Sterlite Industries Q1FY14 Earnings Conference Call

Transcription

1 Sterlite Industries Q1FY14 Earnings Conference Call July 25, 2013 MANAGEMENT: MR. M. S.MEHTA CEO, STERLITE INDUSTRIES MR. TARUN JAIN DIRECTOR, FINANCE, STERLITE INDUSTRIES MR. D. D. JALAN CFO, STERLITE INDUSTRIES MR. S K ROONGTA CEO - ALUMINIUM &POWER, STERLITE INDUSTRIES MR. ASHWIN BAJAJ DIRECTOR - INVESTOR RELATIONS, STERLITE INDUSTRIES Page 1 of 16

2 Ladies and gentlemen, good day and welcome to the Sterlite Industries 1 st Quarter Financial Year 2014 Results Conference Call. As a reminder, all participant lines will be in the listenonly mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing * followed by 0 on you touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwin Bajaj -- Head of Investor Relations. Thank you and over to you sir. Ashwin Bajaj: Thank you, operator. Hello ladies and gentlemen. This is Ashwin Bajaj, Director of Investor Relations. Thanks for joining us today to discuss Sterlite results for the first quarter ended 30th June From our management team we have with us today Mr. M.S. Mehta CEO of the Group; Mr. D.D. Jalan - Group CFO; Mr. Tarun Jain Director of Finance and Mr. S.K. Roongta CEO of Aluminum and Power businesses. I will now hand it over to Mr. Mehta who will take you through the results, and then we will be happy to take your questions. So Mr. Mehta. M.S. Mehta: Thank you Ashwin and good evening everyone and welcome to Sterlite Earnings Call for the 1 st Quarter of FY 14. Before reviewing business for the operating and financial performance, I would like to go over few key points. Despite ongoing challenging commodity and regulatory environment during the quarter, we delivered an EBITDA of 2,174 crores. During this quarter, we delivered a strong performance in Hindustan Zinc, power business and aluminum business delivered a steady production performance. As you are aware, Tuticorin smelter was closed for most of the quarter and started operation again from 23 rd June. Our balance sheet continues to go robust with a cash and liquid investment of almost Rs.26,000 crores. Regarding the Sesa-Sterlite merger, the proposed Vedanta group consolidation and simplification has received the approval of High Court of Madras on 25th July and approval of the High Court of Bombay at Goa on 3 rd April. One of the shareholders of Sesa Goa has filed an appeal against the order passed by the High Court of Bombay at Goa before the division bench of the same court. The hearing before the division bench has completed and the order is awaited. Now, let me walk you through the business highlights. First at Zinc India, we delivered strong production growth in Q1 and we would deliver better performance going forward driven by the improved asset utilization and operational efficiencies. With higher volumes and stable CoP, we achieved 9% higher revenues and 7% higher EBITDA despite lower LME. We delivered 27% higher mined metal production and remain on track to deliver about a million ton of mined metal production during the year with higher volumes coming from SK (Sindesar Khurd), Kayad and Zawar Mines. With the higher availability of mined metal, we may also sell excess concentrate later this year. Our integrated production of refined zinc was 10% higher due to improved utilization. Integrated production of lead was in line with the previous Q1, and integrated saleable silver production was 9% higher, driven by higher volume from SK and Zawar Mines. We are on track to produce 360 tons of saleable silver this year. Page 2 of 16

3 Marginal increase in cost of production in rupee terms essentially reflects impact of price increase in excavation cost, lower acid credit, depreciation of rupee and positive impact of volume increase and reduced specific consumptions. Going forward we expect our cost to stay stable in the current band. Moving to Zinc International, total production at Zinc International was lower due to disruption of production at Lisheen and Black Mountain, which has come back to normalcy now. We expect the full year production at Zinc International to be in the line with earlier guidance of 390,000 to 400,000 tons. Our CoP at Zinc International remains stable and we expect to sustain this throughout the year. The lower production and lower LME resulted in 12% lower EBITDA at Zinc International. Moving to Copper India, the Tuticorin smelter as I mentioned before is operating normally since 23 rd June and is expected to produce its normal run rate of 85,000 to 90,000 tons quarterly in the remaining quarters. Since the plant operated only for few days in the quarter, sales revenue, EBITDA are not comparable with the prior periods. At Australia, MIC production was lower due to lower grade. We expect full year production of about 25,000 to 26,000 tons from mined metal at Australia. Overall, the EBITDA was lower due to plant closure in Tuticorin and fixed cost in Tuticorin which is partly offset by sale of surplus power which were some 137 million units from 1 st unit of 80 MW power plant at Tuticorin. The 2 nd unit is ready for commissioning, awaiting consent to operate. In Custom Smelting business globally, Tc/Rc is favorable to smelter at this moment, and this year we expect an average Tc/Rc of about 16 cents. Even though the net CoP of custom smelting business in Q1 was not meaningful, we expect to achieve a figure of around 7 cents in the whole year despite current weak asset realizations. Moving to aluminum and first to Balco 245,000 tons smelter operated at its rated capacity. The plant continues to convert most of its metal into value-added products. Our net sales realization over LME was strong at about $450 per ton. Balco CoP of aluminum was higher by around Rs. 4,000 per ton of aluminum due to tapering of linkage coal. In addition there were some one-off developments in Q1, the cost of power generation went up during the quarter due to maintenance shut down of one of the units of 540 MW power plant which should go back to normal levels in Q2 onwards. This places Balco in the third quarter of the cost curve. Largely it s happening due to coal tapering and will get corrected with the production coming in from coal block. On the Balco projects, the new smelter of 325,000 tons is expected to commence tapping of metal in Q3 this year. The 1,200 MW power plant is ready and is awaiting consent to operate, which we are pursuing. Regarding coal block, as you are aware, we earlier obtained the 2nd stage forest clearance and are currently working to obtain the remaining approvals from the state and other regulatory bodies. This has taken longer than expected. At this moment, we expect to commence the mining in Q1 of the next year. Page 3 of 16

4 Moving to Vedanta Aluminum, the VAL smelter operated at 7% above its name plate8:1 capacity and delivered 8% higher volume over the corresponding quarter last year. Going forward, we expect to maintain and sustain current production level from this plant. Asset optimization and driving cost efficiencies are top priority and we continue to deliver significant improvements in specific power consumption, throughput volume and other operating parameters which will helped us drive the CoP down to around Rs.94, 000 per ton (in dollar terms $1,675 per tonne), which is lower than Q4 on a sequential basis and on the year-on-year quarter comparison. Current CoP is well within the second quarter of the global cost curve and we hope to sustain and maintain this position going forward. Other emphasis, is the strong cost performance in Q1 was despite the fact that Lanjigarh refinery was not operating. Refinery restarted operation in July and we hope to reach our capacity run rate by end of Q2. The feedstock will be sourced from conventional sources including Balco and augmented by imported bauxite. On long-term bauxite sourcing, we remain engaged with Government of Odisha and looking for different alternatives. The VAL smelter continues to convert about 45% of its metal into value added products, which is helping us to deliver robust performance or realization and during the quarter, it delivered or achieved $320 per ton of sales realization over the LME. EBITDA though was lower due to lower LME and fixed cost at Lanjigarh, partially offset by higher volumes and cost performance. As additional information, while two smelter interest expenses which were hitherto being capitalized, are now being charged out to P&L account, which has also impacted the PAT at VAL level. Moving on to power Power sales was higher by 20% during the quarter driven by higher power generation from the 2,400 MW Jharsuguda Power Plant. The plant operated at PLF of 54% on 4 unit basis as compared to 50% for 3 unit basis a year ago. For full year, we expect to deliver significantly improved PLF close to 60%-70% driven by improved access to evacuation of power. As I mentioned earlier, one of the units of 540 MW power plant in Balco had a maintenance shut down during the quarter, which made us divert about 204 million units of power from 270 MW power plant of Balco, resulting in net commercial sale from Balco. The average realization at power business was higher, due to higher sales in open access. The generation cost in SEL has also been stable. Overall, we delivered 21% higher EBITDA driven by higher volumes. On Talwandi Sabo Power Project, we expect the first unit to get synchronized in Q3 this year. On an overall basis, in view of the impending merger, the company borrowed 5,000 crore at a lower rate of interest and lent it to Vedanta Aluminum with an objective of optimizing the Page 4 of 16

5 overall borrowing cost at VAL. Accordingly, the increase in interest cost and borrowing was largely offset by increase in other income. Before I close, I would like to reiterate that we had a good production performance in zinc and power business. We have a world-class portfolio of assets which has been well invested and roll over the years. Our strategy of strong focus and cost control and culture of continuous improvement has helped us to deliver strong operational performance even in uncertain environment, and we hope to maintain the same performance, going forward. With that I would like to take your questions. Thank you. Thank you. Ladies and gentlemen we will now begin with the question-and-answer session. We have the first question from the line Somil Metha from IDFC Securities. Please go ahead. Sir, a couple of questions, one is what was the average coal cost for the quarter for SEL and Balco, what was it as on Q4 FY 13? Average coal cost for SEL for the current quarter is Rs No, no, sorry in terms of rupees per ton if you can give the rupees per ton coal cost? Rupee per ton coal cost roughly will be 2,070 per metric ton. Sir this is for SEL? This is different GCV; it is based upon 3000 GCV. What would be as on Q4 FY 13? Q4 FY 13 was much less, it was roughly about Rs How do you expect that going forward, should the linkage proportion come down in that case or this should be the average coal cost for the entire FY 14? Yeah, because one of the primary reasons for this increase is that linkage percentage has come down as our PLF has improved, and that is why Q4 and Q1 are not exactly comparable. It was additional coal we had to source other than linkage. What could be the similar coal cost in Balco because I think the tapering percentage in Balco is coming down because the coal mine is going to commission very soon? Our standard GCV parameter for Balco is 3600, so on 3600 GCV our coal cost for Balco has been roughly about Rs And what would that cost be in Q4 FY 13? Page 5 of 16

6 Q4 FY 13 cost was certainly lower than this... M.S. Mehta: May be we can come back to you, Somil, but I also like to supplement that there is always a skew in supply of linkage coal from Coal India and I would say its more biased towards Q4. That also give the impact and this one has seen over the years, quarter-on-quarter, year-onyear. So there is a distinct pattern of almost 10-15% differences aside. I can give the data now. Coal cost in current quarter is roughly about Rs. 2,380 what I mentioned Q4 were also around the same level, Rs My second question is basically on the captive coal mine. Despite taking all the clearances, stage-1 stage-2, we have seen some delays, you did mention that some of the approvals are pending. So just wanted to know what kind of approvals, is it more on the state government part and how do you see that, whether we can expect those approvals will come by in a couple of quarters? Yeah these approvals are primarily on the state government part. We already have the stage 2 clearance from central government and they primarily relate to forest diversion because this has got forest land, the block, and for which certain approvals are required from the state and also there will have to be Samta Committee approval for that land. So, these two approvals are in the process. You know the overall regulatory environment is taking longer than what we had anticipated for obvious reasons. So that is why it is taking longer than what we had anticipated, but we are pursuing and there is no serious issue as such except that the regulatory authorities are taking its own time. Have we acquired the entire land or there is still some land acquisition pending? There are two parts to this, some is forest land which even after that approval, we will get that forest land diverted. Than on private land, private land acquisition we have done some acquisition but major chunk of the acquisition is yet to be done. But we do not have to acquire all the land to start mining, we can start the mining operations even this part acquisition. My last question is basically on VAL, did I hear you correctly that there has been some interest cost because the Jharsuguda-2 has been commissioned? D.D. Jalan: Somil I think what Mr. Mehta said that even though Jharsuguda Plant II is yet to be commissioned but since the plant is almost ready, so that is why as per Accounting Standard 18, we have started charging the interest to profit and loss account. So the interest of Rs.316 Crore should be more or less recurring in the subsequent quarters as well? D.D. Jalan: Yeah, the interest of around Rs.300 crores that should be almost recurring in the quarter till we start commissioning, and once we start commissioning perhaps at that point of time we can decide to capitalize. Page 6 of 16

7 Thank you. The next question is from the line of Prasad Baji from Edelweiss. Please go ahead. Prasad Baji: First question on the Sterlite Energy business, the Jharsuguda unit. I believe we have signed further FSAs. So how do you see generation for the full year FY-14 and perhaps FY-15 and how do you see coal sourcing for the unit in Jharsuguda? Yeah, we already have the FSA in place for 3 units, and only for 1 unit FSA is to be signed. So in terms of the new guidelines Ministry of Coal is giving it to Coal India, we will sign the FSA for the first unit. And as Mr. Mehta has mentioned that we expect our PLF to be in the range of 60 to 70% for the full year. Prasad Baji: So currently since there are 55%, do you expect next quarter itself to go to a higher level of 70%, how do we see the progression in the coming quarters? I suppose, larger improvement will come in 3 rd and 4 th quarter because in 2 nd quarter for a few days we had some issue of water availability, but otherwise we expect progressively PLF to improve in 3 rd and 4 th quarter. Prasad Baji: So full year average will be 60%, just to be clear? That is what we have said full year average should be 60 to 70% in that range that is what we expect. Prasad Baji: Obviously, we are getting the additional coal, you have signed FSAs, but at the same time you mentioned that the linkage proportion fell in this quarter. So how should we see the coal cost going forward? We are able to get even non-linkage coal because we are in the midst of the coal belt so we are able to source it comparatively at competitive rates because our logistic costs are much lower, and also MCL and Coal India, some of its subsidiaries they have got extra coal at their pit heads which they are allowing outside the linkage quantity also. So, we have access to that coal as well, that is the part of the Coal India policy to sell the excess pit head coal, as long as buyer can make its own logistics arrangement which we are able to do. Certainly, to the extent the proportion of linkage coal comes down and other coal proportion goes up, your average cost will tend to move up, but we will try to see that our costs are contained as much as we can. Prasad Baji: Just on the Copper business we have seen intermittent shut downs by the various authorities. At the current stage we have restarted. But on an overall basis how do you see that unit working, do you expect further regulatory action or have we seen the end of it, how do we see the unit operating on an overall yearly basis? M.S. Mehta: I think Prasad you have to also see the plant that we are operating for 15-years now and it is one of the benchmark plants and somehow it is getting a lot of attention and every attention also attract a lot of committees visiting and inspecting the plants. Last 2-years, I would say Page 7 of 16

8 that four inspections have been carried out; two under NGT direction and two under supreme court direction and everything has been seen upside down or in fact if you go carefully by the NGT s recent order, they observed based on expert committee finding, that the plant is neither an existing polluter nor the threat of future pollution resulting in health hazards. So, what we can say that this plant has stood through all the kind of scrutiny in the past and we standby to commit our commitment that we need to operate the plant with the best environmental practices. Having said that yes, you are right, we have faced the challenges often, there will be any other reasons for that, we are not the only plant who get this kind of attention, there are many plants around that, even Kudankulam is also one of the examples. So, we will have to deal with it as it comes, but we remain committed that we must operate the plant to the best standards, and at this moment both NGT order, we wish to continue running the plant with our current standards. Prasad Baji: With Sterlite having increased the borrowings of Rs. 5,000 crores that interest cost would start from this quarter and next quarter onwards, the interest cost should be fully reflected on this 5,000 crores immediately, is it not? Prasad, on an overall basis, it is just a refinancing and Sterlite has borrowed the money and given it to VAL. So in Sterlite basically the borrowing cost has increased and that much amount is coming in other income by way of interest which is coming from VAL. Thank you. The next question is from the line of Ash Lazenby from Liberum Capital. Please go ahead. Ash Lazenby: Just a quick question relating to the merger of Sterlite and Sesa Goa. Obviously, you said today that the shareholders of Sesa Goa filed an appeal and there was a hearing before the division bench which is completed and the order is awaited, just wondering to the extent that you can comment, what the process is now to deliver deal completion and can you give an indication perhaps at the timing of that and whether there have been other appeals, whether risks of further hearings that may have to occur as a result of them? Tarun Jain: As you rightly observed, there was an appeal from one of the shareholders in Goa and we have said that hearings are already over, just the order is to be announced which we expect in the next one or two weeks and thereafter scheme can be implemented because now we have the order from the Chennai High Court. So, once court processes are over I think within a week or so we will be announcing a record date and completing the share-swap exercise as well. At this point of time, there is only one appeal from one of the shareholder of Sesa Goa, which is pending. Order is pending rather, hearings are over. Thank you. The next question is from the line of Anuj Singla from Deutsche Bank. Please go ahead. Anuj Singla: My question relates to the cost of production of aluminum at VAL as well as at Balco. Over the last few quarters we have seen a wide divergence in the cost of production whereas VAL Page 8 of 16

9 has been declining, Balco has in fact remained stable or slightly increased. So could you throw some light on what is the key reason of this differential? And secondly, should we expect the cost of production at VAL to go down in the coming quarters given that it already includes some amount of fixed cost on account of Lanjigarh refinery and we should expect some savings as Lanjigarh comes online and also on Balco is there a chance of reduction in this cost of production, without assuming that the coal block is coming over the next 2-3 quarters? Anuj, you have rightly observed about a varying difference in CoP of Jharsuguda and Balco. Now first taking Balco, there is a spike in CoP of Balco as Mr. Mehta also explained in his opening remarks that Rs. 4,000 per ton is the impact of tapering of coal linkage, next 25% coal linkage has been tapered with effect from June this year so as against original 100% linkage last year, 25% was cut off and now another 25% has been cut off. So that is making the difference of Rs.4,000 a ton. So, we will not be able to offset that cost. But also we had another impact as was mentioned that we had a shut down of one unit in our more efficient 540 MW CPP and as against that we had to draw the power for a smelter from less efficient 270 MW CPP which has a higher cost of production because of its efficiency parameters. So those kinds of costs we will be able to adjust going forward and we are driving the cost parameters aggressively in Balco, we expect also lower cost in terms of the carbon costs going forward because carbon prices are softening to some extent, and also once we have the Lanjigarh operational then part of the alumina requirement will come through tolling via Lanjigarh, that will bring down the alumina cost. So, certainly we expect Balco cost to come down. As far as Jharsuguda is concerned, the primary reasons for cost efficiency have been better operational efficiency parameters in terms of consumption parameters of alumina, carbon, as well as lower power consumption and power cost. Through various measures we have been able to keep our coal cost contained at Jharsuguda by getting the improved quality of coal from Coal India and there is somewhat reduction in coal cost we have been able to achieve at Jharsuguda, and it will be our effort to drive this cost going forward. Of course, there can be seasonal impact like in monsoon period, there is always less availability of coal and also the coal quality deteriorates, but certainly we will make best possible efforts to keep our cost down and maintain our cost level. Yes, the impact of fixed cost of Lanjigarh was not very high, but certainly it will also help in keeping the cost down. Anuj Singla: Mr. Roongta, just one follow-up question, in this quarter there is a difference of around $260 between the CoP at VAL and Balco. Will it be fair to assume that a significant portion of that is primarily on account of higher coal and power cost at Balco or are there any other heads also as well where Balco is inefficient compared to VAL? Yes, primarily coal and power cost, but there are also element of fixed costs at Balco because of the employee cost and other cost, because of historical reasons we have higher fixed cost at BALCO. That is also one of the major factors, but we are reducing our manpower going forward and certainly there is a plan to progressively reduce our manpower and bring down the fixed cost. Page 9 of 16

10 M.S. Mehta: In fact, as and when we start the new smelter, it will help us to reduce the manpower cost element, this should have happened, but delay in 325ktpa smelter delay that impact also, but in 325 ktpa one would also see reduction in the fixed overheads of BALCO, which is quite significant. The next question is from the line of Pinakin Parekh from JP Morgan. Please go ahead. Pinakin Parekh: Two questions; first on VAL, one is the company has announced the restart of the alumina smelter at Lanjigarh. Now just trying to understand how would this change the VAL smelter cost of production going forward, will it increase or will it decrease and roughly by how much? And my second question on VAL is that, a couple of quarters back the company had mentioned that it is evaluating the decision to start the second smelter. What are your thoughts over there and where do we stand? As far as the cost impact on account of starting of Lanjigarh alumina refinery, the difference between our landed cost of imported alumina, which we are today sourcing to run our VAL smelter to service our cost at Lanjigarh will be roughly about $40, but we are not going to source the entire alumina from Lanjigarh because part of the alumina will go to BALCO and only part import will get replaced to Lanjigarh. Pinakin Parekh: Lanjigarh would be cheaper by $40 per ton? Yes, roughly as compared to imported alumina. Pinakin Parekh: And on the Jharsuguda smelter? Once we attain the full production at Lanjigarh, then Lanjigarh will be meeting roughly little less than 50% of the Jharsuguda s requirements. So, overall on the smelter cost it will make a difference of about $30 to $40. Pinakin Parekh: And any thoughts on the Jharsuguda smelter restart the second smelter, which is right now not operating? Commissioning of new smelter is concerned, as the smelter is almost ready now to be commissioned and we are continuing to evaluate our options with regard to power-fuel purchase smelter, but since now all our facilities are ready, we will take the decision shortly. Of course, we are also closely watching the movement in LME and also the power sales rates. Pinakin Parekh: Just one more question on the interest cost, the company did mention that if there is refinancing, but if we were to look from merged entity basis, then the other income would get cut off from VAL to Sterlite, but VAL s accounting interest has gone up because of the cessation of interest while the net borrowing at Sterlite would have also gone up. For the merged entity basis, the interest cost has taken a step up from the previous quarter, would that be a correct way to look at it? Page 10 of 16

11 If we just try to look at, out of Rs 7,000 crores which is increasing borrowing, 5,000 crores is refinancing, whatever money is lent to VAL, VAL has used for refinancing its higher cost borrowings, so virtually there is a saving of somewhere around 2.5% in the VAL s borrowing cost as a merged entity, and there is a temporary increase in the borrowing in Sterlite because of the working capital and stoppage of the plant. So once the plant gets recommissioned and so that it will get normalized and that increase in borrowing will get reduced. Pinakin Parekh: 2.5% interest cost savings will be on the quantum of 5,000 crores? That is right. Pinakin Parekh: Given the volatility we have seen in interest rates over the last few weeks, is this savings still in place or these are shorter term borrowings which will get repriced over the coming quarters? These are long term borrowings and this saving will remain. The next question is from the line of Ram Modi form Dolat Capital. Please go ahead. Ram Modi: I just wanted to know what would be the impact of the recent increase in price by Coal India on our cost of production both at BALCO and VAL? Coal India has increased the price of linkage coal by about 10% recently, and going by the composition of linkage coal in our total basket, it makes a difference of about 4 paise to 5 paise roughly per unit. Ram Modi: About only 4-5 paise per unit? Yes, because we do not have full linkage. Ram Modi: Just wanted to check on our power plant at BALCO which is a 1200 MW, it is ready to operate, but we are not getting the consent to operate, any specific issues which are there, which is taking so long for that consent to operate permission? Yes, consent to operate is taking a little longer than what it should have, there are several formalities, which Government of Chhattisgarh has to complete in their revenue records with regard to registration of certain land and there are certain processes they are going through in the state government between district and secretariat, and that is taking a little extra time, but there are no issues, we will get the consent to operate. Ram Modi: And lastly on Zinc International, we have not seen any updates coming out in terms of progress on the Gamsberg project. Is the feasibility study completed and what are the timelines we are looking at? I was curious about that. Page 11 of 16

12 MS Mehta: I think the study is still underway and as we mentioned before as and when we start this project, we would like to complete it in a phased fashion. So it can be maybe one, two or three kinds of different modules, but at this moment study is going on. Since study is going on, the board has not taken a view on the project commencement so far. At the parallel, we are also in the process of obtaining the necessary regulatory approvals for environment clearance, etc. in post jurisdictions, that process is parallely going on. The next question is from the line of Bhavin Chheda from Enam Holdings, please go ahead. Bhavin Chheda: Does the entire impact of reduction in linkage coal at Balco captured in the quarter so that linkage coal quantities now would be almost similar in the coming quarters, or would we see a further decline in coming quarters? It is more or less captured, of course, we had some small quantity in the month of April, which was higher in the linkage, but going by the fact that they do not give the full quantities in Q1, and there was some reduction in the linkage quantity by the railways, as per the impact, it is, you can say more or less captured. MS Mehta: I think, it is a representative of current picture of linkage reduction, yes. Bhavin Chheda: At Sterlite Energy also, out of the four units I believe you have linkage for first two units only, right, last two were purely based on e-auction coal? No, we have linkage for three units i.e. FSA are in place for three units already. Bhavin Chheda: You get around 50% of your requirement at SEL? We get on an average about 55% of the three units requirement. Bhavin Chheda: Other thing is, can you give the gross consolidated debt number and if possible company wise, particularly Sterlite Energy, Sterlite standalone, and Balco number? The gross consolidated loan is Rs.27,300 crores, of this Balco is Rs.4,800 crores, and SEL is Rs.2,700 crores. Bhavin Chheda: Talwandi Sabo? Rs.4,100 crores. Bhavin Chheda: Balance would all be in the Sterlite standalone, right? By and large, there is a small amount of loan in one of our port companies and then balance is in Sterlite. Bhavin Chheda: Zinc International has net cash, right? Page 12 of 16

13 Yes, absolutely right. The next question is from the line of Ashish Kejriwal from Elara Capital. Please go ahead. Ashish Kejriwal: This is regarding Gamsberg project, when we are talking about that, study is still under progress, which means, is it safe to assume that it will not be commenced before FY15? M.S. Mehta: That is a very fine question, so it is a question of commencement, difficult to answer your question so sharply. But if you are looking at the cash flow point of view, that you can imagine typically cash flow picks up after four to six months of project commencement. So, I hope my response is able to answer your inherent query which is behind your question, so that is the way I can respond. The next question is from the line of Tanuj Rastogi from Marwadi Shares & Finance. Please go ahead. Tanuj Rastogi: My question is for SEL. Have you started signing PPAs for all the four units? We do not have to naturally sign PPAs for all the four units, we already have PPA for one unit with Gridco of Odisha, and we have MTOA s for some of our power, and we will be using some of this power for running our smelter. So, we don t have to really sign PPAs for all the units. The next question is from the line of Dharmesh Shah from PhilipCapital. Please go ahead. First of all, I just missed a couple of things in the start. Mr. Roongta, you said Balco s coal cost was Rs. 2,380 in the first quarter, right, per ton and Rs. 2,410 in Q4? Yes, for 3600 GCV. But if I am not wrong, with the tapering of the coal linkage, the cost should have gone up on a per ton basis, right, this is showing a 30-rupee decline so it is a bit difficult to understand. Why would that be the case? We have been able to source e-auction coal at a cheaper rate in Q1 of this year as compared to Q4 that has brought down the average cost, and also we source some of washery reject coal for our power plant, that cost has also come down. These two have made an impact in keeping our overall coal cost, plus also is a factor of quality. So if GCV quality improves the coal and that can also bring down the cost. Secondly, with regards to the debt at VAL, does this Rs. 32,484 Crore, include the working capital debt, or that is over and above this? That includes the total debt. Page 13 of 16

14 And how much would be working capital in this? I think working capital will not be much, that is hardly somewhere around Rs. 450 Crores or so. Which is included in this, right? Yes. Sir, my next question was with regards to the 1200 MW power plant at Balco. Just wanted to understand, is the delay in consent to operate on account of the factory license, which was being suspended by the Chhattisgarh government some quarters back? No, I do not think so it is due to that. The factory license will get restored. And as I have mentioned there are certain records which Government of Chhattisgarh has to reconcile with their own departments and that is taking its time to really get its due. So we have not even got the factory license, right, because I believe No, that action will be parallelly on, so I do not think so that is a cause for worry, the factory license we are confident of getting it. This $320 dollars that we earned over and above the LME aluminum prices in VAL, that would include the custom duty part as well, right, and the regional premium? Yes, it includes. M.S. Mehta: This is the net effect of all factors ex-factory. But it also includes the premium on exports, where we do not get this custom duty premium, so $320 including domestic and export. $320 is the blended that we got over and above LME, let me put it that way, sir? Yes. The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher. Please go ahead. Kamlesh Bagmar: Sir, just wanted to understand on Sterlite Energy selling, like sale of power. What we understand is that Coal India gives the coal or sells the coal under FSA only to the companies who have the PPAs with them. So, in our case what is the structure in terms of power sales with PPA and short term or spot sale of power, so what is the broad breakup? And when we interact with Coal India, they do mention that all the coal which they are selling, all is going at linkage prices, provided the buyer has a PPA with them. Page 14 of 16

15 As I mentioned that we do have PPAs with Gridco, which qualifies for, we also have medium term PPAs and taking all that into account we are sourcing our coal as per Coal India s policy. Kamlesh Bagmar: But currently are we getting the coal under the MoU or it is under the FSA? As I mentioned, we have FSA for three units and we are getting under FSA, not under MoU. Kamlesh Bagmar: But Coal India says that there should be a long term PPA. So when we say that it is a mid-term or a short-term PPA, how does that broadly define under that? Yes, as the policy is evolving, after Coal India, new guidelines from time to time are coming and whatever coal we are drawing it is as per Coal India s policy only. We will take the last question from the line Giriraj Daga from Nirmal Bang Securities, please go ahead. Giriraj Daga: What is the sales volume of Copper, like we did a production of 16,000, but volume was different, have we sold any inventory out there? MS Mehta: About 16,000 tonnes. Giriraj Daga: 16,000, same in the production. Okay, my question is again on cost for Vedanta aluminum and Balco, it would be very helpful if you give the breakup of what is alumina cost, what is smelting cost, and what is other cost for these two, so that will clear many doubts. Tarun Jain: We can start giving this from next quarter. Actually, the alumina cost is more or less comparable. Giriraj Daga: But the number is what, 700 to 800? Alumina cost, I do not have the figures with me, but I think it is close to about Rs. 42,000 or so. Giriraj Daga: So that should be roughly $700 per ton. Smelting of Vedanta aluminum should be around $800? Our power and carbon cost put together, yes, you take it and so it is roughly about $900. Giriraj Daga: $900 per ton for that? It is Balco number. Giriraj Daga: Balco is $900. And other cost should be? Other cost of Balco is roughly about Rs 11,000. Page 15 of 16

16 Giriraj Daga: Do we have the VAL smelting cost, is it like for Balco we have $900, for VAL it should be what, about $700, $600? It will be less. $953 is including fixed cost, so the rest you take it as about $950 including fixed cost. Giriraj Daga: Including fixed cost at VAL is $950. $700 plus $950, about $1650. Ladies and gentlemen, that was the last question. I would now like to hand the floor back to Mr. Ashwin Bajaj and the management for closing comments. Please go ahead. Ashwin Bajaj: Ladies and gentlemen, thank you for joining us today. And if you have further questions, please feel free to contact us at IR. Thank you. Thank you gentlemen of the management. Ladies and gentlemen, on behalf of Sterlite Industries that concludes this conference call. Thank you for joining us and you may now disconnect your lines. For further information, please contact: Ashwin Bajaj Senior Vice President Investor Relations Sheetal Khanduja AGM Investor Relations [email protected] Tel: [email protected] Tel: About Sterlite Industries Sterlite Industries (India) Limited is India s largest diversified metals and mining company. The company produces aluminium, copper, zinc, lead, silver, and commercial energy. Sterlite Industries has a portfolio of world class assets in India, Australia, Namibia, South Africa and Ireland. Sterlite Industries is listed on the Bombay Stock Exchange and National Stock Exchange in India and the New York Stock Exchange in the United States. For more information, please visit Disclaimer This transcript is provided without express or implied warranties of any kind, and should be read in conjunction with materials published the company on the same date. This document contains forward-looking statements - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as expects, anticipates, intends, plans, believes, seeks, should or will. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behaviour of financial and metals markets including the London Metal Exchange, fluctuations in interest and or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different that those expressed in our forwardlooking statements. We do not undertake to update our forward-looking statements. Regd. Office: SIPCOT Industrial Complex, Madurai Bypass Road, TV Puram P.O., Tuticorin , Tamil Nadu Page 16 of 16