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Sterlite Technologies Limited | Annual Report 2007-08


FORWARD LOOKING STATEMENT

In this Annual Report we have disclosed forward-looking information to enable investors to comprehend our prospects and

take informed investment decisions. This report and other statements that we periodically make contain forward-looking

statements that set out anticipated results based on the management’s plans and assumptions. We have tried wherever

possible to identify such statements by using words such as ‘anticipate’, ‘estimate’, ‘expects’, ‘projects’, ‘intends’, ‘plans’, ‘believes’, and words of similar substance in connection with any discussion of future performance.

We cannot guarantee that these forward-looking statements will be realized, although we believe we have been prudent

in our assumptions. The achievement of results are subject to risks, uncertainties and estimates taken as assumptions.

Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Readers should bear this in mind.

Contents

02 VISION MISSION AND VALUES 04 FINANCIAL HIGHLIGHTS 06 HIGHLIGHTS OF 2007-08 08 VIGNETTES, 2007-08 10 STERLITE IN THE NEWS 12 AWARDS 13 CHAIRMAN’S MESSAGE 14 MESSAGE FROM THE CEO 28 INTELLECTUAL PROPERTY 30 MANAGEMENT DISCUSSION AND ANALYSIS 36 FINANCIAL ANALYSIS 44 RISK MANAGEMENT 48 HUMAN RESOURCE REPORT 50 SUSTAINABLE DEVELOPMENT REPORT 54 BOARD OF DIRECTORS 58 MANAGEMENT COMMITTEE 60 DIRECTORS’ REPORT 62 CORPORATE GOVERNANCE REPORT 70 FINANCIAL SECTION 83 LOCATIONS 139 A BRIEF INSIGHT…


SMILE. RELIEF. HAPPINESS. CARE. AFFECTION. LOVE. ELATION. WARMTH. PLEASURE. RESPECT. PRIDE. WISH. HOPE. VICTORY. WONDER. ECSTASY. NEED. JOY. CHEER. DELIGHT. GAIETY. DEMAND. EXCITEMENT. JUBILATION. SURPRISE. BLISS. ANTICIPATION. ZEAL. DESIRE. DREAMS.

WE CONNECT MINDS…


A Brief Insight‌ We are among the top three power transmission conductor manufacturers and among the top ten optical fiber manufacturers in the world.

2 |Sterlite Technologies Limited | Annual Report 2007-08


Presence Headquartered in Pune, Maharashtra. Eight manufacturing plants in various locations in India. Ten sales and marketing offices located in different parts of India, China, Thailand, Russia, U.K. and South Africa. Listed on the Bombay Stock Exchange and the

Parentage Commenced manufacturing of telecom products in 1988 as Sterlite Industries Limited. Commenced operations from July 2000 as Sterlite Optical Technologies Ltd after the demerger from Sterlite Industries Limited. Acquired the Power Transmission Business in 2006.

National Stock Exchange. The shares of the

Name changed to Sterlite Technologies Limited

Company are traded actively.

in 2007.

Business Solutions Optical Fibers under the brand name of BEND-LITE, OH-LITE, PMD-LITE, DOF-LITE, MULTI-LITE. Fiber Optic Cables marketed under the brand name of ARMOR-LITE, DROP-LITE, DUCT-LITE, FRP Armor-LITE, RIBBON-LITE. Power Transmission Conductors covering the entire range of extra-high voltage, high-voltage and power distribution conductors. Copper Telecom Cables. Structured Data Cables marketed under the brand names of DURATUBE. ADSL2+ modems under the brand name of SAM 100, SAM 200, SAM 300, SAM 400. Telecom Integration and Managed Services.

A Brief Insight‌ | 3


Vision We will be among the top three manufacturers in the world by 2010 in terms of market share for all our business lines.

Mission Based on industry and customer requirements, we strive to develop a portfolio of quality products and solutions, through the effective use of information technology, six sigma and a sustained focus on intellectual property and the environment.

Sterlite team

Commenced operations

Promoter’s holding

1988

45.11%

746

As on March 31, 2008

As on March 31, 2008

4 |Sterlite Technologies Limited | Annual Report 2007-08


Values Excellence: Strive relentlessly and constantly improve ourselves in our offerings. Creativity:

Allow

minds

to

reach

beyond

conventional and predictable solutions. Integrity: Conduct our business fairly, with honesty and transparency. Responsibility: For our words and actions. Respect: For our stakeholders, environment and community.

Rs.

15.46 For the year 2007-08

Market capitalization

Book value

Diluted earnings per share

Rs.

540

Crores

As on March 31, 2008

Rs.

1,048

Crores

As on March 31, 2008

Vision, Mission and Values | 5


Financial Highlights

Net Revenues

PAT

ROCE

(Rs. in Crores)

(Rs. in Crores)

(%)

6 |Sterlite Technologies Limited | Annual Report 2007-08

EBITDA

(Rs. in Crores)

Diluted EPS

(Rs. per Share)

Net Worth

(Rs. in Crores)


US$ in million (except per share data)

2003-04

2004-05

2005-06

2006-07

2007-08

20

73

124

265

419

EBITDA

4

11

19

26

52

PBDT

1

8

15

19

42

PBT

(5)

2

9

12

32

PAT

(4)

2

9

11

25

Capital Employed

96

93

128

230

299

(0.07)

0.04

0.16

0.17

0.38

92

327

547

1,198

1,686

(24)

256

67

119

41

19

47

83

119

211

(158)

143

76

43

77

% to Net Revenue

21

14

15

10

13

Interest

13

10

16

35

44

PBDT

7

37

67

85

168

% to Net Revenue

7

11

12

7

10

PBT

(22)

10

38

53

130

% to Net Revenue

(21)

3

4

7

8

PAT

(19)

10

41

51

101

% to Net Revenue

(21)

3

7

4

6

Net Worth

251

261

332

417

540

Capital Employed

418

408

570

1,001

1,197

(2.08)

5.07

9.53

8.45

14.31

Interest Coverage Ratio

1.51

4.55

5.16

3.45

4.85

Working Capital Ratio

2.06

1.64

2.91

3.23

3.10

Debt Equity Ratio

0.67

0.56

0.72

1.40

1.22

(3.38)

1.83

7.27

7.83

15.46

Net revenue

Diluted EPS

Rs. in Crores (except per share data) Net revenue % growth EBITDA % growth

Return on Capital Employed (%)

Diluted EPS

Financial Highlights | 7


Highlights of 2007-08

Business Performance Net revenue of Rs. 1,686 Crores, EBITDA of Rs. 211 Crores and PAT of Rs. 101 Crores. Net revenue up by 41%, EBITDA up by 77% and PAT up by 98% over the last fiscal. Diluted EPS of Rs. 15.46 (each share of Rs. 5 face value). Revenue from exports up by 75% over the previous fiscal amounts to 31% of net revenue.

Intellectual Property Four patents granted for optical fiber products and processes in the US, India and China, in addition to nine patents granted in previous years.

8 |Sterlite Technologies Limited | Annual Report 2007-08


Manufacturing Capacity Enhancements The

new

Haridwar

facility

commenced

the

manufacture of power transmission conductors, making Sterlite the largest manufacturer in India and

New Product

among the top three in the world, with capacity of

AL-59 alloy power transmission conductors

115,000 MT.

compliant with the Swedish standard

The Brownfield expansion completed at Aurangabad

SS241814, suited for high-power transfer.

takes the annual optical fiber capacity from 4 million fkm to 6 million fkm. Projected

to

double

annual

optical

fiber

manufacturing capacity to 12 million fkm by 2009, triple fiber optic cable capacity to 6 million fkm and enhance power conductor capacity to 160,000 Metric Tonnes by 2009.

Awards and Listings Deloitte Technology Fast 500 Asia Pacific and Fast 50 India Awards 2007. IMC-Ramkrishna Bajaj National Quality Award – Certificate of Merit 2007 – for manufacturing

Certifications and Approvals

(optical fiber plant).

TL 9000 quality management system for fiber-

Dun & Bradstreet Corporate Award 2007 for

optic cables facility.

telecom equipment.

Creep Test by SAG, Germany, for ACSR, ACO and

IEEMA Certificate of Appreciation – Best New

ACSR 490/65 power transmission conductors.

Product Award 2007 for AL-59 alloy conductors.

OHSAS 18001:1999 management system for

The Top Telecom Cables Company of 2007 as

fiber optic cables facility.

per the annual V&D100 survey.

Six-Sigma black belt certifications from the

Among the EFY top 100 Technology companies

American Society for Quality (ASQ).

in India.

Highlights of 2007-08 | 9


Vignettes, 2007-08 Participated in events in nine countries across four continents

55th IWCS Conference 2007, USA FTTH Council Europe Conference 2008, Paris CRU Wire & Cable Conference 2007, Paris ECOC 2007, Berlin SVIAZ ExpoComm 2007, Moscow GITEX / GULFCOMMS 2007, Dubai 10 |Sterlite Technologies Limited | Annual Report 2007-08


Middle East Electricity 2008, Dubai Telecoms World Africa 2007, Johannesburg 16th Convergence India 2008, Delhi ELECRAMA 2008, Mumbai CommunicAsia 2007, Singapore

Vignettes, 2007-08 | 11


Sterlite in the News

12 |Sterlite Technologies Limited | Annual Report 2007-08


Awards

D&B Award RBNQA Certificate of Merit IEEMA Award for AL-59 Deloitte Award / Certificate Fast 50 India V&D Top Cable Company 2007 Award

Sterlite in the News & Awards | 13


14 |Sterlite Technologies Limited | Annual Report 2007-08


“We possess a potent combination of leadership, team-spirit and technology to grow our global presence in a sustainable way across the telecom and power sectors.�

Sterlite Technologies is the Group's vehicle for participation in the growing infrastructure sectors of Telecom and Power, and remains a key part of the Group's overall vision of attaining a leadership position in all the businesses we operate in.

sustainable way across our focus sectors. In a challenging global environment, we continue to deliver telecom & power solutions at global benchmark costs and within schedules. We remain committed towards enhancing our

The global demand for telecom and power products continues

market access, while maintaining financial stability and growing

to be robust and sustainable. We are seeing a structural shift in

our business portfolio.

the demand pattern of these products from mature markets to emerging economies. This is on account of an increase in disposable incomes and living standards. These are truly exciting times and Sterlite is competitively placed to capitalize

Measured against our objectives, FY 2007-08 was a year of significant strides. We will continue to build upon these achievements and I eagerly look forward to report on our progress on various initiatives in FY 2008-09 and beyond.

on this ongoing transformation. We delivered an outstanding year with notable successes across our broad range of markets and technologies for the Telecom and Power sectors. Our businesses enjoy an established culture of knowledge, technical and operational excellence. We possess a potent combination of leadership,

Anil Agarwal

team-spirit and technology to grow our global presence in a

Chairman

Chairman’s message | 15


16 |Sterlite Technologies Limited | Annual Report 2007-08


Awarded the Deloitte Technology Fast 500 Asia Pacific and Fast 50 India Awards for third consecutive year

Global presence in power transmission conductors 27% share in the Indian power transmission conductor market 3% global share of the global power transmission market

Global presence in optical fiber 46% share of the Indian optical fiber market 4% share of the global optical fiber market

CONNECTING‌ THE WORLD At Sterlite Technologies, we believe that a global competitive edge can be sharpened only through progressive investments in key businesses in favourable as well as challenging markets. Power transmission conductors We invested in this business and today possess the only

We made business-enhancing investments in scaling

facility in India that is vertically integrated from aluminium

capacities, growing operational capacities from 4 million fkm

ingots to conductors and is poised to cater to the growing

to 6 million fkm.

demands of India and neighbouring economies.

The products were manufactured in line with norms

We achieved an annual capacity of 115,000 MT through

stipulated by International Telecom Entities like ITU resulting

timely capital investments .

in increasing global market access.

Fiber and cables

The result is that Sterlite Technologies Limited has emerged as

We possess a facility that is vertically integrated from silicon

one of world’s three leading power transmission conductor

to cables, the only one of its kind in South Asia and among

manufacturers and among the ten leading optical fiber

the few across the world.

manufacturers today.

Connecting ... the World | 17


18 |Sterlite Technologies Limited | Annual Report 2007-08


Scaling operations to meet customer demand Optical fiber 1995 Commenced operation

Received the Dun & Bradstreet Corporate Award 2007

1997 1 mn FKM

2001 4 mn FKM

2007 6 mn FKM

2009(E) 12 mn FKM

Power transmission conductors 1996 Commenced operation

2006 75,000 MT

2007 115,000 MT

2009 (E) 160,000 MT

Sole partner Sterlite was chosen as the sole supplier for over 17,000 km of ‘AAAC Conductors’ that will be installed for a World Bank-funded electrification programme in Ethiopia. Sterlite was the sole manufacturer and supplier of over 4,200 km of ‘ACSR Bermisis Conductors’ that were installed in the first 765 kV Extra High Voltage Transmission Line to be charged in India.

CONNECTING… WITH OUR CUSTOMERS We are a preferred vendor for global customers across both our businesses, resulting in repeat business across extended periods. Over the years, we have customized our business model from

Provided effective inventory management for our customers

being a supplier to growing customers through the following

comprising staggered supply and just-in-time delivery.

differentiators:

Created multiple communication channels for clients for the

Increased scale of production to reassure global clients of

prompt redressal of issues; published bi-monthly and

uninterrupted product supply that would address their

quarterly periodicals to enhance customer awareness

growing requirements.

about the latest corporate developments; revamped website

Offered an extensive product basket covering the entire

to make it more user friendly with all recent available

range of power transmission conductors and optic fiber

updates.

cables that facilitate diverse basic and critical applications.

We now have our footprint across 60 countries and count most

Engaged in active product development; over the last three

of the telecom and power companies in emerging economies

years, we have launched new products and improved existing

amongst our customer base. Our order book position as on

products across both business divisions.

March 31, 2008, was Rs. 1,020 Crores representing more than

Provided adequate client flexibility comprising the order cycle, shipment quantity and payment period – delighting customers.

6 months of production across both businesses. We were also awarded the TEMA National Telecom Award for Excellence in Exports.

Connecting ... with our customers | 19


20 |Sterlite Technologies Limited | Annual Report 2007-08


Awarded the IEEMA Certificate of Appreciation – Best New Product Award 2007 for AL-59 alloy conductors

Innovation + Insight = International acceptance The development of the AL-59 alloy power transmission conductors compliant with the Swedish standard SS241814 suited to high-power transfer. 17 new fiber optical products introduced in the last three years as per the evolving applications of the global telecommunication industry.

CONNECTING‌ THROUGH TECHNOLOGY ENHANCEMENTS We invested in a lateral mindset to extend the frontiers of existing global technology benchmarks. We achieved superior standards to exceed the prevailing

We enhanced our technology performance through a

international benchmarks across various nations.

proactive investment in stringent quality assurance

We reinforced our infrastructure to attract product

infrastructure.

guarantees from the most demanding international quality

We established our technological and infrastructural edge

assurance centers; we are among the few in the world to get

through an ISO 9001:2000 quality management system

our power conductors approved for quality from SAG

(both businesses), OHSAS 18001:1999 management system

Laboratory, Germany.

for the fiber optic cables facility and Six-Sigma black belt

We invested in cutting-edge technologies that resulted in a

certifications from the American Society for Quality (ASQ).

global acceptance of our facilities and brand; our fiber optic

The result is that 13 Sterlite Technologies patents were

cable facility received the TL9000 certification, a respected

approved globally and 110 patents have been filed by the

international telecom standard.

Company, enhancing our access to global market.

Connecting ... through technology enhancements | 21


22 |Sterlite Technologies Limited | Annual Report 2007-08


Featured among the EFY TOP 100 Technology Companies in India

Intellectual capital = Great rewards The Company’s intellectual capital comprises 5 PhDs, 153 engineers, 31 MBAs, 19 Chartered Accountants, 125 Post Graduates and 413 others with an average 4.4 person-years of experience

CONNECTING… WITH OUR PEOPLE We have created an environment that facilitates a transformation of the individual mindset - from a follower to a leader, from an implementer to a creator. Some of the Company’s ‘team-oriented’ policies that facilitated

employees working to enhance corporate intellectual

this transformation comprised the following:

property.

Incorporated the Balanced Score Card system for

Introduced suggestion schemes across units to facilitate the

transparent performance management.

implementation of new ideas.

Initiated periodical reward and recognition programs like the

Conducted movie screenings, family day out, sports day,

monthly bonus, Employee/Team of the Month, CEO Kitty

festival celebrations at individual locations. The institution of

Award, Core Values Award, Employee Stock Options and

the Sterlite Cricket Club encouraged inter-unit bonding.

Sterlite Management Incentive Scheme.

These initiatives created a robust team capable of meeting

Introduced ‘ACT-UP’, a special program to identify performers

diverse challenges and an organizational citizenship mindset.

and bring them under a business leadership group;

Our average age of 29 years represents a prudent mix of energy

introduced Platinum Club to fast-track the growth of high

and experience (4.4-person years of organizational experience).

achievers.

We grew our team by 134 to 746 in 2007-08. Average revenue

Provided financial assistance to employees to pursue a post-

per employee grew at a compounded 37% over the four years

graduate diploma in management and strengthen their skills.

leading to 2007-08, while profit per employee strengthened by

Introduced the Sterlite Innovation Award to recognize

67% across the same period.

Connecting ... with our people | 23


24 |Sterlite Technologies Limited | Annual Report 2007-08


Featured as the ‘Top Telecom Cables Company’ of 2007 as per the V&D100 survey for the fourth consecutive year

A multi-bagger An investment of Rs. 100 in the Company’s shares in 2005 had grown to Rs. 294.5 as on March 31, 2008.

CONNECTING… WITH SHAREHOLDERS We have prudently invested our resources with the objective to enhance returns for our shareholders. Our performance reflects this priority: We grew our revenues from Rs. 327 Crores in 2004-05 to

in 2007-08 and a 586 basis point increase over 8.45% in

Rs. 1,686 Crores in 2007-08 at a CAGR of 73% and a

2006-07.

revenue growth of 41% over 2006-07.

We enhanced our diluted earnings per share from Rs. 1.83

We grew our PAT from Rs. 10 Crores in 2004-05 to Rs. 101

per share in 2004-05 to Rs. 15.46 in 2007-08.

Crores in 2007-08 at a CAGR of 116% and a growth of 98% over 2006-07.

Our superior performance reflected in an increase in market capitalization from Rs. 347 Crores as on March 31, 2005 to

We grew our export revenues by 75% to Rs. 518 Crores

Rs. 1,048 Crores as on March 31, 2008. Besides, the

in 2007-08 from Rs. 296 Crores in 2006-07.

Company’s foreign holdings increased significantly from 35.24%

We reinforced our ROCE from 5.07% in 2004-05 to 14.31%

as on March 31, 2005 to 43.63% as on March 31, 2008.

Connecting... with shareholders | 25


26 |Sterlite Technologies Limited | Annual Report 2007-08


IMC Ramkrishna Bajaj National Quality Award – Certification of Merit – for manufacturing.

Socially Relevant Business Practices + Voluntary Employee Involvement = Responsible and Caring Corporate. The Company provides a healthy workplace through controlled and safe plant operations. The Company integrates environment, health and safety considerations into business planning and decision-making.

CONNECTING‌ WITH THE COMMUNITY At Sterlite Technologies, a sensitive concern for the community and the world makes our business truly sustainable. We invested in our community development through the following initiatives: Community welfare Provided a mobile dispensary and ambulance for medical assistance in the remotest villages. Organized health and nutrition camps attended by 300

and the Union Territories of Dadra and Nagar Haveli. Implemented greening initiatives to protect the environment.

Empowerment

villagers. Empowered village women through vocational training that Constructed potable water and sanitation facilities, which will

encouraged the manufacture of cottage industry products.

benefit 300 villagers. Initiated computer literacy programmes in villages.

Environment management Constructed ten check dams in drought-stricken Maharashtra

Thanks to these initiatives, entailing 1 % of its net profit, Sterlite enhanced life quality for 79,750 lives across India.

Connecting ... with the community | 27


At most of our manufacturing units, we are running at nearly 100% capacity and we have capacity expansions underway. We have decided to double our Optical Fiber capacity to 12 Million-fkm, triple our Fiber Optic Cable capacity to 6 Million-fkm and further enhance our power conductors capacity to 160,000 MT.

28 |Sterlite Technologies Limited | Annual Report 2007-08


“Through focused efforts in backward integration, development of applicationoriented solutions, a glocalized market approach & an enhanced global customer footprint, Sterlite has transformed into a truly global, market-centric organization.”

I am glad to present the Annual Report for FY 2007-08. The past year was truly exciting, and served as a springboard for Sterlite’s growth vision. The markets are growing at a consistent pace and both our business segments, Telecom and Power, have shown significant progress over the last year. Our investments, both recent and planned, have encouraged us that this is the right time to prepare for the future. With our enhanced business horizon and unanimous approval from shareholders, the name of the Company was changed to Sterlite Technologies Limited with effect from December 1, 2007. In FY 2007-08, net revenue increased to Rs. 1,686 Crores, compared with Rs. 1,198 Crores in FY 2006-07. Sterlite’s EBITDA was Rs. 211 Crores, compared to an EBITDA of Rs. 119 Crores in the last fiscal. This broadly translates to a CAGR of about 73% in net revenue and 64% in EBITDA from FY 2004-05 through FY 2007-08. Our revenues from export sales increased exponentially by 75% compared with the last fiscal and now account for 31% of our total revenues. During the year, we commenced manufacturing operations at our new Power Transmission Conductors facility at Haridwar. Thus, we now have a cumulative manufacturing capacity of 115,000 MT per annum, placing Sterlite among the Top 3 power conductor manufacturers in the world. We continued to focus on projects related to the debottlenecking of currently installed capacities, improvements in operational efficiencies and productivity. At the same time, we continue to review our capacities vis-à-vis industry demand and our global market access. At most of our manufacturing units, we are running at nearly 100% capacity and we have capacity expansions underway. We have decided to double our Optical Fiber capacity to 12 Million-fkm, triple our Fiber Optic Cable capacity to 6 Millionfkm and further enhance our power conductors capacity to 160,000 MT.

During the year, we were granted four patents in the USA, China and India, adding to our basket of nine patents granted in previous years. To date, our technology development team has filed over 100 patent applications for innovations in our products and processes and we are confident that the next fiscal would see the fruition of several more patent grants. In our quest for business excellence, we also ensure that our products comply with the ‘best-in-industry‘ standards. During the year, our Fiber Optic Cables facility has received the TL9000 certification, which is a specialized international telecom standard and the OHSAS 18001:1999 certification. Sterlite received the 'Deloitte Technology Fast 500 Asia Pacific & Fast 50 India Awards’ for the 3rd consecutive year. Other awards received include the ‘Dun & Bradstreet Corporate Award 2007 (Telecom Equipment)’, the 'IMC Ramkrishna Bajaj National Quality Award – Certificate of Merit 2007', IEEMA Best Product Award’ (for AL-59 Power Conductors) & the 'V&D 100 Top Telecom Cables Company Award 2007' Through focused efforts in backward integration, development of application-oriented solutions, a glocalized market approach & an enhanced global customer footprint, Sterlite has transformed into a truly global, market-centric organization. We are proud of the fact that our telecom and power products are integral to the daily lives of the citizens of the world - in connecting locations, connecting people, connecting countries, connecting events, connecting realities and connecting the present to the future. We believe that Sterlite has made a difference to people’s lives, and we are certain that we can do even more! The Management Team & I are confident that we possess the competitive position to make our success sustainable across the coming years. I take this opportunity to thank you, our shareholders, for your confidence in the Company and we look forward to continuing our service to you. Here's looking forward to exciting and promising times ahead!

In-house Research and Development and advancement of our Intellectual Property portfolio remains a high priority. To ensure technological enhancements of our existing product lines and to develop new products as per the evolving needs of the telecom industry, we have decided to expand the scope and dimensions of our Company.

Dr. Anand Agarwal Chief Executive Officer

CEO’s message | 29


Intellectual Property, Product Development and Process Engineering Report “As an extension of our core value of creativity, we are committed to allow minds to reach beyond conventional and predictable solutions, enhancing the intellectual capital of our Company.” Product obsolescence is inherent in technology-intensive businesses. The Sterlite management has prioritized in-house

The Company instituted the annual Sterlite Innovation Award to recognise employees who enhanced the Company’s intellectual property through the patentability, sustainability and novelty of ideas.

R&D to catalyse product development as per evolving industry requirements, technical enhancements and quality needs. As an extension of our core value of creativity, we are committed to allow minds to extend beyond conventional and predictable solutions, enhancing our intellectual capital. The R&D team comprises PhDs, engineering and science graduates from some of the best Indian and international universities. The Company emphasizes on research for product development and process improvements focusing on building long term technological differentiation and a strong portfolio of intellectual property. Distribution by academic qualification of the research / product development & IP teams

Product Development and Process Engineering Sterlite’s R&D centre in Aurangabad (India), approved by the Department of Scientific & Industrial Research (DSIR*), undertakes the following: Design of new products for evolving telecommunication standards and network applications. Develop necessary tests, procedures and methods for new products as per international certifications/standards.

30 |Sterlite Technologies Limited | Annual Report 2007-08


Introduce reliability tests for new products to meet or exceed

responsibility of searching and reviewing patents, preparing

international standards.

innovation specifications and documenting the application for

Enhance the technical parameters of existing products.

the grant of patents.

Develop new processes and technologies.

Sterlite has been granted 13 patents for optical fiber products

Re-engineer existing equipment in exchange for higher

and process innovations in the US, European Union, China and

productivity.

India; four patents were granted in FY 2007-08.

Design new equipment to manufacture new products.

The following patents were granted in FY 2007-08:

Strengthen waste engineering to produce value-added

Patent US 7209620 for dispersion optimized fiber having a

downstream products.

higher spot area, granted in the US. The patent is valid up to

In FY 2007-08, Sterlite also introduced a new product, AL-59

2024.

alloy power transmission conductor, compliant with the

Patent US7310974B2 USA for the method for producing

SS4240814 Swedish standard. AL-59 alloy conductors are

twisted optical fiber with reduced polarisation mode

used in power transmission and distribution lines for a wide –

dispersion, granted in the US. The patent is valid up to 2025.

low to extra-high - voltage range. The advantages of these

Patent CN 1317212 C for optical fiber with low attenuation

specialized conductors over the conventional AAAC and ACSR

at 1380 nm wavelength region and the method of producing

conductors include higher current carrying and power transfer

the same, granted in China. The patent is valid up to 2024.

capacity with a lower cross-sectional area, lower sag as well as evident commercial benefits (lower power loss and higher power transfer capacity).

Patent IN208147 for dispersion shifted fiber with low dispersion slope, granted in India. The patent is valid up to 2021.

This product won the IEEMA Certificate of Appreciation – Best

Our R&D team filed over 100 applications for patents and

New Product Award at ELECRAMA 2008 held in Mumbai, India.

is presently at an advanced preparation stage of several product and process patent applications due for filing during

Intellectual Property

FY 2008-09.

Patents Regional distribution of patents granted

Trademarks

(Table See below)

Sterlite made 30 applications for corporate and product

We believe that patents represent a visible manifestation of our technological edge. Our in-house patent cell has been given the

trademarks in various regions to protect its brand identity. Of these applications, seven trademarks were registered (brief summary below).

Connecting through technology enhancements | 31


Trademark

Category

China

Europe

India

USA

Middle East

AERIAL – LITE

Product – Fiber Optic Cable

TM

ARMOR – LITE

Product – Fiber Optic Cable

TM

BEND – LITE

Product – Optical Fiber

TM

TM

TM

TM

DOF – LITE

Product – Optical Fiber

TM

TM

TM

DUCT – LITE

Product – Fiber Optic Cable

TM

DURATUBE

Product – Structured Data Cable

TM

TM

Fiber Café

Technical set-up for FTTH/FTTD

TM

FiberLounge

Technical set-up for FTTH/FTTD

TM

MULTI – LITE

Product – Optical Fiber

®

TM

OH – LITE

Product – Optical Fiber

TM

®

®

TM

PMD – LITE

Product – Optical Fiber

TM

®

®

®

RIBBON – LITE

Product – Fiber Optic Cable

TM

SAM100

Product – ADSL2+ MODEM

TM

SAM400

Product – ADSL2+ MODEM

TM

Sterlite (Wordm)

Corporate Brand Identity

®

TM

Sterlite (Logo)

Corporate Brand Identity

TM

® - Registered

TM – trademark pending / advertised

Wordm – Wordmark

The Sterlite Innovation Award We aim to encourage creativity through recognition and reward. The Company instituted the annual Sterlite Innovation Award to recognise employees who enhanced the Company’s intellectual property through the patentability, sustainability and novelty of ideas.

Technical Papers and Forums During 2007-08, the Company contributed to the global knowledge pool through the publishing of white papers and participation in technical conferences and symposia across the globe. Four technical white papers chosen for presentation and publishing at the IWCS 2007 USA and Cablewire 2008, India. Figured as speaker at the CRU Wire and Cable Conference 2007 and KMI Fiberoptics Conference 2007, France.

32 |Sterlite Technologies Limited | Annual Report 2007-08


Figured as speaker at the Ariba User Group Conferences

speed fiber connectivity can be delivered to all European

2007, USA and Thailand.

citizens within the next years. Its website address is

Figured as technical discussion panelist at the International

www.ftthcouncil.eu.

Broadband Summit 2007, India.

International Cablemakers Federation (ICF): ICF was

Was nominated to the Technical Symposium Committee for

founded in 1990 with a permanent secretariat in Vienna.

IWCS 2007, USA.

Today, ICF comprises more than 100 members from more than 30 countries, representing approximately 70% of the

Industry/Committee Memberships

global manufacturing capacity of the wire and cable industry.

As an industry leader, Sterlite holds key committee

ICF’s key objectives include the promotion of the use of

memberships in various industry associations, which

cables, saving of energy, increased safety and the

consolidate industry knowledge and drive technological

improvement of recovery and re-use of cable materials. Its

excellence.

website address is www.icf.at.

Confederation of Indian Industry (CII): CII creates and

Quest Forum: Quest Forum is a unique collaboration

sustains an environment conducive to industrial growth,

of service providers and suppliers dedicated to telecom

partnering industry and government alike through advisory

supply chain quality and performance. It aims to unify the

and consultative processes. CII is a non-government, not-for-

global telecom community through the implementation of TL

profit, industry-led and industry-managed organization

9000 (telecom-specific quality standard), collaboration in

playing a proactive role in India's development. Founded over

work groups and regional hubs, emphasis on learning and

112 years ago, it is India's premier business association with

sharing industry-best practices and the creation and delivery

a direct membership of over 7,000 organizations from the

of reports and benchmarks. Its website address is

private and public sectors including SMEs and MNCs; it

www.questforum.org.

enjoys an indirect membership of over 90,000 companies from around 362 national and regional sectoral associations.

* Note: The Department of Scientific and Industrial Research (DSIR) is a part of the Ministry of Science and Technology, which was announced

Its website address is www.ciionline.org.

through a presidential notification dated January 4, 1985. The DSIR has

International Telecommunications Union (ITU): ITU is the leading UN agency for information and communication technologies. It is the global focal point for governments and the private sector; its role in helping the world communicate

a mandate to carry out the activities relating to indigenous technology promotion, development, utilization and transfer. The primary endeavour of the department is to promote R&D by the industries, support a larger cross-section of small and medium

extends across the radio communication, standardization

industrial units to develop state-of-the-art globally competitive

and development sectors. ITU is based in Geneva,

technologies

Switzerland, and its membership includes 191 member

commercialization

of

high of

commercial lab-scale

potential,

R&D,

catalyse

enhance

the

faster share

states and more than 700 sector members and associates.

of technology-intensive exports in overall exports, strengthen industrial

Its website address is www.itu.int.

consultancy and technology management capabilities and to establish

FTTH Council Europe: The FTTH Council Europe believes that

user-friendly information network to facilitate scientific and industrial research in the country.

the development and deployment of fiber-based broadband access networks will enhance the quality of life for European citizens

and

provide

European

countries

with

an

infrastructure to enhance their global effectiveness. The council’s charter is to educate European governments,

It also links scientific laboratories and industrial establishments for the transfer of technologies through the National Research Development Corporation (NRDC) and facilitates investment in R&D through the Central Electronics Limited (CEL). Source: www.dsir.nic.in

policymakers and political leaders on why and how high-

Connecting through technology enhancements | 33


Technical Article

(As contributed to Wire & Cable Technology, USA)

New Range of Alloy – Power Transmission Conductors

By G.L. Prasad GENERAL MANAGER - OPERATIONS (Power Transmission Business) Sterlite Technologies Limited 4th Floor, Godrej Millennium 9, Koregaon road, Pune- 411001 Maharashtra, India www.sterlitetechnologies.com

The product is capable of 56% higher power rating than traditional conductors

For several years, distribution and transmission lines have been designed using aluminium conductors steel reinforced (ACSR) or in some countries all aluminium alloy conductors (AAAC). Both types normally have a conductivity calculated on the total area of 53% to 54% copper. Since the mid-1970s, the cost of producing electric energy has grown rapidly, leading to an increase in the total cost of losses. An attempt to find new conductor material producing fewer losses in the network was started in Sweden at the beginning of the 1970s and led in 1979 to the release of a new conductor standard called AL-59, where 5 stands for its conductivity

New Al - 59 Alloy

(IACS).

Conductors

New Alloy Power Transmission Conductors AL-59 Alloy Conductors, which were developed by Sterlite Technologies Ltd., are manufactured from Al-Mg-Si (AluminiumMagnesium-Silica) rods. The conductor is comprised of an inner core and concentrically arranged strands forming the inner and Power Transmission Conductors

The Company has recently executed supplies valued at INR280 million (US$7million) of these specialized conductors to Sweden.

outer layers of the conductor.

ACSR Moose

AL-59 Alloy

Power Transfer Capacity

901 MW

1405 MW

Current Carrying Capacity

838 Amperes

1307 Amperes

7.47 m

6.89 m

8.2

8.9

Sag for 350 m Spans Strength-to-Weight Ratio

34 |Sterlite Technologies Limited | Annual Report 2007-08


Additionally, AL-59 Alloy Conductors have a 9% better strength-

optical fibers, and telecommunication cables launched its

to-weight ratio and 8% lower sag as compared with ACSR

range of AL-59 Alloy Power Transmission conductors compliant

conductors. Both of these characteristics provide for effective

with the Swedish standard SS4240814, suited for high power

optimization of tower designs and the future-proofing of the

transfer. The Company has recently executed supplies valued at

electrical grid.

Rs. 28 Crores (US$7million) of these specialized conductors to Sweden.

Significance of these new alloy conductors to the power industry “Power for all by the year 2012” is the vision of the Ministry of Power, Government of India. The Government of India’s Transmission Perspective Plan focuses on the creation of a National Grid in a phased manner by adding over 60,000 Km of transmission network by 2012.

Sterlite Technologies is a significant contributor to the global power sector with a complete range of power transmission conductors at extra high voltages (400-800 KV), high voltages (66-220 KV) and power distribution conductors (11-33 KV). Sterlite currently has about 3% global market share for power transmission conductors, and these products have been sold in 38 countries across Africa, the Middle-East, Asia and

Such an integrated grid is expected to evacuate additional

Europe.

70 GW by the year 2012 and carry 60% of the power generated in the country. The existing inter-regional power transfer capacity is 9000 MW, which is to be further enhanced to 37,000 MW by 2012 through creation of “Transmission Super

Sterlite Technologies currently supplies about 27% of India’s total demand for power transmission and distribution conductors.

Highways.” On a global level, ABS Research, of the UK reports that the global market for power transmission conductors was valued at about US$12.3 billion in 2006 and has a CAGR of 7% from 2004 through 2006. ABS Research also anticipates a stable demand growth in the global market from 2007 through 2010 at a CAGR of about 7%. In view of the development of new power transmission and distribution grids by global power incumbents, AL-59 Alloy Conductors would have a special significance while designing transmission line networks, as the properties of these conductors enable superior power evacuation while optimizing the cost of the entire grid.

The Manufacturer’s Contribution to the Global Power Industry In September 2007, Sterlite Optical Technologies Ltd., India’s leading global provider of power transmission conductors,

Connecting through technology enhancements | 35


Management Discussion and Analysis

The ‘always-on’ economy For most people, mobile numbers and e-mail IDs have become an extension of their personality. A day seems incomplete without sending an e-mail or receiving an SMS. Photo-upload features on Yahoo have given way to video-sharing applications on Google. MP3 downloads have been replaced by video-streaming and iTunes. 2-D social networks like Orkut and Linked-in are being substituted by 3-D virtual worlds like Second-Life and There.

Telecom and Power infrastructures are integral fundamentals that connect countries, locations, events, people, realities and the present to the future.

Cross

border

interaction

frequency

has

increased

phenomenally. Communication reach has expanded beyond national boundaries. Smaller regional players have gained access to the world’s largest markets. Families use applications like Skype and Sopcast to ‘converge’ and celebrate festivals across the world. An MIT professor is tutoring millions of physics students through Youtube. Environment groups are reaching out with new concepts like Earth Hour through search engines like Google to a global audience. There are many such stories of small innovations, resulting in big benefits in 2007-08. Video-conferencing with suppliers in Japan, mobile calls to customers in India, webcasting to investors in Europe and

36 |Sterlite Technologies Limited | Annual Report 2007-08


social-networking with schoolmates in the US. These are now a

grown by 25% from 281 million in 2006 to 350 million in 2007.

norm rather than an exception.

The technology-wise break-up for 2007 data shows that DSL

Internet-based applications are bringing about major changes in business, transportation, weather forecast, environment monitoring, health, education and governance. Tickets to airlines and movies can be bought online. Tour itineraries

accounts for 65% of broadband subscribers, while Fiber-To-TheX (FTTX) subscribers have grown to nearly 11%, driven by investments in fiber networks in Asia and North America (Source: Point-topic)

comprising the finer details of airport pick-up and hotel room

User volumes are also increasing in line with widening

reservations are being done through a single travel portal.

applications. Trends indicate a move towards high-bandwidth

Retail investors are conducting stock transactions in higher

applications and content, which has increased the bandwidth

volumes through personalized demat accounts. Payments for

per user (shown below).

electricity, phone bills and credit cards are being made through the internet. Gifts, books and flowers can be purchased from online stores like ebay and Amazon. In short, it is now possible for any physical transaction to be executed over the phone or computer from the comfort of one’s location and convenience.

Broadening of the internet band The internet now touches over 1.4 billion users directly, a penetration of 20% (Source: International Telecommunication Union). Despite Asia accounting for 40% of the global population, it suffers from a low internet penetration of only 14%. With improved standards of living and the centre of activity shifting eastwards, economic development will now be more dependent on the growth of infrastructure. Geography-wise Breakup A broadband connection is an always-on, high-speed internet connection. The number of global broadband subscribers has

Geography-wise Breakup

The result is a substantial increase in the number of minutes spent online translating into enhanced e-commerce revenues. Online retail sales in the US for 2007 were close to US$175 billion, a growth of 20% over 2006 (Source: Forrester Research). This is expected to grow as consumers will buy for two simple reasons: transparency of prices from different suppliers and convenience of shopping from one location.

India on-line and India on-call The number of Indian internet subscribers grew by 21% to 10.4 million in December 2007 (Source: TRAI), while the number of internet users rose to 46 million in 2007-08 (Source: IAMAI). Despite this growth, the country’s penetration was a mere 4%, representing an attractive scope for sustained expansion even after the incidence of broadband subscribers doubling periodically since January 2007. The optimism is derived from the fact that India is now rapidly

Penetration

(Source: ITU)

Connecting with our customers | 37


Broadband subscribers (in million)

Minimum requirement of bandwith in kbps

CAGR = 46%

(Source: ITU, TRAI, Point-topic)

(Source: ITU, TRAI, Point-topic)

embracing the internet revolution. India’s B2C commerce grew

India’s government policy is focused on network expansion,

from US$1.6 billion to well past US$2.2 billion. The online travel

rural telephony, broadband coverage, R&D and the provision of

industry accounted for over three quarters of the overall

an enabling environment, leading to a competitive sectoral

business transacted compared to 12% and 9% for online

growth. The result is an impressive forward momentum,

shopping and classified advertisements. This momentum is

resulting in growing investments, capacity expansion,

expected to accelerate as an increasing number of

technological innovations and improved telecom service

establishments go online and payment systems get more

quality.

secure. Education, e-governance, health and e-choupal-like concepts will drive widespread internet usage in India’s semiurban and rural areas.

The year 2007-08 witnessed a number of milestones: the world's lowest call rates (equivalent to 2-3 US cents a minute), the fastest subscriber growth (over 15 million in four months),

Internet growth, particularly broadband’s share in it, mirrors the

the fastest sale of a million mobile phones (a week), the world's

contribution of mobile telephony in India. India is now the

cheapest mobile handset (less than Rs. 800) and the world's

world’s second largest telecom market with a tele-density of

most affordable colour phone (less than Rs. 1,200), according

around 25%. The sector grew significantly during the year and

to the IBEF.

catalyzed the country’s resurgent economy, supported by proactive government policies and private sector investments.

Private telcos emerged as the primary driver of this industry transformation. While government telcos added 55 million

Internet and Broadband

Telephony

(Source: TRAI)

(Source: TRAI)

38 |Sterlite Technologies Limited | Annual Report 2007-08


Wireless- Value Added Services Forecast: USD 2.75 billion by 201C

(Source: Stanford University, BDA Connect)

subscribers in 1998-2007, private players added nearly 150

India's surging domestic market is also providing excellent

million subscribers. With more wireless licenses being issued

investment opportunities in other segments of the telecom

and additional spectrum being allocated to private players, the

equipment industry. TRAI estimates that the country will need

speed of growth is likely to sustain, if not bettered.

about 350,000 telecom towers by 2010 as against 125,000 in

Another first for the Indian market was the concept of being paid for incoming calls. The mobile value-added services (VAS) market grew significantly. According to a study by Stanford University and consulting firm BDA, the Indian mobile VAS market was over US$925 million in 2007 with a projected CAGR of 44% till 2010. Gartner research estimates data services to grow from 12% of total revenues in 2007 to 22% by 2010. High-quality content and heavy-data applications are increasing the bandwidth requirement per user.

2007. Communication cable companies, witnessing a period of intense activity, are cautiously optimistic.

Power, the other new fundamental need With growing urbanization and disposable incomes, India is passing through a period of unprecedented consumption. The country is the second fastest growing major economy in the world with a GDP growth of 9% in 2007-08. The result is that Indians are now talking on state-of-the-art phones, working on the sleekest laptops and watching the latest movies on bigger flat screens. Increasing per-day sales of washing machines,

Telcos, private and government, are recognizing this shift

microwaves, ACs, DVD players, among others have encouraged

towards high-bandwidth user requirements and making huge

multi-national brands to commission production facilities in

investments in network infrastructure. With aggressive

India. The Indian government is strengthening its infrastructure

government targets for 2010, innovative plans are being

to sustain investor confidence. Growing investments in SEZs,

worked out to increase mobile telephony and broadband

ports, airports and residential townships are in turn catalysing

internet penetration in India. Number portability and MVNOs will

the demand for quality power.

keep competition healthy and enhance penetration in underserved areas.

The Indian government is proposing various measures to realize its ambitious dream of ‘Power for All’ by 2012. The base

During the financial year 2007-08, investments close to US$15

demand deficits for the last few years have highlighted the

billion were made in mobile networks and backbone

urgency for capacity addition. Until 2003, the power sector was

infrastructure (Source: industry estimates). FDI inflows during

driven almost entirely through central and state undertakings;

April-December 2007 were approximately US$1 billion in

the tariff-setting function was vested entirely with the

telecom as against US$ 478 million for the whole of 2006-07,

government and not on cost-of-service or economic utility.

partly incentivized by higher profit margins. A report by Merrill

State-level transmission and distribution networks used

Lynch puts Indian telecom industry's EBITDA ahead of

medium and low voltage lines, resulting in high transmission

developed countries like the US, UK, Japan and France.

losses of around 34%, against an average of 10-13% in mature

Connecting with our customers | 39


economies. Typically, annual power shortfall was estimated

About 50% of the planned US$ 200 billion investment in the

at 8-10%.

Eleventh Plan will be in the T&D sector. The government

Following the introduction of the Electricity Act 2003, power sector regulations have been relaxed, returns for companies

projects the share of the transmission segment to be close to US$35 billion. Power companies are recognizing the

active in the sector have improved and the participation of

opportunities available over the next few years and charting

private players has increased. The country is transitioning from

growth plans accordingly. Equipment and integration

a cost-plus tariff mechanism to a market-derived structure. The

companies, including wire and cable players, are also readying

result is that operational efficiency will be rewarded, leading to

themselves for the demand surge.

the survival only of quality players over the long-term. Besides,

Wiring up for growth

the sector’s bullishness has been reinforced by measures like SEB unbundling, distribution franchise model, Accelerated Power Development Reform Programme, Ultra Mega Power Projects, open access and power trading, among others. In view of these developments, the Indian government has envisaged power sector investments of approximately US$ 200 billion over the Eleventh Five-Year Plan (2007-12). For the first time, India seeks a significant contribution from the state and private sectors in addition to usual investments by the government.

The global market for wires and cables was pegged at US$150 billion in 2007, a 7% increase over the previous year. Wires and cables now represent a mature business, having withstood several shocks over the last decade. US and European deregulation and the privatization of power utilities affected the energy cable sector adversely in the midNineties as the restructured utilities pruned fresh capex and focused singularly on cash generation, stagnating the cable market.

The immediate target for additional generation capacity is 78

The internet fiasco in 2001-02 was another setback – this time

GW by 2012. According to the Integrated Energy Policy, the

to the optical fiber and communication cable industry. Huge

installed capacity of power generation needs to rise from 130

capacities were developed by manufacturers, while networks

GW in FY2006-07 to 800 GW in FY2031-32 to achieve

were laid by telcos to accommodate demand peaks in internet

economic growth at the projected rates.

services. The burst caused the telecom cable market to

In this rapidly expanding environment, the country’s T&D network cannot lag. Following years of neglect, the country’s

collapse almost overnight due to a lack of demand and a transmission over-capacity.

transmission network has accelerated in sync with generation

The Indian copper cable market (traditionally used by BSNL and

capacity growth. There is an emphasis on the National Grid with

MTNL) experienced a downturn around the same time. A

8,000 MW of inter-regional capacity in 2005 increased to

number of power cable companies entered the jelly filled

16,200 MW by the end-2007 and a projected 37,000 MW by

telecom cables (JFTC) business encouraged by the anticipated

2012 and 52,000 MW by 2014.

growth that would arise out of the country’s enunciated telecom

Region-wise Shift in Demand for Optical Fiber

(Source: CRU)

40 |Sterlite Technologies Limited | Annual Report 2007-08


Segmental Distribution of Optical Fiber in India

Demand (million kms)

Demand for optical fiber

(Source: CRU)

(Source: Industry sources, Company)

policies. A consequent oversupply dented realizations and as

driving optical fiber connectivity between tower-to-tower, tower-

BSNL and MTNL focused more on wireless from 2001-02

to-exchange and intercity trunking.

onwards, JFTC volumes, realizations and capacity utilisation declined further. The market has remained flat since.

India will account for a sizeable share of this market. Bare optical fiber volumes increased from 3.1 mn km in 2006-07

The optical fiber industry, on the other hand, is growing

to over 5.5 million km against industry expectations of a mere

annually, the volume increases reflecting application-based

15% growth. The growth has extended from major telcos to

demand arising out of different regions.

power, gas and railway utilities. These are using their optical

Optical fiber backbone networks are being built extensively in the emerging economies of Asia (excluding Japan and South

fiber-based signalling infrastructure to generate additional revenues through the leasing of bandwidth to other operators

Korea), North and Central Africa, Brazil and Argentina. Telcos in

The scenario for power conductors in the country was slightly

France and The Netherlands are the latest developers for

different. Traditionally, Power Grid Corporation of India (PGCIL)

fiber-to-the-home networks following Verizon (US) and NTT

has been the largest buyer of aluminium conductors for T&D

DoCoMo (Japan). Fiber-to-the-Curb/Node is the preferred

projects. With 40% of the total market deregulated in 2006-07,

access network topography for telcos like AT&T and Quest in

PGCIL was expected to continue to accelerate government

the US and countries like Germany and West Russia. Wireless

projects, but funding delays resulted in a larger role for the

subscribers in India and China have also increased significantly,

private sector.

India power transmission conductors market

(Source: Industry sources, Company)

Connecting with our customers | 41


Integrators, EPC companies and IPPs helped grow the market

India is divided into five power transmission zones – North,

from 0.32 mn MT in 2006-07 to 0.35 mn MT in 2007-08

West, South, East and the Northeast – from the national grid.

resulting in Indian market growth of around 10% in 2007-08,

While generation capacities are concentrated in the East and

higher than the global growth rate of approximately 3%.

Northeast enjoying abundant hydro-power and coal supply,

With PGCIL already announcing orders and tenders in the first month of FY2008-09 and private investments also expected to rise, conductor manufacturers have commenced capacity expansions. India’s top five players contribute 60% of the country’s total capacity, the remaining 40% being supplied by smaller and region-specific manufacturers.

maximum power demand is derived from the economically developed North and West zones. Thus, power deficits are evident in the North and West, while relative surpluses prevail in the East and Northeast. To balance the scenario, new power generation capacities need to be commissioned in the regions with shortfall or power transmitted from surplus to deficit zones. The latter option is likely to be preferred as it is more

Also, transmission companies now prefer new and technically

economical to transmit power than transport fuel for power

advanced products, auguring well for the conductor industry

generation, a scenario facilitated by the National Electricity

where superior quality products are yet to enjoy the premium

Policy, 2005.

they deserve. Companies are now opting for globally benchmarked practices as well as better conductivity, power rating and other value-additive products. Hence, manufacturers with technology differentiators in a commoditized business are

This scenario indicates sustained demand for power conductors, the Ministry of Power indicating an investment of over Rs. 28 billion over the next five years for conductors and cables.

likely to emerge as partners for transmission companies. This

The Indian economy grew at 9% during the year under review,

shift in technology towards higher voltages and advanced

clocking a three-year CAGR of 9.3%. Power will play a major role

products will help reduce the demand-supply mismatch and

in sustaining this acceleration. With conductors forming the

lower T&D losses, while power is transferred from a generating

backbone of this growth, India is ready to ‘transmit’ itself into a

location to a load-centre.

powerful future.

42 |Sterlite Technologies Limited | Annual Report 2007-08


Drivers – Key Growth Initiatives in Electricity Act 2003 Generation de- licensing except for large hydro projects. Three Ultra Mega Power Projects (> 4000 MW) Awarded; six more in the pipeline.

Generation

For Rural Power Development: generation and distribution is de-licensed in rural areas.

Development of National Grid for interstate transmission and optimum utilisation between surplus/deficit regions. Open access on transmission and distribution network.

Transmission

Encouragement to FDI in transmission and distribution networks. Functional unbundling of the integrated state electricity board. Setting up of State Electricity Regulatory Commission made mandatory by states. Adequate margins and redundancy levels to be built in according to global standards and practices. Transmission tariff and pricing to move to a format based on Distribution

distance, direction and quantum of flow.

Power trading and market development are recognized. Accelerated Power Development Reform Programme (APDRP) Retail competition mandates that consumers above 1 MW can choose their suppliers. End users

Strong anti-theft and malpractice provisions; 100% metering.

(Source: CEA, Ministry of Power)

Connecting with our customers | 43


Financial Analysis

The Company delivered all-round financial growth in 2007-08, reflected in the comparative table below. 2006-07

2007-08

Growth

1,198

1,686

41%

119

211

77%

51

101

98%

EBITDA margin (%)

9.93

12.52

258 basis points

Net Profit margin (%)

4.24

5.98

173 basis points

EPS (Rs.)

8.59

16.08

87%

RONW (%)

12.2

18.7

621 basis points

ROCE (%)

8.5

14.3

571 basis points

Net Revenue (Rs. Crores) EBITDA (Rs. Crores) Net Profit (Rs. Crores)

Revenue

Profitability

It is a pleasure to report that our net revenue grew 41% from

The Company’s business segments posted a healthy growth

Rs. 1,198 Crores in 2006-07 to Rs. 1,686 Crores for the year

in profitability during the year under review. New orders

ended March 31, 2008.

generated healthy margins largely due to a judicious selection

The power transmission business with net revenue of

of project orders, adherence to a risk management process,

Rs. 1,050 Crores was the major contributor to the Company’s

improved product positioning, maintenance of high quality

net revenue of Rs. 1,686 Crores.

standards and delivery commitments. Correspondingly, net

The telecom business contributed Rs. 635 Crores to the Company’s net revenues. 44 |Sterlite Technologies Limited | Annual Report 2007-08

operating profit after tax strengthened from Rs. 51 Crores to Rs. 101 Crores as did net profit margin by 173 basis points.


EBITDA

(Rs. in Crores)

PAT

(Rs. in Crores)

Capital employed and return

Debt

The capital employed by the Company in business increased

The debt of the Company increased from Rs. 587 Crores as on

from Rs. 1,001 Crores in 2006-07 to Rs. 1,197 Crores in 2007-

March 31, 2007 to Rs. 663 Crores as on March 31, 2008 on

08. However, with increased utilization of capacities across all

account of increased capacity and revenues. The increase in

businesses the return on capital employed increased from 8.5%

shareholders’ funds during the year under review led to a

in 2006-07 to 14.3% in 2007-08. The turnover to capital

decline in the debt-equity ratio. The Company has funded its

employed ratio rose from 1.30 in 2006-07 to 1.47 in 2007-08.

capital expansion in optical fiber and power transmission

Total net worth strengthened 31% from Rs. 417 Crores as on March 31, 2007 to Rs. 540 Crores as on March 31, 2008; equity share capital was Rs. 32.23 Crores and the rest

business only by internal accruals and consequently, there is no increase in term loans of the Company.

A comparative study of debt-equity ratio

comprised reserves and surpluses. During the year under review, the remaining share warrants of Rs. 1.4 Crores outstanding in 2006-07 were converted to

Debt-equity ratio

2006-07

2007-08

1.40

1.22

equity share capital and also added Rs. 27 Crores to the share premium account. During the year under review, the

Secured debt accounted for 95% of the total debt portfolio, the

Company issued 73,680 shares to employees under the

balance being unsecured.

ESOP scheme.

The absolute interest cost for the Company increased from

Sustained efforts in integration projects, efficiency optimization and focus on technical products and solutions helped in increasing returns. ROCE

Rs. 35 Crores in 2006-07 to Rs. 44 Crores in 2007-08. However, improved profitability and increased EBITDA strengthened interest cover from 3.45 in 2006-07 to 4.85 in

(%)

2007-08.

Gross block and capital work-in-progress The strength of a manufacturing company lies in the size and quality of its gross block. The Company’s gross block grew from Rs. 793 Crores as on March 31, 2007 to Rs. 919 Crores as on March 31, 2008 following the commencement of operations at the Haridwar facility. Efficient asset utilization was reflected in an increase in the asset turnover ratio from 1.06 in 2006-07 to 1.14 in 2007-08. Besides, the capital work-in-progress stood at Rs. 36 Crores at Connecting with our customers | 45


the end of 2007-08, due to the ongoing expansion project of

amalgamation of the erstwhile Sterlite Telelink Ltd.,

the optical fiber plant in Aurangabad and power transmission

depreciation was provided on the written-down value method.

line business in Haridwar.

An increase in gross block enhanced the depreciation provision

The Company consistently followed the straight line method of asset depreciation. For all assets acquired following the

for the year under review from Rs. 32 Crores in 2006-07 to Rs. 37 Crores in 2007-08; this also provided an adequate tax shield for the Company in 2007-08.

Working capital

(Rs. Crores) March 2008

March 2007

Inventories

219.38

119.99

Sundry debtors

519.10

433.21

89.07

78.93

Loans and advances

168.91

104.38

(A)Total current assets

996.47

736.51

Current liabilities

303.53

199.76

18.22

16.75

(B)Total current liabilities

321.75

216.51

Working capital (A)-(B)

674.72

520.00

Cash and bank balances

Provisions

The working capital requirement increased consequent to the increased scale of operation. The working capital cycle stood at 121 days in 2007-08 against 124 days in 2006-07, while debtors (days) declined to 107 days over 122 days in 2006-07.

Cash flow statement

(Rs. Crores) March 2008

March 2007

13.05

46.31

65.94

130.89

(b) Investing activities

(128.41)

(269.54)

(c) Financing activities

51.82

92.79

2.42

13.05

Opening cash and cash equivalents Cash flow from: (a) Operating activities

Closing cash and cash equivalents

The cash inflow was used by the Company for the repayment of term loans from banks and as a major part of financing working capital.

Dividend The Board of Directors recommended an equity dividend of 20% i.e. Re 1 per share of Rs. 5 each. This will lead to an outflow of Rs. 7.55 Crores (including corporate dividend tax) during the year. The dividend per share payout grew by more than 33% over 2006-07.

46 |Sterlite Technologies Limited | Annual Report 2007-08


Internal Control Systems & their Adequacy

Internal control systems continue to be a prime focus area at

all data for the software modules, which currently includes

Sterlite. The Company also lays a very high importance on

Operations, Financials, Supply Chain Management, Projects &

availability of real time data, enabled through Information

Data Warehousing.

Technology (IT), on which it bases crucial operational & managerial decisions.

The ERP system is cross-functional and Company wide. All functional departments that are involved in operations or

In a unique combination of the focus areas of Internal Control

production are integrated in one system. The ERP software,

Systems & Information Technology, Sterlite implemented an

among other things, combined the data of formerly separate

advanced version of enterprise resource planning (ERP) in FY07

applications. This simplified keeping data in synchronization

and the advantages of the same were evident during FY08.

across the Company.

Sterlite’s ERP system attempts to integrate several data

Sterlite also has well defined policies and schedules of

sources and processes into a unified system. The two key

authority that are communicated through the organization. In

components of this system are a common database and a

order to ensure the adherence to these policies, periodic audits

modular software design. The common database allows every

of all functional areas are undertaken by independent audit

department to store and retrieve information in real-time. Using

firms of international repute.

a common database allows information to be more reliable, accessible, and easily shared. Sterlite’s ERP system delivers a single database that contains

The reports on audit findings and action taken are tabled at each Audit Committee meeting. The actions are taken on the basis of recommendations of the Audit Committee.

Connecting with our customers | 47


Risk Management at Sterlite

“Sterlite’s approach to Risk Management is deeply embedded in its corporate philosophy, reconciling a rich insight into business fundamentals with industry preparedness.” Risk is a tangible business reality with far-reaching commercial and material implications. At Sterlite Technologies, our overarching objective is to reinforce a culture of responsible risk management to safeguard the interests of shareholders, customers and suppliers. Due to the nature of operations and role in the industry, the Company’s risk-management framework encompasses effective processes, catalyzed by qualified professionals. As a result, business decisions balance risk and reward leading to sustainable growth.

1

Industry risk

Risk Management The Company derisked its presence in Telecom by branching into the Power Transmission Conductors segment. This allowed the Company to be present in two high-priority and highgrowth sectors – Power and Telecom; sectors which are attracting huge Indian and global investments, driving their long-term growth.

Slowdown in end-user

The Company also expanded into various geographies to manage risk arising out of dependence

sectors could impact the

on any one or two markets like India and China. Exports have grown consistently from 10% to

Company’s performance.

31% in the last four years with increasing contributions from Africa, SE Asia, other SAARC countries and Europe.

2

Product obsolescence risk

Risk Management Regular innovation and introduction of technologically improved products have allowed the Company to limit the risk arising out of product variants. Optical Fiber was introduced in India and other neighbouring markets when traditional copper cables were still pre-dominantly used. Recent launches of new products include power conductors, optical fiber and cables exceeding the most stringent specification standards.

Improved product variants

The Company enjoys good proximity with customers and research institutions allowing for a

could put at risk the

better understanding of the latest end-user requirements and trends. This knowledge is

Company’s prospects.

leveraged by the R&D team to design products and solutions, which are relatively future-proof and can keep the Company ahead of the Competition.

48 |Sterlite Technologies Limited | Annual Report 2007-08


3

Growing competition risk

Increased opportunities could grow competition.

4

Commodity prices related risk Increased prices or availability issues may influence profits.

5

Financial risk

Risk Management The Company received a large number of approvals, certifications and accredition from leading international agencies and customers after exceeding specifications and testing criteria. This allows the Company to be a preferred partner with customers. Compliance of such stringent standards act as entry barriers for new entrants. The Company’s integrated facilities and economies of scale helped widen margins and competitive strength. Limited access to technical know-how and gestation cycles for establishing green-field profitable facilities will also limit risk for the Company from new competition.

Risk Management The Company operates under business segments where cost changes of key raw material like Aluminium and Copper are fully passed through to the customer, thus limiting risks related to increased raw material prices. The Company is considered among the best vertically integrated facilities for all its product lines. Regular long-shot and sure-shot projects ensure that cost dynamics are kept within permissible limits. Sourcing and logistics arrangements with global leaders ascertain that availability of key raw material is a limited risk.

Risk Management The Company requires funds for its expansion plans. The primary sources of funding are cash accruals of the Company. In addition to the existing cash flows from operations, there are sufficient funding facilities at competitive rates, which provide liquidity to cater to short term and long term needs.

Increased cost of funds

The Company uses derivative and non-derivative financial instruments reasonably, to manage

could impact value-

its risks resulting from adverse fluctuations in commodity prices, interest rates and foreign

accretive projects.

currency exchange rates. These may include commodity pricing contracts and/or foreign currency exchange contracts. Derivative financial instruments are not used for trading or speculative purposes. Global or domestic increase in interest costs may affect the Company – this is managed through optimum use of various borrowing options available.

Connecting with our customers | 49


Human Resource Report

Our success has been our ability to recruit and retain highly qualified and motivated people in all areas of the Company.

Our success has been our ability to recruit and retain highly

We use structured, transparent and people-friendly policies that allow our employees a great deal of freedom to apply their talent, skills, knowledge and business excellence. We emphasize smart working, collaboration and team work.

qualified and motivated people. Our entire talent pool of about 750 employees possess college degrees; more than 40% hold advanced degrees like PhD, MBA, chartered accountancy and engineering. Our goal is to recruit and retain people who are the best at what they do, people who are motivated to achieve results, have high standards of quality and integrity, possess a flexible, entrepreneurial spirit and are committed to develop them to their full potential. Function-wise Distribution

Academic qualifications of Human Resource

50 |Sterlite Technologies Limited | Annual Report 2007-08


We recruit the best management talent from leading business

emphasize smart working, collaboration and team work.

schools and engineering talent from IITs and NITs. We provide a

Teamwork and collaboration: We recognise the significance

stimulating and challenging, yet supportive, environment and

and challenge of team work in achieving business goals. We

encourage

consciously encourage individual and teams striving for

self-initiatives,

peer

interaction

and

open

communication. We encourage cultural diversity in all

organizational effectiveness.

functional areas.

Delegation and accountability: To keep pace with growing

Our HR philosophy We keep our word and honour our commitments to earn the confidence of those whose lives we touch and those with whom we associate.

business complexity, we delegate appropriately and expect that those who know the work best will make sound, timely decisions, explain the decision rationale to those involved and affected, and be accountable for the outcome. Job rotation: We encourage job rotation to enhance

We maintain open and direct communication with our

employee versatility with the objective to build competencies

customers, vendors, employees, shareholders and all other

for self-development and creating multi-faceted managerial

stakeholders. We encourage new ideas and value them on

talent.

the basis of merit, not position or level. We encourage the

Internet culture: We encourage our workforce to exploit the

culture of receiving and giving feedbacks to strengthen

power of the internet beyond mere communication. We

quality of relationships and provide timely, relevant

emphasize the use of the internet as a source of knowledge

information to make informed decisions.

as well as personal and professional excellence.

We strive to build an environment where performance,

Customer focus: We are committed to develop solutions that

excitement and challenges are integral to daily activities.

meet customer needs. Our goal is to be a preferred provider based on our performance, ethics and integrity as well as our

HR guiding principles

unique ability to provide innovative solutions. We value, seek

We use structured, transparent and people-friendly policies that

and respond to our customers' input and feedback.

allow our employees a great deal of freedom to apply their

Internally, we work together to achieve operational

talent, skills, knowledge and business excellence. We

excellence in all businesses.

Connecting with our people | 51


Performance measurement system (PMS) We

have

implemented

a

scientific

and

transparent

Learning, development and career enhancement

performance measurement system administered through the

Act-up: The Accelerated Competency Tracking and Upgradation

Balanced Scorecard (BSC) methodology. The BSC is a

Programme (Act-up) is a process for all permanent employees

performance planning and measurement framework, best

where high performers are identified, nurtured and brought

characterized as a strategic management system. Balanced

under the Business Leadership Group (BLG). A special career

Scorecard comprises simple tables broken into sections

progression roadmap is charted for members in addition to

(financial, customer, internal business processes, learning and

other recognition.

growth).

Platinum Club: An exclusive club where outstanding performers

BSC at Sterlite, cascaded across hierarchies, has resulted in

are recognized and future leaders are identified. The award

the following:

recognizes

Drive strategy execution Clarify and operationalise strategies

business

achievements

as

well

as

the

demonstration of organizational values. The members of the Platinum Club are provided fast-track career growth, special increments and nomination for exclusive training programmes,

Identify and align strategic initiatives

including overseas ones.

Link budget with strategy Learning and development: Employees are trained through Align the organizational goals and objectives with strategy

various modes, depending upon the type of requirement. We

Conduct periodic strategic performance reviews for

have a mix of seminars, Company visits, classroom sessions,

knowledge and improvement

conferences, interactive workshops, on-the-job training, and

Successor planning is also covered under this process, where

knowledge sharing by internal faculty, among others. We

every manager has to identify at least two successors from

maintain an annual training and development calendar; five

his/her direct or indirect reportees.

days of training per year are earmarked for each employee,

52 |Sterlite Technologies Limited | Annual Report 2007-08


based on his training and development needs, identified during

bonus, Employee/Team of the Month Awards, CEO Kitty Award,

the half-yearly and annual appraisal process.

Core Values Award, Employee Stock Options (ESOP) and Sterlite

The executive MBA programme: The Company provides financial assistance to employees to acquire a post-graduate diploma in management, developing their professional expertise and competencies for the time they move into a general management role.

Management Incentive Scheme (SMIS) to name a few.

Induction of fresh talent We look for students from reputed campuses with the talent, aptitude and initiative. We conduct an intensive 10-12-week internship programme, providing students with a unique

Beyond business: We encourage every employee to invest time

opportunity to acquaint with our business operations. Interns

in the Company’s sustainable development initiatives, with a

participate as members of project teams in research,

clear objective of holistic development.

development,

Employee safety and health Employee safety and health is highly emphasized by the Company. Over the years, we undertook various initiatives, including the BSC five-star rating and the RoHS certification for the EU directive banning hazardous substances. We also conduct regular awareness programmes on safety, periodic ergonomics audits, medical check-ups and emergency mock drills to ensure that our workforce remains informed and alert at all times.

manufacturing

or

business

areas

that

complement their college curricula with relevant hands-on experience. Working alongside some of the most talented people in technology and telecommunications provides an excellent environment for academic and career growth.

Inclusion of the family unit Movie screenings, family day out, Sterlite sports day, celebrations for festivals and parties are some of the exciting events organized each month at individual locations. Sterlite Cricket Club is an endeavour to encourage inter-unit

Rewards and recognition

camaraderie. Akansha is a ladies’ club managed by employee

Various reward schemes are introduced to recognize

spouses and playing an active role in sustainability and

superlative performances at the workplace, such as monthly

community welfare projects initiated by the Company.

Connecting with our people | 53


Sustainable Development Report

Sterlite’s sustainable development initiatives directly impact over 79,750 lives across India.

Sterlite's commitment extends beyond business. We aim to develop

We monitor and reduce social and environmental risks, improve resource utilization, minimize pollution and forge partnerships with local communities.

our telecom and power businesses with the objective to provide attractive shareholder returns. We conduct our activities in a socially and environmentally responsible manner with the objective to enhance value for the community. The principle of sustainable development is fundamental to this approach. It requires us to monitor and reduce social and environmental risks, improve resource utilization, minimize pollution and forge partnerships with local communities. We achieve this through a balanced mix of regulatory compliances, business practices, audits, certifications and employee involvement. At all our manufacturing facilities, we ensure that operations are carried out with a key focus on the following: Implementing measures to reduce pollution, emissions, waste and energy consumption. Exploring the use of environment-friendly technologies and materials within our research, development and manufacturing processes. Preventing/minimizing impact from pollution and occupational health and safety risks. Conserving natural resources. Recycling and creating innovative recycling opportunities. Providing a safe work environment for employees and safe living conditions for our neighbours.

Regulatory compliances Sterlite ensures that its operations comply with all applicable laws,

54 |Sterlite Technologies Limited | Annual Report 2007-08


regulations and Company standards. Some of these include

integration of quality, environmental, occupational health and

national-level regulations such as Environmental Protection Act,

safety management systems. The website address is

Prevention of Water Pollution Act and Prevention of Air Pollution

www.ohsas.org.

Act. Besides, the Company ensures that it complies with and strives to exceed state-level regulations on environmental protection and pollution prevention.

Business practices Sterlite is also committed to providing a healthy work environment for employees and associates through controlled plant operations and continuous improvement in our processes, products and services.

(c) The British Safety Council’s (BSC) five-star audit is a unique service provided by the British Safety Council. The scope of the audit includes a review of the health and safety performance of businesses from the management of health and safety to the implementation of associated systems in the workplace. By applying the principles of audit to health and safety issues, organizations can improve operational performance and systematically reduce overall costs. The website address is www.britishsafetycouncil.co.uk.

Sterlite integrates environment, health and safety (EHS) considerations into business planning and decision-making. A

Employee involvement

robust integrated management system is created for process

We stimulate EHS awareness among all employees

and operational changes to assess the suitability, adequacy

and associates through periodic training programmes and

and effectiveness of our efforts on environment, health and

increasing environmental awareness within our plants

safety.

and facilities. We keep abreast with latest international

This ensures that operations are carried out under adequate supervision through the use of necessary personal protecting equipment (PPE) as well as an adherence to safety precautions. We also conduct periodic environmental audits and progress reviews.

Certifications

practices, codes and standards, which are adopted wherever applicable.

Key achievements – environmental protection Following are the special tasks, which we have completed in last year towards environment protection: 1. ISO 14001:2004 (EMS) certification – Successfully

Sterlite’s optical fiber facility has been audited by BVQi and

completed the ISO 14001:2004 certification in the month of

certified for the ISO 14001:2004 quality management system

April, 2008.

and OHSAS 18001:1999. (a) ISO 14001 specifies the actual requirements for an environmental management system, applying to those environmental aspects over which the organization exercises control. The website address is www.iso.org. (b) OHSAS specifies the requirements for an occupational health and safety (OH&S) management system to enable an organization to control its OH&S risks and improve

2. Conservation of Natural Resources – Start monitoring and control uses of electric energy and water consumption. 3. Establish the scrap disposal matrix – Safe disposal method of waste / hazardous material. 4. Awareness towards environment protection – Training program / display board has been conducted / displayed for conservation of natural resources (e.g water, electricity & depletion of resources).

performance. OHSAS 18001 has been developed to achieve

5. We have also contributed in the areas of greenbelt

compatibility with the ISO 9001 (Quality) and ISO 14001

development wherein we under took plantation of approx

(Environmental) management system standards to facilitate an

1,000 trees in our facilities.

Connecting with our community | 55


6. Abolished use of paper cups and plastic bags (Food is now being served through containers) ,

camp attended by 300 villagers. We undertook the construction of potable water and sanitation facilities, the completion of which will benefit over 300 individuals.

Enriching the community Sterlite undertakes various activities based on an assessment of needs and aspirations of the community. The Company has allocated 1% of its annual net profit towards these projects. Environment, healthcare, education and the development of the community are integral to its ideology. Our sustainable development initiatives span villages in the remotest locations in Maharashtra and the Union Territory of

We

continued

supporting

women's

empowerment. Our initiatives in training in tailoring, manufacture of cottage industry products and teaching empowered 200 underprivileged women. We formed teams at every manufacturing location to assess potential projects and ensure their implementation, monitoring and sustenance. The management and the teams remain community impact.

Some of our environment management initiatives comprise the construction of over 10 check dams in drought-stricken villages,

Expense Outlay 2005-08

which are now capable of storing about 50 TCM of water, radically changing the economic potential of the villages. Focusing on the pressing need for greening, we undertook the plantation of more than 4.5 hectares. Our health initiatives comprise the sponsorship of a mobile dispensary and ambulance, 730 cataract operations for the underprivileged and hearing aids for 100 hearing-impaired children. In addition, we also conducted a health and nutrition

Summary of community sustainable development projects Category

Type of project

Education

Tailoring course for under-privileged women Teachers’ training programme Training in the manufacture of cottage industry products Construction of check dams Reforestation plantations

Health

and

committed to the projects and we will strive towards positive

Dadra and Nagar Haveli.

Environment

education

Organising of health and nutrition camps, cataract operations Provision of hearing aids for students Provision of a mobile medical dispensary and ambulance Construction of facilities for potable water and sanitation

Sterlite’s sustainable development initiatives directly impact over 79,750 lives across India.

56 |Sterlite Technologies Limited | Annual Report 2007-08


Sustainable Development - Case Study “We were not able to grow Rabi season crops in our village for nearly 10 years due to chronic drought. However, after the construction of check dams, we are now growing vegetables and wheat.” – Tukaram Ghavate, a farmer in Karanjgaon village, Maharashtra

Tukaram Ghavate is one of 2,000 farmers in Karanjgaon,

Enhance the livelihood of rural families through the judicious

Shekta and Hasanabadwadi villages belonging to drought-

use of natural resources

prone Aurangabad (Maharashtra). In this region the average

Sterlite partnered with Dilasa Janvikas Pratishthan (a reputed

erratic annual rainfall is less than 500 mm.

NGO working on natural resource management in Maharashtra

The topography of the land does not allow for soil and water

for over 15 years) to construct three check dams with a

harvesting, resulting in a chronic shortage of water for drinking

cumulative storage capacity of 12.34 TCM in 2007-08 and a

and irrigation. As a result, the livelihood of 6,000 village

total of eight check dams of 46.95 TCM during the last two

inhabitants depends on rain-fed farming without an assurance

years.

of consistency.

The Company minimized the withdrawal of water from bore

Over the years, the excessive use of water through wells and

wells for crops requiring high water supply. No direct pumping

bore wells has caused ground water depletion. As a result,

of water was allowed from the stored water of the check dams.

limited rainwater can no longer satisfy growing population

These regulatory actions were accepted by the local community.

needs, making it imperative to recharge or create water

The construction of the check-dams have far-reaching socio-

conserving structures like check dams.

economic implications. Farmers in these villages have

Sterlite undertook the construction of check dams with the

enhanced their Rabi (winter) yield, annual family incomes have

following objectives:

increased by about Rs. 20,000 on an average and living

Conserve large-scale water in the drought-prone areas of Aurangabad Increase the groundwater table through the recharging of

standards have improved. Some quantitative results of one check dam at the Shevga village comprise the following: Water conserved was 16.50 TCM.

rainwater

There was an increase in ground water table of about five

Minimize the problem of drinking and irrigation water in rural

metres in summer.

areas

Irrigation area increased from 2.76 hectares to 9.60

Increase crop productivity by increasing the command area

hectares.

Develop an effective tool for drought proofing and

Kharif agriculture production (June-November) increased by

sustainable solution in rural areas

over 150%.

Connecting with our community | 57


Board of Directors

Anil Agarwal

Anil Agarwal founded the Sterlite Group in 1976 and has been

(Non-Executive Chairman)

overseeing its operations since its inception. Anil is the Executive Chairman of Vedanta Resources Plc, Sterlite Industries (India) Limited, Bharat Aluminium Company Limited (BALCO) and is a Director of Hindustan Zinc Limited (HZL) and Vedanta Alumina Limited. He has over 30 years of experience in business strategy, general management and commercial matters.

Navin Agarwal

Navin Agarwal has been overseeing the Sterlite Group's

(Non-Executive Director)

operations since its inception. He is the Deputy Executive Chairman of Vedanta Resources Plc, Executive Vice Chairman of Sterlite Industries (India) Limited, Chairman of Konkola Copper Mines (KCM-Zambia) and MALCO and is also a Director of Bharat Aluminum Company Limited (BALCO), Hindustan Zinc Limited (HZL) and Vedanta Alumina Limited. He has over 20 years of experience in business strategy, general management and commercial matters.

Arun Todarwal

Arun Todarwal, partner of Todarwal & Todarwal, a Mumbai-

(Non-Executive and Independent Director)

based firm of chartered accountants, holds a bachelors degree in commerce and is a member of the Institute of Chartered Accountants of India. He has a rich and varied experience spanning over two decades in finance and audit.

58 |Sterlite Technologies Limited | Annual Report 2007-08


Haigreve Khaitan

Haigreve Khaitan, partner of Khaitan & Co, a Mumbai-based

(Non-Executive and Independent Director)

firm of lawyers, holds a bachelors degree in legislative laws. He has varied experience spanning eight years in commercial and corporate laws, tax laws, mergers and acquisitions, restructuring, foreign collaboration, licensing, etc.

Pravin Agarwal

Pravin Agarwal has been closely involved with the Sterlite

(Whole-time Director)

Group's operations in India since its inception and has been instrumental in growing the telecom and power businesses. His rich experience in general management and commercial matters spans over 25 years.

A.R. Narayanaswamy

A.R. Narayanaswamy is a chartered accountant by profession,

(Non-Executive and Independent Director)

Mr. Narayanaswamy has an experience spanning over 30 years.

Anand Agarwal

Anand Agarwal joined Sterlite in 1995 and has held various

(CEO and Whole-time Director)

positions, including manufacturing, quality assurance and business development. Prior to joining Sterlite, he worked with Siemens. Anand completed his BTech in metallurgical engineering from the IIT Kanpur and was awarded Masters and PhD from the Rensselaer Polytechnic Institute, USA.

Board of Directors | 59


Management Committee

Anand Agarwal

Anand Agarwal joined Sterlite in 1995 and has held various

(CEO and Whole-time Director)

positions, including manufacturing, quality assurance and business development. Prior to joining Sterlite, he worked with Siemens. Anand completed his BTech in metallurgical engineering from the IIT Kanpur and was awarded Masters and PhD from the Rensselaer Polytechnic Institute, USA.

Anupam Jindal

Anupam Jindal joined the Sterlite Group in 1998 and has since then

(Chief Financial Officer)

worked with the Group’s aluminium foils and copper telecom cables businesses before heading finance and accounts at Sterlite’s mining operations in Australia. His key focus areas have been finance, treasury, accounts and MIS. Anupam is a chartered account from the Institute of Chartered Accountants of India.

Anuraag Rai

Anuraag Rai is responsible for the organisational development and

(Vice President, Human Resources)

effectiveness. He has been working with the Vedanta Group & Sterlite for over three years. His prior assignments include Suzlon Energy Limited, DELL International, ACC Ltd., DCL Polyester Ltd. & Eicher Good Earth Ltd. Anuraag is a law graduate from Ravi Shankar University in Raipur and holds a masters degree in personnel management from Nagpur University.

60 |Sterlite Technologies Limited | Annual Report 2007-08


K.S. Rao

K.S. Rao joined Sterlite in 1992 and has since held various

(Chief Operating Officer - Telecom)

positions in the Company’s telecom business. His key focus area has been engineering, manufacturing, product development, project management and business development. K.S. Rao holds a bachelors degree in mechanical engineering.

Rajendra Mishra

Rajendra Mishra joined Sterlite in 2008 and is responsible for the

(Chief Operating Officer - Power)

Power business. In a career spanning 18 years, Rajendra has been associated with Batliboi Ltd and RPG Cables in various marketing, sales, operations and strategic positions. He holds a bachelors degree in electrical and electronics engineering from Regional Engineering College, Surathkal.

Anil Sikka

Anil Sikka joined Sterlite in 2005 and his key focus areas have been

(Associate Vice President, Marketing

marketing and general management. In a career spanning over 20

– Power Transmission Business)

years, he has served companies like ABB India and Bahwan Engineering Company in Oman. Mr. Sikka holds a bachelor of technology degree in electrical engineering from the College of Engineering, Rourkee, and has a post-graduate diploma in marketing management from IIT Delhi.

Dharmendra Jain

Dharmendra Jain joined Sterlite in 1997 and his key focus areas

(General Manager, Finance, Banking and Treasury

are finance, treasury, taxation, commercial, accounts and MIS. A

– Power Transmission Business)

seasoned professional, having served organisations like Indian Aluminium Cable Ltd. (HDC Group), during his 16-year career, Dharmendra holds a degree for chartered accountancy from the Institute of Chartered Accountants of India

Management Committee | 61


Directors’ Report

Your Directors are pleased to present the Ninth Annual Report together with the audited accounts of the Company for the year ended March 31, 2008.

Financial Results

(Rs. in Crores)

Particulars

2007-08

2006-07

Net Revenues

1,685.79

1,198.15

211.27

119.11

Less: Interest

43.65

34.50

Less: Depreciation

37.17

31.57

130.44

53.04

14.66

6.04

0.77

-

(14.66)

(6.04)

27.88

1.72

1.07

0.46

Net Profit /(Loss) for the year after tax

100.72

50.86

Balance carried forward from previous year

250.08

208.01

Amount available for appropriation

350.80

258.87

Proposed Dividend

6.45

4.62

Provision for Tax for Dividend

1.10

0.79

335.70

250.08

Profit / (Loss) before Interest, Depreciation & Tax

Net Profit / (Loss) before taxation Provision for Taxation: Current Tax Earlier Year Tax / (Written Back) Minimum Alternative Tax eligible for Set Off Deferred Tax (Credit) Fringe Benefit Tax

Appropriations

Balance carried forward to the next year

Performance Your Company achieved net revenues of Rs. 1,686 Crores

Income from exports increased by 75%, from Rs. 296 Crores in

this year which is 41% higher than the revenues for the previous

the last year to Rs. 518 Crores in the year under review.

year. The profits of the Company after providing for tax

Currently the export sales account for 31% of our net revenues.

increased to Rs. 101 Crores as compared to the profits of

Export will be the focal point for the Company from future

Rs. 51 Crores, (after tax credit and exceptional income) in the

growth perspective and with that intent, the Company is in the

last year.

process of setting up representative offices in USA, and Russia

62 |Sterlite Technologies Limited | Annual Report 2007-08


As per the demand in the global optical fiber industry, your Company has decided to double the Optical Fiber annual manufacturing capacity to 12 Million-fkm.

in addition to the existing offices at China, Thailand, UK and

manufacturing capacity to 12 Million-fkm pa. This brown-field

South Africa.

expansion is being done at the Company’s existing facilities at

The detailed analysis of Company’s operations and segmentwise performance is covered under the report on ‘Management Discussion & Analysis’.

Aurangabad and commercial production is expected to commence by June 2009. The expanded capacity would primarily cater to the growing demand from the Indian market and also enable the Company to grow its global market share.

Expansion & Diversification

In conjunction with Optical Fiber capacity expansion, the

Your Company is operating in two verticals, which are

Company plans to expand its Fiber Optic Cable capacity to

witnessing significant growth rates. Also, most of the

6 Million-fkm from its current capacity of 2 Million-fkm.

manufacturing operations of the Company are utilizing nearly

The Company established its Integration & Managed Services

100% capacity to cater to the increased demand for Power

(IMS) business during financial year 2006-07, as its customers

Conductors and Optical Fiber. Your Company has been

required

investing in new capacities both for green field and brown field

implemented, in addition to their purchases of access products.

expansions.

As the Company is committed to facilitating the propagation of

Your Company commenced manufacturing at its new Power Transmission and Distribution Conductors facility at Haridwar in

complete

telecom

access

solutions

to

be

broadband in India, it has developed the capability to provide these solutions for the telecom and broadband sectors.

the State of Uttarakhand in August 2007. The Company now

This year, the Company’s IMS business has taken great strides

has a cumulative manufacturing capacity of 115,000 MT

with the successful implementation of MTNL’s MPLS core in

(Metric Tonnes), making it the largest manufacturer in India.

New Delhi and Mumbai. Sterlite also received a contract from

This facility includes the latest drawing and stranding machines

MTNL for deployment of a Broadband & Metro Ethernet network

capable of manufacturing standard and specialized Power

in New Delhi and Mumbai. This is a turnkey project that involves

Conductor products. The facility also has a Rolling Mill capable

design, development and implementation of the network. The

of producing specialized mechanical alloy. The Company has

network, once completed, would be capable of handling about

plans to enhance the capacity to 160,000 MT during the

half a million broadband connections in these cities.

current year.

The Company now serves as a ‘one-stop window’ for a

During the year, your Company also completed the expansion of

comprehensive suite of Telecom and Energy products that

its Optical Fiber capacity from 4 Million-fkm to 6 Million-fkm. As

would include Optical Fibers, Fiber Optic Cables, Copper

per CRU, UK, the global demand for Optical Fiber in 2007 was

Telecom Cables, Structured Data Cables, Power Transmission

127.4 Million-fkm, higher by about 25% compared with the demand in 2006. This has been the highest annual demand ever for the Optical Fiber industry. Future projections indicate robust global demand in FTTH (Fiber-to-the-Home) and a broader mix of telecom applications, including intercity backbones, metro rings, access network projects and cellular backhaul. Your Company has now decided to double the Optical Fiber

and Distribution Conductors and Integrated Telecom Solutions that include MPLS, NGN (Next Generation Network), Metro Ethernet Broadband etc.

Dividend Your Board of Directors is pleased to recommend a dividend of 20% for the financial year 2007-08. The distribution of dividend will result in payout of Rs. 6.45 Crores excluding tax on dividend.

Connecting with shareholders | 63


Preferential Allotment of equity shares to Promoters

Explanation on Auditor’s Comment

As reported in the last year, your Company had allotted

Report over Note No. 8 in Schedule 21 on Notes to Accounts

56,00,000 shares to its promoters under Preferential Allotment

regarding demand of excise duty and penalty amounting to

scheme. The Company completed preferential allotment by

Rs. 188 Crores is self-explanatory and does not require further

conversion of the second and final tranche of 28,00,000

comment.

warrants into shares. The proceeds raised from preferential

In the year 2004-05, CESTAT had upheld the demand of

allotment were utilized by the Company for capital expenditure

Rs. 188 Crores and the interest thereon against the Company

and general corporate purpose.

for alleged breach of norms pertaining to Export Oriented Unit

The remark of Auditors at Para 5 (v) & (vi) of the Auditor’s

(EOU). The Company's appeal against this order was dismissed

Employees Stock Option Scheme The Company had launched Stock Option Scheme for the employees (ESOP-2006) in June 2006. During the year, the Company extended the scheme to cover most of its employees

by the Hon'ble High Court of Mumbai during the year, on the grounds that appeal is not maintainable in the High Court, however, without prejudice to the rights of the Company.

by granting 2,61,550 fresh options. The Company allotted

The Company subsequently filed Special Leave Petition and an

73,680 shares during the year to various employees who

appeal with the Hon'ble Supreme Court, which has been

exercised their options. The details of the options granted up to

admitted by the Court. The Hon'ble Supreme Court has also

March 31, 2008 are set out in Annexure-II to this report, as

maintained the stay granted by Hon'ble High Court of Mumbai.

required under Clause 12 of the Securities and Exchange Board

Based on merits of the case and the legal opinion obtained, the

of India (Employees Stock Option Scheme and Employees Stock

Management believes that the Company has a strong case and

Purchase Scheme) Guidelines, 1999.

it has been carrying adequate provisions for contingencies in the Books of Account in this matter and does not require any

Subsidiary

further provisioning.

During the year, the Company acquired 60,00,000 equity shares of Rs. 10 each (in addition to the existing holding of

Research and Development

5,200 shares) in Sterlite Infrastructure Private Limited (SIPL) at

Product obsolescence risks are inherent in the technology

par value. With this investment, the holding of your Company in

sector businesses. The Management has accorded high priority

SIPL has increased to 58.70 %, making SIPL, a subsidiary of

to in-house Research and Development in order to ensure new

your Company.

product development as per the evolving needs of the industry

SIPL is incorporated with the objective to carry on Telecom

for technical enhancements. Your Company has set up a

business. SIPL, during the year, made application for licenses

Research and Development Centre at Aurangabad. This facility

for

Unified

Access

Services

to

the

Department

of

is approved by the Department of Scientific & Industrial

Telecommunications (DOT) to provide wireless mobile telecom

Research (DSIR) in India.

services in India. The decision of the DOT on the allotment of

The Company has focused its attention towards development of

licenses is still awaited. SIPL has not yet commenced any

products having applications in FTTH and Metro-Access

commercial activity.

Telecom Networks and Power Transmission Networks.

64 |Sterlite Technologies Limited | Annual Report 2007-08


The Company had launched Stock Option Scheme for the employees (ESOP-2006) in June 2006. During the year, the Company extended the scheme to cover most of its employees by granting 2,61,550 fresh options. Fixed Deposits

maintenance

During the year, the Company has not accepted any deposits

accordance with the provisions of the Companies Act, 1956

from the public or otherwise in terms of Section 58A of the

for safeguarding the assets of the Company and for

Companies Act, 1956, read with Companies (Acceptance of

preventing and detecting fraud and other irregularities;

Deposit) Rules, 1975.

of

adequate

accounting

records

in

iv) They have prepared the accounts on a “going concern” basis.

Directors By virtue of Section 255 of the Companies Act, 1956 and the

Group

Articles of Association of the Company, Mr. Navin Agarwal and

The Company is controlled by the Agarwal Group; being a group

Mr. Arun Todarwal retire by rotation at the ensuing Annual

as defined under the Monopolies and Restrictive Trade

General Meeting. A brief resume, expertise, shareholding in

Practices Act, 1969. The list of entities in the group is as under:

your Company and details of other directorships of these

1. Volcan Investments Limited, Bahamas

directors are given in the Corporate Governance Report.

2. Twin Star Overseas Limited, Mauritius

Management Discussion and Analysis

3. Mr. Dwarkaprasad Agarwal

The Report on Management Discussion and Analysis has been

4. Mr. Agnivesh Agarwal

attached and forms part of the Annual Report.

Auditors

Corporate Governance

M/s. S.R. Batliboi & Co., Chartered Accountants hold office till

The Report on Corporate Governance along with the Certificate

the conclusion of the forthcoming Annual General Meeting and

from the Statutory Auditors certifying the compliance of

being eligible, offer themselves for re-appointment. The

Corporate Governance enumerated in Clause 49 of the Listing

Company has received intimation to the effect that, proposed

Agreement with the Stock Exchanges is included in the Annual

re-appointment, if made, would be within the prescribed limit

Report.

under Section 224(1-B) of the Companies Act, 1956.

Directors’ Responsibility Statement

Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Your Directors confirm that: i)

In the preparation of the annual accounts, the applicable accounting standards have been followed;

The particulars of conservation of energy, technology absorption and foreign exchange earnings and outgo as

ii) They have selected such accounting policies and applied them consistently, 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,

prescribed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosures of Particulars in the Report of Directors) Rules, 1988, is given as Annexure I and forms a part of the Directors’ Report.

2008 and of the profit of the Company for the financial year ended March 31, 2008; iii) They have taken proper and sufficient care for the

Particulars of Employees The particulars of employees as required under the provisions

Connecting with shareholders | 65


of Section 217(2A) of the Companies Act, 1956 read with the

contributions made by the employees through their hard work,

Companies (Particulars of Employees) Rules, 1975 is annexed

dedication, competence, support and co-operation towards the

hereto and forms a part of this report. However, as per the

success of your Company. Last but not the least, your Directors

provisions of Section 219(1)(b)(iv) of the Companies Act, 1956,

are also thankful for consistent co-operation and assistance

the report and the Accounts are being sent to all shareholders

received from its investors, business associates, customers,

of the Company excluding the aforesaid information. Any

vendors, bankers, regulatory and government authorities.

shareholder interested in obtaining such particulars may write to the “Company Secretary� at the Registered Office of the Company.

For and on behalf of the Board of Directors

Acknowledgement It has been an encouraging year for the Company especially with the expectations of continuing with the growth it had displayed last year and of holding on to its domestic market share while at the same time expanding its global footprint.

Mumbai

Your Directors take on record their sincere appreciation to the

April 29, 2008

66 |Sterlite Technologies Limited | Annual Report 2007-08

Anil Agarwal

Chairman


Annexure I to Directors’ Report Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo as per Section 217 (1) (a) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the report of Directors) Rules, 1988 for the year ended 31 March, 2008

MM armor wire for mechanical applications. (b) Benefits derived as a result of above R&D Opportunity to compete in international market. Technology Up-gradation. Development of new designs in products.

1. Conservation of Energy The Company adopted the following measures on energy conservation – a) Installed harmonics filters at Rakholi-Power Transmission Conductor Plant b) Additional capacitor panel at Haridwar-Power Transmission Conductor Plant c) Installation of metal halide lamp in place of mercury. d) All street lights and plant lights controlled through timers. e) AHU speed & temperature control with SCADA system f) Hot water booster pump at HWF chiller in CPP Plant has been bypassed. g) Insulation Replacement in Furnaces of Sinter Machine. h) Third Stage Pressure reduction of Oxygen and Hydrogen compressors & supply of Hydrogen & Oxygen at 10 Kg pressure at Optical Fiber plant.

2. Technology Absorption A. Research and Development (a) Specific areas in which the Company carried out R&D Development of Sterlite DOF-LITE ITU-T G.655 D&E range of optical products for application in access networks and modems for broadband applications. Designed mini cable having small diameter (~4.0 mm), light weight (16 Kg/km) cables specially for FTTH applications to deploy using air blown technology in the microducts. Designed Hybrid cable for power and telecom using optical fibers for communication purpose and Aluminium conductors to provide sufficient power supply. Developed AL-59 - Alloy Power Transmission Conductor compliant with the SS4240814 Swedish Standard, which are used in transmission and distribution lines for a wide voltage range - low voltage to extra high voltage. Developed O Temper rods for cable applications and 9.27

Attaining accreditation of our products from internationally recognized bodies. (c) Future plan on R&D Ensure new product development as per evolving needs of the industry, technical enhancements and quality improvements of existing product offerings.

B. Technology Absorption, Adoption and Innovation (a) Efforts made towards technology absorption, adoption and innovation: The technology used for manufacture of various products of the Company is fully absorbed and new innovations in process control, product development, cost reduction and quality improvements are being made on a continuous basis. (b) Benefits derived as a result of the efforts i.e., product improvement, cost reduction, product development: The Company is engaged in that business where product obsolescence are inherent. The efforts made for product improvement / development help Company not only to offer better value added products to its customers but also explore new markets. (c) Information regarding technology imported during last 5 years: The Company has not imported any technology.

3. Foreign Exchange Earnings and Outgo Discussion on activities related to development of exports is covered in Directors’ Report and Management Discussion & Analysis report. Foreign Exchange Earned: Rs. 517 Crores Foreign Exchange Outgo:

Rs. 27 Crores

The Company does not fall in the list of industries which are required to give details of power and fuel consumption as per “Form A” of Companies (Disclosure of Particulars in the Report of Directors) Rules, 1998.

Connecting with shareholders | 67


Annexure II to Directors’ Report Statement as at March 31, 2008 as required under Clause 12 of the Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999.

1 Options Granted

Total 8,54,450 options were granted as on March 31, 2008 4,65,700 options were granted on June 14, 2006 1,27,200 options were granted on March 19, 2007 2,61,550 options were granted on September 28,2007

2 Pricing formula

Options vest at a nominal value i.e. Rs. 5 per option

3 Options vested

93,140

4 Options exercised

73,680

5 Total number of ordinary shares arising

73,680

as a result of exercise of Options 6 Options Lapsed

79,160

7 Variation of terms of Options

Refer Note -1

8 Money raised by exercise of Options

Rs. 3,68,400

9 Total number of Options in force

701,610

10 Number of Options granted to Senior Managerial Personnel Dr. Anand Agarwal

CEO & Whole-time Director

41,300

Mr. Anupam Jindal

Chief Financial Officer

14,000

Mr. K.S. Rao

Chief Operating Officer (Telecom)

24,700

Mr. Anil Sikka

Associated VP, Marketing (Power)

11,100

Mr. Dharmendra Jain

GM–Finance Banking & Treasary (Power)

10,100

68 |Sterlite Technologies Limited | Annual Report 2007-08


11 Identified employees who were granted Options during

None

any one year, equal to or exceeding 1% of issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant. 12 Diluted earnings per share pursuant to issue of

Rs. 15.46

ordinary shares on exercise of Options calculated in accordance with Accounting Standard {(AS) 20 “Earnings Per Share”} 13 Method of Calculation of Employee Compensation Cost

The Company has used fair market value method for calculation of compensation cost, using the Black Scholes Option Pricing Model.

14 Weighted average exercise price and weighted average fair value of Options granted for options whose exercise

Weighted Average exercise price (per option) – Rs. 5 Weighted Average Fair value (per option) – Rs. 230.71

price either equals or exceeds or is less than the market price of the stock. 15 A description of method and significant assumptions used during the year to estimate the fair values of options

The fair value of each option is estimated using the Black Scholes Option Pricing model after applying following weighted average Assumptions: Grant dated September 28, 2007

1. Risk Free Interest rate

7.20%

2. Expected Life

1.50 years

3. Expected Volatility

56.69%

4. Expected Dividend Yield

0.51%

5. The price of underlying share at the time of grant

Rs. 230.71

Note: The options granted on June 14, 2006 had vesting schedule of 30%, 30% and 40% due on June 14, 2007, June 14, 2008 and June 14, 2009 respectively. The Compensation Committee varied vesting schedule to 20%, 40% and 40% and relaxed performance criteria for the first vesting which was due on June 14, 2007.

Connecting with shareholders | 69


Corporate Governance Report

Philosophy of the Company

Strategic Supervision: The Board of Directors occupies the

Corporate Governance represents the value, ethical and moral

topmost tier in the governance structure. It plays a role of

framework under which business decisions are taken. The

strategic supervision that is devoid of involvement in the task of

investors want to be sure that not only is their capital handled

strategic management of the Company. The Board lays down

effectively and adds to the creation of wealth, but the business

strategic goals and exercises control to ensure that the

decisions are also taken in a manner which is not illegal or

Company is progressing to fulfill stakeholders’ aspirations.

involving moral hazard. The Company perceives good corporate governance practices as a key to sustainable corporate growth and long-term

Strategic Management: The Management Committee is composed of the senior management of the Company and operates upon the directions of the Board.

shareholder value creation. The primary objective is to develop

Executive Management: The function of Executive

and adhere to a corporate culture of harmonious and

Management is to execute and realize the goals laid down by

transparent functioning, increasing employee and customer

the Board and Management Committee.

satisfaction and enhancing shareholders’ wealth by developing capabilities and identifying opportunities that best serve the goal of value creation. All actions and strategic plans are directed towards delivering value to all stakeholders, as well as conform to the highest standards of corporate behavior. The five core values that drive the Company’s business are:

I. Board of Directors The Board of Directors consists of two Whole-time Directors and five Non-Executive Directors. Three Non Executive Directors are also Independent Directors. Mr. Anil Agarwal is the Chairman of the Board and the meetings of the Board of Directors are chaired by him and in his absence by Mr. Navin Agarwal. Mr.

Excellence:

Creativity:

Integrity:

Strive relentlessly and constantly improve

Anil Agarwal is a non-executive Chairman. The Company has

ourselves in our offerings

three independent directors and therefore the Company

Allow minds to reach beyond conventional

complies with the criteria of at least one-third of the Board

and predictable solutions

should comprise of Independent Directors.

Conduct our business fairly, with honesty

During financial year 2007-08, four (04) Board meetings were

and transparency

held on April 30, 2007, July 26, 2007, October 30, 2007 and

Responsibility: For our words and actions Respect:

For our employees, business partners and stakeholders

January 21, 2008. The composition of the Board of Directors, attendance of the Directors in Board Meetings and Annual General Meeting and their shareholding details in the Company are as follows:

The Company has three-tier governance structure:

70 |Sterlite Technologies Limited | Annual Report 2007-08


Name

Designation

No. of

Last

No. of

Committee

No. of shares held in

Board

AGM

Directorships

Memberships

the Company

in other

& (Chairmanships)

(including

Companies

in other Companies

family members)

Meetings attended attended Anil Agarwal

Non-Executive

Nil

No

12

Nil

Nil

04

Yes

14

03

89,200

03

Yes

03

04

115

03

No

19

10

Nil

04

No

04

03

Nil

Whole-time Director

04

Yes

01

Nil

82,962

CEO & Whole-time

04

Yes

01

Nil

20,260

Chairman Navin Agarwal

Non-Executive Director

Arun Todarwal *

Non-Executive Director

Haigreve Khaitan*

Non-Executive Director

A.R. Narayanaswamy*

Non-Executive Director

Pravin Agarwal Dr. Anand Agarwal

Director * Independent Directors as defined in Clause 49 of Listing Agreement.

Directors with Materially Significant, Pecuniary or Business Relationship with the Company

II. Committees of the Board

As required under Accounting Standard 18, transactions

The Company has the Audit Committee constituted in

with related parties are furnished under Note 17 of Schedule

accordance with the requirements of Section 292A of the

21 - Notes to the Accounts. There are no transactions of

Companies Act, 1956 and Clause 49 of the Listing Agreement

material nature with the Promoters, Directors or their relatives,

entered into with the Stock Exchanges. The primary objective of

Audit Committee

etc that may have potential conflict with the interest of the

the Audit Committee of the Board of Directors of the Company

Company.

is to discharge responsibilities relating to accounting and

Disclosures have been received from Directors and Senior

reporting of financial practices adopted by the Company and its

Management relating to the financial transactions in which they

subsidiaries, surveillance of internal controls as well as

or their relatives may have personal interest. However, none of

accounting and audit activities.

these transactions have a potential conflict with the interest of

The terms of reference of the Audit Committee include:

the Company at large.

1. Review of the Company’s financial reporting process and the

Connecting with shareholders | 71


disclosure of its financial information 2. Recommending the appointment and removal of external auditor.

2007-08 on April 30 2007, July 26, 2007, October 30, 2007 and January 21, 2008. The Composition of the Audit Committee and attendance at Committee meetings is as follows:

3. Reviewing the management, the periodical financial

Name

statements. 4. Reviewing with the management, external and internal

Category

No of Meetings

attended Arun Todarwal, Chairman Non-Executive

auditors, the adequacy of internal control systems, frequency

& Independent

03

of internal audit, significant findings by internal auditors and follow up there on.

Haigreve Khaitan

Non-Executive & Independent

03

5. Discussion with external auditors, nature and scope of audit as well as have post-audit discussions

A. R. Narayanaswamy

Non-Executive & Independent

04

6. Reviewing the Company’s financial and risk management policies.

Pravin Agarwal

Whole-time Director

04

7. Reviewing Whistle Blower Mechanism. 8. Reviewing Management Discussion and Analysis Report, Statement of significant related party transactions submitted by the management; Management letters / letters of internal control weaknesses issued by the statutory auditors, if any; Internal audit reports relating to internal control weaknesses. 9. Reviewing of financial statements and investments made by subsidiary companies.

Remuneration / Compensation Committee The Remuneration / Compensation Committee discharges Board’s responsibilities relating to compensation of Company’s Executive Directors. The Committee has overall responsibility for approving and evaluating the compensation plans, policies and programs of the Executive Directors. This Committee has also been empowered to administer Employees Stock Option

Composition and Meetings

Scheme, 2006 of the Company.

The Audit Committee comprises of four Non–Executive

Composition and Meetings

Directors, three of whom are independent. The representatives

The Committee comprises of four Non – Executive Directors,

of internal and statutory auditors are permanent invitees of the

three of whom are independent. The Chairman of the

Audit Committee meeting. Mr. Arun Todarwal, Chairman of the

Committee is a Non – Executive Independent Director.

Committee (Non–Executive Independent Director) is a Chartered Accountant and has accounting and financial expertise. The other committee members are financially literate.

The Committee met three times during the year 2007-08 on April 30, 2007, September 28, 2007 and January 21, 2008. The Composition of the Remuneration and Compensation Committee and attendance at Committee meetings is as

The Audit Committee met four times during the year

72 |Sterlite Technologies Limited | Annual Report 2007-08

follows:


Name Arun Todarwal, Chairman Haigreve Khaitan A. R. Narayanaswamy Navin Agarwal

Category attended

appointment of Mr. Pravin Agarwal is for a period of 3 years

No of Meetings

expiring on October 29, 2009. As per the terms of appointment,

Non-Executive & Independent

03

Non-Executive & Independent

02

Non-Executive & Independent

03

Non-Executive Director

02

the agreement can be terminated by giving 90 days’ notice or equivalent pay by either of the sides. Dr. Anand Agarwal, Wholetime Director is designated as Chief Executive Officer. The term of appointment of Dr. Agarwal is for a period of 3 years expiring on July 29, 2009. As per the terms of appointment, the agreement can be terminated by giving 90 days’ notice or equivalent pay by either of the sides. The Company pays sitting fees to its non-executive Directors. In addition, it also pays commission not exceeding Rs. 2.50 lakh

Details of Remuneration paid to the Directors

to its Independent Directors. The break up of remuneration

Mr. Pravin Agarwal and Dr. Anand Agarwal are the two Executive

actually paid to directors (excluding provisions, if any) during

Directors. Mr. Pravin Agarwal was appointed Whole-time

Financial Year 2007-08 is as under:

Director with effect from October 30, 2006. The term of

Director

Salary (Rs.)

Perquisites (Rs.)

Incentive (Rs.)

Sitting Fee (Rs.)

Total (Rs.)

Anil Agarwal

-

-

-

-

-

Navin Agarwal

-

-

-

1,20,000

1,20,000

Arun Todarwal

-

-

-

1,50,000

1,50,000

Haigreve Khaitan

-

-

-

1,10,000

1,10,000

A. R. Narayanaswamy

-

-

-

1,80,000

1,80,000

1,38,24,000

23,57,400

23,40,000

-

1,85,21,400

71,24,460

7,08,126

25,03,649

-

1,03,36,235

Pravin Agarwal Dr. Anand Agarwal Notes

1. Dr. Anand Agarwal has been granted 41,300 Stock options, each option convertible in one equity share of Rs. 5 each. The first tranche of 8,260 options vested in June 2007, in respect of which equal number of shares were allotted to Dr. Anand Agarwal. The remaining options may vest equally in June 2008 and June 2009 depending on vesting conditions approved by the Compensation Committee. Options can be exercised in one year after vesting. The Company has accrued an expenditure of Rs. 4.48 Crores towards total options granted till March 31, 2008, out of which Rs. 0.27 Crore is attributable to the options granted to Dr. Anand Agarwal. 2. As approved by the Board of Directors, a Commission of Rs. 2,50,000 is payable to its Non-executive Independent Directors viz. Mr. Arun Todarwal, Mr. Haigreve Khaitan and Mr. A.R. Narayanaswamy for the financial year 2007-08.

Connecting with shareholders | 73


Shareholders' /Investors' Grievances Committee

The details of Committee meetings and attendance of Directors

The Shareholders’ / Investors’ Grievances Committee oversees

are as under:

redressal of shareholders’ grievances. The Committee comprises of Mr. A.R. Narayanaswamy (Chairman), Mr. Arun

Name

Category

No. of

Todarwal and Mr. Pravin Agarwal as the members. The

Meetings attended

Company Secretary is the Compliance Officer. The Committee

during the period

met four times during the year 2007-08 on April 30, 2007,

A.R.

Non-Executive

July 26, 2007, October 30, 2007 and January 21, 2008. During

Narayanaswamy,

& Independent

the year the Company received 248 complaints for various

Chairman

matters like non-receipt of share certificates, non issue of

Arun Todarwal

duplicate certificates, rejection of demat request, etc. All the complaints were resolved by the Company to the satisfaction of

Non-Executive

04

03

& Independent Pravin Agarwal

Whole-time Director

04

investors.

III. Profile of Directors Appointed-Reappointed Mr. Navin Agarwal oversees the Sterlite Group's operations since inception. He has over 22 years of experience of general management and commercial matters. The details of Mr. Navin Agarwal and directorships in other companies are as under: Date of birth

January 11, 1961

Date of joining the Board of the Company

July 30, 2003

Shareholding in the Company either in his own name

Refer to Section I –

or in the name of others and having beneficial interest,

‘Board of Directors’ of this report

as on March 31, 2008 Directorships

Konkola Copper Mines, Plc Bharat Aluminium Company Limited Hindustan Zinc Limited Sterlite Industries (India) Limited Sterlite Paper Limited Vedanta Aluminium Limited The Madras Aluminium Company Limited Sterlite Shipping Ventures Pvt Limited Sterlite Iron and Steel Company Limited Sterlite Energy Limited Vedanta Resources Plc, UK Sterlite Infrastructure Pvt Limited Sterlite Infrastructure Holdings Pvt Limited Finsider International Limited

74 |Sterlite Technologies Limited | Annual Report 2007-08


Mr. Arun Todarwal is a senior partner of Todarwal & Todarwal, Chartered Accountants based in Mumbai and holds a Bachelors Degree in Commerce and is a member of the Institute of Chartered Accountants of India. Mr. Todarwal has rich and varied experience spanning over two decades in Finance and Accounts. The details of Mr. Arun Todarwal and directorships in other companies are as under: Date of birth

June 16, 1957

Date of joining the Board of the Company

January 25, 2003

Shareholding in the Company either in his own name

Refer to Section I – ‘Board of Directors’ of this report

or in the name of others and having beneficial interest, as on March 31, 2008 Directorships

The Madras Aluminium Company Limited Welspun India Limited Muthukumarsamy Textiles Limited

IV. Disclosures

shareholders, due to delay in receipt of the approval of the

i) Disclosures on materially significant related party

Reserve Bank of India, under FEMA in connection with

transactions

applications accepted in the open offer for HZL.

There were no transactions with the Promoters, Directors and

SOVL, SIIL and the Company had preferred an appeal against

management during the period, which would have potential

the SEBI order before Securities Appellate Tribunal (SAT). SAT

conflict with the interests of the Company at large.

has passed a final order on February 11, 2005 setting aside the

ii) Details of non compliance by the Company, Penalties and

aforesaid impugned order of SEBI.

Strictures imposed on the Company by Stock Exchange, SEBI

During the year there were no Penalties and Strictures imposed

or any Statutory Authorities or any matter related to capital

on the Company by Stock Exchange, SEBI or any Statutory

market in last three years

Authorities for any matter related to capital market.

During the process of Open Offer for acquisition of 20% shares

iii) The Company has adopted a ‘Whistleblower Policy’, which

of Hindustan Zinc Limited from the public shareholders, there

has been communicated to all the employees along with Code

was a delay in receipt of approval from the RBI and

of Business Conduct & Ethics. The Whistleblower Policy is the

consequently, delay in payment to nine non-resident

mechanism to help the employees to raise their concerns about

shareholders.

any malpractice, impropriety, abuse or wrongdoing at an early

SEBI had passed an order dated June 12, 2003 under SEBI

stage and in the right way, without fear of victimisation,

(Substantial Acquisition of Shares and Takeovers) Regulation,

subsequent discrimination or disadvantage. The Policy

1997 (“Takeover Code”) on Sterlite Opportunities and Ventures

encourages the employees to raise concerns within the

Limited (SOVL) (as acquirer), Sterlite Industries India Ltd. (SIIL)

Company than overlooking a problem. CEO, COO and CFO have

and the Company (as persons acting in concert) directing

been designated as Ombudsmen in the Policy. The Company

payment of interest at 10% per annum, for alleged delay in

has created a special email id to enable the employees to report

payment of consideration amount to NRIs/FIIs/OCBs

their concerns. The employees can even report their concerns

Connecting with shareholders | 75


to the Audit Committee directly. The Ombudsman who is responsible to submit his report to the Audit Committee does the investigation in the reported concerns. Disciplinary action, if

No person has been denied access to the Audit Committee. During the year no concern was reported under Whistleblower mechanism.

required, is determined by the Audit Committee. The reporting person can make appeal to the Board of Directors against the

iv) The Company has complied with all the mandatory

order of Audit Committee. The Whistleblower Policy also

requirements of Clause 49 of the Listing Agreements executed

contains mechanism of redressal available for an employee, if

with the Stock Exchanges. Comments on adoption of non-

he/she feels that he/she has been retaliated against due to

mandatory requirements are given at the end of this report.

disclosure of concern.

V. General Shareholder Information Details of last three Annual General Meetings Date

Location

August 9, 2005

B-10/4, Waluj MIDC Industrial Area,

Time 11.00 am

Special Resolutions Passed Nil

Aurangabad 431 136 Maharashtra, India August 18, 2006

E-1, Waluj MIDC Industrial Area,

11.00 am

Aurangabad 431 136 Maharashtra, India

Reappointment of Dr.Anand Agarwal, Whole time Director. Further issue of share capital.

July 13, 2007

E-1, Waluj MIDC Industrial Area,

11:30 am

Aurangabad 431 136 Maharashtra, India

Appointment of Pravin Agarwal, Whole-time Director. Change of Name of the Company to ‘Sterlite Technologies Limited’.

No other shareholders’ meeting was held during the year.

Means of Communication Quarterly Financial Results are published in the All-India

The Company also displays official news releases and the

Edition of The Business Standard or The Economic Times and

presentations on the website.

in the Aurangabad Edition of Sakal or Lokmat Times. Results are also posted on the Company’s website: www.sterlitetechnologies.com

76 |Sterlite Technologies Limited | Annual Report 2007-08

Management Discussion and Analysis is a part of the Annual Report.


Implementation of Code of Conduct The Company has adopted the ‘Code of Business Conduct &

Compliance with SEBI (Prohibition of Insider Trading) Regulations, 2002

Ethics’ for its employees at all levels including Senior

In pursuance of these Regulations, the Company has

Management and Directors. The Code has been effective from

formulated Insider Trading Code for the Employees and

April 1, 2005 and was circulated to all the employees and

Directors for dealing in shares of the Company. The Code was

Directors of the Company and has also been posted on the

implemented with effect from October 16, 2004. Various forms

Company’s website. The Code serves as a guide to the

have been designed to receive periodical information from the

employees of the Company to make informed and prudent

employees and the Directors of the Company, as required in

decisions and act on them. As required under Clause 49 of the

terms of these Regulations. Further, the trading window for

Listing Agreement, the affirmation of compliance with the Code

dealing in shares of the Company has been closed for the

from Directors and Senior Management personnel has been

Directors and employees of the Company as per the Insider

obtained for this financial year.

Trading Code in force in the Company.

Annual General Meeting Day, Date, Time

Friday, August 08, 2008 at 11.00 a.m.

Book Closure Dates: Friday, July 25, 2008 to Monday, July 28,

Venue

E-1, MIDC Waluj Aurangabad 431 136

2008 (both days inclusive)

Maharashtra, India

Listing of shares on Stock Exchanges

1. Adoption of Audited Accounts and

The equity shares of the Company are listed on Bombay

Agenda

other reports thereon for FY 2007-08 2. Declaration of final dividend for the financial year ended March 31, 2008. 3. Reappointment of Mr. Navin Agarwal as Director liable to retire by rotation.

Stock Exchange Limited, National Stock Exchange of India Limited. Application for delisting from Calcutta Stock Exchange is pending for approval. Annual listing fees for the financial year ended March 31, 2008 have been paid to Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The Stock Codes of the Exchanges

4. Reappointment of Mr. Arun Todarwal

are as under:

as Director liable to retire by rotation. 5. Appointment of Statutory Auditors

Financial Calendar for financial year 2008-09 First Quarter Results

:

End of July, 2008

Half Yearly Results

:

End of October, 2008

Third Quarter Results

:

End of January, 2009

Fourth Quarter/ Annual Results :

Exchange

Code

BSE

532374

NSE

STRTECH

April/May, 2009

Connecting with shareholders | 77


Stock Price Data Stock Price data for the period April 1, 2007 to March 31, 2008 is as detailed below: Month

Monthly High (Rs.) NSE

Monthly Low (Rs.) NSE

Monthly High (Rs.) BSE

Monthly Low (Rs.) BSE

Apr-07

208.9

177.4

208.7

178.0

May-07

222.5

175.4

222.3

175.4

Jun-07

254.9

204.3

254.7

204.1

Jul-07

262.9

208.1

262.8

208.2

Aug-07

230.5

197.0

231.0

201.1

Sep-07

248.0

209.2

247.5

221.0

Oct-07

323.5

205.0

323.0

207.0

Nov-07

345.0

269.0

344.3

269.0

Dec-07

382.0

300.1

381.4

299.0

Jan-08

352.0

121.1

352.4

145.0

Feb-08

229.0

182.1

229.0

181.0

Mar-08

202.9

142.0

201.0

143.0

Sources: Data Compiled from BSE & NSE official website

78 |Sterlite Technologies Limited | Annual Report 2007-08

March 08

Feb 08

Jan 08

Dec 07

Nov 07

Oct 07

Oct 07

Sept 07

August 07

July 07

June 07

May 07

April 07

Indexed to 100 as on April 1, 2007

Stock Performance | The performance of the Company’s stock prices as against NSE NIFTY is given in the charts below:


Distribution of Share holding as on March 31, 2008 Range of Shares

No. of Shareholders

% of Shareholders

No. of Shares

% of Equity Capital

99,141

97.87

1,17,82,082

18.28

1,176

1.16

16,97,501

2.63

10001 to 20000

488

0.48

13,74,840

2.13

20001 to 30000

207

0.20

10,32,664

1.60

30001 to 40000

67

0.07

4,62,578

0.72

40001 to 50000

47

0.05

4,40,429

0.68

50001 to 100000

70

0.07

10,21,222

1.58

100001 & Above

98

0.10

4,66,56,931

72.37

1,01,294

100

6,44,68,247

100

1 to 5000 5001 to 10000

TOTAL

Equity holding pattern as on March 31, 2008 Category

As on March 31, 2008 No. of Shares

% of Equity Capital

2,90,83,609

45.11

Directors and their relatives

2,09,522

0.33

Life Insurance Corporation

42,58,785

6.61

2,43,865

0.38

205

0.00

Mutual Funds

38,96,827

6.04

Foreign Institutional Investors

38,25,677

5.93

7,40,609

1.15

49,86,887

7.74

79,796

0.12

170

0.00

Individuals (Public)

1,71,42,295

26.59

TOTAL

6,44,68,247

100

Promoters Group

Insurance Companies Unit Trust of India

NRI/ OCB/ Foreign Body Corporate / Foreign National Indian Bodies Corporate Banks Government Companies

Connecting with shareholders | 79


Dematerialisation of shares and liquidity

Karvy Computershare Private Limited, Hyderabad is Registrars

The Company’s equity shares are compulsorily traded in the

and Transfer Agents for both physical and electronic mode of

electronic form. As at March 31, 2008, 6,20,11,950 shares

transfer of shares. Transfer for shares held in the physical mode

representing 96.19% of total equity capital was held in

are approved on a 10 days cycle. Physical Shares sent for

electronic form. The shareholders can hold the shares in demat

transfer are duly transferred within 10-15 days of receipt of

form either through NSDL or CDSL. The ISIN number allotted to

documents, if found in order. Shares under objection are

the Company is INE089C01011.

returned within 7-10 days.

Unpaid / unclaimed dividend

Registrar & Transfer Agents

In terms of section 205A and 205C of the Companies Act,

Karvy Computershare Private Limited, Hyderabad is the

1956, the Company is required to transfer the amount of

Registrar and Transfer Agent of the Company.

dividend remaining unclaimed for a period of seven years from the date of transfer from the unpaid dividend account to the Investor Education and Protection Fund (IEPF). Unclaimed dividend(s) will be transferred to IEPF, as under:

Shareholders, beneficial owners and Depository Participants, (DPs) can send / deliver the documents / correspondence relating to the Company’s share transfer activity, etc to Karvy Computershare Private Limited at the following address:

Dividend for the year 2000-01:

November 4, 2008

Dividend for the year 2005-06:

September 24, 2013

(Unit–Sterlite Technologies Limited),

Dividend for the year 2006-07:

August 18, 2014

Plot No. 17 to 24, Vittalrao Nagar, Madhapur,

Karvy Computershare Private Limited

Hyderabad-500 081

Outstanding GDRs / ADRs / Warrants or any Convertible instruments, conversion date & likely impact on equity -

Tel: +91-40-23420818 / 828, Fax: +91-40-23420814 E-mail: einward.ris@karvy.com

There are no outstanding instruments convertible in equity as Shareholders’ correspondence should be addressed to the

on March 31, 2008.

Company’s Registrar and Transfer Agents at the above-

Share Transfer System

mentioned address. Members may also write to the Company

Two Directors and some Executives of the Company have been

Secretary at the Office of the Company as detailed below:

given powers to deal with all the matters related to transfers, transmission,

issuance

of

duplicate

share/debenture

certificates, split and/or consolidation requests. In addition, the Company Secretary and authorized officials of the Registrar and Transfer Agents of the Company have been given powers to endorse registration of transfers on share certificates.

Sandeep Deshmukh – Company Secretary Sterlite Technologies Limited 4th Floor Godrej Millennium, 9 Koregaon Road, Pune - 411 001 Maharashtra, India Phone: +91-20-30514000, Fax: +91-20-26138083 Email: sandeep.deshmukh@sterlite.com

The Company’s shares being in compulsory demat list are also transferred through the depository system. The Company

Registered Office:

has entered into agreements with both the depositories

E-1, Waluj MIDC Industrial Area, Aurangabad 431 136, Maharashtra, India.

NSDL & CDSL.

80 |Sterlite Technologies Limited | Annual Report 2007-08


Plant Locations Optical Fiber

E2, E3, MIDC, Waluj Aurangabad – 431136, India

Fiber Optic Cables

Survey No. 68/1, Rakholi Village Madhuban Dam Road, Silvassa - 396230 Union Territory of Dadra & Nagar Haveli, India

Copper Telecom Cables

Survey No. 209, Phase 2 Piparia Industrial Estate, Silvassa - 396240 Union Territory of Dadra & Nagar Haveli, India

Structured Data Cables

Survey No. 33/1/1 Waghdara Road, Dadra - 396191 Union Territory of Dadra & Nagar Haveli, India

Power Transmission Conductors

Survey No. 99, Rakholi Village Madhuban Dam Road, Silvassa - 396230 Union Territory of Dadra & Nagar Haveli, India PO Karanjwane, Nasarapur Velhe Road Off Pune Satara Highway, Taluka Velhe Pune – 412305, India Plot 2D, Sector 10 IIE SIDCUL, Haridwar – 249403, India

Non-mandatory requirements of Corporate Governance

Stock Exchanges, all Board Members and Senior Management

Mr. Anil Agarwal is the Chairman of the Board. As required

Personnel have affirmed compliance with the Code of Conduct

under non-mandatory requirements the Company has

and Business Ethics of the Company during the year ended

constituted Remuneration Committee. Further, the Company

March 31, 2008.

has adopted Whistle-blower mechanism, which has been discussed in this report. The Company’s policies as regards

For Sterlite Technologies Limited

adoption of other non-mandatory requirements shall be disclosed in this report from time to time.

Declaration

Place: Mumbai

As provided under Clause 49 of the Listing Agreement of the

Date: April 29, 2008

Dr. Anand Agarwal CEO & Whole-time Director

Connecting with shareholders | 81


Auditors’ Certificate On Corporate Governance

To The Members of Sterlite Technologies Limited We have examined the compliance of conditions of corporate governance by Sterlite Technologies Limited, for the year ended on March 31, 2008, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchanges. The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, and the representation made by Directors and the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company.

For S. R. Batliboi & Co.

Chartered Accountants

Vijay Bhatt Place: Mumbai Date: April 29, 2008

82 |Sterlite Technologies Limited | Annual Report 2007-08

Partner Membership No.: F-36647


Auditors’ Report

To The Members of Sterlite Technologies Ltd. (Formerly Known as Sterlite Optical Technologies Ltd.) 1. We have audited the attached Balance Sheet of Sterlite

1956;

Technologies Ltd. (‘the Company’) as at March 31, 2008

v. On the basis of the written representations received

and also the Profit and Loss account and the cash flow

from the directors, as on March 31, 2008, and taken on

statement for the year ended on that date annexed thereto.

record by the Board of Directors, we report that none of

These financial statements are the responsibility of the

the directors is disqualified as on March 31, 2008 from

Company’s management. Our responsibility is to express an

being appointed as a director in terms of clause (g) of

opinion on these financial statements based on our audit.

sub-section (1) of section 274 of the Companies Act,

2. We conducted our audit in accordance with auditing

1956.

standards generally accepted in India. Those Standards

vi. As stated in Note no.8 of Schedule 21, provision for

require that we plan and perform the audit to obtain

liability against excise/customs is considered adequate

reasonable assurance about whether the financial

by the management based on the current status and the

statements are free of material misstatement. An audit

legal advice received by them. In the event the decision

includes examining, on a test basis, evidence supporting

of the Hon`ble Supreme Court goes against the

the amounts and disclosures in the financial statements. An

Company on any of the grounds of appeal, additional

audit also includes assessing the accounting principles

provision against the said demand may be required.

used and significant estimates made by management, as

Pending disposal of the matter by the Hon`ble Supreme

well as evaluating the overall financial statement

Court, the amount of additional excise/customs duty, if

presentation. We believe that our audit provides a

any, is currently unascertainable.

reasonable basis for our opinion.

vii. In our opinion and to the best of our information and

3. As required by the Companies (Auditor’s Report) Order,

according to the explanations given to us, the said

2003 (as amended) issued by the Central Government of

accounts give the information required by the

India in terms of sub-section (4A) of Section 227 of the

Companies Act, 1956, in the manner so required and

Companies Act, 1956, we enclose in the Annexure a

subject to the effects of our observations given in para

statement on the matters specified in paragraphs 4 and 5

vi above give a true and fair view in conformity with the

of the said Order.

accounting principles generally accepted in India; a) in the case of the Balance Sheet, of the state of

4. Further to our comments in the Annexure referred to above,

affairs of the Company as at March 31, 2008;

we report that: i.

We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii. In our opinion, proper books of account as required by

b) in the case of the Profit and Loss Account, of the Profit for the year ended on that date; and c) in the case of Cash Flow Statement, of the Cash Flows for the year ended on that date.

law have been kept by the Company so far as appears

For S.R. Batliboi & Co.

from our examination of those books;

Chartered Accountants

iii. The Balance sheet, Profit and Loss account and Cash Flow Statement dealt with by this report are in agreement with the books of account ; iv. In our opinion, the Balance sheet, Profit and Loss

per Vijay N Bhatt Place: Mumbai Date: April 29, 2008

Partner Membership No.: F-36647

account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act,

Connecting with Shareholders | 83


Annexure referred to in paragraph 3 of our report of even date Re: Sterlite Technologies Ltd. (‘the Company’) (i)

(a)

(b)

The Company has maintained proper records

of inventory and fixed assets and for the sale of goods.

showing full particulars, including quantitative details

During the course of our audit, no major weakness has

and situation of fixed assets.

been noticed in the internal control system in respect of

The Company has a program for phased physical

these areas.

verification of all its fixed assets over a period of

(v)

As informed, the Company has not entered into any

three years, which, in our opinion, is reasonable

contracts or arrangements to which the provisions of

having regard to the size of the Company and the

section 301 of the Companies Act, 1956 apply. As a result,

nature of its assets. Accordingly, certain fixed assets

provisions of paragraphs 4(v) (a) and (b) of the Companies

have been physical verified by the management

(Auditor’s Report) Order, 2003 (as amended) are not

during the year and no material discrepancies were

applicable to the Company.

noticed on such verification. (vi) The Company has not accepted any deposits from the (c)

There was no substantial disposal of fixed assets

public.

during the year. (vii) In our opinion, the Company has an internal audit system (ii)

(a)

The management has conducted physical verification

commensurate with the size and nature of its business.

of inventory at reasonable intervals during the year. (b)

The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the

(c)

The Company is maintaining proper records of inventory and no material discrepancies were

prescribed accounts and records have been made and maintained.

noticed on physical verification. (ix) (a) (iii) (a)

As informed, the Company has not granted any loans,

Undisputed statutory dues including provident fund, investor

secured or unsecured to companies, firms or other

education

and

protection

fund,

or

employees’ state insurance, income tax, sales tax,

parties covered in the register maintained under

wealth tax, service tax, customs duty, excise duty,

section 301 of the Companies Act, 1956. As a result,

cess have generally been regularly deposited with

provisions of paragraphs 4(iii) (b), (c) and (d) of the

the appropriate authorities.

Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of

(b)

As informed, the Company has not taken any loans,

provident fund, investor education and protection

secured or unsecured from companies, firms or other

fund, employees’ state insurance, income-tax,

parties covered in the register maintained under

wealth-tax, service tax, sales-tax, customs duty,

section 301 of the Companies Act, 1956. As a result,

excise duty, cess and other undisputed statutory

provisions of paragraphs 4(iii) (f) and (g) of the

dues were outstanding, at the year end, for a period

Companies (Auditor’s Report) Order, 2003 (as

of more than six months from the date they became

amended) are not applicable to the Company. (iv) In our opinion and according to the information and

payable. (c)

According to the records of the Company, the dues

explanations given to us, there is an adequate internal

outstanding of income-tax, sales-tax, wealth-tax,

control system commensurate with the size of the

service tax, customs duty, excise duty and cess on

Company and the nature of its business, for the purchase

84 |Sterlite Technologies Limited | Annual Report 2007-08


account of any dispute, are as follows: Amount Period to which (Rs. in Crores) the amount relates

Name of the Statute

Nature of dues

Central Sales Tax Act

Sales Tax

0.59

1997-01

Sales Tax Service Tax Service Tax Custom Duty Custom Duty Excise Duty Excise Duty Excise Duty

0.69 0.35 0.45 69.60 4.92 31.75 34.07 188.67

2003-04 2001-03 1999-03 1999-03 2001-03 1994-07 1994-03 2001-02

Service Tax Customs Act, 1962 Central Excise Act, 1944

Forum where dispute is pending Sales Tax Appellate Tribunal Commissioner Commissioner CESTAT CESTAT Commissioner Commissioner CESTAT Supreme Court

The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a banks or financial institution. The Company continues to dispute amounts aggregating to Rs.18.87 Crores debited by one of the bankers in the earlier year, towards import consignments under Letter of Credit not accepted by the Company, owing to discrepancies in documents; at this stage we are unable to determine whether there is a default in repayment of dues to the Lender.

(xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(x)

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company. (xiv) In respect of dealing/trading in shares, securities, debentures and other investments, in our opinion and according to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The shares, securities, debentures and other investments have been held by the Company, in its own name.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment. (xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956. (xix) The Company does not have any outstanding debentures during the year. (xx) The Company has not raised any money through public issue during the year. (xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit. For S.R. Batliboi & Co. Chartered Accountants per Vijay N Bhatt Place: Mumbai Date: April 29, 2008

Partner Membership No.: F-36647

Connecting with Shareholders | 85


Balance Sheet

(Rs. in Crores)

Schedule I.

As at

As at

March 31, 2008

March 31, 2007

SOURCES OF FUNDS 1. Shareholders' Funds Share Capital

1

Upfront Payment against Share Warrants

32.23

30.80

–

2.80 1.87

Employee Stock Option Outstanding

2

5.73

Reserves & Surplus

3

501.55

381.16 539.51

416.63

2. Loan Funds Secured Loans

4

632.65

565.39

Unsecured Loans

5

30.54

21.27 663.19

586.66

38.13

10.25

1,240.83

1,013.54

3. Deferred Tax Liability (Net) (Refer Note No 3 of Schedule No.21) Total II. APPLICATION OF FUNDS 1. Fixed Assets

6

Gross Block

918.88

792.50

Less: Accumulated Depreciation & Impairment

395.00

358.04

Net Block

523.88

434.46

36.22

52.76

Capital Work-in-Progress including Capital Advances (Refer Note 32 of Schedule No. 21) 2. Investments

7

560.10

487.22

6.01

6.31

3. Current Assets, Loans & Advances Inventories

8

219.39

119.99

Sundry Debtors

9

519.10

433.21

Cash and Bank Balances

10

89.07

78.93

Loans and Advances

11

168.91

104.39

996.47

736.52

Less: Current Liabilities & Provisions: Current Liabilities

12

303.53

199.76

Provisions

13

18.22

16.75

321.75

216.51

Net Current Assets Total Notes to Accounts

674.72

520.01

1,240.83

1,013.54

21

The schedules referred to above and notes to accounts form an integral part of the Balance Sheet As per our attached report of even date

For and on behalf of the Board

For S.R. Batliboi & Co. Chartered Accountants

Pravin Agarwal Whole-time Director

Dr. Anand Agarwal CEO & Whole-time Director

Anupam Jindal Chief Financial Officer

Sandeep Deshmukh Company Secretary

Per Vijay N. Bhatt Partner Membership Number: F- 36647

Place: Mumbai Dated: April 29, 2008

86 |Sterlite Technologies Limited | Annual Report 2007-08


Profit and Loss Account

(Rs. in Crores)

Schedule I. INCOME Turnover (Gross) Less: Excise Duty Turnover (Net) Other Income

Year Ended March 31, 2008

14 Total

II. EXPENDITURE Manufacturing & other expenses Personnel Selling & Distribution Administration & General Research & Development Interest & Finance charges Provision for Amortization

15 16 17 18 19 20

Less: Pre operative expenses of projects (Refer Note 34 of schedule 21) Profit before depreciation & taxation Depreciation & Impairment (Including Rs.0.21 Crore (previous year Nil) for Impairment loss) Profit before taxation Provision for taxation - Current Tax for the year - Minimum Alternate Tax Credit Eligible for Set Off (Refer Note 7 of schedule 21) - Provision for earlier years - Deferred Tax (Net) (Refer Note 3 of schedule 21) - Fringe Benefit Tax (Includes Rs.0.15 crore for earlier year) Profit after taxation Balance brought forward from previous year Amount available for appropriations Appropriations Transfer to General Reserve Proposed Dividend on Equity Shares Rs.1.00 Per Share (Previous Year Rs.0.75 Per Share) Corporate Tax on Proposed Dividend Transfer on amalgamation of Subsidiaries Balance carried to Balance Sheet Earnings Per Share (Face value Rs.5 each) (Refer note 19 of schedule 21) Basic Diluted Notes to Accounts

Year Ended March 31, 2007

1,771.28 85.49 1,685.79 4.11 1,689.90

1,300.87 102.72 1,198.15 5.19 1,203.34

1,344.05 41.89 57.53 36.74 4.75 43.65 – 1,528.61

995.58 29.82 27.62 29.81 3.34 34.50 1.82 1,122.49

6.32 1,522.29 167.61

3.76 1,118.73 84.61

37.17 130.44

31.57 53.04

14.66 (14.66)

6.04 (6.04)

0.77 27.88 1.07 100.72 250.08 350.80

– 1.72 0.46 50.86 208.01 258.87

7.55 6.45

2.54 4.62

1.10 – 335.70 350.80

0.79 0.84 250.08 258.87

16.08 15.46

8.59 7.83

21

The schedules referred to above and notes to accounts form an integral part of the Profit and Loss Account As per our attached report of even date

For and on behalf of the Board

For S.R. Batliboi & Co. Chartered Accountants

Pravin Agarwal Whole-time Director

Dr. Anand Agarwal CEO & Whole-time Director

Anupam Jindal Chief Financial Officer

Sandeep Deshmukh Company Secretary

Per Vijay N. Bhatt Partner Membership Number: F- 36647

Place: Mumbai Dated: April 29, 2008

Connecting with Shareholders | 87


Schedules forming part of the Balance Sheet (Rs. in Crores)

As at March 31, 2008 SCHEDULE 1

As at March 31, 2007

SHARE CAPITAL

Authorized 9,00,00,000 (Previous Year 9,00,00,000) Equity Shares of Rs. 5 each.

45.00

45.00

45.00

45.00

32.23

30.80

32.23

30.80

Issued, Subscribed & Paid up 6,44,68,247 (Previous Year 6,15,94,567) Equity Shares of Rs. 5 each fully paid - up Total Of the above: 1) 5,59,12,559 (Previous Year 5,59,12,559) equity shares of Rs. 5 each were allotted to the shareholders of Sterlite Industries (I) Ltd. upon demerger pursuant to the scheme of arrangement sanctioned by the Honorable High Court of Judicature at Bombay. 2) During the year 28,00,000 (Previous Year 28,00,000) Share warrants were converted into 28,00,000 Equity Shares of Rs.5 each fully paid up. No Warrants are outstanding as on March 31, 2008 with option to exercise equity conversion. (Previous year 28,00,000 warrants) 3) During the year 73,680 (Previous Year Nil) shares were issued to employees of the Company under ESOP Scheme. 4) For Stock Options outstanding details Refer Note 10 of Schedule 21.

SCHEDULE 2

EMPLOYEE STOCK OPTION OUTSTANDING

Balance as per last Balance Sheet

1.87

Add: Employees Stock Option Expenses For the year

4.48

1.87

Less: Transferred to Share Premium Account

0.62

Total

5.73

1.87

(Refer Note 10 of schedule 21)

SCHEDULE 3

RESERVES & SURPLUS

Share Premium Balance as per last Balance Sheet Add: Transfer from Employee Stock Option Add: Received During the year (Refer Note 20 of schedule 21)

57.50

30.90

0.62

26.60

26.60 84.72

57.50

General Reserve Balance as per last Balance Sheet Add: Transfer from Profit and Loss account

73.54

58.04

7.55

2.54

Add: Deferred Tax Asset arised on Amalgamation of Sterlite Telelink Ltd

8.90

Add: Deferred Tax Asset arised on Amalgamation of Sterlite Telecom Ltd

3.56

Add: Transfer on Amalgamation of Sterlite Telecom Ltd

0.50 81.09

88 |Sterlite Technologies Limited | Annual Report 2007-08

73.54


Schedules forming part of the Balance Sheet (Rs. in Crores)

As at March 31, 2008 SCHEDULE 3

As at March 31, 2007

RESERVES & SURPLUS (Contd.)

Capital Reserve Balance as per last Balance Sheet Add: Transfer on Amalgamation of Sterlite Telelink ltd

0.04

0.04 0.04

0.04

Profit & Loss Account Surplus as per Profit & Loss Account

335.70

250.92

Add: Transfer on Amalgamation of Sterlite Telelink ltd

9.43

Add: Transfer on Amalgamation of Sterlite Telecom Ltd

(10.27)

Total

SCHEDULE 4

335.70

250.08

501.55

381.16

531.69

410.04

50.00

132.50

0.15

50.81

22.85

632.65

565.39

SECURED LOANS

(A) Working Capital Loans From Banks (B) Term Loans From Banks (C) Interest Accrued and Due (D) Other Loans From Banks Total Notes: A. Working capital loans and Other loans from Banks are secured by hypothecation of Raw materials, Work in Progress, Finished Goods & Sundry Debtors and further secured by second charge on all immovable and movable fixed assets of the Company both present and future. B. Term loans are secured by first charge by deposit of title deed of immovable properties of the Company and hypothecation of movable properties of the Company both present and future.

SCHEDULE 5

UNSECURED LOANS

aSales Tax Loan (Interest Free) [(Due within one year Rs. 2.20 Crores)

20.54

20.72

Others

10.00

0.55

Total

30.54

21.27

(Previous Year Rs. Nil Crore)] Short Term Loans

Connecting with Shareholders | 89


90 |Sterlite Technologies Limited | Annual Report 2007-08

15.71

– 75.90

*** Addition on Purchase of " Power Transmission line" Business.

** Addition on amalgamation of Sterlite Telelink Limited.

62.37

* Addition of Fixed assets of ICOMM Tele Limited (formerly ARM Limited)

570.16

PREVIOUS YEAR

– –

5.69

69.51

137.13

0.58

0.96

4.42

0.61

0.95

1.29

103.40

17.62

1.61

1.15

10.75

0.43

0.36

9.96

21.81

792.50

918.88

0.86

4.43

31.15

4.41

11.74

6.13

734.41

86.90

17.04

223.25

298.35

0.69

9.44

1.04

6.96

1.46

263.39

15.33

0.04

44.06

of STLL**

Amalgamation

31.57

36.96

0.14

0.42

1.38

0.21

0.95

0.38

30.49

2.87

0.12

Year

As at

IMPAIRMENT

0.53

0.21

0.21

298.35

335.10

0.14

0.90

10.82

1.25

7.91

1.84

293.88

18.20

0.16

59.69

59.69

1.14

58.55

As at

As at

NET BLOCK As at

(Rs. in Crores)

0.05

0.16

Year

0.21

59.69

59.90

1.14

0.05

58.71

434.46

523.88

0.72

3.53

19.19

3.11

3.83

4.29

381.82

68.70

16.88

21.81

434.46

0.28

3.21

16.15

2.76

3.83

3.38

309.07

54.31

25.35

16.12

the 31.03.2008 31.03.2008 31.03.2007

As at During

tions 31.03.2008 01.04.2007

Addition on For the Deduc-

DEPRECIATION/Amortization

792.50

TOTAL

0.28

"PTL" Business***

As at

tions 31.03.2008 01.04.2007

As at

Software/Licences

of STLL**

tions

Addi- Deduc-

3.90

26.73

3.80

Tele Limited*

Purchase of

Addition on

GROSS BLOCK AT COST Addition on

from ICOMM Amalgamation

Additions

INTANGIBLE ASSETS

Vehicles

Electric Fittings

Office Equipments

Equipments

10.79

4.84

Data Processing

Furniture & Fixture

69.64

631.01

Building

Plant & Machinery

16.12

25.39

Freehold Land

01.04.2007

As at

FIXED ASSETS

Leasehold land

TANGIBLE ASSETS

of Assets

Nature

SCHEDULE 6

Schedules forming part of the Balance Sheet


Schedules forming part of the Balance Sheet (Rs. in Crores)

As at March 31, 2008 SCHEDULE 7

As at March 31, 2007

INVESTMENTS

Long Term Investment (at Cost) Other than Trade (Unquoted) In Equity Shares of Subsidiary Companies

6.01

0.01

1.30

5.00

6.01

6.31

60,05,200 (Previous Year 5,200) Equity shares of Sterlite Infrastructure Private Limited of Rs.10 each fully paid up. Current Investment (at Cost or Market Value whichever is lower) In Units of Mutual Funds (Quoted) (13,01,091.153) units of Rs.10/-each of ICICI Prudential Institutional Liquid Plan of ICICI Prudential Mutual fund (50,00,000) units of Rs.10/- each of Reliance Fixed Horizon Fund II of Reliance Mutual Fund Total NOTE The following Current Investments were purchased and sold during the year :

Mutual Fund Units DBS Chola Freedom Income STP-Inst.-Cum-Org

Face Value (Rs.)

Units (Nos.)

Amount in Rs.

10

8,13,107

1,00,00,000

Reliance Liquidity fund - Daily Dividend Reinvestment Option

10

3,50,82,625

35,09,35,008

Reliance Liquid fund -Treasury Plan - Institutional Option-Growth Option

10

5,09,848

1,00,04,385

ICICI Prudential Institutional Liquid Plan - Super institutional Growth

10

6,22,72,206

69,99,70,211

JM Liquidity I P Growth

10

7,91,427

1,00,05,145

Sahara Liquid fund VP Growth

10

18,543

2,56,26,338

1,04,450

51,04,450

Retail Option-Growth

10

6,23,95,190

72,53,71,454

FIEDILITY Cash Fund - Instl - Gr

10

19,04,272

2,00,51,987

Kotak Liquid Inst premium plan - Growth

10

1,07,57,742

16,46,46,798

Birla Cash Plus - Institutional - Growth

10

6,55,93,127

88,17,06,138

Principal cash management fund Liquid option-Instl. Plan - Growth Plan

10

51,68,987

6,51,55,998

Sahara Fix income10 Templeton Floating Rate INCOME FUND Short Term Plan

Lotus India Liquid Fund - Institutional Growth

10

41,49,625

4,50,39,779

LIC MF Liquid Fund - Growth Plan

10

5,12,56,834

71,82,49,324

DWS INSTA CASH PLUS FUND - Institutional Plan - Growth

10

2,45,85,584

31,73,52,853

ABN AMRO Money Plus Fund - Institutional Plan - Growth

10

2,49,34,934

29,13,80,959

UTI Liquid Cash Plan Institutional - Growth Option

10

3,17,147

41,55,89,482

Connecting with Shareholders | 91


Schedules forming part of the Balance Sheet (Rs. in Crores)

As at March 31, 2008 SCHEDULE 8

INVENTORIES

(At cost or net realisable value, whichever is lower) Raw Materials (Including Goods in Transit Rs.16.50 Crores) (Previous Year 1.17 Crores) Work-in-Progress Finished Goods Stores, Spares, Packing Materials & Others Total

SCHEDULE 9

As at March 31, 2007

105.31 39.89 53.09 21.10 219.39

37.44 29.37 42.25 10.93 119.99

51.73 19.90 71.63 19.90 51.73 467.37 519.10

93.03 19.65 112.68 19.65 93.03 340.18 433.21

0.10

0.08

1.42 86.66 0.59 –

12.15 65.88 0.49 0.15

0.30 89.07

0.18 78.93

SUNDRY DEBTORS (Unsecured)

(a) Debts Outstanding for a period exceeding 6 months: - Considered good - Considered doubtful Less: Provision for Doubtful Debts (b) Others - Considered good Total

SCHEDULE 10 CASH & BANK BALANCES Cash in hand Balance with Scheduled Banks in (i) Current Accounts (ii) Deposit Accounts (iii) Dividend Accounts Cheques in Hand Balances with Non Scheduled Banks in (i) Current Accounts (*) Total * Balance with Non Scheduled banks is maintained with: Balance with Industrial Bank of China Rs.0.05 Crore (Previous year Rs.0.03 Crore) (Maximum Amount Outstanding During the year Rs.0.24 Crore) (Previous year Rs.0.03 Crore) Balance with Dubai Bank Rs.0.05 Crore (Previous year Rs.0.04 Crore) (Maximum Amount Outstanding During the year Rs.0.07 Crore) (Previous year Rs.0.25 Crore) Balance with Bangkok Bank PCL Rs.0.20 Crore (Previous year Rs.0.11 Crore) (Maximum Amount Outstanding During the year Rs.0.13 Crore) (Previous year Rs.0.35 Crore)

92 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Balance Sheet (Rs. in Crores)

As at March 31, 2008

As at March 31, 2007

SCHEDULE 11 LOANS & ADVANCES (Unsecured Considered Good) To Subsidiary Companies

0.30

2.50

Advances recoverable in cash or in kind or for value to be received

71.73

65.89

Balances with Central Excise Authorities

47.48

15.33

3.90

2.46

8.51

23.91

9.25

4.13

0.04

17.46

0.41

168.91

104.39

1.16

40.18

234.69

103.73

Interest accrued but not due on Loans

4.59

1.49

Unclaimed Dividend

0.59

0.49

Sundry Deposits

0.35

0.26

Advance from Customers

44.13

39.83

Other Liabilities

18.02

13.78

303.53

199.76

For Contingencies

9.50

9.50

For Employee Benefits

1.17

1.84

Proposed Dividend Equity Shares

6.45

4.62

Corporate Tax on Proposed Dividend

1.10

0.79

18.22

16.75

Share Application Money (Pending allottment)

Deposits - Others Income Tax - Advance Tax and Tax Deducted at Source (Net of Provisions) Minimum Alternate Tax Credit Entitlement Interest accured on Investment Other Advances Total

SCHEDULE 12 CURRENT LIABILITIES Acceptances Sundry Creditors (i) Micro, medium and Small Enterprises (Refer note 31 of Schedule 21) (ii) Others

Total

SCHEDULE 13 PROVISIONS

Total Note :

The Company had made a provision of Rs.9.50 Crores towards contingencies in the earlier years against various disputed claims against the Company as described in Note 29 of Schedule 21, the timing and quantum of which is presently unascertainable.

Connecting with Shareholders | 93


Schedules forming part of the Profit and Loss Account (Rs. in Crores)

Year Ended March 31, 2008

Year Ended March 31, 2007

SCHEDULE 14 OTHER INCOME Income from Mutual Fund

0.78

0.04

Profit on Sale of Asset

0.01

Unclaimed Liablities written back

0.52

1.76

Provision no longer required

2.05

Gain on Prepayment of Deferred Sales tax Liablity (Refer Note 9 of Schedule 21)

0.35

Miscellaneous Income

1.57

2.22

Total

4.11

5.19

1,231.59

876.34

Interest on Income Tax Refund

SCHEDULE 15 MANUFACTURING & OTHER EXPENSES Raw materials consumed Decrease/ (Increase) in stock Opening Stock Work-in-Progress *

29.37

22.27

Finished Goods**

42.25

87.62

71.62

109.89

Work-in-Progress

39.89

29.37

Finished Goods

53.09

42.25

Closing Stock

92.98 Decrease/ (Increase) in stock

71.62 (21.36)

38.27

1.90

(6.41)

Stores & Spares

24.88

15.94

Power, Fuel & Water

39.97

27.37

Excise Duty on stocks

Repairs and Maintenance – Building

0.92

0.42

– Machinery

6.87

4.77

– Others

0.01

0.39

Carriage Inward

4.07

3.71

Packing Material

41.20

27.17

Other Manufacturing Expenses

14.00

7.61

1,344.05

995.58

Total

*Includes Rs.Nil (Previous Year 15.71 Crores) opening stock transfer on acqusition of "Power Transmission Line" business from Sterlite Industries (I) Ltd.and Rs.Nil (Previous Year 0.86 Crore) Opening Stock Transfer upon amalgamation of Sterlite Telelink Ltd. **Includes Rs.Nil (Previous Year 53.80 Crores) opening stock transfer on acqusition of "Power Transmission Line" business from Sterlite Industries (I) Ltd.and Rs.Nil (Previous Year 1.01 Crores) Opening Stock Transfer upon amalgamation of Sterlite Telelink Ltd.

94 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Profit and Loss Account (Rs. in Crores)

Year Ended March 31, 2008

Year Ended March 31, 2007

SCHEDULE 16 PERSONNEL Salaries, Wages, Bonus & Commission Contribution to Provident Fund and Superannuation Funds Gratuity Expenses (Refer Note 21 of Schedule 21) Employees' Welfare & Other Amenities Employees Stock Option Expenses (Refer Note 10 of Schedule 21) Total

32.27 1.86 (0.19) 3.47 4.48 41.89

22.28 1.20 0.32 4.15 1.87 29.82

10.31 3.26 40.86 3.10 57.53

7.98 0.54 15.70 3.40 27.62

1.50 1.70 0.68 9.39 0.08 – 0.82 0.25 0.11 22.21 36.74

0.81 2.20 0.75 6.74 0.12 0.33 – – 0.05 18.81 29.81

Salaries, Wages, Bonus & Commission

0.93

0.84

Stores & Spares

0.30

0.02

Raw materials consumed

2.04

1.73

Rates & Taxes

1.06

0.38

General Expenses

0.42

0.37

Total

4.75

3.34

6.77

3.97

37.64

29.52

5.73

4.06

50.14

37.55

6.49

3.05

43.65

34.50

SCHEDULE 17 SELLING & DISTRIBUTION Sales Commission ( Other than Sole Selling Agent) Sales Promotion Carriage Outward Other Expenses Total

SCHEDULE 18 ADMINISTRATION & GENERAL Rent Insurance Rates & Taxes Conveyance & Travelling Expenses Loss on sale of Fixed Assets Loss from Management of ICOMM Tele Limited Bad Debts Written Off Provision for Doubtful Debts Directors Sitting Fee and Commission General Expenses Total

SCHEDULE 19 RESEARCH & DEVELOPMENT

SCHEDULE 20 INTEREST & FINANCE CHARGES : (Net) On Fixed Loans Others Bank charges Less: Interest Received on Customers & Fixed Deposits [Tax Deducted at Source Rs.1.49 Crores (previous year Rs.0.63 Crore)) Total

Connecting with Shareholders | 95


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS 1.

Nature of Operations The Company is a manufacturer of Power Transmission and Telecom products in India. Telecom Business includes integrated Optical Fiber, Telecom Cables (Fiber Optic Cables, Copper Telecom Cables & Structured Data Cables), access equipments and integrated management business.

2.

Significant Accounting Policies (a) Basis of Preparation of Financial Statements The financial statements have been prepared to comply in all material respects with the notified Accounting Standards by Companies Accounting Standard Rules 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis of accounting except in case of assets for which impairment is carried out. The accounting policies have been consistently applied by the Company. (b) Use of Estimates The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting year. Difference between the actual result and estimates are recognized in the year in which the results are known/ materialized. (c) Fixed Assets Fixed Assets are stated at cost (net of Cenvat) less accumulated depreciation and impairment. Cost comprises of the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Expenditure during construction period (including financing cost relating to borrowed funds for construction or acquisition of fixed assets) incurred on projects under implementation are treated as Pre-operative expenses, pending allocation to the assets, and are included under “Capital work in Progress”. (d) Depreciation (i) Depreciation on Fixed Assets is provided on straight line method at the rates specified in Schedule XIV of the Companies Act, 1956. Depreciation on fixed assets acquired on amalgamation of the erstwhile Sterlite Telelink Limited is provided on written down value method at the rates specified in Schedule XIV of the Companies Act, 1956. (ii) Cost of leasehold land is amortized in proportion to the period of lease. (iii) Cost of acquired intangible assets is amortized over a period of five years. (e) Impairment of Assets (i) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. (ii) After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. (iii) A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. (f) Investments Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined for category of investments. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments. (g) Inventories Inventories of raw material, packing material, work –in – process and finished goods are valued at cost or net realizable value, whichever is lower, except for scrap which is valued at net realizable value. Cost is ascertained on a weighted average cost basis. Cost of finished goods includes the cost of materials consumed, manufacturing overheads & excise duty.

96 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. (h) Foreign Currency Transactions (i) Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (ii) Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. (iii) Exchange differences arising on the settlement of monetary items or on reporting Company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise. (iv) The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. None of the forward exchange contracts are taken for trading or speculation purpose. (i)

Borrowing Costs Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

(j)

Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Sale of Goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales include excise duty, sale of scrap and are net of sales tax and quantity discount. Interest Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

(k) Retirement and other Employee Benefits (i) Retirement benefits in the form of Provident Fund & Superannuation Fund is a defined contribution scheme and the contributions are charged to the Profit & Loss Account of the year when the contributions to the respective funds are due. The Company has no other obligation other than the contributions payable. (ii) Gratuity liability is a defined benefit obligation and are provided for on the basis of an actuarial valuation on Projected Unit Credit Method calculated at the end of each financial year. (iii) Leave encashment liability is provided for based on actuarial valuation done as per Projected Unit Credit Method calculated at the end of each financial year. (iv) Actuarial gains / losses are immediately taken to profit and loss account and are not deferred. (l)

Employee Stock Option: Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by The Institute of Chartered Accountants on India. The Company measures compensation cost relating to employee stock options using the fair value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.

(m) Research and Development Revenue expenditure on research and development (R&D) is expensed as incurred. (n) Export Incentives

Connecting with Shareholders | 97


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) Advance licences are issued to the Company under the Advance License Scheme [Duty Exemption Entitlement Certificate (DEEC Scheme)]/duty entitlement credited under the Duty Entitlement Pass Book Scheme (DEPB Scheme)/Target Plus Entitlement Scheme on export of the goods manufactured by it. Wherever export sales are made by the Company, pending receipt of imported duty-paid raw materials under the DEPB scheme, the higher cost of domestic raw materials actually consumed for the purpose of such exports is compensated and/or matched by accruing the value of the benefit under the DEPB scheme. (o) Taxes on Income Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is determined as the amount of tax payable in respect of taxable income for the year based on provisions of Income Tax Act, 1961. Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In case of unabsorbed depreciation and carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the Minimum Alternative Tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period. (p) Expenditure on new projects and substantial expansion Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is related to construction or is incidental thereto. Income earned during construction period is deducted from the total of the indirect expenditure. (q) Operating Leases Assets taken on Lease under which all significant risks and rewards of ownership are effectively retained by the lessor are classified as Operating Leases. Lease payments under Operating Leases are recognized on straight line basis over the lease period unless another systematic basis is more representative of the time pattern of the users benefit. (r) Earnings Per Share The Company reports basic and diluted earnings per share in accordance with Notified AS 20 under the Companies (Accounting Standards) Rules, 2006 issued by The Institute of Chartered Accountants of India on ‘Earnings Per Share’. Basic earning per share is computed by dividing the net profit or loss for the period attributable to equity shareholders after deducting attributable taxes by the weighted average number of Equity shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit or loss for the period by the weighted average number of equity shares outstanding during the period. Both profit for the year and weighted average number of shares are adjusted for the effects of all diluted potential equity shares except where the results are anti- dilutive.

98 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) (s) Cash and Cash equivalents Cash and Cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. (t) Segment Reporting Policies The Company’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Company generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. The Corporate and Other segment includes general corporate income and expense items which are not allocated to any business segment. (u) Provisions, Contingent Liabilities and Contingent Assets As per Notified AS 29 under the Companies (Accounting Standards) Rules, 2006, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Company recognizes provisions (without discounting to its present value) only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation as and when a reliable estimate of the amount of the obligation can be made. No provision is recognized for i) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or ii)

Any present obligation that arises from past events but is not recognized because• It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or • A reliable estimate of the amount of obligation cannot be made.

Such obligations are disclosed as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made. Contingent Assets are neither recognized nor disclosed in the financial statements since this may result in the recognition of income that may never be realized. (v) Commodity Hedging Transactions The Commodity Hedging Contracts are accounted on the date of their settlement and realized gain / (loss) in respect of settled Contracts are recognized in the Profit and Loss accounts.

3.

Deferred Tax a) The break-up of closing net deferred tax liability is as under: Particulars

(Rs. in Crores)

Current Year

Previous Year

Deferred Tax Liability (a) Depreciation

63.24

61.98

0.02

1.66

6.76

5.34

17.97

47.96

(c) On Employee Benefits

0.40

0.08

Net Deferred Tax Liability

38.13

10.25

(b) On export benefit Deferred Tax Assets (a) On provision for doubtful debts. (b) On unabsorbed tax depreciation and carried forward losses.

Connecting with Shareholders | 99


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) b)

Deferred tax charged for the year

(Rs. in Crores)

Particulars

Current Year

Opening Deferred Tax Liability Add: Net Deferred Tax balances taken over upon Merger of Sterlite Telelink Ltd. & Sterlite Telecom Ltd. Less: Deferred Tax Asset arising on amalgamation of Sterlite Telelink Limited & Sterlite Telecom Limited adjusted to general reserves Subtotal Less: Closing Deferred tax liability Deferred tax charged for the year

Previous Year

10.25

18.36

–

2.62

– 10.25 38.13 27.88

(12.45) 8.53 10.25 1.72

4.

The amount of foreign exchange (gain)/loss adjusted during the year to the carrying cost of the fixed assets and capital work in progress is Rs.Nil (previous year Rs.0.20 Crore) and (credited) / debited to respective heads of accounts in Profit and Loss Account is Rs.(31.02) Crores (previous year Rs.(6.09) Crores); premium on forward exchange contract to be recognized in the Profit and Loss account of subsequent accounting period is Rs.0.61 Crores (previous year Rs.0.56 Crore).

5.

Derivative Instruments The Company has entered into the following derivative instruments: (a) The following are the outstanding Forward Exchange Contracts entered into by the Company, for hedge purpose, as on March 31, 2008 Year Current Year

Previous Year

Currency in Crore US $ 6.62 US $ 5.79 Euro 0.01 JPY 50.70 US $ 5.00 US $ 5.70 Euro 0.58 Euro 0.19

Amount (Rs. in Crores) 264.25 231.53 0.46 20.32 217.82 248.33 33.42 10.86

Buy/Sell

No of Contracts

Buy Sell Sell Buy Buy Sell Sell Buy

137 149 2 2 187 178 16 8

Options: Currency in Crore

Amount (Rs. in Crores)

Buy/Sell

No of Contracts

Current Year

US $ 0.15

6.00

Buy

1

Previous Year

US $ 0.35

15.04

Sell

9

Year

(b) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: i.

Amounts receivable in foreign currency on account of the following: Year Current Year

Previous Year

Particulars

(Rs. in Crores)

Currency

Amount

Export of goods

US $ 0.25

9.74

Export of goods

Euro 0.08

4.30

Advance to Suppliers

US $ 0.30

11.85

Advance to Suppliers

Euro 0.01

0.76

Advance to Suppliers

THB 0.06

0.07

Advance to Suppliers

JPY 0.21

0.07

Export of goods

US $ 3.12

135.79

Export of goods

Euro 0.19

10.89

Advance to Suppliers

Euro 0.00

0.05

Fixed Assets

Euro 0.00

0.10

100 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) ii.

Amounts payable in foreign currency on account of the following: Particulars Import of goods and services Import of goods and services Advance from Customers Loans payable Loans payable

Currency in Crore Current Year US$ 1.39 Euro 0.07 US$ 0.83 US $ 1.02 Euro 0.04

Amount (Rs. in Crores) Current Year 55.71 4.21 33.01 40.81 2.41

Currency in Crore Previous Year US$ 1.00 – – US$ 5.74 Euro 0.03

Amount (Rs. in Crores) Previous Year 43.49 – – 250.02 1.43

(c) Commodity Future Contract to hedge against fluctuation in commodity prices. The Following are the outstanding Futures contracts entered into by the Company as on March 31, 2008: Year Current Year Previous Year

No. of Contracts 24 105

Contracted Quantity 2,625 MT 9,975 MT

Buy/ Sell Buy Buy

6.

In terms of accounting policy (Refer Note 2 (n)) for the accrual of export incentives, estimated benefits of Rs.18.99 Crores (Previous Year Rs.2.90 Crores) have been taken into account under the DEPB / Target Plus Entitlement scheme / Duty Drawback scheme.

7.

In view of book profits and no taxable profits, as per computation of income, the provision for tax has been made as per MAT under section 115 JB of the Income Tax Act, 1961. The Company is entitled to avail Credit under section 115JAA (1A). Accordingly it has considered MAT credit entitlement as an asset as it has reversible deferred tax liability on account of depreciation.

8.

The Company had in the earlier year received an order of CESTAT upholding the demand of Rs.188 Crores (including penalties) in the pending excise/custom matters on various grounds. During the period, the Company’s appeal with the Hon’ble High Court of Mumbai was rejected on the grounds of jurisdiction. The Company preferred an appeal with the Hon’ble Supreme Court of India against the order of CESTAT which has been admitted. The Company has re-evaluated the case on admission of appeal by the Hon’ble Supreme Court. Based on their appraisal of the matter, the legal advisors/consultants are of the view that under most likely event, the provision of Rs.5 Crores made by the Company against the above demand is adequate. The management is confident of a favourable order and hence no further provision is considered against the said demand.

9.

Other Income includes Rs.Nil (Previous Year Rs.0.35 Crore) on account of the prepayment of deferral sales tax liability in accordance with the scheme framed by the Government of Maharashtra.

10. Employee Stock Option Scheme The Company has granted Employees Stock Options Plan, 2006 (ESOP) to its employees pursuant to the resolution passed by the shareholders at the Extraordinary General Meeting held on March 13, 2006.The Company has followed the fair value method (Black Scholes Options Pricing Model) for the valuation of these options. The Compensation Committee of the Company has approved three grants vide their meeting held June 14, 2006; March 19, 2007 and September 28, 2007 respectively. As per the plan, Options granted under ESOP would vest in not less than one year and not more than five years from the date of grant of such options. Vesting of options would be subject to continued employment with the Company. The plan will be equity settled plan. Other details of the options are as follows: Date of grant Number of Options granted Method of Settlement Vesting Period Exercise Period Vesting Conditions

Grant 1 14-Jun-06 465,700 Equity 3 Yrs 1 Year Business Performance

Grant 2 19-Mar-07 127,200 Equity 2.25 Yrs. 1 Year Business Performance

Grant 3 28-Sep-07 261,550 Equity 1.71 Yrs. 1 Year Business Performance

Connecting with Shareholders | 101


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) The details of the activity under the plan have been summarized below: Current Year Previous Year Number of Weighted Average Number of Weighted Average Options Exercise Price (Rs.) Options Exercise Price (Rs.) Outstanding at the beginning of the year

5,92,900

5

Granted during the year

2,61,550

5

5,92,900

5

Nil

Nil

Forfeited during the year Exercised during the year

73,680

5

Nil

Expired during the year

79,160

5

Nil

7,01,610

5

5,92,900

5

11,620

5

Nil

1.17

2.15

Outstanding at the end of the year Exercisable at the end of the year Weighted average remaining contractual life (in years) Weighted average fair value of options granted

143.31

102.88

The fair value as per the Black Scholes Options Pricing Model was measured based on the following input: Date of grant

Vest 1

Vest 2

Vest 3

14-Jun-07

14-Jun-08

14-Jun-09

89.25

89.25

89.25

59.78%

58.90%

60.52%

Risk free Rate

7.07%

7.16%

7.26%

Exercise Price

5

5

5

1.5

2.5

3.5

0.57%

0.57%

0.57%

83.99

83.81

83.62

20.00%

40.00%

40.00%

June 14, 2006 Variables Weighted average Stock Price Expected Volatility (*)

Time To Maturity Dividend yield Outputs Option Fair Value Vesting Percentage Option Fair Value Date of grant

83.79

Vest 1

Vest 2

19-Jun-08

19-Jun-09

179

179

62.90%

57.75%

Risk free Rate

8.07%

8.06%

Exercise Price

5

5

March 19, 2007 Variables Weighted Average Stock Price Expected Volatility (*)

Time To Maturity

1.5

2.5

0.57%

0.57%

Option Fair Value

173.04

172.37

Vesting Percentage

60.00%

40.00%

Option Fair Value

172.77

172.77

Dividend yield Outputs

102 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) Date of grant

Vest 1

Vest 2

28-Sep-08

14-Jun-09

Weighted Average Stock Price

237.30

237.30

Expected Volatility (*)

September 28, 2007 Variables

56.69%

60.98%

Risk free Rate

7.20%

7.29%

Exercise Price

5.00

5.00

Time To Maturity

1.50

2.21

0.51%

0.51%

Dividend yield Option Fair Value

231.02

230.40

Vesting Percentage

50.00%

50.00%

Option Fair Value

230.71

230.71

(*)The measure of volatility used in the above model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time. The volatility periods considered above, corresponding to the respective expected lives of the different vests are prior to the grant date. The daily volatility of stock prices is considered as per the National Stock Exchange (NSE) prices over these years. 11. Estimated amount of contracts remaining to be executed in Capital Account and not provided for (Net of Advances) are Rs. 66.88 Crores (Previous Year Rs. 34.78 Crores). 12. In view of Notified AS 28 under the Companies (Accounting Standards) Rules, 2006 on Impairment of Assets (AS) – 28 issued by the Institute of Chartered Accountants of India, the Company has reviewed its fixed assets and impaired assets worth Rs.0.21 Crore during the year (Previous Year Nil) on account of impairment in addition to the provision already made in the books. 13. Loans and Advances to subsidiaries Outstanding Loans/Advance given to subsidiary Sterlite Infrastructure Private Limited is Rs.0.30 Crore (Previous Year Rs.Nil). The maximum amount outstanding from Sterlite Infrastructure Private Limited during the year is Rs.0.30 Crore (Previous year Rs.Nil). 14. There are no amounts due and outstanding to be credited to Investor Education and Protection Fund.

15. Payment To Auditors Particulars

(Rs. in Crores)

Current Year

Previous Year

a)

Audit Fees *

0.32

0.34

b)

Tax Audit Fees

0.03

0.03

c)

Other services

0.01

0.01

0.36

0.38

Total

* The payment is inclusive of Rs.Nil (Previous Year Rs.0.07 Crore) paid for previous year & exclusive of Service tax. 16. Managerial Remuneration Particulars (i)

(Rs. in Crores)

Current Year

Previous Year

Salary

2.09

1.20

(ii) Perquisites

0.60

0.23

(iii) Contribution to Superannuation fund

0.03

0.03

(iv) Contribution Provident Fund

0.16

0.07

Total

2.88

1.53

Note: As the future liability for gratuity and leave encashment is provided on an actuarial basis for the Company as a whole, the amount pertaining to the directors is not ascertainable and, therefore, not included above.

Connecting with Shareholders | 103


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) (Rs. in Crores)

Computation of net profits in accordance with section 349 of the Companies Act, 1956 for calculation of commission payable to directors.

Current Year

Net Profit Before Tax As Per Profit & Loss Account

Previous Year

130.49

53.08

Depreciation as per books

37.17

31.57

Profit/(Loss) on sale of fixed assets (net)

(0.08)

(0.11)

Commission to Non -Executive Directors

0.08

0.02

Managerial Remuneration

2.88

1.51

Provision for Doubtful Debts

0.25

Depreciation under Companies Act ,1956

37.17

31.57

Net Profit for the year as per section 349

133.37

54.50

Restricted to 1 %

1.33

0.55

Comission payable to non - exceutive directors

0.08

0.02

Add:

Less :

Commission to:

17. Related Party Disclosures Related party disclosures as required by Notified AS 18 under the Companies (Accounting Standards) Rules, 2006 “Related Party Disclosures” are given below: (A) Name of related party and its relationship: (i) Subsidiary of the Company Sterlite Infrastructure Private Limited (ii) Key Management Personnel Dr. Anand Agarwal Mr. Pravin Agarwal (iii) Investing Company Twin Star Overseas Limited. (B) There are no provisions for doubtful debts or no amounts have been written off in respect of debts due to or from related parties. (C) The following transactions were carried out with the related parties:

Sr No Transaction

(Rs. in Crores)

Sterlite Infrastructure Private Limited 07-08 06-07

Twin Star Ovearseas Limited 07-08 06-07

Key Management Personnel 07-08 06-07

Transactions during the year: 1

Remuneration (*)

2.88

1.53

2

Investments during the year

6.00

3

Dividend

1.90

4

Equity Share Capital Issue

1.40

1.40

5

Equity Share Premium

26.60

26.60

6

Advance given to Subsidiary

0.30

Balance outstanding as at the year end: 7

Advances

0.30

8

Investment in Equity Share

6.01

* It includes payment to Dr. Anand Agarwal of Rs.1.03 Crores (Previous Year Rs.0.79 Crore) & Rs.1.85 Crores paid to Mr. Pravin Agarwal (Previous Year Rs.0.74 Crore) .

104 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) 18. Operating Leases Disclosures in respect of Operating Leases of office buildings as per the requirement of Notified AS 19 under the Companies (Accounting Standard) Rules, 2006 on Leases issued by The Institute of Chartered Accountants of India, is as under: (a) Lease payments recognized in the statement of Profit and Loss for the period is Rs.0.29 Crore (previous year Nil). (b) The future minimum lease payments payable over the next one-year is Rs.0.51 Crore (previous year Nil). (c) The future minimum lease payments payable later than one year but not later than five year is Rs.0.81 Crore (previous year Nil). (d) The future minimum lease payments payable later than five year is Rs.Nil (previous year Nil). 19. Earnings per Share (EPS)

(Rs. in Crores)

Current Year I

Net Profit as per Profit and Loss Account available for Equity Shareholders

II

Weighted Average Number of equity shares

Previous Year

100.72

50.86

6,26,32,181

5,92,31,827

6,26,32,181

5,92,31,827

18,36,066

51,62,740

6,71,201

5,63,098

651,39,448

6,49,57,665

Basic (On Nominal Value of Rs.5 Per Share) Rupees

16.08

8.59

Diluted (On Nominal Value of Rs.5 Per Share) Rupees

15.46

7.83

For Basic Earning Per share For Diluted Earning Per Share No. of Share for Basic EPS Add: Potential Equity Shares a)

Convertible Warrant

b)

Employee Stock Option

No of Shares for Diluted Earning Per Share III

Earning Per Share (Weighted Average)

20. The Company had allotted 56,00,000 warrants on March 29, 2006 on preferential basis, (Rs.10 per warrant had been received upfront) to Twin Star Overseas Limited. The warrant holders had an option to be allotted one equity share of Rs.5/- each at a price of Rs.100 each on the payment of balance amount. During the year, 28,00,000 Share warrants were converted into 28,00,000 Equity Shares (Previous year 28,00,000 Share warrants were converted into 28,00,000 Equity Shares). 21. The disclosures as per the Notified AS 15 under the Companies (Accounting Standards) Rules, 2006 on “Employee Benefits�, are as follows: The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation of India in the form of a qualifying insurance policy. The future contributions payable by the Company under the Gratuity Scheme are currently not ascertainable.

Balance Sheet Details of Provision for Gratuity: Particulars Defined Benefit Obligation Fair Value of Plan Assets Plan (Assets) / Liability Change in defined benefit obligation: Defined benefit obligation at the beginning of the year Current Service cost Interest cost Actuarial (gain) / loss on obligation Benefits paid Defined benefit obligation, end of the period

(Rs. in Crores)

Current Year

Previous Year

1.89 2.14 (0.25)

1.88 1.64 0.24

1.88 0.33 0.17 (0.32) (0.17) 1.89

1.44 0.21 0.12 0.27 (0.16) 1.88

Connecting with Shareholders | 105


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) (Rs. in Crores)

Particulars

Current Year

Previous Year

Change in fair value of plan assets Fair value of plan assets at the beginning of the year

2.13

1.54

Expected return on plan assets

0.17

0.12

Contribution by employer

0.03

0.02

Benefits paid

(0.17)

(0.16)

Actuarial gain / (loss) on plan assets

(0.01)

0.11

2.14

1.64

Current Service cost

0.33

0.21

Interest cost on benefit obligation

0.17

0.12

Net actuarial (gain) / loss recognized in the year

(0.31)

0.16

Expected return on plan assets

(0.17)

(0.12)

0.02

0.36

Fair value of plan assets at the end of the year Net period gratuity cost

Net benefit expense

The major categories of plan assets as a percentage of the fair value of total plan asset is as follows: Particulars

Current Year %

Investment with Insurer (Life Insurance Corporation of India)

Previous Year %

100.00

100.00

Assumptions: Discount rate

8.00 %

Expected rate of return on plan assets

8.00 %

Employee Turnover

2.00 %

22. Details regarding licensed/registered, installed capacity and actual production (as certified by the Management) A. Capacity

UNIT

Copper Telecom Cables

CKM

Fiber Optic cables * Optical Fiber

Licensed /Registered Capacity Current Year Previous Year Per Annum Per Annum

Installed Capacity Current Year Previous Year Per Annum Per Annum

95,00,000

95,00,000

FKM

32,22,528

32,22,528

32,22,528

32,22,528

KM

1,20,00,000

50,00,000

60,00,000

40,00,000

15,00,000

15,00,000

10,00,000

7,20,000

N.A

N.A

147,200

75,000

UNIT

Current Year

Previous Year

Copper Telecom Cables

CKM

27,35,708

19,24,895

Fiber Optic cables

FKM

15,47,019

12,05,441

Optical Fiber*

KM

41,29,930

39,05,548

Distribution Conductor (AAC/ACSR) **

MT

85,297

58,199

Broadband Access Networks

NOS

1,29,668

60

Broadband Access Networks

NOS.

95,00,000

95,00,000

Power Transmission LineDistribution Conductor **

MT

* Based on Average FKM ** N.A.-Delicenced vide notification no 477 (E) Dated July 27, 1991. B. Production (including for captive consumption)

Power Transmission Line-

* It includes 1,629,223 KM (Previous Year 1,150,015 KM) produced for captive consumption ** Current Year 112,192 KM, (Previous Year 91,426 KM)

106 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) 23. Quantitative information in respect of Opening Stock, Closing Stock, Sales of Finished goods and Consumption of Raw Materials (As Certified by Management) (Rs. in Crores) Current Year Previous Year UNIT Quantity Value Quantity Value a)

Opening Stock Copper Telecom Cables

CKM

96,769

7.80

2,06,324

12.19

Fiber Optic cables

FKM

62,239

6.94

58,087

8.23

Optical Fiber

KM

4,46,485

14.65

4,14,165

13.41

2,032 KM Previous Year is 6,055 KM)

MT

1,038

12.85

4,077

53.80

Broadband Access Networks

NOS

60

Power Transmission Line - Distribution Conductor (AAC/ACSR) (Current year

Total b)

42.25

87.62

Closing Stock Copper Telecom Cables

CKM

1,11,717

8.67

96,769

7.80

Fiber Optic cables

FKM

53,113

4.38

62,239

6.94

Optical Fiber

KM

3,16,276

10.08

4,46,485

14.65

2,932 KM Previous Year is 2,032 KM)

MT

2,935

29.74

1,038

12.85

Broadband Access Networks

NOS

3,123

0.22

60

Power Transmission Line Conductor (AAC/ACSR) (Current year

Total c)

53.09

42.25

Sales Copper Telecom Cables

CKM

27,20,553

288.95

20,34,450

179.83

Fiber Optic cables

FKM

15,52,907

187.52

12,01,289

156.83

Optical Fiber

KM

26,32,767

89.28

27,23,213

97.45

MT

82,658

1,080.57

61,238

846.39

Power Transmission & Distribution Conductors AAC/ACSR Current Year 110,934 KM, Previous Year 95,449 KM) Broadband & Access Networks * Others Total

116.31

0.14

8.65

20.24

1,771.28

1,300.88

* Including Revenue of Integrated Management Services Rs.104.33 Crores (Previous Year Rs.0.14 Crore) d)

Raw Material Consumed Aluminum/ Alloy

MT

85,583

824.03

58,199

642.33

Copper Rods

MT

4,693

147.50

3,147

95.84

Polyethylene Compounds

MT

7,667

51.38

2,376

15.20

Galvanized Steel Wire/ Steel tape

MT

3,260

15.17

1,164

6.47

Resin

KG

2,06,398

12.40

2,07,974

11.19

Others Total

181.11

105.31

1,231.59

876.34

Connecting with Shareholders | 107


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) 24. CIF Value of Imports

(Rs. in Crores)

Particulars

Current Year

Raw Material Stores Spares & Consumables Capital Goods Total

Previous Year

847.50

383.46

6.87

5.66

42.29

22.37

896.66

411.49

25. Expenditure in Foreign Currency Particulars

Current Year

Previous Year

Travel

1.00

0.92

Sales Commission

4.18

5.11

Interest

12.97

7.45

Others

9.51

5.06

27.57

18.54

Total

26. Earnings in Foreign Currency Particulars

Current Year

FOB value of Exports Others

Previous Year

517.79

296.44

0.22

–

27. Value of Raw Material Consumed Description

Current year (Rs. in Crores)

% of Total Consumption

Previous year (Rs. in Crores)

% of Total Consumption

Indigenous

394.22

32.01

527.31

60.17

Imported

837.37

67.99

349.03

39.83

1,231.59

100

876.34

100

28. Value of Components, Stores and Spare Parts Consumed Current year Description (Rs. in Crores)

% of Total Consumption

Previous year (Rs. in Crores)

% of Total Consumption

19.56

78.62

12.07

75.75

5.32

21.38

3.87

24.25

24.88

100

15.94

100

Total

Indigenous Imported Total

108 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) 29. Contingent Liabilities

(Rs. in Crores)

Sr. No. Descriptions 1

Current Year

Previous Year

Disputed Liabilities in Appeal a)

Sales Tax

1.28

0.59

b)

Excise Duty

65.82

32.00

c)

Customs Duty

74.52

68.21

d)

Service Tax

0.80

0.80

e)

Claims lodged by a Bank Against the Company

18.87

18.87

f)

Excise Duty Case in Supreme Court (Refer Note 8 supra) 36.57

558.32

397.90

2.21

2.31

215.90

388.71

6.78

66.88

34.78

19.32

2

Unexpired Letter of Credit

3

Outstanding Bank Guarantees

4

Outstanding amount of Export obligation against Advance Licence

5

Export Obligation under EPCG Scheme

6

Bond in Favour of Excise Department

7

Estimated Amount of contracts remaining to be executed on Capital account and not provided for (Net of Advances)

8

Bills Discounted

9

The Company has given Corporate Guarantee to the Income Tax Department on behalf of group companies. The outstanding amount is Rs.114.00 Crores (Previous Year Rs.114.00 Crores) on this account as at the year-end.

30. In accordance with the Notified AS 17 under the Companies (Accounting Standards) Rules, 2006 on “Segment Reporting”, issued by the Institute of Chartered Accountants of India, the Company has identified two reportable Business Segments i.e. Telecom Product and Power Transmission Business, which are regularly evaluated by the Management, in deciding the allocation of resources and assessment of performance. Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common cost. The segment performance as follows: (Rs. in Crores) (i)

Particulars

Segment Revenue

Telecom Current Previous Year Year

452.01 1,080.57

Others Current Previous Year Year

Unallocable Current Previous Year Year

Total Current Previous Year Year

848.87

– 1,771.28

Less: Excise

55.39

38.22

30.10

64.50

85.49

102.72

Net Revenue

635.33

413.79

1,050.46

784.36

1,685.79

1,198.15

61.86

25.56

109.42

58.44

(1.78)

2.40

171.28

84.62

Segment Results (PBIT)

690.71

Transmission Current Previous Year Year

1,300.88

Less: Interest

40.84

31.58

40.84

31.58

Profit/(Loss) Before Tax

130.44

53.04

Provision for Tax (Net)

29.72

2.18

29.72

2.18

100.72

50.86

109.80 1,562.59

1,246.91

Segment Assets

Profit/(Loss) After Tax

793.40

629.93

651.96

507.18

117.23

Segment Liabilities

202.26

135.42

111.36

76.18

51.99

33.90

365.61

245.50

Incurred

51.84

21.75

85.28

110.13

137.13

131.88

Depreciation

28.03

27.54

8.93

4.03

36.96

31.57

Impairment

0.21

0.21

1.82

1.82

Capital Expenditure

Amortisation

Connecting with Shareholders | 109


Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) (Rs. in Crores)

(ii) Particulars 1.

2.

3.

Current Year

Segment Revenue - External Turnover - Within India - Outside India Total Revenue Segment Assets - Within India - Outside India Total Assets Capital Expenditure - Within India - Outside India Total Capital Expenditure

1,253.27 518.01 1,771.28 1,467.93 94.66 1,562.59 137.13 – 137.13

Previous Year 1,004.44 296.44 1,300.88 – 1,165.85 81.06 1,246.91 – 131.88 – 131.88

31. The Company has not received any intimation from “suppliers” regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid / payable as required under the said Act have not been given. 32. Expenditure of Rs.6.49 Crores (Previous Year Rs.3.13 Crores) on account of financing cost relating to borrowed funds for construction or acquisition of fixed assets on projects under implementation is debited to “Capital work in Progress”. 33. Remittances in Foreign Currency: On account of dividend to non-resident shareholders Final Dividend: Current Year No. of Shareholders No. of Equity Shares Amount Remitted, net of tax (Rs. in Crores) Year to which it pertains

1 2,53,30,550 1.90 2006-07

Previous Year 1 2,25,30,550 1.13 2005-06

34. Pre - Operative Expenses Details of Pre – Operative Expenses are given below: Current Year Manufacturing & Other Expenses Personnel Administration & General Interest & Finance Charges

Previous Year

2.62 0.45 0.43 2.82 6.32

0.03 0.16 0.65 2.92 3.76

35. Previous Year Comparatives The Company has acquired ‘Power Transmission Line’ (PTL) Business from Sterlite Industries Limited (SIL) on going concern basis w.e.f July 1, 2006. hence, figures for current period are not comparable to figures for the previous periods. Previous Year’s figures have been regrouped where necessary to confirm to current year’s classification. The figures of previous year were audited by another firm of Chartered Accountants. As per our attached report of even date

For and on behalf of the Board

For S.R. Batliboi & Co. Chartered Accountants

Pravin Agarwal Whole-time Director

Dr. Anand Agarwal CEO & Whole-time Director

Anupam Jindal Chief Financial Officer

Sandeep Deshmukh Company Secretary

Per Vijay N. Bhatt Partner Membership Number: F- 36647

Place: Mumbai Dated: April 29, 2008

110 |Sterlite Technologies Limited | Annual Report 2007-08


Cash Flow Statement (Rs. in Crores)

Year Ended

Year Ended

March 31, 2008

March 31, 2007

A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) after tax as per Profit & Loss Account Adjustment for Taxation

100.72

50.86

29.72

2.22 130.44

53.08

Adjustments for : - Depreciation and Impairment

37.17

31.57

1.82

- Provision for Doubtful Debts

0.25

- Bad Debts written off

0.82

- Gain on prepayment of Deferred Sales Tax Liability

(0.35)

- Provision for debtors written back

(0.50)

- Interest Expenses (net)

43.65

34.46

- Exchange difference

(1.41)

(4.88)

- (Profit) / Loss on Sale of Assets

0.08

0.11

- Employees Stock Option Expenses amortized

4.48

1.87

- Provision for amortisation

85.04 Operating profit before working capital changes

215.48

117.18

Movements in working capital : - (Increase)/Decrease in Trade and other receivables - (Increase)/Decrease in Inventories - Increase/(Decrease) in Trade payables

(141.53)

(94.16)

(99.40)

126.56

99.39

(141.54)

(11.44)

Cash generated from operations

73.94

138.14

Direct taxes Paid / TDS deducted (Net of Refunds)

(7.99)

(7.24)

Net cash flow from Operating Activities

65.95

130.90

(120.58)

(98.32)

Proceed from Sale of Fixed Assets

10.45

0.31

Purchase of Investments

(3.50)

(114.93)

6.30

108.63

(148.51)

(20.78)

(16.72)

(0.30)

(128.41)

(269.54)

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (Including Capital Work in Progress)

Sale of Investments Purchase consideration for Power Transmission Line (PTL) Division of Sterlite Industries India Ltd Investment in Bank Fixed Deposits* Advances to Subsidiaries Net cash flow used in Investing Activities

Connecting with Shareholders | 111


Cash Flow Statement (Contd.) (Rs. in Crores)

Year Ended

Year Ended

March 31, 2008

March 31, 2007

C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds/(Repayment) of Secured Loans (net)

67.26

95.50

Proceeds/ (Repayment) of Share Capital

25.20

25.20

Proceeds/ (Repayment) of Employee Stock Options

0.04

Proceeds/ (Repayment) of Unsecured Loans (net)

9.26

10.02

(44.64)

(34.61)

Dividend paid on Equity Shares (Including Corporate Dividend Tax)

(5.30)

(3.33)

Net Cash flow from Financing Activities

51.82

92.78

Net Increase/(decrease) in cash and cash equivalent

(10.64)

(45.86)

Cash and cash equivalent as at beginning of year**

13.05

46.31

12.60

2.41

13.05

Interest paid

Cash and cash equivalent taken over on merger of subsidiaries & purchase of PTL division Cash and cash equivalent as at year end **

* Investments in Bank Fixed Deposits having maturity of more than 3 Months have been shown under the cash flows from Investing activities. ** Fixed deposits of Rs.86.66 Crores (Previous Year Rs.65.88 Crores) having maturity of more than 3 months have not been considered as Cash and cash equivalent.

As per our attached report of even date

For and on behalf of the Board

For S.R. Batliboi & Co.

Pravin Agarwal

Dr. Anand Agarwal

Chartered Accountants

Whole-time Director

CEO & Whole-time Director

Per Vijay N. Bhatt Partner

Place: Mumbai

Anupam Jindal

Sandeep Deshmukh

Membership Number: F- 36647

Dated: April 29, 2008

Chief Financial Officer

Company Secretary

112 |Sterlite Technologies Limited | Annual Report 2007-08


Balance Sheet Abstract and Company’s General Business Profile I.

Registration Details Registration No. Balance Sheet Date

1 3

1

Date

II.

III.

0

2

5

2

3

2

2

0

Month

0

5

1 1

State Code

8

Year

Capital Raised during the year (Amount in Rs. Crores) Public Issue

N

I

L

Rights Issue

N

I

L

Private Placement

N

I

L

2

4

1

Position of Mobilisation and Deployment of Funds (Amount in Rs. Crores) Total Liabilities

1

2

1

4

1

Total Assets

3

2

Share Warrants

N

I

L

6

Reserve & Surplus

5

0

2

3

3

Unsecured Loans

3

0

3

8

Sources of Funds Paid-up Equity Share Capital Employee Stock Option Outstanding 6

Secured Loans Deferred Tax Application of Funds

IV.

Net Fixed Assets

5

6

0

Investments

Net Current Assets

6

7

5

Miscellaneous Expenses

N

I

L

Accumulated Losses

N

I

L

6

8

6

Profit after Tax

1

0

1

1

3

0

Dividend Rate %

2

0

.

4

6

Total Expenditure

6

0

Performance of Company (Amount in Rs. Crores) 1

Turnover Profit before Tax Earnings Per Share in Rs.

1

5

Other Income V.

6

1

5

4

Generic Names of Three Principal Products of Company Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description

9

0 0

1

1 0 0 0

OPTICAL FIBER 9

0 0

1

1 0 0 0

OPTICAL FIBER CABLE 8

5 4

4

2 0 1 9

JELLY FILLED TELEPHONE CABLE 7

6 1 4 1 0

ALUMINIUM CONDUCTORS (AAC/ACSR) 8

5 1

7

6 2 3 0

BROADBAND ACCESS NETWORKS For and on behalf of the Board

Place: Mumbai Dated: April 29, 2008

Pravin Agarwal Whole-time Director

Dr. Anand Agarwal CEO & Whole-time Director

Anupam Jindal Chief Financial Officer

Sandeep Deshmukh Company Secretary

Connecting with Shareholders | 113


Consolidated Accounts

114 |Sterlite Technologies Limited | Annual Report 2007-08


Auditors’ Report

To The Members of Sterlite Technologies Ltd. 1. We have audited the attached consolidated Balance Sheet of Sterlite Technologies Ltd. (formerly ‘Sterlite Optical Technologies Limited’) and its subsidiary (‘the Group’), as at March 31, 2008, and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Sterlite Technologies Limited's management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as

statements, issued by the Institute of Chartered Accountants of India. 5. As stated in Note no.8 of Schedule 21, provision for liability

against excise/customs is considered adequate by the management based on the current status and the legal advice received by them. In the event the decision of the Hon`ble Supreme Court goes against the Company on any of the grounds of appeal, additional provision against the said demand may be required. Pending disposal of the matter by the Hon`ble Supreme Court, the amount of additional excise/customs duty, if any, is currently unascertainable. 6. Based on our audit and on consideration of report of other auditor on separate financial statements and on the other financial information of the subsidiary, and to the best of our information and according to the explanations given to us, we are of the opinion that the attached consolidated financial statements give, subject to the effects of our

observations given in para 5 above, a true and fair view in con-formity with the accounting principles generally accepted in India:

well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statements of subsidiary, whose financial statements reflect total assets of Rs.6.30 Crores as at March 31, 2008, the total revenue of Rs. Nil, total net loss of Rs. 0.09 Crores and net cash outflows

(a) in the case of the consolidated balance sheet, of the state of affairs of the Group as at March 31, 2008; (b) in the case of the consolidated profit and loss account, of the profits for the year ended on that date; and (c) in the case of the consolidated cash flow statement, of the cash flows for the year ended on that date.

amounting to Rs. 0.25 Crores for the year then ended. These financial statements and other financial information

For S.R. Batliboi & Co.

have been audited by other auditors whose report has been

Chartered Accountants

furnished to us, and our opinion is based solely on the report of other auditors. 4. We report that the consolidated financial statements have been prepared by the Sterlite Technologies Ltd's

per Vijay N. Bhatt Place: Mumbai Date: April 29, 2008

Partner Membership No.: F-36647

management in accordance with the requirements of Accounting Standards (AS) 21, Consolidated financial

Connecting with Shareholders | 115


Consolidated Balance Sheet

(Rs. in Crores)

As at

Schedule I.

March 31, 2008

SOURCES OF FUNDS 1. Shareholders' Funds Share Capital

1

32.23

Employee Stock Option Outstanding

2

5.73

Reserves & Surplus

3

501.49 539.45

2. Minority Interest

2.48

3. Loan Funds Secured Loans

4

632.65

Unsecured Loans

5

30.54 663.19

4. Deferred Tax Liability (Net) (Refer Note No 3 of Schedule No.21)

38.13 Total

1,243.25

II. APPLICATION OF FUNDS 1. Fixed Assets

6

Gross Block

918.88

Less: Accumulated Depreciation & Impairment

395.00

Net Block

523.88

Capital Work-in-Progress including Capital Advances

36.22

(Refer Note 21 of Schedule No. 21) 560.10 2. Goodwill (Refer Note 1(a) of Schedule 21) 3. Investments

2.43 7

6.09

4. Current Assets, Loans & Advances Inventories

8

219.39

Sundry Debtors

9

519.10

Cash and Bank Balances

10

89.18

Loans and Advances

11

168.61 996.28

Less: Current Liabilities & Provisions: Current Liabilities

12

303.53

Provisions

13

18.22 321.75

Net Current Assets

674.53

5. Miscellaneous Expenditure (to the extent not written off or adjusted) Preliminary Expenses

0.10 Total

Notes to Consolidated Accounts

1,243.25

21

The schedules referred to above and notes to accounts form an integral part of the Consolidated Balance Sheet As per our attached report of even date

For and on behalf of the Board

For S.R. Batliboi & Co. Chartered Accountants

Pravin Agarwal Whole-time Director

Dr. Anand Agarwal CEO & Whole-time Director

Anupam Jindal Chief Financial Officer

Sandeep Deshmukh Company Secretary

Per Vijay N. Bhatt Partner Membership Number: F- 36647

Place: Mumbai Dated: April 29, 2008

116 |Sterlite Technologies Limited | Annual Report 2007-08


Consolidated Profit and Loss Account

(Rs. in Crores)

Year Ended March 31, 2008

Schedule I. INCOME Turnover (Gross) Less: Excise Duty Turnover (Net) Other Income

1,771.28 85.49 1,685.79 4.31 1,690.10

14 Total

II. EXPENDITURE Manufacturing & other expenses Personnel Selling & Distribution Administration & General Research & Development Interest & Finance charges

15 16 17 18 19 20

1,344.05 41.89 57.53 37.04 4.75 43.65 1,528.91 6.32 1,522.59 167.51 37.17 130.34

Less: Pre operative expenses of projects (Refer note 22 of Schedule 21) Profit before depreciation & taxation Depreciation & Impairment (Including Rs.0.21 Crore for Impairment loss) Profit before taxation Provision for taxation - Current Tax for the year - Minimum Alternate Tax Credit Eligible for Set Off (Refer Note 7 of schedule 21) - Provision for earlier year - Deferred Tax (Net)(Refer Note No 3 of Schedule No.21) - Fringe Benefit Tax (Includes Rs.0.15 Crore for earlier year) Profit after taxation Minority Interest Profit after minority interest Balance brought forward from previous year Amount available for appropriations Appropriations Transfer to General Reserve Proposed Dividend on Equity Shares Rs.1.00 Per Share Corporate Tax on Proposed Dividend Balance carried to Balance Sheet Earnings Per Share (Face Value Rs.5 each) (Refer note 16 of schedule 21) Basic Diluted Notes to Consolidated Accounts

14.66 (14.66) 0.77 27.88 1.07 100.62 (0.04) 100.66 250.08 350.74 7.55 6.45 1.10 335.64 350.74 16.07 15.45 21

The schedules referred to above and notes to accounts form an integral part of the Consolidated Profit and Loss Account As per our attached report of even date

For and on behalf of the Board

For S.R. Batliboi & Co. Chartered Accountants

Pravin Agarwal Whole-time Director

Dr. Anand Agarwal CEO & Whole-time Director

Anupam Jindal Chief Financial Officer

Sandeep Deshmukh Company Secretary

Per Vijay N. Bhatt Partner Membership Number: F- 36647

Place: Mumbai Dated: April 29, 2008

Connecting with Shareholders | 117


Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)

As at March 31, 2008 SCHEDULE 1

SHARE CAPITAL

Authorized 9,00,00,000 Equity Shares of Rs.5 each.

45.00 45.00

Issued, Subscribed & Paid up 6,44,68,247 Equity Shares of Rs.5 each fully paid - up

32.23

Total

32.23

Of the above: 1) 5,59,12,559 equity shares of Rs.5 each were allotted to the shareholders of Sterlite Industries (I) Ltd. upon demerger pursuant to the scheme of arrangement sanctioned by the Honorable High Court of Judicature at Bombay. 2) During the year 28,00,000 Share warrants were converted into 28,00,000 Equity Shares of Rs.5 each fully paid up. No Warrants are outstanding as on March 31, 2008 with option to exercise equity conversion. 3) During the year 73,680 shares were issued to employees of the Company under ESOP Scheme. 4) For Stock Options outstanding details Refer Note 10 of Schedule 21.

SCHEDULE 2

EMPLOYEE STOCK OPTION OUTSTANDING

Balance as per last Balance Sheet

1.87

Add: Employees Stock Option Expenses For the year (Refer note 10 of Schedule 21)

4.48

Less: Transferred to Share Premium Account

0.62

Total

SCHEDULE 3

5.73

RESERVES & SURPLUS

Share Premium Balance as per last Balance Sheet Add: Transfer from Employee Stock Option Add: Received During the year (Refer note 17 of Schedule 21)

57.50 0.62 26.60 84.72

General Reserve Balance as per last Balance Sheet Add: Transfer from Profit and Loss account

73.54 7.55 81.09

Capital Reserve Balance as per last Balance Sheet

0.04 0.04

Profit & Loss Account Surplus as per Profit & Loss Account

335.64

Total

501.49

118 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)

As at March 31, 2008 SCHEDULE 4

SECURED LOANS

(A) Working Capital Loans From Banks

531.69

(B) Term Loans From Banks

50.00

(C) Interest Accrued and Due (D) Other Loans

0.15 50.81

From Banks Total

632.65

Notes A. Working capital loans and Other loans from Banks are secured by hypothecation of Raw materials, Work in Progress, Finished Goods & Sundry Debtors and further secured by second charge on all immovable and movable fixed assets of the Company both present and future. B. Term loans are secured by first charge by deposit of title deed of immovable properties of the Company and hypothecation of movable properties of the Company both present and future.

SCHEDULE 5

UNSECURED LOANS

Sales Tax Loan (Interest Free) [(Due within one year Rs.2.20 Crores)]

20.54

Short Term Loans Others

10.00

Total

30.54

Connecting with Shareholders | 119


120 |Sterlite Technologies Limited | Annual Report 2007-08

As at

TOTAL

Software/Licences

INTANGIBLE ASSETS

Vehicles

Electric Fittings

Office Equipments

Equipments

792.50

0.28

3.90

26.73

3.80

10.79

4.84

Data Processing

631.01

Furniture & Fixture

69.64

Building

Plant & Machinery

16.12

25.39

Leasehold land

01.04.2007

FIXED ASSETS

Freehold Land

TANGIBLE ASSETS

of Assets

Nature

SCHEDULE 6

137.13

0.58

0.96

4.42

0.61

0.95

1.29

103.40

17.62

1.61

5.69

tions

Addi-

As at

10.75

0.43

0.36

9.96

918.88

0.86

4.43

31.15

4.41

11.74

6.13

734.41

86.90

17.04

21.81

tions 31.03.2008

Deduc-

GROSS BLOCK AT COST

298.35

0.69

9.44

1.04

6.96

1.46

263.39

15.33

0.04

01.04.2007

As at

36.96

0.14

0.42

1.38

0.21

0.95

0.38

30.49

2.87

0.12

Year

For the

0.21

0.21

tions

Deduc-

As at

As at

335.10

0.14

0.90

10.82

1.25

7.91

1.84

293.88

18.20

0.16

59.69

1.14

58.55

31.03.2008 01.04.2007

DEPRECIATION/AMORTISATION

Schedules forming part of the Consolidated Balance Sheet

0.21

0.05

0.16

the Year

During

IMPAIRMENT

59.90

1.14

0.05

58.71

31.03.2008

As at

523.88

0.72

3.53

19.19

3.11

3.83

4.29

381.82

68.70

16.88

21.81

31.03.2008

As at

NET BLOCK

(Rs. in Crores)


Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)

As at March 31, 2008 SCHEDULE 7

INVESTMENTS

CURRENT INVESTMENT (at Cost or Market Value whichever is lower) In Units of Mutual Funds (Quoted) 60,90,000units of Rs.10 each of Reliance Fixed Horizon Fund - VI

6.09

Series 3 - Institutional Dividend Payout of Reliance Mutual Fund Total

6.09

Note The following Current Investments were purchased and sold during the year:

Mutual Fund Units

Face Value (Rs.)

Units (Nos.)

Amount in Rs.

DBS Chola Freedom Income STP-Inst.-Cum-Org

10

8,13,107

1,00,00,000

Reliance Liquidity fund - Daily Dividend Reinvestment Option

10

3,50,82,625

35,09,35,008

Reliance Liquid fund -Treasury Plan- Institutional Option - Growth Option

10

5,09,848

1,00,04,385

ICICI Prudential Institutional Liquid Plan - Super institutional Growth

10

6,22,72,206

69,99,70,211

JM Liquidity I P Growth

10

7,91,427

1,00,05,145

Sahara Liquid fund VP Growth

10

18,543

2,56,26,338

1,04,450

51,04,450

Short Term Plan Retail Option-Growth

10

6,23,95,190

72,53,71,454

FIEDILITY Cash Fund - Instl - Gr

10

19,04,272

2,00,51,987

Kotak Liquid Inst premium plan - Growth

10

1,07,57,742

16,46,46,798

Birla Cash Plus - Institutional - Growth

10

6,55,93,127

88,17,06,138

Principal cash management fund Liquid option - Instl. Plan-Growth Plan

10

51,68,987

6,51,55,998

Lotus India Liquid Fund - Institutional Growth

10

41,49,625

4,50,39,779

Sahara Fix income10 Templeton Floating Rate INCOME FUND

LIC MF Liquid Fund - Growth Plan

10

5,12,56,834

71,82,49,324

DWS INSTA CASH PLUS FUND - Institutional Plan - Growth

10

2,45,85,584

31,73,52,853

ABN AMRO Money Plus Fund - Institutional Plan - Growth

10

2,49,34,934

29,13,80,959

UTI Liquid Cash Plan Institutional - Growth Option

10

3,17,147

41,55,89,482

DWS Credit Opportunities Cash Fund - Weekly Dividend Plan

10

60,65,509

6,10,00,220 (Rs. in Crores)

As at March 31, 2008 SCHEDULE 8

INVENTORIES

(At cost or net realisable value, which ever is lower) Raw Materials (Including Goods in Transit Rs.16.50 Crores)

105.31

Work-in-Progress

39.89

Finished Goods

53.09

Stores, Spares, Packing Materials & Others

21.10

Total

219.39

Connecting with Shareholders | 121


Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)

As at March 31, 2008 SCHEDULE 9

SUNDRY DEBTORS (Unsecured)

(a) Due for a period exceeding 6 months: - Considered good - Considered doubtful Less: Provision for Doubtful Debts (b) Others - Considered good Total

51.73 19.90 71.63 19.90 51.73 467.37 519.10

SCHEDULE 10 CASH & BANK BALANCES Cash in hand Balance with Scheduled Banks in (i) Current Accounts (ii) Deposit Accounts (iii) Dividend Accounts Cheques in Hand Balances with Non Scheduled Banks in (i) Current Accounts (*) Total

0.10 1.53 86.66 0.59 – 0.30 89.18

*Balance with Non Scheduled banks is maintained with: Balance with Industrial Bank of China Rs.0.05 Crore (Maximum Amount Outstanding During the year Rs.0.24 Crore) Balance with Dubai Bank Rs.0.05 Crore (Maximum Amount Outstanding During the year Rs.0.07 Crore) Balance with Bangkok Bank PCL Rs.0.20 Crore (Maximum Amount Outstanding During the year Rs.0.13 Crore)

SCHEDULE 11 LOANS & ADVANCES (Unsecured Considered Good) Advances recoverable in cash or in kind or for value to be received Balances with Central Excise Authorities Deposits - Others Minimum Alternate Tax Credit Entitlement Interest accured on Investment Other Advances Total

122 |Sterlite Technologies Limited | Annual Report 2007-08

71.73 47.48 3.90 23.91 4.13 17.46 168.61


Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)

As at March 31, 2008 SCHEDULE 12 CURRENT LIABILITIES Acceptances Sundry Creditors (i) Micro, Medium and Small Enterprises (ii) Others Interest accrued but not due on Loans Unclaimed Dividend Sundry Deposits Advance from Customers Other Liabilities Total

1.16 – 234.69 4.59 0.59 0.35 44.13 18.02 303.53

SCHEDULE 13 PROVISIONS For Taxation (Net of Advance Tax and TDS) [Including for Wealth Tax Rs.0.03 Crore]

–

For Contingencies

9.50

For Employee Benefits

1.17

Proposed Dividend Equity Shares

6.45

Corporate Tax on Proposed Dividend

1.10

Total

18.22

Note: The Company had made a provision of Rs.9.50 Crores towards contingencies in the earlier years against various disputed claims against the Company as described in Note 8 of Schedule 21, the timing and quantum of which is presently unascertainable.

Connecting with Shareholders | 123


Schedules forming part of the Consolidated Profit and Loss Account (Rs. in Crores)

Year Ended March 31, 2008 SCHEDULE 14 OTHER INCOME Income from Mutual Fund

0.78

Interest Income on Income Tax Refund

1.76

Miscellaneous Income

1.77

Total

4.31

SCHEDULE 15 MANUFACTURING & OTHER EXPENSES Raw materials consumed

1,231.59

Decrease/ (Increase) in stock Opening Stock: Work-in-Progress

29.37

Finished Goods

42.25 71.62

Closing Stock: Work-in-Progress

39.89

Finished Goods

53.09 92.98

Decrease/ (Increase) in stock Excise Duty on stocks

(21.36) 1.90

Stores & Spares

24.88

Power, Fuel & Water

39.97

Repairs and Maintenance - Building

0.92

- Machinery

6.87

- Others

0.01

Carriage Inward

4.07

Packing Material

41.20

Other Manufacturing Expenses Total

14.00 1,344.05

SCHEDULE 16 PERSONNEL Salaries, Wages, Bonus & Commission Contribution to Provident Fund & Super annuation Fund Gratuity Expenses (Refer Note 18 of Schedule 21) Employees' Welfare & Other Amenities Employees Stock Option Expenses (Refer Note 10 of Schedule 21) TOTAL

124 |Sterlite Technologies Limited | Annual Report 2007-08

32.27 1.86 (0.19) 3.47 4.48 41.89


Schedules forming part of the Consolidated Profit and Loss Account (Rs. in Crores)

Year Ended March 31, 2008 SCHEDULE 17 SELLING & DISTRIBUTION Sales Commission (Other than Sole Selling Agent)

10.31

Sales Promotion

3.26

Carriage Outward

40.86

Other Expenses Total

3.10 57.53

SCHEDULE 18 ADMINISTRATION & GENERAL Rent

1.50

Insurance

1.70

Rates & Taxes

0.68

Conveyance & Travelling Expenses

9.52

Loss on sale of Fixed Assets

0.08

Bad Debts Written Off

0.82

Provision for Doubtful Debts

0.25

Directors Sitting Fee and Commission

0.11

General Expenses

22.38

Total

37.04

SCHEDULE 19 RESEARCH & DEVELOPMENT Salaries, Wages, Bonus & Commission

0.93

Stores & Spares

0.30

Raw materials consumed

2.04

Rates & Taxes

1.06

General Expenses

0.42

Total

4.75

SCHEDULE 20 INTEREST & FINANCE CHARGES : (Net) On Fixed Loans Others Bank charges

6.77 37.64 5.73 50.14

Less: Interest Received from customers

6.49

[Tax Deducted at Source Rs.1.49 Crores] Total

43.65

Connecting with Shareholders | 125


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS 1.

Background & Basis of Consolidation (a) Background The Company acquired 58.70% Equity Share Capital of Sterlite Infrastructure Private limited (SIPL) on September 28, 2007, a Company incorporated to do business of infrastructure development. Consequently, SIPL has become subsidiary of the Company. At the reporting date, this has resulted in Goodwill of Rs.2.43 Crores. (b) Basis of Consolidation (a) The consolidated financial statements of the Company and its subsidiary are prepared in accordance with Accounting Standard – 21 “Consolidated Financial Statements”, issued by The Institute of Chartered Accountants of India. (b) The financial statements of the Company and its Subsidiary Company has been combined on line – by – line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra group balances and intra group transactions and consequent unrealized profit and losses. (c) Excess cost of acquisition over carrying value of assets acquired is treated as Goodwill. (d) The consolidate financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances.

2.

Significant Accounting Policies (a) Basis of Preparation of Financial Statements The financial statements have been prepared to comply in all material respects with the notified Accounting Standards by Companies Accounting Standard Rules 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis of accounting except in case of assets for which impairment is carried out. The accounting policies have been consistently applied by the Company. (b) Use of Estimates The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting year. Difference between the actual result and estimates are recognized in the year in which the results are known/ materialized. (c) Fixed Assets Fixed Assets are stated at cost (net of Cenvat) less accumulated depreciation and impairment. Cost comprises of the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Expenditure during construction period (including financing cost relating to borrowed funds for construction or acquisition of fixed assets) incurred on projects under implementation are treated as Pre-operative expenses, pending allocation to the assets, and are included under “Capital work in Progress”. (d) Depreciation (i) Depreciation on Fixed Assets is provided on straight line method at the rates specified in Schedule XIV of the Companies Act, 1956. Depreciation on fixed assets acquired on amalgamation of the erstwhile Sterlite Telelink Limited is provided on written down value method at the rates specified in Schedule XIV of the Companies Act, 1956. (ii) Cost of leasehold land is amortized in proportion to the period of lease. (iii) Cost of acquired intangible assets is amortized over a period of five years. (e) Impairment of Assets (i) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. (ii) After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. (iii) A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However,

126 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. (f) Investments Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined for category of investments. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. (g) Inventories Inventories of raw material, packing material, work –in – process and finished goods are valued at cost or net realizable value, whichever is lower, except for scrap which is valued at net realizable value. Cost is ascertained on a weighted average cost basis. Cost of finished goods includes the cost of materials consumed, manufacturing overheads & excise duty. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. (h) Foreign Currency Transactions (i) Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (ii) Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. (iii) Exchange differences arising on the settlement of monetary items or on reporting Company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise. (iv) The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. None of the forward exchange contracts are taken for trading or speculation purpose. (i)

Borrowing Costs Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

(j)

Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Sale of Goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales include excise duty, sale of scrap and are net of sales tax and quantity discount. Interest Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

(k) Retirement and other Employee Benefits (i) Retirement benefits in the form of Provident Fund & Superannuation Fund is a defined contribution scheme and the contributions are charged to the Profit & Loss Account of the year when the contributions to the respective funds are due. The Company has no other obligation other than the contributions payable. (ii) Gratuity liability is a defined benefit obligation and are provided for on the basis of an actuarial valuation on Projected Unit Credit Method calculated at the end of each financial year. (iii) Leave encashment liability is provided for based on actuarial valuation done as per Projected Unit Credit Method

Connecting with Shareholders | 127


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) calculated at the end of each financial year. (iv) Actuarial gains / losses are immediately taken to profit and loss account and are not deferred. (l)

Employee Stock Option Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the institute of Chartered Accountants on India. The Company measures compensation cost relating to employee stock options using the fair value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.

(m) Research and Development Revenue expenditure on research and development (R&D) is expensed as incurred. (n) Export Incentives Advance licences are issued to the Company under the Advance License Scheme [Duty Exemption Entitlement Certificate (DEEC Scheme)]/duty entitlement credited under the Duty Entitlement Pass Book Scheme (DEPB Scheme)/Target Plus Entitlement Scheme on export of the goods manufactured by it. Wherever export sales are made by the Company, pending receipt of imported duty-paid raw materials under the DEPB scheme, the higher cost of domestic raw materials actually consumed for the purpose of such exports is compensated and/or matched by accruing the value of the benefit under the DEPB scheme. (o) Taxes on Income Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is determined as the amount of tax payable in respect of taxable income for the year based on provisions of Income Tax Act, 1961. Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In case of unabsorbed depreciation and carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the Minimum Alternative tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period. (p) Expenditure on new projects and substantial expansion Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is related to construction or is incidental thereto. Income earned during construction period is deducted from the total of the indirect expenditure. (q) Operating Leases

128 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) Assets taken on Lease under which all significant risks and rewards of ownership are effectively retained by the lessor are classified as Operating Leases. Lease payments under Operating Leases are recognized on straight line basis over the lease period unless another systematic basis is more representative of the time pattern of the users benefit. (r) Earnings Per Share The Company reports basic and diluted earnings per share in accordance with Notified AS 20 under the Companies (Accounting Standards) Rules, 2006 issued by The Institute of Chartered Accountants of India on ‘Earnings Per Share’. Basic earning per share is computed by dividing the net profit or loss for the period attributable to equity shareholders after deducting attributable taxes by the weighted average number of Equity shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit or loss for the period by the weighted average number of equity shares outstanding during the period. Both profit for the year and weighted average number of shares are adjusted for the effects of all diluted potential equity shares except where the results are anti- dilutive. (s) Cash and Cash equivalents Cash and Cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. (t) Segment Reporting Policies The Company’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Company generally accounts for inter-segment sales and transfers as if the sales or transfers were to third parties at current market prices. Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. The Corporate and other segment includes general corporate income and expense items which are not allocated to any business segment. (u) Provisions, Contingent Liabilities and Contingent Assets As per Notified AS 29 under the Companies (Accounting Standards) Rules, 2006, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Company recognizes provisions (without discounting to its present value) only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation as and when a reliable estimate of the amount of the obligation can be made. No provision is recognized for i) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or ii)

Any present obligation that arises from past events but is not recognized because• It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or • A reliable estimate of the amount of obligation cannot be made.

Such obligations are disclosed as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made. Contingent Assets are neither recognized nor disclosed in the financial statements since this may result in the recognition of income that may never be realized. (v) Commodity Hedging Transactions The Commodity Hedging Contracts are accounted on the date of their settlement and realized gain / (loss) in respect of settled Contracts are recognized in the Profit and Loss accounts.

Connecting with Shareholders | 129


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) 3.

Deferred Tax a) The break-up of closing net deferred tax liability is as under:

(Rs. in Crores)

Particulars

Current Year

Deferred Tax Liability (a) Depreciation

63.24

(b) On export benefit

0.02

Deferred Tax Assets (a) On provision for doubtful debts.

6.76

(b) On unabsorbed tax depreciation and carried forward losses.

17.97

(c) On Employee Benefits provided as per Revised AS 15

0.40

Net Deferred Tax Liability b)

38.13

Deferred tax charged for the year Particulars

Current Year

Opening Deferred Tax Liability

10.25

Less: Closing Deferred tax liability

38.13

Deferred tax charged for the year

27.88

4.

The amount of foreign exchange (gain)/loss adjusted during the year to the carrying cost of the fixed assets and capital work in progress is Rs.Nil and (credited) to respective heads of accounts in Profit and Loss Account is Rs.(31.02) Crores; premium on forward exchange contract to be recognized in the Profit and Loss Account of subsequent accounting period is Rs.0.61 Crore.

5.

Derivative Instruments The Company has entered into the following derivative instruments: (a) The following are the outstanding Forward Exchange Contracts entered into by the Company, for hedge purpose, as on March 31, 2008.

Year Current Year

Currency in Crores

Amount (Rs. in Crores)

Buy/Sell

No of Contracts

US $ 6.62

264.25

Buy

137

US $ 5.79

231.53

Sell

149

Euro 0.01

0.46

Sell

2

JPY 50.70

20.32

Buy

2

Currency in Crore

Amount (Rs. in Crores)

Buy/Sell

No of Contracts

US $ 0.15

6.00

Buy

1

Options: Year Current Year

(b) The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: i.

Amounts receivable in foreign currency on account of the following:

(Rs. in Crores)

Year

Particulars

Current Year

Export of goods

US $ 0.25

9.74

Export of goods

Euro 0.08

4.30

Advance to Suppliers

US $ 0.30

11.85

Advance to Suppliers

Euro 0.01

0.76

Advance to Suppliers

THB 0.06

0.07

Advance to Suppliers

JPY 0.21

0.07

130 |Sterlite Technologies Limited | Annual Report 2007-08

Currency

Amount


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) ii.

Amounts payable in foreign currency on account of the following: Particulars

Currency in Crores Current Year

Amount (Rs. in Crores) Current Year

Import of goods and services

US$ 1.39

55.71

Import of goods and services

Euro 0.07

4.21

Advance from Customers

US$ 0.83

33.01

Loans payable

US $ 1.02

40.81

Loans payable

Euro 0.04

2.41

(c) Commodity Future Contract to hedge against fluctuation in commodity prices. The following are the outstanding Futures contracts entered into by the Company as on March 31, 2008: Year Current Year

No. of Contracts

Contracted Quantity

Buy/ Sell

24

2,625 MT

Buy

6.

In terms of accounting policy (Refer Note 2 (n)) for the accrual of export incentives, estimated benefits of Rs.18.99 Crores have been taken into account under the DEPB / Target Plus Entitlement scheme / Duty Drawback scheme.

7.

In view of book profits and no taxable profits, as per computation of income, the provision for tax has been made as per MAT under section 115 JB of the Income Tax Act, 1961. The Company is entitled to avail Credit under section 115JAA (1A). Accordingly it has considered MAT credit entitlement as an asset as it has reversible deferred tax liability on account of depreciation.

8.

The Company had in the earlier year received an order of CESTAT upholding the demand of Rs.188 Crores (including penalties) in the pending excise/custom matters on various grounds. During the period, the Company’s appeal with the Hon’ble High Court of Mumbai was rejected on the grounds of jurisdiction. The Company preferred an appeal with the Hon’ble Supreme Court of India against the order of CESTAT, which has been admitted. The Company has re-evaluated the case on admission of appeal by the Hon’ble Supreme Court. Based on their appraisal of the matter, the legal advisiors/consultants are of the view that under most likely event, the provision of Rs.5 Crores made by the Company against above demand is adequate. The management is confident of a favourable order and hence no further provision is considered against the said demand.

9.

Other Income includes Rs.Nil on account of the prepayment of deferral sales tax liability in accordance with the scheme framed by the Government of Maharashtra.

10. Employee Stock Option Scheme The Company has granted Employees Stock Options Plan, 2006 (ESOP) to its employees pursuant to the resolution passed by the shareholders at the Extraordinary General Meeting held on March 13, 2006.The Company has followed the fair value method (Black Scholes Options Pricing Model) for the valuation of these options. The Compensation Committee of the Company has approved three grants vide their meeting held June 14, 2006; March 19, 2007 and September 28, 2007 respectively. As per the plan, Options granted under ESOP would vest in not less than one year and not more than five years from the date of grant of such options. Vesting of options would be subject to continued employment with the Company. The plan will be equity settled plan. Other details of the options are as follows: Grant 1

Grant 2

Grant 3

14-Jun-06

19-Mar-07

28-Sep-07

465,700

127,200

261,550

Equity

Equity

Equity

Vesting Period

3 Yrs

2.25 Yrs.

1.71 Yrs.

Exercise Period

1 Year

1 Year

1 Year

Business

Business

Business

Performance

Performance

Performance

Date of grant Number of Options granted Method of Settlement

Vesting Conditions

Connecting with Shareholders | 131


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) The details of the activity under the plan have been summarized below: Current Year Number of Weighted Average Options Exercise Price (Rs.) Outstanding at the beginning of the year

5,92,900

5

Granted during the year

2,61,550

5

Nil

Forfeited during the year Exercised during the year

73,680

5

Expired during the year

79,160

5

7,01,610

5

11,620

5

1.17

143.31

Outstanding at the end of the year Exercisable at the end of the year Weighted average remaining contractual life (in years) Weighted average fair value of options granted

The fair value as per the Black Scholes Options Pricing Model was measured based on the following input: Date of grant Vest 1

Vest 2

Vest 3

14-Jun-07

14-Jun-08

14-Jun-09

89.25

89.25

89.25

59.78%

58.90%

60.52%

Risk free Rate

7.07%

7.16%

7.26%

Exercise Price

5

5

5

1.5

2.5

3.5

0.57%

0.57%

0.57%

83.99

83.81

83.62

20.00%

40.00%

40.00%

June 14, 2006 Variables Weighted average Stock Price Expected Volatility (*)

Time To Maturity Dividend yield Outputs Option Fair Value Vesting Percentage Option Fair Value

83.79

Date of grant Vest 1

Vest 2

19-Jun-08

19-Jun-09

179

179

62.90%

57.75%

Risk free Rate

8.07%

8.06%

Exercise Price

5

5

March 19, 2007 Variables Weighted Average Stock Price Expected Volatility (*)

Time To Maturity

1.5

2.5

0.57%

0.57%

Option Fair Value

173.04

172.37

Vesting Percentage

60.00%

40.00%

Option Fair Value

172.77

172.77

Dividend yield Outputs

132 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) Date of grant Vest 1

Vest 2

28-Sep-08

14-Jun-09

Weighted Average Stock Price

237.30

237.30

Expected Volatility *

56.69%

60.98%

Risk free Rate

7.20%

7.29%

Exercise Price

5.00

5.00

Time To Maturity

1.50

2.21

0.51%

0.51%

Option Fair Value

231.02

230.40

Vesting Percentage

50.00%

50.00%

Option Fair Value

230.71

230.71

September 28, 2007 Variables

Dividend yield

(*)The measure of volatility used in the above model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time. The volatility periods considered above, corresponding to the respective expected lives of the different vests are prior to the grant date. The daily volatility of stock prices is considered as per the National Stock Exchange (NSE) prices over these years. 11. In view of Notified AS 28 under the Companies (Accounting Standards) Rules, 2006 on Impairment of Assets (AS) – 28 issued by the Institute of Chartered Accountants of India, the Company has reviewed its fixed assets and impaired assets worth Rs.0.21 Crore during the year (Previous Year Nil) on account of impairment in addition to the provision already made in the books. 12. There are no amounts due and outstanding to be credited to Investor Education and Protection Fund.

13. Payment To Auditors Particulars

(Rs. in Crores)

Current Year

a)

Audit Fees

0.32

b)

Tax Audit Fees

0.03

C)

Other services

0.01

Total

0.36

14. Related Party Disclosures Related party disclosures as required by Notified AS 18 under the Companies (Accounting Standards) Rules, 2006 “Related Party Disclosures” are given below: (A) Name of related party and its relationship: (i)

Key Management Personnel Dr. Anand Agarwal Mr. Pravin Agarwal

(ii) Investing Company Twin Star Overseas Limited. (B) There are no provisions for doubtful debts or no amounts have been written off in respect of debts due to or from related parties.

Connecting with Shareholders | 133


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) (C) The following transactions were carried out with the related parties:

Sr No Transaction

(Rs. in Crores)

Twin Star Ovearseas Limited

Key Management Personnel

Transactions during the year: 1

Remuneration (*)

2

Equity Share Capital Issue

3

Equity Share Premium

2.88

1.40

26.60

* It includes payment to Dr. Anand Agarwal of Rs.1.03 Crores & Rs.1.85 Crores paid to Mr. Pravin Agarwal. 15. Operating Leases Disclosures in respect of Operating Leases of office buildings as per the requirement of Notified AS 19 under the Companies (Accounting Standard) Rules, 2006 on Leases issued by The Institute of Chartered Accountants of India, is as under: (a) Lease payments recognized in the statement of Profit and Loss for the period is Rs.0.29 Crore. (b) The future minimum lease payments payable over the next one-year is Rs.0.51 Crore. (c) The future minimum lease payments payable later than one year but not later than five year is Rs.0.81 Crore. (d) The future minimum lease payments payable later than five years is Rs.Nil.

16. Earnings per Share (EPS)

(Rs. in Crores)

Current Year I

Net Profit as per Profit and Loss Account available for Equity Shareholders

II

Weighted Average Number of equity shares For Basic Earning Per share

100.66 62,632,181

For Diluted Earning Per Share No. of Share for Basic EPS

62,632,181

Add: Potential Equity Shares a)

Convertible Warrant

b)

Employee Stock Option

No of Shares for Diluted Earning Per Share III

1,836,066 671,201 65,139,448

Earning Per Share (Weighted Average) Basic (On Nominal Value of Rs.5 Per Share) Rupees

16.07

Diluted (On Nominal Value of Rs.5 Per Share) Rupees

15.45

17. The Company had allotted 56,00,000 warrants on March 29, 2006 on preferential basis, (Rs.10 per warrant had been received upfront) to Twin Star Overseas Limited. The warrant holders had an option to be allotted one equity share of Rs.5/- each at a price of Rs.100 each on the payment of balance amount. During the year, 28,00,000 Share warrants were converted into 28,00,000 Equity Shares.

134 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) 18. The disclosures as per the Notified AS 15 under the Companies (Accounting Standards) Rules, 2006 on “Employee Benefits�, are as follows: The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation of India in the form of a qualifying insurance policy. The future contributions payable by the Company under the Gratuity Scheme are currently not ascertainable. Balance Sheet

(Rs. in Crores)

Particulars

Current Year

Details of Provision for Gratuity Defined Benefit Obligation

1.89

Fair Value of Plan Assets

2.14

Plan (Assets) / Liability

(0.25)

Change in defined benefit obligation Defined benefit obligation at the beginning of the year

1.88

Current Service cost

0.33

Interest cost

0.17

Actuarial (gain) / loss on obligation

(0.32)

Benefits paid

(0.17)

Defined benefit obligation, end of the period

1.89

Change in fair value of plan assets Fair value of plan assets at the beginning of the year

2.13

Expected return on plan assets

0.17

Contribution by employer

0.03

Benefits paid

(0.17)

Actuarial gain / (loss) on plan assets

(0.01)

Fair value of plan assets at the end of the year

2.14

Net period gratuity cost Current Service cost

0.33

Interest cost on benefit obligation

0.17

Net actuarial (gain) / loss recognized in the year

(0.31)

Expected return on plan assets

(0.17)

Net benefit expense

0.02

The major categories of plan assets as a percentage of the fair value of total plan asset is as follows: Current Year % Investment with Insurer (Life Insurance Corporation of India)

100.00

Assumptions: Discount rate

8.00 %

Expected rate of return on plan assets

8.00 %

Employee Turnover

2.00 %

Connecting with Shareholders | 135


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) 19. Contingent Liabilities

(Rs. in Crores)

Sr. No. Descriptions 1

Current Year

Disputed Liabilities in Appeal a)

Sales Tax

b)

Excise Duty

65.82

1.28

c)

Customs Duty

74.52

d)

Service Tax

e)

Claims lodged by a Bank Against the Company

f)

Excise Duty Case in Supreme Court (Refer Note 8 supra)

0.80 18.87

2

Unexpired Letter of Credit

3

Outstanding Bank Guarantees

36.57

4

Outstanding amount of Export obligation against Advance License

5

Export Obligation under EPCG Scheme

6

Estimated Amount of contracts remaining to be executed on Capital account

7

The Company has given Corporate Guarantee to the Income Tax Department

558.32 2.21 215.90

and not provided for (Net of Advances)

66.88

on behalf of group companies. The outstanding amount is Rs.114.00 Crores on this account as at the year-end. 20. In accordance with the Notified AS 17 under the Companies (Accounting Standards) Rules, 2006 on “Segment Reporting”, issued by the Institute of Chartered Accountants of India, the Company has identified two reportable Business Segments i.e. Telecom Product and Power Transmission Business, which are regularly evaluated by the Management, in deciding the allocation of resources and assessment of performance. Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common cost. The segment performance as follows: (Rs. in Crores)

(i)

Particulars Segment review

Telecom

Transmission

Unallocable

Total

690.71

1,080.57

1,771.28

Less: Excise

55.39

30.10

85.49

Net Revenue

635.33

1,050.46

1,685.79

61.86

109.42

171.28

Less: Interest

40.84

40.84

Profit/(loss) before tax

130.44

Provision for Tax (Net)

29.72

29.72

Profit/(Loss) after Tax

100.72

Segment Assets

793.40

651.96

117.23

1,562.59

Segment Liabilities

202.26

111.36

51.99

365.61

Capital Expenditure Incurred

51.84

85.28

137.13

Depreciation

28.02

8.93

36.96

Impairment

0.21

0.21

Segment Results (PBIT)

136 |Sterlite Technologies Limited | Annual Report 2007-08


Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) (Rs. in Crores)

(ii) Particulars 1.

Current Year

Segment Revenue - External Turnover - Within India

1,253.27

- Outside India

518.01

Total Revenue 2.

1,771.28

Segment Assets - Within India

1,467.93

- Outside India

94.66

Total Assets 3.

1,562.59

Capital Expenditure - Within India

137.13

- Outside India

Total Capital Expenditure

137.13

21. Expenditure of Rs.6.49 Crores on account of financing cost relating to borrowed funds for construction or acquisition of fixed assets on projects under implementation is debited to “Capital work in Progress”. 22. Pre - Operative Expenses Details of Pre – Operative Expenses are given below:

(Rs. in Crores)

Current Year Manufacturing & Other Expenses

2.62

Personnel

0.45

Administration & General

0.43

Interest & Finance Charges

2.82 6.32

23. Previous Year Comparatives Being first year of consolidation, previous year’s figures are not given.

As per our attached report of even date

For and on behalf of the Board

For S.R. Batliboi & Co.

Pravin Agarwal

Dr. Anand Agarwal

Chartered Accountants

Whole-time Director

CEO & Whole-time Director

Per Vijay N. Bhatt Partner

Place: Mumbai

Anupam Jindal

Sandeep Deshmukh

Membership Number: F- 36647

Dated: April 29, 2008

Chief Financial Officer

Company Secretary

Connecting with Shareholders | 137


Consolidated Cash Flow Statement

(Rs. in Crores)

Year Ended March 31, 2008 A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) after tax as per Profit & Loss Account Adjustment for Taxation

100.62 29.72 130.34

Adjustments for : - Depreciation and Impairment - Provision for Doubtful Debts - Bad Debts written off - Interest Expenses (net) - Exchange difference - (Profit) / Loss on Sale of Assets - Employees Stock Option Expenses amortized Operating profit before working capital changes Adjustments for : - (Increase)/Decrease in Trade and other receivables - (Increase)/Decrease in Inventories - Increase/(Decrease) in Trade payables Cash generation from operations Direct taxes (paid / TDS deducted)/Refund received Net cash flow from Operating Activities B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (Including Capital Work in Progress) Proceed from Sale of Fixed Assets Purchase of Investments Sale of Investments Investment in Bank Fixed Deposits* Net cash flow used in Investing Activities C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds/(Repayment) of Secured Loans (net) Proceeds/ (Repayment) of Share Capital Proceeds/ (Repayment) of Employee Stock Options Proceeds/ (Repayment) of Unsecured Loans (net) Interest paid Dividend paid on Equity Shares (Including Corporate Dividend Tax) Share Issued Expenses Net Cash flow from Financing Activities Net Increase/(decrease) in cash and cash equivalent Cash and cash equivalent as at beginning of year** Cash and cash equivalent as at year end **

37.17 0.25 0.82 43.65 (1.41) 0.08 4.48

(141.50) (99.40) 99.39

85.04 215.38

(141.51) 73.87 (7.99) 65.88 (120.58) 10.45 (9.59) 6.30 (20.78) (134.20) 67.26 32.90 0.04 7.26 (44.64) (5.30) (0.09) 57.43 (10.89) 13.41 2.52

* Investments in Bank Fixed Deposits having maturity of more than 3 Months have been shown under the cash flows from Investing activities. ** Fixed deposits of Rs.86.66 Crores having maturity of more than 3 months have not been considered As per our attached report of even date

For and on behalf of the Board

For S.R. Batliboi & Co. Chartered Accountants

Pravin Agarwal Whole-time Director

Dr. Anand Agarwal CEO & Whole-time Director

Anupam Jindal Chief Financial Officer

Sandeep Deshmukh Company Secretary

Per Vijay N. Bhatt Partner Membership Number: F- 36647

Place: Mumbai Dated: April 29, 2008

138 |Sterlite Technologies Limited | Annual Report 2007-08


Locations CORPORATE OFFICE

REGISTERED OFFICE

4th Floor, Godrej Millennium 9, Koregaon Road, Pune - 411001 Maharashtra, INDIA Phone: +91-20-30514000 Fax: +91-20-26138083

E1, MIDC, Waluj Aurangabad - 431136 Maharashtra, INDIA Phone: +91-240-2564599 Fax: +91-240-2564598

MARKETING / SALES & REPRESENTATIVE OFFICES 601, Samarpan Complex New Link Road Chakala, Andheri (East), Mumbai - 400099 Maharashtra, INDIA Phone: +91-22-67022260 Fax: +91-22-67022265

Scope Office Complex, Core - 6 6th Floor, C/o BALCO 7 Lodhi Road New Delhi - 110003, INDIA Phone: +91-11-24366087 Fax: +91-11-24364076

1310, 13th Floor Chiranjivi Tower Nehru Place New Delhi - 110019, INDIA Phone: +91-11-66602802 Fax: +91-11-66602804

Atur Chambers 2A, Moledina Road Pune - 411001 Maharashtra, INDIA Phone: +91-20-30512700 Fax: +91-20-26124340

E1, E2, E3, MIDC, Waluj Aurangabad - 431136 Maharashtra, INDIA Phone: +91-240-2564599 Fax: +91-240-2564598

Room 1802, China Merchants Tower No 118 Jian Guo Road Chao Yang District Beijing 100022, CHINA Phone: +86-10-59233898 Fax: +86-10-59233705

B2002, Far East International Plaza 317, Xianxia Road Shanghai - 200051, CHINA Phone: +86-21-62351469 Fax: +86-21-62351470

The Meadows Church Road, Dodleston Cheshire CH4 9NG, UNITED KINGDOM Phone: +44-5601-257106 Fax: +44-1244-661189

90, bid.3 Krasnobogatyrskaya St 107076 Moscow, RUSSIA Phone: +7-495-579 2337 Fax: +7-495-579 2337

Level 27, Bangkok City Tower 179/114-116 South Sathorn Road Kwaeng Thungmahamek, Khet Sathorn Bangkok 10120, THAILAND Phone: +66-2343 1858 Fax: +66-2343 1818

PO Box 784689, Sandton 2146 377 Rivonia Boulevard Rivonia 2128, SOUTH AFRICA Phone: +27-11-2750284 Fax: +27-11-2345022

PO Box 123472, LOB04, Office 019 Jebel Ali Free Zone, Dubai UNITED ARAB EMIRATES Phone: +971-4-8817917 Fax: +971-4-8873025

Optical fiber

Fiber optic cables

Copper telecom cables

E2, E3, MIDC, Waluj Aurangabad - 431136 Maharashtra, INDIA Phone: +91-240-2564599 Fax: +91-240-2564598

Survey No. 68/1, Rakholi Village Madhuban Dam Road, - 396230 Union Territory of Dadra & Nagar Haveli, INDIA Phone: +91-260-6612000 Fax: +91-260-6612013

Survey No. 209, Phase 2 Piparia Industrial Estate, Silvassa-394240 Union Territory of Dadra & Nagar Haveli, INDIA Phone: +91-260-6612100 Fax: +91-260-6612122

MANUFACTURING LOCATIONS

Power transmission conductors + aluminium and alloy rods Survey No. 99, Rakholi Village Madhuban Dam Road, Silvassa - 396230 Union Territory of Dadra & Nagar Haveli, INDIA Phone: +91-260-6612200 Fax: +91-260-6612260

P. O. Karanjawane, Nasarapur Velhe Road Off Pune Satara Highway, Taluka Velhe Pune - 412305, Maharashtra, INDIA Phone: +91-2130-236113 / 4 Fax: +91-2130-236117

Structured data cables

Customer premise equipment

Survey No. 33/1/1 Waghdara Road, Dadra Union Territory of Dadra & Nagar Haveli, INDIA Phone: +91-260-6452959 Fax: +91-260-6612122

E1, MIDC, Waluj Aurangabad - 431136 Maharashtra, INDIA Phone: +91-240-2564599 Fax: +91-240-2564598

Plot 2D, Sector 10 IIE SIDCUL, Haridwar - 249403 Uttarakhand, INDIA Phone: +91-1334-239463 Fax: +91-1334-239375

Connecting with Shareholders | 139


140 |Sterlite Technologies Limited | Annual Report 2007-08


CORPORATE INFORMATION Annual General Meeting

Bankers

August 08, 2008, Friday at 1100 hrs

Citibank

Date , Day & Time : Venue :

E-1, MIDC, Waluj,

Aurangabad – 431 136, Maharashtra, India

Board of Directors Anil Agarwal

Navin Agarwal

Arun Todarwal

A.R.Narayanaswamy

Bank of Maharashtra Corporation Bank

HDFC Bank Limited ICICI Bank Limited

Oriental Bank of Commerce Punjab National of Bank State Bank of India

Union Bank of India Yes Bank

Haigreve Khaitan

Registered Office

Anand Agarwal

Maharashtra, India.

Pravin Agarwal

E-1, Waluj MIDC Industrial Area, Aurangabad 431 136,

Chief Financial Officer

Registrar and Transfer Agents

Company Secretary

Unit – Sterlite Technologies Limited)

Anupam Jindal

Sandeep Deshmukh

Auditors

S.R.Batliboi & Co.

Karvy Computershare Private Limited Plot No.17 to 24, Vittalrao Nagar, Madhapur, Hyderabad –500 081

Tel: +91-40-23420818 / 828 Fax: +91-40-23420814

E-mail: einward.ris@karvy.com

A Product info@trisyscom.com


www.sterlitetechnologies.com


Annual Report 2007-08