UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 20-F

(Mark One)

o		Registration statement pursuant to section 12(b) or 12(g) of the Securities Exchange Act of 1934

þ		Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended March 31, 2009

o		Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                                                    to                                                   

o		Shell company report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Date of event requiring this shell company report                                                                                 

Sterlite Industries (India) Limited

Republic of India (Jurisdiction of Incorporation or Organization)		Vedanta, 75 Nehru Road Vile Parle (East) Mumbai, Maharashtra 400-099 India (Address of Principal Executive Offices)

Rajiv Choubey
Company Secretary and Head Legal
Vedanta, 75 Nehru Road
Vile Parle (East)
Mumbai, Maharashtra 400-099
India
(91) 461 661 2123
rajiv.choubey@vedanta.co.in
(Name, Telephone, E-mail and/or facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

American Depositary Shares, each representing one equity share, par value Rs. 2 per equity share (Title of Class)		New York Stock Exchange (Name of Exchange On Which Registered)

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
 
None
(Title of Class)

     Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

     As of March 31, 2009, 708,494,411 equity shares, par value Rs. 2 per equity share, were issued and outstanding, of which 75,678,479 equity shares were held in the form of 75,678,479 American Depositary Shares, or ADSs. Each ADS represents one equity share.

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ       No o

     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o      No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ      No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o      No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See the definitions of “large accelerated filer” and “accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

     Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP þ		International Financial Reporting Standards as issued by the International Accounting Standards Board o		Other o

     If “Other” has been checked in the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o          Item 18 o

     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes o      No þ

 

 

TABLE OF CONTENTS

		PAGE
PART I			2
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			2
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE			3
ITEM 3. KEY INFORMATION			3
ITEM 4. INFORMATION ON THE COMPANY			25
ITEM 4A. UNRESOLVED STAFF COMMENTS			92
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS			92
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			123
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			130
ITEM 8. FINANCIAL INFORMATION			136
ITEM 9. THE OFFER AND LISTING			140
ITEM 10. ADDITIONAL INFORMATION			141
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			175
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			176
PART II			176
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			176
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			177
ITEM 15. CONTROLS AND PROCEDURES			177
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT			179
ITEM 16B. CODE OF ETHICS			179
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES			179
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			179
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			179
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT			179
ITEM 16G. CORPORATE GOVERNANCE			180
PART III			180
ITEM 17. FINANCIAL STATEMENTS			180
ITEM 18. FINANCIAL STATEMENTS			180
ITEM 19. EXHIBITS			180
SIGNATURES			185
INDEX TO FINANCIAL STATEMENTS			F-1
EX-4.42 Settlement and Purchase and Sale Agreement dated March 6, 2009.
EX-4.43 Amendment No.1 dated April 15, 2009 to the Settlement and Sales and Purchase Agreement dated March 6, 2009.
EX-4.44 Amendment No.2 effective as of April 22, 2009 to the Settlement and Sale and Purchase Agreement dated March 6, 2009, as amended on April 15, 2009.
EX-4.45 Amendment No.3 effective as of June 12, 2009 to the Settlement and Sale and Purchase Agreement dated March 6, 2009, as amended on April 15, 2009 and April 22, 2009.
EX-4.46 Sterlite Plan Agreement in Principle Term Sheet dated June 12, 2009.
EX-4.47 Credit Agreement Letter dated February 7, 2005 between India Foils Limited and ICICI Bank Limited.
EX-4.48 Novation Agreement dated November 15, 2008 among Sterlite Industries (India) Limited, India Foils Limited and ICICI Bank Limited in respect of the Rs.772.5 million term loan facility.
EX-4.49 Credit Agreement Letter dated August 4, 2005 between India Foils Limited and ICICI Bank Limited.
EX-4.50 Novation Agreement dated November 15, 2008 among Sterlite Industries (India) Limited, India Foils Limited and ICICI Bank Limited in respect of the Rs.250 million term loan facility.
EX-4.51 Rs.55,690 million Common Rupee Loan Agreement dated June 29, 2009 among Sterlite Energy Limited, the State Bank of India as facility agent and issuing bank, IDBI Trusteeship Services Limited.
EX-4.52 $140 million Term Loan Facility Agreement dated June 29, 2009 among Sterlite Energy Limited, India Infrastructure Finance (UK) Company Limited.
EX-4.53 Sponsor Support Agreement dated June 29, 2009 among Sterlite Industries (India) Limited, Sterlite Energy Limited, and the State Bank of India as facility agent.
EX-4.54 Term Sheet dated May 22, 2009 between Sterlite Industries (India) Limited and Vedanta Aluminium Limited relating to the subscription of 9.75% Non-Convertible Debentures.
EX-4.55 Agreement dated February 18, 2009 between the Orissa Mining Corporation Limited and Sterlite Industries (India) Limited.
EX-8.1 List of subsidiaries of Sterlite Industries (India) Limited.
EX-12.1 Certification by the Chief Executive Officer pursuant to 17 CFR 240. 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
EX-12.2 Certification by the Chief Financial Officer pursuant to 17 CFR 240. 15D-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
EX-13.1 Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-13.2 Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

CONVENTIONS USED IN THIS ANNUAL REPORT

     In this annual report, we refer to information regarding the copper, zinc and aluminum industries and our competitors from market research reports, analyst reports and other publicly available sources. Although we believe that this information is reliable, we have not independently verified the accuracy and completeness of the information. We caution you not to place undue reliance on this data.

     In this annual report, references to the “ADS offering” are to the initial public offering of our equity shares in the form of American Depositary Shares, or ADSs, each representing one equity share, in the United States completed in June 2007.

     In this annual report, references to “US” or the “United States” are to the United States of America, its territories and its possessions. References to “UK” are to the United Kingdom. References to “India” are to the Republic of India. References to “$,” “US$,” “dollars” or “US dollars” are to the legal currency of the United States, references to “Rs.,” “Rupees” or “Indian Rupees” are to the legal currency of India and references to “AUD,” “Australian dollars” or “A$” are to the legal currency of the Commonwealth of Australia. References to “¢” are to US cents. References to “lb” are to the imperial pounds (mass) equivalent to 0.4536 kilograms, references to “tons” are to metric tons, a unit of mass equivalent to 1,000 kilograms or 2,204.6 lb, references to “oz” are to ounces, with one kilogram being equivalent to 35.2740 oz and one ton equivalent to 32,000 oz, and references to “ha” are to hectares, a unit of area equal to 10,000 square meters or 107,639 square feet. Unless otherwise indicated, the accompanying financial information for our company has been prepared in accordance with US generally accepted accounting principles, or US GAAP, for the fiscal years ended March 31, 2007, 2008 and 2009. References to a particular “fiscal” year are to our fiscal year ended March 31 of that year. Our fiscal quarters end on June 30, September 30 and December 31. References to a year other than a “fiscal” year are to the calendar year ended December 31.

     We conduct our businesses both directly and through a consolidated group of companies that we have ownership interests in. See “Item 4. Information on the Company — A. History and Development of our Company” for more information on these companies and their relationships to us. Unless otherwise stated in this annual report or unless the context otherwise requires, references in this annual report to “we,” “us,” “our,” “Sterlite,” “our company” or “our consolidated group of companies” mean Sterlite Industries (India) Limited, its consolidated subsidiaries and its predecessors, collectively, including Monte Cello BV, or Monte Cello, Copper Mines of Tasmania Pty Ltd, or CMT, Thalanga Copper Mines Pty Ltd, or TCM, Bharat Aluminium Company Limited, or BALCO, Sterlite Energy Limited, or Sterlite Energy, Sterlite Opportunities and Ventures Limited, or SOVL, Hindustan Zinc Limited, or HZL, Fujairah Gold FZE, Sterlite (USA), Inc., or Sterlite USA, and Talwandi Sabo Power Limited, or TSPL. References in this annual report to “SIIL” mean Sterlite Industries (India) Limited. Our consolidated financial information does not include Vedanta Resources plc, or Vedanta, Vedanta Resources Holdings Limited, or VRHL, Konkola Copper Mines plc, or KCM, Twin Star Holdings Limited, or Twin Star, Welter Trading Limited, or Welter Trading, the Anil Agarwal Discretionary Trust, Onclave PTC Limited, or Onclave, The Madras Aluminium Company Limited, or MALCO, Sterlite Technologies Limited, or STL, Monte Cello Corporation NV, or MCNV, Twin Star Infrastructure Limited, Sesa Goa Limited, Sesa Industries Limited, and Vedanta Aluminium Limited, or Vedanta Aluminium, except that as to Vedanta Aluminium, our consolidated financial statements account for our 29.5% minority interest therein under the equity method of accounting, but Vedanta Aluminium is not otherwise included in our consolidated group of companies or our consolidated financial statements. References to the “Vedanta group” are to Vedanta and its subsidiaries.

     In this annual report, references to The London Metal Exchange Limited, or LME, price of copper, zinc or aluminum are to the cash seller and settlement price on the LME for copper, zinc or aluminum for the period indicated. References to primary market share in this annual report are to the market that includes sales by producers of metal from copper concentrate or alumina, as applicable, and do not include sales by producers of recycled metal or imports.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This annual report contains “forward-looking statements” as defined in the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our company and our industry. These forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “project,” “seek,” “should” and similar expressions. These forward-looking statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that, although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate and, as a result, the forward-looking

statements based on those assumptions could be materially incorrect. Factors which could cause these assumptions to be incorrect include, but are not limited to:

	•		a decline or volatility in the prices of or demand for copper, zinc or aluminum;
	•		events that could cause a decrease in our production of copper, zinc or aluminum;
	•		unavailability or increased costs of raw materials for our products;
	•		our actual economically recoverable copper ore, lead-zinc ore or bauxite reserves being lower than we have estimated;
	•		our ability to expand our business, effectively manage our growth or implement our strategy, including our planned entry into the commercial power business;
	•		our ability to retain our senior management team and hire and retain sufficiently skilled labor to support our operations;
	•		regulatory, legislative and judicial developments and future regulatory actions and conditions in our operating areas;
	•		increasing competition in the copper, zinc or aluminum industry;
	•		political or economic instability in India or around the region;
	•		worldwide economic and business conditions, including the unprecedented and challenging conditions recently;
	•		our ability to successfully consummate strategic acquisitions, including our proposed acquisition of substantially all of the operating assets of ASARCO LLC, or Asarco, a copper mining, smelting and refining company based in Tucson, Arizona, United States;
	•		the outcome of outstanding litigation in which we are involved;
	•		our ability to maintain good relations with our trade unions and avoid strikes and lock-outs;
	•		any actions of our controlling shareholder, Vedanta;
	•		our business’ future capital requirements and the availability of financing on favorable terms;
	•		the continuation of tax holidays, exemptions and deferred tax schemes we enjoy;
	•		changes in tariffs, royalties, customs duties and government assistance; and
	•		terrorist attacks and other acts of violence, natural disasters and other environmental conditions and outbreaks of infectious diseases and other public health concerns in India, Asia and elsewhere.

     These and other factors are more fully discussed in “Item 3. Key Information — D. Risk Factors,” “Item 5. Operating and Financial Review and Prospects” and elsewhere in this annual report. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans, objectives or projected financial results referred to in any of the forward-looking statements. Except as required by law, we do not undertake to release revisions to any of these forward-looking statements to reflect future events or circumstances.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable

ITEM 3. KEY INFORMATION

A. Selected Consolidated Financial Data

     The selected historical consolidated statements of operations, cash flows and other consolidated financial data presented below for fiscal 2007, 2008 and 2009, and the selected historical consolidated balance sheet data as of March 31, 2008 and 2009, have been derived from our audited consolidated financial statements, which have been audited by Deloitte Haskins & Sells, Mumbai, India, or Deloitte, our independent registered public accounting firm, and included elsewhere in this annual report. The selected historical consolidated statements of operations, cash flows and other consolidated financial data presented below for fiscal 2005 and 2006, and the selected historical consolidated balance sheet data as of March 31, 2006 and 2007, have been derived from our audited consolidated financial statements, which have also been audited by Deloitte, that are not included in this annual report.

     Our consolidated financial statements are prepared and presented in accordance with US GAAP. Our historical results do not necessarily indicate our expected results for any future period. The translations of Indian Rupee amounts to US dollars are solely for the convenience of the reader and are based on the noon buying rate of Rs. 50.87 per $1.00 and AUD 1.44 per $1.00 in the City of New York for cable transfers of Indian Rupees and the Australian dollar, respectively, as certified for customs purposes by the Federal Reserve Bank of New York on March 31, 2009. No representation is made that the Indian Rupee and Australian dollar amounts represent US dollar amounts or have been, could have been or could be converted into US dollars at such rates or any other rates.

     You should read the following information in conjunction with “Item 5. Operating and Financial Review and Prospects” and the consolidated financial statements included elsewhere in this annual report.

		Year Ended March 31,
		2005				2006				2007				2008				2009				2009
		(in millions, except share and per share data)
Consolidated Statement of Operations Data:
Net sales		Rs.	66,643			Rs.	122,791			Rs.	241,246			Rs.	246,414			Rs.	212,192			$	4,171.3
Other operating revenues			628				1,334				2,251				2,616				3,683				72.4
Total revenue			67,271				124,125				243,497				249,030				215,875				4,243.7
Cost of sales			(50,615	)			(86,981	)			(144,798	)			(164,869	)			(164,566	)			(3,235.1	)
Selling and distribution expenses			(1,428	)			(2,117	)			(3,444	)			(3,808	)			(3,847	)			(75.6	)
General and administration expenses			(2,370	)			(2,596	)			(2,633	)			(4,572	)			(5,078	)			(99.8	)
Other income/(expenses):
Gain on sale of real estate			—				—				986				—				—				—
Impairment of assets			(1,276	)			—				—				—				—				—
Voluntary retirement scheme expenses			(186	)			—				(97	)			—				—				—
Guarantees, impairment of investments and loans			—				(1,300	)			—				(628	)			(137	)			(2.7	)
Operating income			11,396				31,131				93,511				75,153				42,247				830.5
Interest and dividend income			1,780				1,873				2,072				6,548				16,728				328.8
Interest expense			(1,962	)			(3,238	)			(4,329	)			(3,386	)			(6,874	)			(135.1	)
Net realized and unrealized investment gains			399				541				2,280				4,511				2,254				44.3
Income before income taxes, minority interests and equity in net (loss)/income of associate			11,613				30,307				93,534				82,826				54,355				1,068.5
Income taxes:
Current			(2,674	)			(7,894	)			(23,192	)			(18,410	)			(8,041	)			(158.1	)
Deferred			(831	)			(1,111	)			(1,967	)			(3,214	)			1,595				31.4
Income after income taxes, before minority interests and equity in net (loss)/income of associate			8,108				21,302				68,375				61,202				47,909				941.8
Minority interests			(2,764	)			(6,073	)			(21,053	)			(19,093	)			(12,346	)			(242.7	)
Equity in net (loss)/income of associate, net of taxes			—				(99	)			24				491				(6,001	)			(118.0	)
Net income from continuing operations			5,344				15,130				47,346				42,600				29,562				581.1
Discontinued operations:
Income from divested business, net of tax			222				369				86				—				—				—
Net Income		Rs.	5,566			Rs.	15,499			Rs.	47,432			Rs.	42,600			Rs.	29,562			$	581.1

		Year Ended March 31,
		2005				2006				2007				2008				2009				2009
		(in millions, except share and per share data)
Basic earnings per share:(1)
Income from continuing operations		Rs.	11.74			Rs.	27.35			Rs.	84.78			Rs.	63.16			Rs.	41.7			$	0.82
Income from discontinued operations			0.48				0.67				0.15				—				—				—
Basic earnings per share		Rs.	12.22			Rs.	28.02			Rs.	84.93			Rs.	63.16			Rs.	41.7			$	0.82
Diluted earnings per share: (1)
Income from continuing operations		Rs.	11.57			Rs.	27.35			Rs.	84.78			Rs.	63.16			Rs.	41.7			$	0.82
Income from discontinued operations			0.48				0.67				0.15				—				—				—
Diluted earnings per share		Rs.	12.05			Rs.	28.02			Rs.	84.93			Rs.	63.16			Rs.	41.7			$	0.82
Weighted average number of equity shares used in computing earnings per share: (1)
Basic			455,343,743				553,216,634				558,494,411				674,478,018				708,494,411				708,494,411
Diluted			465,108,143				553,216,634				558,494,411				674,478,018				708,494,411				708,494,411
Dividend declared per share(2)		Rs.	3.00			Rs.	1.25			Rs.	4.00			Rs.	4.00			Rs.	3.50			$	0.07

		As of March 31,
		2006				2007				2008				2009				2009
		(in millions)
Consolidated Balance Sheet Data:
Cash and cash equivalents		Rs.	9,258			Rs.	9,436			Rs.	12,363			Rs.	2,701			$	53.1
Total assets			167,539				225,881				376,179				443,086				8,710.2
Long-term debt, net of current portion			30,237				13,128				9,949				14,384				282.8
Short-term and current portion of long-term debt			4,390				8,353				10,190				20,202				397.1
Total shareholders’ equity			53,498				96,960				221,123				246,865				4,852.9

		Year Ended March 31,
		2005				2006				2007				2008				2009				2009
		(in millions)
Cash Flow Data:
Net cash provided by (used in):
Operating activities		Rs.	6,075			Rs.	19,595			Rs.	40,418			Rs.	(17,594	)		Rs.	78,204			$	1,537.3
Investing activities			(21,391	)			(16,676	)			(24,006	)			(56,404	)			(95,458	)			(1,876.5	)
Financing activities			17,321				375				(15,910	)			76,582				7,986				157.0
Other Consolidated Financial Data:
Net sales:
Copper		Rs.	34,508			Rs.	67,921			Rs.	115,192			Rs.	126,276			Rs.	116,525			$	2,290.7
Zinc			21,967				38,573				85,963				78,222				55,724				1,095.4
Aluminum			10,168				16,297				40,091				41,596				39,170				770.0
Power(1)			—				—				—				—				773				15.2
Corporate and others(1)			—				—				—				320				—				—
Total		Rs.	66,643			Rs.	122,791			Rs.	241,246			Rs.	246,414			Rs.	212,192			$	4,171.3
Operating income:
Copper		Rs.	2,440			Rs.	7,659			Rs.	17,235			Rs.	11,037			Rs.	10,557			$	207.5
Zinc			8,309				21,287				62,908				53,192				25,148				494.4
Aluminum			1,824				3,496				13,371				11,581				6,364				125.1
Power(1)			—				—				—				—				184				3.6
Corporate and others(1)			(1,177	)			(1,311	)			(3	)			(657	)			(6	)			(0.1	)
Total		Rs.	11,396			Rs.	31,131			Rs.	93,511			Rs.	75,153			Rs.	42,247			$	830.5
Segment profit:(2)
Copper		Rs.	3,899			Rs.	8,982			Rs.	17,689			Rs.	12,650			Rs.	12,574			$	247.2
Zinc			9,785				23,216				65,129				55,563				27,777				546.0
Aluminum			2,504				4,752				15,765				14,244				8,954				176.0
Power(1)			—				—				—				—				792				15.6
Corporate and others(1)			(100	)			(8	)			(2	)			384				132				2.6
Total		Rs.	16,088			Rs.	36,942			Rs.	98,581			Rs.	82,841			Rs.	50,229			$	987.4

 

		Year Ended March 31,
		2005				2006				2007				2008				2009				2009
		(in millions)
Copper:
Operating income		Rs.	2,440			Rs.	7,659			Rs.	17,235			Rs.	11,037			Rs.	10,557			$	207.5
Plus:
Depreciation, depletion and amortization			1,239				1,323				1,440				1,613				2,017				39.7
Gain on sale of real estate			—				—				(986	)			—				—				—
Impairment of assets			220				—				—				—				—				—
Segment profit		Rs.	3,899			Rs.	8,982			Rs.	17,689			Rs.	12,650			Rs.	12,574			$	247.2
Zinc:
Operating income		Rs.	8,309			Rs.	21,287			Rs.	62,908			Rs.	53,192			Rs.	25,148			$	494.4
Plus:
Depreciation, depletion and amortization			1,290				1,929				2,124				2,371				2,629				51.6
Voluntary retirement scheme expenses			186				—				97				—				—				—
Segment profit		Rs.	9,785			Rs.	23,216			Rs.	65,129			Rs.	55,563			Rs.	27,777			$	546.0
Aluminum:
Operating income		Rs.	1,824			Rs.	3,496			Rs.	13,371			Rs.	11,581			Rs.	6,364			$	125.1
Plus:
Depreciation, depletion and amortization			680				1,256				2,394				2,663				2,590				50.9
Segment profit		Rs.	2,504			Rs.	4,752			Rs.	15,765			Rs.	14,244			Rs.	8,954			$	176.0
Power:(a)
Operating income		Rs.	—			Rs.	—			Rs.	—			Rs.	—			Rs.	184			$	3.6
Plus:
Depreciation, depletion and amortization			—				—				—				—				608				12.0
Segment profit		Rs.	—			Rs.	—			Rs.	—			Rs.	—			Rs.	792			$	15.6
Corporate and others:(a)
Operating income		Rs.	(1,177	)		Rs.	(1,311	)		Rs.	(3	)		Rs.	(657	)		Rs.	(6	)		$	(0.1	)
Plus:
Depreciation, depletion and amortization			21				3				1				413				1				0.0
Impairment of assets			1,056				—				—				—				—				—
Guarantees, impairment of investments and loan			—				1,300				—				628				137				2.7
Segment profit		Rs.	(100	)		Rs.	(8	)		Rs.	(2	)		Rs.	384			Rs.	132			$	2.6

		Year Ended March 31,
		2007				2008				2009
		(in US dollars per ton, except as indicated)
Market and Cost Data:
London Metal Exchange (LME) price:(1)
Copper		$	6,984			$	7,588			$	5,885
Zinc			3,581				2,992				1,563
Aluminum			2,663				2,620				2,234
Treatment charge and refining charge (TcRc):(2)
Copper			31.1	¢/lb			15.7	¢/lb			11.7	¢/lb
Cost of production:(3)
Copper smelting and refining(4)			6.1	¢/lb			1.8	¢/lb			3.1	¢/lb
Zinc(5)		$	862			$	884			$	710
Aluminum(6)		$	1,626				1,720				1,700

		Year Ended March 31,
		2007				2008				2009
		(in millions, except Production output and Cost of production)
Copper:
Segment sales		Rs.	115,192			Rs.	126,276			Rs.	116,670
Less:
Segment profit			(17,689	)			(12,650	)			(12,574	)
Segment cost			97,503				113,626				104,096
Less:
Purchased concentrate/rock			(91,489	)			(107,422	)			(95,478	)
By-product/free copper net sales			(1,935	)			(4,283	)			(4,337	)
Cost for downstream products			(938	)			(1,197	)			(1,613	)
Others, net			(1,236	)			(195	)			(1,690	)
Total expenses		Rs.	1,905			Rs.	529			Rs.	979
Production output (in tons)			312,720				339,294				312,833
Cost of production(a)		6.1¢/lb				1.8¢/lb				3.1¢/lb

		Year Ended March 31,
		2007				2008				2009
		(in millions, except Production output and Cost of production)
Zinc:
Segment sales		Rs.	85,963			Rs.	78,222			Rs.	55,724
Less:
Segment profit			(65,129	)			(55,563	)			(27,777	)
Segment cost			20,834				22,659				27,947
Less:
Cost of tolling including raw material cost			(14	)			—				(409	)
Cost of intermediary product sold			(2,487	)			(2,944	)			(1,301	)
By-product net sales			(1,223	)			(2,637	)			(4,848	)
Cost of lead metal sold			(1,463	)			(1,787	)			(2,079	)
Others, net			(2,050	)			(118	)			(1,312	)
Total expenses		Rs.	13,598			Rs.	15,173			Rs.	17,998
Production output (in tons)			348,316				426,323				551,724
Cost of production (per ton) (a)		$	862			$	884			$	710
Aluminum:
Segment sales		Rs.	41,002			Rs.	41,695			Rs.	39,336
Less:
Segment profit			(15,765	)			(14,244	)			(8,954	)
Segment cost			25,237				27,451				30,382
Less:
Cost of intermediary product sold			(177	)			(118	)			—
By-product net sales			(312	)			(367	)			(328	)
Cost for downstream products			(1,323	)			(1,709	)			(1,966	)
Others, net			(322	)			(181	)			(314	)
Total expenses		Rs.	23,103			Rs.	25,076			Rs.	27,774
Production output (hot metal) (in tons)			313,817				362,296				355,733
Cost of production (per ton) (a)		$	1,626			$	1,720			$	1,700

     Not applicable

     Not applicable

     This annual report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those described in the following risk factors and elsewhere in this annual report. If any of the following risks actually occur, our business, financial condition and results of operations could suffer and the trading price of our ADSs could decline.

     Our copper and aluminum businesses source a majority of their copper concentrate and alumina requirements from third parties. For example, in fiscal 2009, we sourced 92.0% of our copper requirements and BALCO sourced in excess of 72.0% of its alumina requirements from third parties. As a result, profitability and operating margins of our copper and aluminum businesses depend upon our ability to obtain the required copper concentrate and alumina at prices that are low relative to the market prices of the copper and aluminum products that we sell.

     We purchase copper concentrate at the LME price for copper metal for the relevant quotational period less a TcRc that we negotiate with our suppliers but which is influenced by the prevailing market rate for the TcRc. The TcRc has historically fluctuated independently and significantly from the copper LME price. We attempt to make the LME price a pass through for us as both our copper concentrate purchases and sales of finished copper products are based on LME prices. Nevertheless, we are also exposed to differences in the LME price between the quotational periods for the purchase of copper concentrate and sale of the finished copper products, and any decline in the copper LME price between these periods will adversely affect us. We attempt to hedge against such risks, but are still exposed to timing and quantity mismatches. In addition, some of our long-term copper concentrate supply agreements provide for a TcRc that is a percentage of the prevailing LME price, and hence would fluctuate with the LME price, or provide our third party supplier with price participation terms linked to LME prices. See “Item 5. Operating and Financial Review and Prospects — Factors Affecting Results of Operations — Metal Prices and Copper TcRc.” On March 6, 2009, we and Asarco signed an agreement for us to purchase substantially all the operating assets of Asarco. The agreement remains subject to approval by the US Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, before which Asarco has been in reorganization proceedings under Chapter 11 of the US Bankruptcy Code. If this acquisition is completed, our copper reserves would be substantially increased and our results of operations in future periods would be increasingly dependent upon the LME price of copper metal. See “Item 5. Operating and Financial Review and Prospects — Recent Developments.”

     We purchase alumina from third party suppliers through short-term contracts and on the spot market. The market price for alumina has historically fluctuated independently and significantly from the market price of aluminum. See “Item 5. Operating and Financial Review and Prospects — Factors Affecting Results of Operations — Metal Prices and Copper TcRc — Zinc and Aluminum.” Both the market prices of the copper concentrate and alumina that we purchase and the market prices of the copper and aluminum metals that we sell have experienced volatility in the past, and any increases in the market prices of these raw materials relative to the market prices of the metals that we sell would adversely affect the profitability and operating margins of our copper and aluminum businesses, which could have a material and adverse effect on our results of operations and financial condition.

Our operations are subject to operating risks that could result in decreased production, increased cost of production and increased cost of or disruptions in transportation, which could adversely affect our revenue, results of operations and financial condition.

     We are subject to operating conditions and events beyond our control that could, among other things, increase our mining, transportation or production costs, disrupt or halt operations at our mines and production facilities permanently or for varying lengths of time or interrupt the transport of our products to our customers. These conditions and events include:

	•		Disruptions in mining and production due to equipment failures, unexpected maintenance problems and other interruptions. All of our operations are vulnerable to disruptions. Our aluminum smelters are particularly vulnerable to disruptions in the supply of power which, even if lasting only a few hours, can cause the contents of the furnaces or cells to solidify, which would necessitate a plant closure and a shutdown in operations for a significant period, as well as involve expensive repairs. For example, power interruptions caused BALCO to partially suspend operations at its 245,000 tpa aluminum smelter at Korba in May 2006, and as a result of this interruption the smelter did not become fully operational again until November 2006. Similarly, our Tuticorin copper refining and smelting facility had a four-day delay in ramp-up following a scheduled maintenance shutdown between April and May 2008 due to stabilization issues faced during the post-shutdown ramp-up and an unscheduled 34-day interruption in production between November and December 2008 due to damage in a cooling tower as a result of the collapse of its foundation. CMT’s Mt. Lyell processing plant had an unscheduled shutdown for 20 days in September 2008 in order to make structural repairs and reinforcements. The losses from these interruptions include lost production, repair costs and other expenses.
	•		Availability of raw materials for energy requirements. Any shortage of or increase in the prices of any of the raw materials needed to satisfy our businesses’ energy requirements may interrupt our operations or increase our cost of production. We are particularly dependent on coal, which is used in many of our captive power plants. Our aluminum business, which has high energy consumption due to the energy-intensive nature of aluminum smelting, is significantly dependent on receiving allocations from Coal India Limited, or Coal India, the government-owned coal monopoly in India, and its subsidiaries. A shortage of coal from April 2005 led Coal India to reduce the amount of coal supplied to all of its non-utility customers, including BALCO. As a result, BALCO was forced to utilize higher-priced imported coal and coal from non-linkage sources, which resulted in higher power generation costs.

	•		Availability of water. The mining operations of our zinc and aluminum businesses and our captive power plants depend upon the supply of a significant amount of water. There is no assurance that the water required will continue to be available in sufficient quantities or that the cost of water will not increase. For example, BALCO is currently in a dispute with the National Thermal Power Corporation Limited, or NTPC, regarding the right of way for a water pipeline that provides one of BALCO’s captive power plants access to a body of water adjacent to NTPC premises. Arbitration proceedings commenced on May 18, 2009 and are ongoing. An unfavorable resolution to this dispute may significantly increase BALCO’s costs of obtaining water for that power plant.
	•		Disruptions to or increased costs of transport services. We depend upon seaborne freight, rail, trucking, overland conveyor and other systems to deliver bauxite, alumina, zinc concentrate, copper concentrate, coal and other supplies to our operations and to deliver our products to customers. Any disruption to or increase in the cost of these transport services, including as a result of interruptions that decrease the availability of these transport services or as a result of increases in demand for transport services from our competitors or from other businesses, or any failure of these transport services to be expanded in a timely manner to support an expansion of our operations, could have a material adverse effect on our operations and operating results.
	•		Accidents at mines, smelters, refineries, cargo terminals and related facilities. Any accidents or explosions causing personal injury, property damage or environmental damage at or to our mines, smelters, refineries, cargo terminals and related facilities may result in expensive litigation, imposition of penalties and sanctions or suspension or revocation of permits and licenses. Risks associated with our open-pit mining operations include flooding of the open-pit, collapses of the open-pit wall and operation of large open-pit mining and rock transportation equipment. Risks associated with our underground mining operations include underground fires and explosions (including those caused by flammable gas), cave-ins or ground falls, discharges of gases or toxic chemicals, flooding, sinkhole formation and ground subsidence and underground drilling, blasting and removal and processing of ore. Injuries to and deaths of workers at our mines and facilities have occurred in the past and may occur in the future. We are required by law to compensate employees for work-related injuries. Failure to make adequate provisions for our workers’ compensation liabilities could harm our future operating results.
	•		Strikes and industrial actions or disputes. The majority of the total workforce of our consolidated group of companies is unionized. Strikes and industrial actions or disputes have in the past and may in the future lead to business interruptions and halts in production. For example, the trade unions of BALCO initiated a 67-day-long strike in May 2001 in opposition to the divestment of equity shares of BALCO by the Government of India. We also experienced short strikes and work stoppages in 2005 and 2006. In addition, we may be subject to union demands and litigation for pay raises and increased benefits, and our existing arrangements with trade unions may not be renewed on terms favorable to us, or at all. The wage settlement agreements entered into by HZL and BALCO with their respective unions expired on July 1, 2007 and April 1, 2009, respectively. We are currently in negotiations with these unions to renew the wage settlement agreements and work is therefore ongoing at HZL and BALCO without collective agreements. Other work stoppages or other labor-related developments, including the introduction of new labor regulations in India or Australia, may occur in the future.

     The occurrence of any one or more of these conditions or events could have a material adverse effect on our results of operations and financial condition.

We are substantially dependent upon our Rampura Agucha zinc mine, and any interruption in our operations at that mine could have a material adverse effect on our results of operations and financial condition.

     Our Rampura Agucha zinc mine produced 91% of the total mined metal in zinc concentrate that we produced in fiscal 2009 and constituted 76% of our proven and probable zinc reserves as of March 31, 2009. Our zinc business provided 59.5% of our operating income in fiscal 2009. Our results of operations have been and are expected to continue to be substantially dependent on the reserves and low cost of production of our Rampura Agucha mine, and any interruption in our operations at the mine for any reason could have a material adverse effect on the results of operations and financial condition of our business as a whole.

If we are unable to secure additional reserves of copper, zinc and bauxite that can be mined at competitive costs or cannot mine existing reserves at competitive costs, our profitability and operating margins could decline.

     If our existing copper, zinc and bauxite reserves cannot be mined at competitive costs or if we cannot secure additional reserves that can be mined at competitive costs, we may become more dependent upon third parties for copper concentrate, zinc concentrate and alumina. Because our mineral reserves decline as we mine the ore, our future profitability and operating margins depend upon our ability to access mineral reserves that have geological characteristics enabling mining at competitive costs. Replacement reserves may not be available when required or, if available, may not be of a quality capable of being mined at costs comparable to the existing or exhausted mines.

     We may not be able to accurately assess the geological characteristics of any reserves that we acquire, which may adversely affect our profitability and financial condition. Because the value of reserves is calculated based on that part of our mineral deposits that are economically and legally exploitable at the time of the reserve calculation, a decrease in commodity prices of the metals may result in a reduction in the value of any mineral reserves that we do obtain as less of the mineral deposits contained therein would be economically exploitable at the lower prices. Exhaustion of reserves at particular mines may also have an adverse effect on our operating results that is disproportionate to the percentage of overall production represented by such mines. Further, with depletion of reserves, we will face higher unit extraction costs per mine.

     Our ability to obtain additional reserves in the future could be limited by restrictions under our existing or future debt agreements, competition from other copper, zinc and aluminum companies, lack of suitable acquisition candidates, government regulatory and licensing restrictions, difficulties in obtaining mining leases and surface rights or the inability to acquire such properties on commercially reasonable terms, or at all. To increase production from our existing bauxite and lead-zinc mines, we must apply for governmental approvals, which we may not be able to obtain in a timely manner, or at all.

     Capital requirements. We require capital for, among other purposes, expanding our operations, making acquisitions, managing acquired assets, acquiring new equipment, maintaining the condition of our existing equipment and maintaining compliance with environmental laws and regulations. To the extent that cash generated internally and cash available under our existing credit facilities are not sufficient to fund our capital requirements, we will require additional debt or equity financing, which may not be available on favorable terms, or at all. Since the second half of 2008, this uncertainty has increased due to the disruption in the global financial markets. See “ — Risks Relating to Investments in Indian Companies, Global Economic Conditions and International Operations — Recent global economic conditions have been unprecedented and challenging and have had, and continue to have, an adverse effect on the Indian financial markets and the Indian economy in general, which has had, and may continue to have, a material adverse effect on our business, our financial performance and the prices of our equity shares and ADSs.” Future debt financing, if available, may result in increased finance charges, increased financial leverage, decreased income available to fund further acquisitions and expansions and the imposition of restrictive covenants on our business and operations. In addition, future debt financing may limit our ability to withstand competitive pressures and render us more vulnerable to economic downturns. If we fail to generate or obtain sufficient additional capital in the future, we could be forced to reduce or delay capital expenditures, sell assets or restructure or refinance our indebtedness.

     In light of this, our planned and any proposed future expansions and projects may be materially and adversely affected if we are unable to obtain funding for such capital expenditures on satisfactory terms, or at all, including as a result of any of our existing facilities becoming repayable before its due date. In addition, there can be no assurance that our planned or any proposed future expansions and projects will be completed on time or within budget, which may adversely affect our cash flow. These expansions and projects include those described in “Item 4. Information on the Company — B. Business Overview — Our Business — Competitive Strengths — Strong pipeline of growth projects.”

     Cost overruns and delays. Our current and future projects may be significantly delayed by failure to receive regulatory approvals or renewal of approvals, failure to obtain sufficient funding, technical difficulties due to human resource, technological or other resource constraints or for other unforeseen reasons, events or circumstances. As a result, these projects may incur significant cost overruns and may not be completed on time, or at all. Our decision to undertake or continue any of these projects will be based on assumptions of future demand for our products which may not materialize. As a consequence of project delays, cost overruns, changes in demand for our products and other reasons, we may not achieve the reductions in the cost of production or other economic benefits expected from these projects, which could adversely affect our business, financial condition and results of operations.

     Demands on management. Our efforts to continue our growth will place significant demands on our management and other resources and we will be required to continue to improve operational, financial and other internal controls, both in India and elsewhere. Our ability to maintain and grow our existing business and integrate new businesses will depend on our ability to maintain the necessary management resources and on our ability to attract, train and retain personnel with skills that enable us to keep pace with growing demands and evolving industry standards. We are in particular dependent to a large degree on the continued service and performance of our senior management team and other key team members in our business units. These key personnel possess technical and business capabilities that are difficult to replace. The loss or diminution in the services of members of our senior management or other key team members, or our failure otherwise to maintain the necessary management and other resources to maintain and grow our business, could have a material adverse effect on our results of operations, financial condition and prospects.

     Acquisition risks. As part of our growth strategy, we intend to continue to pursue acquisitions to expand our business. There can be no assurance that we will be able to identify suitable acquisition, strategic investment or joint venture opportunities, obtain the financing necessary to complete and support such acquisitions or investments, integrate such businesses or investments or that any business acquired will be profitable. If we attempt to acquire non-Indian companies, we may not be able to satisfy certain Indian regulatory requirements for such acquisitions and may need to obtain the prior approval of the RBI which we may not be able to obtain. In addition, acquisitions and investments involve a number of risks, including possible adverse effects on our operating results, diversion of management’s attention, failure to retain key personnel, risks associated with unanticipated events or liabilities and difficulties in the assimilation of the operations, technologies, systems, services and products of the acquired businesses or investments. Any failure to achieve successful integration of such acquisitions or investments could have a material adverse effect on our business, results of operations or financial condition.

     On March 6, 2009, we and Asarco signed an agreement for us to purchase substantially all the operating assets of Asarco. We had previously signed an agreement to acquire substantially all the operating assets of Asarco on May 30, 2008, following which in October 2008, due to the financial turmoil, the steep fall in copper prices and adverse global economic conditions, we and Asarco entered into discussions to renegotiate the prior agreement. The current agreement to acquire Asarco follows such renegotiation of the prior agreement and remains subject to approval by the US Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, before which Asarco has been in reorganization proceedings under Chapter 11 of the US Bankruptcy Code. We cannot assure you that the acquisition as renegotiated will be completed, or that, if completed, we will be successful in integrating the acquired business into our existing businesses or that the acquired business will be profitable. See “Item 5. Operating and Financial Review and Prospects — Recent Developments.”

If we do not continue to invest in new technologies and equipment, our technologies and equipment may become obsolete and our cost of production may increase relative to our competitors, which would have a material adverse effect on our ability to compete, results of operations, financial condition and prospects.

     Our profitability and competitiveness are in large part dependent upon our ability to maintain a low cost of production as we sell commodity products with prices we are unable to influence. Unless we continue to invest in newer technologies and equipment and are successful at integrating such newer technologies and equipment to make our operations more efficient, our cost of production relative to our competitors may increase and we may cease to be profitable or competitive. However, newer technologies and equipment are expensive and the necessary investments may be substantial. Moreover, such investments entail additional risks as to whether the newer technologies and equipment will reduce our cost of production sufficiently to justify the capital expenditures to obtain them. Any failure to make sufficient or the right investments in newer technologies and equipment or in integrating such newer technologies and equipment into our operations could have a material adverse effect on our ability to compete and our financial condition, results of operations and prospects.

We are developing our commercial power generation business, a line of business in which we have limited experience, from which we may never recover our investment or realize a profit and which may result in our management’s focus being diverted from our core copper, zinc and aluminum businesses.

     In August 2006, our shareholders approved a new strategy for us to enter into the commercial power generation business in India. We are investing approximately Rs. 82,000 million ($1,612.0 million) to build a 2,400 MW thermal coal-based power facility (comprising four units of 600 MW each) in Jharsuguda in the State of Orissa. The project is being pursued by our wholly-owned subsidiary Sterlite Energy. Commissioning of this project will be carried out in stages and is expected to begin in the third quarter of fiscal 2010, with full completion anticipated by the second quarter of fiscal 2011. For more information, see “Item 4. Information on the Company — B. Business Overview — Our Business — Our Commercial Power Generation Business — Our Plans for Commercial Power Generation.”

     In July 2008, Sterlite Energy succeeded in an international bidding process and was awarded the project for the construction of a 1,980 MW coal-based commercial thermal power plant at Talwandi Sabo in the State of Punjab in India at an estimated cost of Rs. 92,450 million ($1,817.4 million). Commissioning of this project will be carried out in stages and is expected to be completed in April 2013. On September 1, 2008, Sterlite Energy completed the acquisition of Talwandi Sabo Power Limited, or TSPL, for a purchase price of Rs. 3,868.4 million ($76.0 million). For more information, see “Item 4. Information on the Company — B. Business Overview — Our Business — Our Commercial Power Generation Business — Our Plans for Commercial Power Generation.”

     In addition, HZL’s board of directors has approved the establishment of wind power plants with a combined capacity of up to 300 MW at an estimated cost of Rs. 16,000 million ($314.5 million). Wind power plants with a combined power generation capacity of 123.2 MW have been commissioned in the States of Gujarat and Karnataka in India at a total cost of Rs. 6,030 million ($118.5 million) and have been fully operational since July 2008.

     Although we have some experience building and managing captive power plants to provide a significant percentage of the power requirements of our copper, zinc and aluminum businesses, and in March 2007 commissioned our first wind power plant, we have limited experience building, operating and managing wind power plants and competing in the commercial power generation business. In addition to the significant capital investment, our management’s focus will also be directed towards this new business.

     In particular, the building of coal-based power facilities is a long and capital-intensive process, with typically several years elapsing and significant capital investment required between the time that a decision to commence a project is made and the commencement of commercial operations. The completion targets for our projects and any other projects we may undertake are estimates and are subject to numerous risks and uncertainties, such as:

	•		We may face many uncertainties, including regulatory requirements and restrictions which may change by the time our planned power facility is completed. These may include a change in the tariff policy, which may have an adverse impact on our revenues and reduce our margins. We may also face delays in the development of our power plants and any coal mines we may seek to develop, as other coal and power companies in India and Southeast Asia recently have, as a result of protests or other obstructive or delaying activities by displaced persons and others who may oppose such developments.
	•		We must obtain the consent of certain of our lenders to commence a new business, and there can be no assurance that we will obtain such consents.
	•		We will be dependent upon third parties for the construction, delivery and commissioning of the power facilities, the supply and testing of equipment and transmission and distribution of any power we produce.
	•		We do not have our own coal mines, and given recent shortages in coal supplies in India, we may also not be successful at procuring an adequate supply of coal at sufficiently attractive prices, or at all, for our power plant to operate and generate a return on our investment.
	•		We may face opposition to our projects by local communities where these projects are located or from special interest groups, including as a result of the perceived negative impact of coal mines and coal-based power plants to the environment or any required displacement and resettlement of individuals and families in the area of a project.
	•		The commercial power generation business is highly competitive and we will be competing with established commercial power generation companies, including NTPC, the Tata Power Company Limited, or Tata Power, and Reliance Energy Limited, with significant resources and many years of experience in the commercial power generation business.

     There can be no assurance that we will recover our investment in this new business, that we will realize a profit from this new business or that diverting our management’s attention to this new business will not have a material adverse effect on our existing copper, zinc and aluminum businesses, any of which results may have a material adverse effect on our results of operations, financial condition and prospects.

If any power facilities we build and operate as part of our commercial power generation business do not meet operating performance requirements and agreed norms as may be set out in our agreements, or otherwise do not operate as planned, we may incur increased costs and penalties and our revenue may be adversely affected.

     Operating power plants involves many operational risks, including the breakdown or failure of generation equipment or other equipment or processes, labor disputes, fuel interruption and operating performance below expected levels. However, the power purchase agreements and other agreements we may enter into may require us to guarantee certain minimum performance standards, such as plant availability and generation capacity, to the power purchasers. If our facilities do not meet the required performance standards, the power purchasers with whom we have power purchase agreements may not reimburse us for any increased costs arising as a result of our plants’ failure to operate within the agreed norms, which in turn may affect our results of operations. In addition to the performance requirements specified in our power purchase and other agreements, national and state regulatory bodies and other statutory and government mandated authorities may from time to time impose minimum performance standards upon us. Failure to meet these requirements could expose us to the risk of penalties.

Our proposed acquisition of Asarco faces competition from other potential acquirors, is uncertain and on which investors should not place undue reliance, and if it is not completed, we may be sued by Asarco based on our prior agreement to acquire Asarco.

     On March 6, 2009, we and Asarco signed an agreement for us to purchase substantially all the operating assets of Asarco. We had previously signed an agreement to acquire substantially all the operating assets of Asarco on May 30, 2008, following which in October 2008, due to the financial turmoil, the steep fall in copper prices and adverse global economic conditions, we and Asarco entered into discussions to renegotiate the prior agreement. The current agreement to acquire Asarco follows such renegotiation of the prior agreement and its consummation remains contingent upon the confirmation of a Chapter 11 plan of reorganization proposed by Asarco and sponsored by our wholly owned subsidiary Sterlite (USA) Inc., or Sterlite USA, by the US Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, before which Asarco has been in reorganization proceedings under Chapter 11 of the US Bankruptcy Code. See “Item 5. Operating and Financial Review and Prospects — Recent Developments.”

     Our proposed acquisition of Asarco is uncertain and investors should not place undue reliance upon it. Two other potential acquirors, namely, Asarco Incorporated along with Americas Mining Corporation, subsidiaries of Grupo México, S.A.B. de C.V., or Grupo México, and Harbinger Capital Partners Master Fund I Ltd, have also submitted proposed reorganization plans. The US Bankruptcy Court allowed such reorganization plans to be considered along with the reorganization plan proposed by Asarco and sponsored by Sterlite USA, and submission of a joint disclosure statement containing the three reorganization plans proposed by all three parties. At a court hearing on July 2, 2009, the US Bankruptcy Court approved the adequacy of the joint disclosure statement. The three reorganization plans have been submitted to Asarco’s creditors for their approval. The US Bankruptcy Court will decide which proponent’s plan will be confirmed based on, among other things, whether the plan (i) meets the statutory requirements for confirmation under the US Bankruptcy Code, (ii) treats creditors more fairly than the others, (iii) is more feasible than the others, and (iv) is preferred by creditors based upon responses expressed in their ballots. The decision is expected to be made following a hearing which is currently scheduled from August 10, 2009 through August 19, 2009.

     If either of the other two potential acquirors is selected, we will not be able to acquire Asarco and we may be sued by Asarco under certain circumstances. Each of the other two potential acquirors has included in its proposed reorganization plan that all potential claims held by Asarco against Sterlite and Sterlite USA for, among other things, alleged breach of the original May 30, 2008 agreement, will be distributed to a trust for the benefit of the creditors of Asarco, which trust will prosecute such claims for the benefit of the creditors. Grupo México, in its proposed reorganization plan, has estimated the value of Asarco’s claims against Sterlite and Sterlite USA to be in the range of $400 million to $3 billion, subject to mitigating factors. Those factors may include the ultimate purchase price for the assets being sold by Asarco, adjustments to the ultimate purchase price due to changes in value of working capital as provided in the original May 30, 2008 agreement and changes in the value of assumed liabilities. Asarco discloses in the joint disclosure statement its view that the recovery, if any, against such potential claims may be approximately $100 million. Accordingly, if we are not selected as the winning plan proponent, we will likely be the defendant of breach of contract claims demanding the payment of significant damages. Any adverse judgment or settlement would likely have a material adverse effect on our business, results of operations, financial condition and prospects. Our current agreement with Asarco provides for the settlement and release of any potential claims against us arising out of our original May 30, 2008 agreement, but that agreement will only be effective if the reorganization plan proposed by Asarco and sponsored by Sterlite USA is confirmed.

     If we are successful in acquiring Asarco, we will be subject to a number of risks, including risks relating to the size of the acquisition, the acquisition price, our ability to integrate the acquired business, an increase in the geographic scope of our operations that exposes us to extensive laws and regulations in the United States and our ability to retain the senior management team and key employees of the acquired business.

     If we are selected as the winning plan proponent for Asarco and our proposed acquisition of Asarco is completed, we will be subject to a number of additional risks that could adversely affect our business, financial condition and results of operations, which may in turn affect the value of our common stock after the closing of the transaction. These risks include the following:

	•		It is a substantial acquisition and shareholders cannot be certain that we are paying an appropriate price for Asarco. The Asarco acquisition will be the largest acquisition in the history of our company, representing a significant investment of our company’s resources. While we have performed what we believe to be adequate diligence with respect to Asarco, as we are purchasing Asarco out of bankruptcy, the information available to us has been more limited than might otherwise be the case. In addition, as with any acquisition, we cannot be certain that we have adequately accounted for all of the costs and risks of the acquired business in the price we have negotiated. Similarly, our shareholders cannot be certain that the price we are paying is an appropriate price. Further, there can be no assurance the price we have currently negotiated will be the final purchase price for the acquisition as the purchase consideration has been increased previously, from $1.7 billion to $1.87 billion, mainly in line with expected changes in working capital at closing, as agreed on June 12, 2009, and may be increased in the future.
	•		Integration of Asarco’s business. We may be unsuccessful in integrating Asarco’s business and operations with our own in an effective and efficient manner, which may cause us to fail to achieve the anticipated benefits of the acquisition and harm our business. The difficulties of combining the two companies’ businesses potentially will include, among other things:

	¡		the necessity of coordinating geographically separated organizations and addressing possible differences in corporate cultures and management philosophies, and the integration of certain operations following the transaction will require the dedication of significant management resources, which may temporarily distract management’s attention from the day-to-day business of our company;
	¡		any inability of our management to integrate successfully the operations of Asarco or to adapt to the copper mining, smelting and refining business in the United States; and
	¡		any inability of our management to cause best practices to be applied to the business we are acquiring.

	•		The geographic scope of our business will be increased to include the United States. Asarco’s business and assets are located in the United States. If the acquisition is completed, we will be subject to extensive laws and regulations governing exploration, development, production, occupational health, mine safety, toxic substances, waste disposal, protection and remediation of the environment, protection of endangered and protected species, and other related matters in the United States, including the US Federal Clean Air Act and the US Federal Resource Conservation and Recovery Act, as well as local and state laws in the states of Arizona and Texas. Our business will also become subject to political, economic and social conditions in the United States. Because we presently have no significant operations in the United States, these risks are different from and in addition to those to which our business has historically been exposed.
	•		We may be unsuccessful in retaining the senior management team and other key employees at Asarco. The success of our acquisition will depend in part upon our ability to retain the senior management team and other key employees at Asarco. Competition for qualified personnel can be very intense. In addition, senior management and key employees may depart because of issues relating to the uncertainty or difficulty associated with the integration of Asarco or a desire not to remain with our company. Accordingly, no assurance can be given that we will be able to retain senior management and key employees at Asarco to the extent necessary to successfully integrate its business with ours and make the acquired business profitable.

The Government of India may allege a breach of a covenant by our subsidiary SOVL and seek to exercise a put or call right with respect to shares of HZL, which may result in substantial litigation and serious financial harm to our business, results of operations, financial condition and prospects.

     It has been reported in the media that the Government of India is considering asserting that our subsidiary, SOVL, has breached a covenant under the shareholders’ agreement between the Government of India and SOVL with respect to HZL. Under the terms of the shareholders’ agreement, SOVL agreed that it would take all steps to ensure that HZL would implement a 100,000 tpa greenfield zinc smelter plant at Kapasan, Chittorgarh District, State of Rajasthan, or the Kapasan Project, within a period of five years from April 11, 2002. The shareholders’ agreement further provided that if SOVL, within a period of one year from April 11, 2002, reviewed the feasibility of the Kapasan Project and determined that the Kapasan Project was not in the best economic interests of HZL, which determination was required to be supported by the report of an independent expert, and the board of directors of HZL, in the exercise of such board’s good faith and reasonable judgment, confirmed that in light of the then existing circumstances it was not in the best economic interest of HZL to implement the Kapasan Project, then SOVL would not be obligated to ensure that HZL implement the Kapasan Project.

     By a letter dated April 4, 2003, the managing director of HZL notified the Government of India that the board of directors of HZL had reviewed its expansion plans and had approved a brownfield expansion of its smelting capacity at Chanderiya by setting up a new 170,000 tpa zinc smelter. Furthermore, the April 4, 2003 letter informed the Government of India that the Kapasan Project would not be undertaken and that considering the very significant cost advantage of undertaking the brownfield expansion at Chanderiya as compared to the Kapasan Project, the report of an independent expert may not be required. Although the expansion at Chanderiya was reviewed and approved by the HZL board of directors at its meetings held on January 24, 2003, April 16, 2003 and April 25, 2003, the minutes of the HZL board meetings did not reflect that a review of the feasibility of the Kapasan Project had occurred within a period of one year from April 11, 2002, that the HZL board had, in its good faith and reasonable judgment, confirmed that the Kapasan Project was not in the best economic interests of HZL, or that the report of an independent expert would not be obtained. Over two years later, in a letter dated November 10, 2005, the Government of India responded to the letter sent by HZL on April 4, 2003 and requested that HZL provide it with a copy of the report of the independent expert on the basis of which SOVL concluded that the Kapasan Project was not in the best economic interest of HZL. The Government of India also requested a copy of the minutes of the meeting of the HZL board of directors related to the decision not to pursue the Kapasan Project. In a letter dated December 1, 2005, the Government of India repeated its request for the documentation specified in its November 10, 2005 letter to HZL. HZL responded to the Government of India in a letter dated December 7, 2005 and provided extracts of the minutes of the HZL board meetings held on January 24, 2003, April 16, 2003 and April 25, 2003, related to the review and approval of the brownfield expansion at Chanderiya. HZL did not obtain a report of an independent expert related to the Kapasan Project, and accordingly did not provide such a report to the Government of India. Since December 7, 2005, we have not received any further communication from the Government of India in relation to the Kapasan Project or a notice asserting that SOVL has breached the covenant under the provisions of the shareholders’ agreement between the Government of India and SOVL with respect to HZL.

     If the Government of India claims that SOVL has breached the covenant related to the Kapasan Project under the shareholders’ agreement between the Government of India and SOVL resulting in litigation, and it was determined that SOVL had breached such covenant triggering an event of default, the Government of India, under the terms of the shareholders’ agreement, may become entitled to the right, which is exercisable at any time within 90 days of the day it became aware of such event of default, to either sell any or all of the shares of HZL held by the Government of India to SOVL at a price equivalent to 150% of the market value of such shares, or purchase any or all of the shares of HZL held by SOVL at a price equivalent to 50% of the market value of such shares. Based solely on the closing market price of HZL’s shares on the National Stock Exchange of India Limited, or the NSE, on July 3, 2009 of Rs. 602.75 ($11.85) per share, if the Government of India were determined to have, and were to exercise, a right to sell all of its 124,795,059 shares of HZL at a price equivalent to 150% of their market value, we would be required to pay Rs. 112,830 million ($2,218.0 million) for those shares, and if the Government of India were determined to have, and were to exercise, a right to purchase all of the 274,315,431 shares of HZL held by SOVL at a price equivalent to 50% of their market value, we would receive Rs. 82,672 million ($1,625.2 million) for those shares.

     If the Government of India were to assert that an event of default occurred and seek to exercise a put or call right with respect to shares of HZL, we may face expensive and time-consuming litigation over the matter, uncertainty as to the future of our zinc business, an inability to exercise our call option to acquire the Government of India’s remaining 29.5% ownership interest in HZL and the possibility of serious financial harm if we were unsuccessful in litigation, any of which may have a material adverse effect on our business, results of operations, financial condition and prospects.

Our option to purchase the Government of India’s remaining shares in HZL may be challenged.

     A public interest litigation was filed in 2003 against the Government of India, HZL, SOVL and others, challenging the Government of India’s divestment of 64.9% of HZL to Sterlite. The petitioner in this public interest litigation has since filed an application to withdraw the case and, as of May 13, 2009, the Supreme Court of India has allowed the case to be withdrawn.

     There can be no assurance that a challenge will not be made to any future divestment of shares in HZL by the Government of India. In addition, there can be no assurance that the Government of India will not undertake a public offer of its shares, which it has the right to do, and complete the public offer prior to the exercise of our call option. Even if we seek to exercise our call option to acquire the Government of India’s remaining ownership interest in HZL, there can be no assurance that such an acquisition by us will not be challenged, including a challenge on the same grounds as those raised in respect of our exercise of the BALCO call option discussed below. Any adverse ruling may preclude or delay us from exercising our option to increase our ownership interest in HZL, and such outcome would be likely to have a material adverse effect upon our operational flexibility, results of operations and prospects. Alternatively, we may only be able to acquire the Government of India’s remaining ownership interest in HZL at a price in excess of the market value or fair value of those shares, which could have a material adverse effect on our results of operations and financial condition. See “Item 4. Information on the Company — B. Business Overview — Our Business — Options to Increase Interests in HZL and BALCO.”

The Government of India has disputed our exercise of the call option to purchase its remaining 49.0% ownership interest in BALCO.

     Under the terms of the shareholders’ agreement between us and the Government of India, we were granted an option to acquire the shares of BALCO held by the Government of India at the time of exercise. We exercised this option on March 19, 2004. However, the Government of India has contested the purchase price and validity of the option. As negotiations for an amicable resolution were unsuccessful, on direction of the court, arbitrators were appointed by the parties, as provided for under the terms of the shareholders’ agreement. Arbitration proceedings commenced on February 16, 2009 and we submitted our claim statement to the arbitrators. The Government of India has been directed by the arbitrators to file its reply to our claim statement by July 10, 2009. The next hearing on this matter has been scheduled for August 26, 2009. Notwithstanding the outcome of the dispute, the Government of India retains the right and has expressed an intention to sell 5.0% of BALCO to BALCO employees. See “Item 4. Information on the Company — B. Business Overview — Our Business — Options to Increase Interests in HZL and BALCO.”

     There is no assurance that the outcome of the arbitration proceedings will be favorable to us. In the event of an unfavorable outcome, we may be unable to purchase the Government of India’s remaining 49.0% stake in BALCO or may be required to pay a higher purchase price, which may adversely affect our operational flexibility, results of operations and prospects.

Appeal proceedings in the High Court of Bombay have been brought by the Securities and Exchange Board of India, or SEBI, to overrule a decision by the Securities Appellate Tribunal, or SAT, that we have not violated regulations prohibiting fraudulent and unfair trading practices.

     In April 2001, SEBI ordered prosecution proceedings to be brought against us, alleging that we have violated regulations prohibiting fraudulent and unfair trading practices and also passed an order prohibiting us from accessing the capital markets for a period of two years. This order of SEBI was overruled by the SAT on October 22, 2001 on the basis of a lack of sufficient material evidence to establish that we had, directly or indirectly, engaged in market manipulation and that SEBI had exercised its jurisdiction incorrectly in prohibiting us from accessing the capital markets. On November 9, 2001, SEBI appealed to the High Court of Bombay. A hearing date has not been fixed.

     SEBI’s order was based on its finding that we had manipulated the price of our shares in connection with our proposed acquisition of shares in Indian Aluminium Company Limited, or INDAL, and our proposed open offer to the shareholders of INDAL in 1998. SEBI also alleged that MALCO, our associate company, provided funds to an entity we allegedly controlled to enable its associate to purchase our shares, as part of a connected price manipulation exercise.

     In the event the High Court of Bombay decides the above matters unfavorably against us, we may be prohibited from accessing the capital markets for a period of two years and may become liable to pay penalties. Further, certain of our key officers and directors may be imprisoned, which would have an adverse effect on our business and operations.

     In addition to the civil proceedings, SEBI also initiated criminal proceedings before the Court of the Metropolitan Magistrate, Mumbai, against us, our Non-Executive Chairman, Mr. Anil Agarwal, Mr. Tarun Jain, one of our directors until March 31, 2009, and the chief financial officer of MALCO at the time of the alleged price manipulation. When SEBI’s order was overturned in October 2001, we filed a petition before the High Court of Bombay to quash those criminal proceedings on the grounds that the SAT had overruled SEBI’s order on price manipulation. An order has been passed by the High Court of Bombay in our favor, granting an interim stay of the criminal proceedings. The matter is pending at the stage of final arguments. The next date of hearing has not yet been notified. If we and the individuals named in the criminal proceedings do not prevail before the High Court of Bombay, our business and operations may be materially and adversely affected.

We are involved in a number of litigation matters, both civil and criminal in nature, and any final judgments against us could have a material adverse effect on our business, results of operations, financial condition and prospects.

     We are involved in a variety of litigation matters, including matters relating to alleged violations of environmental and tax laws and alleged price manipulation of our equity shares on the NSE and the Bombay Stock Exchange Limited, or the BSE. A final judgment against us or our directors in one or more of these disputes may result in damages being awarded that we must pay or injunctions against us, or criminal proceedings being instituted against us or our directors, which may require us to cease or limit certain of our operations and have a material adverse effect on our business, results of operations, financial condition and prospects. For a detailed discussion of material litigation matters pending against us, see “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal Proceedings.”

Defects in title or loss of any leasehold interests in our properties could limit our ability to conduct operations on our properties or result in significant unanticipated costs.

     Our ability to mine the land on which we have been granted mining lease rights is dependent on the surface rights that we acquire separately and subsequently to the grant of mining lease rights and generally over only part of the land leased. Additional surface rights may be negotiated separately with landowners, though there is no guarantee that these rights will be granted. Although we expect to be able to continue to obtain additional surface rights in the future in the ordinary course, any delay in obtaining or inability to obtain surface rights could negatively affect our financial condition and results of operations.

     A significant part of our mining operations are carried out on leasehold properties. Our right to mine some of our reserves may be materially and adversely affected if defects in title or boundary disputes exist or if a lease expires and is not renewed or if a lease is terminated due to our failure to comply with its conditions. Any challenge to our title or leasehold interests could delay our mining operations and could ultimately result in the loss of some or all of our interests. Also, in any such case, the investigation and resolution of title issues would divert management’s time from our business and our results of operations could be adversely affected. Further, if we mine on property that we do not own or lease, we could incur liability for such mining.

     We can also be subject to claims challenging our title to our non-mine properties. For example, BALCO is currently engaged in a dispute with the State Government of Chhattisgarh regarding alleged encroachment on state-owned land at its Korba facility. On February 6, 2009, a single bench of the Chhattisgarh High Court held that BALCO is in legal possession of the land and is required to pay premium and rent on the land according to the rates offered by the Government of Chhattisgarh in 1968. The State Government of Chhattisgarh has challenged this order in an appeal before the division bench of the Chhattisgarh High Court. See “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal Proceedings.”

Our operations are subject to extensive governmental and environmental regulations which have in the past and could in the future cause us to incur significant costs or liabilities or interrupt or close our operations, any of which events may adversely affect our results of operations.

     Numerous governmental permits, approvals and leases are required for our operations as the industries in which we operate and seek to operate are subject to numerous laws and extensive regulation by national, state and local authorities. Failure to comply with any laws or regulations or to obtain or renew the necessary permits, approvals and leases may result in the loss of the right to mine or operate our facilities, the assessment of administrative, civil or criminal penalties, the imposition of cleanup or site restoration costs and liens, the imposition of costly compliance procedures, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement measures that could have the effect of closing or limiting production from our operations. In addition, a significant number of approvals are required from government authorities for metals and mining and commercial power generation projects, and any such approvals may be subject to challenge. We are currently primarily subject to laws and regulations relating to our operations in India and Australia, but if our announced agreement to purchase substantially all the operating assets of Asarco is completed, we will also be subject to extensive laws and regulations governing exploration, development, production, occupational health, mine safety, toxic substances, waste disposal, protection and remediation of the environment, protection of endangered and protected species, and other related matters in the United States, including the US Federal Clean Air Act and the US

Federal Resource Conservation and Recovery Act, as well as local and state laws in the states of Arizona and Texas. Our business, financial condition, results of operations and prospects may be materially and adversely affected by any of a number of significant legal and regulatory matters to which we are subject. See “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal Proceedings” and “Item 4. Information on the Company — B. Business Overview — Our Business — Regulatory Matters.”

     The costs, liabilities and requirements associated with complying with existing and future laws and regulations may be substantial and time-consuming and may delay the commencement or continuation of exploration, mining or production activities. For example, a gas leak at HZL’s sulphuric acid plant in Chanderiya caused the Rajasthan State Pollution Control Board to shut down the entire plant for a period of 12 days in November 2005. Environmental regulations may also subject us to substantial costs and liabilities for the closure of our mines and other facilities.

     New legislation or regulations may be adopted in the future that may materially and adversely affect our operations, our cost structure or our customers’ ability to use our products. New legislation or regulations, or different or more stringent interpretation or enforcement of existing laws and regulations, may also require us or our customers to change operations significantly or incur increased costs, which could have a material adverse effect on our results of operations or financial condition.

Any increase in competition in our target markets could result in lower prices or sales volumes of the copper, zinc and aluminum products we produce, which may cause our profitability to suffer.

     There is substantial competition in the copper, zinc and aluminum industries, both in India and internationally, and we expect this to continue. Our competitors in the copper, zinc and aluminum markets outside India include major international producers. Certain of these international producers have significantly larger scale of operations, greater financial resources and manufacturing and technological capabilities, more established and larger marketing and sales organizations and larger technical staffs than we do.

     In the Indian copper market, we compete primarily against Hindalco Industries Limited, or Hindalco, the government-owned Hindustan Copper Limited, or Hindustan Copper, and imports. In the Indian zinc market, we compete primarily against imports. In the Indian aluminum market, we compete primarily against National Aluminium Company Limited, or NALCO, a Government of India enterprise, Hindalco, MALCO, a subsidiary of Vedanta, and imports. Many of our competitors are also expanding their production capacities. If domestic demand is not sufficient to absorb these increases in capacity, our competitors could reduce their prices, which may force us to do the same or cause us to lose market share or sell our products in overseas markets at lower prices. If our announced agreement to purchase substantially all the operating assets of Asarco is completed, we will compete primarily against Freeport-McMoRan Copper & Gold Inc., or Freeport-McMoRan, Nexans Energy USA Inc., Caraíba Metais S.A., Southwire Company and Grupo México in the United States and international copper markets.

     The end-user markets for our metal products are highly competitive. Copper competes with a number of other materials, including aluminum and plastics. Zinc metal faces competition as a result of substitution of materials, including aluminum, stainless steel and other alloys, plastics and other materials being substituted for galvanized steel and epoxies, paints and other chemicals being used to treat steel in place of galvanization in the construction market. Aluminum competes with materials such as plastic, steel, iron, glass and paper, among others, for various applications. In the past, customers have demonstrated a willingness to substitute other materials for copper, zinc and aluminum. The willingness of customers to accept substitutes could have a material adverse effect on our business, results of operations and prospects.

Our insurance coverage may prove inadequate to satisfy future claims against us.

     We maintain insurance which we believe is typical in our industry in India and Australia and in amounts which we believe to be commercially appropriate. Nevertheless, we may become subject to liabilities, including liabilities for pollution or other hazards, against which we have not insured adequately or at all or cannot insure. Our insurance policies contain exclusions and limitations on coverage. In addition, our insurance policies may not continue to be available at economically acceptable premiums, or at all. As a result, our insurance coverage may not cover the extent of any claims against us, including for environmental or industrial accidents or pollution. See “Item 4. Information on the Company — B. Business Overview — Our Business — Insurance.”

Third party interests in our subsidiary companies and restrictions due to stock exchange listings of our subsidiary companies will restrict our ability to deal freely with our subsidiaries, which may have a material adverse effect on our operations.

     We do not wholly own all of our operating subsidiaries. Although we have management control of HZL and BALCO, and we intend to increase our ownership interests in both, each of these companies has other shareholders who, in some cases, hold substantial interests in them. The minority interests in our subsidiaries and the listing of HZL on the NSE and the BSE may limit our ability to increase our equity interests in these subsidiaries, combine similar operations, utilize synergies that may exist between the operations of different subsidiaries or reorganize the structure of our business in a tax effective manner. For example, the Government of India, which is a minority shareholder in each of HZL and BALCO, has entered into shareholders’ agreements for HZL and BALCO and it is a term of the shareholders’ agreements that HZL and BALCO may not grant loans to companies which are under the same management as HZL or BALCO, as the case may be, without the prior consent of the Government of India. In addition, the Government of India has the right to appoint directors and has veto power over certain management decisions. These restrictions on our ability to deal freely with our subsidiaries caused by the minority interests may have a material adverse effect on our results of operations or financial condition as our ability to move funds among the different parts of our business will be restricted and we will be unable to access cash held in HZL or BALCO except through dividend payments by HZL and BALCO which would be payable to all shareholders. This will limit our ability to make payments of interest and principal in respect of financial liabilities and obligations which we have undertaken on behalf of our consolidated group of companies. Further, pursuant to the requirements for the continued listing of the shares of HZL on the NSE and BSE, in the event we exercise our call option to acquire the Government of India’s remaining ownership interest in HZL, we would have to either divest a portion of our shareholding in HZL within a period of one year from the acquisition such that the minimum public shareholding requirement of 10% is complied with or delist HZL’s shares from the NSE and BSE by making an offer to purchase the equity shares held by the remaining HZL’s shareholders at a price determined by way of a reverse book-build process, which could adversely impact our financial condition and results of operations. See “Item 4. Information on the Company — B. Business Overview — Our Business — Options to Increase Interests in HZL and BALCO.”

We may be liable for additional taxes if the tax holidays, exemptions and tax deferral schemes which we currently benefit from expire without renewal, and the benefits of the tax holidays, exemptions and tax deferral schemes are limited by the minimum alternative tax, or MAT.

     We currently benefit from significant tax holidays, exemptions and tax deferral schemes. These tax holidays, exemptions and tax deferral schemes are for limited periods. For example, HZL’s captive power plant at Debari benefits from tax exemptions on the profits generated from transfers of power to HZL’s other units, which are expected to generate substantial savings through fiscal 2013.

     The captive power plants in our copper business benefit from tax exemptions on the profits generated from transfers of power to the smelter which are expected to generate savings through fiscal 2014. These tax incentives resulted in a decrease in our effective tax rate compared to the tax rate that we estimate would have applied if these incentives had not been available. Our copper refinery and copper rod plant at Tuticorin and our two hydrometallurgical zinc smelters at Chanderiya with a capacity of 210,000 tpa each have been awarded the status of export oriented units, under which we are eligible for tax exemptions on raw materials, capital goods procured and finished goods sold until June 1, 2011. There can be no assurance that these tax holidays or exemptions will be renewed when they expire or that any applications we make for new tax holidays or exemptions will be successful. Although tax exemptions for export oriented units have been extended in the Government of India’s Budget for 2008-2009, any further extensions would be at the discretion of the new Government of India. The Government of India’s Budget for 2009-2010 has recently been presented by the new Government of India which proposed that the tax exemptions for export oriented units be extended by one more year. The Budget for 2009-2010 is pending the approval of the Indian Parliament. Accordingly, there can be no assurance that such tax exemptions will be extended. Similarly, the tax exemptions for captive power plants expire on March 31, 2010 and unless extended, new captive power plants will not be eligible for such tax exemptions. Captive power plants will continue to have the benefit of any existing tax exemptions after March 31, 2010 until such tax exemptions expire. The expiry or loss of existing tax holidays, exemptions and tax deferral schemes or the failure to obtain new tax holidays, exemptions or tax deferral schemes will likely increase our tax obligations and any increase could have a material adverse effect on our financial condition or results of operations.

     In addition, we are subject to a MAT which sets a minimum amount of tax that must be paid each year based on our book profits. The effective MAT rate is 11.3% as of the date of this annual report. The MAT prevents us from taking full advantage of any tax holidays, exemptions or tax deferral schemes that may be available to us.

Shortage of skilled labor in the metals and mining industry could increase our costs and limit our ability to maintain or expand our operations, which could adversely affect our results of operations.

     Mining and metal refining, smelting and fabrication operations require a skilled and experienced labor force. If we experience a shortage of skilled and experienced labor, our labor productivity could decrease and costs could increase, our operations may be interrupted or we may be unable to maintain our current production or increase our production as otherwise planned, which could have a material adverse effect on our results of operations, financial condition and business prospects.

Risks Relating to Our Industry

Commodity prices and the copper TcRc may be volatile, which would affect our revenue, results of operations and financial condition.

     Historically, the international commodity prices for copper, zinc and aluminum and the prevailing market TcRc rate for copper have been volatile and subject to wide fluctuations in response to relatively minor changes in the supply of, and demand for, such commodities, market uncertainties, the overall performance of world or regional economies and the related cyclicality in industries we directly serve and a variety of other factors. For example, due at least in part to the adverse global economic conditions in the last year, between March 31, 2008 and March 31, 2009, the average LME prices of copper, zinc and aluminum decreased by 22.4%, 47.8% and 14.8%, respectively. Between March 31, 2009 and June 30, 2009, the average LME prices of copper, zinc and aluminum decreased by 20.5%, 5.6% and 33.4%, respectively. Commodity prices and the market TcRc rate for copper may continue to be volatile and subject to wide fluctuations in the future. A decline in the prices we receive for our copper, zinc or aluminum metals and in the market TcRc rate for copper would adversely affect our revenue and results of operations, and a sustained drop would have a material adverse effect on our revenue, results of operations and financial condition.

Our ore reserves are estimates based on a number of assumptions, any changes to which may require us to lower our estimated reserves.

     The ore reserves stated in this annual report are estimates and represent the quantity of copper, zinc, lead and bauxite that we believed, as of March 31, 2009, could be mined, processed, recovered and sold at prices sufficient to cover the estimated future total costs of production, remaining investment and anticipated additional capital expenditures. These estimates are subject to numerous uncertainties inherent in estimating quantities of reserves and could vary in the future as a result of actual exploration and production results, depletion, new information on geology and fluctuations in production, operating and other costs and economic parameters such as metal prices, smelter treatment charges and exchange rates, many of which are beyond our control. As a result, you should not place undue reliance on the reserve data contained in this annual report. In the event that any of these assumptions turn out to be incorrect, we may need to revise our ore reserves downwards and this may adversely affect our life-of-mine plans and consequently the total value of our mining asset base, which could increase our costs and decrease our profitability.

Changes in tariffs, royalties, customs duties and government assistance may reduce our Indian market domestic premium, which would adversely affect our profitability and results of operations.

     Copper, zinc and aluminum are sold in the Indian market at a premium to the international market prices of these metals due to tariffs payable on the import of such metals. The Government of India may reduce or abolish customs duties on copper and aluminum in the future, although the timing and extent of such reductions cannot be predicted. As we sell the majority of the commodities we produce in India, any reduction in Indian tariffs on imports will decrease the premiums we receive in respect of those sales. Our profitability is dependent to a small extent on the continuation of import duties and any reduction would have an adverse effect on our results of operations and financial condition.

     We pay royalties to the State Governments of Chhattisgarh and Rajasthan based on our extraction of bauxite and lead-zinc ore, respectively, and to the State Government of Tasmania in Australia based on our extraction of copper ore. Most significant of these is the royalty that HZL is required to pay to the State Government of Rajasthan, where all of HZL’s mines are located, at a rate of 6.6% of the LME zinc metal price payable on the zinc metal contained in the ore produced and 5.0% of the LME lead metal price payable on the lead metal contained in the ore produced. The royalties we pay are subject to change. Any upward revision to the royalty rates being charged currently may adversely affect our profitability. Additionally, the Department of Mines and Geology of the State of Rajasthan has raised additional demands for payment through several show cause notices to HZL for mining minerals associated with lead and zinc such as cadmium and silver. Any upward revision to the royalty rates being charged currently or payment of additional royalty for mining of associated minerals may adversely affect our profitability. See “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal Proceedings — Demands against HZL by Department of Mines and Geology.”

     Indian exports of copper, aluminum and zinc receive assistance premiums from the Government of India, which have been reduced since 2002. These export assistance premiums have been reduced in recent years and may be further reduced in the future. Any reduction in these premiums will decrease the revenue we receive from export sales and may have a material adverse effect on our results of operations or financial condition. See “Item 5. Operating and Financial Review and Prospects — Factors Affecting Results of Operations — Government Policy.”

Regulation of greenhouse gas emissions effects and climate change issues may adversely affect our operations and markets.

     Our mining, smelting and refining operations are energy intensive and depend heavily on electricity, thermal coal, diesel fuel and fuel oil. In addition, our commercial power generation business depends on coal-fired power plants. Many scientists believe that emissions from the combustion of carbon-based fuels contribute to greenhouse effects and therefore potentially to climate change.

     A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to the potential impacts of climate change. International treaties or agreements may also result in increasing regulation of greenhouse gas emissions, including the introduction of carbon emissions trading mechanisms, in jurisdictions in which we operate. Any such regulation will likely result in increased future energy and compliance costs. From a medium and long-term perspective, we are likely to see an increase in costs relating to our assets that emit significant amounts of greenhouse gases as a result of these regulatory initiatives. These regulatory initiatives will be either voluntary or mandatory and may impact our operations directly or through our suppliers or customers. Assessments of the potential impact of future climate change regulation are uncertain, given the wide scope of potential regulatory change in countries in which we operate.

     The potential physical impacts of climate change on our operations are highly uncertain, and would be particular to the geographic circumstances. These may include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperatures. These effects may adversely impact the cost, production and financial performance of our operations.

Risks Relating to Our Relationship with Vedanta

We are controlled by Vedanta and your ability to influence matters requiring shareholder approval will be extremely limited.

     We are a majority-owned and controlled subsidiary of Vedanta. Vedanta is in turn 59.4%-owned by Volcan Investments Limited, or Volcan. Volcan is a holding company 100% owned and controlled by the Anil Agarwal Discretionary Trust. Onclave PTC Limited, or Onclave, is the trustee of the Anil Agarwal Discretionary Trust and controls all voting and investment decisions of the Anil Agarwal Discretionary Trust. As a result, shares beneficially owned by Volcan may be deemed to be beneficially owned by the Anil Agarwal Discretionary Trust and, in turn, by Onclave. The beneficiaries of the Anil Agarwal Discretionary Trust are members of the Agarwal family, who are related to Mr. Anil Agarwal. Mr. Anil Agarwal, the Executive Chairman of Vedanta and our Non-Executive Chairman, as protector of the Anil Agarwal Discretionary Trust, may be deemed to have deemed beneficial ownership of shares that are beneficially owned by the Anil Agarwal Discretionary Trust. Vedanta, Volcan, the Anil Agarwal Discretionary Trust, Onclave and Mr. Anil Agarwal are parties to a relationship agreement that seeks to enable Vedanta to carry on its business independently of Volcan, its direct and indirect shareholders, and their respective associates, or collectively, the Volcan Parties. See “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Related Parties — Vedanta.” However, we cannot assure you that the relationship agreement will be effective at insulating Vedanta, and in turn us, from being influenced or controlled by the Volcan Parties, which influence or control could have a material adverse effect on the holders of our equity shares and ADSs.

     As long as Vedanta, through its subsidiaries, owns a majority of our outstanding equity shares, Vedanta will have the ability to control or influence significant matters requiring board approval and to take shareholder action without the vote of any other shareholder, and the holders of our equity shares and ADSs will not be able to affect the outcome of any shareholder vote. Vedanta will have the ability to control all matters affecting us.

     In the event Vedanta ceases to be our majority shareholder, we will be required to immediately repay some of our outstanding long-term debt.

     Vedanta’s voting control may discourage transactions involving a change of control of us, including transactions in which holders of our equity shares and ADSs might otherwise receive a premium therefor over the then-current market prices. Vedanta is not prohibited from selling a controlling interest in us to a third party and may do so without the approval of holders of our equity shares and ADSs and without providing for a purchase of our equity shares or ADSs. Accordingly, our equity shares and ADSs may be worth less than they would be if Vedanta did not maintain voting control over us.

Vedanta may decide to allocate business opportunities to other members of the Vedanta group instead of to us, which may have a material adverse effect on our business, results of operations, financial condition and prospects.

     Vedanta’s control of us means it can determine the allocation of business opportunities among us, itself and its other subsidiaries. For example, as of June 30, 2009, Vedanta owned 79.4% of Konkola Copper Mines plc, or KCM, an integrated copper producer in Zambia, 93.6% of MALCO, an aluminum metals and mining company in India with which we compete, and 70.5% of Vedanta Aluminium Limited, or Vedanta Aluminium, an alumina refining and aluminum smelting business. As Vedanta controls KCM, MALCO, Vedanta Aluminium and us, it determines the allocation of business opportunities among, as well as strategies and actions of, KCM, MALCO, Vedanta Aluminium and us. Vedanta may determine to have KCM, MALCO, Vedanta Aluminium or another of its subsidiaries, instead of us, pursue business opportunities in the copper, zinc, aluminum or commercial power generation business, or any other business, or cause such companies or us to undertake corporate strategies, the effect of which is to benefit such companies instead of us and which could be detrimental to our interests. If Vedanta were to take any such actions, our business, results of operations, financial condition and prospects could be materially and adversely affected and the value of our equity shares and the ADSs may decline.

We have issued several guarantees as security for the obligations of certain of our subsidiaries and other companies within the Vedanta group and we will have liability under these guarantees in the event of any failure by such entities to perform their obligations, which could have a material adverse effect on our results of operations and financial condition.

     We have issued several guarantees in respect of the obligations of certain of our subsidiaries and other companies within the Vedanta group, including guarantees issued as security for loan obligations, credit facilities or issuance of customs duty bonds for import of capital equipment at concessional rates of duties. Our outstanding guarantees cover obligations aggregating Rs. 47,160 million ($927.1 million) as of March 31, 2009, the liabilities for which have not been recorded in our consolidated financial statements. We will have a liability in the event that any of these entities fails to perform its obligations under the loan agreements, credit facilities or bonds, which could have a material adverse effect on our results of operations and financial condition. See “Item 5. Operating and Financial Review and Prospects — Guarantees.”

Any disputes that arise between us and Vedanta or other companies in the Vedanta group could harm our business operations.

     Disputes may arise between Vedanta or other companies in the Vedanta group and us in a number of areas, including:

	•		intercompany agreements setting forth services and prices for services between us and Vedanta or other companies in the Vedanta group;
	•		business combinations involving us;
	•		sales or distributions by Vedanta of all or any portion of its ownership interest in us; or
	•		business opportunities that may be attractive to us and Vedanta, or other companies in the Vedanta group.

     We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party.

     Our agreements with Vedanta and other companies in the Vedanta group may be amended upon agreement between the parties. As we are controlled by Vedanta, Vedanta may require us to agree to amendments to these agreements that may be less favorable to us than the original terms of the agreements.

Some of our directors and executive officers may have conflicts of interest because of their ownership of Vedanta shares, options to acquire Vedanta shares and positions with Vedanta.

     Some of our directors and executive officers own Vedanta shares and options to purchase Vedanta shares, including through their continued participation in the Vedanta Long-Term Incentive Plan 2003, or the Vedanta LTIP. In addition, some of our directors and executive officers are directors or executive officers of Vedanta. Ownership of Vedanta shares and options to purchase Vedanta shares and the presence of an executive officer of Vedanta on our board of directors could create, or appear to create, potential conflicts of interest and other issues with respect to their fiduciary duties to us when our directors and officers are faced with decisions that could have different implications for Vedanta than for us.

     In addition, we are a party to a shared services agreement with Vedanta and certain other subsidiaries of Vedanta under which our management’s time and services are shared between the Vedanta group and us. As a result, our management, including our senior management, is not solely focused on our business and may be distracted by, or have conflicts as a result of, the demands of Vedanta or other businesses within the Vedanta group, which may materially and adversely affect our business, results of operations and financial condition. For more information on the shared services agreement, see “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Related Transactions.”

Risks Relating to Investments in Indian Companies, Global Economic Conditions and International Operations

A substantial portion of our assets and operations are located in India and we are subject to regulatory, economic, social and political uncertainties in India.

     We are incorporated in India. Our primary operating subsidiaries, HZL, BALCO and Sterlite Energy, as well as our associate company, Vedanta Aluminium, are also incorporated in India. A substantial portion of our assets and employees are located in India and we intend to continue to develop and expand our facilities in India. Consequently, our financial performance and the market price of our ADSs will be affected by changes in exchange rates and controls, interest rates, changes in government policies, including taxation policies, social and civil unrest and other political, social and economic developments in or affecting India.

     The Government of India has exercised and continues to exercise significant influence over many aspects of the Indian economy. Since 1991, successive Indian governments have pursued policies of economic liberalization, including by significantly relaxing restrictions on the private sector. Nevertheless, the role of the Indian central and state governments in the Indian economy as producers, consumers and regulators has remained significant and we cannot assure you that such liberalization policies will continue. The present government, formed in May 2004 and re-elected in May 2009, has taken initiatives that support the continued economic liberalization policies that have been pursued by previous governments. The present government continues to be a multiparty coalition and therefore there is no assurance that it will be able to generate sufficient cross-party support to implement its liberalization policies. The rate of economic liberalization could change, and specific laws and policies affecting metals and mining companies, foreign investments, currency exchange rates and other matters affecting investment in India could change as well. Further, protests against privatizations and government corruption scandals, which have occurred in the past, could slow the pace of liberalization and deregulation. Given the changes in government policy on divestments, there can be no assurance that any of the proposed privatizations which we may be interested in pursuing will be implemented or completed in the near future, or at all. A significant change in India’s policy of economic liberalization and deregulation could adversely affect business and economic conditions in India generally and our business in particular if new restrictions on the private sector are introduced or if existing restrictions are increased.

Recent global economic conditions have been unprecedented and challenging and have had, and continue to have, an adverse effect on the Indian financial markets and the Indian economy in general, which has had, and may continue to have, a material adverse effect on our business, our financial performance and the prices of our equity shares and ADSs.

     Recent global market and economic conditions have been unprecedented and challenging with tighter credit conditions and recession in most major economies continuing into 2009. Continued concerns about the systemic impact of potential long-term and wide-spread recession, energy costs, geopolitical issues, the availability and cost of credit, and the global housing and mortgage markets have contributed to increased market volatility and diminished expectations for western and emerging economies. In the second half of 2008, added concerns fueled by the United States government conservatorship of the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association, the declared bankruptcy of Lehman Brothers Holdings Inc., the United States government financial assistance to American International Group Inc., Citigroup Inc., Bank of America and other federal government interventions in the United States financial system led to increased market uncertainty and instability in both United States and international capital and credit markets. These conditions, combined with volatile oil prices, declining business and consumer confidence and increased unemployment, have contributed to volatility of unprecedented levels.

     As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. These factors have led to a decrease in spending by businesses and consumers alike, and corresponding decreases in global infrastructure spending and commodity prices. Continued turbulence in the United States and international markets and economies and prolonged declines in business consumer spending may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our customers, including our ability to refinance maturing liabilities and access the capital markets to meet liquidity needs. These global market and economic conditions have had, and continue to have, an adverse effect on the Indian financial markets and the Indian economy in general, which has had, and may continue to have, a material adverse effect on our business, our financial performance and the prices of our equity shares and ADSs. For example, in response to recent global economic conditions and a decline in commodity prices, we have ceased operations at one of our aluminum smelters at the Korba complex which may have a material adverse effect on our business and financial performance.

As the domestic Indian market constitutes the major source of our revenue, the downturn in the rate of economic growth in India due to the unprecedented and challenging global market and economic conditions, or any other such downturn for any other reason, will be detrimental to our results of operations.

     In fiscal 2009, approximately 66.1% of our net sales were derived from commodities that we sold to customers in India. The performance and growth of our business are necessarily dependent on the health of the overall Indian economy. Any downturn in the rate of economic growth in India, whether due to political instability or regional conflicts, economic slowdown elsewhere in the world or otherwise, may have a material adverse effect on demand for the commodities we produce. The Indian economy, following a period of significant growth, has more recently been adversely affected by the unprecedented and challenging global market and economic conditions that has caused and may continue to cause a downturn in the rate of economic growth in India. The Indian economy is also largely driven by the performance of the agriculture sector, which depends on the quality of the monsoon, which is difficult to predict. In the past, economic slowdowns have harmed manufacturing industries, including companies engaged in the copper, zinc and aluminum sectors, as well as the customers of manufacturing industries. The current economic slowdown has had and could continue to have, and any future slowdown in the Indian economy could have, a material adverse effect on our financial condition and results of operations.

Terrorist attacks and other acts of violence involving India or other neighboring countries could adversely affect our operations directly, or may result in a more general loss of customer confidence and reduced investment in these countries that reduces the demand for our products, which would have a material adverse effect on our business, results of operations, financial condition and cash flows.

     Terrorist attacks and other acts of violence or war involving India or other neighboring countries may adversely affect the Indian markets and the worldwide financial markets. In recent years, there have been incidents in and near India such as the November 2008 terrorist shootings and bombings in Mumbai, the July 2006 bombings of suburban trains in Mumbai and other terrorist attacks in Mumbai, Delhi and other parts of India, a terrorist attack on the Indian Parliament, troop mobilizations and military confrontations in Kashmir and along the India/Pakistan border and an aggravated geopolitical situation in the region. In addition, South Asia more generally has experienced instances of civil unrest and hostilities among neighboring countries from time to time. The occurrence of any of any such terrorist attacks or acts of violence or war in the future may disrupt communications, make travel more difficult, create the perception that investments in Indian companies involve a high degree of risk and result in a loss of business confidence, which could potentially lead to economic recession and generally have an adverse effect on our business, results of operations, financial condition and cash flows. Furthermore, if India were to become engaged in armed hostilities, particularly hostilities that were protracted or involved the threat or use of nuclear weapons, we might not be able to continue our operations. Our insurance policies for a substantial part of our business do not cover terrorist attacks or business interruptions from terrorist attacks or for other reasons. As a result, any terrorist attacks or other acts of violence or war or deterioration in international relations may result in investor concern regarding regional stability which could adversely affect the price of our equity shares and ADSs.

If natural disasters or environmental conditions in India, including floods and earthquakes, affect our mining and production facilities, our revenue could decline.

     Our mines and production facilities are spread across India, and our sales force is spread throughout the country. Natural calamities such as floods, rains, heavy downpours (such as heavy downpours in Tuticorin in 2008 which caused the closure of our Tuticorin facilities for 2-3 days, as well as the rains in Mumbai and other parts of the State of Maharashtra in 2005 and other states in 2006) and earthquakes could disrupt our mining and production activities and distribution chains and damage our storage facilities. Other regions in India have also experienced floods, earthquakes, tsunamis and droughts in recent years. In December 2004, Southeast Asia, including the eastern coast of India, experienced a massive tsunami, and in October 2005, the State of Jammu and Kashmir experienced an earthquake, both of which events caused significant loss of life and property damage. Substantially all of our facilities and employees are located in India and there can be no assurance that we will not be affected by natural disasters in the future. In addition, if there were a drought or general water shortage in India or any part of India where our operations are located, the Government of India or local, state or other authorities may restrict water supplies to us and other industrial operations in order to maintain water supplies for drinking and other public necessities which would cause us to reduce or close our operations.

Currency fluctuations among the Indian Rupee, the Australian dollar and the US dollar could have a material adverse effect on our results of operations.

     Although substantially all of our revenue is tied to commodity prices that are typically priced by reference to the US dollar, most of our expenses are incurred and paid in Indian Rupees or Australian dollars. In addition, in fiscal 2009, approximately 33.9% of our net sales were derived from commodities that we sold to customers outside India. The exchange rates between the Indian Rupee and the US dollar, and between the Australian dollar and the US dollar have changed substantially in recent years and may fluctuate substantially in the future. Our results of operations could be adversely affected if the US dollar depreciates against the Indian Rupee or Australian dollar or the Indian Rupee or Australian dollar appreciates against the US dollar. We seek to mitigate the impact of short-term movements in currency on our business by hedging most of our near-term exposures. Typically, most of our exposures with a maturity of less than two years are hedged completely. However, large or prolonged movements in exchange rates may have a material adverse effect on our results of operations and financial condition.

If India’s inflation worsens or the prices of oil or other raw materials rise, we may not be able to pass the resulting increased costs to our customers and this may adversely affect our profitability or cause us to suffer operating losses.

     India has recently experienced fluctuating wholesale price inflation compared to historical levels due to the global economic downturn. In addition, international prices of crude oil have recently experienced significant volatility, including a rise to historical highs that increased transportation costs followed more recently by a significant decline as global economic conditions have deteriorated. Inflation, increased transportation costs and an increase in energy prices generally, which may be caused by a rise in the price of oil, or an increase in the price of thermal coal in particular, could cause our costs for raw material inputs required for production of our products to increase, which would adversely affect our financial condition and results of operations if we cannot pass these added costs along to customers.

Stringent labor laws in India may adversely affect our profitability.

     India has stringent labor legislation that protects the interests of workers, including legislation that sets forth detailed procedures for dispute resolution and employee removal and imposes financial obligations on employers upon employee layoffs. This makes it difficult for us to maintain flexible human resource policies, discharge employees or downsize, which may adversely affect our business and profitability.

As a foreign private issuer and a “controlled company” within the meaning of the New York Stock Exchange, or NYSE, rules, we are subject to different NYSE rules than non-controlled domestic US issuers. Consequently, the corporate governance standards which we are required to adhere to are different than those applicable to such companies, which may limit the information available to, and the shareholder rights of, holders of our ADSs.

     We qualify as a “controlled company” within the meaning of the NYSE rules as Vedanta has effective control of a majority of our equity shares. This will allow Vedanta to, among other things, control the composition of our board of directors and direct our management and policies.

     As a foreign private issuer and a “controlled company,” we are exempt from complying with certain corporate governance requirements of the NYSE, including the requirement that a majority of our board of directors consist of independent directors. As the corporate governance standards applicable to us are different than those applicable to domestic non-controlled US issuers, holders of our equity shares and ADSs may not have the same protections afforded under the NYSE rules as shareholders of companies that do not have such exemptions. It is also possible that the Agarwal family’s significant ownership interest of us as a result of its majority ownership of Vedanta’s majority shareholder, Volcan, could adversely affect investors’ perceptions of our corporate governance. For a summary of the differences between the corporate governance standards applicable to us as a listed company in India and as a foreign private issuer and “controlled company” in the United States and such standards applicable to a domestic non-controlled US issuer, see “Item 10. Additional Information — B. Memorandum and Articles of Association — Comparison of Corporate Governance Standards.”

There are certain differences in shareholder rights and protections between the laws of India and the United States and between governance standards for a US public company and a foreign private issuer such as us.

     We are incorporated in India and investors should be aware that there are certain differences in the shareholder rights and protections between the laws of India and the United States. There are also certain differences in the corporate governance standards for a domestic US issuer and those applicable to a foreign private issuer such as us. See “Item 10. Additional Information — B. Memorandum and Articles of Association — Comparison of Shareholders’ Rights.”

     SEBI and the various Indian stock exchanges are responsible for improving and setting standards for disclosure and other regulatory standards for the Indian securities markets. SEBI has issued regulations and guidelines on disclosure requirements, insider trading and other matters. Nevertheless, there may be less information made publicly available in respect of Indian companies than is regularly made available by public companies in the United States as a result of differences between the level of regulation and monitoring of the Indian securities markets and of the transparency of the activities of investors and brokers in India compared to the United States. Similarly, our disclosure obligations under the rules of the NSE and BSE on which our equity shares are listed may be less than the disclosure obligations of public companies on the NYSE.

Risks Relating to our ADSs

Substantial future sales of our equity shares or ADSs in the public market, or the perception of such sales, could cause the market price of our ADSs to fall.

     If our existing shareholders sell a substantial number of our equity shares in the open market, or if there is a perception that such sale or distribution could occur, the market price of our equity shares and ADSs could be adversely affected. These sales, or the perception that these sales could occur, also might make it more difficult for us to sell securities in the future at a time or at a price that we deem appropriate or pay for acquisitions using our equity securities.

     As of June 30, 2009, we had 708,494,411 equity shares outstanding, including 66,802,214 equity shares represented by 66,802,214 ADSs. Of our outstanding equity shares, 708,494,411 were freely tradable on the NSE and BSE as of June 30, 2009. Furthermore, Vedanta, through Twin Star and MALCO, continued to have effective control over 436,919,733 of our outstanding equity shares, which represented 61.7% of our outstanding share capital as of June 30, 2009.

Fluctuations in the exchange rate between the Indian Rupee and the US dollar could have a material adverse effect on the value of our ADSs, independent of our actual operating results.

     The price of the ADSs is quoted in dollars. Our equity shares are quoted in Indian Rupees on the NSE and BSE. Any dividends in respect of our equity shares will be paid in Indian Rupees and subsequently converted into US dollars for distribution to ADS holders.

     Currency exchange rate fluctuations will affect the dollar equivalent of the Indian Rupee price of our equity shares on the NSE and BSE and, as a result, the prices of our ADSs, as well as the US dollar value of the proceeds a holder would receive upon the sale in India of any of our equity shares withdrawn from the depositary under the deposit agreement and the US dollar value of any cash dividends we pay on our equity shares. Holders may not be able to convert Indian Rupee proceeds into US dollars or any other currency, and there is no guarantee of the rate at which any such conversion will occur, if at all. Currency exchange rate fluctuations will also affect the value received by ADS holders from any dividends paid by us in respect of our equity shares. Holders of our ADSs will bear all of the risks with respect to a decline in the value of the Indian Rupee as compared to the US dollar, which would adversely affect the price of our ADSs and the US dollar value of any dividends we pay that are received by ADS holders.

Transfers of the underlying shares by persons resident outside India to residents of India are subject to certain pricing norms.

     Under current Indian regulations, subject to certain conditions, no prior regulatory approval is required for the sale of any equity shares, including any equity shares withdrawn from the ADS facilities, by a person resident outside India to a resident of India. However, certain reporting requirements would need to be complied with by the parties to the sale transaction. Also, the prior approval of the RBI would be required in the event of a sale of the equity shares underlying our ADSs by a non-resident investor to a resident investor if the sale price is greater than the maximum price set by the RBI under Indian foreign exchange laws. Any such approval required from the RBI or any other government agency may not be obtained on terms favorable to a non-resident investor, or at all.

Holders of ADSs may be restricted in their ability to exercise preemptive rights under Indian law and thereby may suffer future dilution of their ownership positions.

     Under the Indian Companies Act, 1956, or the Indian Companies Act, the holders of equity shares of a company incorporated in India have a preemptive right to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any new equity shares by the company, unless the preemptive rights have been waived by adopting a special resolution passed by 75% of the shareholders present and voting at a general meeting. Holders of ADSs may be unable to exercise preemptive rights for the underlying equity shares of the ADSs unless a registration statement under the Securities Act of 1933, as amended, or the Securities Act, is effective with respect to such rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to prepare and file such a registration statement and our decision to do so will depend on the costs and potential liabilities associated with any such registration statement, as well as any other factors we consider appropriate at the time. No assurance can be given that we would file a registration statement under these circumstances. If we issue any such securities in the future, such securities may be issued to the depositary, which may sell the securities for the benefit of the holders of the ADSs. The value the depositary would receive from the sale of such securities cannot be predicted. To the extent that holders of ADSs are unable to exercise preemptive rights granted in respect of our equity shares represented by their ADSs, their proportional ownership interests in us would be diluted.

We may be classified as a passive foreign investment company, which could result in adverse United States federal income tax consequences to US Holders.

A non-United States corporation will be considered a passive foreign investment company, or PFIC, for any taxable year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the total value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets, including cash, that produce or are held for the production of passive income, or passive assets. For this purpose, the total value of our assets generally will be determined by reference to the market price of our equity shares and ADSs. Based on the market prices of our equity shares and ADSs and the composition of our income and assets, including goodwill, we do not believe we were a PFIC for United States federal income tax purposes for our taxable year ended March 31, 2009. However, the application of the asset test described above is subject to ambiguity in several respects and, therefore, the US Internal Revenue Service may assert that, contrary to our belief, due to the decrease in our share value and the amount of cash and other passive assets we held during the taxable year ended March 31, 2009, at least 50% of the total value of our assets was attributable to assets producing passive income and, as a result, we were a PFIC for such taxable year. In addition, we must make a separate determination each taxable year as to whether we are a PFIC (after the close of each taxable year). A decrease in the market value of our equity shares and ADSs and/or an increase in cash or other passive assets (see “Item 5. Operating and Financial Review and Prospects — Recent Developments — Raising of Additional Capital”) would increase the relative percentage of our passive assets. Accordingly, we cannot assure you that we will not be a PFIC for the taxable year that will end on March 31, 2010 or any future taxable year. If we were a PFIC for any taxable year during which a US Holder (as defined under “Item 10. Additional Information — E. Taxation — United States Federal Income Taxation”) holds an ADS or an equity share, certain adverse United States federal income tax consequences could apply to the US Holder. See “Item 10. Additional Information — E. Taxation — United States Federal Income Taxation — Passive Foreign Investment Company.” US Holders are urged to consult their own tax advisors regarding the potential application of the PFIC rules to their ownership of ADSs or equity shares and the availability and advisability of any elections.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of our Company

     Sterlite Industries (India) Limited was incorporated on September 8, 1975 under the laws of India and maintains a registered office at SIPCOT Industrial Complex, Madurai Bypass Road, T.V. Puram P.O., Tuticorin, State of Tamil Nadu 628 002, India. Our principal executive office is located at Vedanta, 75 Nehru Road, Vile Parle (East), Mumbai, Maharashtra 400 099, India and the telephone number for this office is (91-22) 6646-1000. Our website address is www.sterlite-industries.com. Information contained on our website, or the website of any of our subsidiaries or affiliates, including Vedanta and other members of the Vedanta group, is not a part of this annual report. Our agent for service in the United States is CT Corporation System, 111 Eighth Avenue, New York, New York 10011.

     We were acquired by Mr. Anil Agarwal and his family in 1979 and have grown from a small wire and cable manufacturing company to one of India’s leading non-ferrous metals and mining companies. In 1988, we completed an initial public offering of our shares in India to finance in part our first polythene insulated jelly filled copper telephone cables plant. As part of our strategy to concentrate on businesses with high growth potential, we discontinued production of polyvinyl chloride power and control cables and enamelled copper wires in 1990 and in 1991 commissioned a continuous cast copper rod plant.

     In 1997, in order to obtain captive sources of copper for our copper rod plant, we commissioned the first privately developed copper smelter in India at Tuticorin.

     In 2000, we acquired CMT, which owns the Mt. Lyell copper mine in Australia. CMT had been acquired by Monte Cello BV, or Monte Cello, in 1999, and we acquired it through our acquisition of Monte Cello from a subsidiary of Twin Star in 2000.

     In July 2000, our telecommunications cables and optical fiber business was spun-off into a new company, Sterlite Technologies Limited, or STL. The Agarwal family has substantial interests in STL. STL is not a part of our group of companies.

     We acquired our aluminum business through our acquisition of a 51.0% interest in BALCO from the Government of India on March 2, 2001. On March 19, 2004, we gave notice to exercise our call option to purchase the Government of India’s remaining 49.0% shareholding in BALCO at a price determined in accordance with the shareholders’ agreement entered into by us and the Government of India. The exercise of this option has been contested by the Government of India. Further, the Government of India retains the right and has expressed an intention to sell 5.0% of BALCO to BALCO employees. See “— B. Business Overview — Our Business — Options to Increase Interests in HZL and BALCO” for more information.

     On April 11, 2002, we acquired through SOVL a 26.0% interest in HZL from the Government of India and a further 20.0% interest through an open market offer. On November 12, 2003, we acquired through SOVL a further 18.9% interest in HZL following the exercise of a call option granted by the Government of India, taking our interest in HZL to 64.9%. In addition, SOVL has a call option, which became exercisable beginning on April 11, 2007, to acquire the Government of India’s remaining ownership interest in HZL.

     On October 3, 2006, we acquired 100% of Sterlite Energy from Twin Star Infrastructure Limited, Mr. Anil Agarwal and Mr. Dwarka Prasad Agarwal, one of our directors until March 31, 2009, for a total consideration of Rs. 4.9 million ($0.1 million). Sterlite Energy is our subsidiary through which we are setting up a thermal coal-based 2,400 MW power facility in the State of Orissa.

     In June 2007, we completed an initial public offering of our shares in the form of ADSs in the US and our ADSs were listed on the NYSE. Vedanta’s ownership interest, held through its subsidiaries, decreased to 59.9%.

     On March 6, 2009, we announced that we had signed an agreement to purchase substantially all the operating assets of Asarco. We had previously signed an agreement to acquire substantially all the operating assets of Asarco on May 30, 2008, following which in October 2008, due to the financial turmoil, the steep fall in copper prices and adverse global economic conditions, we and Asarco entered into discussions to renegotiate the prior agreement. The current agreement to acquire Asarco follows such renegotiation of the prior agreement. On June 12, 2009, we agreed to increase the purchase consideration from $1.7 billion to $1.87 billion, mostly related to an expected increase in working capital on the closing date. The purchase consideration consists of a cash payment of $1.1 billion on closing and a senior secured non-interest promissory note for $770 million, payable over a period of nine years. This agreement remains subject to approval by the US Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, before which Asarco has been in reorganization proceedings under Chapter 11 of the US Bankruptcy Code. See “Item 5. Operating and Financial Review and Prospects — Recent Developments.”

     Our equity shares are listed and traded on the NSE and BSE. Our equity shares have been included in S&P CNX Nifty, a diversified index of 50 Indian stocks listed on the NSE, since April 5, 2007 and have been included in BSE Sensex, a diversified index of 30 Indian stocks listed on the BSE, since July 28, 2008. Our ADSs are quoted on the NYSE (NYSE: SLT).

     We are a majority-owned and controlled subsidiary of Vedanta, a public company in the United Kingdom listed on the London Stock Exchange plc, or LSE, and included in the FTSE 100 Index. Vedanta is a leading metals and mining company with operations in copper, zinc and aluminum located primarily in India, though with a copper business in Zambia. We and Vedanta share a common management team with a common strategic vision, and we form the core of Vedanta’s operations.

     Vedanta is 59.4%-owned by Volcan, a holding company 100% owned and controlled by the Anil Agarwal Discretionary Trust. Onclave is the trustee of the Anil Agarwal Discretionary Trust and controls all voting and investment decisions of the Anil Agarwal Discretionary Trust. As a result, shares beneficially owned by Volcan may be deemed to be beneficially owned by the Anil Agarwal Discretionary Trust and, in turn, by Onclave. The beneficiaries of the Anil Agarwal Discretionary Trust are members of the Agarwal family, who are related to Mr. Anil Agarwal. Mr. Anil Agarwal, the Executive Chairman of Vedanta and our Non-Executive Chairman, as protector of the Anil Agarwal Discretionary Trust, may be deemed to have deemed beneficial ownership of shares that are beneficially owned by the Anil Agarwal Discretionary Trust. Vedanta, Volcan, the Anil Agarwal Discretionary Trust, Onclave and Mr. Anil Agarwal are parties to a relationship agreement that seeks to enable Vedanta to carry on its business independently of the Volcan Parties. See “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Related Parties — Vedanta.”

     Our capital expenditures spent in fiscal 2007, 2008 and 2009 were $588.4 million, $635.4 million and $808.1 million, respectively. See “Item 5. Operating and Financial Review and Prospects — Off-Balance Sheet Arrangements — Capital Expenditures and Commitments” for more information.

B. Business Overview

OUR INDUSTRY

     Unless otherwise indicated, all data relating to the copper, zinc and aluminum industries contained in this annual report is primarily derived from Brook Hunt & Associates Ltd, or Brook Hunt, and other industry sources.

     Unless otherwise indicated, all financial and statistical data relating to the power industry in India in the following discussion is derived from the Ministry of Power’s Annual Report (2005-06, 2006-07 and 2007-08), the Central Electricity Authority of India’s General Review (2004-05 and 2007-08), and the Ministry of Power website. The data may have been re-classified for the purpose of presentation. Unless otherwise indicated, the data presented excludes captive power generation capacity and captive power generation. The term “units” as used herein refers to kilowatt-hours (kWh).

Copper

Global Copper Market

     Background

     Copper is a non-magnetic, reddish-colored metal with a high electrical and thermal conductivity (among pure metals at room temperature, only silver has a higher electrical conductivity), high tensile strength and resistance to corrosion.

     Copper consumption has three main product groups: copper wire rods, copper alloy products and other copper products. The predominant intermediate use of copper has been the production of copper wire rods, which accounted for approximately half of total copper production in 2007. Copper rods are used in wire and cable products such as energy cables, building wires and magnet wires. Copper alloy products were the next largest users of copper in 2007, followed by other copper products, which include non-electrical applications such as tubes for air conditioners and refrigerators, foils for printed circuit boards and other industrial and consumer applications.

     In the global copper consumer market in 2008, the construction segment accounted for 35% of copper consumption, followed by the electronic products segment (32%), the industrial machinery segment (12%), the transportation equipment segment (11%) and the consumer products segment (10%).

     The copper industry has three broad categories of producers:

	•		Miners, which mine the copper ore and produce copper concentrate;
	•		Custom smelters, which smelt and refine copper concentrate to produce copper metal; and
	•		Integrated producers, which mine copper ore from captive mines and produce copper metal either through smelting and refining or through leaching.

     Refined Copper Consumption

     Global copper consumption increased from 17.5 million tons in 2006 to 17.9 million tons in 2007, then increased to 18.0 million tons globally in 2008. The 2.6% increase from 2006 to 2007 was in part due to a recovery in Chinese demand which reflected re-stocking throughout the whole supply chain following de-stocking in 2006, and the country’s ongoing urbanization and infrastructure development as well as the continual demand for copper intensive products on the back of rising incomes. These last two factors were also responsible for supporting double digit growth in Indian demand during 2007. This consumption growth was slightly offset by a decline in demand growth in Western Europe by 6.7% and Japanese consumption by 3.0% due to a general slowdown in these economies. Consumption increased marginally to 18.0 million tons in 2008. In 2008, renewed demand in China and India, increased by 9.0% and 5.2%, respectively, was partially offset by a decline in demand in Western Europe and Japan, which decreased by 6.8% and 5.4 %, respectively, due to a slowdown in these economies.

     Asia (including the Middle East), Western Europe and North America together accounted for 86% of global copper consumption in 2008. Europe and North America accounted for over 60% of copper consumption during the 1980s, but strong growth in Asia, led by China and Japan, has since significantly changed global consumption patterns. With a compound annual growth rate of 7.2% between 2003 and 2007, Asia has been the fastest growing copper market in the world. Strong growth in Asia (including the Middle East), Russia and the Commonwealth of Independent States, or CIS, and Eastern European countries is expected from 2011 onwards following a recovery in demand from the current slowdown.

     The following table sets forth the regional consumption pattern of refined copper from 2005 to 2008:

		Year Ended December 31,
		2005								2006								2007								2008
Region		Volume				%				Volume				%				Volume				%				Volume				%
		(thousands of tons, except percentages)
Rest of Asia(1)			4,171				24.6	%			4,246				24.3	%			4,182				23.3	%			4,153				23.1	%
Western Europe			3,565				21.0				3,923				22.4				3,661				20.4				3,413				19.0
China			3,815				22.5				3,967				22.7				4,600				25.7				5,014				27.9
North America			2,549				15.0				2,408				13.8				2,395				13.4				2,200				12.2
CEE(2) and CIS			1,106				6.5				1,210				6.9				1,251				7.0				1,240				6.9
Latin America			955				5.6				895				5.1				863				4.8				906				5.0
India			415				2.4				458				2.6				568				3.2				598				3.3
Africa			234				1.4				243				1.4				275				1.5				295				1.6
Oceania			155				0.9				143				0.8				148				0.8				144				0.8
Total			16,965				100.0	%			17,493				100.0	%			17,943				100.0	%			17,963				100.0	%

Notes:

(1)		Rest of Asia is Asia excluding China and India, but including the Middle East.
(2)		Central and Eastern Europe.

Source: Brook Hunt Copper Metal Service Report, May 2009.

     Copper Supply

     Global mine production is the principal source of copper, with scrap recycling accounting for only a minor part of the aggregate supplies. The five largest copper mining countries were Chile (34.4%), the United States (8.6%), Peru (7.9%), China (6.1%) and Australia (5.7%), which together accounted for approximately 63% of the total copper mined worldwide in 2008. Less than 50% of global copper mine production is integrated, with the remainder sold in the custom smelting market. The five largest copper mining companies in 2008 were Corporación Nacional del Cobre, Chile, or Codelco, Freeport-McMoRan, BHP Billiton Limited, or BHP Billiton, Xstrata AG, or Xstrata, and Rio Tinto Alcan Ltd, or Rio Tinto.

     The major smelting locations include China (20.4%), Japan (10.7%), Chile (10.6%), Russia (5.2%) and India (4.8%), which together accounted for 51.7% of global production and thus are major importers of copper concentrate in 2008. The five largest refined copper producing countries were China (20.6%), Chile (16.7%), Japan (8.4%), the United States (7.1%) and Russia (4.8%), which together accounted for about 57.4% of the total copper produced worldwide in 2008. The five largest copper smelting companies in 2008 were Codelco, Xstrata, Aurubis AG, Nippon Mining and Metals Co. Ltd and Freeport-McMoran, while the five largest copper refining companies in 2008 were Codelco, Freeport-McMoran, Aurubis AG, Xstrata, and Nippon Mining Metals Co. Ltd.

     Global refined copper production increased from 17.3 million tons in 2006 to 18.0 million tons in 2007, an increase of 4.1%, and to 18.4 million tons in 2008, an increase of 2.0% over 2007. There was a production surplus over consumption during 2007 and 2008.

     The following table sets forth the regional production pattern of refined copper from 2005 to 2008:

		Year Ended December 31,
		2005								2006								2007								2008
Region		Volume				%				Volume				%				Volume				%				Volume				%
		(thousands of tons, except percentages)
Latin America			3,985				24.0	%			3,906				22.6	%			3,953				22.0	%			4,070				22.2	%
Rest of Asia(1)			2,738				16.5				2,953				17.1				2,995				16.6				2,927				15.9
China			2,600				15.6				3,003				17.4				3,497				19.4				3,779				20.6
CEE(2) and CIS			2,166				13.1				2,173				12.6				2,123				11.8				2,087				11.4
North America			1,775				10.7				1,758				10.2				1,786				9.9				1,733				9.4
Western Europe			1,841				11.1				1,877				10.9				1,846				10.3				1,945				10.6
Africa			528				3.2				567				3.3				638				3.5				645				3.5
Australia			461				2.8				430				2.5				443				2.5				502				2.7
India			499				3.0				629				3.6				722				4.0				683				3.7
Total			16,593				100.0	%			17,296				100.0	%			18,003				100.0	%			18,371				100.0

Notes:

(1)		Rest of Asia is Asia excluding China and India, but including the Middle East.
(2)		Central and Eastern Europe.

Source: Brook Hunt Copper Metal Service Report, May 2009.

     Pricing

     Copper is traded on the LME. Although prices are determined by LME price movements, producers normally charge a regional premium that is market driven. The significant price increase in 2006 resulted from healthy demand growth and supply, due to limited ore availability and labor disruptions at several of the large mines. Strong imports into China due to increased domestic consumption in 2007 reduced international inventories and saw the price trade above $7,000 per ton for most of the second and third quarters of 2007. The same trend continued in the first nine months of 2008, but in the fourth quarter of 2008 the price decreased to below $4,000 per ton mainly due to the turmoil in the financial markets and the fall in global demand. The following table sets forth the movement in copper prices from 1999 to 2008:

		Year Ended December 31,
		1999				2000				2001				2002				2003				2004				2005				2006				2007				2008
		($ per ton, except percentages)
LME Cash Price($)			1,573				1,814				1,577				1,557				1,779				2,869				3,683				6,729				7,124				6,966
% Change			—				15.3				(13.1	)			(1.3	)			14.3				61.2				28.4				82.7				5.9				(2.2	)

     The LME copper cash price was $4,035 per ton as of March 31, 2009 and $5,108 per ton as of June 30, 2009.

     For custom smelters, TcRc rates have a significant impact on profitability as prices for copper concentrate are equal to the LME price net of TcRc and prices of finished copper products are equal to the LME price plus a premium. A significant proportion of concentrates are sold under frame contracts and TcRc is negotiated annually. The main aspects of the contract that are subject to negotiation are the TcRcs that are expressed in US dollars per dry metric ton, or dmt, of concentrate (the Tc) and in cents per pound of payable copper (the Rc) and, until recently (under long-term contracts) price participation. The TcRc rates are influenced by the demand-supply situation in the concentrate market, prevailing and forecasted LME prices and mining and freight costs.

     Since 2006, TcRcs have fallen significantly, reflecting a continuing tightening in the physical concentrate demand/supply balance. The annual negotiations for copper concentrate TcRc charges (excluding price participation, if any) between the Japanese smelters and BHP Billiton (which traditionally set the market benchmark) settled at $45.00 per ton and $0.05 per pound in 2008, a significant drop from the $60.00 per ton and $0.06 per pound terms agreed for 2007.

     The following table sets forth the movement in copper TcRc from 1999 to 2008:

		Year Ended December 31,
		1999				2000				2001				2002				2003				2004				2005				2006				2007				2008
		(US cents per lb, except percentages)
TcRc(1)			15.3				15.9				17.4				15.5				13.9				13.0				29.6				45.9				15.4				11.5
% Change			—				3.9				9.4				(10.9	)			(10.3	)			(6.5	)			127.7				55.1				(66.4	)			(24.7	)

Note:

(1)

Includes price participation, if any.

Source: Brook Hunt Copper Metal Service Report.

     The TcRc for long-term settlements for the Japanese smelters in 2009 is expected to be 19.3 ¢/lb, according to Brook Hunt.

Indian Copper Market

     Background

     The Indian copper industry consists primarily of custom smelters as there are limited copper deposits in the country. The available deposits are owned by the government-owned Hindustan Copper, which was the only producer in India until 1995. Since then, the industry has transformed significantly with our entry and the entry of Birla Copper, now owned by Hindalco. Hindalco had a primary market share by production volume of 48.0% and we had a primary market share by production volume of 45.7% in fiscal 2009 according to the International Copper Promotion Council, India, or ICPCI, with the remainder of the primary copper market served by Hindustan Copper (5.8%) and SWIL Limited (0.6%). Primary copper refining output in India has grown at a compound annual growth rate of 11.0% from 499,000 tons in 2005 to 683,000 tons in 2008.

     Consumption Pattern

     From 2005 to 2008, consumption in the Indian primary copper market increased at a compound annual growth rate of 14.3%. The consumption by the electronics and power segments witnessed growth at a compound annual growth rate of 3.3% during fiscal years 2002 to 2008. The total domestic demand for primary copper is estimated to have increased from 415,000 tons in 2005 to 598,000 tons in 2008, a compound annual growth rate of 12.9% over three years. In addition, the demand for copper in India is expected to grow from 598,000 tons in 2008 to 1.2 million tons in 2020, representing a compound annual growth rate of 5.8%. This compares to world demand for copper, which Brook Hunt estimates will grow from 18.0 million tons in 2008 to 24.7 million tons in 2020, representing a compound annual growth rate of 2.7%, according to Brook Hunt.

     Pricing and Tariff

     Indian copper prices track global prices as the metal is priced on the basis of landed costs of imported metal. Copper imports in India are currently subject to a customs duty of 5.0% and an additional surcharge of 3.0% of the customs duty. The customs duty has been reduced in a series of steps from 25.0% in 2003 to 5.0% in January 2007. Indian producers are also able to charge a regional premium, which is market driven.

Market Outlook

     Global Copper Outlook

     The rapidly developing Asian market is expected to drive copper consumption growth. The countries from Asia that are contributing to this rapid growth are primarily China and India. Copper demand is expected to continue to be dominated by its use in electric wires and cables. Global refined consumption of copper is expected to decrease from approximately 18.0 million tons in 2008 to 17.4 million tons in 2009, a decrease of 3.2%.

     Anticipated mine production capacity expansions are barely sufficient to match the forecast smelter production and the world is expected to remain in a copper concentrate supply deficit for 2009. China is rapidly expanding its copper smelting and refining capacities. However, its domestic mining supplies fall well short of its smelter demands and thus China will continue to remain a major importer of copper concentrate. Apart from China, major smelting and refining capacity expansions are expected in India, Zambia, Kazakhstan, Congo DR, Brazil, Malaysia and Bulgaria.

     To meet the forecast copper demand, copper smelting capacity is expected to grow until 2013. The major projects expected to contribute to copper smelting capacity include Olympic Dam (Australia), Ventanas (Chile), Oyu Tolgoi (Mongolia), Chagres Expansion (Chile) and El Sewedy (Egypt).

     The catalyst for any meaningful recovery in long-term TcRcs will be a rationalization, or at least restructuring, of the custom smelting industry. Until then, TcRcs are likely to remain well below their previous long-term average.

     Indian Copper Outlook

     The Indian market outlook is expected to remain positive, with strong growth in key user segments such as power, construction and engineering. Domestic consumption is expected to marginally decrease by 2% from 2008 to 2009 and then increase by 4.5% from

2009 to 2010, primarily driven by rising living standards and the development of the domestic power sector. Growing industrialization and regulatory reforms are attracting huge investments to the power sector and the transmission and distribution segments. Increased residential and infrastructure development is also expected to generate demand for copper. Growth in domestic copper demand is expected to be lower than the historical averages, largely on account of negative growth in the telecom cable segment which continues to suffer from increasing penetration of the cellular telecommunication industry and low prices of optic fibers in the international markets.

Zinc

Global Zinc Market

     Background

     Zinc is a moderately reactive bluish-white metal that tarnishes in moist air, producing a layer of carbonate. It reacts with acids and alkalis and other non-metals. Zinc is the fourth most common metal in worldwide annual production, trailing only iron, aluminum and copper in worldwide annual production.

     The principal use for zinc in the western world is galvanizing, which involves coating steel with zinc to guard against corrosion. Galvanizing, including sheet, tube, wire and general galvanizing, accounted for approximately 50% of world consumption of zinc in 2008. The main end-use industries for galvanized steel products are the automobile manufacturing, domestic appliance manufacturing and construction industries, and it is these industries on which zinc consumption ultimately depends. Other major uses for zinc include brass semis and castings (17%), die-casting alloys (17%) and oxides and chemicals (10%). Alloys are principally used in toys, vehicles and hardware.

     The zinc industry has three broad categories of producers:

	•		Miners, which mine the lead-zinc ore and produce zinc concentrate for sale to smelters, and usually receive payment for 85% of the zinc contained in the concentrate less a Tc;
	•		Smelters, which purchase concentrate and sell refined metal, with some smelters also having some integrated production downstream; and
	•		Integrated producers, which are involved in both the mining and smelting of zinc.

     Most integrated producers are only partially integrated and therefore need to either buy or sell some concentrate. Only approximately one-third of total western world zinc production can be attributed to integrated producers.