6 July 2016
Shareholder Documentation
Further to the release by Vedanta Resources plc (the "Company") of its preliminary results on 12
May 2016, the Company has today posted the following documents on its website at www.vedantaresources.com
· Annual Report and Accounts 2016
· Notice of Annual General Meeting
2016
· Sustainability Report
· Form of Proxy
In accordance with LR 9.6.1 of the UK Listing Authority, the Company has submitted copies of the
above documents to the National Storage Mechanism which will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM.
The Company also announces that its 2016 Annual General Meeting will be held at 3.00 p.m. on 5
August 2016 at Ironmongers' Hall, Shaftesbury Place, London EC2Y 8AA.
The Appendix to this announcement contains the following additional information which has been
extracted from the 2016 Annual Report for the purposes of compliance with DTR 6.3.5 only:
· a description of principal risks and uncertainties;
· a note on related party transactions; and
· the Directors' Responsibilities Statements.
The Appendix should be read in conjunction with the Company's Preliminary Results announcement
issued on 12 May 2016 (including the notice on forward looking statements included in that announcement). Together these
constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory
Information Service. This announcement should be read in conjunction with and is not a substitute for reading the full 2016
Annual Report. Page and note references in the text below refer to page numbers and notes in the 2016 Annual Report and terms
defined in that document have the same meanings in these extracts.
Appendix
Related Party
Sterlite Technologies Limited is related by virtue of having the same controlling party as the
Group, namely Volcan. Pursuant to the terms of the Shared Services Agreement dated 5 December 2003 entered into by the Company
and STL, the Company provides various commercial services in relation to STL's businesses on an arm's length basis and at normal
commercial terms. For the year ended 31 March 2016, the commercial services provided to STL were performed by certain senior
employees of the Group on terms set out in the Shared Services Agreement. The services provided to STL in this year amounted to
US$0.02 million (2015: US$0.02 million).
Vedanta Foundation
During the year US$0.5 million was paid to the Vedanta Foundation (2015: US$0.7
million).
The Vedanta Foundation is a registered not-for-profit entity engaged in computer education and
other related social and charitable activities. The major activity of the Vedanta Foundation is providing computer education for
disadvantaged students. The Vedanta Foundation is a related party as it is controlled by members of the Agarwal family who
control Volcan. Volcan is also the majority shareholder of Vedanta Resources plc.
Sesa Goa Community Foundation Limited
Following the acquisition of erstwhile Sesa Goa Limited, the Sesa Goa Community Foundation
Limited, a charitable institution, became a related party of the Group on the basis that key management personnel of the Group
have significant influence on the Sesa Goa Community Foundation Limited. During the year ended 31 March 2016, US$0.4 million
(2015: US$0.4 million) was paid to the Sesa Goa Community Foundation Limited.
Sterlite Iron and Steel Limited
Sterlite Iron and Steel Limited is a related party by virtue of having the same controlling party
as the Group, namely Volcan.
Vedanta Medical Research Foundation
Vedanta Medical Research Foundation is a related party of the Group on the basis that key
management personnel of the Group exercise significant influence.
Volcan Investments Limited
Volcan Investments Limited is a related party of the Group by virtue of being an ultimate
controlling party of the Group. A bank guarantee has been provided by the Group on behalf of Volcan in favour of Income tax
department, India as collateral in respect of certain tax disputes of Volcan. The guarantee amount is US$17.3 million (2015:
US$18.4 million).
Ashurst LLP
Ashurst LLP is a related party of the Group on the basis that an independent Director of the Group
was a partner in the legal firm Ashurst LLP during the year ended 31 March 2016. It ceased to be a related party from 1 May 2015
onwards.
Principal Risks
The resources sector is currently in the midst of correction, with an extended period of lower and
volatile commodity prices impacting earnings, balance sheets and investor perceptions. Our businesses are also exposed to a
variety of risks which are inherent to a global natural resources organisation. It is therefore essential to have in place
necessary systems to manage these risks, while balancing the relative risk reward equation demanded by our
stakeholders.
Our management systems, organisational structures, processes, standards, code of conduct together
form the system of internal control that governs how we conduct the Group's business and manage the associated risks. Our risk
management framework is designed to be simple, consistent and clear for managing and reporting risks from the Group's businesses
to the board.
Risk management is embedded in our critical business activities, functions and processes. It helps
Vedanta meet its objectives through aligning operating controls with mission and vision. The effective management of risk is
critical to support the delivery of the Group's strategic objectives. The framework helps the organization meet its objectives
through alignment of operating controls to the mission and vision of the group.
We have a multi-layered risk management framework aimed at effectively mitigating the various risks
which our businesses are exposed to in the course of their operations as well as in their strategic actions. We identify risk at
the individual business level for existing operations as well as for ongoing projects through a consistently applied
methodology.
Formal discussion on risk management happens in business level review meetings at least once in a
quarter. The respective businesses review the risks, change in the nature and extent of the major risks since the last
assessment, control measures established for the risk and further action plans. The control measures
stated in the risk matrix are also periodically reviewed by the business management teams to verify their
effectiveness.
Ensuring effective tone at the top is vital for the risk management process to function
effectively. These meetings are chaired by business CEOs and attended by CXOs, senior management and concerned functional heads.
Risk officers have been formally nominated at all operating businesses as well as Group level whose role is to create awareness
on risks at senior management level and to develop and nurture a risk management culture within the businesses. Risk mitigation
plans form an integral part of performance management process. Structured discussion on risk management also happens at SBU
levels on their respective risk matrix and mitigation plans. Governance of risk management framework in
the businesses is anchored with their leadership team.
The Board of Directors has the ultimate responsibility for management of risks and for ensuring the
effectiveness of internal control systems. Such a system is designed to manage rather than eliminate the risk of failure to
achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.
The Audit Committee aids the Board in this process by identification and assessment of any changes in risk exposure, review of
risk control measures and by approval of remedial actions, where appropriate.
The Audit Committee is in turn supported by the Group Level Risk Management Committee which helps
the Audit Committee in evaluating the design and operating effectiveness of the risk mitigation program and the control systems.
Group Risk Management Committee (GRMC) comprising of Group CEO, Group CFO, Director Finance, Director - Management Assurance and
Group Head - HSE meets every quarter. GRMC discusses key events impacting the risk profile, emerging risks and progress against
the planned actions apart from other things.
Materiality and tolerance for risk are key considerations in our decision-making. The
responsibility for identifying and managing risk lies with all the managers and business leaders in the group.
The Group's approach to risk management, elaborated on its risk policy and the risk charter is
aimed at embedding a risk aware culture in all decision making process. Accountability for risk management is clear throughout
the group and is a key performance area for line managers.
Our approach to risk management and systems of internal control is aligned to the recommendations
in the FRC's revised guidance 'Risk management, internal control and related financial and business reporting' (the Risk
Guidance) issued in September 2014.
The Board level risk appetite has been defined taking into consideration the Group risk tolerance
level and with clear link to its strategic priorities. The risk appetite forms the basis of the Board's assessment and
prioritization of each risk based on its impact on the business operations. A risk scale consisting of qualitative and
quantitative factors has been defined to facilitate a consistent assessment of the risk exposure across the Group. This scale is
also aligned to the Board's overall risk appetite.
As stated above, every business division in the Group has developed its own risk matrix of Top 20
risks which gets reviewed at business management committee/business ExCo chaired by CEO. In addition, business divisions have
also developed their own risk registers depending on size of operations and number of SBUs/locations. These risks get reviewed in
SBU level meetings.
The principal risks and uncertainties listed in the sections below may threaten the group in the
following respects.
Terminology
|
Description
|
Business model (BM)
|
A business model is the plan implemented by a company to generate revenue and make a profit
from operations.
|
Future performance (FP)
|
Ability to deliver financial plan in short/medium term.
|
Solvency (S)
|
Solvency is the ability of a company to meet all its financial obligations.
|
Liquidity (L)
|
Liquidity is a company's ability to meet its short-term obligations/liabilities as they
fall due.
|
Health, safety, environment and communities (HSEC)
|
Group's ability to send our employees and contractors home safe and healthy every day and
work with our communities and partners to achieve Group's sustainable development goals.
|
Reputation (R)
|
Ability to maintain investor confidence and our social licence to operate.
|
The order in which these risks appear in the section below does not necessarily reflect the
likelihood of their occurrence or the relative magnitude of their impact on our business. Risk direction of each risk was
reviewed based on events, economic conditions, changes in business environment and regulatory changes. While our risk management
framework is designed to help the organisation meet its objectives, there can be no guarantee that our risk management activities
will mitigate or prevent these or other risks from occurring.
In addition to the above structure, other key risk governance and oversight committees include the
following:
n CFO Committee has an oversight on the treasury
related risks. This committee comprises of Group CFO, Deputy CFO, business CFOs, Group Treasury Head and Treasury Heads at
respective businesses
n Group Capex Sub-Committee which evaluates the
risks while reviewing any capital investment decisions as well as institutes a risk management framework in expansion
projects
n Vedanta Board Level Sustainability Committee which looks at sustainability relates risks. This committee is headed by a non-Executive Director and has Group CEO and
other business leaders as its members
n The board with the assistance of management has carried out a robust
assessment of the principal risks and uncertainties of the group (including those that threaten the business model, future
performance, solvency or liquidity) and tested the financial plans for the group for each of the principal risks and
uncertainties mentioned below.
Risk and Impact
|
Risk direction
|
Impact criteria
|
Mitigation
|
Access to capital
|
The Group may not be able to meet its payment obligations when due or be unable to borrow
funds in the market at an acceptable price to fund actual or proposed commitments. A sustained adverse economic downturn
and/or suspension of its operation in any business, effecting revenue and free cash flow generation, may cause stress on
the Company's financing and covenant compliance and its ability to raise financing at competitive terms. Any constraints
on upstreaming of funds from the subsidiaries to the Group may affect the liquidity position at the Group
level.
|
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Future performance
Solvency
Liquidity
Reputation
|
n The team is working on completing the near term refinancing,
reducing cost of borrowing, extending maturity profile & deleveraging the balance sheet. The group also has a track
record of good relations with banks and of raising borrowings in last few years.
n Structured ramp-up of facilities will give better margins and
help in loan repayments/interest servicing.
n Regular discussions are going on with rating agencies.
n The lending banks at Vedanta have consented to certain changes
requested by the Company to its covenants under the terms of the relevant debt facilities effective from 31 March 2016
until the period ending 30 September 2018.
n The Group also generates healthy cash flows from its current
operations which, together with the available cash and cash equivalents and liquid financial asset investments, provide
liquidity both in the short term as well as in the long-term.
|
Operational turnaround at KCM
|
Lower production and higher cost at KCM may impact our profitability.
|
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Business Model
Future performance
Liquidity
Reputation
|
n We are reviewing our operations and engaging with all
stakeholders in light of operating challenges.
n Several cost-saving initiatives and restructuring reviews are
also under way at KCM to preserve cash. At Nchanga, the underground operations (NUG) were put under care &
maintenance during Q3 FY2016.
n To mitigate the impact of power tariff hike, the company is
exploring a range of possible solutions and is in continued dialogue with the relevant stakeholders.
n Issues of VAT refunds are being addressed.
n Our focus at Konkola is to improve efficiency, equipment
availability, dewatering and enhance volumes. We are committed to improving KCM operating performance.
n We are engaging with all stakeholders, Government authorities for
resolution of pending matters.
|
Challenges to operationalize investments in aluminium business
|
Some of our projects have been completed (pending commissioning) or are nearing completion
and may be subject to number of challenges during operationalization phase. These may include challenges around sourcing
raw materials.
|
Ú
|
Business Model
Future performance
Liquidity
Reputation
|
n We are in the process of commencing operationalization of these
facilities. We have received approval to convert 3 units at Jharsuguda from IPP to CPP effective April 2016. Ramp-up of
the first line of 1.25 million tonnes Jharsuguda-II smelter commenced from April 2016. The remaining two units of BALCO
power plant have been commissioned recently. Third unit of TSPL was also synchronized in Q4 FY2016. Pot ramp up
activities commenced at Korba II smelter in April 2016.
n We continue our efforts to secure key raw material linkages for
our alumina/aluminium business. Various infrastructures related challenges are being addressed.
n A strong management team is in place and continues to work
towards sustainable low cost of production, operational excellence and securing key raw material linkages.
n Further details in this connection are included in the Aluminium
business section.
|
Challenges in production growth of Iron Ore business
|
While Goa iron ore production resumed in FY2016, risk around the lifting of existing mining
caps remains.
|
Ú
|
Business Model
Future performance
Liquidity
Reputation
|
n We have resumed operations at our major mines. All mining plans
have been approved by Indian Bureau of Mines and the state government allocations of mining cap is in line with Supreme
Court directive.
n We continue to actively pursue the lifting of mining caps and
additional allocation of production from the state government.
|
Extension of Production Sharing Contract of Cairn beyond 2020 or extension at less
favourable terms
|
Cairn India has 70% participating interest in Rajasthan Block. The production sharing
contract (PSC) of Rajasthan Block runs till 2020. Challenges in extension of production sharing contract of Cairn (beyond
2020) or extension at less favourable terms may have implications.
|
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Business Model
Future performance
Liquidity
Solvency
|
n We are in continuous dialogue with the Indian Government and
relevant stakeholders. The Production-Sharing Contract has certain in-built options for extension; Cairn has already
applied for an extension and the matter is being pursued with all stakeholders.
|
Discovery risk
|
The increased production rates from our growth oriented operations places demand on
exploration and prospecting initiatives to replace reserves and resources at a pace faster than depletion. A failure in
our ability to discover new reserves, enhance existing reserves or develop new operations in sufficient quantities to
maintain or grow the current level of our reserves could negatively affect our prospects. There are numerous
uncertainties inherent in estimating ore and oil & gas reserves, and geological, technical and economic assumptions
that are valid at the time of estimation. These may change significantly when new information becomes
available.
|
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Business Model
Future performance
|
n Our strategic priority is to add to our reserves and resources by
extending resources at a faster rate than we deplete them, through continuous focus on drilling and exploration
program.
n In order to achieve this we have developed an appropriate
organisation and allocated adequate financial resources for exploration. International technical experts and agencies are
working closely with our exploration team to build on this target.
n We continue to work towards long-term supply contracts with mines
to secure sufficient supply where required.
|
Transitioning of zinc and lead mining operations from open pit to underground
mining
|
Our zinc and lead mining operations in India are transitioning from an open pit mining
operation to an underground mining operation. Difficulties in managing this transition may result in challenges in
achieving stated business milestones.
|
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|
Future performance
Liquidity
|
n A strong separate empowered organization is working towards
ensuring a smooth transition from open pit to under-ground mining. We are working with internationally renowned
engineering and technology partners on this project. There is strong focus on safety aspects in the project.
n Technical audits are being carried out by independent
agencies.
n Reputed contractors have been engaged to ensure completion of the
project on indicated time lines. These mines will be developed using best in class technology and equipment and ensuring
the highest level of productivity and safety.
n We have inducted employees/contractors in our system having
underground mining expertise. We are also sending our employees to overseas underground mines for skill
development.
n Stage gate process to review risks and remedy at multiple stages
on the way. Robust quality control procedures have also been implemented to check safety and quality of
services/design/actual physical work.
n Further, additional output from stage V as well as ramp up from
some of the mines is expected to smoothen out this transition.
|
Fluctuation in commodity prices (including oil)
|
Prices and demand for the Group's products are expected to remain volatile/uncertain and
strongly influenced by global economic conditions. Volatility in commodity prices and demand may adversely affect our
earnings, cash flow and reserves.
|
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|
Business Model
Future performance
Solvency
Liquidity
|
n In order to mitigate the impact of falling commodity prices, a
cost reduction program is being pursued. Optimization of operations to drive efficiencies and product mix optimization is
also being pursued. Structured cost reduction program delivering transformational improvements will reset our cost base
to the lowest possible level. We continue to focus on manpower rationalization and deriving value out of procurement
synergies across locations.
n The Group has a well-diversified portfolio which acts as a hedge
against fluctuations in commodities and delivers cash flows through the cycle. Vedanta considers exposure to commodity
price fluctuations to be an integral part of the Group's business and its usual policy is to sell its products at
prevailing market prices and not to enter into price hedging arrangements other than for businesses of custom smelting
and purchased alumina, where back-to-back hedging is used to mitigate pricing risks. In exceptional circumstances we may
enter into strategic hedging but only with prior approval of the Executive Committee.
n The Group monitors the commodity markets closely to determine the
effect of price fluctuations on earnings, capital expenditure and cash flows. The CFO Committee reviews all
commodity-related risks and suggests necessary courses of action as needed by business divisions. Our focus is on cost
control and cost reduction.
|
Currency exchange rate fluctuations
|
Our assets, earnings and cash flows are influenced by a variety of currencies due to the
diversity of the countries in which we operate. Fluctuations in exchange rates of those currencies may have an impact on
our financials.
Although the majority of the Group's revenue is tied to commodity prices that are typically
priced by reference to the US dollar, a significant part of its expenses are incurred and paid in local currency.
Moreover Group borrowings are significantly denominated in US dollars while a large percentage of cash and liquid
investments are held in other currencies, mainly in the Indian rupee. Any material fluctuations of these currencies
against the US dollar could result in lower profitability or in higher cash outflows towards debt obligations.
|
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Business Model
Future performance
Solvency
Liquidity
|
n Vedanta does not speculate in forex. We have developed robust
controls in forex management to hedge currency risk liabilities on a back-to-back basis.
n The CFO Committee reviews our forex-related matters periodically
and suggests necessary courses of action as may be needed by businesses from time to time, and within the overall
framework of our forex policy.
n We seek to mitigate the impact of short-term movements in
currency on the businesses by hedging short-term exposures progressively based on their maturity. However, large or
prolonged movements in exchange rates may have a material adverse effect on the Group's businesses, operating results,
financial condition and/or prospects.
n At the time of borrowing decisions, appropriate sensitivity
analysis is carried out for domestic borrowings vis-à-vis overseas borrowings
n Notes to financial statements in the Annual Report give details
of accounting policy followed in computation of currency translation impact. We continue to monitor the currency
translation impact and highlight this separately in the financials to give appropriate perspective.
|
Tax related matters
|
Our businesses are in a tax regime and change in any tax structure or any tax related
litigations may impact our profitability.
|
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Solvency
Liquidity
Reputation
|
n Vedanta has a robust organisation in place at business and Group
level to handle tax-related matters. We engage, consult and take opinion from reputable tax consulting firms. Reliance is
placed on appropriate legal opinion and precedence.
n We continue to take appropriate legal opinions and actions on the
tax matters to mitigate the impact of these actions on the Group and its subsidiaries.
|
Breaches in information/IT security
|
Like many other global organisations, our reliance on computers and network technology is
increasing. These systems could be subject to security breaches resulting in theft, disclosure or corruption of
key/strategic information. Security breaches could also result in misappropriation of funds or disruptions to our
business operations. A cyber security breach could have an impact on business operations.
|
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|
Future performance
Reputation
|
n Appropriate organisation is in place at respective businesses for
information and IT security.
n At group level, Chief Information Security Officer (CISO) focuses
on formulating necessary frameworks, policies, procedures and for leading any agreed group wide initiatives to mitigate
risks. Various initiatives have been taken up to beef up IT/cyber security controls.
n We seek to manage cyber security risk through increased
standards, ongoing monitoring of threats and awareness initiatives throughout the organisation. An IT system is in place
to monitor logical access controls. We continue to carry out IT security reviews by experts periodically and improve IT
security standards.
|
Political, legal and regulatory risk
|
We have operations in many countries around the globe, which have varying degrees of
political and commercial stability. The political, legal and regulatory regimes in the countries we operate in may result
in higher operating costs, restrictions such as the imposition or increase in royalties or taxation rates, export duty,
impact on mining rights/ban and change in legislation pertaining to repatriation of money. We may also be affected by the
political acts of governments including resource nationalisation and legal cases in these countries over which we have no
control.
|
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Business Model
Future performance
Reputation
|
n The Company and its business divisions monitor regulatory and
political developments on continuous basis. Our focus has been to communicate our responsible mining credentials through
representations to government and industry associations.
n We continue to demonstrate the Group's commitment to
sustainability by proactive environmental, safety and CSR practices. We continue to actively engage with local
community/media/NGOs on these matters.
n We are SOX and SEC related compliant organizations. We have an
online portal for compliance monitoring. Appropriate escalation and review mechanisms are in place. Competent in-house
legal organisation exists at all the businesses and the legal teams have been strengthened with induction of senior legal
professionals at all businesses. SOP has been implemented across businesses for compliance monitoring.
n Contract management framework has been strengthened with issue of
boiler plate clauses across the group which will form part of all contracts. All key contract types standardized.
Involvement of legal in decision making process is being reinforced. A Framework for monitoring against Anti Bribery
& Corruption guidelines is also in place.
|
Community relations
|
The continued success of our existing operations and future projects are in part dependent
upon broad support and a healthy relationship with the respective local communities. Failure to identify and manage local
concerns and expectations can have a negative impact on relations with local communities and therefore affect the
organisation's reputation and social licence to operate and grow.
|
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Business Model
Future performance
HSEC
Reputation
|
n Establishing and maintaining close links with stake holders an
essential part of our journey as a sustainable business.
n CSR approach to community programs is governed by two key
considerations: the needs of the local people and the development plan in line with the SDGs and also CSR National
Voluntary Guidelines of Ministry of Corporate Affairs, Government of India as well as Section 135 of companies act in
India. We integrate CSR objectives with Sustainable Development Goals by UN.
n Our business leadership teams have periodic engagements with the
local communities to establish relations based on trust and mutual benefit. Our businesses seeks to identify and minimise
any potentially negative operational impacts and risks through responsible behaviour - acting transparently and
ethically, promoting dialogue and complying with commitments to stakeholders.
n Establishing and maintaining close links with stakeholders an
essential part of our journey as a sustainable business. There are structured programmes on reducing Water, Energy and
Carbon consumption.
n Our focus is on local consent prior to accessing resources.
Structured community development programs continue to operate at various locations.
n Board level Corporate Social Responsibility Committee decides the
focus areas of CSR activities, budget and programs to be undertaken by businesses. We help communities identify their
priorities through need assessment programmes and then work closely with them to design programmes that seek to make
progress towards improvement in quality of life of the local communities.
n Further details of the Group's CSR activities are included in the
Sustainability section.
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Health, safety and environment (HSE)
|
The resources sector is subject to extensive health, safety, and environmental laws,
regulations and standards. Evolving regulations, standards and stakeholder expectations could result in increased cost,
litigation or threaten the viability of operations in extreme cases.
|
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HSEC
Business Model
Reputation
|
n Health, Safety and Environment (HSE) is a high priority area for
the organisation. Compliance with international and local regulations and standards, protecting our people, communities
and the environment from harm and our operations from business interruptions are our key focus areas.
n Vedanta Board level Sustainability Committee chaired by a
non-executive director and includes the CEO as its member meets periodically to discuss HSE performance.
n We have appropriate policies and standards in place to mitigate
and minimise any HSE related occurrences. Structured monitoring and a review mechanism and system of positive compliance
reporting is in place.
n The Company has implemented a set of standards to align its
sustainability framework in line with international practices. A structured sustainability assurance programme continues
to operate in the business divisions covering environment, health, safety, community relations and human rights aspects
and to embed our commitment at the operational level.
n HSE experts are also inducted from reputed Indian and global
organisations to bring in best-in-class practices.
n The businesses have an appropriate policy in place for
occupational health related matters supported by structured processes, controls and technology. Our operations ensure the
issue of operational health and consequential potential risk/obligations are carefully handled. Depending on the nature
of the exposure and surrounding risk, our operations have different levels of processes, controls and monitoring
mechanisms. There is a strong focus on safety during project planning/execution with adequate thrust on contract workmen
safety.
n Fatal accidents and injury rates have declined. We are
implementing programs to eliminate fatalities and control injuries. Our leadership remains focused on a Zero-Harm culture
across the organization. Consistent application of 'Life-Saving' performance standards, introduction of making better
risk decisions concept, quantitative risk assessments for critical risks and the formal identification of process safety
risks with the focus on the implementation of controls are central to our improvement program. We continue to improve on
our safety investigations and follow-up processes. Further details of our HSE related activities are included in the
Sustainability section.
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Talent/skill shortage risk
|
The Company's efforts to continue its growth and efficient operations will place
significant demand on its management resources. Our highly skilled workforce and experienced management team is critical
to maintaining its current operations, implementing its development projects and achieving longer-term growth. Any
significant loss or diminution in the collective pool of Vedanta's executive management or other key team members could
have a material effect on its businesses, operating results and future prospects.
|
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Future performance
Reputation
|
n We continue to invest in initiatives to widen our talent pool.
This is a priority area for the group. Our senior leadership is actively involved in development of talent pool. We have
a talent management system in place to identify and develop internal candidates for critical management positions and
processes to identify suitable external candidates.
n Our performance management system is designed to provide reward
and remuneration structures and personal development opportunities to attract and retain key employees. A structured
program maps critical positions and ensures all such positions are filled with competent resources.
n Our progressive HR policies and strong HR leadership have ensured
that career progression, job rotation and job enrichment are focus areas for our businesses.
n We have established the Mining Academy in Rajasthan to develop an
employee pool with enhanced underground mining skills. We also have a structured program to develop a technically
proficient employee pool.
|
Loss of assets or profit due to natural calamities
|
Our operations may be subject to a number of circumstances not wholly within the Group's
control. These include damage to or breakdown of equipment or infrastructure, unexpected geological variations or
technical issues, extreme weather conditions and natural disasters, any of which could adversely affect production and/or
costs.
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Future performance
Reputation
|
n Vedanta has taken appropriate Group insurance cover to mitigate
this risk. We have appointed an external agency to review the risk portfolio and adequacy of this cover and to assist us
in our insurance portfolio. Our underwriters are reputed institutions and have capacity to underwrite our risk. There is
an established mechanism of periodic insurance review in place at all entities.
n However, any occurrence not fully covered by insurance could have
an adverse effect on the Group's business.
n We continue to focus on the capability building within the
group.
|
The Group's reported results could be adversely affected by the impairment of
assets
|
The change in carrying value of assets depends on various assumptions. The change in any of
those assumptions may impact the useful life and its carrying value.
|
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Reputation
|
n We maintain a close watch on various business drivers that could
impact impairment assessment. There is continuous focus, monitoring and periodic review of our assets.
n We also periodically review the assumptions, carry out testing
and reassess the useful life of these assets with the help of reputed firms.
n Vedanta reviews the carrying value of its assets and long-term
price assumptions in light of the recent weakness in commodity & oil prices. Any impact of changes to these
assumptions on the carrying values will be a non-cash charge reflected in the results for FY2016. This non-cash charge do
not affect the cash generation capability of the business. With the completion of this review and subsequent decisions
being taken as a fallout of the same, we expect this risk to be mitigated to a large extent.
|
Longer-term viability statement
In accordance with paragraph C2.2 of the UK Corporate Governance Code, the Directors have assessed
the prospects of the Group's viability over a longer period than the 12 months required by the going
At Vedanta, the business planning process covers a one-year detailed plan with capital allocation
and
refinancing plans covering a longer period of up to three years.
The planning process takes into consideration key assumptions, around commodity prices and
exchange rates, cost and supply parameters for major inputs such as raw materials, labour and fuel; refinancing and a range
of assumptions regarding volume ramp up, regulatory matters and the Group's cost-saving programme. To align with our internal
financial modeling period and taking into account the current volatility in commodity markets, Vedanta has considered a
three-year period of assessment appropriate for the longer-term viability statement.
To assess the Group's longer-term viability, additional robust stress testing has been undertaken,
utilizing the models used for the going concern exercise. The principal risks which were considered for stress testing,
individually and in combination, are commodity price movements, delays in ramping up production and refinancing risks. These are
considered severe but plausible and well beyond those expected in the normal course of business.
The viability of the Group under these severe but plausible scenarios remained sound, taking into
consideration the availability of mitigating actions within management's control, in particular flexibility in capital
allocation, access to lines of credit and alternative sources of finance.
While it is impossible to foresee all risks, and the combinations in which they could manifest,
based
on the results of this assessment and taking into account the Group's current position and
principal risks, the Directors have assessed the prospects of the Group, over the next three years, and have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over a period of three
years from 1 April 2016.
Directors' Responsibility Statements
The 2016 Annual Report contains the following statements regarding responsibility for the
financial statements in compliance with DTR 4.1.12. The responsibility statement is repeated here
solely for the purpose of complying with DTR 6.3.5.
Each of the Directors in post as at 12 May 2016, the names and roles
of whom are set out on pages 88 and 89 of the 2016 Annual Report, confirms to the best of their knowledge:
· the financial statements, prepared in
accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
· the strategic report includes a fair
review of the development and performance of the business and the position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face;
and
· the Annual Report and Financial
Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to
assess the Company's performance, business model and strategy.
For further information, please contact:
Investors
Ashwin Bajaj
Director - Investor Relations
Vedanta Resources plc
|
ir@vedanta.co.in
Tel: +91 22 6646 1531
|
Media
Daniela Fleischmann
Finsbury
|
Tel: +44 20 7251 3801
|
Deepak
Kumar
Tel: +44 20 7459 5900
Company Secretary
Vedanta Resources plc