Strategy Paper on how to generate consistent value for shareholders, and how Investor Relations can help a company do that.

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Creating value for Shareholders
Sterlite Technologies Limited
Power to
every Village

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Some Definitions
Value (mathematics)
- the value of a variable in mathematics.
Value (economics)
- the market worth or estimated worth of commodities, services, assets, or work.
Value

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To refer to the concept that the primary goal for a company is to enrich its shareholders (owners)
by paying dividends and/or causing the stock price to increase.
To refer to the more specific concept that planned actions by management and the returns to
shareholders should outperform certain bench-marks such as the cost of capital concept.
Shareholder Value
Some Definitions
Total Shareholder
Return
Close Price @
End of Year
Open Price @
Start of Year
Dividend
Payout
Shareholder
Value
Capital
Structure
Equity Debt Cost of Capital
Capital
Structure
Equity Debt Cost of Capital
Corporate
Vision
Strategic
Plan
Business /
Operating Plan
Revenue /
Profit growth

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Company Shareholder
You keep asking
us for more
profits and
returns! How
much more do
you want ???

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Companies which can
consistently grow
shareholder value are
the ones which are
considered great by
all stakeholders.
Company
2007 2002 2006 2002 2006 2002
1 1 Wal-Mart 351,139 219,812 11,284 6,671
2 2 Exxon Mobil 347,254 191,581 39,500 15,320
6 6 General Electric 168,307 125,913 20,829 13,684
8 8 Citigroup 146,777 112,022 21,538 14,126
49 72 Microsoft 44,282 25,296 12,599 7,346
52 56 Motorola 43,739 30,004 3,661 -3,937
Revenues (mil USD) Profits (mil USD)Rank
Fortune 500 list
Consistency breeds greatness
Rank by M-Cap Business Standard Forbes Business Asia
2007 2005 2000
Reliance Industries 1 1 4
Bharti airtel 4 11 N/A
Infosys 7 15 2
L&T 12 22 26
ITC 14 14 8
Sterlite Industries 19 20 32
Satyam 31 47 11
But how can companies grow consistently?
Shar eholder Value
Shareholder Value
Shareholder Value
Shareholder Value
Shareholder Value
Shareholder Value

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Introduction Growth Maturity
Time
1. Innovation
2.
Corporate Governance
Value
Ideal scenario
Revenues /
Profits
Two Key Drivers for Creating Shareholder Value
Maturity -
• Corporate Governance
• Focused Messaging
• Cost Leadership
• Operating Margins
Growth -
• Sustainable Ideas
• M&A options
• IPO
• Revenues & Net Profits
Introduction -
• Business Idea / Vision
• Strategy
• Business Model
• Financing Methods
• Startups with disruptive business ideas are valued more during their growing phase.
• Mature companies which are transparent to shareholders are valued more.

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-500
0
500
1000
1500
2000
2500
3000
2003-04 2004-05 2005-06 2006-07 2007-08*
M - Cap
Revenues
PAT
0
5000
10000
15000
20000
25000
30000
2003-04 2004-05 2005-06 2006-07 2007-08*
M - Cap
Revenues
PAT
Growth company v/s Mature company
Telecom – Emerging industry v/s
Auto – Maturing industry
Fiber – Disruptive technology (04)
Auto - New Brands, Promos (04)
Power - Sourcing & customer synergies
Auto - Improving governance and
transparency (Bajaj Auto etc)
Sterlite Optical Technologies
Maruti Udyog
Emerging Industry + Disruptive Technology + Cost
Leadership scope + Business Development options
Consistent Shareholder Value
Creation Opportunities
* - as per Business Plan for SOTL and Q1 annualized for Maruti

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Can we quantify Shareholder Value?
Cost of products sold / Revenue
Cost of goods sold / Revenue
Sales and marketing expense/ Revenue
Fixed assets / Revenue
Working capital / Revenue
General and administrative expense / Revenue
Other operational costs / Revenue
ROCE =
Margin =
Asset utilization =
Operational profit
Fixed assets + working capital
Operational profit
Revenue
Revenue
Fixed assets + working capital
X
+
+
1 -
1 /
According to our experience
(Return On Capital Employed) is
the best indicator of creating value
for shareholders
Cost of products sold / Revenue
Cost of goods sold / Revenue
Sales and marketing expense/ Revenue
Fixed assets / Revenue
Working capital / Revenue
General and administrative expense / Revenue
Other operational costs / Revenue
ROCE =
Margin =
Asset utilization =
Operational profit
Fixed assets + working capital
Operational profit
Revenue
Revenue
Fixed assets + working capital
X
+
+
1 -
1 /
According to our experience
(Return On Capital Employed) is
the best indicator of creating value
for shareholders
• TSR and RoCE are considered to be the best indicators for judging sustainable
shareholder value.
Total Shareholder
Return
Close Price @
End of Year
Open Price @
Start of Year
Dividend
Payout

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-10
-5
0
5
10
15
20
25
30
35
2003-04 2004-05 2005-06 2006-07 2007-08*
-10%
0%
10%
20%
30%
40%
50%
Basic EPS RoCE
How does SOTL stack up?
Backward integration projects for
achieving global cost leadership
New Business lines for more of customer’s
capex pie (Revenue and Profit growth)
New Geographies and Customers
targeted for Business Development.
Aggressive Push – PTB, New Sales offices,
New Backward Integration projects
0
50
100
150
200
250
2003-04 2004-05 2005-06 2006-07 2007-08*
-10%
0%
10%
20%
30%
40%
50%
TSR per share RoCE
Expansion Projects, Brand
Building, IP focus, Talent
Management, New Business Lines
* Assuming M-Cap of Rs. 2500 crores at March 31, 2008
• Historically, shareholder returns have been growing.
• In the future, shareholder returns are expected to grow faster!!!
Confidential to the
Company
Confidential to the
Company

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• Targeted communication to media
• Targeted communication to investors
• Increased focus on R&D
• Continuous search for newer geographies
• Continuous search for newer product lines
• Brand building
• Regular awards
• Six sigma, lean manufacturing, etc.
Projects and Activities to ensure sustained growth
Messaging
Governance
Cost Leadership
Innovation
Biz Dvlpmt

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Drivers determining Company’s Valuation / Share Price

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Where/How does Investor Relations help?

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Thank You