Matt Fernley matt.fernley@gmpeurope.

com +44-20-7647 2806

At the Open
February 2, 2010

Vedanta Resources PLC
VED - LSE 2624p (intraday)
What's changed Rating Target EPS FY10E (US$) EPS FY11E (US$) NAV/share (p) Share Data Shares - m (basic/fully diluted) 52-week high/low Free float 3M average daily volume 3M average daily value Market capitalisation Enterprise value Dividend yield Total projected return Key financials Revenue (US$m) EBIT (US$m) Net income adj. (US$m) EPS adj./dil. (US$) CEPS adj./dil (US$) Net DPS (US$) Summary metrics EBIT margin % ROIC (EBIT) % EV/EBITDA x PE x P/CF x New NC 3500p 1.68 5.65 3,015 Old Buy 3650p 2.47 6.80 3,161

BUY
Target: 3500p Slightly disappointing production results; good progress of aluminium expansion  Vedanta reported slightly disappointing FQ3/10 production results with Zambian copper production particularly weak. Sales were also weaker than expected in Zambian Copper and Iron Ore where realised prices were lower than expected.  The company surprised by including revenue from its Phase 1 smelter at Jharsuguda for the first time; previously this had been capitalised.  We have cut our FY10-12E EBITDA by 12%, 6% and 2% respectively, due mainly to cuts at KCM, Sesa Goa and the Indian copper operations.  We lower our price target to 3500p from 3650p, but re-iterate our BUY rating on the company’s strong near-term production growth, diversification and exposure to Indian demand.

03/09 6,579 1,139 244 0.84 2.48 0.41 03/09 17.3 9.0 13.9 49.6 16.9

288.2m/289.4m 2,967p/493p 40% 1.7m £41.4m US$12,042m US$20,456m 1.0% 34% 03/10E 03/11E 7,836 14,049 1,856 5,035 533 1,792 1.68 5.65 3.43 8.06 0.55 1.87 03/10E 03/11E 23.7 10.3 9.3 24.9 12.2 35.8 27.4 3.9 7.4 5.2

SLIGHTLY DISAPPOINTING FQ3/10 PRODUCTION RESULTS
Vedanta reported FQ3/10 production results that were slightly below our estimates, with Zambian Copper the most disappointing. Revenues were particularly disappointing in the Zambian Copper and Iron Ore (Sesa Goa) businesses with weak production impacting in Zambia and lower than expected realised prices impacting at Sesa Goa. The company reported revenues and EBITDA from phase 1 of the Jharsuguda aluminium smelter for the first time which buoyed the results for the aluminium division.

Prepared by GMP Securities Europe LLP See important disclosures at end of this report.

February 2, 2010

a 6% cut in FY11E and a 2% cut in FY12E. Power) Indian Copper Zambian Copper Zinc Iron ore 33 56 75 293 336 82 39 36 291 217 147% -31% -52% -1% -35% 205 825 341 433 495 287 753 265 446 390 39% -9% -22% 3% -21% Actual Diff Source: Company data. We have cut our EBITDA estimates for Sesa Goa in FY10E to reflect the weaker than expected FQ3/10 sales and have further lowered our FY11E and FY12E forecasts. We have cut our forecasts at the Indian Copper operations to reflect slightly higher than expected operating costs.com +44-20-7647 2806 Vedanta FQ3/10 results (unaudited) vs GMP estimates FQ3/10 GMPe Sales Aluminium (incl.     Changes to our estimates Sales Mar-10 Aluminium Indian copper KCM HZL Sesa Goa Total 4% -5% -15% 1% -15% -6% Mar-11 0% -4% -15% 2% -7% -4% Mar-12 0% -4% -4% 4% -7% -2% Mar-10 12% -17% -31% -1% -25% -12% EBITDA Mar-11 0% -10% -15% 0% -10% -6% Mar-12 0% -9% -4% 3% -9% -2% Source: GMP estimates February 2. We have also increased our unit cost estimates. Power) Indian Copper Zambian Copper Zinc Iron ore EBITDA Aluminium (incl. resulting in a reduction of our EBITDA estimate for FY10E by 31%.Matt Fernley matt. We have increased our FY10E forecast for the aluminium division to reflect the fact that the company is now including the Jharsuguda phase 1 smelter in the P&L. forecasts substantially for FY10-12E. 2010 . and hence earnings. These changes result in a 12% decline in our FY10E forecast. GMP estimates CHANGES TO OUR FORECASTS  The continuing underperformance from the Zambian copper division has led us to cut our production. for FY11E by 15% and for FY12E by 4%.fernley@gmpeurope.

87 288 11% 2.5% 87% 2.948 33.42 202 11% 2. It yields a value of 3015p per diluted share. We re-iterate our BUY rating.790 3.503 9.167 317 50. we note that they are measuring different things. Vedanta Resources SotP valuation Sterlite Copper PV of cash flow 2010-20E PV of TV Total PV Net debt / (Net cash) Minority interests PV of Equity No.648 1.41 83 8% 1.804 4. While the two metrics seem to yield widely disparate valuations.027 317 6.39 378 8% 3.71 693 11% 2. CONCLUSIONS AND RECOMMENDATION Following slightly weaker than expected FQ3/10 production data. Our SotP valuation is based on DCFs for the company’s major operating divisions for the period FY10-20E using the parameters in the table below.507 Power 892 2.665 3.487 317 14.5% 93% 2.fernley@gmpeurope.5% 54% -6 -76 317 -0.37 -968 8% 2.24 -14 11% 2.015 Source: GMP estimates Our multiple-derived valuation metric yields a value of 5704p per diluted share.164 1.339 MALCO -30 -51 -81 Vedanta BALCO Aluminium Sesa Goa 2. 2010 VALUATION UPDATE We value Vedanta using a simple average of two valuation metrics.545 317 4. However we still believe Vedanta is one of the most attractive metals and mining stocks in the sector due to its strong near-term growth outlook.5% 479 306 785 KCM 1.927 19 1.733 4.61 1516 11% 2.308 6.773 12.725 11.0x EV/EBITDA multiple.557 Other -420 0 -420 4. while the DCF valuation measures cash flow across the cycle. February 2.5% 79% 3.085 317 3. The multiple-based approach is highly leveraged to near-term growth.709 8.946 HZL 5.5% 57% -5.5% 29% 1.674 4. We apply a 20% discount to this valuation because of the company’s conglomerate structure.com +44-20-7647 2806 At the Open February 2.95 3.852 4. we are lowering our price target to 3500p from 3650p. 2010 . diversified product offering and exposure to strong Indian materials demand growth.717 317 11. which we expect to be significant.193 317 -16.5% 57% 401 1. a DCF-derived sum of the parts (SotP) valuation and a multiple on our CY11E EBITDA forecast.630 2. based on a 5.181 8.Matt Fernley matt.529 2.733 16. We believe that both approaches are relevant when deriving a fair value for the company.14 837 11% 2.570 3. of shares in issue Value per share (fd) Value per share (fd) Discount rate LT growth rate Vedanta's interest US$m US$m US$m US$m US$m US$m m US$ GBp % % % 337 447 317 1.773 Group 21.280 227 6. Prepared by GMP Securities Europe LLP See important disclosures at end of this report.5% 57% 1. so we take an average of the two which yields a value of 4360p.127 317 25.

3 Source: Company data.3 2012E 18.8 319.895 2.117 3.967 1.792 6.213 -281 900 -681 219 244 0.895 10.68 287.78 288.801 766 5. 2010 y/e Mar (US$m) PROFIT & LOSS Revenues Cost of sales EBITDA D&A EBIT plus investment income & pension items Net interest income/(expense) Other financials income/(expense) Pre-tax income Adjusted PTP Taxation Post-tax income Minority interests Net income (reported) Net income (adjusted earnings) Per share data (US$) EPS (adjusted.746 -415 1.2 317.067 158 944 -57 48 934 934 -280 653 -281 372 372 1.2 317.2 317.139 -288 362 1.701 4.585 -1.612 473 1.977 843 8.746 1.035 -400 362 4.4 2010E 7. provided paid investment banking services or acted as underwriter to the issuer.134 -336 362 7.181 1.9 317.814 -878 936 938 3. February 2.487 2.412 556 1.56 286.579 4. within the previous 12 months.48 287. **[Other disclosure] Prepared by GMP Securities Europe LLP See important disclosures at end of this report.95 3.880 -1.8 293.85 1.502 3.204 5. basic) Shares outstanding (fully diluted) 2006 3.84 2.332 -799 533 533 1. but that individual has no influence in the preparation of this report.59 2.577 -219 265 2.594 -1.049 8.5 2009 6.com +44-20-7647 2806 At the Open February 2.65 8. 8 the analyst who prepared this research report owns this issuer's securities. diluted) Cash EPS (adjusted earnings plus dep.804 5.22 5. 2010 . 9 limited voting 10 GMP or any of its group affiliated companies owns 1% or more of this issuer’s securities.635 1.702 2.248 5.836 5.792 1. 3 non-voting 4 subordinate-voting 5 restricted-voting 6 multiple-voting 7 the analyst who prepared this report has viewed the material operations of this issuer.010 430 2. basic) EPS (adjusted.127 753 745 2.488 -673 1.790 -2.798 2.626 -758 1.81 286.fernley@gmpeurope. * The analyst is related to a member of the Board of Directors of [name of company].594 7.Matt Fernley matt.68 3.30 1.9 2008 8.5 2007 6.06 288.05 9.85 0. diluted) Shares outstanding (period average.2 289.3 2011E 14. 2 GMP or any of its group affiliated companies is a market maker for the securities of the issuer.27 2.856 -458 362 1.504 -63 45 2.729 8.12 11.895 2.43 288.33 3. Company disclosures 1 GMP or any of its group affiliated companies has.637 2.193 3.792 1.704 195 2.701 -1.705 9.27 1. GMP estimates GMP Securities Europe LLP (“GMP”) is authorised by the Financial Services Authority and is a member of the London Stock Exchange. & amort.424 2.

S. the securities mentioned herein. GMP prohibits any director. FOCUS REDUCE. SPECULATIVE BUY. clients wishing to effect transactions in any security referred to herein should do so through Griffiths McBurney Corp. 2010 . GMP Research will initiate.. Small cap stocks (defined as stocks with less than $500 million market capitalization) in this category have a total return potential (including dividends payable) of greater than 25% and large cap stocks a greater than 20% total return potential. nor in providing it does GMP Securities Europe LLP (“GMP”) or any group company or firm or associate assume any responsibility or liability except to the extent required by applicable law. Reproduction in whole or in part without permission is prohibited. The information contained in this report may be based on assumptions and different assumptions may produce materially different information. Prepared by GMP Securities Europe LLP See important disclosures at end of this report. These stocks will have a 30% or greater total potential return and they will have a speculative component which could be material to the return expectations. These stocks will have 15% or greater (small cap) or 10% or greater (large cap) total return potential. Companies ranked Reduce have a negative potential total return. Investors should be aware that the value of investments can rise or fall and need to be aware of these risks in exercising investment decisions. have a position in. and stocks that have a speculative component which could be material to the return expectations ranked HOLD will have a total return potential of 0% to 30%. Past performance is not indicative of future performance. nor does the information purport to cover all information available on the subject.Matt Fernley matt. London W1S 4GA Tel 0044 20 7647 2800 Fax 0044 20 7647 2801. GMP Analysts are compensated competitively based on several criteria. 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