To the Members,
The Board of Directors presents the Annual Report of the Company together with the Audited Statements of Account for the financial year ended March 31, 2014.
The Group structure consolidation and simplification exercise, announced in February 2012, was concluded and took effect in two phases on August 17, 2013 and August 19, 2013. Therefore, the numbers of FY 2013-14 are not comparable with FY 2012-13. On account of the merger, your Company on standalone is into iron-ore, copper, aluminium and power businesses.
The merger of Sterlite Industries (India) Ltd. and Sesa Goa Ltd., and the consolidation of the Vedanta Group has created India's largest and one of the world's top seven diversified natural resource majors by market capitalisation and EBITDA.
The merger creates a platform to reinforce the Company's position with a diversified portfolio to reduce the volatility of earnings through commodity cycles, lowering capital cost and enhancing value. The consolidation will generate significant financial and operational synergies.
Results of Operations
The strength of our portfolio continued to support the business performance during a year where we faced subdued commodity prices. Even though operating in a challenging economic environment, volatile markets and generally low global growth rate, our revenue and EBITDA remained strong and enabled to deliver robust profits in FY 2013-14.
The operational highlights during the year comprise:
J Full year record production of Oil & Gas,driven by production ramp-up in Rajasthan block
J Higher integrated refined metal production and stable mined metal production for the full year at Zinc India
J First metal tapping at the BALCO 325kt aluminium smelter during Q4
J Strong utilisation at Tuticorin copper smelter; 2nd 80MW unit of power plant commissioned during Q4
J The Honorable Supreme Court vide its order dated April 21, 2014 has conditionally lifted the ban on mining in the State of Goa with cap of 20 mtpa
J Resumption of iron ore mining operation at Karnataka
The Financial highlights include:
J Revenues remained strong at Rs. 28,378 Crore and Rs. 65,733 Crore on standalone and consolidated basis, respectively, on account of higher volumes at Zinc India, Oil & Gas, Aluminium businesses and INR depreciation
J Profit from operations before other income, finance costs and exceptional items at Rs. 807 Crore and Rs. 12,742 Crore on standalone and consolidated basis, respectively
J Standalone loss before tax Rs. 1,072 crore and profit after tax at Rs. 9,493 Crore on consolidated basis
J Net profit at Rs. 1,076 Crore on standalone and Rs. 6,299 Crore on consolidated basis
J Contribution of Rs. 31,100 Crore to the Indian Exchequer during the year, in terms of taxes, duties, royalties and profit petroleum Strong balance sheet with Cash & Cash equivalents of over Rs. 50,000 Crore
MANAGEMENT DISCUSSION AND ANALYSIS
A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.
SCHEME OF AMALGAMATION & ARRANGEMENT
In terms of order dated April 2, 2013 of Hon'ble High Court of Bombay at Goa further confirmed by order dated August 27, 2013 of the Supreme Court of India, the merger of Sterlite Industries (India) Ltd ('Sterlite') and The Madras Aluminium Company Limited (MALCO) with Sesa Goa and transfer of MALCO power plant to Vedanta Aluminium Limited (VAL) pursuant to the Scheme of amalgamation and arrangement amongst Sterlite, MALCO, Sterlite Energy Limited (SEL), VAL and Sesa Goa and their respective Shareholders and Creditors ('Composite Scheme') and the Scheme of Amalgamation of Ekaterina Limited (Ekaterina) with Sesa Goa and their respective Shareholders and Creditors ('Ekaterina Scheme') became effective from August 17, 2013.
August 28, 2013 was fixed as the Record date for determining the list of the shareholders of Sterlite, MALCO and Ekaterina to whom the equity shares of the Sesa Goa were allotted as per terms of the scheme in the following manner:
To the Shareholders of Sterlite:
Every equity shareholder of Sterlite holding 5 (five) equity shares in Sterlite of Rs.1 each fully paid up ('Sterlite Shares') as of the Record Date shall be entitled to be issued 3 (three) shares of face value Rs. 1 each, at par, credited as fully paid up,of the Sesa Goa ('Sesa Goa Shares').
To the ADS holders of Sterlite:
Every holder of Sterlite ADSs (each representing 4 (four) Sterlite shares) holding 5 (five) Sterlite ADSs shall be entitled to receive 3 (three) Sesa Goa ADSs (each representing 4 (four) Sesa Goa shares).
To the Shareholders of MALCO:
Every equity shareholder of MALCO holding 10 (ten) equity shares in MALCO of Rs.2 each fully paid up as of the Record Date shall be entitled to be issued 7 (seven) equity shares of face value Rs. 1 each, at par, credited as fully paid up, of the Sesa Goa.
To the Shareholders of Ekaterina:
Every equity shareholder of the Ekaterina Limited holding 25 (Twenty Five) equity shares in Ekaterina Limited of USD 0.1 each fully paid up as of the Record Date shall be entitled to be issued 1 (One) equity share of the face value of Rs. 1 each, at par, credited as fully paid-up, of the Sesa Goa.
The shares were allotted on August 29, 2013 and the shares were credited to the depository accounts and share certificates dispatched in first week of September, 2013. Consequent to allotment the share paid up share capital of the Company went up from Rs. 869,101,423 to Rs. 2,964,674,487.
Treatment of fractional entitlements:
All fractional entitlements (cumulatively) of individual shareholders were allotted to Mr. P. K. Mukherjee, Executive Director as Trustee for and on behalf of such shareholders of Sterlite and MALCO and the shares were disposed off and the proceeds distributed to such shareholders in proportion to and in lieu of their respective fractional entitlements. The Proceeds also included interim dividend of Rs. 1.50 per share declared by the Board on October 31, 2013.
The board of directors has recommended a final dividend 0175% , i.e., Rs. 1.75 per equity share of Rs. 1/- each for FY 2013-14. This is in addition to interim dividend of Rs. 1.50 per share declared and paid during the year. The dividend payout is subject to approval of members at the ensuing Annual General Meeting.
TRANSFER TO GENERAL RESERVE
Out of the total profit of Rs. 1,076.09 Crore for the financial year, an amount of Rs. 115 Crore is proposed to be transferred to the General Reserve. The above transfer to general reserves is in compliance to the Companies (Transfer of Profits to Reserves) Rules, 1975.
CRISIL Research certifies its ratings of your Company for the financial year. The treasury portfolio of fixed income investments has been consistently evaluated as 'Very Good' (highest safety from credit default on CRISIL's 4 point scale).
During the year, your Company businesses upgraded their existing management systems to meet the requirements of the Vedanta Sustainability Framework. Further, we cascaded framework information down to our subsidiary businesses by providing on-location training to managers to ensure compliance by their teams. Large-scale posters and other support materials were provided to reinforce the key messages. We are using the Vedanta Sustainability Assurance Programme (VSAP) to ensure Framework compliance, including through a programme of audits.
CORPORATE SOCIAL RESPONSIBILITY (CSR) AND COMMUNITY DEVELOPMENT
The Company's CSR Policy is in line with the Group's approach to community programmes and are governed by two key considerations: the needs of the local people and the development plan in line with the UN Millennium Development Goals (UNMDG) and also the CSR National Voluntary Guidelines of the Ministry of Corporate Affairs, Government of India.
In order to manage both our community relationships and community investment programmes, every business of the Company has a dedicated team of Corporate Social responsibility. These individuals are crucial to driving and managing local engagement and act as a point of contact for community members. The key focus areas for CSR of the Company is in the area of health, nutrition, sanitation, education, sustainable livelihoods and women empowerment.
In line with the requirements of the Companies Act, 2013, the Board in their meeting held on March 29, 2014 has constituted a CSR Committee comprising of Mr. Naresh Chandra as Chairman of CSR Committee, Mr. Ravi Kant, Mr. Tom Albanese, CEO & Whole-Time Director and Mr. Tarun Jain, Whole-Time Director. The CSR Committee will decide the focus area of CSR Activities, budget and programmes to be undertaken and implemented by the respective businesses of the Company.
During the year, on consolidated basis the Company has spent Rs. 173 Crore on CSR during FY 2013-14 and is looking forward to progressively increase the CSR expenditure in FY 2014-15. A detailed section on the CSR programmes being carried by your Company is mentioned in the section Business Responsibility Report (BRR) of the Annual Report.
BUSINESS RESPONSIBILITY REPORT
SEBI vide its circular CIR/ CFD/DIL/8/2012 dated August 13, 2012 and Clause 55 of the Listing Agreement, mandated that top 100 listed companies based on market capitalisation at BSE and NSE, to include Business Responsibility Report (BRR) as part of the annual report. The BRR shall portray the initiatives taken by the Company on governance, environmental, social and economic responsibilities aspects mentioned in the BRR which forms part of this annual report.
As on March 31, 2014, the Company has 60 subsidiaries including indirect subsidiaries.
The Ministry of Corporate Affairs, vide its circular no.2/2011 dated February 8, 2011, had granted exemption to holding companies from attaching the financial statements of its subsidiaries to the Company's annual report. In accordance with the said circular, the Balance Sheet, the Profit & Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. The Company will make available the annual accounts of the subsidiary companies to any member of the Company who may be interested in obtaining the same. The
Annual Accounts of the subsidiaries companies will also be kept for inspection by any shareholders at the registered office of the holding company and of the subsidiary companies concerned at the respective companies' registered offices. Further, the Annual Accounts of the subsidiaries are also available on the website of the Company www.sesasterlite.com
The shareholders may refer to the statement under Section 212 of the Companies Act, 1956 and information on the financial statements of subsidiaries appended to the above Statement under Section 212 of the Companies Act, 1956 in this annual report for further information on these subsidiaries.
Members may write to the Secretarial Department at Sesa Sterlite Limited, Sesa Ghor, 20 EDC Complex, Patto Panaji, Goa 403001, to obtain a copy of the financial statements of the subsidiary companies.
Post implementation of the Scheme of Arrangement, the Board of the Company was restructured. The Board in its meeting held on August 17, 2013 inducted Mr. Anil Agarwal, Mr. Navin Agarwal and Mr. Mahendra Singh Mehta as Directors of the Company. Mr. Navin Agarwal as Executive Vice Chairman of the Company for a period of five years till July 31, 2018. The Board in its meeting held on March 29, 2014, w.e.f. April 1, 2014 has re-designated Mr. Navin Agarwal as the Executive Chairman of the Company. The Board also appointed Mr. Mahendra Singh Mehta as Whole-Time Director & Chief Executive Officer (CEO) of the Company for the period from August 17, 2013 to December 31, 2013. The Board granted further extension to Mr. Mehta as WTD & CEO till March 31, 2014, Mr. P. K. Mukherjee was re-designated from Managing Director to Executive Director - Iron ore Business. During the year Mr. Amit Pradhan stepped down as Director and Whole Time Director of the Company with effect from August 18, 2013. The shareholders vide postal Ballot approved the appointments of Mr. Navin Agarwal, Mr. Mahendra Singh Mehta Change in Designation and change in terms of remuneration of Mr. P. K. Mukherjee.
During the year the following Independent Directors resigned from their respective Directorship, viz., Mr. Ashok Kini w.e.f. from August 28, 2013, Mr. Jagdish Pal Singh, w.e.f. January 28, 2014 and Mr. Kuldip Kumar Kaura, w.e.f. March 20, 2014. Mr. Anil Agarwal w.e.f. March 31, 2014 stepped down from the Board and as Chairman. During the year, Mr. M. S. Mehta and Mr. P. K. Mukherjee, Whole-Time Director superannuated and resigned respectively w.e.f. April 1, 2014. The Board places on record valuable contribution made by
Mr. Anil Agarwal, Mr. Ashok Kini, Mr. Jagdish Pal Singh, Mr. Kuldip Kumar Kaura, Mr. M. S. Mehta and Mr. P. K. Mukherjee during their respective tenures of office as Directors of the Company.
Mr. Anil Agarwal will continue to be associated as Chairman Emeritus and Chief Mentor of the Company.
The Board in its meeting held on January 28, 2014 appointed Mr. Ravi Kant as Director in casual vacancy in place of Mr. Ashok Kini and in the Meeting held on March 29, 2014 made the following appointments:
J Mr. Naresh Chandra as an Independent NonExecutive Director in casual vacancy due to resignation of Mr. J. P. Singh.
J Ms. Lalita Gupte Independent NonExecutive Director in the casual vacancy due to resignation of Mr. Kuldip Kumar Kaura.
J Appointed Mr.Thomas Albanese as Additional Director and also as CEO & Whole-Time Director, Mr. D. D. Jalan as CFO & Whole-Time Director and Mr. Tarun Jain as Whole-Time Director of the Company with effect from April 1, 2014 which are subject to the approval of Shareholders and the Central Government, if any. In terms of Section 161 of the Companies Act, 2013, Mr. Albanese, Mr. D. D. Jalan and Mr. Tarun Jain will be holding office up to the ensuing Annual General Meeting and being eligible offer themselves for appointment.
Mr. G. D. Kamat and Mr. Ravi Kant, Directors, retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment.
AUDITORS & AUDITOR'S REPORT
The statutory auditors of the Company, M/s. Deloitte Haskins & Sells, LLP Chartered Accountants, hold office until the conclusion of the ensuing Annual General Meeting. They have confirmed their eligibility and willingness to accept office of Auditors. The Audit Committee and the Board of Directors therefore recommend M/s. Deloitte Haskins & Sells, LLP Chartered Accountants as Statutory Auditors of the Company for FY 201415 for the approval of shareholders.
The Notes on Financial Statements referred to in the Auditors Reports are self-explanatory and do not call for any comments and explanation.
The Company has appointed the following cost auditors for conducting the audit of cost records of the Company for the Financial Year 2013-14.
(i) Copper - M/s Ramnath Iyer & Co., Cost Accountants
(ii) Iron Ore - M/s R. J. Goel & Co., Cost Accountants
(iii) Aluminium - M/s Chandra Wadhwa & Co., Cost Accountants
(iv)Power - M/s Chandra Wadhwa & Co., Cost Accountants
As reported last year, the Company has discontinued renewal of its fixed deposits on maturity. As on March 31, 2014 all fixed deposits had matured while deposits amounting to Rs. 54,000 remained unclaimed. Since the matter is subjudice, the Company is maintaining status quo.
ADEQUACY OF INTERNAL CONTROLS
The Company, as part of Vedanta Group, has a strong internal control system in place. The internal control system of the Company is supported by the Management Assurances Services (MAS) function. Your Company has a documented Standard Operating System (SOPs) for procurement, project / expansion management capex, human resources, sales and marketing, finance, treasury, compliance, Safety, Health and Environment (SHE) and manufacturing. An annual audit plan is drawn in consultation with the MAS team as approved by the Audit Committee. The internal controls system and mechanism is reviewed periodically to make it robust, so as to meet the challenges of the business. The Company has a system of carrying out internal audit, covering monthly physical verification of inventory, monthly review of accounts and a quarterly review of all business processes. To enhance internal controls, the internal audit follows stringent grading mechanism, focusing on the implementation of all recommendations of internal auditors. Your Company engages the services of 'Big Four' Audit Firms for internal audit (Internal Auditors). The internal auditors make periodical presentations to the Audit Committee, who review the same and ensure strict compliance. Your Company is also subject to the controls under SOX (Sarbanes Oxley Act) and has adopted SAPGRC (Governance, Risk and Compliance) framework to further strengthen the internal control. The Company also follows the 'Turnbull Risk Matrix) as part of Risk Management.
DEPOSITORY SYSTEM AND LISTING OF SHARES
Details of the depository system and listing of shares are given in the section "Additional Shareholder Information", which forms a part of the Corporate Governance Report and is attached with the Annual Accounts.
REGISTRAR AND SHARE TRANSFER AGENT
M/s. Karvy Computershare Private Limited, Hyderabad, is the Registrar and Share Transfer Agent of the Company.
ENERGY CONSDERVATION, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
Particulars prescribed under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure A, which forms part of this Report.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement it is hereby confirmed that:
a) In the preparation of the Annual Accounts for the year ended March 31, 2014, the applicable accounting standards have been followed and there is no material departures from the
b) The Directors have selected such accounting policies have been selected and they have consistently applied them and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2014 and of the profit of the Company for the year ended on that date;
c) The Directors confirm that they have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of this Act, for safeguarding the assets of the Company, and for preventing and detecting fraud and other irregularities;
d) The Directors have prepared the annual accounts of the Company on a 'going concern' basis.
A certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this Report along with report on Corporate Governance.
Your Directors express their deep appreciation for the unrelenting cooperation and support rendered by the employees at all levels of the Company. Your Directors wish to lay emphasis on safe working culture in the organisation and urge all the employees to not only follow safety standards but also to excel in all safety parameters.
Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of employees are set out as an annexure to the Directors' Report.
However, as per provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the report and the accounts are being sent to all the shareholders excluding the aforesaid information. Any shareholder desirous of obtaining such particulars may write to the Company Secretary at the registered office of the Company.
Your Company maintained healthy, cordial and harmonious industrial relations at all levels. The enthusiasm and unstinting efforts of the employee have enabled your Company to remain at the forefront of the industry. The Directors place on record, their sincere appreciation for significant contributions made by the employees through their dedication, hard work and commitment towards the success and growth of the Company.
The Directors also acknowledge the support and assistance extended to us by the Government of India, various state governments, and government departments, financial institutions, bankers, shareholders and investors at large, and look forward to having the same support in our endeavours.
For and on behalf of Board of Directors
Place : Mumbai
Dated : April 29, 2014