Balance sheet and cash flows
We continue to have a strong balance sheet with capital employed of US$7.6 billion and net debt of US$200.8 million. Net debt comprises US$4,912.6 million of cash and liquid investments offset by debt of US$5,113.4 million. An explanation of the movement from net cash to net debt during the year is provided later in this review.
During the year we raised debt of US$2,208 million of which US$1.25 billion was raised by the parent company and the rest by the subsidiaries. The parent company issued 5 and 10 year bonds totalling US$1.25 billion under difficult market conditions at an average coupon rate of c.9.2%. External debt held by operating subsidiaries rose to US$1,718.3 million at 31 March 2009 compared to US$757.3 million at 31 March 2008. This was due to additional project financing secured by some of our subsidiaries which are engaged in large capacity expansions. We refinanced a US$1 billion loan taken out for the acquisition of Sesa and have increased the tenure of this loan by 4.6 years. At 31 March 2009, our balance sheet gearing was 2.6%.
In FY 2009 the Indian rupee, the functional currency of our Indian subsidiaries, depreciated approximately 27.5% against the US dollar. A large part of our shareholders’ equity is contributed by our Indian subsidiaries. Since our presentation currency is the US dollar, the depreciation of the Indian rupee has resulted in a currency translation loss in shareholders’ equity (including minority interests) of US$2,195.3 million.
Cash and liquid investments at 31 March 2009 were US$4.9 billion, the majority Indian rupee denominated. Of this, US$380.5 million was cash and cash equivalents and US$4,532.1 million was liquid investments. Cash and cash equivalents include cash and bank balances, short-term deposits with banks and short-term highly liquid investments. Liquid investments consist of investments in mutual funds and bank deposits with maturity of more than 90 days. Our policy is to invest only in those funds and banks which have a high credit rating. We place significant emphasis on safety and liquidity of the investments.
The movement in net (debt)/cash in FY 2009 is set out below.
| (in US$ million, except as stated) | FY 2009 | FY 2008 | |||
| EBITDA | 1,612.2 | 3,010.4 | |||
| Operating exceptional items | (31.9) | 11.1 | |||
| Working capital movements | 620.6 | (53.3) | |||
| Changes in long-term creditors and non-cash items | 104.7 | (19.4) | |||
| Sustaining capital expenditure1 | (306.3) | (256.9) | |||
| Sale of tangible fixed assets | 7.9 | 2.7 | |||
| Net interest paid | (208.7) | 33.0 | |||
| Dividend received | 241.9 | 144.5 | |||
| Tax paid | (330.8) | (655.2) | |||
| Free cash flow | 1,709.6 | 2,216.9 | |||
| Expansion capital expenditure1 | (3,021.3) | (1,997.7) | |||
| Issue of shares by subsidiary | – | 1,969.4 | |||
| Purchase of fixed assets investments | (85.4) | – | |||
| Acquisition of minorities | (316.8) | – | |||
| Acquisitions, net of cash and liquid investments acquired | – | (757.7) | |||
| Buyback of shares of Vedanta Resources plc | (80.3) | – | |||
| Sale of non-core business | – | 83.1 | |||
| Dividends paid to equity shareholders | (118.8) | (104.3) | |||
| Dividends paid to minority shareholders | (56.1) | (53.5) | |||
| Other movements2 | (374.4) | 353.8 | |||
| Movement in net (debt)/cash | (2,343.5) | 1,710.0 | |||
1 On an accruals basis.
2 Includes foreign exchange movements.
