UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

Sterlite Industries (India) Limited

Not Applicable
(Translation of Registrant’s name into English)

Republic of India
(Jurisdiction of incorporation or organization)

Vedanta, 75 Nehru Road
Vile Parle East
Mumbai, Maharashtra 400-099, India
+91-22-6646-1000
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F þ                    Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Indicate by check mark whether the Registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o                    No þ

If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 12g3-2(b): Not applicable.

 

 

CONVENTIONS USED IN THIS REPORT

     In this report, references to “US” or the “United States” are to the United States of America, its territories and its possessions. References to “UK” are to the United Kingdom. References to “India” are to the Republic of India. References to “$,” “US$,” “dollars” or “US dollars” are to the legal currency of the United States, references to “Rs.,” “Rupees” or “Indian Rupees” are to the legal currency of India and references to “AUD,” “Australian dollars” or “A$” are to the legal currency of the Commonwealth of Australia. References to “¢” are to US cents. References to “lb” are to the imperial pounds (mass) equivalent to 0.4536 kilograms, references to “tons” are to metric tons, a unit of mass equivalent to 1,000 kilograms or 2,204.6 lb, references to “oz” are to ounces, with one kilogram being equivalent to 35.2740 oz and one ton equivalent to 32,000 oz, and references to “ha” are to hectares, a unit of area equal to 10,000 square meters or 107,639 square feet. Unless otherwise indicated, the unaudited condensed consolidated interim financial information for the fiscal year ended March 31, 2010 and for six-month period ended September 30, 2009 and 2010 for our Company included in this report has been prepared in accordance with International Financial Reporting Standards, or IFRS, and its interpretations issued by the International Accounting Standards Board, or IASB.

     References to a particular “fiscal” year are to our fiscal year ended March 31 of that year. Our fiscal quarters end on June 30, September 30 and December 31. References to a year other than a “fiscal” year are to the calendar year ended December 31.

     We conduct our businesses both directly and through a consolidated group of companies that we have ownership interests in. Unless otherwise stated in this report or unless the context otherwise requires, references in this report to “we,” “us,” “our,” “Sterlite,” “our company” or “our consolidated group of companies” mean Sterlite Industries (India) Limited, its consolidated subsidiaries and its predecessors, collectively, including Monte Cello BV, or Monte Cello, Copper Mines of Tasmania Pty Ltd, or CMT, Thalanga Copper Mines Pty Ltd, or TCM, Bharat Aluminium Company Limited, or BALCO, Sterlite Energy Limited, or Sterlite Energy, Sterlite Opportunities and Ventures Limited, or SOVL, Vizag General Cargo Berth Private Limited or VGCB, Hindustan Zinc Limited, or HZL, Fujairah Gold FZE, Sterlite (USA), Inc., or Sterlite USA, and Talwandi Sabo Power Limited, or TSPL. References in this report to “SIIL” mean Sterlite Industries (India) Limited. Our consolidated financial information does not include Vedanta Resources plc, or Vedanta, Vedanta Resources Holdings Limited, or VRHL, Konkola Copper Mines plc, or KCM, Twin Star Holdings Limited, or Twin Star, Welter Trading Limited, or Welter Trading, the Anil Agarwal Discretionary Trust, Onclave PTC Limited, or Onclave, The Madras Aluminium Company Limited, or MALCO, Sterlite Technologies Limited, or STL, Monte Cello Corporation NV, or MCNV, Twin Star Infrastructure Limited, Sesa Goa Limited, Sesa Industries Limited, and Vedanta Aluminium Limited, or Vedanta Aluminium, except that as to Vedanta Aluminium, our consolidated financial statements account for our 29.5% Non-Controlling interest therein under the equity method of accounting, but Vedanta Aluminium is not otherwise included in our consolidated group of companies or our consolidated financial statements. References to the “Vedanta group” are to Vedanta and its subsidiaries. In this report, references to The London Metal Exchange Limited, or LME, price of copper, zinc, lead or aluminum are to the cash seller and settlement price on the LME for copper, zinc, lead or aluminum for the period indicated.

     Unless otherwise specified, translation of amounts for the convenience of the reader has been made in this report from Indian Rupee to US dollars at the noon buying rate of $1.00 = Rs. 44.56 in the City of New York for cable transfers of Indian Rupee as certified for customs purposes by the Federal Reserve Bank of New York on September 30, 2010. No representation is made that the Indian Rupee amounts represent US dollar amounts or have been, could have been or could be converted into US dollars at such rates or any other rate.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This report contains “forward-looking statements” as defined in the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our company and our industry. These forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “project,” “seek,” “should” and similar expressions. These forward-looking statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that, although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate and, as a result, the forward-looking statements based on those assumptions could be materially incorrect. Factors which could cause these assumptions to be incorrect include, but are not limited to:

	•		a decline or volatility in the prices of or demand for copper, zinc, aluminum or power;
	•		events that could cause a decrease in our production of copper, zinc, aluminum or power;
	•		unavailability or increased costs of raw materials for our products;
	•		our actual economically recoverable copper ore, lead-zinc ore or bauxite reserves being lower than we have estimated;
	•		our ability to expand our business, effectively manage our growth or implement our strategy, including our entry into the commercial power business;
	•		our ability to retain our senior management team and hire and retain sufficiently skilled labor to support our operations;
	•		regulatory, legislative and judicial developments and future regulatory actions and conditions in our operating areas;
	•		increasing competition in the copper, zinc, aluminum or power industry;
	•		political or economic instability in India or around the region;
	•		worldwide economic and business conditions;
	•		our ability to successfully consummate strategic acquisitions;
	•		the outcome of outstanding litigation in which we are involved;
	•		our ability to maintain good relations with our trade unions and avoid strikes and lock-outs;
	•		any actions of our controlling shareholder, Vedanta;
	•		our business’ future capital requirements and the availability of financing on favorable terms;
	•		the continuation of tax holidays, exemptions and deferred tax schemes we enjoy;
	•		changes in tariffs, royalties, customs duties and government assistance; and

•

terrorist attacks and other acts of violence, natural disasters and other environmental conditions and outbreaks of infectious diseases and other public health concerns in India, Asia and elsewhere.

These and other factors are more fully discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and in our other filings with the US Securities and Exchange Commission, or the SEC, including “Item 3. Key Information — D. Risk Factors,” “Item 5. Operating and Financial Review and Prospects” and elsewhere in our annual report on Form 20-F for fiscal 2010. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans, objectives or projected financial results referred to in any of the forward-looking statements. Except as required by law, we do not undertake to release revisions to any of these forward-looking statements to reflect future events or circumstances.

Index to Unaudited Condensed Consolidated Interim Financial Statements

		Page(s)
Unaudited Condensed Consolidated Interim Statements of Income for six-month period ended September 30, 2009 and 2010.			F-1
Unaudited Condensed Consolidated Interim Statements of Comprehensive Income for six-month period ended September 30, 2009 and 2010.			F-2
Audited Statement of Financial Position as of March 31, 2010 and Unaudited Condensed Consolidated Interim Statements of Financial Position as of September 30, 2010.			F-3
Unaudited Condensed Consolidated Interim Statements of Cash Flows for six-month period ended September 30, 2009 and 2010.			F-4
Unaudited Condensed Consolidated Interim Statements of Changes in Equity for six-month period ended September 30, 2009 and 2010.			F-5
Notes to the Unaudited Condensed Consolidated Interim Financial Statements			F-6

STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES

				Six-month period ended September 30,
		Notes		2009				2010				2010
				(Rs. In				(Rs. in				(US dollars in
				millions)				millions)				millions)
Revenue		4			105,730				119,528				2,682.4
Cost of sales					(81,570	)			(90,785	)			(2,037.4	)
Gross profit					24,160				28,743				645.0
Other operating income					1,444				982				22.0
Distribution expenses					(1,510	)			(1,338	)			(30.0	)
Administration expenses					(2,626	)			(2,801	)			(62.9	)
Operating profit					21,468				25,586				574.1
Investment and other income		5			8,947				10,101				226.7
Finance and other costs		6			(3,259	)			1,761				39.5
Share in Consolidated (loss)/profit of associate					1,398				(1,343	)			(30.1	)
Profit before tax					28,554				36,105				810.2
Income tax expense		7			(5,433	)			(8,809	)			(197.7	)
Profit for the period					23,121				27,296				612.5
Profit attributable to:
Equity holders of the parent					16,303				19,702				442.1
Non-Controlling Interests					6,818				7,594				170.4
					23,121				27,296				612.5
Earnings per share		25
Basic					4.97				5.86				0.1
Diluted					4.97				5.39				0.1
Weighted average number of equity shares used in computing earnings per share
Basic					3,281,458,062				3,361,207,534				3,361,207,534
Diluted					3,281,458,062				3,446,945,134				3,446,945,134

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES

		Six-month period ended September 30,
		2009				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Profit for the period			23,121				27,296				612.5
Other comprehensive income, net of tax:
Exchange differences on translating foreign operations			1,437				338				7.6
Available-for-sale financial investments			181				44				1.0
Cash flow hedges			270				321				7.2
Share of other comprehensive (loss)/income of associate			277				239				5.4
Total other comprehensive income for the period, net of taxes			2,165				942				21.2
Total comprehensive income			25,286				28,238				633.7
Total comprehensive income attributable to:
Equity holders of the parent			18,382				20,649				463.4
Non-Controlling Interests			6,904				7,589				170.3
			25,286				28,238				633.7

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES

				As of
				March 31,				September 30,				September 30,
		Notes		2010				2010				2010
				(Rs. in				(Rs. in				(US dollars in
				millions)				millions)				millions)
ASSETS
Non-current assets
Property, plant and equipment		8			226,629				249,201				5,592.5
Leasehold land prepayments					1,220				1,217				27.3
Investment in associate		9			4,621				3,518				78.9
Financial assets investments		10			1,362				1,406				31.6
Other non-current assets		11			10,227				16,762				376.2
Total non-current assets					244,059				272,104				6,106.5
Current assets
Inventories		12			29,822				41,820				938.5
Current tax asset					660				111				2.5
Trade and other receivable		13			118,907				77,486				1,738.9
Short term investments		14			211,022				237,088				5,320.7
Derivative financial assets					115				298				6.7
Restricted cash and cash equivalents		15			60				75				1.7
Cash and cash equivalents		16			2,021				2,744				61.6
Total current assets					362,607				359,622				8,070.6
Assets held for sale		17			188				51				1.1
Total assets					606,854				631,777				14,178.2
LIABILITIES
Current liabilities
Short-term borrowings		20			19,121				15,772				354.0
Acceptances					29,901				29,643				665.2
Trade and other payables		18			35,095				34,715				779.1
Derivative Financial Liabilities					669				371				8.3
Provisions					748				782				17.6
Current tax liabilities					863				1,429				32.1
Total current liabilities					86,397				82,712				1,856.3
Net current assets					276,210				276,910				6,214.3
Non-current liabilities
Long-term borrowings		20 & 21			43,578				46,781				1,049.8
Deferred tax liabilities					17,955				18,617				417.8
Retirement benefits					865				1,320				29.6
Provisions					382				398				8.9
Other non current liabilities		19			5,689				6,465				145.1
Total non-current liabilities					68,469				73,581				1,651.2
Total liabilities					154,866				156,293				3,507.5
Net assets					451,988				475,484				10,670.7
EQUITY
Share capital					1,681				3,361				75.4
Security premium					182,797				181,117				4,064.6
Other components of equity					2,723				3,670				82.4
Retained earnings					177,971				193,999				4,353.6
Equity attributable to equity holders of the parent					365,172				382,147				8,576.0
Non-Controlling Interests					86,816				93,337				2,094.7
Total Equity					451,988				475,484				10,670.7

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES

		For the period ended September 30,
		2009				2010				2010
		(Rs. in				(Rs. In				(US dollars in
		millions)				millions)				millions)
Cash flows from operating activities
Profit before taxes			28,554				36,105				810.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			3,913				4,701				105.5
Provision for doubtful debts/advances			—				26				0.6
Fair valuation gain on financial assets held for trading			(1,257	)			(1,752	)			(39.3	)
Profit on sale of fixed asset, net			—				(81	)			(1.8	)
Share in consolidated (profit) / loss of associate			(1,398	)			1,343				30.1
Exchange (gains)/loss, net			264				(595	)			(13.4	)
Gain on fair valuation of conversion option			—				(2,320	)			(52.1	)
Interest and dividend income			(6,297	)			(8,225	)			(184.6	)
Interest expenses			1,602				1,174				26.3
Changes in assets and liabilities:
Decrease/(Increase) in trade and other receivables			2,496				(3,497)				(78.4)
(Increase) in inventories			(10,939	)			(12,061	)			(270.6	)
(Increase)/decrease in other current and non-current assets			2,071				(1,764	)			(39.6	)
(Decrease) in trade and other payable			5,152				(857	)			(19.2	)
(Decrease)/ Increase in other current and non-current liabilities			(1,576	)			58				1.3
Proceeds from short term investments			1,429,732				227,730				5,110.6
Purchases of short term investments			(1,504,534	)			(201,787	)			(4,528.4	)
Cash generation/(used) from operation			(52,217	)			38,198				857.2
Interest paid			(2,569	)			(1,599	)			(35.8	)
Interest received			2,932				6,194				139.0
Dividend received			2,958				1,945				43.7
Income tax paid			(5,059	)			(6,897	)			(154.7	)
Net cash from (used)/ provided in operating activities			(53,955	)			37,841				849.4
Cash flows from investing activities
Purchases of property, plant and equipment			(35,939	)			(24,961	)			(560.2	)
Proceeds from sale of property, plant and equipment			27				486				10.9
Loans repaid by related parties			—				72,702				1,631.5
Loans to related parties			(18,133	)			(31,994	)			(718.0	)
Proceeds from short term deposits			39,746				21,129				474.2
Purchases of short term deposits			(11,577	)			(71,433	)			(1,603.1	)
Net changes in restricted cash and cash equivalents			(1,475	)			(15	)			(0.3	)
Net cash used in investing activities			(27,351	)			(34,086	)			(765.0	)
Cash flows from financing activities
Proceeds from issuance of equity shares ,net			76,532				—				—
Proceeds from/(repayment of) working capital loan, net			4,000				2,152				48.3
Proceeds from/(repayment of) acceptances, net			(8,666	)			(401	)			(9.0	)
Repayment of other short term borrowings			(2,294	)			(2,000	)			(44.9	)
Proceeds from other short-term borrowings			13,060				2,427				54.5
Proceeds from long-term borrowings			5,473				978				21.9
Repayment of long-term borrowings			(2,836	)			(1,479	)			(33.2	)
Payment of dividends to equity holders of the parent, including dividend tax			(3,437	)			(3,674	)			(82.5	)
Payment of dividends to Non-Controlling interest, including dividend tax			(725	)			(1,068	)			(24.0	)
Net cash provided/(used) by financing activities			81,107				(3,065	)			(68.9	)
Effect of exchange rate changes on cash and cash equivalents			370				33				0.7
Net increase in cash and cash equivalents			171				723				16.2
Cash and cash equivalents at the beginning of the period			2,701				2,021				45.4
Cash and cash equivalents at the end of the period			2,872				2,744				61.6
Supplementary disclosure of non-cash investing activities:
Payables for purchase of property, plant and equipment			17,263				19,360				434.5

     The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES

		Attributable to equity holders of the parent
														Available
														for
										Translation				sale				Cash
		Share				Securities				of foreign				financial				flow				Retained								Non-Controlling				Total
		capital				premium				operations				investments				hedges				earning				Total				Interest				equity
Balance as at April 1, 2009			1,417				106,532				(399	)			(21	)			830				142,174				250,533				70,070				320,603
Profit for the period			—				—				—				—				—				16,303				16,303				6,818				23,121
Exchange differences on translation of foreign operations			—				—				1,437				—				—				—				1,437				—				1,437
Movement in available for sale financial investments			—				—				—				181				—				—				181				—				181
Net movement in fair value of cash flow hedges, net of tax			—				—				—				—				184				—				184				86				270
Share in consolidated other comprehensive income of associate, net of tax			—				—				—				—				277				—				277				—				277
Total comprehensive income for the period			—				—				1,437				181				461				16,303				18,382				6,904				25,286
Share Capital			264				76,268				—				—				—				—				76,532				—				76,532
Dividend paid including tax on dividend			—				—				—				—				—				(3,437	)			(3,437	)			(725	)			(4,162	)
Balance as at September 30, 2009			1,681				182,800				1,038				160				1,291				155,040				342,010				76,249				418,259
Balance as at April 1, 2010			1,681				182,797				896				326				1,501				177,971				365,172				86,816				451,988
Profit for the period																							19,702				19,702				7,594				27,296
Exchange differences on translation of foreign operations			—				—				338				—				—				—				338				—				338
Movement in available for sale financial investments			—				—				—				44				—				—				44				—				44
Net movement in fair value of cash flow hedges, net of tax			—				—				—				—				326				—				326				(5	)			321
Share of other comprehensive income of associate, net of tax			—				—				—				—				239				—				239				—				239
Total comprehensive income for the period			—				—				338				44				565				19,702				20,649				7,589				28,238
Shares issued			1,680				(1,680	)			—				—				—				—				—				—				—
Dividend paid including tax on dividend																							(3,674	)			(3,674	)			(1,068	)			(4,742	)
Balance as at September 30, 2010			3,361				181,117				1,234				370				2,066				193,999				382,147				93,337				475,484
Balance as at September 30, 2010 (in US dollars in millions)			75.4				4,064.6				27.7				8.3				46.4				4,353.6				8,576.0				2,094.7				10,670.7

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

STERLITE INDUSTRIES (INDIA) LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. Company Overview

Sterlite Industries (India) Limited and its consolidated subsidiaries (the “Company” or “Sterlite”) are engaged in non-ferrous metals and mining in India and Australia. Sterlite Industries (India) Limited (“SIIL”) was incorporated on September 8, 1975 under the laws of the Republic of India. SIIL’s shares are listed on National Stock Exchange and Bombay Stock Exchange in India. In June 2007, Sterlite completed its initial public offering of American Depositary Shares, or ADS, each representing one equity share, and listed its ADSs on the New York Stock Exchange. In July 2009, Sterlite completed its follow-on offering of an additional 131,906,011 ADSs, each representing one equity share, which are listed on the New York Stock Exchange.

SIIL is a majority-owned subsidiary of Twin Star Holdings Limited (“Twin Star”) which is in turn a wholly-owned subsidiary of Vedanta Resources plc (“Vedanta”), a public limited company incorporated in the United Kingdom and listed on the London Stock Exchange plc. Twin Star held 54.6 % of SIIL’s equity as of September 30, 2010.

The Company’s copper business is principally one of custom smelting and includes a copper smelter, a refinery, a phosphoric acid plant, a sulphuric acid plant, a copper rod plant and two captive power plants at Tuticorin in Southern India, and a refinery and two copper rod plants at Silvassa in Western India. In addition, the Company owns and operates the Mt. Lyell copper mine in Tasmania, Australia through its subsidiary, Copper Mines of Tasmania Pty Ltd (“CMT”), which provides a small percentage of the copper concentrate requirements, and a precious metal refinery in Fujairah in the UAE.

The Company’s zinc business is owned and operated by Hindustan Zinc Limited (“HZL”) in which it has a 64.9% interest as of September 30, 2010. HZL’s operations include four lead-zinc mines, four zinc smelters, one lead smelter, one lead-zinc smelter, four sulphuric acid plants, a silver refinery and five captive power plants in the State of Rajasthan in Northwest India, one zinc smelter and a sulphuric acid plant in the State of Andhra Pradesh in Southeast India and a zinc ingot melting and casting plant in the State of Uttarakhand in North India.

The Company’s aluminum business is owned and operated by Bharat Aluminium Company Limited (“BALCO”) in which it has a 51.0% interest as of September 30, 2010. BALCO’s operations include two bauxite mines, two power plants (of which one is used to produce power for captive consumption), and refining, smelting and fabrication facilities in Central India.

The Company owns 29.5% Non-Controlling interest in Vedanta Aluminium Limited (“Vedanta Aluminium”), 70.5% owned subsidiary of Vedanta.

The Company acquired 100% shareholding of Sterlite Energy Limited (“SEL”) during fiscal 2007. SEL is engaged in power generation business in India. SEL has commenced construction of its 2,400 MW thermal coal-based commercial power facility in the State of Orissa in Eastern India.

In July 2008, following a competitive bidding process in which SEL was selected as the successful bidder, SEL acquired 100% ownership interest in Talwandi Sabo Power Limited (“TSPL”), a company created by the Punjab State Electricity Board of India for the purpose of undertaking a 1,980 MW thermal coal-based commercial power project in the State of Punjab, India. TSPL is a development stage enterprise in the process of constructing the power plant.

2. Basis of preparation of financial statements

Basis of preparation

These interim financial statements have been prepared in accordance with the accounting policies that the Company had previously adopted in its annual financial statements for the fiscal year ending March 31, 2010. Those accounting polices are based on IFRS and its interpretations. The policies set out below were consistently applied to all periods presented unless otherwise noted.

Basis of measurement

The unaudited condensed consolidated interim financial statements have been prepared on a historical cost basis and on an accrual cost basis, except for derivative financial instruments, liquid investments, available-for-sale financial assets and defined benefit pension obligations that have been measured at fair value.

Recently issued accounting pronouncements

a) At the date of authorization of these financial statements, the following standards interpretations and amendments which have not been applied in these financial statements were in issue but were not yet effective:

In May 2010, the IASB issued “Improvements to IFRS” — a collection of amendments to certain IFRSs — as part of its program of annual improvements to its standards, which is intended to make necessary, but non-urgent, amendments to standards that will not be included as part of another major project. The amendments resulting from these improvements mainly have effective dates for annual periods beginning on or after January 1, 2011 respectively, although entities are permitted to adopt them earlier. The Company is currently evaluating the impact, if any, the adoption of these improvements will have on the Company’s consolidated financial statements.

IFRS 3 (Revised 2008) “Business Combinations”

IFRS 7 “Financial Instruments: Disclosures”

IAS 1(Revised 2007) “Presentation of Financial Statements”

IAS 27 (Revised 2008) “Consolidated and Separate Financial Statements”

IAS 34 “Interim Financial Reporting”

IFRS 9, “Financial Instruments”

In November 2009, the International Accounting Standards Board issued IFRS 9, “Financial Instruments: Recognition and Measurement”, to reduce the complexity of the current rules on financial instruments as mandated in IAS 39, “Financial Instruments: Recognition and Measurement: Eligible Hedged Items”. The effective date for IFRS 9 is annual periods beginning on or after January 1, 2013 with early adoption permitted. IFRS 9 has fewer classification and measurement categories as compared to IAS 39 and has eliminated the categories of, held to maturity, available for sale and loans and receivables. Further it eliminates the rule-based requirement of segregating embedded derivatives and tainting rules pertaining to held to maturity investments. For an investment in an equity instrument which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss. The Company is currently evaluating the requirements of IFRS 9, and has not yet determined the impact on its unaudited condensed consolidated interim financial statements.

(b) Standards adopted by the Company during the period ended September 30, 2010 is as below :

(i) IFRS 3 (Revised 2008), “Business Combinations” is applicable for annual periods beginning on or after July 1, 2009. This standard was adopted by the company from April 1, 2010. Business Combinations consummated after April 1, 2010 will be impacted by this standard. IFRS 3 (Revised) primarily requires the acquisition-related costs to be recognized as period expenses in accordance with the relevant IFRS. Costs incurred to issue debt or equity securities are required to be recognized in accordance with IAS 39. Consideration, after this amendment, will include fair values of all interests previously held by the acquirer. Re-measurement of such interests to fair value would be carried out through net profit in the statement of comprehensive income. Contingent consideration is required to be recognized at fair value even if not deemed probable of payment at the date of acquisition

     IFRS 3 (Revised) provides an explicit option on a transaction-by-transaction basis, to measure any Non-controlling interest (NCI) in the entity acquired at fair value of their proportion of identifiable assets and liabilities or at full fair value. The first method will result in a marginal difference in the measurement of goodwill from the old IFRS 3; however the second approach will require recording goodwill on NCI as well as on the acquired controlling interest. Upon consummating a business transaction in future the company is likely to adopt the first method for measuring NCI. The revised standard has no impact on the Company in these financial statements since there are no business combinations consummated during the half year ended September 30, 2010.

(ii) IAS 27 (Revised 2008), “Consolidated and Separate Financial Statements” is applicable for annual periods beginning on or after July 1, 2009. This standard was adopted by the company from April 1, 2010. It requires a mandatory adoption of economic entity model which treats all providers of equity capital as shareholders of the entity. Consequently, a partial disposal of interest in a subsidiary in which the parent company retains control does not result in a gain or loss but in an increase or decrease in equity. Additionally purchase of some or all of the NCI is treated as treasury transaction and accounted for in equity and a partial disposal of interest in a subsidiary in which the parent company loses control triggers recognition of gain or loss on the entire interest. A gain or loss is recognized on the portion that has been disposed off and a further holding gain is recognized on the interest retained, being the difference between the fair value and carrying value of the interest retained. This Standard requires an entity to attribute their share of net profit and reserves to the NCI even if this results in the NCI having a deficit balance. The revised standard has no impact on the Company in these financial statements since there is no disposal of subsidiary nor purchase of the NCI during the half year ended September 30, 2010.

Going concern

The unaudited condensed consolidated interim financial statements have been prepared in accordance with the going concern basis of accounting.

Convenience translation

The accompanying unaudited condensed consolidated interim financial statements are presented in Indian Rupee, the functional and presentational currency of the Company. Solely for the convenience of the readers, the unaudited condensed consolidated financial statements as of and for the period ended September 30, 2010 have been translated into US dollars (“$”) at the noon buying rate of $1.00 = Rs. 44.56 in the City of New York for cable transfers of Indian Rupee as certified for customs purposes by the Federal Reserve Bank of New York on September 30, 2010. No representation is made that the Indian Rupee amounts represent US dollar amounts or have been, could have been or could be converted into US dollars at such a rate or any other rate.

3. Significant accounting policies

A. Basis of consolidation

The unaudited condensed consolidated interim financial statement incorporates the results of SIIL and all its subsidiaries, being the entities that it controls. This control is normally evidenced when SIIL is able to govern an entity’s financial and operating policies so as to benefit from its activities or where SIIL owns, either directly or indirectly, the majority of an entity’s equity voting rights unless in exceptional circumstances it can be demonstrated that ownership does not constitute control.

The results of subsidiaries acquired or sold during the period are consolidated for the periods from, or to, the date on which control passed. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring any dissimilar accounting policies that may exist in line with Company’s policy.

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, have been eliminated in preparing the unaudited condensed consolidated interim financial statements. Unrealized losses are eliminated unless costs cannot be recovered.

B. Investments in Associates

Investments in associates are accounted for using the equity method. An associate is an entity over which the Company is in a position to exercise significant influence over operating and financial policies and normally owns between 20% and 50% of the voting equity but is neither a subsidiary nor a joint venture. Goodwill arising on the acquisition of associates is accounted for in accordance with the policy set out above and is included in the carrying value of investments in associate.

Investment in associates is initially recorded at the cost to the Company and then, in subsequent periods, the carrying value is adjusted to reflect the Company’s share of the associate’s consolidated profits or losses, other changes to the associate’s net assets and is further adjusted for impairment losses, if any. The consolidated statements of income and comprehensive income includes the Company’s share of associate’s results, except where the associate is generating losses, the Company’s investments in the associate has been written down to zero and the Company has no legal or constructive obligation to make any payments on behalf of the associate.

Unrealized gains arising from transactions with associates are eliminated against the investment to the extent of the Company’s interest in the associate. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment of the asset transferred.

C.Revenue Recognition

Revenues are measured at the fair value of the consideration received or receivable, net of discounts, volume rebates, outgoing sales taxes, excise duty and other indirect taxes.Revenues are recognised when all significant risks and rewards of ownership of the asset sold are transferred to the customer and the commodity has been generally delivered to the shipping agent. Revenues from sale of material by-products are included in revenue.

Dividend income is recognised when the shareholders’ right to receive payment is established. Interest income is recognised using an effective interest method.

Certain of our sales contracts provide for provisional pricing based on the price on The London Metal Exchange Limited (“LME”), as specified in the contract, when shipped. Final settlement of the prices is based on the applicable price for a specified future period. The Company’s provisionally priced sales are marked to market using the relevant forward prices for the future period specified in the contract and same is adjusted in revenue.

D. Business Combinations

Acquisitions are accounted for under the purchase method. The acquirer’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3, are recognized at their fair value at the acquisition date.

Excess purchase consideration, being the difference between the fair value of the consideration given and the fair value of the identifiable assets and liabilities acquired, is is recorded as goodwill. Goodwill arising on acquisitions is reviewed for impairment annually.Where the fair values of the identifiable assets and liabilities exceed the cost of acquisition, the surplus is credited to the statement of income 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, and the corresponding adjustments to purchased goodwill, are finalized within 12 months of the acquisition date.

Internally generated goodwill is not recognized.

The interest of Non-Controlling shareholders in the acquiree is initially measured at the Non-Controlling interest’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

E. Property, Plant and Equipment

(i). Mining Properties

Exploration and evaluation expenditure is written off in the period in which it is incurred.

The costs of mining properties, which include the costs of acquiring and developing mining properties and mineral rights, are capitalised as property, plant and equipment under the heading “Mining properties” in the period in which they are incurred.

When a decision is taken that a mining property is viable for commercial production, all further pre-production primary development expenditure other than land, buildings, plant and equipment, etc is capitalised as part of the cost of the mining property until the mining property is capable of commercial production. From that point, capitalised mining properties are amortized on a unit-of-production basis over the total estimated remaining commercial reserves of each property or group of properties.

Exploration and evaluation assets acquired are recognised as assets at their cost of acquisition subject to meeting the commercial production criteria mentioned above and are subject to impairment review.

Stripping costs/secondary development expenditure incurred during the production stage of operations of an ore body is charged to the statement of income immediately.

In circumstances where a property is abandoned, the cumulative capitalized costs relating to the property are written off in the period.

Commercial reserves are proved and probable reserves. Changes in the commercial reserves affecting unit of production calculations are dealt with prospectively over the revised remaining reserves.

(ii). 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. Expenditure incurred after the property, plant and equipment have been put into operation, such as repairs and maintenance, are normally charged to the statement of income in the period in which the costs are incurred. Major inspection and overhaul expenditure is capitalized.

(iii). Assets in the Course of Construction

Assets in the course of construction are capitalized 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 are capitalised until the period of commissioning has been completed and the asset is ready for its intended use.

(iv). Depreciation

Mining properties and other assets in the course of development or construction, freehold land and goodwill are not depreciated. Capitalised mining properties costs are amortised once commercial production commences, as described in “Property, Plant and Equipment — Mining Properties”.

Other buildings, plant and equipment, office equipment and fixtures, and motor vehicles are stated at cost less accumulated depreciation and any provision for impairment. Depreciation commences when the assets are ready for their intended use. Depreciation is provided at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over its expected useful life, as follows:

	Buildings:
	— Operations		30 years
	— Administration		50 years
	Plant and equipment		10 — 20 years
	Office equipment and fixtures		3 — 20 years
	Motor vehicles		9 — 11 years

Major inspection and overhaul costs are depreciated over the estimated life of the economic benefit derived from such costs. The carrying amount of the remaining previous overhaul cost is charged to the statement of income if the next overhaul is undertaken earlier than the previously estimated life of the economic benefit.

The Company 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(s) is accounted for as a change in accounting estimate.

F .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 statement of financial position.

G. Financial Instruments

(i). Non-derivative financial assets

The Company initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial asset when the contractual rights to the 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.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Company has the following non-derivative financial assets: financial asset investments, short-term investments, cash and cash equivalents, loans and receivables.

(a). Financial asset investments

Financial asset investments are classified as available for sale and are initially recorded at cost and then remeasured at subsequent reporting dates to fair value. Unrealized gains and losses on financial asset investments are recognised directly in other comprehensive income. Upon disposal or impairment of the investments, the gains and losses in other comprehensive income are recycled into the statement of income.

Investments in unquoted equity instruments that do not have a market price and whose fair value cannot be reliably measured are measured at cost. Equity investments are recorded in non-current assets unless they are expected to be sold within one year.

(b). Short term investments

Short term investments represent short-term marketable securities and other bank deposits with an original maturity between three to twelve months.

Short-term marketable securities are categorized as held for trading and are initially recognised at fair value with any gains or losses arising on remeasurement recognised in the statement of income.

(c). Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand, and short-term deposits which have a maturity of three months or less from the date of acquisition.

(d). Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Trade receivables are stated at their transaction value as reduced by appropriate allowances for estimated irrecoverable amounts. The allowance accounts in respect of loans and receivables are used to record impairment losses unless the Company is satisfied that no recovery of the amount owing is possible; at that point the amounts are considered irrecoverable and are written off against the loans and receivables directly.

Loans and other receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short term receivables when the interest would be immaterial.

(ii). Non-derivative financial liabilities

The Company initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Company has the following non-derivative financial liabilities: Borrowings, Foreign currency convertible notes, trade and other payables.

(a). Borrowings

Interest bearing loans and borrowings are initially recorded at the proceeds received. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of income when the liabilities are derecognised as well as through the effective interest rate method (“EIR”) amortisation process.

Amortised cost is calculated by taking into account the finance charges, including premiums payable on settlement or redemption and direct issue costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the statement of income. The unamortised portion is classified with the carrying amount of debt.

(b). Foreign currency convertible notes

Convertible notes issued in foreign currency are convertible at the option of the holder into ordinary shares of the Company according to the terms of the issue. The conversion option which is not settled by exchanging a fixed amount of cash for a fixed number of shares is accounted for separately from the liability component as derivative and initially accounted for at fair value. The liability component is recognized initially at the difference between the fair value of the note and the fair value of the conversion option. Directly attributable notes issue costs are allocated to the liability component and the conversion option in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component is measured at amortized cost using the effective interest method. The conversion option is subsequently measured at fair value at each reporting date, with changes in fair value recognized in statement of income. The conversion option is presented together with the related liability.

(c). Trade and other payables

Trade and other payables are recognised at their transaction cost, which is its fair value, and subsequently measured at amortised cost.

(iii). Derivative financial instruments

In order to hedge its exposure to foreign exchange, interest rate and commodity price risks, the Company enters into forward, option, swap contracts and other derivative financial instruments. The Company 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 financial position dates.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss 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 Company revokes the hedge relationship, the hedging instrument expires or is sold, terminated, or exercised or no longer meets the criteria for hedge accounting,

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the statement of income. The cumulative gain or loss previously recognized in other comprehensive income remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when it is recognized. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss. However, when a hedge of a forecast transaction subsequently results in recognition of a
non financial asset, the associated cumulative gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of that asset. 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 recognized in the other comprehensive income is transferred to statement of income.

Derivative financial instruments that do not qualify for hedge accounting are marked to market at the financial position date and gains or losses are recognized in the statement of income 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 reported in the statement of income.

H. 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 Company are recognised at the proceeds received, net of direct issue costs.

I. Borrowing costs

Borrowing costs directly relating to the acquisition, construction or production of a qualifying capital project under construction are capitalized 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. Where funds are borrowed specifically to finance a project, the amount capitalized represents the actual borrowing costs incurred. Where surplus funds are available out of money borrowed specifically to finance a project, the income generated from such short term investments is also capitalised and deducted from the total capitalised borrowing cost. Where the funds used to finance a project form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to relevant general borrowings of the Company during the period.

All other borrowing costs are recognized in the statement of income in the period in which they are incurred.

J. Impairment

Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortized 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 recognized in the statement of income. Any cumulative loss in respect of an available-for-sale financial asset recognized previously in other comprehensive income is transferred to the statement 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 recognized. For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the statement of income. For available-for-sale financial assets that are equity securities, the change in fair value is recognized directly in other comprehensive income.

The allowance accounts in respect of trade and other receivables are used to record impairment losses unless the Company is satisfied that no recovery of the amount owing is possible; at that point the amounts are considered irrecoverable and are written off against the financial asset directly.

Non-financial assets

The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value 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 the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount.

Impairment losses are recognized in the statement of income. Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

K. Government grants

Government grants are not recognised until there is a reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. Government grants relating to tangible fixed assets are treated as deferred income and released to the statement of income over the expected useful lives of the assets concerned. Other grants are credited to the statement of income as and when the related expenditure is incurred.

L. Inventories

Inventories including work-in-progress are stated at the lower of cost and net realisable value, less any provision for obsolescence. Cost is determined on the following bases:

•

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 a weighted average basis;

	•		finished products are valued at raw material cost plus costs of conversion, comprising labour costs and an attributable proportion of manufacturing overheads based on normal levels of activity and are moved out of inventory on a FIFO basis; and
	•		by-products and scrap are valued at net realisable value

Net realisable value is determined based on estimated selling price, less further costs expected to be incurred to completion and disposal.

M.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. In interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings. Such estimated average annual effective income tax rate is applied to the pre-tax income of the interim period.

Subject to 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:

	•		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 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 or loss; and
	•		deferred tax assets are recognised only to the extent that it is more likely than not that they will be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized 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 recognized directly in other comprehensive income is recognised in other comprehensive income and not in the statement of income.

The carrying amount of deferred tax assets 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 liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.

N. Retirement benefit schemes

The Company operates or participates in a number of defined benefits and defined contribution pension schemes, the assets of which are (where funded) held in separately administered funds. For defined benefit pension schemes, the cost of providing benefits under the plans is determined separately each year for each plan using the projected unit credit method by independent qualified actuaries.

Actuarial gains and losses arising in the year are recognised in full in the statement of income for the year. For defined contribution schemes, the amount charged to the statement of income in respect of pension costs and other post-retirement benefits is the contributions payable in the year.

O. Share based payments

SIIL does not have any outstanding share based payments. Vedanta offers certain share based incentives under the Long-Term Incentive Plan (“LTIP”) to employees and directors of SIIL and its subsidiaries. Vedanta recovers the proportionate cost (calculated based on the grant date fair value of the options granted) from the respective group companies, which is charged to the statement of income.

P. Provisions for liabilities and charges

Provisions represent liabilities to the Company for which the amount or timing is uncertain. Provisions are recognized when the Company 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 recognized in the statement of income as a finance cost. Provisions are reviewed at each reporting date and are adjusted to reflect the current best estimate.

Q. 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. 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 statement of income 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 and other cost in the statement of income.

Costs for the restoration of subsequent site damage, which is caused on an ongoing basis during production, are charged to the statement of income as extraction progresses. Where the costs of site restoration are not anticipated to be material, they are expensed as incurred.

R. Foreign currency translation

The functional currency for each entity in the Company is determined as the currency of the primary economic environment in which it operates. For all principal operating subsidiaries, the functional currency is the local currency of the country in which it operates.

In the financial statements of individual group companies, transactions in currencies other than the functional currency are translated into the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in other currencies are translated into the functional currency 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 and are translated at the exchange rates prevailing on the dates on which such values were determined. All exchange differences are included in the statement of income except any exchange differences on monetary items designated as an effective hedging instrument of the currency risk of designated forecasted sales, which are recognized in other comprehensive income.

For the purposes of the consolidated financial statements, items in the statement of income of those entities for which the Indian Rupees (functional currency of SIIL) is not the functional currency are translated into Indian Rupees at the average rates of exchange during the year. The related statements of financial position are translated at the rates as at the reporting date. Exchange differences arising on translation are recognised in other 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 statement of income.

S. Earnings per share

The Company presents basic and diluted earnings per share (“EPS”) data for its equity shares. Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of SIIL by the weighted average number of equity shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to equity shareholders and the weighted average number of equity shares outstanding for the effects of all dilutive potential equity shares.

T. Critical accounting judgments and estimation uncertainty

The preparation of 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. Actual results may differ from these estimates under different assumptions and conditions

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are included in the following accounting policies and/or notes:

i.

Note 8 and the accounting policy on property, plant and equipments- Mining reserve estimates and useful life of property, plant and equipment.

ii.     Note 17 and the accounting policy on impairment of assets: In assessing the property, plant and equipment for impairment, factors leading to significant reduction in profits such as changes in commodity prices, the Company’s business plans and significant downward revision in the estimated mining reserves are taken into consideration. The carrying value of the assets of a cash generating unit (CGU) and associated mining reserves is compared with the recoverable amount of those assets, that is, the higher of fair value less costs to sell and value in use. Value in use is usually determined on the basis of discounted estimated future cash flows. This involves management estimates on commodity prices, market demand and supply, economic and regulatory climates, long term mine plan and other factors. Any subsequent changes to cash flow due to changes in the abovementioned factors could impact on the carrying value of the assets.

iii.

Accounting policy on restoration, rehabilitation and environmental costs:

Provision is made for costs associated with restoration and rehabilitation of mining sites as soon as the obligation to incur such costs arises. Such restoration and closure costs are typical of extractive industries and they are normally incurred at the end of the life of the mine. The costs are estimated on the basis of mine closure plans and the estimated discounted costs of dismantling and removing these facilities and the costs of restoration are capitalized when incurred reflecting ourobligations at that time. A corresponding provision is created on the liability side. The capitalized asset is charged to the income statement over the life of the asset through depreciation over the life of the operation 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.

iv.		Accounting policy on retirement benefit schemes
v.		Note 26 and 29 Contingencies:

The Company also has significant capital commitments in relation to various capital projects which are not recognized on the statement of financial positions. In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Guarantees are also provided in the normal course of business. 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 consolidated financial statements. Although there can be no assurance regarding the final outcome of the legal proceedings in which Company involved, it is not expected that such contingencies will have a materially adverse effect on its financial position or profitability.

vi.

Note 7 and accounting policy on taxation:

In preparing consolidated financial statements, the Company recognises income taxes in each of the jurisdictions in which it operate. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

vii.

Note 9 on investments in associates:

Consequent to ongoing delay in approval for the Niyamgiri mines, the Company has reviewed the carrying value of its investments in Vedanta Aluminium for impairment, and has concluded that no impairment is necessary based on possible alternate sources of obtaining bauxite.

4. Revenue:

		For the period ended September 30,
		2009				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Gross revenue			111,201				128,374				2,880.9
Less: excise duty			(5,470	)			(8,846	)			(198.5	)
Revenue, net of excise duty			105,730				119,528				2,682.4

5. Investment and other income:

		For the period ended September 30,
		2009				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Dividend income on financial assets held for trading			2,958				2,267				50.9
Fair value gain on financial assets held for trading			1,257				1,752				39.3
Interest income on bank deposits			84				1,906				42.8
Interest income on loans and receivables			3,220				4,040				90.7
Foreign exchange gain /(loss)			1,482				180				4.0
Capitalisation of interest income(1)			(54	)			(44	)			(1.0	)
			8,947				10,101				226.7

6. Finance and other costs:

		For the period ended September 30,
		2009				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Interest on borrowings other than convertible notes			(1,433	)			(733	)			16.4
Interest on convertible notes			—				(939	)			21.1
Bank charges			(223	)			(189	)			4.3
Unwinding of discount on provisions			(5	)			(8	)			0.2
Gain on fair valuation of conversion option			—				2,320				(52.1	)
Foreign exchange (loss)/gain			(1,997	)			195				(4.4	)
Others			(208	)			(462	)			10.4
Capitalisation of finance costs(1)			607				1,577				(35.4	)
			(3,259	)			1,761				(39.5	)

7. Tax expenses

The following are the details of tax expenses charged to the statement of income for the periods indicated:

		For the Six-month period ended September 30,
		2009				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Current tax:
Current tax on the profit for the period			4,663				8,317				186.7
Credits in respect of current tax for earlier Period			175				46				1.0
Total current tax			4,838				8,363				187.7
Deferred tax:
Origination and reversal of temporary differences			595				446				10.0
Total deferred tax			595				446				10.0
Tax expense for the period			5,433				8,809				197.7
Effective income tax rate (%)			19.0				24.4				24.4

8. Property, plant and equipments:

																										US dollar in
		Rs. In millions																								millions
						Land												Office
		Mining				and				Plant and				Motor				equipments
		property				Building				equipments				vehicles				and fixtures				Total				Total
Cost
April 1, 2010			17,435				14,350				143,127				372				2,684				177,968				3993.9
Additions			—				857				5,748				25				258				6,888				154.6
Disposals/adjustments*			—				(26	)			(1	)			(7	)			(4	)			(38	)			(0.9	)
Foreign exchange			221				(1	)			106				1				10				337				7.6
September 30, 2010			17,656				15,180				148,980				391				2,948				185,155				4,155.2
Accumulated depreciation and impairment
April 1, 2010			10,186				3,361				48,175				133				1,356				63,211				1,418.6
Charge for the period			445				203				3,951				15				73				4,687				105.2
Disposals/adjustments*			—				(3	)			8				(2	)			(4	)			(1	)			—
Foreign exchange			221				0				104				1				10				336				7.5
September 30, 2010			10,852				3,561				52,238				147				1,435				68,233				1,531.3
Property, plants and equipment as at:
April 1, 2010			7,249				10,989				94,952				239				1,328				114,757				2,575.3
Assets under construction																							111,872				2,510.6
Total																							226,629				5,085.9
September 30, 2010			6,804				11,619				96,742				244				1,513				116,922				2,623.9
Assets under construction																							132,279				2,968.6
Total																							249,201				5,592.5
September30, 2010 (US dollar in millions)			152.7				260.7				2,171.1				5.5				34.0

Plant and equipment includes refineries, smelters, power plants and related facilities, data processing equipment and electrical fittings.

Certain property, plant and equipment are pledged as collateral against borrowings, the details related to which have been described in “Borrowings”. Interest (net) capitalised as part of property, plant and equipment was Rs. 1,533 million ($34.4 million) for the period ended September 30, 2010.

9. Investment in associate

Vedanta Aluminium is a non public entity engaged in the production of metallurgical grade alumina and other aluminium products. Vedanta Aluminium cater to a wide spectrum of industries and has its presence in Jharsuguda and Lanjigarh, in the state of Orissa. The Company owns a 29.5% interest in Vedanta Aluminium. Vedanta owns the remaining 70.5% interest.

The Company’s investment in Vedanta Aluminium consists of the following:

		As at
		March 31,				September 30,				September 30,
		2010				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Equity investment			4,621				3,518				78.9
Total			4,621				3,518				78.9

Summarized consolidated financial information in respect of Vedanta Aluminium is as follows:

		As at
		March 31,				September 30,				September 30,
		2010				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Current assets			22,681				22,565				506.4
Non-current assets			244,867				267,539				6,004.0
Total assets			267,548				290,104				6,510.4
Current liabilities			149,486				177,615				3,986.0
Non-current liabilities			102,398				100,566				2,256.9
Total liabilities			251,884				278,181				6,242.9

		For the period ended September 30,
		2009				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions )				millions )				millions)
Total revenue			1,161				21,230				476.4
Operating (loss)			(1,021	)			(437	)			(9.8	)
Profit/(loss) for the period			4,738				(4,551	)			(102.1	)
Share in consolidated profit/(loss) of associate			1,398				(1,343	)			(30.1	)
Share in consolidated other comprehensive (loss)/income of associate, net of tax			277				239				5.3

10. Financial assets investments

Financial asset investments represent investments classified and accounted for as available-for-sale investments

Movements:

		As at
		March 31,				September 30,				September 30,
		2010				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Beginning of the period,			1,044				1,362				30.6
Changes in fair value			318				44				1.0
As at September 30,			1,362				1,406				31.6

Available for sale financial assets consists of the following:

		As at
		March 31,				September 30,				September 30,
		2010				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Quoted			378				422				9.5
Unquoted			984				984				22.1
			1,362				1,406				31.6

Quoted investments represent investments in equity securities that present the Company with opportunities for return through dividend income and gains in value. The fair values of such securities are determined by reference to published price quotations in active market.

Unquoted investments are held at cost and principally represent an investment in the equity share capital of the Andhra Pradesh Gas Power Corporation Limited. The fair value of unquoted equity investments cannot be reliably measured as the variability in the range of fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed.

11. Other non-current assets

		As at
		March 31,				September 30,				September 30,
		2010				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Loans to associate			8,890				8,390				188.3
Loans to other related parties			—				6,922				155.4
Other non-current assets			1,337				1,450				32.5
			10,227				16,762				376.2

12. Inventories

Inventories consist of the following:

		As at
		March 31,				September 30,				September 30,
		2010				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Raw materials and consumables			15,908				21,287				477.7
Work-in-progress			12,847				18,346				411.7
Finished goods			1,067				2,187				49.1
			29,822				41,820				938.5

Inventories with a carrying amount of Rs. 4,419 million and Rs. 7,075 million ($158.8 million) have been pledged as security against certain bank borrowings of the Company as at March 31, 2010 and September 30, 2010, respectively.

13. Trade and other receivables

Trade and other receivables (net of allowances) consist of the following for the period indicated:

		As at
		March 31,				September 30,				September 30,
		2010				2010				2010
		(Rs. in				(Rs. in				(US dollars in
		millions)				millions)				millions)
Trade receivables			4,963				7,822				175.5
Trade receivables from associate			634				1,553				34.9
Trade receivables from other related parties			423				199				4.5
Loans to associate			95,709				53,750				1,206.2
Loans to other related parties			6,805				4				0.1
Balance with Government authorities			2,589				4,875				109.4
Prepayments			624				952				21.4
Claims/refunds receivable			3,365				2,742				61.5
Advances for supplies			1,525				1,031				23.1
Other receivables			2,270				4,558				102.3
			118,907				77,486				1,738.9