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Directors Report of United Spirits Ltd.

Mar 31, 2023

Your directors are pleased to present the 24th Report of Directors of your Company and the audited financial statements for the year ended March 31, 2023.

''in million

Particulars

Standalone Consolidated

2022-23

2021-22

2022-23

2021-22

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

Revenue from operations

2,75,775

3,07,731

2,78,154

3,10,618

Other income

742

337

731

355

Total Income

2,76,517

3,08,068

2,78,885

3,10,973

Total expenses

2,65,333

2,96,393

2,67,849

2,98,455

Share of net loss in associate

14

Profit before exceptional items and tax

11,184

11,675

11,022

12,518

Exceptional items, net

1,709

(1,560)

1,764

(1,652)

Profit before tax

12,893

10,115

12,786

10,866

Total tax expenses

2,376

1,606

1,528

2,760

Profit for the year

10,517

8,509

11,258

8,106

Other Comprehensive Income:

Exchange differences on translation of foreign operations

(17)

1

Remeasurements of post-employment benefit plans

(6)

165

(6)

164

Income tax credit / (charge) relating to these items

1

(41)

1

(41)

Total other comprehensive income for the year, net of tax

(5)

124

(22)

124

Total comprehensive income for the year

10,512

8,633

11,236

8,230

Total comprehensive income is attributable to:

Owners

11,341

8,410

Non-controlling interests

(105)

(180)

Profit/(loss) available for appropriation

(510)

(11,022)

(3,080)

(13,544)

EPS-Basic & Diluted ('')

14.46

11.70

16.01

11.68

During the current year revenue from operations decreased by 10.4% on standalone basis and by 10.5% on consolidated basis. Profit after tax has increased by 23.6 % on standalone basis and by 38.9% on consolidated basis. The challenges which United Spirits Limited (''USL'' / ''Company'') faced during the year and the environment in which the Company operates have been detailed is Management Discussion and Analysis Report which is forming part of this Annual Report (''Report'').

1. Performance of the Company

During the year under review, your Company''s sales volume was 72.5 million cases resulting in a drop of 8.4% compared to previous year. This is largely on account of the slump sale of the business undertaking associated with 32 brands and franchising of 11 Popular brands to an unrelated party. The transaction was a conclusion of the strategic review of the select popular segment brands and was approved by the Board on 27 May 2022. Net sales/income from operations (net of duties and taxes) of your Company increased by 10.1% in the financial year ended March 31, 2023 which stood at ''103,737 million (previous year ''94,237 million).

With continuous focus on premiumization, overall Prestige & Above segment represented 66% of total volumes (Vs 54% in the previous year) and 81% of total net sales (Vs 72% in the previous year) during the financial year ended March 31, 2023. The Prestige and Above segment''s net sales were up 22.8% with strong double-digit growth across the higher value sub-segments. The Popular segment represented 34% (Vs 46% in the previous year) of total volumes and 18% (Vs 26% in the previous year) of total net sales during the financial year ended March 31, 2023. The Popular segment''s net sales declined by 25% during the financial year ended March 31, 2023. The decline this year was on account of the slump sale and franchising transaction mentioned above.

2. Material changes and commitments / events subsequent to the date of the financial statements

There are no material changes and commitments, affecting the financial position of the Company which has occurred between the close of the Financial Year as on March 31, 2023, to which the Financial Statement relate and the date of this Report.

3. Change in nature of business, if any

The details of change in nature of business, if any, are provided under Management Discussion and Analysis Report and the Report on Risk Management forming part of this Report.

4. Dividend

In view of the accumulated losses of the preceding years, your directors could not recommend any dividend.

5. Transfer to reserve

During the year under review, there was no amount transferred to reserves of the Company.

6. Capital

At the beginning of the year, the authorised capital was ''7,19,20,00,000 (2,74,00,00,000 Equity shares of ''2 each and 17,12,00,000 Preference Shares of ''10 each). The National Company Law Tribunal, Bengaluru Bench ("NCLT”) approved Scheme of Amalgamation and Arrangement of United Spirits Limited ("USL”) with Pioneer Distilleries Limited ("PDL”) and their respective shareholders and creditors vide order dated

4th November 2022. Pursuant to the NCLT order, the authorized share capital of PDL is added to the authorized share capital of USL and USL allotted 7,12,138 equity shares of ''2/- each aggerating ''14,24,276 to public shareholders of PDL in the ratio as per the Scheme.

The revised Share Capital is as below:

7. Details of subsidiary companies and associate companies and their financial position

The performance of subsidiaries and associate Companies and their contribution to the overall performance of the Company is covered as part of the consolidated financial statement and form AOC-1 annexed as part of this Report as Annexure-1. Out of 9 subsidiary companies, 8 subsidiary companies are non-operative.

i. As mentioned in the Annual Report of 2021-22, the Board of Directors ("Board”) of Pioneer Distilleries Limited, a listed subsidiary of the Company ("PDL”) and of the Company at their meetings held on December 2, 2019 considered and approved a scheme of amalgamation and arrangement in relation to the proposed merger of PDL with the Company under Sections 230 - 232 and other applicable provisions of the Companies Act, 2013 and the rules thereunder. The National Company Law Tribunal, Bengaluru Bench ("NCLT”), vide Order dated November 4, 2022 approved the Scheme of

Amalgamation and Arrangement and certified copy of the order was received on November 17, 2022. The merger was effective from December 30, 2022.

Pursuant to the scheme on January 13, 2023, the Company allotted 7,12,138 number of fully paid up equity shares to PDL shareholders as on record date (January 06, 2023) in the ratio of 10 (ten) fully paid-up equity shares of face value ''2 (Rupees two only) each of the Transferee Company, for every 47 (forty-seven) fully paid-up equity shares of face value ''10 (Rupees ten only). These shares were listed with National Stock Exchange of India Ltd.("NSE”) & BSE Limited ("BSE”) effective 21st February 2023. The shareholding of Diageo Relay BV (the holding Company, a subsidiary of Diageo PLC) in the Company has changed from 55.94% to 55.88%.

Particulars

''

Authorized Capital

2,82,75,00,000 Equity Shares of ''2 /- each

5,65,50,00,000

17,37,00,000 Preference Shares of ''10 /- each

1,73,70,00,000

Total

7,39,20,00,000

Issued, Subscribed and Paid-up Capital

72,73,50,853 equity shares of ''2/- each

1,45,47,01,706

ii. During the year, Your Company made an investment of ''315 million in Nao Spirits & Beverages Private Limited ("NAO”). Your Company has acquired 8,094 Compulsory Convertible Preference Shares and 4670 equity shares of NAO aggregating to 22.5% of shareholding. Subsequent to this investment, NAO is associate company of your Company. Further, on January 24, 2023, Board of Directors have approved further investment of ''150 million. This investment will be made upon satisfaction of condition precedents.

Company has complied with the FEMA Regulations with respect to the downstream investment made in NAO Spirits & Beverages Private Limited.

iii. During the year, Sovereign Distilleries Limited (SDL) ceased to be subsidiary of your Company. Your Company has sold all equity shares held in SDL for consideration of ''320 million, pursuant to approval of board of directors of the Company at their meeting held on 24th January 2023. SDL was a non-operative, wholly owned subsidiary company and consequently did not have any turnover or revenue or income. It had a net worth of approximately ''174 million representing 0.3% of the Company''s consolidated net-worth as on the aforesaid date.

iv. During the year, United Spirits (Shanghai) Trade Company Limited ("USSTCL”), wholly owned subsidiary of Company in China stands closed. USSTCL was a non-operative company and consequently did not have any turnover or revenue or operating income. It had a negative net worth of approximately RMB 1.81 million million. Since USSTCL was a non-operative company, its de-registration will not have any impact on the Company''s business.

v. During the year, United Spirits Singapore Pte. Ltd. ("USSPL”), wholly owned subsidiary of Asian Opportunities and Investments Limited [Company''s wholly owned subsidiary], in Singapore stands dissolved. USSPL was a non-operative company and consequently did not have any turnover or revenue or operating income. Since USSPL was a non-operative company, its voluntary winding up will not have any impact on the Company''s business.

vi. Royal Challengers Sports Private Limited (RCSPL), a wholly owned subsidiary of your Company, reported a revenue from operations of ''2442 million during the year which has degrew by 16.3%, primarily on account of reduction in central rights income from BCCI (change in IPL standing position and reduced number of matches played in current year). During the current year, RCSPL reported a loss of '' (116) million against the profit of '' 893 million in previous year, primarily on account of loss from Women''s Premier League.

RCSPL participated in the tender conducted by the BCCI and won the bid for the Bangalore team for the Women''s Premier League ("WPL”) for ''9010 million. This was one of the 5 successful bids for a WPL franchise and Team RCB finished 4th in the inaugural 2023 season.

The Company''s policy for determining material subsidiaries is available at the Company''s website at https://media.diageo. com/diageo-corporate-media/media/fcap5yuo/policy-on-material-subsidiary.pdf

In accordance with the 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 https://www. diageoindia.com/en/investors/subsidiaries-financial

8. Prospects/Outlook

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

9. Board meetings, board of directors, key managerial personnel & committees of directors:A. i) Resignation of Mr. Randall Ingber

Mr. Randall Ingber, Director of the Company, resigned as a non-executive director of the Company effective from end of the day January 31, 2023.

ii) Appointment of Mr. Pradeep Jain

Mr. Pradeep Jain, Chief Financial Officer was appointed as Whole Time Director designated as an "Executive Director and Chief Financial Officer” of the Company with effect from February 01, 2023. He continues to be Chief Financial Officer and Key Managerial Personnel of the Company.

iii) Appointment of Ms. Mamta Sundara

Ms. Mamta Sundara was appointed as a nonexecutive non-independent director of the Company with effect from February 01, 2023.

iv) Re-appointment of Mr. Mark Sandys

As per the provisions of the Companies Act, 2013, Mr. Mark Sandys retires by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offered himself for re-appointment.

Members may please note that Mr. Mark Sandys, was appointed as a director on April 01, 2022. Mr. Mark Sandys is not debarred from holding the directorship under any statutory regulations. Details about Mr. Mark Sandys is provided in the Notice of the 24th annual general meeting of the Company.

B. Independent Directors

Your Company did not appoint any new Independent Director in the financial year 2022-23. Criteria for selection/ appointment or re-appointment of Independent Directors include skills, expertise of the Director, qualifications, experience, and domain knowledge. The required skills of Independent Directors are leadership, managerial experience, diversity, risk management and corporate governance. All our Independent Directors viz., Mr. Mahendra Kumar Sharma, Mr. V K Viswanathan, Mr. D Sivanandhan, Mr. Rajeev Gupta and Dr. (Mrs.) Indu Shahani possess the aforesaid skills.

C. Declaration by Independent Directors

Independent Directors have given a declaration pursuant to sub-section (6) of Section 149 of the Companies Act, 2013. In the opinion of the Board, Independent Directors fulfill the conditions specified in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI (LODR) Regulations) and are independent of the management.

D. Number of meetings of the Board

The details of the Board Meetings and other Committee Meetings held during the financial year 2022-23 are stated in the Corporate Governance Report which is forming part of this Report.

E. Board Committees

The Company has the following committees of the Board:

• Audit Committee

• Risk Management Committee

• Nomination and Remuneration Committee

• Stakeholders Relationship and General Committee

• Corporate Social Responsibility and Environmental, Social and Governance Committee

The composition of each of the above Committees, their respective roles and responsibilities are provided in the Corporate Governance Report which forms part of this Report.

F. Policies

The Company has adopted all policies as required under the provisions of the Companies Act, 2013 and SEBI (LODR) Regulations. The same are uploaded on the website of the Company. Policy on directors and senior appointments and Remuneration and rewards policy were merged and renamed as Nomination and Remuneration Policy.

Further, certain changes were made to the policy to align with the Company''s guidelines and practices as required under section 178 of the Companies Act, 2013.

The revised policy was recommended by the Nomination and Remuneration Committee and was approved by the Board. The policy is uploaded on the website at https:// media.diaqeo.com/diaqeo-corporate-media/media/ chwfdoiQ/nomination-remuneration-policy.pdf

The salient features of the revised policy are:

• The Scope of the policy is appointment and remuneration of the Directors, Key Managerial Personnel ("KMP”), Senior Management Personnel ("SMP”) and other employees.

• The policy lays down the appointment criteria, qualifications, relevant expertise etc. and that the appointment of directors including managing directors, whole time directors, non-executive directors and independent directors shall be in accordance with the provisions of the Companies Act, including schedule IV and V of the Act and the rules made thereunder and the provisions of the SEBI Listing Regulations.

• The appointment of Directors, KMP and SMP shall be recommended by the NRC to the Board and appointment of directors is subject to approval of shareholders. Additionally, approval of the audit committee is required for the appointment of the Chief Financial Officer.

• The remuneration philosophy of the Company is designed on following principles:

i. the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the Company successfully

ii. relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and

iii. remuneration to directors, SMP and KMP involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals.

iv. the Company will benchmark the ratio of remuneration of senior leaders to the median remuneration of all employees with its peer group companies on a periodic basis.

v. the benchmark compensation positioning will be the market median based on a periodic market benchmarking study

undertaken by an external firm. For specific niche functions, skills and roles, a higher benchmark positioning may be targeted to attract and retain talent.

• The policy details the approval process for the remuneration payable to:

a) Managing Director/Chief Executive Officer/Whole time director;

b) Remuneration to independent directors

c) KMPs, SMPs and other employees

• The Non-executive Non-Independent Director shall not be entitled to receive any sitting fees and commission.

• The policy provides a brief note on familiarisation of the independent directors and succession policy for orderly succession for appointments of members of the Board and for appointments of senior management personnel.

G. Recommendations of the audit committee and other committees

All the recommendations of the Audit Committee and of the other Committees were accepted by the Board.

H. Details of remuneration to directors

As required under section 197(12) of the Companies Act, 2013 information relating to remuneration paid to Directors during the financial year 2022-23 is provided in the Corporate Governance Report.

As stated in the Corporate Governance Report, sitting fees is paid to Independent 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 addition, the Independent Directors are also eligible for commission every year as may be recommended by the Nomination and Remuneration Committee and approved by the Board within the overall limit of ''4 Crore or 1% of the net profits of the Company calculated in accordance with section 198 of the Companies Act, 2013, whichever is higher, as approved by the shareholders in twenty third Annual General Meeting held on August 09, 2022. Criteria for payment of remuneration to Independent Directors are as given below:

i. Membership of Committees

ii. Chairmanship of the Committees/Board

iii. Benchmarking with other companies

The Board of Directors have approved payment of commission of ''20 million to five independent directors after applying the criteria stated above for the financial year 2022-23.

The criteria for payment of remuneration to executive directors is determined by the Nomination and Remuneration Committee based on various criteria including performance criteria. Nomination and Remuneration Policy is available on the Company''s website https://media.diageo.com/diageo-corporate-media/media/chwfdoiQ/nomination-remuneration-policy.pdf

I. Board evaluation criteria

Pursuant to the provisions of the Companies Act, 2013 and regulation 17 of the SEBI (LODR) Regulations, the Board has carried out an annual performance evaluation, based on parameters which, inter alia, include performance of the Board on deciding strategy, rating the composition & mix of Board members, discharging of their duties, handling critical issues etc. The parameters for the performance evaluation of the Directors include contribution made at the Board meeting, attendance, instances of sharing information on best practices applied in other industries, domain knowledge, vision, strategy and engagement with senior management, etc.

The Independent Directors at their separate meetings, review the performance of non-independent directors and the Board as a whole. Chairperson of the Company after taking into account the views of executive directors and non-executive directors, reviews the quality, quantity and timeliness of flow of information between the management and the Board for the Board to effectively and reasonably perform their duties. Based on the outcome of the performance evaluation exercise, areas have been identified for the Board to engage itself with and the same would be acted upon.

The details of the evaluation process are set out in the Corporate Governance Report which forms part of this Report.

J. Meeting amongst Independent Directors

Schedule IV of the Companies Act, 2013, SEBI (LODR) Regulations and Secretarial Standard - 1 on Meetings of the Board of Directors mandates that the Independent Directors of the Company hold at least one meeting in a year, without the attendance of Non-Independent Directors.

The Independent Directors met amongst themselves without the presence of any other persons on May 27, 2022, July 25, 2022, October 20, 2022, January 23, 2023.

10. Vigil Mechanism

Your Company has established whistle-blower mechanism known as SpeakUp, which is being independently operated by a third-party agency. We encourage our employees or representatives acting on behalf of the Company, to raise their compliance concerns through this mechanism, apart from other internal reporting channels viz. Line Manager, HR Business Partner, Legal Business Partner and Business Integrity partner.

The SpeakUp channel is available on the Company''s website at https://www.diageoindia.com/en/about-us/corporate-governance/speak-up, with services available in English and 5 other regional languages, and compliance concerns can be raised by any aggrieved person through web page or toll-free number.

The quality of investigation reports and remedial actions are reviewed and monitored by the Global Business Integrity team and Diageo India Business Integrity team. The decision on sanctions on the reported breaches are determined and monitored by a Compliance Committee for significant breaches and the Grievance Committee for other breaches, ensuring there is a collective, transparent and an unbiased decisionmaking process and that consistent action is undertaken in a timely manner to resolve the identified breaches.

A structured Breach Management Standard is in place which is in line with the Global Standard, for timely and conclusive resolution of compliance concerns raised through the whistle blower mechanism.

This vigil mechanism has been established to provide adequate safeguards against the victimization of employees, who avail this mechanism for reporting complaints and grievances in good faith and without fear of being punished for doing so. Access to the Chairman of the Audit Committee is provided as required under the Companies Act, 2013 and the SEBI (LODR) Regulations.

11. Related party transactions

The Company''s policy on dealing with related party transactions was adopted by the Board on June 15, 2015 and further amended from time to time. This policy is available on the Company''s website at https://www.diageoindia.com/en/ investors/shareholder-centre/policies.

Form AOC-2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is set out in the Annexure-2 to this Report.

All related party transactions that were entered into during the financial year, were at arm''s length basis and were in the ordinary course of business. There are no material significant

related party transactions entered into by the Company with promoters, directors, key managerial personnel or other designated persons which may have a conflict of interest with the Company at large.

12. Auditorsi) Financial audit

M/s. Price Waterhouse & Co. Chartered Accountants LLP (FRN 304026E / E-300009) Statutory Auditors of your Company, were appointed as Auditors of your Company from the conclusion of the 22nd AGM for a period of 5 years. Since the appointment is not subject to ratification of the appointment by the members at every AGM, no resolution is proposed at this AGM pursuant to the provisions of Companies (Amendment) Act, 2017.

The statutory auditors have given unqualified opinion on the financial for the financial year ended March 31, 2023.

ii) Secretarial Audit and Board''s responses to observations, qualifications and adverse remarks in auditor''s report

Pursuant to section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit has been carried out by Mr. Sudhir V Hulyalkar, Practicing Company Secretary (FCS: 6040 and CP No. 6137) and his report is annexed as Annexure-3.

In the Secretarial Audit report, the Secretarial Auditor has reported that the gap between two consecutive meetings of the Risk Management Committee in terms of Regulation 21 (3C) of the Listing Regulations was exceeded on account of delay of 8 days. It is clarified that inadvertently the gap between two Risk Committee meetings exceeded by 8 days. The Company has taken note of this and the future meetings have been rescheduled to ensure compliance. Further the Company and the Board of Directors are serious about ensuring compliances and Company has a robust Risk Management framework including functional risk committees and national risk committee at an executive level which meets on a quarterly basis . The detailed report on Risk Management is enclosed in Annexure-5.

The secretarial auditor has also mentioned in his report that the Company needs to strengthen the process with regard to obtaining the prior approval of Audit Committee in all cases of related party transactions, whether it relates to renewal or modification of limits although such related party transactions have been subsequently ratified by the Audit Committee. It is clarified that the Company has taken note of the suggestion and the process has been strengthened.

In addition, Pursuant to Regulation 24A of the SEBI (LODR) Regulation, the Secretarial Compliance Report for the financial year ended March 31, 2023, in relation to compliance of all applicable SEBI Regulations/ circulars/guidelines issued thereunder, is annexed as Annexure-3A. The Secretarial Compliance Report has been voluntarily disclosed as part of this Report as good disclosure practice. The said report has been submitted to the stock exchanges and is also available on the Company''s website at https://media.diageo. com/diaqeo-corporate-media/media/qvqhqpqt/se_ ascr_2023sd.pdf

iii) Cost audit

Consequent to the merger of Pioneer Distilleries Limited, the Company is required to make and maintain cost records for extra neutral alcohol (ENA) product as specified by the Central Government under sub-section (1) of section 148 of the Act. Accordingly, the Company has been making and maintaining the records as required.

13. Reporting of fraud by Auditors

During the year under review, neither the statutory auditors nor the secretarial auditor have reported to the Audit Committee or the Board, under section 143(12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in this Report.

14. Corporate governance

A Corporate Governance Report for the year under review is annexed separately which forms part of this annual report. Board confirms compliance with Secretarial Standards.

15. Management discussion and analysis report

The Management Discussion and Analysis Report for the year under review is annexed separately which forms part of this annual report.

16. Fixed deposits

As reported in the earlier annual reports, 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 Companies Act, 2013, 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, by paying additional interest of 1% per annum on those fixed deposits repaid before the maturity date pursuant to the contract entered into with the Fixed Deposit holders. During the year the Company

has transferred the unclaimed deposits of ''2,942,789 to Investor Education and Protection Fund (IEPF) and the balance as on March 31, 2023 was NIL.

17. Annual return

In accordance with section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, a draft annual return in e-form MGT-7 for financial year 2022-23 uploaded on Company''s website https://www. diageoindia.com/en/investors/financials/results-reports-and-presentations. Members may also note that the annual return uploaded on the website is a draft and the final annual return will be uploaded after the same is filed with the Ministry of Corporate Affairs (''MCA'').

18. Transfer to Investor Education and Protection Fund (IEPF)

The details of unclaimed/unpaid dividends and fixed deposits which have not been transferred to the IEPF account as the period of seven years have not been completed is given below pursuant to the provisions of the Companies Act, 2013 and the applicable rules there under.

i) Dividend:

The Company has not declared any dividend from financial year 2013-14 onwards.

No unclaimed dividend, shares were required to be transferred to IEPF during the year ended March 31, 2023 to Investor Education and Protection Fund pursuant to section 124(6) of the Companies Act, 2013.

ii) Fixed Deposits:

1.

Accepted during the year

NIL

2.

Remained unpaid or unclaimed as at the end of the year

NIL

3.

Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved

NIL

4.

The details of deposits which

Not

are not in compliance with the requirements of Chapter V of the Companies Act, 2013

Applicable

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.

19. Human resources

Employee relations remained cordial at all the locations of the Company. Particulars of employees drawing an aggregate remuneration of ''1,02,00,000/- or above per annum or ''8,50,000/- 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-4 hereto.

20. Employees stock option scheme

Your Company has not offered any stock options to its employees during the year 2022-23 within the meaning of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

21. Particulars of loans, guarantees and investments

Loans, guarantees and investments covered under section 186 of the Companies Act, 2013 are detailed in Notes to the financial statements under Note 4, relating to investments and Note 5 relating to loans given as per the standalone financial statements for the year ended March 31, 2023.

22. Risk management

Details on Risk Management is annexed as Annexure-5 to this Report.

23. Internal financial controls

During the year under review, Governance Risks and Controls (GRC) team has conducted detailed review of policies as per the direction of the management of the Company, to simplify the process and ensuring adherence. The GRC team also undertook comprehensive review of existing controls (SOX & non-SOX controls) and added attributes wherever required to ensure that controls are in alignment with the laid down policies and practices and meeting the global benchmark. It has been shared with the statutory auditors who have confirmed their alignment. The controls with additional attributes have been tested both by Management tester and by the Statutory auditors for its effectiveness. The Board after considering the materials placed before it reviewed the confirmation received from external parties and reviewed 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 which are commensurate with the size of the Company and that such internal financial controls are broadly adequate and are operating effectively. The

certification by the statutory auditors on internal financial control forms part of the audit report. A statement to this effect is also appearing in the Directors'' Responsibility Statement.

24. Corporate social responsibility

Information on the composition of the Corporate Social Responsibility and Environmental, Social and Governance Committee (CSR & ESG) is provided in the Corporate Governance Report that forms part of this Report. Furthermore, as required by Section 135 of the Companies Act, 2013 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-6 to this Report.

25. Conservation of energy, technology absorption, foreign exchange earnings and outgo

The particulars prescribed under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, are set out in Annexure-7 to this Report.

26. Details of significant and material orders passed by the regulators or courts impacting the going concern status and Company''s operations in future pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014

The Company has not received any significant or material order passed by regulators or courts or tribunals impacting the Company''s going concern status or the Company''s operations in future. The details of notices received from regulatory authorities and related matters have been disclosed as part of note no. 40 to the audited standalone financial statements for the year ended March 31, 2023 and as note no. 42 of the consolidated financial statements for the year ended March 31, 2023.

27. Disclosure as required under section 22 of Sexual Harassment of Women at Workplace (prevention, prohibition and redressal) Act, 2013

As per requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (SHWWA), the Company has designed and implemented a comprehensive policy and framework to promote a safe and secure work environment, where every person at the workplace is treated with dignity and respect. Moreover, the Company''s policy is inclusive and gender neutral. Further, the complaint redressal mechanism detailed in the policy ensures complete anonymity and confidentiality to the parties.

Internal Committees (IC) have been constituted and each Internal Committee has appointed members who are employees of the Company and an independent external member, having extensive experience in the field. The Internal Committees meet on a half yearly basis to discuss matters on policy awareness, best practices, judicial trends, etc. During the

year, Internal Committees have also been trained on nuances of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Internal Committees'' role is to consider and resolve the complaints reported on sexual harassment at workplace. Investigation is conducted and decisions are made by the Internal Committees at the respective location, and a senior woman employee is the presiding officer on every case.

i) Number of complaints filed during the financial year: 2 (Two) complaints received

ii) Number of complaints disposed off during the financial year: 1 (One)

iii) Number of complaints pending as on end of the financial year: 1 (One) under progress

To build awareness in this area, the Company has been publishing newsletters, emailers, posters, conducting online training modules and monthly induction training for newly joined employees. Besides the refresher, virtual training programmes are conducted in the organization on a continuous basis for employees (including blue collared employees), consultants, contractual employees and permanent/contractual workers in regional languages. The Internal Committee has also conducted informal sessions to check the pulse at the grassroot levels.

28. Business Responsibility and Sustainability Report (BRSR)

In accordance with the SEBI (LODR) Regulations, 2015, the BRSR for the year under review is annexed separately which forms part of this annual report.

29. Other Disclosures

a. The Company has not issued equity shares with differential rights as to dividend, voting or otherwise.

b. The Company has not issued any sweat equity shares to its directors or employees.

c. No application has been made under the Insolvency and Bankruptcy Code; hence the requirement to disclose the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year is not applicable.

d. The requirement to disclose the details of difference between amount of the valuation done at the time of onetime settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable.


30. Directors'' responsibility report

Pursuant to section 134 (5) of the Companies Act, 2013 in relation to financial statements (together with the notes to such financial statements) for the financial year 2022-23, the Board of Directors report that:

(i) in the preparation of the annual accounts for the financial year ended March 31, 2023, the applicable accounting standards have been followed and there are no 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 as at March 31, 2023 and of the profit of the Company for year ended on that date;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 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.

(vi) Proper systems have been devised to ensure compliance with the provisions of all applicable laws by implementing an automated process having comprehensive systems and securing reports of statutory compliances periodically from the functional units and that such systems are adequate and are operating effectively.

The Board of Directors place on record sincere gratitude and appreciation for all the employees at all levels for their hard work, solidarity, cooperation and dedication during the year.

The Board conveys its appreciation for its customers, shareholders, suppliers as well as vendors, bankers, business associates, regulatory and government authorities for their continued support.

By Order of the Board Mahendra Kumar Sharma

Place : Mumbai Chairman

Date : May 18, 2023 DIN: 00327684


Mar 31, 2022

Your directors are pleased to present the 23rd Report of Directors of your Company and the audited financial statements for the year ended March 31, 2022.

'' in Million

Particulars

Standalone

Consolidated

2021-22

2020-21

2021-22

2020-21

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

Revenue from operations

3,07,311

271,764

3,10,618

274,185

Profit / Loss from operations

14,873

8,697

15,556

9,035

Exceptional and other non-recurring

(2,091)

(1,514)

(1,652)

(643)

Less:

Depreciation

2,542

2,493

3,038

2,991

Taxation (including deferred tax)

2,542

1,587

2,760

1,779

Profit / (Loss) after tax

7,698

3,103

8,106

3,621

Profit B/F from previous year

(18,463)

(21,623)

(21,954)

(25,840)

Reinstated Profit B/F from previous year

(18,463)

(21,623)

(21,954)

(25,840)

Minority Interest appropriation

-

180

217

Foreign Currency Translation Reserve Considered separately

-

(1)

(15)

Total Comprehensive Income

123

57

124

63

Transfer between reserves

-

-

Profit / (Loss) available for appropriation

(10,642)

(18,463)

(13,544)

(21,954)

Your Directors have made the following appropriations:

General Reserve

NIL

NIL

NIL

NIL

Dividend paid in respect to previous years

NIL

NIL

NIL

NIL

Proposed dividend

NIL

NIL

NIL

NIL

Balance carried to the Balance Sheet

(10,642)

(18,463)

(13,544)

(21,954)

EPS-Basic & Diluted (Rupees)

10.59

4.27

11.68

5.41

Balance carried to the Balance Sheet

(18,463)

(21,623)

(21,954)

(25,840)

EPS-Basic & Diluted (Rupees)

10.59

4.27

11.68

5.41

As can be seen from the above table, the revenue from operations increased by 13.08% during the year on standalone basis and increased by 13.29% on consolidated basis. Profit after tax has increased during the year by 148.08 % on standalone basis and increased by 123.86% on consolidated basis. The challenges which United Spirits Limited (''USL'' / ''Company'') faced during the year and the environment in which the Company operates have been detailed in Management Discussion and Analysis Report which is forming part of this Annual Report (''Report'').

1. Performance of the Company

During the year under review, your Company''s sales volume was about 79.1 million cases resulting in a volume increase of 11.9% compared to previous year. Net sales/income from operations (net of duties and taxes) of your Company increased by 18.9% in the financial year ended March 31, 2022 which stood at '' 93,817 million (previous year '' 78,890 million). Adjusting one-off sale of bulk Scotch, net sales/income from operations increased by 18.4% for the year. Sales volume of the Company''s brands in the ''Prestige and Above'' segment increased by 14.6% in the financial year ended March 31, 2022 which stood at 42.6 million cases (previous year 37.2 million cases). Net sales of the ''Prestige and Above'' segment increased by 23.6% which stood at '' 68,050 million net of duties and taxes (previous year '' 55,035 million). The ''Prestige and Above'' segment represented 72.5% of total net sales and 53.9% of total sale volume during the year.

2. Board''s responses to observations, qualifications and adverse remarks in auditor''s report

The statutory and secretarial auditors have given unqualified opinion on the financial statements and in the secretarial audit report for the year ended March 31, 2022 and hence this is not applicable.

3. Material changes and commitments / events subsequent to the date of the financial statements

There are no material changes and commitments/events subsequent to the date of financial statements. Management has determined that COVID-19 is not likely to materially impact the future operations of the Company considering a large section of the population has been vaccinated and based on Company''s own past experience with the pandemic,. The Company continues to maintain a positive outlook for the next financial year and will continue to monitor changes in future economic conditions.

4. Change in nature of business, if any

The details of change in nature of business, if any, are provided under Management Discussion and Analysis Report and the Report on Risk Management forming part of this Report.

5. Dividend

In view of the accumulated losses of the preceding years, your directors could not recommend any dividend.

6. Transfer to reserve

During the year under review, there was no amount transferred to reserves of the Company.

7. Capital

The authorized share capital of your Company remains unchanged at 2,740,000,000 equity shares of '' 2/- each and 171,200,000 preference shares of '' 10/- each. The issued, subscribed and paid-up capital of the Company is 726,638,715 equity shares of '' 2/- each aggerating '' 1,453,277,430. There was no change in the issued, subscribed and paid-up capital of the Company during the year under review.

8. Details of subsidiary companies and associate companies and their financial position

The performance of subsidiaries and associate Companies and their contribution to the overall performance of the Company is covered as part of the consolidated financial statement and form AOC-1 annexed as part of this Report as Annexure - 1. The Company has 13 subsidiary companies. Out of 13 subsidiary companies, 12 subsidiary companies are non-operative.

As mentioned in the Annual Report of 2020-21, during the year, Montrose International (S.A.), Panama, a wholly owned overseas subsidiary of your Company was liquidated effective April 16, 2021 and thus ceased to be a subsidiary.

During the year, Hip Bar Private Limited ceased to be an associate company of your Company. On 3rd August 2021, a share purchase agreement has been executed with Hip Bar Private Limited for sale of the entire stake of the Company [Equity Shares (4,567,568 Nos.) and Compulsory Convertible Preference Shares (1,950,000 Nos.) in Hip Bar Private Limited for INR 5.2 million. Amount received on account of disposal amounting to INR 5.2 million has been presented as gain on disposal of associate under Exceptional item. Pursuant to the sale, the Company has also received all rights, title, and interest in the trademarks ''CloudBar'' and ''BarOnTheCloud'' from Hip Bar Private Limited, which have been valued at INR Nil

Highlights

The Board of Directors ("Board”) of Pioneer Distilleries Limited, a listed subsidiary of the Company ("PDL”) and of the Company at their meetings held on December 2, 2019 considered and approved a scheme of amalgamation and arrangement (the "Scheme”) in relation to the proposed merger of PDL with the Company under Sections 230 - 232 and other applicable provisions of the Companies Act, 2013 and the rules thereunder. Upon completion of the merger, the non-promoter shareholders of PDL will receive 10 equity shares of the Company (face value of '' 2 each) for every 47 equity shares of PDL (face value of '' 10 each), held by them as on the record date. Post the merger, the Company''s issued capital is expected to expand by 712,138 shares and the revised shareholding of Relay BV (the holding Company, a subsidiary of Diageo PLC) in the Company will change from 55.94% to 55.88%. The Scheme is subject to the receipt of requisite approvals from the relevant statutory authorities and the respective shareholders and

creditors of PDL and of the Company. The BSE Limited and the National Stock Exchange of India Limited have issued their no-objection to the draft scheme and related documents filed, vide observation letters dated October 21, 2020 and October 22, 2020, respectively. The Company jointly with PDL have filed application under Sections 230 to 232 of the Companies Act, 2013 on November 27, 2020 with the National Company Law Tribunal, Bangalore ("NCLT”) and again an Interlocutory Application was filed before NCLT on April 07, 2021. Based on the order of the NCLT received on August 18, 2021, the Company and PDL convened meetings of their respective equity shareholders, and the Company also convened a meeting of its unsecured creditors, on September 30, 2021. The Scheme was approved with requisite majority at these meetings. Subsequently, a joint petition to sanction the Scheme has been filed by USL and PDL with the NCLT on October 02, 2021. Company''s petition was heard by the NCLT on January 12, 2022. Next hearing is scheduled for May 27, 2022.

Royal Challengers Sports Private Limited (RCSPL), a wholly owned subsidiary of your Company, reported a revenue from operations of '' 2916 million during the year which was mainly attributed to the increase in central rights income from Board of Cricket Control of India (BCCI) and as a result of Royal Challengers Bangalore, a franchisee team of Indian Premier League (IPL), securing fourth position in the IPL Season 2021 similar to season 2020. RCSPL also accounted a profit of 661 million with an increase of 119 million during the year.

The Company''s policy for determining material subsidiaries is available at the Company''s website at https://www. diageoindia.com/investors/shareholder-centre/policies/ policy-for-determining-material-subsidiaries/

In accordance with the 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 https://www.diageoindia.com/ investors/subsidiaries-financial/.

9. Prospects/Outlook

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

10. Appointment/reappointment and resignation/ retirement/step down of Executive Directors and Key Managerial Personnel during the financial year:

A. i) Step down of Mr. Anand Kripalu as Managing Director and Chief Executive Officer (MD & CEO )& appointment of Ms. Hina Nagarajan as Managing Director and Chief Executive Officer - Key Managerial Personnel (KMP)

As already updated in the annual report for the year ended 2020-21, The Board at its meeting held on December 10, 2020 approved the appointment of Ms. Hina Nagarajan as an Additional Director and MD & CEO with effect from July 01, 2021 in the place of Mr. Anand Kripalu, erstwhile MD & CEO who stepped down as MD & CEO effective end of day June 30, 2021.

ii) Resignation of Mr. Vinod Rao as director of the Company

Mr. Vinod Rao, Director of the Company, resigned as a non-executive director of the Company effective from end of day December 15, 2021 and the Board noted the same.

iii) Appointment of Mr. Mark Dominic Sandys

Mr. Mark Dominic Sandys was appointed as a Director of the Company with effect from April 01, 2022.

Apart from the aforesaid appointment, there was no appointment of executive director during the year.

iv) Re-appointment of Mr. Randall Ingber

As per the provisions of the Companies Act, 2013, Mr. Randall Ingber (Mr. Ingber) retires by rotation at the ensuing annual general meeting (AGM) and being eligible, offered himself for re-appointment.

Members may please note that Mr. Ingber, who was appointed as a director at the 21st AGM held on August 26, 2020. Mr. Ingber is not debarred from holding the directorship under any statutory regulations. Details about Mr. Ingber is provided in the Notice of the 23rd annual general meeting of the Company.

B. Independent Directors

Your Company did not appoint any new Independent Director in the financial year 2021-22. Criteria for selection/ appointment or re-appointment of Independent Directors include skills, expertise of the Director, qualifications, experience, and domain knowledge. The required skills of Independent Directors are leadership, managerial experience, diversity, risk management and corporate governance. All our Independent Directors viz., Mr. Mahendra Kumar Sharma, Mr. V K Viswanathan, Mr. D Sivanandhan, Mr. Rajeev Gupta and Dr. (Mrs.) Indu Shahani possess the aforesaid skills.

C. Declaration by Independent Directors

Independent Directors have given a declaration pursuant to sub-section (6) of Section 149 of the Companies Act, 2013. In the opinion of the Board, Independent Directors fulfill the conditions specified in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI (LODR) Regulations) and are independent of the management.

D. Number of meetings of the Board

The details of the Board Meetings and other Committee Meetings held during the financial year 2021-22 are stated in the Corporate Governance Report which is forming part of this Report.

E. Board Committees

The Company has the following committees of the Board:

• Audit Committee

• Risk Management Committee

• Nomination and Remuneration Committee

• Stakeholders Relationship and General Committee

• Corporate Social Responsibility Committee (Committee was renamed as "Corporate Social Responsibility and Environmental, Social and Governance Committee” w.e.f. April 1, 2022)

The composition of each of the above Committees, their respective roles and responsibilities are provided in the Corporate Governance Report which forms part of this Report.

F. Policies

The Company has adopted all policies as required to be maintained by the Company under the provisions of the Companies Act, 2013 and SEBI (LODR) Regulations and the same are uploaded on the website of the Company wherever required and the salient features of the policies are detailed in Corporate Governance Report.

G. Recommendations of the audit committee and other committees

All the recommendations of the Audit Committee and of the other Committees were accepted by the Board.

H. Details of remuneration to directors

As required under section 197(12) of the Companies Act, 2013 information relating to remuneration paid to

Directors during the financial year 2021-22 is provided in the Corporate Governance Report. The Company has also prepared a draft annual return in revised e-form MGT-7 for FY 2021-22 and uploaded the same on Company''s website at https://www.diageoindia. com/investors/financials/annual-and-financial-reports/ annual-return-2021-22/. Members may also note that the annual return uploaded on the website is a draft and the final annual return will be uploaded after the same is filed with the Ministry of Corporate Affairs (''MCA'').

As stated in the Corporate Governance Report, sitting fees is paid to Independent 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 Independent Directors are also eligible for commission every year as may be recommended by the Nomination and Remuneration Committee and approved by the Board within the overall limit of '' 4 Crore or 1% of the net profits of the Company calculated in accordance with section 198 of the Companies Act, 2013, whichever is higher, as approved by the shareholders through Postal Ballot Resolution effective January 18, 2019. Criteria for payment of remuneration to Independent Directors are as given below:

i. Membership of Committees

ii. Chairmanship of the Committees/Board

iii. Benchmarking with other companies

The Board of Directors have approved payment of commission of '' 20 million to five independent directors after applying the criteria stated above for the financial year 2021-22.

The criteria for payment of remuneration to executive directors is determined by the Nomination and Remuneration Committee based on various criteria including performance criteria. Remuneration Policy is available on the Company''s website at https:// www.diageoindia.com/investors/shareholder-centre/policies/remuneration-reward-policy/.

I. Board evaluation criteria

Pursuant to the provisions of the Companies Act, 2013 and regulation 17 of the SEBI (LODR) Regulations, the Board has carried out an annual performance evaluation, based on parameters which, inter alia, include performance of the Board on deciding strategy, rating the composition

& mix of Board members, discharging of their duties and handling critical issues etc. The parameters for the performance evaluation of the Directors include contribution made at the Board meeting, attendance, instances of sharing information on best practices applied in other industries, domain knowledge, vision, strategy and engagement with senior management, etc.

The Independent Directors at their separate meetings, review the performance of non-independent directors and the Board as a whole. Chairperson of the Company after taking into account the views of Executive Director and non-executive directors, reviews the quality, quantity and timeliness of flow of information between the management and the Board for the Board to effectively and reasonably perform their duties. Based on the outcome of the performance evaluation exercise, areas have been identified for the Board to engage itself with and the same would be acted upon.

The details of the evaluation process are set out in the Corporate Governance Report which forms part of this Report.

J. Vigil Mechanism

Your Company has established whistle-blower mechanism known as SpeakUp, which is being independently operated by a third-party agency. We encourage our employees or representatives acting on behalf of the Company, to raise their compliance concerns through this mechanism, apart from other internal reporting channels viz. Line Manager, HR Business Partner, Legal Business Partner and Business Integrity partner.

The SpeakUp channel is available on the Company''s website at https://www.diageoindia.com/about-us/corporate-governance/speak-up/, with services available in English and 5 other regional languages, and compliance concerns can be raised by any aggrieved person through web page or toll-free number. During the year, we have introduced QR code to facilitate the access to SpeakUp channel.

The quality of investigation reports and remedial actions are reviewed and monitored by the Global Business Integrity team and Diageo India Business Integrity team. The decision on sanctions on the reported breaches are determined and monitored by a Compliance Committee for significant breaches and the Grievance Committee for other breaches, ensuring there is a collective, transparent and an unbiased decision-making process and that consistent action is undertaken in a timely manner to resolve the identified breaches.

A structured Breach Management Standard is in place which is in line with the Global Standard, for timely and conclusive resolution of compliance concerns raised through the whistle blower mechanism.

This vigil mechanism has been established to provide adequate safeguards against the victimization of employees, who avail this mechanism for reporting complaints and grievances in good faith and without fear of being punished for doing so. Access to the Chairman of the Audit Committee is provided as required under the Companies Act, 2013 and the SEBI (LODR) Regulations.

K. Related party transactions

The Company''s policy on dealing with related party transactions was adopted by the Board on June 15, 2015 and further amended from time to time. This policy is available on the Company''s website at https://www.diageoindia.com/investors/shareholder-centre/policies/policy-on-related-party-transactions/.

Form AOC-2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is set out in the Annexure-2 to this Report.

All related party transactions that were entered into during the financial year, were at arm''s length basis and were in the ordinary course of business. There are no material significant related party transactions entered into by the Company with promoters, directors, key managerial personnel or other designated persons which may have a conflict of interest with the Company at large.

L. Meeting amongst Independent Directors

Schedule IV of the Companies Act, 2013, SEBI (LODR) Regulations and Secretarial Standard - 1 on Meetings of the Board of Directors mandates that the Independent Directors of the Company hold at least one meeting in a year, without the attendance of Non-Independent Directors.

The Independent Directors met amongst themselves without the presence of any other persons on May 20, 2021 and October 26, 2021.

11. Auditors

i) Financial audit

M/s. Price Waterhouse & Co. Chartered Accountants LLP (FRN 304026E / E-300009) Statutory Auditors of your Company, were appointed as Auditors of your Company from the conclusion of the 22nd AGM for a period of 5 years. Since the appointment is not subject to ratification of the appointment by the members at every AGM, no resolution is proposed at this AGM pursuant to the provisions of Companies (Amendment) Act, 2017.

ii) Secretarial audit

Pursuant to section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a Secretarial Audit has been carried out by Mr. Sudhir V Hulyalkar, Practicing Company Secretary (FCS: 6040 and CP No. 6137) and his report is annexed as Annexure - 3.

In addition, Pursuant to Regulation 24A of the SEBI (LODR) Regulation, the Secretarial Compliance Report for the financial year ended March 31, 2022, in relation to compliance of all applicable SEBI Regulations/ circulars/guidelines issued thereunder, is annexed as Annexure - 3A. The Secretarial Compliance Report has been voluntarily disclosed as part of this Report as good disclosure practice. The said report has been submitted to the stock exchanges and is also available on the Company''s website at https://www.diageoindia. com/investors/shareholder-centre/notice-board/annual-secretarial-compliance-report-2022/

iii) Cost audit

The Company is not covered by the requirement of maintenance of cost records, as specified under subsection (1) of section 148 of the Companies Act, 2013.

12. Reporting of fraud by Auditors

During the year under review, neither the statutory auditors nor the secretarial auditor have reported to the Audit Committee or the Board, under section 143(12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in this Report.

13. Corporate governance

A Corporate Governance Report is annexed separately as part of this Report. Board confirms compliance with Secretarial Standards.

14. Management discussion and analysis report

The Management Discussion and Analysis Report is annexed separately as part of this Report.

15. Fixed deposits

As reported in the earlier annual reports, 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 Companies Act, 2013, 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 by paying additional interest of 1% per annum on those fixed deposits repaid before the maturity date pursuant to the contract entered into with the Fixed Deposit holders. Fixed Deposits from the public and shareholders which remained unclaimed and for which no discharge certificates were received from the depositors as on March 31, 2022 stood at '' 10,98,000. Unclaimed amount was transferred into a separate non-interest bearing escrow account opened specifically for the purpose of re-payment pursuant to the provisions of the Companies Act, 2013 and the rules made thereunder. Out of this amount, a sum of '' 4,40,000/- has since been paid as per instructions received after the year end and balance unclaimed amount as of May 27, 2022 is '' 6,58,000/-.

16. Annual return

The draft Annual Return of the Company as on March 31, 2022 in E-Form MGT - 7 in accordance with section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, is available on the website of the Company at https://www.diageoindia.com/ investors/financials/annual-and-financial-reports/annual-return-2021-22/

17. Transfer to Investor Education and Protection Fund (IEPF)

The details of unclaimed/unpaid dividends and fixed deposits which have not been transferred to the IEPF account as the period of seven years have not been completed is given below pursuant to the provisions of the Companies Act, 2013 and the applicable rules there under.

i) Dividend:

The Company has not declared any dividend from financial year 2013-14 onwards owing to accumulated losses. Hence, there are no unclaimed/unpaid dividends from financial year 2013-14 onwards.

No shares were transferred during the year ended March 31, 2022 to Investor Education and Protection Fund pursuant to section 124(6) of the Companies Act, 2013.

ii) Fixed Deposits:

1.

Accepted during the year

NIL

2.

Remained unpaid or unclaimed as at the end of the year

10,98,000

3.

Whether there has been any default in repayment of deposits or payment of

interest thereon during the year and if so, number of such cases and the total amount involved

NIL

4.

The details of deposits which are not

Not

in compliance with the requirements of Chapter V of the Companies Act, 2013

Applicable

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.

18. Human resources

Employee relations remained cordial at all the locations of the Company. Particulars of employees drawing an aggregate remuneration of '' 1,02,00,000/- or above per annum or '' 8,50,000/- 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 - 4 hereto.

19. Employees stock option scheme

Your Company has not offered any stock options to its employees during the year 2021-22 within the meaning of SEBI (Share Based Employee Benefit) Regulations, 2014.

20. Particulars of loans, guarantees and investments

Loans, guarantees and investments covered under section 186 of the Companies Act, 2013 are detailed in Notes to the financial statements under Note 4, relating to investments and Note 5 relating to loans given as per the standalone financial statements for the year ended March 31, 2022. The Company has not given any guarantee to any Company as on March 31, 2022.

21. Risk management

Details on Risk Management is annexed as Annexure - 5 to this Report.

22. Internal financial controls

During the year Governance Risks and Controls (GRC) team has conducted detailed review of policies as per the direction of the management of the Company, to simplify the process and ensuring adherence. The GRC team also undertook

comprehensive review of existing controls (SOX & non-SOX controls) & added attributes wherever required to ensure that controls are in alignment with the laid down policies and practices and meeting the global benchmark. It has been shared with the statutory auditors who have confirmed their alignment. The controls with additional attributes have been tested both by Management tester and by the Statutory auditors for its effectiveness. The Board after considering the materials placed before it, reviewed the confirmation received from external parties and reviewed 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 which are commensurate with the size of the company and that such internal financial controls are broadly adequate and are operating effectively. The certification by the auditors on internal financial control forms part of the audit report. A statement to this effect is also appearing in the Directors'' Responsibility Statement.

23. 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 Report. Furthermore, as required by Section 135 of the Companies Act, 2013 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 - 6 to this Report.

24. Conservation of energy, technology absorption, foreign exchange earnings and outgo

The particulars prescribed under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, are set out in Annexure - 7 to this Report.

25. Details of significant and material orders passed by the regulators or courts impacting the going concern status and Company''s operations in future pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014

The Company has not received any significant or material order passed by regulators or courts or tribunals impacting the Company''s going concern status or the Company''s operations in future. The details of notices received from regulatory authorities and related matters have been disclosed as part of note no. 40 to the audited standalone financial statements for the year ended March 31, 2022 and as note no. 40 of the consolidated financial statements for the year ended March 31, 2022.

26. Disclosure as required under section 22 of Sexual Harassment of Women at Workplace (prevention, prohibition and redressal) Act, 2013

As per requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (SHWWA), the Company has designed and implemented a comprehensive policy and framework to promote a safe and secure work environment, where every person at the workplace is treated with dignity and respect. Moreover, the Company''s policy is inclusive and gender neutral. Further, the complaint redressal mechanism detailed in the policy ensures complete anonymity and confidentiality to the parties.

Internal Committees (IC) have been constituted as per the requirement. Maintaining the highest governance norms, each Internal Committee has appointed members who are employees of the Company and an independent external member, having extensive experience in the field. The ICs meet on a half yearly basis to discuss matters on policy awareness, best practices, judicial trends, etc. During the year, ICs have also been trained on nuances of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Internal Committees role is to consider and resolve the complaints reported on sexual harassment at workplace. Investigation is conducted and decisions are made by the IC at the respective location, and a senior woman employee is the presiding officer on every case.

i) Number of complaints filed during the financial year: 1 (One) complaint received

ii) Number of complaints disposed of during the financial year: NIL

iii) Number of complaints pending as on end of the financial year: 1 (One) under progress

To build awareness in this area, the Company has been publishing newsletter, emailers, posters, conducting online training module and monthly induction training for newly joined employees. Besides the refresher, virtual training programmes are conducted in the organization on a continuous basis for employees (including blue collared employees), consultants, contractual employees and permanent/contractual workers in regional languages. The Internal Committee has also conducted informal sessions to check the pulse at the grassroot levels.

27. Business Responsibility Report (BRR)

In accordance with the SEBI (LODR) Regulations, 2015, the BRR has been placed on the Company''s website at https://www. diageoindia.com/investors/financials/annual-and-financial-reports/business-responsibility-report-2021-22/

28. Other Disclosures

a) The Company has not issued equity shares with differential rights as to dividend, voting or otherwise.

b) The Company has not issued any sweat equity shares to its directors or employees.

c) No application has been made under the Insolvency and Bankruptcy Code; hence the requirement to disclose the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year is not applicable.

d) The requirement to disclose the details of difference between amount of the valuation done at the time of onetime settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable.

29. Directors'' responsibility report

Pursuant to section 134 (5) of the Companies Act, 2013 in relation to financial statements (together with the notes to such financial statements) for the year 2021-22, the Board of Directors report that:

(i) in the preparation of the annual accounts for the financial year ended March 31, 2022, the applicable accounting standards have been followed and there are no 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 as at March 31, 2022 and of the profit of the Company for year ended on that date;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 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.

(vi) Proper systems have been devised to ensure compliance with the provisions of all applicable laws by implementing an automated process having comprehensive systems and securing reports of statutory compliances periodically from the functional units and that such systems are adequate and are operating effectively.

The Board of Directors place on record sincere gratitude and appreciation for all the employees at all levels for their hard work, solidarity, cooperation and dedication during the year.

The Board conveys its appreciation for its customers, shareholders, suppliers as well as vendors, bankers, business associates, regulatory and government authorities for their continued support.

By Order of the Board Mahendra Kumar Sharma

Chairman DIN: 00327684

Place : Mumbai Date : May 27, 2022


Mar 31, 2021

Dear Members,

Your directors are pleased to present the 22nd Report of Directors of your Company and the audited financial statements for the year ended March 31, 2021.

'' in Million

Particulars

Standalone

Consolidated

2020-21

2019-20

2020-21

2019-20

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

Revenue from operations

271,764

285,892

274,185

288,237

Profit / Loss from operations

8,697

13,609

9,033

13,790

Exceptional and other non-recurring

(1,514)

13

(643)

666

Less:

Depreciation

2,493

2,275

2,991

2,853

Taxation (including deferred tax)

1,587

4,300

1,778

5,397

Profit / (Loss) after tax

3,103

7,047

3,621

6,206

Profit B/F from previous year

(21,623)

(28,396)

(25,840)

(32,159)

Impact of change in Revenue Recognition policy on adoption of IND AS 115

-

-

-

-

Reinstated Profit B/F from previous year

(21,623)

(28,396)

(25,840)

(32,159)

Minority Interest appropriation

-

-

217

382

Foreign Currency Translation Reserve Considered separately

-

-

(15)

(49)

Total Comprehensive Income

57

(274)

63

(220)

Transfer between reserves

-

-

-

-

Profit / (Loss) available for appropriation

(18,463)

(21,623)

(21,954)

(25,840)

Your Directors have made the following appropriations:

General Reserve

NIL

NIL

NIL

NIL

Dividend paid in respect to previous years

NIL

NIL

NIL

NIL

Proposed dividend

NIL

NIL

NIL

NIL

Balance carried to the Balance Sheet

(18,463)

(21,623)

(21,954)

(25,840)

EPS-Basic & Diluted (Rupees)

4.27

9.70

5.41

9.29

Balance carried to the Balance Sheet

(21,623)

(28,396)

(25,840)

(32,159)

EPS-Basic & Diluted (Rupees)

4.27

9.70

5.41

9.29

As can be seen from the above table, the revenue from operations decreased by 4.94% during the year on standalone basis and decreased by 4.88% on consolidated basis. Profit after tax has decreased during the year by 55.97% on standalone basis and decreased by 41.64% on consolidated basis. The challenges which the Company faced during the year and the environment in which the Company operates have been detailed in Management Discussion and Analysis Report which is forming part of this Annual Report (''Report'').

1. Performance of the Company

During the year under review, your Company''s sales volume was about 70.7 million cases resulting in a volume decline of 11.3% compared to previous year. Net sales/income from operations (net of duties and taxes) of your Company declined by 13.2% in the financial year ended March 31, 2021 which stood at '' 78,890 million (previous year '' 90,908 million). Adjusted one-off sale of bulk Scotch, net sales/ income from operations declined by 10.8% for the year. Sales volume of the Company''s brands in the ''Prestige and Above'' segment declined by 9% in the financial year ended March 31, 2021 which stood at 37.2 million cases (previous year 40.9 million cases). Net sales of the ''Prestige and Above'' segment declined by 7.2% which stood at '' 55,035 million net of duties and taxes (previous year '' 59,311 million). The ''Prestige and Above'' segment represented 69.8% of total net sales and 52.6% of total sale volume during the year.

2. Board''s responses to observations, qualifications and adverse remarks in auditor''s report

The statutory and secretarial auditors have given unqualified opinion on the financial statements and in the secretarial audit report for the year ended March 31,2021 and hence this is not applicable.

Secretarial Audit Report for financial year 2020-21 is annexed as Annexure - 3.

3. Material changes and commitments / events subsequent to the date of the financial statements

Certain events arising out of COVID-19 Virus Pandemic having impact on businesses worldwide have been covered in detail in the Management Discussion and Analysis Report forming part of this Report. The sharp rise in COVID-19 cases across India has led to implementation of lockdown order at most of the states in the country, while some states have imposed strict lockdown orders, others are partial in nature. Out of the 47 manufacturing sites including tie-up manufacturing units, 3 factories are not in operation currently due to complete lockdown while 6 factories are operating with government restrictions.

4. Change in nature of business, if any

The details of change in nature of business, if any, are provided under Management Discussion and Analysis Report and the Report on Risk Management forming part of this Report.

5. Dividend

In view of the accumulated losses of the preceding years, your directors could not recommend any dividend.

6. Transfer to reserve

During the year under review, there was no amount transferred to reserves of the Company.

7. Capital

The authorized share capital of your Company remains unchanged at 2,740,000,000 equity shares of '' 2/- each and 171,200,000 preference shares of '' 10/- each. The issued, subscribed and paid-up capital of the Company is 726,638,715 equity shares of '' 2/- each aggerating '' 1,453,277,430. There was no change in the issued, subscribed and paid-up capital of the Company during the year under review.

8. Details of subsidiary companies and associate companies and their financial position

The performance of subsidiaries and associate Companies and their contribution to the overall performance of the Company is covered as part of the consolidated financial statement and form AOC-1 annexed as part of this Report as Annexure - 1. The Company has 14 subsidiary companies and 1 associate company. Out of 14 subsidiary companies, 12 subsidiary companies are non-operative.

During the year, 3 companies ceased to be subsidiary viz., (i) UB Sports Management Overseas Limited, a wholly owned overseas subsidiary consequent upon its merger with Palmer Investment Group Limited, another wholly owned overseas subsidiary; (ii) Liquidity Inc, an overseas subsidiary, consequent upon the sale of entire stake held by the Company and (iii) Tern Distilleries Private Limited, a wholly owned subsidiary, consequent upon sale of entire stake held by the Company.

After the end of financial year 2020-21, Montrose International (S.A.), Panama, a wholly owned overseas subsidiary of your Company was liquidated effective April 16, 2021 and thus ceased to be a subsidiary.

On June 25, 2018, the Company had subscribed to 4,567,568 equity shares of Hip Bar Private Limited ("Hip Bar"), constituting 26% of the paid-up equity share capital of Hip Bar. In April 2020, compulsory convertible preference shares (CCPS) were issued by Hip Bar to Hip Bar''s promoter Group for '' 3 crore, to which the Company did not subscribe. While the exact conversion ratio of these CCPS would be fixed at a later date, the dilution of Company''s equity in Hip Bar consequent to the aforesaid CCPS issuance is expected to be in the range of 2.4% to 3.4%. Further, in October 2020, the Company made an investment of '' 1.95 crore in CCPS of Hip Bar which is expected to be 2.4% to 3.4% based on the valuation at the

time of conversion. The shareholding of the Company in Hip Bar on fully diluted basis including the existing shareholding is expected to be 26% when the CCPS is exercised. During the year, investment in Hip Bar has been impaired, as the operations have been closed.

Highlights

The Board of Directors ("Board") of Pioneer Distilleries Limited, a listed subsidiary of the Company ("PDL") and of the Company at their meetings held on December 2, 2019 considered and approved a scheme of amalgamation and arrangement (the "Scheme") in relation to the proposed merger of PDL with the Company under Sections 230 - 232 and other applicable provisions of the Companies Act, 2013 and the rules thereunder. Upon completion of the merger, the non-promoter shareholders of PDL will receive 10 equity shares of the Company (face value of '' 2 each) for every 47 equity shares of PDL (face value of '' 10 each), held by them as on the record date. Post the merger, the Company''s issued capital is expected to expand by 712,138 shares and the revised shareholding of Relay BV (the holding Company, a subsidiary of Diageo PLC) in the Company will change from 55.94% to 55.88%. The Scheme is subject to the receipt of requisite approvals from the relevant statutory authorities and the respective shareholders and creditors of PDL and of the Company. The BSE Limited and the National Stock Exchange of India Limited have issued their no-objection to the draft scheme and related documents filed, vide observation letters dated October 21, 2020 and October 22, 2020, respectively. The Company jointly with PDL have filed application under Sections 230 to 232 of the Companies Act, 2013 on November 27, 2020 with the National Company Law Tribunal, Bangalore ("NCLT") and again an Interlocutory Application was filed before NCLT on April 07, 2021.

Royal Challengers Sports Private Limited (RCSPL), a wholly owned subsidiary of your Company, reported a revenue from operations of '' 272 million during the year which was mainly attributed to the increase in central rights income from Board of Cricket Control of India (BCCI) and as a result of Royal Challengers Bangalore, a franchisee team of Indian Premier League (IPL), securing fourth position in the IPL Season 2020. RCSPL also accounted for a profit of '' 541 million with an increase of '' 504 million accounting to 326% of increase during the year.

The Company''s policy for determining material subsidiaries is available at the Company''s website at https://www. diageoindia.com/investors/shareholder-centre/policies/ policy-for-determining-material-subsidiaries/.

In accordance with the 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 https://www. diageoindia.com/investors/subsidiaries-financial/.

9. Prospects/Outlook

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

10. Appointment/reappointment and resignation/ retirement/step down of Executive Directors and Key Managerial Personnel during the financial year:

A. i) Retirement of Mr. V Ramachandran as Company Secretary & appointment of Mr. Mital Sanghvi as Company Secretary (CS) - Key Managerial Personnel (KMP)

As already updated in the annual report for the year ended 2019-20, the Board at its meeting held on January 27, 2020 appointed Mr. Mital Sanghvi as CS of the Company with effect from June 01, 2020 in the place of Mr. V Ramachandran, erstwhile CS who retired from the services of the Company effective end of day May 31, 2020.

ii) Resignation of Executive Director and Chief Financial Officer (ED & CFO) - Key Managerial Personnel (KMP)

The Board at its meeting held on September 18, 2020 noted the resignation of Mr. Sanjeev Churiwala as ED & CFO of the Company effective end of day September 30, 2020. Mr. Sanjeev Churiwala resigned as an ED & CFO as he was promoted within Diageo group at Singapore.

iii) Appointment of Chief Financial Officer (CFO)

The Board at its meeting held on September 18, 2020 appointed Mr. Pradeep Jain as CFO of the Company with effect from October 01, 2020.

iv) Stepping down of Mr. Anand Kripalu as Managing Director and Chief Executive Officer (MD & CEO) - Key Managerial Personnel (KMP)

The Board at its meeting held on December 10, 2020 approved the stepping down of Mr. Anand Kripalu as MD & CEO of the Company effective end of day June 30, 2021. Mr. Anand Kripalu is stepping down as MD & CEO owing to his retirement.

v) Appointment of Managing Director and Chief Executive Officer (MD & CEO)

The Board at its meeting held on December 10, 2020 approved the appointment of Ms. Hina Nagarajan (Ms. Nagarajan) as Additional Director and MD &

CEO with effect from July 01, 2021. Ms. Nagarajan assumed office as Chief Executive Officer - Designate with effect from April 01, 2021 and continue in that position till June 30, 2021. Details about Ms. Nagarajan is provided in the Notice of the 22nd annual general meeting of the Company.

Apart from the aforesaid appointment, there was no appointment of executive director during the year.

vi) Re-appointment of Mr. John Thomas Kennedy

As per the provisions of the Companies Act, 2013, Mr. John Thomas Kennedy (Mr. Kennedy) retires by rotation at the ensuing annual general meeting (AGM) and being eligible, offered himself for reappointment.

Members may please note that Mr. Kennedy, who is a nominee of Relay B V, was appointed as a director at the 19th AGM held on September 07, 2018. Mr. Kennedy is not debarred from holding the directorship under any statutory regulations. Details about Mr. Kennedy is provided in the Notice of the 22nd annual general meeting of the Company.

vii) Appointment of Mr. Vegulaparanan Kasi Viswanathan as an Independent Director of the Company for the second term.

The tenure of office of Mr. Vegulaparanan Kasi Viswanathan (Mr. V K Viswanathan), who was appointed as an Independent Director of the Company on October 17, 2016 and whose first term of 5 years expires on October 16, 2021. The Board of Directors at their meeting held on May 21, 2021 has accepted the recommendation of the Nomination & Remuneration Committee for re-appointment of Mr. V K Viswanathan as an Independent Director for a further period of 5 years with effect from October 17, 2021. Details about Mr. V K Viswanathan is provided in the Notice of the 22nd annual general meeting of the Company.

viii) Continuation of Mr. Mahendra Kumar Sharma as Director of the Company on completion of 75 years of age.

Mr. Mahendra Kumar Sharma (Mr. M K Sharma), non-executive Chairman, was re-appointed as an Independent Director at the Annual General Meeting of the Company held on August 21, 2019 for a further period of 5 years. During his tenure in the Office, he will be attaining the age of 75 years. Details about Mr. M K Sharma is provided in the Notice of this 22nd annual general meeting of the Company.

B. Independent Directors

Your Company did not appoint any new Independent Director or Nominee Director in the financial year 2020-21. Criteria for selection/appointment or reappointment of Independent Directors include skills, expertise of the Director, qualifications, experience and domain knowledge. The required skills of Independent Directors are leadership, managerial experience, diversity, risk management and corporate governance. All our Independent Directors viz., Mr. Mahendra Kumar Sharma, Mr. V K Viswanathan, Mr. D Sivanandhan, Mr. Rajeev Gupta and Dr. (Mrs.) Indu Shahani possess the aforesaid skills.

C. Declaration by Independent Directors

Independent Directors have given a declaration pursuant to sub-section (6) of Section 149 of the Companies Act, 2013. In the opinion of the Board, Independent Directors fulfill the conditions specified in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI (LODR) Regulations) and are independent of the management.

D. Number of meetings of the Board

The details of the Board Meetings and other Committee Meetings held during the financial year 2020-21 are stated in the Corporate Governance Report which is forming part of this Report.

E. Board Committees

The Company has the following committees of the Board:

• Audit Committee

• Risk Management Committee

• Nomination and Remuneration Committee

• Stakeholders Relationship and General Committee

• Corporate Social Responsibility Committee.

The composition of each of the above Committees, their respective roles and responsibilities are provided in the Corporate Governance Report which forms part of this Report.

F. Policies

The Company has adopted all policies as required to be maintained by the Company under the provisions of the Companies Act, 2013 and SEBI (LODR) Regulations and the same are uploaded on the website of the Company wherever required and the salient features of the policies are detailed in Corporate Governance Report.

G. Recommendations of the audit committee and other committees

All the recommendations of the Audit Committee and of the other Committees were accepted by the Board.

H. Details of remuneration to directors

As required under Section 197(12) of the Companies Act, 2013 information relating to remuneration paid to Directors during the financial year 2020-21 is provided in the Corporate Governance Report. The Company has also prepared a draft annual return in revised e-form MGT-7 for FY 2020-21 and uploaded the same on Company''s website at https://www.diageoindia.com/investors/financials/ annual-and-financial-reports/annual-return-2020-21. Members may also note that the annual return uploaded on the website is a draft and the final annual return will be uploaded after the same is filed with the Ministry of Corporate Affairs (''MCA'').

As stated in the Corporate Governance Report, sitting fees is paid to Independent 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 Independent Directors are also eligible for commission every year as may be recommended by the Nomination and Remuneration Committee and approved by the Board within the overall limit of '' 4 Crore or 1% of the net profits of the Company calculated in accordance with Section 198 of the Companies Act, 2013, whichever is higher, as approved by the shareholders through Postal Ballot Resolution effective January 18, 2019. Criteria for payment of remuneration to Independent Directors are as given below:

i. Membership of Committees

ii. Chairmanship of the Committees/Board

iii. Benchmarking with other companies

The Board of Directors have approved payment of commission of '' 20 million to five independent directors after applying the criteria stated above for the financial year 2020-21.

The criteria for payment of remuneration to executive directors is determined by the Nomination and Remuneration Committee based on various criteria including performance criteria. Remuneration Policy is available on the Company''s website at https://www.diageoindia.com/investors/shareholder-centre/policies/remuneration-reward-policy/.

I. Board evaluation criteria

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 of the SEBI (LODR) Regulations, the Board has carried out an annual performance evaluation, based on parameters which, inter alia, include performance of the Board on deciding strategy, rating the composition & mix of Board members, discharging of their duties and handling critical issues etc. The parameters for the performance evaluation of the Directors include contribution made at the Board meeting, attendance, instances of sharing information on best practices applied in other industries, domain knowledge, vision, strategy, engagement with senior management, etc. The Independent Directors at their separate meetings, review the performance of non-independent directors and the Board as a whole. Chairperson of the Company after taking into account the views of Executive Director and non-executive directors, reviews the quality, quantity and timeliness of flow of information between the management and the Board for the Board to effectively and reasonably perform their duties. Based on the outcome of the performance evaluation exercise, areas have been identified for the Board to engage itself with and the same would be acted upon. The details of the evaluation process are set out in the Corporate Governance Report which forms part of this Report.

J. Vigil Mechanism

The Company has a whistle blower mechanism known as SpeakUp, which is independently operated by a third-party agency. The Company encourage the employees/ representatives acting on behalf of the Company to raise their compliance concerns through this mechanism, apart from other internal reporting channels viz. Line Manager or HR Business Partner, Legal Business Partner and Business Integrity partner. A structured Breach Management Standard is in place which is in line with the Global Standard, for timely and conclusive resolution of compliance concerns raised through the whistle blower mechanism.

The quality of investigation reports and remedial actions are reviewed and monitored by the Global Business Integrity team. The decision on sanctions on the reported breaches are determined and monitored by a Compliance Committee, in order to ensure that there is a collective and a fair decision-making process and consistent action is undertaken in resolving the breaches.

This mechanism also provides for adequate safeguards against the victimization of employees who avail the vigil mechanism for reporting the compliance complaint

in good faith and without fear of being punished for raising that concern. Access to the Chairman of the Audit Committee is provided as required under the Companies Act, 2013 and the SEBI (LODR) Regulations.

The SpeakUp channel is available on the Company''s website at https://www.diageoindia.com/about-us/ corporate-governance/speak-up/, and the toll-free number is available in english and other prominent regional languages.

K. Related party transactions

The Company''s policy on dealing with related party transactions was adopted by the Board on June 15, 2015 and further amended from time to time. This policy is available on the Company''s website at https://www. diageoindia.com/investors/shareholder-centre/policies/ policy-on-related-party-transactions/.

Form AOC-2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is set out in the Annexure-2 to this Report.

All related party transactions that were entered into during the financial year, were at arm''s length basis and were in the ordinary course of business. There are no material significant related party transactions entered into by the Company with promoters, directors, key managerial personnel or other designated persons which may have a conflict of interest with the Company at large.

L. Meeting amongst Independent Directors

Schedule IV of the Companies Act, 2013, SEBI (LODR) Regulaions and Secretarial Standard - 1 on Meetings of the Board of Directors mandates that the Independent Directors of the Company hold at least one meeting in a year, without the attendance of Non-Independent Directors.

The Independent Directors met amongst themselves without the presence of any other persons on May 27, 2020, July 27, 2020 and November 04, 2020.

11. Auditors

i) Financial audit

M/s Price Waterhouse & Co Chartered Accountants LLP, (FRN 304026E/E-300009) were appointed as Statutory Auditors of your Company at the 17th AGM of the Company for a period of 5 years and their term comes to an end at the conclusion of the 22nd AGM of the Company. The Audit Committee at their

meeting held on May 20 & 21, 2021, recommended the re-appointment of M/s Price Waterhouse & Co Chartered Accountants LLP, (FRN 304026E/E-300009) (''PWC'') who have given their consent and willingness to be re-appointed as Auditors of your Company. PWC, being one of the reputed international audit firm and given their expertise in the field of audit, the Board of Directors at their meeting held on May 21, 2021, approved the recommendation of the Audit Committee and proposed to re-appoint PWC as Auditors of your Company for a period of 5 years, from the conclusion of the ensuing 22nd AGM till the conclusion of the 27th AGM of the Company subject to the approval of the members of the Company at the ensuing AGM.

ii) Secretarial audit

Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a Secretarial Audit has been carried out by Mr. Sudhir V Hulyalkar, Practicing Company Secretary (FCS: 6040 and CP No. 6137) and his report is annexed as Annexure - 3.

In addition, Pursuant to Regulation 24A of the SEBI (LODR) Regulation, the Secretarial Compliance Report for the financial year ended March 31, 2021, in relation to compliance of all applicable SEBI Regulations/ circulars/guidelines issued thereunder, is annexed as Annexure - 3A. The Secretarial Compliance Report has been voluntarily disclosed as part of this Report as good disclosure practice. The said report has been submitted to the stock exchanges and is also available on the Company''s website at https://www.diageoindia.com/ investors/shareholder-centre/notice-board/annual-secretarial-compliance-report-2021/.

iii) Cost audit

The Company is not covered by the requirement of maintenance of cost records, as specified under subsection (1) of Section 148 of the Companies Act, 2013.

12. Reporting of fraud by Auditors

During the year under review, neither the statutory auditors nor the secretarial auditor have reported to the Audit Committee or the Board, under Section 143(12) of the Companies Act 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in this Report.

13. Corporate governance

A Corporate Governance Report is annexed separately as part of this Report. Board confirms compliance with Secretarial Standards.

14. Management discussion and analysis report

The Management Discussion and Analysis Report is annexed separately as part of this Report.

15. Fixed deposits

As reported in the earlier annual reports, 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 Companies Act, 2013, 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 by paying additional interest of 1% per annum on those fixed deposits repaid before the maturity date pursuant to the contract entered into with the Fixed Deposit holders. Fixed Deposits from the public and shareholders which remained unclaimed and for which no discharge certificates were received from the depositors as on March 31, 2021 stood at ^17,97,000. Unclaimed amount was transferred into a separate non-interest bearing escrow account opened specifically for the purpose of re-payment pursuant to the provisions of the Companies Act, 2013 and the rules made thereunder. Out of this amount, a sum of ^1,15,000/- has since been paid as per instructions received after the year end and balance unclaimed amount as of May 21, 2021 is ?16,82,000/-. The balance unclaimed fixed deposits continue to remain in the escrow account as on May 21, 2021.

16. Annual return

The draft Annual Return of the Company as on March 31, 2021 in E-Form MGT - 7 in accordance with Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, is available on the website of the Company at https://www.diageoindia.com/investors/financials/annual-and-financial-reports/annual-return-2020-21.

17. Transfer to Investor Education and Protection Fund (IEPF)

The details of unclaimed/unpaid dividends and fixed deposits which have not been transferred to the IEPF account as the period of seven years have not been completed is given

below pursuant to the provisions of the Companies Act, 2013 and the applicable rules there under.

i) Dividend:

The Company has not declared any dividend from financial year 2013-14 onwards owing to accumulated losses. Hence, there are no unclaimed/unpaid dividends from financial year 2013-14 onwards.

No shares were transferred during the year ended March 31, 2021 to Investor Education and Protection Fund pursuant to Section 124(6) of the Companies Act, 2013.

ii) Fixed Deposits:

1. Accepted during the year NIL

2. Remained unpaid or unclaimed as at the ^17,97,000 end of the year

3. Whether there has been any default

in repayment of deposits or payment of NIL interest thereon during the year and if so, number of such cases and the total amount involved

4. The details of deposits which are not

in compliance with the requirements of Not Applicable Chapter V of the Companies Act, 2013

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.

18. Human resources

Employee relations remained cordial at all the locations of the Company. Particulars of employees drawing an aggregate remuneration of '' 1,02,00,000/- or above per annum or '' 8,50,000/- 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 - 4 hereto.

19. Employees stock option scheme

Your Company has not offered any stock options to its employees during the year 2020-21 within the meaning of SEBI (Share Based Employee Benefit) Regulations, 2014.

20. Particulars of loans, guarantees and investments

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 are detailed in Notes to the financial statements under Note 4, relating to investments and Note 5 relating to loans given as per the standalone

financial statements for the year ended March 31, 2021. The Company has not given any guarantee to any Company as on March 31, 2021.

21. Risk management

Details on Risk Management is annexed as Annexure - 5 to this Report.

22. Internal financial controls

During the year Controls, Compliance & Ethics (CC&E) team have implemented a detailed plan under the direction of the Executive Committee of the Company, to reinforce the code of business conduct and to further embed compliance across the business. The CC&E team also undertook comprehensive review of existing controls (SOX & non-SOX controls) & added additional attributes in the existing controls. The same has been shared with the statutory auditors who have confirmed that they are aligned with the same. The controls with additional attributes have been tested both by Management tester (Deloitte) and by the Statutory auditors in March 2021 for its effectiveness. The Board after considering the materials placed before it, reviewed the confirmation received from external parties and 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 which are commensurate with the size of the Company and that such internal financial controls are broadly adequate and are operating effectively. The certification by the auditors on internal financial control forms part of the audit report. A statement to this effect is also appearing in the Directors'' Responsibility Statement.

23. Corporate social responsibility

Information on the composition of the Corporate Social Responsibility (CSR) Committee is provided in the Corporate Governance Report that forms part ofthis Report. Furthermore, as required by Section 135 of the Companies Act, 2013 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 - 6 to this Report.

24. Conservation of energy, technology absorption, foreign exchange earnings and outgo

The particulars prescribed under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, are set out in Annexure - 7 to this Report.

25. Details of significant and material orders passed by the regulators or courts impacting the going concern status and Company''s operations in future pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014

The Company has not received any significant or material order passed by regulators or courts or tribunals impacting the Company''s going concern status or the Company''s operations in future. The details of notices received from regulatory authorities and related matters have been disclosed as part of note no. 40(e) to the audited standalone financial statements for the year ended March 31,2021 and as note no. 40(e) of the consolidated financial statements for the year ended March 31, 2021.

26. Disclosure as required under Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

As per requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (SHWWA), the Company has implemented the policy and framework. Moreover, the Company''s policy is all gender inclusive and the process ensures complete anonymity and confidentiality to the parties.

Internal Committees (IC) have been constituted for all locations. While maintaining the highest governance norms, the various Internal Committee has appointed internal members and an external member who have extensive experience in the field. The IC''s meet on quarterly basis to discuss the matters on policy awareness, best practices, judicial trends, etc. During the year, IC has also been trained on nuances of the SHWWA.

The IC''s role is to consider and resolve the complaints reported on sexual harassment at workplace. Investigation is conducted and decisions are made by the IC at the respective location, and a senior woman employee is the presiding officer over every case.

i) Number of complaints filed during the financial year: 1

ii) Number of complaints disposed of during the financial year : 1

iii) Number of complaints pending as on end of the financial year: NIL

To build awareness in this area, the Company has been publishing newsletter, emailers, posters, conducting online training module and IBegin-induction training for newly joined employees. Besides the refresher, virtual training programmes are conducted in the organisation on a continuous basis for employees, consultants, contractual employees and permanent/contractual workers in regional

languages. The IC has also conducted informal sessions to check the pulse at the grassroot levels.

27. Business Responsibility Report (BRR)

In accordance with the SEBI (LODR) Regulations, 2015, the BRR has been placed on the Company''s website at https:// www.diageoindia.com/investors/financials/annual-and-financial-reports/business-responsibility-report-2020-21.

28. Other Disclosures

a) The Company has not issued equity shares with differential rights as to dividend, voting or otherwise.

b) The Company has not issued any sweat equity shares to its directors or employees.

c) No application has been made under the Insolvency and Bankruptcy Code; hence the requirement to disclose the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year is not applicable.

d) The requirement to disclose the details of difference between amount of the valuation done at the time of onetime settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable.

29. Directors'' responsibility report

Pursuant to Section 134 (5) of the Companies Act, 2013 in relation to financial statements (together with the notes to such financial statements) for the year 2020-21, the Board of Directors report that:

(i) in the preparation of the annual accounts for the financial year ended March 31, 2021, the applicable accounting standards have been followed and there are no 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 as at March 31, 2021 and of the profit of the Company for year ended on that date;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 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.

(vi) Proper systems have been devised to ensure compliance with the provisions of all applicable laws by implementing an automated process having comprehensive systems and securing reports of statutory compliances periodically from the functional units and that such systems are adequate and are operating effectively.

The Board of Directors place on record sincere gratitude and appreciation for all the employees at all levels for their hard work, solidarity, cooperation and dedication during the year. The Board conveys its appreciation for its customers, shareholders, suppliers as well as vendors, bankers, business associates, regulatory and government authorities for their continued support.

By Order of the Board

Mahendra Kumar Sharma

Chairman DIN:00327684

Dear Members,

Your directors are pleased to present the 22nd Report of Directors of your Company and the audited financial statements for the year ended March 31, 2021.

'' in Million

Particulars

Standalone

Consolidated

2020-21

2019-20

2020-21

2019-20

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

Revenue from operations

271,764

285,892

274,185

288,237

Profit / Loss from operations

8,697

13,609

9,033

13,790

Exceptional and other non-recurring

(1,514)

13

(643)

666

Less:

Depreciation

2,493

2,275

2,991

2,853

Taxation (including deferred tax)

1,587

4,300

1,778

5,397

Profit / (Loss) after tax

3,103

7,047

3,621

6,206

Profit B/F from previous year

(21,623)

(28,396)

(25,840)

(32,159)

Impact of change in Revenue Recognition policy on adoption of IND AS 115

-

-

-

-

Reinstated Profit B/F from previous year

(21,623)

(28,396)

(25,840)

(32,159)

Minority Interest appropriation

-

-

217

382

Foreign Currency Translation Reserve Considered separately

-

-

(15)

(49)

Total Comprehensive Income

57

(274)

63

(220)

Transfer between reserves

-

-

-

-

Profit / (Loss) available for appropriation

(18,463)

(21,623)

(21,954)

(25,840)

Your Directors have made the following appropriations:

General Reserve

NIL

NIL

NIL

NIL

Dividend paid in respect to previous years

NIL

NIL

NIL

NIL

Proposed dividend

NIL

NIL

NIL

NIL

Balance carried to the Balance Sheet

(18,463)

(21,623)

(21,954)

(25,840)

EPS-Basic & Diluted (Rupees)

4.27

9.70

5.41

9.29

Balance carried to the Balance Sheet

(21,623)

(28,396)

(25,840)

(32,159)

EPS-Basic & Diluted (Rupees)

4.27

9.70

5.41

9.29

As can be seen from the above table, the revenue from operations decreased by 4.94% during the year on standalone basis and decreased by 4.88% on consolidated basis. Profit after tax has decreased during the year by 55.97% on standalone basis and decreased by 41.64% on consolidated basis. The challenges which the Company faced during the year and the environment in which the Company operates have been detailed in Management Discussion and Analysis Report which is forming part of this Annual Report (''Report'').

1. Performance of the Company

During the year under review, your Company''s sales volume was about 70.7 million cases resulting in a volume decline of 11.3% compared to previous year. Net sales/income from operations (net of duties and taxes) of your Company declined by 13.2% in the financial year ended March 31, 2021 which stood at '' 78,890 million (previous year '' 90,908 million). Adjusted one-off sale of bulk Scotch, net sales/ income from operations declined by 10.8% for the year. Sales volume of the Company''s brands in the ''Prestige and Above'' segment declined by 9% in the financial year ended March 31, 2021 which stood at 37.2 million cases (previous year 40.9 million cases). Net sales of the ''Prestige and Above'' segment declined by 7.2% which stood at '' 55,035 million net of duties and taxes (previous year '' 59,311 million). The ''Prestige and Above'' segment represented 69.8% of total net sales and 52.6% of total sale volume during the year.

2. Board''s responses to observations, qualifications and adverse remarks in auditor''s report

The statutory and secretarial auditors have given unqualified opinion on the financial statements and in the secretarial audit report for the year ended March 31,2021 and hence this is not applicable.

Secretarial Audit Report for financial year 2020-21 is annexed as Annexure - 3.

3. Material changes and commitments / events subsequent to the date of the financial statements

Certain events arising out of COVID-19 Virus Pandemic having impact on businesses worldwide have been covered in detail in the Management Discussion and Analysis Report forming part of this Report. The sharp rise in COVID-19 cases across India has led to implementation of lockdown order at most of the states in the country, while some states have imposed strict lockdown orders, others are partial in nature. Out of the 47 manufacturing sites including tie-up manufacturing units, 3 factories are not in operation currently due to complete lockdown while 6 factories are operating with government restrictions.

4. Change in nature of business, if any

The details of change in nature of business, if any, are provided under Management Discussion and Analysis Report and the Report on Risk Management forming part of this Report.

5. Dividend

In view of the accumulated losses of the preceding years, your directors could not recommend any dividend.

6. Transfer to reserve

During the year under review, there was no amount transferred to reserves of the Company.

7. Capital

The authorized share capital of your Company remains unchanged at 2,740,000,000 equity shares of '' 2/- each and 171,200,000 preference shares of '' 10/- each. The issued, subscribed and paid-up capital of the Company is 726,638,715 equity shares of '' 2/- each aggerating '' 1,453,277,430. There was no change in the issued, subscribed and paid-up capital of the Company during the year under review.

8. Details of subsidiary companies and associate companies and their financial position

The performance of subsidiaries and associate Companies and their contribution to the overall performance of the Company is covered as part of the consolidated financial statement and form AOC-1 annexed as part of this Report as Annexure - 1. The Company has 14 subsidiary companies and 1 associate company. Out of 14 subsidiary companies, 12 subsidiary companies are non-operative.

During the year, 3 companies ceased to be subsidiary viz., (i) UB Sports Management Overseas Limited, a wholly owned overseas subsidiary consequent upon its merger with Palmer Investment Group Limited, another wholly owned overseas subsidiary; (ii) Liquidity Inc, an overseas subsidiary, consequent upon the sale of entire stake held by the Company and (iii) Tern Distilleries Private Limited, a wholly owned subsidiary, consequent upon sale of entire stake held by the Company.

After the end of financial year 2020-21, Montrose International (S.A.), Panama, a wholly owned overseas subsidiary of your Company was liquidated effective April 16, 2021 and thus ceased to be a subsidiary.

On June 25, 2018, the Company had subscribed to 4,567,568 equity shares of Hip Bar Private Limited ("Hip Bar"), constituting 26% of the paid-up equity share capital of Hip Bar. In April 2020, compulsory convertible preference shares (CCPS) were issued by Hip Bar to Hip Bar''s promoter Group for '' 3 crore, to which the Company did not subscribe. While the exact conversion ratio of these CCPS would be fixed at a later date, the dilution of Company''s equity in Hip Bar consequent to the aforesaid CCPS issuance is expected to be in the range of 2.4% to 3.4%. Further, in October 2020, the Company made an investment of '' 1.95 crore in CCPS of Hip Bar which is expected to be 2.4% to 3.4% based on the valuation at the

time of conversion. The shareholding of the Company in Hip Bar on fully diluted basis including the existing shareholding is expected to be 26% when the CCPS is exercised. During the year, investment in Hip Bar has been impaired, as the operations have been closed.

Highlights

The Board of Directors ("Board") of Pioneer Distilleries Limited, a listed subsidiary of the Company ("PDL") and of the Company at their meetings held on December 2, 2019 considered and approved a scheme of amalgamation and arrangement (the "Scheme") in relation to the proposed merger of PDL with the Company under Sections 230 - 232 and other applicable provisions of the Companies Act, 2013 and the rules thereunder. Upon completion of the merger, the non-promoter shareholders of PDL will receive 10 equity shares of the Company (face value of '' 2 each) for every 47 equity shares of PDL (face value of '' 10 each), held by them as on the record date. Post the merger, the Company''s issued capital is expected to expand by 712,138 shares and the revised shareholding of Relay BV (the holding Company, a subsidiary of Diageo PLC) in the Company will change from 55.94% to 55.88%. The Scheme is subject to the receipt of requisite approvals from the relevant statutory authorities and the respective shareholders and creditors of PDL and of the Company. The BSE Limited and the National Stock Exchange of India Limited have issued their no-objection to the draft scheme and related documents filed, vide observation letters dated October 21, 2020 and October 22, 2020, respectively. The Company jointly with PDL have filed application under Sections 230 to 232 of the Companies Act, 2013 on November 27, 2020 with the National Company Law Tribunal, Bangalore ("NCLT") and again an Interlocutory Application was filed before NCLT on April 07, 2021.

Royal Challengers Sports Private Limited (RCSPL), a wholly owned subsidiary of your Company, reported a revenue from operations of '' 272 million during the year which was mainly attributed to the increase in central rights income from Board of Cricket Control of India (BCCI) and as a result of Royal Challengers Bangalore, a franchisee team of Indian Premier League (IPL), securing fourth position in the IPL Season 2020. RCSPL also accounted for a profit of '' 541 million with an increase of '' 504 million accounting to 326% of increase during the year.

The Company''s policy for determining material subsidiaries is available at the Company''s website at https://www. diageoindia.com/investors/shareholder-centre/policies/ policy-for-determining-material-subsidiaries/.

In accordance with the 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 https://www. diageoindia.com/investors/subsidiaries-financial/.

9. Prospects/Outlook

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

10. Appointment/reappointment and resignation/ retirement/step down of Executive Directors and Key Managerial Personnel during the financial year:

A. i) Retirement of Mr. V Ramachandran as Company Secretary & appointment of Mr. Mital Sanghvi as Company Secretary (CS) - Key Managerial Personnel (KMP)

As already updated in the annual report for the year ended 2019-20, the Board at its meeting held on January 27, 2020 appointed Mr. Mital Sanghvi as CS of the Company with effect from June 01, 2020 in the place of Mr. V Ramachandran, erstwhile CS who retired from the services of the Company effective end of day May 31, 2020.

ii) Resignation of Executive Director and Chief Financial Officer (ED & CFO) - Key Managerial Personnel (KMP)

The Board at its meeting held on September 18, 2020 noted the resignation of Mr. Sanjeev Churiwala as ED & CFO of the Company effective end of day September 30, 2020. Mr. Sanjeev Churiwala resigned as an ED & CFO as he was promoted within Diageo group at Singapore.

iii) Appointment of Chief Financial Officer (CFO)

The Board at its meeting held on September 18, 2020 appointed Mr. Pradeep Jain as CFO of the Company with effect from October 01, 2020.

iv) Stepping down of Mr. Anand Kripalu as Managing Director and Chief Executive Officer (MD & CEO) - Key Managerial Personnel (KMP)

The Board at its meeting held on December 10, 2020 approved the stepping down of Mr. Anand Kripalu as MD & CEO of the Company effective end of day June 30, 2021. Mr. Anand Kripalu is stepping down as MD & CEO owing to his retirement.

v) Appointment of Managing Director and Chief Executive Officer (MD & CEO)

The Board at its meeting held on December 10, 2020 approved the appointment of Ms. Hina Nagarajan (Ms. Nagarajan) as Additional Director and MD &

CEO with effect from July 01, 2021. Ms. Nagarajan assumed office as Chief Executive Officer - Designate with effect from April 01, 2021 and continue in that position till June 30, 2021. Details about Ms. Nagarajan is provided in the Notice of the 22nd annual general meeting of the Company.

Apart from the aforesaid appointment, there was no appointment of executive director during the year.

vi) Re-appointment of Mr. John Thomas Kennedy

As per the provisions of the Companies Act, 2013, Mr. John Thomas Kennedy (Mr. Kennedy) retires by rotation at the ensuing annual general meeting (AGM) and being eligible, offered himself for reappointment.

Members may please note that Mr. Kennedy, who is a nominee of Relay B V, was appointed as a director at the 19th AGM held on September 07, 2018. Mr. Kennedy is not debarred from holding the directorship under any statutory regulations. Details about Mr. Kennedy is provided in the Notice of the 22nd annual general meeting of the Company.

vii) Appointment of Mr. Vegulaparanan Kasi Viswanathan as an Independent Director of the Company for the second term.

The tenure of office of Mr. Vegulaparanan Kasi Viswanathan (Mr. V K Viswanathan), who was appointed as an Independent Director of the Company on October 17, 2016 and whose first term of 5 years expires on October 16, 2021. The Board of Directors at their meeting held on May 21, 2021 has accepted the recommendation of the Nomination & Remuneration Committee for re-appointment of Mr. V K Viswanathan as an Independent Director for a further period of 5 years with effect from October 17, 2021. Details about Mr. V K Viswanathan is provided in the Notice of the 22nd annual general meeting of the Company.

viii) Continuation of Mr. Mahendra Kumar Sharma as Director of the Company on completion of 75 years of age.

Mr. Mahendra Kumar Sharma (Mr. M K Sharma), non-executive Chairman, was re-appointed as an Independent Director at the Annual General Meeting of the Company held on August 21, 2019 for a further period of 5 years. During his tenure in the Office, he will be attaining the age of 75 years. Details about Mr. M K Sharma is provided in the Notice of this 22nd annual general meeting of the Company.


B. Independent Directors

Your Company did not appoint any new Independent Director or Nominee Director in the financial year 2020-21. Criteria for selection/appointment or reappointment of Independent Directors include skills, expertise of the Director, qualifications, experience and domain knowledge. The required skills of Independent Directors are leadership, managerial experience, diversity, risk management and corporate governance. All our Independent Directors viz., Mr. Mahendra Kumar Sharma, Mr. V K Viswanathan, Mr. D Sivanandhan, Mr. Rajeev Gupta and Dr. (Mrs.) Indu Shahani possess the aforesaid skills.

C. Declaration by Independent Directors

Independent Directors have given a declaration pursuant to sub-section (6) of Section 149 of the Companies Act, 2013. In the opinion of the Board, Independent Directors fulfill the conditions specified in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI (LODR) Regulations) and are independent of the management.

D. Number of meetings of the Board

The details of the Board Meetings and other Committee Meetings held during the financial year 2020-21 are stated in the Corporate Governance Report which is forming part of this Report.

E. Board Committees

The Company has the following committees of the Board:

• Audit Committee

• Risk Management Committee

• Nomination and Remuneration Committee

• Stakeholders Relationship and General Committee

• Corporate Social Responsibility Committee.

The composition of each of the above Committees, their respective roles and responsibilities are provided in the Corporate Governance Report which forms part of this Report.

F. Policies

The Company has adopted all policies as required to be maintained by the Company under the provisions of the Companies Act, 2013 and SEBI (LODR) Regulations and the same are uploaded on the website of the Company wherever required and the salient features of the policies are detailed in Corporate Governance Report.

G. Recommendations of the audit committee and other committees

All the recommendations of the Audit Committee and of the other Committees were accepted by the Board.

H. Details of remuneration to directors

As required under Section 197(12) of the Companies Act, 2013 information relating to remuneration paid to Directors during the financial year 2020-21 is provided in the Corporate Governance Report. The Company has also prepared a draft annual return in revised e-form MGT-7 for FY 2020-21 and uploaded the same on Company''s website at https://www.diageoindia.com/investors/financials/ annual-and-financial-reports/annual-return-2020-21. Members may also note that the annual return uploaded on the website is a draft and the final annual return will be uploaded after the same is filed with the Ministry of Corporate Affairs (''MCA'').

As stated in the Corporate Governance Report, sitting fees is paid to Independent 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 Independent Directors are also eligible for commission every year as may be recommended by the Nomination and Remuneration Committee and approved by the Board within the overall limit of '' 4 Crore or 1% of the net profits of the Company calculated in accordance with Section 198 of the Companies Act, 2013, whichever is higher, as approved by the shareholders through Postal Ballot Resolution effective January 18, 2019. Criteria for payment of remuneration to Independent Directors are as given below:

i. Membership of Committees

ii. Chairmanship of the Committees/Board

iii. Benchmarking with other companies

The Board of Directors have approved payment of commission of '' 20 million to five independent directors after applying the criteria stated above for the financial year 2020-21.

The criteria for payment of remuneration to executive directors is determined by the Nomination and Remuneration Committee based on various criteria including performance criteria. Remuneration Policy is available on the Company''s website at https://www.diageoindia.com/investors/shareholder-centre/policies/remuneration-reward-policy/.

I. Board evaluation criteria

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 of the SEBI (LODR) Regulations, the Board has carried out an annual performance evaluation, based on parameters which, inter alia, include performance of the Board on deciding strategy, rating the composition & mix of Board members, discharging of their duties and handling critical issues etc. The parameters for the performance evaluation of the Directors include contribution made at the Board meeting, attendance, instances of sharing information on best practices applied in other industries, domain knowledge, vision, strategy, engagement with senior management, etc. The Independent Directors at their separate meetings, review the performance of non-independent directors and the Board as a whole. Chairperson of the Company after taking into account the views of Executive Director and non-executive directors, reviews the quality, quantity and timeliness of flow of information between the management and the Board for the Board to effectively and reasonably perform their duties. Based on the outcome of the performance evaluation exercise, areas have been identified for the Board to engage itself with and the same would be acted upon. The details of the evaluation process are set out in the Corporate Governance Report which forms part of this Report.

J. Vigil Mechanism

The Company has a whistle blower mechanism known as SpeakUp, which is independently operated by a third-party agency. The Company encourage the employees/ representatives acting on behalf of the Company to raise their compliance concerns through this mechanism, apart from other internal reporting channels viz. Line Manager or HR Business Partner, Legal Business Partner and Business Integrity partner. A structured Breach Management Standard is in place which is in line with the Global Standard, for timely and conclusive resolution of compliance concerns raised through the whistle blower mechanism.

The quality of investigation reports and remedial actions are reviewed and monitored by the Global Business Integrity team. The decision on sanctions on the reported breaches are determined and monitored by a Compliance Committee, in order to ensure that there is a collective and a fair decision-making process and consistent action is undertaken in resolving the breaches.

This mechanism also provides for adequate safeguards against the victimization of employees who avail the vigil mechanism for reporting the compliance complaint

in good faith and without fear of being punished for raising that concern. Access to the Chairman of the Audit Committee is provided as required under the Companies Act, 2013 and the SEBI (LODR) Regulations.

The SpeakUp channel is available on the Company''s website at https://www.diageoindia.com/about-us/ corporate-governance/speak-up/, and the toll-free number is available in english and other prominent regional languages.

K. Related party transactions

The Company''s policy on dealing with related party transactions was adopted by the Board on June 15, 2015 and further amended from time to time. This policy is available on the Company''s website at https://www. diageoindia.com/investors/shareholder-centre/policies/ policy-on-related-party-transactions/.

Form AOC-2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is set out in the Annexure-2 to this Report.

All related party transactions that were entered into during the financial year, were at arm''s length basis and were in the ordinary course of business. There are no material significant related party transactions entered into by the Company with promoters, directors, key managerial personnel or other designated persons which may have a conflict of interest with the Company at large.

L. Meeting amongst Independent Directors

Schedule IV of the Companies Act, 2013, SEBI (LODR) Regulaions and Secretarial Standard - 1 on Meetings of the Board of Directors mandates that the Independent Directors of the Company hold at least one meeting in a year, without the attendance of Non-Independent Directors.

The Independent Directors met amongst themselves without the presence of any other persons on May 27, 2020, July 27, 2020 and November 04, 2020.

11. Auditors

i) Financial audit

M/s Price Waterhouse & Co Chartered Accountants LLP, (FRN 304026E/E-300009) were appointed as Statutory Auditors of your Company at the 17th AGM of the Company for a period of 5 years and their term comes to an end at the conclusion of the 22nd AGM of the Company. The Audit Committee at their

meeting held on May 20 & 21, 2021, recommended the re-appointment of M/s Price Waterhouse & Co Chartered Accountants LLP, (FRN 304026E/E-300009) (''PWC'') who have given their consent and willingness to be re-appointed as Auditors of your Company. PWC, being one of the reputed international audit firm and given their expertise in the field of audit, the Board of Directors at their meeting held on May 21, 2021, approved the recommendation of the Audit Committee and proposed to re-appoint PWC as Auditors of your Company for a period of 5 years, from the conclusion of the ensuing 22nd AGM till the conclusion of the 27th AGM of the Company subject to the approval of the members of the Company at the ensuing AGM.

ii) Secretarial audit

Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a Secretarial Audit has been carried out by Mr. Sudhir V Hulyalkar, Practicing Company Secretary (FCS: 6040 and CP No. 6137) and his report is annexed as Annexure - 3.

In addition, Pursuant to Regulation 24A of the SEBI (LODR) Regulation, the Secretarial Compliance Report for the financial year ended March 31, 2021, in relation to compliance of all applicable SEBI Regulations/ circulars/guidelines issued thereunder, is annexed as Annexure - 3A. The Secretarial Compliance Report has been voluntarily disclosed as part of this Report as good disclosure practice. The said report has been submitted to the stock exchanges and is also available on the Company''s website at https://www.diageoindia.com/ investors/shareholder-centre/notice-board/annual-secretarial-compliance-report-2021/.

iii) Cost audit

The Company is not covered by the requirement of maintenance of cost records, as specified under subsection (1) of Section 148 of the Companies Act, 2013.

12. Reporting of fraud by Auditors

During the year under review, neither the statutory auditors nor the secretarial auditor have reported to the Audit Committee or the Board, under Section 143(12) of the Companies Act 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in this Report.

13. Corporate governance

A Corporate Governance Report is annexed separately as part of this Report. Board confirms compliance with Secretarial Standards.

14. Management discussion and analysis report

The Management Discussion and Analysis Report is annexed separately as part of this Report.

15. Fixed deposits

As reported in the earlier annual reports, 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 Companies Act, 2013, 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 by paying additional interest of 1% per annum on those fixed deposits repaid before the maturity date pursuant to the contract entered into with the Fixed Deposit holders. Fixed Deposits from the public and shareholders which remained unclaimed and for which no discharge certificates were received from the depositors as on March 31, 2021 stood at ^17,97,000. Unclaimed amount was transferred into a separate non-interest bearing escrow account opened specifically for the purpose of re-payment pursuant to the provisions of the Companies Act, 2013 and the rules made thereunder. Out of this amount, a sum of ^1,15,000/- has since been paid as per instructions received after the year end and balance unclaimed amount as of May 21, 2021 is ?16,82,000/-. The balance unclaimed fixed deposits continue to remain in the escrow account as on May 21, 2021.

16. Annual return

The draft Annual Return of the Company as on March 31, 2021 in E-Form MGT - 7 in accordance with Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, is available on the website of the Company at https://www.diageoindia.com/investors/financials/annual-and-financial-reports/annual-return-2020-21.

17. Transfer to Investor Education and Protection Fund (IEPF)

The details of unclaimed/unpaid dividends and fixed deposits which have not been transferred to the IEPF account as the period of seven years have not been completed is given

below pursuant to the provisions of the Companies Act, 2013 and the applicable rules there under.

i) Dividend:

The Company has not declared any dividend from financial year 2013-14 onwards owing to accumulated losses. Hence, there are no unclaimed/unpaid dividends from financial year 2013-14 onwards.

No shares were transferred during the year ended March 31, 2021 to Investor Education and Protection Fund pursuant to Section 124(6) of the Companies Act, 2013.

ii) Fixed Deposits:

1. Accepted during the year NIL

2. Remained unpaid or unclaimed as at the ^17,97,000 end of the year

3. Whether there has been any default

in repayment of deposits or payment of NIL interest thereon during the year and if so, number of such cases and the total amount involved

4. The details of deposits which are not

in compliance with the requirements of Not Applicable Chapter V of the Companies Act, 2013

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.

18. Human resources

Employee relations remained cordial at all the locations of the Company. Particulars of employees drawing an aggregate remuneration of '' 1,02,00,000/- or above per annum or '' 8,50,000/- 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 - 4 hereto.

19. Employees stock option scheme

Your Company has not offered any stock options to its employees during the year 2020-21 within the meaning of SEBI (Share Based Employee Benefit) Regulations, 2014.

20. Particulars of loans, guarantees and investments

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 are detailed in Notes to the financial statements under Note 4, relating to investments and Note 5 relating to loans given as per the standalone

financial statements for the year ended March 31, 2021. The Company has not given any guarantee to any Company as on March 31, 2021.

21. Risk management

Details on Risk Management is annexed as Annexure - 5 to this Report.

22. Internal financial controls

During the year Controls, Compliance & Ethics (CC&E) team have implemented a detailed plan under the direction of the Executive Committee of the Company, to reinforce the code of business conduct and to further embed compliance across the business. The CC&E team also undertook comprehensive review of existing controls (SOX & non-SOX controls) & added additional attributes in the existing controls. The same has been shared with the statutory auditors who have confirmed that they are aligned with the same. The controls with additional attributes have been tested both by Management tester (Deloitte) and by the Statutory auditors in March 2021 for its effectiveness. The Board after considering the materials placed before it, reviewed the confirmation received from external parties and 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 which are commensurate with the size of the Company and that such internal financial controls are broadly adequate and are operating effectively. The certification by the auditors on internal financial control forms part of the audit report. A statement to this effect is also appearing in the Directors'' Responsibility Statement.

23. Corporate social responsibility

Information on the composition of the Corporate Social Responsibility (CSR) Committee is provided in the Corporate Governance Report that forms part ofthis Report. Furthermore, as required by Section 135 of the Companies Act, 2013 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 - 6 to this Report.

24. Conservation of energy, technology absorption, foreign exchange earnings and outgo

The particulars prescribed under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, are set out in Annexure - 7 to this Report.


25. Details of significant and material orders passed by the regulators or courts impacting the going concern status and Company''s operations in future pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014

The Company has not received any significant or material order passed by regulators or courts or tribunals impacting the Company''s going concern status or the Company''s operations in future. The details of notices received from regulatory authorities and related matters have been disclosed as part of note no. 40(e) to the audited standalone financial statements for the year ended March 31,2021 and as note no. 40(e) of the consolidated financial statements for the year ended March 31, 2021.

26. Disclosure as required under Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

As per requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (SHWWA), the Company has implemented the policy and framework. Moreover, the Company''s policy is all gender inclusive and the process ensures complete anonymity and confidentiality to the parties.

Internal Committees (IC) have been constituted for all locations. While maintaining the highest governance norms, the various Internal Committee has appointed internal members and an external member who have extensive experience in the field. The IC''s meet on quarterly basis to discuss the matters on policy awareness, best practices, judicial trends, etc. During the year, IC has also been trained on nuances of the SHWWA.

The IC''s role is to consider and resolve the complaints reported on sexual harassment at workplace. Investigation is conducted and decisions are made by the IC at the respective location, and a senior woman employee is the presiding officer over every case.

i) Number of complaints filed during the financial year: 1

ii) Number of complaints disposed of during the financial year : 1

iii) Number of complaints pending as on end of the financial year: NIL

To build awareness in this area, the Company has been publishing newsletter, emailers, posters, conducting online training module and IBegin-induction training for newly joined employees. Besides the refresher, virtual training programmes are conducted in the organisation on a continuous basis for employees, consultants, contractual employees and permanent/contractual workers in regional

languages. The IC has also conducted informal sessions to check the pulse at the grassroot levels.

27. Business Responsibility Report (BRR)

In accordance with the SEBI (LODR) Regulations, 2015, the BRR has been placed on the Company''s website at https:// www.diageoindia.com/investors/financials/annual-and-financial-reports/business-responsibility-report-2020-21.

28. Other Disclosures

a) The Company has not issued equity shares with differential rights as to dividend, voting or otherwise.

b) The Company has not issued any sweat equity shares to its directors or employees.

c) No application has been made under the Insolvency and Bankruptcy Code; hence the requirement to disclose the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year is not applicable.

d) The requirement to disclose the details of difference between amount of the valuation done at the time of onetime settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable.

29. Directors'' responsibility report

Pursuant to Section 134 (5) of the Companies Act, 2013 in relation to financial statements (together with the notes to such financial statements) for the year 2020-21, the Board of Directors report that:

(i) in the preparation of the annual accounts for the financial year ended March 31, 2021, the applicable accounting standards have been followed and there are no 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 as at March 31, 2021 and of the profit of the Company for year ended on that date;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 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.

(vi) Proper systems have been devised to ensure compliance with the provisions of all applicable laws by implementing an automated process having comprehensive systems and securing reports of statutory compliances periodically from the functional units and that such systems are adequate and are operating effectively.

The Board of Directors place on record sincere gratitude and appreciation for all the employees at all levels for their hard work, solidarity, cooperation and dedication during the year. The Board conveys its appreciation for its customers, shareholders, suppliers as well as vendors, bankers, business associates, regulatory and government authorities for their continued support.

By Order of the Board

Mahendra Kumar Sharma

Chairman DIN:00327684


Mar 31, 2019

REPORT OF THE DIRECTORS

Dear Members,

Your Directors are pleased to present the 20* Report of Directors of your Company and the audited financial statements for the year ended March 31,2019.

INR in Million

Particulars

Standalone

Consolidated

2018-19

2017-18

2018-19

2017-18

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

Revenue from operations

2,85,123

2,60,691

288725

2,65,559

Profit / Loss from operations

11,626

9,664

12,256

11,486

Exceptional and other non-recurring

(267)

90

(26)

445

Less:

Depreciation

1,445

1,351

2,147

1,923

Taxation (including deferred tax)

3,328

2,786

3,281

2,599

Profit / (Loss) after tax

6,586

5,617

6,836*

6519*

Profit B/F from previous year

(34,624)

(40,324)

(38,802)

(45,248)

Impact of Change in Revenue Recognition policy on adoption of IND AS115

(368)

(368)

Reinstated Profit B/F from previous year

(34,992)

(40,324)

(39,170)

(45,248)

Minority Interest appropriation

-

-

166

(181)

Foreign Currency Translation Reserve Considered separately

-

-

(20)

71

Total Comprehensive Income

10

83

28

17

Transfer between reserves -

Profit /(Loss) available for appropriation

(28,396)

(34,624)

(32,159)

(38,802)

Your Directors have made the following appropriations:

General Reserve

NIL

NIL

NIL

NIL

Dividend paid in respect to previous years

NIL

NIL

NIL

NIL

Proposed dividend

NIL

NIL

NIL

NIL

Balance carried to the Balance sheet

(28,396)

(34,624)

(32,159)

(38,802)

EPS-Basic & Diluted (Rupees)

9.06

7.73**

9.87

8.94**

Balance carried to the Balance sheet

(34,624)

(40,324)

(38,802)

(45,248)

EPS-Basic & Diluted (Rupees)

38.65

11.69

44.68

7.06

* Excluding minority interest.

** EPS has been revised considering the effect of Share Split.

*- As can be seen from the above table, the revenue from operations increased by 9.37% during the year on standalone basis and 8.72% on consolidated basis. Profit after tax has also improved during the year by 17.25% on standalone basis and 4.86% on consolidated basis. The challenges which the company faced during the year and the environment in which the company operates have been detailed in Management Discussion and Analysis Report which is forming part of this Report.

1. Performance of the Company

During the year under review, your Company has achieved a sales volume of about 81.6 million cases, and this resulted in a growth of 4.0% compared to prior period. After adjusting for the franchise model changes in Popular segment, underlying volume grew 5.4% compared to prior period. Net sales/income from operations of your Company grew 9.9% in the financial year ended March 31, 2019 and stood at INR 89,806 million net of duties and taxes (previous year INR 81,701 million). Adjusted for the franchise model changes. Net sales/income from operations grew 10.5% for the year. Sales volume of the Company''s brands in the ''Prestige and Above'' segment grew 11.8% in the financial year ended March 31, 2019 and stood at 41.6 million cases (previous year 37.2 million cases). Net sales of the ''Prestige and Above''segment grew 15.2% and stood at INR 59,095 million net of duties and taxes (previous year INR 51,276 million). The ''Prestige and Above'' segment represented 71% of total net sales and 50.9% of total sale volume during the year.

2. Subsidiary Companies

In accordance with section 129(3) of the Companies Act, 2013, (''Companies Act) 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.

3. Board''s Responses to Observations, Qualifications and Adverse Remarks in Auditor''s Report

The Statutory Auditors have given unqualified opinion on the Financial Statements for the year ended March 31, 2019 and hence this is not applicable.

The Secretarial Auditor has given an unqualified opinion in the Secretarial Audit Report for the year ended March 31, 2019, and the Secretarial Audit Report is annexed as Annexure - 3.

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

During the year, the company has sub-divided 548,000,000 equity shares of face value of Rs 10/- per equity share into 2,740,000,000 equity share of Rs 2/- per equity share and also 1,200,000 preference shares of face value of Rs 100/-per preference share into 12,000,000 preference shares of Rs 10/- per preference share of the company. There are no other material changes and commitments/Events subsequent to the date of the Financial Statements.

5. Change in nature of Business, if any

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

6. Dividend

In view of the accumulated losses of the preceding years, your directors could not recommend any dividend. No amount is proposed to be carried to reserves.

7. Capital

The total authorized share capital of your Company remains unchanged however the Face Value of 548,000,000 equity shares of Rs 10/- per share have been sub-divided into 2,740,000,000 equity shares of Rs 2/- each and brought uniformity between two classes of preference shares resulting in 171,200,000 Preference Shares of Rs 10/-each.

8. Details of Subsidiary Companies, Joint Ventures and Associate Companies and their Financial Position

Your Company currently has 17 subsidiary companies and one Associate Company. During the financial year, the entire stake of the company in one of the subsidiary viz.. Four Seasons Wines Limited was divested on January 16, 2019. On June 25, 2018, the Company subscribed to 4,567,568 equity shares of Hip Bar Private Limited ("Hip Bar"), constituting 26% of the paid-up equity share capital of Hip Bar . The information required under the first proviso to section 129(3) of the Companies Act, 2013 is given in form AOC- 1 in Annexure - 1. The Company''s policy for determining material subsidiaries is available at Company''s website www.diageoindia.com.

Performance of Associates, Subsidiaries and Joint Ventures and their contribution to overall performance of the Company is covered as part of the Consolidated Financial statements and in form AOC-1 in Annexure -1, annexed and forming part of this Annual Report.

In accordance with the 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. diageoindia.com

9. 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.

10. Depository System

The trading in the equity shares of your Company is under compulsory dematerialisation mode. As on March 31, 2019, equity shares representing 99.23% 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 the facility of dematerialisation of the Company''s shares. Moreover, transfer of shares of the company by physical means has been barred from April 01, 2019 pursuant to SEBI''s Notification dated 3rd December, 2018.

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

A. Appointment, change in designation and resignation

Details on appointments, changes in designation, resignation of Directors, key managerial personnel, and Committees of Directors as well as on Board and Committee meetings of your Company and the matters required to be specified pursuant to sections 134, 177 and 178 of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI (LODR) Regulations) are provided in the Corporate Governance Report that is annexed to and forming part of this Annual Report.

B. Re-appointment

As per the provisions of the Companies Act, 2013, Mr Vinod Rao retires by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offered himself for re-appointment.

Members may please note that Mr Vinod Rao, who is a nominee of Relay BV, was appointed as a Director at the 17th Annual General Meeting (AGM).

A brief profile of Mr Vinod Rao is provided as an Annexure to the Notice convening 20th AGM.

Mr. Anand Kripalu was appointed as Managing Director and Chief Executive Officer effective August 14, 2014 for a period of five years which is ending on August 13, 2019. Nomination and Remuneration Committee and Board of Directors have approved his re-appointment for a further period of three years effective August 14, 2019 to August 13, 2022 which is subject to the approval of the members at the 20th Annual General Meeting

Re-Appointment of Independent Directors

On the recommendation of the Nomination and Remuneration Committee (NRC) and apporoval by the Board of Directors, following Independent Directors will be re-appointed as Independent Directors. The first term of the following independent directors are ending on the following dates:

Dr (Mrs) Indu Shahani - September 29,2019 • Mr. DSivanandan-September 29,2019 Mr. Rajeev Gupta - December 22,2019 Mr. Mahendra Kumar Sharma - March 31,2020.

It is being proposed to re-appoint the aforesaid independent directors for a second term of five years, which are as follows:

a. Dr (Mrs.). Indu Shahani be and is hereby re-appointed as an Independent Director of the Company for a period of 5 years with effect from September 30, 2019 to September 29, 2024 subject to approval of the Members at the ensuing general meeting.

b. Mr. D Sivanandan be and is hereby re-appointed as an Independent Director of the Company for a period of 5 years with effect from September 30, 2019 to September 29, 2024 subject to approval of the Members at the ensuing general meeting.

c. Mr. Rajeev Gupta be and is hereby re-appointed as an Independent Director of the Company for a period of 5 years with effect from December 23, 2019 to December 22, 2024 subject to approval of the Members at the ensuing general meeting.

d. Mr. Mahendra Kumar Sharma be and is hereby re-appointed as an Independent Director of the Company for a period of 5 years with effect from April 01,2020 to March 31,2025 subject to approval of the Members at the ensuing general meeting.

C. Independent Directors and Nominee Directors

Your Company did not appoint any new Independent Director or Nominee Director in the Financial Year 2018-2019. Criteria for selection of Independent Directors include skills, expertise of the Director, qualifications, experience and domain knowledge. Independent Directors are also expected to have the following skills, expertise and competencies:

i. Bringing objectivity and independence to board discussions and to provide essential leadership to the Company''s strategy, performance, risk management as well as ensuring high standards of financial probity and corporate governance.

ii. Fulfil the role and duties including the ones assigned by the Board from time to time and as stated in Schedule IV of the Companies Act, 2013

Executive Director

Your company did not appoint any new Executive Director for the Company for the year 2018-19.

D. Independent Directors

Independent Directors have given a declaration pursuant to sub-section (6) of Section 149 of the Companies Act, 2013. In the opinion of the Board, Independent Directors fulfill the conditions specified in SEBI (LODR) Regulations and are independent of the management.

E. Number of Meetings of the Board

The details of the Board Meetings and other Committee Meetings held during the financial Year 2018-19 are stated in the Corporate Governance Report which forms part of this Annual Report.

F. Board Committees

The Company has setup the following committees of the Board:

Audit and Risk Management Committee

Nomination and Remuneration Committee

Stakeholders Relationship and General

Committee

Corporate Social Responsibility Committee.

The composition of each of the above Committees, their respective roles and responsibilities are provided in the Corporate Governance Report which forms part of this Annual Report.

G. Recommendations of the Audit and Risk Management Committee and other Committees All the recommendations of the Audit and

Risk Management Committee and of the other Committees from time to time were accepted by the Board.

H. Details of remuneration to Directors

As required under Section 197(12) of the Companies Act, 2013 information relating to remuneration paid to Directors during the financial year 2018-19 is provided in the Corporate Governance Report and in form MGT 9, that is annexed to and forming part of this Annual Report as Annexure-4.

As stated in the Corporate Governance Report, sitting fees are paid to Independent 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 Independent Directors are also eligible for commission every year as may be recommended by the Nomination and Remuneration Committee and approved by the Board within the overall limit of higher of Rs 4 Crores or 1% of the net profits of the Company calculated in accordance with Section 198 of the Companies Act, 2013, whichever is higher, as approved by the shareholders at the AGM held on September 30, 2014 and Postal Ballot Resolution effective January 18, 2019. Criteria for payment of remuneration to Independent Directors are as given below:

1. Membership of Committees

2. Chairmanship of the Committees/Board

3. Benchmarking with other companies

Pursuant to the provisions of the Companies Act, 2013, the Commission payable by the Company to the Independent Directors for the FY 2018-19 is INR 20 Million.

The criteria for payment of remuneration to executive directors is determined by the Nomination and Remuneration Committee which includes various criteria including performance criteria.

I. Board Evaluation Criteria

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 of the SEBI (LODR) Regulations,

the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the Committees of the Board. 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 was based on the time spent by each of the Board Members, their core competencies, expertise and contribution to the effectiveness and functioning of the Board and its Committees which was carried out through a peer feedback mechanism.

The Board and the Nomination and Remuneration Committee identified certain aspects and areas to make the Board''s functioning even better. The Board also reviewed the achievements during the year against those observations arising from the evaluation in earlier years.

J. Vigil Mechanism

Your Company has a well-established vigil mechanism named as ''SpeakUp'' in place, which is overseen by the compliance & ethics team.''SpeakUp''is a confidential service available to employees and others to make a report of any breach of the code, policies or applicable laws. ''SpeakUp'' is managed by an external agency with staff who are trained to deal with the calls and translators who are immediately available to assist if required. The details of establishment of Speak Up is disclosed in the website of the Company www. diageo.com. Access to the Chairman of the Audit Committee is provided in appropriate/exceptional cases, as required under the Companies Act, 2013 and the SEBI (LODR) Regulations. All complaints are investigated by the compliance and ethics team and appropriate action taken in accordance with your Company''s policies.

K. Related Party Transactions

The Company''s policy on dealing with related party transactions was adopted by the Board on June 15, 2015 and further amended from time to time last one being on January 23, 2019 effective April 01, 2019.

This policy has been amended from time to time and is available on the Company''s website www.diageoindia. com.

All related party transactions that were entered into during the financial year, were at arm''s length basis and were in the ordinary course of business. There are no material significant related party transactions entered into by the Company with promoters, directors, key managerial personnel or other designated persons which may have a conflict of interest with the Company at large.

The details of related party transactions required under section 134(3)(h) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 are given in form AOC-2 and the same is enclosed as Annexure - 2.

L. Meeting amongst Independent Directors

The Independent Directors met amongst themselves without the presence of any other persons on May 24, 2018 and July 23,2018 respectively.

12. Auditors

Financial Audit

M/s. Price Waterhouse & Co. Chartered Accountants LLP (FRN 304026E/E-300009) Statutory Auditors of your Company, were appointed as Auditors of your Company from the conclusion of the 17th AGM for a period of 5 years. Since the appointment is not subject to ratification of the appointment by the members at every AGM, no resolution is proposed at this AGM pursuant to the provisions of Companies (Amendment) Act, 2017. Fees paid to the statutory auditors and their network of firms/ entities in India during the year by the Company and its subsidiaries are as follows;

By United Spirits Limited - Rs 49 Million

By the subsidiaries of United Spirits Limited - Rs 5 Million

Further details on fees to statutory auditors are disclosed in the Standalone and Consolidated Financial Statements.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a Secretarial Audit has been carried out by Mr Sudhir V Hulyalkar, Practicing Company Secretary (PCS: 6040 [CP No. 6137]) and his report is annexed as Annexure - 3.

In addition, the company has also obtained Secretarial Compliance Report for the year ended March 31,2019 in terms of the SEBI Circular issued on February 08,2019.The said report has been submitted to the stock exchanges and is also available on the Company''s website viz., www.diageoindia.com.

Cost Audit

The Company is not covered by the requirement of maintenance of cost records, as specified under subsection (1) of Section 148 of the Companies Act, 2013.

13. Listing of Shares of the Company

The equity shares of your Company continue to be listed with the BSE Limited (BSE) and National Stock Exchange of India Limited (NSE). No Listing fees are due as on date.

14. Corporate Governance

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

15. Management Discussion and Analysis Report

The Management Discussion and Analysis Report is annexed separately as part of this report.

16. 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 Companies Act, 2013 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 by paying additional interest of 1% per annum on those fixed deposits before the maturity date pursuant to the contract entered into with the Fixed Deposit holders. Fixed Deposits from the public and shareholders which remained unclaimed and for which no discharge certificates were received from the depositors as on March 31, 2019 stood at Rs 67,59,000. This amount was transferred into a separate non-interest bearing escrow account opened specifically for the purpose of re-payment, has been re-paid consistent with the provisions of the Companies Act, 2013 and the rules made thereunder. Of this amount, a sum of Rs 6,13,000 (as of May 29, 2019) has since been paid as per instructions received after the year end. The balance unclaimed fixed deposits continue to remain in the escrow account as on May 29, 2019.

17. Extract of Annual Return

The extract of the Annual Return in Form MGT-9 is annexed as Annexure-4.

18. Transfer to Investor Education and Protection Fund (IEPF)

The details of unclaimed/unpaid Dividends and Fixed Deposits which have not been transferred to the IEPF account as the period of seven years have not been completed is given below pursuant to the provisions of the Companies Act, 2013 and the applicable Rules there under.

Dividend:

Financial Year For which the divided is declared

No. of Members who have not claimed their dividend

Unclaimed dividend as on March 31, 2019 (Amount in INR)

Unclaimed dividend as % to total dividend

Date of declaration

Last date for claiming the dividend prior to its transfer to IEPF

2011-12

16,215

3,056,067.50

0.93

25-Sep-2012

14-Nov-2019

2012-13

10,866

2,214,265.00

0.61

24-Sep-2013

15-Sep-2020

The Company has not declared any dividend from financial year 2013-14 onwards. Hence, the aforesaid details do not include unpaid dividends from financial year 2013-14 onwards.

The number of Unclaimed equity shares transferred during the year ended March 31, 2019 to Investor Education and Protection Fund pursuant to section 124(6) of the Companies Act, 2013 is 580975.

Fixed Deposits:

1.

Accepted during the year

NIL

2.

Remained unpaid or unclaimed as at the end of the year

Rs 67,59,000

3.

Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved

NIL

4.

The Details of deposits which are not in compliance with the requirements of Chapter V of the Companies Act, 2013

Not Applicable

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.

19. Human Resources

Employee relations remained cordial at all the locations of the Company. Particulars of employees drawing an aggregate remuneration of Rs 1,02,00,000/- or above per annum or Rs 8,50,000/- 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 - 5 hereto.

20. Employees Stock Option Scheme

Your Company has not offered any stock options to its employees during the year 2018-19.

21. Particulars of Loans, Guarantees and Investments

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 are detailed in Notes to the financial statements, which are as follows:

Note 4 is relating to investments. Note 5 is relating to loans given as per the standalone financial statements for the year ended March 31,2019 include these disclosures.The Company has not given any guarantee to any company as on March 31,2019.

22. Risk Management

Details on Risk Management are annexed as part of this report in Annexure - 6 hereto. The Company has not done any commodity hedging.

23. Internal Financial Controls

Please refer to note no 48 of Standalone financial Statements and Note no 50 of Consolidated Financial Statements for the year ended March 31, 2019. During the year Controls, Compliance & Ethics (CC&E) team have commenced implementation of a detailed plan agreed with the Executive Committee of the Company, to reinforce the code of business conduct and to further embed compliance across the business. The CC&E team also undertook comprehensive review of existing controls (Sox & non-Sox controls) & added additional attributes in the existing controls. The same has been shared with the statutory auditors who have confirmed that they are aligned with the same. The controls with additional attributes have been tested both by Management tester (Deloitte) and by the Statutory auditors in March 19 for its effectiveness. The Board after considering the materials placed before it, reviewed the confirmation received 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 which are commensurate with size of the company and that such internal financial controls are broadly adequate and are operating effectively. The certification by the auditors on internal financial control forms part of the audit report. A statement to this effect is also appearing in the Directors ''Responsibility Statement.

24. 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 Companies Act, 2013 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 - 7 to this report. Business Responsibility Report under Regulation 34(2) of the SEBI (LODR) Regulations has been enclosed as Annexure - 9 and also uploaded on to the Company''s website www.diageoindia.com.

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

The particulars prescribed under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, are set out in Annexure - 8 to this report.

26. Details of Significant and Material Orders Passed by the Regulators or Courts Impacting the Going Concern Status and Company''s Operations in Future pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014

The Company has not received any significant or material order passed by regulators or courts or tribunals impacting the Company''s going concern status or the Company''s operations in future. The Management Discussion and Analysis Report read with the report on Risk Management contains impact on the business due to regulatory changes. The details of notices received from regulatory authorities and related matters have been disclosed as part of Note No. 45 to the Audited Standalone Financial statements for the year ended March 31,2019 and as Note No. 47 of the Consolidated Financial Statements for the year ended March 31,2019.

27. 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 and constituted an internal complaints committee 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 in compliance with the requirements of SHWWA. During the financial year 2018-19 one complaint was received and resolved.

28. Highlights of performance of subsidiaries, associates and joint venture companies of the Company

The highlights of performance of subsidiaries, associates and joint venture companies of the Company and their contribution to the overall performance of the Company is covered as part of the Consolidated Financial Statement and form AOC-1 annexed as part of this report. Out of 17 subsidiary companies and 1 associate company, 15 subsidiary companies are non-operative companies.

29. Directors'' Responsibility Statement

Pursuant to section 134 (5) of the Companies Act, 2013 in relation to financial statements (together with the notes to such financial statements) for the year 2018-19, 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 Companies Act, 2013 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.

(vi) the Company has a system of securing reports of statutory compliances periodically from the units and has implemented an automated process having comprehensive systems to ensure compliance with the provisions of all applicable laws which is adequate and is operating effectively.

Your Directors place on record their sincere appreciation for the continued support from the shareholders, customers, suppliers, government, 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 Order of the Board

Anand Kripalu

Mahendra Kumar Sharma

MD & CEO

Chairman

Bengaluru

May 29, 2019


Mar 31, 2018

The Directors are pleased to present the 19th Annual Report of your Company and the audited financial statements for the year ended March 31, 2018.

1. Financial Results

INR in Million

Particulars

Standalone

Consolidated

2017-18

2016-17

2017-18

2016-17

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

Profit / Loss from operations

9,664

7,131

11,486

7,194

Exceptional and other non-recurring items

(90)

3,262

445

3,681

Less:

Depreciation

1,351

1,323

1,923

1,886

Taxation (including deferred tax)

2,786

847

2,599

697

Profit / (Loss) after tax

5,617

1,699

6519*

930*

Profit B/F from previous year

(40,324)

(42,590)

(45,248)

(46,815)

Minority Interest appropriation

-

-

(181)

71

Foreign Currency Translation Reserve Considered separately

-

-

71

29

Total Comprehensive Income

83

499

17

468

Transfer between reserves

-

68

-

68

Profit / (Loss) available for appropriation

(34,624)

(40,324)

(38,802)

(45,248)

Your Directors have made the following appropriations:

General Reserve

-

-

-

-

Dividend paid in respect to previous years

-

-

-

-

Proposed dividend

-

-

-

-

Corporate Tax on Proposed Dividend

-

-

-

-

Corporate Tax on Dividend paid

-

-

-

-

Balance carried to the Balance sheet

(34,624)

(40,324)

(38,802)

(45,248)

EPS-Basic & Diluted (Rupees)

38.65

11.69

44.68

7.06

* Excluding minority interest

1.1 Subsidiary Companies

In accordance with section 129(3) of the Companies Act, 2013, (‘Companies Act’) 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 the 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.diageoindia.com

2. Board’s Responses to Observations, Qualifications and Adverse Remarks in Auditor’s Report

The Statutory Auditors have given unqualified opinion on the Financial Statements for the year ended March 31, 2018 and hence this is not applicable.

The Secretarial Auditor has given an unqualified opinion in the Secretarial Audit Report for the year ended March 31, 2018, and the Secretarial Audit Report is annexed as Annexure - 3.

3. Material changes and commitments/Events subsequent to the date of the Financial statements

The company has Sub-Divided 548,000,000 Equity Shares of Face Value of Rs.10/- per Equity Share into 2,740,000,000 equity share of Rs.2/- per Equity Share and also 1,200,000 Preference Shares of face value of Rs.100/- per preference share into 12,000,000 preference shares of Rs.10/- per preference share of the company subsequent to the end of the Financial Year 2017-18.

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 forms part of this Annual Report.

5. Dividend

In view of the accumulated losses of the preceding years, your directors could not recommend any dividend. No amount is proposed to be carried to reserves.

6. Capital

The authorized share capital of your Company remains unchanged however the Face Value of 548,000,000 equity shares of Rs.10/- per share have been sub-divided into 2,740,000,000 equity shares of Rs.2/- each and brought uniformity between two classes of preference shares resulting in 171,200,000 Preference Shares of Rs.10/- each.

7. Performance of the company

During the year under review, your Company has achieved a sales volume of about 78.5 million cases and this resulted in a decline of 13% compared to prior period (90 million cases previous year, that included volume from states where the Popular segment has been franchised). After adjusting for the franchise model changes, underlying volume declined 2% compared to prior period. Net sales/ income from operations of your Company declined 4% in the financial year ended March 31, 2018 and stood at INR 81,701 million net of duties and taxes (INR 85,476 million previous year). This was as a result of franchising our Popular segment in a few states. Adjusted for the operating model changes, net sales/income from operations grew 1% for the year. Sales volume of the Company’s brands in the ‘Prestige and Above’ segment grew 1% in the financial year ended March 31, 2018 and stood at 37.2 million cases (previous year 36.8 million cases). Net sales of the ‘Prestige and Above’ segment grew 3% and stood at INR 51,280 million net of duties and taxes (previous year INR 49,660 million). The ‘Prestige and Above’ segment represented 63% of total net sales and 47% of total sale volume during the current year.

8. Details of subsidiary companies, Joint Ventures and Associate companies and their Financial position

Your Company currently has 18 subsidiary companies, the entire stake of the company in one of the subsidiary, viz., United Spirits Nepal Private Limited was sold during the Financial Year 2017-18. The information required under the first proviso to section 129(3) of the Companies Act, 2013 is given in form AOC- 1 in Annexure - 1. The Company’s policy for determining material subsidiaries is available at Company’s website www.diageoindia.com.

Performance of Associates, Subsidiaries and Joint Ventures and their contribution to overall performance of the Company is covered as part of the Consolidated Financial statements and in form AOC-1 in Annexure - 1, annexed and forming part of this Annual Report.

9. 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.

10. Depository system

The trading in the equity shares of your Company is under compulsory dematerialisation mode. As on March 31, 2018, equity shares representing 99.02% 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 the facility of dematerialisation of the Company’s shares. Moreover transfer of shares of the company will be allowed only if they are in dematerialization mode with effect from December 5th, 2018 as per SEBI’s Notification dated 8th June, 2018.

11. Board Meetings, Board of Directors, Key Managerial Personnel & committees of Directors.

11.1 A. Appointment, change in designation and resignation

Details on appointments, changes in designation, resignation of Directors, key managerial personnel, and Committees of Directors as well as on Board and Committee meetings of your Company and the matters required to be specified pursuant to sections 134, 177 and 178 of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI (LODR) Regulations) are provided in the Corporate Governance Report that is annexed to and form part of this Annual Report.

B. Re-appointment

As per the provisions of the Companies Act, 2013, Mr John Thomas Kennedy retires by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offered himself for re-appointment.

Members may please note that Mr John Thomas Kennedy, who is a nominee of Relay B V, was appointed as a Director at the 18th Annual General Meeting (AGM).

A brief profile of Mr John Thomas Kennedy is provided as an Annexure to the Notice convening 19th AGM.

C. independent Directors and Nominee Directors

Your Company did not appoint any new Independent Director or Nominee Director in the Financial Year 2017-2018. Criteria for selection of Independent Directors include skills, expertise of the Director, qualifications, experience and domain knowledge.

D. Executive Director

Your company appointed Mr Sanjeev Churiwala as the Executive Director and Chief Financial Officer of the Company with effect from April 1, 2017.

E. Number of Meetings of the Board

The details of the Board Meetings and other Committee Meetings held during the financial Year 2017-18 are stated in the Corporate Governance Report which forms part of this Annual Report.

F. Board committees

The Company has setup the following committees of the Board:

Audit and Risk Management Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and General Committee and Corporate Social Responsibility Committee.

The composition of each of the above Committees, their respective roles and responsibilities are provided in the Corporate Governance Report which forms part of this Annual Report.

G. Recommendations of the Audit and Risk Management committee

All the recommendations of the audit and Risk Management Committee were accepted by the Board.

H. Details of remuneration to Directors

As required under Section 197(12) of the Companies Act, 2013 information relating to remuneration paid to Directors during the financial year 2017-18 is provided in the Corporate Governance Report and in form MGT 9, that is annexed to and forming part of this Annual Report as Annexure-4.

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 as recommended by the Nomination and Remuneration Committee and approved by the Board within the overall limit of 1% of the net profits of the Company calculated in accordance with Section 198 of the Companies Act, 2013 as approved by the shareholders at the AGM held on September 30, 2014. Criteria for payment of remuneration to Non- Executive Directors is as below:

1. Membership of Committees

2. Chairmanship of the Committees/Board

3. Benchmarking with other companies

The Company has paid commission of INR 20.2 million for the Financial Year 2017-18 to the Non Executive Directors pursuant to the provisions of the Companies Act, 2013.

The criteria for payment of remuneration to executive directors is determined by the Nomination and Remuneration Committee which includes performance criteria.

i. Board Evaluation Criteria

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 of the SEBI (LODR) Regulations, 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 was based on the time spent by each of the Board Members, their core competencies, expertise and contribution to the effectiveness and functioning of the Board and its Committees which was carried out through a peer feedback mechanism.

J. Vigil Mechanism

Your Company has a well-established vigil mechanism named as ‘SpeakUp’ in place, which is overseen by the compliance & ethics team. ‘SpeakUp’ is a confidential service available to employees to make a report of any breach of the code, policies or applicable laws. ‘SpeakUp’ is managed by an external agency 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 provided in appropriate/exceptional cases, as required under the Companies Act, 2013 and the SEBI (LODR) Regulations. All complaints are investigated by the compliance and ethics team and appropriate action taken in accordance with your Company’s policies.

K. Related party Transactions

The Company’s policy on dealing with related party transactions was adopted by the Board on June 15, 2015.

This policy has been amended from time to time and is available on the Company’s website www.diageoindia. com.

All related party transactions that were entered into during the financial year, were at 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 conflict of interest with the Company at large.

The details of related party transactions required under section 134(3)(h) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in form AOC-2 and the same is enclosed as Annexure - 2.

L. Meeting amongst independent Directors

The Independent Directors met amongst themselves without the presence of any other persons on May 30, 2017 and July 23, 2017 respectively.

12. Auditors Financial Audit

M/s. Price Waterhouse & Co. Chartered Accountants LLP (FRN 304026E / E-300009) Statutory Auditors of your Company, were appointed as Auditors of your Company from the conclusion of the 17th AGM for a period of 5 years. Since the appointment is not subject to ratification of the appointment by the members at every AGM, no resolution is proposed at this AGM pursuant to the provisions of Companies (Amendment) Act, 2017.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a Secretarial Audit has been carried out by Mr Sudhir V Hulyalkar, Practicing Company Secretary (FCS: 6137), and his report is annexed as Annexure - 3.

13. Listing of shares of the company

The equity shares of your Company continue to be listed with the BSE Limited (BSE) and National Stock Exchange of India Limited (NSE). No Listing fees are due as on date.

14. Corporate Governance

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

15. Management Discussion and Analysis Report

The Management Discussion and Analysis Report is annexed separately as part of this report.

16. 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 Companies Act, 2013 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 by paying additional interest of 1% per annum on those fixed deposits before the maturity date pursuant to the contract entered into with the Fixed Deposit holders. Fixed Deposits from the public and shareholders which remained unclaimed and for which no discharge certificates were received from the depositors as on March 31, 2018 stood at Rs.80,36,000. This amount was transferred into a separate non-interest bearing escrow account opened specifically for the purpose of re-payment, has been re-paid consistent with the provisions of the Companies Act, 2013 and the rules made thereunder. Of this amount, a sum of Rs.7,81,000 (as of June 30, 2018) has since been paid as per instructions received after the year end. The balance unclaimed fixed deposits continue to remain in the escrow account as on 30th June, 2018.

17. Extract of Annual Return

The extract of the Annual Return in Form MGT-9 is annexed as Annexure - 4.

18. Transfer to investor education and protection fund (iepf)

The details of unclaimed/unpaid Dividends and Fixed Deposits which have not been transferred to the IEPF account as the period of seven years have not been completed is given below pursuant to the provisions of the Companies Act, 2013 and the applicable Rules there under.

Dividend:

Financial Year

No. of Members who have not claimed their dividend

Unclaimed dividend as on March 31, 2018 (Amount in INR)

Unclaimed dividend as % to total dividend

Date of declaration

Last date for claiming the dividend prior to its transfer to

iepf

2010-11

14,336

2,818,290.41

0.86

29-Sep-2011

4-Dec-2018

2011-12

16,331

3,102,085

0.95

25-Sep-2012

30-Nov-2019

2012-13

10,301

2,009,965

0.55

24-Sep-2013

29-Nov-2020

2013-14

Not applicable

Not applicable as no dividend was declared for the year 2013-14.

Not

applicable

2014-15

Not applicable

Not applicable as no dividend was declared for the year 2014-15.

Not

applicable

2015-16

Not applicable

Not applicable as no dividend was declared for the year 2015-16.

Not

applicable

2016-17

Not applicable

Not applicable as no dividend was declared for the year 2016-17.

Not

applicable

The number of Unclaimed equity shares transferred during the year ended 31st March, 2018 to Investor Education and Protection Fund pursuant to section 124(6) of the Companies Act, 2013 is 565,206.

Fixed Deposits:

1.

Accepted during the year

NIL

2.

Remained unpaid or unclaimed as at the end of the year

YEAR

AMOUNT in ‘

2017-18

Not Applicable

2016-17

Not Applicable

2015-16

Not Applicable

2014-15

1,558,934

2013-14

2,376,745

2012-13

3,003,196

2011-12

459,892

3.

Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved

NIL

4.

The Details of deposits which are not in compliance with the requirements of Chapter V of the Companies Act, 2013

Not Applicable

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.

19. Human Resources

Employee relations remained cordial at all the locations of the Company. Particulars of employees drawing an aggregate remuneration of Rs.1,02,00,000/- or above per annum or Rs.850,000/- 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 - 5 hereto.

20. Employees stock option scheme

Your Company has not offered any stock options to its employees during the year 2017-18.

21. particulars of Loans, Guarantees and investments

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 are detailed in Notes to the financial statements, which are as follows:

Note 6 is relating to investments, Note 4 is relating to loans given and Note 36 is relating to guarantee given as per the standalone financial statements for the year ended March 31, 2018 include these disclosures.

22. Risk Management

Details on Risk Management are annexed as part of this report in Annexure - 6 hereto.

23. Internal Financial controls

The Board after considering the materials placed before it, reviewed the confirmation received 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 which are commensurate with size of the company and that such internal financial controls are broadly adequate and are operating effectively. The certification by the auditors on internal financial control forms part of the audit report. A statement to this effect is also appearing in the Directors’ Responsibility Statement.

24. 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 Companies Act, 2013 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 - 7 to this report. Business Responsibility Report under Regulation 34(2) (f) of the SEBI (LODR) Regulations has been enclosed as Annexure - 9 and also uploaded on to the Company’s website www.diageoindia.com

25. Conservation of energy, Technology Absorption, Foreign Exchange Earnings and outgo

The particulars prescribed under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, are set out in Annexure - 8 to this report.

26. 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 pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014. The Management Discussion and Analysis Report read with the report on Risk Management contains impact on the business due to regulatory changes.

27. 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 2017-18 two complaints were received and resolved.

28. Highlights of performance of subsidiaries, associates and joint venture companies of the company

The highlights of performance of subsidiaries, associates and joint venture companies of the Company and their contribution to the overall performance of the Company is covered as part of the Consolidated Financial Statement and form AOC-1 annexed as part of this report. Out of 18 subsidiary/ associate companies, 15 are inoperative companies.

29. Directors’ Responsibility statement

Pursuant to section 134 (5) of the Companies Act, 2013 in relation to financial statements (together with the notes to such financial statements) for the year 2017-18, 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 Companies Act, 2013 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.

(vi) the Company has a system of getting reports of compliance periodically from the units and has substantially implemented a process having comprehensive systems to ensure compliance with the provisions of all applicable laws and is operating effectively.

Your Directors place on record their sincere appreciation for the continued support from the shareholders, customers, suppliers, government, 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 Mahendra Kumar sharma

MD & CEO Chairman

Edinburgh, Scotland July 23, 2018


Mar 31, 2017

The Directors are pleased to present the 18th Annual Report of your Company and the audited financial statements for the year ended March 31, 2017.

1. Financial Results#

Rs. Million

Standalone

Consolidated

2016-17

2015-16

2016-17

2015-16

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

Profit / Loss from operations

7,131

5,452

7,194

5,508

Exceptional and other non-recurring items

3,262

1,280

3,681

274

Less:

Depreciation

1,323

1,017

1,886

1,572

Taxation (including deferred tax)

847

1,936

697

2,228

Profit / (Loss) after tax

1,699

1,219

9301

1,434*

Profit B/F from previous year

(42,590)

(52,244)

(46,815)

(56,621)

Minority Interest appropriation

-

-

71

-52

Foreign Currency Translation Reserve Considered separately

-

-

29

-215

Total Comprehensive Income

499

86

468

290

Transfer between reserves

68

8,349

68

8,349

Profit / (Loss) available for appropriation

(40,324)

(42,590)

(45,248)

(46,815)

Your Directors have made the following appropriations:

General Reserve

-

-

-

-

Dividend paid in respect to previous years

-

-

-

-

Proposed dividend

-

-

-

-

Corporate Tax on Proposed Dividend

-

- |

-

-

Corporate Tax on Dividend paid

-

-

-

-

Balance carried to the Balance sheet

(40,324)

(42,590)

(45,248)

(46,815)

EPS-Basic & Diluted(Rupees)

11.69

8.39

7.06

9.75

* Excluding minority interest

# Previous year''s figures varies compared to 17th Annual Report in view of the implementation of Indian Accounting Standard (Ind AS) effective April 1, 2016.

1.1 Subsidiary Companies

In accordance with section 129(3) of the Companies Act, 2013, (''Companies Act1) a statement containing salient features of the financial statements of the subsidiary companies in Form AOC1 is provided as Annexure - 1 to this report.

In accordance with the third proviso to section 136(1) of the Companies Act, the annual report and financial statements of each of the subsidiary companies have also been placed on the website of the Company www.diageoindia.com

2. Board''s Responses to Observations, Qualifications and Adverse Remarks in Auditor''s Report

The Statutory Auditors have given unqualified opinion on the Financial Statements for the year ended March 31, 2017 and hence this is not applicable.

The Secretarial Auditor has given an unqualified opinion in the Secretarial Audit Report for the year ended March 31, 2017, referred to in Annexure 3 and hence this item is not applicable.

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

The details of material changes and commitments/ event subsequent to the date of the financial statement is provided under Management Discussion and Analysis Report and the report on Risk Management forming part of this Annual Report.

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 accumulated losses of the preceding years, your directors have not recommended any dividend. No amount is proposed to be carried to reserves.

6. Capital

The authorized share capital of your Company remains unchanged at Rs.7,192,000,000 divided into 548,000,000 equity shares of Rs. 10/- each amounting to Rs.5,480 million, 159,200,000 Preference shares of Rs.10/- each amounting to Rs.1,592.0 million and 1,200,000 7% non-cumulative redeemable Preference Shares of Rs.100/- each amounting to Rs.120 million.

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

7. Global Depository Shares

During the financial year 2005-06, the Company had issued 17,502,762 global depository shares (GDSs) representing 8,751,381 equity shares with 2 GDSs representing 1 equity share of face value of Rs.10/- each at US$ 7.4274 per GDS, aggregating to US$ 130 million, listed on the Luxembourg stock exchange. These GDSs did not carry any voting rights. The Company, as mentioned in its letter dated September 22, 2016 addressed to Deutsche Bank Trust Company Americas, Depository for the GDS, had elected to terminate the deposit agreement in respect of the GDSs and the same was communicated to the Luxembourg Stock Exchange with the objective of delisting these GDSs listed with Luxembourg stock exchange. The Company vide its letter dated January 09, 2017, extended the termination date to February 10, 2017 and eventually the Depository for global depository shares (GDSs), was terminated by virtue of which the GDSs have been cancelled. Notwithstanding this development, the number of shares outstanding or issued and subscribed in the share capital of the Company remains unchanged at Rs.1,453 million being 145,327,743 equity shares of Rs.10 each fully paid up and the Company''s shares continue to be listed with the National Stock Exchange of India Limited and BSE Limited. Consequent to this, the GDS listed with the Luxembourg Stock Exchange had been delisted.

8. Performance of the Company

During the year under review, your Company has achieved a sales volume of over 90 million cases and this resulted in decline of 3.2% compared to prior period (previous year 93 million cases, excluding royalty / franchise markets). Net sales/income from operations of the Company''s brands grew 3.6% in the financial year ended March 31, 2017 and stood at Rs.85,476 million net of duties and taxes (previous year Rs.82,482 million). Sales volume of the Company''s brands in the ''Prestige and Above'' segment grew 7.7% in the financial year ended March 31, 2017 and stood at 37 million cases (previous year 34 million cases). Net sales of the ''Prestige and Above'' segment grew 13% and stood at Rs.49,660 million net of duties and taxes (previous year Rs.46,013 million). The ''Prestige and Above'' segment represents 41% of total sales volumes and 58% of total net sales with 4 basis points and 5 basis points improvement respectively compared to previous year.

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

Your Company continues to have 19 subsidiary companies in the financial year ended on March 31, 2017. The information required under the first proviso to section 129(3)of the Companies Act is given inform AOC- 1 in Annexure 1. The Company''s policy for determining material subsidiaries is available at Company''s website www.diageoindia.com.

Performance of Associates, Subsidiaries and Joint Ventures and their contribution to overall performance of the Company is covered as part of the Consolidated Financial statement and in form AOC-1, annexed to and forming part of this Annual Report.

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, 2017, equity shares representing 98.77% of the equity share capital are indematerialised 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, resignation of Directors, key managerial personnel, and Committees of Directors, as well as on Board and Committee meetings of your Company, and the matters required to be specified pursuant to sections 134 and 178 of the Companies Act, 2013 and the SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015 (SEBI (LODR) Regulations) are provided in the Corporate Governance Report that is annexed to and form part of this Annual Report.

B. Re-appointment

As per the provisions of the Companies Act, Mr Vinod Rao retires by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offers himself for re- appointment.

Members may please note that Mr Vinod Rao, who is a nominee of Relay B V, was appointed as a Director at the 17th Annual General Meeting (AGM).

A brief profile of Mr Vinod Rao is provided in the Notice convening 18th AGM.

C. Independent Directors and Nominee Directors

Mr Sudhakar Rao, an Independent Director of the Company resigned as director with effect from May 19, 2016.

Mr Ravi Rajagopal, a Non-Executive Director of the Company resigned as director with effect from October 13, 2016.

Dr Nicholas Bodo Blazquez, a Non-Executive Director of the Company resigned as director with effect from January 22, 2017.

Your directors place on record their sincere appreciation of the valuable services rendered by Mr Sudhakar Rao, Mr Ravi Rajagopal and Dr Nicholas Bodo Blazquez during their tenure as directors of the Company.

Mr V K Viswanathan was appointed as an Independent Director with effect from October 17, 2016

Pursuant to nominations received from Relay B.V., the holding company of your Company, Mr Vinod Rao, Mr John Thomas Kennedy and Mr Randall Ingber, were appointed as Directors of the Company with effect from May 24, 2016, August 17, 2016 and February 2, 2017 respectively.

Brief profiles of Mr V K Viswanathan, Mr Vinod Rao, Mr John Thomas Kennedy and Mr Randall Ingber are provided in the Notice convening 18th AGM.

D. Executive Director

Mr Sanjeev Churiwala, Chief Financial Officer, was nominated by Relay B V, for appointing him as an Executive Director and accordingly the Board of Directors of the Company appointed him as an Executive Director and Chief Financial Officer of the Company with effect from April 1, 2017.

A brief profile of Mr Sanjeev Churiwala is provided in the Notice convening 18th AGM.

E. Number of Meetings of the Board

The details of the Board Meetings and other Committee Meetings held during the financial Year 2016-17 are stated in the Corporate Governance.

F. Board Committees

The Company has setup the following committees of the Board:

Audit and Risk Management Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee and General Committee of Directors.

The composition of each of the above Committees, their respective roles and responsibilities are provided in the Corporate Governance Report.

G. Recommendations of the Audit and Risk Management Committee

All the recommendations of the audit and risk managment committee have been accepted by the Board.

H. Details of remuneration to Directors

As required under Section 197(12) of the Companies Act, information relating to remuneration paid to Directors during the financial year 2016-17 is provided in the Corporate Governance Report and in form MGT 9, that is annexed to and forming part of this Annual Report as Annexure-4.

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 Companies Act, as approved by the shareholders at the AGM held on September 30, 2014. Such approval remain in force until revoked. The payment of Commission is to be decided by the Board of Directors, based on the recommendation of the Nomination and Remuneration Committee. Criteria for payment of remuneration to Non-Executive Directors is as below:

1. Membership of Committees

2. Chairmanship of the Committees/Board

3. Benchmarking with other companies

The Company has made a provision of '' 21.5 million for paying commission to the Non-Executive Directors pursuant to the provisions of the Companies Act, 2013.

The criteria for payment of remuneration to executive directors is determined by the Nomination and Remuneration Committee.

I. Board Evaluation Criteria

Pursuant to the provisions of the Companies Act and Regulation 17 of the SEBI (LODR) Regulations, 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 was 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. ''SpeakUp'' 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 laws. ''SpeakUp'' is managed by an external agency 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 provided for in appropriate/ exceptional cases, as required under the Companies Act and the SEBI (LODR) Regulations. 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. This policy has been amended from time to time and is available on the Company''s website www.diageoindia. com.

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 of interest with the Company at large.

The details of related party transactions required under section 134(3)(h) of the Companies Act read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in form AOC-2 and the same is enclosed as Annexure-2.

13. Auditors

13.1 Financial Audit

M/s. Price Waterhouse & Co Chartered Accountants LLP (FRN 304026E/ E-300009) Statutory Auditors of your Company, were appointed as Auditors of your Company from the conclusion of the 17th AGM for a period of 5 years subject to ratification of the appointment by the members at every AGM.

13.2 Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a Secretarial Audit has been carried out by Mr Sudhir V Hulyalkar, Practising Company Secretary, and his report is annexed as Annexure 3.

14. Listing of Shares of the Company

The equity shares of your Company continue to be listed with the BSE Limited and the National Stock Exchange of India Limited (NSE). The listing fees due as on date have been paid to the respective stock exchanges. The GDS listed with Luxembourg Stock Exchange had been delisted consequent upon the termination of the Depository Agreement entered into with the Depository namely Deutsche Bank Trust Company Americas.

15. Corporate Governance

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

16. Management Discussion and Analysis Report

The Management Discussion and Analysis Report is annexed separately as 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 Companies 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, 2017 stood at Rs.1,12,05,419. This amount was transferred into a separate non-interest bearing escrow account opened specifically for the purpose of re-payment, has been re-paid consistent with the provisions of the Companies Act and the rules made thereunder. Of this amount, a sum of Rs.49,02,310 (as of June 30, 2017) 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 extract of the Annual Return in Form MGT-9 is annexed as Annexure 4.

19. Transfer to Investor Education and Protection Fund (IEPF)

An amount of Rs.27,77,294/- and Rs.5,60,826/- in respect of the unclaimed/unpaid dividend and fixed deposits respectively, during the financial year 2009-10 have been transferred to Investors Education and Protection Fund pursuant to the provisions of Sections 124 of the Companies Act read with Rule 8 of the Companies (Accounts) Rules, 2014. The details of the shareholders and Fixed Deposit holders with the names of those shareholders and deposit holders are available on the website of the Company.

The details of unclaimed/unpaid Dividends and Fixed Deposits which have not been transferred to the IEPF account as the period of seven years has not been completed is given below pursuant to the provisions of the Companies Act and the applicable Rules there under.

Dividend:

Financial

Year

No. of Members who have not claimed their dividend

Unclaimed dividend as on March 31, 2017 (Amount in '')

Unclaimed dividend as% to total dividend

Date of declaration

Last date for claiming the dividend prior to its transfer to IEPF

2009-10

12,416

2690870

0.86

29-Sep-2010

4-Dec-2017

2010-11

14,390

2833572

0.86

29-Sep-2011

4-Dec-2018

2011-12

16,459

3138447

0.96

25-Sep-2012

30-Nov-2019

2012-13

10,356

2030605

0.56

24-Sep-2013

29-Nov-2020

2013-14

-

Not applicable

-

Not applicable as no dividend was declared for the year 2013-14.

Not

applicable

2014-15

-

Not applicable

-

Not applicable as no dividend was declared for the year 2014-15.

Not

applicable

2015-16

-

Not applicable

-

Not applicable as no dividend was declared for the year 2015-16.

Not

applicable

Fixed Deposits:

1.

Accepted during the year

NIL

2.

Remained unpaid or unclaimed as at the end of the year

YEAR

AMOUNT in ''

2016-17

Not Applicable

2015-16

Not Applicable

2014-15

2850572.00

2013-14

2527021.00

2012-13

3526798.00

2011-12

1076345.00

2010-11

796623.00

3.

Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved

NIL

4.

The Details of deposits which are not in compliance with the requirements of Chapter V of the Companies Act

Not Applicable

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 the locations of the Company. Particulars of employees drawing an aggregate remuneration of Rs.1,02,00,000/- or above per annum or Rs.850,000/- 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 5 hereto.

21. Employees Stock Option Scheme

Your Company has not offered any stock options to its employees during the year 2016-17. During the year 2015-16, the Board approved a Stock Appreciation Rights (SAR) plan for grant of 500,000 SARs and authorized 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 Companies Act, are detailed in Notes to the financial statements, which are as follows:

Notes 4.1 and 4.2 relating to investments, Notes 5, 6 and 9 relating to loans given and Note 37 relating to guarantee given as per the standalone financial statements for the year ended March 31, 2017 include these disclosures.

23. Risk Management

Details on Risk Management are annexed as part of this report in Annexure 6 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 which commensurate with size of the company and that such internal financial controls are broadly adequate and are operating effectively. The certification by the auditors on internal financial control forms part of the audit report. A statement to this effect is also appearing in the Directors'' Responsibility Statement.

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 Companies 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 7 to this report. Business Responsibility Report under Regulation 34(2) (f ) of the SEBI (LODR) Regulations has been enclosed as Annexure 9 and also uploaded on to the Company''s website www.diageoindia.com

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

The particulars prescribed under section 134(3)(m) of the Companies Act, read with Rule 8 of the Companies (Accounts) Rules, 2014, are set out in Annexure 8 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. The Management Discussion and Analysis Report read with the report on Risk Management contains impact on the business due to regulatory changes.

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 ongoing training is provided to employees as required by the SHWWA. During the financial year 2016-17 no complaint was received.

29. Highlights of performance of subsidiaries, associates and joint venture companies of the Company

The highlights of performance of subsidiaries, associates and joint venture companies of the Company and their contribution to the overall performance of the Company is covered as part of the Consolidated Financial Statement and form AOC-1 annexed as part of this report. Out of 20 subsidiary/associate companies, 13 are inoperative companies.

30. Directors'' Responsibility Statement

Pursuant to section 134 (5) of the Companies Act, in relation to financial statements (together with the notes to such financial statements) for the year 2016-17, 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 Companies 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 the control gaps noticed in invoicing has since been appropriately addressed; and

(vi) the Company has a system of getting reports of compliance periodically from the units and has substantially implemented a process having comprehensive systems to ensure compliance with the provisions of all applicable laws and is operating effectively.

Your Directors place on record their sincere appreciation for the continued support from the 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 Mahendra Kumar Sharma

MD & CEO Chairman

Bengaluru July 23, 2017


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, 2012

The Shareholders,

The Directors have pleasure in presenting the Annual Report of your Company and the audited accounts for the year ended March 31, 2012.

FINANCIAL RESULTS

Rupees in Millions

2011-12 2010-11

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

- Profit from operations 5,755.508 5,925.148

- Exceptional and other (108.163) 368.399 non-recurring items

5,647.345 6,293.547

Less:

- Depreciation 608.453 477.470

- Taxation 1,610.951 1,961.365 (including deferred tax)

- Profit after tax 3,427.941 3,854.712

Profit B/F from previous year 15,357.972 12,380.525

Profit transferred on Amalgamation - 4.030

Profit available for appropriation 18,785.912 16,239.267

Your Directors have made the following Appropriations :

General Reserve 500.000 500.000

Proposed Dividend 326.987 326.987

Corporate Tax on Proposed

Dividend 53.046 54.309

Balance carried to the Balance Sheet 17,905.879 15,357.971

EPS - Basic & Diluted (Rupees) 26.91 29.47

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 25, 2012, there was an outstanding of 1,284,554 GDSs representing 642,277 equity shares.

PERFORMANCE OF THE COMPANY

During the year under review, your Company has achieved a sales volume of over 120 million cases (Previous year 112 Million cases), representing a growth of 7% 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.5,755.508 million (previous year Rs.5,925.148 million) registering a marginal decrease over the previous year mainly on account of increase in input costs.

SUBSIDIARIES

During the year under review, Chennai Breweries Private Limited (CBPL), a wholly owned subsidiary ceased to be the subsidiary of the Company consequent to its amalgamation with United Breweries Limited (UBL), a UB group Company in terms of Scheme of Amalgamation. Consequent to the aforesaid amalgamation of CBPL with UBL, your Company received 8,500,000 equity shares of Rs. 1/- each of UBL for the shares held by the Company in CBPL.

Whyte and Mackay (Americas) Limited, LLC, a wholly owned subsidiary of Whyte and Mackay Limited, became an utlimate wholly owned subsidiary of your Company.

Sovereign Distilleries Limited (SDL) which became a subsidiary during the year under review became a wholly owned subsidiary of your Company on April 19, 2012 consequent to the acquisition of the balance 38.47% equity shares in terms of Share Purchase Agreement (SPA) executed with the erstwhile promoters of Sovereign Distilleries Limited (SDL).

Your Company is considering various steps including infusion of share capital to make the net worth of its subsidiaries viz. Pioneer Distilleries Limited, Sovereign Distilleries Limited and Tern Distilleries Private Limited, positive.

During the year under review, your Company subscribed to 15,612,245 12% Non Cumulative Redeemable Optionally Convertible Preference shares of Rs.10/- each at par in Four Seasons Wines Limited (FSWL), a subsidiary of the Company. Your Company also subscribed during the current year 8,000,000 12% Cumulative Redeemable Preference shares of Rs.10/- each at par in FSWL.

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 29, 2012 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 2010-11 of USNPL ended on July 16, 2011 and the Accounting Year 2011-12 will end on July 16, 2012 i.e., after the end of the close of the financial year of the Company, which ended on March 31, 2012. 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, 2012.

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 10.75 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 its current position as the world’s largest distilled spirits marketeer by volume.

With the fixation of a more than comfortable floor price for ethanol supplies for oil blending by the Oil Marketing Companies coupled with the uncontrolled grant of permissions to export of molasses and spirit, the potential availability of Extra Neutral Alcohol (ENA), a primary raw material required in the manufacture of Company’s products, has been adversely affected. To counter this hardship, as a part of its business strategy, your Company is continuing with its initiatives of building up supply side security by integrating backwards into distillation by way of acquiring substantial interest in Pioneer Distilleries Limited in Maharashtra and Sovereign Distilleries Limited in North Central Karnataka, both states rich in sugarcane cultivation. These will go a long way to reduce the Company’s dependence on external supplies of ENA.

In order to mitigate the increase in the cost of glass bottles, which is another key ingredient, as a part of its business strategy initiatives, your Company has envisaged setting up a glass container manufacturing facility in south India for captive consumption, besides developing alternate packaging materials in some of the southern states of the

Country to reduce the impact of the increased cost of glass bottles.

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 on May 25, 2012, equity shares representing 97.64 % 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. Sreedhara Menon and Dr. Vijay Mallya retire by rotation and being eligible, offer themselves for re-appointment.

Mr. G.N.Bajpai was appointed as Additional Director on January 20, 2012 and 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 by your Company from a member signifying his intention to propose the appointment of Mr. G.N. Bajpai as Director at the 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, 2012.

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 2012-13 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. 6,387.556 Million as at March 31, 2012. Matured deposits for which disposal instructions had not been received from the depositors concerned stood at Rs. 105.338 Million as at March 31, 2012. Of this, a sum of Rs. 55.354 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 and Deposits, remaining unclaimed and unpaid for a period of 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 2011-12.

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 2011-12, 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, 2012;

- 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

Mumbai Dr. VIJAY MALLYA

May 29, 2012 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


Mar 31, 2010

The Directors have pleasure in presenting the Annual Report of your Company and the audited accounts for the year ended March 31, 2010.

FINANCIAL RESULTS

Rupees in Millions

2009-10 2008-09

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

- Profit from operations 5,123.093 4,953.169

- Exceptional and other non-recurring items 699.953 --

5,823.046 4,953.169

Less:

- Depreciation 386.302 361.565

- Taxation

(including deferred tax) 1,676.529 1,624.980

- Profit after tax 3,760.215 2,966.624

Profit B/F from previous year 9,486.445 7,018.342

Profit transferred on Amalgamation - 103.983

Profit available for appropriation 13,246.660 10,088.949

Your Directors have made the following Appropriations:

General Reserve 500.00 350.000

Proposed Dividend 313.986 215.825

Corporate Tax on Proposed

Dividend 52.149 36.679

Balance carried to the Balance Sheet 12,380.525 9,486.445

EPS - Basic & Diluted (Rupees) 32.51 27.49

Your Directors propose a Dividend on the Equity Shares of the Company at the rate of Rs. 2.50 per share, including on 17,681,952 Equity Shares of Rs.10/- each fully paid up allotted during the year to the Qualified Institutional Buyers under a Qualified Institutions Placement.

CAPITAL

Consequent to amalgamation of Shaw Wallace & Company Limited and Primo Distributors Private Limited, the Authorised Capital of your Company stood increased from Rs.1,200,000,000/- divided into 110,000,000 Equity Shares of Rs.10/- each and 10,000,000 Preference Shares of Rs.10/- each to 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. During the year under review, the Issued, Subscribed and Paid-up Equity Share Capital of the Company stood increased from Rs.1,001,632,560/- divided into 100,163,256 Equity Shares of Rs.10/- each to Rs.1,255,943,290/- divided into 125,594,329 Equity Shares of Rs.10/- each by issue and allotment of 7,749,121 Equity Shares of Rs.10/- each, fully paid-up, to the shareholders of Shaw Wallace & Company Limited consequent to its amalgamation with your Company and issue and allotment of 17,681,952 Equity Shares of Rs.10/- each, fully paid-up, to certain Qualified Institutional Buyers under a Qualified Institutions Placement.

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 August 13, 2010, there was an outstanding of 1,854,454 GDSs representing 927,227 Equity Shares.

QUALIFIED INSTITUTIONS PLACEMENT

During the year under review, the Company raised funds of US$ 350 Million (equivalent to Rs. 1,615.60 Crores) by issue of 17,681,952 Equity Shares of Rs.10/- each at a price of Rs.913.70 per Share to certain Qualified Institutional Buyers through a Qualified Institutions Placement under Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. The funds so raised have been used to reduce part of the debt incurred for the acquisition of Whyte and Mackay Group Limited, to repay other debts, for capital expenditure and other corporate purposes.

PERFORMANCE OF THE COMPANY

The Company has turned in a stellar performance despite a challenging operating environment. Achieving sales of over 100 Million cases is a major milestone, confirming the Companys place as the No. 2 Spirits Marketeer in the World.

A difficult cost regime has been substantially mitigated by a combination of up-selling, cost control and efficiency increases.

AMALGAMATION OF BALAJI DISTRILLERIES LIMITED WITH THE COMPANY

At the Extraordinary General Meeting held on April 21, 2010, the shareholders have approved, by way of a Special Resolution, the Scheme of Arrangement between Balaji Distilleries Limited (BDL), Chennai Breweries Private Limited (CBPL) and the Company (the Scheme) and the Draft Rehabilitation Scheme (DRS) of BDL as circulated by the Honble Board for Industrial and Financial Reconstruction (the BIFR) vide Order dated February 19, 2010. The Scheme envisages transfer of the Brewery Division Undertaking of BDL to CBPL and merger of BDL other than the Brewery Division Undertaking into the Company with effect from April 1, 2009.

The Scheme and the DRS are pending with the Honble BIFR formed under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985, for approval and the Scheme shall become effective on receipt of such approval.

SUBSIDIARIES

During the year under review, Tern Distilleries Private Limited having a unit for manufacture of Extra Neutral Alcohol in Andhra Pradesh, became a wholly owned subsidiary of your Company consequent upon the acquisition of its entire paid- up share capital by the Company.

Consequent to allotment of equity shares to another investor and to the Company, Four Seasons Wines Limited ceased to be a wholly owned subsidiary but continues to be a subsidiary of the Company.

Shaw Wallace & Company Limited, which was a subsidiary of your Company and had merged with your Company during the year under review, was subsequently dissolved without winding up by the order of the Honble High Court at Calcutta.

In terms of the approval received from the Government of India pursuant to Section 212 (8) of the Companies Act, 1956, the Balance Sheet, Profit & Loss Account, Directors Report, Auditors Report and other particulars of the Subsidiary Companies as on March 31, 2010 have not been attached with the Accounts of the Company. 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 Companys Subsidiary in Nepal is from mid-July to mid-July every year. Accordingly, Accounting year of 2008-09 of USNPL ended on July 15, 2009 and the Accounting Year 2009-10 ended on July 16, 2010, i.e., after the end of the close of the financial year of the Company, which ended on March 31, 2010. 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, 2010.

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 continues its winning ways in the early months of the current fiscal reporting strong growth. The Company is set to overtake the current World leader and seal its position as the Worlds largest Spirits marketeer in short order.

Input prices, particularly of spirit appear to be softening though steady increases in cost of glass and paper partially offset these gains.

DEPOSITORY SYSTEM

The trading in the Equity Shares of your Company is under compulsory dematerialisation mode. As on August 13, 2010, Equity Shares representing 97.31% 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 Companys shares.

DIRECTORS

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

AUDITORS

M/s. Price Waterhouse, your Companys 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, 2010.

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 2010-11 have been paid to these Stock Exchanges.

7,749,121 Equity Shares and 17,681,952 Equity Shares issued and allotted to the shareholders of erstwhile Shaw Wallace & Company Limited and to certain Qualified Institutional Buyers, respectively as mentioned above, have also been listed on the aforesaid Stock Exchanges during the year under review.

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. 2,215.463 Million as at March 31, 2010. Matured Deposits for which disposal instructions had not been received from the Depositors concerned stood at Rs. 12.440 Million as at March 31, 2010. Of this, a sum of Rs.3.894 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 Companys locations.

Particulars of employees drawing an aggregate remuneration of Rs.2,400,000/- or above per annum or Rs.200,000/- or above per month, as required under Section 217(2A) of the Companies Act, 1956 are annexed.

EMPLOYEE STOCK OPTION SCHEME

The Company has not offered any stock option to the employees during the year 2009-2010 either under the McD ESOP Scheme or McD-Employee Stock Option Scheme - 2002.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION, ETC.

In accordance with the provision 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 2009-10, 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, 2010;

- 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 years performance.

By Authority of the Board

New Delhi Dr. VIJAY MALLYA

August 18, 2010 Chairman

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