Document:

<PAGE>
                                                                    EXHIBIT 10.7

                             SHAREHOLDERS AGREEMENT

                                      among

                               GOVERNMENT OF INDIA

                                       and

                         STERLITE INDUSTRIES (INDIA) LTD

                                       and

                        BHARAT ALUMUNIUM COMPANY LIMITED

                                  March 2, 2001

<PAGE>

                             SHAREHOLDERS AGREEMENT

THIS SHAREHOLDERS AGREEMENT is made and entered into on this 2nd day of March
2001.

BY AND AMONG:

THE PRESIDENT OF INDIA, acting through and represented by the Secretary,
Ministry of Mines and Minerals, Department of Mines of the Government of India
(hereinafter referred to as the "GOVERNMENT")

                                      -and-

STERLITE INDUSTRIES (INDIA) LTD a company duly incorporated and existing under
the provisions of the Act (as hereinafter defined/laws of India with its
registered office at B-10/4, Waluj MIDC Industrial Area. Waluj, Dist: Aurangabad
- 431 133. Maharashtra, India (hereinafter referred to as the "STRATEGIC
PARTNER" or the "SP" which expression shall include its successors, Affiliates
(as defined hereinafter), permitted assigns and liquidators)

                                       and

BHARAT ALUMINIUM COMPANY LIMITED, a public limited company duly incorporated and
existing under the provisions of the Companies Act, 1956, as amended, with its
registered office at Aluminium Sadan, Scope Complex, Lodi Road, New Delhi, India
(hereinafter referred to as the "COMPANY")

RECITALS

A.    The Company is engaged in a business that, among others, involves
      manufacture, sale and distribution of primary aluminium metal and
      aluminium products.

B.    The authorized share capital of the Company is Rs. 500,00,00,000/- (Rupees
      Five Hundred Crores Only) divided into 50,00,00,000/- (Fifty Crores)
      voting equity shares of Rs. 10 each.

C.    The issued paid-up share capital of the Company is Rs. 220,62,45,000/-
      (Rupees Two Hundred Twenty Crores Sixty Two Lacs Forty Five Thousand Only)
      divided into 22,06,24,500 (Twenty Two Crores Six Lacs Twenty Four Thousand
      Five Hundred Only) voting equity shares of Rs. 10 each.

D.    The Government is the beneficial and legal owner of 22,06,23,700 (Twenty
      Two Crores Six Lacs Twenty Three Thousand Seven Hundred Only) voting
      equity shares of the Company representing 99.99% of the total issued and
      paid up share capital of the Company.

                                     Page 2
<PAGE>

E.    The remaining 800 voting equity shares are being held by nominees of the
      Government, (hereinafter referred to as the "NOMINEE SUBSCRIBERS") more
      specifically stipulated in Schedule "A" of the Share Purchase Agreement.

F.    The SP. the Company and the Government are parties to an agreement of even
      date whereby the Government has, subject to the terms and conditions
      stated therein, agreed to sell and cause the Nominee Subscribers to sell
      to the SP, and the SP has agreed to purchase from the Government and the
      Nominee Subscribers, 11,25,18,495 (Eleven Crores Twenty Five Lacs Eighteen
      Thousand Four Hundred Ninety Five) voting equity shares of the Company
      (such shares, the "PURCHASE SHARES", and such agreement, the "SHARE
      PURCHASE AGREEMENT").

G.    The Parties have entered into this Agreement to record their agreement as
      to the manner in which the Company's affairs shall be conducted after the
      SP acquires the Purchase Shares from the Government and to grant to each
      other certain rights and obligations with respect to their ownership,
      directly and indirectly, of the voting equity shares of the Company.

H.    Subject to Clause 7.2, the Parties envision that all employees of the
      Company on the date hereof shall continue in the employment of the
      Company.

I.    The Government, as a significant shareholder of the Company shall extend
      reasonable co-operation to the Company to facilitate the conduct of the
      business of the Company.

J.    The SP recognises that the Government in relation to its employment
      policies follows certain principles for the benefit of the members of the
      Scheduled Caste/Scheduled Tribes, physically handicapped persons and other
      socially disadvantaged categories of the society. The SP shall use its
      best efforts to cause the Company to provide adequate job opportunities
      for such persons. Further, in the event of any reduction in the strength
      of the employees of the Company, the SP shall use its best efforts to
      ensure that the physically handicapped persons are retrenched at the end.

NOW, THEREFORE, in consideration of the premises and mutual agreements and
covenants contained in this Agreement and other good and valuable consideration
(the receipt and adequacy of which are hereby mutually acknowledged), each of
the Parties hereto hereby agree as follows:

                                     Page 3
<PAGE>

                                    ARTICLE 1

                  DEFINITIONS AND PRINCIPLES OF INTERPRETATION

1.1   DEFINITIONS

      In addition to the terms defined in the introduction to and the text of
      this Agreement, wherever used in this Agreement, the following words and
      terms shall have the meanings set out below:

"ACT" means the Indian Companies Act, 1956, as now enacted or as the same may
from time to time be amended, re-enacted or replaced;

"AFFILIATE" means, with respect to any Party, any Person which is a holding
company or subsidiary of such Party, or any Person which, directly or
indirectly, (a) owns or controls such Party, (b) is owned or controlled by such
Party, or (c) is owned or controlled by the same Person who, directly or
indirectly, owns or controls such Party. For the purposes of this Agreement, the
terms "holding company" any "subsidiary" shall have the meanings ascribed to
them under Section 4 of the Act, and the term "control" shall mean:

a)    control over the composition of Board of Directors of an entity; or

b)    control of at least 51% of the issued equity share capital of a company.

Provided however that in no event shall the Company be deemed an Affiliate of
either the Government or the SP.

"AGREEMENT" means this Shareholders Agreement and all attached schedules and all
instruments supplemental to or in amendment or confirmation of this Agreement
entered into by the Parties in writing;

"BOARD" means the board of directors of the Company;

"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which the
principal commercial banks located in Mumbai/New Delhi are open for business
during normal banking hours;

"EVENT OF BANKRUPTCY" in respect of a Person (other than the Government) means
the first to occur of any of the following:

      i)    if the Person makes an assignment for the benefit of creditors; or

      ii)   if a Provisional or Official Liquidator is appointed in relation to
            any Person by an appropriate court under any applicable Law; or

                                     Page 4
<PAGE>

      iii)  if the Person avails itself of the benefit of any other legislation
            for the benefit of debtors: or

      iv)   if the Person applies to an appropriate court for voluntary
            liquidation under any applicable Law.

"FAIR VALUE" means, with respect to any voting equity shares of the Company, the
price of such equity shares as determined in accordance with Schedule 6.1 of
this Agreement and expressed in terms of money;

"PARTIES" means, collectively, the Government, the SP and the Company and any
other Person which becomes a party to this Agreement, and "Party" means any one
of them;

"PERSON" includes any individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organisation, trust, body corporate, and a natural person in his capacity as
trustee, executor, administrator, or other legal representative;

"SECURITIES" means, collectively, loans made to the Company by its shareholders,
and the voting equity shares of the Company;

"SHAREHOLDERS" means the Government and the SP together with such other Persons
as may become parties to this Agreement as an equity shareholder of the Company,
collectively, and "Shareholder" means any one of such parties individually;

"SHARE PURCHASE AGREEMENT" shall have the meaning ascribed to it in Recital F of
this Agreement; and

"VALUATION DATE" has the meaning set forth in Clause 6.1.

1.2   CERTAIN RULES OF INTERPRETATION IN THIS AGREEMENT,

(a)   the descriptive headings of Articles and Clauses are inserted solely for
      convenience of reference and are not intended as complete or accurate
      descriptions of content thereof and shall not be used to interpret the
      provisions of this Agreement;

(b)   the use of words in the singular or plural, or with a particular gender,
      shall not limit the scope or exclude the application of any provision of
      this Agreement to any Person or Persons or circumstances as the context
      otherwise permits;

(c)   the terms "hereof, "herein" , "hereto", "hereunder" or similar expressions
      used in this Agreement mean and refer to this Agreement and not to any
      particular Article or Clause of this Agreement. The terms "Article" and
      "Clause" mean and refer to the Article and Clause of this Agreement so
      specified:

                                     Page 5
<PAGE>

(d)   unless otherwise specified, time periods within or following which any
      payment is to be made or act is to be done shall be calculated by
      excluding the day on which the period commences and including the day on
      which the period ends and by extending the period to the next Business Day
      following if the last day of such period is not a Business Day; and
      whenever any payment to be made or action to be taken under this Agreement
      is required to be made or taken on a day other than a Business Day, such
      payment shall be made or action taken on the next Business Day following.

(e)   All capitalized words and expressions used in this Agreement but not
      defined shall have the same meaning as ascribed to them in the Share
      Purchase Agreement.

(f)   The damages payable by either Party to the other of them as set forth in
      this Agreement, are intended to be genuine pre-estimates of loss and
      damage likely to be suffered and incurred by the Party entitled to receive
      the same and are not by way of penalty or liquidated damages.

1.3   SCHEDULES

      The schedules annexed to this Agreement, as listed below, form an integral
      part of this Agreement.

      Schedule 4.5 Matters Requiring Special Consent;

      Schedule 6.1 - Principles of Valuation;

      Schedule 6.2 - Mechanism relating to sale and purchase between the Parties
                     of shares of the Company in the future;

      Schedule 11.1 - Arbitration Procedures.

                                    ARTICLE 2

                        EFFECTIVE DATE, PURPOSE AND SCOPE

2.1   EFFECTIVE DATE

      This Agreement shall come into force and effect from and after the Closing
      Date.

2.2   COMPLIANCE WITH AGREEMENT

      Each Shareholder, being a party to this Agreement, agrees, at all times,
      to vote and act as a shareholder of the Company to fulfill the provisions
      of this Agreement and in all other respects to comply with, and use all

                                     Page 6
<PAGE>

      reasonable efforts to comply and to cause the Company to comply with, this
      Agreement. Each of such Shareholder shall, at all times, cause its
      respective nominee(s) as directors of the Company to act in accordance
      with this Agreement, amend the articles of association of the Company to
      conform to this Agreement, and cause the Company to adopt such amended
      articles of association through the passage of appropriate Board and
      shareholder's resolutions and take other actions as required under law in
      this regard.

2.3   COMPLIANCE BY THE COMPANY

      The Company undertakes to carryout and be bound by the provisions of this
      Agreement to the fullest extent that it has the capacity and power at law
      to do so. The Shareholders shall, to the extent possible, cause the
      Company to take all steps as may be necessary to effectively adopt, abide
      by and ratify the terms of this Agreement.

2.4   COMPLIANCE WITH LAWS

      In carrying out the obligations specified herein, the Parties shall comply
      with all applicable Laws.

                                    ARTICLE 3

                     EQUITY PARTICIPATION; FINANCIAL SUPPORT

3.1   EQUITY PARTICIPATION

(a)   The Company and the Government represent and warrant to the SP that upon
      the occurrence of the Closing, the Shareholders' respective equity
      shareholding in the Company shall be as follows:

<TABLE>
<CAPTION>

                                                             Percentage of Total Equity
Shareholder                 Number of Voting Equity Shares         Share Capital
--------------------------  ------------------------------   --------------------------
<S>                         <C>                              <C>
Government                           10,81,06,005                       49%
SP and Purchaser Nominees            11,25,18,495                       51%
</TABLE>

3.2   ADDITIONAL CAPITAL

(a)   Notwithstanding any other provision of this Agreement, if the Board, in
      exercise of good faith and in its reasonable judgment, determines that the
      Company requires additional funds and such funds cannot be obtained from
      banks or other financial institutions on reasonable arms-length commercial
      terms (or terms

                                     Page 7
<PAGE>

      that are more favourable to the Company than reasonable arms-length
      commercial terms) and without guarantees of or recourse to, the
      Shareholders or any Person not dealing at arm's length with any
      shareholder, the Board may request, by issuance of a notice (the "FUNDING
      NOTICE") to all the shareholders of the Company, to contribute, within 90
      Business Days after the issuance of the Funding Notice (the "FUNDING
      PERIOD"), additional capital to the Company, on a pro rated basis
      depending upon the number of voting equity shares of the Company then held
      by such shareholders, by way of subscription for additional voting equity
      shares in accordance with Section 81(1) of the Act or provide a loan to
      the Company, all as determined by the Board and set forth in the Funding
      Notice.

(b)   If additional capital is to be contributed pursuant to Clause 3.2(a) by
      way of subscription for additional voting equity shares of the Company,
      then the subscription price for each such additional voting equity shares
      shall be determined by the Board and set out in the Funding Notice. The
      Company shall, promptly upon the receipt of such subscription price, issue
      to its shareholders the appropriate number of voting equity shares based
      upon the payment received from each such Shareholder. Such voting equity
      shares shall rank pari passu with the existing Shares in all respects
      except for the purposes of dividend that shall be pro rated to the period
      for which such newly issued shares are in existence.

(c)   If any offer to subscribe for voting equity shares of the Company pursuant
      to Clause 3.2(a) (such offer, the "RIGHT") includes a right to renounce
      the Right in favour of any other Person, then, no Shareholder shall
      renounce such Right in favour of any other Person (other than an Affiliate
      of the renouncing Shareholder) without first giving the other Shareholder
      a reasonable opportunity to acquire such Right, either directly or through
      its nominees on the same terms and conditions that such Right is proposed
      to be renounced in favour of any other Person (other than an Affiliate of
      the renouncing Shareholder).

(d)   Any Person other than a Party hereto, who acquires any Shares pursuant to
      Clause 3.2(c), shall execute a deed of adherence and an undertaking to
      adhere to the terms and conditions of this Agreement. The rights of such
      Person shall be determined in the following manner:

      i)    Subject to the provisions of Section 3.2(c) above, in the event that
            a non-renouncing Shareholder exercises its option to cause its
            nominee to acquire the Right, such non-renouncing Shareholder shall
            exercise all the rights and privileges on behalf of such nominee and
            shall be responsible for all the duties and obligations of such
            nominee under the terms of this Agreement. The rights of the
            non-renouncing Shareholder and such nominee shall be the rights
            available to the non-renouncing Shareholder under this Agreement and
            no additional rights or privileges shall accrue to or be available
            to the non-renouncing Shareholder or the nominee.

      ii)   Subject to the provisions of Section 3.2(c) above, in the event that
            the non-renouncing Shareholder

                                     Page 8
<PAGE>

            does not exercise its option to acquire or cause its nominee to
            acquire the Right and the renouncing Shareholder offers the Right to
            a third party, such renouncing Shareholder shall exercise all the
            rights and privileges on behalf of such third party and shall be
            responsible for all the duties and obligations of such third party
            under the terms of this Agreement. The rights of the renouncing
            Shareholder and such third party shall be the rights available to
            the renouncing Shareholder under this Agreement and no additional
            rights or privileges shall accrue to or be available to the
            renouncing Shareholder or the third party.

(e)   For the avoidance of doubt, under no circumstances shall a failure to
      provide funds by a Shareholder pursuant to a Funding Notice be considered
      to be a default by such Shareholder under this Agreement or make such
      Shareholder in any way liable for the payment of such funds.

3.3   ADHERENCE BY AFFILIATES

      In the event that any of the Affiliate(s) of the SP becomes a Shareholder
      of the Company, whether pursuant to a renunciation of a Right under Clause
      3.2 or otherwise, such Affiliate of the SP shall adhere to this Agreement
      and be compliant with the provisions hereof.

                                    ARTICLE 4

                            MANAGEMENT OF THE COMPANY

4.1   BOARD OF DIRECTORS

      a)    So long as the SP, directly or indirectly through its Affiliates,
            continues to hold at least 51% of the voting equity share capital of
            the Company, the Company shall have a Board consisting of not more
            than 12 directors who shall be appointed by the Government and the
            SP in proportion of their equity shareholding in the Company.
            Provided however that the SP shall have at all times the right to
            appoint such number of directors on the Board such that the SP
            always has control over the majority of the votes on the Board.

      b)    The Parties agree that immediately after the sale and purchase of
            the Purchase Shares between the Government and the SP, the Board
            shall comprise of 9 directors of which the SP shall have the right
            to appoint 5 directors (including the chief executive
            officer/managing director).

      c)    The Government shall have the right to appoint the remaining 4
            directors who shall all be non-working directors of the Company.
            Provided that the Government agrees it shall not appoint any

                                     Page 9
<PAGE>

            person as its nominee to the Board if such person is a director or
            employee of any other company or entity that is engaged in any
            activity or business in competition with the business of the
            Company.

      d)    Both the Government and the SP shall vote the equity shares of the
            Company held by them to elect/remove the directors nominated in
            accordance with this Agreement.

      e)    In the event that the Board constitutes a share transfer committee
            for the purposes of effecting the transfer of Shares, such share
            transfer committee shall include one nominee of the SP and the
            Government each.

4.2   REMOVAL AND REPLACEMENT OF NOMINEES

      The Government and the SP shall be entitled to remove any director
      nominated by them by notice to such director and the other Parties. Any
      vacancy occurring on the Board by reason of the death, disqualification,
      inability to act, shall be filled by the Party whose nominee was so
      affected so as to maintain a Board that is consistent with the provisions
      of Clause 4.1.

4.3   MEETING OF BOARD

      The Board shall meet at least once every calendar quarter period during
      the term of this Agreement and in the event that a meeting of the Board is
      not held during any such quarter period, any director may call a meeting
      of the Board on 48 hours prior notice to the other directors. At each
      meeting of the Board, unless waived by atleast one nominee director each
      of the SP and the Government, the chief executive officer/managing
      director of the Company shall report duly to the Board with respect to the
      current status of the operations of the Company and with respect to all
      major developments or planned action involving the Company and shall
      present to the meeting complete current financial information with respect
      to the Company.

4.4   QUORUM

      a)    The quorum requirements for the Board and shareholders meeting of
            the Company shall be governed by the provisions of the Act and the
            SP shall ensure that the Government is given reasonable notice of
            all such meetings in a timely manner.

      b)    Notwithstanding anything to the contrary in sub-clause 4.4(a) above,
            the presence of at least one

                                    Page 10
<PAGE>

            nominee director each of the Government and the SP, in case of a
            Board meeting, or at least one authorised representative each of the
            Government and the SP, in case of a general meeting, shall be
            necessary to constitute quorum for any meeting in which a resolution
            for any of the matters specified in Schedule 4.5 is to be passed and
            a notice of not less than 7 (seven) days shall be given to the
            Government and the SP for any such meeting, unless the Government
            and the SP agrees to a shorter notice in writing.

      c)    In the event that no nominee director or authorised representative
            of either the Government or the SP is present at a meeting referred
            to in sub-clause 4.4(b) above, such meeting shall stand adjourned to
            the same day in the next week, at the same time and place, or to
            such later day as may be notified to the Government or the SP as the
            case may be.

      d)    In the event that no nominee director or authorised representative
            of the same Shareholder, whose nominee director/authorised
            representative was not present in the meeting referred to in
            sub-clause 4.4(b), is present at the adjourned meeting referred to
            in sub-clause 4.4(c) above, such meeting shall stand adjourned to
            the same day in the next week, at the same time and place, or to
            such later day as may be notified to such Shareholder.

      e)    Notwithstanding anything to the contrary in sub-clause 4.4(b) above,
            in the event that no nominee director/authorised representative of
            the same Shareholder, whose nominee director/authorised
            representative was not present in the meetings referred to in
            sub-clauses 4.4(b) and 4.4(c), is present at the adjourned meeting
            referred to in sub-clause 4.4(d), it shall be deemed that the
            presence of the nominee director/authorised representatives of such
            Shareholder is not required for such meeting and the
            directors/shareholders present at such adjourned Board/general
            meeting shall be entitled to proceed with the items on the agenda in
            such manner as they deem fit even though such items may be relating
            to matters listed in Schedule 4.5.

4.5   APPROVAL OF MATTERS

      Notwithstanding any other provision of this Agreement or otherwise
      permitted or provided under the Act, no obligation of the Company or any
      of its subsidiaries shall be entered into, no decision shall be made and
      no action shall be taken by or with respect to the Company or any of its
      subsidiaries in relation to the matters identified in Schedule 4.5, unless
      such obligation, decision or action, as the case may be, is approved:

      a)    If at any meeting of the Company's shareholders duly called for the
            purpose of considering such obligation, decision or action, by an
            affirmative vote of the one authorised representative of both the
            Government and the SP:

                                    Page 11
<PAGE>

      b)    If at the meeting of the Board, then subject to the provisions of
            sub-clause 4.4(e) by at least one nominee director of each of the
            Government and the SP.

4.6   VOTING

      Excepting the matters listed in Schedule 4.5, the Government or any other
      entity nominated by it shall, at all shareholders' meeting of the Company,
      exercise the voting rights attached to the voting equity shares of the
      Company held by the Government in the manner directed in writing by the
      SP. For purposes of clarity and avoidance of doubt, on any resolution that
      directly or indirectly relates to matters specified in Schedule 4.5, the
      Government shall be free to exercise the voting rights attached to the
      Company's shares held by it in the manner it deems fit.

4.7   MANAGING DIRECTOR

      Throughout the term of this Agreement, the Company shall have a Managing
      Director appointed by the Board in accordance with Clause 4.1(b). The
      Managing Director shall be a member of the Board and shall manage the
      daily operations of the Company. The term of the office of the Managing
      Director shall be determined by a resolution of the Board. The Managing
      Director shall function under the supervision, control and direction of
      the Board and shall, subject to such supervision, control and direction,
      have the authority to manage the business operations of the Company.
      Subject to the provisions of Clause 4.5 read with Schedule 4.5, the powers
      and duties of the Managing Director shall be defined and/or modified from
      time to time by resolution of the Board, and shall include the powers and
      duties to:

      (a)   incur capital expenditure which has been previously approved by the
            Board and any other operational expenditure;

      (b)   appoint and terminate any buyers, suppliers, ancillaries,
            franchisees and distributors;

      (c)   appoint, retrench and/or dismiss employees, consultants and contract
            labour of the Company, subject to Clause 7.2 and other applicable
            provisions of this Agreement, the applicable staff regulations, the
            standing orders of the Company and applicable Law;

      (d)   make decisions regarding the marketing of the Company's products,
            including fixing the price, margins, discounts and determining the
            advertisement policy and budgets;

                                    Page 12
<PAGE>

      (e)   make operational decisions regarding the quality and product
            constituents for the customers; and

      (f)   take such actions or execute such contracts on behalf of the Company
            that are in the ordinary course of business of the Company.

4.8   REPORTING REQUIREMENTS

      The SP shall ensure that the Company provides to the Government:

            (i)   annually within 3 (three) months of the end of a relevant
                  financial year an audited profit and loss account, balance
                  sheet and cash flow analysis for such financial year, together
                  with all reports and statements required to be annexed
                  thereto:

            (ii)  at least thirty (30) days prior to the commencement of a
                  financial year, the projections, financial budget and
                  operating plan for the next succeeding three financial years
                  and in respect of the first financial year of such succeeding
                  three years a detailed financial budget and operating plan
                  which shall be prepared on a quarterly basis;

            (iii) within sixty (60) days of the end of each quarter period,
                  financial statements for such quarter showing profits or
                  losses before taxation, taxation on profits, profits or losses
                  attributable to shareholders, the balance at the end of the
                  period of share capital and reserves, and comparative figures
                  for the previous quarter and any other financial information
                  together with a commentary on the business of the Company;

            (iv)  such reports and such additional information prepared in the
                  usual form of the Company concerning any financial data
                  regarding operations, financial condition, business, affairs
                  or prospects of the Company.

                                   ARTICLE 5

                              DEALING WITH SHARES

5.1   RESTRICTIONS ON TRANSFER OF SHARES

      a)    Except as expressly provided in this Agreement, or as may otherwise
            be unanimously agreed, the SP shall not, for a period of 3 (three)
            years from Closing, directly or indirectly, sell, transfer, assign,
            pledge, charge, mortgage or in any other way dispose of or encumber
            (any such, a "TRANSFER") any Purchase Shares or the legal or
            beneficial ownership of Purchase Shares or any of its rights or
            obligations under this Agreement, to any Person without first
            complying with all of the provisions of this Agreement.

                                    Page 13
<PAGE>

      (b)   Subject to Clause 5.3(a), the SP may pledge, charge or mortgage any
            Purchase Shares provided it gives a written notice to the
            Government, at least 15 (fifteen)days prior to the creation of any
            such pledge, charge or mortgage, specifying the identity of the
            Person in whose favour the SP proposes to pledge, charge or mortgage
            any Purchase Shares and the material terms and conditions concerning
            pledge, charge or mortgage. Similarly, the Government may pledge,
            charge or mortgage any equity shares of the Company held by it
            provided it gives a written notice to the SP, at least 15 (fifteen)
            days prior to the creation of any such pledge, charge or mortgage,
            specifying the identity of the Person in whose favour the Government
            proposes to pledge, charge or mortgage any equity shares of the
            Company held by it and the material terms and conditions concerning
            the creation of such pledge, charge or mortgage.

      (c)   The Parties agree that in the event that any share transfer
            committee is constituted pursuant to Clause 4.1(e), no Transfer of
            any Shares held by any Shareholder shall be approved by such share
            transfer committee without an affirmative vote of the nominees of
            both the SP and the Government on the share transfer committee.
            Provided however, that the SP and the Government nominee on the
            share transfer committee shall not withhold their approval to any
            transfer of Share if such transfer is in accordance with the terms
            of the Agreement.

5.2   NOTICE OF RESTRICTIONS

      a)    For a period of 3 (three) years from the Closing Date, the SP hereby
            pledges the Purchase Shares and undertakes that it shall pledge any
            additional Shares that it may acquire pursuant to this Agreement
            prior to the expiry of 3 (years) (collectively referred to as the
            "PLEDGED SHARES"), to the benefit of the Government as a continuing
            security to secure its performance and adherence to the prohibition
            on transfer of the Pledged Shares for 3 (three) years as provided in
            sub-clause 5.1(a).

      b)    The Government hereby agrees that upon the expiry of 3 years from
            the Closing Date, the Government shall issue a pledge closure
            confirmation form in respect of all the Pledged Shares to the
            Depository Participant of the Government.

      c)    Notwithstanding anything to the contrary in this Clause 5.2, the SP
            shall be entitled to exercise any and all voting and other
            consequential rights pertaining to the Pledged Shares in a manner
            that is consistent with the terms of this Agreement.

                                    Page 14
<PAGE>

      d)    Notwithstanding what is provided hereinabove in sub-clause 5.2(a),
            the SP may with the prior written approval of the Government, pledge
            the Shares held by it to a financial institution, a scheduled bank
            or a recognized lender as security for any loan or advances made by
            such financial institution, scheduled bank or recognized lender,
            provided however that the identity of the proposed pledgee is
            disclosed to the Government and such pledge confirms that the pledge
            shall be bound by the restrictions on transfer of Shares and the
            contractual obligations and covenants as provided in this Agreement.
            The Government agrees that it shall not unreasonably withhold its
            consent to a proposal by the SP to pledge the Shares held by the SP
            in accordance with this sub-clause.

      e)    For a period of 3 (three) years from Closing, all share certificates
            with respect to the Shares held by the Government and in the event
            that at any time prior to the expiry of 3 (three) years from
            Closing, the SP holds any of its Shares in the form of physical
            share certificates, then the share certificates for such of the SP's
            Shares shall bear the following legend either as an endorsement or
            on the face of such share certificate:

            "THIS CERTIFICATE AND THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
            SUBJECT IN ALL RESPECTS TO THE PROVISIONS OF THE SHAREHOLDERS
            AGREEMENT AND THE SHARE PURCHASE AGREEMENT BOTH OF WHICH ARE DATED
            MARCH 2, 2001, BY AND AMONG THE PRESIDENT OF INDIA, STERLITE
            INDUSTRIES (INDIA) LTD AND BHARAT ALUMINIUM COMPANY LIMITED, COPIES
            OF WHICH ARE ON FILE AT THE CORPORATE OFFICE OF THE COMPANY. SUCH
            SHAREHOLDERS AGREEMENT, AMONG OTHER THINGS, IMPOSES VARIOUS
            RESTRICTIONS ON THE TRANSFER, SALE, ASSIGNMENT, PLEDGE,
            HYPOTHECATION, GIFT, PLACEMENT IN TRUST (VOTING OR OTHERWISE), OR
            OTHER ENCUMBRANCE OR DISPOSAL OF AN INTEREST IN, DIRECTLY OR
            INDIRECTLY AND WHETHER OR NOT VOLUNTARILY, BY OPERATION OF LAW OR
            OTHERWISE, THE COMPANY'S EQUITY SHARES, PAR VALUE Rs. 10 PER SHARE
            (THE "EQUITY SHARES"), AND GRANTS TO CERTAIN SHAREHOLDERS OF THE
            COMPANY CERTAIN OPTIONS TO PURCHASE AND SELL THE EQUITY SHARES." THE
            ABOVE LEGEND SHALL BE VALID FOR A PERIOD COMMENCING FROM MARCH 2,
            2001 TILL MARCH 1, 2004 AND SHALL BE DEEMED TO HAVE AUTOMATICALLY
            LAPSED UPON THE EXPIRY OF THREE YEARS FROM THE DATE OF THE
            ENDORSEMENT OR THE EXPIRY OF THE SHAREHOLDERS AGREEMENT, WHICHEVER
            IS EARLIER.

                                    Page 15
<PAGE>

      f)    Upon the expiry of three (3) years from Closing, both the SP and the
            Government shall have the right to submit the share certificates
            bearing the legend to the Company and seek the substitution by a new
            share certificate without the legend.

5.3   RIGHT OF FIRST REFUSAL

      (a)   Subject to Clause 5.1(a), if the Government desires to sell all or
            any of the voting equity shares of the Company held by it, or if the
            SP desires to sell all or any of the Purchase Shares, or any other
            voting equity shares of the Company acquired pursuant to this
            Agreement, the Government or the SP, as the case may be, (the
            "OFFEROR") shall first offer (the "OFFER") to sell such voting
            equity shares of the Company to the other Shareholder (the "OTHER
            SHAREHOLDER"). The Offeror shall send a notice of the offer (the
            "SALE NOTICE") to the Other Shareholder irrevocably offering to sell
            the Offeror Shares, for cash, to the Other Shareholder.

      (b)   The Sale Notice shall clearly stipulate among other things, the
            number of such voting equity shares of the Company that the Offeror
            desires to sell (the "OFFER SHARES"), the price at which it wishes
            to sell the Offer Shares (the "OFFER PRICE"), and details of any
            willing third party buyer, if any.

      (c)   Upon the Sale Notice being given, the Other Shareholder shall have
            the right, exercisable at its sole discretion, to purchase all, but
            not less than all, of the Offer Shares.

      (d)   Within 30 Business Days of the Sale Notice (the "OFFER PERIOD"), the
            Other Shareholder may give to the Offeror a notice in writing (an
            "ACCEPTANCE NOTICE") accepting the offer contained in the Sale
            Notice. If the Acceptance Notice is given by the Other Shareholder,
            the transaction of purchase and sale shall be completed within 60
            Business Days of the expiry of the Offer Period.

      (e)   If the Other Shareholder does not give Acceptance Notice in
            accordance with the provisions of Clause 5.3(d), the rights of the
            Other Shareholder, subject to the terms provided in this Clause 5.3,
            to purchase the Offer Shares shall cease and the Offeror may sell
            the Offer Shares to any Person or Persons within 60 Business Days
            after the expiry of the Offer Period, for a price and on terms no
            more favourable to such Persons than those set out in the Sale
            Notice. If the Offer Shares are not sold within such 60 Business Day
            period on such terms, the rights of the Other Shareholder pursuant
            to this Clause 5.3 shall again take effect with respect to any sale
            of voting equity shares of the Company held by the Offeror, and so
            on from time to time. For the avoidance of doubt, if the Offeror
            proposes to sell the Offer Shares at a price lower than the Offer
            Price stipulated in the Sale Notice, the Offeror shall be bound to
            offer the Offer Shares at such lower price to the Other

                                    Page 16
<PAGE>

            Shareholder in accordance with Clause 5.3(a) and such lower price
            shall then be deemed to be the 'Offer Price' for the purposes of
            this Clause 5.3.

      (f)   In the event that the Offeror is the Government and the Other
            Shareholder, being the SP, does not give the Acceptance Notice in
            accordance with the provisions of Clause 5.3(d), the Government may
            decide, in exercise of rights of an Offeror provided in Clause
            5.3(e), to offer the Offer Shares to the public and the Government
            shall promptly inform the SP of such decision to offer the Offer
            Shares to the public.

      (g)   Within 15 (fifteen) days of the Government informing the SP as
            provided under sub-clause 5.3(f), the SP shall have the option to
            issue a notice (the "PUBLIC OFFER CALL NOTICE") to the Government
            requiring the Government to sell such part of the Offer Shares to
            the SP that would make the entire SP's shareholding in the Company
            equal to the number of shares as are equal to one share more than
            75% of the then entire issued and paid up equity share capital of
            the Company ("RE-OFFERED SHARES").

      (h)   The Government shall be under an obligation to sell and the SP shall
            be under an obligation to purchase the Re-offered Shares within 15
            (fifteen) days of the date of Public Offer Call Notice at the Offer
            Price.

      (i)   Upon the completion of the sale and purchase of the Re-offered
            Shares or if the SP does not give the Public Offer Call Notice
            within the period specified in sub-clause 5.3(g), the Government
            shall be entitled to sell the Offer Shares or such part of the Offer
            Shares as are remaining after the exercise of the Public Offer Call
            Notice by the SP at a price not lower than the Offer Price.

      (j)   The SP and the Government shall cause such resolutions to be passed
            at the shareholders meeting and Board meeting as may be required for
            the listing of the Company's Shares at the stock exchange(s), under
            applicable Law, including without limitation, Securities Exchange
            Board of India guidelines and listing conditions. Further, the SP
            and the Government shall cause the Company to comply with all
            Securities Exchange Board of India guidelines, issue norms and
            listing guidelines and all other conditions for listing under
            applicable Law.

      (k)   Notwithstanding the provisions of Clause 5.3(e), the Other
            Shareholder shall be entitled to require proof that the purchase and
            sale of the Offer Shares was completed at a price and on terms no
            more favourable than those that would have been applicable had the
            Other Shareholder agreed to purchase the Offer Shares.

                                    Page 17
<PAGE>

      (l)   All Sale Notices, Acceptance Notices or any other notices given
            under this Clause shall be given concurrently to the Company.

      (m)   Notwithstanding anything to the contrary in this Article 5, the
            Government, shall at its sole discretion, have the option of selling
            from its shares representing not more than 5% (five percent) of the
            equity share capital existing as of date of this Agreement, to the
            employees of the Company. In the event that the Government exercises
            its option to sell part of its shares to the employees, the
            employees shall be issued fresh share certificates for the shares
            transferred to the employees, without the endorsement of the legend
            provided in Clause 5.2(e). The Parties agree that, upon the
            completion of transfer, the shares transferred to the employees
            pursuant to this sub-clause (m) shall not be subject to any
            restrictions in this Agreement, whether by way of a voting
            arrangement or a right of first refusal.

5.4   TAG ALONG RIGHT

      a)    Notwithstanding anything to the contrary in Clause 5.3, but subject
            to the restrictions in Clauses 5.1 and 5.3, in the event that the
            Other Shareholder (as defined in Clause 5.3(a)) decides not to
            exercise its right of first refusal pursuant to a Sale Notice (as
            defined in Clause 5.3(a)), the Other Shareholder at any time before
            the expiry of the Offer Period (as defined in Clause 5.3(d)), may
            instead of exercising its right to purchase the Offer Shares (as
            defined in Clause 5.3(b)), send a tag along notice (the "TAG ALONG
            NOTICE") to the Offeror (as defined in Clause 5.3(a))requiring the
            Offeror to ensure that the proposed third party purchaser of the
            Offer Shares also purchases all or some of the Other Shareholders
            equity shares in the Company at the same price and on the same terms
            as the Offer Shares, Provided that if the Offeror is the Government
            and the Government proposes to offer the Offer Shares to the public
            in accordance with sub-clauses 5.3(f)-(h), the SP shall not have the
            right to issue the Tag Along Notice and the provisions of this
            Clause 5.4 shall not apply.

      b)    In the event that the Other Shareholder delivers a Tag Along Notice
            to the Offeror, the Offeror shall ensure that along with the Offer
            Shares, the proposed third party purchaser also acquires the shares
            specified in the Tag Along Notice for the same consideration and
            upon the same terms and conditions as applicable to the Offer
            Shares.

      c)    In the event that the proposed third party purchaser is unwilling or
            unable to acquire all of the Offer Shares and the Other
            Shareholder's equity shares mentioned in the Tag Along Notice, upon
            such terms then the Offeror may elect either to cancel such proposed
            transfer or to allocate the maximum number of equity shares of the
            Company which the proposed third party purchaser is

                                    Page 18
<PAGE>

            willing to purchase among the Sale Shares and the shares mentioned
            in the Tag Along Notice pro-rata in the ratio of equity shareholding
            in the Company at such time of the Offeror and the Other Shareholder
            and to complete such transfer on such terms.

      d)    Notwithstanding anything to the contrary in this Agreement, the
            Offeror shall not be entitled to sell or transfer any of the Offer
            Shares to any proposed purchaser / transferee unless the proposed
            purchaser / transferee simultaneously purchases and pays for the
            required number of equity shares mentioned in the Tag Along Notice
            in accordance with the provisions of this Clause 5.4.

5.5   INSOLVENCY OF A SHAREHOLDER

      (a)   If an Event of Bankruptcy occurs in relation to the SP, the SP shall
            give notice of such Event of Bankruptcy ("INSOLVENCY OFFER NOTICE")
            to the Government within 15 Business Days of such Event of
            Bankruptcy, offering to sell all, but not less than all, of the
            voting equity shares of the Company beneficially then owned by the
            SP (the "SP's SHARES") to the Government or its nominee at a price
            determined pursuant to Clause 6.1.

      (b)   Within 60 Business Days of the purchase price being determined in
            accordance with Clause 6.1 (for the purposes of this Clause the
            "OFFER PERIOD") the Government may give to the SP, with a copy to
            the Company, a notice in writing exercising its right to purchase
            the SP's Shares under this Clause 5.5 (an "INSOLVENCY ACCEPTANCE
            NOTICE"). If the Insolvency Acceptance Notice is given by the
            Government, the transaction of purchase and sale shall be completed
            within 60 Business Days of the expiry of the Offer Period.

      (c)   Upon the completion of the purchase of the SP shares by the
            Government pursuant to this Clause 5.5, the Government shall be
            constituted as successors in interest of the SP to the extent of the
            equity shares of the Company held by the SP and the Government shall
            be entitled to succeed to, and be transmitted as the successor
            Shareholders on the register of members of the Company.

5.6   PERMITTED TRANSFERS

      (a)   Any Securities held by the SP may be Transferred to a Person who is
            an Affiliate of the SP provided that, in connection with any such
            Transfer (i) the transferee shall, in writing, assume all rights and
            obligations of the transferor under this Agreement, and (ii)
            effective provision is made whereby the transferee and the
            transferor are bound, prior to the transferee ceasing to be an
            Affiliate of SP to effect the Transfer back to the SP, of all (but
            not less than all) such Securities held by the transferee.

                                    Page 19
<PAGE>

      (b)   Notwithstanding the completion of any Transfer of Securities by the
            SP to an Affiliate pursuant to this Clause 5.6, the SP shall
            continue to be bound by all the obligations under this Agreement as
            the principal obligator.

5.7   CONSEQUENCES OF BREACH BY A SHAREHOLDER

      (a)   If either of the SP or the Government commits any breach or default
            of the terms of this Agreement (the "DEFAULTING PARTY") which, if
            capable of being remedied, is not remedied within 30 days of receipt
            of notice of such breach, the other Party (the "NON-DEFAULTING
            PARTY") shall have the right, exercisable at its sole discretion, at
            any time within 90 days of the day it became aware of such breach or
            default, to give notice (such notice being referred to in this
            Clause 5.7 as the "NOTICE") to the Defaulting Party containing an
            offer by the Non-Defaulting Party, at the option of the
            Non-Defaulting Party to either:

            (i)   sell all or any of the voting equity shares of the Company
                  held by the Non- Defaulting Party to the Defaulting Party
                  (such offer being referred to in this Clause 5.7 as, an "Offer
                  to Sell") at a price that is equivalent to 125% of the price
                  of such equity shares determined in accordance with Clause
                  6.1, Provided however, that in the event that the Defaulting
                  Party is the SP and the event of breach committed by the SP is
                  under the terms of sub-clauses 7.2(e) and (f), Clause 4.5 read
                  with item 20 of Schedule 4.5 or this Article 5, the price at
                  which the Government (the Non-Defaulting Party) may make the
                  Offer to Sell shall be 150% of the price of such equity shares
                  determined in accordance with Clause 6.1; or

            (ii)  purchase, directly or indirectly, through a designated
                  nominee, all or any of the voting equity shares of the Company
                  held by the Defaulting Party (such offer being referred to in
                  this Clause 5.7 as, an "Offer to Purchase") at a price that is
                  equivalent to 75% of the price of such equity shares
                  determined in accordance with Clause 6.1, Provided however,
                  that in the event that the Defaulting Party is the SP and the
                  event of breach committed by the SP is under the terms of
                  sub-clauses 7.2(e) and (f), Clause 4.5 read with item 20 of
                  Schedule 4.5 or this Article 5, the price at which the
                  Government (the Non-Defaulting Party) may make the Offer to
                  Purchase shall be 50% of the price of such equity shares
                  determined in accordance with Clause 6.1.

      (b)   Within 30 Business Days of the Notice being given containing the
            Offer to Sell or the Offer to Purchase, as the case may be, the
            Defaulting Party shall complete the transaction of the purchase and
            sale.

                                    Page 20
<PAGE>

      (c)   The Defaulting Party shall be liable for all costs and expenses
            (including reasonable legal fees) including, but not limited to,
            those that the Non-Defaulting Party or its nominee may incur to
            complete the transaction of sale and purchase pursuant to this
            Clause 5.7 and comply with the applicable rules and regulations of
            the Securities and Exchange Board of India, if applicable.

5.8   CALL OPTION

      a)    The Parties hereby agree that upon the expiry of the third
            anniversary of the Closing Date, and at any time thereafter, the SP
            shall have the option to issue a notice ("CALL NOTICE") to the
            Government, thereby requiring the Government to sell to the SP
            within a period of 60 (sixty) days from the date of receipt of the
            Call Notice (the "CALL PERIOD"), all but not less than all the
            voting equity shares in the Company then held by the Government,
            (the "CALLED SHARES") and the Government in that event shall be
            under mandatory obligation to sell the Called Shares as aforesaid.
            The price for the sale and purchase of the Called Shares pursuant to
            this Clause shall be the higher of:

            i)    Fair Value of the Called Shares; or

            ii)   The unit sale price (as provided in Clause 2.1 of the Share
                  Purchase Agreement at which the SP has purchased the Purchase
                  Shares pursuant to the Share Purchase Agreement) together with
                  interest at the rate of 14% per annum compounded with half
                  yearly rests and calculated from the Closing Date after giving
                  credit for the dividend received by the Government as a
                  Shareholder of the Company during the period from the Closing
                  till the date of the completion of the sale and purchase of
                  the Called Shares.

      b)    The Parties shall cause the Fair Value of the Called Shares to be
            determined within 30 days of the date of receipt of the Call Notice.

      c)    Upon receiving a Call Notice from the SP, the Government shall not
            be entitled to sell, transfer, assign, pledge, charge, mortgage or
            in any other way dispose of or encumber its Shares during the Call
            Period. If the purchase, pursuant to the Call Notice is not
            completed by the SP, the Government shall be relieved of its
            obligations to sell the Called Shares specified in Clause 5.8
            herein. For the avoidance of doubt, other than the right of first
            refusal provided in Clause 5.3 and the tag along rights provided in
            Clause 5.4, there shall be no restriction on the right of the
            Government to Transfer any or all of its Shares till such time that
            the Call Notice is received by the Government.

                                    Page 21
<PAGE>

      d)    Upon the issuance of the Call Notice by the SP, the SP shall be
            under an obligation to complete the purchase of the Called Shares
            within the Call Period.

      e)    The sale and purchase of the Called Shares pursuant to this Clause
            5.8 shall be subject to the procurement of all Approvals.

                                   ARTICLE 6

                        ARRANGEMENTS REGARDING TRANSFER

6.1   VALUATION

      The purchase price payable for any voting equity shares of the Company to
      be transferred hereunder at a price determined pursuant to this Clause 6.1
      shall be equal to the Fair Value determined, as at the date of the event
      which gives the right of purchase or sale (the "VALUATION DATE"), in
      accordance with the principles of valuation set forth in Schedule 6.1.

6.2   CLOSING

      a)    Save and except the transfer of the Purchase Shares by the
            Government to the SP pursuant to the Share Purchase Agreement, any
            transaction relating to the sale and purchase of the equity shares
            of the Company between the Parties shall take into consideration the
            matters specified in Schedule 6.2.

      (b)   In the event of any transfer of any loan made by a Shareholder to
            the Company in accordance with the terms of this Agreement, the
            Company shall, upon the notes, debentures or other evidence of
            indebtedness held by the transferor being delivered to the Company
            for cancellation, issue to the transferee replacement notes,
            debentures or other evidence of indebtedness, on the same terms and
            in the same form as held by the transferor, in the principal amount
            of such shareholder loans transferred and assigned to the
            transferee.

                                    Page 22
<PAGE>

                                   ARTICLE 7

                         REPRESENTATIONS AND WARRANTIES

7.1   COMPANY'S REPRESENTATIONS AND WARRANTIES

      The Company represents and warrants to each of the Shareholders that:

      (a)   The authorized capital of the Company consists of 50,00,00,000/-
            voting equity shares of Rs. 10 each and the total paid-up share
            capital of the Company consists of 22,06,24,500 voting equity shares
            of Rs. 10 each.

      (b)   No Person has any agreement or option or right capable of becoming
            an agreement for the purchase, subscription or issue of any shares
            of the Company, save and except as provided for in this Agreement
            and the Share Purchase Agreement.

7.2   SP'S REPRESENTATIONS, WARRANTIES AND COVENANTS

      The SP represents and warrants to and covenants with each of the
      Government and the Company that:

      (a)   it has been duly incorporated or created and is validly subsisting
            and in good standing under the laws of the jurisdiction indicated in
            the preamble to this Agreement;

      (b)   it has the corporate power and authority to enter into and perform
            its obligations under this Agreement;

      (c)   this Agreement has been duly authorised, executed and delivered by
            it and constitutes a valid and binding obligation enforceable
            against it in accordance with its terms;

      (d)   it is not a party to, bound or affected by or subject to any
            indenture, mortgage, lease, agreement, instrument, charter or by-law
            provision, statute, regulation, judgment, decree or law which would
            be violated, contravened, breached by or under which default would
            occur or under which any payment or repayment would be accelerated
            as a result of the execution and delivery of this Agreement or the
            consummation of any of the transactions provided for in this
            Agreement.

      (e)   Notwithstanding anything to the contrary in this Agreement, it shall
            not retrench any part of the labour force of the Company for a
            period of one (1) year from the Closing Date other than any
            dismissal or termination of employees of the Company from their
            employment in accordance with

                                    Page 23
<PAGE>

            the applicable staff regulations and standing orders of the Company
            or applicable Law; and

      (f)   Notwithstanding anything to the contrary in this Agreement, but
            subject to sub-clause (e) above, any restructuring of the labour
            force of the Company shall be implemented in the manner recommended
            by the Board and in accordance with all applicable laws.

      (g)   Notwithstanding anything to the contrary in this Agreement, but
            subject to sub-clause (e) above, in the event of any reduction of
            the strength of the Company's employees the SP shall ensure that the
            Company offers its employees, an option to voluntarily retire on
            terms that are not, in any manner, less favourable than the
            voluntary retirement scheme offered by the Company which is referred
            to in Schedule 7.4 of the Share Purchase Agreement: and

      (h)   It shall vote all the voting equity shares of the Company, directly
            or indirectly, held by it to ensure that all provisions of this
            Agreement, to the extent required, are incorporated in the Company's
            articles of association.

7.3   GOVERNMENT'S REPRESENTATIONS AND WARRANTIES

      The Government represents and warrants to each of the Company and the SP
      that:

      (a)   it has the power and authority to enter into and perform its
            obligations under this Agreement;

      (b)   this Agreement has been duly authorised, executed and delivered by
            it and constitutes a valid and binding obligation enforceable
            against it in accordance with its terms;

      (c)   except as disclosed in the Disclosed Information or the Share
            Purchase Agreement, to the Knowledge of the Government, the
            Government is not a party to, bound or affected by or subject to any
            indenture, mortgage, lease, agreement, instrument, charter or by-law
            provision, statute, regulation , judgment, decree or law which would
            be violated, contravened, breached by or under which default would
            occur or under which any payment or repayment would be accelerated
            as a result of the execution and delivery of this Agreement or the
            consummation or any of the transactions provided for in this
            Agreement; and

      (d)   it shall vote all the voting equity shares of the Company held by it
            to ensure that all provisions of this Agreement, to the extent
            required, are incorporated in the Company's articles of association.

                                    Page 24
<PAGE>

7.4   SURVIVAL OF REPRESENTATIONS

      All of the representations and warranties made in this Agreement shall
      survive and continue to be in effect for a period of 3 (three) years from
      the date of this Agreement and shall be deemed to be continuing in full
      force and effect.

                                   ARTICLE 8

                      INDEMNIFICATION AND CONFIDENTIALITY

8.1   INDEMNIFICATION

      Each Shareholder agrees to indemnify, defend and hold harmless each of the
      Company, the other Shareholder, and their respective lawful successors and
      assigns from and against any and all losses, liabilities, claims, damages,
      costs and expenses including reasonable legal fees and disbursements in
      connection therewith and interest chargeable thereon (collectively,
      "CLAIMS") asserted against or incurred by the Company or such other
      Shareholder which arise out of; results from, or may be payable by virtue
      of any breach of any representation, warranty, covenant or agreement made
      or obligation required to be performed by the indemnifying Shareholder
      pursuant to this Agreement; provided, however, that in no event shall the
      indemnifying Shareholder be liable, wherein in contract, tort,
      misrepresentation, warranty, negligence, strict liability or otherwise,
      for any special, indirect, incidental or consequential damages arising out
      of or in connection with this Agreement, or any performance,
      non-performance or breach of any provision hereof.

8.2   CONFIDENTIALITY

      The SP agrees that it shall not, at any time or under any circumstances,
      without the prior written consent of the Company and the Government,
      directly or indirectly communicate or disclose to any Person (other than
      an Affiliate of SP) any knowledge or information howsoever acquired by
      them relating to the customers, products, technology, trade secrets,
      systems, operations or other confidential information regarding the
      property, business and affairs of the Company or any of its subsidiaries
      including, but not limited to, any foreign collaboration agreements and
      technical collaboration agreements entered into by the Company or any of
      its subsidiaries. The SP further agrees that it shall not utilise, or make
      available to any Person any such knowledge or information, in connection
      with the transfer or proposed transfer of any of the Securities, Provided
      however that the confidentiality obligation under this Clause 8.2 shall be
      subject to the following exceptions:

                                    Page 25
<PAGE>

a)    disclosure to the employees and auditors requiring the information for the
      purposes of this Agreement subject to the execution of a confidentiality
      agreement by them; or

b)    legal advisors and professional consultants subject to the execution of a
      confidentiality agreement by them; or

c)    if the information is, prior to the execution of this Agreement, lawfully
      in the possession of the SP through sources other than the party who
      supplied the information: or

d)    if required by Law; or

e)    if the information is or becomes generally and publicly available, other
      than due to reason of breach of this Agreement.

                                    ARTICLE 9

                                   GOOD FAITH

9.1   The SP confirms that it has, prior to the Closing, disclosed particulars
      to the Government of any activities or business that it is engaged in that
      are in competition with the business of the Company.

9.2   In the event that the SP, its Affiliates or its nominees at any time after
      Closing, decides to undertake any activities or businesses that may be in
      competition with the then existing business of the Company, the SP shall
      be under an obligation to disclose such activity or business to the
      Government.

9.3   The SP agrees that, in the event that, at any time, the SP, its Affiliates
      or its nominees is engaged in any activities or businesses that may be or
      is in competition with the Company's business, both existing or future,
      then the SP its Affiliates or its nominees shall always act in good faith
      and in the interests of the Company.

                                   ARTICLE 10

                               MANAGEMENT DEADLOCK

10.1  In the event that the Government withholds its consent for a matter
      specified in Schedule 4.5 in a Board Meeting and the same matter is placed
      before the Board in the next Board Meeting or a Board Meeting held within
      three (3) months of the first Board Meeting at which the consent was
      withheld by the Government,

                                       Page 26

<PAGE>

      the Government may at is discretion, either:

      a)    give its consent to such matter at such succeeding Board Meeting:

      b)    determine that a deadlock ("DEADLOCK") has arisen and issue a
            written deadlock notice (the "DEADLOCK NOTICE") to the SP.

10.2  Within fourteen (14) days after receipt of a Deadlock Notice by the SP,
      the Parties shall refer the Deadlock Notice to the senior representatives
      of the SP and the Government for resolution of the Deadlock.

10.3  If the senior representatives of the Parties fail to resolve the Deadlock
      within sixty (60) days of the reference of the Deadlock Notice, or such
      extended period as may be agreed in writing between the Parties, the
      Parties shall proceed in accordance with Article 10.4.

10.4  In the event that the matter of Deadlock, is not resolved in terms of
      Article 10.3, the Government may serve notice on the SP requiring the SP
      to buy all the Shares held by the Government at the higher of their Fair
      Value or the unit sale price (as provided in Clause 2.1 of the Share
      Purchase Agreement at which the SP has purchased the Purchase Shares
      pursuant to the Share Purchase Agreement) together with interest at the
      rate of 14% per annum compounded with half yearly rests and calculated
      from the Closing Date after giving credit for the dividend received by the
      Government as a Shareholder of the Company during the period from the
      Closing till the date of the completion of the sale and purchase of the
      said shares.

10.5  In the event that the Government serves a notice on the SP pursuant to
      Clause 10.4, the SP shall complete the purchase of the Shares held by the
      Government within sixty (60) days of receipt of such notice.

                                   ARTICLE 11

                                 MISCELLANEOUS

11.1  ARBITRATION

      a)    Any controversy or dispute which arises between the Parties to this
            Agreement concerning its construction or application, or the rights,
            duties or obligations of any Party hereunder, shall be referred to
            arbitration subject to the procedures set out in Schedule 11.1 to
            this Agreement.

      b)    Notwithstanding anything to the contrary in sub-clause hereinabove,
            the Parties agree that any valuation pursuant to Clause 6.1 is an
            expert opinion and shall be final and binding on the Parties and
            shall not be the subject matter of dispute between the Parties.

                                          Page 27

<PAGE>

11.2  APPLICATION OF THIS AGREEMENT

      The terms of this Agreement shall apply mutatis mutandis to any shares:

      (a)   resulting from any conversion, reclassification, redesignation,
            subdivision or consolidation or other change of the voting equity
            shares of the Company held by the Shareholders; and

      (b)   of the Company or any successor body corporate which maybe received
            by the Shareholders as a result of any merger, amalgamation,
            arrangement or other reorganisation of or including the Company:

      (c)   and prior to any such action being taken the Parties shall give a
            consideration to any changes which may be required to this Agreement
            in order to give effect to the intent of this Clause.

11.3  FURTHER ASSURANCES

      The Parties shall, with reasonable diligence, do all such things and
      provide all such reasonable assurances as may be required to consummate
      the transactions contemplated by this Agreement, and each Party shall
      provide such further documents or instruments required by any other Party
      as may be reasonably necessary or desirable to effect the purpose of this
      Agreement and carry out its provisions.

11.4  BENEFIT OF THE AGREEMENT

      This Agreement shall ensure to the benefit of and be binding upon the
      respective heirs, executors, administrators, successors and permitted
      assigns of the Parties hereto. Irrespective of whether or not the
      memorandum and/or articles of association of the Company fully
      incorporate the provisions hereof or any of them, the Government and the
      SP's rights and obligations shall be governed by this Agreement which
      shall prevail in the event of any ambiguity or inconsistency between the
      articles of association of the Company and the provisions of this
      Agreement.

11.5  ENTIRE AGREEMENT

      This Agreement constitutes the entire agreement between the Parties to
      this Agreement with respect to the subject matter of this Agreement and
      cancels and supersedes any prior understandings and agreements between the
      Parties with respect to such subject matter. There are no representations,
      warranties, terms, conditions, undertakings or collateral agreements,
      express, implied or statutory between the Parties other

                                          Page 28

<PAGE>

      than those expressly set forth in this Agreement.

11.6  AMENDMENTS AND WAIVERS

      No amendment to this Agreement shall be valid or binding unless set forth
      in writing and duly executed by all of the Parties to this Agreement. To
      the extent any such modification or amendment requires a corresponding
      modification or amendment to the memorandum and/or the articles of
      association, the Parties shall use their best efforts in good faith to
      cause all such modifications or amendments to the memorandum and/or the
      articles of association of the Company. No waiver of any breach of any
      provision of this Agreement shall be effective or binding unless made in
      writing and signed by the Party purporting to give the same and, unless
      otherwise provided in the written waiver, shall be limited to the specific
      breach waived.

11.7  ASSIGNMENT

      Except as may be expressly provided in this Agreement, none of the Parties
      to this Agreement may assign its rights or obligations under this
      Agreement without the prior written consent of all of the other Parties.

11.8  TERMINATION

      This Agreement shall terminate upon:

      (a)   the written agreement of all of the Company, SP and the Government;
            or

      (b)   the dissolution or bankruptcy of the Company; or

      (c)   either Party becoming the beneficial owner of more than 75% of the
            voting shares of the Company; or

      (d)   either of the Parties directly or indirectly ceasing to hold the
            legal and beneficial ownership of at least 25.01% of the outstanding
            and issued voting equity share capital of the Company,

11.9  SURVIVAL

      a)    Notwithstanding anything to the contrary in this Agreement, any
            termination pursuant to Clause 11.8 will not affect the
            effectiveness of Articles 1, 6, 8 and 11 and, to the extent that the
            termination is caused pursuant to Clause 11.8 (c) & (d), the
            effectiveness of Clause 3.3, 5.3, 5.4, 5.5, 5.6 and 5.7, of this
            Agreement and the Parties, obligations stated therein.

                                         Page 29

<PAGE>

      b)    No termination of this Agreement or any agreement related hereto
            shall release any Party from any liability to any other Party which
            at the time of such termination has already accrued, nor affect in
            any way the survival of any right of obligation of any Party which
            is expressly stated elsewhere in this Agreement or in any agreement
            related hereto to survive the expiration or termination hereof.

11.10 SEVERABILITY

      If any provision of this Agreement is determined to be invalid or
      unenforceable in whole or in part, such invalidity or unenforceability
      shall attach only to such provision or part of such provision and the
      remaining part of such provision and all other provisions of this
      Agreement shall continue to be in full force and effect.

11.11 NOTICES

      Any notice or other writing required or permitted to be given under this
      Agreement or for the purposes of this Agreement (referred to in this
      Clause as a "NOTICE") to any Party shall be sufficiently given if
      delivered personally, or if sent by prepaid registered mail or if
      transmitted by fax or other form of recorded communication tested prior to
      transmission to such Party:

      (a)   in the case of a notice to the Government, at:
            Ministry of Mines and Minerals
            Department of Mines
            Shastri Bhawan
            New Delhi 110 001, India

            Attention: Joint Secretary
            Fax: 011 338 7937

      (b)   in the case of a notice to the SP, at:
            Sterlite Industries (India) Ltd
            5th   Floor, Dhanraj Mahal
            Chatrapati Shivaji Marg, Apollo Bunder
            Mumbai, India

            Attention: Company Secretary
            Fax:  022 204 8688

                                     Page 30
<PAGE>

     (c)  in case of a notice to the Company, at:
          Bharat Aluminium Company Limited
          Aluminium Sadan, Scope Complex
          Lodi Road, New Delhi, India

          Attention: Chairman/ Company Secretary
          Fax: 011 436 4193

      Or at such other address as the Party to whom such writing is to be given
      shall have last notified to the Party giving the same in the manner
      provided in this Clause. Any notice personally delivered to the party to
      whom it is addressed as provided in this Clause shall be deemed to have
      been given and received on the day it is so delivered at such address,
      provided that if such day is not a Business Day then the notice shall be
      deemed to have been given and received on the manner provided for in
      Clause 1.2 (d). Any notice sent by prepaid registered mail shall be deemed
      to have been given and received on the fifth Business Day next following
      the date of its mailing. Any notice transmitted by fax or other form of
      recorded communication shall be deemed given and received on the first
      Business Day after its transmission.

11.12 NON-SOVEREIGN ACT

      The execution, delivery and performance by the Government of this
      Agreement and any other related agreements to which it is a party
      constitutes commercial acts done and performed for commercial purposes and
      do not constitute sovereign acts and the Government, saving and excepting
      the assets and properties concerning the military of the Government or any
      diplomatic consular office, waives any and all rights of immunity that it
      or any of its assets may have or may acquire in future against the
      institution of any legal or arbitral proceedings and the enforcement of
      any judgment, settlement or arbitral award.

11.13 GOVERNING LAW

      This Agreement shall be governed and interpreted by and construed in
      accordance with the laws of India, without giving effect to the principles
      of conflict of laws thereunder.

11.14 COUNTERPARTS

      This Agreement may be executed by the Parties in separate counterparts
      each of which when so executed and delivered shall be an original, but all
      such counterparts shall together constitute one and the same instrument.

                                    Page 31
<PAGE>

IN WITNESS WHEREOF, EACH OF THE PARTIES have caused this Agreement to be duly
executed by their duly authorised representatives on the date and year first
hereinabove written.

Witnessed by: /s/ R. Srinivaan          For and on behalf of
              -----------------------   GOVERNMENT OF INDIA
                                        Signed By: /s/ A. Bagchee
Name: R. SRINIVAAN                                -----------------------------
Address: 21A, JANPATH,                  Title:    J.S., Ministry of Mines
         N. DELHI-110001

Witnessed by: /s/ Shardul S. Shroff     For and on behalf of Bharat
              -----------------------   Aluminium Company Limited
                                        Signed By: /s/ S. C. Tripathi
Name: MR. SHARDUL S. SHROFF                       -----------------------------
Address:  3, LSC, Pamposh Enclave,      Title:    CMD, BALCO
          N. DELHI-110048

Witnessed by: /s/ O. P. Khaitan         For and on behalf of
              -----------------------   Sterlite Industries (India) Ltd
                                        Signed By: /s/ Tarun Jain
Name:     O. P. KHAITAN                           -----------------------------
Address:  B-1, DEFENCE COLONY,          Title:    Director (Finance)
          NEW DELHI

                                    Page 32
<PAGE>

                                  SCHEDULE 4.5

                        MATTERS REQUIRING SPECIAL CONSENT

1.   Alter the provisions of the articles of association of the Company.

2.   Change the place of the registered office from one State to another.

3.   Commence any new line of business.

4.   Change the name of the Company.

5.   Issue further Shares without pre-emptive rights to members or convert loans
     or debentures into Shares and the terms and conditions of such issue.

6.   Determine that any portion of the share capital not already called up shall
     not be called up except in the event of, and for the purpose of, winding up
     the Company.

7.   Reduction of the share capital.

8.   Approval of variation of rights of special classes of Shares.

9.   Keep registers and returns at any other place than within city, town or
     village in which the registered office is situated.

10.  Authorise the payment of interest on the paid-up amount of share capital
     raised for the purpose of defraying the expenses of construction of any
     work or building or the provisions of any plant that cannot be made
     profitable for a lengthy period.

11.  Consent to a Director or his relative or partner or firm or private company
     holding an office or place of profit, except that of managing director,
     manager, banker, or trustee for debenture-holders of the Company.

12.  Appoint sole selling or buying or purchasing agent.

13.  Make loans or provide guarantees or security to other companies under the
     same management.

14.  Apply to a Court to wind-up the Company.

                                    Page 33
<PAGE>

15.  Wind-up the Company voluntarily.

16.  Bind the Company by a scheme of arrangement made under Section 517 of the
     Act.

17.  For various other matters pertaining to the winding up of the company under
     Sections 433(a), 494(1)(b), 507.512(l), 546(l)(b), 550(l)(b)of the Act.

18.  Any buy-back by the Company of Shares under the provisions of Section 77A
     of the Act.

19.  The granting of any security or creation of any Liens on the assets of the
     Company or guaranteeing the debts of any Person which in aggregate exceeds
     100% of the free reserves and paid up capital of the Company but excluding
     those necessary to secure operating lines of credit/working capital
     requirements of the Company with institutional investors, multilateral
     agencies, scheduled banks and financial institutions.

20.  Any one or a series of transactions which causes a sale, lease, exchange or
     disposition of property or assets of the Company or its subsidiary having
     an aggregate value exceeding 20% of the total value of the net fixed assets
     of the Company as specified in the Audited Financial Statement.

21.  The making, directly or indirectly, of loans or advances in excess of
     Rs. 20 Crores to any Person except in the ordinary course of business.

22.  Vesting or delegation of such powers to the Managing Director/Chairman cum
     Managing Director or the Chief Executive Officer or officer of equivalent
     position in the Company that are in excess of the powers and authority of
     the Managing Director as specified in Clause 4.7.

23.  Any commitment or agreement to do or delegation of any powers to any person
     to do, any of the foregoing.

                                    Page 34
<PAGE>

                                  SCHEDULE 6.1

                            PRINCIPLES OF VALUATION

(a)  VALUATION PROCEDURE

     Upon the provisions of this Schedule becoming applicable (but subject to
     sub-clause (b)), the non-defaulting party /selling Party (if not a
     Defaulting Party) shall, unless otherwise agreed to between the Parties,
     appoint an independent valuer of international repute from among the
     entities mentioned in sub-Clause (c) of this Schedule to determine the
     Fair Value of the relevant voting equity shares of the Company as at the
     Valuation Date.

     In determining the Fair Value of the relevant voting equity shares of the
     Company, the independent valuer shall take into account various factors,
     including, but not limited to the following:

     i)   Discounted cash flow principles;

     ii)  Commonly used valuation multiples of comparable transactions;

     iii) if the Company is listed, the current price of the voting equity
          shares of the Company as quoted on the stock exchange(s) where they
          are primarily traded;

     iv)  the Securities and Exchange Board of India's guidelines and principles
          of valuation, if applicable;

     v)   whether such voting equity shares of the Company which are subject to
          the transaction of purchase and sale constitute a minority block or a
          majority block of all of the issued and outstanding voting equity
          shares of the Company;

     vi)  whether such equity shares have any contractual rights with respect to
          the Company attached to them and appropriate discount or premium shall
          be applied to its valuation on the basis thereof;

     vii) discounting principles, if the selling party is insolvent, for
          assuming any restriction and obligations attached to the shares.

     The valuation arrived at by the independent valuer is, made as an expert
     and not as an umpire or arbitrator, shall be final and binding on the
     parties and no appeal shall lie from such valuation.

(b)  COSTS OF VALUATION

     All cost and expenses relating to the determination of the Fair Value of
     any voting equity shares of the Company pursuant to this Schedule shall be,
     unless otherwise expressly provided, shared equally among the vendors and
     purchasers in the subject transaction. Provided that if the sale or
     purchase of Shares under this Agreement is pursuant to a breach by either
     Party, then the Defaulting Party shall bear the entire cost and expenses
     relating to the determination of the Fair Value of any voting equity shares
     of the Company

                                    Page 35
<PAGE>

     pursuant to this Schedule.

(c)  Each Party agrees that the following entities and their successor entities
     are acceptable to the Party as the independent valuer to be appointed
     pursuant to sub Clause (a) of this Schedule 6.1.

     1.   ARTHUR ANDERSEN & ASSOCIATES

     2.   KPMG PEAT MARWICK

     3.   ERNST & YOUNG

     4.   PRICE WATERHOUSE COOPERS

     5.   A. F. FERGUSON & CO

d)   The Parties agree that the list of entities in sub-Clause (c) of this
     Schedule 6.1, shall be subject to such additions and modifications as the
     Parties may mutually decide from time to time.

                                    Page 36
<PAGE>

                                  SCHEDULE 6.2

           MECHANISM RELATING TO SALE AND PURCHASE BETWEEN THE PARTIES
                    OF SHARES OF THE COMPANY IN THE FUTURE.

a)   The transfer and assignment Securities proposed to be transferred (the
     "TRANSFER SECURITIES") shall be completed at the Company's registered
     office, on the date specified for closing.

b)   If the Shares are held in physical form and are proposed to be transferred
     in physical form, the transferor(s) shall transfer and assign to the
     transferee(s) good title to the Transfer Securities being transferred and
     assigned free and clear of all Liens and shall deliver the following
     documents to the transferee

     i)   Share certificates or other documents of title evidencing ownership of
          the Transfer Securities;

     ii)  Duly endorsed blank transfer deeds for the Transfer Securities;

     iii) Resignations and releases of all or some of the nominees of the
          transferor on the Board and all such resignations to be effective no
          later than the time of delivery;

     iv)  Duly executed powers of attorney as may be reasonably required to
          effect the transfer of shares.

c)   Simultaneously, with the delivery of documents specified in sub-clause b),
     the transferee shall deliver to the transferor a demand draft drawn upon a
     bank acceptable to the transferor in full payment of the purchase price
     payable for the Transfer Securities and execute the appropriate instrument
     of transfer delivered to it by the transferor and submit it to the
     Company's company secretary for due and prompt filing and recording.

d)   Upon the receipt of the appropriate instruments of transfer the Company
     shall accordingly effect the recording of the transfer of the Securities in
     its books and records in accordance with all applicable laws.

e)   If the Shares are held in dematerialized form and are proposed to be
     transferred in a dematerialized form, then any transfer of such Shares
     shall be in the manner prescribed by the bye-laws and regulations of the
     Depository.

f)   If, at the time of closing, the transferor fails to complete the
     transaction of purchase and sale, the transferee (if not then in default
     under this Agreement) shall have the right, without prejudice to any other
     rights which it may have upon payment of that part of the purchase price
     payable to the transferor at the time of closing to the credit of the
     transferor in the main branch of the Company's bank, to execute and
     deliver, on

                                    Page 37
<PAGE>

     behalf of and in the name of the transferor, such deeds, transfers, share
     certificates, resignations or other documents that may be necessary to
     complete the subject transaction.

g)   In an appropriate case, where the transferee is not bound by the terms of
     this Agreement (sale to employee), a fresh certificate shall be issued
     after deletion of the legend.

                                    Page 38
<PAGE>

                                  SCHEDULE 11.1

                              ARBITRATION PROCEDURE

(a)  DISPUTE RESOLUTION

     Any and all claims, disputes, questions or controversies involving the
     Parties or any two or more of them and arising out of or in connection with
     this Agreement, or the execution, interpretation, validity, performance,
     breach or termination hereof (including, without limitation, the provisions
     of this Schedule 11.1(collectively, "DISPUTES") which cannot be finally
     resolved by such Parties within sixty (60) calendar days of the arising of
     a Dispute by amicable negotiation and conciliation shall first be submitted
     for settlement by informal mediation to a panel consisting of one nominee
     of each of such Party, as applicable. If any such panel, negotiating in
     good faith, is unable to resolve and settle the Dispute within sixty (60)
     calendar days after the dispute is first submitted to it, then any Party
     shall be entitled to cause the Dispute to be submitted for arbitration
     pursuant to the terms of Clause (b) of this Schedule 11.1.

(b)  ARBITRATION

     Any Dispute which is not settled after an attempt by the parties to the
     Dispute at amicable negotiations and conciliation under Clause (a) of this
     Schedule 11.1 shall be resolved by final and binding arbitration held in
     New Delhi in accordance with the provision of Indian Arbitration and
     Conciliation Act, 1996, as amended (the "ARBITRATION ACT").

     The Disputes shall be referred to a sole arbitrator if the Parties agree
     upon a sole arbitrator and failing such agreement, to three arbitrators,
     one to be appointed by the Government, the other to be appointed by the SP
     and the third to be jointly appointed by the two arbitrators appointed by
     the Parties.

     In connection with the arbitration proceedings, the parties to the Dispute
     hereby agree to cooperate in good faith with each other and the arbitral
     tribunal and to use their respective best efforts to respond promptly to
     any reasonable discovery demand made by such party and the arbitral
     tribunal.

     Except as otherwise required by law or any applicable stock exchange rules
     and regulations, the arbitral proceedings and the arbitral award (the
     "AWARD") shall not be made public without the joint consent of the parties
     to the Dispute and each such party shall maintain the confidentiality of
     such proceedings or the Award, unless otherwise permitted by the other such
     party in writing. The costs of arbitration shall be borne equally by the
     parties to the Dispute unless otherwise awarded by the arbitral tribunal.
     Unless the Award provides for non-monetary remedies, any such Award shall
     be made and shall be promptly payable, net of any tax or other deduction.

                                    Page 39
<PAGE>

     All notices and other communications by one party to the Dispute to the
     other or by the arbitral tribunal to any of such parties in connection with
     the arbitration hereunder shall be in accordance with the provisions of
     Clause 11.11 of the Agreement.

     Each of the Parties expressly understands and agrees that the Award shall
     be the sole, exclusive, final and binding remedy between them regarding any
     and all Disputes presented to the arbitral tribunal. Application shall be
     made to any court with jurisdiction over the party (or its assets) against
     whom the Award is rendered for a judicial acceptance of the Award and an
     order of enforcement.

(c)  CONTINUING OBLIGATIONS

     Neither the existence of any Dispute nor the fact that any arbitration is
     pending hereunder shall relieve any of the Parties of their respective
     obligations under this Agreement.

     The pendency of dispute in any arbitration proceeding shall not affect the
     performance of the obligations under this Agreement.

                                     Page 40<PAGE>
                                                                    EXHIBIT 10.8

                              GUARANTEE AGREEMENT

THIS GUARANTEE AGREEMENT (the "GUARANTEE") is made and entered into on this 4th
day of April, 2002.

                                 BY AND AMONG:

THE PRESIDENT OF INDIA, acting in his executive capacity for and on behalf of
the Government of India, as represented by and acting through the Joint
Secretary, Ministry of Coal and Mines, Department of Mines of the Government of
India (hereinafter referred to as the "GOVERNMENT")

                                      AND

Sterlite Industries (India) Limited, a company duly incorporated and existing
under the provisions of the Companies Act, 1956/the laws of India with its
registered office(s) at B-10/4, Waluj MIDC Industrial Area, Waluj, Dist:
Aurangabad- 431133 (hereinafter referred to as "P1", which expression shall
include its successors, Affiliates, permitted assigns and liquidators)

                                      AND

Sterlite Optical Technologies Limited, a company duly incorporated and existing
under the provisions of the Companies Act, 1956/ laws of India with its
registered office(s) at E-1, Waluj MIDC Industrial Area, Waluj. Dist:
Aurangabad- 431133 (hereinafter referred to as "P2", which expression shall
include its successors, Affiliates, permitted assigns and liquidators)

                                      AND

Sterlite Opportunities and Ventures Limited, a company duly incorporated and
existing under provisions of the Companies Act, 1956/ the laws of India
with its registered office(s) at 91-92, Maker Chambers III, Nariman Point,
Mumbai- 400021 (hereinafter referred to as "SPV", which expression shall
include its successors, Affiliates, permitted assigns and liquidators).

RECITALS

WHEREAS

A.   HINDUSTAN ZINC LIMITED, a public limited company duly incorporated and
     existing under the provisions of the Companies Act, 1956, as amended, with
     its registered office at Yashad Bhawan, Udaipur - 313004, Rajasthan, India
     (hereinafter referred to as the "COMPANY") is engaged in a business that,
     among others, involves mineral exploration, development, production and
     marketing of mineral products.

<PAGE>
                                                                               1

B.   The authorized share capital of the company is Rs. 500,00,00,000/- (Rupees
     Five Hundred Crores only) divided into 50,00,00,000 (Fifty Crores only)
     Shares of Rs. 10/- (Rupees ten only) each.

C.   The issued and paid-up share capital of the Company is Rs. 422,53,19,000/-
     (Rupees Four Hundred Twenty Two Crores Fifty Three Lacs Nineteen Thousand
     only) divided into 42,25,31,900 (Forty Two Crores Twenty Five Lacs Thirty
     One Thousand Nine Hundred only) Shares of Rs. 10/- (Rupees ten only) each.

D.   The Government is the beneficial and registered owner of 32,07,93,840
     (Thirty Two Crores Seven Lacs Ninety Three Thousand Eight Hundred and Forty
     only) Shares constituting 75.92% of the Share Capital.

E.   The Government, with the desire to sell the Purchased Shares (as
     hereinafter defined) invited expressions of interest from interest parties.

F.   P1 and P2 had expressed a desire to acquire the Purchased Shares from the
     Government and pursuant to a competitive bidding process have been selected
     as the successful strategic partner.

G.   P1 and P2, for certain strategic and corporate planning reasons, propose to
     acquire the Purchased Shares from the Government through the SPV.

H.   The Government, the SPV and the Company are parties to a Share Purchase
     Agreement of even date (the "Share Purchase Agreement") pursuant to which
     the Government has agreed to sell to the SPV, and the SPV has agreed to buy
     from the Government, the Purchased Shares (as hereinafter defined).

I.   The Government and the SPV are also parties to a Shareholders Agreement
     which records their agreement as to the manner in which the Company's
     affairs shall be conducted after the SPV buys the Purchased Shares from the
     Government and grants to each other certain rights and obligations with
     respect to the ownership, directly and indirectly, of the Shares of the
     Company.

J.   The Share Purchase Agreement, as a pre-condition to the completion of the
     sale and purchase of the Purchased Shares, requires the SPV to provide this
     Guarantee to the Government.

K.   Each of P1 and P2 has agreed to, jointly and severally, guarantee the due
     and punctual performance by the SPV of all its obligations under the Share
     Purchase Agreement and under the Shareholders Agreement.

NOW, THEREFORE, in consideration of the premises and mutual agreements and
covenants contained in this Guarantee and other good and valuable consideration
(the receipt and adequacy of which are hereby mutually acknowledged), each of
the Parties hereto hereby agree as follows:

1.   DEFINITIONS AND INTERPRETATION.

1.1  In addition to the terms defined in the introduction to and the text of
     this Guarantee, wherever used in this Guarantee, the following words and
     terms shall have the meaning set out below:

     "PARTIES" means, collectively, the Government, P1, P2 and the SPV and any
     other Person which becomes a party to this Guarantee, and "PARTY" means any
     one of them;

<PAGE>
                                                                               2

     "PERSON" includes any individual, sole proprietorship, partnership,
     unincorporated association, unincorporated syndicate, unincorporated
     organization, trust, body corporate, company and a natural person in his
     capacity as trustee, executor, administrator or other legal representative;

     "PRINCIPALS" means collectively, P1 and P2, and "PRINCIPAL" means any of
     them;

     "PURCHASED SHARES" means 10,98,58,294 (Ten Crores Ninety Eight Lacs Fifty
     Eight Thousand Two Hundred Ninety Four Only) Shares, owned and Controlled
     by the Government and constituting 26% of the Share Capital; and

     "TRANSACTION AGREEMENTS" means, collectively, the Share Purchase Agreement,
     the Shareholders Agreement and the Non Disposal Agreement.

1.2  In this Guarantee:

     (a)  reference to Clauses, unless otherwise stated, are to the clauses of
          this Guarantee;

     (b)  references to statutes and/or statutory provisions shall be construed
          as referring to such statutes or statutory provisions as respectively
          replaced, amended, extended, consolidated or re-enacted from time to
          time and shall include any order, regulation, instrument or other
          subordinate legislation made under the relevant statute or statutory
          provision,

     (c)  the headings to Clauses are for convenience only and shall have no
          legal effect;

     (d)  references herein to any agreement or document shall be construed as
          referring to such agreement or document as the same may have been or
          may, from time to time, be varied, amended, supplemented, substituted,
          novated or assigned.

     (e)  all expressions used but not defined in this Guarantee shall have the
          same meaning as ascribed to them in the Share Purchase Agreement and
          the Shareholders Agreement.

2.   GUARANTEE

2.1  Each Principal jointly and severally, irrevocably and unconditionally;

     (a)  covenants with and guarantees to the Government that the SPV shall, at
          all times, fully and faithfully perform and discharge all its
          obligations under the Transaction Agreements and that the SPV shall,
          at all times, duly comply with all the terms and conditions of the
          Transaction Agreements; and

     (b)  agrees with the Government as a primary obligor to defend, indemnify,
          keep indemnified and hold the Government harmless from and against any
          and all losses, liabilities, damages, judgments, settlements, costs
          and expenses, including attorney's fees, incurred or suffered by the
          Government arising out of or resulting from or as may be payable by
          virtue of any breach by the SPV or any of the Principals of any of the
          representations, warranties, convenants, agreements or obligations
          contained in the Transaction Agreements and this Guarantee.

<PAGE>
                                                                               3

3.   NATURE OF GUARANTOR'S OBLIGATIONS

3.1  The Guarantee shall be unconditional, irrevocable and a continuing security
     which shall be and continue in full force and effect irrespective of the
     legality, validity or enforceability of any provision of the Transaction
     Agreements in relation to the SPV, until all the obligations of the SPV
     under the Transaction Agreements have been discharged or satisfied in full
     notwithstanding the liquidation administration or other incapacity or any
     change in the constitution, status or function of any of the Principals or
     the SPV or in the name and style thereof or any settlement of account or
     other matter whatsoever. Each Principal hereby irrevocably waives all or
     any rights it may have to apply for any relief in relation to the
     Guarantee.

3.2  The Guarantee shall be in addition to and not in substitution for or
     derogation of any other security held by the Government for whose benefit
     the Guarantee is given and shall not merge with or otherwise prejudice or
     affect or be prejudiced or affected by such other security, right, remedy,
     guarantee or indemnity and may be enforced without first having recourse to
     such other security, right, remedy, guarantee or indemnity.

3.3  The Guarantee shall be a primary obligation of each Principal and
     accordingly, the Government, for whose benefit the Guarantee is given,
     shall not be obliged before enforcing the Guarantee to make any demand on
     the SPV under the Transaction Agreements, any other agreement or security
     to take any steps to enforce any right or remedy against the SPV or any
     other Person.

4.   NON-EXONERATION

4.1  The liability of each Principal shall not be affected nor shall the
     Guarantee be discharged or diminished by reason of any present or future
     guarantee (other than the Guarantee), indemnity, mortgage, charge, pledge,
     lien or other security or right or remedy held by or available to the
     Government being or becoming wholly or in part void, voidable or
     unenforceable on any ground whatsoever or by the Government from time to
     time dealing with exchanging, varying, realizing, releasing or failing to
     perfect or enforce any of the same.

4.2  Each Principal shall have the benefit of the provisions of the Transaction
     Agreements limiting or restricting the liability of the SPV but, subject
     thereto, obligations of each Principal under this Guarantee shall not be
     discharged or affected by any act, omission, matter or thing which, but for
     this provision, might operate to release or otherwise exonerate either or
     both of the Principals from their obligations hereunder or affect such
     obligations, including:

     (a)  any time or indulgence at any time given to the SPV or any variation
          of or forbearance, neglect or delay in seeking performance of the
          relevant obligations; and

     (b)  any limitation (other than any limitation imposed by this Guarantee)
          disability, incapacity or other circumstances relating to the SPV
          under applicable Laws.

4.3  As a separate and independent stipulation, each Principal agrees that any
     obligation expressed to be undertaken by the SPV which may be unenforceable
     against the SPV by reason of any limitation, disability or incapacity on or
     of the SPV under any applicable Laws or of any fact or circumstance (other
     than a limitation imposed by this Guarantee) shall nevertheless be
     enforceable against and recoverable from each Principal as though the same
     had been incurred by each Principal and each Principal was the sole and
     principal obligor in respect thereof.

<PAGE>
                                                                               4

5.   NO SECURITY.

     Each Principal warrants to the Government that it has not taken or received
     the benefit of any security, indemnity or guarantee from the SPV extending
     to the liabilities under the Guarantee and that it will not (without the
     prior written consent of the Government) take from the SPV any security or
     receive the benefit of any security in respect of or in connection with its
     obligations under this Guarantee. Provided that no other person from whom
     the Principal may have received the benefit of any security, indemnity or
     guarantee extending to the liabilities under the Guarantee in connection
     with its obligations under this Guarantee shall have any rights that are
     senior or superior in any manner to the rights of the Government under this
     Guarantee.

6.   REPRESENTATIONS AND WARRANTIES

6.1  Each Principal, jointly and severally, represents and warrants to the
     Government that:

     (a)  it has been duly incorporated or created and is validly subsisting and
          in good standing under the Laws of the jurisdiction in which it is
          incorporated or created;

     (b)  it has the corporate power and authority to enter into and perform its
          obligations under this Guarantee;

     (c)  this Guarantee has been duly authorized, executed and delivered by it
          and constitutes a valid, binding and enforceable obligation
          enforceable against it in accordance with its terms;

     (d)  the authorized share capital of the SPV is Rs. 3,00,00,000/- divided
          into equity shares of Rs. 10/- each and that the issued equity share
          capital of the SPV is Rs. 2,55,00,000/- divided into 25,50,000 equity
          shares of Rs. 10/- each;

     (e)  P1 is the beneficial and legal owner of 20,50,000 equity shares of the
          SPV constituting 80.39% of the total outstanding, issued and paid-up
          equity capital of the SPV and that P2 is the beneficial and legal
          owner of 5,00,000 equity shares of the SPV constituting 19.61% of the
          total outstanding, issued and paid-up equity capital of the SPV; and

     (f)  The Principals, together, jointly Control the SPV and by virtue of
          such Control, are in a position to ensure and procure, severally and/
          or jointly that the SPV at all times performs and discharges all its
          obligations under the Transaction Agreements and complies with all the
          terms and conditions thereunder.

7.   ADDITIONAL COVENANTS

7.1  The Principals, hereby, jointly and severally, agree that they shall;

     (a)  take such actions as may be necessary to cause the SPV at all times
          fully and faithfully to perform and discharge all its obligations
          under the Transaction Agreements and to duly comply with all the terms
          and conditions thereunder;

<PAGE>
                                                                               5

     (b)  ensure and provide that the SPV shall not during the continuance of
          the Guarantee without obtaining the prior written consent of the
          Government, issue any shares to any Third Party so as to lose Control
          of the SPV;

     (c)  at all times Control the SPV;

     (d)  ensure and provide that each share certificate of the SPV in respect
          of the equity shares held by each of P1 and P2, shall bear the
          following legend either as an endorsement or on the face of such
          certificate:

          "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ALL THE
          TERMS AND CONDITIONS OF A GUARANTEE AGREEMENT MADE AS OF APRIL 4,
          2002, A COPY OF WHICH IS ON FILE AT THE REGISTERED OFFICE OF THE SPV;

     (e)  not, without obtaining the prior written consent of the Government,
          which consent shall not be unreasonably withheld, directly or
          indirectly, sell, transfer, assign, pledge, charge, mortgage or in any
          other way dispose of or encumber any shares held by any of them in the
          SPV. Provided however that the Principal may transfer, sell or assign
          any shares of the SPV, subject to such sale, transfer or assignment
          not effecting the Principal(s)' Control over the SPV; and

     (f)  if required under applicable Law or otherwise, cause the Articles of
          Association or other constituting documents of the SPV to be amended
          to include the provisions of this Clause 7.1, and shall take and cause
          to be taken by any person all such actions as may be required to
          ensure that the provisions of this Clause 7.1 are and remain valid,
          binding and enforceable against each of the Principal and the SPV.

     For the purposes of this Article 7, "CONTROL" shall mean:
     a)   control over the composition of board of directors of a company; and
     b)   control of at least 51% of the share capital of a company

8.   WAIVER

     No failure or delay by the Government in exercising any right or remedy
     shall operate as a waiver thereof nor shall any single or partial exercise
     or waiver of any other right or remedy preclude its further exercise or the
     exercise of any other right or remedy.

9.   INDEMNITY

     The Government and any Person, agent, officer or employee for whose
     liability, act or omission the Government may be responsible, shall be
     indemnified and kept indemnified out of monies recovered hereunder in
     respect of all liabilities, costs, charges, losses and expenses properly
     incurred or suffered by them or any of them in the execution or the
     purported execution of any powers, authorities or discretions vested in
     them or any of them pursuant to this Guarantee and against all actions,
     proceedings, claims and demands in respect of any manner or thing done or
     omitted or in any way relating to the provisions of this Guarantee or
     occasioned by any breach by any of the Principals of any of its covenants
     or other obligations to the Government hereunder.

<PAGE>
                                                                               6

10.  NOTICES

10.1 Every notice request, demand or other communication in this Guarantee shall
     be in writing delivered personally or by registered mail or facsimile
     transmissions to the address or facsimile number of the addressee set out
     below and marked for the attention of the persons set out below.

(a)  in the case of the Government if by letter to it at Department of Mines,
     Ministry of Coal & Mines, Room No. 322A, A- Wing, Shastri Bhavan, New
     Delhi- 1100001, and if by facsimile to it at 011- 3388487, in each case
     marked for the attention of Joint Secretary to the Government of India; and

(b)  in the case of P1, if by letter to it at B-10/4, Waluj MIDC Industrial
     Area, Waluj, Dist: Aurangabad- 431133, and if by facsimile to it at
     022-2836474/ 2048688 in each case marked for the attention of Director,

(c)  in the case of P2, if by letter to it at E-1, Waluj MIDC Industrial Area,
     Waluj, Dist: Aurangabad- 431133, and if by facsimile to it at 022- 2836474/
     2048688, in each case marked for the attention of Director,

(d)  in the case of SPV, if by letter to it at 91-92, Maker Chambers III,
     Nariman Point, Mumbai- 400021, and if by facsimile to it at 022-2836474/
     2048688, each case marked for the attention of Director,

     or at such other addresses or numbers, or for the attention of such other
     persons, as the Parties hereto may from time to time notify to each other.

10.2 Any notice, request, demand or other communication to be given or made
     under or in relation to this Guarantee shall be deemed to have been
     delivered, in the case of any notice, request demand or other communication
     given or made by personal delivery or facsimile when dispatched or
     delivered unless dispatched or delivered outside normal business hours when
     it shall be deemed to have been delivered on the next business day
     following the date on which it was dispatched or, in the case of any
     notice, request, demand or other communication given or made by letter,
     five business days after having been posted by registered mail provided
     that any notice, request, demand or other communication to be made or
     delivered by any Principal or any other Person to the Government shall only
     be effective when received by the Government and that each notice, request,
     demand or other communication given or made by facsimile shall, without
     prejudice to the validity or effectiveness of the same, be confirmed by
     letter.

10.3 Any such notice or demand or any certificate as to the breach by SPV of any
     of its obligations under any Transaction Agreement and/ or as to the amount
     at any time due from the SPV or any of the Principals shall be conclusive
     and binding upon the SPV and the Principals if signed by an officer of the
     Government.

11.  MISCELLANEOUS

11.1 If the SPV is wound up, goes into liquidation, becomes insolvent or makes
     any composition or arrangement with its creditors, neither the existence
     hereof nor any monies received or recovered by the Government pursuant to
     this Guarantee shall impair the right of the Government to prove in such
     winding up, liquidation, insolvency, composition or arrangement the total
     amount due to the Government from the SPV and, to this end, so as to
     preserve intact

<PAGE>

                                                                               7

     the obligations of any Person answerable for any part of such total amount,
     the Government may at any time and from time to time keep, for so long as
     it thinks fit, any monies received or recovered under this Guarantee in a
     separate or suspense account in or towards discharge of any part of such
     total amount.

11.2 Any release, settlement or discharge between the Government and any
     Principal shall be conditional upon no security disposition or payment to
     the Government by the SPV or the Principals is set aside, reduced or
     ordered to be refunded by virtue of any provision or enactment relating to
     bankruptcy, insolvency or liquidation for the time being in force or
     for any reason whatsoever and the Government shall be entitled to recover
     the value or amount of any such security or payment from the Principals
     subsequently as if such settlement or discharge had not occurred.

11.3 The Government shall be entitled to retain this Guarantee, until the
     payment, discharge and satisfaction of all monies, obligations and
     liabilities that are or may become due, owing or incurred to the Government
     from the SPV and/ or the Principal under the Transaction Agreements.

11.4 Each of the provisions of this Guarantee is severable and distinct from the
     others and if at any time one or more of such provisions is or becomes
     invalid, illegal or unenforceable with respect to any Principal, the
     legality, validity or enforceability of the remaining provisions hereof
     shall not in any way be affected or impaired thereby, and the Parties
     expressly agree to substitute such illegal, invalid or unenforceable
     provisions with another provision of similar import reflecting the original
     intent of the Parties to the extent permissible under applicable Law.

11.5 This Guarantee may be executed in any number of counterparts, each of which
     shall be an original and all of such counterparts taken together shall be
     deemed to constitute one and the same instrument.

12.  APPLICABLE LAW AND JURISDICTION

12.1 This Guarantee shall be governed by and interpreted by the Laws of India,
     without giving effect to the principles of conflict of laws therein, the
     Courts of New Delhi, India shall have exclusive jurisdiction over all
     matters arising out of or relating to this Guarantee.

12.2 The Parties to this Guarantee irrevocably agree that the provisions of
     Article 9.1 of the Shareholders Agreement shall apply to any dispute, suit,
     action, or proceeding which arises out of or in connection with this
     Guarantee.

13.  CONFIRMING PARTIES

     The SPV is executing this Guarantee as a confirming party. The SPV
     represents and confirms that each Principal acting severally and jointly
     have given the Guarantee at the request of the SPV.

<PAGE>
                                                                               8

IN WITNESS WHEREOF, this Guarantee has been duly executed by the authorized
representatives of each of the Parties on the day and year first above written.

<TABLE>
<S>                                                         <C>
For and in the name of the                                  Witnessed by:
PRESIDENT OF INDIA
Signed By Shri S.P. Gupta
                                                            /s/ Shri Hem Pande
                                                            Name: Shri Hem Pande
                                                            Address: Director, Ministry of Coal and Mines
/s/ Shri S.P. Gupta                                         314-D, Shastri Bhawan, New Delhi 110 001
Designation: Joint Secretary, Ministry of Coal and
Mines, Department of Mines, Government of India

For and in the name of the                                  Witnessed by:
STERLITE OPPORTUNITIES AND VENTURES
LIMITED
Signed by Shri Tarun Jain                                   /s/ Shri Sandeep Gokhale
                                                            Name: Shri Sandeep Gokhale
                                                            Address: Dhanraj Mahal, 5th Floor,
                                                            CSM Road, Apollo Bunder Colaba,
/s/ Shri Tarun Jain                                         Mumbai- 400 039
Authorised by resolution of the board of directors of
dated March 13, 2002
Designation:

STERLITE INDUSTRIES (INDIA) LIMITED                         Witnessed by:
By: Shri Tarun Jain
Title Director (Finance)
                                                            /s/ Shri Sandeep Gokhale
                                                            Name: Shri Sandeep Gokhale
                                                            Address: Dhanraj Mahal, 5th Floor,
/s/ Shri Tarun Jain                                         CSM Road, Apollo Bunder Colaba,
Duly authorised by the resolution of the Board of            Mumbai- 400 039
Directors dated December 28, 2001

STERLITE OPTICAL TECHNOLOGIES                               Witnessed by:
LIMITED
By: Mr. Tarun Jain
Title: Authorised Signatory                                 /s/ Shri Sandeep Gokhale
                                                            Name: Shri Sandeep Gokhale
                                                            Address: Dhanraj Mahal, 5th Floor,
                                                            CSM Road, Apollo Bunder Colaba,
/s/ Tarun Jain                                              Mumbai- 400 039
Duly authorised by the resolution of the Board of
Directors dated January 30, 2002
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]