Annual Report - JSW Steel - 2009-2010

JSW STEEL LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Dear Members,

Your Directors present the Sixteenth Annual Report of your Company together
with the Standalone and Consolidated Audited Statement of Financial
Accounts for the year ended 31 March 2010.



1. FINANCIAL RESULTS

Rupees in crores
Standalone Consolidated

Particulars F.Y. F.Y. F.Y. F.Y.
2009-10 2008-09 2009-10 2008-09

Net Turnover 18,202.48 14,001.25 18,957.17 15,934.84
Other Income 532.84 259.56 536.00 271.66
Total Revenue 18,735.32 14,260.81 19,493.17 16,206.50
Profit before Interest,
Depreciation, & Taxation
(EBIDTA) 4,805.74 3,092.67 4,606.67 3,253.50
Interest 862.68 797.25 1,108.01 1,155.62
Depreciation 1,123.41 827.66 1,298.66 987.77
Profit before Taxation &
Exceptional Items 2,819.65 1,467.76 2,200.00 1,110.11
Exceptional Items - 790.13 - 794.78
Profit before Taxation (PBT) 2,819.65 677.63 2,200.00 315.33
Tax including Deferred Tax 796.91 219.13 646.71 72.60
Profit after Taxation but
before minority interest
and share of profit of
Associates 2,022.74 458.50 1,553.29 242.73
Share of Losses of Minority - - (33.21) (20.53)
Share of Profit of Associates
(Net) - - 11.05 11.65
Profit after Taxation (PAT) 2,022.74 458.50 1,597.55 274.91
Profit brought forward from
earlier year 3,883.15 3,505.86 3,676.02 3,482.32
Amount available for
Appropriation 5,905.89 3,964.36 5,273.57 3,757.23
Appropriations
Transferred (to) / from
Debenture Redemption
Reserve (125.00) 20.45 (125.00) 20.45
Transferred to Capital
Redemption Reserve (9.90) - (9.90) -
Dividend on Preference
Shares (28.92) (28.99) (28.92) (28.99)
Proposed Final Dividend on
Equity Shares (177.70) (18.71) (177.70) (18.71)
Corporate Dividend Tax (34.31) (8.11) (34.31) (8.11)
Transfer to General Reserve (202.28) (45.85) (202.28) (45.85)
Total (578.11) (81.21) (578.11) (81.21)
Balance carried to Balance
Sheet 5,327.78 3,883.15 4,695.46 3,676.02

The fiscal year under review would be marked as an important year for the
domestic steel industry. When the year began, the Indian economy,
invalidating the theory of coupling, started showing signs of growth,
amidst the global slowdown that was still prevailing, however, during the
course of FY 2009-10, the export dependency on the advanced world declined
substantially, driven by stimulated domestic demand.

During the current financial year, your Company took various strategic
initiatives to improve its volumes and profitability, which helped the
Company to post an impressive performance for the year.

The 2.8 MTPA Crude Steel Expansion Project at Vijayanagar Works commenced
commercial production on 10th April 2009 enhancing the Crude Steel
manufacturing capacity to 6.8 MTPA and scaling up the overall steel
manufacturing capacity of the Company to 7.8 MTPA. With the completion of
this expansion project, the Company has scaled new heights as a leading
player in the steel industry in the country. The Expansion facilities
stabilized quickly and achieved hot metal production of 2.2 Million tonnes
during the current year, which worked out to around78% of the Installed
capacity.

Consequently, the Company achieved a significant volume growth of 61% in
crude steel production and 67% in saleable steel during the current year,
compared to that of last year, despite disruptions in the plant operations
at Vijayanagar Works due to unprecedented and incessant rains followed by
floods in southern part of India in October 2009. The Company achieved
normal operations by December 2009 and during the current Financial Year
2009-10, it had achieved crude steel production of 5.987 Million tonnes
(the overall production was 6.02 Million tonnes, considering trial run
production from the expansion project) and saleable steel of 5.720 Million
tonnes (the overall sales was 5.74 Million tonnes, considering trial run
sales), which works out to around 94% of volume guidance of 6.4 Million
tonnes and 6.1 Million tonnes, respectively for the fiscal year under
review. The operational performance could have been much better if the
normalcy was there during October and November 2009.

During the year, the production of Rolled Products, both Long and Flat
(including Value Added Flat), went up significantly compared to last
fiscal. HR Coil production has reached highest levels at 3.399 Million
tonnes during the year, which is around 106% of enhanced rated capacity of
3.2 Million tonnes. The HR Coil production is expected to go up further, on
stabilization of the state-of-the-art new Hot Strip Mill, commissioned at
Vijayanagar Works in March 2010.

The domestic sales volume continued to show rising trend, constituting 84%
of the total sales for current year as against 72% in the last year, inline
with Company's strategy of increased focus in the domestic markets. The
number of JSW Shoppe outlets went up to 174 and the Retail sales for the
current fiscal, through JSW Shoppe, accounted for 16% of domestic sales,
excluding semis.

The various cost reduction initiatives taken by the Company, such as,
increased coal injection in blast furnace, lower usage of fluxes, higher
captive power generation, increase in utilization of Corex Gas, usage of
Coke Oven Gas from Recovery Type Coke Ovens, etc., along with lower input
costs led to reduction in cost of production.

The Gross Turnover and Net Turnover for the year stood at Rs. 19,456.64
crores and Rs. 18,202.48 crores, respectively, showing a growth of 28% and
30% over the previous year mainly driven by growth in volumes, in spite of
drop in blended sales realizations by 21%, relative to that of previous
fiscal year.

The EBIDTA for the year was Rs. 4,805.74 crores inclusive of forex gains of
Rs. 412.95 crores. The EBIDTA margin for the year was 26.2% as against
21.8% in the previous year.

Your Company posted a highest ever Profit after Tax of Rs. 2,022.74 crores,
up 341% over the last year.

Pursuant to the Accounting Standard (AS) - 21 on 'Consolidated Financial
Statements' issued by the Institute of Chartered Accountants of India,
consolidated financial statements presented by the Company include
financial information of its subsidiaries. The Company has made an
application to the Government of India seeking exemption under Section
212(8) of the Companies Act, 1956 from attaching the Balance Sheet, Profit
and Loss Account and other documents of the subsidiary companies to the
Balance Sheet of the Company. The Company will make available these
documents/details upon request by any member or investor of the
Company/subsidiary companies. Further, the Annual Accounts of the
subsidiary companies will be kept open for inspection by any investor at
the registered office of the Company and also that of the subsidiary
companies.

Consolidated Financial Statements also reflect minority interest in
associates as per Accounting Standard (AS) - 23 on 'Accounting for
Investments in Associates in Consolidated Financial Statements' and
proportionate share of interest in Joint Venture as per Accounting Standard
(AS) - 27 on 'Financial Reporting of Interests in Joint Ventures'.

As per the Consolidated Financial Statements, the Gross Turnover, Net
Turnover, EBIDTA and PAT of the Company were Rs. 20,211.33 crores, Rs.
18,957.17 crores, Rs. 4,606.67 crores and Rs.1,597.55 crores, respectively.
The PAT on consolidated basis was lower than the standalone Net Profit,
mainly due to global slow down adversely impacting the overseas operations
in USA and UK.

2. DIVIDEND

The Board has, subject to the approval of the Members at the ensuing Annual
General Meeting, recommended dividend at the stipulated rate of Re. 1.00
per Share on the 27,90,34,907, 10% Cumulative Redeemable Preference Shares
of Rs.10 each of the Company for the year ended 31 March 2010.

The Board had also vide a Circular Resolution passed by it on 17 February
2010, approved the Redemption of the Company's 99,00,000 11% Cumulative
Redeemable Preference Shares of Rs.10 each on 8 March 2010, along with
dividend due thereon for the Financial year 2009-10 upto the date of
redemption, at the stipulated rate of 11% per annum.

The Board considering the Company's performance and financial position for
the year under review, also recommended payment of dividend of Rs. 9.50 per
Equity Share on the 18,70,48,682 Equity Shares of Rs. 10 each of the
Company, for the year ended 31 March 2010, subject to the approval of the
Members at the ensuing Annual General Meeting.

Together with Corporate Tax on dividend, the total outflow on account of
Equity dividend will be Rs. 207.21 crores, vis-a-vis Rs. 21.89 crores paid
for fiscal 2008-09.

3. PROSPECTS

Having witnessed faster recovery in World Economy in 2009, IMF estimates a
positive economic rebound in 2010. World GDP growth is estimated at the
rate of 4.2% in 2010 while Advanced World and Emerging World is estimated
to grow 2.3% and 6.3%, respectively. Further WTO projects World Trade to
expand by 9.5% with Advanced World increasing by 7.5% and Emerging World by
11%. Nonetheless, with the timely stimulated economic efforts, the depth,
span and intensity of the economic catastrophic spread of 2008, seems to be
partially taken care of albeit caution continues with certain probable
sovereign defaults to continue to haunt the world in near term.

In these 'Trying and Managing Times' India has proved its mettle reflecting
a strong note of positive Economic Growth of 7.2% stimulated by timely
Economic measures, both towards Investment and Consumption expenditure.
Capitalizing the high degree of domestic consumption, low credit leverage
and debt exposure with expanding focus towards immense opportunities for
Investment and Consumption, prospects for Indian Economy look far better
and promising in 2010-11 and ahead. Preliminary guidance by various
agencies for the economic growth in 2010-11 is in the range of 8%-8.5%,
coupled with 9% in 2011-12 and double-digit growth projections in times
ahead.

Steel Facts and Estimates

The global steel production and consumption in 2009 declined by 8% and
6.7%, respectively, inspite of rebound in the second half of calendar year
2009. The impact of economic crisis in Advanced Countries continued to
depress the steel demand. China and India showed resilience due to strong
domestic demand cushioning the slow recovery in Advanced Economies. India,
posted a growth of 8.1% and 4.2% in steel consumption and production,
respectively in FY 2009-10. As the demand outpaced the production, the
import of steel products grew by 23%. India is expected to continue to be
the net importer of steel considering the strong demand from
infrastructure, construction, real estate, Automobiles and white goods
industry and tardy progress in creating new capacities.

Your Company will be in an advantageous position to derive the full benefit
from the growing domestic demand, with the increase in capacity utilization
from its 7.8 MTPA steel plant operations. The newly commissioned Hot Strip
Mill at Vijayanagar Works and blooming mill at Salem Works to be
commissioned in July 2010 will enhance the proportion of value added rolled
steel products with better sales realizations.

Your Company has worked out a business plan for the fiscal year 2010-11 to
produce and sell 7.0 Million tonnes and 6.75 Million tonnes, respectively
of various steel products showing a growth of 17% and 18%, respectively,
over fiscal year 2009-10 under review. The increase in bench mark prices
for key inputs viz., Iron ore and Coal is likely to push up the cost of
production in FY 2010-11. As the raw material suppliers insisted for
quarterly pricing in lieu of traditional yearly pricing methodology,
uncertainties in the pricing of key inputs beyond Q1 in FY 2010-11 will
prevail. However, the Company expects that the steel product prices will
fluctuate in sympathy with the change in raw material prices with lead and
lag effect. The increase in cost is likely to be neutralized by anticipated
rise in sales realizations and possible improvement due to change in
product mix.

The Company is planning to start some of its new facilities, which are part
of 10 MTPA expansion project, during FY 2010-11, to have better cost
advantage at Vijayanagar Works.

4. PROJECTS AND EXPANSION PLANS

Vijayanagar Works

(a) Projects commissioned during FY 2009-10

* The implementation of the Crude Steel capacity expansion project by 2.8
MTPA to reach 6.8 MTPA at Vijayanagar Works was completed, with the
commissioning of Pulverized Coal Injection Unit and Top Gas Recovery
Turbine in Blast Furnace#3 and RH Degasser unit and LHF#2 in Steel Melt
Shop#2, during first quarter of FY 2009-10.

* All major facilities such as Blast Furnace#3, SMS#2 comprising of
Converters, Slab Caster and Billet Caster, Long Product Mills comprising of
Wire Rod Mill and Bar Rod Mill along with the other support facilities such
as Coke Oven#3, Sinter Plant#2, Raw Material Handling systems, Utilities
and other infrastructural facilities forming part of this expansion
project, which were commissioned during last fiscal 2008-09, achieved its
full capacity production levels during the current year.

* The state-of-the-art new Hot Strip Mill with a capacity of 5 MTPA is
being implemented in two phases. The Phase-I with a capacity of 3.5 MTPA
has been successfully commissioned on March 28, 2010. After successful
trial runs, the Mill commenced commercial operations on 10 April 2010.
Phase-II is under implementation.

(b) Projects under Progress

* Further expansion of crude Steel capacity by 3.2 MTPA to reach 10 MTPA at
Vijayanagar Works along with associated facilities is under implementation
and targeted for completion by March 2011.

(c) Other Projects

* Beneficiation plant of 20 MTPA is being executed in two phases. One of
the three units of first phase came in operation in December 2009. 2nd &
3rd units will be completed by July 2010 & December 2010, respectively.
Phase II is planned for completion in FY 2011-12.

* To enhance productivity levels in the Blast Furnaces, one more Pellet
Plant of 4.2 MTPA capacity is being added and is planned for commissioning
by March 2011.

* The new captive power plant of 300 MW is also expected to be commissioned
in FY 2011-12 to achieve self sufficiency in power at 10 MTPA stage.

Salem Works

(a) Major modifications undertaken during FY 2009-10

The following modifications/improvements were made during FY 2009-10:

* Adapted tuyere gas control and a 'Jugad' slag-splash technique for
improving the refractory life of EOF.

* Introduced Economizer in captive power plant (CPP) to enhance fuel
efficiency.

* Islanding scheme was implemented in the electrical power system.

* Imposed loop-control rolling mill giving enhanced productivity for
special steel.

(b) Projects under progress

Blooming Mill Phase I and Phase II, 300 TPD lime kiln, third railway line
and Wagon Tippler will be commissioned during FY 2010-11. With the
commissioning of Blooming Mill in FY 2010-11, Salem Works will complete
expansion of rolling capacity, matching with the existing cast steel
production capacity.

Vasind and Tarapur Works

(a) Projects commissioned during FY 2009-10

30 MW Power Plant has been commissioned at Tarapur in December 2009,
equipped with latest ESP system and designed for zero affluent discharge.
This has not only helped the Company in reducing the cost of production
vis-a-vis procuring costly power from the state electricity grid for the
manufacturing operations but the Company has also entered into an agreement
with Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) for sale
of the surplus power. Since December 2009, the Company has been selling the
surplus power to MSEDCL.

(b) Projects under progress

* Railway Siding at Vasind - expected to be commissioned in January 2011.

* RLNG Project at Vasind to replace costly fuels being used (Furnace Oil in
HRM & LPG in Galvanizing Lines) - expected to be commissioned in January
2011.

* Galvalume Project - For conversion of existing CGL 1 & CSD II Galvanizing
lines, equipment procurement in progress.

5. SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES

A. Indian Subsidiaries

1. JSW Bengal Steel Limited (JSW Bengal), its Subsidiary Barbil
Beneficiation Company Limited and Associate JSW Energy (Bengal) Limited
(JSWEBL)

JSW Bengal Steel Limited was incorporated for setting up a Steel Plant in
the State of West Bengal. The Company is in possession of Land required for
this project. Boundary wall work at Salboni site is in progress. It is
proposed to implement the project in phases.

The first phase will be 4 MTPA Integrated Steel Plant with an estimated
project cost of Rs. 15,000 crores. The Company is drawing up plans to take
up implementation of the project in FY 2010-11 onachieving financial
closure.

JSW Bengal has entered into sole and exclusive long term Coal Supply
Agreement in March 2010, with West Bengal Mineral Development Corporation
Limited (WBMDTC), for supply of coal from the Kulti and Sitarampur coal
blocks.

A new SPV namely JSW Energy (Bengal) Limited (JSWEBL) has been incorporated
on 8th February 2010, with 26% of share holding by JSW Bengal and 74% by
JSW Energy Limited. JSWEBL proposes to set up a 2X800 MW captive power
plant to meet the power requirement of JSW Bengal and sell excess power to
WBEPCL/ JSW Power Trading Co. Limited, at an estimated project cost of Rs.
9,680 crores, including investment for Coal Mine development of Rs. 2,000
crores, which is proposed to be funded by way of Debt and Equity in the
ratio of 3:1. Target date for completion is FY 2014-15.

2. JSW Jharkhand Steel Limited

JSW Jharkhand Steel Limited was incorporated for setting up a steel plant
in the State of Jharkhand. The Company is pursuing for various
approvals/clearances viz., raw material linkages, land acquisition,
environmental clearances, etc., for this project.

3. JSW Steel Processing Centres Limited (JSWSPCL)

JSW Steel Processing Centres Limited (JSWSPCL) is a 100% subsidiary of the
Company. The subsidiary company was set up as Steel Service Centre
consisting of HR/CR Slitter and cutto length facility with annual slitting
capacity of 500,000 tonnes. The Company processed 3,04,718 tonnes of steel
during the FY 2009-10, as compared to 1,04,110 tonnes in the previous year.

4. JSW Building Systems Limited (JSWBSL)

JSWBSL, a 100% subsidiary, was incorporated on 28 March, 2008 with its main
objects as to design, make, prepare, develop, create, alter, replace,
repair pre-fabricated building systems and technologies. It was envisaged
that JSWBSL will be participating in the 50% equity capital of JSW
Severfield Structures Limited, a JV Company incorporated in March 2009 with
50:50 Equity participation by JSWBSL and Severfield-Rowen Mauritius
Limited. During the year, the Company has directly invested 50% Equity in
the JV Company, instead of through JSWBSL.

B. Overseas Subsidiaries

1. JSW Steel (Netherlands) B.V. (JSW Netherlands)

JSW Netherlands is a holding Company for USA, UK and Chile Operations. It
has 49% participation in the Equity of Georgia based Geo Steel LLC,
incorporated under the laws of Georgia. The Company invested in the plate
and pipe mill in USA and iron ore mining concessions in Chile and service
centre in UK through the following step down subsidiaries.

(a) JSW Steel Holding (USA) Inc. and its Subsidiary JSW Steel (USA) Inc.

During the financial year 2009-10, the performance of Plate and Pipe Mill
in USA continued to be impacted due to high cost Raw material inventory and
lower capacity utilization. For the year 2009-10, the Subsidiary Company
produced 195,275 net tonnes of Plates and 73,969 net tonnes of Pipes, and
achieved capacity utilization of 19% and 13%, respectively.

There has been improvement in US operations during the last quarter i.e. Q4
FY 2009-10, with increase in capacity utilization at the back of improved
market demand and lower costs. The US Subsidiary achieved positive EBIDTA
of US$ 2.08 Million during Q4 FY 2009-10.

It is expected that during the next fiscal FY 2010-11, US operations will
show progress in terms of operational performance with improved capacity
utilization and also improved financial performance with better
realizations.

(b) JSW Steel (UK) Limited and its Subsidiaries namely Argent Independent
Steel (Holdings) Limited and JSW Steel Service Centre (UK) Limited

JSW Steel Service Centre (UK) Limited has slitting and blanking facilities
to cater to specific customer requirements.

The latest demand forecasts indicate massive processing over capacity, in
the industry as a whole, reduced consumer demand and poor margins in the
first half of FY 2010. Given this situation, the Company has to respond to
these market pressures and at the same time generate revenues from the
lowest possible cost base. It has been decided that until the market
improves significantly, the Company will explore alternate Markets and
opportunities.

During the year under review, JSW Steel Service Centre (UK) Limited
processed 11,143 tonnes of steel.

(c) JSW Panama Holdings Corporation and Chilean subsidiaries namely
Inversiones Eurosh Limitada, Santa Fe Mining and Santa Fe Puerto S.A

During the financial year 2009-10, the feasibility studies were carried out
by the Subsidiary Company for starting beneficiation operations using wet
process. Preparation of Feasibility report for beneficiation operations is
in progress.

Considering rebound in commodity market leading to increase in long-term
Annual Price for FY 2010-11, the Subsidiary Company has decided to commence
mining under the dry method by contractual mining route.

Parallelly, the Subsidiary Company contemplates to commence work on putting
up wet beneficiation plant of 2.5 to 3 MTPA beneficiated ore to be
operational in FY 2011-12.

2. JSW Natural Resources Limited (JSWNRL) and its Subsidiary JSW Natural
Resources Mozambique Lda (JSWNRML)

JSW Natural Resources Limited was incorporated in Mauritius to pursue
acquiring coal assets/other assets relating to steel business.

JSW Natural Resources Limited formed a wholly owned subsidiary in
Mozambique to acquire Coal assets and engaging in the business of
prospecting and exploration of Coking/Thermal Coal.

While thermal coal was found on drilling and on receipt of test report, in
one of the Mining concessions held in Mozambique, the drilling of second
concession did not yield any positive result. Efforts are in progress to
explore and evaluate other alternatives to acquire and develop coal mines.

C. Joint Venture Companies

1. Geo Steel LLC

Georgia based Joint Venture Geo Steel LLC in which your Company holds 49%
equity through JSW Steel (Netherlands) B.V, has set up a steel rolling mill
in Georgia with annual production capacity of 175000 tonnes in the
industrial area of Rustavi in Georgia. The plant became operational during
current year 2009-10. It is designed to produce rebar through hot rolling
process by using steel billets produced through the Electric Arc Furnace
Route.

Geo Steel had started commercial production with effect from January 2010
and has produced 16260 tonnes of Billets and 7435 tonnes of Rebar during
the quarter January - March 2010. The Gross Turnover was USD 7.3 Million.

2. Rohne Coal Company Private Limited

Your Company holds 49% equity in Rohne Coal Company Pvt. Ltd. (JSW group is
holding 69%, including that of the Company), which is a joint Venture with
three other partners (two partners from outside the Group). This JV Company
received the final allotment letter from the Government of India for
development of Rohne Coal Block. Mining plan has been approved by Ministry
of Coal. The application for Mining Lease is under consideration. In-
principle approval for railway siding for Coal Mine has been obtained from
East Central Railway. Environmental clearance has been recommended by the
Expert Appraisal Committee and the final clearance from Ministry of
Environment and Forests (MoEF) is awaited. Forest clearance is under
process.

3. MJSJ Coal Limited

In terms of the Joint Venture Agreement to develop Utkal - A and Gopal
Prasad (West) thermal coal block in Orissa, your Company agreed to
participate in the 11% equity of newly formed MJSJ Coal Limited, Orissa
along with four other partners. The Government of India has decided to
allot 1,522 acres of Gopal Prasad west area to MJSJ Coal Limited. Mahanadi
Coalfields Ltd., a Public Sector Company holds 60% of the equity. Land
acquisition is under progress.

4. Gourangdih Coal Limited

Ministry of Coal (MoC), Government of India has allocated Gourangdih ABC
Thermal coal block in the State of West Bengal having a geological reserve
of 131.7 million tonnes of thermal coal for captive mining jointly by the
Company and Himachal EMTA Power Corporation Ltd. (HEPL) by working through
a 50:50 Joint Venture Company for meeting their proportionate share of
requirement of coal. To pursue this objective, a JV Company, Gourangdih
Coal Ltd. (GCL), has been incorporated on 26th October 2009 with its
Registered Office in Kolkata.

5. Toshiba JSW Turbine and Generator Private Limited

Toshiba JSW Turbine & Generator Pvt. Ltd. was incorporated with a
shareholding of 75% by Toshiba Corporation Ltd., Japan, 20% by JSW Energy
Ltd. and 5% by the Company, to design, manufacture, marketing and
maintenance services of mid to largesized Supercritical Steam Turbines &
Generators of size 500 MW to 1000 MW.

Land lease agreement has been signed with Government of Tamilnadu for
setting up of manufacturing facility of JV Company near Ennore port,
Chennai. Technology transfer agreement has been signed between Toshiba
Corporation, Japan and Toshiba JSW Turbine & Generator Pvt. Ltd. for
transferring supercritical turbine manufacturing technology. The land
development, civil work, engineering and procurement of equipment have
commenced. The phased manufacturing of different components of Steam
Turbine Generator is expected to commence from early 2011.

6. Vijayanagar Minerals Private Limited (VMPL)

During the financial year 2009-10, VMPL supplied 1.76 million tonnes of
Iron Ore from Thimmappanagudi Iron Ore Mines, vis-a-vis 1.50 million tonnes
in the last financial year 2008-09. VMPL has planed to supply 2.5 million
tonnes during the next FY 2010-11. VMPL is set to enhance the production
capacity to 4 million tonnes in TIOM subject to Forest and Environment
clearance.

7. JSW Severfield Structures Limited (JSSL) and its Subsidiary JSW
Structural Metal Decking Limited (JSWSMD)

JSSL a Joint Venture Company was incorporated on 19 March 2009, with 50:50
Equity participation by the Company and Severfield-Rowen Mauritius Limited.
The Project having a capacity of 35000 tonnes per annum of Structural
Steelwork facility is being set up at Vijayanagar Works and is under
implementation.

JSSL will be engaged in design, fabrication and erection of structural
steelwork and ancillaries, including decking for construction projects in
India, Pakistan, Bangladesh, Nepal, Sri Lanka and Bhutan. The Company is
expected to start commercial production during FY 2010-11.

JSWSMD a downstream subsidiary company of JSSL being 67:33 joint venture
with SMD Asia LLP, UK was incorporated on 18 December, 2009. JSWSMD will be
engaged in the business of the design, roll forming and installation of
structural metal decking and ancillaries, including shear connectors, for
construction projects primarily in India but also covering Pakistan,
Bangladesh, Nepal,Sri Lanka and Bhutan (Jointly the 'Core Markets'). The
Company is expected to start commercial production during FY 2010-11.

D. Associate Companies

Jindal Praxair Oxygen Company Private Limited (JPOCL)

The oxygen plants of JPOCL have been working satisfactorily primarily to
meet the requirement of the steel plant operations at Vijayanagar Works.
During the financial year 2009-10, the combined production of the oxygen
plant module #1 and module # 2 of JPOCL was: gaseous oxygen - 1,009 million
Nm3; gaseous nitrogen - 309 million Nm3; Liquid oxygen - 8.8 million Nm3;
Liquid nitrogen - 14.8 million Nm3 and Argon - 12.5 million Nm3.

6. MOU with JFE

Your Company has signed a Strategic Collaboration Agreement with JFE Steel
Corporation, the world renowned Japanese steel company on 19 November 2009
at Mumbai. This collaboration agreement providesan ideal platform for both
the steel companies to come together and leverage each others strength to
their mutual benefit.

The parties have in principle agreed, subject to (i) obtaining all
regulatory approvals, (ii) entering into definitive agreements, and (iii)
fulfilling all conditions precedent as may be agreed to between the parties
in the definitive agreements, to collaborate with each other in India in
the area of automotive steel including production technologies and supply
of substrate materials for hot rolled, cold rolled and galvanized products.
The scope also covers joint service activities including application
engineering and product development for automotive customers. Separate
detailed agreements which shall spell out the scope and time-frames will
be executed between the two companies area by area.

JFE and the Company have also arrived at a broad consensus on the areas
where possible mutual collaboration can be explored in India in the near
future in accordance with applicable laws. The areas include:

1) Production of steel products other than automotive steel

2) Energy reduction programmes

3) Environmental programmes

4) Quality and yield improvement programmes

5) Performance audit of JSW facilities

6) Benchmarking of techno-economic parameters between the parties

7) Procurement of raw materials both in and outside of India

8) Project for building and operating an integrated steel production
facility in JSW's West Bengal Steel Project

9) Mutual Stockholding

10) Other items which may come in the mutual interest of the parties.

Dedicated teams from both the Companies are working on certain areas
identified in the Strategic Collaboration Agreement.

7. ACQUISITION OF COKING COAL MINES IN USA

The Company identified certain Coking Coal Assets in USA along with Railway
Load out and Barge facility. Following the due diligence, the Board has
approved the acquisition of these Assets. As per Company's estimates, these
mines have resources aggregating to 123 million tonnes. The Company is in
the process of formalising the acquisition. While one of these mines is
operating, balance mines can be made operational over 24 Months. The
business plan envisages commencing production of Coking Coal of 1 million
tonnes in the first year to be ramped up to 3 million tonnes in 3rd year.

8. CREDIT RATING

Various long-term debt, medium term debt and bank facilities sanctioned
and/or availed by the Company has been rated by Credit Analysis & Research
Limited (CARE) as 'CARE AA-' (Double AA minus).

The long term Non Convertible Debentures (NCDs) of the Company has also
been assigned 'CARE AA-' rating. 'CARE AA-' indicates high safety for
timely servicing of debt obligations and very low credit risk.

The short term debt/facilities sanctioned and/or availed by the Company has
been assigned 'PR1+' rating by CARE. Short term NCDs have been assigned
'PR1+' rating. 'PR1+' rating is the highest rating in the category and
indicates a strong capacity for timely payment of short-term debt
obligations and lowest credit risk.

9. FIXED DEPOSITS

Your Company has not accepted any fixed deposits from public and is
therefore not required to furnish information in respect of outstanding
deposits under Non Banking Non Financial Companies (Reserve Bank)
Directions, 1966 and Companies (Acceptance of Deposits) Rules, 1975.

10. SHARE CAPITAL

The Company's 99,00,000 11% Cumulative Redeemable Preference Shares of Rs.
10 each (11% CRPS) were redeemed at a premium of Re. 1 per share on 8 March
2010, along with dividend due thereon for the Financial year 2009-10 up to
the date of redemption, at the stipulated rate of 11% per annum, in terms
of the Circular Resolution passed by the Board on 17 February 2010. There
were no other changes in the Share Capital of the Company during the
Financial Year under review.

11. ISSUE OF WARRANTS TO SAPPHIRE TECHNOLOGIES LIMITED, A PROMOTER GROUP
ENTITY ON A PREFERENTIAL BASIS

An issuance of 1,75,00,000 warrants convertible into equity shares, to
Sapphire Technologies Limited, a Promoter Group Entity has been approved by
the Board, subject to necessary approvals, including that of the Members in
an Extra Ordinary General Meeting to be convened on 2 June 2010 for the
purpose. Each of these warrants will be convertible into 1 (one) Equity
Share of par value of Rs.10 each at the option of the Warrant holder within
18 months from the date of their allotment. The Warrants will be issued at
a price not less than the minimum price determined as per the provisions of
Chapter VII of the SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009.

The shareholding of 45% held by the promoters as on 31 March 2010 will
increase to 49.71% of the post issue share capital on conversion of the
aforesaid 1,75,00,000 warrants without considering the equity shares that
may be issued upon conversion, if any, of the Company's outstanding Foreign
Currency Convertible Bonds (FCCBs).

12. FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)

During the F.Y 2007-2008, your Company had issued 3250 Zero Coupon Foreign
Currency Convertible Bonds (FCCBs) of US$ 100,000 each due 2012 (ISIN
XS0302937031), aggregating to US$ 325 Million to international investors to
part finance the capital expenditure programme of the Company. Each Bond is
convertible into equity shares of the face value of Rs.10 each of the
Company at a conversion price of Rs. 953.40 per share, at any time on or
after 7 August 2007 until the close of business on 21 June 2012, unless
previously redeemed, converted or purchased and cancelled. The Bonds, which
are not redeemed, converted or purchased and cancelled, are redeemable on
28 June 2012 at an amount equal to the principal amount of the Bonds
multiplied by 142.801 per cent.

Out of the aforesaid 3,250 Bonds issued, 8 bonds were converted into 33,799
equity shares which were allotted on 4 January 2008.

The Company repurchased and cancelled 15.36% of its remaining outstanding
Zero Coupon Foreign Currency Convertible Bonds of US$ 1,00,000 each,
aggregating to US$ 49.80 million (US$ 47.80 million in March 2009 & US$ 2
million in April 2009) in accordance with the A.P. (DIR Series) Circular
No. 39 dated 8 December 2008 issued by the Reserve Bank of India.

The principal amount of Bonds outstanding after this repurchase and
cancellation is US$ 274.40 million.

13. DIRECTORS

Mrs. Savitri Devi Jindal, Mr. Anthony Paul Pedder and Mr. Uday M. Chitale,
Directors, retire by rotation at the forthcoming Annual General Meeting and
being eligible, offer themselves for re-appointment.

Dr. Vijay Kelkar who was appointed by the Board of Directors of your
Company in its meeting held on 20 January 2010 as an Additional Director
w.e.f. 20 January 2010 in terms of Article 123 of the Articles of
Association of your Company, holds office upto the date of the ensuing
Annual General Meeting. Your Company has received a notice under Section
257 of the Companies Act, 1956 from a shareholder of your Company,
signifying his intention to propose the name of Dr. Vijay Kelkar for
appointment as a Director of your Company.

The proposals regarding the appointment/re-appointment of the aforesaid
Directors are placed for your approval.

Other changes in the Board of Directors of your Company during the year
under review are as follows:

Karnataka State Industrial Investment and Development Corporation Limited
(KSIIDC) nominated Mr. N. C. Muniyappa, IAS as its nominee on the Board of
your Company in place of Mr. V. Madhu, IAS w.e.f. 16 June 2009.
Subsequently KSIIDC nominated Mrs. Vandita Sharma, IAS, as its nominee on
the Board of your Company, in place of Mr. N. C. Muniyappa, IAS w.e.f. 19
November 2009.

UTI Asset Management Company Ltd. withdrew the nomination of Mr. G. R.
Sundaravadivel as a Director of your Company w.e.f. 11 May 2009 and
appointed Mr. B. Babu Rao in his place. Subsequently UTI Asset Management
Company Ltd. withdrew the nomination of Mr. B Babu Rao as a Director of the
Company w.e.f. 1 February 2010 since the Company paid the entire
outstanding and there were no dues to UTI as on date.

Your Directors place on record their deep appreciation of the valuable
services rendered by Mr. V. Madhu, IAS, Mr. N. C. Muniyappa, IAS, Mr. G. R.
Sundaravadivel & Mr. B. Babu Rao during their tenure as Directors of the
Company.

14. AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, auditors of the
Company, retire at the conclusion of the ensuing Annual General Meeting and
have expressed their willingness to act as auditors of the Company, if
appointed, and have further confirmed that the said appointment would be in
conformity with the provisions of Section 224 (1B) of the Act.

15. PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Information in accordance with the provisions of Section 217(1)(e) of the
Companies Act, 1956 read with Companies (Disclosure of Particulars in the
Report of the Board of Directors) Rules, 1988 regarding conservation of
energy, technology absorption and foreign exchange earnings and outgo is
given in the statement annexed (Annexure 'A') hereto forming part of the
report.

16. PARTICULARS OF EMPLOYEES

The information required under Section 217(2A) of the Companies Act, 1956
read with the Companies (Particulars of Employees) Rules, 1975 is given in
the statement annexed (Annexure 'B') hereto forming part of the report.

17. AWARDS AND ACCOLADES

Your Company and its employees received the following awards during the
year:

i. Karnataka Chapter Safety Award 2009: Unnatha Suraksha Puraskara, a
trophy and certificate was presented for outstanding safety performance and
management systems in Metals category of industries during 2006-08, by
National Safety Council, Karnataka Chapter, on 09 September 2009 at
Bengaluru.

ii. Greentech Environment Excellence Award 2009: Gold award in metal and
mining sector for outstanding achievement in Environment Management (10
October 2009, Kovalam).

iii. ISO-14001:2004 Certification: Vidyanagar Township was recommended for
certification of ISO-14001:2004 for environmental management practices, on
23 September 2009, by TUV Rheinland Group.

iv. National Award for Excellence in Energy Management 2009: Excellent
Energy Efficient Unit Award 2009 for Best Energy Management Practices (19,
20 November 2009, Chennai), by CIIGodrej Green Business Centre.

v. PM's Trophy 2007-08: Runner-Up of the best performing Integrated Steel
Plant in the country, known as Steel Minister's Trophy (declared on 13
November 2009).

vi. CII-EXIM Award 2009: 'Commendation Certificate for Significant
Achievement' for Business Excellence by Confederation of Indian Industries,
on 17 December 2009 at Delhi.

vii. IMC Ramkrishna Bajaj National Quality Award: 'Performance Excellence
Trophy in the Manufacturing Category' by Indian Merchant Chambers Quality
Cell, on 19 March 2010 at Mumbai.

Individual and Team Recognitions:

1. Dr. Madhu Ranjan, VP (R & D and SS), has been conferred with
Metallurgist of the Year Award - 2009' instituted by the Ministry of
Steel, Govt. of India, at the 47th National Metallurgists' Day Celebrations
held on the 14 November 09 at Kolkata.

2. Oral Presentation Category at 63rd Annual Technical Meet, Kolkata

a. Second Prize was won by -

1. Mr. Pranav Tripathi

2. Mr. Sujay P. Patil

3. Mr. D. Satish Kumar

4. Mr. Abhijit Sarkar

5. Mr. P. C. Mahapatra

b. Third Prize was won by -

1. Mr G.S. Rathore

2. Mr Mukul Verma.

3. National Award for Excellence in Energy Management 2009

Most Useful Presentation Award' was won by JSW Steel team for making
excellent presentation, on 20 November 2009 at CII-Godrej Green Business
Centre, Chennai.

18. CORPORATE GOVERNANCE

Your Company has complied with the requirements of Clause 49 of the Listing
Agreement regarding Corporate Governance. A report on the corporate
governance practices, the Auditors' Certificate on compliance of mandatory
requirements thereof and Management Discussion and Analysis are given as an
annexure to this report.

19. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 217 (2AA) of the Companies Act,
1956, your Directors hereby state and confirm that:

(i) in the preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanation relating to
material departures;

(ii) they have selected such accounting policies and applied them
consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the
Company for that period;

(iii) they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of this Act
for safeguarding the assets of the Company and for preventing and detecting
fraud and other irregularities;

(iv) they have prepared the annual accounts on a going concern basis.

20. APPRECIATION

Your Directors take this opportunity to express their appreciation for the
cooperation and assistance received from the Central Government of India,
Republic of Chile, Central Government of Mozambique, USA and UK; the State
Government of Karnataka, Maharashtra, Tamil Nadu, West Bengal and
Jharkhand; the financial institutions, banks as well as the shareholders
and debenture holders during the year under review. The Directors also wish
to place on record their appreciation of the devoted and dedicated services
rendered by all employees of the Company.

For and on behalf of the Board of Directors

Savitri Devi Jindal
Date: 3 May 2010 Chairperson

PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE
REPORT OF BOARD OF DIRECTORS) RULES, 1988.

Annexure A'

A. CONSERVATION OF ENERGY

The Company took various initiatives to conserve energy across all
locations during the year under review.

Energy Conservation Initiatives at Vijayanagar:

Your Company's Energy Reduction Initiative and Energy management were
established in late 2007, with creation of new energy management group.

Vijayanagar achieved Specific Energy consumption of 6.495 Gcal/Tcs in FY
2009-10 vis-a-vis 6.704 Gcal/Tcs in FY 2008-09, reducing the Energy
consumption by 3.12%.

For the second year in a row, Vijayanagar Works was adjudged as an
excellent energy efficient unit for the Year 2009-10 for Energy Management
by the Confederation of Indian Industries. Each year CII honor outstanding
contributions in protecting the environment and reducing greenhouse gas
emissions through energy efficiency. Over the past three years, the energy
management program has achieved a 5.1% improvement in energy intensity.

During FY 2009-10, Vijayanagar works achieved energy savings by reducing
use of LPG & purchased electricity and increasing use of by-product gasses.
The reductions were due to capital investment made at different facilities,
such as installation of top-gas recovery turbine,3.8 MTPA & 6.8 MTPA gas
interconnections to facilitate mixed under firing for Coke Ovens Batteries
and Gas Mixing Station and Gas line to power plant to use excess Blast
Furnace Gas and Coke Oven Gas in power generation.

This distinction demonstrates the Company's commitment in maintaining
operational excellence, while efficiently managing energy resources. The
Company prides itself on producing safe, sustainable steel and its
dedication to energy efficiency will continue to be a leading priority.

This has been possible due to improvement in following:

a) Coke rate at Corex was lower by 6.7%. This was achieved with better
heating regime and consistent coal availability.

b) Coke rate at Blast Furnace was lower by 9.3 % by increasing pulverized
coal injection. This was achieved by increased availability of Blast
Furnace for operation.

c) LCP heat rate was lower by 5.6% and power rate was lower by 6.8%. This
has been achieved by increased productivity and better availability of
gases for Lime production.

d) LD gas recovery at BOF improved by 1.7%. It was possible with 100% gas
holder availability and installation of additional gas booster.

e) HSM heat rate improved to 4.2% and power rate was reduced by 11.9%. This
was achieved by eliminating idle hour of HSM due to non-availability of gas
and by ensuring more availability of gas to reheating furnace.

f) Mills has stabilized in operation due to overall increase in value added
products power rate at CRM was lower by 13.25%.

g) Corex gas utilization has been improved from 97% to 97.94% by better gas
management.

h) Waste heat utilization improvement at Non-recovery type coke oven based
Captive Power Plant resulting in increase of power generation from 72.38
MWh to 106.23 MWh.

i) Gas based captive power generation.

Energy Conservation Initiatives at Salem

Several initiatives were taken up for the Conservation of Energy and the
following were achieved during the Financial Year under review:

* Increased BF gas utilization in the Re-heat Furnace of rolling mill.

* Introduced an economizer in Power Plant to enhance fuel efficiency.

* Recycled the water from Captive Power Plant for coke quenching oven which
resulted in water saving.

* Altered the design of key components of coal boiler reducing the power
plant shutdown.

Energy Conservation Initiatives at Vasind and Tarapur

i) Switching off one more 93 KW water pump at Cold rolling mills through
monitoring and optimization of parameters.

ii) Installation of VVF Drives in Oven Blowers (4Nos) in Colour Coating
Line.

iii) Controlling Blowers Speed with reduced Oven set Pressure when Coating
is not ON in Colour Coating Line.

iv) Controlling Cooling after Galvanizing Blowers speed with production
rate through programming Logic.

v) Replacing Old Screw Air compressors with energy efficient two stage air
compressor at TM-4 Rolling Mill.

Total Energy Consumption and Energy Consumption per unit of production are
given in Form A'.

B. TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION

Efforts made in Technology Absorption are given in Form B'.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Activities relating to exports, initiatives taken to increase exports,
development of new export markets for products and services and export
plans:

Exports has always been a strategic move of the Company with a clear focus
on Value-Addition, Customisation and expanded geographical reach. Inspite
of demand contraction in international market during fiscal 2009-10, the
Company exported 0.896 million tonnes expanding its reach to five
continents.

b) Total Foreign Exchange used and earned:

Rs. in crores
FY 2009-10 FY 2008-09

i) Foreign Exchange earned 2,772.02 4,194.70
ii) Foreign Exchange used 8,897.74 8,293.63

Form A'

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

A. POWER AND FUEL CONSUMPTION

Particulars 2009-10 2008-09

1. Electricity

a) Purchased

Unit (kwh) (in Lacs) 17435.20 8082.83
Total Amount (Rs. in crores) 614.45 374.49
Rate/Unit (Rs.) 3.52 4.63

b) Own Generation

i) Through Captive power plant

Unit (kwh) (in Lacs) 22049.70 17972.36
Total Amount (Rs. in crores) 578.50 547.30
Cost/Unit (Rs.) 2.62 3.05

ii) Through diesel generator

Unit (kwh) (in Lacs) 562.59 532.99
Unit per litre of diesel 2.55 2.54
Total Amount (Rs. in crores) 29.91 25.75
Cost/Unit (Rs.) 5.32 4.83

iii) Through top Recovery Turbine

Units (kwh) (in lacs) 68.63 -
Total Amount (Rs. in crores) 0.44 -
Cost/Unit (Rs.) 0.64 -

2. Coal + Coke

Quantity (tonnes) 68,47,016 t 48,49,085 t
of Coal of Coal
+ +
5,37,727 t 4,88,667 t
of Coke of Coke
Total Amount (Rs in crores) 6,230.90 5,862.15
Coal Rate (Rs./t) 7996 9872
Coke Rate (Rs./t) 14056 22006

3. Furnace Oil

Quantity (K.Ltrs) 12625 10810
Total Amount (Rs in crores) 32.60 28.45
Average Rate (Rs./Ltrs) 25.82 26.32

4. LPG

Quantity (tonnes) 24218 19603
Total Amount (Rs in crores) 80.90 74.72
Average Rate (Rs./t) 33405 38116

B. Consumption per unit of Production

Particulars 2009-10 2008-09

1. Crude Steel
Electricity (kwh/t) 510 523
LPG (Kg/t) 1.0 1.3

2. Hot Rolled Coils/Steel plates/ sheets:
Electricity (kwh/t) 80 91

3. Rolled Products - Long
Electricity (kwh/t) 181 114

4. Galvanised Coils/Sheets:
Electricity (kwh/t) 198 186
LPG (Kg/t) 18 19

Form B'

FORM OF DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

RESEARCH AND DEVELOPMENT (R & D)

1. Specific areas in which R & D activities were carried out by the
Company:

Research and Development activities were carried out in various
technological areas, including Beneficiation of Iron-Ore, Pelletization and
Sintering of Iron-Ore, Coke Making, Iron Making in Corex and Blast Furnace,
Steel Making and Casting, Hot Rolling, Cold Rolling, and Waste utilization,
with emphasis on improvement in quality, productivity, energy conservation,
waste utilization, cost reduction, and environment protection.

R & D was also carried out for development of value added products in the
form of 33 new slab grades and 23 new billet grades to meet specific
requirements of customers, including:

* API grades for line pipe steel

* Drawing and Deep Drawing Steels

* Medium Carbon and High Tensile Steels

* Micro-alloyed structural grade steels

* Auto and Tube makers grade

* Billet grade steels

2. Benefits derived as a result of R & D efforts:

* Optimization of the coking time for varying quality of coal blends
improved production at non-recovery coke ovens by 5%.

* Reduced the Coke Moisture in Coke Oven #3 from 8% to less than 5%.

* Optimization of Sintering Parameters reduced sinter return fines from 30%
to < 20%.

* Improvement in Pellet Quality by improving pellet CCS > 220 kg/p

* BF-2 productivity increased from 2.1 to 2.4 t/m3/d, through optimization
of burden distribution, material discharge rate, soft blowing philosophy

and improvement in tapping practice.

* Reduction in Fuel Rate at BF-1 and BF-2 by 10 kg/thm.

* Minimizing Inclusions in Ladle Change over Slabs through water modelling
to reduce emulsification during ladle changeover.

* Recycling of various SMS Slags in Cement and Pellet Making to estimate
the maximum permissible limits of slag addition in cement and pellet
making.

* Development of model to predict optimum Finishing and Coiling
Temperatures for a typical HR Product by optimization of Thermal Regime in
HSM.

* Study of thermal profile and wear pattern of rolls in HSM during rolling
and improve the critical factors.

* Development of new process to produce DRI from green pellets, thereby
reducing CO2 generation.

* Development of a novel technique for utilization of steel plant wastes to
produce high quality DRI for steelmaking as a replacement of steel scrap.

Development of Predictive Models:

* Hearth Wear Monitoring Model for COREX.

* Coal Pyrolysis and Power Generation Model for Non-Recovery Coke Ovens.

* Voidage evaluation Model for BF.

* Top gas prediction Model for BF.

* Model to predict direct and indirect reduction along with minimum fuel
rate.

* Model to predict the Hearth liquid level and Drainage rate.

* Model for predicting defective Segments in caster.

Intellectual Capital of the Company in the form of following Patents and
Copyrights

a) Patent: Following Patent applications have been filed:

* Iron Enriched DRI and its Process of Manufacture using Iron rich wastes.

* DRI and its process of Manufacture from iron ore fines eliminating
induration.

* Method for Steel manufacture, involving step of De-phosphorizing the Hot
Metal.

* Method for Steel manufacture involving Hot Metal Pre-treatment for De-
siliconizing of Hot Metal.

* Connector/Bend Adapted for transporting materials including granular
materials and System for using the same.

b) Copyrights

* Hearth wear monitoring Model for Corex

* Coal Pyrolysis Kinetics & Power Generation Model for Non-recovery Coke
Ovens.

* BF Top Gas Analysis Prediction Model

* Raft Prediction Model

* BF Slag Viscosity Prediction Model

* Mass Balance Model for Pelletization

3. Plan of action for FY 2010-11

To set up off-line simulation facilities such as beneficiation lab,
agglomeration lab, physical model lab, product development lab and
characterization facilities under R&D. Such facilities will enable
optimization of the existing processes and development of new processes and
products. Another thrust area would be utilization of solid wastes
generated within the plant. A pilot scale briquetting facility is under
commissioning for converting waste into wealth.

4. Expenditure on R & D for FY 2009-10

Rs. in crores

Particulars Vijayanagar Salem Vasind/Tarapur Total

Capital 7.10 - 0.31 7.41
(4.53) (0.28) (0.50) (5.31)
Recurring 3.53 1.94 0.77 6.24
(5.68) (0.88) (0.51) (7.07)
TOTAL 10.63 1.94 1.08 13.65
(10.21) (1.16) (1.01) (12.38)

Previous Year figures in ()

5. Technology Absorption, Adoption and Innovation

A) Vijayanagar

* Design and development of moving wall pilot coke oven with stamp charging
facility for optimization of blend for coke ovens.

* Developed a process for producing DRI from iron ore fines eliminating in
duration.

* Developed a process to produce iron rich DRI from steel plant waste.

B) Salem

* Developed innovative technique to remove accretion in blast without using
explosive.

* Elimination of lump in iron bearing materials to improve raw mix feeding
at Sinter Plant and to reduce impurities fed into blast furnace by
introducing screening system.

* In order to reduce the burning loss of hot coke while travelling towards
quenching tower, an innovative mobile quenching facility was installed in
the quenching car itself. This reduces ash formation and yield.

* By introducing oven door with auxiliary locking system,the cycle time of
the quenching car was reduced.

* The coal throughput per oven was increased by charging optimum coalsize
and bulk density of coal and the coking time. This resulted in enhanced
coke production and improvement in yield besides reduction in coke breeze
generation.

* Container shipment of wire rod to reach customer site with bettershape
and quick delivery.

C) Vasind/Tarapur

i) Replacement of conventional temperature control system with
Thyristorized control for Ammonia cracker heating unit.

ii) Installation of Ultrasonic sensor in place of conventional Laser sensor
for strip tension control at CCL Unit.

Imported Technologies

Major imported technologies commissioned during the year include:

* New state-of-the-art Hot Strip Mill supplied by M/s. Mitsubhishi- Hitachi
of Japan.

The above technology commissioned during the year has been fully absorbed.

Further, the following technologies were imported during the year2009-10:

* Pilot Briqueting Machine from M/s. East Sea Corporation, Korea; and

* Computational Fluid Dynamics (Mathematical Modelling Tool) from M/s.
Ansys, USA.

MANAGEMENT DISCUSSION AND ANALYSIS

(A) ECONOMY AND STEEL

(1) Global economy

The year 2009 witnessed the turbulence pain and panic from the
unprecedented Economic and Financial Crisis adversely impacting the Global
Economic growth. As per the IMF's April-10 estimates, Global Economic
growth in 2009 is estimated to contract by approx. 0.6%. China as well as
India, cushioned the intensity of Global meltdown during 2009 as
demonstrated hereunder

* Global Economy as per the IMF estimates of April10 contracted by approx.
US$ 3.3 trillion while Chinese and Indian Economy expanded by 8.7% & 7.2%
respectively.

* Real Global Trade decelerated by 10.7% with Merchandize Exports down in
value-terms by approx. 23% to $ 12,147 Billion and Services by 13%to $
3,312 Billion while China graduated from the 2nd rank to the highest global
merchandize exporter at US$ 1,201 Billion in 2009.

* Global automobile production contracted by approx. 15% to 60 Million
units while China qualified as the World's largest Producer at 13.6 Million
units with highest ever domestic sale of Passenger cars of 10.3 Million
units up by 52.9%. Similarly, Indian Passenger Vehicle production and
domestic sales rose by 28% & 26% respectively in FY 2009-10.

The timely, cumulative stimulated economic efforts of all Governments
significantly curtailed the depth, span and intensity of the economic
catastrophic spread - although the possibility of few noted and sovereign
defaults continue to haunt the world in the near term.

The IMF estimates suggest a positive economic rebound in 2010 with the
Global economy registering a 4.2% growth; Advanced economies and the
Emerging world growing by 2.3% & 6.3% respectively. Further the WTO
projects world trade to expand by 9.5% with the Advanced world growing by
7.5% and the Emerging world by 11%.

(2) Global steel Industry

Steel being at the core of economic progress witnessed an unprecedented
downturn in 2009. Advanced economies buckled under pressure of large
inventories coupled with stand still demand; the rest of the world
(excluding China and India) suffocated under low domestic demand; their
high degree of export dependency on the advanced world added to their woes.
This reconfirmed the concept of increasing global integration and global
trade coupling (except China and India).

Crude steel production

World crude steel production declined 8% from 1,329 million tonnes in 2008
to 1,223 million tonnes for the year of 2009. Steel production declined in
nearly all the major steel producing countries and regions including the
EU, North America, South America and the CIS in 2009. However, Asia, in
particular China and India, and the Middle East showed positive growth in
2009. Asia produced 799 million tonnes of crude steel in 2009, an increase
of 3.6% compared to 2008; its share of world steel production increased to
65% in 2009 from 58% in 2008.

Production (Mn tonnes)

Year North South EU-27 CIS Asia China
America America (excl
China)

2008 124.5 47.4 198.0 114.3 270.1 500.3
2009 82.5 37.8 138.9 97.5 231.2 567.8
Variance (%) (33.7) (20.1) (29.8) (14.7) (14.4) 13.5

(Source: worldsteel)

Production by steel process: C.Y. 2009:

Regions/Country BoF EAF Total

(MnT) (%) (MnT) (%) (MnT) (%)

Adv. World 150 (30%) 144 (29%) 294 (30%)
Emg. World 692 +6.8% 238 (9.9%) 930 +2.2%
World 843 (2.1%) 382 (18.6%) 1,223 (8%)
China 506 +16% 62 (0.7%) 568 +13.5%
Emg. (-) China 186 (11.4%) 176 (12.8%) 362 (11.6%)

(Source: worldsteel/Primary Estimates)

Steel consumption:

The global economic and financial crisis impacted steel consumption -
consumption declined 6.7% from 1,202 mn tonnes in 2008 to 1,121 mn tonnes
in 2009. Of the consumption, 50% was flats (largely consumption led demand)
and 50% was long products (largely infrastructure driven demand). World
consumption of finished steel excluding BRIC countries registered a decline
of 26.8% in 2009. Steel consumption of BRIC countries grew 18% largely due
to the massive consumption of steel from China to satiate stimulated
domestic demand.

Consumption (Mn tonnes)

Year North Central EU-27 CIS Asia China
America & South (excl
America China)

2008 129.2 44.3 182.7 49.8 258.9 434.6
2009 80.9 33.6 118.4 35.8 213.1 542.4
Variance (%) (37.4) (24.1) (35.2) (28.2) (17.7) 24.8

(Source: worldsteel)

Production and Consumption (Mn tonnes)

Year 2005 2006 2007 2008 2009

Crude steel 1,144 1,247 1,346 1,329 1,223
production (mnt) (+6.8%) (+9.0%) (+7.9%) (-) 1.3% (-) 8.0%

Finished steel 1,040 1,134 1,214 1,202 1,121
consumption (mnt) (+6.4%) (+9.1%) (+7.0%) (-)1.0% (-) 6.7%

(Source: worldsteel)

Top 10 Steel Producing Nations (Mn tonnes)

Rank Nation 2009 2008 Variance

1 China 567.8 500.3 +13.5%
2 Japan 87.5 118.7 -26.3%
3 Russia 59.9 68.5 -12.5%
4 The US 58.1 91.4 -36.4%
5 India 60.2 57.8 4.2%
6 RoK 48.6 53.6 -9.4%
7 Germany 32.7 45.8 -28.7%
8 Ukraine 29.8 37.3 -20.2%
9 Brazil 26.5 33.7 -21.4%
10 Turkey 25.3 26.8 -5.6%
Top-10 992.8 1,031.2 -3.7%
World 1,223 1,329 -8.0%

(Source: worldsteel)

In 2009, The top10 nations accounted for 81% of the crude steel production
- their production registered a 4.8% CAGR during 2004 to 2009.

Top 10 Steel Consuming Nations (Mn tonnes)

Rank Nation 2009 2008 Variance

1 China 542.4 434.6 +24.8%
2 The US 57.4 98.3 - 41.6%
3 India 55.3 51.3 + 7.7%
4 Japan 53.2 77.9 - 31.7%
5 RoK 45.4 58.6 - 22.5%
6 Germany 28.4 42.4 - 33.0%
7 Russia 24.7 35.4 - 30.2%
8 Italy 18.6 33.1 - 43.8%
9 Brazil 18.5 24.0 - 22.9%
10 Turkey 18.1 19.9 - 9.4%
Top-10 861.9 875.4 - 1.5%
World 1,121 1,202 - 6.7%

(Source: worldsteel)

In 2009, the top 10 nations accounted for 77% of the steel consumption -
their consumption registered a 2.8% CAGR during 2004 to 2009.

Global Steel Trade

The impact of the global crisis loomed large on global trade of steel which
declined about 30% (estimated at 300 mn tonnes). This was largely due to
the relatively high dependence of the emerging world on advanced world
which collapsed under the pressure of the global meltdown. As a result, the
export dependency on the advanced world declined substantially which was
compensated by stimulated domestic demand in emerging economies especially
China and India.

Emerging world to Advanced world - a significant change

Altering export dynamics

Particulars 2008 2009

Volume Percentage Volume % of the Variance
(Mn of total (Mn total (%)
tonnes) exports tonnes)

Global exports 428 100% 319 100% -25%

Adv. world exports 188 44% 114 36% -39%

Exports to:

- Adv. world 126 67% 77 68% -39%

- Emg. world 62 33% 37 32% -40%

Emerging world
exports 240 56% 205 64% -15%

Exports to:

- Adv. world 75 31% 65 32% -13%

- Emg. world 165 69% 140 68% -15%

(Source: ISSB)

Altering import dependence

Particulars 2008 2009

Volume Percentage Volume % of the Variance
(Mn of total (Mn total (%)
tonnes) exports tonnes)

Global imports 342 100% 238 100% -30%

Adv. world
imports 181 53% 128 54% -29%

Imports from:

- Adv. world 121 67% 77 60% -36%

- Emg. world 59 33% 51 40% -14%

Emg. world
imports 162 47% 110 46% -32%

Imports from:

- Adv. world 63 39% 32 29% -49%

- Emg. world 99 61% 78 71% -21%

(Source: ISSB)

(3) China - an Economic Power:

China, the new Economic Power, played as global economic savior in 2009,
preventing the world economy from expected decline. Aggressive fiscal and
monetary stimulus in 2009 offset much of the impact of the global
recession. After a relatively weak first quarter (January - March 2009),
the economy accelerated to register a 8.7% growth in the GDP, strengthening
its position as the world's fastest growing economy. But this, when
compared with the double-digit expansion during 2003-07 and the 9.6% growth
in 2008, reflects the global meltdown effect on China.

In 2009, the Chinese economy was driven largely by public investment. The
Chinese Government pumped in US$ 1.4 trillion as loan to the economy (to
industry and individuals) against US$ 0.6 trillion in 2008 which
facilitated infrastructure creation. Consequently, the fixed investment to
GDP ratio grew 58% in 2009 against 49% in 2008, the highest in three
decades.

In line with the global meltdown, China reduced its dependence on exports,
especially to advanced economies which were significantly affected than
other geographies. Consequently, export dependency declined from 32% in
2008 to 24% in 2009; exports to advanced economies dropped to about 15% of
total exports in 2009 against 24% in 2008; overall exports in value terms
declined from US$ 1,428 billion in 2008 to around US$ 1,200 billion.
Despite this drop, China dominated global trade and emerged as the world's
largest merchandise exporter, leveraging its cost competency against peer
nations.

The focus on the domestic market was reflected in a number of statistics.
Real incomes grew 9.8% in urban areas and 8.5% in rural areas. Further,
government incentivized car purchase scheme accelerated automotive sales to
13.6 mn units (China emerged as the world's largest car producer in 2009).
Incentives by local governments accelerated housing demand (housing
accounts for a lion's share of the Chinese revenue), boosting land sale
incomes by about 60% to US$233 billion in 2009.

Intelligent crisis management by the Chinese Government strengthened its
brand as the preferred investment destination, owing to which, FDI into
China declined only US$ 2 billion (from US$ 92 billion 2008 to US$ 90
billion 2009) compared with a 39% world-over decline and 47% collapse in
advanced economies. Consequently, even in a gloomy global scenario, China's
forex reserves ballooned from US$ 1.95 trillion as on December 31, 2008 to
US$ 2.45 trillion as on December 31, 2009.

Chinese Economy Scorecard

Particulars 2007 2008 2009

GDP growth (%) 13.0% 9.6% 8.7%
FAI to GDP 55% 49% 58%
Exports to GDP (%) 36% 33% 25%
Forex reserves (US$ bn) 1,528 1,950 2,450
FDI (US$ bn) 74.8 92.4 90.0

Source: NBS/MOFCOM

Chinese steel industry

A large economy, building of world-class infrastructure with the advantage
of cheap labour is driving economic growth further fuelling mega
investments in China. The rapid growth in fixed asset investment in China
catalyzed an unprecedented addition to steel capacities in the country. As
a result, China dominates the global steel industry, accounting more than a
third of the global steel capacity.

China - Solid Growth

Parameters 2000 2009 CAGR (%)

Installed capacity 149.6 716.1 19%
Production 127.2 567.8 18.1%
Consumption 124.3 542.4 17.8%
Exports 6.0 24.6 17.0%
Imports 16 22.2 3.7%

(Source: Mysteel)

China's Steel Dominance (2009 statistics)

Capacity Production Consumption Export

Globe (Mn t) 1,802 1,223 1,121 319
China (Mn t) 716.1 567.8 542.4 24.6
%-Share (%) 40% 46.4% 48.3% 7.7%

(Source: Mysteel / worldsteel)

Chinese steel sector in 2009 - moving against the global tide

China's net addition to its installed capacity in 2009 was 39 MTPA taking
its cumulative installed capacity to an estimated 716 MTPA; when more than
30% of world steel capacity remaining non-operational across the globe.
Chinese steel manufacturers produced 568 mn tonnes of steel in 2009, an
increase of 14% from the 500 mn tonnes in 2008, setting a new benchmark for
annual crude steel production figure for a single country. As a result,
China's share of world steel production continued to grow in 2009 producing
46% of world total crude steel.

Domestic steel consumption grew 25% from 435 mn tonnes in 2008 to 542 mn
tonnes in 2009 - due to sustained demand from the infrastructure,
automotive and housing sectors. The increased domestic consumption resulted
in a huge decline in steel exports - net exports declined from 45 mn tonnes
in 2008 to 2.4 mn tonnes in 2009. China accounted for more than 48% of the
global steel demand.

Chinese trade equation (mn tonnes)

Particulars 2006 2007 2008 2009

Exports 51.2 69.0 60.5 24.6
Imports 18.9 17.2 15.7 22.2
Net exports 32.3 51.8 44.8 2.4

(Source: Mysteel)

China's steel equation (mn tonnes)

Particulars 2006 2007 2008 2009

Production 419.2 489.3 500.3 567.8
Imports 18.9 17.2 15.7 22.2
Consumption 369.8 413.7 434.6 542.4
Exports 51.2 69.0 60.5 24.6

(Source: Mysteel / worldsteel)

China's new steel policy

In China, steel is considered as a high polluting, resource and energy
intensive sector but a moderately priced product. As a result, the
Government plans to ban the exports of basic steel products. The New Steel
Policy to be implemented by the Chinese Government is expected to
incentivize exports of value-added products. The other features of the New
Steel Policy include:

Intensify restructuring: The steel sector is expected to stick to market
orientation, thus directing production when there is a demand. Besides,
expansion and greenfield projects are forbidden.

Strengthen elimination campaign: Guide the steel makers to eliminate
obsolete capacity by law.

Standardize operation: Constituting a regulation to meet standard
qualifications of operation. This is expected to decrease number of
qualified steel makers; improve management efficiency and promote healthy
growth of the steel sector.

Actively promote M&A: Create an environment conducive to M&A between steel
makers voluntarily on fair and legal basis. Superior and competitive
Enterprises with competitive strengths are encouraged to grow.

Increase effective steel supply: Rebar, anti-quake steel, new structural
steel that can replace low-end steel products should be encouraged ; and on
the other, to strengthen awareness of the people to save materials and
increase comprehensive use of steel products.

(4) Indian economy:

India registered a strong come-back in 2009-10 displaying its ability to
withstand extreme external adversities, which destabilized major economies.
India recorded a GDP growth of 7.2% in 2009-10 against 6.7% in 2008-09.
This was largely due to the timely economic stimulus fueling investment and
consumption. The key drivers to India's economic growth during the year
2009-10 were:

* Strong IIP Growth: 10.4%
* Core Infrastructure Industry Growth: 5.5%
* Automobile Production: 26%

Capitalizing on the high degree of domestic dependency, low credit leverage
and debt exposure and the Government's thrust on infrastructure creation
are expected to accelerate the Indian economy in 2010-11 and beyond.
Preliminary guidance by the Central Government for the economic growth in
2010-11 is estimated at 8.2% and 9% in 2011-12.

Particulars 2008-09 2009-10 2010-11 2011-12
(QE) (AE) (F) (F)

Agriculture, forestry
and fishing 1.6 -0.2 5.0 4.0

Mining and quarrying 1.6 8.7 7.5 8.0

Manufacturing 3.2 8.9 8.9 9.2

Electricity Gas & Water 3.9 8.2 8.0 9.0

Construction 5.9 6.5 9.0 10.0

Trade, Hotel, Transport 7.6 8.3 9.0 11.0

Particulars 2008-09 2009-10 2010-11 2011-12
(QE) (AE) (F) (F)

Finance, Insurance,
Real Estate 10.1 9.9 10.0 11.0

Community & Personal
Services 13.9 8.2 7.0 7.0

GDP at factor cost 6.7 7.2 8.2 9.0

Industry 3.9 8.6 8.7 9.2

Services 9.8 8.7 8.8 10.1

Non-Agriculture 5.2 5.7 6.7 7.5

GDP Market & Current
Prices: US$ Bn 1,222 1,312 1,557 1,886

(Source: PM EAC / CSO)

The Indian economy - a snapshot

Parameters Unit 2007-08 2008-09 2009-10

GDP % Growth 9.2 6.7 7.2
Investment % of GDP 37.7 34.9 36.28
Savings % of GDP 36.4 32.5 34.0
IIP % 8.7 2.7 10.4
Export US$-Bn 163 185 177
Import US$-Bn 252 304 278
Trade Balance US$-Bn -89 -118 -102
FDI US$-Bn 24.5 35.2 34.2
Forex Reserve US$-Bn 310 252 280
External Debt US$-Bn 224.6 229.9 251.3
INR/US$ Exchange 40.35 51.2 45.9
Bank Credit (growth) % 12.1 19.8 15.1
Food Grain Production MnT 231 234 217
Auto Sales Mn No's 10.8 11.2 14.1

(Source: PM EAC / CSO / RBI / SIAM)

(5) Indian Steel Industry:

Indian steel industry stood out in the global steel industry due to its
resilience during the downturn. While the steel production in the world
dipped by 8% in 2009, it registered a growth of around 4% in this period.

This clearly demonstrates India's strong domestic consumption story. Even
though the real estate and housing sector showed marked decline during this
period, the same was compensated by sustained growth in sectors like
infrastructure, manufacturing and automobile. Government intervention in
the form of fiscal stimulus helped to propel growth in the end user
industry.

India is the 5th Largest producer of steel in the world and it was expected
that it will become 2nd largest by 2015 on the back of the capacity
addition. India is also the world's largest producer of DRI with around 21
Mn tonnes of production during 2009-10.

India's per capita steel consumption is 48 kg in F.Y. 2009-10 compared to
the world average of 190 kg. Within the country the semi-urban and rural
sector has significant growth opportunities due to its low per capita
consumption as compared to urban area.

India's Steel Equation (mn tonnes)

Particulars 2006-07 2007-08 2008-09 2009-10

Production 52.5 55.2 57.2 59.5
Imports 4.9 6.9 5.8 7.2
Import Dep. (%) 10.5% 13.5% 11.2% 12.7%
Consumption 46.7 51.5 52.3 56.3
Exports 5.2 5.0 4.4 3.2
Export Dep. (%) 10.0% 9.0% 7.8% 5.3%

(Source: JPC)

The growth in demand for steel has outpaced the growth in production,
leading to increased import dependency. The CAGR for production during the
given period is 6.5% and CAGR for consumption is 9.1%.

Slow pace in creation of incremental capacities and rising demand made the
country a net importer of steel. The net import of steel stood at 4.0
million tonnes that grew at a CAGR of 26% from 2004-05 to 2009-10, and
export registered a declining trend of 8% from 2004-05 to 2009-10.

To make up this demand supply mismatch various Brownfield and Greenfield
expansion programmes are announced. The capacity addition by various Indian
steel producers as well as foreign producers are on the anvil. Around 222
MoUs have been signed by the various steel players with the State
Government to set up an additional capacity of 275 Mn tonnes by 2020. These
are as under:

State No. of MoUs Capacity (MnT)

Orissa 49 75.66
Jharkhand 65 104.23
Chattisgarh 74 56.61
West Bengal 12 21.00
Other States 22 18.20
Total 222 275.70

(Source: Ministry of Steel)

The estimated production capacity by various players by 2012-13 is as
under:

Company 2009-10 2010-11 2011-12 2012-13
(MnT) (MnT) (MnT) (MnT)

SAIL 12.9 15.4 24.2 24.8
RINL 3.3 5.9 5.9 5.9
TATA Steel 6.8 6.8 10.0 13.0
Essar Steel 4.6 8.0 9.7 9.7
JSW Steel 7.8 10.8 10.8 10.8
JSPL 3.0 5.0 8.0 8.0
Ispat 3.6 4.2 4.2 4.2
Bhushan Steel & Power 1.2 1.2 2.4 2.4
Bhushan Steel 3.0 3.0 5.0 5.0
Lloyds 0.6 0.6 0.6 0.6
Others / Secondary 27.1 29.1 31.1 33.1
Total 74.0 90.1 111.9 126.5

(Source: Ministry of Steel / Industry)

Growth Drivers:

India's construction and infrastructure sector have been the main growth
drivers for domestic steel consumption, with a share of 61% during the year
2009-10.

SECTOR WISE CONSUMPTION

Others - 12%
Packaging - 5%
Consumer durables - 3%
Capital goods - 11%
Autos - 8%
Construction - 61%

Challenges for The Indian Steel Industry

Exports of Iron ore

India is the 4th largest producer which produced 226 million tonnes of iron
ore during 2009-10. In terms of reserves India has 8th largest reserve
worldwide. However iron ore industry in India is small as compared to its
global counterpart, although country has 4% of world reserves. Iron ore
exports registered a 6% CAGR over the last five years which constitute 47%
of iron ore produced in the country.

Coal Dependency

India prime and medium coking coal constitutes around 12% of the total
reserves in the country. The country produced 33 Mn tonnes coking coal
during 2008-09 which was just 7% of total coal produced in the country. The
country is deficient in coking coal and largely depends on import. However
some integrated players like Tata Steel and SAIL have 60% and 30% captive
availability of coal. Coking coal imports into India are growing at a CAGR
of around 10% from 2004-05 to 2008-09. Various Indian steel companies are
scouting to acquire mining concessions for raw material security required
for their existing units and for expansion plans.

Logistics

Inadequate infrastructure and logistics have significantly impacted the
steel industry. Every ton of steel produced involves transportation of
approximately 5 tonnes of materials. This implies that by 2020 around 1000
million tonnes of material is required to be transported. This requires a
huge investment in key infrastructure including railways, ports and
highways.

Secondary steel units

The large number of secondary steel units with swing capacity can create
oversupply particularly in long products segment especially the TMT bar
section as secondary steel segment cater to about 75% of the domestic
demand for TMT bars.

Regulatory issues in land for Greenfield projects

The delays in regulatory approvals for raw material linkages and hurdles in
land acquisition for Greenfield units hampered the growth of the Indian
Steel Sector. As a result, most of the capacity expansions in 2009-10 and
those are expected to be commissioned over the next 24 months will be
through the Brownfield route.

Raw Material Prices

The escalating raw material prices during 2009-10 caused immense pressure
on cost of production of integrated steel producers as well as secondary
steel producers. The steel producers are heavily dependent on coking coal
import, and the price rise by Iron Ore and coking coal majors has impacted
the margins of the Indian steel producers. The latest Long term Agreement
Price for coking coal has escalated from US$ 129 to US$ 200 with shift to
quarterly pricing and for iron ore the hike was from 90% to 100%.

(B) STEEL MAKING AT JSW

(1) Operational Overview

The Company has an installed crude steel making capacity of 7.8 MTPA in
India consisting 23% of value added flat products, (capacity of 1.8 MTPA),
spread across four locations, viz. Vijayanagar Works in Karnataka, Salem
Works in Tamil Nadu and Vasind & Tarapur Works in Maharashtra.

Vijayanagar Works has an existing operating capacity of 6.8 MTPA,
comprising of 5.3 MTPA of flat steel products (including 0.8 MTPA of value
added flat products) and 1.5 MTPA of long products. Salem Works have an
operating capacity of 1.0 MTPA of long products. Vasind & Tarapur Works has
1.0 MTPA of value added flat products.

The production performance during F.Y. 2009-10 was as under:

(Mn Tonnes)

Location Product F.Y. 2009-10 F.Y. 2008-09

Vijayanagar Slabs / Billets 5.224 3.079
Works
HR Coils 3.399 2.519

CR 0.735 0.344

Galvanized 0.034 0.022

Rolled Long 0.595 -

Salem Works Billets & Blooms 0.763 0.645

Rolled Long 0.363 0.330

Vasind & HR Plates 0.310 0.245
Tarapur Works
Galvanized/ 0.871 0.723
Galvalume

Colour Coated 0.148 0.090

Total Crude Steel Production 5.987 3.724

Total Saleable Steel Sales 5.720 3.428

Plant operations in 2009-10 were satisfactory. Crude steel production
increased 61% over the previous year; volume of saleable steel rose 67%
over 2008-09. Higher production volumes were largely due to additional
volumes derived from the new expansion project at the Vijayanagar Works,
which stabilized in a short span of time. The production volumes would have
been higher but for the Karnataka floods which affected operations at the
Vijayanagar site during October and November 2009. The commissioning of the
HSM in March 2010 was a landmark as it will reorient the company's product
mix towards wider value-added products.

The Salem Works is on its way to emerge as the largest special steels unit
in India following the commissioning of a Blooming Mill in 2010-11,
improving profitability.

The downstream Vasind and Tarapur units recorded higher production meeting
the significant demand increase for coated products from automotive and
white goods sectors.

(a) Vijayanagar Works

Vijayanagar Works represents JSW's flagship 6.8 MTPA steel-making facility
and is located in close proximity to the rich Iron Ore Mines belt in
Karnataka, surrounding Bellary-Sandur-Hospet Regions. It is Karnataka's
only Integrated Steel facility, largest in South India.

This state-of-the-art facility enshrines JSW's quintessential corporate
philosophy: 'question every convention, replace the often quoted why' with
the bolder 'why not'. This facility possesses contemporary technologies,
varied product mix viz., flat, long and value-added steel products, and
redefines global benchmarks in the manufacturing of steel.

The uniqueness of this integrated steel plant is reflected in the
following:

Location

Post-operation of its fourth blast furnace, this facility will emerge as
the only 10 MTPA Integrated steel plant globally, which is land-locked.

Technological uniqueness

* Successfully operates the contemporary Corex technology; regarded as the
best Corex unit operational globally;

* Houses the largest blast-furnace operational in India;

* Capable of rolling products over 2 metres wide (widest hot-strip mill);
only domestic capacity with the contemporary pair-cross technology;

* Only twin-stand reversible cold-rolling mill in India; possesses a
continuous pickling line, first in India's steel industry; and

* The wire rod mill is India's fastest facility, operating at 105 metres
per second; the unit's coil weight is India's highest (2.2 tonnes), against
industry average of 1.5-1.75 tonnes.

People management

* The team comprises only 2,483 members in works area, which translates to
2,124 tonnes of steel per person - among the world's highest; and

* Achieved the unique recognition of having one of the lowest conversion
cost per tonne of steel globally, and the lowest employee cost per tonne of
steel among global peers.

Environment management

Contrary to conventional mindset, Vijayanagar's focus on maintaining
zerodischarge and its greening initiatives have increased the area's
average rainfall - a feat, which a few steel units can claim.

Highlights, 2009-10

* Registered a higher capacity utilization at Coke ovens 1&2 over 2008-09;
Coke oven 3 achieved capacity utilization of 92% in 2009-10 against the
rated utilization of 85%.

* Created a customer base for tar (by-product from Coke oven 3).

* Commissioned the first phase of the beneficiation plant (BP-2) in January
2010 and stabilized the operations, which can upgrade low-grade iron ore to
64% Fe usable in iron making, with superior iron ore recovery.

* Achieved over 100% capacity utilization, produced 2.38 mn tonnes of
sinter at Sinter plant-2 during 2009-10 (which is the unit's rated
capacity); achieved a daily all-time highest production of 8,308 tonnes.

* Up-timed the blast furnace and ancillary equipment of 99.95% through
innovative preventive measures.

* Stabilized the new blast furnace (BF-3) in three months with in-house
resources and expertise; achieved a maximum 8,337 tonnes daily in January
2010 (8,580 TPD rated capacity).

* Manufactured an average 20,000 tonnes per month of API X-70 grade steel,
high value- added steel for the oil pipeline sector for the first time in
India; received approval from 'Total', France as an approved steel maker
for pipes.

* Achieved the highest number of heats at the SMS-1 facility, totaling 3.45
mn tonnes annually; hot metal handling loss reduced from 2.64% in April
2008 to 1.79% in February 2010.

* Achieved a capacity utilization of 106% in the HSM unit by increasing
rolling width (1300 mm to 1350 mm) and rolling thickness (12mm to 16mm);
mill utilization reached an all time high of 85% in 2009-10 against 81.90%
in 2008-09.

* Commissioned the second hot strip mill (HSM 2), which is the widest mill
in India and can roll products up to 2100 mm width.

* Achieved close to rated capacity of the cold rolling mill; products
received approvals from respected brands in the automotive sector.

* Stabilized successfully the wire rod mill and achieved up to 84% capacity
utilization in March 10; achieved an ovality index of less than 2 mm,
lowest in India, enhancing product acceptability.

* Launched the TMT 500-plus brand on a pan-India basis; created two
specialized product grades 500D and 500CRS with niche applications in the
infrastructure segment.

Key initiatives, 2009-10

Preparatory: The entire focus is on cost optimization, which is achieved
through production volumes, increased plant availability and consumption of
process waste.

* Optimized the blending of the feed in the coke ovens - replaced the
proportion of prime coking coal by 5% with semi soft coking coal (from
corex area); this created a stock of prime coking coal which can sustain
higher production over the coming years and also substantial reduction in
cost.

* Maintained a consistent pushing of material in 108 ovens (Coke oven 1 &
2) throughout the year, which improved productivity and product quality and
eliminated shocks to the coke ovens due to irregular pushing.

* Utilised the gas generated (in 2009-10) from the Coke oven 3 in other
plant operations and power generation.

* Institutionalized a scientific preventive maintenance schedule for all
Coke Oven batteries in a way that production is not hampered.

* Repaired the Pellet Plant for refurbishing the critical equipment; this
is expected to stabilize the operations of the Pellet Plant, going forward.

* Stabilized operations of Sinter Plant 2; increased the plant availability
from 43% to 93% by reducing interruptions.

* Improved productivity at Sinter Plant 2 through important initiatives -
more than three-folded the base mix pile size and modified the calcined
lime feed system;

* Utilized beneficiated iron ore fines and about 90 kg per tonnes of plant
solid waste; improved crushing fineness of fluxes and coke breeze above
90%.

* Initiated addition of nut coke with sinters (a first at the Works) in the
blast furnace; this facilitated nut coke consumption (otherwise not used in
iron making) reducing lump coke consumption in iron-making - a cost
optimization initiative.

Iron making: This is the zone which consumes resources and constitutes the
largest cost component in steel making. Hence, the focus here is to
minimize resource consumption, reduce cost and ensure maximum plant
availability for higher production.

* Changed the design of the end-piece of the dust burners in the Corex unit
which increased its life to 10 months against a previous average of three
months - improving plant availability.

* Repaired and replaced the refractory lining in the blast furnace (BF-1)
to eliminate shutdowns; facilitated stable operations of the furnace,
maintaining optimum parameters high productivity from February 2010.

* Nearly doubled coal injection volume in BF1 and BF2 reducing production
cost; introduced double screening of lump iron ore to minimize ore fines in

the iron ore feed in the furnaces.

* Converted the PLC system in BF-1 from a singler tier in series to a three
tier network in a record six-and-a-half days; this improved the network
utilization time and facilitated recording of all alarms programmed into
the system.

* Improved the ancillary equipment availability for the blast furnaces
through timely preventive maintenance and innovative measures.

- Replaced the electromechanical drive with a hydraulic drive for running
the BF-1 main charging conveyor, eliminating the shutdown of 20 hours
annually due to belt failure.

- Revamped the runner refractory by replacing and gunniting; helped achieve
campaign life of 200,000 tonnes.

* Created a temporary coal injection system for BF-3, which facilitated
injection of coal dust.

Steel making: Unlike the iron-making zone, the steel-melting shop
concentrates on improving productivity and value addition to cater to
diverse sectoral requirements.

* Developed high value-added IF grade steel.

* Intelligent production planning and use of the wider width caster
(Caster-3) facilitated increased heats and improved productivity.

* Improved productivity through reducing arcing time, improving overall
plant availability and taking long sequences by extended tundish life.

* Improved gas recovery to an average 105 m3 per tonne in 2009-10 against
the norm of 90m3 per tonne; operating at 117m3 per tonne in March 2010 -
gas recovered used in other process and for generating power. This was
achieved by optimizing the blow pattern in the converters.

* Optimised cost by consuming less ferro-alloys & energy and reduced
refractory consumption; intelligent process improvements also trimmed
costs.

* Commissioned the steel slag granulator, first in India, which maximized
steel recovery from slag and facilitated slag utilization in sinter plant.
Currently 15% is used and plan is to go for 100% utilizations.

Flats segment:

* Improved operation and maintenance practices and increased the speed of
the HSM which improved average yield from 96.4% in 2008-09 to 97.4% in
2009-10; average productivity increased, scale loss reduced significantly.

* Increased production reduced the power consumption, gas consumption also
dropped.

* Increased jumbo HR coils feed in the cold-roll mill; it reduced material
feeding time and improved mill productivity; improved operational practices
strengthened the product yield by 50 bps.

Longs segment:

* Created a varied product basket comprising of products ranging from 5.5
mm to 22 mm in the wire rod mill.

* Rolled niche high carbon welding steel grades in the wire rod mill whose
production is limited in India; produced 8mm and 10mm TMT bars in this
mill.

* Established a presence in the TMT bar segment with a large product range
(8mm-40mm); its niche product 500D received approvals from recognized
Indian builders while 500CRS is under approval.

The edge is mindset

The Company's long product quality has an edge over peers for a basic fact:
the flats mind set. Flats require a significantly better control on product
chemistry and physical properties. The Company's long products are also
made from the same ingredients which are used to make flats.

2010-11 on the radar

The year 2010-11 is expected to be very critical for the preparatory
segment - greenfield and brownfield expansions, stabilizing of capacities
of recently commissioned units and the units which are expected to come up
within the first nine months of 2010-11 to feed the fourth blast furnace -
adding 3.2 MTPA to the existing steel making capacity.

* Commissioning and stabilizing the operations of Coke oven 4 with an
annual capacity of 1.9 MTPA which by December 2010 will service the new
iron-making capacity.

* Automate the operations systems of the recently commissioned Coke oven 3.

* Implement the second phase capacity expansion in BP-2, which is expected
to triple its capacity from the present 500 tonnes per hour to 1,500 tonnes
per hour.

* Set up a new 4.2 MTPA Pellet Plant, which will meet the requirement for
the additional 3.2 MTPA capacity to be commissioned in FY 2010-11.

* Improve productivity from Sinter-2 by further reducing interruptions;
improve sinter quality which facilitates in reducing fines generation.

* Commission Sinter-3 & 4, which will take the total sinter manufacturing
capacity at Vijayanagar to 13 MTPA. Both the units are expected to commence
operation in the last quarter of FY 2010-11.

In the iron-making zone, the next important milestone is the commissioning
of the Fourth Blast Furnace by March 2011. The learnings from BF-3 will be
used to ensure that from the first tap from BF-4 the hot metal would be
sent to SMS for steel making and no dumping will take place. In addition,
the team is looking to strengthen the productivity parameters of BF-3.

The Steel Melting Shop will not create a third station to cater to the
addition 3.2 MTPA which is expected to be operational by March 2011. It
plans to add equipment to the existing infrastructure to seamlessly manage
the additional load.

* Add a de-dusting mechanism to improve in-station environment management.

* Introduce the sub-lance technology (for removing carbon impurities) which
facilitates less time in analyzing the hot metal, reducing the tap-to-tap
time and enhancing productivity.

* Increase the tap weight size and ladle size to handle the increase in hot
metal inflow; improve the material handling equipment to manage the
additional production.

The Hot Strip Mill which is expected to strengthen the Company's
profitability in the next twelve months has a very clear agenda for the
coming year:

* Stabilise the new mill; the team has already been trained.

* Create the promised product basket of value-added, niche products for
diverse segments.

* Commence operations of the second phase of the second HSM unit.

The Cold Roll Mill's strategic blueprint would favourably impact the
Company's profitability and comprise the following:

* Develop high strength steels for the auto sector; the Company expecting
the approval of the TS-16949 certification - an international watermark to
quality standards.

* Work closely with collaborators to develop special steel grades, which
are import substitutes.

The Wire Rod Mill having been stabilized, the Company is working to achieve
rated capacity, enhance market penetration and grow market share. For the
bar mill, the team is working to stabilize the unit to achieve its rated
capacity. Besides, increasing the acceptance of niche products (the 500
series) is also high on the list of priorities.

(b) Salem, the special steel arm

The Salem Works is a 1 MTPA Integrated Steel manufacturing facility which
specializes in the manufacture of high, value-added special steel with
critical applications in the automobile and heavy engineering sectors. This
unit showcases the Company's value-addition commitment. Although the unit
represents less than 15% of the Company's total steel manufacturing
capacity, but its has some unique features such as:

* Largest single location facility for special steels in India.

* Manufactures about 250 steel grades having diverse applications.

* Steel quality grade as per end customer's need.

* World's second unit to commission an energy optimization furnace in its
steelmaking shop.

* Sinter plant is the largest consumer of solid process waste in India.

* The reheating furnace of the blooming mill (to be commissioned in 2010-
11) will operate on process waste (Blast Furnace) gas, eliminating fossil
fuel use.

* Following the commissioning of the blooming mill, Salem Works will be the
only Indian facility to manufacture the entire range of rolled products
(5.5 to 200 mm).

2009-10 in retrospect

(i) Increased production

* Increased the use of semi soft coking coal in coke making by 100 basis
points (average 2009-10); enhanced soft coal usage upto 20% in Q4 2009-10.

* Introduced multiple modifications in the coke oven for 100% self-
sufficiency translating into lower costs.

* Enhanced wire rod productivity (750 TPD-1,100 TPD) through optimized
plant operations.

* Increased the injection of PCI coal in the blast furnace thus reducing
the consumption of scarce coke.

* Increased special steel flats productivity from 1,100 TPD to 1,500 TPD.

* Increased the heats per campaign from the EOF from 700 heats to about
1,150 heats by optimizing tuyeres gas control and by utilizing a very
innovative slag splashing technique suitable for EOF's.

(ii) Improved support from utility services

* Introduced an economizer in the power plant (CPP 1) to enhance fuel
efficiency.

* Altered the design of the key component of the coal boiler, reducing
plant shutdowns; the power plant (CPP 2) registered its highest plant
availability at 99.38% (98.75% in 2008-09).

* Implemented the islanding scheme to isolate the plant and power
generating units from the state power grid during power failure, resulting
in uninterrupted operations.

* Enhanced power generation capacity from 60 MW to 63 MW due to optimized
waste heat recovery from coke ovens and fine tuned generators.

* Adopted the multi-modal transport to reduce delivery time.

* Recycled water from captive power plants for coke quenching oven,
resulting in savings in water consumption.

(iii) Strengthened product visibility

* Cast 160 sq and 160 diameter blooms for production of rolled products in
the bloom caster which would have otherwise have to be idled (meant for
casting 200 dia and 200 sq and above products from the blooming mill) in
only 45 days.

* Received product approvals from new clients in the automobile and heavy
engineering segments.

(iv) Strengthened the learning curve

* Introduced safety and quality management techniques.

Agenda for 2010-11

* Upgrade CPP 1 - the turbine, boiler and generating systems, increase the
steam generation capacity from the waste heat recovery boilers of CPP 2 -
to enhance power generation.

* Eliminate the heat loss from the third coke oven battery; increase semi-
soft coking coal in coke manufacture without quality deterioration and
increase the cake height further so as to exceed rated capacity.

* Commission and stabilize the blooming mill, which is expected to emerge
as the biggest volume driver of Salem Works.

* Create and install an in-plant automated ultrasonic testing facility
critical for the quality assurance and marketing of specialty steels for
auto components application.

* Installation of more automated material handling systems.

* Improve in-plant roads to accelerate movement and cleanliness.

Coke self-sufficiency

* Increased blend coal cake bulk density, height and optimized coking time
to increase throughput.

* Introduced an auxiliary locking system of coke oven doors, reducing the
quenching car cycle time.

* Introduced a mobile quenching system to reduce burning loss and improve
yield.

* Adjusted nozzles for uniform quenching at the quenching station, reducing
the coke moisture content.

Result: Coke production improved from average 1,370 TPD in 2008-09 to
average 1,420 TPD in 2009-10.

(c) Downstream units, adding brand value to steel

The Company's Vasind and Tarapur facilities showcase its value-addition.
These units provide a wide product range (HR plates, Galvanised plain and
corrugated products and colour-coated products) for multi-sectoral
applications. The unit represents the company's branded business. Over 65%
of the business for these units was generated from longstanding customers
and reputed corporate brands in 2009-10. These units source about 1.25 mn
tonnes of steel slabs/HR Coils a year from Vijayanagar Works, ensuring
consistent quality.

Product Brand

Galvanised corrugated sheet Jindal Vishwas
Galvalume products Jindal Vishwas Plus
Colour coated galvanized products JSW Colouron
Colour coated galvalume products JSW Colouron Plus

These facilities enjoy the following unique features:

* India's largest Galvanized Steel producer in terms of installed capacity.

* Only Indian Company to be permitted use of the Galvalume certification.

* Offers more than 200 shades of colour coated galvanized products;
ondemand delivery of any shade within only three weeks.

Highlights, 2009-10

* Commissioned a 30 MW Thermal Power Plant to reduce power costs;

downstream units emerged as net surplus power generators, which was wheeled
to the state electricity grid, a first in the history of these units.

* Highest production in galvanised products (0.871 million tonnes), plate
mill (0.310 million tonnes) and colour-coated line (0.148 million tonnes)
was primarily due to Slabs & HR Coils availability from Vijayanagar and a
robust order book.

Key initiatives, 2009-10

* Installed VVF drives in compressors and blowers in various plant sections
at Tarapur and Vasind, reducing energy consumption by an estimated 10%.

* Improved and monitored control charts and SOPs in galvanizing and Colour-
Coating sections to reduce power consumption.

* Replaced the conventional temperature control system with Thyristorized
control for the Ammonia cracker heating unit.

* Replaced the conventional laser sensor with the ultrasonic equivalent for
strip tension control at the CCL unit, improving product quality.

* Introduced 12 value-added product grades with diverse sectoral
applications.

* Conducted more than 25 small group activities at both locations to
improve productivity and optimize energy consumption.

* Accelerated execution of two important projects - the railway siding
project and the LNG gas pipeline project at Vasind - that are expected to
be commissioned by January 2011.

Plan for 2010-11:

* Install pipe lines (process already started) across the plant at Tarapur
for steam use from the turbine of the newly commissioned power plant.

* Commission the railway siding and LNG pipeline projects to reduce
logistics and production costs.

New life line

The LNG project involves creating an 8 km pipeline between the nearest GAIL
pipeline and the plant. The Company signed a contract with GAIL for gas
transportation. This LNG is expected to replace high cost furnace oil used
in the HSM unit and LPG used in the Galvanising unit at Vasind.

(C) Other critical functions

(1) Raw material management systems

Relevance of efficient management

The production of 6 million tonnes of steel in a year necessitates handling
of about 24 million tonnes raw material to be unloaded, managed, blended
and fed into the system.

Consumers - Blast Furnaces, Corex, Coke ovens, SMSs, LCPs, Pellet Plant,
Sinter Plants, Beneficiations and Power Plants - processes need to be fed
with adequate inputs on a continuous basis.

Highlights 2009-10

* Introduced the use of screened C-ore and pellets and increased the
production of blast furnace-3 by 22%.

Result: The monthly average production of hot metal from BF3 increased by
feeding of screened C-ore and Pellets.

* Modified the screw takeup arrangement of boom conveyor of stacker
reclaimer to reduce the maintenance time.

Result: The loosening and tightening of belt by screw takeup during belt
replacement of stacker reclaimer boom conveyor, was reduced from 9 to 10
hours to an hour.

Key initiatives

* Modified wagon tippler hopper grizzly from plate/plate to plate/rod cross
section which reduced jamming of wet material due to use of 32mm rod in
place of 28mm x 200mm width plate.

* Installed metal detectors in yard conveyors to detect metallic objects in
the scrap which may damage the conveyor in the discharge chute.

* Installed Radar level sensors to monitor various materials at the silos
and bunkers and provided an accurate reading of material contained in silos
or bunkers.

* The installation of the wireless control system was extended to stackers,
barrel reclaimer and twin boom stacker eliminated frequent failure of cable
and enhanced stacker availability.

* Installed chute jamming sensors and bin vibrators to reduce the spillage
and jamming at the conveyors.

* Installed CCTV camera in Wagon tipplers for enhanced monitoring of
inaccessible area, thereby reducing the down time.

Way ahead

* Arrange for feeding washed materials to sinter plant-1 for quality
improvement.

* Increase focus on environment by installing yard sprinklers and dry fog
systems.

(2) Logistics management

Relevance of logistics

To Sell 1 tonne of steel, logistics involved are:

* 4 tonnes of raw material into the facility.

* 1 tonne of finished product to the customer's destination.

The production of 6 million tonnes of steel in a year necessitates
logistics management similar to regulating train movements at a busy
station. Incoming raw material is estimated at about 24 million tonnes,
while outgoing finished goods is estimated at 6 million tonnes. In
addition, the team manages 300 commercial vehicles everyday for external
material dispatch. The Company has 4 rake entry and exit points into its
facility; it needs to handle 24 rakes each day, comprising inbound and
outbound materials; its in-facility logistics infrastructure comprises 105
km railway line, 22 locomotives, 50 Open top ladles and 10 torpedoes, used
for internal material transfer.

Highlights 2009-10

* Invested about Rs. 19 crores to strengthen logistics management

* Created one new entry point into the facility

Key initiatives, 2009-10

* Developed an exchange yard / peripheral yards (with total 26 lines) which
are technically graded into separate grids and de-bottled for safe and
secure movements. The rakes will be unloaded at six wagon tipplers and iron
ore at track hoppers.

* Developed a dedicated iron-ore corridor (22 km) from Nandihalli and
Ramanadurga mines to the Vijayanagar Works for iron-ore transportation. The
entire infrastructure, operation and line maintenance are managed in-house.

* Added an additional entry at raw material receipt yard for incoming rakes
from Hospet / Goa to overcome congestion caused on existing railway lines
by engine reversals; this was eliminated saving a minimum two hours with a
substantial saving for the Railways.

* Developed a new software application for generating details of wagon and
rake loading, reducing documentation time and improving accuracy. This
application will be extended for online invoice generation.

* Initiated the direct loading of finished steel onto the rakes at the wire
rod and bar rod mills to minimize material handling and shifting, saving
time.

* Increased road transportation to address increase in logistic needs
through the following:

- Introduced pan-India dedicated fleet owners.

- Introduced multi-model transportation to de-risk against rake shortages
(road-rail-road, rail-road, road-rail, rail-barge, road-barge).

- Reduced the turnaround time of commercial vehicles from four hours in
2008-09 to about three hours in 2009-10.

Blueprint, 2010-11

* Initiate the construction of track hopper to unload bottom discharge
wagons (to be commissioned) for effective utilization of rolling stocks;
this will enable the unloading rakes of 58 wagons in two hours against
present six hours for BOXN rakes.

* Develop an additional entry/exit point from Daroji railway station on
Bellary side to Vijayanagar Works to reduce congestion at Toranagallu and
for forward movement of rake.

* Develop multi-model logistics to ensure rake availability and accelerate
delivery of growing volumes.

* With HSM-2 becoming operational from March 2010, the Company intends to
add high-capacity trailers dedicated for Logistics.

(3) Energy management

Relevance of energy in steel

To manufacture a tonne of Crude steel about 500 kwh of power is required.

Power generation

Vijayanagar Works is the only Integrated Steel Plant where the entire power
generation currently utilizes waste heat, process gas and solid waste. The
facility's cumulative power requirement stands at 400 MW of power.
Currently it generates around 195 MW and the rest is drawn from JSW Energy
Ltd.

Highlights, 2009-10

- Specific energy consumption declined in 2009-10, despite the
stabilization of the new 3 mn tonne facility (commenced operation in
February 2009) which necessitates higher power consumption. In February
2010, specific energy consumption was an impressive 6.469 gcal per tonne of
steel. Reduction in specific energy consumption brings substantial savings
to the company.

- Received the CII Award for Excellence in Energy Management 2009.

Key initiatives, 2009-10

- Commissioned the atmospheric fluidized bed boiler, a new technology that
uses coke breeze (20% of the raw material feed into the boiler) for steam
generation. Hitherto, coke breeze, a process waste, was sold in the open
market.

* Optimized the operation of the coke gas holder critical for the optimum
utilization of coke oven gas for power generation and other steel-making
processes.

* A new flare stack (for safety purposes) designed for coke oven 2 at a
third of the cost in a record 45 days without a shut down in the coke oven
unit. Flaring reduced from 25,000 nm3 to 18,000 nm3, saving rich coke oven
gas for other processes.

* Invested in installing four gas mixing stations for mixing varied process
gases (namely blast furnace gas, coke oven gas, Corex gas and LD gas). As a
result, continuous gas volume (around 115,000 nm3/hour) was supplied for
power generation (led to significant saving in coal). About 30% of the
overall gas generated was once flared, which is now reduced substantially.

* Developed an in-house 2.2 km network for Blast Furnace gas in three
months; devised a mechanism for maintaining consistent pressure, so that
the gas could be utilized in the remotest site corner.

* Utilized the Blast Furnace gas from all furnaces (through the common
grid) for under-firing coke ovens.

* Streamlined operations of the energy centre for minimized gas loss.

* Replaced rich Corex gas with Blast Furnace gas for Ore drying furnace;
drying being a slow process requires gas with low pressure, making Blast
Furnace gas preferred medium.

* Developed an in-house mechanism to seamlessly operate all units (hitherto
dependent on Corex gas) with gas from other units.

* Completed the gas mixing and boosting station enabling accurate gas
feeding for three furnaces and optimizing gas consumption.

Blueprint, 2010-11

* Completion of the concept of a common grid for oxygen and nitrogen supply
to the units.

Extracting wealth from gas

Gas utilization in 2008-09 Gas utilization in 2009-10

Corex gas 98% 98%
Blast furnace gas 65% 84%
Coke oven gas 93% 99.8%

(4) Research and Development

Relevance

With high input costs, profitability primarily depends on being able to
produce more from less.

Innovation team

The R&D team is innovation-centric. It believes in redefining national and
global benchmarks in iron and steel manufacture. The result is improved
productivity and consistently declining costs. The R&D team comprised 26
qualified members who work along with shop-floor teams to design and
implement shop-floor processes; its efforts are facilitated by a full-
fledged R&D centre equipped with contemporary infrastructure and pilot
testing and simulation facilities.

Key initiatives, 2009-10

Process improvements

* Optimized coking time in coke ovens for various blends (formed a coking
time matrix for various blends); improved productivity of the non-recovery
type coke ovens by about 5%.

* Developed a novel quenching methodology to reduce the coke moisture
content and also reduced water consumption in coke quenching.

* Analysed sinter-making parameters leading to better sinter quality;
sinter return fines declined from 30-35% to about 20% (this quantity can be
re-used in sinter making).

* Optimised the pellet-making process by altering the input blend, which
improved pellet quality and strength.

* Optimised burden distribution (furnace feeding pattern) and the material
discharge rate in the blast furnace; adopted the soft blowing practice
(controlled blowing of air into the furnace) and improved tapping practice;
these resulted in improved blast furnace productivity.

* Reduced the fuel rate (coke volume) by about 10 kgs/tonne of hot metal
(BF-1 & BF-2).

* Recycled various steel-making slag in cement and pellet making to replace
about 5% clinker in cement making with slag.

* Developed unique processes to manufacture DRI from green pellets and
steel plant waste, replacing scrap consumption in the BOF plant.

Predictive models

Predictive models are emerging as a key tool for improved operations for a
good reason: iron and steel making is conducted in a closed environment
under extreme conditions (high temperature, pressure and toxic gases)
making it necessary to closely monitor operations. The predictive models
provide details of possible outcome proactively facilitating de-risking.

Hearth wear monitoring model for Corex: This model predicted the wear and
tear on the refractory lining due to the uneven temperature in different
areas of the hearth; it reduced equipment shutdown due to interruptions and
facilitated a better control of Corex unit operations.

Coal pyrolysis and power generation model for non-recovery coke ovens:

When volatile matter is released during the coking process, some heat is
released. The team created a model to predict power-generating potential
from the VM for a specific coal variety.

Voidage evaluation model for Blast Furnace:

This model predicts the volume of vacant space in the furnace to determine
the air volume to be pushed into the furnace, improving feed reduction and
enhancing top-gas generation.

Top gas prediction model for Blast Furnace:

This model estimates the highest volume of top gas generated and the
percentage composition of hydrogen, carbon-monoxide and carbon-dioxide in
the gas. The volume of carbon-monoxide and carbon-dioxide provides a fair
indication on the reduction rate in the furnace.

Model to predict reduction (direct and indirect) in the Blast Furnace:

In the Blast Furnace, reduction is of two kinds: carbon to carbon monoxide
(endothermic reaction to reduce temperature furnace) and carbon monoxide to
carbon dioxide (exothermic reaction to increase furnace temperature). The
reduction model specifies whether the two types of reduction happen as per
standard norms. These also optimize the fuel rate (coke volume) in the
furnace.

Model to predict the hearth liquid level:

The model predicts the level of hot metal inside the furnace, important for
a critical reason: it identifies the time range to drain the hot metal from
the furnace. If this is not done, it can reach the tuyere level (place from
where air is blown into the furnace) and cause furnace disruptions.

Model for predicting caster defective segments:

When solidified, slabs and billets can develop cracks due to caster
defects, causing downstream problems at the hot rolling stage. The team
developed a model, which identified crack formation and responded with
rectification.

Product development

The team developed 33 new slab grades and 23 new billet grades. The key
products developed comprise the following:

* API grades for line pipe steel
* Drawing and deep drawing steels
* Medium carbon and high tensile steel
* Micro-alloyed structural-grade steels
* Auto and tube maker grade
* Billet grade steels

Patents filed

The R&D team filed 6 patents and received approval for 1 application.

In 2009-10, the team made the following patent applications:

* Iron-enriched DRI and its process of manufacture using iron-rich wastes.

* DRI and its manufacturing process from iron ore fines, eliminating
induration.

* A specific steel making process involving hot metal de-phosphorising.

* A method for steel manufacture involving hot metal pre-treatment for hot
metal de-siliconisation.

* A connector/bend adapted for transporting material including granular
material and a system using the same.

* A method of controlled ramping of tundish weight for reduced
emulsification and a system thereof.

Blueprint, 2010-11

* Extract heat from the sinter plant and utilize it for heating water in
sinter making.

* To set up off-line simulation facilities like a beneficiation laboratory,
agglomeration laboratory, physical model laboratory, product development
laboratory and characterisation facilities.

* Increase the consumption of in-plant solid waste; a pilot briquette
facility will convert waste into wealth.

Water modeling

The ladle changeover in the steel melting shop is critical for the
following reasons:

* It needs to maintain a flow rate into the tundish, which will leave
sufficient metal volume in the tundish (which feeds the caster) to continue
caster operations during the ladle changeover time.

* The flow rate of the metal into the tundish has to be controlled or it
will otherwise impact the steel impurities (this being the last stage
before casting - it cannot be cleaned further).

The team created a water model which provided the following: optimum height
of the ladle above the tundish, metal flow from the ladle to the tundish
and metal drainage rate from the tundish to the casters. This data was
linked to an automatic sensor at the ladle opening mechanism facilitating
the automation of the ladle opening process and ensuring the manufacture of
clean steel.

(5) Project Management

Relevance

An investment of more than Rs. 20,000 crores in more than 7 projects over
the last 3-4 years to increase manufacturing capacity (3.8 MTPA to 10 MTPA)
along with ancillary and value-added facilities. A marginal delay in
project implementation implies the following: burden on the financial
viability of the project due to an additional interest burden, additional
employees for the new facilities (yet to be commissioned), loss of
contribution.

Projects team

The uniqueness of project management is outlined below:

* All projects are implemented by the in-house team, which facilitates low
cost, faster implementation as teams work concurrently leverages captive
knowledge of equipment maintenance.

* The project management team comprises cross functional participation -
select members from diverse departments bring diverse skills and
capabilities to supplement the core project management team.

* The Cement, TMT and steel used in projects (20% of the cost) is available
in-house.

* Following project completion, the team is given the responsibility of
operating and managing that facility.

As a result, our project management teams have redefined global and Indian
benchmarks in terms of time taken to commission projects and stabilize
operations.

Highlights, 2009-10

* Completed 2.8 MTPA expansion projects following the commissioning of the
pulverised coal injection system, the top gas recovery turbine in BF-3 and
the RH Degasser unit and the LHF 2 for SMS-2 in the first quarter of 2009-
10.

* Commissioned the first phase of the state-of-the-art Hot strip mill in
March 2010. After successful trial runs, the mill commenced commercial
operation on 10 April 2010.

* Commissioned one of the three units of phase one of the 20 MTPA
beneficiation capacity in December 2009.

Key initiatives, 2009-10

* Increased the average packet size of procurement from project vendors,
which made commercials more attractive for vendors and optimized capital
investments.

* Selectively drew talent from the recently completed expansion project to
spearhead the next expansion project in addition to new cross-departmental
members.

Blueprint

* Implementation and commissioning of 3.2 MTPA of steel-making capacity
along with associated facilities at Vijayanagar.

* Commission second phase of new HSM, taking rolling capacity of this
facility to 5 MTPA.

* Implement first and second phase of beneficiation unit, taking the total
capacity to 20 MTPA.

* Set up a new 4.2 MTPA pellet making capacity and 2 x 300 MW power plant
to achieve self sufficiency in power requirement after the new facilities
are commissioned.

(6) Marketing

F.Y. 2009-10 could be viewed as the testing times for the proven and
promising Economies, Business, Corporates as well as all Individuals across
the globe.

Inspite of poor South-West Monsoons adversely impacting the Agriculture
Performance, the timely support by Industrial Growth up by 10.4% coupled
with Core-Industries growth up by 5.5% outperformed the analysts estimates,
leading the Indian economy to sustain its growth momentum ahead @ approx.
7.2% (prov.).

Indian Steel demand continued to follow the footsteps of the Indian
Economy, growing by 7.6% (prov.) while the Global steel demand witnessed an
unprecedented fall of 6.7%. JSW Steel with its core-understanding of the
economic under-currents, went all out to capitalize the expanding domestic
opportunities with its domestic sales for 2009-10 outperforming by 96% to
4.8 Mn tonnes coupled with increasing its domestic dependency to 84% from
72% on the overall expanded tonnage of 5.7 Mn tonnes.

Highlights: 2009-10:

* Increasing association with projects of National Significance - including
NHAI, CPWD, Metro-Projects, Atomic Power including Power Sector,
International Airports, Ports etc.

* Helping to build structures of National pride - supplied steel to
prestigious projects viz. Atomic Power Plant, Wankhade Stadium, Mumbai
Monorail project, Bangalore Metro, Delhi International Airport etc.

* Product Development to meet tomorrow's challenges - With an aim to offer
value with economy, developed new grades for the automotive industry,
Infrastructure and Construction and General Engineering.

* Expanding customer base - Graduating association for our products to
reputed clientele including Tata Motors, Ashok Leyland, Honda Motors
(Global-approval), Meritor-USA, Mahindra & Mahindra, etc.

* Steel for the Common Man - Expanding distribution aimed towards making
steel available for the common man

* Graduating Brand-Recall - The Company brand graduated to the 35th
position amongst 'India's Most Valuable Brand' with its brand value up from
US$ 42 Mn to US$ 447 Mn.

Strategy

Domestic Markets

* Focus - Value Addition: Through increasing the sales of Value added
Products as well as by developing new products conforming to higher end
specifications and grades. Value added product sales up by 55%.

* Enhancing Global Competitiveness of Value-Chain partners: By making steel
available at globally competitive proposition.

* Thrust - Import Substitution: Expanded domestic share from 72% in 2008-09
to 84%.

* Expanding distribution network: To capitalize the spread-out demand
opportunities as well as for the betterment of timely delivery concept. JSW
Shoppe continues to expand from 50 in 2008-09 to 174 as on March'10 with
Shoppe sales up by 114% to 0.64 million tonnes, leveraging the demand of
the Semi-Urban and Rural India as well. Additionally, JSW has been
expanding its Distribution Points on a Pan-India basis as well.

* Increasing Domestic presence for Flat Steel: Domestic sales up by 59% to
3.04 million tonnes with domestic market share increasing to approx. 13%
from 9% in the previous year.

* Efforts onto Brand Building: Focus on leveraging brand-recall and brand-
value adopting multi-fold brand-building techniques viz. Introduced
innovative concept of 'Shoppe-On-Wheel' in the Rural India, Wall-
Paintings, Pro-Active participation in relevant exhibitions, Print-Media
Advertisements, etc., leveraged sales of branded products by 64% of
domestic sales.

International Markets

The Company has been maintaining a strategic presence in the international
market. 2009-10 proved a boon in disguise which led us explore and
partially shift our focus from the conventional advanced markets, adversely
impacted by the global economic crisis, to other promising economies.

* Shift of Focus by exploring the world: While the demand in conventional
coated export markets of North America and the Europe suffocated, JSW
strategically shifted and consolidated its presence in other promising
geographies including South America, CIS, Africa and Asia and capitalized
the demand potential, especially for the Coated products.

* Expand into Logistics-Advantage zone: Increased our presence for other
Semis, Flats and Wire Rods into the economies having logistics advantage
including South & Far East Asia, Rest of Asia, Middle East and Africa,
especially, while the prices were touching the bottoms.

* Enhance Customer base: In order to maximize tonnages coupled with Price-
Advantage, JSW judiciously expanded its customer base, meeting the
challenges of small order lots with high degree of customization demanding
a fast-track delivery schedules. For the coated products, 96 new customers
were added accounting for approx. 13% of export sales.

The Company successfully paved its way through the trying times of 2009-10
and further sharpened its focus and efficiency across the domestic and
international markets, harnessing and nurturing its relationship with its
valued business partners (customers) which would enable its journey ahead
more effective while taking the challenges of expanding product range with
an expanded tonnage intensity.

(7) Of the people, by the people for the people

The Company represents a compelling story of courage, perseverance,
counter-convention and stretch achievements. Consider this: a team size of
7,703 members are responsible for the 7.8 MTPA Integrated Steel plant
operations, predictably the smallest team size per tonne manufactured in
India's growing steel sector.

Mindset

Employees are encouraged to aspire for holistic personality development. An
individual could be an expert in his / her chosen field, but competence is
not just about domain knowledge, but an aptitude for multitasking. This
organizational belief has inspired a culture of multifaceted capability,
accelerating individual development and empowering a team. The organization
not only provides a plethora of opportunities to the individual, but to the
entire family. The result is higher retention and also instances of
employees rejoining.

Building the team

Attracting qualified professionals is a challenging reality in India.
Building the JSW team is of critical importance for important reasons:

* Enhanced capacities in various in-plant sections; new capacities /
facilities were commissioned in each of previous three years.

* Adopted state-of-the-art technologies in the manufacturing process.

The Company recruits graduate engineers, diploma engineers and management
students from leading engineering and management colleges. It visits
management and engineering colleges of repute like IIMs, IITs, NITs and
other reputed Institutes under its Campus Connect Programme'. In 2009-10,
the Company participated in campus recruitment for management and
engineering graduates from reputed Management & Engineering Institutes.

The Company's lateral recruitment of experienced professionals is driven
through references, connections, advertisements and placement agencies. In
2009-10, its Employee Referral Scheme' helped recruit experienced diploma
holders.

Composition and Qualification:

The Employees comprised a rich pool of MBAs, CAs, CSs, ICWAs, ITIs,
Engineers, Graduates, Postgraduates and Diploma holders as on 31 March
2010.

Qualification profile of JSW Steel's employees

Percentage

Diploma holders 33.46%
Engineers 25.29%
Graduates and post-graduates 13.12%
ITIs 9.16%
CA/CS/ICWAs 1.67%
MBAs 1.87%
Others 15.43%

Even as the average experience of the senior management is over 20 years,
the Company's average employee age is about 36.5 years. The result is a
prudent mix of youth and experience.

< 25 years 25-35 years 35-45 years 45-55 years > 55 years
27.44% 32.37% 28.55% 11.44% 0.2%

Fostering bonding

Efficient communication model catalyses knowledge dissemination,
accelerates information flow and facilitates decision-making. The following
enhances across-hierarchy information interchange to build sustainable
relationships:

Manthan: HR meet of JSW Group Companies, encompassing a review of all
recent HR related activities; the management makes an assessment of
feasible ideas, activities undertaken, their progress and results,
facilitating strategic HR decisions.

Soundboard: Enables the shopfloor team to communicate directly with the top
management.

Voice of people: These surveys represent a platform for employee feedback
to formulate strategic HR policies.

Open door policy: Allows all JSW team members to interact directly with the
Jt. Managing Director & Group CFO on a one-on-one basis for professional
and personal guidance.

Bonding: Promotes the spirit of teamwork and enriches interpersonal
relationships among employees through informal gatherings, picnics,
celebrating birthdays, among other events; invites employees' families for
celebrating festivals.

Mera Sujhav: Encourages the contribution of ideas to improve technology,
process, policy or work-life balance, which is rewarded on the basis of
implementation and probable savings.

Performance Management and Reward System

The functional meritocracy is based on individual performances. The
Company's performance management and review system evaluate employee
performance across multiple performance and leadership parameters. Besides,
the Company promotes talent from within, offering members the scope to grow
in their roles, coupled with an opportunity for cross-functional movement.
The Company's compensation package is linked to performance and benchmarked
to better-than-industry standards.

Highlights 2009-10

* Took 1,500 employees through structured feedback process to enable
employees understand and leverage their strengths and take care of their
development areas to enhance individual/team effectiveness.

* Created learning forums and equipped the Line Managers with coaching and
mentoring skill to build learning culture.

* Facilitated small-group activities through cross functional teams and
quality circles.

* Commenced pan-organisational manpower analysis, following which the
Company recruited more than 100 middle management members.

* Initiated succession planning (identify star performers, chart out a
career path and train intensively) so that they can soon assume larger
responsibilities.

* Recorded high employee retention.

Priorities, 2010-11

* Leadership development and effective succession Planning.

* Performance culture that sustain competitive edge and business growth.

* Building learning culture through host of initiatives such as - formal
informal learning forums, e-learning, managers as coach and teacher for

their people, etc.

* Employee engagement and higher employee productivity.

(8) Corporate Communications

The corporate communications team at JSW Steel manages internal and
external communications. Its goal is to showcase the Group profile
consistent with its size, stature and performance; manage perceptions among
media and the financial community about the Company's business strategy and
future prospects and strengthen the Company's brand among global and
domestic stakeholders.

Media Relations

Media relations is a bridge-building exercise between the corporate and the
media, a task crucial for correct and factual information dissemination and
creating the right image for the outside world. It is important for the
Company to create platforms from where relevant information can be
effectively passed on for positive impact. The corporate communication team
conducted the following communication activities during this fiscal:

Press Conferences: Organised press conferences regularly to announce
quarterly results, strategic and critical issues and key business
decisions. More than six such press conferences were organised in 2009-10.

Financial Communications

The Company proactively communicates to investors across the world, to
strengthen investor confidence and provide a platform for interaction with
management. The corporate communication team organised:

* Analyst meet at every quarter end

* Investors and shareholders' visit to plant locations

Branding

JSW's branding strategy is aimed at nurturing the JSW brand and managing
stakeholders' perception to maximise business value. Branding, has an
integrated marketing approach with business solutions which create a
uniform message for all stakeholders.

At JSW, strategy goes through the following process:

* Identifying the brand's stakeholders; JSW's stakeholders comprise
associates, investors, customers and society

* Understanding where the brand is currently; periodically conduct an image
research on various brand-related parameters to get an idea of the
Company's position as compared with competitors

* Understanding market trends.

* Defining where the brand should be; the overall corporate strategy gives
an idea about the JSW brand's position with respect to a timeframe

* Communicating coherently and consistently; all communication to
stakeholders should be coherent and consistent.

Achievements, 2009-10

JSW launched an eight weeks-long, pan-India advertising campaign. The
Company was listed at the top of the AD diagnostic list, which measures
softer parameters such as likeability, enjoyment, believability and claims.
The survey was conducted by Synovate India and supported by ad monitoring
films TVADIndx which covers 750 respondents, 250 each in Mumbai, New Delhi
and Bangalore.

Internal Communication

JSW gives due importance to internal communication to keep the employees
abreast all developments in the organisation, sector and economy. The
Company provides several ways to employees to communicate to the
management.

Website Management

The dynamic business environment of today requires continuous update of
information. The Company proactively updates its website with the help of a
team to provide the right information to its various stakeholders at all
times. As an environment-friendly initiative, the Corporate Communication
team introduced daily news briefings which are posted on the website,
saving paper.

(9) Information Technology

Relevance

IT Infrastructure is critical for the following reasons:

* 4 manufacturing facilities spread across 3 states.

* 35+ units across India and overseas.

* 45 team members need to continuously communicate across locations.

* Facilities will be commissioned to cater to the ambitious expansion plans

over the next decade.

This transforms IT from just another support service to a critical
efficiency driver. JSW is continuously upgrading its IT Systems in line
with business requirements, investing Rs.140 crores to upgrade IT Systems
and Infrastructure over the three years leading to 2009-10.

Highlights, 2009-10

* Commissioned a disaster recovery centre at Vijayanagar for critical ERP
functions so that the Company's operations are not affected even in adverse
circumstances and act as a back-up to the primary centre at Bangalore.

* Implemented product costing solutions at the Vasind and Tarapur Works to
provide accurate data for effective cost control.

Key initiatives

* Migrated from the OCS mailing system to Logix as it offers upscaling or
downscaling flexibility, which resulted in 30% cost reduction.

* Extended the existing ERP system to 21 branches and consignment agents to
increase operational efficiencies and information transparency across the
value chain in the Order to cash cycle.

* Implemented state-of-the-art manufacturing solution at the Cold Rolling
Mill of Vijayanagar Works; the solution is built on a robust and scalable
architecture to automate various tasks.

* Completed a series of network augmentation and enhancement activities at
various locations and branches to ensure optimal utilization of the IT
infrastructure and availability of network bandwidth; the existing network
was revamped to obtain higher bandwidth at lower costs.

Way ahead

* Homogenize multi-location processes to upgrade the existing ERP system.

* Integrate disparate manufacturing systems into the ERP for faster data
access.

* Implement the product costing solution at Vijayanagar and Salem Works for
cost control.

* Enhance focus on centralization of information and shared services.

(10) Internal Control and audit

Internal Control

The Company has a proper and adequate system of internal control
commensurate with the size and nature of its business. The Internal control
system is integral part of the Company's Corporate Governance.

Some key features of the internal control system comprise:

* Adequate documentation of policies, guidelines, authorities and approval
procedures covering all the important functions of the Company.

* Deployment of an organization-wide ERP system covering its operations and
is supported by a defined on-line authorization protocol.

* Ensuring complete compliance with laws, regulations, standards and
internal procedures and systems.

* De-risking the Company's assets / resources from any loss, attrition and
deterioration.

* Ensuring the integrity of the accounting system; the proper and
authorized recording and reporting of all transactions.

* Preparation and monitoring of annual budgets for all operating and
service functions.

* Ensuring a reliability of all financial and operational information.

* Audit Committee comprising of Independent Directors. The Audit Committee
regularly reviews audit plans, significant audit findings, adequacy of
internal controls, compliance with Accounting Standards, etc.

* A comprehensive Information Security Policy and continuous updation of IT
systems.

Internal Audit

The Company has an Internal Audit function that inculcates global best
standards and practices of international majors into the Indian operations.
The Company has a strong Internal Audit department comprising more than 25
executives headed by a senior experienced professional reporting to the
Audit Committee comprising of Independent Directors who are experts in
their field.

The Company successfully integrated the COSO (Committee of Sponsoring
Organization's of the Treadway Commission) framework with its audit process
to enhance the quality of its financial reporting, compatible with business
ethics, effective controls and governance.

The Company extensively practices delegation of authority across its team,
which creates effective checks and balances within the system to arrest all
possible gaps within the system. The internal audit team has access to all
information in the organization - this is largely facilitated by ERP
implementation across the organization.

Audit Plan and Execution

Internal Audit department prepares Risk Based Audit Plan. The frequency of
audit is decided by risk ratings of areas / functions. The audit plan is
carried out by the internal team.

Addition to the audit plan: The audit plan is reviewed periodically to
include areas which have assumed significant importance in line with the
emerging industry trend and the aggressive growth of the company. In
addition, the audit department also places reliance on internal customer
feedback and other external events for inclusion of areas into audit plan.

(11) Risk Management

The Company adopts an integrated, prudent and proactive approach to risk
management to ensure that organizational objectives are achieved with
reasonable predictability and to strengthen the Company's resilience to
adverse situations.

Risk Management Framework

The Company follows the Committee of Sponsoring Organizations' (COSO)
Framework of Risk Management, a globally respected mechanism for monitoring
risk and analyzing organizational impact.

Risk Identification and Review

Process specific risks are identified and regularly reviewed by the
respective process owners to proactively de-risk the organization from
probable adversities emerging from a dynamic global business environment.

Risk Assessment

Risks are assessed for probability of occurrence and impact on occurrence.
Impact on strategy, operations, reporting, compliance, employees,
environment, health and safety is analyzed. Inherent controls and
mitigation measures are considered. Considering the Company's preparedness,
risks are classified as high, medium and low.

Information, Communication and Monitoring

Process owners maintain process specific risk register and update it
regularly. Risk registers are uploaded on Company's intranet. The Internal
Audit team reviews risks identified and controls and actions taken to
minimize their impact on the organization's performance. New high risks,
movement in high risks and action status are discussed in quarterly
locational committee meetings.

A Risk sub-committee of Directors' consisting of three Independent and
three Executive Directors is held quarterly. The Chairmen of locational
meetings are invited to attend the meeting. The committee reviews minutes
of locational meetings, location and process specific high risks which
strengthen the reliance on a robust risk management framework. The
committee discusses in detail high risks arising due to external trends,
reviews internal preparedness and provides de-risking guidelines. The Board
of Directors is informed quarterly, of committee meeting discussions.
Special cross-functional task forces are constituted for specific focused
reviews like Capex risk evaluation'. Treasury risks are being reviewed by
the Treasury Committee. All these activities are coordinated by a Chief
Risk Officer.

(D) Looking into the financial statements (Standalone)

Highlights 2009-10

Rs. in crores

2009-10 2008-09 Growth (%)

Net Turnover 18,202 14,001 30%

EBIDTA 4,806 3,093 55%

PAT 2,023 459 341%

Earnings per share
(diluted) (Rs.) 105.94 22.70 367%

ROCE (%) 16.8% 12.2% -

RONW (%) 23.7% 5.6% -

EBIDTA margin (%) 26.2% 21.8% -

Net Long Term Debt
gearing ratio 1.07 1.24 -

The Gross Turnover and Net Turnover for the year stood at Rs. 19,457 crores
and Rs. 18,202 crores, respectively, with a growth of 28% and 30%
respectively, over the previous year, mainly driven by higher growth in
volumes of saleable steel by 67%, inspite of drop in blended sales
realizations by 21%.

The EBIDTA for the year went up, mainly due to reduction in cost of
production relative to last year and foreign exchange gains of Rs. 412.95
crores. The EBIDTA margin was higher at 26.2 % as against 21.8 % in the
previous year. As a result, the Profit after Tax of the Company also went
up by 341% over last year.

The Standalone Company's debt gearing was at 1.07 (as against 1.24 as on
31.3.2009). The weighted average cost of debt was at 8.02% compared to
8.22% last year.

(1) Revenue Analysis

Rs. in crores

2009-10 2008-09 Change Change %

Domestic Turnover 16,461 10,680 5,781 54%
Export Turnover 2,936 4,450 (1,514) -34%
Sale of Carbon Credits 60 49 11 23%
Gross Turnover 19,457 15,179 4,278 28%
Less: Excise duty 1,255 1,178 77 6%
Net Turnover 18,202 14,001 4,201 30%

Product wise quantity break-up (Mn tonnes)

Products 2009-10 2008-09

Domestic Export Domestic Export

Semis 0.943 0.306 0.262 0.280
Rolled products - Flat 1.727 0.023 1.389 0.210
Rolled products - Long 0.842 0.032 0.293 -
Value-added products 1.312 0.535 0.517 0.477
Total 4.824 0.896 2.461 0.967
Saleable Steel 5.720 3.428

The significant growth in revenues during the year was mainly attributable
to the marketing strategy of prudent sales mix, focus on domestic market,
widening of the product basket and market presence, as explained below:

Enhanced domestic market focus: The Company grew its domestic turnover by
54% through established retail presence across 22 states and covered 117
districts to reach the untapped semi-urban and rural market.

Created value-added products: The Company widened its product basket, added
new value-added products and customised offerings. The value-added product
segment grew 54% and the value-added production facilities were fully
utilized.

Retail revenue: The Company's retail network expanded largely with the
establishment of 174 JSW Shoppes and contributed 16% to the rolled product
domestic sales as on 31 March 2010, compared to 14% as on 31 March 2009.

Geography-wise revenue break-up

Domestic: Domestic revenue increased, due to strategic shift to local
markets and improved realizations gradually from their lows. The Company
strengthened its dealership network, widening pan-India visibility. The
domestic volumes went up significantly by 96% over last year, but there was
drop in steel prices compared to last year.

Export: The Company has export footprint in over 100 countries. Majority of
the exports comprised value-added products. Exports were lower compared to
last year, due to lower volumes by 7% and also drop in global steel price
relative to last year, as well as appreciation of Rupee against US Dollar,
in current year.

(2) Other Income

Rs. in crores

2009-10 2008-09 Change Change %

Other Income 533 260 273 105%

The reasons for the change are foreign exchange gains of Rs. 413 crore
during the current year vis-a-vis gains on FCCB buy back of Rs. 97 crores
and few one off items such as write backs, consultancy charges, etc.
totaling to Rs. 41 crores, in the last year.

(3) Materials

Rs. in crores

2009-10 2008-09 Change Change %

Materials 10,461 8,450 2,011 24%

The Company's raw-material expenditure increased due to higher level of
production, resulting from the commissioning of new facilities of 2.8 MTPA
expansion project. The raw materials cost went up by 24% when the
production volume went up by 61% as, the increase was mitigated partly, on
a/c of drop in prices of key raw materials relative to last year and
reduction in costs achieved due to operational improvements.

(4) Employee Remuneration and Benefits

Rs. in crores

2009-10 2008-09 Change Change %

Employees
Remuneration
and Benefits 365 289 76 26%

Employee remuneration and benefits were up mainly due to annual increments
and rise in manpower relating to operations, on commissioning of new
facilities at Vijayanagar, which were under construction in last year. The
Company employed about 7,703 employees as on 31st March 2010, vis-a-vis
7,669 as at the end March last year.

(5) Manufacturing and Other Expenses

Rs. in crores

2009-10 2008-09 Change Change %

Power and Fuel 1,015 673 342 51%
Other Expenses 2,089 1,756 333 19%

Total Manufacturing
and other Expences 3,104 2,429 675 28%

There was increase in power consumption on account of higher valume of
production, in particular, increase in production of Rolled products - Flat
& Long and Value added products. However, increase in captive generation of
power coupled with reduction in price of coal, helped in containing the
cost per tonne of finished goods. Increase in other costs mainly relate to
higher consumption of stores and spares (43% increase to Rs. 280 crores)
and Repairs & Maintenance (27% to Rs. 63 crores), due to increase in scale
of operations.

(6) Interest

Rs. in crores

2009-10 2008-09 Change Change %

Interest and Finance
Charges (net) 863 797 66 8%

Long-term interest went up on acoount of long-term borrowing pertaining to
expansion projects which started operations in April '09 and working
capital interest reduced, mainly due to reduction of interest rates.

(7) Depreciation

Rs. in crores

2009-10 2008-09 Change Change %

Depreciation 1,123 828 295 36%

Depreciation increase is attributable to the capitalization of new
facilities during the year.

(8) Exceptional Items

There were no exceptional items in the current year. Whereas, in the
previous year, it included Foreign Exchange loss of Rs. 790 crores, due to
Rupee depreciation against the US dollar.

(9) Fixed Assets

Rs. in crores

2009-10 2008-09 Change Change %

Gross Block 21,796 16,897 4,899 29%

Less: Depreciation 4,930 3,811 1,119 29%

Net Block 16,866 13,086 3,780 29%

Capital
Work-in-Progress 6,684 9,243 -2,559 -28%

Total 23,550 22,329 1,221 5%

Gross block increased during the year due to capitalization of 2.8 mtpa
expansion project. The increase was also due to commissioning of new
facilities, viz., 30 MW power plant at Tarapur and first unit of Phase-1 of
the beneficiation plant at Vijayanagar.

Capital work-in-progress as at 31 March 2010, comprises of ongoing projects
which are under implementation, viz. 3.2 MTPA expansion project, new Hot
Strip Mill, 20 MTPA Beneficiation Plant and 300 MW captive power plant at
Vijayanagar, Blooming Mill at Salem and Railway siding at Vasind.

(10) Investments

Rs. in crores

2009-10 2008-09 Change Change %

Investments 1,768 1,250 518 41%

Infusion of equity capital in subsidiaries amounts is Rs. 313 crores and
rest towards investment in mutual funds.

(11) Inventories

Rs. in crores

2009-10 2008-09 Change Change %

Raw Materials 1,279 801 478 60%

Production
Consumables and
Stores & Spares 411 316 95 30%

Work-in-Progress 114 132 (18) -14%

Semi Finished/
Finished Goods 782 789 (7) -1%

Traded Goods 0 13 (13) -100%

Total 2,586 2,051 535 26%

The average inventory holding in terms of number of days as on 31 March,
2010 is 68 days vis-a-vis 67 as on 31 March, 2009. Higher inventory of raw
materials & spares is mainly due to commencement of new facilities.

(12) Sundry Debtors

Rs. in crores

2009-10 2008-09 Change Change %

Total Debtors 581 415 166 40%

Less: Provision for
Doubtful debts (18) (17) (1) 6%

563 398 165 41%

The average debtors i.e., collection period, in terms of number of days as
on 31 March 2010 was 11 days, compared to 10 days as on 31 March 2009.

(13) Loans and Advances

Rs. in crores

2009-10 2008-09 Change Change %

Loans and Advances 2,123 1,745 378 22%

The increase was mainly due to increase in entitlement of Minimum
Alternative Tax credit of Rs. 259 crores.

(14) Current Liabilities

Rs. in crores

2009-10 2008-09 Change Change %

Liabilities 7,358 7,476 (118) -2%
Provisions 264 81 183 326%
Total 7,622 7,557 65 1%

Reduction in current liabilities is mainly due to payment of project
creditors relating to new 2.8 mtpa expansion project and other projects.

(15) Secured and Unsecured Loans

Rs. in crores

2009-10 2008-09 Change Change %

Secured Loans 8,987 8,215 772 9%
Unsecured Loans 2,598 3,058 (460) -15%
Total 11,585 11,273 312 3%

The Company's total debt comprised 78% of secured loans (debentures, long-
term loans and working capital loans from Banks and Financial Institutions)
and 22% unsecured loan portfolio (long-term customer advances, Foreign
Currency loans and zero coupon convertible bonds, among others). Increase
in debt is due to additional borrowings for expansion projects. Of the
total debt portfolio, 66% was rupee-denominated debt, the balance being
Foreign Currency loans.

The Company's net long-term debt equity ratio declined from 1.24 as on 31
March 2009 to 1.07 as on 31 March 2010, as the Company met its entire
repayment schedule in 2009-10.

Rs. in crores

2009-10 2008-09

Loan repayment 988 1,040

(16) Capital Employed

Total capital employed increased 13% from Rs. 20,653 crores as on 31 March
2009 to Rs. 23,256 crores as on 31 March 2010, due to growing scale of
operations and on account of funds invested for completion of ongoing
projects which are expected to be commissioned over the next 12 to 18
months. Return-on-capital employed increased from 12.2% in 2008-09 to 16.8%
in 2009-10, on account an increase in profitability, consequent upon
significant growth in volumes by 61% in crude steel production and 67% in
saleable steel, during the current year.

(17) Own Funds

Net worth increased from Rs. 7,670 crores as on 31 March 2009 to Rs. 9,427
crores as on 31 March 2010 due to plough-back of operational surplus into
the business to fund the Company's future growth initiatives. Return on
networth was higher from 5.6% in 2008-09 to 23.7% in 2009-10, due to an
increase in the Company's profit. The book value per share improved from
Rs. 410 as on 31 March 2009 to Rs. 504 as on 31 March 2010.

Reserves: Reserves and surplus increased from Rs. 7,422 crores as on 31
March 2009 to Rs. 9,179 crores as on 31 March 2010. This is a zero cost
fund which strengthens the ability of the Company to undertake growth
initiatives.

(E) LOOKING INTO THE FINANCIAL STATEMENTS (CONSOLIDATED)

The Company's consolidated financial statements include the financial
performance of the following Subsidiaries, Joint Ventures and Associates.

Subsidiaries:

i. JSW Steel (Netherlands) B.V.
ii. JSW Steel (UK) Limited
iii. Argent Independent Steel (Holdings) Limited
iv. JSW Steel Service Centre (UK) Limited
v. JSW Steel Holding (USA) Inc.
vi. JSW Steel (USA) Inc.
vii. JSW Panama Holdings Corporation
viii. Inversiones Eroush Limitada
ix. Santa Fe Mining
x. Santa Fe Puerto S.A.
xi. JSW Natural Resources Limited
xii. JSW Natural Resources Mozambique Limitada
xiii. JSW Steel Processing Centres Limited
xiv. JSW Bengal Steel Limited
xv. Barbil Beneficiation Company Limited
xvi. JSW Jharkhand Steel Limited
xvii. JSW Building Systems Limited

Joint Venture:

i. Vijayanagar Minerals Private Limited
ii. Rhone Coal Company Private Limited
iii. Geo Steel LLC
iv. JSW Severfield Structures Limited
v. Gourangdih Coal Limited

Associates:

i. Jindal Praxair Oxygen Company Private Limited
ii. JSW Energy (Bengal) Limited

The Company has reported a Consolidated Gross Turnover, Net Turnover,
EBIDTA and PAT of the Company of Rs. 20,211 crores, Rs. 18,957 crores,
Rs.4,607 crores and Rs.1598 crores, respectively. The PAT on consolidated
basis was lower than the standalone Net Profit by Rs. 425 crores, mainly
due to global slow down adversely impacting the overseas operations in USA
and UK. The consolidated long term debt gearing was at 1.49 as on 31 March
2010.

(F) OUT LOOK

Steel demand and prices are expected to move northward in 2010 due to
increased demand and higher input prices. This optimism stems from the
following realities:

* Economic recovery across the globe is expected to generate real demand
pull and an inventory restocking led demand pull. While the former is
expected to be generated from investment in infrastructure and private
consumption, the latter is expected to emanate from creating inventories
which were used up by the economies across the globe in 2009.

* Dollar dynamics which regulates the steel trade and price intensity is
expected to work in favour of global steel trade. The depreciating dollar
is expected to fuel capital investment and consumption expenditure pulling
up steel demand.

* Cost push resulting from higher coking coal and iron ore prices is
expected to drive steel prices northwards. The coking coal spot prices have
skyrocketed to US$ 300 per tonne. The same trend is noticed in Iron ore
prices too. More importantly, the decade-long practice of long-term
agreements for coal and Iron procurement has now been altered to quarterly
contracts bringing more uncertainty and volatility.

Indian Scenario:

* India is 4th largest economy in terms of PPP.

* During the last decade growth has been led by investment with its share
rising from 25% to 36%.

* Industry share has been 28% while services now accounts for over 57% of
economy.

* Favourable demography implies that labour force in India would continue
to be dominated by young workers.

* A steady uptick in savings and investment rates is also indicative of
positive structural change.

India Ranking in Infrastructure: Total surveyed 133 Nations.

Country Overall Road Railway Port Airline Power Telephone

India 89 89 20 90 65 106 103
China 66 50 27 61 80 61 49
Japan 17 22 2 34 53 11 30

(Source: World Economic Forum)

Infrastructure and construction which constitute around 61% of total steel
consumption in the country - is expected to register robust growth in the
near future.

As per Planning Commission, the 11th Five Year Plan targets to increase
total investment in infrastructure from around 5% of GDP in the base year
of 11th Five Year Plan to 9% by the terminal year of 11th Five Year Plan.

Norms of steel demand in infrastructure sector

Investment Programme Demand for Steel ( Norms / Illustration)

NHDP 100 mt for Rs. 50 million Spent.

Railways 300 mt for double line per Km, 24-30 mt
for each wagon.

Power Projects 33,000 mt for 500 MW, additional demand for
special steel such as CRGO / CRNO.

Oil & Gas Well platform requires 2,000 mt of structural
steel and a process platform requires
10,000 mt of steel. A 6 MnT refinery requires
85,000 mt of steel.

Housing Residential blocks typically require 1,000
to 2,000 mt of steel per block.

(Source: SAIL)

Private Investment

Private investment in infrastructure has picked up in recent years, as
indicated in the mid-term appraisal of the Eleventh plan 2007-12,
encouraging the Government to go for a more ambitious infrastructure
creation drive through a greater emphasis on private public partnership
(PPP) mode of execution.

The private sector is now expected to contribute at least half of the over
$1 trillion dollar (Rs. 40.99 lakh crore) investment planned in
infrastructure in the 12th plan (2012-17). A rise in private investments
during the Eleventh Plan period is, in fact, expected to compensate for a
shortfall in public sector investment.

While there may be a shortfall of about 8.7% in public investment as
compared to the initial targets of the Eleventh Plan, this is likely to be
made good by an increase of about 20% in private investment.

Overall investments in infrastructure during the Eleventh Plan is estimated
at Rs. 20,54,205 crore, against a target of Rs. 20,56,150 crore.

The increase in Private Sector investment during the ongoing Plan is
significant in the telecom sector where the final achievement is likely to
be 1.59 times of original estimate. Private Sector investments accounted
for 80% of total investments in ports, 82% in telecom, 64% in airports, 44%
in electricity, 16% in roads and a meager 4% in railways.

Sector Planned Private Sector % - Pvt.
Sector
(Rs. Cr) (Rs. Cr) (%)

Telecom 258,439 211,919 82%

Ports 87,995 70,396 80%

Airports 30,968 19,819 64%

Electricity 666,525 293,271 44%

Roads 314,152 50,264 16%

Railways 261,808 10,472 4%

Total 1,619,887 656,141 41%

11th Plan Period 20,56,150 656,141 32%
(US$ 514Bn)

12th Plan Peroid 40,99,240 1,028,075 50%
(US$ 1025Bn)

Source: MTA 11th Five Year Plan

The expected increase in infrastructure spend is positive for the steel
industry. Your Company, with the estimated volume growth of 17% to 7
million tonnes in FY 2010-11 and in particular, enhanced proportion of
value added rolled steel products having better sales realizations, will be
in an advantageous position to benefit from the growing domestic demand.
The Company is also planning to start some of its new facilities, which are
being part of 10 MTPA expansion project during FY 2010-11, to have better
cost advantage. The increase in cost is likely to be neutralized by
expected cost savings, anticipated rise in sales realizations and possible
improvement due to change in product mix.

Forward loking and Cautionary Statements:

Certain statements in the Management Discussion and Analysis concerning our
future growth prospects are forward looking statements, which involve a
number of risks, and uncertainties that could cause actual results to
differ materially from those in such forward looking statements. The risks
and uncertainties relating to these statements include, but are not limited
to, risks and uncertainties regarding fluctuations in earnings, our ability
to manage growth, intense competition within Steel Industry including those
factors which may affect our cost advantage, wage increases in India, our
ability to attract and retain highly skilled professionals, time and cost
overruns on fixed-price, fixed-time frame contracts, client concentration,
restrictions on immigration, our ability to manage our internal operations,
reduced demand for steel, our ability to successfully complete and
integrate potential acquisitions, liability for damages on our service
contracts, the success of the companies in which - has made strategic
investments, withdrawal of fiscal governmental incentives, political
instability, legal restrictions on raising capital or acquiring companies
outside India, unauthorized use of our intellectual property and general
economic conditions affecting our industry. The Company does not undertake
to update any forward looking statements that may be made from time to time
by or on behalf of the Company.