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Directors Report of United Spirits Ltd.

Mar 31, 2015

The Directors are pleased to present the Annual Report of your company and the audited accounts for the year ended March 31, 2015.

1. Financial Results

Rupees (Millions)

Standalone Consolidated

2014-15 2013-14 2014-15 2013-14

The working of your company for the year under review resulted in Profit/Loss from operations 532.68 (6,210.53) (5,732.63) (7,742.06)

Exceptional and other non-recurring items (18,716.68) (43,216.26) (8,391.56) (32,357.35)

(18,184.00) (49,426.79) (14,124.19) (40,099.41)

Less:

Depreciation 1,097.40 855.03 (2,228.74) (2,026.13)

Taxation (including deferred tax) 283.35 746.40 (520.40) (2,762.31)

Profit/(Loss) after tax (19,564.75) (51,028.22) (16,873.33) (44,887.85)

Profit B/f from previous year (30,835.13) 20,233.81 (38,852.41) 6,030.31

Minority interest appropriation - - (3.82) (3.07)

Net impact of Profit of demerged unit 24.91 - 24.91 -

Transitional depreciation (79.55) - (667.39) -

Transfer between reserves - - - 48.92

Profit/(Loss) available for appropriation (50,454.52) (30,794.41) (56,372.04) (38,811.69)

Your Directors have made the following appropriations:

General Reserve - - - -

Dividend paid in respect to previous years - (36.32) - (36.32)

Proposed dividend - - - -

Corporate tax on proposed Dividend - - - -

Corporate tax on Dividend paid - (4.39) - (4.39)

Balance carried to the Balance sheet (50,454.52) (30,835.13) (56,372.04) (38,852.41)

EPS - Basic & Diluted (Rupees) (134.62) (356.60) (116.13) (316.86)

1.1. Subsidiary Companies

In accordance with section 129(3) of the companies Act, 2013, a statement containing salient features of the financial statements of the subsidiary companies in form Aoc 1 is provided as Annexure - 1 to this report.

In accordance with third proviso to section 136(1) of the companies Act, 2013, the annual report and financial statements of each of the subsidiary companies have also been placed on the website of the company www. unitedspirits.in

2. Board's Responses to Observations, Qualifications and Adverse Remarks In Auditor's Report the statutory Auditors (Auditors) have qualified their opinion in relation to the matters specified in Notes 24(d), 26(a), 26(e) and 45 of the financial statements for the year ended March 31, 2015 (statements). the Board's responses to the qualifications and other observations or adverse remarks are as follows.

2.1. Auditor's observations under paragraph 1 of the Auditor's Report to the Statements

As stated in Notes 26(a) and 26(e) to the financial statements, during the year ended 31 March 2014, certain parties who had previously given the required undisputed balance confirmations for the year ended 31 March 2013, claimed in their balance confirmations to the Company for the year ended 31 March 2014 that they had advanced certain amounts to certain alleged UB Group entities and that the dues owed by such parties to the Company would, to the extent of the amounts owing by such alleged UB Group entities to such parties in respect of such advances, be paid / refunded by such parties to the Company only upon receipt of their dues from such alleged UB Group entities. These dues of such parties to the Company were on account of advances by the Company in the earlier years under agreements for enhancing capacity, obtaining exclusivity and lease deposits in relation to Tie-up Manufacturing Units ("TMUs"); agreements for specific projects; or dues owing to the Company from customers. In response to these claims, under the instruction of the Board of Directors of the Company ("Board"), a preliminary internal inquiry was initiated by the Management. Based on the findings of the preliminary internal inquiry by the Management, under the instructions of the Board; and Management's assessment of recoverability, an aggregate amount of Rs. 6,495.5 million (including interest claimed) was provided in the financial statements for the financial year ended 31 March 2014 and was disclosed as prior period items. During the year ended 31 March 2015, an additional provision of Rs. 216 million was made for interest claimed during the year. The Company has not made provision for any unclaimed interest on these amounts.

During the year ended 31 March 2014, the Board had also directed a further detailed and expeditious inquiry in relation to the above matter, the role of individuals involved and potential non-compliance (if any) with the provisions of the Companies Act, 1956 and other regulations applicable to the Company in relation to such transactions, and the possible existence of any other transaction of a similar nature ("Inquiry"). While the Inquiry has since been completed, with regard to the possible existence of any other transaction of a similar nature, the Inquiry identified references to certain additional parties ("Additional Parties") in various documents, which documents dealt with transactions involving the counterparties referred to above. The Inquiry also identified certain additional matters ("Additional Matters") where the documents identified concerns as to the propriety of the underlying transactions.

Based on its current knowledge, the Management believes that the provisions made with respect to the above matters are adequate and no additional material adjustments are likely to be required in relation thereto. The Board has directed the Management to expeditiously review the Additional Matters and transactions with the Additional Parties and report to the Board on Management's conclusions on the transactions and any further impact on the Company's financial statements. Pending such review of the Additional Matters and transactions with Additional Parties, we are unable to comment on the nature of these transactions; the provisions established; or any further impact on the financial statements including the impact on the opening balances for the year. Further, pending resolution of the above disputes, we are unable to comment on whether the provision established for interest is appropriate

Board's Response: Detailed information and explanation on the qualification in paragraph 1 of the audit report are provided in Notes 26(a) and 26(e) to the statement. in particular, as stated in Note 26(a) an aggregate amount of Rs. 649.55 crores (including interest claimed) was provided in the financial statements for the financial year ended March 31, 2014 and was disclosed as a prior period item. During the year ended March 31, 2015, an additional provision of Rs. 21.60 crores was made for interest claimed. the Management has determined that in light of these provisions, no additional material adjustments to the financial statements are required in respect of the dues owing to the company from such parties. in connection with the recovery of the above funds, pursuant to the decision of the Board at its meeting held on April 25, 2015, the company is in the process of initiating steps for recovery against the relevant parties, so as to seek to expeditiously recover the company's dues from such parties, to the extent possible.

In relation to the transactions with the Additional parties and the Additional Matters referred to above, as stated in Note 26(e) to the statement, Management has made the following provisions with respect to such transactions:

(a) Rs. 67.81 crores made in the company's financial statements for the financial year ended March 31, 2015,

(b) Rs. 44.54 crores made in the company's subsidiaries' financial statements for the financial year ended March 31, 2015, (c) Rs. 15.70 crores made in the previous year in the company's financial statements, and (d) Rs. 108.71 crores made in the previous year in the company's consolidated financial statements. the Management believes these provisions are adequate and no additional material adjustments are likely to be required in relation thereto. the Board has directed the Managing Director and chief executive officer (MD & ceo) to expeditiously further review the Additional Matters and transactions with the Additional parties during the period covered by the inquiry and report to the Board his conclusions on the transactions and any further impact on the company's financial statements.

2.2. Auditor's observations under paragraph 2 of the Auditor's Report to the Statements

As stated in Note 24(d) to the financial statements, as per the requirements of the equity listing agreements entered into by the Company with various stock exchanges in India and various circulars and regulations issued by the Securities and Exchange Board of India ("SEBI") and applicable provisions of the Act, the Company sought approval of its equity shareholders for certain agreements in the extraordinary general meeting ("EGM") held on 28 November 2014. Some of the agreements, as detailed in the aforesaid note, were not approved by the equity shareholders in the aforesaid EGM. The Company has sought clarification/direction from SEBI with respect to the implications arising from the non-approval of the said agreements. Pending the clarification/direction from the SEBI, during the year ended 31 March 2015, the Company has recognised the underlying expenses pursuant to these agreements up to 28 November 2014 aggregating Rs. 1,357 million. The Company has not recognised charges arising out of non-approved agreements aggregating Rs. 486 million for the period from 29 November 2014 to 31 March 2015 and has disclosed the same as contingent liability. Further, subsequent to 28 November 2014, in response to the letters received by the Company from some of the concerned counterparties, the Company has made payments amounting to Rs. 74 million to such counterparties with respect to the dues for services received prior to 28 November 2014 specifically stating that the said amounts would be refundable to the Company if it is determined that such amounts were not payable by the Company in view of the shareholders not having approved the respective agreements. Pending the resolution of this matter, we are unable to comment on the accounting treatment of the expenses under the agreement, balance due to/from the respective counterparties and any other implications resulting from such non-approval.

Board's response: Detailed information and explanation on the qualification in paragraph 2 of the audit report is provided in Note 24(d) to the statement. pending the clarification/ direction from SEBI, the company has recognized the charges up to November 28, 2014, in respect of the agreements listed in (c) to (g) and (i) specified in Note 24(d) above, amounting to Rs. 135.73 crores during the financial year ended March 31, 2015 (Rs. 138.22 crores for the financial year ended March 31, 2014). in light of the fact that the company's shareholders have not approved the said agreements on November 28, 2014, the company has not recognized the charges amounting to Rs. 48.62 crores from November 29, 2014 to March 31, 2015 payable under the agreements listed in (c) to (g) and (i) specified in Note 11 above. the company has informed the respective counterparties that the contracts mentioned above have not been approved by the shareholders. further, subsequent to November 28, 2014, in response to the letters received by the company from the concerned counterparties, the company has made payments amounting to Rs. 7.43 crores to some of these counterparties with respect to the dues for services received prior to November 28, 2014, specifically stating that the said amounts would be refundable to the company if it is determined that such amounts were not payable by the company in view of the shareholders not having approved the respective agreements. pending the clarifications/ directions from SEBI, the company has not made any payments to the respective counterparties under the agreements in (c) to (g) and (i) specified in Note 24(d) above for the period subsequent to November 28, 2014 and has considered these amounts as contingent liabilities. Also see Note 26(b) of the statement in relation to the loan agreement listed in (a) of Note 24(d). pending any clarifications/ directions from SEBI, the company is unable to determine whether there could be any impact on the financial statements.

2.3. Auditor's observations under paragraph 3 of the Auditor's Report to the Statements

As stated in Note 45 to the financial statements, the Managerial remuneration for the year ended 31 March 2015 aggregated Rs. 65 million and Rs.153 million towards remuneration of the Managing Director and Chief executive Officer (MD & CEO) and the Executive Director and Chief Financial Officer (ED & CFO), respectively. The aforesaid amounts include remuneration in excess of the limits prescribed under the provisions of Schedule V to the Act. The Company is in the process of obtaining the requisite approval from the Central Government for such excess remuneration. In the absence of the required approval, we are unable to assess the impact of such excess remuneration on the financial statements of the Company.

Board's response: information and explanation on the qualification in paragraph 3 of the audit report is provided in Note 45 to the statement. in particular, as stated in Note 45, the company is in the process of obtaining the requisite approval from the central Government for such excess remuneration. pending such approval, the company is unable to determine whether there could be any impact on the financial statements.

2.4. A. Auditor's observations under paragraphs (iii), (iii) (a) and (iii)(b) of the Annexure to the Auditor's Report to the Statements

According to the information and explanation given to us, the Company has granted loans to eleven companies, firms or other parties covered in the Register maintained under Section 189 of the Companies Act, 2013 ("the Act"). These loans include loan to United Breweries (Holdings) Limited ("UBHL" ) by way of conversion of certain pre-existing loans/ advances/ deposits due to the Company and its subsidiaries (refer Paragraph 1 under 'Emphasis of Matter').

Further, as stated in Note 26, the Board had directed a detailed and expeditious inquiry in relation to certain transactions identified during the year ended 31 March 2014. The Inquiry stated that between 2010 and 2013, funds involved in many of these transactions were diverted from the Company and/ or its subsidiaries to certain UB Group companies, including in particular, Kingfisher Airlines Limited ("KFA"), which is a party covered in the register maintained under Section 189 of the Act.

Additionally, pending the completion of the review of the Additional Matters and transactions with Additional Parties identified through the Inquiry as disclosed in Paragraph 1 under 'Basis for Qualified Opinion', we are unable to comment whether any such arrangements represent transactions with any body corporate covered in the register maintained under Section 189 of the Act.

(a) As stated in Paragraph 2 under 'Basis for Qualified Opinion', in the case of the loan granted to UBHL, a company covered in the Register maintained under Section 189 of the Act, the loan agreement was not approved by the Equity Shareholders in the Extraordinary General Meeting held on 28 November 2014. We have been informed by the Management that, the Company has sought clarification/ direction from the SEBI with respect to the implications arising from the non-approval of the said agreement. The Company is evaluating steps for recovery of the loan. Further, as stated in Paragraph 1 under 'Emphasis of Matter', the Company has not received the first instalment of interest amounting to Rs. 1,911 million (gross of tax) with respect to the loan. No interest has been received on this loan to date. The loan has been fully provided for in the financial statements.

With respect to loans given to other companies, firms or other parties covered in the Register maintained under Section 189 of the Act, the principal and interest are repayable either on demand or the repayment terms are not stipulated. According to the information and explanation given to us, we understand that no amounts were demanded by the Company during the year.

(b) According to information and explanation provided to us, the Company is evaluating the required steps for the recovery of the principal and interest due in respect of the loan granted to UBHL. Further, as stated in Note 26(a), the Company is also in the process of initiating recovery proceedings with respect to the funds that may have been diverted from the Company and/ or its subsidiaries to certain UB Group companies.

Board's response: information and explanation on the qualification in paragraph (iii) of the Annexure to the audit report is provided in Notes 24(d), 26(a), 26(b) and 26(e) to the statement.

in particular, Note 24(d) provides information in connection with the non-approval by the shareholders of the company of the loan agreement with UBHL (and of other potential related party transactions).

furthermore, as stated in Note 26(b), the inquiry report stated that prima facie, between 2010 and July 2013, certain transactions appear to have been undertaken and certain accounting entries appear to have been made to show a lower exposure of the company (and its subsidiaries) to UBHL than the exposure that actually existed at that time. prima facie, this indicates various improprieties and potential violations of provisions, inter alia, of the companies Act, 1956, and the listing agreement signed by the company with various stock exchanges in India on which its securities are listed (Listing Agreement). the company is in the process of evaluating its rights and remedies in relation to such violations.

in addition, as stated in Note 26(b), during the previous year, as a matter of prudence, the company had not recognized interest income of Rs. 96.31 crores and had provided Rs. 330.32 crores towards the principal outstanding as at March 31, 2014. the notes to accounts for the previous year had recorded the Management's belief that it should be able to recover, and that no further provision is required for the balance amount of Rs. 995.46 crores. the said notes also mentioned that the Management would continue to assess the recoverability of the said loan on an on-going basis. As per the terms of the said loan agreement, an amount of Rs. 191.10 crores (gross of tax) was payable by UBHL to the company towards the interest payable as of January 2015 under the loan agreement. however, the company is yet to receive such interest payment from UBHL. the company received a letter from UBHL stating that it is involved in litigations with various creditors of KFA in different courts all over the country, and that some of the winding up petitions fled against UBHL have been admitted by the high court of Karnataka. As a result of the above and other relevant factors, as a matter of prudence, the company has provided a further amount of Rs. 995.46 crores towards the entire balance principal amount (i.e., the entire principal amount due under the loan agreement less the amount already provided in the accounts for the financial year ended March 31, 2014) and has not recognized interest income of Rs. 120.70 crores.

As stated in Notes 26(a) and 26(b), the company is in the process of pursuing its rights and claims to recover the entire amount of the loan together with accrued interest from UBHL and the other counterparties referred to in the said Notes to the statements.

With regard to the Additional Matters and transactions with Additional parties, as stated in Note 26(e), the Board has directed the MD & CEO to expeditiously further review the Additional Matters and transactions with the Additional parties during the period covered by the inquiry and report to the Board his conclusions on the transactions and any further impact on the company's financial results.

B. Auditor's observations under paragraph (viii) of the Annexure to the Auditor's Report to the Statements

The accumulated losses of the Company at the end of the year are not less than fifty per cent of its net worth. The Company has incurred cash losses in the current and previous financial year.

Board's response: the Board notes that the accumulated losses of the company at the end of the year is 86.3% of its peak net worth in the previous four financial years. therefore, the company will be required to file a report under section 23 of the sick industrial companies (special provisions) Act, 1985 (SICA). the Board believes this report under section 23 would arise as technical requirement under SICA and does not reflect upon the long term prospects of the company given the Profitable nature of its business and as the accumulated losses are principally on account of exceptional items.

C. Auditor's observations under paragraph (ix) of the Annexure to the Auditor's Report to the Statements

In our opinion and according to the information given to us, the Company has not defaulted in the repayment of dues to a bank or to any financial institution except that in case of loans due to banks, principal amounting to Rs. 25.78 million and interest aggregating Rs. 69.24 million were repaid with a delay of up to 1 day and 5 days, respectively. The Company did not have any outstanding debentures during the year.

Board's response: the Management has informed the Board that as of 31 March 2015, there were no outstanding defaults by the company of any dues to a bank or financial institution. As stated in note 25(a) to the financial statements for the year ended March 31, 2015, the company has disputed a demand made by a bank.

D. Auditor's observations under paragraphs (xi), (xii) (a), (xii)(b) and (xii)(c) of the Annexure to the Auditor's Report to the Statements

In our opinion and according to the information and explanations given to us, the term loans taken by the Company and applied during the year were for the purpose for which they were raised. The Inquiry referred to in Paragraph 1 of the 'Basis for Qualified Opinion' and Paragraph 1 of the 'Emphasis of Matter', stated that certain funds were diverted to other UB Group entities in earlier years. Such diversions may indicate application of term loans for purposes other than for which they were raised.

(xii)(a) As stated in Note 26 and Paragraph 1 of the Basis for Qualified Opinion, the Board had directed a detailed and expeditious inquiry in relation to certain transactions identified during the year ended 31 March 2014. The Inquiry stated that between 2010 and 2013, funds involved in many of these transactions were diverted from the Company and/or its subsidiaries to certain UB Group companies. The Inquiry Report also indicated that the manner in which certain transactions were conducted, prima facie, indicates various improprieties and legal violations.

(b) As stated in Note 26(b), with regard to the prior transactions that were consolidated into the single loan due from UBHL on 3 July 2013, the Inquiry stated that, prima facie, between 2010 and July 2013, certain transactions appear to have been undertaken and certain accounting entries appear to have been made to show a lower exposure of the Company to UBHL than that which actually existed at that time. The inquiry also indicates that the manner in which these transactions were conducted and these entries made, prima facie, indicates various improprieties and legal violations.

(c) As discussed in Note 26(c), the Inquiry indicated that an agreement signed with an Alleged Claimant for a lien on certain investments of the Company, to secure an advance by the Alleged Claimant to KFA, was entered into without appropriate Board authorisation or approval.

We have submitted a report under Section 143(12) of the Companies Act, 2013 and the relevant rules thereunder, seeking the Audit Committee's reply/observations to the matters listed in (a) to (c) above. As at the date of this report, we are awaiting a reply/observations from the Audit Committee.

Additionally, pending the completion of the review of the Additional Matters and transactions with Additional Parties identified through the Inquiry as disclosed in Paragraph 1 under 'Basis for Qualified Opinion', we are unable to comment whether any arrangements covered by such review can be terms as 'fraud' and whether there are other instances of a similar nature.

Board's response: see responses to paragraph 1 of the Auditor's Report to the statements and to paragraphs (iii), (iii)(a) and (iii)(b) of the Annexure to the said Auditor's Report. subsequent to the balance sheet date, and as indicated in Note 30 to the statements, the Board's Audit committee has provided its reply and observations to the auditor's report under section 143(12) of the companies Act, 2013 (Act) and the relevant rules thereunder. the said reply and observations to the Auditors include the following observations.

(i) the Board is not in a position to make (and has not made) any final determinations with regard to the roles of any individuals involved. the Board has therefore directed that the company report such transactions to the authorities as required under applicable law. Accordingly, the company has duly reported the transactions and associated facts to the relevant authorities, and has also responded / is in the process of responding, as the case may be, to requests for clarifications on the inquiry that have been sought by the Regional Director of the Ministry of corporate Affairs, the income-tax Department and the stock exchanges.

(ii) in addition, as noted above, pursuant to the Board's directions, a copy of the MD & CEO'S inquiry report, including the inputs and expert advice of the independent advisers and specialists, as well as the communications received from a concerned director have been provided to the company's auditors.

(iii) in connection with the recovery of funds that appear to have been diverted from the company, the Board passed a resolution that the company should take the necessary steps to pursue all rights and claims against, and expeditiously recover its dues from, the relevant parties, to the extent possible. the Board has also authorized the MD & CEO to temper these actions, if considered appropriate, bearing in mind imperatives of business continuity with vendors/ distributors. the company has initiated discussions to assist with such recovery and the Board is being updated on this matter.

(iv) in light of the above, and without making any determination as to fault or culpability, at their meeting on April 25, 2015, the directors noted that they had lost confidence in Dr Vijay Mallya continuing in his role as a director and as chairman and therefore, the Board called upon Dr Mallya to resign forthwith as a director and as the chairman of the Board and step down from his positions in the company's subsidiaries. in the event Dr Mallya declines to step down, the Board also resolved that it would recommend to the shareholders of the company, the removal of Dr Mallya as a director and as the chairman of the Board.

(v) As previously announced by the company's majority shareholder, Relay B V., an indirect wholly owned subsidiary of Diageo plc (Diageo), following the re- appointment of Dr Mallya at the company's annual general meeting on September 30, 2014, Diageo has contractual obligations to support Dr Mallya continuing as non-executive director and chairman of the company, subject to certain conditions. therefore, in the event Dr Mallya declines to step down, the Board resolved to request Diageo to expeditiously review the position in relation to its contractual obligations and authorised sharing with Diageo a copy of the inquiry report and all the materials relating to the company's inquiry. As Dr Mallya has not heeded the Board's request to step down as director and chairman, the Board has requested Diageo to expeditiously review the position in relation to its contractual obligations and the company has provided Diageo a copy of the inquiry report and the materials relating to the company's inquiry as directed by the Board.

(vi) in respect of the other employees of the company who appear to have been involved in certain transactions covered by the inquiry, the Board directed the company's MD & CEO to initiate necessary internal proceedings in accordance with the applicable rules and policies of the company. the company has made significant progress with these internal proceedings and the Board is being updated on these proceedings regularly.

(vii) the Board, at its meeting on April 25, 2015, noted that the control systems of the company have been strengthened after July 2013. in addition, the Board directed the company's management to continue with the development and strengthening of the robust controls environment that is currently underway to prevent such transactions from occurring in the future.

(viii) following its review of the inquiry report, the Board reframed its commitment to the highest standards of corporate governance and resolved that the company would cooperate with all relevant authorities in relation to these matters.

(ix) furthermore, the company has received letters from its previous auditors (i.e. who served as the company's auditors during the period covered by the inquiry), seeking consultation to discuss their prior audit reports. the company has responded to these letters scheduling time for such meetings and have also met with the previous auditors. the company will consider any remedial actions proposed in this regard, in light of applicable legal provisions.

With regard to the review of the Additional Matters and transactions with Additional parties identified through the inquiry, as stated in Note 26(e) to the statements, the Board has directed the MD & CEO to expeditiously further review the Additional Matters and transactions with the Additional parties during the period covered by the inquiry and report to the Board his conclusions on the transactions and any further impact on the company's financial statements. Based on the outcome of such review, the company will take appropriate action in respect of the underlying Additional Matters and transactions with Additional parties, as is ft and necessary in the circumstances.

2A. Board's Responses to Observations/Qualifications in Secretarial Auditor's Report

the Board's responses to the qualifications and other observations are as follows.

the secretarial Auditors (Auditors) have submitted their report in form No.MR3 and qualified their opinion/observations in respect of the secretarial Audit conducted for the financial year 2014- 15 as under and the Board's responses are given against each qualification/ observation as follows:

1. the company is required to take the central Government approval for payment of managerial remuneration in excess of limits prescribed under section 197 read with schedule V of the Act, in absence of Profits during the year.

Board's Response: the inadequacy of Profits came to the knowledge of the Board upon the approval of the audited financial statements for the financial year 2014- 15. Necessary application has been made to the central Government in respect of the remuneration paid to Mr. Anand Kripalu, Managing Director and chief executive officer and shortly application will also be submitted to the central Government in respect of the remuneration paid to Mr. P.A. Murali, former executive Director, who ceased to be in the employment of the company with effect from April 22, 2015.

2. As required under clause 41 of the Listing Agreement, the company has not submitted standalone and consolidated audited financial results for the entire financial year and quarter ended on 31.03.2014 within sixty days of the end of said year and also unaudited financial results for the quarter ended on June 30, 2014, within 45 days of the end of said quarter period.

Board's Response: the delay was due to the internal inquiry initiated by the Board of Directors during the year and the stock exchanges have accepted our delayed submission with fine and the issue stands closed.

3. As required under clause 49 ii of the listing agreement, the company did not have the requisite number of independent directors on its board with effect from October 1, 2014 till the appointment of a independent director was made on April 1, 2015 and as required under this clause, the vacancy of independent directors was not filled at the next board meeting or three months from the date of vacancy whichever is later.

Board's Response: the vacancies arose on September 30, 2014 consequent upon the resignation/ exit of three independent Directors at the conclusion of the Annual General Meeting held on September 30, 2014 and was partially filled within the period stipulated under the Listing Agreement. As per the Listing Agreement in force on September 30, 2014, a period of 180 days was available to fill up the vacancy which expired on March 31, 2015. the contention of the secretarial Auditor that the period available is 90 days pursuant to the new Listing Agreement, which came into effect from October 10, 2014 is not tenable. since, the vacancy was filled up on April 1, 2015 instead of March 31, 2015, there was a delay of one day and that the delay of 1 day has been reported in our fling with the stock exchanges as well.

4. there was a non-compliance of pollution control Board order at companies Unit in Malakajgiri, Andhra pradesh, as this unit was manufacturing the more number of cases than permitted number of cases.

Board's Response: currently, processes have been put in place to ensure compliance.

3. Material Changes and Commitments/ Events Subsequent to the date of the Financial Statements

3.1. Inquiry into Prior Year's Audit Qualifications

During the previous financial year, the Board had directed a detailed and expeditious inquiry in relation to certain matters referred to below, the role of individuals involved and potential non-compliance (if any) with the provisions of the companies Act, 1956, and other regulations applicable to the company in relation to such transactions, and the possible existence of any other transaction of a similar nature (inquiry). pursuant to the directions of the Board, the inquiry was headed by the MD & CEO of the company. the Board also directed the MD & CEO to engage independent advisers and specialists as required.

At its meeting held on April 25, 2015 (April 25 Meeting), the Board discussed and considered in detail the report (inquiry Report) submitted by the MD & CEO in relation to the inquiry, the inputs and expert advice of the independent advisers and specialists and other relevant inputs. the Board promptly informed the stock exchanges of the outcome of its April 25 Meeting, including the various decisions taken by the Board as a result of its consideration of the inquiry Report. the following paragraphs provide further updates on these decisions.

With regard to steps taken in relation to the recovery, directed by the Board at its April 25 Meeting, of funds that appear to have been diverted, your company has commenced discussions with counterparties in connection with recovering funds that may have been diverted, and will take appropriate action as directed by the Board in this regard.

With regard to the Board's recommendations made at the April 25 Meeting, concerning the chairman, Diageo has announced that it noted the recommendation of the USL Board and would consider its position under its agreements with Dr. Mallya and United Breweries (holdings) Limited, in light of the inquiry Report and materials provided to it. in this regard, the company has also not received any special notice under section 169 of the Act.

With regard to other employees who appear to have been involved in certain transactions covered by the inquiry, as directed by the Board at the April 25 Meeting necessary internal proceedings have been completed, in accordance with applicable rules and policies of the company, and the MD & CEO has updated the Board on actions taken in accordance with the applicable rules and policies of the company.

As was also directed by the Board at its April 25 Meeting, the company is continuing to cooperate with the authorities and provide information being requested, including in relation to the additional letters/ notices referred to in Note 30 to the financial statements for year ended March 31, 2015.

3.2. Sale of shares of United Breweries Limited held by the Company.

further to the approval of the Board of Directors of the company and final clearance of the individual directors authorised by the Board to monitor the process, on July 7, 2015, the company placed an order for sale by way of a block trade on National stock exchange of India Limited (Nse) of 85,00,000 equity shares held by the company in United Breweries Limited (UBL) (constituting 3.21% of the paid up equity share capital of UBL) to heineken international B.V. at a price of Rs. 1,030 per share. the sale consideration, net of brokerage, was Rs. 872 crores (against book value of Rs. 15 crores) resulting in Profit on this transaction (which is to be determined after taking into account other transaction costs and taxes). following the completion of this sale on July 9, 2015, the company holds no shares in UBL and has ceased to be a promoter in UBL. this divestment was a part of the process of monetising certain non-core assets of the company (as previously disclosed to the stock exchanges on October 20, 2014), in the ordinary course of the company's business.

3.3. Changes/Restructuring of business/subsidiaries:

During the financial year, the company's manufacturing unit situated at poonamalle, chennai was hived-of to enrica enterprises private Limited in terms of section 391 to 394 of the companies Act, 1956 pursuant to the approval of the hon'ble high courts of Karnataka and Madras. in addition, the company's entire holding in its wholly owned subsidiary Whyte and Mackay Group Limited along with its subsidiaries were transferred during the year to emperador inc.

Subsequent to the financial year 2014-15, SW finance co. Limited, a wholly owned subsidiary of the company, was amalgamated with the company pursuant to the orders of the hon'ble high courts being fled with the Registrar of companies.

3.4. Delay in Convening Annual General Meeting

following the provision of the inquiry Report to various authorities, USL has received multiple requests for clarifications and submission of additional documents from multiple authorities, as stated in Note 30 to the statements. Because of the sheer volume of these on-going requests, USL has been heavily burdened and has had to dedicate its corporate legal, finance and secretarial resources to assisting and submitting responses to these governmental authorities in a timely manner. As a result, and for these special reasons, between May and August 2015, sufficient time could not be devoted to the preparation of the Directors' Report under section 134 of the Act and the disclosures thereunder.

in view of these special reasons, and the unusual and exceptional circumstances, in early August 2015, USL requested the Registrar of companies to allow an extension of the date by which USL must hold its next AGM, pursuant to the provisions of section 96(1) of the Act. the Registrar replied on September 5, 2015 denying this request. the Registrar's response did not explain why the reasons provided by USL were found to be not tenable.

in light of the relatively recent rejection of its request for extension, received two weeks ago, your company has sought to compile the necessary documents and convene the AGM by the earliest date feasible.

the Directors regret the delay that has resulted because of these exceptional reasons, and the Board has directed the company to file necessary applications for condonation/ compounding of this delay under applicable law.

4. Change in nature of Business, if any

the details of change in nature of business is provided under Management Discussion and Analysis Report and the Report on Risk Management forming part of this Annual Report.

5. Dividend

in view of the loss incurred in the financial year ended March 31, 2015, your Directors do not recommend any dividend.

6. Capital

the authorised capital of your company remained unchanged at Rs. 5,542,000,000/- divided into 395,000,000 equity shares of Rs. 10/- each and 159,200,000 preference shares of Rs. 10/- each.

the issued, subscribed and paid-up equity share capital of your company stands unchanged at Rs. 1,453,277,430/- divided into 145,327,743 equity shares of Rs. 10/- each.

7. Global Depository Shares

the 17,502,762 global depository shares (GDSS) issued, representing 8,751,381 equity shares ranking pari-passu in all respects with the existing paid-up equity shares, with 2 GDSS representing 1 equity share of par value of Rs. 10/- each at Us$7.4274 per GDSS, aggregating to Us$ 130 million, continue to be listed on the Luxembourg stock exchange.

8. Performance of the Company

During the year under review, your company has achieved a sales volume of over 117.06 million cases (previous year 120.70 million cases). sales of the company's brands in the 'prestige and Above' segment grew 8% in the financial year ended March 31, 2015 and stood at 35 million cases (previous year 33 million cases). imputed turnover, i.e., the price at which the company's brands were billed from its manufacturing facilities (owned/ leased/ contracted) and its warehouses, stood at Rs. 98,733.30 million net of duties and taxes (previous year Rs. 97,990.63 million) constituting a rise of 1%. the growth in imputed turnover of the company's brands in the 'prestige and Above' category during the year was Rs. 46,195 million, up by 9% from the Rs. 42,570 million recorded in the previous year.

9. Details of Subsidiary Companies, Joint Ventures and Associate Companies, and Their Financial Position

Your company had 22 subsidiary companies in the financial year ended on March 31, 2015. the information required under the first proviso to section 129(3) of the Act is given in form Aoc- 1 in Annexure 1. the company's policy for determining material subsidiaries is available at www.unitedspirits.in.

As stated in Note 24(a) to the statements, consequent to the sale of Whyte and Mackay, Whyte & Mackay Group Limited, and all its subsidiaries ceased to be the company's subsidiaries with effect from October 31, 2014.

10. Prospects/ Outlook

the details about prospects/ outlook of your company are provided under the Management Discussion and Analysis Report, forming part of this Annual Report.

11. Depository System

the trading in the equity shares of your company is under compulsory dematerialisation mode. As on March 31, 2015, equity shares representing 98.65% of the equity share capital are in dematerialised form. As the depository system offers numerous advantages, members are requested to take advantage of the same and avail of the facility of dematerialisation of the company's shares.

12. Board Meetings, Board of Directors, Key Managerial Personnel & Committees of Directors

12.1. A. Appointment, change in designation and resignation

Details on appointments, changes in designation, and resignation of Directors, key managerial personnel, and committees of Directors, as well as on Board and committee meetings of your company are provided in the corporate Governance Report that is annexed to, and forms part of this Annual Report.

B. Re-appointment

As per the provisions of the Act, Mr. Ravi Rajagopal retires by rotation and, being eligible, offers himself for re- appointment.

C. Independent Directors

As stated in the corporate Governance Report, the following independent Directors were appointed at 15th annual general meeting (AGM) of your company for a period of 5 years from the date of that AGM.

Mr. sudhakar Rao

Mr. D. sivanandhan

Dr. (Mrs). indu shahani

the following independent Directors are proposed to be appointed at the 16th AGM of the company for a period of 5 years from the date of their appointment as Additional Director.

Mr. Rajeev Gupta

Mr. Mahendra Kumar sharma

As required by clause 49 of the Listing Agreement, familiarisation exercise forms part of the policy on Directors/ senior Appointments and is available on the company’s website www.unitedspirits.in. the company familiarized the independent Directors, at the time of joining, about the company, their roles, rights, responsibilities in the company, nature of the industry in which the company operates, business model of the company, etc. the company also familiarizes the independent directors, from time to time, with the company's business, nature of the industry and the challenges through a detailed strategy presentation of the business and the environment in which it operates.

the company has received declarations from independent Directors under 149(6) of the companies Act, 2013.

in addition, Dr. Nicholas Bodo Blazquez who was appointed as an Additional Director as a Nominee of Relay B V, is proposed to be appointed as a Director at the forthcoming 16th AGM.

D. Key managerial personnel

consequent upon the retirement of Mr. Ashok capoor, Managing Director on April 30, 2014, Mr. Anand Kripalu was appointed as the chief executive officer with effect from May 1, 2014 and as Managing Director & chief executive officer with effect from August 14, 2014.

consequent upon the resignation of Mr. p. A. Murali, executive Director and chief financial officer with effect from April 22, 2015, Mr. Vinod Rao was appointed as the interim head of finance with effect from April 25, 2015.

consequent upon the retirement of Mr. V. s. Venkataraman, company secretary, on March 31, 2015, Mr. V Ramachandran was appointed as the company secretary with effect from May 1, 2015.

E. Number of Meetings of the Board

the details of the Board Meetings and other committee Meetings held during the financial Year 2014-15 are stated in corporate Governance Report.

F. Board Committees

the company has set up the following committees of the Board.

Audit committee

Nomination and Remuneration committee

stakeholders Relationship committee

corporate social Responsibility committee

Risk Management committee

General committee of Directors

the composition of each of the above committees, and their respective roles and responsibilities are detailed in the corporate Governance Report.

F. Recommendations of the Audit Committee

All the recommendations of the audit committee have been accepted by the Board,

G. Policies on Directors / Senior Appointments

the policy on Directors / senior Appointments is enclosed as Annexure 2.

H. Details of remuneration to Directors

As required under section 197(12) of the Act, information relating to remuneration paid to Directors is provided in the corporate Governance Report and in form MGT 9, that is annexed to and forms part of this Annual Report as Annexure 5. furthermore, as stated in the corporate Governance Report, the company is in the process of obtaining the requisite approval from the central Government for remuneration paid in excess of the limits prescribed under the provisions of schedule V to the Act.

As stated in the corporate Governance Report, sitting fees are paid to non-executive Directors for attending Board/ committee meetings. they are also entitled to reimbursement of actual travel expenses, boarding and lodging, conveyance and incidental expenses incurred in attending such meetings, in accordance with the travel policy for Directors. in addition, the Non-executive Directors are also eligible for commission every year, not exceeding 1% of the net Profits of the company, calculated in accordance with section 198 of the Act, as approved by the shareholders at the AGM held on September 30, 2014, such approval to remain in force until revoked. such commission may be apportioned amongst the directors in any manner they deem ft. No commission is proposed to be paid for the year ended March 31, 2015 due to absence of Profits. criteria for payment of remuneration to Directors including non-executive directors is disclosed in the reward policy enclosed as Annexure 2.

I. Board Evaluation Criteria

pursuant to the provisions of the Act, and clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the Directors individually, as well as the Board committees. the evaluation process considered the effectiveness of the Board and the committees with special emphasis on the performance and functioning of the Board and the committees. the evaluation of the Directors were based on the time spent by each of the Board Members, core competencies, expertise and contribution to the effectiveness and functioning of the Board and the committees:

12.2 Vigil Mechanism

Your company has a well-established vigil mechanism in place, which is managed by the compliance & ethics team. ispeak is a confidential service available to employees to make a report when they believe there to be a potential breach of the code, policies or applicable law. ispeak is managed by an external company, with staff who are trained to deal with the calls, and translators who are immediately available to assist if required. Access to the chairman of the Audit committee is made available in exceptional cases, as required under the Act and the Listing Agreement. All complaints are investigated by the compliance and ethics team and appropriate action taken in accordance with your company's policies.

12.3 Related Party Transactions

the company's policy on dealing with Related party transactions was adopted by the Board on June 15, 2015 and is available on website link http://unitedspirits.in/ policy/1125135202policy%20on%20Rpt.pdf.

All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. there are no materially significant related party transactions made by the company with promoters, Directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large.

the details of related party transactions required under section 134(3)(h) read with rule 8 of the companies (Accounts) Rules, 2014, is given in form Aoc 2 and the same is enclosed as Annexure 3.

As stated in Note 24(d) to the statements, the company, on or prior to July 3, 2013, entered into certain agreements with entities, which may be considered as directly or indirectly owned/ controlled/ significantly influenced by the erstwhile promoter group. Details of these agreements have also been included in Annexure 3, although it is not clear whether they fall under the purview of related party transactions under the Act, or the Listing Agreement.

it was stated in the notice to the extraordinary General Meeting on November 28, 2014 (EGM) that the company was in the process of seeking confirmations from, and verifying the position in relation to, the counterparties to the above mentioned agreements as to whether or not they are related parties of the company, and it was not clear whether the counterparties to such agreements are indeed related parties of the company for the purpose of clause 49(Vii) of the Listing Agreement. the company is continuing to seek such confirmations. to the extent it is determined, based on materials available and information provided, that all or any of above mentioned agreements do not qualify as existing material related party contracts or arrangements, or the counterparties to all or any of these agreements do not qualify as related parties of the company, such that approval of the shareholders of the company is not required in respect of any of the above mentioned contracts or arrangements then, it follows that there will be no consequences on such contracts or arrangements or on their validity or on any act or omission that may have been committed or omitted pursuant thereto, by reason of the shareholders having approved or not approved any of such contracts or arrangements.

As further stated in Note 24(d) to the statements, at the EGM, certain of the said historical agreements were not approved by the shareholders of the company by requisite majority. consequently, the company has sought clarifications/ directions from the securities and exchange Board of India (SEBI) with respect to the implications of the non-approval of the aforesaid agreements by the shareholders of the company (to the extent such approval is required under applicable law), and clarifications are awaited.

13. Auditors

13.1. Financial Audit

M/s. B.S.R. & co. LLP, chartered Accountants, statutory Auditors of your company, will hold office up to the conclusion of the 20th AGM of the company, and their appointment is subject to ratification by the shareholders at each of the intervening AGMs.

13.2. Secretarial Audit

pursuant to the provisions of section 204 of the Act, and the companies (Appointment and Remuneration of Managerial personnel) Rules, 2014, a secretarial Audit has been carried out by M/s. sudhir V hulyalkar, practising company secretary, and his report is annexed as Annexure 4.

14. Listing of Shares of the Company

the equity shares of your company continue to be listed with the BSE Limited and the NSE. the listing fees for the year 2014-15 have been paid to these stock exchanges. the company's shares were also listed on the Bangalore stock exchange Limited, whose operations were closed during the year.

15. Corporate Governance

A corporate Governance Report is annexed separately as a part of this report.

16. Management Discussion and Analysis Report the Management Discussion and Analysis Report is annexed separately as a part of this report.

17. Fixed Deposits

As reported in the previous year's annual report, your company discontinued accepting fixed deposits from the public and shareholders effective January 1, 2014. in addition, pursuant to section 74(1)(b) of the Act, the Board of Directors at their meeting held on August 1, 2014 decided to repay all fixed deposits maturing on or after March 31, 2015 by March 31, 2015. fixed deposits from the public and shareholders, which remained unclaimed and for which instructions had not been received from the depositors as on March 31, 2015, stood at Rs. 215.462 million. this amount was repaid by transfer into a separate, non-interest bearing escrow account opened specifically for the purpose, consistent with the provisions of the Act, and the rules made thereunder. of this amount, a sum of Rs. 180.941 million (as of August 31, 2015) has since been paid as per instructions received after the year end. the balance unclaimed fixed deposits continue to remain in the escrow account.

18. Extract of Annual Return

the details forming part of the extract of the Annual Return in form MGT 9 is annexed as Annexure 5.

19. Transfer to Investor Education and Protection Fund (IEPF) pursuant to the provisions of sections 205A(5) and 205c of the companies Act, 1956, the Unclaimed Dividend and Deposits, remain unclaimed and unpaid for a period of more than 7 years. the company has accordingly transferred an amount aggregating to Rs. 41,35,063/- as unpaid dividend and Rs. 159,301.58 as unclaimed fixed deposits including interests during the year to the investor education and protection fund.

Due Date for Dividend Unpaid Amt (Rs.) Transfer to IEPF Declaration Date

8-Jan-16 09-Jan-09 1,468,167.00

8-oct-16 09-oct-09 2,143,560.00

13-oct-17 14-oct-10 2,844,185.00

21-sep-18 22-sep-11 2,986,765.00

15-oct-19 16-oct-12 3,284,965.00

16-sep-20 17-sep-13 2,149,242.50

18-Jan-16 19-Jan-09 387,896.00

Fixed Deposits:

Due Date for Transfer to IEPF Unpaid Amt (Rs.)

2015-16 & 2016-17 397,157.52

2017-18 2,215,880

2018-19 3,018,927

2019-20 894,974

2020-21 705,247

2021-22 36,009,195

Necessary compliance under rule 3 of the investor education and protection fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, has been ensured.

20. Human Resources

employee relations remained cordial at all company's locations.

particulars of employees drawing an aggregate remuneration of Rs. 60,00,000/- or above per annum or Rs. 5,00,000/- or above per month, as well as additional information on employee remuneration as required under the provisions of rule 5(1), 5(2) and 5(3) of the companies (Appointment and Remuneration of Managerial personnel) Rules, 2014 is annexed as part of this report in Annexure 6 hereto.

21. Employees Stock Option Scheme

Your company has not offered any stock options to its employees during the year 2014-15. During the year 2015–16, the Board, at its meeting held on August 20, 2015, approved a stock Appreciation Rights (SAR) plan for grant of 500,000 SARS and authorised the Nomination and Remuneration committee to decide the criteria for grant and vesting of the SARS to employees and eligible directors. since there will be no fresh issue of shares as a result of the SARS, there will be no dilution of equity and earning per share.

22. Particulars of Loans, Guarantees and Investments Loans, guarantees and investments covered under section 186 of the Act, are detailed in Notes to the financial statements, which are as follows:

Notes 7 and 11.1 relating to investments, Notes 9 and 11.5 relating to loans given and Note 33 relating to guarantees given.

23. Risk Management

Details on Risk Management are annexed as part of this report in Annexure 7 hereto.

24. Internal Financial Controls

the Board considered materials placed before it, and after reviewing the confirmation from external parties and reviewing the effectiveness of the policies and procedures adopted by the company for ensuring orderly and efficient conduct of its business, including adherence to company's policy, safeguarding its assets, prevention and detection of frauds and errors and completeness of accounting records and timely preparation of financial statements, the Board has satisfied itself that the company has laid down internal financial controls, commensurate with size of the company and that such internal financial controls are broadly adequate and are operating effectively.

25. Corporate Social Responsibility

information on the composition of the corporate social Responsibility (CSR) committee is provided in the corporate Governance Report that forms part of this annual report. furthermore, as required by section 135 of the Act, and the rules made thereunder, additional information on the policy and implementation of CSR activities by your company during the year are provided in Annexure 8 to this report. Business Responsibility Report under clause 55 of the Listing Agreement is not applicable to the company since it was not among the top 100 listed companies by market cap as of March 31, 2012.

26. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

the particulars prescribed under section 134(3)(m) of the Act, read with rule 8 of the companies (Accounts) Rules, 2014, are set out in Annexure 9 to this report.

27. Details of Significant and Material Orders Passed By the Regulators or Courts Impacting the Going Concern Status and Company's Operations in Future

the company has not received any significant or material order passed by regulators or courts impacting the company's going concern status or the company's operations in future.

28. Disclosure as Required Under Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 the company has implemented a prevention of sexual harassment policy, in line with the requirements of the sexual harassment of Women at Workplace (prevention, prohibition and Redressal) Act, 2013 (SHWWA). An internal complaints committee (ICC) has been set up to redress complaints received regarding sexual harassment, and on-going training is provided to employees as required by the SHWWA. During the financial year 2014-15 one complaint was received and disposed of by the ICC.

29. Directors' Responsibility Statement

pursuant to section 134 (5) of the Act, in relation to financial statements (together with the notes to such financial statements) for the year 2014-15, the Board of Directors report that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the Profit/ loss of the company for that period;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(iv) the Directors have prepared the financial statements on a going concern basis;

(v) the Directors have laid down internal financial controls to be followed by the company commensurate with the size and nature of its business and the complexity of its operations and that such internal financial controls are adequate and are operating effectively; and

(vi) the company has a system of getting reports of compliance periodically from the units and is also in the process of implementing formal systems to ensure compliance with the provisions of all applicable laws.

Your Directors place on record their sincere appreciation for the continued support from shareholders, customers, suppliers, banks and financial institutions and other business associates. A particular note of thanks to all employees of your company, without whose contribution, your company could not have achieved the year's performance.

By Authority of the Board

Dr. Nicholas Bodo Blazquez Anand Kripalu

Vice chairman Managing Director and

chief executive officer

Bangalore September 23, 2015


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting the Annual Report of your Company and the audited accounts for the year ended March 31, 2014.

FINANCIAL RESULTS

Rupees in Millions 2013-14 2012-13

The working of your Company for the year under review resulted in

* Profit/(Loss) from operations (6,210.528) 5,774.717 * Exceptional and other non-recurring items (43,216.262) (216.481) (49,426.790) 5,558.236 Less: * Depreciation 855.025 718.269 * Taxation 746.404 1,632.008 (including deferred tax) * Profit/(Loss) after tax (51,028.219) 3,207.960 Profit B/F from previous year 20,233.807 17,905.879 Profit/(Loss) available for appropriation (30,794.412) 21,113.839 Your Directors have made the following Appropriations :

General Reserve - 500.000 Dividend paid in respect to previous years 36.322 - Proposed Dividend - 326.987 Corporate Tax on Proposed Dividend - 53.045 Corporate Tax on Dividend paid 4.385 - Balance carried to the Balance Sheet (30,835.129) 20,233.807 EPS - Basic & Diluted (Rupees) (356.60) 24.53

In view of Loss, your Directors do not recommend any Dividend on the equity shares of the Company.

CAPITAL

The authorised capital of your Company remained unchanged at Rs.5,542,000,000/- divided into 395,000,000 equity shares of Rs.10/- each and 159,200,000 preference shares of Rs.10/- each.

The issued, subscribed and paid-up equity share capital of your Company stood increased from Rs.1,307,949,680/- divided into 130,794,968 equity shares of Rs.10/- each to Rs.1,453,277,430/- divided into 145,327,743 equity shares of Rs.10/- each consequent upon the issue and allotment of 14,532,775 equity shares of Rs.10/- each at a price of Rs.1,440/- per equity share on preferential basis to Relay B.V., an indirect wholly owned subsidiary of Diageo plc.

GLOBAL DEPOSITORY SHARES

Your Company had issued 17,502,762 Global Depository Shares (GDSs) representing 8,751,381 Equity Shares ranking pari-passu in all respects with the existing paid-up equity shares, with 2 GDSs representing 1 equity share of par value of Rs.10/- each at US$7.4274 per GDSs aggregating to US$ 130 mn. These GDSs are listed on the Luxembourg Stock Exchange.

As on August 29, 2014 there were outstanding GDSs of 13,83,254 representing 691,627 Equity Shares.

PERFORMANCE OF THE COMPANY

During the year under review, your Company has achieved a sales volume of over 120.7 Million cases (Previous year 123.70 Million cases). Sales of the Company''s brands in the Prestige and Above segment grew 15% in the fiscal year ended March 31, 2014 and stood at 33 million cases (Previous Year 28.7 million). For reasons which have been highlighted above and in quarterly communication following the declaration of results, viz. rising cost of inputs, forced curtailment of capacity in Tamil Nadu etc., your Company deliberately de-emphasised sales of its popular brands which recorded sales of 87.6 million cases, a drop of 8% from the previous year''s 95 million cases. Imputed turnover, i.e. the price at which the Company''s brands were billed from its manufacturing facilities (own/leased/contracted) and its warehouses, stood at Rs. 97,990.63 Million net of duties and taxes (Previous Year Rs. 93,862.90 Million) a rise of 4%. The growth in imputed turnover of the Company''s brands in the Prestige and Above category during the year was Rs.42,570 Million, up by 17% from the Rs. 35,806 Million recorded in FY 2012-13.

SUBSIDIARIES

As stated in the Annual Report 2012-13, Tern Distilleries Private Limited ("Tern") has made a reference to the Board for Industrial and Financial Reconstruction ("BIFR") under Section 15 of Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA"), in view of the erosion of the entire net worth of Tern. The BIFR at the hearing held on May 30, 2013 has declared Tern as a sick industrial company and asked Tern to submit a draft rehabilitation scheme ("DRS"). Tern has filed a DRS along with Scheme of Amalgamation for amalgamation of Tern with your Company, which was subsequently approved by the shareholders of Tern and your Company at their respective Extraordinary General Meetings held on March 18, 2014. The BIFR had directed Tern to submit a revised DRS, which has since been submitted by Tern and the matter is pending before the BIFR.

As stated in the Annual Report 2012-13, Sovereign Distilleries Limited ("SDL"), a wholly owned subsidiary of the Company has made a reference to the BIFR under Section 15 of SICA, in view of the erosion of the entire net worth of SDL. The BIFR has appointed IDBI Bank Limited to conduct a Special Investigative Audit ("SIA") of SDL as per the provisions of Section 16(2) of SICA. M/s. Dagliya & Company, appointed by IDBI Bank Limited, have conducted the SIA and submitted its report and the matter is pending before the BIFR.

As stated in the Annual Report 2012-13, Pioneer Distilleries Limited ("PDL"), a subsidiary of the Company has made a reference to the BIFR under Section 15 of SICA, in view of the erosion of the entire net worth of PDL. The BIFR has appointed IDBI Bank Limited to conduct a SIA of PDL as per the provisions of Section 16(2) of SICA. IDBI Bank Limited has appointed M/s. Dagliya & Company to conduct the SIA ordered by BIFR and the SIA is in process.

During the year under review, Relay B.V. (as acquirer) along with Diageo plc and your Company (as persons acting in concert) made an open offer to the public shareholders of PDL for the acquisition of up to 2,466,168 equity shares representing 18.42% of the paid-up capital of PDL at a price of Rs.64.02 in compliance with the provisions of Regulations 3(1), 4 and 5 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. However, the total equity shares validly tendered by the public shareholders were only 639,185 constituting 4.77% of the equity shares, which were acquired by your Company. Consequently, the shareholding of your Company in PDL increased from 81.58% to 86.35%. As per the listing agreement, your Company is required to bring down its shareholding to a level of 75% of the total paid up capital of PDL before September 25, 2014. Your Directors are taking necessary steps to bring down the shareholding to 75%.

The Board of Directors have decided to amalgamate SW Finance Co. Limited, a wholly owned subsidiary of the Company, with your Company and necessary applications have been submitted to BSE Limited, National Stock Exchange of India Limited and Bangalore Stock Exchange Limited pursuant to the provisions of the Listing Agreement with the Stock Exchanges for obtaining their observation letter / approval for the amalgamation. While observation letter from Bangalore Stock Exchange Limited has been received, observation letters from other two Stock Exchanges are awaited.

During the year under review, your Directors recommended to the board of directors of United Spirits (Great Britain) Limited ("USGBL"), an indirect wholly owned subsidiary of the Company, to consider approving the sale of the entire issued share capital of Whyte and Mackay Group Limited, that is presently owned by USGBL, to Emperador UK Limited, a subsidiary of Emperador Inc., for an enterprise value of £430 million, in accordance with the terms and subject to the conditions set out in a share sale and purchase agreement between USGBL, Emperador UK Limited and Emperador Inc. The board of directors of USGBL has, on May 9, 2014, approved the sale and entered into the share sale and purchase agreement with Emperador UK Limited and Emperador Inc. Pursuant to Section 180 of the Companies Act, 2013, postal ballot was conducted by the Company to seek the approval of the members in this regard by way of a special resolution. The estimated aggregate net proceeds of sale are approximately £408 million, however the actual proceeds of sale could fluctuate depending upon the adjustments to be made pursuant to the said share sale and purchase agreement. The net proceeds of the sale will be utilised by USGBL to repay facilities and also the associated costs of the sale. However, the net proceeds will be insufficient to repay an intra-USL group loan (owing to USL). As per the mandatorily applicable accounting standards, your Company has provided in its books of accounts regarding impairment of its investment in USL Holdings Limited, BVI, a wholly owned overseas subsidiary of your Company, and also for a part of the said intra-USL group loan, and subject to prior approval of the RBI, your Company will be required to write-off the amounts so provided for upon completion of the sale. The said provisioning inter alia has resulted in erosion of fifty two per cent of the Company''s peak net worth during the immediately preceding four financial years, and consequently the Board is required to file a report in relation to the Company under Section 23 of the SICA. However, the Board believes that this report, if required to be filed, would arise as a technical requirement under SICA principally due to the exceptional and one-time write off and does not reflect upon the long term prospects of the Company. The special resolution was passed with requisite majority and the result of the postal ballot was announced on July 4, 2014.

Post the financial year under review, Whyte and Mackay Singapore Pte Limited, an indirect wholly owned overseas subsidiary of your Company, has changed its name to United Spirits Singapore Pte Limited.

In terms of Circular No.2/2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs, Government of India, a general exemption has been granted from the compliance of Section 212 of the Companies Act, 1956, requiring holding companies to attach with their balance sheet, a copy of the balance sheet, profit and loss account and other documents of each of its subsidiaries, provided the Board of Directors of such holding companies give consent, by way of a resolution, for not attaching the balance sheet of their subsidiary companies and certain other conditions prescribed by the Ministry in this regard are complied with.

The Board of Directors of your Company, at their meeting held on September 03, 2014 have given their consent for not attaching, inter alia, the balance sheet, profit and loss account etc. of its subsidiary companies since your Company has complied with all the conditions prescribed by the Ministry vide its circular dated February 8, 2011, in this regard.

In view of the above, the balance sheet, statement of profit and loss and other documents/details of the subsidiary companies, which are required to be attached with the balance sheet of the Company, are not attached. The annual accounts of the subsidiary companies and the related detailed information will be made available to any shareholder of the Company and subsidiary companies seeking such information at any point in time. The annual accounts of the subsidiary companies will also be kept for inspection by any shareholder at the respective registered offices of the Company and the subsidiary companies concerned, during the business hours on any working day.

The accounting year of United Spirits Nepal Private Limited ("USNPL"), your Company''s subsidiary in Nepal, is from mid- July to mid-July every year. Accordingly, accounting year of 2012-13 of USNPL ended on July 15, 2013 and the accounting year 2013-14 ended on July 15, 2014 i.e., after the end of the close of the financial year of the Company, which ended on March 31, 2014. For the purpose of compliance under Accounting Standard - 21, relating to "Consolidated Financial Statement," the Accounts of USNPL has been drawn up to March 31, 2014.

For the purpose of compliance under Accounting Standard - 21, "Consolidated Financial Statement" presented by the Company includes the financial information of its subsidiaries.

HIVING OFF OF THE COMPANY''S DISTILLERY AT POONAMALLEE, IN TAMIL NADU

During the year under review, your Company has decided to hive-off the Company''s Distillery Unit situated at Poonamallee, Chennai, Tamil Nadu to Enrica Enterprises Private Limited, Chennai. Your Company has received the necessary observation letters/approvals from the concerned stock exchanges. The Company Petitions, along with the Scheme of Arrangement ("Scheme"), have been filed before the Hon''ble High Court of Karnataka at Bangalore and Hon''ble High Court of Madras, Tamil Nadu pursuant to Sections 391 to 394 and other relevant provisions of the Companies Act, 1956. While sanction from the Hon''ble High Court of Madras has been received, the sanction from the Hon''ble High Court of Karnataka at Bangalore is awaited. The hive-off, however, will be effective only after the Scheme is sanctioned by both the Hon''ble High Courts.

INVESTMENT IN THE EQUITY CAPITAL OF THE COMPANY BY RELAY B.V., NETHERLANDS

As stated in the last year''s Directors'' Report, Relay B.V., an indirect wholly owned subsidiary of Diageo plc, had acquired 14,532,775 equity shares of Rs.10/- each at a price of Rs.1,440/- per equity share by way of subscribing to a preferential allotment of equity shares in the Company in accordance with the terms of a Preferential Allotment Agreement entered into between Diageo plc, Relay B.V. and the Company on November 9, 2012. Separately, Relay B.V. acquired 58,668 equity shares of the Company from the public shareholders of the Company pursuant to an open offer made by Relay B.V. together with Diageo plc and others as persons acting in concert, in accordance with the provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. On July 4, 2013, Relay B.V. acquired a further 21,767,749 equity shares from United Breweries (Holdings) Limited, Kingfisher Finvest India Limited, SWEW Benefit Company, Palmer Investment Group Limited and UB Sports Management Overseas Limited in accordance with the terms of a Share Purchase Agreement ("SPA") dated November 9, 2012. As on July 4, 2013, Relay B.V. held 36,359,192 equity shares representing 25.02% of the paid up equity capital of the Company.

Further, Relay B.V. acquired 1,967,940 equity shares constituting 1.35 % and 3,500,000 equity shares constituting 2.41% of the paid-up equity capital of the Company by way of on-market purchases on November 28, 2013 and February 4, 2014 respectively. Relay B.V. further acquired 37,785,214 equity shares constituting 26% of the paid-up equity capital of the Company from the public shareholders of the Company pursuant to an open offer made by Relay B.V. together with Diageo plc as a person acting in concert (which open offer completed on July 2, 2014). With these acquisitions, Relay B.V. now holds 54.78% of the paid up equity capital of your Company.

Consequent to the above acquisitions, your Company has become the direct subsidiary of Relay B.V. and an indirect subsidiary of Diageo plc.

The acquisition by Relay B.V. of 3,459,090 equity shares representing 2.38% of the paid up equity capital of the Company held by USL Benefit Trust (of which the Company is the sole beneficiary) in terms of the SPA has not yet been completed, due to refusal of one of the lenders of the Company (IDBI Bank Limited) to instruct the security trustee to release the pledge over those shares, in spite of repayment of entire outstanding loan by the Company. The Company has filed a writ petition against IDBI Bank Limited and the security trustee before the Hon''ble High Court of Karnataka at Bangalore seeking appropriate reliefs in this matter (including release of pledge over the said shares) and the matter is pending before the Hon''ble High Court.

ASSET PURCHASE AGREEMENT WITH JP IMPEX INCORP

Your Company has entered into an Asset Purchase Agreement with JP Impex Incorp ("Firm"), a partnership firm having its principal place of business at #219/11, J P Corp, Bellary Road, Sadashivanagar, Bangalore - 560 080 and factory at Plot No.82/3 and 82/2 in Survey No.95 in the Nandur Kesaratagi Industrial Area, Nandur Hobli, Kesaba Teluka, Gulbarga District, Gulbarga, Karnataka ("Factory"), inter alia, for purchasing from the Firm, the building, plant and machinery, licences, transfer of lease hold rights on the land, all relating to the Factory. The purchase of the above assets would facilitate an increase in the Company''s licensed Indian Made Foreign Liquor production capacity in the State of Karnataka, which the Company proposes to use for Tetra Pak production and availing logistical advantage. The closing of the transaction is subject to the fulfilment of certain conditions precedents by the Firm.

PROSPECTS

With over half of the Indian population under the age of 25 and more and more young Indians joining the work force with more disposable income in their hands at ages earlier than the previous generation, the Indian spirits industry is expected to see a large increase in its target consumers and hence continue on the growth path. The increasing affluence at early stages of the working life of the average Indian reinforces our confidence that premiumization in all spheres including in our industry is here to stay. The only hindrance to such continued growth and moving up the value chain could be the unbridled efforts of the State Governments to continue enhancing duties and taxes.

In a scenario where nearly three out of every four cases is sold by the Company to parastatal organisations, price increases are not easy to come by. However, your Company continues to be in the forefront of discussions with these agencies to push through price increases. Notwithstanding this, your Company has managed price increases in various states through a mix of upgraded product launches at higher price points and judicious price corrections in certain markets as also through reduced trade spends.

Your Company has also been in the forefront of discussions with the Central Government seeking coverage of the Alcoholic Beverages Industry under GST and has made out a strong case for such inclusion. The new Government in power at the Centre seems committed to resolving the impasse with the States on the question of compensation arising from the introduction of GST. In all probability the Government may push through a Constitutional Amendment for the introduction of an all-encompassing GST - what is unclear, however, is whether the States have the financial muscle to follow suit and introduce an all-encompassing GST rules and regulations. If the Alcobev industry is excluded from levy of the tax on its finished product, it will end up with cost pressures owing to an increased input cost which will now be subject to 20% GST compared to a 12-odd % excise duty and a 2% CST.

Input costs, particularly of the key ingredient - Extra Neutral Alcohol - are likely to harden in a mandatory 10% ethanol blending scenario and with price increases not easy to come by, margins will continue to be under pressure. Your Company is however confident that it is best poised even in this difficult scenario to push its premiumization agenda and drive up margins through innovative strategies.

DEPOSITORY SYSTEM

The trading in the equity shares of your Company is under compulsory dematerialisation mode. As on August 29, 2014, equity shares representing 98.58% of the equity share capital are in dematerialised form. As the depository system offers numerous advantages, members are requested to take advantage of the same and avail of the facility of dematerialisation of the Company''s shares.

DIRECTORS

As per the provisions of the Companies Act, 2013, Dr. Vjay Mallya retires by rotation and being eligible, offers himself for re-appointment. Mr. Gilbert Ghostine who retires by rotation at the forthcoming Annual General Meeting, has not offered himself for re-appointment. For the time being, the vacancy caused by such retirement has not yet been filled up. Mr. G.N. Bajpai, who was earlier appointed as Independent Director of the Company and liable for retirement by rotation under the Companies Act, 1956, and proposed to be appointed as Independent Director, not liable to retire by rotation, at the forthcoming Annual General Meeting, pursuant to the provisions of Sections 149, 150(2) and 152 read with Schedule IV and other applicable provisions of the Companies Act, 2013 and rules made thereunder, has not offered himself for re-appointment. For the time being, such vacancy caused has not yet been filled up.

Mr. Ashok Capoor tendered his resignation as Managing Director and Director on the Board of the Company with effect from May 1, 2014 and has assumed the role of President

- Strategy of the Company with effect from May 01, 2014 and your Directors place on record their appreciation of the valuable services rendered by Mr. Ashok Capoor during his tenure as Managing Director of your Company.

Ms. Renu Sud Karnad, an Independent Director appointed at the Board Meeting held on July 4, 2013 has tendered her resignation as a Director of the Company with effect from February 25, 2014 and the Directors place on record their appreciation of the valuable services rendered by Ms. Renu Sud Karnad during her tenure as an Independent Director of the Company.

Dr.(Mrs.) Indu Shahani was appointed as an Additional Director in the capacity of Independent Director at the Board Meeting held on August 14, 2014, who will hold office in terms of Section 161 of the Companies Act, 2013 up to the forthcoming Annual General Meeting. A notice in writing has been received from a Member signifying the intention to propose the appointment of Dr.(Mrs.) Indu Shahani as a Director at the forthcoming Annual General Meeting. In terms of Sections 149, 150(2) and 152 read with Schedule IV and other applicable provisions of the Companies Act, 2013 and rules made thereunder, she is proposed to be appointed as an Independent Director of the Company, not liable to retire by rotation, for a period of five consecutive years from September 30, 2014 to September 29, 2019.

Mr. Anand Kripalu who was appointed as a Chief Executive Officer (CEO) of the Company w.e.f. May 1, 2014, was appointed as an Additional Director of the Company w.e.f. August 14, 2014 and as Managing Director and Chief Executive Officer of the Company for a period of five (5) years. The appointment of and remuneration payable to Mr. Anand Kripalu has been approved and recommended by the Nomination and Remuneration Committee of Directors and is being placed for the approval of the Members at the forthcoming Annual General Meeting. Mr. Anand Kripalu will hold office in terms of Section 161 of the Companies Act, 2013 up to the date of the forthcoming Annual General Meeting. A notice in writing has been received from a Member signifying his intention to propose the appointment of Mr. Anand Kripalu as a Director at the forthcoming Annual General Meeting.

Mr. Sudhakar Rao and Mr. D. Sivanandhan, who were earlier appointed as Independent Directors of the Company on July 04, 2013 and were liable for retirement by rotation under the Companies Act, 1956, are proposed to be appointed as Independent Directors, not liable to retire by rotation, pursuant to the provisions of Sections 149, 150(2) and 152 read with Schedule IV and other applicable provisions of the Companies Act, 2013 and rules made thereunder, for a period of five years from September 30, 2014 to September 29, 2019. The Company has received notices from the Members signifying their intention to propose their appointment as Independent Directors at the forthcoming Annual General Meeting.

Mr. Arunkumar Ramanlal Gandhi and Mr. Vikram Singh Mehta, who were earlier appointed as Independent Directors of the Company on July 04, 2013 and August 19, 2013 respectively and were liable for retirement by rotation under the Companies Act, 1956 and proposed to be appointed as Independent Directors, not liable to retire by rotation, at the forthcoming Annual General Meeting pursuant to the provisions of Sections 149, 150(2) and 152 read with Schedule IV and other applicable provisions of the Companies Act, 2013 and rules made thereunder, have not offered themselves for re-appointment. For the time being, such vacancies caused have not yet been filled up.

In view of loss during the financial year ended March 31, 2014, the remuneration paid during the financial year under review to Mr. Ashok Capoor, Managing Director and Mr. P.A. Murali, Executive Director have been considered as "minimum remuneration" pursuant to Section 269 and 309 read with Schedule XIII of the Companies Act, 1956. As the effective capital of the Company is positive, there is no necessity for seeking approval of the Members afresh as payment of "minimum remuneration" in case of inadequacy / no profit during any financial year during their tenure of appointments have been approved by the shareholders earlier. Since Mr. Ashok Capoor and Mr. P.A. Murali both qualify as "Professional Managerial Persons", the approval of the Central Government is also not required pursuant to General Circular No.46/2011 (No.14/03/2011/CL.VII) issued by the Ministry of Corporate Affairs dated July 14, 2011.

AUDITORS

M/s. B.S.R. & Co. LLP, Chartered Accountants, Statutory Auditors of your Company, will hold office up to the conclusion of the forthcoming Annual General Meeting ("AGM") of the Company and are eligible for re-appointment. In terms of the provisions contained in the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the appointment of Statutory Auditors is proposed for a period of five years from the conclusion of the fifteenth Annual General Meeting till the conclusion of the twentieth Annual General Meeting. Their appointment during the aforesaid term of five years shall be subject to ratification by the Members at every subsequent Annual General Meeting. Your Company has received a written confirmation from them to the effect that their appointment, if made, would satisfy the criteria provided in Section 141 of the Companies Act, 2013 for their appointment. The Board recommends the re-appointment of M/s. B.S.R. & Co. LLP, Chartered Accountants as the Statutory Auditors of the Company from the conclusion of the ensuing AGM till the conclusion of the twentieth AGM subject to the remuneration as may be recommended by the Audit Committee in consultation with the Auditors and that such remuneration may be paid on a progressive billing basis to be agreed upon between the Auditors and the Board of Directors.

BOARD OF DIRECTORS'' RESPONSES TO OBSERVATIONS, QUALIFICATIONS AND ADVERSE REMARKS IN AUDITOR''S REPORT

The Statutory Auditors have qualified their opinion in relation to the matters specified in Notes 26(a), 26(b), 26(c) and 30(f) of the Financial Statement as follows:

1. Auditor''s observations under Paragraph 1 of the Auditor''s report to the financial statement (”the Statement"): As stated in Note 26(a) to the Statement, certain parties who had previously given the required undisputed balance confirmations for the year ended 31 March 2013, alleged during the current year, that they have advanced certain amounts to certain alleged UB Group entities and linked the confirmation of amounts due to the Company to repayment of such amounts to such parties by the alleged UB Group entities. Also, some of these parties stated that the dues to the Company will be paid / refunded only upon receipt of their dues from such alleged UB Group entities. These dues of such parties are on account of advances by the Company in the earlier years under agreements for enhancing capacity, obtaining exclusivity and lease deposits in relation to Tie-up Manufacturing Units; agreements for specific projects; or dues owing to the Company from customers. These claims received in the current year may indicate that all or some of such amounts may have been improperly advanced from the Company to such parties for, in turn, being advanced to the UB Group entities. However, this can only be confirmed after a detailed inquiry. Based on the findings of the preliminary internal inquiry by the Management, under the instructions of the Board of Directors; and Management''s assessment of recoverability, an aggregate amount of Rs.6,495.5 million has been provided in the Statement and has been disclosed as prior period items. Based on its current knowledge, the Management believes that the aforesaid provision is adequate and no additional material adjustments to the Statement are likely to be required in relation to this matter. As stated in paragraph 4 below, the Board of Directors have instructed the Management to undertake a detailed inquiry into this matter. Pending such inquiry, we are unable to comment on the nature of these transactions; the provision established; or any further impact on the Statement.

Directors'' Response: Information and explanation on the qualification on paragraph 1 of the audit report is provided in Note 26(a) to the Statement. In particular, as stated in Note 26(a), the transactions referred to in the said Note are on account of amounts that were advanced by the Company in the earlier years and were duly confirmed by the relevant parties as payable to the Company in such earlier years, but were disputed by such parties for the first time when the Company sought balance confirmations from them for the year ended 31 March 2014. This was brought to the attention of the Board after 31 March 2014. Accordingly, as mentioned in Note 26(a), as a matter of prudence, the amounts mentioned in the Note 26(a) have now been provided for. Since the transactions referred to in the said Note 26(a) were entered in to prior to 31 March 2013, they have been reflected as prior period items in the financial statements.

Further, as mentioned in Note 26(a), the Board has: (i) directed a detailed and expeditious inquiry into this matter and (ii) authorized the initiation of suitable action and proceedings as considered appropriate by the Managing Director and Chief Executive Officer (MD) for recovering the Company''s dues. Appropriate other action will also be taken commensurate with the outcome of that inquiry.

2. Auditor''s observations under Paragraph 2 of the Auditor''s report to the financial statement: As stated in Note 30(f) to the Statement, subsequent to the balance sheet date, the Company received a letter dated 5 May 2014 from the lawyers of an entity (Alleged Claimant) alleging that the Alleged Claimant had advanced loans amounting to Rs.2,000 million to Kingfisher Airlines Limited (herein after referred to as "KFA"), a UB Group entity in an earlier year on the basis of agreements, executed in December 2011 and January 2012, through which the Company was alleged to have created a lien on certain investments in favour of the Alleged Claimant as security for the aforesaid loans. The letter alleged that KFA had defaulted in repayment of the aforesaid loans as well as interest of Rs.790 million due thereon and demanded that the Company should pay the aforesaid amounts and pending such repayments, create a valid pledge on the specified investments. The Company responded to the aforesaid letter vide its letters dated 3 June 2014 and 28 July 2014, wherein the Company denied knowledge of the purported loan transactions and the purported agreements for the creation of security on such investments held by the Company. A letter dated 31 July 2014 was received from the Alleged Claimant wherein they have stated that the notice sent earlier did not take into account an addendum to the loan agreement; and after examining the aforesaid addendum, they have no claim or demand of any nature against the Company. In September 2014, scanned copies of the purported agreements and certain related documents were furnished to the Company. These documents indicate that while the agreements may have sought to create a lien on certain investments of the Company; subsequently the Alleged Claimant and KFA sought to negotiate the release of the lien, which was formalised vide a second addendum in September 2012.

The Management has represented to us that the Company had no knowledge of these purported agreements; that the Board of Directors of the Company have not approved any such purported agreements; and it is not liable under any such purported agreements. We are unable to conclude on the validity of these agreements; any required compliance with the provisions of the Companies Act, 1956; and any consequential impact of the same.

Directors'' Response: Information and explanation on the qualification at paragraph 2 of the audit report is provided in Note 30(f) to the Statement. In particular, as stated in Note 30(f), the claim is based on documents purportedly executed by the Company in the months of December 2011 and January 2012. However, the claim was received by the Company only after the year ended 31 March 2014. This matter was only thereafter brought to the knowledge of the Board by the Management. A letter dated 31 July 2014 was received from the Alleged Claimant wherein they have stated that the notice sent earlier did not take into account an addendum to the loan agreement; and after examining the aforesaid addendum, they have no claim or demand of any nature against the Company. Subsequently, in September 2014, the Company obtained scanned copies of the purported agreements (including the purported power of attorney) and various communications between KFA and the Alleged Claimant. These documents indicate that while the purported agreements may have sought to create a lien on certain investments of the Company, subsequently, the Alleged Claimant and KFA sought to negotiate the release of the purported obligation to create such lien, which was formalised vide a second addendum in September 2012.

The Management has verified from a perusal of the minutes of meetings of the board of directors of the Company that the board of directors at the relevant time had not approved or ratified any such documents. Accordingly, the Company has, in its responses to the Alleged Claimant, disputed the alleged claim and denied having created the alleged security or having executed any document in favour of the Alleged Claimant. Further, the Management, based on legal advice received, does not expect any liability or obligation to arise on the Company out of these allegations.

3. Auditor''s observations under Paragraph 3 of the Auditor''s report to the financial statement: As stated in Note 26(b) to the Statement, the Company and its subsidiaries had various pre-existing loans / advances / deposits due from United Breweries (Holdings) Limited (hereinafter referred to as "UBHL"). During the current year, pursuant to a previous resolution passed by the Board of Directors on 11 October 2012, these dues (together with interest) were consolidated into an unsecured loan aggregating Rs.13,374 million vide an agreement dated 3 July 2013. The loan has been granted for a period of 8 years with a moratorium period of 6 years. Certain lenders have filed petitions for winding-up against UBHL. UBHL has provided guarantees to lenders and other vendors of Kingfisher Airlines Limited, which have been invoked and are currently being challenged in courts. The Company has also filed its affidavit opposing the aforesaid winding-up petition and the matter is sub-judice. Based on its assessment of the recoverability of the loan, the Company has made a provision of Rs.3,303 million against the loan outstanding and has not recognised the interest income of Rs.963 million on the loan. Given the various uncertainties involved with respect to the litigations involving UBHL as aforesaid and the extended period for repayment of the loan, we are unable to comment on the level of provision established.

Directors'' Response: Information and explanation on the qualification at paragraph 3 of the audit report is provided in Note 26(b) to the Statement. In particular, as stated in Note 26(b), the Management has performed an assessment of the recoverability of the loan and has reviewed valuation reports in relation to UBHL prepared by reputed independent valuers that were commissioned by UBHL, and shared by UBHL with the Company. As a result of the above mentioned assessment and review by the Management, in accordance with the recommendation of the Management, the Company, as a matter of prudence, has not recognized interest income of Rs.963 Million and has provided Rs.3,303 Million towards the principal outstanding as at 31 March 2014. The Management believes that it should be able to recover, and no further provision is required for the balance amount of Rs.9,957 Million, though the Company will attempt to recover the entire amount of Rs.14,223 Million. However, the Management will continue to assess the recoverability of the said loan on an ongoing basis.

Further, the Board has directed the management to review the underlying loan agreement(s) and / or other relevant documents ("Loan Documents"), to inter-alia assess: (i) whether any event of default(s) under the Loan Documents has occurred on the part of UBHL; (ii) the legal rights and remedies which the Company has under the Loan Documents; (iii) whether the Company should invoke any of the remedies available to it under the Loan Documents (including recalling of the entire loan); and (iv) whether there is any scope of renegotiating the terms and conditions under the Loan Documents.

In this regard, the management should expeditiously take all the necessary steps to fully protect the interest of the Company and shareholders.

4. Auditor''s observations under Paragraph 4 of the Auditor''s report to the financial statement: As stated in Note 26(c) to the Statement, the Board of Directors have instructed the Management to undertake a detailed inquiry in relation to the matters stated in the paragraphs above; the possible existence of any other transaction of a similar nature; the role of individuals involved; and potential non-compliance (if any) with the provisions of the Companies Act, 1956 and other regulations applicable to the Company. The Board has also instructed the Management to engage independent advisers and specialists, as required, for the inquiry. As the inquiry is yet to be carried out, we are unable to comment on any further adjustment that could be identified as a result of the inquiry; its resultant impact on the Statement; and any potential non-compliances with the provisions of the Companies Act, 1956 and other regulations.

Directors'' Response: Information and explanation on the qualification at paragraph 4 of the audit report is provided in Note 26(c) to the Statement. In particular, as stated in Note 26 (c) above, in addition to commissioning the inquiry, the Board has also authorized the MD to take suitable action and proceedings as considered appropriate by him for recovering the Company''s dues. Appropriate other action will also be taken commensurate with the outcome of the inquiry commissioned by the Board. On the basis of the current knowledge and information of the Management, the Management believes that no additional material adjustments to the financial statements are likely to be required in relation to the matters mentioned above in Notes 26(a), 26(b) and 30(f). However, pending completion of the detailed inquiry mentioned above, the Company is unable to determine whether, on completion of such detailed inquiry, there could be any impact on the financial statements.

5. Auditor''s observations under Paragraph 5 of the Auditor''s report to the financial statement: Though the observations in paragraph 1 above relate to claims received in the current year, the underlying transactions were entered into in earlier years. Accordingly, the financial statements of those earlier years and consequently the opening balances may be incorrectly stated to that extent. Further, the detailed inquiry as referred to in paragraph 4 above may result in further adjustments that may have an impact on the opening balances.

Directors'' Response: Information and explanation on the qualification at paragraph 5 of the audit report is provided in Note 26(a) to the Statement. In particular, as stated in Note 26 (a), while the claims referred to in Note 26(a) were received only when the Company sought balance confirmations from the relevant parties for the year ended 31 March 2014, the transactions referred to in the said Note were entered in to prior to 31st March 2013 and therefore, they have been reflected as prior period items in the financial statements. Further, as stated in Note 26(a) (iii), the Management has stated to the Board that, on the basis of their current knowledge, no additional material adjustments to the financial statements are likely to be required in relation to the matters mentioned in the said Note. As mentioned in Note 26(c) to the financial statement, the Board has commissioned the inquiry referred to in Note 26(c). Upon completion of the inquiry, the Board will consider impact on the financial statements, if any. 6(a)Auditors observation under Paragraph (iii) (a) of Annexure to the Auditor''s Report: According to the information and explanations given to us, the Company has granted an unsecured loan to a company covered in the register maintained under Section 301 of the Companies Act, 1956 (''the Act'') by way of conversion of certain pre-existing loans / advances / deposits due to the Company and its subsidiaries (refer paragraph 3 under ''basis for qualified opinion''). The year-end balance of the loan and the maximum amount outstanding during the year amounted to Rs.13,374 million.

Further, as mentioned in paragraph 1 under ''basis for qualified opinion'', certain parties alleged that they have advanced certain amounts to certain alleged UB Group entities and linked the confirmation of amounts due to the Company to repayment of such amounts to such parties by the alleged UB Group entities. Also, some of these parties stated that the dues to the Company will be paid / refunded only upon receipt of their dues from such alleged UB Group entities. Considering the matters disclosed in paragraphs 1 and 4 of ''basis for qualified opinion'', we are unable to comment whether any such arrangements represent transactions with any company/ firm/ other party covered in the register maintained under Section 301 of the Act.

Directors'' Response: Information and explanation on the qualification at paragraph (iii)(a) of Annexure to the Auditor''s report is provided in Note 26(a) to the Statement. Further, the Management has certified to the Board that, on the basis of the Management''s current information, particulars of contracts or arrangements that are required to be entered in the register maintained under section 301 of the Companies Act, 1956 (the Act) have been so entered. As mentioned in Note 26(c) to the financial statement, the Board has ordered a detailed and expeditious inquiry in relation to the matters disclosed in paragraphs 1 and 4 of ''basis for qualified opinion'' in the auditor''s report. On completion of such inquiry, appropriate action if any will be taken.

6(b)Auditor''s observation under Paragraph (iii)(b) of Annexure to Auditor''s Report :

In our opinion, the rate of interest and other terms and conditions on which the above unsecured loan has been granted to the company covered in the register maintained under Section 301 of the Act as stated in sub-clause (a) above, are prima facie, prejudicial to the interest of the Company.

Based on its assessment of recoverability, the Company has during the current year, made a provision of Rs.3,303 million against the loan and has not recognised any interest income (amounting to Rs.963 million on the said loan).

Further, as mentioned in paragraph 1 under ''basis for qualified opinion'', a provision of Rs.6,495.4 million has been made with respect to amounts due from certain parties who alleged that they have advanced certain amounts to alleged UB Group entities.

Directors'' Response: Management informed the Board that: (i) pursuant to a previous resolution passed by the board of directors of the Company on 11 October 2012, certain dues (together with interest) aggregating to Rs.13,374 Million were consolidated into, and recorded as, an unsecured loan by way of an agreement entered into between the Company and UBHL on 3 July 2013; (ii) the interest rate of 9.5% p.a. was in accordance with Section 372A of the Companies Act, 1956, read with the circular issued by the Reserve Bank of India publishing the bank rate in terms section 49 of the Reserve Bank of India Act, 1934.

The management and the nominee directors of the controlling shareholder have informed the Board that they will take all the necessary steps within their power and authority as management and directors of the Company to fully protect the interest of the shareholders in this regard.

Further, the Board has directed the management to review the underlying loan agreement(s) and / or other relevant documents ("Loan Documents"), to inter-alia assess: (i) whether any event of default(s) under the Loan Documents has occurred on the part of UBHL; (ii) the legal rights and remedies which the Company has under the Loan Documents; (iii) whether the Company should invoke any of the remedies available to it under the Loan Documents (including recalling of the entire loan); and (iv) whether there is any scope of renegotiating the terms and conditions under the Loan Documents.

In this regard, the management should expeditiously take all the necessary steps to fully protect the interest of the Company and shareholders.

6(c) Auditor''s observation under Paragraph (iii)(c) of Annexure to Auditor''s Report: According to the information and explanations given to us, in case of the unsecured loan granted to the company covered in the register maintained under Section 301 of the Act as stated in sub- clause (a) above, no amounts were repayable during the year as per the terms of the loan agreement.

Considering the matters disclosed in paragraphs 1 and 4 under ''basis for qualified opinion'', we are unable to comment on the regularity in the receipt of the principal amount and interest relating to any other loan, secured or unsecured, that may have been granted to any company/ firm/ other party covered in the register maintained under Section 301 of the Act, as a result of the transactions disclosed in paragraphs 1 and 4 under ''basis for qualified opinion''.

Directors'' Response: The Management has certified to the Board that, on the basis of the Management''s current information, particulars of contracts or arrangements that are required to be entered in the register maintained under section 301 of the Act have been so entered. As mentioned in Note 8 to the Statement, the Board has ordered a detailed and expeditious inquiry in relation to the matters disclosed in paragraphs 1 and 4 of ''Basis for Qualified opinion'' in the auditor''s report. On completion of such inquiry, appropriate action, if any, will be taken.

6(d)Auditor''s observations under Paragraph (iii)(d) of Annexure to Auditors Report: According to the information and explanations given to us, in case of the unsecured loan granted to the company covered in the register maintained under Section 301 as stated in sub- clause (a) above, there is no overdue amount of more than Rupees one lakh in respect of the said loan.

Considering the matters disclosed in paragraphs 1 and 4 under ''basis for qualified opinion'', we are unable to comment whether there is overdue amount of more than Rupees one lakh in respect of any other loan, secured or unsecured, that may have been granted to any company/ firm/ other party covered in the register maintained under Section 301 of the Act, as a result of the transactions disclosed in paragraphs 1 and 4 under ''basis for qualified opinion''.

Directors'' Response: The Management has certified to the Board that, on the basis of the Management''s current information, particulars of contracts or arrangements that are required to be entered in the register maintained under section 301 of the Act have been so entered. As mentioned in Note 8 to the Statement, the Board has ordered a detailed and expeditious inquiry in relation to the matters disclosed in paragraphs1 and 4 of ''Basis for qualified opinion'' in the auditor''s report. On completion of such inquiry, appropriate action, if any, will be taken.

6(e)Auditor''s Observation under Paragraph (iv) of Annexure to the Auditors Report: In our opinion and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company''s specialised requirements and suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventories and fixed assets and with regard to the sale of goods and services during the year.

Except for the matter discussed below, we have not observed any major weaknesses in the internal control system during the course of the audit.

Considering the matters stated under ''basis for qualified opinion'', we are unable to comment on the adequacy of the internal control system of the Company at certain points in time during the earlier years with respect to such instances as stated under ''basis for qualified opinion''.

Directors'' Response: The matters stated under ''basis for qualified opinion'' relate to the period prior to 1 April 2013. The Management believes that the Company has an internal control system commensurate with the size of the Company and the nature of its business. The Board has instructed the Management that, depending on the outcome of the inquiry, further strengthening of the internal control system should be carried out, as may be required.

6(f)Auditor''s observation under Paragraph (v)(a) of Annexure to the Auditor''s Report: In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements entered into during the year referred to in Section 301 of the Act have been entered in the register required to be maintained under that Section.

However, considering the matters stated under ''basis for qualified opinion'', particularly paragraphs 1 and 4 thereof, we are unable to comment whether the particulars of any such contracts or arrangements that may result from the transactions disclosed under ''basis for qualified opinion'' and that need to be entered in the register maintained under Section 301 of the Act, have been so entered.

Directors'' Response: The Management has certified to the Board that, on the basis of the Management''s current information, particulars of contracts or arrangements that are required to be entered in the register maintained under section 301 of the Act have been so entered. As mentioned in Notes 26(a), 26(b) and 30(f) to the Statement, the Board has ordered a detailed and expeditious inquiry in relation to the matters disclosed in paragraphs 1 and 4 of ''Basis for qualified opinion'' in the auditor''s report. On completion of such inquiry, appropriate action, if any will be taken.

6(g)Auditor''s observation under Paragraph (vii) of Annexure to the Auditor''s Report: In our opinion, the Company has an internal audit system commensurate with the size and nature of its business during the year, except in relation to matters stated under ''basis for qualified opinion'', where the internal audit system needs to be strengthened.

Directors'' Response: The matters stated under ''basis for qualified opinion'' relate to the period prior to 1 April 2013. The Management believes that the Company has an internal audit system commensurate with the size of the Company and the nature of its business. The Board has instructed the Management that, depending on the outcome of the inquiry, further strengthening of the internal audit system should be carried out, as may be required.

6(h)Auditor''s observation under Paragraph (x) of Annexure to Auditor''s Report: The accumulated losses of the Company at the end of the year are not less than fifty percent of its net worth. The Company has incurred cash losses in the financial year. However, no cash losses were incurred in the immediately preceding financial year.

Directors'' Response: The Board notes that the accumulated losses of the Company at the end of the year is 52% of its peak net worth in the previous four financial years. Therefore, the Company will be required to file a report under Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), The Board believes this report under Section 23 would arise as a technical requirement under SICA and does not reflect upon the long term prospects of the Company given the profitable nature of its business and as the accumulated losses are principally on account of exceptional items during the year.

6(i) Auditor''s Observation under Paragraph (xi) of Annexure to Auditor''s Report: In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to a bank or to any financial institution except that in case of loans due to banks, principal amounting to Rs.410 million and interest amounting to Rs.474 million were repaid with a delay of up to 67 days and 37 days, respectively. The Company did not have any outstanding debentures during the year.

Directors'' Response: The Management has informed the Board that as of 31 March 2014, there were no outstanding defaults by the Company of any dues to a bank or any financial institution.

6(j) Auditor''s Observation under Paragraph (xvi) of Annexure to Auditor''s Report: In our opinion and according to the information and explanations given to us, the term loans taken by the Company and applied during the year were for the purpose for which they were raised.

However, considering the matters stated under ''basis for qualified opinion'', particularly paragraphs 1, 3 and 4, we are unable to comment whether any transactions relating to such matters represent application of term loans for the purpose for which they were raised.

Directors'' Response: The Management has certified to the Board that, on the basis of the Management''s current information, the Company has applied term loans taken by the Company during the year for the purpose for which they were raised. However, as mentioned in Note 26(c) to the Statement, the Board has ordered a detailed and expeditious inquiry in relation to the matters disclosed in paragraphs 1, 3 and 4 of ''basis for qualified opinion'' in the auditor''s report. On completion of such inquiry, appropriate action will be taken, as may be required.

6(k)Auditor''s Observation under Paragraph (xxi) of Annexure to Auditor''s Report: As mentioned in detail in paragraphs 1 and 2 under ''basis for qualified opinion'', wherein it is stated that:

(i) certain parties alleged that they have advanced certain amounts to certain alleged UB Group entities and linked the confirmation of amounts aggregating to Rs.5,846.9 million due to the Company to repayment of such amounts to such parties by the alleged UB Group entities. Further, some of these parties stated that the dues to the Company will be paid/refunded only upon receipt of their dues from such alleged UB Group entities; and

(ii) an alleged instance of a purported agreement to create a lien on certain investments of the Company as security against loans given by an Alleged Claimant to Kingfisher Airlines Limited (KFA) in earlier years was noted. However, in a letter dated 31 July 2014 from the Alleged Claimant, it was stated that the allegation made earlier did not take into account an addendum to the loan agreement; and after examining the aforesaid addendum and the agreement, the Alleged Claimant does not have any claim or demand of any nature against the Company. Subsequently, in September 2014, scanned copies of the purported agreements were furnished to the Management by KFA. The Management has represented to us that the Company had no knowledge of these purported agreements; that the Board of Directors of the Company have not approved any such purported agreements; and it is not liable under any such purported agreements.

Pending the completion of the inquiry as mentioned in paragraph 4 under ''basis for qualified opinion'', we are unable to conclude whether these instances can be termed as ''fraud'' and whether there are other instances of a similar nature.

Directors'' Response: See responses to paragraphs 1 to 3 of the Auditor''s Report to the Financial Statement. As mentioned in the note 30(f) to the Statement, the Board has directed a detailed and expeditious inquiry in relation to the matters disclosed in paragraphs 1 to 5 of "basis for qualified opinion" in the Auditors'' Report. Pending the completion of such inquiry, the Board is unable to conclude whether there have been any instances of fraud against the Company. Based on the findings of such inquiry, appropriate action, including action for recovery of the Company''s assets or amounts owing to the Company, will be taken.

LISTING OF SHARES OF THE COMPANY

The Equity Shares of your Company continue to remain listed with Bangalore Stock Exchange Limited, BSE Limited and National Stock Exchange of India Limited. The listing fees for the year 2014-15 have been paid to these Stock Exchanges.

CORPORATE GOVERNANCE

A report on the Corporate Governance is annexed separately as part of this report along with a certificate of compliance from a Company Secretary in practice. Necessary requirements of obtaining certifications/declarations in terms of Clause 49 have been complied with.

MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report is annexed and forms an integral part of the Annual Report.

FIXED DEPOSITS

Fixed Deposits from the public and shareholders, stood at Rs. 3909.371 Million as at March 31, 2014. Matured deposits for which disposal instructions had not been received from the depositors concerned stood at Rs.52.504 Million as at March 31, 2014. Of this, a sum of Rs.26.759 Million (as of August 29, 2014) has since been paid as per instructions received after the year end.

Effective January 1, 2014, your Company has discontinued acceptance / renewal of fixed deposits from the public and the shareholders.

Pursuant to the provisions of Companies Act, 2013 ("Act"), unless the Company complies with certain conditions as prescribed under Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014, Company has to repay the fixed deposits which were accepted under the erstwhile provisions of the Companies Act, 1956 within a period of one year from the date of the commencement of the provisions of Section 74 of the Act or from the date on which such payments are due, whichever is earlier. Section 74 of the Act came into force on April 1, 2014. The Board of Directors at their meeting held on August 1, 2014, decided to repay all the existing fixed deposits with the Company, including the fixed deposits which will mature after March 31, 2015 along with the interest as per the contracted terms, on or before March 31, 2015.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956, the Unclaimed Dividend and Deposits, remaining unclaimed and unpaid for a period of more than 7 years, have been transferred to the Investor Education and Protection Fund.

Necessary compliance under Rule 3 of the Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012 have been followed.

HUMAN RESOURCES

Employee relations remained cordial at all Company''s locations except at the Company''s plant at Palakkad in the State of Kerala, where lock-out for a Limited period was declared due to labour unrest and the lockout has since been lifted.

Particulars of employees drawing an aggregate remuneration of Rs.60,00,000/- or above per annum or Rs.5,00,000/- or above per month, as required under Section 217(2A) of the Companies Act, 1956, as amended, is annexed.

EMPLOYEE STOCK OPTION SCHEME

The Company has not offered any stock option to the Employees during the year 2013-14.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION, ETC.

In accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, the required information relating to Conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo is annexed.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, in relation to financial statements (together with the notes to such financial statements) for the year 2013-14, the Board of Directors reports that:

* in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

* accounting policies have been selected and applied consistently and that the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the loss of the Company for the year ended March 31, 2014;

* proper and sufficient care have been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

* The annual accounts have been prepared on a going concern basis.

* The statutory auditors have issued a qualified opinion on the financial statements of the Company for the financial year ended 31 March 2014. Such qualifications relate to transactions of earlier years, which have come to the knowledge of this Board only recently. The Board has initiated a detailed and independent inquiry as referred to in Note no 26 (c) of the Financial Statement. All further actions, including adjustments to the financial statements (including matters arising out of earlier years), if required, will be made in light of the result of the inquiry. However, based on the current knowledge and information of the management, it believes that no additional material adjustments to the financial statements are likely to be required in relation to the matters mentioned above. Subject to the foregoing, the Board has approved the annual financial statements, before the completion of the inquiry in the interest of the public shareholders.

THANK YOU

Your Directors place on record their sincere appreciation for the continued support from shareholders, customers, suppliers, banks and financial institutions and other business associates. A particular note of thanks to all employees of your Company, without whose contribution, your Company could not have achieved the year''s performance.

By Authority of the Board

ANAND KRIPALU P.A. MURALI Managing Executive Director Mumbai Director and Chief September 04, 2014 Executive Officer


Mar 31, 2013

The Directors have pleasure in presenting the Annual Report of your Company and the audited accounts for the year ended March 31, 2013.

FINANCIAL RESULTS

Rupees in Millions

2012-13 2011-12

The working of your Company for the year under review resulted in

- Profit from operations 5,774.717 5,755.508

- Exceptional and other (216.481) (108.163) non-recurring items

5,558.236 5,647.345

Less:

- Depreciation 718.268 608.453

- Taxation 1,632.008 1,610.951 (including deferred tax)

- Profit after tax 3,207.960 3,427.941

Profit B/F from previous year 17,905.879 15,357.972

Profit available for appropriation 21,113.839 18,785.912

Your Directors have made the following Appropriations :

General Reserve 500.000 500.000

Proposed Dividend 326.987 326.987

Corporate Tax on Proposed

Dividend 53.045 53.046

Balance carried to the Balance Sheet 20,233.807 17,905.879

EPS - Basic & Diluted (Rupees) 24.53 26.21

Your Directors propose a Dividend on the equity shares of the Company at the rate of Rs. 2.50 per share.

CAPITAL

The Authorised Capital of your Company remained unchanged at Rs.5,542,000,000/- divided into 395,000,000 Equity Shares of Rs.10/- each and 159,200,000 Preference Shares of Rs. 10/- each.

The issued, subscribed and paid-up Equity Share Capital of your Company also remained unchanged at Rs.1,307,949,680/- divided into 130,794,968 equity shares of Rs.10/- each.

GLOBAL DEPOSITORY SHARES

Your Company had issued 17,502,762 Global Depository Shares (GDSs) representing 8,751,381 Equity Shares ranking pari-passu in all respects with the existing paid up equity shares, 2 GDSs representing 1 equity share of par value of Rs.10/- each at US$7.4274 per GDSs aggregating to US$ 130 mn. These GDSs are listed on the Luxembourg Stock Exchange.

As on May 10, 2013, there was an outstanding of GDSs 889,758 representing 444,879 equity shares.

PERFORMANCE OF THE COMPANY

During the year under review, your Company has achieved a sales volume of over 123.70 Million cases (Previous year 120.18 Million cases), representing a growth of 3% over the previous year, thus continuing to maintain its position as the largest distilled spirits marketeer in the world in terms of volume. Profit from operations stood at Rs.5,774.717 million (previous year Rs.5,755,508 million) registering a marginal increase over the previous year.

SUBSIDIARIES

During the year under review, Daffodils Flavours & Fragrances Private Limited, Jasmine Flavours & Fragrances Private Limited, United Vintners Limited, United Alcobev Limited, McDowell & Company Limited, McDowell Beverages Limited and BDL Distilleries Limited wholly owned subsidiaries ceased to be the subsidiaries of the Company consequent to the divestment of the entire paid up capital held by the Company in these subsidiaries. Similarly, Ramanreti Investments and Trading Company Limited, an indirect wholly owned subsidiary of the Company also ceased to be a subsidiary of the Company consequent to the divestment of the entire paid up capital held by your subsidiary SW Finance Co. Limited (formerly Shaw Wallace Breweries Limited) in this subsidiary. Your Company purchased 16,86,004 equity shares of Rs 10/- each held by its erstwhile wholly owned subsidiary, Ramanreti Investments and Trading Company Limited in SW Finance Co. Limited (formerly Shaw Wallace Breweries Limited), a wholly owned subsidiary of your Company.

Subsequent to the divestment of its entire equity shareholding in the Company by R G Shaw & Company Limited, Shaw Scott & Company Limited, Shaw Darby & Company Limited and Thames Rice Milling Company Limited, UK based wholly owned subsidiaries of the Company, to Palmer Investment Group Limited, BVI another wholly owned subsidiary of the Company, these four UK-based wholly owned subsidiaries have been dissolved. Accordingly, these four UK-based companies ceased to be the subsidiaries of the Company during the year under review.

During the year under review, Whyte and Mackay Singapore Pte. Limited, a wholly owned subsidiary of Whyte and Mackay Limited, became wholly owned subsidiary of your Company.

During the year under review, JIHL Nominees Limited, a wholly owned subsidiary of your Company has changed its name to UB Sports Management Overseas Limited.

In terms of the listing requirements to have minimum public shareholding, your Company is required to bring down its shareholding to a level of 75% of the total paid up capital of Pioneer Distilleries Limited (PDL) from the present holding of 81.58%. During the year under review, your Company was successful in divesting 55,100 Equity shares of PDL in the open market through a Stock Exchange mechanism (Offer for Sale) representing 0.41% of the paid up equity capital of PDL.

Pioneer Distilleries Limited (PDL), Sovereign Distilleries Limited (SDL) and Tern Distilleries Private Limited (TDPL) subsidiaries of the Company have made a reference to the Board for Industrial and Financial Reconstruction (BIFR) under Section 15 of Sick Industrial Companies (Special Provisions) Act, 1985, in view of the erosion of the entire net worth of these companies. However, your Company, is considering various steps, inter alia, infusion of further share capital by way of conversion of existing loan into equity capital to make the net worth of its subsidiaries positive.

Four Seasons Wines Limited (FSWL), a subsidiary of the Company has made a reference to the Board for Industrial and Financial Reconstruction (BIFR) under Section 23 of Sick Industrial Companies (Special Provisions) Act, 1985 in view of erosion of more than 50% of its peak net worth during the immediately preceding four financial years.

In terms of Circular No.2/2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs, Government of India, a general exemption has been granted from the compliance of Section 212 of the Companies Act, 1956, requiring holding companies to attach with their balance sheet, a copy of the balance sheet, profit and loss account and other documents of each of its subsidiaries provided the Board of Directors of such companies give consent, by way of a resolution, for not attaching the balance sheet of the subsidiary companies concerned with the balance sheet of the Company and certain conditions prescribed by the Ministry in this regard are complied with.

The Board of Directors of your Company, at their meeting held on May 15, 2013 have given their consent for not attaching, inter alia, the balance sheet, profit and loss account etc. of its subsidiary companies since your Company has complied with all the conditions prescribed by the Ministry vide its circular dated February 8, 2011, in this regard.

In view of the above, the balance sheet, profit and loss account and other documents/details of the subsidiary companies, which are required to be attached with the balance sheet of the Company, are not attached. The Annual Accounts of the Subsidiaries and the related detailed information will be made available to any shareholder of the Company seeking such information at any point in time. The Annual Accounts of the Subsidiary Companies will also be kept for inspection by any shareholder of the Company at its Registered Office and that of the Subsidiary Companies concerned, during the business hours on any working day.

The Accounting Year of United Spirits Nepal Private Limited (USNPL), your Company''s subsidiary in Nepal is from mid- July to mid-July every year. Accordingly, Accounting Year of 2011-12 of USNPL ended on July 15, 2012 and the Accounting Year 2012-13 will end on July 15, 2013 i.e., after the end of the close of the financial year of the Company, which ended on March 31, 2013. For the purpose of compliance under Accounting Standard - 21, relating to "Consolidated Financial Statement," the Accounts of USNPL has been drawn up to March 31, 2013.

For the purpose of compliance under Accounting Standard - 21, "Consolidated Financial Statement" presented by the Company includes the financial information of its subsidiaries.

Investment in The Equity Capital of the Company by Relay B.V., Netherlands

During the year under review, Palmer Investment Group Limited, UB Sports Management Overseas Limited (both wholly owned subsidiaries of the Company), USL Benefit Trust (of which your Company is a beneficiary), SWEW Benefit Company, United Breweries (Holdings) Limited and Kingfisher Finvest India Limited (both promoters of the Company) have entered into a Share Purchase Agreement with Relay B.V., an indirect wholly owned subsidiary of Diageo Plc and Diageo Plc for sale of equity shares of the Company constituting up to 19.29% of the present paid up equity share capital of the Company at a price of Rs. 1440/- per equity share to Relay B.V. Simultaneously, your Company has also entered into a Preferential Allotment Agreement with Relay B.V. and Diageo Plc for issue of 14,532,775 equity shares of the face value of Rs. 10/- each constituting 10% of the post-issue equity share capital of the Company to Relay B.V. on a preferential allotment basis at a price of Rs. 1440/- per share. The consummation of the transactions referred to above, are subject to various conditions precedent, including receipt of approval from the Competition Commission of India and in case of the preferential allotment, approval of the shareholders of the Company by way of a special resolution through postal ballot. Shareholder approval to the preferential allotment and approval from the Competition Commission of India, has since been received. Consequent to the above agreements Relay B.V. has made an Open Offer to acquire up to 37,785,214 equity shares from the public shareholders of the Company. Relay B.V. has acquired 58,668 equity shares of the Company pursuant to the Open Offer.

PROSPECTS

Your Company achieved a sales volume of just under 10 Million cases during the first month of the current financial year and judging by the continuing growth in the current year, the Company is set to maintain leadership position in the World''s spirits industry.

With over half of the Indian population under the age of 25 and more and more young Indiansjoining the workforce with more disposable income in their hands at ages earlier than the previous generation, the Indian Spirits Industry is expected to witness a sea change in its target consumers and hence continue on the growth path. Being an undisputed leader, by volume in the Spirits Industry, your Company will reap huge benefits from the above expansion of the target consumers. The only hindrance to such continued growth could be the unbridled efforts of the state governments to continue enhancing their revenues by increasing duties and taxes. To mitigate this partially, as reported last year, your Company has already embarked upon a strategy to build supply-side security to protect your Company against fluctuation in price and availability of its key raw material, Extra Neutral Alcohol (ENA), by targeting to reach a minimum level of 50% of ENA requirement through in-house distillation. During the current fiscal year, your Company has made investments in the creation of additional capacities in the existing in-house distillation plants.

Though your Company has temporarily heldback its plans to put up a glass container manufacturing facility for captive consumption, the prices of glass containers, a major packaging material which is a key ingredient in the cost of production, has recently dropped by 5% due to over- capacity in the industry.

With all these measures, your Directors are hopeful that your Company would achieve a structural improvement in its profitability in the years to come.

DEPOSITORY SYSTEM

The trading in the equity shares of your Company is under compulsory dematerialisation mode. As onMay 10, 2013, equity shares representing 98.20% of the equity share capital are in dematerialised form. As the depository system offers numerous advantages, members are requested to take advantage of the same and avail of the facility of dematerialisation of the Company''s shares.

DIRECTORS

Mr. Subhash Raghunath Gupte and Mr Sudhindar Krishan Khanna retire by rotation and being eligible, offer themselves for re-appointment.

The revision in the terms of remuneration payable to Mr. Ashok Capoor, Managing Director of the Company, as approved and recommended by the Compensation Committee of Directors, is being placed for the approval of the members at this Annual General Meeting.

AUDITORS

M/s. Walker, Chandiok & Co., your Company''s Auditors, are eligible for re-appointment at the Annual General Meeting and it is necessary to fix their remuneration.

TAX AUDITORS

Your Directors have appointed M/s. Lodha & Co., Chartered Accountants as the Tax Auditors of the Company to carry out the tax audit of the Company for the year ended March 31, 2013.

LISTING OF SHARES OF THE COMPANY

The Equity Shares of your Company continue to remain listed with Bangalore Stock Exchange Limited, BSE Limited and National Stock Exchange of India Limited. The listing fees for the year 2013-14 have been paid to these Stock Exchanges.

CORPORATE GOVERNANCE

A report on the Corporate Governance is annexed separately as part of this report along with a certificate of compliance from a Company Secretary in practice. Necessary requirements of obtaining certifications/declarations in terms of Clause 49 have been complied with.

MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report is annexed and forms an integral part of the Annual Report.

FIXED DEPOSITS

Fixed Deposits from the public and shareholders, stood at Rs. 4359.83 Million as at March 31, 2013. Matured deposits for which disposal instructions had not been received from the depositors concerned stood at Rs. 86.20 Million as at March 31, 2013. Of this, a sum of Rs. 30.128 Million (as of 26.5.2013) has since been paid as per instructions received after the year-end.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956, the Unclaimed Dividend and Deposits, remaining unclaimed and unpaid for a period of more than 7 years, have been transferred to the Investor Education and Protection Fund.

Necessary compliance under Rule 3 of the Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012 have been followed.

HUMAN RESOURCES

Employee relations remained cordial at all Company''s locations.

Particulars of employees drawing an aggregate remuneration of Rs. 60,00,000/- or above per annum or Rs. 5,00,000/- or above per month, as required under Section 217(2A) of the Companies Act, 1956, as amended, is annexed.

EMPLOYEE STOCK OPTION SCHEME

The Company has not offered any stock option to the Employees during the year 2012-13.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION, ETC.

In accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, the required information relating to Conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo is annexed.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, in relation to financial statements for the year 2012-13, the Board of Directors reports that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

- accounting policies have been selected and applied consistently and that the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the year ended March 31, 2013;

- proper and sufficient care have been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- The annual accounts have been prepared on a going concern basis.

THANK YOU

Your Directors place on record their sincere appreciation for the continued support from shareholders, customers, suppliers, banks and financial institutions and other business associates. A particular note of thanks to all employees of your Company, without whose contribution, your Company could not have achieved the year''s performance.

By Authority of the Board

Bangalore Dr. VIJAY MALLYA

May 15, 2013 Chairman


Mar 31, 2011

Dear Members,

The Directors have pleasure in presenting the Annual Report of your Company and the audited accounts for the year ended March 31, 2011.

FINANCIAL RESULTS

Rupees in Millions

2010-11 2009-10

The working of your Company for the year under review resulted in

- Profit from operations 5,925.149 5,123.093

- Exceptional and other non-recurring items 368.399 699.953

6,293.548 5,823.046

Less:

- Depreciation 477.470 386.302

- Taxation

(including deferred tax) 1,961.365 1,676.529

- Profit after tax 3,854.713 3,760.215

Profit B/F from previous year 12,380.525 9,486.445

Profit transferred on Amalgamation 4.030 -

Profit available for appropriation 16,239.268 13,246.660

Your Directors have made the following Appropriations :

General Reserve 500.000 500.000

Proposed Dividend 326.987 313.986

Corporate Tax on Proposed

Dividend 54.309 52.149

Balance carried to the Balance Sheet 15,359.972 12,380.525

EPS - Basic & Diluted (Rupees) 29.47 32.51

Your Directors propose a Dividend on the equity shares of the Company at the rate of Rs. 2.50 per share, including on 5,200,639 Equity Shares of 10/- each fully paid up allotted during the year to the shareholders of Balaji Distilleries Limited ("BDL"), since amalgamated with the Company.

CAPITAL

During the year under review, consequent to amalgamation of Balaji Distilleries Limited with the Company, the Authorised Capital of your company stood increased from Rs. 3,292,000,000/- divided into 245,000,000 Equity Shares of Rs.10/- each and 84,200,000 Preference Shares of Rs.10/- each to Rs. 5,542,000,000/- divided into 395,000,000 Equity Shares of Rs.10/- each and 159,200,000 Preference Shares of Rs.10/- each. The Issued, Subscribed and Paid-up Equity Share Capital of the Company stood increased from Rs. 1,255,943,290/- divided into 125,594,329 Equity Shares of Rs.10/- each to Rs.1,307,949,680/- divided into 130,794,968 Equity Shares of Rs. 10/- each by issue and allotment of 5,200,639 Equity Shares of Rs.10/- each, fully paid-up, to the shareholders of Balaji Distilleries Limited consequent to its amalgamation with your Company.

GLOBAL DEPOSITARY SHARES

Your Company had issued 17,502,762 Global Depositary Shares ("GDSs") representing 8,751,381 Equity Shares ranking pari-passu in all respects with the existing paid up equity shares, 2 GDSs representing 1 equity share of par value of Rs.10/- each at US$7.4274 per GDSs aggregating to US$ 130 mn. These GDSs are listed on the Luxembourg Stock Exchange.

As on July 29, 2011, there was an outstanding of 1,662,666 GDSs representing 831,333 equity shares.

PERFORMANCE OF THE COMPANY

During the year under review, the Company has achieved a sales volume of over 112 million cases, representing a growth of 12% over the previous year, thus making it the largest distilled spirits marketeer in the world in terms of volume. Profit from operations at Rs. 5,925.149 millions registered a growth of 16% over the previous year.

Through a combination of premiumization, cost control and increased effeciency at every stage of its process, the Company has been able to not only mitigate cost increases but also improve its profitabality.

AMALGAMATION OF BALAJI DISTILLERIES LIMITED WITH THE COMPANY

The Hon'ble Appellate Authority for Industrial and Financial Reconstruction has sanctioned the Rehabilitation Scheme of Balaji Distilleries Limited which includes the Scheme of Arrangement between Balaji Distilleries Limited ("BDL"), Chennai Breweries Private Limited ("CBPL") and United Spirits Limited ("USL") (the "Company") and their respective Shareholders and Creditors ("the Scheme") vide its order dated November 29, 2010, and the Scheme became effective from December 27, 2010. In terms of the sanctioned scheme, all the assets and liabilities of BDL, other than Brewery Division Undertaking, as a going concern stood transferred to and vested in the Company with effect from 1st April, 2009, being the "Merger Appointed Date" and "BDL" stood dissolved without winding up. In terms of the Scheme, the shareholders of BDL were issued and alloted in aggregate 5,200,639 equity shares of Rs.10/- each of fully paid up in the Company in the ratio of 2 equity shares of Rs. 10/- each fully paid up in the Company for every 55 equity shares of Rs. 10 /- each fully paid up in BDL.

ACQUISITION OF PIONEER DISTILLERIES LIMITED

In terms of Share Purchase Agreement ("SPA") executed with the promoters of Pioneer Distilleries Limited ("PDL"), a company listed on Pune Stock Exchange Limited, National Stock Exchange of India Limited and Bombay Stock Exchange Limited, your Company acquired 7,322,280 Equity shares constituting 54.69% of the paid up capital of PDL. Further, 977,212 Equity shares, constituting 7.30% and 2,677,640 Equity shares, constituting 20.00% of the paid up capital of PDL were acquired from the open market and through open offer in terms of SEBI Takeover Regulations, respectively, thereby acquiring a total of 10,977,132 Equity shares, aggregating to 81.99% of the paid up capital of PDL. Consequently, PDL has become a subsidiary of the Company. PDL is in the business of manufacture and sale of Extra Neutral Alcohol ("ENA"), which is the primary ingredient for manufacture of Indian Made Foreign Liquor ("IMFL") and having a manufacturing plant in Balapur Village, Dharmabad Taluk, Nanded District, Maharashtra.

Pursuant to the provisions of listing agreements executed with the concerned stock exchanges, the Company would take necessary steps to bring down its total shareholding in PDL to 75% of the paid up capital, in due course.

ACQUISITION OF SOVEREIGN DISTILLERIES LIMITED

In terms of Share Purchase Agreement ("SPA") executed with the promoters of Sovereign Distilleries Limited ("SDL"), your Company proposes to acquire 100% of the paid up capital of SDL and has so far acquired 35,954,280 equity shares constituting 61.53% of the paid up capital of SDL. Consequently, SDL has become a subsidiary of the Company. SDL is engaged in the business of manufacturing, sale and / or marketing of Extra Neutral Alcohol ("ENA"), and Indian Made Foreign Liquor ("IMFL") and having a manufacturing plant at Village Singapur, District Raichur, Karnataka.

SUBSIDIARIES

During the year under review, Chennai Breweries Private Limited ("CBPL"), a wholly owned subsidiary of Balaji Distilleries Limited ("BDL") became a wholly owned subsidiary of the Company consequent to amalgamation of BDL with the Company. CBPL is proposed to be amalgamated with United Breweries Limited, a UB Group Company in terms of the Scheme of Amalgamation, subject to the approval of the Hon'ble High Court of Karnataka and Madras. Upon the Scheme becoming effective, the Company would receive 8,500,000 equity shares of Rs. 1/- each of United Breweries Limited for the shares held in CBPL.

Pioneer Distilleries Limited, and Sovereign Distilleries Limited became subsidiaries of the Company during the current year consequent upon their acquisition as aforesaid.

During the year under review, Herbertsons Limited and Spring Valley Investments Holding Inc., have ceased to be subsidiaries of your Company consequent to the sale of shares and liquidation respectively.

In terms of Circular No.2/2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs, Government of India, a general exemption has been granted from the compliance of Section 212 of the Companies Act, 1956, requiring holding companies to attach with their balance sheet, a copy of the balance sheet, profit and loss account and other documents of each of its subsidiaries provided the Board of Directors of such companies give consent, by way of a resolution, for not attaching the balance sheet of the subsidiary companies concerned with the balance sheet of the Company and certain conditions prescribed by the Ministry in this regard are complied with.

The Board of Directors of your Company, at their meeting held on August 03, 2011 have given their consent for not attaching, inter alia, the balance sheet, profit and loss account etc. of its subsidiary companies and have also agreed to comply with the conditions prescribed by the Ministry vide its circular dated February 8, 2011, in this regard.

In view of the above, the balance sheet, profit and loss account and other documents/details of the subsidiary companies, which are required to be attached with the balance sheet of the Company, are not attached. The Annual Accounts of the Subsidiaries and the related detailed information will be made available to any shareholder of the Company seeking such information at any point in time. The Annual

Accounts of the Subsidiary Companies will also be kept for inspection by any shareholder of the Company at its Registered Office and that of the Subsidiary Companies concerned, during the business hours on any working day.

The Accounting year of United Spirits Nepal Private Limited ("USNPL"), your Company's Subsidiary in Nepal is from mid-July to mid-July every year. Accordingly, Accounting year of 2009-10 of USNPL ended on July 14, 2010 and the Accounting Year 2010-11 ended on July 16, 2011 i.e., after the end of the close of the financial year of the Company, which ended on March 31, 2011. For the purpose of compliance under Accounting Standard - 21, relating to "Consolidated Financial Statement," the Accounts of USNPL has been drawn up to March 31, 2011.

For the purpose of compliance under Accounting Standard - 21, "Consolidated Financial Statement" presented by the Company includes the financial information of its subsidiaries.

PROSPECTS

Your Company achieved a sales volume of 30.73 million cases during the first quarter of the current financial year and judging by continuing growth in the current year, the Company is set to maintain its current position as the world's largest spirits marketeer by volume.

The energy inflation prevailing in the market had adversely affected the cost of Extra Neutral Alcohol ("ENA"), a primary raw material required in the manufacture of your Company's products. Your Company presently procures the majority of its ENA requirement from external suppliers, some of whom are also competitors in the finished product arena. In order to reduce the dependence on such suppliers, your Company has acquired two entities having primary distillation units, during the year, namely Pioneer Distilleries Limited and Sovereign Distilleries Limited, having plants in Maharashtra and Karnataka respectively. These also will go a long way to help the Company to gain the arbitrage over ENA costs.

The price of glass containers also rose substantially due to inflation and the near monopoly situation existing in the market. In order to mitigate the cost of glass containers, your Company has developed alternate packaging materials viz., PET and Tetra Brick Packaging, which have proved a big success in Karnataka and Andhra Pradesh. Upon procuring regulatory approvals, such alternative packaging will be rolled out in other markets too. Apart from these measures, your Company is evaluating plans to set up a glass manufacturing unit in South India for captive consumption. With these measures, your Directors are hopeful that your Company would achieve a structural improvement in future profitability in the years to come.

DEPOSITORY SYSTEM

The trading in the equity shares of your Company is under compulsory dematerialisation mode. As on July 29, 2011, equity shares representing 97.49 % of the equity share capital are in dematerialised form. As the depository system offers numerous advantages, members are requested to take advantage of the same and avail of the facility of dematerialisation of the Company's shares.

DIRECTORS

Mr. M.R. Doraiswamy Iyengar and Mr. B.M. Labroo retire by rotation and being eligible, offer themselves for re-appointment.

Mr. V.K. Rekhi ceased to be the Managing Director of the Company with effect from April 19, 2011 consequent upon the expiry of his office as Managing Director and resigned as a Director of the Company with effect from the close of business hours on April 29, 2011.

Your Directors place on record their appreciation of the valuable services rendered by Mr. V.K. Rekhi during his tenure as Managing Director of your Company.

Mr. Ashok Capoor was appointed as an Additional Director of the Company with effect from April 29, 2011 and as Managing Director of the Company for a period of 3 (three) years commencing from May 2, 2011 to May 1, 2014. The appointment of and remuneration payable to Mr. Ashok Capoor as approved and recommended by the Compensation Committee of Directors is being placed for the approval of the members at this Annual General Meeting.

Mr. Ashok Capoor will hold office in terms of Section 260 of the Companies Act, 1956 up to the date of the ensuing Annual General Meeting. A notice in writing has been received from a member signifying the intention to propose the appointment of Mr. Ashok Capoor as a Director at the Annual General Meeting.

Mr. Ashok Capoor's appointment as Director and the appointment and the remuneration payable to him as Managing Director of the Company, have been included in the Notice convening this Annual General Meeting for your approval.

AUDITORS

M/s.Price Waterhouse, your Company's Auditors are not seeking re-appointment at the forthcoming Annual General Meeting. Your Directors place on record their appreciation of the valuable services rendered by them during their tenure as Auditors of your Company. It is proposed to appoint M/s. Walker, Chandiok & Co., Chartered Accountants, as the Statutory Auditors to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting.

M/s. Walker, Chandiok & Co., Chartered Accountants, have consented to be the Auditors of the Company if appointed by the Members at the Annual General Meeting and have also confirmed that their appointment would be within the limits specified under section 224(1-B) of the Companies Act, 1956.

TAX AUDITORS

Your Directors have appointed M/s. Lodha & Co., Chartered Accountants as the Tax Auditors of the Company to carry out the tax audit of the Company for the year ended March 31, 2011.

LISTING OF SHARES OF THE COMPANY

The Equity Shares of your Company continue to remain listed with Bangalore Stock Exchange Limited, Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The listing fees for the year 2011-12 have been paid to these Stock Exchanges.

5,200,639 Equity Shares issued and allotted to the shareholders of erstwhile Balaji Distilleries Limited as mentioned above during the year under review have also been listed on the aforesaid stock exchanges.

CORPORATE GOVERNANCE

A report on the Corporate Governance is annexed separately as part of this report along with a certificate of compliance from a Company Secretary in practice. Necessary requirements of obtaining certifications/declarations in terms of Clause 49 have been complied with.

MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report is annexed and forms an integral part of the Annual Report.

FIXED DEPOSITS

Fixed Deposits from the public and shareholders, stood at Rs. 5,412.039 Million as at March 31, 2011. Matured deposits for which disposal instructions had not been received from the depositors concerned stood at Rs. 53.819 Million as at March 31, 2011. Of this, a sum of Rs. 24.651 Million has since been paid as per instructions received after the year-end.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956, the Unclaimed Dividend, Debentures and Deposits, remaining unclaimed and unpaid for more than 7 years, have been transferred to the Investor Education and Protection Fund.

HUMAN RESOURCES

Employee relations remained cordial at all Company's locations.

Particulars of employees drawing an aggregate remuneration of Rs. 60,00,000/- or above per annum or Rs. 5,00,000/- or above per month, as required under Section 217(2A) of the Companies Act, 1956, as amended, is annexed.

EMPLOYEE STOCK OPTION SCHEME

The Company has not offered any stock option to the Employees during the year 2010-11.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION, ETC.

In accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, the required information relating to Conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo is annexed.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, in relation to financial statements for the year 2010-11, the Board of Directors reports that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

- accounting policies have been selected and applied consistently and that the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the year ended March 31, 2011;

- proper and sufficient care have been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- The annual accounts have been prepared on a going concern basis.

THANK YOU

Your Directors place on record their sincere appreciation for the continued support from shareholders, customers, suppliers, banks and financial institutions and other business associates. A particular note of thanks to all employees of your Company, without whose contribution, your Company could not have achieved the year's performance.

By Authority of the Board

New Delhi Dr. VIJAY MALLYA

August 03, 2011 Chairman

 
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