Sarda Energy & Minerals Ltd Management Meet Note 13th January 2010

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1 Not Rated Price (INR) 297 Target (INR) NA Return (%) NA Beta (Sensex) 1.79 Market Data Mar Cap (INR Mn) 9,815 Enterprise Value (INR Mn) 15,967 Total Shares (Mn) 34 Avg Qtr Dly Vol (000's) 329 Shareholding Promoter 70.1% DII 8.0% FII 6.4% Non Institution 15.6% We met the management of Sarda Energy & Minerals Ltd. SEML is into production of Steel and Ferro Alloys. The company has acquired Coal, Iron Ore and Manganese ore mines which are at various stages of getting operational. The company also has plans for significant capacity addition in Thermal and Hydro power. Once the mines get operational they will significantly contribute to improvement in EBITDA margins. The power projects and additional capacities for Wire Rod, Ferro Alloy & Steel will drive revenue growth in the longer term. The conversion of reconnaissance permit / prospecting licenses into mining lease and easing of naxal activities will play key role in company s revenue and profitability outlook going ahead. The stock is currently trading at 9.7 x Adj Cons EPS of INR 30 for FY10. We do not have a rating on the stock. Wire Rod to boost sales, improve operating margin and profits Ferro Alloys: Increasing demand, better realizations and capacity expansion to drive earnings Stock Code NSE SARDAEN BSE Bloomberg SEML IN Reuters SAEM.BO Source : MLR, Company Coal, Iron Ore & Manganese Ore resources to help in backward integration Thermal and Hydro power projects, to scale up the business in the longer term Standalone Quarterly Financials (INR Mn) Sep-10 Sep-09 Var% Jun-10 Jun-09 Var% Net Sales 2, , , Other operating income Net Sales & Other Operating Income 2, , , Total Expenditure 1, , PBIDT (Excl OI) Other Income , Operating Profit Interest Exceptional Items PBDT Depreciation PBT , Tax , Profit After Tax , Extraordinary Items Net Profit (after Extraordinary Items) , EPS , PBIDTM% (Excl OI) PATM% MLR Investment Research

2 Status of Projects and Mining Resources Steel & Ferro Alloys Product Location Capacity (TPA) Status Pellet Plant Chattisgarh 600,000 Operational Sponge Iron Chattisgarh 360,000 Operational Crude Steel Chattisgarh 240,000 Operational Wire Rod Chattisgarh 180,000 Operational Ferro Alloys Chattisgarh 82,500 Operational Ferro Alloys Andhra Pradesh 125,000 Operational by Mar'12 Coal Washery Chattisgarh 960,000 Operational by Apr'11 Integrated Steel Chattisgarh 1,000,000 Land Acquired Thermal Coal Iron Ore Manganese Ore Thermal Power Hydro Power Resource Location Reserves (Mn Tn) Status Thermal Coal Chattisgarh 100 Operational Thermal Coal Chattisgarh 36 Environment Clearance Awaited Thermal Coal Indonesia (50% Economic Interest) 300 Operational by Dec'11 Resource Location Reserves (Mn Tn) Status Iron Ore Chattisgarh 20 Operational by Mar'11 Iron Ore Chattisgarh 200 (to be acertained) 4 RP & 1 PL Received Resource Location Reserves (Mn Tn) Status Manganese Ore Goa 6 Environment Clearance Awaited Manganese Ore Madhya Pradesh 25 (to be acertained) 3 RP & 2 PL Received Power Location Capacity (MW) Status Thermal Chattisgarh (Captive) 81.5 Operational Thermal Andhra Pradesh (Captive) 80 Operational by Mar'12 Thermal Chattisgarh 300 Land Acquired Thermal Chattisgarh 1320 Land Acquired Power Location Capacity (MW) Status Hydro Uttranchal 4.8 Operational Hydro Sikkim 96 Operational by FY15 Hydro Chattisgarh 101 Financial Closure Awaited Source : MLR, Company Company Background Sarda Energy & Minerals Ltd is into production of Steel and Ferro Alloys. The company has acquired Coal, Iron ore and Manganese ore mines in India and Indonesia for backward integration. It also has a captive thermal power plant and has plans for additional capacities for thermal and hydro power. The company is based in Raigarh, Chattisgarh. Mr Kamal Kishore Sarda is the chairman & managing director of the company. Recently SEML has allotted 5% of its equity to Asia Minerals Ltd. AML is a Hong Kong based company and is specialized in all Manganese related business from Ores to Alloys, Metals and Chemicals. 2 MLR Investment Research

3 Wire Rod to boost sales, improve operating margin and profits The company has set up a Wire Rod mill with a capacity of 180,000 TPA. The plant has started trial production; however, commercial production will start only in FY12. The demand for Wire Rod is likely to increase due to higher investments in the infrastructure sector. Also, the realization for Wire Rod is higher than Billets as Wire Rod is a finished product. The operating margin will also improve as the increase in realization is higher than the conversion expense. The company will also be selling Sponge Iron which will aid revenue growth from Steel division. Ferro Alloys: Increasing demand, better realizations and capacity expansion to drive earnings The demand for steel in India, the world s second fastest growing economy is increasing at a faster pace than the rest of the world. The demand for ferro alloys is directly related to the demand for steel and the growth outlook looks bright. The capacity addition in the ferro alloys space is not happening at a fast pace and demand is likely to outpace supply resulting in decrease in exports and better realizations. The company at present has an installed capacity of 82,500 TPA and has plans to add 125,000 TPA of fresh capacity in Andhra Pradesh, the new plant will also be having a captive power plant of 80 MW. The company expects the plant to be operational by Mar 12. Coal, Iron Ore & Manganese Ore resources to help in backward integration The company has two coal mines in Chhattisgarh with a total reserve of 136 Mn Tn. The company has also acquired a coal mine in Indonesia with approximate reserve of 300 Mn Tn, however the Indonesian coal mine is not likely to become operational before Dec 11. The coal mined from the captive resources would be used for the production of sponge iron and power plants. 3 MLR Investment Research

4 The company is having an Iron Ore mine in Chhattisgarh with a reserve of 20 Mn Tn and is likely to become operational by Mar 11. It has received prospecting license for one mine and recommended prospecting license for four mines in the state of Chhattisgarh. The five mines are likely to have total Iron Ore reserve of 200 Mn Tn. The company is having a Manganese Ore mine in Goa with a reserve of 6 Mn Tn. It has also received reconnaissance permit and prospecting license for Manganese Ore mines in the state of Madhya Pradesh. The reserve of these mines is yet to be ascertained. The company has set up a pellet plant and a coal washery. The pellet plant has a capacity of 600,000 TPA and started production from Q1 FY11. The captive iron ore and pellet plant will result in a saving of INR 6000/Tn of Steel. It is also setting up a Coal washery facility with a capacity of 960,000 TPA and the facility is expected to be operational by Apr 11. The mining resources combined with the pellet plant and coal washery would aid in improving the margin. Thermal and Hydro power projects, to scale up the business in the longer term The company at present is having a total power capacity of 81.5 MW, 30 MW is waste heat recovery based power and 51.5 MW is coal based. The current power capacities are captive, however, at times when steel prices are subdued the company has been selling power in the open market. The company is also planning a 300 MW coal based power plant in Chhattisgarh near its coal mines. The land for the project has been acquired. The company is planning two hydro power projects in Sikkim and Chhattisgarh with capacities of 96 MW and 101 MW respectively. The Sikkim project has been appraised by PFC and civil contract has been awarded, the project is likely to be operational by FY15. The work on Chhattisgarh hydro power project is yet to start and the financial closure is awaited. A 1320 MW (2*660 MW) in Chattisgarh is also at its initial stages, the land for the project has been acquired, coal linkage and water permissions has also been received. 4 MLR Investment Research

5 Financials (Consolidated, INR Mn) Income Statement FY06 FY07 FY08 FY09 FY10 Revenue 2, , , , ,277.1 Operating Expense 1, , , , ,494.5 EBITDA , , Other Income ,237.1 Dep & Amo Interest Tax Minority Interest Net Income , , ,442.1 Non Recurring Item Adjusted Net Income , , ,011.8 Balance Sheet FY06 FY07 FY08 FY09 FY10 Share Capital Reserve , , , ,172.7 Total Equity , , , ,513.2 Loan Fund 1, , , , ,220.7 Minority Capital Deferred Tax Liability Total Capital 1, , , , ,278.8 Fixed Asset 1, , , , ,063.7 Investment , ,111.6 Cash Inventory , ,520.0 Other Current Asset , , Total Current Liabilitiy , ,002.3 Net Current Asset , , , ,103.5 Total Asset 1, , , , ,278.8 Ratio Analysis FY06 FY07 FY08 FY09 FY10 Revenue Growth (%) EBITDA Margin (%) EBITDA Growth (%) Adj Net Income Margin (%) Adj Net Income Growth (%) Asset Turnover (x) Financial Leverage (x) RoE (%) BVPS (INR) P/BV (x) Adj EPS (INR) Adj P/E (x) Source : MLR, Company 5 MLR Investment Research

6 Research Analyst Saurabh singh Head of Research Aditya Damani Head Office 4th Floor, Surya Mahal 5, Burjorji Bharucha Marg Fort Mumbai Disclaimer : This document has been prepared by MLR Securities Pvt. Ltd. This document does not constitute an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein is from publicly available data or other sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied on as such. MLR Securities Pvt. Ltd. or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any information contained in this report. The user assumes the entire risk of any use made of this information. We and our affiliates, group companies, officers, directors, and employees may have potential conflict of interest with respect to any recommendation and related information and opinions. This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MLR Securities Pvt. Ltd. and affiliates/ group companies to any registration or licensing requirements within such jurisdiction. 6 MLR Investment Research