is not expected
that such contingencies will have a material effect on its
financial position or profitability.
(xix) 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. Such costs, discounted to net present value,
are provided for and a corresponding amount is capitalised
at the start of each project, as soon as the obligation to incur
such costs arises. These costs are charged to the consolidated
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,
changes to lives of operations, 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 consolidated 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 value and charged to the consolidated
income statement as extraction progresses. Where the costs
of site restoration are not anticipated to be material, they are
expensed as incurred.
(xx) Accounting for Foreign currency transactions and
translations
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 normally the local
currency of the country in which it operates with the exception
of KCM and Oil and gas business operations which have
a US Dollar functional currency as that is the currency of
the primary economic environment in which they operate.
The financial statements are presented in US Dollars.
In the financial statements of individual group companies,
transactions in currencies other than the respective
functional currencies are translated into their functional
currencies at the exchange rates ruling at the date of the
transaction. Monetary assets and liabilities denominated in
other currencies are translated into functional currencies
at exchange rates prevailing on the reporting date.
Non-monetary assets and liabilities denominated in other
currencies and measured at historical cost or fair value are
translated at the exchange rates prevailing on the dates on
which such values were determined.
All exchange differences are included in the consolidated
income statement except those where the monetary item is
designated as an effective hedging instrument of the currency
risk of designated forecasted sales or purchases, which are
recognised in the other comprehensive income.
183
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Exchange differences which are regarded as an adjustment to
interest costs on foreign currency borrowings, are capitalised
as part of borrowing costs in qualifying assets.
reporting date. Terms of a liability that could, at the option
of the counterparty, result in its settlement by the issue of
equity instruments do not affect its classification.
For the purposes of consolidation of financial statements,
items in the consolidated income statement of those
businesses for which the US dollar is not the functional
currency are translated into US dollars at the average rates of
exchange during the year/ exchange rates as on the date of
transaction. The related consolidated statement of financial
position is translated into US dollars at the rates as at the
reporting date. Exchange differences arising on translation are
recognised in the consolidated statement of comprehensive
income. On disposal of such entities the deferred cumulative
exchange differences recognised in equity relating to that
particular foreign operation are recognised in the consolidated
income statement.
(xxi) Buyers’ credit / suppliers’ credit
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 Group at a later date providing
working capital timing benefits. These are normally settled
up to twelve 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 twelve months, the
economic substance of the transaction is determined
to be operating in nature and these are recognised as
Operational buyers’ credit/suppliers’ credit (under Trade and
other payables). Where these arrangements are for project
materials with a maturity up to thirty-six months, the economic
substance of the transaction is determined to be financing
in nature, and these are presented within borrowings in the
statement of financial position. Interest expense on these are
recognised in the finance cost.
(xxii) Current and non-current classification
The Group presents assets and liabilities in the consolidated
statement of financial position based on current / non-current
classification. An asset is classified as current when it satisfies
any of the following criteria:
• it is expected to be realised in, or is intended for sale or
consumption in, the Group’s normal operating cycle.
• it is held primarily for the purpose of being traded;
• it is expected to be realised within 12 months after the
reporting date; or
• it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months
after the reporting date.
All other assets are classified as non-current.
A liability is classified as current when it satisfies any of the
following criteria:
• it is expected to be settled in the Group’s normal operating
cycle;
• it is held primarily for the purpose of being traded;
• it is due to be settled within 12 months after the reporting
date; or
• the Group does not have an unconditional right to defer
settlement of the liability for at least 12 months after the
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as
non-current only.
(xxiii) Borrowing costs
Borrowing cost includes interest expense as per effective
interest rate (EIR) and exchange differences arising from
foreign currency borrowings to the extent they are regarded as
an adjustment to the interest cost.
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 i.e. when they are
capable of commercial production. Borrowing costs relating to
the construction phase of a service concession arrangement
is capitalised as part of the cost of the intangible asset.
Where funds are borrowed specifically to finance a qualifying
capital 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
deducted from the total capitalised borrowing cost. If any
specific borrowing remains outstanding after the related
asset is ready for its intended use or sale, that borrowing then
becomes part of general borrowing. Where the funds used
to finance a project form part of general borrowings, the
amount capitalised is calculated using a weighted average of
rates applicable to relevant general borrowings of the Group
during the year.
All other borrowing costs are recognised in the consolidated
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.
EIR is the rate that exactly discounts the estimated future
cash payments or receipts over the expected life of the
financial liability or a shorter period, where appropriate, to the
amortised cost of a financial liability. When calculating the
effective interest rate, the Group estimates the expected cash
flows by considering all the contractual terms of the financial
instrument (for example, prepayment, extension, call and
similar options).
(xxiv) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand
and short-term money market deposits which have a maturity
of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of
changes in value.
For the purpose of the consolidated statement of cash flows, cash
and cash equivalents consist of cash and short-term deposits, as
defined above and additionally includes unpaid dividend account.
184
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 2(b) APPLICATION OF NEW AND REVISED STANDARDS
The Group has adopted with effect from 01 April 2018, the
following new standards and amendments.
been delivered to the shipping agent. Revenues from sale of
by-products are included in revenue.
IFRS 15 – Revenue from contracts with customers
The Group has adopted IFRS 15 Revenue from contracts with
Customers with effect from April 1, 2018 which outlines a single
comprehensive model for entities to use in accounting for revenue
arising from contracts with customers. The standard replaces most
of the current revenue recognition guidance. The core principle of
the new standard is for companies to recognise revenue when the
control of the goods and services is transferred to the customer as
against the transfer of risk and rewards. As per the Group’s current
revenue recognition practices, transfer of control happens at the
same point as transfer of risk and rewards thus not effecting the
revenue recognition. The amount of revenue recognised reflects
the consideration to which the Group expects to be entitled in
exchange for those goods or services.
Under this standard, services provided post transfer of control
of goods are treated as separate performance obligation and
requires proportionate revenue to be deferred along with
associated costs and to be recognised over the period of service.
The Group provides shipping and insurances services after the
date of transfer of control of goods and therefore has identified
it as a separate performance obligation. As per the result of
evaluation of contracts of the relevant revenue streams, it is
concluded that the impact of this change is immaterial to the
Group and hence no accounting changes have been done.
The Group has products which are provisionally priced at the
date revenue is recognised. Revenue in respect of such contracts
are recognised when control passes to the customer and is
measured at the amount the entity expects to be entitled – being
the estimate of the price expected to be received at the end
of the measurement period. Post transfer of control of goods,
subsequent movements in provisional pricing are accounted for in
accordance with IFRS 9 “Financial Instruments” rather than IFRS 15
and therefore the IFRS 15 rules on variable consideration do not
apply. These ‘provisional pricing’ adjustments i.e. the consideration
received post transfer of control has been included in total
revenue on the face of the Consolidated Income statement.
The accounting for revenue under IFRS 15 does not, therefore,
represent a substantive change from the Group’s previous practice
for recognising revenue from sales to customers.
Further, export incentives received from Government that
were included within revenue are now included within other
operating income.
The Group has adopted the modified transitional approach
as permitted by the standard under which the comparative
financial information is not restated. The accounting changes
required by the standard are not having material effect on the
recognition or measurement of revenues and no transitional
adjustment is recognised in retained earnings at 01 April 2018.
Additional disclosures as required by IFRS 15 have been included
in these financial statements.
Previous period Accounting Policy: Revenue Recognition
Revenues are measured at the fair value of the consideration
received or receivable, net of discounts, volume rebates,
outgoing sales taxes, goods and service tax, excise duty and
other indirect taxes. Revenues from sales are recognised when
all significant risks and rewards of ownership of the commodity
sold are transferred to the customer and the commodity has
Certain of the Group’s sales contracts provide for provisional
pricing based on the price on the London Metal Exchange (“LME”)
and crude index, as specified in the contract, when shipped.
Final settlement of the price is based on the applicable price for a
specified future period. The Group’s provisionally priced sales are
marked to market using the relevant forward prices for the future
period specified in the contract and is adjusted in revenue.
Revenue from oil, gas and condensate sales represent the Group’s
share of oil, gas and condensate production, recognised on
a direct entitlement basis, when significant risks and rewards
of ownership are transferred to the buyers. Direct entitlement
basis represents entitlement to variable physical volumes of
hydrocarbons, representing recovery of the costs incurred
and a stipulated share of the production remaining after such
cost recovery. The stipulated share of production is arrived
after reducing government’s share of profit petroleum which is
accounted for when the obligation, in respect of the same arises.
Revenue from sale of power is recognised when delivered and
measured based on rates as per bilateral contractual agreements
with buyers and at rate arrived at based on the principles laid
down under the relevant Tariff Regulations as notified by the
regulatory bodies, as applicable.
Where the Group acts as a port operator, revenues and costs
relating to each construction contract of service concession
arrangements are recognised over the period of each
arrangement only to the extent of costs incurred that are probable
of recovery. Revenues and costs relating to operating phase of the
port contract are measured at the fair value of the consideration
received or receivable for the services provided.
Revenue from rendering of services is recognised on the basis of
work performed.
IFRS 9: Financial Instruments
IFRS 9 has reduced the complexity of the current rules on financial
instruments as mandated in IAS 39. It has fewer classification and
measurement categories as compared to IAS 39. It eliminates the
rule-based requirement of segregating embedded derivatives from
financial assets and tainting rules pertaining to held to maturity
investments. For financial assets which are debt instruments, IFRS
9 establishes a principle-based approach for classification based
on cash flow characteristics of the asset and the business model
in which an asset is held. 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 on such equity investment would ever be
reclassified to profit or loss. It requires the entity, which chooses
to designate a liability as at fair value through profit or loss, 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.
185
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 For transition, the Group has elected to apply the limited
exemptions in IFRS 9 relating to the classification, measurement
and impairment requirements for financial assets and accordingly
has not restated comparative periods.
The Group has adopted IFRS 9 from 01 April 2018. The areas
impacted on adopting IFRS 9 on the Group are detailed below.
Classification and measurement
The measurement and accounting treatment of the Group’s
financial assets is materially unchanged with the exception of
equity securities previously categorised as available for sale.
These will be held at fair value through other comprehensive
income, meaning the recycling of gains and losses on disposal and
impairment losses is no longer permitted for this category.
Impairment
Based on the Group’s assessment, under expected credit loss
model, the impairment of financial assets held at amortised cost
does not have a material impact on the Group’s results, given the
low exposure to counterparty default risk as a result of the credit
risk management processes that are in place.
Hedge accounting
The Group has adopted the IFRS 9 hedge accounting
requirements. The adoption of the new standard has no
effect on the amounts recognised in relation to the existing
hedging arrangements.
Previous period Accounting Policy: Financial Instruments
Financial asset investments
Financial asset investments are classified as available for sale
under IAS 39 and are initially recorded at fair value plus transaction
costs that are directly attributable to the acquisition of financial
asset investments and then remeasured at subsequent reporting
dates to fair value. Unrealised gains and losses on financial asset
investments are recognised through other comprehensive income.
On disposal or impairment of the investments, the gains and
losses in equity are recycled to the income statement.
Investments in equity instruments are recorded in non-current
assets unless they are expected to be sold within one year.
The Group assesses at each reporting date whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. An impairment exists if one or more events that
has occurred since the initial recognition of the asset (an incurred
‘loss event’) has an impact on the estimated future cash flows
of the financial asset or the group of financial assets that can be
reliably estimated.
Short-term investments
Short-term 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.
These include Short-term marketable securities and other
Bank Deposits.
Short-term marketable securities are categorised as held for
trading and are initially recognised at fair value with any gains or
losses arising on remeasurement recognised in the consolidated
income statement.
Other bank deposits are subsequently measured at amortised cost
using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position
comprise cash at bank and in hand, short-term deposits with
banks and short-term highly short-term 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.
Trade receivables
Trade receivables are stated at their transaction 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.
Trade receivables are subsequently measured at amortised
cost using the effective interest method, less any impairment.
Interest income is recognised on non-current receivables on
specific items by applying the effective interest rate method.
Trade payables
Trade and other payables are recognised at their transaction cost,
which is its fair value, and subsequently measured at amortised
cost except for the put option liability that is measured at fair value.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Borrowings
Interest bearing loans and overdrafts are recorded initially at
the fair value. 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.
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 (net of transaction cost)
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
186
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 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.
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.
Hedge accounting
At the inception of the hedge relationship, the entity documents
the relationship between the hedging instrument and the hedged
item, along with its risk management objectives and its strategy
for undertaking various hedge transactions. Furthermore, at
the inception of the hedge and on an ongoing basis, the Group
documents whether the hedging instrument is highly effective in
offsetting changes in fair values or cash flows of the hedged item
attributable to the hedged risk.
Fair Value Hedges
Changes in the fair value of derivatives that are designated and
qualify as fair value hedges are recognised in income statement
immediately, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
Hedge accounting is discontinued when the Group revokes
the hedge relationship, the hedging instrument or hedged item
expires or is sold, terminated, or exercised or no longer meets the
criteria for hedge accounting.
Cash flow Hedges
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges are recorded in
the consolidated statements of comprehensive income. The gain
or loss relating to the ineffective portion is recognised immediately
in the income statement. Amounts recognised in the consolidated
statement of comprehensive income are transferred to the income
statement when the hedged transaction affects profit or loss,
such as when the hedged financial income or financial expense
is recognised or when a forecast transaction occurs. When the
hedged item is a non-financial asset, the amount recognised in the
consolidated statement of comprehensive income is transferred
to the carrying amount of the asset when it is recognised.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies for
hedge accounting. If a hedged transaction is no longer expected
to occur, the net cumulative gain or loss recognised in the
consolidated statement of comprehensive income is transferred to
the income statement.
Hedge of net investment in foreign operation-
For derivative instruments that are designated and qualify as
a hedge of a net investment in a foreign operation, the gain or
loss is reported in the consolidated statement of comprehensive
income as part of the exchange difference on translation of
foreign operations to the extent it is effective. Any ineffective
portions of net investment hedges are recognised in the income
statement immediately. Under a hedge of a net investment, the
cumulative gain or loss remains in the consolidated statement
of comprehensive income when the hedging instrument
expires or is sold, terminated or exercised, or when the hedge
no longer qualifies for hedge accounting or the Group revokes
designation of the hedge relationship. The cumulative gain
or loss is recognised in the income statement as part of the
gain / loss on disposal when the net investment in the foreign
operation is disposed.
Derivative financial instruments that do not qualify for hedge
accounting are marked to market at the financial position
date and gains or losses are recognised in the income
statement immediately.
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 host contracts
and the host contracts are not carried at fair value with unrealised
gains or losses recognised in the income statement.
Impairment:
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
statement of comprehensive income.
In respect of trade and other receivables, the Group would
provide for impairment losses unless the Company is satisfied
that no recovery of the amount owing is possible; at that point the
187
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 amounts are considered irrecoverable and are written off against
the financial asset directly.
Other recently issued accounting pronouncements and not
effective for the year ended March 31, 2019
Amendment to IAS 23: Borrowing Cost
The amendment clarifies that an entity considers any borrowings
made specifically for the purpose of obtaining a qualifying asset
as part of the general borrowings, when substantially all of the
activities necessary to prepare that asset for its intended use or
sale are complete. The amendment is applicable to borrowing
costs incurred on or after the beginning of the annual reporting
period in which the entity first applies those amendments.
The amendment is effective from 01 January 2019, with earlier
application permitted. The Group has applied the amendment
prospectively from the current reporting year i.e. for the borrowing
costs incurred on or after 01 April 2018.
Based on the Amendment, the Group has now capitalised
certain borrowing costs on general borrowings. This has resulted
in capitalisation of interest expense of US$78 million for the
year ended March 31, 2019 and a corresponding increase in
depreciation of US$1 million. The consequent incremental impact
on profit for the year net of tax was US$53 million.
The change did not have any significant impact on the
Group’s consolidated balance sheet and the consolidated
statement of cash flows.
Other Amendments
The adoption of IFRIC 22 “Foreign Currency Transactions and
Advance Consideration” and other minor changes to IFRS’s
applicable for the year ended 31 March 2019 did not have a
significant impact on the Group’s financial statements.
Standards issued but not yet effective
The following standards/amendments to standards have been
issued but are not yet effective up to the date of issuance of the
Group’s Financial Statements. Except specifically disclosed below,
the Group is evaluating the requirements of these standards,
improvements and amendments and has not yet determined the
impact on the financial statements.
IFRS 16: Lease
IFRS 16, Leases, replaces the existing standard on accounting
for leases, IAS 17, with effect from 1 April 2019. This standard
introduces a single lessee accounting model and requires a lessee
to recognise a ‘right of use asset’ (ROU) and a corresponding
‘lease liability’ for all leases. Lease costs will be recognised in the
income statement over the lease term in the form of depreciation
on the ROU asset and finance charges representing the unwinding
of the discount on the lease liability. In contrast, the accounting
requirements for lessors remain largely unchanged.
The Groups acts as a lessee in lease arrangements mainly
involving office premises and other properties. The Group has
elected to apply the modified retrospective approach on transition,
and accordingly the comparative figures will not be restated.
For contracts in place at this date, the Group will continue to apply
its existing definition of leases under current accounting standards
(“grandfathering”), instead of reassessing whether existing
contracts are or contain a lease at the date of application of the
new standard. Further, as permitted by IFRS 16, the Group will not
bring leases of low value assets or short-term leases with 12 or
fewer months remaining on to balance sheet.
Transition to IFRS 16 does not have a material effect on the
Group’s Financial Statements.
Standards not yet effective for the financial statements
for the year ended March 31, 2019
IFRIC 23 Uncertainty over Income Tax
Treatments
Amendments to IFRS 9 Prepayment features
with Negative Compensation
Amendments to IAS 28 Long term interests in
Associates and Joint Ventures
Annual improvements to IFRS standards 2015-
2017 cycle
Amendments to IAS 19: Plan Amendment,
Curtailment or Settlement
Effective for annual
periods beginning on
or after
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
Amendments to References to the Conceptual
Framework in IFRS Standards
1 January 2020
Amendment to IFRS 3 Business Combinations
1 January 2020
Amendments to IAS 1 and IAS 8: Definition of
Material
1 January 2020
IFRS 17 Insurance Contracts
1 January 2021
The Group is currently evaluating the impact of these
pronouncements.
2(c) SIGNIFICANT ACCOUNTING ESTIMATES AND
JUDGMENTS
The preparation of consolidated financial statements
in conformity with IFRS requires management to make
judgments, 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.
These judgments and estimates are based on management’s
best knowledge of the relevant facts and circumstances,
having regard to previous experience, but actual results
may differ materially from the amounts included in the
financial statements.
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 information about significant areas of estimation
uncertainty and critical judgements in applying accounting
policies that have the most significant effect on the amounts
recognised in the financial statements are as given below:
I. Significant Estimates:
(i) Oil & Gas reserves
Significant technical and commercial judgements are
required to determine the Group’s estimated oil and
natural 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 annually.
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.
188
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 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 oil and gas prices
could impact the depletion rates, carrying value of assets (refer
note 16) and environmental and restoration provisions.
(ii) Carrying value of exploration and evaluation oil and gas
assets
The recoverability of a project is assessed under IFRS 6.
Exploration assets are assessed by comparing the carrying
value to higher of fair value less cost of disposal or value in
use, if impairment indicator exists. 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
accounting policy above. The amounts for exploration and
evaluation assets represent active exploration projects.
These amounts will be written off to the consolidated 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.
During the financial year ended 31 March 2018, the Group
had recognised impairment reversal (net) against exploration
and evaluation oil and gas assets. The details of impairment
reversal and the assumptions and sensitivities used are
disclosed in note 6. Carrying values of exploration and
evaluation assets are disclosed in note 16.
(iii) Carrying value of developing/producing oil and gas
assets
Management performs impairment tests on the Group’s
developing/producing oil and gas assets where indicators
of impairment or impairment reversal of previous recorded
impairment are identified in accordance with IAS 36.
During the financial year ended 31 March 2018, the Group
had recognised impairment reversal of its developing/
producing oil and gas assets in Rajasthan. During the current
year, an impairment reversal has been recorded in the oil
and gas assets in Krishna Godavari (KG) basin. The details
of impairment charge/reversal and the assumptions and
sensitivities used are disclosed in note 6.
In the current year, the management has reviewed the key
assumptions i.e. future production, oil prices, discount to
price, Production sharing contract (PSC) life, discount rates,
etc. for all of its oil and gas assets. Based on analysis of
events that have occurred since then, there did not exist
any indication that the assets may be impaired or previously
recorded impairment charge may reverse except for the
assets in KG basin. Hence, detailed impairment analysis has
not been conducted in the current financial year, except for
assets in KG basin.
Carrying values of oil & gas assets are disclosed in note 16.
(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 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/reversal and the assumptions
used and carrying values are disclosed in note 6 and note
16 respectively.
(v) Assessment of Impairment of Goa iron ore mines:
Pursuant to an order passed by the Hon’ble Supreme Court of
India on 07 February 2018, the second renewal of the mining
leases granted by the State of Goa in 2014-15 to all miners
including Vedanta were cancelled. Consequentially all mining
operations stopped with effect from 16 March 2018 until fresh
mining leases (not fresh renewals or other renewals) and fresh
environmental clearances are granted in accordance with
the provisions of The Mines and Minerals (Development and
Regulation) (MMDR) Act. Significant uncertainty exists over
the resumption of mining at Goa under the current leases.
The Group had assessed the recoverable value of all its assets
and liabilities associated with existing mining leases which led
to a non-cash impairment charge in March 2018. There are
no significant changes subsequent to the financial year
ended 31 March 2018.
Details of this impairment charge and method of estimating
recoverable value is disclosed in note 6.
(vi) 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 or oil fields. The costs are
estimated on an annual basis on the basis of mine 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. The provision for decommissioning oil and gas assets is
based on the current estimate of the costs for removing and
decommissioning producing facilities, the forecast timing and
currency of settlement of decommissioning liabilities and the
appropriate discount rate.
189
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 A corresponding provision is created on the liability side.
The capitalised asset is charged to the consolidated
income statement through the depreciation over the life
of operation 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. Details of such provision
are set out in note 26.
(vii) 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 26.
(viii) 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 34 (I). 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.
(ix) Recoverability of deferred tax and other income tax
assets
The Group has carry forward tax losses, unabsorbed
depreciation and MAT credit that are available for offset
against future taxable profit. Deferred tax assets are
recognised only to the extent that it is probable that taxable
profit will be available against which the unused tax losses
or tax credits can be utilised. This involves an assessment of
when those assets are likely to reverse, and a judgement as to
whether or not there will be sufficient taxable profits available
to offset the assets. This requires assumptions regarding
future profitability, which is inherently uncertain. To the extent
assumptions regarding future profitability change, there can
be an increase or decrease in the amounts recognised in
respect of deferred tax assets and consequential impact in the
consolidated income statement.
Additionally, the Group has tax receivables on account of
refund arising on account of past amalgamation and relating
to various tax disputes. The recoverability of these receivables
involve application of judgement as to the ultimate outcome
of the tax assessment and litigations. This pertains to the
application of the legislation, which in certain cases is based
upon management’s interpretation of country specific tax
law, in particular India, and the likelihood of settlement.
Management uses in-house and external legal professionals to
make informed decision (refer note 11(d)).
The details of MAT assets (recognised and unrecognised) are
set out in note 11(c).
(x) Copper operations India
In an appeal filed by the Group against the closure order of
the Tuticorin Copper smelter by Tamil Nadu Pollution Control
Board (“TNPCB”), the appellate authority National Green
Tribunal (“NGT”) passed an interim order on 31 May 2013
allowing the copper smelter to recommence operations
and appointed an Expert Committee to submit a report
on the plant operations. Post the interim order, the plant
recommenced operations on 23 June 2013. Based on Expert
Committee’s report on the operations of the plant stating
that the plant’s emission were within prescribed standards
and based on this report, NGT ruled on 08 August 2013
that the Copper smelter could continue its operations
and recommendations made by the Expert Committee
be implemented in a time bound manner. The Group has
implemented all of the recommendations. TNPCB has filed
an appeal against the order of the NGT before the Supreme
Court of India.
In the meanwhile, the application for renewal of Consent
to Operate (CTO) for existing copper smelter, required as
per procedure established by law was rejected by TNPCB in
April 2018. Vedanta Limited has filed an appeal before the
TNPCB Appellate Authority challenging the Rejection Order.
During the pendency of the appeal, there were protests by a
section of local community raising environmental concerns
and TNPCB vide its order dated 23 May 2018 ordered closure
of existing copper smelter plant with immediate effect.
Further, the Government of Tamil Nadu, issued orders dated 28
May 2018 with a direction to seal the existing copper smelter
plant permanently. The company believes these actions were
not taken in accordance with the procedure prescribed under
applicable laws.
Subsequently, the Directorate of Industrial Safety and
Health passed orders dated 30 May 2018, directing the
immediate suspension and revocation of the Factory
License and the Registration Certificate for the existing
smelter plant. Separately, the company has filed a fresh
application for renewal of the Environmental Clearance for
the proposed Copper Smelter Plant 2 (Expansion Project)
dated 12 March 2018 before the Expert Appraisal Committee
of the MoEF wherein a sub-committee was directed to
visit the Expansion Project site prior to prescribing the
Terms of Reference.
In the meantime, the Madurai Bench of the High Court of
Madras in a Public Interest Litigation held vide its order
dated 23 May 2018 that the application for renewal of the
Environmental Clearance for the Expansion Project shall be
processed after a mandatory public hearing and in the interim,
ordered the company to cease construction and all other
activities on site for the proposed Expansion Project with
immediate effect. The Ministry of Environment and Forests
(MoEF) has delisted the expansion project since the matter
is sub judice. Separately, SIPCOT vide its letter dated 29
May 2018, cancelled 342.22 acres of the land allotted for the
proposed Expansion Project. Further the TNPCB issued orders
on 07 June 2018 directing the withdrawal of the Consent to
Establish (CTE) which was valid till 31 March 2023.
190 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 The company has approached Madras High Court by way of
writ petition challenging the cancellation of lease deeds by
SIPCOT pursuant to which an interim stay has been granted.
The company has also filed Appeals before the TNPCB
Appellate Authority challenging withdrawal of CTE by the
TNPCB, the matter is pending for adjudication.
The company has appealed this before the National Green
Tribunal (NGT). NGT vide its order on 15 December 2018 has
set aside the impugned orders and directed the TNPCB to
pass fresh orders for renewal of consent and authorisation
to handle hazardous substances, subject to appropriate
conditions for protection of environment in accordance with
law. The State of Tamil Nadu and TNPCB approached Supreme
Court in Civil Appeals on 02 January 2019 challenging the
judgment of NGT dated 15 December 2018 and the previously
passed judgment of NGT dated 08 August 2013. The Supreme
Court vide its judgment dated 18 February 2019 set aside
the judgments of NGT dated 15 December 2018 and 08
August 2013 on the basis of maintainability alone.
The company has also filed a writ petition before Madras
High Court challenging the various orders passed against
the company in 2018 and 2013. The case was heard on 01
March 2019 wherein the company pressed for interim relief
for care and maintenance of the plant. The Madras High Court
has directed the State of Tamil Nadu and TNPCB to file their
counter to our petition for interim relief.
The company is taking appropriate legal measures to
address the matters.
Even though there can be no assurance regarding the final
outcome of the process and the timing of such process in
relation to the approval for the expansion project, as per the
company’s assessment, it is in compliance with the applicable
regulations and expects to get the necessary approvals in
relation to the existing operations and the expansion project
and is not expecting any material impairment loss on this
account. The carrying value of the assets under operation and
under expansion as at 31 March 2019 is US$290 million and
US$147 million respectively.
The company has carried out an impairment analysis
considering the key variables and concluded that there
exists no impairment. The company has done an additional
sensitivity with a delay in commencement of operations both
at the existing and expansion plants by three years and noted
that the recoverable amount of the assets would still be in
excess of their carrying values.
(xi) Assessment of impairment at Konkola Copper
Mines (KCM)
The KCM operations in Zambia have been experiencing lower
equipment availability, throughput constraints and other
operational challenges for quite some time which led to the
production ramp-up, specifically at the Konkola mine, during
the year being lower than expected.
Additionally, changes in fiscal regime during the year including
imposition of customs duty on imported concentrate has
further impacted the Company’s ability to procure copper
concentrate from outside Zambia, which is pertinent for
optimised concentrate blending at smelter and generate
enough acid from its dedicated 1,850 tpd acid facility at
smelter for its integrated operation at Tail Leaching Plant (TLP).
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 no impairment was required as the recoverable
amount (estimated based on fair value less costs of disposal)
exceeded the carrying amount as at 31 March 2019. Refer to
2(c)(I)(iv) for key estimates and assumptions. Additionally,
the model assumes as a key assumption, the production
ramp-up over a period of next four years through successful
implementation of development plans at the Konkola mine and
the associated capex and funding assumptions.
The Group has also carried out a sensitivity analysis on key
variables like movement in copper prices, discount rate and
delayed production ramp-up. Based on the sensitivity analysis
carried out for each individual assumption while keeping other
assumptions as constant, the recoverable amount is still expected
to exceed the carrying value. Mining companies have made
representations to the Government for roll back of the additional
taxes. In the absence of this, which is a critical requirement from
a future investment perspective in key identified areas, coupled
with non-achievement of planned production ramp-up, there
could be significant risk of impairment.
The carrying value of assets as at 31 March 2019 is US$1,513
million (31 March 2018: US$1,576 million).
(xii) PSC Extension
Rajasthan Block
On 26 October 2018, the Government of India (GoI), acting
through the Directorate General of Hydrocarbons (DGH) has
granted its approval for a ten-year extension of the Production
Sharing Contract (PSC) for the Rajasthan Block (RJ), with effect
from 15 May 2020 subject to certain conditions. The GoI has
granted the extension under the Pre-NELP Extension Policy, the
applicability whereof to PSC for RJ is sub-judice and pending
before the Hon’ble Delhi High Court. To address two of the
conditions stated by DGH, Vedanta Limited has taken the
following steps:
• Submission of Audited Accounts and End of year statement:
Vedanta Limited and one of the joint venture partners have
divergent views on the cost oil entitlement and therefore
the End of Year statement for the year ended March 31,
2018 and Investment Multiple as at 31 March 18 could
not be finalised. To resolve this, the Company has initiated
arbitration proceedings against the joint venture partner.
Consequentially, profit petroleum pertaining to the said
Block for the year ended March 31, 2019 and applicable
Investment Multiple calculated based on management’s
cost oil computation (resulting into Government’s share of
profit petroleum @ 40% for DA-1 & DA-2 and @20% for DA-3
for FY2019), remains provisional. The computation is after
considering relevant independent legal advice.
• Profit Petroleum: DGH has raised a demand for the period
upto 31 March 2017 for Government’s additional share of
Profit Oil based on its computation of disallowance of cost
incurred over the initially approved Field Development Plan
(FDP) of pipeline project and retrospective allocation of
certain common costs between Development Areas (DAs) of
Rajasthan Block. The company believes that it has sufficient
as well as reasonable basis (pursuant to PSC provisions &
approvals) for having claimed such costs and for allocating
common costs between different DAs and has responded to
the government accordingly. Group’s view is also supported
by an independent legal opinion.
191
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Pursuant to the aforesaid approval of 26 October 2018,
the Group has recomputed its reserves till 2030 and
has reclassified exploration costs of US$1,994 million to
property plant and equipment. This has led to a reduction in
depletion charge of US$126 million for the period from 26
October 2018 till 31 March 2019.
Ravva Block
The Government of India has granted its approval for a
ten-year extension of PSC for Ravva Block with effect from 28
October 2019, subject to certain conditions. The extension
has been granted with a 10% increase in GOI share of profit oil.
Management has reviewed the conditions and is confident of
fulfilling or disposing of such conditions.
The Group does not expect any material adjustment to the
financial statements on account of the aforesaid matters.
II. Significant Judgements:
(i) Assessment of IFRIC 4- Determining whether an
arrangement contains a lease
The Group has ascertained that the Power Purchase
Agreement (PPA) entered into between one of the Subsidiary
and a State Grid qualifies to be an operating lease under IAS
17 “Leases”. Accordingly, the consideration receivable under
the PPA relating to recovery of capacity charges towards
capital cost have been recognised as operating lease rentals
and in respect of variable cost that includes fuel costs,
operations and maintenance etc. is considered as revenue
from sale of products/services.
Significant judgement is required in segregating the capacity
charges due from State Grid, between fixed and contingent
payments. The Group has determined that since the capacity
charges under the PPA are based on the number of units
of electricity made available by its Subsidiary which would
be subject to variation on account of various factors like
availability of coal and water for the plant, there are no fixed
minimum payments under the PPA, which requires it to be
accounted for on a straight-line basis. The contingent rents
recognised are disclosed in note 33.
(ii) Contingencies
In the normal course of business, contingent liabilities may
arise from litigation, taxation and other claims against the
Group. A tax provision is recognised when the Group has a
present obligation as a result of past events, and it is probable
that the Group will be required to settle that obligation.
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.
When considering the classification of a legal or tax cases
as probable, possible or remote there is judgement involved.
This pertains to the application of the legislation, which in
certain cases is based upon management’s interpretation of
country specific applicable law, in particular India, and the
likelihood of settlement. Management uses in-house and
external legal professionals to make informed decision.
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 33.
(iii) Revenue recognition and receivable recovery in relation
to the power division
In certain cases, the Group’s power customers are disputing
various contractual provisions of Power Purchase Agreements
(PPA). Significant judgement is required in both assessing the
tariff to be charged under the PPA in accordance with IFRS 15
and to assess the recoverability of withheld revenue currently
accounted for as receivables.
In assessing this critical judgment management considered
favorable external legal opinions the Group has obtained
in relation to the claims and favorable court judgements in
the related matter. In addition the fact that the contracts are
with government owned companies implies the credit risk is
low. Refer note 18.
(iv) 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 IFRS.
The determination as to which items should be disclosed
separately requires a degree of judgement. The details of
special items is set out in note 6.
3. BUSINESS COMBINATION AND OTHERS
a) Electrosteel Steels Limited
On 4 June 2018, the Group, through its subsidiary Vedanta
Star Limited (VSL) acquired management control over
Electrosteel Steels Limited (ESL) as the previous Board of
Directors of ESL was reconstituted on that date. Further, on
15 June 2018, pursuant to the allotment of shares to VSL, the
Group holds 90% of the paid-up share capital of ESL through
VSL. The acquisition will complement the Group’s existing Iron
Ore business as the vertical integration of steel manufacturing
capabilities has the potential to generate significant
efficiencies. ESL was admitted under corporate insolvency
resolution process in terms of the Insolvency and Bankruptcy
Code, 2016 of India. The financial results of ESL from the date
of acquisition to 31 March 2019 have been included in the
Consolidated Financial Statements of the Group.
192
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 The fair value of the identifiable assets and liabilities of ESL as at the date of the acquisition were as follows:
Particulars
Property, Plant and Equipment
Non-current tax assets
Other non-current assets
Non-current assets
Inventories
Trade and other receivables
Short-term investments
Cash and cash equivalents
Current Assets
Total Assets (A)
Liabilities
Borrowings
Trade and other payables
Provisions (Non-Current)
Total Liabilities (B)
Net Assets (C=A-B)
Satisfied by:
Total Cash Consideration (D)
Non-Controlling interest on acquisition (10% of net assets after adjustment of borrowings from immediate parent (VSL)
of US$527 million) (E)
Bargain Gain/Goodwill (C-D-E)
Acquisition costs recognised in Consolidated Income Statement
(US$ million)
Fair Value
718
1
8
727
122
57
46
36
261
988
1
168
2
171
817
788
29
-
(3)
Since the date of acquisition, ESL has contributed US$600
million and US$40 million to the Group revenue and
profit before taxation respectively for the year ended 31
March 2019. If ESL had been acquired at the beginning of the
year, the Group revenue would have been US$14,127 million
and the profit before taxation of the Group would have been
US$1,092 million.
The gross carrying amount of trade and other receivables
equals the fair value of trade and other receivables.
None of the trade and other receivables was impaired and
the full contractual amounts were expected to be realised.
Property has been valued using the Market approach - Sales
comparison method (SCM). This method models the behavior
of the market by comparing with similar properties that have
been recently sold/ rented or for which offers to purchase/
rentals have been made. Plant and equipment have been
valued using the cost approach - Depreciated replacement
cost (DRC) method. For estimating DRC, gross current
replacement cost is depreciated in order to reflect the value
attributable to the remaining portion of the total economic life
of the plant and equipment. The method takes into account
the age, condition, depreciation, obsolescence (economic and
physical) and other relevant factors, including residual value at
the end of the plant and equipment’s economic life.
Non-controlling interest has been measured at the
non-controlling interest’s proportionate share of ESL’s
identifiable net assets.
(b) Avanstrate Inc.
(a) On 28 December 2017, the Group acquired 51.63%
equity stake in AvanStrate Inc. (ASI) for a cash consideration
of JPY 1 million ($ 0.01 million) and acquired debts for JPY
17,058 million (US$151 million). Additionally, a loan of JPY
815 million ($7 million) was extended to ASI. ASI is involved in
manufacturing of glass substrate. Provisional fair values that
were determined as at 31 March 2018 for consolidation were
finalised during the current year.
As per the shareholding agreement (SHA) entered with the
other majority shareholder holding 46.6% in ASI, the Group
has call option, conversion option to convert part of its debt
given to ASI into equity of ASI as well as it has issued put
option to the other majority shareholder. These are exercisable
as per the terms mentioned in the SHA.
The final fair value of the identifiable assets and liabilities of
ASI as adjusted for measurement period adjustments as at the
date of the acquisition were as follows. The comparative year
amounts have been restated accordingly.
193
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Particulars
Property, Plant and Equipment
Intangible assets
Deferred tax assets
Other non-current assets
Non-Current Assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current Assets
Total Assets (A)
Borrowings (excluding borrowings from immediate parent)
Deferred tax liabilities
Trade and other payables
Total Liabilities (B)
Net Assets (C=A-B)
Satisfied by:
Cash Consideration paid for 51.63% stake & Debt acquired
Less: Fair Value of Conversion option asset on debt acquired net of the fair value of Put
option liability towards acquisition of Non-controlling interests
Total Purchase Consideration (D)
Non-Controlling interest on acquisition (48.37% of net assets after adjustment of fair
value of borrowings from immediate parent of US$141 million) (E)
Bargain Gain (C-D-E)
Acquisition costs recognised in Consolidated Income Statement
Provisional
Fair Value
Fair Value
Adjustments
(US$ million)
Fair Value at
Acquisition
242
32
20
6
300
22
36
24
82
382
99
78
23
200
182
158
-
158
12
12
(7)
-
-
-
-
-
-
-
-
-
-
-
6
-
6
(6)
-
(17)
(17)
5
6
-
242
32
20
6
300
22
36
24
82
382
99
84
23
206
176
158
(17)
141
17
18
(7)
The gross carrying amount of trade and other receivables equals the fair value of trade and other receivables. None of the trade
and other receivables was impaired and the full contractual amounts were expected to be realised. Property, plant and equipment
have been valued using cost approach - cost of reproduction new (CRN) method. For estimating CRN, appropriate indices
were used to develop trend factors that have been applied on the acquisition/historical costs of the different assets over the
period during which the asset has been commissioned or in other words life spent. The estimated CRN was further adjusted for
applicable physical deterioration to arrive at fair value. The physical deterioration was based on the estimated age and remaining
useful life. Fair value of assumed debt was determined using yield-method, wherein, the expected cash flows including interest
component and principal repayments have been discounted at an appropriate market interest rate.
Non-controlling interest has been measured at the non-controlling interest’s proportionate share of ASI’s identifiable net assets.
(c) Acquisition of new hydrocarbon blocks
In August, 2018, Vedanta Limited was awarded 41 hydrocarbon blocks out of 55 blocks auctioned under the open acreage
licensing policy (OALP) by Government of India (GOI). The blocks awarded to Vedanta Limited comprise of 33 onshore and 8
offshore blocks. Vedanta Limited will share a specified proportion of the net revenue from each block with GOI and has entered
into 41 separate revenue sharing contracts (RSC) on 1 October 2018.
The bid cost of US$551 million represents Vedanta Limited’s total committed capital expenditure on the blocks for the committed
work programs during the exploration phase. Vedanta Limited has provided bank guarantees for minimum work programme
commitments amounting to US$309 million for the 41 exploration blocks. These have been disclosed in note 33.
194
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 4. SEGMENT INFORMATION
The Group is a diversified natural resources Group engaged in exploring, extracting and processing minerals and oil and gas.
The Group produces zinc, lead, silver, copper, aluminium, iron ore, oil and gas and commercial power and have a presence across
India, Zambia, South Africa, Namibia, UAE, Ireland, Australia, Liberia, Japan, South Korea and Taiwan. The Group is also in the
business of port operations and manufacturing of glass substrate and steel.
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
‘Others’ segment mainly comprises of port/berth, steel and glass substrate business and those segments which do not meet the
quantitative threshold for separate reporting.
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 except for power segment sales to aluminium segment
amounting to US$10 million for the year ended 31 March 2019 (31 March 2018: US$21 million), which were at cost.
The following tables present revenue and profit information and certain asset and liability information regarding the
Group’s reportable segments for the years ended 31 March 2019 and 31 March 2018. Items after operating profit are not
allocated by segment.
195
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 (a) Reportable segments
Year ended 31 March 2019
Zinc-India
Zinc-
International
Oil and
gas
Iron Ore
Copper-
India*/
Australia
Copper-
Zambia Aluminium
Power
Others Elimination
(US$ million)
Total
operations
2,955
392
1,892
415
1,537
1,025
4,180
924
711
-
14,031
REVENUE
Sales to external
customers
Inter-segment sales
-
Segment revenue**
2,955
-
392
100
(61)
-
1,892
1,100
(611)
1
416
90
(35)
0
60
3
1,537
1,085
4,183
(36)
(21)
(63)
(102)
316
(240)
10
934
219
(86)
7
718
151
(58)
1,516
(268)
1,248
39
489
55
(57)
(165)
76
133
93
(81)
(81)
-
14,031
-
-
-
3,393
(1,482)
1,911
480
(1,267)
(75)
47
1,096
Segment Result
EBITDA(1)
Depreciation and
amortisation(2)
Operating profit
/ (loss) before
special items
Investment revenue
Finance costs
Other gains and
(losses) [net]
Special items
PROFIT BEFORE
TAXATION
Segments assets
2,704
872
3,983
547
1,074
1,844
7,432
2,635
1,270
-
22,361
Financial asset
investments
Deferred tax assets
Short-term
investments
Cash and cash
equivalents
Tax assets
Others
Total Assets
Segment liabilities
733
197
1,421
190
585
578
2,909
243
207
Borrowings
Current tax liabilities
Deferred tax
liabilities
Others
Total Liabilities
Other segment
information
Additions to
property, plant
and equipment,
exploration and
evaluation assets and
intangible assets***
Impairment
reversal(3)
522
228
550
5
39
39
245
8
776
-
-
38
-
-
-
-
-
-
707
778
4,164
1,133
505
133
29,781
7,063
15,980
61
776
648
24,528
2,412
38
-
-
-
196
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 Year ended 31 March 2018
Zinc-India
Zinc-
International
Oil and
gas
Iron Ore
Copper-
India*/
Australia
Copper-
Zambia
Aluminium
Power
Others
Elimination
(US$ million)
Total
operations
REVENUE
Sales to external
customers
3,354
535
1,480
481
3,828
1,181
3,541
854
Inter-segment sales
-
Segment revenue**
3,354
-
535
220
(28)
-
4
0
102
4
1,480
485
3,828
1,283
3,545
849
(461)
48
(69)
162
(25)
73
(112)
414
(257)
23
877
258
(75)
1,902
(233)
40
2
42
37
(11)
1,669
192
388
(21)
137
(39)
157
183
26
Segment Result
EBITDA(1)
Depreciation and
amortisation(2)
Operating profit/
(loss) before
special items
Investment revenue
Finance costs
Other gains and
(losses) [net]
Special items
PROFIT BEFORE
TAXATION
-
15,294
(135)
-
(135)
15,294
-
-
-
3,963
(1,271)
2,692
465
(1,239)
(16)
586
2,488
Segments assets
2,575
862
3,706
613
1,447
2,017
7,440
2,950
425
-
22,035
Financial asset
investments
Deferred tax assets
Short-term
investments
Cash and cash
equivalents
Tax assets
Others
Total Assets
Segment liabilities
638
170
851
250
1,368
758
2,061
268
30
-
25
917
4,808
798
523
132
29,238
6,394
15,194
54
749
307
22,698
473
255
163
22
84
27
221
11
280
1,536
-
-
1,448
(759)
-
-
-
-
-
-
689
(1) EBITDA is a non-IFRS measure and represents earnings before special items, depreciation, amortisation, other gains and losses, interest and tax.
(2) Depreciation and amortisation is also provided to the chief operating decision maker on a regular basis.
(3) Included under special items (Note 6).
* The annual consent to operate (CTO) under the Air and Water Acts for copper smelters in India was rejected by the State Pollution Control Board on 09
April 2018 for want of further clarification and consequently the operations have presently been suspended. The matter is presently pending in High Court
(refer note 2(c)(I)(x)).
** Export incentive has been reclassified from ‘segment revenue’ to ‘other operating income’. Refer Note 1 (b)
*** Including acquisition through business combination
197
Borrowings
Current tax liabilities
Deferred tax
liabilities
Others
Total Liabilities
Other segment
information
Additions to
property, plant
and equipment,
exploration and
evaluation assets and
intangible assets***
Impairment reversal/
(charge)(3)
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 (b) Geographical segmental analysis
The Group’s operations are located in India, Zambia, Namibia, South Africa, UAE, Liberia, Ireland, Australia, Japan, South Korea and
Taiwan. The following table provides an analysis of the Group’s revenue by region in which the customer is located, irrespective of
the origin of the goods.
India
China
UAE
Malaysia
Others
Total
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
8,643
1,089
164
696
3,439
14,031
8,212
2,181
613
826
3,462
15,294
The following is an analysis of the carrying amount of non-current assets, excluding deferred tax assets, derivative financial
assets, financial asset investments and other non-current financial assets analysed by the geographical area in which the
assets are located:
India
Zambia
Namibia
South Africa
Taiwan
Others
Total
(US$ million)
Carrying amount of non-current assets
As at
31 March 2019
As at
31 March 2018
16,094
1,534
144
605
176
147
16,045
1,624
171
570
188
130
18,700
18,728
Information about major customer
No customer contributed 10% or more to the Group’s revenue during the year ended 31 March 2019 and 31 March 2018.
Disaggregation of revenue
Below table summarises the disaggregated revenue from contracts with customers:
Particulars
Zinc Metal
Lead Metal
Silver Bars
Oil
Gas
Iron ore
Pig Iron
Metallurgical coke
Copper Products
Aluminium Products
Power
Steel Products
Others
Revenue from contracts with customers
Revenue from contingent rents (refer note 33E(ii))
Gains/(losses) on provisionally priced contracts (refer note 5)
Total Revenue
(US$ million)
Year ended
31 March 2019
2,437
563
367
1,809
75
99
294
8
2,353
4,017
682
600
624
13,928
242
(139)
14,031
198
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 5. TOTAL REVENUE
Sale of products (including excise duty)
Less: Excise duty
Sale of products (net of excise duty)
Sale of services
Revenue from contingent rents (refer note 33E(ii))
Total Revenue
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
13,758
-
13,758
31
242
15,188
(164)
15,024
31
239
14,031
15,294
Revenue from sale of products and from sale of services for the year ended March 31, 2019 comprises of revenue from contracts
with customers of US$13,928 million and a net loss on mark-to-market of US$139 million on account of gains/ losses relating to
sales that were provisionally priced as at 31 March 2018 with the final price settled in the current year, gains/ losses relating to
sales fully priced during the year, and marked to market gains/ losses relating to sales that were provisionally priced as at
31 March 2019. It further includes US$668 million for which contract liabilities existed at the beginning of the year.
Revenue from sale of products are recorded at a point in time and those from sale of services and are recognised over a
period of time.
6. SPECIAL ITEMS
Reversal of provision of DMF1
Gratuity- change in limits2
Gross profit special items
Impairment reversal of oil and
gas assets3
Impairment of iron ore assets4
Total impairment reversal/
(charge) (net)
Loss on unusable assets under
construction- Aluminium5
Operating special items
Financing special items6
Bargain gain net of acquisition cost7
Special items
Year ended 31 March 2019
Year ended 31 March 2018
Special items
Tax effect of
Special items
Special items
after tax
Special items
Tax effect of
Special items
Special items
after tax
(US$ million)
-
-
-
38
-
38
-
38
9
-
47
-
-
-
(13)
-
(13)
-
(13)
(3)
-
(16)
-
-
-
25
-
25
-
25
6
-
31
46
(13)
33
1,448
(759)
689
(39)
683
(108)
11
586
(16)
3
(13)
(570)
225
(345)
14
(344)
6
-
(338)
30
(10)
20
878
(534)
344
(25)
339
(102)
11
248
1. During the year ended 31 March 2018, the Group had recognised the
reversal of provisions of US$46 million relating to contribution to the District
Mineral Foundation. Effective 12 January 2015, the Mines and Minerals
Development and Regulation Act, 1957 prescribed the establishment of
the District Mineral Foundation (DMF) in any district affected by mining
related operations. The provisions required contribution of an amount
equivalent to a percentage of royalty not exceeding one-third thereof, as
may be prescribed by the Central Government of India. The rates were
prescribed on 17 September 2015 for minerals other than coal, lignite and
sand and on 20 October 2015 for coal, lignite and sand as amended on
31 August 2016. The Supreme Court order dated 13 October 2017 had
determined the prospective applicability of the contributions from the date
of the notification fixing such rate of contribution and hence DMF would be
effective;
a) for minerals other than coal, lignite and sand from the date when the rates
were prescribed by the Central Government; and;
b) for coal, lignite and sand, DMF would be effective from the date when
the rates were prescribed by the Central Government of India or from the
date on which the DMF was established by the State Government by a
notification, whichever is later.
Pursuant to the aforesaid order, the Group had recognised a reversal of DMF
provision for the period for which DMF is no longer leviable.
2. The Indian subsidiaries of the Company participate in a defined benefit
plan (the “Gratuity Plan”) covering certain categories of employees. In a
few of these companies, the maximum liability was capped at the statutory
prescribed limit of INR 1 million (US$0.02 million). Consequent to the increase
in the statutory limit to INR 2 million (US$0.03 million), the increase in provision
representing past service cost had been recognised as a special item.
3. During the year, the Group has recognised net impairment reversal of
US$38 million in respect of Oil & Gas Block KG-ONN-2003/1 (CGU) on
booking of commercial reserves and subsequent commencement of
commercial production. The impairment reversal has been recorded against
Oil & Gas producing facilities. The recoverable amount of the Group’s share
in KG-ONN-2003/1 (CGU) was determined to be US$30 million.
The recoverable amount of the KG-ONN-2003/1 CGU 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 and 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 the current estimates
of reserves and risked resources. Reserves assumptions for fair value less
costs of disposal 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
short-term oil price of US $ 62 per barrel for the year ended March 31,
2019 and scales upto long term nominal price of US $ 65 per barrel by
year ended March 31, 2022 derived from a consensus of various analyst
recommendations. Thereafter, these have been escalated at a rate of 2.5%
199
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 per annum. The cash flows are discounted using the post-tax nominal
discount rate of 11.8% derived from the post-tax weighted average cost of
capital. The sensitivities around change in crude price and discount rate are
not material to the financial statements.
During the year ended 31 March 2018, the Group had recognised net
impairment reversal of US$1,448 million on its assets in the oil and gas
segment comprising of:
a) reversal of previously recorded impairment charge of US$1,465 million
relating to Rajasthan oil and gas block (‘CGU’) mainly following the progress
on key Growth Projects expected to result in the enhanced recovery of
resources in a commercially viable manner leading to a higher forecast of oil
production and adoption of an integrated development strategy for various
projects leading to savings in cost. Of this reversal, US$500 million reversal
has been recorded against oil and gas properties and US$965 million
reversal has been recorded against exploratory and evaluation assets.
The recoverable amount of the CGU, US$2,514 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 and 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 is based on assumption for oil price of US$62 per barrel for FY2019
and scales up to the long term nominal price of US$65 per barrel over the
next three years thereafter 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 10.1% derived from the post-tax weighted average cost
of capital after factoring in the risks ascribed to PSC extension including
successful implementation of key Growth Projects. Based on the sensitivities
carried out by the Group, change in crude price assumptions by US$1/
bbl and changes to discount rate by 0.5% would lead to a change in
recoverable value by US$64 million and US$53 million respectively.
b) Impairment charge of US$17 million representing the carrying value
of assets relating to exploratory wells in Block PR-OSN-2004/1 which was
relinquished during the year ended 31 March 2018.
4. During the year ended 31 March 2018, the Group had recognised an
impairment charge of US$759 million as against the net carrying value
of US$865 million on its iron ore assets in Goa in the Iron Ore segment.
Pursuant to an order passed by the Hon’ble Supreme Court of India
7. INVESTMENT REVENUE
on 7 February 2018, the second renewal of the mining leases granted
by the State of Goa in 2014–15 to all miners including Vedanta were
cancelled. Consequently, all mining operations stopped with effect from 16
March 2018 until fresh mining leases (not fresh renewals or other renewals)
and fresh environmental clearances are granted in accordance with the
provisions of The Mines and Minerals (Development and Regulation)
(MMDR) Act.
Significant uncertainty exists over the resumption of mining at Goa under
the current leases. The Group had assessed the recoverable value of all
its assets and liabilities associated with existing mining leases which led
to a non-cash impairment charge in March 2018. The recoverable value
of the mining reserve (grouped under ‘mining property and leases’) was
been assessed as Nil, as there is no reasonable certainty towards re-award
of these mining leases. Similarly, upon consideration of past precedence,
the provision for restoration and rehabilitation with respect to these mines
has been assessed as Nil, as the Group believes that the same would be
carried out by the future successful bidder at the time of mine closure.
The net recoverable value of other assets and liabilities was assessed at
US$114 million based on the fair value less cost of sales methodology
using a Level 3 valuation technique. The fair value was determined based
on the estimated selling price of the individual assets using depreciated
replacement cost method.
5. During the year ended 31 March 2018, the Group had recognised a loss
of US$39 million relating to certain items of capital work-in-progress at the
aluminium operations, which were no longer expected to be used.
6. During the year ended 31 March 2019, the Group has partly reversed the
provision for interest of US$9 million for dues towards SSNP pursuant to the
Honourable Supreme Court of India order. A charge of US$17 million in this
matter was recognised pursuant to an unfavourable arbitration order during
the year ended 31 March 2018.
Additionally during the year ended 31 March 2018, the Group had
recognised US$91 million loss as financing special items arising on the bond
buybacks completed during the year.
7. On 28 December 2017, the Group through its wholly owned subsidiary,
acquired 51.6% equity stake in AvanStrate Inc. (ASI) for a cash consideration
of JPY 1 million ($ 0.01 million) and acquired debts for JPY 17,058 million
(US$151 million) and incurred acquisition expenses of US$7 million.
Additionally, a loan of JPY 815 million (US$7 million) was extended to ASI.
The transaction was accounted for on a provisional basis in the financial
statements for the year ended 31 March 2018 under IFRS 3 and the resultant
bargain purchase gain, net of US$7 million of acquisition expenses, was
recorded in the consolidated income statement. Provisional fair values that
were determined as at 31 March 2018 for consolidation were finalised during
the current year and consequentially amounts for the year ended March 31,
2018 have been restated (Refer note 3(b)).
Fair value gain on financial assets held for trading/ fair value through profit or loss (FVTPL)(1)
Interest Income:
Interest income- financial assets held for trading/FVTPL
Interest income- bank deposits at amortised cost
Interest income- loans and receivables at amortised cost
Interest income- others
Dividend Income:
Dividend Income- available-for-sale investments/investments held at FVOCI
Dividend income- financial assets held for trading/ FVTPL
Foreign exchange gain (net)
Net loss arising on qualifying hedges and non-qualifying hedges
Total
(1) Includes mark to market gain of US$137 mn relating to structured investment. (Refer note 35)
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
265
129
23
31
17
0
6
27
(18)
480
258
108
21
38
34
0
4
2
-
465
200 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 8. FINANCE COSTS
Interest expense – financial liabilities at amortised cost
Other finance costs (including bank charges)
Total interest cost
Unwinding of discount on provisions (note 26)
Net interest on defined benefit arrangements
Special items (note 6)
Capitalisation of finance costs/borrowing costs (note 16)
Total
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
1,295
69
1,364
13
9
(9)
(119)
1,258
1,204
68
1,272
13
8
108
(54)
1,347
All borrowing costs are capitalised using rates based on specific borrowings and general borrowings with the interest rate of 8.0% per annum for the year
ended 31 March 2019.
9. OTHER GAINS AND (LOSSES) (NET)
Foreign exchange loss (net)
Change in fair value of financial liabilities measured at fair value
Net (loss)/ gain arising on qualifying hedges and non-qualifying hedges
Bargain gain net of acquisition cost (note 6)
Total
10(a). PROFIT/ (LOSS) FOR THE YEAR HAS BEEN STATED AFTER CHARGING/ (CREDITING):
Depreciation & amortisation
Costs of inventories recognised as an expense
Auditor’s remuneration for audit services (note 37)
Research and development
Net Loss/ (profit) on disposal of Property, plant and equipment
Provision for receivables*
Impairment of assets
Impairment reversal/(charge) of oil & gas assets
Employee costs (note 28)
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
(65)
(1)
(9)
-
(75)
(11)
(1)
(4)
11
(5)
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
1,482
4,182
3
1
9
(0)
-
(38)
577
1,271
5,533
3
1
(1)
76
693
(1,448)
540
* Includes provision of US$66 million relating to iron ore business recognised as special items during the year ended 31 March 2018. (Refer note 6).
10(b). EXCHANGE GAIN/ (LOSS) RECOGNISED IN THE CONSOLIDATED INCOME STATEMENT:
Cost of sales
Investment revenue
Other gains and losses
Total
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
(79)
9
(74)
(144)
(40)
2
(15)
(53)
201
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 11. TAX
(a) Tax charge/ (credit) recognised in Consolidated Income Statement (including on special items)
Current tax:
Current tax on profit for the year
Charge/(credit) in respect of current tax for earlier years
Total current tax (a)
Deferred tax
Origination and reversal of temporary differences
Charge in respect of deferred tax for earlier years
Charge in respect of Special items (note 6)
Total deferred tax (b)
Net tax expense ((a)+(b))
Profit/ (loss) before taxation
Effective tax rate (%)
Tax expense
Particulars
Tax effect of special items (Note 6)
Tax expense – others
Net tax expense
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
554
(1)
553
103
-
16
119
672
1,096
61.3%
516
6
522
140
13
338
491
1,013
2,488
40.7%
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
16
656
672
338
675
1,013
(b) A reconciliation of income tax expense applicable to profit/ (loss) before taxation 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 2019 is as follows.
Given majority of the Group’s operations are located in India, the reconciliation has been carried out from Indian statutory
income tax rate.
Profit before taxation
Indian statutory income tax rate
Tax at statutory income tax rate
Disallowable expenses
Non-taxable income
Tax holidays and similar exemptions
Effect of tax rates differences of subsidiaries operating in other jurisdictions
Dividend distribution tax
Unrecognised tax assets (net)*
Changes in deferred tax balances due to change in income tax rate from 34.608% to 34.944%
Capital Gains subject to lower tax rate
Charge/(credit) in respect of previous years
Others
Total
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
1,096
2,488
34.944%
34.608%
383
81
(27)
(116)
(22)
158
204
-
(2)
(1)
14
672
861
21
(37)
(158)
73
63
165
12
(12)
19
6
1,013
* Deferred tax charge for the year ended 31 March 2019 includes US$121 million (31 March 2018: US$ Nil million) representing reversal of deferred tax asset
created on carry forward losses not expected to be utilised during the statutory permitted period.
202 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 Certain businesses of the Group within India are eligible for
specified tax incentives which are included in the table above
as tax holidays and similar 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). FY2018 was the last year of eligibility for deduction for
Haridwar unit. In the current year, Pantnagar is the only unit
eligible for deduction at 30% of taxable profit.
The location based exemption: SEZ Operations
In order to boost industrial development and exports, provided
certain conditions are met, profits of undertaking located in
Special Economic Zone (‘SEZ’) 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, 50%
of profits for five years thereafter and 50% of the profits for
further five years provided the amount allowable in respect of
deduction is credited to Special Economic Zone Re-Investment
Reserve account. However, such undertaking would continue to
be subject to the Minimum Alternative tax (‘MAT’).
The Group has setup SEZ Operations in its aluminium division
of Vedanta Limited (where no benefit has been drawn).
Sectoral Benefit - Power Plants and Port Operations
To encourage the establishment of infrastructure certain
power plants and ports have been offered income tax
For the year ended March 31, 2019:
exemptions of upto 100% of profits and gains for any ten
consecutive years within the 15 year period following
commencement of operations subject to certain conditions.
The Group currently has total operational capacity of 8.4
Giga Watts (GW) of thermal based power generation facilities
and wind power capacity of 274 Mega Watts (MW) and port
facilities. However, such undertakings would continue to be
subject to 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).
The Group operates a zinc refinery in Export Processing Zone,
Namibia which has been granted tax exempt status by the
Namibian government.
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$116 million for the year ended 31 March 2019
(31 March 2018: US$158 million).
(c) Deferred tax assets/liabilities
The Group has accrued significant amounts of deferred
tax. The majority of the deferred tax liability represents
accelerated tax relief for the depreciation of property, plant
and equipment, the depreciation of mining reserves and the
fair value uplifts created on acquisitions, net of losses carried
forward by Vedanta Limited (post the re-organisation) and
unused tax credits in the form of MAT credits carried forward
in Vedanta Limited, Cairn Energy Hydrocarbons Limited and
Hindustan Zinc Limited. Significant components of Deferred
tax (assets) and liabilities recognised in the consolidated
balance sheet are as follows:
Significant components of
deferred tax liabilities/(assets)
Property, plant and equipment, Exploration and
Evaluation and other intangible assets
Unabsorbed depreciation/business loss
Voluntary retirement scheme
Employee benefits
Fair value of derivative assets/ liabilities
Fair valuation of other assets/liabilities
MAT credits entitlement
Other temporary differences
Total
Opening
balance as
at 01 April
2018
2,484
(914)
(6)
(27)
(9)
145
(1,705)
(136)
(168)
Charged/
(credited) to
Income
Statement
Charged/
(credited) to
other
comprehensive
income
Deferred tax
on acquisition
through
business
combination
113
(78)
-
-
6
(25)
110
(7)
119
-
-
-
(4)
(2)
-
-
-
(6)
-
-
-
-
-
-
-
-
-
(US$ million)
Closing
balance as at
31 March
2019
Exchange
difference
transferred to
translation of
foreign
operation
(155)
2,442
113
1
14
(3)
-
103
(20)
53
(879)
(5)
(17)
(8)
120
(1,492)
(163)
(2)
203
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 For the year ended March 31, 2018:
Significant components of
deferred tax liabilities/(assets)
Property, plant and equipment, Exploration and
Evaluation and other intangible assets
Unabsorbed depreciation/business loss
Voluntary retirement scheme
Employee benefits
Fair value of derivative assets/ liabilities
Fair valuation of other assets/liabilities
MAT credits entitlement
Other temporary differences
Total
Charged/
(credited) to
Income
Statement
Charged/
(credited) to
other
comprehensive
income
Deferred tax
on acquisition
through
business
combination
Exchange
difference
transferred to
translation of
foreign
operation
298
73
1
2
1
(97)
200
13
491
-
-
-
(1)
(5)
-
-
-
(6)
(3)
-
-
-
-
61
-
6
64
10
2
0
(0)
0
4
11
(4)
23
Opening
balance as
at 01 April
2018
2,179
(989)
(7)
(28)
(5)
177
(1,916)
(151)
(740)
(US$ million)
Closing
balance as at
31 March
2019
2,484
(914)
(6)
(27)
(9)
145
(1,705)
(136)
(168)
Deferred tax assets and liabilities have been offset where they arise in the same taxing jurisdiction with a legal right to offset but
not otherwise. Accordingly the net deferred tax (assets)/liability has been disclosed in the Balance Sheet as follows :
Deferred tax assets
Deferred tax liabilities
Net Deferred tax (assets) / Liabilities
As at
31 March 2019
(US$ million)
As at
31 March 2018
(778)
776
(2)
(917)
749
(168)
Recognition of deferred tax assets on MAT credits entitlement
is based on the respective legal entity’s present estimates
and business plans as per which the same is expected to be
utilised within the stipulated fifteen year period from the date
of origination.
tax losses have been recognised to the extent of deferred
tax liabilities on taxable temporary differences available. It is
expected that any reversals of the deferred tax liability would
be offset against the reversal of the deferred tax asset at
respective entities.
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. For certain components
of the Group, deferred tax assets on carry forward unused
Unused tax losses / unused tax credit for which no deferred
tax asset has been recognised amount to US$4,129
million and US$3,533 million as at 31 March 2019 and 31
March 2018 respectively.
As at 31 March 2019
Unutilised tax losses/ Unused tax credit
Particulars
Unutilised business losses
Unabsorbed depreciation
Unutilised R&D credit
Unabsorbed interest allowance*
Total
As at 31 March 2018
Unutilised tax losses/ Unused tax credit
Particulars
Unutilised business losses
Unabsorbed depreciation
Unutilised Capital losses
Unutilised R&D credit
Unabsorbed interest allowance*
Total
Within
one year
389
-
-
-
389
Within
one year
615
-
19
-
-
634
Greater than
one year, less
than five years
812
-
-
-
812
Greater than
one year, less
than five years
866
-
22
-
-
888
Greater than
five years
88
-
-
-
88
Greater than
five years
2
-
-
-
-
2
(US$ million)
Total
2,968
975
1
185
4,129
(US$ million)
Total
3,194
25
41
1
272
3,533
No expiry
date
1,679
975
1
185
2,840
No expiry
date
1,711
25
-
1
272
2,009
* As per UK’s corporate interest restriction rules, the disallowed interest expense for any year can be carried forward and claimed in future years for unlimited
life subject to specified conditions
204 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 No deferred tax assets has been recognised on these unused tax losses/ unused tax credit as there is no evidence that sufficient
taxable profit will be available in future against which these can be utilised by the respective entities.
Additionally, the Group has not recognised MAT credit for one of its components, details of which are as under:
Year of Expiry
2022
2023
2024
2025
2026
2027
2028
2029
As at
31 March 2019
(US$ million)
As at
31 March 2018
15
2
7
7
15
9
1
1
57
15
2
8
8
15
10
1
1
60
The Group has not recognised any deferred tax liabilities
for taxes that would be payable on the Group’s share in
unremitted earnings of certain of its subsidiaries because
the Group controls when the liability will be incurred and it is
probable that the liability will not be incurred in the foreseeable
future. The amount of unremitted earnings are US$4,260
million and US$4,830 million as at 31 March 2019 and 31
March 2018 respectively.
(d) Non-current tax assets
Non-current tax assets of US$504 million (31 March, 2018:
US$521 million) mainly represents income tax receivable
from Indian tax authorities by Vedanta Limited relating to the
refund arising consequent to the Scheme of Amalgamation
& Arrangement made effective in August 2013 pursuant to
approval by the jurisdiction High Court and receivables relating
to matters in tax disputes in Group companies including
tax holiday claim.
12. UNDERLYING ATTRIBUTABLE PROFIT/(LOSS) FOR
THE YEAR
Underlying earnings is an alternative earnings measure, which
the management considers to be a useful additional measure
of the Group’s performance. The Group’s Underlying profit/
loss is the profit/ loss for the year after adding back special
items, other losses/(gains) [net] (note 9) and their resultant tax
(including taxes classified as special items) and non-controlling
interest effects. This is a Non-IFRS measure.
(Loss)/ Profit for the year attributable to equity holders of the parent
Special items
Other gains/(losses) [net]
Tax and non-controlling interest effect of special items (including taxes classified as
special items) and other gains/ (losses) [net]
Underlying attributable (loss)/ profit for the year
13. DIVIDENDS
Note
6
9
Amounts recognised as distributions to equity holders:
Equity dividends on ordinary shares:
Final dividend for 2017-18: 41.0 US cents per share (2016-17: 35.0 US cents per share)*
Interim dividend paid during the year: NIL US cents per share (2017-18: 24.0 US cents per share)
Proposed for approval by shareholders
Equity dividends on ordinary shares:
Final dividend for 2018-19: 65.0 US cents per share (2017-18: 41.0 US cents per share)
Year ended
31 March 2019
(237)
(47)
75
(17)
(US$ million)
Year ended
31 March 2018
239
(586)
16
497
(226)
166
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
114
-
185
97
68
114
* This includes US$1 million (31 March 2018: US$1 million) dividend on equity shares held by a separate investment trust holding treasury shares of the
Company.
14. GOODWILL
At 01 April
Impairment during the year
At 31 March
(US$ million)
As at
31 March 2019
As at
31 March 2018
12
-
12
17
(5)
12
205
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Goodwill is allocated for impairment testing purposes to the
following CGU’s.
• US$12 million Copper India (As at 31 March 2019 & 31
March 2018)
• US$5 million - Impaired during the year ended 31
March 2018
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$12 million as at 31 March 2019. The carrying
amount of goodwill allocated to the relevant cash generating
unit is considered to be insignificant in comparison with the
total carrying value of the cash generating unit. The carrying
amount of goodwill was evaluated using the higher of Fair
value less cost of disposal (‘FVLCD’) or value in use based
on discounted future cash flows of the cash generating unit
to which the goodwill pertains and comparing this to the
total carrying value of the relevant cash generating units.
It was determined that the carrying amount of goodwill is
not impaired and nor was impairment indicated following a
reasonably possible change in a key assumption.
15. INTANGIBLE ASSETS
Intangible assets include Port concession rights to operate a
general cargo berth for handling coal at the outer harbour of
the Visakhapatnam port on the east coast of India, software
licences, technological know-how, acquired brand and others.
Cost
As at 1 April 2017
Addition
Disposals/Adjustments
Acquisition through business combination (note 3(b))
Exchange differences
As at 1 April 2018
Addition
Disposals/Adjustments
Acquisition through business combination (note 3(a))
Exchange differences
As at 31 March 2019
Accumulated amortisation
As at 1 April 2017
Charge for the year
Disposals/Adjustments
Exchange differences
As at 1 April 2018
Charge for the year
Disposals/Adjustments
Exchange differences
As at 31 March 2019
Net book value
As at 1 April 2017
As at 1 April 2018
As at 31 March 2019
Port concession
rights(1)
Software license
Others(2)
Total
(US$ million)
93
0
(0)
-
(1)
92
0
(0)
-
(5)
87
14
3
-
(0)
17
3
(0)
(1)
19
79
75
68
18
1
(1)
0
0
18
1
(0)
0
(2)
17
10
4
(1)
0
13
3
0
(1)
15
8
5
2
10
0
-
32
2
44
0
-
-
(2)
42
1
0
-
(0)
1
4
-
(1)
4
9
43
38
121
1
(1)
32
1
154
1
(0)
0
(9)
146
25
7
(1)
(0)
31
10
(0)
(3)
38
96
123
108
(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 wholly owned by 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 upgraded berth would be 10.18 mmtpa and 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 technological know-how and acquired brand relating to acquisition of AvanStrate Inc.
206 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 16. PROPERTY, PLANT AND EQUIPMENT
Mining
property and
leases
Freehold
Land and
buildings
Plant and
equipment
Assets under
construction
Oil & Gas
properties(3)
Others
Total
Property,
plant and
equipment
Exploratory
and
evaluation
assets(4)
(US$ million)
Grand Total
2,863
1,716
13,327
2,445
252
11
-
-
54
25
4
(1)
49
13
341
552
(142)
163
475
(568)
(16)
27
34
16
9,921
139
31
(2)
-
-
114
11
1
(3)
3
2
30,386
9,837
40,223
1,243
31
(164)
242
119
19
(31)
(10)
-
-
1,262
-
(174)
242
119
3,180
1,806
14,275
2,379
10,089
128
31,857
9,815
41,672
164
321
-
-
(8)
-
(216)
3,441
1,425
183
-
-
638
12
2,258
219
-
-
-
-
(119)
2,358
1,438
922
1,083
73
167
-
-
(2)
134
281
441
-
-
(169)
517
602
(967)
-
1
(17)
66
(122)
(774)
(160)
468
8,468
-
-
(2)
-
-
2,056
14,571
1,904
19,023
357
52
-
-
13
9
431
66
(1)
-
-
-
(34)
462
1,359
1,375
1,594
4,132
557
(125)
0
29
38
4,631
568
(96)
(3)
1
-
(253)
4,848
9,195
9,644
9,723
78
-
-
-
9,011
461
(2)
-
46
(500)
0
-
124
8,970
-
-
-
-
-
609
(2)
6,474
-
(38)
(3)
-
121
16,013
2,367
2,255
1,783
910
1,119
3,010
26
38
-
-
(7)
1
1,614
8,468
-
1
(205)
718
(10)
176
(1,282)
41,171
79
1,693
(8,468)
(7)
-
-
-
-
-
(7)
1
(205)
718
(1,282)
1,419
42,590
-
31
11
(1)
(0)
(0)
1
42
15
(7)
3
-
-
(6)
47
83
86
15,034
8,436
23,470
1,264
(128)
-
226
-
-
-
1,264
(128)
-
(947)
(721)
60
-
60
16,456
7,489
23,945
1,477
(106)
-
-
1,477
(106)
6,474
(6,474)
1
(38)
(415)
-
-
-
-
1
(38)
(415)
23,849
1,015
24,864
15,352
15,401
1,401
2,326
16,753
17,727
129
17,322
404
17,726
Cost
At 1 April 2017
Additions
Transfers
Disposals/Adjustments
Acquisition through business
combination (note 3(b))
Exchange differences
At 1 April 2018
Additions
Transfers
Unsuccessful Exploration cost
Reclassification
Disposals/Adjustments
Acquisition through business
combination (note 3(a))
Exchange differences
At 31 March 2019
Accumulated depreciation,
amortisation and impairment
At 1 April 2017
Charge for the year
Disposals/Adjustments
Reclassification
Impairment/(impairment reversal)
of assets (note 6)
Exchange differences
At 1 April 2018
Charge for the year
Disposals/Adjustments
Transfer from E&E assets
Reclassification
Impairment/(impairment reversal)
of assets (note 6)
Exchange differences
At 31 March 2019
Net book value
At 1 April 2017
At 1 April 2018
At 31 March 2019
(1) During the year ended 31 March 2019, interest and foreign exchange losses capitalised was US$119 million (31 March 2018: US$54 million).
(2) Certain property, plant and equipment are pledged as collateral against borrowings, the details related to which have been given in note 22 on
Borrowings.
(3) Oil and Gas Properties includes development assets under construction of carrying value US$1,517 million (31 March 2018: US$339 million).
(4) Oil & Gas properties and exploration and evaluation assets net block includes share of jointly owned assets with the joint venture partners US$3,331
million (31 March, 2018 US$3,292 million). Refer note 2(c)(I)(xii) for reasons for transfer of exploration and evaluation assets to property, plant and equipment.
207
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 17. FINANCIAL ASSET INVESTMENTS
Financial asset investments represent investments classified and accounted for as fair value through profit or loss or through
other comprehensive income (refer note 25).
Financial Asset Investments
Year of Expiry
At 1 April 2018
Purchase of structured investment (refer note 35)
Movements in fair value (including on investments purchased during the year)
Exchange difference
At 31 March 2019
As at
31 March 2019
(US$ million)
As at
31 March 2018
25
541
143
(2)
707
11
-
14
(0)
25
Financial asset investment represents quoted investments in equity shares and other investments that present the Group with an
opportunity for returns through dividend income and gains in value. These securities are held at fair value. These are classified as
non-current as on 31 March 2019 and 31 March 2018.
18. OTHER NON-CURRENT ASSETS AND TRADE AND OTHER RECEIVABLES
As at 31 March 2019
As at 31 March 2018
Non- Current
Current
Total
Non- Current
Current
Bank Deposits(2)
Site restoration assets
Trade Receivables(1)
Others(4)
Trade receivables from related parties
Cash call / receivables from joint
operations
Financial (A)
Balance with Government Authorities
Advance for supplies
Others(3)
Non-financial (B)
Total (A+B)
3
79
533
108
-
-
723
120
-
167
287
-
-
593
55
5
298
951
208
221
124
553
3
79
1,126
163
5
298
1,674
328
221
291
840
1,010
1,504
2,514
19
72
209
71
-
-
371
164
-
124
288
659
(US$ million)
Total
19
72
853
154
4
99
1,201
397
309
279
985
-
-
644
83
4
99
830
233
309
155
697
1,527
2,186
The credit period given to customers ranges from zero to 90 days.
(1) In July 2017, the Appellate Tribunal for Electricity dismissed the appeal
filed by one of the Group’s subsidiaries, Talwandi Sabo Power Limited (TSPL)
with respect to the interpretation of how the calorific value of coal and
costs associated with it should be determined. However, APTEL had allowed
payment of shunting and unloading charges. TSPL filed an appeal before
the Honourable Supreme Court, which by an order dated 7 March 2018 has
decided the matter in favour of TSPL. PSPCL has not paid the due amount
as per the direction of the Supreme court. Therefore, TSPL filed its contempt
petition before the Supreme court. The matter is pending for adjudication.
The outstanding trade receivables in relation to this dispute as at 31
March 2019 is US$164 million (31 March 2018: US$123 million).
In another matter relating to assessment of whether there has been a
change in law following the execution of the Power Purchase Agreement,
the Appellate Tribunal for Electricity has dismissed the appeal in July 2017
filed by TSPL. TSPL filed an appeal before the Honourable Supreme Court
to seek relief which is yet to be listed. The outstanding trade receivables in
relation to this dispute and other matters as at 31 March 2019 is US$154
million (US$127 million as at 31 March 2018). The Group, based on external
legal opinion and its own assessment of the merits of the case, remains
confident that it is highly probable that the Supreme court will uphold TSPL’s
appeal and has thus continued to treat these balances as recoverable.
Additionally, as at 31 March 2018 US$112 million was outstanding on
account of certain disputes relating to computation of tariffs and differential
revenues recognised with respect to tariffs pending finalisation by the
Odisha state regulatory commission. During the current year the said
disputes were settled. However, the customer has raised certain claims on
the company in respect of short supply of power for which a provision of
$ 31 million has been made. A Minutes of Meeting (MOM) has been signed
with the customer and subsequently Vedanta Limited has received payment
of US$8 million in March 2019. Pending ratification of MOM by Odisha
Electricity Regulatory Commission (OERC) and adjudication on certain
issues related to the claim, the customer has withheld US$181 million,
which the company is confident of recovering.
(2) Includes US$ Nil of restricted bank deposits maintained as debt service
reserve account (31 March 2018: US$16 million) and US$3 million
(31 March 2018: US$3 million) under lien with banks.
(3) Includes claim receivables, advance recoverable (oil and gas business),
prepaid expenses, export incentive receivables and others.
(4) Includes claims receivables, advance recoverable (oil and gas business),
unbilled revenue (contract assets) and others. It also includes advance profit
petroleum US$43 million (refer note 34(iv)). The outstanding balance of
contract assets was US$21 million (31 March 2018 : US$64 million).
208 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019
19. INVENTORIES
Raw materials and consumables
Work-in-progress
Finished goods
Total
(US$ million)
As at
31 March 2019
As at
31 March 2018
1,369
454
237
2,060
1,330
578
130
2,038
Inventory held at net realisable value amounted to US$642 million (31 March 2018: US$168 million). The write down
of inventories amounts to US$38 million (31 March 2018: US$7 million) and this has been charged to the Consolidated
Income Statement.
20. SHORT-TERM INVESTMENTS
Bank deposits(1)
Other investments
Total
(US$ million)
As at
31 March 2019
As at
31 March 2018
122
4,042
4,164
483
4,325
4,808
(1) Includes US$28 million(31 March 2018: US$31 million) on lien with banks , US$19 million(31 March 2018: US$6 million) of margin money, US$47
million(31 March 2018: US$9 million) maintained as debt service reserve account and US$9 million(31 March 2018: US$12 million) of restricted funds held as
collateral in respect of closure costs.
Bank deposits are made for periods of between three months and one year depending on the cash requirements of the
companies within the Group and earn interest at the respective fixed deposit rates.
Other investments include mutual fund investments and investment in bonds which are recorded at fair value with changes in fair
value reported through the income statement. These investments do not qualify for recognition as cash and cash equivalents due
to their maturity period and risk of change in value of the investments. Refer Note 25 for further details.
21. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following
Cash at bank and in hand
Short-term deposits
Restricted cash and cash equivalents(1)
Total
(US$ million)
As at
31 March 2019
As at
31 March 2018
620
441
72
1,133
604
158
36
798
(1) Restricted cash and cash equivalents includes US$15 million (31 March 2018: US$36 million) kept in a specified bank account to be utilised solely for the
purposes of payment of dividends to non-controlling shareholders, which is being carried as a current liability. Restricted cash and cash equivalents further
include US$57 million (31 March 2018 : Nil) kept in short term deposits under lien with banks as margin money.
Short-term deposits are made for periods of between one day and three months, depending on the immediate cash
requirements of the Group, and earn interest at the respective short-term deposit rates.
22(a) BORROWINGS
Current borrowings consist of:
Banks and financial institutions
Current maturities of long term borrowings
Current borrowings (A)
Non-current borrowings consist of:
Banks and financial institutions
Non- convertible bonds
Non-convertible debentures
Redeemable Preference shares
Others
Non-current borrowings
Less: Current maturities of long term borrowings
Non-current borrowings, net of current maturities (B)
Total (A+B)
(US$ million)
As at
31 March 2019
As at
31 March 2018
4,132
1,324
5,456
6,585
3,142
2,034
0
87
11,848
(1,324)
10,524
15,980
3,607
1,853
5,460
5,892
3,360
1,779
463
93
11,587
(1,853)
9,734
15,194
209
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 The Group has discounted trade receivables on recourse basis US$196 million (31 March 2018: US$120 million). Accordingly,
the monies received on this account are shown as borrowings as the trade receivables do not meet de-recognition criteria.
The Group facilities are subject to certain financial and non-financial covenants. The primary covenants which must be complied
with include fixed charge cover ratio, net borrowing to EBITDA ratio, total net assets to borrowings ratio and net interest expense to
EBITDA ratio. The Group has complied with the covenants as per the terms of the loan agreement.
Details of the Non-convertible bonds and Non-convertible debentures issued by the Group have been provided below
(carrying value):
Non-Convertible Bonds :
0.230% bonds due October, 2032 (Repayable in 10 instalments)
6.125% bonds due August 2024
7.125% bonds due June, 2023
6.375% bonds due July, 2022
8.250% bonds due June, 2021
6.000% bonds due January, 2019
Non-Convertible Debentures
8.75% due September-2021
9.18% due July-2021
9.27% due July-2021
8.50% due June-2021
8.75% due April-2021
8.50% due April-2021
8.55% due April-2021
7.80% due December-2020
9.00% due November-2020**
8.25% due september-2020
7.85% due August-2020
9.45% due August-2020
8.00% due June-2020*
7.90% due July-2020
8.70% due April-2020
7.95% due April-2020*
7.50% due November-2019*
8.20% due November-2019
8.25% due October-2019
7.75% due September-2019
8.65% due September-2019
7.60% due May-2019
9.17% due July-2018
9.10% due April 2018
8.91% due April 2018
(US$ million)
As at
31 March 2019
As at
31 March 2018
18
993
495
995
641
-
17
992
494
993
640
224
3,142
3,360
36
145
144
238
36
340
145
72
29
62
72
289
29
43
87
43
29
43
43
36
22
51
-
-
-
38
-
-
-
38
-
-
77
-
65
77
308
31
46
92
46
31
46
46
38
23
54
185
384
154
* The debenture holders of these NCDs and the company have put and call option at the end of 5 years from the respective date of the allotment of the NCDs
** The debenture holders of these NCDs and the company have put and call option at the end of 1 year from the respective date of the allotment of the NCDs
2,034
1,779
210 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019
Security Details
The Group has taken borrowings in various countries towards funding of its acquisitions and working capital requirements.
The borrowings comprise of funding arrangements from various banks and financial institutions taken by the parent and
subsidiaries. Out of the total borrowings of US$15,980 million (31 March 2018: US$15,194 million) shown above total secured
borrowings are US$6,547 million (31 March 2018: US$5,665 million) and unsecured borrowings are US$9,433 million
(31 March 2018: US$9,529 million). The details of security provided by the Group in various countries, to various lenders on
the assets of Parent and subsidiaries are as follows:
Facility Category
Security details
Project buyers credit
from banks (grouped
under banks and
financial institutions)
Working Capital
Loans (grouped under
banks and financial
institutions)
Secured by exclusive charge on the assets of Vedanta Limited’s aluminium
division at Jharsuguda imported under facility and first charge on Jharsuguda
aluminium’s current assets on pari passu basis
Other secured project buyer’s credit
Secured by first pari passu charge on current assets, present and future of
Vedanta Limited
Secured by hypothecation of stock of raw materials, work-in-progress, semi-
finished, finished products, consumable stores and spares, bills receivables,
book debts and all other movables, both present and future in BALCO.
The charges rank pari passu among banks under the multiple banking
arrangements for fund based facilities
First pari passu charge on the entire current assets of the Vedanta Limited,
both present and future. First pari passu charge on all rights, title, claim and
benefit in all the whole of the current assets of the Vedanta Limited, both
present and future, including stock and raw material, stock in process, semi
finished and finished goods, stores and spares not relating to plant, and
machinery (consumable stores and spares)
First charge on the entire current assets of the Vedanta Limited, present and
future, on pari passu basis
Secured by a first pari passu charge on all present and future inventories,
book debts and all other current assets of TSPL.
First pari passu charge on current assets of Vedanta Limited
Secured by charge on current assets of AvanStrate
Other secured working capital loans
External commercial
borrowings (grouped
under banks and
financial institutions)
The facility is secured by first pari passu charge on all movable property, plant
and equipments related to power plants and aluminium smelters of BALCO
located at Korba both present and future along with secured lenders
The facility is secured by first pari passu charge on all movable project assets
related to 1200 MW power project and 3.25 LTPA Smelter project both
present and future along with secured lenders at BALCO
(US$ million)
As at
31 March 2019
As at
31 March 2018
2
-
16
18
19
0
47
26
80
98
7
40
52
6
-
45
50
-
91
-
26
45
50
211
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Facility Category
Security details
Non convertible
debentures
Secured by way of movable fixed assets of the Lanjigarh Refinery Expansion
Project including 210 MW Power Project for the Lanjigarh Refinery Expansion
Project with a minimum security cover of 1 time of the outstanding amount
of the debenture and specifically exclude the 1MTPA alumina refinery of
the company along with 90 MW power plant in Lanjigarh and all its related
expansions
Secured by the whole of the movable fixed assets of the 1.6 MTPA Aluminium
Smelter along with 1215 MW captive power plant in Jharsuguda and 1 MTPA
alumina refinery alongwith 90 MW co-generation plant in Lanjigarh, including
its movable plant and machinery, capital works-in-process, machinery spares,
tools and accessories, and other movable fixed assets
Secured by way of first ranking pari passu charge on movable fixed assets in
relation to the Lanjigarh Refinery Expansion Project (having capacity beyond
2 MTPA and upto 6 MTPA) situated at Lanjigarh, Odisha. The Lanjigarh
Refinery Expansion Project shall specifically exclude the ‘1 MTPA alumina
refinery of the Company along with 90 MW power plant in Lanjigarh’ and all
its related capacity expansions
Secured by way of “movable fixed assets” in relation to the 1.6 MTPA
Aluminium Smelter alongwith 1215 MW (135MW * 9) captive power plant
located in Jharsuguda and 1 MTPA Alumina Refinery alongwith 90 MW
Co-generation power plant located at Lanjigarh in Odisha State and shall
include all present movable plant and machinery, machinery spares, tools
and accessories, fixtures, mechanical and electrical equipments, machinery
and all other movable fixed assets and all estate, right, title, interest, property,
claims and demands whatsoever in relation to assets
Secured by a first pari - passu charge on the whole of the present and future
of the movable fixed assets of 2400 MW (600 MW*4) Power Plant of Vedanta
Limited at Jharsuguda location
Secured by first pari passu charge on movable and/or immovable fixed assets
of the TSPL with a minimum asset cover of 1 time during the tenure of NCD
Secured by way of first pari-passu charge on the specific movable and/
or immovable fixed assets of VGCB, as may be identified and notified by
the Issuer to the Security Trustee from time to time, with minimum asset
coverage of 1 time of the aggregate face value of bonds outstanding at any
point of time
Secured by way of first pari-passu charge on all present and future of the
movable fixed assets of 2400 MW (600 MW*4) Power Plant of Vedanta
Limited at Jharsuguda location, as may be identified and notified by the
Issuer to the Security Trustee from time to time, with minimum asset
coverage of 1 time of the aggregate face value of debentures outstanding at
any point of time
First pari passu charge over the immovable property (excluding of leasehold
land and coal block assets) of the BALCO. First pari passu charge on the
hypothecated assets (excluding current assets) of BALCO
Other secured non-convertible debentures
(US$ million)
As at
31 March 2019
As at
31 March 2018
123
131
116
123
181
192
289
308
578
470
61
384
315
65
145
-
72
-
77
184
212
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 Facility Category
Term loan from banks
(grouped under
banks and financial
institutions)
Others
Security details
Secured by first pari passu charge on fixed assets of TSPL both present and
future
First pari passu charge by way of hypothecation/ equitable mortgage on
the movable/ immovable assets of the Aluminium Division of the Vedanta
Limited comprising of alumina refinery having output of 1 MTPA along with
co-generation captive power plant with an aggregate capacity of 90 MW at
Lanjigarh, Odisha; aluminium smelter having output of 1.6 MTPA along with a
1215 (9x135) MW CPP at Jharsuguda , Odisha, both present and future
A pari passu charge by way of hypothecation of all the movable fixed assets of
the Vedanta Limited pertaining to its Aluminium Division project consisting of
(i) alumina refinery having output of 1 MTPA (Refinery) along with co-generation
captive power plant with an aggregate capacity of 90 MW at Lanjigarh, Odisha
(Power Plant); and (ii) aluminium smelter having output of 1.6 MTPA along with
a 1215 (9x135) MW CPP at Jharsuguda, Odisha (Smelter) (the Refinery, Power
Plant and Smelter). Also, a first pari passu charge by way of equitable mortgage
on the land pertaining to the mentioned project of aluminium division
Secured by a pari - passu charge by way of hypothecation on the movable
fixed assets of the Lanjigarh Refinery Expansion Project including 210 MW
Power Project for the Lanjigarh Refinery Expansion Project. Lanjigarh Refinery
Expansion Project shall specifically exclude the 1 MTPA alumina refinery of
the Vedanta Limited along with 90 MW power plant in Lanjigarh and all its
related expansions
A pari-passu charge by way of hypothecation on the movable fixed assets of
the Vedanta Limited pertaining to its Aluminium Division comprising of
1 mtpa alumina refinery plant with 90 MW captive power plant at Lanjigarh,
Odisha and 1.6 mtpa aluminium smelter plant with 1215 MW captive power
plant at Jharsuguda, Odisha
First pari passu charge by way of hypothecation/ equitable mortgage on
the movable/ immovable assets of the Aluminium Division of the Vedanta
Limited comprising of alumina refinery having output of 1 MTPA along with
co-generation captive power plant with an aggregate capacity of 90 MW at
Lanjigarh, Odisha; aluminium smelter having output of 1.6 MTPA along with
a 1215 (9x135) MW CPP at Jharsuguda , Odisha and additional charge on
Lanjigarh Expansion project, both present and future
A pari-passu charge by way of hypothecation/equitable mortgage of the
movable/immovable fixed assets of the Vedanta Limited pertaining to its
Aluminium Division comprising of 1 mtpa alumina refinery plant with 90 MW
captive power plant at Lanjigarh, Odisha and 1.6 mtpa aluminium smelter
plant with 1215 MW captive power plant at Jharsuguda, Odisha
Secured by charge on Cairn Energy Hydrocarbons Limited’s (CEHL) all banks
accounts, cash & investments, all receivables and current assets (but excluding
any shares issued to CEHL by its subsidiaries, all of its right, title and interest in
and to Production Sharing Contract and all of its fixed assets of any nature)
As security for the Parent’s (THL Zinc Limited) obligation under the limited
guarantee, the Parent pledges all of its shares and other securities held by it in
BMM and is a security cession and not an outright cession of all its rights, title and
interest in and to all and any claims held by the Parent in and against the BMM
The facility is secured by first pari passu charge on all movable property, plant
and equipments related to power plants and aluminium smelters of BALCO
located at Korba both present and future along with secured lenders
Secured by first pari passu charge on movable property, plant and equipment
(except for coal block) of the BALCO
Secured by first pari passu charge on all present and future movable fixed assets
including but not limited to plant & machinery ,spares, tools and accessories of
BALCO (excluding coal block assets) by way of a deed of hypothecation
Unattested deed of Hypothecation executed in favour of Vistra ITCL (India)
Limited, Security Trustee for the lenders of Vedanta Star limited by providing
security for the facility, by a charge, by way of hypothecation over the
hypothecated properties of ESL
Secured against assets of KCM
Secured by Fixed asset (platinum) of AvanStrate.
Total
As at
31 March 2019
524
(US$ million)
As at
31 March 2018
627
738
849
513
606
70
251
-
-
171
190
431
-
379
426
60
30
214
140
488
113
75
6,547
-
30
232
152
-
293
79
5,665
213
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
22(b). MOVEMENT IN NET DEBT(1)
Cash and cash
equivalents
Short term
investments
1,682
(924)
24
8,043
(3,441)
-
-
16
798
341
36
-
(42)
209
(3)
4,808
(639)
46
187
(238)
At 1 April 2017
Cash flow
Net debt on
acquisition
through business
combination (note
3(b))
Other non-cash
changes (2)
Foreign exchange
currency translation
differences
At 1 April 2018
Cash flow
Net cash flow
on acquisition
through business
combination (note
3(a))
Other non-cash
changes(2)
Foreign exchange
currency translation
differences
-
-
-
-
-
-
254
-
137
-
Financial asset
investment net of
related liabilities
and derivatives(1)
Total cash and
short-term
investments
Debt due within
one year
Debt due after
one year
Debt
carrying value
(7,659)
3,859
-
Debt
carrying value
(10,570)
(694)
(99)
(US$ million)
Total Net Debt
(8,504)
(1,200)
(75)
9,725
(4,365)
24
209
(1,669)
1628
13
9
1
168
23
5,606
(44)
82
(5,460)
1,199
(1)
(9,734)
(2,394)
-
(9,588)
(1,239)
81
324
(1,449)
1,398
(280)
255
206
273
181
At 31 March 2019
1,133
4,164
391
5,688
(5,456)
(10,524)
(10,292)
(1) Net debt is a Non-IFRS measure and represents total debt after fair value adjustments under IAS 32 and IFRS 9 as reduced by cash and cash equivalents,
short-term investments and structured investment, net of the deferred consideration payable for such investments (referred above as Financial asset
investment net of related liabilities) (refer note 35), if any
(2) Other non-cash changes comprise of amortisation of borrowing costs, foreign exchange difference on net debt and reclassification between debt due
within one year and debt due after one year. It also includes US$324 million (31 March 2018: US$209 million) of fair value movement in investments and
accrued interest on investments.
23. NON-EQUITY NON-CONTROLLING INTERESTS
As at 31 March 2019, non-equity non-controlling interests amounts to US$12 million (31 March 2018: US$12 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$0.99 per share,
which is the maximum amount payable to the deferred shareholders. These deferred shares have not been discounted as the
effect would not be material.
214
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 24. TRADE AND OTHER PAYABLES
Operational buyers’ credit/ suppliers’
credit
Dividend payable to NCI
Trade payables
Liabilities for capital expenditure
Profit petroleum Payable
Other payables (1)
Security deposits and retentions
Put option liability with non-
controlling interests (2)
Financial (A)
Statutory liabilities
Advance from customers (3)
Other payables
Non-financial (B)
Total (A+B)
Non- Current
-
-
-
7
-
189
2
29
227
-
17
-
17
244
As at 31 March 2018
As at 31 March 2018
Current
1,173
24
1,680
864
148
1,024
23
-
4,936
484
1,408
50
1,942
6,878
Total
1,173
24
1,680
871
148
1,213
25
29
5,163
484
1,425
50
1,959
7,122
Non- Current
-
-
-
19
-
10
2
21
52
-
66
-
66
118
(US$ million)
Total
1,448
46
1,653
628
127
752
40
21
Current
1,448
46
1,653
609
127
742
38
-
4,663
4,715
453
886
76
1,415
6,078
453
952
76
1,481
6,196
Trade payables are majorly non-interest bearing and are normally settled upto 180 days terms.
Operational buyers’ credit/ suppliers’ credit are interest-bearing liabilities and are normally settled within a period of twelve
months. These represent arrangements whereby operational suppliers of raw materials are paid by financial institutions, with the
Group recognising the liability for settlement with the institutions at a later date.
The fair value of trade and other payables is not materially different from the carrying value presented.
(1) Includes US$143 million (non-current) and US$156 million (current) of deferred consideration payable as at 31 March 2019 in relation to purchase of
structured investment. (Refer note 35)
(2) The non-controlling shareholders of ASI have an option to offload their shareholding to the Group. The option is exercisable at any time within the period
of three years following the fifth anniversary of the date of shareholders’ agreement (22 December 2017) at a price higher of US$0.757 per share and the
fair market value of the share. Therefore, the liability is carried at higher of the two. Subsequent changes to the put option liability are treated as equity
transaction and hence accounted for in equity.
(3) Advance from customers are contract liabilities and include amounts received under long term supply agreements. The advance payment plus a fixed
rate of return/ discount will be settled by supplying respective commodity over a period up to twenty four months under an agreed delivery schedule as per
the terms of the respective agreements. As these are contracts that the Group expects, and has the ability, to fulfil through delivery of a non-financial item,
these are recognised as advance from customers and will be released to the income statement as respective commodity is delivered under the agreements.
The portion of the advance that is expected to be settled within the next 12 months has been classified as a current liability. The increase in contract liabilities
is due to additional amounts received during the year.
25. FINANCIAL INSTRUMENTS
Financial Assets and Liabilities :
The following tables present the carrying value and fair value of each category of financial assets and liabilities as at
31 March 2019 and 31 March 2018:
Fair value
through profit
or loss
Fair value
through other
comprehensive
income
Derivatives
designated
as hedging
instruments
Amortised
cost
Total carrying
value
Total fair
value
(US$ million)
As at 31 March 2019
Financial Assets
Financial instruments (derivatives)
Financial asset investments held at fair value*
Short term investments
- Bank deposits
- Other investments
Cash and cash equivalents
Other non-current assets and trade and other
receivables
5
690
-
4,042
35
-
17
-
-
-
Total
4,772
17
* Includes structured investment (refer note 35).
6
-
-
-
-
6
-
-
122
1,133
1,639
11
707
122
4,042
1,133
1,674
11
707
122
4,042
1,133
1,674
2,894
7,689
7,689
215
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
As at 31 March 2019
Financial Liabilities
Financial instruments (derivatives)
Trade and other payables
Borrowings
Total
Fair value
through profit
or loss
Derivatives
designated
as hedging
instruments
Amortised
cost
Others*
Total carrying
value
Total fair
value
(US$ million)
79
221
-
300
1
-
-
1
-
4,913
15,980
20,893
-
29
-
29
80
5,163
15,980
21,223
80
5,163
15,873
21,116
* Represents put option liability accounted for at fair value - Refer Note 3(b) and 24
As at 31 March 2018
Financial Assets
Financial instruments (derivatives)
Financial asset investments held at fair value
Short term investments
- Bank deposits
- Other investments
Cash and cash equivalents
Other non-current assets and trade and other
receivables
Held for
trading
Loans and
receivables
Available for
sale
Derivatives
Total carrying
value
-
-
-
4,325
-
-
-
-
483
-
798
1,201
-
25
-
-
-
-
24
-
-
-
-
-
24
25
483
4,325
798
1,201
(US$ million)
Total fair
value
24
25
483
4,325
798
1,201
Total
4,325
2,482
25
24
6,856
6,856
As at 31 March 2018
Financial Liabilities
Financial instruments (derivatives)
Trade and other payables
Borrowings
Total
Amortised
cost
-
4,694
15,194
19,888
Derivatives
Others*
Total carrying
value
Total fair
value
40
-
-
40
-
21
-
21
40
4,715
15,194
19,949
40
4,715
15,311
20,066
* Represents put option liability accounted for at fair value - Refer Note 3(b) and 24
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
216
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 The below tables summarise the categories of financial assets and liabilities as at 31 March 2019 and 31 March 2018
measured at fair value:
Financial assets
At fair value through profit or loss
- Short term investments
- Financial asset investments held at fair value*
- Financial instruments (derivatives)
- Other non-current assets and trade and other receivables
At fair value through other comprehensive income
- Financial asset investments held at fair value
Derivatives designated as hedging instruments
- Financial instruments (derivatives)
Total
Financial liabilities
At fair value through profit or loss
- Financial instruments (derivatives)
- Trade and other payables
Derivatives designated as hedging instruments
- Financial instruments (derivatives)
Trade and other payables- Put option liability with non controlling interest (refer note 3(b))
Total
* Includes structured investment (refer note 35)
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)
Trade and other payables- Put option liability with non controlling interest (refer note 3(b))
Total
(US$ million)
As at 31 March 2019
Level 1
Level 2
Level 3
939
-
-
15
-
954
-
-
-
-
3,091
690
5
35
-
6
3,827
79
221
1
-
301
12
-
-
2
-
14
-
-
29
29
(US$ million)
As at 31 March 2018
Level 1
Level 2
Level 3
1,163
-
23
1,186
-
-
-
3,162
24
-
3,186
40
-
40
-
-
2
2
-
21
21
The below table summarises the fair value of borrowings which are carried at amortised cost as at 31 March 2019
and 31 March 2018:
Borrowings
Total
As at 31 March 2019
As at 31 March 2018
Level 1
3,068
3,068
Level 2
12,805
12,805
Level 1
3,444
3,444
Level 2
11,867
11,867
(US$ million)
217
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
The fair value of the financial assets and liabilities are at the
amount that would be received to sell an asset and paid to
transfer a liability in an orderly transaction between market
participants at the measurement date. The following methods
and assumptions were used to estimate the fair values:
• Investments traded in active markets are determined by
reference to quotes from the financial institutions; for
example: Net asset value (NAV) for investments in mutual
funds declared by mutual fund house. For other listed
securities traded in markets which are not active, the quoted
price is used wherever the pricing mechanism is same as
for other marketable securities traded in active markets.
Other current investments and structured investments
are valued by referring to market inputs including quotes,
trades, poll, primary issuances for securities and /or
underlying securities issued by the same or similar issuer for
similar maturities and movement in benchmark security, etc.
• Financial assets forming part of Trade and other receivables,
cash and cash equivalents (including restricted cash and
cash equivalents), bank deposits, financial liabilities forming
part of trade and other payables and short-term borrowings:
Approximate their carrying amounts largely due to the
short-term maturities of these instruments.
• Other non-current financial assets and financial liabilities:
Fair value is calculated using a discounted cash flow model
with market assumptions, unless the carrying value is
considered to approximate to fair value.
• Long term fixed-rate and variable rate borrowings: Listed
bonds are fair valued based on the prevailing market
price. For all other long term fixed-rate and variable-rate
borrowings, either the carrying amount approximates the
fair value, or fair value has been estimated by discounting
the expected future cash flows using a discount rate
equivalent to the risk-free rate of return adjusted for the
appropriate credit spread.
• Quoted financial asset investments: Fair value is derived
from quoted market prices in active markets.
• Derivative financial assets/liabilities: The Group enters into
derivative financial instruments with various counterparties.
Interest rate swaps, foreign exchange forward contracts and
commodity forward contracts are valued using valuation
techniques, which employs the use of market observable
inputs. The most frequently applied valuation techniques by
the Group include forward pricing and swap models, using
present value calculations. The models incorporate various
inputs including the foreign exchange spot and forward
rates, yield curves of the respective currencies, currency
basis spreads between the respective currencies, interest
rate curves and forward rate curves of the underlying
commodity. Commodity contracts are valued using the
forward LME rates of commodities actively traded on the
listed metal exchange i.e. London Metal Exchange, United
Kingdom (UK).
For all other financial instruments, the carrying amount is
either the fair value, or approximates the fair value.
The changes in counterparty credit risk had no material
effect on the hedge effectiveness assessment for derivatives
designated in hedge relationship and the value of other
financial instruments recognised at fair value.
The estimated fair value amounts as at 31 March 2019 have
been measured as at that date. As such, the fair values of
these financial instruments subsequent to reporting date may
be different than the amounts reported at each year-end.
There were no significant transfers between level 1, level 2 and
level 3 during the current year.
Risk management framework
The Group’s businesses are subject to several risks and
uncertainties including financial risks.
The Group’s documented risk management polices act
as an effective tool in mitigating the various financial risks
to which the businesses are exposed to 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, counterparty credit risk and
capital management.
Risks are identified at both the corporate and individual
subsidiary level with active involvement of senior
management. 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 other committees of the Board including 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 periodic meetings
of the 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.
The risk management framework aims to:
• improve financial risk awareness and risk transparency
• identify, control and monitor key risks
• identify risk accumulations
• provide management with reliable information on the
Group’s risk situation
• improve financial returns
Treasury management
Treasury management focuses on liability management,
capital protection, liquidity maintenance and yield
maximisation. The treasury policies are approved by the
Committee of the Board. Daily 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 managed jointly by the business treasury team
and the central team at corporate treasury while short-term
funding for routine working capital requirements is delegated
to subsidiary companies. A monthly reporting system exists
to inform senior management of the Group’s investments and
debt position, exposure to currency, commodity and interest
rate risk and their mitigants including the derivative position.
The Group has a strong system of internal control which
enables effective monitoring of adherence to Group’s policies.
218
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 The internal control measures are effectively supplemented by
regular internal audits.
The investment portfolio at the Group is independently
reviewed by CRISIL Limited and Group portfolio has been
rated as Tier I or “Very Good” meaning highest safety.
The investments are made keeping in mind safety, liquidity and
yield maximisation.
The Group uses derivative instruments to manage the
exposure 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, interest rate and
currency swaps and these are in line with the Group’s policies.
Equity price risk
As at 31 March 2019, the Group held economic interest in a
structured investment for the equity shares of Anglo American
Plc (AA Plc), a company listed on the London Stock Exchange,
having fair value of US$690 million (31 March 2018: Nil).
The instrument is exposed to equity price movements of AA
Plc, subject to a put option embedded therein (Refer note 35).
Set out below is the impact of 10% increase/ decrease in
equity prices on pre-tax profit/ (loss) for the year and pre-tax
equity as a result of changes in value of the investment:
For the year ended 31 March 2019:
Financial asset investment
Structured investment
Total Exposure
(fair value)
690
Effect on pre-tax profit/
(loss) of a 10% increase
in the equity price
Effect on pre-tax equity
of a 10% increase in the
equity price
Effect on pre-tax profit/
(loss) of a 10% decrease
in the equity price
Effect on pre-tax equity
of a 10% decrease in
the equity price
60
-
(28)
-
(US$ million)
The above sensitivities are based on change in price of the
underlying equity shares of AA plc and provide the estimated
impact of the change on profit and equity assuming that all
other variables remain constant.
Commodity Price 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 import of input commodities
such as Copper Concentrate & Alumina, for our Copper and
Aluminium business respectively, is hedged on back-to back
basis ensuring no price risk for the business. Hedging is used
primarily as a risk management tool and, in some cases, 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, basis clearly laid down guidelines.
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.
Financial instruments with commodity price risk are entered
into in relation to following activities:
• economic hedging of prices realised on commodity
contracts
• cash flow hedging of revenues, forecasted highly probable
transactions
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 outsourced alumina to
protect its margins.
The Group also enters into hedging arrangements for its
aluminium sales to realise average month of sale LME prices.
Copper
The Group’s custom smelting copper operations at Tuticorin
is benefitted 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 Treatment charges/Refining charges or “Tc/
Rc”, 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/Rc is a major source of income for the Indian copper
smelting operations. Fluctuation in Tc/Rc is 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 engages in
hedging for its custom smelting operations in line with
the Group’s policy on custom smelting at Tuticorin, as
explained above.
219
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Zinc, lead and silver
The sales prices are linked to the LME prices. The Group also
enters into hedging arrangements for its Zinc, Lead and Silver
sales to realise average month of sale LME prices.
Zinc International
Raw material for zinc and lead is mined in Namibia and South
Africa with sales prices linked to the 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.
Oil and Gas
The prices of various crude oils are based upon the price of
the key physical benchmark crude oil such as Dated Brent,
West Texas Intermediate, and Dubai/Oman etc. The crude
oil prices move based upon market factors like supply
and demand. The regional producers price their crude
basis these benchmark crude with a premium or discount
over the benchmark based upon quality differential and
competitiveness of various grades.
For the year ended 31 March 2019:
Natural gas markets are evolving differently in important
geographical markets. There is no single global market for
natural gas. This could be owing to difficulties in large-scale
transportation over long distances as compared to crude
oil. Globally, there are three main regional hubs for pricing of
natural gas, which are USA (Henry Hub Prices), UK (NBP Price)
and Japan (imported gas price, mostly linked to crude oil).
Provisionally priced financial instruments
On 31 March 2019, the value of net financial assets linked
to commodities (excluding derivatives) accounted for on
provisional prices was US$45 million (31 March 2018: liability
of US$468 million). These instruments are subject to price
movements at the time of final settlement and the final price
of these instruments will be determined in the financial year
beginning 01 April 2019.
Set out below is the impact of 10% increase in LME prices
on pre-tax profit/ (loss) for the year and pre-tax equity as
a result of changes in value of the Group’s commodity
financial instruments:
Commodity price sensitivity
Copper
For the year ended 31 March 2018:
Commodity price sensitivity
Copper
(US$ million except as stated)
Effect on pre-tax
profit/(loss) of a
10% increase in
the LME
Effect on pre-tax
equity of a 10%
increase in the
LME
Total Exposure
(21)
(2)
-
(US$ million except as stated)
Effect on profit/
(loss) of a 10%
increase in the LME
Effect on total
equity of a 10%
increase in the LME
31 March 2018
Total Exposure
(568)
(57)
-
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 statements.
The impact on pre-tax profit/(loss) mentioned above includes
the impact of a 10% increase in closing copper LME for
provisionally priced copper concentrate purchased at Vedanta
Limited Copper division custom smelting operations of
US$11 million (31 March 2018: US$57 million), which is pass
through in nature and as such will not have any impact on
the profitability.
Financial risk :
The Group’s Board approved financial risk policies include
monitoring, measuring and mitigating the 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 risk
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 short term 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$991 million, and cash, short
term investments and structured investment net of deferred
consideration payable for such investments of US$5,688
million as at 31 March 2019, are expected to be sufficient to
meet the liquidity requirement of the Group in the near future.
During FY2019, Moodys revised the outlook on ratings for
Vedanta Resources Limited to Negative from Stable while
affirming the corporate family rating at Ba3 in February 2019.
This was on account of expectation of weaker earnings on
account of downside risk to commodity prices and increased
risk of movement of funds outside Vedanta. S&P affirmed
the ratings at B+ while revising the Outlook to Negative in
March 2019 on account of weaker operating performance due
to commodity slowdown which along with higher debt could
keep its metrics weaker than required for current rating levels.
220 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 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 2019
Payment due by period
Trade and other payables(1)
Bank and other borrowings(2)
Derivative liabilities
Total
At 31 March 2018
Payment due by period
Trade and other payables(1)
Bank and other borrowings(2)
Derivative liabilities
Total
< 1 year
4,748
6,481
66
11,295
< 1 year
4,468
6,427
22
10,917
(1) Excludes accrued interest which has been included with borrowings
(2) Includes current and non-current borrowings and committed interest payments.
At 31 March 2019, the Group had access to following funding facilities:
As at 31 March 2019
Fund/Non-fund based
Total
As at 31 March 2018
Fund/Non-fund based
Total
1-3 years
3-5 years
> 5 years
172
6,098
14
6,284
1-3 years
31
4,164
18
4,213
29
3,914
-
3,943
3-5 years
21
4,823
-
4,844
Total facility
13,176
13,176
Total facility
12,003
12,003
-
2,900
-
2,900
> 5 years
-
2,956
-
2,956
Drawn
10,952
10,952
Drawn
10,256
10,256
(US$ million)
Total
4,949
19,393
80
24,422
(US$ million)
Total
4,520
18,370
40
22,930
(US$ million)
Undrawn
2,224
2,224
(US$ million)
Undrawn
1,747
1,747
Collateral
The Group has pledged financial instruments with carrying
amount of US$3,197 million and inventories with carrying
amount of US$1,564 million as per the requirements specified
in various financial facilities in place. The counterparties have
an obligation to release the securities to the Group when
financial facilities are surrendered.
(b) Foreign currency risk
Fluctuations in foreign currency exchange rates may have
an impact on the consolidated income statement, the
consolidated statements of change in equity, where any
transaction references more than one currency or where
assets/liabilities are denominated in a currency other than the
functional currency of the respective consolidated entities.
Considering the countries and economic environment in
which the Group operates, its operations are subject to
risks arising from the fluctuations primarily in the US dollar,
Australian dollar, Namibian dollar, AED, ZAR, GBP, INR, JPY and
Euro against the functional currencies of its subsidiaries.
Exposures on foreign currency loans are managed through
the Group wide hedging policy, which is reviewed periodically
to ensure that the results from fluctuating currency exchange
rates are appropriately managed. The Group strives to achieve
asset liability offset of foreign currency exposures and only the
net position is hedged.
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 except for Oil and Gas business operations
which have a US dollar functional currency. 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.
A more conservative approach has been adopted for project
expenditures to avoid budget overruns, where cost of the
project is calculated taking into account the hedge cost.
The hedge mechanisms are reviewed periodically to ensure
that the risk from fluctuating currency exchange rates is
appropriately managed.
The following analysis is based on the gross exposure as
at the reporting date which could affect the consolidated
income statement. The exposure summarised below is
mitigated by some of the derivative contracts entered into
by the Group as disclosed under the section on “Derivative
financial instruments”
221
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 The carrying amount of the Group’s financial assets and liabilities in different currencies are as follows:
USD
INR
Others
Total
(US$ million)
As at 31 March 2019
As at 31 March 2018
Financial Assets
Financial liabilities
Financial Assets
Financial liabilities
2,108
4,764
817
7,689
10,548
10,049
626
21,223
1,221
5,490
145
6,856
10,164
9,474
311
19,949
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 non-functional currency of the
Group’s main operating subsidiaries.
The foreign exchange rate sensitivity calculated by the aggregation of the net foreign exchange rate exposure with a
simultaneous parallel foreign exchange rates shift in the currencies by 10 % against the functional currencies of the
respective entities.
Set out below is the impact of a 10% strengthening in the functional currencies of the respective entities on pre-tax profit/(loss)
and pre-tax equity arising as a result of the revaluation of the Group’s foreign currency monetary financial assets/liabilities :
USD
USD
(US$ million)
For the year ended 31 March 2019
Closing
exchange rate
Effect on pre-tax
profit/(loss) of
10% strengthening
in currency
Effect on pre-tax
equity of
10% increase in
currency
69.1713
149
0
(US$ million)
For the year ended 31 March 2018
Closing
exchange rate
Effect on pre-tax
profit/(loss) of
10% strengthening
in currency
Effect on pre-tax
equity of
10% increase in
currency
65.0441
234
-
A 10% weakening of the functional currencies of the
respective entities would have an equal and opposite effect on
the Group’s financial statements.
(c) Interest rate risk
At 31 March 2019, the Group’s net debt of US$10,292 million
(31 March 2018: US$9,588 million net debt) comprises cash,
cash equivalents, short term investments and structured
investment net of deferred consideration payable for such
investments of US$5,688 million (31 March 2018: US$5,606
million) offset by debt of US$15,980 million (31 March 2018:
US$15,194 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. The borrowings of the Group are principally
denominated in Indian Rupees and US dollars with mix of fixed
and floating rates of interest. The USD floating rate debt is
linked to US dollar LIBOR and INR Floating rate debt to Bank’s
base rate. The Group has a policy of selectively using interest
rate swaps, option contracts and other derivative instruments
to manage its exposure to interest rate movements.
These exposures are reviewed by appropriate levels of
management on a monthly basis.
The Group invests cash and short term 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.
222 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 The exposure of the Group’s financial assets to interest rate risk is as follows:
Financial assets
Total financial assets
As at 31 March 2019
As at 31 March 2018
Floating rate
financial assets
Fixed rate financial
assets
Non-interest
bearing financial
assets
Floating rate
financial assets
Fixed rate financial
assets
2,120
2,120
2,676
2,676
2,893
2,893
3,021
3,021
2,260
2,260
The exposure of the Group’s financial liabilities to interest rate risk is as follows:
As at 31 March 2019
As at 31 March 2018
Floating rate
financial assets
Fixed rate financial
assets
Non-interest
bearing financial
assets
Floating rate
financial assets
Fixed rate financial
assets
Financial liabilities
Total financial liabilities
7,753
7,753
9,447
9,447
4,023
4,023
6,483
6,483
10,211
10,211
(US$ million)
Non-interest
bearing financial
assets
1,575
1,575
(US$ million)
Non-interest
bearing financial
assets
3,255
3,255
Considering the net debt position as at 31 March 2019 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 financial instruments at the
balance sheet date.
The below table illustrates the impact of a 0.5% to 2.0% movement in interest rate of floating rate financial assets/liabilities
(net) on profit/(loss) and equity assuming that the changes occur at the reporting date and has been calculated based on risk
exposure outstanding as of date. The year end balances are not necessarily representative of the average debt outstanding
during the year. This analysis also assumes that all other variables, in particular foreign currency rates, remain constant.
Increase in interest rates
0.5%
1.0%
2.0%
Effect on pre-tax
profit/(loss)
during the
year ended
31 March 2019
(US$ million)
Effect on pre-tax
profit/(loss)
during the
year ended
31 March 2018
(28)
(56)
(112)
(17)
(35)
(69)
A reduction in interest rates would have an equal and opposite
effect on the Group’s financial statements.
For derivative and financial instruments, the Group attempts
to limit the credit risk by only dealing with reputable banks and
financial institutions.
(d) Credit risk
Credit risk refers to the risk that counterparty will default on
its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with
creditworthy counterparties and obtaining sufficient collateral,
where appropriate, as a means of mitigating the risk of
financial loss from defaults.
The Group is exposed to credit risk from trade receivables,
contract assets, cash and cash equivalents, short term
investments and other financial instruments.
The Group has clearly defined policies to mitigate
counterparty risks. For short-term investments, counterparty
limits are in place to limit the amount of credit exposure to any
one counterparty. This, therefore, results in diversification of
credit risk for our mutual fund and bond investments.
Credit risk on receivables is limited as almost all credit sales are
against letters of credit and guarantees of banks of national
standing. 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 2019 and 31 March 2018,
no single customer accounted for 10% or more of the
Group’s net sales. 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 as at
31 March2019 is US$7,689 million (31 March 2018: US$
6,856 million).
223
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 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 :
Neither past due nor impaired
Past due but not impaired
- Less than 1 month
- Between 1 - 3 months
- Between 3 - 12 months
- Greater than 12 months
Total
2019
972
129
49
76
366
1,592
(US$ million)
2018
574
126
60
112
238
1,110
Receivables are deemed to be past due or impaired with reference to the Group’s normal terms and conditions of business.
These terms and conditions are determined on a case to case basis with reference to the customer’s credit quality and prevailing
market conditions. Receivables that are classified as ‘past due’ in the above table are those that have not been settled within the
terms and conditions that have been agreed with that customer.
The credit quality of the Group’s customers is monitored on an ongoing basis and assessed for impairment where indicators of
such impairment exist. The solvency of the debtor and their ability to repay the receivable is considered in assessing receivables
for impairment. Where receivables have been impaired, the Group actively seeks to recover the amounts in question and enforce
compliance with credit terms.
Movement in allowances for Financial Assets (other non-current assets and trade and other receivables)
Particulars
As at 01 April 2017
Allowance made during the year
Reversals during the year
Foreign Exchange difference
As at 31 March 2018
Allowance made during the year
Reversals during the year
Foreign Exchange difference
As at 31 March 2019
US$ million
146
37
(33)
0
150
7
(1)
(5)
151
Derivative financial instruments
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 these are subject to the Group
guidelines and policies.
The fair value of all derivatives are separately recorded on the
balance sheet within other financial assets (derivatives) and
other financial liabilities (derivatives), current and non-current.
Derivatives that are designated as hedges are classified
as current or non-current depending on the maturity of
the derivative.
The use of derivatives can give rise to credit and market
risk. The Group tries to control credit risk as far as possible
by only entering into contracts with reputable banks and
financial institutions. The use of derivative instruments
is subject to limits, authorities and regular monitoring by
appropriate levels of management. The limits, authorities and
monitoring systems are periodically reviewed by management
and the Board. The market risk on derivatives is mitigated
by changes in the valuation of the underlying assets,
liabilities or transactions, as derivatives are used only for risk
management purposes.
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 enters into forward exchange and commodity price
contracts for hedging highly probable forecast transaction
and account for them as cash flow hedges and states them
at fair value. Subsequent changes in fair value are recognised
in consolidated statement of comprehensive income until
the hedged transaction occurs, at which time, the respective
gain or losses are reclassified to the consolidated income
statement. These hedges have been effective for the year
ended 31 March 2019.
The Group uses foreign exchange contracts from time to time
to optimise currency risk exposure on its foreign currency
transactions. The Group hedged part of its foreign currency
exposure on capital commitments during fiscal year 2019.
Fair value changes on such forward contracts are recognised
in the consolidated statement of comprehensive income.
224 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 The majority of cash flow hedges taken out by the Group
during the year comprise non-derivative hedging instruments
for hedging the foreign exchange rate of highly probable
forecast transactions and commodity price contracts
for hedging the commodity price risk of highly probable
forecast transactions.
for the respective quotational period to hedge its commodity
price risk based on average LME prices. Gains and losses
on these hedge transactions are substantially offset by
the amount of gains or losses on the underlying sales.
Net gains and losses are recognised in the consolidated
income statement.
The cash flows related to above are expected to occur during
the year ending 31 March 2020 and consequently may impact
the consolidated income statement for that year depending
upon the change in the commodity prices and foreign
exchange rates movements. For cash flow hedges regarded as
basis adjustments to initial carrying value of the property, plant
and equipment, the depreciation on the basis adjustments
made is expected to affect the consolidated income
statement over the expected useful life of the property, plant
and equipment.
Fair value hedges
The fair value hedges relate to forward covers taken to hedge
currency exposure and commodity price risks.
The Group uses foreign exchange contracts from time to time
to optimise currency risk exposure on its foreign currency
transactions. Fair value changes on such forward contracts are
recognised in the consolidated income statement.
Non-qualifying/economic hedge
The Group enters into derivative contracts which are not
designated as hedges for accounting purposes, but provide
an economic hedge of a particular transaction risk or a risk
component of a transaction. Hedging instruments include
copper, aluminium and zinc future contracts on the LME and
certain other derivative instruments. Fair value changes on
such derivative instruments are recognised in the consolidated
income statement.
The Group’s sales are on a quotational period basis, generally
one month to three months after the date of delivery at a
customer’s facility. The Group enters into forward contracts
The fair value of the Group’s open derivative positions as
at 31 March 2019, recorded within financial instruments
(derivative) is as follows:
As at 31 March 2019
As at 31 March 2018
Liability
Asset
Liability
Asset
(US$ million)
Current
Cash flow hedges
- Commodity contracts
- Forward foreign currency contracts
Fair value hedges
- Commodity contracts
- Forward foreign currency contracts
Non Qualifying hedges
- Commodity contracts
- Forward foreign currency contracts
- Other (Foreign currency swap)
Total
Non-current
Fair Value Hedges
- Forward foreign currency contracts
Non Qualifying hedges
- Commodity contracts
- Forward foreign currency contracts
Total
Grand Total
1
0
-
-
11
53
1
66
-
-
14
14
80
0
5
0
1
1
4
0
11
-
-
-
-
11
15
-
0
1
2
4
0
22
16
0
2
18
40
18
0
1
2
1
2
0
24
-
-
-
-
24
225
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 26. PROVISIONS
(US $ million)
Provision for restoration, rehabilitation and environmental
Provision for employee benefits
Others
Total
As at 31 March 2019
As at 31 March 2018
Current Non- Current
2
29
7
38
369
2
-
371
Total
371
31
7
409
Current
Non- Current
7
8
7
22
344
7
-
351
Total
351
15
7
373
Other
19
0
-
-
-
-
(12)
0
-
7
0
-
-
-
-
(0)
-
7
Restoration,
rehabilitation and
environmental
317
8
(1)
(10)
13
23
(6)
3
4
351
3
(2)
(1)
13
23
(16)
0
371
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.
Others
Others include provision for disputed cases and claims.
27. RETIREMENT BENEFITS
The Group participates in defined contribution and benefit
plans, the assets of which are held (where funded) in
separately administered funds.
For defined contribution plans the amount charged to
the consolidated income statement is the total amount of
contributions payable in the year.
For defined benefit plans, the cost of providing benefits
under the plans is determined by actuarial valuation
separately each year for each plan using the projected unit
credit method by independent qualified actuaries as at the
year end. Re-measurement gains and losses arising in the
year are recognised in full in Consolidated Statement of
Comprehensive Income for the year.
As at 1 April 2017
Additions
Utilised
Unused amounts reversed
Unwinding of discount (note 8)
Revision in estimates
Reclassified during the year
Exchange differences
Acquisition through business combination
As at 1 April 2018
Additions
Utilised
Unused amounts reversed
Unwinding of discount (note 8)
Revision in estimates
Exchange differences
Acquisition through business combination (net of disposal)
As at 31 March 2019
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 licences and
contractual arrangements.
Within India, the principal restoration and rehabilitation
provisions are recorded within Cairn India where a legal
obligation exists relating to the oil and 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.
These amounts are calculated by considering discount
rates within the range of 2% to 14%, and become payable
on closure of mines and are expected to be incurred over
a period of one to thirty years. The discount rates at major
units are in the range of 2% to 10% at Zinc International with
lower range at operations in Ireland and higher range at
operations in African Countries, 2% to 3% at Oil & Gas division
and 14% at KCM.
226 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019
(i) Defined contribution plans
The Group contributed a total of US$17 million and US$16 million for the year ended 31 March 2019 and 2018 respectively, to
the following defined contribution plans.
Particulars
Employer’s contribution to Recognised Provident fund and family pension fund
Employer’s contribution to superannuation
Year ended
31 March 2019
(US $ million)
Year ended
31 March 2018
15
2
17
14
2
16
Indian pension plans
Central recognised provident fund
In accordance with the ‘The Employees Provident and
Miscellaneous Provisions Act ,1952’, employees are entitled
to receive benefits under the Provident Fund. Both the
employee and the employer make monthly contributions to
the plan at a predetermined rate (12% for the year ended
31 March 2019 and 31 March 2018) of an employee’s basic
salary. All employees have an option to make additional
voluntary contributions. These contributions are made to the
fund administered and managed by the Government of India
(GOI) or to independently managed and approved funds.
The Group has no further obligations under the fund managed
by the GOI beyond its monthly contributions which are
charged to the consolidated income statement in the period
they are incurred.
Family 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 is provided for every permanent employee on the payroll.
At the age of superannuation, contributions ceases 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.
Superannuation
Superannuation, another pension scheme applicable in
India, is applicable only to executives above certain grade.
However, in case of oil & gas (applicable from the second
year of employment) and Iron Ore Segment, the benefit
is applicable to all executives. Vedanta Limited and each
relevant Indian subsidiary holds policy with the Life Insurance
Corporation of India (“LIC”), to which each of these entities
contributes a fixed amount relating to superannuation and
the pension annuity is met by the LIC as required, taking into
consideration the contributions made. The Group has no
further obligations under the scheme beyond its monthly
contributions which are charged to the consolidated income
statement in the year they are incurred.
Australian pension Scheme
The Group also participates in defined contribution
superannuation 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, into the employee’s fund of choice 9.5% of
the employee’s gross remuneration where the employee is
covered by the industrial agreement and 12.50% of the basic
remuneration for all other employees. All employees have an
option to make additional voluntary contributions. The Group
has no further obligations under the scheme beyond its
monthly contributions which are charged to the consolidated
income statement in the year they are incurred.
Zambian Pension Scheme
The Konkola Copper Mines (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 2 times annual salary in the event of death
before retirement.
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 in the year
they are incurred.
227
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Black Mountain (Pty) Limited, South Africa Pension & Provident Funds
Black Mountain Mining (Pty) Ltd has two retirement funds, both administered by Alexander Forbes, a registered financial service
provider. The purpose of the funds is to provide retirement and death benefits to all eligible employees. Group contributes at a
fixed percentage of 10.5% for up to supervisor grade and 15% for others.
Membership of both funds is compulsory for all permanent employees under the age of 60.
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 consolidated income statement in the year
they are incurred.
(ii) Defined benefit plans
(a) Contribution to provident fund trust (the “trusts”) of Iron ore division, Bharat Aluminium Company Limited (BALCO),
Hindustan Zinc Limited (HZL), Sesa Resources Limited (SRL) and Sesa Mining Corporation Limited (SMCL)
The provident funds of Iron ore division, BALCO, HZL, SRL and SMCL are exempted under section 17 of The Employees Provident
Fund and Miscellaneous Provisions Act, 1952. Conditions for grant of exemption stipulates that the employer shall make good
deficiency, if any, between the return guaranteed by the statute and actual earning of the Fund. Based on actuarial valuation
in accordance with IAS 19 and Guidance note issued by Institute of Actuaries of India for interest rate guarantee of exempted
provident fund liability of employees, there is no interest shortfall that is required to be met by Iron ore division, BALCO, HZL,
SRL and SMCL as at March 31,2019 and March 31,2018. Having regard to the assets of the fund and the return on investments,
the Group does not expect any deficiency in the foreseeable future. The Group contributed a total of US$10 million & US$10
million for the years ended 31 March 2019 and 2018 respectively in relation to the independently managed and approved funds.
The present value of obligation and the fair value of plan assets of the trust are summarised below.
Particulars
Fair value of plan assets of trusts
Present value of defined benefit obligation
Net liability arising from defined benefit obligation
Percentage allocation of Plan assets of the trust
Assets by Category
Government Securities
Debentures / Bonds
Equity
Fixed Deposits
(US$ million)
As at
31 March 2019
As at
31 March 2018
317
(306)
-
233
(226)
-
(US$ million)
As at
31 March 2019
As at
31 March 2018
53.1%
45.7%
1.2%
0.0%
71.2%
28.0%
0.6%
0.2%
(b) Post-Retirement Medical Benefits:
The Group has a scheme of medical benefits for employees
at BMM and BALCO subsequent to their retirement on
completion of tenure including retirement on medical grounds
and voluntary retirement on contributory basis. The scheme
includes employee’s spouses as well. Based on an actuarial
valuation conducted as at year-end, a provision is recognised
in full for the benefit obligation. The obligation relating to
post-retirement medical benefits as at 31 March 2019 was
US$9 million (31 March 2018: US$10 million). The obligation
under this plan is unfunded. The Group considers these
amounts as not material and accordingly has not provided
further disclosures as required by IAS 19 (Revised 2011)
‘Employee benefits’. The remeasurement gain and net interest
on the obligation of post-retirement medical benefits of US$0
million (31 March 2018: US$0 million) and US$1 million (31
March 2018: US$1 million) for the year ended 31 March 2019
have been recognised in other comprehensive income and
finance cost respectively.
(c) Other Post-employment Benefits:
India- Gratuity Plan
In accordance with the Payment of Gratuity Act of 1972,
Vedanta Limited and its Indian subsidiaries contributes to
a defined benefit plan (the “Gratuity Plan”) covering certain
categories of employees. The Gratuity Plan provides a lump
sum payment to vested employees at retirement, disability or
termination of employment being an amount based on the
respective employee’s last drawn salary and the number of
years of employment with the Group.
Based on actuarial valuations conducted as at year end using
the projected unit credit method, a provision is recognised in
full for the benefit obligation over and above the funds held
in the Gratuity Plan. For entities where the plan is unfunded,
full provision is recognised in the consolidated statements of
financial position.
The iron ore and oil & gas division of Vedanta Limited, SRL,
SMCL and HZL have constituted a trust recognised by Indian
Income Tax Authorities for gratuity to employees, contributions
to the trust are funded with Life Insurance Corporation of India
(LIC), ICICI Prudential Life Insurance Company Limited and
HDFC Standard life insurance.
Zambia
Specified permanent employees of KCM are entitled to receive
medical and retirement severance benefits. This comprises
228 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 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 sixty
months’ basic pay for employees who joined before 1 April 2000 and thirty months’ basic pay for employees who joined on or
after 1 April 2000. For fixed term contract employees, the benefit payable on death is thirty months’ basic pay.
Principal actuarial assumptions.
Principal actuarial assumptions used to determine the present value of Other post-employment benefit plan obligation
are as follows:
Particulars
Discount rate
Expected rate of increase in compensation level of covered employees
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
7.8% to 17.0% 7.7% to 18.5%
2.0%-15.0%
2.0%-15.0%
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.
Amount recognised in the Consolidated Statement of Financial Position consists of:
Particulars
Fair value of plan assets
Present value of defined benefit obligation
Net liability arising from defined benefit obligation
(US$ million)
As at
31 March 2019
As at
31 March 2018
56
(135)
(79)
52
(122)
(70)
Amounts recognised in Consolidated income statement in respect of Other post-employment benefit plan are as follows:
Particulars
Current service cost
Past service cost
Net Interest cost
Components of defined benefit costs recognised in consolidated income statement
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
9
-
8
17
7
13
7
27
Amounts recognised in the Consolidated Statement of Comprehensive Income in respect of Other post-employment benefit
plan are as follows:
Particulars
Remeasurement of the net defined benefit obligation:
Actuarial losses arising from changes in demographic assumptions
Actuarial losses / (gains) arising from changes in financial assumptions
Actuarial losses / (gains) arising from experience adjustments
Actuarial losses/(gains) on plan assets (excluding amounts included in net interest cost)
Components of defined benefit costs recognised in consolidated statement of comprehensive
income- losses/(gains)
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
0
(1)
7
0
6
-
0
(1)
0
(1)
229
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 The movement of the present value of Other post-employment benefit plan obligation is as follows:
Particulars
Opening balance
Acquired in business combination
Current service cost
Past service cost
Benefits paid
Interest cost
Actuarial (losses)/gains arising from changes in assumptions
Foreign currency translation
Derecognition of death benefit obligation during the year
Reclassification from provisions
Closing balance
The movement in the fair value of Other post-employment benefit plan assets is as follows:
Particulars
Opening balance
Acquired in business combination
Contributions received
Benefits paid
Remeasurement gain/ (loss) arising from return on plan assets
Interest income
Foreign currency translation
Closing balance
Year ended
31 March 2019
(US$ million)
Year ended
31 March 2018
(122)
(116)
(2)
(9)
-
16
(12)
(6)
-
-
-
-
(7)
(13)
7
(11)
1
0
22
(7)
(135)
(122)
Year ended
31 March 2019
(US$ million)
Year ended
31 March 2018
52
2
12
(11)
(0)
4
(3)
56
49
-
5
(6)
(0)
4
(0)
52
The above plan assets have been invested in the qualified insurance policies.
The actual return on plan assets was US$4 million and US$4 million for the year ended 31 March 2019 and 31 March
2018 respectively.
The weighted average duration of the defined benefit obligation is 15 years and 15 years as at 31 March 2019 and 31 March
2018 respectively.
The company expects to contribute US$8 million to the funded Gratuity plan during the year ending 31 March 2020.
Sensitivity analysis for Defined Benefit Plan
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 reporting year while
holding all other assumptions constant.
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
(3)
4
4
(3)
230 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 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.
In presenting the above sensitivity analysis, the present value
of defined benefit obligation has been calculated using the
projected unit credit method at the end of reporting period,
which is the same as that applied in calculating the defined
obligation liability recognised in the consolidated statement of
financial position.
Risk analysis
Group is exposed to a number of risks in the defined benefit
plans. 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 (LIC), ICICI Prudential Life
(ICICI) and HDFC Standard Life. Group does not have any
liberty to manage the fund provided to LIC, ICICI prudential
and HDFC Standard Life.
28. EMPLOYEE NUMBERS AND COSTS
Average number of persons employed by the Group in the year*
The present value of the defined benefit plan obligation is
calculated using a discount rate determined by reference to
Government of India bonds for 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
net plan obligation.
Longevity risk/ Life expectancy
The present value of the defined benefit plan obligation 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 obligation.
Salary growth risk
The present value of the defined benefit plan obligation
is calculated by reference to the future salaries of plan
participants. An increase in the salary of the plan participants
will increase the plan obligation.
Class of business
Zinc
- India
- International
Iron ore
Copper
- India/Australia
- Zambia
Aluminium
Power
Oil & Gas
Other
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
5,905
4,325
1,580
2,688
7,525
1,113
6,412
6,784
98
1,847
3,080
6,035
4,506
1,529
2,869
7,724
1,162
6,562
6,296
223
1,780
156
27,927
25,083
Costs incurred during the year in respect of Employees and Executive Directors recognised in Consolidated Income Statement
Salaries and wages
Defined contribution pension scheme costs (note 27)
Defined benefit pension scheme costs including interest on defined benefit obligation (note 27)
Share- based payments charge
Gratuity- Special Items (note 6)
Less: cost allocated/directly booked in joint ventures
*Non IFRS measure
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
604
17
27
21
-
(92)
577
555
16
24
23
13
(91)
540
231
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 29. 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 2003. 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). In 2016, Vedanta Limited
(subsidiary of Vedanta Resources Limited) introduced an
Employee Stock Option Scheme 2016 (“ESOS”), which was
approved by the Vedanta Limited shareholders.
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. 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:
Performance Share Plan (the ‘PSP’)
Dependent on the level of employee, part of these awards
will be subject to a continued service condition only with the
remainder measured in terms of Total Shareholder Return
(‘TSR’) (being the movement in a company’s share price plus
reinvested dividends), 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 awards granted under PSP plans are either equity-settled
or cash-settled. The equity settled plans have an exercise price
of 10 US cents per share and the performance period is three
years, with no re-testing being allowed. In the cash-based
scheme, business performance set against business plan for
the financial year is included as an additional condition.
Employee Share Ownership Plan (the ‘ESOP’)
The awards under this plan are 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.
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.
The Vedanta Resources Long term Incentive Plan
(the ‘LTIP’)
The awards under this plan are measured in terms of Total
Shareholder Return (‘TSR’) (being the movement in a
company’s share price plus reinvested dividends), 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 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)
Under this 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, but only to service
conditions being met. The vesting schedule is staggered over
a period of one to three years. In case of DSBP, the shares
are purchased from open market and allotted to employees,
officers and directors. As on 31 March 2019, there are no
options outstanding under the DSBP scheme.
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 5 dealing
days before the grant date.
The details of share options for the year ended 31 March 2019 and 31 March 2018 is presented below:
Year of
Grant
2014
2015
2015
2016
2016
2017
2017
Exercise Period
17 November 2017- 17 May 2018
1 January 2018 – 1 July 2018
30 December 2018 – 30 June 2019
12 May 2019 - 12 November 2019
11 November 2019 - 11 May 2020
2 March 2020 – 2 September 2020
(cash based plan)
14 November 2020 – 14 May 2021
(cash based plan)
Exercise
price US
cents per
share
Options
outstanding
1 April 2018
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
2019
10
10
483,340
8,845
10 4,499,326
10
10
-
-
32,000
371,944
627,660
780,180
-
-
-
-
-
-
-
-
(28,547)
-
-
-
(454,793)
(8,845)
(167,587) (1,125,804) (3,205,935)
(7,422)
-
(24,578)
(132,776)
(155,277)
(83,891)
(328,097)
(155,351)
(144,212)
(566,222)
(169,392)
(44,566)
(219,942)
(80,728)
-
-
-
-
-
-
-
-
-
-
2017
14 November 2020 - 14 May 2021
10
300,670
7,103,965
- (1,450,093) (1,686,552) (3,966,820)
232 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 Year of
Grant
2014
2015
2015
2016
2016
2017
2017
Exercise Period
17 November 2017- 17 May 2018
1 January 2018 – 1 July 2018
30 December 2018 – 30 June 2019
12 May 2019 - 12 November 2019
11 November 2019 - 11 May 2020
2 March 2020 – 2 September 2020
(cash based plan)
14 November 2020 – 14 May 2021
(cash based plan)
2017
14 November 2020 - 14 May 2021
Exercise price
US cents per
share
Options
outstanding
1 April 2017
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
2018
(120,483)
(963,690) (2,679,770)
483,340
(6,000)
(6,655)
10 4,247,283
10
21,500
10 4,930,183
32,000
475,000
678,550
10
10
-
-
10
-
-
-
-
-
-
(430,857)
-
(103,056)
(50,890)
-
-
805,900
(25,720)
300,670
-
-
-
-
-
-
-
-
8,845
- 4,499,326
-
-
-
-
-
32,000
371,944
627,660
780,180
300,670
10,384,516 1,106,570
(737,006)
(970,345) (2,679,770) 7,103,965
During the current year, through a cash offer all the
outstanding equity settled options were bought back by
Vedanta Resources Limited’s parent, Volcan Investments
Limited. All the TSR based options were vested based on the
TSR performance from the date of grant to the date on which
buy-back offer on these options went unconditional. For the
service condition related options, no. of options were prorated
as per remaining period left till the date of actual vesting
except for options issued in December 2015 which got vested
in full. For options outstanding under DSBP all options were
vested in full. On account of delisting of the Company, the
cash based options were also early settled. The accelerated
charge on account of early settlement of both the equity
settled and cash settled options was recognised in the
income statement.
Hence, as at 31 March 2019, no options were exercisable
at the year end (31 March 2018: 492,185 options were
exercisable). The Weighted average share price for the share
options exercised during the year ended 31 March 2019 was
GBP 9 (Year ended 31 March 2018: GBP 7). The weighted
average maturity period for the options outstanding as on 31
March 2019 is Nil (31 March 2018: 18 months).
Most of the 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.
Where an award is cash-settled the fair value is recalculated at
each reporting date until the liability is settled.
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. 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/LTIP awards granted during the year ended
31 March 2018 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 2018
PSP/ LTIP
November 2017
November 2017
805,900 (cash settled)
300,670 (equity settled)
-
GBP 7.8
3years
61.33%
3 years
5.77%
0.51%
10%p.a.
GBP 3.1/GBP 6.6
US$0.10
GBP 7.8
3years
61.33%
3 years
5.77%
0.51%
10%p.a.
GBP 3.1
233
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 The Group recognised total expenses of US$6 million
(including expenses on DSBP of US$1 million) and US$12
million (including expenses on DSBP of US$2 million) related
to equity settled share-based payment transactions in the year
ended 31 March 2019 and 31 March 2018 respectively.
The total expense recognised on account of cash settled share
based plan during the year ended 31 March 2019 is US$0
million (31 March 2018 : US$1 million) and the carrying value
of cash settled share based compensation liability as at 31
March 2019 is Nil (31 March 2018 is US$1 million).
The Vedanta Limited Plans
Employee Stock Option Scheme (ESOS) 2016
During the year 2016, Vedanta Limited (subsidiary of Vedanta
Resources Limited) introduced an Employee Stock Option
Scheme 2016 (“ESOS”), which was approved by the Vedanta
Limited shareholders. The maximum value of shares that can
be conditionally awarded to an Executive Committee in a
year is 125% of annual salary. The maximum value of options
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
attached to the award is measured by comparing company’s
performance in terms of TSR over the performance period
with the performance of the companies as defined in the
scheme. The extent to which an award vests will depend on
the Vedanta Limited’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. Dependent on
the level of employee, part of these awards will be subject to a
continued service condition only with the remainder measured
in terms of TSR. The exercise price of the awards is 1 INR per
share and the performance period is three years, with no
re-testing being allowed. Further in some schemes under the
plan, business performance set against business plan for the
financial year is included as an additional condition. During the
year, cash based options were also issued under this scheme.
The details of share options for the year ended 31 March 2019 and 31 March 2018 is presented below:
Year of
Grant
Exercise Period
2017 15 December 2019-15 June 2020
2018 1 September 2020-1 March 2021
2018 16 October 2020-16 April 2021
2018 1 November 2020-1 May 2021
2019 1 November 2021-1 May 2022
2019 1 November 2021-1 May 2022 (Cash settled)
Year of
Grant
Exercise Period
Options
outstanding
01 April 2018
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
31 March
2019
7,098,602
9,617,340
11,570
28,740
-
-
-
-
(590,376)
-
(848,381)
(494,566)
-
-
(444)
(1,102)
- 13,793,980
(227,780)
- 3,889,980
(42,486)
-
-
16,756,252 17,683,960 (1,709,023)
(496,112)
- 6,508,226
- 8,274,393
-
-
11,126
27,638
- 13,566,200
- 3,847,494
- 32,235,077
Options
outstanding
01 April 2017
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
31 March
2018
2017 15 December 2019-14 June 2020
7,803,400
-
(704,798)
2018 1 September 2020-28 February 2021
- 10,048,650 (431,310)
2018 16 October 2020-15 April 2021
2018 1 November 2020-30 April 2021
-
-
11,570
28,740
-
-
7,803,400 10,088,960 (1,136,108)
-
-
-
-
-
- 7,098,602
- 9,617,340
-
-
11,570
28,740
- 16,756,252
The fair value of all 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. 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 Vedanta Limited’s
TSR performance. All options are assumed to be exercised
immediately after vesting.
234 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019
The assumptions used in the calculations of the charge in respect of the ESOS awards granted during the year ended
31 March 2019 and 31 March 2018 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 March 2019
ESOS November 2018
3,889,980 (cash settled)/
13,793,980 (equity settled)
Year ended March 2018
ESOS September, October &
November 2017
10,088,960
INR 1
INR 195.0
3 years
44.3%
3 years
6.5%
7.7%
10%p.a.
INR 1
INR 308.9
3 years
48%
3 years
3.7%
6.5%
10%p.a.
INR 159.9/INR 96.3
INR 275.3/INR 161.1
The Group recognised total expenses of US$12 million (2018: US$7 million) related to equity settled share-based plans under the
above scheme in the year ended 31 March 2019.
The Group has awarded certain other cash settled option plans indexed to shares of its subsidiaries. As the amounts under these
plans are not material, accordingly no further disclosures have been provided.
The total expense recognised on account of these cash settled option plans during the year ended 31 March 2019 is US$3
million (2018: US$3 million) and the carrying value of cash settled share based compensation liability as at 31 March 2019 is
US$5 million (2018: US$3 million).
30. SHARE CAPITAL
Shares in issue
Ordinary shares of 10 US cents each
Deferred shares of £1 each
Total
Rights and obligations attaching to shares
The rights and obligations attaching to the ordinary and
deferred shares are set out in the Articles.
Each ordinary share carries the right to one vote at general
meetings of the Company and is entitled to dividends.
During the year ended 31 March 2019, the Company issued
3,762,142 ordinary shares at par value of 10 US cents per
share to the employees pursuant to the Vedanta Performance
Share Plan (31 March 2018: 2,686,214 shares).This included
the shares which were issued on vesting of the Company
outstanding share plans on account of the takeover offer
by Volcan Investments Limited becoming unconditional.
In addition, 22,502,483 Treasury shares, equivalent to US$491
million were cancelled. As a result, the number of Ordinary
shares in issue has decreased from that at 31 March 2018 to
285,246,698 shares.
6,904,995 Ordinary shares with no voting rights, which were
previously issued on the conversion of certain convertible
bonds issued by one of the Group’s subsidiaries and held
through Global Depositary Receipts, were transferred to
Volcan as part of the takeover offer of the Company’s shares.
Following the takeover, the GDR listing was terminated.
The holders of deferred shares do not have the right to
receive notice of any general meeting of the Company nor
the right to attend, speak or vote at any such general meeting.
As at 31 March 2019
As at 31 March 2018
Number
Paid up amount
(US$ million)
Number
Paid up amount
(US$ million)
285,246,698
50,000
285,296,698
29
0
29
303,987,039
50,000
304,037,039
30
0
30
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.
31. NON-CONTROLLING INTERESTS (‘NCI’)
The Group consists of a parent Company, Vedanta Resources
Limited, incorporated in UK and a number of subsidiaries
held directly and indirectly by the Group which operate and
are incorporated around the world. Note 39 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 Holdings Limited
(CIHL) and its subsidiaries and Vedanta Limited.
As at 31 March 2019, NCIs hold an economic interest of
67.33%, 49.67% and 49.67% respectively in HZL, CIHL and
its wholly owned subsidiaries, and Vedanta Limited. In ASI
(partly owned subsidiary of CIHL), the NCI’s economic interest
is 74.01%. The respective NCI holdings as at 31 March 2018
were 67.38%, 49.75% and 49.75% in HZL, CIHL and its wholly
235
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 owned subsidiaries, and Vedanta Limited. In ASI (partly owned subsidiary of CIHL), the NCI’s economic interest was 74.06% as
at 31 March 2018.
Principal place of business of HZL, CIHL and its subsidiaries and Vedanta Limited is set out under note 39.
The table below shows details of non-wholly owned subsidiaries of the Group that have material non-controlling interests:
The summarised financial information below are on a 100% basis and before inter-company eliminations.
Year ended 31 March 2019
Year ended 31 March 2018
Particulars
HZL
CIHL and its
subsidiaries
Vedanta
Limited
Others*
Total
98
330
(515)
661
HZL
968
CIHL and it’s
subsidiaries
Vedanta
Limited
Others*
Total
257
508
(497)
1,236
Profit/ (loss) Attributable to NCI
Equity Attributable to NCI**
Dividends paid / payable to NCI
748
3,312
(512)
1,096
5,826
(4,053)
6,181
3,772
999
6,258 (4,159)
6,870
-
(496)
-
(1,008)
(221)
-
(607)
-
(828)
* Others consist of investment subsidiaries of Vedanta Limited, other individual non-material subsidiaries and consolidation adjustments.
** US$15 million (31 March 2018 : US$15 million) loss attributable to NCI of CIHL and its subsidiaries transferred to put option liability. Refer note 3(b) and 24.
Summarised financial information in respect of the components of the Group including subsidiaries that have material
non-controlling interests is set out below:
Particulars
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
As at 31 March 2019
HZL
CIHL and its
subsidiaries
Vedanta
Limited
Others*
Total
HZL
As at 31 March 2018
CIHL and it’s
subsidiaries
Vedanta
Limited
Others*
Total
3,031 18,635
(3,690) 20,908
2,830
2,413 19,047
(4,249) 20,041
1,117
3,284
1,353
8,873
3,712
1,106
3,574
805
9,197
1,061
7,039
3,308 12,516
24
871
3,150
7,967 12,012
913
31
408
7,626
2,707 11,654
1,105
2,415
7,493 11,044
4,919
2,216 11,730 (13,612)
5,253
5,598
2,006 12,580 (13,644)
6,540
2,932
3,119
1,108
* Others consist of investment subsidiaries of Vedanta Limited, Vedanta Resources Limited, other individual non-material subsidiaries and consolidation adjustments.
Particulars
Revenue
Profit/ (loss) for the year
Other comprehensive income / (loss)**
Net cash inflow/ (outflow) from
operating activities
Net cash inflow/ (outflow) from
investing activities
Net cash inflow/ (outflow) from
financing activities
Year ended 31 March 2019
Year ended 31 March 2018
HZL
CIHL and its
subsidiaries
Vedanta
Limited
Others*
Total
HZL
CIHL and its
subsidiaries
Vedanta
Limited
Others*
Total
2,981
1,111
5
1,259
969
5,442
4,639 14,031
3,379
714
6,985
4,216 15,294
217
664
(1,568)
424
1,437
523
1,021
(1,506)
1,475
-
(17)
(6)
(18)
(9)
-
14
9
14
148
1,645
(1,166)
1,886
1,560
398
1,235
(1,699)
1,494
(173)
114
(540)
(1,077)
(1,676)
294
(803)
1,911
811
2,213
(1,368)
(46)
(807)
2,388
167
(2,849)
380
(3,111)
973
(4,607)
* Others consist of Investment subsidiaries of Vedanta Limited, Vedanta Resources Limited, other Individual non-material subsidiaries and consolidation adjustments.
** Excluding exchange differences arising on translation of foreign operations
The effect of changes in ownership interests in subsidiaries that did not result in a loss of control is as follows:
As at 31 March 2019
Other changes in non-controlling interests
As at 31 March 2018
Other changes in non-controlling interests
HZL
-
HZL
-
CIHL and its
subsidiaries
Vedanta Limited
Others
-
11
21
CIHL and its
subsidiaries
17
Vedanta Limited
Others
5
(2)
(US$ million)
Total
32
(US$ million)
Total
20
236 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 32. 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 and
other borrowings.
The Group monitors capital using a gearing ratio, being the ratio of net debt as a percentage of total capital.
Total equity
Net debt
Total capital
Gearing
(US$ million)
As at
31 March 2019
As at
31 March 2018
5,253
10,292
15,545
66 %
6,540
9,588
16,128
59%
The increase in the gearing ratio compared to 2018 ratio is primarily due to increase in net debt pursuant to special dividend paid
by a subsidiary of the Company.
33. COMMITMENTS, GUARANTEES, CONTINGENCIES AND OTHER DISCLOSURES
A. Commitments
The Group has a number of continuing operational and financial commitments in the normal course of business including:
• Exploratory mining commitments;
• Oil and gas commitments;
• Mining commitments arising under production sharing agreements; and
• Completion of the construction of certain assets.
Capital commitments contracted but not provided
Estimated amount of contracts remaining to be executed on capital accounts and not provided for:
Oil & Gas sector
Cairn India
Aluminium sector
Lanjigarh Refinery (Phase II)
Jharsuguda 1.25 MTPA smelter
Zinc sector
Zinc India (mines expansion and smelter)
Gamsberg mining & milling project
Copper sector
Tuticorin Smelter 400 KTPA*
Others
Total
*currently contracts are under suspension under the force majeure clause as per the contract
Commitments related to the minimum work programme (Other than capital commitment):
Oil & Gas sector
Cairn India (OALP - New Oil and Gas blocks)
(US$ million)
As at
31 March 2019
As at
31 March 2018
2,003
2,020
(US$ million)
As at
31 March 2019
As at
31 March 2018
797
209
67
284
26
404
216
2,003
668
205
75
305
163
424
180
2,020
(US$ million)
As at
31 March 2019
As at
31 March 2018
551
-
237
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
B. Guarantees
The aggregate amount of indemnities and other guarantees
on which the Group does not expect any material losses, was
US$1,120 million (31 March 2018: US$416 million).
The Group has given guarantees in the normal course of
business as stated below:
• Guarantees and bonds advanced to the customs authorities
in India of US$98 million relating to the export and payment
of import duties on purchases of raw material and capital
goods (31 March 2018: US$107 million).
• Guarantees issued for Group’s share of minimum work
programme commitments of US$342 million (31
March 2018: US$26 million).
• Guarantee issued against liabilities for structured investment
worth US$277 million. Liability of US$299 million pertaining
to above mentioned structured investment has been shown
under Trade and other payables (refer note 24)
• Guarantees of US$78 million issued under bid bond (31
March 2018: US$2 million).
• Bank guarantees of US$17 million (US$18 million as on 31
March 2018) has been provided by the Group on behalf of
Volcan Investments Limited to Income tax department, India
as a collateral in respect of certain tax disputes
• Other guarantees worth US$308 million (31 March 2018:
US$263 million) issued for securing supplies of materials
and services, in lieu of advances received from customers,
litigation, for provisional valuation of custom duty and also
to various agencies, suppliers and government authorities
for various purposes. The Group does not anticipate any
liability on these guarantees.
Cairn PSC guarantee to Government
The Group has provided Parent Company guarantee for the
Cairn India Group’s obligation under the Production Sharing
Contract (‘PSC’).
C. Export Obligations
The Indian entities of the Group have export obligations of
US$562 million (31 March 2018: US$1,904 million) on account
of concessional rates of import duty paid on capital goods
under the Export Promotion Capital Goods Scheme and under
the Advance Licence Scheme for the 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$78 million (31 March 2018:
US$169 million) reduced in proportion to actual exports, plus
applicable interest.
The Group has given bonds of US$216 million (31
March 2018: US$226 million) to custom authorities against
these export obligations.
D. Contingencies
The Group discloses the following legal and tax cases as
contingent liabilities.
Hindustan Zinc Limited: 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$48
million as at 31 March 2019 (31 March 2018: US$51 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 it is unlikely that the claim will lead to a future
obligation and thus no provision has been made in the
financial statements. HZL had filed appeals (writ petitions)
in the High Court of Rajasthan in Jodhpur. The High Court
restrained the Department of Mines and Geology from
undertaking any coercive measures to recover the penalty.
Central Government has also been made a party to the case
and the matter is likely to be listed now for hearing after
completion of pleadings by the Central Government.
Richter and Westglobe: Income Tax
The Group, through its subsidiaries Richter Holdings Limited
and Westglobe Limited, in 2007 acquired the entire stake
in Finsider International Company Limited (FICL) based in
the United Kingdom which held 51% shares of Sesa Goa
Ltd, an Indian Company. In October 2013, the Indian Tax
Authorities (Tax Authorities) had served an order on Richter
and Westglobe for alleged failure to deduct withholding tax on
capital gains on the indirect acquisition of shares in April 2007.
The Tax Authorities determined the liability for such
non-deduction of tax as US$127 million (31 March 2018:
US$135 million) in the case of Richter and US$84 million
(31 March 2018: US$90 million) in the case of Westglobe,
comprising tax and interest as at 31 March 2019. Richter and
Westglobe filed appeals before the first appellate authority.
Appeals (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.
The Karnataka High Court passed interim orders and directed
that the adjudication of liability (TDS quantum and interest)
shall no longer remain in force since the tax department
passed the orders on merits travelling beyond the limited
issue of jurisdiction. The jurisdiction issue will be heard by
the High Court.
In another similar matter, ITAT in the case of Cairn UK Holdings
Limited held that being a retrospective transaction, interest
would not be levied. As a result of the above order from ITAT,
the Group now considers the risk in respect of the interest
portion of claim to be remote. Accordingly, the Group has
revised the contingent liability to US$74 million in the case of
Richter and US$49 million in the case of Westglobe.
Vedanta Limited: Income tax
In March 2014, Vedanta Limited (notice was served on Cairn
India Limited which subsequently merged with Vedanta
Limited, accordingly now referred to as Vedanta Limited)
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), for
acquiring shares of Cairn India Holdings Limited (CIHL), as part
of their internal reorganisation. The Tax Authorities have stated
in the notice that a short-term capital gain has accrued to
CUHL on transfer of the shares of CIHL to Vedanta Limited, in
the financial year 2006–2007, on which tax should have been
withheld by Vedanta Limited. Pursuant to this various replies
were filed with the Tax Authorities. After several hearings, the
Income Tax Authority, in March 2015, issued an order holding
Vedanta Limited as ‘assessee in default’ and raised a demand
totalling US$2,963 million (including interest of US$1,481
million). Vedanta Limited had filed an appeal before the First
238 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 Appellate Authority, Commissioner of Income Tax (Appeals)
which vide order dated 3 July 2017 confirmed the tax demand
against Vedanta Limited. Vedanta Limited has challenged the
Commissioner of Income Tax’s (Appeals) order before the
Income Tax Appellate Tribunal (ITAT).
Vedanta Limited also filed a writ petition before the
Delhi High Court wherein it has raised several points for
assailing the aforementioned Income Tax Authority’s order.
The matter is pending for adjudication before the Honourable
Delhi High Court.
Separately CUHL, on whom the primary liability of tax lies,
had received an Order from the ITAT in the financial year
2016-17 holding that the transaction is taxable in view of
the clarification made in the Act but also acknowledged that
being a retrospective transaction, interest would not be levied.
Hence affirming a demand of US$1,481 million excluding the
interest portion that had previously been claimed. The tax
department has appealed this order before the Delhi High
Court. As a result of the above order from ITAT, the Group
considers the risk in respect of the interest portion of claim
to be remote. Further, as per the recent recovery notice
dated 12 October 2018 received from the Tax Recovery
Officer (TRO) appointed for CUHL, tax demand of CUHL of
approx. US$722 million along with interest is outstanding.
Further, in the said notice, tax department had also instructed
to remit the preference shares redemption amount including
dividend payable thereon to the TRO. Accordingly, amount
aggregating to US$88 million has been paid to the TRO
on 26 October 2018 thus reducing the liability to US$635
million. Vedanta has also paid interim dividend for FY2019 of
US$1 million to the TRO. Accordingly, the Group has revised
the contingent liability to US$634 million (31 March 2018:
US$1,405 million). In the event, the case is finally decided
against the Company, the demand payable along with interest
as per the above mentioned order would be US$2,963 million,
of which only US$634 million is considered as possible.
Separately, but in connection with this litigation, the Company
has filed a Notice of Claim against the Government of India
(‘GOI’) under the UK India Bilateral Investment Treaty (the BIT).
The International Arbitration Tribunal passed a favourable
order on jurisdiction and recently hearing on merits have
been completed and order will be passed in due course.
The Government of India has challenged the jurisdiction order
of Arbitration Tribunal before the High Court of Singapore.
Ravva Joint Operations arbitration proceedings
ONGC Carry
The Ravva Production Sharing Contract (PSC) obliges the
contractor parties to pay a proportionate share of ONGC’s
exploration, development, production and contract costs in
consideration for ONGC’s payment of costs related to the
construction and other activities it conducted in Ravva prior
to the effective date of the Ravva PSC (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 parties (including Vedanta Limited (Cairn India
Limited which subsequently merged with Vedanta Limited,
accordingly now referred to as Vedanta Limited)) whereas
four other issues were decided in favour of Government of
India (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 upheld the Partial
Award. As the Partial Award did not quantify the sums,
therefore, contractor parties approached the same Arbitration
Tribunal to pass a Final Award in the subject matter since it
had retained the jurisdiction to do so. The Arbitral Tribunal was
reconstituted and the Final Award was passed in October 2016
in Vedanta Limited’s favour. GOI’s challenge of the Final
Award has been dismissed by the Malaysian High Court and
the next appellate court in Malaysia i.e. Malaysian Court of
Appeal. GOI then filed an appeal at Federal Court of Malaysia.
The matter was heard on 28 February 2019 and the Federal
Court dismissed GOI’s leave to appeal. Vedanta Limited has
also filed for the enforcement of the Partial Award and Final
Award with Delhi High Court.
Base Development Cost
Ravva joint operations had received a claim from the Ministry
of Petroleum and Natural Gas, Government of India (GOI) for
the period from 2000-2005 for US$129 million for an alleged
underpayment of profit petroleum (by recovering higher Base
Development Costs (“BDC”) against the cap imposed in the
PSC) to the Government of India (GOI), out of which, Vedanta
Limited’s (Cairn India Limited which subsequently merged
with Vedanta Limited, accordingly now referred to as Vedanta
Limited) share will be US$29 million plus interest. Joint venture
partners initiated the arbitration proceedings and Arbitration
Tribunal published the Award allowing claimants (including
Vedanta Limited) to recover the development costs spent to
the tune of US$278 million and disallowed over run of US$22
million spent in respect of BDC along with 50% legal costs.
The High Court of Kuala Lumpur as well as the Court of Appeal
dismissed GOI’s application of setting aside the part of the
Award. GOI challenge to the same before the Federal Court of
Malaysia was also dismissed on 17 May 2016. Vedanta Limited
has filed an application for enforcement of award before
Delhi High Court.
In connection with the above two matters, Vedanta Limited
has received an order dated 22 October 2018 from the
GOI directing oil marketing companies (OMCs) who are
the offtakers for Ravva to divert the sale proceeds to GOI’s
account. GOI alleges that the Ravva Joint Operations has
short paid profit petroleum of US$314 million (Vedanta
Limited’s share approximately - US$93 million) on account
of the two disputed issues of ONGC Carry and BDC matters.
Against an interim application, filed by Vedanta Limited
and other joint venture partner, seeking stay of such action
from GOI, before the Delhi High Court, where enforcement
petitions for both matters are pending, the Court directed
the OMCs to deposit above sums to the Court for both BDC
and ONGC Carry matters. However, the Company (and other
joint venture partner) has been given the liberty to seek
withdrawal of the proportionate amounts (fallen due as of the
date of Court order) from the Court upon furnishing a bank
guarantee of commensurate value. The interim application is
pending adjudication.
While the Company does not believe the GOI will be
successful in its challenge, if the Arbitral Awards in above
matters are reversed and such reversals are binding, Group
would be liable for approximately US$93 million plus interest
(31 March 2018: US$93 million plus interest).
Proceedings related to the imposition of entry tax
Vedanta Limited and other Group companies i.e.
Bharat Aluminium Company Limited (BALCO) and Hindustan
Zinc Limited (HZL) challenged the constitutional validity of
the local statutes and related notifications in the states of
239
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Chhattisgarh, Odisha and Rajasthan pertaining to the levy of
entry tax on the entry of goods brought into the respective
states from outside.
Post some contradictory orders of High Courts across India
adjudicating on similar challenges, the Supreme Court referred
the matters to a nine judge bench. Post a detailed hearing,
although the bench rejected the compensatory nature of tax
as a ground of challenge, it maintained status quo with respect
to all other issues which have been left open for adjudication
by regular benches hearing the matters.
Following the order of the nine judge bench, the regular bench
of the Supreme Court proceeded with hearing the matters.
The regular bench remanded the entry tax matters relating to
the issue of discrimination against domestic goods bought
from other States to the respective High Courts for final
determination but retained the issue of jurisdiction for levy on
imported goods, for determination by the regular bench of the
Supreme Court. Following the order of the Supreme Court, the
Group filed writ petitions in respective High Courts.
On 9 October 2017, the Supreme Court has held that states
have the jurisdiction to levy entry tax on imported goods.
With this Supreme Court judgment, imported goods will rank
pari passu with domestic goods for the purpose of levy of
Entry tax. Vedanta Limited and its subsidiaries have amended
their appeals (writ petitions) in Odisha and Chhattisgarh to
include imported goods as well. With respect to Rajasthan, the
State Government has filed a counter petition in the Rajasthan
High Court, whereby it has admitted that it does not intend to
levy the entry tax on imported goods.
The issue pertaining to the levy of entry tax on the movement
of goods into a Special Economic Zone (SEZ) remains pending
before the Odisha High Court. The Group has challenged the
levy of entry tax on any movement of goods into SEZ based
on the definition of ‘local area’ under the Odisha Entry Tax Act
which is very clear and does not include a SEZ. In addition,
the Government of Odisha further through its SEZ Policy
2015 and the operational guidelines for administration of this
policy dated 22 August 2016, exempted the entry tax levy on
SEZ operations.
The total claims against Vedanta Limited and its subsidiaries
are US$190 million (31 March 2018: US$203 million) net of
provisions made.
BALCO: Challenge against imposition of Energy
Development Cess
BALCO challenged the imposition of Energy Development
Cess levied on generators and distributors of electrical
energy @ 10 paise per unit on the electrical energy sold or
supplied before the High Court on the grounds that the Cess
is effectively on production and not on consumption or sale
since the figures of consumption are not taken into account
and the Cess is discriminatory since captive power plants are
required to pay @ 10 paise while the State Electricity Board
is required to pay @ 5 paise. The High Court of Chhattisgarh
by order dated 15 December 2006 declared the provisions
imposing ED Cess on CPPs as discriminatory and therefore
ultra vires the Constitution. BALCO has sought refund of ED
Cess paid till March 2006 amounting to US$5 million.
The State of Chhattisgarh moved an SLP in the Supreme Court
and whilst issuing notice has stayed the refund of the Cess
already deposited and the Supreme Court has also directed
the State of Chhattisgarh to raise the bills but no coercive
action be taken for recovery for the same. Final argument in
this matter started before the Supreme Court. In case the
Supreme Court overturns the decision of the High Court,
BALCO would be liable to pay an additional amount of US$108
million (31 March 2018: US$101 million) and the company
may have to bear a charge of US$113 million (31 March 2018:
US$106 million).
South Africa Carry Cost
As part of the farm-in agreement for Block 1, the Group was
required to carry its joint venture partner, Petro SA, up to a
gross expenditure of US$100 million for a work programme
including 3D and 2D seismic studies and at least one
exploration well. The Group has spent US$38 million towards
exploration expenditure and a minimum carry of US$62 million
(including drilling one well) was outstanding at the end of the
initial exploration period. The Group had sought an extension
for execution of deed for entry into the second renewal phase
of the exploration period with a request to maintain status
quo of the prior approvals due to uncertainty in the proposed
changes in fiscal terms impacting the Group financial interest
in the block. The same was granted by the South African
authority subject to risk of exploration right getting expired
on account of recent High Court judgments. The Group had
provided for the requisite damages as applicable under the
South African Regulations.
During financial year 2018-19, Group has received letter from
PASA (Petroleum Agency SA) that exploration right has lapsed
through effluxion of time, in line with past judicial precedents
and asked to submit a closure application. The Group
along with Petro SA has filed the closure application on 19
September 2018. Pending disposal of Group’s application the
obligation for the aforesaid carry cost of US$62 million (31
March 2018: US$62 million) has been assessed as possible
and disclosed as a contingency.
Class actions against KCM on behalf of Zambian nationals
Vedanta and KCM had challenged the jurisdiction of
the English courts to hear and adjudicate the claims
by Zambian residents in relation to KCM’s operations in
Zambia. The allegations relate to claims of personal injury,
significant pollution, environmental damage and claims for
aggravated and exemplary damages and for injunctive relief.
These allegations are currently defended by KCM. On 27
May 2016, the English High Court of Justice, Queen’s Bench
Division, Technology and Construction Court ruled that the
English courts have jurisdiction to hear and adjudicate the
claims. Vedanta and KCM appealed this ruling.
The English Court of Appeal released a judgement on 13
October 2017, dismissing this appeal and ruling that the
English courts have jurisdiction to hear and adjudicate the
claims. This judgement was solely related to the jurisdiction of
the English courts to hear these claims.
Vedanta and KCM had sought permission from the Supreme
Court of London to appeal the Court’s decision, which was
granted by the Supreme Court on 23 March 2018.
The UK Supreme Court hearing on jurisdiction of the UK courts
to adjudicate the substantive claims took place on 15 and 16
January, 2019. Both parties presented their arguments and
submissions on the days. On 10 Apr 2019, the UK Supreme
Court delivered its decision on jurisdiction matter and held
that the English Court has jurisdiction to try such claims.
240 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 The Supreme Court, however, agreed with arguments put
forward by Vedanta and KCM that England is not the proper
place for the trial of these claims and consequently overturned
the lower courts on this point. The Court further added that
the High Court was entitled to conclude on the evidence
before it that there is a real risk that “substantial justice” will not
be obtainable in Zambia and because of this, the claims may
nonetheless be heard in the English Court.
There has been no hearing or proceeding in any court on
the merits of any of these claims to date, none has been
scheduled, and the amount of the claims has not been
specified. Given the stage of proceedings the amount is
presently not quantifiable.
Miscellaneous disputes- Income tax
The Group is involved in various tax disputes amounting to
US$1,070 million (31 March 2018: US$1,075 million) relating
to income tax for the periods for which initial assessments
have been completed. These mainly relate to the disallowance
of tax holiday for 100% Export Oriented Undertaking under
section 10B of the Income Tax Act, 1961, disallowance of
tax holiday benefit on production of gas under section 80IB
of the Income Tax Act, 1961, tax holiday for undertakings
located in certain notified areas under section 80IC of the
Income Tax Act, 1961, disallowance of tax holiday benefit
for power plants under section 80IA of the Income Tax Act,
1961, on account of depreciation disallowances of the Income
Tax Act and interest thereon which are pending at various
appellate levels. There are similar matters pending initial
assessment by the tax authorities for subsequent years and
additional demands, if any, can be determined only once such
assessments are completed.
The Group believes that these disallowances are not tenable
and accordingly no provision is considered necessary.
Miscellaneous disputes- Others
The Group is subject to various claims and exposures which
arise in the ordinary course of conducting and financing its
business from the 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 (excluding the items as set
out separately above) against the Group companies total
US$581 million (31 March 2018: US$543 million).
The Group considers that it can take steps such that the risks
can be mitigated and that there are no significant unprovided
liabilities arising.
Except as described above, there are no pending litigations
which the Group believes could reasonably be expected to
have a material adverse effect on the results of operations,
cash flows or the financial position of the Group.
E. Operating Lease commitments: As lessee
(i) Operating leases are in relation to the office premises, office
equipment and other assets, some of which are cancellable
and some are non-cancellable. There is an escalation clause
in the lease agreements during the primary lease period.
There are no restrictions imposed by lease arrangements
and there are no sub-leases. There are no contingent rents.
The total of the future minimum lease payments under
non-cancellable leases are as under:
Particulars
Within one year of the balance sheet date
Within two to five years from the balance sheet date
After five years from the balance sheet date
Total
(US$ million)
As at
31 March 2019
As at
31 March 2018
2
3
0
5
1
1
0
2
Lease payments recognised as expenses during the year
ended 31 March 2019, on non-cancellable leases, is US$2
million (31 March 2018: US$1 million).
(ii) TSPL has ascertained that the Power Purchase Agreement
(PPA) entered with Punjab State Power Corporation Limited
(PSPCL) qualifies to be an operating lease under IAS 17
‘Leases’. Based on the assessment that the lease payments
by PSPCL are subject to variations on account of various
factors like availability of coal, water, etc., the management
has determined the entire consideration receivable under the
PPA relating to recovery of capacity charges towards capital
cost to be contingent rent under IAS 17. The contingent rent
recognised as revenue in the consolidated income statement
during the year ended 31 March 2019 and 31 March 2018 is
US$242 million and US$239 million respectively.
34. OTHERS MATTERS
i) Share transactions Call options
a. HZL
Pursuant to the Government of India’s policy of divestment, the
Group in April 2002 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 Group 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 Group invoked arbitration which is
in the early stages. The next date of hearing is to be notified.
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. Meanwhile, the Supreme
Court has, in January 2016, directed status quo pertaining to
disinvestment of Government of India’s residual shareholding
in a public interest petition filed which is currently pending
and sub-judice.
241
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 b. BALCO
Pursuant to the Government of India’s policy of divestment,
the Group in March 2001 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
02 August 2019. 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.
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, and hence the call options have not been
recognised in the financial statements.
ii) Konkola Copper Mines: Value Added Tax
As at 31 March 2019, backlog Value Added Tax (falling under
older VAT rule 18 regime) on inputs amounting to US$45
million (31 March 2018 : US$72 million) for eight month’s
period between January 2013 to December 2014 was pending
for refund from the Government of republic of Zambia (GRZ).
VAT receivable under new VAT rule 18 is US$119 million (31
March 2018 : US$116 million). Based on various VAT audits to
the satisfaction of Zambia Revenue Authority (ZRA), KCM was
granted total refunds for US$115 million (including
US$12 million of back log VAT) in FY2019.
Sterlite Technologies Limited (‘STL’)
During FY2018, Government of republic of Zambia
have initiated an industry-wide audit of governance
and documentations surrounding VAT rules through
independent professional audit firms in order to have a more
comprehensive review of compliance and governance in VAT
regime between 01 January 2013 to 31 December 2015.
The company believes the new comprehensive review
would only reaffirm the position of its compliance, given
positive outcomes in earlier audits as conducted by ZRA.
Accordingly, the company does not recognise any provision
against the carrying amount of this receivable. The firm
appointed by ZRA has conducted the long pending forensic
audit with regards to backlog VAT during FY2019 and the
final report has not yet been issued. However, due to delays
in closure of the comprehensive assessment, the backlog
VAT receivables of US$45 million has been continued to be
classified under “Other non-current assets” in Statement of
Financial position as at 31 March 2019.
iii) Electrosteel Steels Limited had filed application for renewal
of Consent to Operate (‘CTO’) on 24 August 2017 for the
period of five years which was denied by Jharkhand State
Pollution Control Board (‘JSPCB’) on 23 August 2018. Hon’ble
High Court of Jharkhand has extended a stay on the order of
denial of CTO by JSPCB and continued their interim order to
allow the operations till next hearing. Hon’ble High Court has
also extended stay against order of Ministry of Environment,
Forests and Climate Change (MOEF) dated 20 September
2018 in respect of environment clearance. Presently the stay
has been extended till 25 July 2019.
iv) Pursuant to Management Committee recommendation
and minutes of Empowered Committee of Secretaries (ECS)
filed by GoI, Vedanta Limited had considered cost recovery of
US$251 million in FY2018, being the cost incurred over the
initially approved FDP of Pipeline Project. Vedanta Limited’s
claim for the resultant profit petroleum of US$43 million (refer
note 18), which had been previously paid, has been disputed
by the GoI. The Group believes that it has a good case on
merits to recover the amount and has therefore treated it as a
non-current recoverable amount.
35. RELATED PARTY TRANSACTIONS
The information below sets out transactions and balances
between the Group and various related parties in the normal
course of business for the year ended 31 March 2019.
Sales
Purchases
Other expenses
Dividend Income
Management fees expense
Management fees income
Net amounts receivable at year end
Net amounts payable at year end
Investment in Equity Share
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
0
-
0
0
2
0
0
2
11
0
-
0
-
0
1
-
15
23
242 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 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 2019, the commercial services provided to STL were performed by certain senior employees of the
Group on terms set out in the Shared Services Agreement.
Sterlite Power Transmission limited (‘SPTL’)
Sales
Purchases
Other income
Reimbursement
Net Interest Received
Net amounts receivable at year end
Net amounts payable at year end
Investment in Equity Share
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
131
175
0
-
0
1
1
1
2
2
0
-
0
1
1
2
Sterlite Power Transmission limited (‘SPTL’) is related by virtue of having the same controlling party as the Group, namely Volcan.
Vedanta Foundation
Donation
Net advance given at year end
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
1
0
0
1
Vedanta Foundation is a registered not-for-profit entity with a broad focus mainly on education, nutrition and livelihood.
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 Limited.
Sesa Goa Community Foundation Limited
Donation
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
1
1
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.
Sterlite Power Grid Ventures Limited
Reimbursement
Net amounts receivable at year end
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
0
0
0
0
Pursuant to scheme of demerger, SPGVL becomes the subsidiary of Sterlite Power Transmission Limited effective 23 May 2016
which is a subsidiary of Twinstar Overseas Limited.
Sterlite Iron and Steel Company Limited
Loan given/(repaid)
Net Interest Income
Advances given/(received) during the year
Loan balance receivable at year end
Net amount receivable at year end (including interest and advance given)
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
0
0
0
0
2
0
0
-
1
2
243
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 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
Donation
Guarantees given during the year (net of relinquishment)
Guarantees given balance at year end
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
14
2
7
13
5
5
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
Recovery of expenses
Dividend paid
Interest paid on bonds held by Volcan
Bonds redeemed during the period**
Value of bonds held by Volcan
Purchase of structured investment*
Deferred consideration payable*
Fair Value of structured investment at year end*
Net amount receivable at the year end
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
0
73
1
8
13
541
299
690
0
0
111
5
82
21
-
-
-
1
** Includes premium on redemption of bonds of US$ Nil and US$6 million for the year ended 31 March 2019 and 31 March 2018 respectively.
Volcan Investments Limited is a related party of the Group by
virtue of being an ultimate controlling party of the Group.
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 million (31 March 2018 : US$18 million).
Pursuant to a buy back offer by Volcan, the Group has
rendered 1.7 million shares held by its separate investment
trust to Volcan and received US$19 million as consideration
towards the same.
to March 31 2019), determined based on an independent
third-party valuation. The ownership of the underlying
shares, and the associated voting interests, remained with
Volcan and the investment would mature in two tranches in
April 2020 and October 2020. As part of the agreement, CIHL
also received a put option (embedded derivative) from the
aforementioned subsidiary, the value of which was not material
at initial recognition. In February 2019, certain terms of the
aforesaid agreement were modified, and it was converted into
a biparty agreement between CIHL and Volcan. The revision in
the terms did not have any material effect on the fair value of
the instrument on that date.
*In December 2018, as part of its cash management activities,
Cairn India Holdings Limited (CIHL), a step-down subsidiary
of the Company, entered into a tripartite agreement with
Volcan and one of its subsidiaries. Under the agreement, CIHL
purchased an economic interest in a structured investment for
the equity shares of Anglo American Plc (AA Plc), a company
listed on the London Stock Exchange, from Volcan for a
total consideration of US$541 million (GBP 428 million) (of
which US$254 million (GBP 200 million) has been paid up
As per the revised agreement, if the share price of AA Plc
remain above the Put exercise price, CIHL would be entitled
to an amount determined based on the share price of AA Plc
multiplied by 15 million and 11 million shares respectively on
the aforementioned two maturity dates. Alternatively, CIHL
also has an option to realise the instrument for US$358 million
(GBP 274 million) and US$247 million (GBP 189 million) on the
respective maturity dates.
Cairn Foundation
Donation
Net amount payable at the year end
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
3
1
3
2
244 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 Cairn Foundation though not a related party as per the definition under IAS 24, related party disclosure has been included by way
of a voluntary disclosure, following the best corporate governance practices.
India Grid Trust
Dividend Income
Investment redeemed during the year
Investment in Equity Share at year end
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
2
-
15
1
0
19
India Grid Trust is a related party of the Group on the basis that the ultimate controlling party of the Group, Volcan Investments
Limited, exercises significant influence.
Runaya Refinery LLP
Purchases
Amount payable at year end
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
0
0
-
-
Runaya Refinery LLP is a related party of the Group by virtue of being controlled by relative of Group’s KMP.
Associates
Investment made during the year
Loans given/(repaid) during the year
Investment redeemed during the year
Loan balance receivable at year end
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
-
(0)
-
1
0
-
0
1
Associates include RoshSkor Township (Pty) Ltd., Gaurav Overseas Private Limited and Madanpur SouthCoal Company Limited.
Post Retirement employees benefit trust
Details of transactions during the year with post-retirement employee benefit trusts. The below mentioned trusts are related
parties because these are employee trusts.
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
BALCO Employees Provident Fund Trust
Hindustan Zinc Ltd. Employee Contributory provident fund trust
Sesa Group Employees Provident Fund Trust
Sesa Resources Limited Employees Provident Fund Trust
Sesa Mining Corporate Limited Employees Provident Fund
HZL Employee group Gratuity Trust
Sesa Group Employees Gratuity Fund and Sesa Group Executives Gratuity Fund
Sesa Resources Limited Employees Gratuity Fund
Sesa Mining Corporation Limited Employees Gratuity Fund
HZL Superannuation fund Trust
Sesa Group Executives Superannuation Scheme
Sesa Resources Limited and Sesa Mining Corporation Limited Employees Superannuation Fund
2
5
1
0
0
9
0
0
0
0
0
0
2
5
1
0
0
3
0
0
0
0
0
0
245
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Details of balance payable at the end of the year to post retirement employee benefit trusts.
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 Corporate Limited Employees Provident Fund
HZL Employee group Gratuity Trust
Sesa Group Employees Gratuity Fund and Sesa Group Executives Gratuity Fund
Sesa Resources Limited Employees Gratuity Fund
Sesa Mining Corporation Limited Employees Gratuity Fund
HZL Superannuation fund
Sesa Group Executives Superannuation Scheme
Sesa Resources Limited and Sesa Mining Corporation Limited Employees Superannuation Fund
Remuneration of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
Compensation for Non-Executive Directors
Commission/Sitting Fees to KMP
As at
31 March 2019
(US$ million)
As at
31 March 2018
1
2
0
0
0
8
1
0
0
0
0
0
1
1
0
0
0
10
1
0
0
0
0
0
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
24
1
4
29
1
0
20
1
5
26
1
0
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 party#
Remuneration to relatives
Commission/ sitting fees to relatives of KMP
# Close relative of the executive chairman.
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
2
0
1
0
36. SUBSEQUENT EVENTS
Subsequent to the Balance sheet date, the Company through it’s wholly owned subsidiary, Vedanta Resources Finance II Plc
issued US$1,000 million bonds in two tranches consisting of :
(i) US$400 million of 8% Bonds due April 2023 and
(ii) US$600 million of 9.25% Bonds due April 2026.
These bonds are guaranteed by the Company.
246 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 37. AUDITOR’S REMUNERATION
The table below shows the fees payable globally to the Company’s auditor, Ernst & Young LLP and their associate firms, for
statutory external audit and audit related services, as well as fees paid to other accountancy firms for statutory external audit and
audit related services in each of the two years ended 31 March:
Fees payable to the Company’s auditor for the audit of Vedanta Resources Limited (formerly Vedanta
Resources Plc) annual accounts
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Fees payable to the Company’s auditor and their associates for other services to the Group
Other services pursuant to legislation(1)
Tax services(2)
Corporate finance services(3)
Other services(4)
Total non-audit fees
Total fees paid to the Company’s auditor
Audit fees payable to other auditors of the Group’s subsidiaries
Non-audit fees payable to other auditors of the Group’s subsidiaries
Total fees paid to other auditors
(US$ million)
Year ended
31 March 2019
Year ended
31 March 2018
1
2
3
2
0
1
0
3
6
0
-
0
1
2
3
2
0
1
0
3
6
0
-
0
(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 services in connection with debt raising transactions, group simplification and other acquisition related
certifications. These assurance-related services are ordinarily provided by the auditor.
(4) Includes certification related services.
38. JOINT ARRANGEMENTS
Joint Operations
The Group’s principal licence interests in oil and gas business are joint operations. The principal licence interests for the year ended 31 March 2019 and 31
March 2018 are as follows:
Oil & Gas blocks/fields
Operating blocks
Ravva block-Exploration, Development and Production
CB-OS/2 – Exploration
CB-OS/2 - Development & production
RJ-ON-90/1 – Exploration
RJ-ON-90/1 – Development & production
South Africa Block 1- Exploration(1)
Non-operating blocks
KG-ONN-2003/1(2)
Area
Krishna Godavari
Cambay Offshore
Cambay Offshore
Rajasthan Onshore
Rajasthan Onshore
Orange Basin South Africa Offshore
Participating
Interest
22.50%
60.00%
40.00%
100.00%
70.00%
60.00%
Krishna Godavari Onshore
49.00%
(1) Application for closure has been filed with relevant authorities in September 2018
(2) Operatorship has been transferred to Oil and Natural Gas Corporation (ONGC) w.e.f. 07 July 2014
(3) PR-OSN-2004/1 block was relinquished on 30 June 2017
247
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 39. LIST OF SUBSIDIARIES
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 below, 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.
Subsidiaries
Principal activities Registered Address
Country of
incorporation
The Company’s economic
percentage holding
31 March
2019
31 March
2018
Immediate
holding company
The Company’s immediate
percentage holding
31-Mar-2019 31-Mar-2018
Direct Subsidiaries of the Parent Company
Vedanta Resources
Holding Limited
(‘VRHL’)
Holding
company
5th Floor, 6 St Andrew
Street, London EC4A
3AE
United
Kingdom
100.00% 100.00%
VRL 100.00% 100.00%
Vedanta Resources
Jersey Limited(‘VRJL”)
Investment
company
Vedanta Resources
Jersey II Limited(‘VRJL-
II’)
Investment
company
47 Esplanade, St
Helier JE1 0BD
47 Esplanade, St
Helier JE1 0BD
Vedanta Finance
(Jersey) Limited (‘VFJL’)
Investment
company
47 Esplanade, St
Helier JE1 0BD
Vedanta Jersey
Investments
Limited(‘VJIL”)
Investment
company
13 Castle Street, St.
Helier, Jersey JE4 5UT,
Channel Islands
Indirect Subsidiaries of the Parent Company
Cairn Energy India Pty
Limited
Oil and gas
exploration,
development
and production
Level 12, 680 George
Street, Sydney NSW
2000, Australia
Jersey(CI)
100.00% 100.00%
VRL 100.00% 100.00%
Jersey(CI)
100.00% 100.00%
VRL 100.00% 100.00%
Jersey(CI)
100.00% 100.00%
VRL 100.00% 100.00%
Jersey(CI)
100.00% 100.00%
VRL 100.00% 100.00%
Australia
50.33%
50.25%
CIHL 100.00% 100.00%
Copper mining c/o MCullough
Australia
50.33%
50.25%
MCBV 100.00% 100.00%
Robertson lawyers 44
martin place, Sydney
NSW 2000
Copper mining C/O MCullough
Australia
50.33%
50.25%
MCBV 100.00% 100.00%
Robertson lawyers 44
martin place, Sydney
NSW 2000
Investment
company
Kaya Flamboyan 6,
Curacao
Copper Mines of
Tasmania Pty Limited
(‘CMT’)
Thalanga Copper
Mines Pty Limited
(‘TCM’)
Monte Cello
Corporation NV
(MCNV’)
Richter Holding
Limited(‘Richter’)
Vedanta Resources
Cyprus Limited
(‘VRCL’)
Investment
company
Investment
company
Welter Trading Limited
(‘Welter’)
Investment
company
Vedanta Limited
Copper
smelting, Iron
ore mining,
Aluminium
mining, refining
and smelting,
Power
generation,
Oil and Gas
exploration,
and production
66, Ippocratous
Street, 1015 Nicosia,
Cyprus
66, Ippocratous
Street, 1015 Nicosia,
Cyprus
28th Oktovriou Street,
205 Louloupis Court,
1st Floor P.C. 3035,
Limassol, Cyprus
Vedanta Limited
1st Floor, ‘C’ wing,
Unit 103, Corporate
Avenue, Atul
Projects, Chakala,
Andheri (East),
Mumbai–400093,
Maharashtra, India
Curacao
100.00% 100.00%
Twin Star 100.00% 100.00%
Cyprus
100.00% 100.00%
VRCL 100.00% 100.00%
Cyprus
100.00% 100.00%
VRFL 100.00% 100.00%
Cyprus
100.00% 100.00%
VRCL 100.00% 100.00%
India
50.33%
50.25%
Twin Star
37.26%
37.20%
248 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019
Subsidiaries
Principal activities Registered Address
Bharat Aluminium
Company Limited
(‘BALCO’)
Aluminium
mining and
smelting
Electrosteel Steels
Limited(3)
Manufacturing
of Steel
(Products :
TMT, Wire Rod
& DI Pipe)
Aluminium Sadan,
2nd Floor, Core-6-
Scope Complex, 7
Lodhi Road, New
Delhi-110 003
801, Uma Shanti
Apartments, Kanke
Road, Ranchi – 834
008, Jharkhand
Goa Sea Ports Private
Limited
Infrastructure SIPCOT Industrial
Complex, Madurai
Bypass Road, T. V.
Puram P.O., Tuticorin,
Thoothukudi TN
628002 IN
Hindustan Zinc
Limited (‘HZL’)
Zinc mining
and smelting
MALCO Energy
Limited (‘MEL’)
Power
generation
Yashad Bhawan,
Udaipur (Rajasthan) –
313004
SIPCOT Industrial
Complex, Madurai
Bypass Road,T.V
PuramP.O., Tuticorin
(Tamil Nadu) - 628
002
Maritime Ventures
Private Limited
Paradip Multi Cargo
Berth Private Limited
Infrastructure SIPCOT Industrial
Complex, Madurai
Bypass Road, T. V.
Puram P.O., Tuticorin,
Thoothukudi TN
628002 IN
Infrastructure SIPCOT Industrial
Complex, Madurai
Bypass Road, T. V.
Puram P.O., Tuticorin,
Thoothukudi TN
628002 IN
Sesa Mining
Corporation Limited
Iron Ore
Sesa Resources
Limited (‘SRL’)
Iron Ore
Sesa Ghor, 20 EDC
Complex, Patto, Panaji
(Goa)- 403001
Sesa Ghor, 20 EDC
Complex, Patto, Panaji
(Goa)- 403001
company limited,
SIPCOT Industrial
Complex, Madurai
Bypass Road, T. V.
Puram P.O., Tuticorin,
Thoothukudi TN
628002 IN
Vill. Banawala, Mansa
- Talwandi Sabo Road,
Mansa, Punjab –
151302
Talwandi Sabo Power
Limited
Power
generation
Country of
incorporation
India
The Company’s economic
percentage holding
31 March
2019
25.67%
31 March
2018
25.63%
The Company’s immediate
percentage holding
31-Mar-2019 31-Mar-2018
51.00%
51.00%
Immediate
holding company
Vedanta
Limited
India
45.30%
- Vedanta Star
Limited
90.00%
-
India
50.33%
50.25%
SPL 100.00% 100.00%
India
32.67%
32.62%
India
50.33%
50.25%
Vedanta
Limited
Vedanta
Limited
64.92%
64.92%
100.00% 100.00%
India
50.33%
50.25%
SPL 100.00% 100.00%
India
50.33%
50.25%
Vedanta
Limited
100.00% 100.00%
India
50.33%
50.25%
SRL 100.00% 100.00%
India
50.33%
50.25%
Vedanta
Limited
100.00% 100.00%
249
Sterlite Ports Limited
(‘SPL’)
Infrastructure MALCO Power
India
50.33%
50.25%
India
50.33%
50.25%
Vedanta
Limited
Vedanta
Limited
100.00% 100.00%
100.00% 100.00%
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Subsidiaries
Principal activities Registered Address
Country of
incorporation
Vedanta Star
Limited***
Holding
Company
India
M 11, First Floor, VIP
Road, Harmu Housing
Colony, P.S. Argoda,
Ranchi 834 002
The Company’s economic
percentage holding
31 March
2019
50.33%
31 March
2018
-
India
50.33%
50.25%
The Company’s immediate
percentage holding
31-Mar-2019 31-Mar-2018
100.00%
-
100.00% 100.00%
Immediate
holding company
Vedanta
Limited
Vedanta
Limited
Vizag General Cargo
Berth Private Limited
Infrastructure SIPCOT Industrial
Complex, Madurai
Bypass Road, T. V.
Puram P.O., Tuticorin,
Thoothukudi TN
628002 IN
Killoran Lisheen
Finance Limited
Investment
company
Killoran Lisheen
Mining Limited
Mining
Deloitte & Touche
House, Charlotte’s
Quay, Limerick,
IrelandKilloran,
Moyne, Thurles, Co.
Tipperay
Deloitte & Touche
House, Charlotte’s
Quay, Limerick,
IrelandKilloran,
Moyne, Thurles, Co.
Tipperay
Lisheen Milling
Limited
Manufacturing Deloitte & Touche
House, Charlotte’s
Quay, Limerick,
IrelandKilloran,
Moyne, Thurles, Co.
Tipperay
Lisheen Mine
Partnership
Mining
Partnership
Firm
Vedanta Exploration
Ireland Limited
Exploration
Company
Vedanta Lisheen
Holdings
Limited(‘VLHL’)
Investment
company
Vedanta Lisheen
Mining Limited
(‘VLML’)
Mining
Avanstrate Inc. (‘ASI’)(1) Holding
company
Deloitte & Touche
House, Charlotte’s
Quay, Limerick,
IrelandKilloran,
Moyne, Thurles, Co.
Tipperay
Deloitte & Touche
House, Charlotte’s
Quay, Limerick,
IrelandKilloran,
Moyne, Thurles, Co.
Tipperay
Deloitte & Touche
House, Charlotte’s
Quay, Limerick,
IrelandKilloran,
Moyne, Thurles, Co.
Tipperay
Deloitte & Touche
House, Charlotte’s
Quay, Limerick,
IrelandKilloran,
Moyne, Thurles, Co.
Tipperay
No.1-11-1 Nishi-
Gotanda-1,
Shinagawa-ku, Tokyo,
Japan
Ireland
50.33%
50.25%
VLHL 100.00% 100.00%
Ireland
50.33%
50.25%
VLHL 100.00% 100.00%
Ireland
50.33%
50.25%
VLHL 100.00% 100.00%
Ireland
50.33%
50.25% VLML,KLML 100.00% 100.00%
Ireland
50.33%
50.25%
VLHL 100.00% 100.00%
Ireland
50.33%
50.25%
THL Zinc
Holding BV
100.00% 100.00%
Ireland
50.33%
50.25%
VLHL 100.00% 100.00%
Japan
25.99%
25.63%
51.63%
51.63%
Cairn India
Holdings
Limited
Valliant (Jersey)
Limited
Investment
Company
47 Esplanade, St
Helier JE1 0BD
Jersey(CI)
100.00% 100.00%
VRJL-II 100.00% 100.00%
250 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 Subsidiaries
Principal activities Registered Address
Cairn India Holdings
Limited
Investment
company
Western Cluster
Limited
Mining
Company
CIG Mauritius
Holdings Private
Limited
Investment
company
CIG Mauritius Private
Limited
Investment
company
Bloom Fountain
Limited (‘BFL’)
Operating
(Iron ore) and
Investment
Company
Sesa Sterlite Mauritius
Holdings Limited*
Investment
company
THL Zinc Limited
Investment
company
THL Zinc Ventures
Limited
Investment
company
Twin Star Energy
Holdings Limited
(‘TEHL’)*
Holding
company
Twin Star Holdings
Limited (‘Twin Star’)
Holding
company
Twin Star Mauritius
Holdings Limited
(‘TMHL’)*
Holding
company
Westglobe Limited
Investment
company
4th Floor, 22-24 New
Street, St. Paul’s Gate,
St. Helier, Jersey, JE1
4TR
Amir Building, 18th
Street, Sinkor, Tubman
Boulevard, Sinkor,
Monrovia, Liberia,
West Africa
Ocorian Corporate
Services (Mauritius)
Limited, 6th Floor,
Tower A, 1 CyberCity,
Ebene, Mauritius
Ocorian Corporate
Services (Mauritius)
Limited, 6th Floor,
Tower A, 1 CyberCity,
Ebene, Mauritius
IQ EQ Corporate
Services (Mauritius)
Ltd 33, Edith Cavell
Street Port Louis,
11324 Mauritius
IQ EQ Corporate
Services (Mauritius)
Ltd 33, Edith Cavell
Street Port Louis,
11324 Mauritius
IQ EQ Corporate
Services (Mauritius)
Ltd 33, Edith Cavell
Street Port Louis,
11324 Mauritius
IQ EQ Corporate
Services (Mauritius)
Ltd 33, Edith Cavell
Street Port Louis,
11324 Mauritius
IQ EQ Corporate
Services (Mauritius)
Ltd 33, Edith Cavell
Street Port Louis,
11324 Mauritius
IQ EQ Corporate
Services (Mauritius)
Ltd 33, Edith Cavell
Street Port Louis,
11324 Mauritius
IQ EQ Corporate
Services (Mauritius)
Ltd 33, Edith Cavell
Street Port Louis,
11324 Mauritius
IQ EQ Corporate
Services (Mauritius)
Ltd 33, Edith Cavell
Street Port Louis,
11324 Mauritius
Country of
incorporation
Jersey
The Company’s economic
percentage holding
31 March
2019
50.33%
31 March
2018
50.25%
The Company’s immediate
percentage holding
31-Mar-2019 31-Mar-2018
100.00% 100.00%
Immediate
holding company
Vedanta
Limited
Liberia
50.33%
50.25%
BFL 100.00% 100.00%
Mauritius
50.33%
50.25% Cairn Energy
Hydrocarbons
Limited
100.00% 100.00%
Mauritius
50.33%
50.25% CIG Mauritius
Holding
Private
Limited
100.00% 100.00%
Mauritius
50.33%
50.25%
Vedanta
Limited
100.00% 100.00%
Mauritius
50.33%
50.25%
BFL 100.00% 100.00%
Mauritius
50.33%
50.25%
100.00% 100.00%
THL Zinc
Ventures
Limited
Mauritius
50.33%
50.25%
Vedanta
Limited
100.00% 100.00%
Mauritius
50.33%
50.25%
BFL 100.00% 100.00%
Mauritius
100.00% 100.00%
VRHL 100.00% 100.00%
Mauritius
50.33%
50.25%
TEHL 100.00% 100.00%
Mauritius
100.00% 100.00%
Richter 100.00% 100.00%
251
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 The Company’s economic
percentage holding
31 March
2019
50.33%
31 March
2018
50.25%
Immediate
holding company
The Company’s immediate
percentage holding
31-Mar-2019 31-Mar-2018
SZPL 100.00% 100.00%
Subsidiaries
Principal activities Registered Address
Country of
incorporation
Amica Guesthouse
(Proprietary) Limited
Accomodation
and catering
services
Namzinc (Proprietary)
Limited (‘SZ’)
Mining
4 mokke street,
Windhoek, Namibia
Namibia
Leasing out
of medical
equipment and
building and
conducting
services
related thereto
Mining
Namibia
50.33%
50.25%
SZPL 100.00% 100.00%
Namibia
34.72%
34.67%
SZPL
69.00%
69.00%
24 Orban Street, Klein
Windhoek, Windhoek
24 Ondye Drive, Rosh
Pinah7 Von Lindeque
Street, Mariental,
Namibia
24 Orban Street, Klein
Windhoek, Windhoek
Namibia
50.33%
50.25%
SZPL 100.00% 100.00%
24 Orban Street, Klein
Windhoek, Windhoek
Acquisition of
immovable
and movable
properties
Namibia
50.33%
50.25%
VNHL 100.00% 100.00%
Mining and
Exploration
24 Orban Street, Klein
Windhoek, Windhoek
Namibia
50.33%
50.25%
Rosh Pinah Healthcare
(Proprietary) Limited
Skorpion Mining
Company
(Proprietarty) Limited
(‘NZ’)
Skorpion Zinc
(Proprietary) Limited
(‘SZPL’)
THL Zinc Namibia
Holdings (Proprietary)
Limited (‘VNHL)
Lakomasko B.V.
Investment
company
Monte Cello BV
(‘MCBV’)
Holding
company
THL Zinc Holding BV
Investment
company
Atrium Building, 8th
Floor, Strawinskylaan,
3127, Amsterdam,
Netherlands
Atrium Building, 8th
Floor, Strawinskylaan,
3127, Amsterdam,
Netherlands
Atrium Building, 8th
Floor, Strawinskylaan,
3127, Amsterdam,
Netherlands
Cairn Energy
Discovery Limited
Cairn Energy Gujarat
Block 1 Limited
Cairn Energy
Hydrocarbons Limited
Cairn Exploration (No.
2) Limited
Oil and gas
exploration,
development
and production
Summit House,
4-5 Mitchell Street,
Edinburgh, EH6 7BD,
Scotland
Oil and gas
exploration,
development
and production
Summit House,
4-5 Mitchell Street,
Edinburgh, EH6 7BD,
Scotland
Oil and gas
exploration,
development
and production
Summit House,
4-5 Mitchell Street,
Edinburgh, EH6 7BD,
Scotland
Oil and gas
exploration,
development
and production
Summit House,
4-5 Mitchell Street,
Edinburgh, EH6 7BD,
Scotland
Black Mountain Mining
(Proprietary) Limited
Mining
Penge Road,
Aggeneys
Cairn South Africa
Proprietary Limited
Oil and gas
exploration,
development
and production
22 Bree Street, Cape
Town, 8001, South
Africa
Netherlands
50.33%
50.25%
Netherlands
50.33%
50.25%
Netherlands
50.33%
50.25%
Scotland
50.33%
50.25%
Scotland
50.33%
50.25%
Scotland
50.33%
50.25%
Scotland
50.33%
50.25%
South Africa
37.24%
37.19%
South Africa
50.33%
50.25% Cairn Energy
Hydrocarbons
Limited
THL Zinc
Limited
THL Zinc
Holding B.V.
100.00% 100.00%
100.00% 100.00%
Vedanta
Limited
Vedanta
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
Cairn India
Holdings
Limited
THL Zinc
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%
74.00%
74.00%
100.00% 100.00%
252 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 Subsidiaries
Principal activities Registered Address
Country of
incorporation
South Korea
The Company’s economic
percentage holding
31 March
2019
25.99%
31 March
2018
25.63%
The Company’s immediate
percentage holding
31-Mar-2019 31-Mar-2018
100.00% 100.00%
Immediate
holding company
Avanstrate
(Japan) Inc.
Sri Lanka
50.33%
50.25% CIG Mauritius
Private
Limited
100.00% 100.00%
84 ,Hyeongoksandan-
ro, Cheongbuk
-myeon,Pyeongtaek-
city , Gyeonggi, South
Korea
Lanka Shipping Tower,
No.99, St. Michael’s
Road, Colombo 03
No 8 , Industry III road
Annan ,Tainan
Taiwan
25.99%
25.63%
Avanstrate
(Japan) Inc.
100.00% 100.00%
P.O. Box 3992,
Fujairah, United Arab
Emirates
UAE
50.33%
50.25%
MEL 100.00% 100.00%
5th Floor, 6 St Andrew
Street, London, EC4A
3AE
5th Floor, 6 St Andrew
Street, London, EC4A
3AE
5th Floor, 6 St Andrew
Street, London, EC4A
3AE
5th Floor, 6 St Andrew
Street, London, EC4A
3AE
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
100.00% 100.00%
Richter,
Westglobe
100.00% 100.00%
100.00% 100.00%
Welter 100.00% 100.00%
100.00%
-
VRHL 100.00%
-
100.00% 100.00%
VRHL 100.00% 100.00%
USA
50.33%
50.25%
Vedanta
Limited
100.00% 100.00%
Zambia
79.42%
79.42%
KCM 100.00% 100.00%
Zambia
79.42%
79.42%
VRHL
79.42%
79.42%
Corporation Service
Company, 2711
Centerville Road,
Suite 400, City of
Wilmington, Country
of New Castle,
Delaware, 19808
Private Bag KCM
(C) 2000, Stand M
1408, Fern Avenue,
Chingola, Zambia
Private Bag KCM
(C) 2000, Stand M
1408, Fern Avenue,
Chingola, Zambia
Avanstrate Korea Inc(1) LCD glass
substrate
manufacturing
Cairn Lanka Private
Limited
Avanstrate Taiwan
Inc(1)
Fujairah Gold FZC
Oil and gas
exploration,
development
and production
LCD glass
substrate
manufacturing
Gold & Silver
processing
Finsider International
Company Limited
Investment
company
Vedanta Finance UK
Limited
Investment
company
Vedanta Resources
Finance II Plc***
Investment
company
Vedanta Resources
Finance Limited
(‘VRFL’)
Sterlite (USA) Inc.
Investment
company
Investment
company
KCM SmelterCo
Limited
Sale of copper
and slimes
Konkola Copper Mines
PLC (‘KCM’)
Mining,
production and
marketing of
Copper and
Cobalt Alloys
* Under liquidation
*** Incorporated during the year
(1) On 28 December 2017, the Group through its wholly owned subsidiary, acquired 51.6% equity stake in AvanStrate Inc. (ASI) (Refer note 3(b))
(2) The Group also has interest in certain trusts which are neither significant nor material to the Group.
(3) On 04 June 2018, the Group through its wholly owned subsidiary, acquired 90.0% equity stake in Electrosteel Steels Limited (ESL) (Refer note 3(a))
40. ULTIMATE CONTROLLING PARTY
At 31 March 2019, all of the issued shares of the Company were held by Volcan Investments Limited and its wholly owned
subsidiary, Volcan Investments Cyprus Limited. Accordingly, the ultimate controlling party of the Group was Volcan, which is
controlled by persons related to the Executive Chairman, Mr Anil Agarwal. Volcan Investments Limited is incorporated in the
Bahamas and Volcan Investments Cyprus Limited is incorporated in Cyprus. Neither Volcan Investments Limited nor Volcan
Investments Cyprus Limited produce Group accounts.
253
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Company Balance sheet
As at 31 March 2019
Fixed assets
Tangible assets
Investments in subsidiaries
Financial asset investment
Current assets
Debtors due within one year
Debtors due after one year
Investments
Cash and cash equivalents
Creditors: amounts falling due within one year
Trade and other creditors
External borrowings
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
Capital Redemption Reserve
Other reserves
Treasury shares
Profit and loss account
Equity shareholders’ funds
Note
As at
31 March 2019
As at
31 March 2018
(US$ million)
2
3
5
6
6
7
8
8
9
9
7
1,226
0
1,233
621
4,487
29
8
0
1,226
0
1,226
2,207
2,565
9
54
5,145
4,835
75
100
175
4,970
6,203
176
4,541
4,717
1,486
29
202
-
2
(2)
-
1,255
1,486
77
252
329
4,506
5,732
176
4,237
4,413
1,319
30
202
13
-
(2)
(491)
1,567
1,319
The separate Financial Statements of Vedanta Resources Limited (formerly Vedanta Resources Plc) with registration number
4740415 were approved by the Board of Directors on 20 May 2019 and signed on their behalf by
Srinivasan Venkatakrishnan
Chief Executive Officer
254 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Company Statement of Changes in Equity
For the year ended 31 March 2019
Equity shareholders’ funds at
1 April 2018
Profit for the year
Dividends paid (note 13 of Group
financial statements)***
Exercise of stock options (note 29
of Group financial statements)
Cancellation of Treasury Shares
Recognition of share based
payments (note 29 of Group
financial statements)
Transfer to capital redemption
reserve
Movement in fair value of Financial
Investment
Equity shareholders’ funds as at
31 March 2019
Share capital* Share premium
30
202
-
-
1
(2)
-
-
-
-
-
-
-
-
-
-
29
202
For the year ended 31 March 2018
Share-based
payment
reserve
Capital
redemption
Reserve
13
-
-
(19)
-
6
-
-
-
-
-
-
-
-
-
2
-
2
Share capital* Share premium
Share-based
payment
reserve
Equity shareholders’ funds at 1 April 2017
30
202
Profit for the year
Dividends paid (note 13 of Group financial
statements)***
Exercise of stock options (note 29 of Group
financial statements)
Recognition of share based payments (note 29
of Group financial statements)
Gift to Employees Benefit Trust****
Movement in fair value of Financial Investment
Equity shareholders’ funds as at 31 March
2018
* For details, refer note 30 of Group financial statements
-
-
0
-
-
-
-
-
-
-
-
-
30
202
28
-
-
(27)
12
-
-
13
Treasury
Shares**
(491)
Retained
earnings Other Reserves
1,567
(2)
-
-
-
491
-
-
-
-
Treasury
Shares**
(491)
-
-
-
-
-
-
274
(114)
19
(489)
-
(2)
-
1,255
-
-
-
-
-
-
0
(2)
Retained
earnings Other Reserves
1,300
407
(165)
27
-
(2)
-
(2)
-
-
-
-
-
(0)
(2)
(491)
1,567
(US$ million)
Total
1,319
274
(114)
1
-
6
-
0
1,486
(US$ million)
Total
1,067
407
(165)
0
12
(2)
(0)
1,319
** The treasury shares have been cancelled during the year. At 31 March 2019, the total number of treasury shares held by the Company was NIL (31
March 2018: 22,502,483).
*** Total dividends of US$114 million (2018:US$165 million) includes dividend of US$1 million (US$1 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 13 of Group financial
statements).
**** Gift to Employees Benefit Trust relates to net purchase of treasury shares under the employee Deferred Share Bonus Plan (Refer to note 29 of Group
financial statements).
255
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 1. COMPANY ACCOUNTING POLICIES
Basis of Accounting
The company meets the definition of a qualifying entity in
accordance with Financial Reporting Standard 100 ‘Application
of Financial Reporting Requirements’ (FRS 100) issued by
the Financial Reporting Council and in accordance with 101
Reduced Disclosure Framework (FRS 101). Accordingly, these
financial statements have been prepared on a going concern
basis and in accordance with the provisions of the UK
Companies Act 2006 and applicable UK accounting standards.
These financial statements have been prepared under the
historical cost convention.
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 profit after tax for the
year of the Company amounted to US$274 million (2018:
Profit US$407 million)
These financial statements are presented in US dollars being
the functional currency of the Company.
In these financial statements, the Company has applied
the exemptions available under FRS 101 in respect of the
following disclosures:
• The requirements of paragraph 38, 134 and 136 of IAS 1
‘Presentation of Financial Statements’
• The requirements of IAS 7 ‘Statement of Cash Flows’;
• The requirements of IFRS 7 ‘Financial Instruments :
Disclosures’;
• The requirements of Paragraph 17 of IAS 24 “Related party
disclosures”
• The requirements of IAS 24, “Related party disclosures” to
disclose related-party transactions entered into between two
or more members of a group, provided that any subsidiary
which is a party to the transaction is wholly owned by such
a member.
• Paragraphs 91-99 of IFRS 13 “Fair value measurement”
(disclosure of valuation techniques and inputs used for fair
value measurement of assets and liabilities)
• The requirements of Paragraph 30 and 31 of IAS 8
“Accounting policies, changes in accounting estimates and
errors” in relation to standards not yet effective.
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 and cash equivalents in the balance sheet comprise of
cash at bank, short term bank deposits and cash in hand.
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 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 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/creditors until repaid.
The resultant increase in equity is recorded in share based
payment reserve.
In case of cash-settled transactions, a liability is recognised
for the fair value of cash-settled transactions. The fair value
is measured initially and at each reporting date up to and
including the settlement date, with changes in fair value
recognised in employee benefits expense. The fair value
is expensed over the period until the vesting date with
recognition of a corresponding liability. The fair value is
determined with the assistance of an external valuer.
Convertible Bonds
The Convertible bond issued by VRJL and VRJL-II 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
256 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 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.
Financial guarantees
Guarantees issued by the Company on behalf of subsidiaries
are designated as ‘Insurance Contracts’. Accordingly these are
shown as contingent liabilities. (Note 10)
The Group has adopted with effect from 01 April 2018, the
following new standards and amendments.
Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
(a) Financial Assets – Recognition
All financial assets are recognised initially at fair value plus, in
the case of financial assets not recorded at fair value through
profit or loss, transaction costs that are attributable to the
acquisition of the financial asset on the trade date.
recognises impairment loss allowance based on lifetime ECLs
at each reporting date, right from its initial recognition.
At each reporting date, for recognition of impairment loss
on other financial assets and risk exposure, the Company
determines whether there has been a significant increase
in the credit risk since initial recognition. If credit risk
has increased significantly, lifetime ECL is used instead
of 12-month ECL.
ECL is the difference between all contractual cash flows that
are due to the Company in accordance with the contract and
all the cash flows that the entity expects to receive, discounted
at the original EIR.
(d) Financial liabilities – Recognition & Subsequent
measurement
The Company’s financial liabilities include trade and other
payables and loans and borrowings. All financial liabilities are
recognised initially at fair value, and in the case of financial
liabilities at amortised cost, net of directly attributable
transaction costs.
For purposes of subsequent measurement, financial assets are
classified in the following categories:
After initial recognition, interest-bearing loans and borrowings
and trade and other payables are subsequently measured at
amortised cost using the EIR method.
Debt instruments at amortised cost
A ‘debt instrument’ is measured at amortised cost if both the
following conditions are met:
a)
The asset is held within a business model whose objective
is to hold assets for collecting contractual cash flows, and
b)
Contractual terms of the asset give rise on specified dates
to cash flows that are solely payments of principal and
interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the Effective
Interest Rate (EIR) method.
Equity instruments
All equity investments in scope of IFRS 9 are measured at
fair value. For all equity instruments not held for trading, the
Company may make an irrevocable election to present in other
comprehensive income subsequent changes in the fair value.
(b) Financial Asset - Derecognition
The Company derecognises a financial asset when the
contractual rights to cash flows from the asset expire, or
it transfers the rights to receive the contractual cash flows
on the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset
are transferred.
(c) Impairment of financial assets
In accordance with IFRS 9, the Company applies expected
credit loss (“ECL”) model for measurement and recognition of
impairment loss on financial assets.
The Company follows ‘simplified approach’ for recognition of
impairment loss allowance on trade receivables. The Company
(e) Financial liabilities – Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires.
Previous period Accounting Policy:
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.
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.
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.
257
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 2. COMPANY TANGIBLE FIXED ASSETS
Cost
At 1 April 2017
Additions
Deletions/Disposals
At 31 March 2018
Additions
Deletions/Disposals
At 31 March 2019
Accumulated depreciation
At 1 April 2017
Charge for the period
At 31 March 2018
Charge for the period
Deletions/Disposals
At 31 March 2019
Net book value
At 1 April 2017
At 31 March 2018
At 31 March 2019
3. INVESTMENTS IN SUBSIDIARIES
Cost
At 1 April 2017
At 1 April 2018
At 31 March 2019
(US$ million)
2
0
-
2
7
(2)
7
2
0
2
0
(2)
0
0
0
7
(US$ million)
1,226
1,226
1,226
At 31 March 2019, the Company held 157,538,524 shares in Vedanta Resources Holdings Limited (‘VRHL’) (March 2018:
157,538,524 shares), being 100% of VRHL’s issued equity share capital. The Company also held one deferred share in VRHL
(March 2018: one). At 31 March 2019, the Company held two shares in Vedanta Finance Jersey Limited (‘VFJL’) (March 2018:
two), two shares in Vedanta Resources Jersey Limited (‘VRJL’) (March 2018: two), two shares in Vedanta Resources Jersey II
Limited (‘VRJL-II’) (March 2018: two), two shares in Vedanta Jersey Investment Limited (‘VJIL’) (March 2018: two), being 100% of its
issued equity share capital.
VRHL is an intermediary holding company incorporated in the United Kingdom (note 39 of the financial statements of the
Group) 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.
4. INVESTMENT IN PREFERENCE SHARES OF SUBSIDIARIES
Fair value
At 1 April 2018
Additions
Redemption
At 31 March 2019
At 1 April 2017
Additions
Redemption
At 31 March 2018
(US$ million)
-
-
-
-
5
-
(5)
-
As at 31 March 2019, the Company held nil preference shares in Vedanta Resources Jersey Limited (“VRJL”) (March 2018: Nil
preference shares). During the previous year, all the preference shares have been redeemed by VRJL.
258 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 5. FINANCIAL ASSET INVESTMENT
Fair value
At 1 April 2018
Fair value movement
At 31 March 2019
At 1 April 2017
Fair value movement
At 31 March 2018
(US$ million)
0
0
0
0
(0)
0
The investment relates to an equity investment in the shares of Victoria Gold Corporation. At 31 March 2019, the investment in
Victoria Gold Corporation was revalued and gain of US$0 million (2018: loss of US$0 million) was recognised in equity.
6. COMPANY DEBTORS
Amounts due from subsidiary undertakings
Prepayments and accrued income
Other taxes
Total
Debtors due within one year
Debtors due after one year
Total
As at
31 March 2019
(US$ million)
As at
31 March 2018
5,106
4,771
1
1
5,108
621
4,487
5,108
1
0
4,772
2,207
2,565
4,772
Amounts due from subsidiary undertakings
At 31 March 2019, the Company had loans due from VRHL of US$2,180 million (2018: US$2,110 million) which represented the
funds being loaned for funding the subsidiaries. Out of the total loan, US$1,433 million bears interest 6.82%, US$547 million at
6.95%, US$200 million at US$LIBOR plus 385 basis points.
At 31 March 2019, the Company had loan of US$2,425 million (2018: US$2,270 million) due from Vedanta Resources Jersey II
Limited (VRJL-II). Out of the total loan US$523 million bears interest at 6.82%, US$60 million at 6.50%, US$1,724 million at 6.95%,
US$118 million at 6.75%.
The loan due from Vedanta Resources Jersey Limited (VRJL) has been fully received during the year (2018: US$84 million).
The Company was owed US$472 million (2018: US$299 million) of accrued interest from VRHL and VRJL-II and VRJL out of which
the accrued interest due from VRJL has been fully received during the year.
In addition to the loans, the Company was also owed US$29 million (2018: US$8 million) of other receivables from
Group companies.
7. COMPANY CURRENT ASSET INVESTMENTS
Bank term deposits
Total
8. COMPANY CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Accruals
Advance from related parties
Term Loans (Note 9)
Bonds:
6.000% bonds due in January, 2019*
Total
*Repaid fully during the current year.
As at
31 March 2019
29
29
(US$ million)
As at
31 March 2018
9
9
As at
31 March 2019
(US$ million)
As at
31 March 2018
71
4
100
-
175
68
9
-
252
329
259
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 9. COMPANY CREDITORS: AMOUNTS FALLING DUE AFTER ONE YEAR
Loan from subsidiary
Term loans
Bonds:
6.125% bonds due August, 2024
8.250% bonds due June, 2021
6.375% bonds due July, 2022
7.125% bonds due May, 2023
6.000% bonds due January, 2019*
Less: Current Maturities (Note 8)
Term loans
6.000% bonds due January, 2019*
Total
* Repaid fully during the current year
As at
31 March 2019
176
1,487
(US$ million)
As at
31 March 2018
176
1,088
993
668
995
498
-
(100)
-
4,717
992
667
993
497
252
(252)
4,413
As at 31 March 2019 loan from subsidiary included a loan of
US$176 million due to Vedanta Finance UK Limited. During the
previous year, its maturity has been extended to January 2021
and the rate of interest has been amended to US$ LIBOR plus
410 basis points.
Terms loans are made up of the following loans that the
Company has entered into:
• 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 due in June 2021 and US$150 million due in
June 2022. As at 31 March 2019, the outstanding amount
under this facility is US$348 million. Accordingly, an amount
of US$100 million has been reclassified from creditors due
after one year to creditors due within one year. Post the
Balance Sheet date, US$100 million under this facility has
been prepaid.
• 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 453 basis points. As at 31 March 2019, the outstanding
amount under this facility is US$298 million.
• In November 2017, the Company entered into a facility
agreement with Syndicate Bank for borrowing up to
US$100 million and bears interest at a rate of 3 months
US$ LIBOR plus 325 basis points. US$1 million is repayable
in November 2021 and US$99 repayable in November 2022.
As at 31 March 2019, the outstanding amount under this
facility is US$99 million.
• During the previous year, the Company entered into
facility agreements with Yes Bank in different tranches for
borrowings up to US$150 million and bears interest at a
rate of US$ LIBOR plus 299 basis points. US$15 million
is repayable in July 2020, US$20 million is repayable in
January 2021, US$25 million is repayable in July 2021,
US$40 million is repayable in January 2022 and US$50
million is repayable in July 2022. As at 31 March 2019, the
outstanding amount under this facility is US$148 million.
• During the previous year, the Company entered into facility
agreements with State Bank of India in different tranches for
borrowings up to US$200 million and bears interest at a rate
of US$ LIBOR plus 339 basis points. The loan is repayable
in January 2025. As at 31 March 2019, the outstanding
amount under this facility is US$198 million.
• During the current year, the Company entered into
facility agreements with ICICI Bank in different tranches
for borrowings up to US$200 million and bears interest
at a rate of US$ LIBOR plus 339 basis points. The loan is
repayable in various instalments till September 2023. As at
31 March 2019, the outstanding amount under this facility is
US$198 million.
• During the current year, the Company entered into facility
agreements with Bank of Baroda in different tranches for
borrowings up to US$200 million and bears interest at a rate
of US$ LIBOR plus 300 basis points. The loan is repayable in
various instalments till June 2024. As at 31 March 2019, the
outstanding amount under this facility is US$198 million.
10. COMPANY CONTINGENT LIABILITIES
The Company has given a corporate guarantee for loan
facilities worth US$428 million (2018: US$689 million) on
behalf of its subsidiaries, Konkola Copper Mines Plc.
The Company has guaranteed US$170 million (out of which,
US $34 million has been repaid during the previous year) for
a loan facility entered by Valliant Jersey Limited with ICICI
bank (2018: US$136 million). Post the Balance Sheet date, an
amount of US$68 million under this facility has been repaid.
The Company has guaranteed US$170 million for revolving
credit facility entered by Twin Star Holdings Limited with First
Abu Dhabi Bank PJSC as facility agent (2018: US$100 million).
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. During the previous year,
US$100 million was repaid under this facility. Further during
the current year, US$150 million has been repaid under
260 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 this facility (2018: US$400 million). Post the Balance Sheet
date, balance amount of US$250 million under this facility
has been prepaid.
The Company has provided a guarantee for the Cairn India
Group’s (now merged with Vedanta Limited) obligation under
the Production Sharing Contract (‘PSC’).
The Company has guaranteed US$180 million for a facility
agreement entered by Vedanta Resources Jersey II Limited
with Yes Bank as facility agent (2018: US$180 million).
The Company has guaranteed US$100 million for a facility
agreement entered by Welter Trading Limited with Axis Bank
as facility agent (2018: US$100 million).
The Company has guaranteed US$100 million for a facility
agreement entered by Twin Star Holdings Limited with First
Abu Dhabi Bank PJSC as facility agent. US$80 million was
drawn under this facility and US$8 million was repaid during
the previous year (2018: US$72 million).
During the year, the Company has guaranteed US$225 million
for a facility agreement entered by Twin Star Holdings Limited
with Standard Chartered Bank as facility agent. Post the
Balance Sheet date, this loan has been prepaid.
Subsequent to the Balance sheet date, the Company through
it’s wholly owned subsidiary, Vedanta Resources Finance II
Plc issued US$1,000 million bonds which were guaranteed
by the Company.
The Company has guaranteed US$575 million for a facility
agreement entered by Twin Star Holdings Limited with Citicorp
International Limited as facility agent (2018: US$575 million).
11. RELATED PARTY TRANSACTIONS
During the year the Company entered into transactions, in the ordinary course of business, with other related parties.
The Company has taken advantage of the exemption under paragraph 8(k) of FRS101 not to disclose transactions with
wholly owned subsidiaries. Transactions entered into and trading balances outstanding at 31 March with other related parties,
are as follows:
(US$ million)
Name of Company
Vedanta Limited
Konkola Copper Mines Plc
Relationship
Subsidiary
Subsidiary
Nature of transaction
Management & Brand Fees charged
Management & Guarantee Fees charged
Sterlite Technologies Limited
Related Party
Management Fees charged
Volcan Investments Limited
Volcan Investments Limited
Holding Company Dividend paid
Holding Company Interest paid on bonds
Volcan Investments Limited**
Holding Company Redemption of bond
Vedanta Limited
Vedanta Limited
Vedanta Limited
Konkola Copper Mines Plc
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Receipt of Service
(Reimbursement)/Payment of Expenses
Recovery against share option expense
Recovery against share option expense
Copper Mines of Tasmania Pty Limited
Subsidiary
Recovery against share option expense
Fujariah Gold FZC
Vedanta Lisheen Holdings Limited
Namzinc Pty Limited
Black Mountain Mining (Pty) Limited
Western Cluster Limited
Twin Star Mauritius Holdings Limited*
Twin Star Energy Holdings Limited*
THL Zinc Limited
THL Zinc Ventures Limited
Konkola Copper Mines Plc
Cairn India Holdings Limited
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
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
Reimbursement of Expenses
Reimbursement of Expenses
Sesa Sterlite Mauritius Holdings Limited* Subsidiary
Reimbursement of Expenses
Bloom Fountain Limited
Subsidiary
Reimbursement of Expenses
2019
48
3
0
73
1
8
(0)
0
2
0
0
0
-
0
0
0
-
-
0
0
-
-
-
0
2018
53
3
0
111
5
82
(1)
(2)
8
1
0
(0)
0
0
0
0
0
0
0
0
0
1
0
-
261
Notes to the Financial Statements continuedfor the year ended 31 March 2019INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Outstanding balances
Name of Company
Vedanta Limited
Konkola Copper Mines Plc
Relationship
Subsidiary
Subsidiary
Sterlite Technologies Limited
Related Party
Copper Mines of Tasmania Pty Limited
Subsidiary
Fujariah Gold FZC
Vedanta Lisheen Holdings Limited
Namzinc Pty Limited
Black Mountain Mining (Pty) Limited
Western Cluster Limited
Twin Star Mauritius Holdings Limited*
Twin Star Energy Holdings Limited*
THL Zinc Limited
THL Zinc Ventures Limited
Monte Cello BV
Cairn India Holdings Limited
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Sesa Sterlite Mauritius Holdings Limited* Subsidiary
Bloom Fountain Limited*
Subsidiary
Nature of transaction
Receivable /(Payable)
Receivable
Receivable
Receivable
Receivable/ (Payable)
(Payable)
(Payable)
Receivable
Receivable
Receivable
Receivable
Receivable
Receivable
(Payable)
Receivable
Receivable
Receivable
Volcan Investments Limited
Holding Company Investment in Bonds
2019
7
15
0
-
0
(0)
(0)
0
0
-
-
0
0
(1)
1
-
0
13
(US$ million)
2018
(8)
12
0
0
(0)
(0)
(0)
0
0
-
-
-
0
(1)
1
-
0
21
* During the previous year, Twin Star Mauritius Holdings Limited, Twin Star Energy Holdings Limited and Sesa Sterlite Mauritius Holdings Limited have filed for
liquidation and have assigned their payables to the Company to their parent company, Bloom Fountain Limited. All of these entities are under liquidation.
** Includes premium on redemption on bonds of US$ nil and US$6 million for the year ended 31 March 2019 and 31 March 2018 respectively.
12. DIRECTORS’ EMOLUMENTS
Short-term employee benefits*
Share-based payments
Total
Year ended
31 March 2019
(US$ million)
Year ended
31 March 2018
10
3
13
5
3
8
*Includes bonus accrued for the year, non cash benefits (vehicle maintenance and medical insurance premium) and NIC contribution.
The aggregate of emoluments received in the year and amounts accrued under the share based plans of the highest paid
director was US$2 million (2018: US$2 million).
262 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTSNotes to the Financial Statements continuedfor the year ended 31 March 2019 Five Year Summary
SUMMARY CONSOLIDATED INCOME STATEMENT
Year ended
31 March 19
Year ended
31 March 18*
Year ended
31 March 17
Revenue
EBITDA
Depreciation and amortisation
Special items
Operating profit
Net finance (costs)/ investment revenues
Profit before taxation
Net tax credit/(expense)
Profit after taxation
Non-controlling interests
Profit attributable to equity shareholders in parent
Dividends
Retained (loss)/profit
Dividend per share (US cents per share)
14,031
3,393
(1,482)
47
1,958
(862)
1,096
(672)
424
661
(237)
(185)
(422)
65
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Goodwill
Intangible assets
Property, plant and equipment
Financial asset investments
Total
Stocks
Debtors
Cash and Liquid Investments
Total
Short-term borrowings
Other current liabilities
Total current liabilities
Net current assets
Total assets less current Liabilities
Long term borrowings
Other long term liabilities
Provisions and deferred tax assets
Total long term liabilities
Equity Non-controlling interests
Non equity Non-controlling interest
Net assets attributable to the equity holders
of the parent
31 March
2019
12
108
17,726
707
18,553
2,060
1,504
5,297
8,861
(5,456)
(7,060)
(12,516)
(3,643)
17,265
(10,524)
(258)
(1,218)
(12,000)
(6,181)
(12)
(928)
15,294
3963
(1,271)
586
3,278
(790)
2,488
(1,013)
1,475
1,236
239
(182)
57
65
31 March
2018
12
123
17,727
25
17,887
2,038
1,527
5,606
9,171
(5,460)
(6,194)
(11,654)
(2,457)
17,584
(9,734)
(136)
(1,162)
(11,032)
(6,870)
(12)
(330)
11,520
3,191
(1,031)
(17)
2,143
(763)
1,380
(500)
880
(902)
(23)
(138)
(160)
55
31 March
2017
17
96
16,751
11
16,874
1,670
1,085
9,725
12,480
(7,659)
(6,413)
(14,072)
(1,588)
17,432
(10,570)
(77)
(758)
(11,405)
(6,423)
(12)
(409)
Year ended
31 March 16
10,738
(US$ million)
Year ended
31 March 15
12,879
2,336
(1,455)
(5,210)
(4,329)
(655)
(4,984)
1,482
(3,502)
1,665
(1,837)
(111)
(1,948)
30
31 March
2016
17
92
16,648
7
16,763
1,366
1,344
8,937
11,647
(4,314)
(6,098)
(10,412)
1,289
19,908
(11,950)
(225)
(869)
(13,043)
(7,565)
(12)
(713)
3,741
(2,006)
(6,744)
(5,009)
(632)
(5,640)
1,853
(3,788)
1,989
(1,799)
(171)
(1,970)
63
(US$ million)
31 March
2015
17
102
23,352
4
23,475
1,606
1,839
8,210
11,655
(3,179)
(5,003)
(8,183)
3,529
28,806
(13,489)
(194)
(2,854)
(16,537)
(10,654)
(12)
1,603
263
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Five Year Summary continued
TURNOVER
Zinc-
India
International
Oil & Gas
Iron ore
Copper: -
India/Australia
Zambia
Aluminium
Power
Steel
Other
Group
EBITDA
Zinc
India
International
Oil & Gas
Iron ore
Copper
India/Australia
Zambia
Aluminium
Power
Steel
Other
Group
EBITDA MARGIN
Zinc
India
International
Oil & Gas
Iron ore
Copper
India/Australia
Zambia
Aluminium
Power
Steel
Group
(1) Excluding one-offs
2019
3,347
2,955
392
1,892
416
2,622
1,537
1,085
4,183
934
600
37
14,031
2019
1,616
1,516
100
1,100
90
(99)
(36)
(63)
316
219
113
38
3,393
2019
48
51
25
58
22
(4)
(2)
(6)
7
24
19
24
2018*
3,889
3,354
535
1,480
485
5,111
3,828
1,283
3,545
877
2017
2,857
2,525
332
1,223
615
4,008
3,134
874
2,040
836
2016
2,503
2,111
392
1,322
350
4,170
3,197
973
1,694
708
(US$ million)
2015
2,944
2,357
587
2,398
327
4,778
3,701
1,077
2,082
588
(93)
15,294
(59)
11,520
(8)
10,738
(237)
12,879
2018*
2,122
1,902
220
849
48
235
162
73
414
258
37
3,963
2018*
54
56
41
57
12
5
5
6
13
251
-
26
2017
1,562
1,423
138
597
194
258
252
6
344
245
(9)
3,191
2017
55
56
42
49
32
6
8
1
17
29
-
28
2016
1,063
995
68
570
73
319
337
(18)
107
196
8
2,336
2016
42
47
17
43
21
8
11
(2)
6
28
-
22
(US$ million)
2015
1,373
1,193
181
1,477
31
277
281
(4)
416
154
13
3,741
(%)
2015
47
51
31
62
10
6
8
(0)
20
26
-
29
264 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Five Year Summary continued
PRODUCTION
Aluminium
BALCO1
Jharsuguda Aluminium2
Copper
Copper India
KCM
Iron Ore (WMT)
Zinc total
HZL
Skorpion
Zinc and Lead MIC
BMM
Lisheen
Gamsberg
Oil & Gas- Gross Production (mmboe)
Oil & Gas- Working Interest (mmboe)
2019
1,959
571
1,388
267
90
177
7,903
960
894
66
82
65
-
17
69
44
(1) BALCO- Including trial run production of NIL KT in 2019 & 16 in 2018.
(2) Jharsuguda- Including trial run production of 61 KT in 2019 & 62 in 2018.
CASH COSTS OF PRODUCTION IN US CENTS
Aluminium – BALCO
Aluminium-Jharsuguda Aluminium
Copper India
Copper – KCM
Zinc including Royalty- HZL
Zinc without Royalty- HZL
Zinc COP- Skorpion
Zinc COP- BMM
Zinc COP- Lisheen
Zinc COP- Gamsberg
Oil & Gas (Opex) (US$/ boe)
(1) Tuticorin plant was under shutdown in FY2019.
CASH COSTS OF PRODUCTION IN INR
Aluminium – BALCO
Aluminium-Jharsuguda Aluminium
Copper India
Zinc including Royalty
Zinc without Royalty
(1) Tuticorin plant was under shutdown in FY2019.
CAPITAL EXPENDITURE
Sustaining
Expansion
Total capital expenditure
2018
1,675
569
1,106
599
403
195
7,903
876
791
84
72
72
-
68
43
2018
87
85
5.7
239
62
44
85
59
0
6.6
2017
1,213
427
786
582
402
180
2016
923
332
592
566
384
182
12,300
5,630
757
672
85
70
70
-
69
44
2017
68
65
5.0
209
52
38
75
51
0
6.2
841
759
82
144
63
81
75
47
2016
75
69
5.7
198
47
37
74
63
57
6.5
2019
92
90
-1
276
63
46
110
66
0
67
7.7
(000’s MT)
2015
877
324
553
531
362
169
667
836
734
102
209
59
150
77
48
(US cents/lb)
2015
89
74
6.4
258
50
39
70
74
53
6.2
(INR/ mt)
2015
119,922
99,676
8,639
66,805
53,071
2019
135,906
135,466
-1
96,488
70,400
2018
123,947
120,349
8,112
87,971
62,882
2017
101,051
96,622
9,047
77,454
55,679
2016
108,629
99,408
8,203
68,408
52,629
2019
435
1,076
1,511
2018
385
820
1,205
2017
145
668
814
2016
185
566
751
(US$ million)
2015
221
1,531
1,752
265
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Five Year Summary continued
NET CASH/(DEBT)
Zinc
India
International
Oil & Gas
Iron Ore
Copper
India/Australia
Zambia
Aluminium
Power
Other
Group
GEARING
Gearing
2019
2,528
2,454
74
1,388
(141)
(317)
(169)
(148)
(4,494)
(1,347)
(7,910)
(10,292)
2018
3,507
3,411
96
754
(176)
(382)
(7)
(375)
(4,400)
(1,693)
(7,198)
(9,588)
2017
3,881
3,741
140
4,185
(404)
(496)
57
(553)
(5,098)
(1,574)
(8,997)
(8,503)
2016
5,415
5,318
97
3,240
(459)
(494)
132
(627)
(4,131)
(1,802)
(9,096)
(7,329)
2019
66%
2018
60%
2017
59%
2016
52%
GROUP FREE CASH FLOW
Group Free Cash Flow after Capital Creditors
Group Free Cash Flow after Project Capex
2019
2,266
1,190
2018
1,745
925
2017
2,212
1,544
2016
2,339
1,773
CAPITAL EMPLOYED
Average Capital Employed
ROCE
ROCE
2019
15,837
2018
15,323
2017
14,350
2016
17,448
2019
9.6%
2018
14.3%
2017
12.8%
2016
3.4%
(US$ million)
2015
5,073
4,937
137
2,857
(634)
(705)
33
(738)
(4,068)
(1,577)
(9,406)
(8,460)
(%)
2015
41%
(US$ million)
2015
2,578
1,047
(US$ million)
2015
23,312
(US$ million)
2015
5.2%
* During the year ended 31 March 2019 the Group has revised the presentation of export incentives and forward premiums on derivative instruments
(Refer note 1 (b) to the consolidated financial statements). The comparative amounts for the year ended 31 March 2018 have been reclassified. Further the
comparative amounts for the year ended 31 March 2018 have been restated on account of finalisation of provisional fair values related to ASI acquisition
(Refer note 3(b) to the consolidated financial statements) The selected financial information tables for the financial year ended 31 March 2015 , 2016 and
2017 have not been reclassified/restated for these changes.
266 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS 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
Finished Copper
Year ended
31 March 2019
Mt
4
-
182
2,873
2,282
86,644
108,915
177,035
Year ended
31 March 2018
Mt
3,28,076
1,033,250
191,746
216,749
67,207
186,418
135,332
195,337
Copper Mining Summary
Mine
Type of mine
Mt Lyell (CMT)
Underground
Konkola &
Nchanga (KCM)
Underground &
Opencast
Ore mined
Copper concentrate
Copper in concentrate & Primary Copper
31 March 2019
mt
31 March 2018
mt
31 March 2019
mt
31 March 2018
mt
31 March 2019
mt
31 March 2018
mt
4,007,474
4,719,835
187,474
217,893
91,135
90,848
-
-
-
Copper Mine Resource and Reserve Summary
Mine
Type of mine
Mt Lyell (CMT)
Underground
Konkola (KCM)
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
Measured
and indicated
million mt
29.6
103.2
Resources
Copper
grade
%
1.09
2.69
Inferred million mt
Copper grade
%
Reserves
Proved and
probable reserves
million mt
30
265.6
1.06
3.36
-
140.3
Copper grade
%
-
1.07
Year ended
31 March 2019
Mt
Year ended
31 March 2018
Mt
571,231
569,050
1,387,784
1,106,041
Year ended
31 March 2019
Mt
Year ended
31 March 2018
Mt
1,500,670
1,209,436
Year ended
31 March 2019
Mt
Year ended
31 March 2018
Mt
0
461,956
589,320
581,920
267
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Production and Reserves Summary continued
Bauxite Mine Resource and Reserve Summary
Mine
BALCO
Mainpat (Kesra, Kudiridih, Sapnadar)
Bodai-Daldali (Kawardha)
Total BALCO
MALCO
Kolli Hills and Yercaud
Resources are additional to Reserves
Hindustan Zinc
Zinc and Lead Production Summary:
Company
HZL
Zinc
Lead
Zinc and Lead Mining Summary:
a) Metal mined & metal concentrate
Resources
Measured and
indicated million
mt
Aluminium grade %
Inferred million mt
Aluminium grade
%
Reserves
Proved and
probable reserves
million mt
Aluminium grade
%
5.9
2.3
8.3
0.8
40.2
45.2
41.6
44.0
1.3
0.5
1.8
42.2
46.3
43.4
4
1.1
5.1
0.2
43.7
44.5
43.8
43.0
Year ended
31 March 2019
Mt
Year ended
31 March 2018
Mt
696,283
197,838
791,461
168,247
Ore mined
Zinc concentrate
Lead concentrate
Bulk concentrate
RampuraAgucha*
Type of mine
RajpuraDariba
31 March
2018
mt
31 March
2019
mt
31 March
2018
mt
Rampura
Agucha(1)
Open cut
11,99,823 29,63,564
191,950
606,700
31 March
2019
mt
17,947
31 March
2018
mt
57,198
31 March
2019
mt
31 March
2018
mt
Rampura Agucha Under ground
Rajpura Dariba
Under ground
Sindesar Khurd
Under ground
Zawar
Total
Under ground
33,30,011 20,78,623
895,568
10,79,955
53,10,794 45,00,000
28,64,587 21,76,111
718,273
456,938
91,815
76,495
59,676
23,027
33,997
18,394
350,272
326,890
187,273
146,148
104,497
51,288
70,458
32,849
-
13,785,170 12,613,866 14,56,807 1,518,311
358,381
288,586
-
41,697
41,697
(1) Includes development ore MT from Kayar
b) Metal in Concentrate (MIC)
RampuraAgucha*
Type of mine
RampuraAgucha*
RajpuraDariba
SindesarKhurd
Zawar
Total
Includes Kayad
Open cut & Underground
Underground
Underground
Underground
Zinc concentrate
Lead concentrate
31 March 2019
mt
31 March 2018
mt
31 March 2019
mt
31 March 2018
mt
455,516
44,305
174,016
54,661
728,498
532,998
37,237
162,709
40,071
773,015
44,963
8,711
108,818
44,698
207,190
52,355
7,100
84,070
30,842
174,367
268 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Production and Reserves Summary continued
Zinc and Lead Mine Resource and Reserve Summary
Zinc India
Resources
Reserves
Mine
Measured
and indicated
million
Zinc grade
%
Lead grade
%
Inferred million
mt
Zinc grade
%
Lead grade
%
Rampura Agucha
RajpuraDariba
Zawar
Kayad
SindesarKhurd
BamniaKalan
Total
19.5
21.8
20.1
1.2
23.6
5.2
91.4
14.8
7.2
4.7
19.6
4.4
4.5
7.5
2.0
2.1
1.7
3.0
2.2
1.5
2.0
35.6
25.8
75.2
2.1
57.5
22.8
219.0
9.7
6.6
4.6
3.5
3.6
3.5
5.3
2.6
1.9
2.7
8.1
1.9
1.5
2.3
Proved and
probable
reserves million
mt
35.3
10.2
10.1
4.5
32.5
-
92.6
Zinc
grade
%
13.6
5.1
3.4
5.4
4.1
-
7.8
Lead grade
%
1.8
1.8
1.8
0.9
3.2
-
2.3
Resources are additional to Reserves
Zinc International
Resources
Reserves
Measured
and indicated
million
Zinc grade
%
Lead grade
%
Inferred million
mt
Zinc grade
%
Lead grade
%
1.2
13.5
14.6
57.3
70.9
2.7
1.3
6.6
-
2.6
3.2
0.6
0.7
11.8
-
14
60.1
151.7
-
1.2
8.3
2.5
-
-
3.4
0.6
1.0
Proved and
probable
reserves million
mt
Zinc
grade
%
Lead grade
%
2.1
10.5
5.1
2.6
53.7
2.9
0.7
6.7
-
2.1
3.4
0.5
Mine
Skorpion
BMM
- Deeps
- Swartberg
- Gamsberg
- Big Syncline
Project
Resources are additional to Reserves
Zinc Production Summary:
Company
Skorpion
Zinc and Lead Mining Summary:
a) Metal mined & metal concentrate
Mine
Type of mine
Year ended
31 March 2019
Mt
Year ended
31 March 2018
Mt
65,948
84,215
Ore mined
Zinc Concentrate
Lead Concentrate
31 March 2019
mt
31 March 2018
mt
31 March 2019
mt
31 March 2018
mt
31 March 2019
mt
31 March 2018
mt
Skorpion
Open Cast
BMM
Total
Underground
Underground
1,009,243
1,611,301
2,620,544
537,066
1,605,892
2,142,958
-
58,874
58,874
-
55,501
55,501
-
55,548
55,548
-
65,381
65,381
b) Metal in Concentrate (MIC)
RampuraAgucha*
Type of mine
Zinc concentrate
Lead concentrate
31 March 2019
mt
31 March 2018
mt
31 March 2019
mt
31 March 2018
mt
BMM
Underground
27,558
27,175
37,354
45,113
269
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Year ended
31 March 2019
Mt
Year ended
31 March 2018
Mt
4.7
0.3
4.4
-
7.9
4.3
2.3
1.3
Iron ore
grade
%
49.4
Production and Reserves Summary continued
Iron ore
Iron Ore Production Summary
Company
Vedanta Limited
Saleable Iron Ore
Goa
Karnataka
Dempo
Iron Ore Resource and Reserve Summary
Mine
Iron ore Karnataka
Measured
and indicated
million mt
15.79
Resources
Iron Ore
grade
%
48.3
Inferred
million mt
9.17
Iron ore
grade
%
43.7
Reserves
Proved and
probable reserves
million mt
56.3
During the year ended 31st March 2018, The Honourable Supreme Court of India issued a ‘vide’ judgement directing that all
mining operations in the state of Goa were to cease with effect from 16 March 2018. Pursuant to this order, we halted to our
mining activities. The Company has taken an impairment (non-cash item) of US$533 million net of taxes (US$758 million gross of
taxes) pursuant to this order. This is mainly related to mining reserves. Therefore, the company has not shown any Reserves and
Resources related to Iron Ore Goa.
Oil and gas
The Oil and gas reserves data set out below are estimated on the basis set out in the section headed “Presentation of Information”.
Cairn India
The Company’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 (2018)”.
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 2019
2,288
-
3,405
724
254
335
7,006
31 March 2018
2,288
-
3,460
733
251
335
7,067
31 March 2019
362
293
428
39
33
40
1,195
31 March 2018
371
335
430
45
34
48
1,263
31 March 2019
253
205
299
9
13
22
801
31 March 2018
260
235
301
10
13
24
842
The Company’s net working interest proved and probable reserves is as follows:
Particulars
Reserves as of 1 April 2017*
Additions / revision during the year
Production during the year
Reserves as of 31 March 2018**
Additions / revision during the year#
Production during the year
Reserves as of 31 March 2019***
Proved and Probable reserves
Proved and Probable reserves
(developed)
Oil
Gas
Oil
Gas
(mmstb)
112
28
(42)
98
259
(42)
315
(bscf)
48
12
(8)
52
224
(12)
264
(mmstb)
100
13
(42)
71
149
(42)
178
(bscf)
15
21
(8)
28
113
(12)
129
* Includes probable oil reserves of 32.37 mmstb (of which 20.62 mmstb is developed) and probable gas reserves of 37.84 bscf (of which 4.92 bscf is developed)
** Includes probable oil reserves of 26.77 mmstb (of which 5.00 mmstb is developed) and probable gas reserves of 25.12 bscf (of which 4.17 bscf is developed)
*** Includes probable oil reserves of 116.21 mmstb (of which 16.03 mmstb is developed) and probable gas reserves of 89.00 bscf (of which 24.19 bscf is developed)
# The increase in reserve is on account of PSC extension for the Rajasthan and Ravva block. For more details, refer to note 2(c)(I)(xii) of the financial statements.
270 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS
Production and Reserves Summary continued
Source Of information:
In respect of all businesses, the information has been certified
by 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’. The 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 Code in force are dated December 2012.
The JORC Code uses the term Ore Reserve for Reserves.
For the purposes of ore and mineral resources reported herein,
the term ore resources have been used throughout.
Oil and Gas reserves and resources have been prepared
according to the Petroleum Resources Management Systems
(PRMS) approved in June 2018 by the Board of Society of
Petroleum Engineers (SPE). The process included approval
by six sponsoring societies: the World Petroleum Council, the
American Association of Petroleum Geologists, the Society
of Petroleum Evaluation Engineers, the Society of Exploration
Geophysicists, the European Association of Geoscientists
and Engineers, and the Society of Petrophysicists and
Well Log Analysts.
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 exclusive 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.
271
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Other information
ALTERNATIVE PERFORMANCE MEASURES
Introduction
Vedanta Group is committed to providing timely and clear
information on financial and operational performance
to investors, lenders and other external parties, in the
form of annual reports, disclosures, RNS feeds and other
communications. We regard high standards of disclosure as
critical to business success.
Alternative Performance Measure (APM) is an evaluation metric
of financial performance, financial position or cash flows
that is not defined or specified under International Financial
Reporting Standards (IFRS).
The APMs used by the group fall under two categories:
• Financial APMs: These financial metrics are usually derived
from financial statements, prepared in accordance with
IFRS. Certain financials metrics cannot be directly derived
from the financial statements as they contain additional
information such as profit estimates or projections, impact
of macro-economic factors and changes in regulatory
environment on financial performance.
• Non-Financial APMs: These metrics incorporate non –
financial information that management believes is useful in
assessing the performance of the group.
APMs are not uniformly defined by all the companies, including
those in the Group’s industry. APM’s should be considered in
addition to, and not a substitute for or as superior to, measures
of financial performance, financial position or cash flows
reported in accordance with IFRS.
Purpose
The Group uses APMs to improve comparability of information
between reporting periods and business units, either by
adjusting for uncontrollable or one-off factors which impacts
upon IFRS measures or, by aggregating measures, to aid the
user of the Annual Report in understanding the activity taking
place across the Group’s portfolio.
APMs are used to provide valuable insight to analysts and
investors along with Generally Accepted Accounting Practices
(GAAP). We believe these measures assist in providing a
holistic view of the company’s performance.
Alternative performance measures (APMs) are denoted by ◊
where applicable.
◊ APM terminology*
Closest equivalent IFRS measure
Adjustments to reconcile to primary statements
EBITDA
Operating profit/(loss) before special items
EBITDA margin (%)
Adjusted revenue
No direct equivalent
Revenue
Adjusted EBITDA
Operating profit/(loss) before special items
Operating Profit/(Loss) before special items Add:
Depreciation & Amortisation
Not applicable
Revenue
Less: revenue of custom smelting operations at
our Copper & Zinc business
EBITDA
Less:
EBITDA of custom smelting operations at our
Copper & Zinc business
Adjusted EBITDA margin
No direct equivalent
Not applicable
Underlying profit/(loss)
Attributable Profit/(loss) before special items
Project Capex
Expenditure on Property, Plant and Equipment (PPE)
Free cash flow
Net cash flow from operating activities
Net debt*
Net debt is a Non-IFRS measure and represents total
debt after fair value adjustments under IAS 32 and
IFRS 9 as reduced by cash and cash equivalents, liquid
investments and structured investment, net of the
deferred consideration payable for such investments
(referred as Financial asset investment net of related
liabilities), if any.
Attributable profit/(loss) before special items
Less: NCI share in other gains/(losses) (net of tax)
Gross Addition to PPE
Less: Gross disposals to PPE
Add: Accumulated Depreciation on disposals
Less: Decommissioning liability
Less: Sustaining Capex
Net Cash flow from operating activities Less:
purchases of property, plant and equipment and
intangibles less proceeds on disposal of property,
plant and equipment
Add: Dividend paid and dividend distribution tax
paid
Add/less: Other non-cash adjustments
No Adjustments
ROCE
No direct Equivalent
Not Applicable
*In December 2018, the Group has made a structured investment which is classified as Financial Assets investments. We believe liquidity of the investment
makes its comparable to the other assets included previously in the debt calculation; therefore inclusion gives more reliable and relevant information.
272
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Other information continued
ROCE for FY2019 is calculated based on the working summarised below. The same method is used to calculate the ROCE for all
previous years (stated at other places in the report).
Particulars
Operating Profit Before Special Items
Less: Cash Tax Outflow
Return on Capital Employed (a)
Opening Capital Employed (b)
Closing Capital Employed (c)
Average Capital Employed (d)= (a+b)/2
ROCE (a)/(d)
Year ended
31 March 2019
1,911
(386)
1,525
16,128
15,545
15,836
9.6%
Adjusted Revenue, EBITDA & EBITDA Margin for FY2019 is calculated based on the working summarised below. The same method
is used to calculate the adjusted revenue and EBITDA for all previous years (stated at other places in the report).
Particulars
Revenue
Less: Revenue of Custom smelting operations
Adjusted Revenue(a)
EBITDA
Less: EBITDA of Custom smelting operations
Adjusted EBITDA(b)
Adjusted EBITA Margin (b)/(a)
Year ended
31 March 2019
14,031
2,065
11,966
3,393
(45)
3,438
29%
273
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Glossary and Definitions
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)
CEO
Chief executive officer
CFO
Chief Financial Officer
CII
Confederation of Indian Industries
Adjusted EBITDA
Group EBITDA net of EBITDA from custom smelting operations
at Copper India, Copper Zambia & Zinc India operations.
CO2
Carbon dioxide
Adjusted EBITDA margin
EBITDA margin computed on the basis of Adjusted EBITDA and
Adjusted Revenue as defined elsewhere
CMT
Copper Mines of Tasmania Pty Limited, a company
incorporated in Australia
Adjusted Revenue
Group Revenue net of revenue from custom smelting
operations at Copper India, Copper Zambia & Zinc
India operations.
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 Limited
Company or Vedanta
Vedanta Resources Limited
Company financial statements
The audited financial statements for the Company for the year
ended 31 March 2019 as defined in the Independent Auditors’
Report on the individual Company Financial Statements to the
members of Vedanta Resources Limited
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;
Attributable Profit
Profit for the financial year before dividends attributable to the
equity shareholders of Vedanta Resources Limited
• One copper mine in Australia, trading through Copper
Mines of Tasmania Pty Limited, a company incorporated in
Australia; and
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 Sustainability, 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
Erstwhile Cairn India Limited and its subsidiaries
Capital Employed
Net assets before Net (Debt)/Cash
Capex
Capital expenditure
• An integrated operation in Zambia consisting of three mines,
a leaching plant and a smelter, trading through Konkola
Copper Mines LIMITED, a company incorporated in Zambia
Copper India
Copper Division of Vedanta Limited comprising of a copper
smelter, two refineries and two copper rod plants in India.
Cents/lb
US cents per pound
CRRI
Central Road Research Institute
CRISIL
CRISIL Limited (A S&P Subsidiary) is a rating agency
incorporated in India
CSR
Corporate social responsibility
CTC
Cost to company, the basic remuneration of executives, which
represents an aggregate figure encompassing basic pay,
pension contributions and allowances
CY
Calendar year
274
VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Glossary and Definitions continued
DDT
Dividend distribution tax
Deferred Shares
Deferred shares of £1.00 each in the Company
DFS
Detailed feasibility study
DGMS
Director General of Mine Safety in the Government of India
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
EAC
Expert advisory committee
Expansion Capital Expenditure
Capital expenditure that increases the Group’s
operating capacity
Financial Statements or Group financial statements
The consolidated financial statements for the Company and
the Group for the year ended 31 March 2019 as defined in
the Independent Auditor’s Report to the members of Vedanta
Resources Limited
Free Cash Flow
Net Cash flow from operating activities Less: purchases of
property, plant and equipment and intangibles Add proceeds
on disposal of property, plant and equipment Add: Dividend
paid and dividend distribution tax paid
Add/less: Other non-cash adjustments
FY
Financial year i.e. April to March.
GAAP, including UK 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
EBITDA is a non-IFRS measure and represents earnings before
special items, depreciation, amortisation, other gains and
losses, interest and tax.
GDP
Gross domestic product
Gearing
Net Debt as a percentage of Capital Employed
EBITDA Margin
EBITDA as a percentage of turnover
GJ
Giga joule
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
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
E&OHSAS
Environment and occupational health and safety
assessment standards
Group
The Company and its subsidiary undertakings and, where
appropriate, its associate undertaking
E&OHS
Environment and occupational health and safety
management system
Gross finance costs
Finance costs before capitalisation of borrowing costs
ESOP
Employee share option plan
ESP
Electrostatic precipitator
HIIP
Hydrocarbons initially-in place
HSE
Health, safety and environment
Executive Committee
The Executive Committee to whom the Board has delegated
operational management. It comprises of the Chief Executive
Officer and the senior management of the Group
HZL
Hindustan Zinc Limited, a company incorporated in India
IAS
International Accounting Standards
Executive Directors
The Executive Directors of the Company
IFRIC
IFRS Interpretations Committee
275
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Glossary and Definitions continued
IFRS
International Financial Reporting Standards
INR
Indian Rupees
Interest cover
EBITDA divided by gross finance costs (including capitalised
interest) excluding accretive interest on convertible bonds,
unwinding of discount on provisions, interest on defined
benefit arrangements less investment revenue
IPP
Independent power plant
Iron Ore Sesa
Iron ore Division of Vedanta Limited, comprising of Iron ore
mines in Goa and Karnataka in India.
Jharsuguda Aluminium
Aluminium Division of Vedanta Limited, comprising of an
aluminium refining and smelting facilities at Jharsuguda and
Lanjigarh in Odisha in India.
KCM or Konkola Copper Mines
Konkola Copper Mines LIMITED, a company
incorporated in Zambia
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
KPIs
Key performance indicators
KTPA
Thousand tonnes per annum
Kwh
Kilo-watt hour
LIBOR
London inter bank offered rate
LIC
Life Insurance Corporation
LME
London Metals Exchange
London Stock Exchange
London Stock Exchange Limited
MALCO
The Madras Aluminium Company Limited, a company
incorporated in India
Management Assurance Services (MAS)
The function through which the Group’s internal audit
activities are managed
MAT
Minimum alternative tax
MBA
Mangala, Bhagyam, Aishwarya oil fields in Rajasthan
MIC
Metal in concentrate
MOEF
The Ministry of Environment, Forests and Climate change 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
Net debt is a Non-IFRS measure and represents total debt after
fair value adjustments under IAS 32 and IFRS 9 as reduced by
cash and cash equivalents, liquid investments and structured
investment, net of the deferred consideration payable for such
investments (referred as Financial asset investment net of
related liabilities), if any.
NGO
Non-governmental organisation
Non-executive Directors
The Non-Executive Directors of the Company
Oil & Gas business
Oil & Gas division of Vedanta Limited, is involved
in the business of exploration, development and
production of Oil & Gas.
Ordinary Shares
Ordinary shares of 10 US cents each in the Company
Lost time injury
An accident/injury forcing the employee/contractor to remain
away from his/her work beyond the day of the accident
ONGC
Oil and Natural Gas Corporation Limited, a company
incorporated in India
LTIFR
Lost time injury frequency rate: the number of lost time injuries
per million man hours worked
OPEC
Organisation of the Petroleum Exporting Countries
LTIP
The Vedanta Resources Long term Incentive Plan or
Long term Incentive Plan
PBT
Profit before tax
276 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Glossary and Definitions continued
PPE
Property plant and equipment
Provident Fund
A defined contribution pension arrangement providing
pension benefits consistent with Indian market practices
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.
PSP
The Vedanta Resources Performance Share Plan
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
TGT
Tail gas treatment
TLP
Tail Leaching Plant
Recycled water
Water released during mining or processing and then used in
operational activities
tpa
Metric tonnes per annum
Relationship Agreement
The agreement between the Company, Volcan Investments
Limited and members of the Agarwal family which had
originally been entered into at the time of the Company’s
listing in 2003 and was subsequently amended in 2011 and
2014 to regulate 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.
TPM
Tonne per month
TSPL
Talwandi Sabo Power Limited, a company incorporated in India
TSR
Total shareholder return, being the movement in the
Company’s share price plus reinvested dividends
Return on Capital Employed or ROCE
Operating profit before special items net of tax outflow, as a
ratio of average capital employed
Twin Star
Twin Star Holdings Limited, a company
incorporated in Mauritius
RO
Reverse osmosis
Twin Star Holdings Group
Twin Star and its subsidiaries and associated undertaking
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
SHGs
Self help groups
SBU
Strategic Business Unit
STL
Sterlite Technologies Limited, a company incorporated in India
Special items
Items which derive from events and transactions that need to
be disclosed separately by virtue of their size or nature
Sterling, GBP or £
The currency of the United Kingdom
US cents
United States cents
Underlying profit/ (loss)
Attributable profit/(loss) before special items Less: NCI share in
other gains/(losses) (net of tax)
Vedanta Limited (formerly known as Sesa Sterlite Limited/
Sesa Goa Limited)
Vedanta Limited, a company incorporated in India engaged in
the business of Oil & Gas exploration and production, copper
smelting, Iron Ore mining, Alumina & Aluminium production
and Energy generation.
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
277
INTEGRATED REPORTMANAGEMENT REVIEWGOVERNANCEFINANCIAL STATEMENTSVEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19 Glossary and Definitions continued
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
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
WBCSD
World Business Council for Sustainable Development
ZCI
Zambia Copper Investment Limited, a company
incorporated in Bermuda
ZCCM
ZCCM Investments Holdings Limited, a company
incorporated in Zambia
ZRA
Zambia Revenue Authority
278 VEDANTA RESOURCES LIMITED | INTEGRATED REPORT AND ANNUAL ACCOUNTS 2018-19
FINANCIAL STATEMENTS Notes
Notes
Design and production of the Integrated Report at
(www.emperor.works)
and
(hello@aicl.in)
ZINC-LEAD-SIVER I OIL & GAS I ALUMINIUM & POWER I COPPER I IRON ORE & STEEL
VEDANTA RESOURCES LIMITED
Vedanta Resources Limited 30 Berkeley Square, Mayfair, London W1J 6EX, UK
CIN: L13209MH1965PLC291394 | www.vedantaresources.com