Sterlite Industries NEUTRAL. Gearing for sterling growth. Initiating Coverage

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1 Initiating Coverage NEUTRAL Price Rs629 Target Price - Investment Period - Stock Info Sector Market Cap (Rs cr) 44,566 Beta Week High / Low 739/165 Avg Daily Volume Face Value (Rs) 2 BSE Sensex 15,16 Nifty 4,481 BSE Code 59 NSE Code STER Reuters Code STRL.BO Bloomberg Code STLT@IN Shareholding Pattern (%) Promoters 56.9 MF / Banks / Indian FIs 11.7 FII / NRIs / OCBs 2. Indian Public / Others 11.4 Abs. 3m 1yr 3yrs Sensex (%) STL (%) Pawan Burde Tel: Ext: pawan.burde@angeltrade.com Laxmikant Waghmare Tel: Ext: laxmikant.w@angeltrade.com Gearing for sterling growth Sterlite Industries is a Vedanta-group company, with diversified operations in copper, aluminium, zinc and power, is well placed to weather the ongoing downturn. The company has embarked upon capacity expansions across commodities in the fast-growing Indian market. Through a subsidiary, Sterlite Energy, the company is getting into the merchant power business in a power-deficit India. At Rs629 the stock is trading at an EV/EBITDA of 5.7x and a P/E of 1.3x FY211E estimates. Due to its diversity in different businesses, we value Sterlite on an SOTP basis and have arrived at a Target Price of Rs63. We are positive on the overall business prospects of Sterlite, but owing to the recent run-up in its price, we initiate coverage on the stock with a Neutral recommendation. Multi-fold Expansions across Commodities: Sterlite has been aggressively expanding capacities in almost all its divisions. Aluminium capacities will be doubled at Bharat Aluminium Company Ltd (BALCO) by September 211E, to.72mtpa from.35mtpa currently, and the company is also setting-up aluminium capacities of 1.75mtpa in Vedanta Aluminium Ltd (VAL) by FY213E. After these expansions by the end of FY213E, the total aluminium capacity will be 2.5mtpa, almost 7x the current capacity, making Vedanta one of the top aluminium producers in the world. Through Hindustan Zinc (HZL), zinc-lead capacity is to be raised by 4% to 1.7mtpa by mid-21e, making HZL the largest integrated zinc producer in the world. Foray into the Power Business - the next Growth Driver: Sterlite, through its wholly-owned subsidiary, Sterlite Energy, is foraying into the merchant-power business in a power-deficit Indian market. This will provide it with the flexibility to either use its power for captive purposes, or to sell the energy as merchant power. We believe that the power business will contribute 15% of the Consolidated Revenues and 21.3% of the EBITDA in FY212E, after the commissioning of the entire 2,4MW project. Healthy Balance Sheet to support Expansions: We believe that Sterlite's balance sheet is healthy enough to feed its expansions. Hindustan Zinc, a 64.9% subsidiary, is a cash-cow with a Cash balance of US $2bn at the end of FY29. Sterlite has a Net Cash balance of US $1.6bn and the Vedanta parent holds another US $5bn. The recent ADS issue of US $1.6bn would fund the company's power expansions and other expansions. Hence, despite the huge capex plans of US $7.9bn, Sterlite's debt-equity ratio of.3x in FY211E is in a comfortable position. Key Financials (Consolidated) Y/E March (Rs cr) FY28 FY29 FY21E FY211E Net Sales 24,75 21,144 19,657 26,183 % chg 1.3 (14.4) (7.) 33.2 Net Profit 4,399 3,54 3,162 5,142 % chg (.5) (19.5) (1.7) 62.6 FDEPS (Rs) OPM (%) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

2 Company Background Sterlite is a diversified metals and mining company, with operations in copper, aluminium, zinc and power Sterlite Industries, part of the London-based Vedanta group, is a diversified metals and mining company, with operations in copper, aluminium, zinc and power. Sterlite operates in the aluminium business through a 51% subsidiary, BALCO, which the Vedanta group had acquired from the Indian government in 21. Also, to expand its aluminium capacities, the parent company Vedanta is setting up a 5mtpa alumina refinery and a 1.75mtpa aluminium smelting unit in Vedanta Aluminium Ltd (VAL), in which Sterlite owns a 29.5% stake. Sterlite has a presence in copper through its standalone operations at Tuticorin, with a copper smelting capacity of.4mtpa. Hindustan Zinc, which is a 64.5% subsidiary of Sterlite, operates high-quality zinc assets, with a current zinc-lead capacity of.7mtpa, which would be raised to 1.7mtpa by FY21E. Moreover, to gain a presence in the merchant-power business in India, Sterlite is also setting up a 2,4MW power project through its 1% subsidiary, Sterlite Energy. Exhibit 1: Vedanta Group s Holding Structure Vedanta Resources 79.4% 51% 8% Konkala Copper Sesa Goa MALCO 7.5% 56.9% 29.5% Vedanta Aluminium Sterlite Ind. 51.% 64.9% 1% 1% BALCO Hindustan Zinc Sterlite Copper Mines of Tasmania Sterlite derives its maximum revenues from the copper business, with Sterlite Standalone contributing almost 55% of the consolidated revenues in FY29, followed by Hindustan Zinc at 27% and BALCO at 19%. However, the zinc business, which is considered as a cash cow for Sterlite, contributes the maximum in the consolidated EBITDA, due to its very low cost of operations. Notably, HZL contributed almost 57% to the consolidated EBITDA in FY29. August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

3 Exhibit 2: Sterlite - FY29 Segmental Performance Segmental Revenues Segmental EBITDA HZL 27% Sterlite 25% HZL 57% Balco 19% Sterlite 55% Balco 18% Sterlite Balco HZL Business Model Sterlite Standalone: Custom copper smelters Sterlite, through its standalone company, operates copper smelters at Tuticorin, Tamil Nadu, with a smelting capacity of.4mtpa. It is to be noted that Sterlite is not an integrated copper producer, but operates custom copper smelters, and, hence, its profitability is dependent on treatment and refining charges, and on Tc/Rc margins. However, with superior smelting technology, Sterlite is among the most efficient copper smelters in the world. Sterlite, through its standalone company, operates copper smelters with a smelting capacity of.4mtpa Exhibit 3: Sterlite - Copper Business Mtpa Tuticorin Silvasa Total Smelting (Anode).4..4 Refinery (Cathode) Copper Rod Sulphuric Acid Phosphoric Acid Captive Power Plant (MW) Additionally, the company owns the Mt. Lyell copper mine in Tasmania, Australia, which provides around 1% of Sterlite's copper-concentrate requirements. Sterlite had acquired the Copper Mines of Tasmania (CMT) in 1999 and, since the acquisition, its capacity has increased from 2.mtpa to 2.6mtpa. January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

4 BALCO: The Third-largest Aluminium player in India BALCO is the third-largest aluminium company in India, after Hindalco and Nalco Sterlite had established its presence in the Indian Aluminium industry through the acquisition of a 51% stake in Bharat Aluminium Company Ltd (BALCO), from the Indian government in 21. BALCO is an integrated aluminium company with captive bauxite mines, an alumina refinery, aluminium smelting and a captive power plant. BALCO is the third-largest aluminium company in India, after Hindalco and Nalco, with a domestic market share of around 22%. Its product lines include Aluminium ingots, wire rods and value-added products like aluminium rolled products, with a revenue contribution of 5%, 3% and 2%, respectively, in total aluminium revenues. The company's operations are located in Korba, Chhattisgarh, and it currently operates two aluminium smelters, BALCO I and BALCO II, with a combined capacity of.345mtpa (end-fy29), and an alumina refinery with a capacity of.2mtpa. The company also has a captive power plant with a capacity of 81MW, which is not only sufficient to feed its smelter, but provides surplus power to sell to the power grid. Exhibit 4: BALCO - Existing capacities (FY29) Facility Capacity (mtpa) Location Alumina Refinery.2 Korba Aluminium Smelting.345 BALCO- I (VSS).1 Korba BALCO-II (GAMI).245 Korba Captive Power (MW) 81 BALCO-I 27 Korba BALCO-II 54 Korba Source-Company, Angel Research Hindustan Zinc: The most profitable business Hindustan Zinc (HZL) is the largest and only integrated zinc company in India, with a domestic market share of around 85%. It is also one of the lowest cost producers of zinc, with some of the best quality mines. Hindustan Zinc is the largest and only integrated zinc company in India, with a domestic market share of around 85% HZL is a fully-integrated zinc company having captive zinc mines, namely the Rampura Agucha Mine, Zawar Mines, Rajpura Dariba Mines and the Sindesar Khurd Mine. All of these mines are located in Rajasthan, with total reserves of around 8mn tonnes and an annual mining capacity of 7.1mn tonnes. The Rampura Agucha mine is the biggest mine of HZL and meets almost 9% of its concentrate requirement. It is also one of the five largest mines in the world, with a higher zinc grade of 13%. This provides HZL with the biggest advantage in the global zinc market, and helps it to be the lowest cost producer in the world. HZL's smelters are situated at Chanderiya, Debari and Visakhapatnam, with a combined zinc capacity of.67mtpa and a lead capacity of 85, tonnes, at the end of FY29. The company also has a captive power capacity of 341.2MW, which has been expanded from 192.4MW in FY27. August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

5 Exhibit 5: Business Model - FY29 Mining Smelting- Zinc/Lead Captive Power Rampura Agucha Mine Chanderiya smelting Chanderiya (Rajasthan) (Rajasthan) (Rajasthan) Reserves: 63.5mtpa Zinc - 5,25,mtpa 234MW (Coal-based) Capacity: 5.mtpa Lead - 85,mtpa Zinc Grade (%): 13. Zawar Mines (Rajasthan) Debari Zinc smelter (Rajasthan) Samana (Gujarat) Reserves: 7.18mtpa Zinc - 88,mtpa 88.8MW (Wind Power) Capacity: 1.2mtpa Lead - mtpa Zinc Grade (%): 3.9 Rajpura Dariba Mines Vizag smelter (AP) Gadag (Karnataka) (Rajasthan) Reserves: 7.7mtpa Zinc - 56,mtpa 18.4MW (Wind Power) Capacity:.6mtpa Capacity:.6mtpa Zinc Grade (%): 6.2 Sindesar Khurd Mine (Rajasthan) Reserves: 1.96mtpa Capacity:.3mtpa Zinc Grade (%): 5.3 Total Total Total Reserves: Zinc: 6,69, Capacity: 7.1 Lead: 85, HZL: Segment-wise Performance HZL also produces sulphuric acid and silver, as these are by-products of zinc and lead mining, and of the smelting process. However, most of HZL's revenue (around 7%) comes from zinc ingots, while 25% comes from lead and zinc-lead concentrate sales. The rest of the revenue is comes from by-products and other sales. Exhibit 6: HZL - Segment-wise Revenues - FY29 Sulphuric Acid 3% Lead Ingots 9% Zinc-Lead Concentrate 16% Silver 2% Others 2% Zinc Ingots 68% January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

6 Industry Outlook Aluminium Aluminium - the weakest base metal In 28, global aluminium production grew by 3.4% to 39.4mn tonnes, as against the 12.4% growth achieved in 27 The global aluminium market is expected to trade weak throughout 29, as the demand continues to be sluggish. The demand for aluminium has dropped significantly, owing to a reduced off-take from the construction, household and auto sectors worldwide. In 28, global aluminium production grew by 3.4% to 39.4mn tonnes, as against the 12.4% growth achieved in 27. The muted growth in production was driven by a fall in demand for the metal globally, resulting in a sharp correction in aluminium prices, taking them below the marginal cost of production. This eventually resulted in a curtailment of production across the globe, as 4-5% of Aluminum smelters were running into losses. So far, around 7mn tonnes of production cuts have been announced, which are equivalent to 18% of global production. Exhibit 7: World Aluminium Production Trend tonnes 45, % 15 37,5 3, 22,5 15, 7,5 1 5 (5) E 21E (1) Production (LHS) yoy % (RHS) Source: Abare, Angel Research We expect that global aluminium production will decline by 7.5% to 36.5mn tonnes (39.4mn tonnes) in 29E, as the cost of production at the current prices is still unviable for many smelters and as the sluggish demand outlook will continue to persist for a while. Also, a piling-up of the inventory at the LME to a multi-year high (since 199) will stall any ramping-up of operations. However, with an easing of inventory pressures and an expected improvement in demand, global aluminium production is expected to increase by 4.5% to 38.1mn tonnes in 21E. Consumption continues to witness downward pressures Global aluminium demand has declined by 2.2% to 36.9mn tonnes in 28 Marred by a drastic fall in demand from major consuming nations like China, USA and Europe, global aluminium demand has declined by 2.2% to 36.9mn tonnes in 28. The fall in demand had been significant during 2HCY28, due to a substantial fall in demand from major consuming sectors like automobiles and infrastructure. However, massive stimulus packages announced by the major economies, in the beginning of 29, have managed to restore confidence in the metal, as demand has since picked up globally. Even though the demand for aluminium appears to be improving, it will still be significantly lower than 28 levels. We expect the demand for aluminium August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

7 to decline by 6% to 34.7mn tonnes in 29E. However, consumption is expected to pick-up in 21E, on an increased off-take, particularly from infrastructure projects linked to stimulus programs; we are estimating a 5% growth in demand in 21E. Exhibit 8: World Aluminium Consumption Trend tonnes 45, 37,5 3, 22,5 15, 7, E 21E % (2) (4) (6) (8) Source: Abare, Angel Research Consumption (LHS) yoy % (RHS) The Aluminium market - surplus continues We expect the global aluminium surplus to be at 1.8mn tonnes and 1.7mn tonnes in 29E and 21E, respectively In the absence of any significant revival in demand and with surplus capacities, the world aluminium market is expected to be surplus in 29E and 21E. We expect the global aluminium surplus to be at 1.8mn tonnes and 1.7mn tonnes in 29E and 21E, respectively. Exhibit 9: World Aluminium Demand-Supply tonnes E 29E 21E Production 27,995 29,839 31,974 33,933 38,138 39,43 36,473 38,114 yoy % (7.5) 4.5 Consumption 27,65 3,32 31,79 34,389 37,749 36,912 34,697 36,432 yoy % (2.2) (6.) 5. Surplus / (Deficit) 345 (481) 265 (456) 389 2,518 1,775 1,682 LME-Al (US $/tonne) 1,448 1,751 1,915 2,596 2,638 2,576 1,6* 1,8 # Source: Abare, Angel Research; * Estimate for FY21E; # Estimate for FY211E January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

8 Exhibit 1: World Aluminium Surplus/(Deficit) Trend tonnes 3, 2,5 2, 1,5 1, 5 (5) E 21E (1,) Source: Abare, Angel Reseach Aluminium Price Outlook Prices recover on Chinese demand LME Aluminium prices have recovered by more than 45% in the last couple of month LME Aluminium prices have recovered by more than 45% in the last couple of months, and are currently hovering in the range of US $1,8/tonne, since hitting a bottom of US $1,3/tonne during February 29. However, prices are still trading 5% lower than the highs witnessed during July 28. Exhibit 11: Chinese Aluminium Import Trend ' tonnes Jan-4 Feb-5 Mar-6 Apr-7 May-8 Jun-9 Source: Bloomberg, Angel Reseach The recent upturn in aluminium prices is largely driven by a restocking by the Chinese State Reserve Bureau (SRB), buying from Chinese Grid operators and from some regional governments, to spur its domestic industry, which is ridden with losses. This has resulted in increasing Chinese imports, and has eventually resulted in a recovery in aluminium prices. Additionally, the supply-side tightness, owing to production cuts, contributed to the uptick in aluminium prices. August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

9 However, the massive inventory overhang will maintain a check on prices The daily average inventory levels, which used to be around.8mn tonnes till July 28, are now hovering at a multi-year high of 4.4mn tonnes Aluminium inventory levels at the LME have jumped manyfold in recent times, as the real demand has been weak owing to the slowdown in the global economy. The daily average inventory levels, which used to be around.8mn tonnes till July 28, are now hovering at a multi-year high of 4.4mn tonnes. In our view, such a huge inventory pile-up is going to have a negative effect on aluminum prices, as the demand is expected to remain weak and is expected to decline by 6% in 29E. In addition to this, the recent upsurge in aluminium prices has led to production being restarted by many smelters, which resulted in additional supply coming into the market, thus worsening the demand-supply scenario globally and exerting pressure on prices. Exhibit 12: LME Aluminium Prices and Inventory Trends US $/tonne 3,5 mn tonnes 5. 3, 4. 2,5 3. 2, 2. 1,5 1. 1,. Jan-1 Jun-2 Nov-3 Apr-5 Sep-6 Feb-8 Jul-9 LME Prices (LHS) Inventory (RHS) Source: Bloomberg, Angel Reseach We believe that average LME aluminium prices will be at US $1,6/tonne in FY21E and at US $1,8/tonne in FY211E Therefore, owing to the weak demand for aluminium and the expected surplus through 29E and 21E, we do not expect prices to jump significantly for the rest of 29, and expect the metal to trade sideways, at around its current levels. We believe that average LME aluminium prices will be at US $1,6/tonne in FY21E, lower by 37% over their 28 levels, and expect them to improve by 12.5% yoy to US $1,8/tonne in 211E. January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

10 Zinc The global zinc market continues to be in surplus In 28, the world zinc-mine production increased by around 5.3% yoy to 11.7mn tonnes, as against a 6.6% growth in 27 The world zinc market is expected to be in surplus through 29E and 21E, with huge capacities in zinc mining and refining expected to come up, and with demand not keeping pace with supply. In 28, the world zinc-mine production increased by around 5.3% yoy to 11.7mn tonnes, as against a 6.6% growth in 27. The increase in mine supply was mainly due to higher production in China, India and Australia, and additional supply from new mines in Bolivia, Peru and Canada. Exhibit 13: Mined-Zinc Production Trend tonnes 14, 12, 1, 8, 6, 4, 2, E 21E % (2) (4) (6) (8) Mine Production (LHS) yoy growth (RHS) Source- ILZSG, Angel Research The world's zinc-mine output has registered a 7.2% de-growth yoy in the first five months of 29, to 4.3mn tonnes, and is expected to continue to de-grow, owing to the large number of cutbacks, closures and start delays in Europe, Latin America, China and North America. So far, around.6mn tonnes of zinc-mine output cuts have been announced, which is 5% of the global mined-zinc output in 28. According to the International Lead and Zinc Study Group's (ILZSG) forecasts, China's zinc-mine output is set to decline by 1% in 29E. The world's zinc-mine production is estimated to de-grow by 6% to 11mn tonnes in 29E, while the production is expected to pick-up in 21E, on account of the restoration of production cutbacks and the starting of new capacities. Subsequently, global mine production is expected to grow by 5% to 11.6mn tonnes in 21E. Refined-zinc production set to fall In 28, global zinc-smelter production increased by a marginal 2.7% yoy to 11.7mn tonnes, as against a 6.6% growth registered in 27 In 28, global zinc-smelter production increased by a marginal 2.7% yoy to 11.7mn tonnes, as against a 6.6% growth registered in 27. This lower growth rate came in on account of a number of closures and production cutbacks in November and December 28. However, the growth in production was supported by a rise in production in China as well as in India, where Hindustan Zinc commissioned its.17mn tonnes zinc refinery at Rampura Agucha during December 28. We believe that refined metal production will de-grow by 4% yoy to 11.2mn tonnes in 29E, while it will grow by 4.5% yoy to 11.7mn tonnes in 21E. The production is expected to decline on account of production cuts announced in Belgium, Brazil, Bulgaria, Japan and Russia. However, a significant fall in global refined-zinc output will be compensated by an increased output in India and China. As per ILZSG estimates, China's refined-zinc output is expected to grow by 2.2% in 29E. August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

11 Exhibit 14: Refined-Zinc Production, Growth Trends ' tonnes 12, 11,5 11, 1,5 1, 9,5 % (2) (4) 9, E 21E (6) Metal Production (LHS) yoy growth (RHS) Source- ILZSG, Angel Research Refined-Zinc consumption expected to fall Globally, refined-zinc consumption is expected to de-grow at 5% in 29E to 1.9mn tonnes The global usage of refined zinc increased by 1.7% in 28 to 11.5mn tonnes, and maintained a surplus in the market for the year; higher consumption in developing countries like China and India drove this increased consumption. However, globally, refined-zinc consumption is expected to de-grow at 5% in 29E to 1.9mn tonnes. This de-growth is expected to be mainly driven by a fall in consumption in Europe, US and Japan by around 12%, 9%, and 13%, respectively. However, according to the ILZSG, China is expected to register a 4.6% growth in consumption in 29E, which would support the sharp fall in global consumption. Notably, the drop in world consumption in 29 (Jan-May) stood at 1.7%. Exhibit 15: Refined-Zinc Consumption, Growth Trends ' tonnes 12, 11,5 11, 1,5 1, 9,5 9, E 21E % (2) (4) (6) Source- ILZSG, Angel Research Metal Usage (LHS) yoy growth(rhs) We expect the global zinc surplus to increase to.29mn tonnes and to.36mn tonnes in 29E and 21E, respectively. In 29, so far, the zinc surplus has been around.18mn tonnes, as against.11mn tonnes during the corresponding period of last year. January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

12 Exhibit 16: World Zinc Demand and Supply tonnes E 21E Mine Production 9,545 9,79 1,146 1,444 11,137 11,724 11,21 11,572 yoy growth (6.) 5. Metal Production 9,912 1,392 1,224 1,655 11,36 11,667 11,2 11,74 yoy growth 4.8 (1.6) (4.) 4.5 Metal Usage 9,842 1,648 1,611 11,16 11,287 11,483 1,99 11,345 yoy growth 8.2 (.3) (5.) 4. Surplus/(Deficit) 7 (256) (387) (361) LME-Zinc (US $/t) 1,4 1,254 1,91 4,29 2,354 1,88 1,45* 1,55 # Source- ILZSG, LME, Angel Research; * Estimate for FY21E; # Estimate for FY211E Exhibit 17: World Zinc Surplus/(Deficit) Trend ' tonnes (1) E 21E (2) (3) (4) (5) Source: ILZSG, Angel Research China - The Key to Growth China is the key growth driver for the global zinc industry, controlling over one-third of the global zinc production and consumption. Refined-zinc metal production in China grew by 4.6% in 28 to 3.9mn tonnes, contributing almost 34% to world zinc production. Global zinc consumption was similarly led by Chinese consumption, which grew in excess of 11% in 28 to 4mn tonnes. Exhibit 18: Chinese Zinc Demand-Supply tonnes Metal Production 2,319 2,72 2,776 3,163 3,743 3,913 yoy % Metal Usage 2,35 2,82 3,37 3,115 3,597 4,14 yoy % Source- ILZSG, AngelResearch However, according to the ILZSG, in 29E, Chinese demand is forecast to rise by 4.6%, substantially lower than that in 28. August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

13 China continues to be a Net Importer During the first six months of 29, Chinese imports shot up substantially, by almost 6% yoy to 4,79,64 tonnes of refined zinc During the first six months of 29, Chinese imports shot up substantially, by almost 6% yoy to 4,79,64 tonnes of refined zinc (from 68,553 tonnes during the same period last year). Chinese imports went up substantially owing to restocking by the Chinese SRB to build up its strategic reserves. Its exports also declined by a substantial 86% to 5,848 tonnes of refined zinc, due to higher domestic prices and tax changes. Hence, China continued to be a net importer of zinc, to the tune of 4,73,791 tonnes during the first six months of 29. With strong demand emerging from its domestic market, from the automobile and construction sectors, China continues to be a net importer of zinc in 29. Exhibit 19: Chinese Zinc Import-Export Trend ' tonnes (2) (4) Exports Imports Net Exports Source- Bloomberg, Angel Research LME Zinc prices recover on falling stocks LME zinc prices in the last couple of months have recovered by more than 4% LME zinc prices in the last couple of months have recovered by more than 4%, led by a restocking by the Chinese SRB to build its strategic reserves. World spot-zinc prices averaged at US $1,88/ tonne during 28, almost 42% lower than the average price of US $3,257/tonne in 27. The spot price of zinc is estimated to average lower at US $1,45/tonne on the LME in FY21E, from an average of US $1,572/tonne in FY29. Forecasts of lower average zinc prices have mainly been on account of increasing world supplies, from the commencement of new mines and refineries. However, prices are expected to recover in FY211E, and would be higher by 7% yoy to US $1,55/tonne, as demand is expected to pick up due to an improved business outlook. January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

14 Exhibit 2: LME Zinc Inventory and Prices US $/tonne 4,25 3,5 2,75 2, mn tonnes , Jan-1 Jun-2 Nov-3 Apr-5 Sep-6 Feb-8 Jul-9 Source: LME, Angel Research Lead Lead is also in surplus LME Prices (LHS) Inventory(RHS) Global usage of lead is expected to decline by 1.1% to 8.6mn tonnes in 29E Global refined lead production grew by 6.7% yoy to 8.7mn tonnes in 28. However, lead production during January-May 29 grew by a mere.2% to 3.5mn tonnes. According to the ILZSG, an escalation in Chinese lead production was the main driver behind an increase in the global production of refined lead. Additionally, the expansion was spurred on by rises in Russia, the UK, Malaysia and South Korea. Output was also higher in Australia, India and Canada. However, global lead production is expected to de-grow by.9% to 8.6mn tonnes in 29E. Subsequently, production is expected to pickup by 5% in 21E. Global demand for refined lead remained flattish and de-grew by.3% to 3.45mn tonnes during January-May 29. According to the ILZSG, global usage of lead is expected to decline by 1.1% to 8.6mn tonnes in 29E. However, the demand is expected to grow by 4% to 8.9mn tonnes in 21E, driven by a growth in demand for Chinese lead by 5.9% and 9.5% in 29E and 21E, respectively. Exhibit 21: World Lead Demand/Supply tonnes E 21E Mine Production 3,113 3,13 3,421 3,525 3,61 3,919 3,672 3,856 yoy % (6.3) 5. Metal Production 6,787 6,998 7,632 7,922 8,122 8,67 8,592 9,22 yoy % (.9) 5. Metal Usage 6,844 7,296 7,81 8,71 8,19 8,648 8,553 8,895 yoy % (1.1) 4. Surplus/(Deficit) (57) (298) (169) (149) (68) Source- ILZSG, LME, Angel Research August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

15 Exhibit 22: World Lead Demand/Supply in 29 tonnes Jan-May 29 Jan-May 28 yoy % Mine Production 1,468 1,546 (5.) Metal Production 3,478 3,472.2 Metal Usage 3,452 3,464 (.3) Surplus/(Deficit) LME-Lead (US $/t) 1,263 2,755 (54.2) Source- ILZSG, Angel Research The world lead market is also expected to remain in surplus through 29E and 21E, to the tune of 39, tonnes and 1,26,6 tonnes, respectively. Exhibit 23: World Lead Surplus/(Deficit) trend ' tonnes (5) E 29E 21E (1) (15) (2) (25) (3) (35) Source: ILZSG, Angel Research January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

16 Investment Arguments Multi-fold expansions across commodities Sterlite has been aggressively expanding capacities in almost all its divisions Sterlite, along with its Parent company, Vedanta Resources PLC, has been aggressively expanding capacities in almost all its divisions. Aluminium capacities will be doubled at Bharat Aluminium Company Ltd (BALCO) by September 211E, to.72mtpa from.35mtpa currently, and the company is also setting-up aluminium capacities of 1.75mtpa in Vedanta Aluminium Ltd (VAL) by FY213E. After these expansions by the end of FY213E, the total aluminium capacity will be 2.5mtpa, almost 7x the current capacity, making Vedanta one of the top aluminium producers in the world. Through Hindustan Zinc (HZL), zinc-lead capacity is to be raised to 1.65mtpa (a 4% increase over FY29 capacity) by mid-21e, making HZL the largest integrated zinc producer in the world. Additionally, to support the aluminium expansions at BALCO and VAL, Sterlite is also setting-up associated captive power plans with capacities of 1,2MW and 1,215MW at BALCO and VAL, respectively. Sterlite to garner a major chunk of the global aluminium market Aluminium capacities to be doubled in BALCO Sterlite is increasing its aluminium capacity at BALCO by almost.375mtpa, taking its total aluminium capacity to.72mtpa by September 211E Sterlite is increasing its aluminium capacity at BALCO by almost.375mtpa, taking its total aluminium capacity to.72mtpa by September 211E. The.375mtpa capacity would be added by setting-up the BALCO III smelter at Korba, with a capacity of.325mtpa, and another 5kt capacity addition through de-bottlenecking at the same location. Along with this, the captive power capacity would also be raised by 1,2MW, taking the total captive power capacity to 2,1MW (from the existing 81MW) at the same location. We believe that the additional 1,2MW power plant will help in saving costs and in generating additional revenues from the sale of surplus power, as BALCO I has been closed owing to lower aluminium prices. The BALCO III Project will comprise of one single pot line containing 336 cells, and is expected to produce its first metal by October 21E, with the entire new capacity expected to be fully commissioned by September 211E. The captive power plant of 1,2MW capacity will consist of four units of 3 MW each, and will meet the entire power requirement of the new Korba smelter. Exhibit 24: Balco - Capacity additions (mn tonnes) Product Existing Capacity Expanded Time Capacities additions capacities line Alumina.2.2 Sept 211 Aluminium Sept 211 Power (MW) 81 1,2 2,1 Sept 211 Bauxite August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

17 The estimated capex for the project is estimated at US $1.8bn, to be spent over a period of four years. The investment will be funded through a combination of existing cash, internal cash accruals and external financing. Sale of surplus power to offset BALCO I closure Currently, the BALCO I smelter has been closed due to its high cost of production and the prevalent lower LME Aluminium prices. Notably, BALCO I, which is an old technology smelter, has an almost 3% higher cost of production as compared to BALCO II, a GAMI technology smelter. In case of lower aluminium prices, BALCO has the flexibility of selling its surplus power on a merchant basis. We believe that the company would benefit from the sale of surplus power in the current weak price environment and with higher merchant tariffs for power. Also, due to the shutting down of BALCO I, the cost of production for aluminium has been reduced to US $1,19/tonne during 1QFY21, from US $1,385/tonne in 4QFY29, and from US $1,642/tonne in 3QFY29. The management is not planning to re-open BALCO I in the near term, and this would be feasible only if aluminium prices rebound significantly. Vedanta Aluminum - future aluminium major VAL is setting up alumina refining capacity of 5mtpa by FY213E The Vedanta group is aggressively expanding its aluminium capacities through Vedanta Aluminium Ltd (VAL), where Sterlite holds a 29.5% stake. VAL has set up an alumina refinery with a capacity of 1.4mtpa, which is operational currently. The company is also expanding its alumina capacity by.6mtpa through de-bottlenecking, taking its total capacity to 2mtpa by March 21E. The company is also in the process of building three new production streams of 1mtpa each. The first stream of 1mtpa is scheduled to be commissioned by mid-21e, and all the three streams are expected to be completed by mid-211e, increasing the capacity by 3mtpa at Lanjigarh. After all the expansions, VAL s total alumina refining capacity would stand at 5mtpa by FY212E. Vedanta's existing presence in the region, together with its excellent track record of executing projects ahead of time and at low capital costs make it ideally placed to lead the development of these abundant bauxite and coal reserves. January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

18 Exhibit 25: VAL - Capacity expansions MTPA Existing Capacity Expanded Time Capex Capacities additions capacities line (US $mn) Alumina Refinery (Lanjigarh) Lanjigarh I Refinery 1,15 1st stream QFY29 2nd stream QFY21 De-bottlenecking Mar 21 Lanjigarh II Refinery 1,72 Line I Mid-21 All other lines Jun 211 Aluminium Smelting (Jharsuguda) Jharsuguda I 2,113 Phase I Jun 29 Phase II Mar 21 Jharsuguda II 2,92 Phase I Sept 211 Phase II Sept 212 Captive Power (Lanjigarh) (MW) Phase I - 1,215 1,215 End-21 Phase II - 1,98 3,195 FY214 Smelting capacity to be at 1.75mtpa by 213E VAL is setting up aluminium smelting capacity of 1.75mtpa by FY213E VAL is also setting up an aluminium smelting capacity of 1.75mtpa by FY213E. A.25mtpa aluminium smelter, as part of Jharsuguda I, has already been completed by 1QFY21, and production from the unit has commenced. Phase II, with another.25mtpa, in Jharsuguda I, will be completed by March 21E, taking the total capacity to.5mtpa. A new 1.25mtpa smelter at Jharsuguda II is in progress and will be operational by Sept 212E. For Lanjigarh and Jharsuguda, the envisaged capex was US $7.7bn, out of which US $3.4bn has already been spent as on March 31, 29. The remaining capex of US $4.3bn will be spent over the next four years. Sterlite - among the Top 5 aluminum producers in the world Post expansions in Balco and VAL, Sterlite would become one of the top five Aluminum producers in the world Sterlite is aggressively expanding its aluminium capacities in BALCO and VAL. After the expansions in aluminium capacities (as explained in the earlier sections), in both BALCO and VAL, Sterlite's total aluminium smelting capacity will reach 2.5mtpa by FY213E, making it the largest aluminium producer in the country and one of the top 5 companies in the world. Also, the captive bauxite mines at Niyamgiri, which are expected to be operational by Mid-21E, and the captive power capacities at BALCO and VAL, will make Sterlite one of the lowest-cost producers of aluminium in the world. August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

19 Exhibit 26: Aluminium Capacity ramp-up mn tonnes FY28 FY29 FY21E FY211E FY212E FY213E Balco VAL Total Captive power to save costs VAL is planning to set up a captive power plant, with a capacity of 1,215MW, by the end of FY21E Power is the major cost component in aluminium manufacturing, and contributes almost 33-35% of the total production costs. One tonne of aluminium generally requires 15,Kwh of power. VAL is planning to set up a captive power plant, with a capacity of 1,215MW, by the end of FY21E. We believe that post commissioning of the plant, the power cost/unit should come down by Rs1-1.5/unit, which will help the company in reducing the overall aluminium costs. The current cost of production at Vedanta Aluminium is higher at US $1,1-1,2, on account of higher alumina costs and higher power costs (which are at Rs2-2.5/unit). The management has targeted reducing the cost of production to US $9/tonne, with the commissioning of the new power plant, the bauxite mines and the full capacity ramp-up. Niyamgiri Mines to save alumina costs Vedanta resources had entered into a joint venture (JV) agreement with the Orissa Mining Corporation to explore the Niyamgiri Bauxite Mines in Orissa's Kalahandi district, which were allotted to it in 24. Due to protests by the residents of Orissa over environmental issues, the mine could not be developed and has been on hold since the last four years. However, during December 28, the Supreme Court approved mining at the site. The Centre had also accorded Stage-I forest clearance in December, 28, with 32 conditions, besides 16 general stipulations. The company had also deposited Rs121cr with the state government for compensatory forestry, other forest management, and peripheral development measures. Eventually, the Centre, on April 28, 29, gave environmental clearance to the mining project. The management now expects the Niyamgiri mines to become operational from October 29E. January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

20 Cost Target of US $9 to be achieved after Niyamgiri mines begin operations The management has targeted the aluminium cost of production at US $9/tonne, post commissioning of Niyamgiri mines We believe that the Niyamgiri mines, with estimated reserves of 75mn tonnes (a mine life of 17 years) and having some of the best quality bauxite, will put Vedanta in one of the lowest cost quartiles for aluminium. Notably, the management has targeted the aluminium cost of production (COP) at US $9/tonne post commissioning of these mines (refining cost at US $25/tonne and smelting cost at US $65/tonne). With bauxite from Niyamgiri, the alumina cost for VAL is expected to be at US $1/tonne, as compared to the current cost of US $25-28/tonne, which translates into a refining cost of US $25/tonne. Currently, VAL is running its Lanjigarh refinery with bauxite sourced from the market. HZL targets to be the world's largest integrated zinc-lead company by 21E HZL is on the verge of a rapid expansion of its smelting, mining and power capacities, to take advantage of the deficit in the Indian zinc market. HZL has increased its zinc smelting capacity at the Chanderiya smelting complex (Rajasthan) by commissioning a 1,7,tpa hydro-metallurgical zinc smelter (Hydro II) in December 27. Moreover, the zinc smelting capacity has been increased by 88,tpa through de-bottlenecking at Chanderiya and Debari in April 28, taking its total zinc capacity to.669mtpa by the end of FY29. HZL has also expanded its capacity at the Rampura Agucha mine from 3.75mn tonnes to 5mn tonnes. Exhibit 27: HZL - Capacity Expansions Completed Zinc Expanded Smelting Expansion Expansion Capacity Tonnes (FY27) (Dec 27) (April 28) (FY29) Chanderiya smelting complex 2,75, 1,7, 8, 5,25, Debari Zinc smelter 8, - 8, 88, Vizag smelter 56, , Total 4,11, 1,7, 88, 6,69, Power capacity expanded to contain costs Along with its zinc capacity, HZL has also enhanced its power capacity from 192.4MW at the end of FY27, to 341.2MW in FY29. HZL commissioned its 8MW coal-based captive power plant (CPP) at Chanderiya in 28. The company had also commissioned 68.8MW wind power capacity in Gujarat and Karnataka, taking its total wind power capacity to 17.2MW at the end of FY29. Exhibit 28: Power capacities (FY28) Location Power Capacity (MW) Type Samana (Gujarat) 88.8 Wind Gadag (Karnataka) 18.4 Wind Chanderiya Smelting Complex 234 Coal Total August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

21 In line with the group's philosophy of being a self-reliant producer of power, a captive thermal power plant, with a capacity of 16MW, will also be set up at Rajpura Dariba, taking its total power capacity to 518.2MW by 21E. Due to the expanded power capacity, HZL will be able to source 7% of its power requirements from the captive sources. Exhibit 29: Smelting Capacity expansions (mtpa) Projects Locations Capacity Completion Date Zinc Smelting Rajpura Dariba 2,1, 21 Lead smelting Rajpura Dariba 1,, 21 Power (MW) Rajpura Dariba Huge zinc reserves to support expansions To support the increased smelting capacities, HZL will also increase its ore production capacity at the Rampura Agucha mine, from 5mtpa to 6mtpa. Ore production at the Sindesar Khurd mine, the new mine in HZL's mining portfolio, will also be increased from.3mtpa to 1.5mtpa. HZL will also start mining activity at the Kayar mine, which will have a production capacity of.3mtpa. Exhibit 3: Zinc Mining Capacity expansions (mtpa) Locations Capacity Completion Date Rampura Agucha Sindesar Khurd 1.2 1H212 Kayar Mine.3 1H212 The zinc and lead smelters, the 16MW CPP and the Rampura Agucha mine expansion will be completed by mid-21e. However, expansions at the Sindesar Khurd and Kayar mines will be completed in phases, by early 212E. The total investment in the above-mentioned projects is estimated at Rs3,6cr, which would mostly be funded through internal accruals. This investment includes the cost of the smelters, CPPs, mine development and shaft sinking, and of other infrastructure. The expansion will utilise the same technology and project management skills that successfully delivered the Chanderiya-II expansion project ahead of schedule HZL will become one of the largest zinc-lead producers in the world, with a zinc-lead capacity of 1.64mn tonnes by 21E After the completion of these projects, HZL will become one of the largest integrated zinc-lead producers in the world, with a zinc-lead capacity of 1.64mn tonnes by 21E, an increase of almost 115% over FY27. We expect HZL to benefit from the expansions, as it will be able to replace imports in the zinc-deficit Indian market, and thus win additional market share. January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

22 Exhibit 31: Capacity ramp-up ' tonnes 1, FY26 FY27 FY28 FY29 FY21E FY211E Zinc Capacity Lead Capacity Source: : Company, Angel Research HZL - one of the lowest-cost producers HZL is one of the lowest-cost zinc manufacturers in the world, with huge reserves of high-quality captive zinc mines HZL is one of the lowest-cost zinc manufacturers in the world, with huge reserves of high-quality captive zinc mines, which meet the entire zinc-concentrate requirements of the company. HZL operates three underground mines, Sindesar Khurd, Rajpura Dariba and Zawar, and the mechanized, open-cast Rampura Agucha mine in Rajasthan. Notably, HZL's cost of zinc production in FY29, excluding royalties, stood at US $686/tonne, as against a cost of production of around US $1,1-1,2/tonne for most high-cost manufacturers across the world. The management has targeted bringing down the cost of production to US $6/tonne, after the commissioning of all the expansions. Increasing reserves through aggressive explorations HZL has been on the verge of extensive explorations to increase the reserves of its zinc mines. Exploration at the Rampura Agucha mine has met with good results. Following extensive exploration programs and drilling in the last couple of years, reserves at the Rampura Agucha mine increased from 4mn tonnes with an average grade of 12.8% zinc, to 63.5mn tonnes with an average grade of around 13% zinc. The company's combined reserves and resource position is currently at 255mn tonnes. HZL estimates the remaining mine life at Rampura Agucha to be approximately 12 years. The two underground mines at Rajpura Dariba and Zawar, which meet around 5% each of the company's ore requirement, have six and four years of mine life left, respectively, on current reserves. Exhibit 32: Mines and Reserves (mn tonnes) Mines Reserves Capacity Zinc Grade % Rampura Agucha Mine Zawar Mines Rajpura Dariba Mines Sindesar Khurd Mine Total August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

23 Sterlite Energy - Powering Growth Sterlite Energy is setting up thermal coal-based power capacity of 2,4MW in Jharsuguda, Orissa We expect Sterlite Energy to contribute 15% of the consolidated revenues and 21.3% of the consolidated EBITDA in FY212E Sterlite is foraying into the high-growth merchant-power business through its wholly-owned subsidiary, Sterlite Energy Ltd. Sterlite Energy is setting up thermal coal-based power capacity of 2,4MW in Jharsuguda, Orissa, which would be commissioned in four phases, with a total capital expenditure of US $1.9bn, which is fully tied-up. The first phase of 6MW is expected to be commissioned by December 29, and 6MW additional capacities are to become operational after every quarter. The full ramp-up of the entire project is expected in FY211E. The company has already entered into a Power Purchase Agreement (PPA) with the Orissa government, to supply around 6MW of power every year. The remaining power can be supplied for the operations of VAL, and the surplus power can be sold in the spot market. Vedanta Aluminium would require 1,MW power at its peak capacity, which would be supplied from Sterlite Energy at the long-term contracted price. However, once the power project at VAL is commissioned, the entire 1,8 MW would be sold on a merchant basis. We expect Sterlite Energy to contribute 15% of the consolidated revenues and 21.3% of the consolidated EBITDA, after the full ramp-up of the project in FY212E. Exhibit 33: BALCO - Capacity additions (mn tonnes) Location Capacity Expanded Time additions capacities line Jharsuguda Sterlite Energy 2,4 2,4 Sept 21 Phase I 6 6 Dec 29 Phase II 6 1,2 Mar 21 Phase III 6 1,8 Jun 21 Phase IV 6 2,4 Sept 21 Talwandi Sabo, Punjab 1,98 Under review Source: Company, AngelResearch Coal linkages secured Sterlite Energy has also been allotted coal blocks, along with six other players; SEL's share of coal would be around 112mn tonnes. Until these mines become operational, SEL would feed its 6MW power plant from the linkages it has secured from the government. Notably, SEL has secured coal linkages from the Mahanandi coal field, for its 6MW power plant. The company is also in the process of securing linkages for its remaining capacity of 1,8MW. January August 7, 3, For Private Circulation Only - Sebi Registration No : INB

24 Healthy balance sheet to support expansions We believe that Sterlite's balance sheet is healthy enough to feed its expansions The estimated capex for Sterlite, over the next four years, is expected to be nearly US $7.9bn, which also includes US $1.1bn to be spent on the Asarco acquisition, and US $1.7bn for minority buyouts in BALCO and Hindustan Zinc. However, despite the huge capex, we believe that Sterlite's balance sheet is healthy enough to feed its expansions. We expect Sterlite's debt-equity ratio to be at a mere.3x in FY211E, and is in a comfortable position. The Hindustan Zinc subsidiary is a cash cow, with a cash balance of US $2bn at the end of FY29. Sterlite Standalone has net cash of US $1.6bn, and the parent company Vedanta is sitting on cash and cash equivalents of US $5bn. Apart from this, the recent ADS issue of US$ 1.6bn will also improve the liquidity and will help in funding the energy projects at Sterlite Energy and the other expansions projects. We expect Sterlite's debt-equity ratio to be at a mere.3x in FY211E, and is in a comfortable position Exhibit 34: Capex from Sterlite US $ bn Capex Spent till date Remaining BALCO VAL Sterlite Energy * Asarco Acquisitions Minority Buyouts Total Cash + Cash Equivalents 1.6 ADS 1.6 Total remaining 1.5 ; * already tied up We don't view the recent ADS issue of US $1.6bn (including a green-shoe option of US $1mn) as a negative development, despite the 15% dilution. We believe that this would provide further liquidity to the company to fund its aggressive capex plans. Minority buyouts - a near-term trigger The company is planning to exercise its call option to buy the remaining 29% stake in HZL from the government. We believe that the minority buyout would be value-accretive, considering the huge cash balance of over US $2bn in HZL. Sterlite is also looking to purchase the remaining 49% stake in BALCO. The management expects a capital outflow of US $1.7bn on the purchase of stakes in both these companies. In the recent con-call, the management has indicated that the purchase will be completed in the next two to three months. August January 7, 3, For Private Circulation Only - Sebi Registration No : INB

25 Financial Performance Expansions to offset lower commodity prices We expect Sterlite's consolidated revenues to grow at a CAGR of 11.3% during FY29-11E Led by capacity expansions at BALCO and HZL, and the ramp-up at Sterlite Energy, we expect Sterlite's consolidated revenues to grow at a CAGR of 11.3% during FY29-11E. We expect revenues to grow from Rs21,144cr in FY29 to Rs26,183cr in FY211E. We also estimate aluminium volumes to grow at a CAGR of 11.1% during the same period, due to the ramp-up of capacities at BALCO. In the same period, we expect zinc volumes to grow at a CAGR of 11.4%. However, due to the fall in LME prices, we expect the revenue growth to be capped, going forward. Exhibit 35: Revenue Trend Rs cr 3, 25, 2, 15, 1, 5, FY27 FY28 FY29 FY21E FY211E % (2) (4) Revenues (LHS) yoy (RHS) Net profit to grow faster than revenues We expect the consolidated net profit is expected to increase at a CAGR of 2.5% We expect Sterlite's Net Profit to grow at a much faster rate than its revenues, due to an improvement in the margins, on account of the reduction in production costs. Notably, the consolidated net profit is expected to increase at a CAGR of 2.5%. Exhibit 36: Net Profit Trend Rs cr 7, 6, 5, 4, 3, 2, 1, FY27 FY28 FY29 FY21E FY211E % (5) Net Profit (LHS) yoy (RHS) January August 7, 3, For Private Circulation Only - Sebi Registration No : INB