The effective tax rate for FY 2009 was 23.8% compared with 27.4% in FY 2008, primarily due to efficiencies in tax management in many of our businesses. We made effective use of various tax benefits available in India and such benefits have resulted in lower effective tax rates in some of our major operating subsidiaries including HZL, Sterlite and Sesa. At KCM, a new tax regime was introduced from April 2008. Tax rates applicable to mining companies were increased from 25% to 30% and a new windfall tax was also introduced. Based on our discussions with the government authorities in Zambia, we provided for windfall tax at the rate of 25% above the minimum threshold limit. The amount of windfall tax recognised in FY 2009 was US$29 million. We have been engaged in discussions with the Zambian Government on this matter and recently the Zambian Government has announced withdrawal of windfall tax with effect from April 2009.
The current tax rate at KCM has increased to 32.1% in FY 2009, up from 22.6% in FY 2008 as a result of a change in the profit mix. Higher contribution of profits from units having a higher incidence of current tax together with tax losses in KCM led to the increase in the overall current tax rate.
Basic EPS in FY 2009 was 76.4 US cents per share as against 305.4 US cents per share in FY 2008 due to lower attributable profits, a result of lower operating profits and a change in profit mix amongst subsidiaries. Underlying EPS, which excludes special items and exchange losses on borrowings in FY 2009 was 119.7 US cents per share compared with 303.9 US cents per share in FY 2008. Special items include impairment losses of mining reserves at one of our mines.
Share buyback and acquisition of subsidiary shares
The steep correction in the global equity market valuations has provided us with an opportunity to buy back shares in the Company and in our individual subsidiaries at attractive valuations. Consequently, during the year we have invested US$80.3 million buying back 9.6 million equity shares or 3.3% of outstanding shares.
We also increased our equity stake in some of our subsidiaries in India under the recently announced scheme of Securities and Exchange Board of India (‘SEBI’). In Sterlite Industries (India) Limited, we have increased our equity stake from 59.9% at 31 March 2008 to 61.3% at 31 March 2009. In Sesa Goa Limited, we have increased our equity stake from 51.2% at 31 March 2008 to 52.7% at 31 March 2009. We are in the process of buying back the entire 20% minority stake in The Madras Aluminium Company Limited through a delisting process under SEBI guidelines. The response from the minority shareholders is encouraging and to date our stake has increased to 93.2%, up from 80%.
We also successfully acquired ZCI’s 28.4% stake in KCM in April 2008 for US$217.2 million, taking our total shareholding in KCM to 79.4%.
We will continue to evaluate the options of buying back shares in Vedanta. We will also continue to increase our underlying shareholdings in our subsidiaries both under schemes notified by SEBI and through other avenues available to us under the applicable laws.
In respect of our options to acquire the minority stake held by Government of India in BALCO, mediation proceedings as directed by the Delhi High Court did not reach a conclusion and consequently an arbitration process is currently underway. In the case of HZL, we have not yet exercised our call option which became exercisable in April 2007. We are awaiting a response from the Indian Government to our interest in purchasing the entire residual stake of the Government of India in HZL.
We entered into an agreement in May 2008 with Asarco LLC, the third largest copper producer in the United States of America, to purchase substantially all of its operating assets for a total consideration of US$2.6 billion. Global economic conditions had since deteriorated and with the uncertain outlook for commodity prices, we renegotiated our agreement with ASARCO for a revised consideration of US$1.7 billion.
