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Notes to Accounts of United Spirits Ltd.

Mar 31, 2015

1. (a) Defined contribution plans

The Company of ers its Employees defined contribution plans in the form of Provident fund (PF) and Employees' Pension Scheme (EPS) with the Government, Superannuation Fund (SF) and certain state plans such as Employees' State Insurance (ESI). PF and EPS cover substantially all regular employees while the SF covers certain executives and the ESI covers certain workers. Contribution to SF is made to United Breweries Staff Superannuation Fund, however, the Company is in the process of creating its own Trust. Other contributions are made to the Government's funds. While both the employees and the Company pay predetermined contributions into the Provident fund and the ESI Scheme, contributions into the pension fund and the superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee's salary.

The Company has taken group term policy from a Insurance company to cover the death benefit of certain category of employees. On the death of employee, a specific amount will be paid by the insurance company to the nominee of the deceased employee as per the grade.

(b) Defined benefit plans

Gratuity:

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employee's last drawn salary and years of employment with the Company. The Company has employees' gratuity funds managed by the Company as well as by Insurance Companies.

Provident fund:

For certain executives and workers of the Company, contributions are made as per applicable Indian laws towards Provident Fund to certain Trusts set up and managed by the Company, where the Company's obligation is to provide the agreed benefit to the employees and the actuarial risk and investment risk fall, in substance, on the Company. Having regard to the assets of the Fund and the return on the investments, shortfall in the assured rate of interest notified by the Government, which the Company is obliged to make good is determined actuarially.

2. Leases

a) Finance lease

The Company has acquired computer equipment and cars on finance leases. The lease agreement is for a primary period of 36 to 60 months for computer equipment and cars. The Company has an option to renew these leases for a secondary period.

b) Operating lease

The Company's significant leasing arrangements in respect of operating leases for premises (residential, office, stores, godown, manufacturing facilities etc.) and plant and machineries, which includes cancellable leases ranging between 11 months and 3 years generally (or longer in certain cases) and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as rent under note 18 to the financial statements.

3. Segment reporting

The Company is engaged in the business of manufacture, purchase and sale of beverage alcohol (spirits and wines) including through tie-up manufacturing units / brand franchise, which constitutes a single business segment. The Company is primarily organised into two main geographic segments namely India and outside India. However, the Company's operations outside India did not exceed the quantitative threshold for disclosure envisaged in Accounting Standard-17 (AS-17) on "Segment Reporting" as prescribed under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014. In view of the above, both primary and secondary reporting disclosures for business / geographical segment as envisaged in AS-17 are not applicable to the Company.

4. Related party disclosures

(a) Names of related parties and description of relationship holding company

i) Diageo Plc. (ultimate holding company with effect from 2 July 2014)

ii) Relay B V (holding company with effect from 2 July 2014)

Fellow subsidiaries

i) Diageo Scotland Limited (fellow subsidiary with effect from 2 July 2014)

ii) Diageo India Private Limited (fellow subsidiary with effect from 2 July 2014)

iii) Diageo Brands BV (fellow subsidiary with effect from 2 July 2014)

iv) Diageo Singapore Supply Pte Limited^ (fellow subsidiary with effect from 2 July 2014)

Entities having significant influence over the Company:

i) United Breweries Holdings Limited

ii) Kingfisher Finvest India Limited

Entities under common influence/control with the Company:

i) City Properties Maintenance Company Bangalore Limited

ii) United Breweries Limited

Enterprise where there is control:

(i) Subsidiary companies

1) United Spirits Nepal Private Limited (USNPL), 2) Asian Opportunities & Investment Limited (AOIL), 3) Bouvet -Ladubay S.A.S (BL), 4) Chapin Landais S.A.S (CL)^, 5) Palmer Investment Group Limited (PIG)^, 6) Montrose International SA (MI)^, 7) UB Sports Management Overseas Limited (Formerly known as " JIHL Nominees Limited")(UBS MOL) 8) Shaw Wallace Overseas Limited (SWOL)^, 9) McDowell & Co (Scotland) Limited (MSL), 10) USL Holdings Limited (USLHL), 11) Royal Challengers Sports Private Limited (RCSPL), 12) USL Holdings (UK) Limited, 13) United Spirits (UK) Limited^, 14) United Spirits (Great Britain) Limited, 15) SW Finance Co. Limited (SWFCBL) (formerly known as "Shaw Wallace Breweries Limited") ^^, 16) Four Seasons Wines Limited (FSWL), 17) Liquidity Inc^, 18) United Spirits (Shanghai) Trading Co. Limited^, 19) Tern Distilleries Private Limited, 20) Sovereign Distilleries Limited, 21) Pioneer Distilleries Limited, 22) United Spirits Singapore Pte Limited (formerly known as "Whyte and Mackay Singapore Pte Limited") Consequent to the sale of Whyte and Mackay, the following companies ceased to be subsidiaries with effect from 31 October 2014. 1) Whyte and Mackay Group Limited^, 2) Whyte and Mackay Holdings Ltd^, 3) Whyte and Mackay Limited (W&M) 4) Whyte and Mackay Warehousing Limited^, 5) Bruce & Company (Leith) Limited^, 6) Charles Mackinlay & Company Limited^, 7) Dalmore Distillers Limited^, 8) Dalmore Whyte & Mackay Limited^, 9) Edinburgh Scotch Whisky Company Limited^, 10) Ewen & Company Limited^, 11) Fettercairn Distillery Limited^, 12) Findlater Scotch Whisky Limited^, 13) Glayva Liqueur Limited^, 14) Glentalla Limited, 15) GPS Realisations Limited^, 16) Grey Rogers & Company Limited^, 17) Hay & MacLeod Limited^, 18) Invergordon Distillers (Holdings) Limited^, 19) Invergordon Distillers Group Limited^, 20) Invergordon Distillers Limited^, 21) Invergordon Gin Limited^, 22) Isle of Jura Distillery Company Limited^, 23) Jarvis Halliday & Company Limited^, 24) John E McPherson & Sons Limited^, 25) Kensington Distillers Limited^, 26) Kyndal Spirits Limited^, 27) Leith Distillers Limited^, 28) Loch Glass Distilling Company Limited^, 29) Longman Distillers Limited^, 30) Lycidas (437) Limited^, 31) Pentland Bonding Company Limited^, 32) Ronald Morrison & Company Limited^,33) St The Sheep Dip Whisky Company Limited^, 34) Vincent Street (437) Limited^, 35) Tamnavulin-Glenlivet Distillery Company Limited^, 36) TDL Realisations Limited^, 37) W & S Strong Limited^,38) Watson & Middleton Limited^,39) Wauchope Moodie & Company Limited^, 40) Whyte & Mackay Distillers Limited^, 41) William Muir Limited^, 42) WMB Realisations Limited^,43) Whyte and Mackay Property Limited^,44) Whyte and Mackay de Venezuela CA^,45) KI Trustees Limited^, 46) Whyte and Mackay Americas Limited^

ii) USL Benefit Trust Associate:

i) Wine Society of India Private Limited^

^ No transactions during the year

^^ Shaw Wallace Breweries Limited renamed as " SW Finance Co. Limited" with effect from 16 January 2013

^^^ Whyte and Mackay Singapore Pte Limited renamed as "United Spirits Singapore Pte Limited" with effect from 1 August 2014

Key Management Personnel:

i) Mr Ashok Capoor - Managing Director (effective upto 30 April 2014)

ii) Mr P A Murali - Executive Director and CFO (effective upto 22 April 2015)

iii) Mr Anand Kripalu - Managing Director and Chief Executive Officer (with effect from 14 August 2014)

Employees' Benefit Plans where there is significant influence:

i) McDowell & Company Limited Staff Gratuity Fund (MCD SGF), ii) McDowell & Company Limited Officers' Gratuity Fund (MCD OGF), iii) Phipson & Company Limited Management Staff Gratuity Fund (PCL SGF), iv) Phipson & Company Limited Gratuity Fund (PCL GF), v) Carew & Company Ltd. Gratuity Fund (CCL GF), vi) McDowell & Company Limited Provident Fund (MCD PF), vii) Shaw Wallace & Associated Companies Employees Gratuity Fund (SWCEGF), viii) Shaw Wallace & Associated Companies Executive Staff Fund (SWCSGF), ix) Shaw Wallace & Co. Associated Companies Provident Fund (SWCPF), x) Balaji Distilleries Employees Gratuity Trust

* Excludes reimbursement of expenses and cost sharing arrangements, unless otherwise stated.

** Represents balance as on 31 October 2014 when the company ceased to be the subsidiary

^ During the year, the Company has not recognised interest income amounting to Rs.1,207.545 Million on advances to United Breweries (Holdings) Limited.

# The Company has also given letter of support to the following subsidiaries to conduct their operations in such a manner as to enable to meet its obligations:

i) Pioneer Distilleries Limited, ii) Sovereign Distilleries Limited, iii) Tern Distilleries Private Limited, iv) Four Seasons Wines Limited, v) Royal Challengers Sports Private Limited, vi) Asian Opportunities & Investment Limited, vii) United Spirits Singapore Pte Limited, viii) Montrose International SA, ix) Palmer Investment Group Limited, x) UB Sports Management Overseas Ltd (Formerly known as " JIHL Nominees Limited") xi) USL Holdings Limited xii) USL Holdings (UK) Limited xiii) United Spirits (UK) Limited xiv) United Spirits (Great Britain) Limited xv) Liquidity Inc xvi) United Spirits (Shanghai) Trading Co. Limited

Refer note 24(d) for details of historical contracts that were not approved by the shareholders of the Company as per the requirements of the listing agreements entered into by the Company with various stock exchanges.

Note: The following agreement was also entered in July 2013, however there was no transaction:

- United Breweries (Holdings) Limited (UBHL) has a drag along right under a property sale agreement between UBHL and the Company which is exercisable at fair value upto July 2015.

The above information has been determined to the extent such parties have been identified on the basis of information provided by the Company, which has been relied upon by the auditors.

4. (d) As per the requirements of the listing agreements entered into by the Company with various stock exchanges, and applicable circulars issued by SEBI (including circular No. CIR/CFD/POLICY CELL/2/2014 dated 17 April 2014 ("April 17 Circular") and circular No. CIR/CFD/ POLICY CELL/7/2014 dated 15 September 2014), the Company sought approval of its shareholders for certain historical agreements at the Extraordinary General Meeting ("EGM") held on 28 November 2014, including the following: (a) loan agreement dated 3 July 2013, between the Company and UBHL; (b) agreements dated 30 September 2011 and 22 December 2011 respectively, between the Company and UBHL requiring UBHL to sell to the Company certain immovable properties; (c) services agreement dated 3 July 2013, between the Company and Kingfisher Finvest India Limited; (d) advertising agreement dated 1 October 2013 (which amended and restated the original agreement dated 3 July 2013) between the Company and Watson Limited; (e) sponsorship agreement dated 11 June 2013 between the Company and United Racing & Bloodstock Breeders Limited; (f ) sponsorship agreement dated 11 June 2013 between the Company and United Mohun Bagan Football Team Private Limited; (g) aircraft services agreement dated 11 June 2013 between the Company and UB Air Private Limited; (h) properties call agreement dated 11 June 2013 between the Company and PE Data Centre Resources Private Limited; and (i) contribution agreement dated 11June 2013 between the Company and Vittal Mallya Scientific Research Foundation.

As stated in the EGM notice dated 31 October 2014, each of the above-mentioned transactions were duly approved by the board of directors of the Company, prior to entering into the agreement corresponding to such transaction. The EGM notice further stated that while the April 17 Circular mandates that all existing material related party transactions be placed before the shareholders for their approval by way of a special resolution, thus far, the consequences of any non-approval of such existing transactions by the shareholders by the requisite majority is unclear. It is therefore possible that non-approval of one or more of the above-mentioned agreements by the requisite majority may result in the Company being obliged to cease to act upon and potentially put the Company in breach of such agreements, which are the subject of non-approval by the shareholders. This could potentially result in a dispute with the relevant counterparties who may contend that the Company has breached the relevant agreement by failing to act on or fulfil its obligations under the same. Such potential disputes could be protracted and costly, and could result in financial or other liabilities on the Company. Also, any inability on the part of the Company to act on or fulfil its obligations under the unapproved agreements could result in the Company being potentially unable to receive the benefit of the various rights that it is entitled to under such agreements (such as in the case of the agreement noted in (b) above). It was also stated in the EGM Notice that in the absence of sufficient clarity in respect of the provisions dealing with existing material related party contracts and arrangements, the Company was tabling the above-mentioned agreements for the approval of the shareholders by way of abundant caution.

It was further stated that the Company was still in the process of seeking confirmations from, and verifying the position in relation to, the counterparties to, inter alia, 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. However, to the extent it ultimately transpired 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 under the April 17 Circular in respect of any of the above mentioned contracts or arrangements then, in that case, it shall follow 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.

At the EGM, the above-mentioned agreements were not approved by the shareholders of the Company by requisite majority. Consequently, the Company has sought clarifications/ directions from SEBI with respect to the implications of the non-approval of the aforesaid agreements by the shareholders of the Company.

Pending the clarification / direction from SEBI, the Company has recognised the charges up to 28 November 2014, in respect of the agreements listed in (c) to (g) and (i) above, amounting to Rs.1,357.3 Million during the financial year ended 31 March 2015 (Rs.1,382.2 Million for the financial year ended 31 March 2014). In light of the fact that the Company's shareholders have not approved the said agreements on 28 November 2014, the Company has not recognised the charges amounting to Rs.486.2 Million from 29 November 2014 to 31 March 2015 payable under the agreements listed in (c) to (g) and (i) above. The Company has informed the respective counterparties that the contracts mentioned above have not been approved by the shareholders. Further, subsequent to 28 November 2014, in response to the letters received by the Company from the concerned counterparties, the Company has made payments amounting to Rs.74.3 Million to some of these 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 clarifications / directions from SEBI, the Company has not made any payments to the respective counterparties under the agreements in (c) to (g) and (i) above for the period subsequent to 28 November 2014 and has considered these amounts as contingent liabilities. Also see Note 26(b) above in relation to the loan agreement listed above.

5. (a) Prepayment of Credit Facility

During the year ended 31 March 2014, the Company decided to prepay credit facilities availed in the earlier years from a bank amounting to Rs.6,216.600 Million, secured by assets of the Company and pledge of shares of the Company held by the USL Benefit Trust. The Company deposited a sum of Rs.6,280.0 Million including prepayment penalty of Rs.40.0 Million with the bank and instructed the bank to debit the amount from the cash credit account towards settlement of the loan and release the assets / shares pledged by the Company. The bank, however, disputed the prepayment and continues to debit the account towards the instalments and interest as per the loan agreement. The Company has disputed the same and a petition is pending before the Honourable High Court of Karnataka. On 31 March 2015, the bank demanded an amount of Rs.474.0 Million towards principal and interest on the said loan. The Company has sought a stay from the Honourable High Court of Karnataka with respect to the aforesaid demand. Pending settlement with the bank, the loan amount and balance available in cash credit account is presented on net basis in the financial results as at 31 March 2015. The tenure of credit facility has been completed as on 31 March 2015.

5. (b) During the year, a bank has declared one of the directors of the Company as a wilful defaulter in respect of another company where he is a promoter director. The Reserve Bank of India's Master Circular on wilful defaulters along with certain covenants in the loan agreements sanctioned by the Company's bankers raise an uncertainty on the impact of this development on the availability of credit facilities to the Company. The said director has assured the Board that he will take appropriate steps to ensure that the operations of the Company are not impacted. Having received such assurance from the said director and appropriate comfort from the controlling shareholder of the Company, the financial results have been prepared on a going concern basis. The Company understands from public records that the above- mentioned decision of the bank declaring the said director as a wilful defaulter has been quashed by an order of the Calcutta High Court on 24 December 2014.

6. Provision for doubtful receivable, advances and deposits

During the previous financial year, the Board had directed a detailed and expeditious inquiry in relation to certain matters referred in paragraphs 26 (a) to 26 (c) 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 (the "Inquiry"). Pursuant to the directions of the Board, the Inquiry was headed by the Managing Director and Chief Executive Officer ("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 25 April 2015, 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.

6. (a) During the financial year ended 31 March 2014, certain parties who had previously given undisputed balance confirmations for the financial year ended 31 March 2013, claimed in their balance confirmations to the Company for the financial 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, a preliminary internal inquiry was initiated by the Management. Based on the findings of the preliminary internal inquiry by the Management, the Management's assessment of recoverability and other considerations, as a matter of prudence, an aggregate amount of Rs.6,495.480 Million (including interest claimed) was provided in the financial statements for the financial year ended 31 March 2014 and was disclosed as a prior period item. Management has sought confirmations of balances from these counterparties for the year ended 31 March 2015 but have not received responses from some of them.

The Inquiry Report 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"). The diverted amounts were included in the provision made by the Company in the financial statements for the previous financial year. The Inquiry also indicated that the manner in which certain transactions were conducted, prima facie, 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. The financial impact of these non-compliances on the Company were estimated by Management to be not material.

During the year ended 31 March 2015, an additional provision of Rs.216.0 Million 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 on this account.

In connection with the recovery of the funds that were diverted from the Company and/or its subsidiaries, pursuant to the decision of the Board at its meeting held on 25 April 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.

6. (b) Certain pre-existing loans / deposits / advances were due to the Company and its wholly-owned subsidiaries from United Breweries (Holdings) Limited ("UBHL") and were in existence as on 31 March 2013. Such dues (together with interest) aggregating Rs.13,374.167 Millions, 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. In addition, the amounts owed by UBHL to the Company's wholly-owned subsidiaries had been assigned by such subsidiaries to the Company and recorded as loans from such subsidiaries in the books of the Company. The interest rate under the above mentioned loan agreement with UBHL is 9.5% p.a., with the interest to be paid at six-monthly intervals starting at the end of 18 months from the effective date of the loan agreement. The loan has been granted for a period of eight years and is payable in three annual instalments commencing from the end of 6th anniversary of the effective date of the loan agreement.

Certain lenders have f led petitions for winding up against UBHL. UBHL has provided guarantees to lenders and other vendors of Kingfisher Airlines Limited (KFA), a UB Group entity. Most of these guarantees have been invoked and are being challenged in Courts. The Company has also f led its afdavit opposing the aforesaid winding up petitions and the matter is sub-judice.

Pursuant to the directions of the Board, the Inquiry also included a review of documentation to further understand and assess elements of and background to the above loan arrangement and to establish the rationale / basis for the interest rate applicable in respect of the consolidated loan amount.

With regard to the prior transactions that were consolidated into the single loan on 3 July 2013, 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. The Company is in the process of evaluating its rights and remedies in relation to such violations. The financial impact of these non-compliances on the Company were estimated by Management to be not material.

During the previous year, as a matter of prudence, the Company had not recognised interest income of Rs.963.069 Million and had provided Rs.3,303.186 Million towards the principal outstanding as at 31 March 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.9,954.597 Million. 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.1,911.0 Million (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 has 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 f led 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.9,954.597 Million 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 31 March 2014) and has not recognised interest income of Rs.1,207.545 Million. The Company will pursue all rights and claims to recover the entire amount of the loan together with accrued interest from UBHL.

Also refer Note 24 (d) 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).

6. (c) In May 2014, the Company received a letter on behalf of a third-party claimant alleging that the Company had signed agreements creating a lien on certain assets held by the Company, to secure loans provided by the third party claimant to Kingfisher Airlines Limited. The Company disputed this and the claim was subsequently withdrawn by the third party. Pursuant to the directions of the Board, the Inquiry included a review of documentation to further understand and assess the Company's position in relation to the above matter. The Inquiry indicated that no Board authorisation or approval had been obtained to authorize anyone to execute any such agreement to create a lien on the investments of the Company to secure the rights of the third party claimant. No claims were received from the claimant or any other person during the year. Based on the Inquiry and its current knowledge, Management does not expect any liability or obligation to arise from this matter.

6. (d) In relation to the Company's funds that were diverted from the Company, the Board of Directors at their meeting held on 25 April 2015, unanimously agreed to pursue all rights and claims against the relevant parties mentioned in the Inquiry Report to expeditiously recover the Company's dues from such parties, to the extent possible.

6. (e) 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 also dealt with transactions involving the counterparties referred to in the notes to the Company's audited financial statements for the previous financial year. The Inquiry also identified certain additional matters ("Additional Matters") where the documents identified raised concerns as to the propriety of the underlying transactions. The Management has made the following provisions with respect to such transactions: (a) Rs.678.080 Million made in the Company's financial statements for the financial year ended 31 March 2015, (b) Rs.445.486 Million made in the Company's subsidiaries' financial statements for the financial year ended 31 March 2015, (c) Rs.157.040 Million made in the previous year in the Company's financial statements and (d) Rs.1,087.10 Million 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 also believes that it is necessary to assess whether the Additional Matters or the transactions with the Additional Parties were improper. The Board has therefore directed the CEO & MD to expeditiously 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.

7. (a) During the year, the scheme of arrangement between the Company and Enrica Enterprises Private Limited ("Enrica") and its shareholders and creditors as the case may be in respect of transfer of undertaking of the Company in Tamil Nadu by way of slump sale, on a going concern basis, under Section 391 read with Section 394 of the Companies Act, 1956 (the "Scheme") with an Appointed Date of 1 April 2013 has been sanctioned by the Honourable High Courts of Karnataka and Madras under their orders dated19 February 2015 and 31 July 2014 respectively.

Upon necessary f ling with the respective Registrar of Companies, the Scheme has become effective from 30 March 2015 (the 'Effective Date') and the effect of the Scheme has been given in these financial statements of the Company. Consequently,

i) the entire business and undertaking of the 'Transferred Undertaking' of the Company, including all assets and liabilities, as a going concern, stands transferred into Enrica with effect from 1 April 2013 being the Appointed Date. The book value of net assets of the Transferred Undertaking as at 1 April 2013 amounts to Rs.894.200 million.

ii) In consideration thereof, the Company has received amount of Rs.1,000.00 Million during the year and balance amount of Rs.250.700 Million has been received subsequent to the Balance sheet date.

iii) The Company has recorded a net profit of Rs.356.500 Million pursuant to sale of the Transferred Undertaking during the year. The profit has been credited to the Statement of profit and loss and has been disclosed separately under the head "Exceptional items (net)".

The Company has also entered into a Franchise Agreement with Enrica under which the Company is entitled to royalty payments in consideration for grant of manufacturing, marketing, distribution and sale rights to Enrica in defined territories. From the Appointed Date up to the Effective Date, the royalty payable was a fixed amount per case or the Franchisee's profit (before tax and royalty) in respect of the franchised products, whichever is lower. Subsequent to the Effective Date, royalty at net sales realisation linked slab rate will accrue to the Company as per the Franchise Agreement.

The net amount resulting from the reversal of the profits of the Transferred Undertaking recognised for the year ended 31 March 2014 and the income under the franchise agreements has been adjusted in the balance of surplus in Statement of profit and loss under the head "Reserves and Surplus". Further, revenue and expenses of the Transferred Undertaking for the Financial Year 2014-15 and its assets and liabilities as at 31 March 2015, have not been considered in the financial statements.

All costs and expenses incidental to the finalisation and implementation of the Scheme, including stamp duty charges, meeting expenses, professional fees, consulting fees and any other expenses attributable to the implementation of the Scheme are debited to respective head of 'Expenditure'. An amount of Rs.871.333 Million is recoverable from Enrica with respect to the working capital amount from the appointed date to the effective date and the balance consideration receivable by the Company.

7. (b) Further to Diageo plc's undertakings offered to UK's Office of Fair Trade ("OFT") (now called Competition and Markets Authority, UK), in January 2014, the Company's Board of Directors decided to initiate a process based on the outlined time-table provided in connection with the decision of the OFT to explore a potential sale of all or part of Whyte and Mackay. As a culmination of this process, on 9 May 2014 the Company's then wholly owned subsidiary, United Spirits (Great Britain) Limited ("seller" or "USGBL") entered into a Share Sale and Purchase agreement with Emperador UK Limited and Emperador Inc. in relation to the sale of the entire issued share capital of Whyte and Mackay Group Limited ("WMG") for an enterprise value of GBP 430 Million (calculated with a normalized level of working capital), from which deduction has been made for the payment of a warranty and indemnity insurance premium of GBP 0.85 Million agreed between the seller and the purchaser. An opinion from a leading merchant banker, addressed to the Board, confirms that the enterprise value is fair from a financial point of view of the Company.

On 31 October 2014, the sale of the entire issued share capital of WMG by USGBL to Emperador UK Limited was completed. With the above sale, WMG and its 45 subsidiaries have ceased to be subsidiaries of the Company. Part of the proceeds from the sale was used to repay Whyte and Mackay acquisition debt amounting to GBP 370 million. Post adjustment of Pension Def cit, repayment of debt and movements in Net Working Capital, the Company will get the balance funds. A Retention Deposit of GBP 10 million is retained for any claims for a period of 7 months post completion. The sale has resulted in true up of provision towards the recoverability of the investments and loans given for WMG, including Palmer and Montrose amounting to Rs.45,064.887 Million. Consequently, additional provision of Rs.1,848.522 Million has been recorded for the year ended 31 March 2015 as an exceptional item. The Company has received a letter dated 16 October 2014 from the authorised dealer advising the Company to complete the disinvestment of WMG and subsequent liquidation of the intermediary wholly owned subsidiary companies. The provisional write of approval is subject to submission of the required documents within a period of 30 days from the date of liquidation of the aforesaid wholly owned subsidiaries. The Company will comply with the requisite conditions specified by the authorised dealer in accordance with applicable law.

8. During the year ended 31 March 2015, the Company has recorded the provisions for diminution on long-term investments in subsidiaries amounting to Rs.3,618.093 Million and loans and advances to subsidiaries amounting to Rs.3,543.507 Million. This provision arises primarily due to low capacity utilization, negative margins or strategic shift in focus of the business. The Company has recorded this provision based on third party valuations.

9. Scheme of amalgamations

The Board of Directors at their meeting held on 8 January 2014, have approved the amalgamation of:

i) Tern Distilleries Private Limited, a wholly owned subsidiary of the Company ("TERN") pursuant to a Draft Rehabilitation Scheme and applicable provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 with the appointed date as 1 April 2013 ("TERN Scheme"). The entire operations of TERN comprise transactions with the Company. The net impact on the financial statement of the Company from such amalgamation is expected to be insignificant when effected. The equity shareholders of the Company approved the TERN Scheme at their Extraordinary General Meeting held on 18 March 2014 and the approval by the Board for Industrial and Financial Reconstruction ("BIFR") is in progress. Pending approval of the TERN Scheme, no effect has been given in the financial statement. A summary of Statement of profit and loss and the statement of assets and liabilities of TERN for the year ended 31 March 2015 is as below:

ii) SW Finance Company Limited, a wholly owned subsidiary of the Company ("SWFCL") with the Company with the appointed date of 1 January 2014 ("SWFCL Scheme") pursuant to the applicable provisions of the Companies Act, 1956, and subject to the sanction of the Honourable jurisdictional High Courts / any competent authority. The accounting for the above amalgamation shall be done upon receiving the necessary sanctions / approval from various regulatory authorities including the Registrar of Companies. Upon the SWFCL Scheme becoming effective, SWFCL will stand merged with the Company. Pending approval of the SWFCL Scheme, no effect has been given in the accompanying financial statement. The operations of SWFCL are predominantly with the Company. The net impact on the financial statement of the Company from such operations is expected to be immaterial when effected. A summary of Statement of profit and loss and the Statement of assets and liabilities of SWFCL for the year ending 31 March 2015 is as below:

10. The following letters / notices were received by the Company subsequent to the Balance sheet date with respect to the matters under Inquiry.

i) The Company has received a notice from the Ministry of Corporate Affairs for an inspection, under Section 206(5) of the Act, of the books of accounts and other books and papers of the Company. A notice under Section 131 of the Income Tax Act, 1961 has also been received. The Company is cooperating fully with the authorities in relation to the same.

ii) The Company has also received letters from erstwhile auditors who served as the Company's statutory auditors during the period covered by the Inquiry, seeking to understand the impact of the findings of the Inquiry on their respective audit reports. Any remedial actions proposed by the previous auditors will be considered by the Company in the light of applicable legal provisions.

iii) As directed by the Board, the Company provided a copy of the Inquiry Report to its statutory auditors for their review and further actions as may be required. Following this, the Audit Committee of the Board has received from the statutory auditors a report under Section 143(12) of the Act and the relevant rules thereunder, seeking the Audit Committee's reply / observations. The Audit Committee is in the process of providing its reply / observations to the statutory auditors.

iv) The Company has also received a letter from the National Stock Exchange Limited ("NSE") pursuant to SEBI circular no. CIR/CFD/DIL/7/2012 dated 3 August 2012 in relation to Form B along with audited financial statements for the financial year ended 31 March 2014. SEBI has directed the NSE to advise the Company to suitably rectify the qualifications raised by the statutory auditors, which the Company has suitably addressed to the extent possible.

11. At an extraordinary general meeting of the shareholders of the Company on 28 November 2014, the shareholders approved the reporting of erosion of more than fifty per cent of the Company's peak net worth in the immediately preceding four financial years as required under Section 23(1)(a)(ii) read with Section 23(1)(b) of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA"). The Company has reported the fact of such erosion to the BIFR as required under Section 23(1)(a)(i) of SICA vide letter dated 29 December 2014.

12. Capital and other commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.1,474.206 Million (2014: Rs.284.990 Million).

(b) Other commitments relating to advertisement, sales promotion and trade mark fee Rs.3,616.568 Million (2014: Rs.8,393.593 Million). The amount with respect to contracts not approved by the Shareholders as mentioned in note 24(d) have not been disclosed as commitments.

(c) The Company has also given letter of support to the following subsidiaries to conduct their operations in such a manner as to enable to meet its obligations.

i) Pioneer Distilleries Limited ii) Sovereign Distilleries Limited iii) Tern Distilleries Private Limited iv) Four Seasons Wines Limited v) Royal Challengers Sports Private Limited vi) Asian Opportunities & Investment Limited vii) United Spirits Singapore Pte Limited viii) Montrose International SA ix) Palmer Investment Group Limited x) UB Sports Management Overseas Ltd (Formerly known as " JIHL Nominees Limited") xi) USL Holdings Limited xii) USL Holdings (UK) Limited xiii) United Spirits (UK) Limited xiv) United Spirits (Great Britain) Limited xv) Liquidity Inc xvi) United Spirits (Shanghai) Trading Co. Limited.

13. Tie-up Manufacturing arrangement

The Company has entered into arrangements with certain distilleries and bottling units (Tie-up units) for manufacture and marketing of its own brands. The Tie-up units have necessary license and regulatory permits to manufacture beverage alcohol. The arrangements stipulates the obligations of each party and the entire manufacturing activity is carried out under the close supervision of the Company executives. It is the responsibility of the Company to Market its products and ensure adequate finance to the tie-up units for its operations. The risk and reward of the activity lies with the Company. In the circumstances, it is considered appropriate to disclose the following information (Unaudited), as applicable to such activities.

14. Appointment of Finance Head

Subsequent to the Balance sheet date, Board of directors of the Company at its meeting held on 25 April 2015 have appointed Mr. Vinod Rao as Head of finance of the Company.

15. Corporate Social Responsibility

Since average net profits of the Company made during the three immediately preceding financial years is negative, therefore the Company has not earmarked specific funding for Corporate Social Responsibility and sustainable activities as required under the provision of section 135 of the Act.

16.

The Managerial remuneration for the financial year ended 31 March 2015 aggregating Rs.64.907 Million and Rs.153.092 Million towards remuneration of the MD & CEO and the Executive Director and Chief Financial Officer ("ED & CFO") respectively was approved by the shareholders of the Company at the annual general meeting of the Company held on 30 September 2014. The aforesaid remuneration includes amounts paid in excess of the limits prescribed under the provisions of Schedule V to the Act. Accordingly, the Company is in the process of obtaining the requisite approval from the Central Government for such excess remuneration.

17. During the year ended 31 March 2015, no material foreseeable loss was incurred for any long-term contract including derivative contracts.

18. Regroupings

Previous year's figures have been regrouped / reclassified as per the current year's presentation for the purpose of comparability. The following


Mar 31, 2014

Preferential allotment of equity shares

i) On 27 May 2013, the Company allotted 14,532,775 equity shares of face value of Rs. 10/- each at a price of Rs. 1,440/- per share (including a premium of Rs. 1,430/- per equity share) to Relay B.V. an indirect wholly owned subsidiary of Diageo plc., on a preferential allotment basis in terms of the preferential allotment agreement entered between Relay B.V., the Company and Diageo plc. on 9 November 2012 and pursuant to the approval of the shareholders through postal ballot on 14 December 2012 by a way a of special resolution, for an aggregate amount of Rs. 20,927.195 Million.

ii) On 4 July 2013, in terms of the share purchase agreement dated 9 November 2012 between Palmer Investment Group Limited (Palmer) and UB Sports Management Overseas Limited (UB Sports) (both wholly owned subsidiaries of the Company), USL Benefit Trust (of which the Company is a beneficiary) (USLBT), SWEW Benefit Company (SWEW), United Breweries (Holdings) Limited (UBHL) and Kingfisher Finvest India Limited (KFIL) with Relay B.V. and Diageo plc., the sale of 21,767,749 equity shares ("Sale Shares") of the Company in aggregate by UBHL, KFIL, SWEW, Palmer and UB Sports to Relay B.V. at a price of Rs. 1,440/- per sale share were completed.

iii) During the year, Relay B.V. (wholly owned subsidiary of Diageo plc), has further acquired through the open offer and from the open market 5,526,608 equity shares representing 3.80% of the equity share capital of the Company.

iv) Subsequent to the balance sheet date, Relay B.V. further acquired 37,785,214 equity shares representing 26 % equity share capital of the Company through an open offer. As a result of the acquisition of these shares, Relay B.V. holds 79,612,346 equity shares, representing 54.78 % equity share capital of the Company as on date and has become the holding company of the Company.

Rights, preferences and restrictions attached to equity shares

The Company has one class of equity shares having a face value of Rs. 10 per share. Each holder of the equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in the case of interim dividend. In the event of liquida- tion, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their holdings.

Shares held by holding / ultimate holding company and / or their subsidiaries / associates

* On 20 December 2013, the Honorable Karnataka High Court passed an order in the matter involving United Breweries (Holdings) Limited (UBHL) and its creditors and the Diageo group setting aside an earlier leave order which permitted UBHL to sell 10,141,437 equity shares in the Company, pending disposal of the winding up petitions against UBHL. On the above matter, UBHL and Diageo plc has approached the Honorable Supreme Court by way of SLPs challenging the order of the division bench. Pending, disposal of the above SLPs, the Honorable Supreme Court has directed that status quo be maintained in respect of the transaction of sale of shares to Relay B.V.

* The 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 Million. These GDSs are listed on the Luxembourg Stock Exchange. Out of the above, 1,538,638 GDS outstanding (representing 769,319 equity shares) as of 31 March 2014 have no voting rights.

Reserves and surplus

Notes:

1) Taken over on amalgamation of Shaw Wallace Distilleries Limited with the Company during the year ended 31 March 2006 as per the terms of the arrangement approved by the Honorable High Courts of Karnataka and Mumbai.

2) Taken over on amalgamation of McDowell & Co. Limited with the Company during the year ended 31 March 2001 as per the terms of the arrangement approved by the Honorable High Court of Karnataka.

Long-term borrowings

A. Nature of Security and terms of repayment for secured borrowings:

(i) Term loans from banks amounting The loan has been repaid fully to Rs. Nil (2013: Rs. 3,954.0 Million) during the year. are secured by a charge on certain fixed assets of the Company including land and building, pledge of shares held by the USL Benefit Trust and hypothecation of certain trademarks of the Company.

(ii) Term loans from banks amounting The Loan has been repaid fully to Rs.Nil (2013: Rs.4,065.656 Million) during the year. are secured by a charge on certain (Refer note 25 (b)) fixed assets of the Company including land and building, pledge of shares held by the USL Benefit Trust and hypothecation of certain trademarks of the Company.

(iii) Term loans from banks amounting Repayable in 5 annual install- to Rs. 631.274 Million (2013: Rs. ments after three years from 664.500 Million) are secured by a the date of loan (25 October charge on certain fixed assets of the 2010) along with interest of Company. base rate plus 3% (current effective rate is 12.50%)

(iv) Term loans from banks amounting The loan has been repaid fully to Rs. Nil (2013: Rs. 1500.0 Million) during the year. are secured by a charge on certain fixed assets of the Company and fixed asset of a subsidiary company.

(v) Term loans from banks amounting The loan has been repaid fully to Rs. Nil (2013: Rs.2,000.0 Million) during the year. are secured by a charge on certain fixed assets of the Company and pledge of certain shares held by the Company.

(vi) Term loan from banks amounting The loan has been repaid fully to Rs. Nil (2013: Rs.937.500 Million) during the year. are secured by a charge on certain fixed assets of the Company.

(vii) Term loan from banks amounting Repayable in 16 equal quarterly to Rs. 412.500 Million (2013: Rs.Nil) installments, starting 15 months are secured by a charge on certain from the date of first disburse- fixed assets of the Company and ment (3 May 2013) along with pledge of shares held by UB interest base rate plus 2.5% Group entities. (current effective rate is 13.25 %).

(viii)Term loan from banks amounting Repayable end of 3rd year from to Rs.5,000.0 Million (2013: Rs. Nil) the date of first disburse- are secured by a charge on certain ment (3 March 2014) along with fixed assets of the Company. interest of 10.85 %.

(ix) Term loan from banks amounting Repayable in 16 equal quarterly to Rs. 1,145.631 Million (2013: installments, starting 15 months Rs.1,145.631 Million) are secured from the date of first disburse- by a charge on certain fixed assets ment (22 March 2013) along with of the Company and pledge of shares interest base rate plus 3.85% held by UB Group entities. (current effective rate of 14.1%). (x) Term loans from other (financial The loan has been repaid fully institution) amounting to Rs. Nil during the year. (2013: Rs. 500.0 Million) are secured by a charge on certain fixed assets of the Company.

b. Terms of repayment for unsecured borrowings

Borrowings Terms of repayment

i. Long term loan from banks:

(a) amounting to Rs. NIL (2013: The loan has been repaid fully Rs.375.0 Mil-lion) are guaranteed during the year. by a director of the Company.

(b) amounting to Rs.85.555 Million Repayable in 36 equal monthly (2013: Rs.342.223 Million) installments with a moratorium of 1 year from the date of loan (27 August 2010) along with interest base plus 4.75% (current effective rate is 16%).

ii. Fixed Deposits Repayable within 1- 3 years from the date of issue and not on demand or notice except at the discretion of the Company. Rate of interest is 11-11.5%.

iii. Inter-corporate deposits

(a) amounting to Rs.6.522 Million These represent an obligation (2013: Rs.22.174 Million) acquired on amalgamation of erstwhile Shaw Wallace & Company Limited (SWCL) with the Company in an earlier year. Pursuant to the Order of Honorable High court of Calcutta on 5 June 2012, has been directed the Company to pay in monthly installments over the period of two years.

(b) amounting to Rs. Nil (2013: The loan has been repaid fully Rs. 200.0 Million) during the year.

(c) amounting to Rs. Nil (2013: The loan has been repaid fully Rs. 250.0 Million) during the year.

iv. from others Rs.256.718 Million Repayable fully on 25 October 2014 (2013: Rs.Nil) along with interest of 12.40%.

v. from related party Rs.4,624.338 Repayable after expiry of three Million (2013: Rs. Nil) years from the date of disbursment along with interest of 13%.

Short-term borrowings

Nature of security Terms of repayment

(i) Working capital loans are The average rate of interest is secured by hypothecation of 12.40%. inventories, book debts and other current assets.

(ii) Short-term loan from bank The loan has been repaid fully amounting to Rs. Nil (2013: during the year. Rs. 1,500.0 Million) are secured by a charge on certain fixed assets of the Company and pledge of shares held by the UB Group Entities.

(iii) Short-term loan from bank Repayable in 6 months from the date amounting to Rs. 2,400.0 Million of rollover (21 November 2013) along (2013: Rs. 2,400.0 Million) are with interest of 11.75%. secured by a pledge of certain shares held by the Company and UB Group entities.

Trade payables

* Includes bills drawn against inland letters of credit of Rs. 2,301.99 Million (2013: Rs. 2,686.569 Million) and secured by a charge on debtors, inventories and other current assets.

** The year end foreign currency exposures that have not been hedged Rs. 65.887 Million (USD 1.094 Million) [(2013: Rs. 23.569 Million (USD:0.437 Million )] and Rs. 49.246 Million (GBP: 0.495 Million) [(2013: Rs. 2.953 Million (GBP: 0.037 Million)]

Notes:

1. Buildings include an amount of Rs. 357.014 Million (2013: Rs. 357.014 Million) which is yet to be registered in the name of the Company.

2. Cost of buildings includes the following payments made for the purpose of acquiring the right of occupation of Mumbai godown space:

i) 660 equity shares (unquoted) of Rs. 100 each fully paid in Shree Madhu Industrial Estate Limited Rs. 0.066 Million (2013: Rs. 0.066 Million). Application has been made for duplicate share certificates and the same is in the process.

ii) 199, 6 % Debentures (unquoted) of Rs.1,000 each fully paid in Shree Madhu Industrial Estate Limited Rs.0.199 Million (2013: Rs. 0.199 Million). Application has been made for duplicate debentures certificates and the same is in the process.

iii) Deposit with Shree Madhu Industrial Estate Limited Rs.0.132 Million (2013: Rs. 0.132 Million)

3. Cost of buildings include value of fully paid shares Rs.0.006 Million (2013: Rs. 0.006 Million) held in Co-operative Housing Societies.

Note:

1. Investments in Unit Trust of India represent those made under Rule 3A of the Companies (Acceptance of Deposit) Rules,1975.

2. Market quotations are not available.

3. The carrying cost of certain investments amounting to Rs. 1,740.815 Million (2013: Rs. 8,162.555 Million), substantially exceeds the year end net worth and the market value of shares held by the Company directly (includes indirectly through its subsidiaries for the previous year). The management of the Company believes that this reflects intrinsic value far in excess of the carrying cost of investments and that such shortfall in net worth /decline in market value of such shares is purely temporary in nature and, hence no provision is considered necessary for the same.

4. On 11 July 2013 pursuant to the open offer made to the public shareholders of Pioneer Distilleries Limited in terms of Regulations 3(1), 4 and 5(1) of the Regulations of SEBI (Substantial Acquisition of Shares and Takeovers) 2011 by Relay B.V. together with Diageo plc. and the Company as persons acting in concert, 639,185 equity shares were acquired during the year.

5. The Company has pledged the shares held in Pioneer Distilleries Limited (partly), Sovereign Distilleries Limited and United Breweries Limited with banks for the term loan availed.

Long term loans and advances

(a) The above amounts include:

(i) Rs.52,333.490 Million (2013: Rs. 48,833.202 Million) given as interest free loans to subsidiaries.

(ii) due from company secretary Rs. 3.041 Million (2013: Rs. 2.579 Million). Maximum amount outstanding at any time during the year Rs. 3.041 Million (2013: Rs. 2.579 Million).

(iii) due from the directors of the company Rs. 15.055 Million (2013: Rs. 7.250 Million). Maximum amount outstanding at any time during the year Rs. 15.055 Million (2013: Rs. 7.250 Million)

(iv) Rs. 2,581.250 Million (2013: Rs. Nil) paid under trade mark licence agreement.

(v) amount deposited Rs. 350.0 Million (2013: Rs. Nil) in Civil Court, Panjim to establish the proprietary interest it has on the property.

(b) The Company has, granted interest free loans in foreign currency amounting to Rs. 47,928.849 Million (2013: Rs. 41,340.698 Million), to USL Holdings Limited, BVI (USL Holdings) a subsidiary of the Company, for acquisition of long term strategic investments. Management is of the view that out of these loans, Rs. 45,060.887 Million (2013: Rs. 40,417.206 Million), from the inception of the grant of loans, in substance, form part of the Company''s net investment in the subsidiary, as the settlement of these loans is neither planned nor likely to occur in the foreseeable future and management intends to convert these loans into investment in share capital of the subsidiary in near future. Accordingly, in line with AS 11 - The effects of changes in foreign exchange rates (AS 11), exchange difference aggregating to Rs. 9,378.534 Million [2013: Rs. 4,734.854 Million (Credit)] such loans has been accumulated in a foreign currency translation reserve, which at the time of the disposal of the net investment in these subsidiaries would be recognised as income or as expenses. During the current year the company has made a provision of Rs. 36,142.32 Million (2013: Rs. NIL) against the loan after adjusting the amount estimated to be recovered and the accumulated balance in the foreign currency translation reserve.(Refer note no 27(b)).

(c) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are as under :

(i) loans and advances to subsidiaries Rs. 44,206.621 Million (USD 737.890 Million), Rs. 3,893.969 Million (GBP 39.100 Million), Rs. 2,365.550 Million (Euro 28.750 Million) (2013: Rs. 40,215.037 Million (USD 740.890 Million), Rs. 1,322.937 Million (GBP 16.100 Million), Rs. 1,996.688 Million (Euro 28.750 Million).

(ii) Capital advances Rs. 16.433 Million (USD 0.257 Million) (2013: Nil) and Rs.0.095 Million ( Euro: 0.001 Million)

* The Company''s shares held by USL Benefit Trust was pledged in favor of Unit Trust of India Investment Advisory Services Limited, a Security Trustee for Punjab National Bank (PNB) and IDBI Bank Limited (IDBI) for the term loan availed by Company from PNB and IDBI. The loan has been repaid and PNB has issued "No Objection Letter", how- ever IDBI is yet to release the Company''s shares. Writ Petition has been filed by the Company and the same is pending before Honorable High Court of Karnataka.(Also refer note 25(b)).

Defined contribution plans

The Company offers its employees defined contribution plans in the form of Provident fund (PF) and employees'' Pension scheme (EPS) with the Government, Superannuation Fund (SF) and certain state plans such as Employees'' State Insurance (ESI). PF and EPS cover substantially all regular employees while the SF covers certain executives and the ESI covers certain workers. Contribution to SF is made to United Breweries Staff Super Annuation Fund, however, the company is in the process of creating its own Trust. Other contributions are made to the Government''s funds. While both the employees and the Company pay predetermined contributions into the Provident fund and the ESI Scheme, contributions into the pension fund and the superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee''s salary.

During the year, the Company has taken group term policy from a insurance company to cover the death benefit of certain category of employees. On the death of employee, a specific amount will be paid by the insurance company to the nominee of the deceased employee as per the grade.

(b) Defined benefit plans Gratuity:

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employee''s last drawn salary and years of employment with the Company. The Company has employees'' gratuity funds managed by the Company as well as by Insurance Companies.

Provident fund:

For certain executives and workers of the Company, contributions are made as per applicable Indian laws towards Provident Fund to certain Trusts set up and managed by the Company, where the Company''s obligation is to provide the agreed benefit to the employees and the actuarial risk and investment risk fall, in substance, on the Company. Having regard to the assets of the Fund and the return on the investments, shortfall in the assured rate of interest notified by the Government, which the Company is obliged to make good is determined actuarially.

Others (funded)

Notes:

1. The estimates of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

2. As per the best estimate of the management, contribution of Rs. 523.710 Million is expected to be paid to the plans during the year ending 31 March 2015.

Leases a) Finance lease

The Company has acquired computer equipment and cars on finance leases. The lease agreement is for a primary period of 36 to 48 months for computer equipment and 36 months to 60 months for cars. The company has an option to renew these leases for a secondary period.

b) Operating lease

The Company''s significant leasing arrangements in respect of operating leases for premises (residential, office, stores, godown, manufacturing facilities etc.) and plant and machineries, which includes both cancellable and non cancellable leases and range between 11 months and 3 years generally (or longer in certain cases) and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as rent under note 18 to the accounts.

Segment reporting

The Company is engaged in the business of manufacture, purchase and sale of beverage alcohol (spirits and wines) including through tie-up manufacturing units/ brand franchise, which constitutes a single business segment. The Company is primarily organised into two main geographic segments namely India and outside India. However, the Company''s operations outside India did not exceed the quantitative threshold for disclosure envisaged in AS-17 on "Segment Reporting" notified under the Companies (Accounting Standard) Rules 2006. In view of the above, both primary and secondary reporting disclosures for business / geographical segment as envisaged in AS-17 are not applicable to the Company.

Related party disclosures

(a) Names of related parties and description of relationship Enterprise where there is control

(i) Subsidiary companies:

1) United Spirits Nepal Private Limited (USNPL), 2) Asian Opportunities & Investments Limited (AOIL), 3) Bouvet -Ladubay S.A.S (BL), 4) Chapin Landais S.A.S (CL)A, 5) Palmer Investment Group Limited(PIG), 6) Montrose International SA (MI), 7) UB Sports Management Overseas Ltd (Formerly known as " JIHL Nominees Limited")(UBS MOL)a 8)Shaw Wallace Overseas Limited (SWOL)a, 9) McDowell & Co. (Scotland) Limited (MSL), 10) USL Holdings Limited (USLHL), 11) Royal Challengers Sports Private Limited (RCSPL), 12) USL Holdings (UK) Limited, 13) United Spirits (UK) Limited, 14) United Spirits (Great Britain) Limited, 15) SW Finance Co. Limited (SWFCL)aa, 16) Four Seasons Wines Limited (FSWL), 17) Liquidity Inc., 18) Whyte and Mackay Group Limited, 19) Whyte and Mackay Holdings Ltd, 20) Whyte and Mackay Limited (W&M), 21) Whyte and Mackay Warehousing Limited, 22) Bruce & Company (Leith) Limited, 23) Charles Mackinlay & Company Limited, 24) Dalmore Distillers Limited, 25) Dalmore Whyte & Mackay Limited, 26) Edinburgh Scotch Whisky Company Limited, 27) Ewen & Company Limited, 28) Fettercairn Distillery Limited, 29) Findlater Scotch Whisky Limited, 30) Glayva Liqueur Limited, 31) Glentalla Limited, 32) gps Realisations Limited, 33) Grey Rogers & Company Limited, 34) Hay & MacLeod Limited, 35) Invergordon Distillers (Holdings) Limited, 36) Invergordon Distillers Group Limited, 37) Invergordon Distillers Limited, 38) Invergordon Gin Limited, 39) Isle of Jura Distillery Company Limited, 40) Jarvis Halliday & Company Limited, 41) John E McPherson & Sons Limited, 42) Kensington Distillers Limited, 43) Kyndal Spirits Limited, 44) Leith Distillers Limited, 45) Loch Glass Distilling Company Limited, 46) Longman Distillers Limited, 47) Lycidas (437) Limited, 48) Pentland Bonding Company Limited, 49) Ronald Morrison & Company Limited, 50) st The Sheep Dip Whisky Company Limited, 51) Vincent Street (437) Limited, 52) Tamnavulin-Glenlivet Distillery Company Limited, 53) tdl Realisations Limited, 54) w & S Strong Limited, 55) Watson & Middleton Limited, 56) Wauchope Moodie & Company Limited, 57) Whyte & Mackay Distillers Limited, 58) William Muir Limited, 59) WMB Realisations Limited, 60) Whyte and Mackay Property Limited, 61) Whyte and Mackay de Venezuela CA, 62) KI Trustees Limited, 63) United Spirits (Shanghai) Trading Company Limited 64) Tern Distilleries Private Limited (Tern) 65) Sovereign Distilleries Limited 66) Pioneer Distilleries Limited. 67) Whyte and Mackay Americas Limited 68) Whyte and Mackay Singapore Pte Limited

ii) USL Benefit Trust

No transactions during the year.

** Shaw Wallace Breweries Limited renamed as " SW Finance Co. Limited" W.E.F. 16 January 2013 Associates:

Wine Soc. of India Private Limited

Entities having significant influence over the Company:

i) Diageo Plc. (holding company of Relay B.V.) (with effect from 4 July 2013)

ii) Relav B.V. (with effect from 4 July 2013)

iii) Diageo Scotland Limited (subsidiary of Diageo plc.) (with effect from 4 July 2013)

iv) Diageo India Private Limited (subsidiary of Diageo plc.) (with effect from 4 July 2013)

v) United Breweries (Holdings) Limited (effective upto 3 July 2013)

vi) Kingfisher Finvest India Limited (effective upto 3 July 2013)

Key Management Personnel:

i) Mr Ashok Capoor - Managing Director (effective upto 30 April 2014)

ii) Mr P A Murali - Executive Director and CFO

Employees'' benefit plans where there is significant influence:

Mc Dowell & Company Limited Staff Gratuity Fund (McD SGF), McDowell & Company Limited Officers'' Gratuity Fund (McD OGF), Phipson & Company Limited Management Staff Gratuity Fund. (PCL SGF), Phipson & Company Limited Gratuity Fund. (PCL GF), Carew & Company Ltd. Gratuity Fund (CCL GF), McDowell & Company Limited Provident Fund (McD PF), Shaw Wallace & Associated Companies Employees Gratuity Fund (SWCEGF), Shaw Wallace & Associated Companies Executive Staff Fund (SWCSGF), Shaw Wallace & Associated Companies Provident Fund (SWCPF), Balaji Distilleries Employees Gratuity Trust.

* Bank facility

The credit facilities sanctioned by one of the Company''s bankers include a special covenant that needs to be complied by 30 September 2014. On the due date, if the condition remains unsatisfied, the credit facilities will be withdrawn. The fund-based and non fund-based working capital limits available from this bank are Rs. 3,250 Million and Rs. 500 Million respectively. There are ongoing discussions with the bank to address the issue. In any event, the Management believes that the Company is in a position to meet its funding requirement.

* Prepayment of credit facility

During the year ended 31 March 2014, the Company decided to prepay credit facilities availed in the earlier years from a bank amounting to Rs. 6,216.6 Million, secured by assets of the Company and pledge of shares of the Compa- ny held by the USL Benefit Trust. The Company deposited a sum of Rs. 6,280.0 Million including prepayment penalty of Rs. 40 Million with the bank and instructed the bank to debit the amount from the cash credit account towards settlement of the loan and release the assets / shares pledged by the Company. The bank, however, disputed the pre- payment and continues to debit the account towards the installments and interest as per the loan agreement. The Company has disputed the same and a petition is pending before the Honourable High Court of Karnataka. Pending resolution of such dispute with the bank, the loan amount and balance available in cash credit account is presented on net basis in the financial statements as at 31 March 2014. The interest amounting to Rs. 276.03 Million debited by the bank has been disclosed as Contingent Liability under the Miscellaneous claims not acknowledged as debts.

* Subsequent to the balance sheet date, a bank has declared one of the directors of the Company as a willful defaulter in respect of another company where he is a promoter director. The Reserve Bank of India''s Master Circular on Willful Defaulters along with certain covenants in the loan agreements sanctioned by the Company''s bankers raise an uncertainty on the impact of this development on the availability of credit facilities to the Company. The said director has assured the Board that he will take appropriate steps to ensure that the operations of the Company are not impacted. Having received such assurance from the said director and appropriate comfort from the controlling shareholder of the Company, the financial statements have been prepared on a going concern basis.

Provision for doubtful receivable, advances and deposits

(a) 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 have advanced certain amounts to certain alleged UB Group entities, and that the dues owed by such parties to the Company will, 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 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 (TMUs); agreements for specific projects; or dues owing to the Company from customers. These dues were duly confirmed by such parties as payable to the Company in such earlier years. However, such parties have now disputed such amounts as mentioned above. Details are as below:

In response to these claims, under the instruction of the Board, a preliminary internal inquiry was initiated by the Management. The results of this inquiry were as follows:

(i) One party (which falls under (a) above), who owes certain amounts to the Company, has disputed an amount of Rs. 2,240.7 Million (including interest claimed by it as due from an alleged UB Group entity), alleging that it had advanced monies to such alleged UB Group entity based on an understanding that, to the extent of the amounts owed to it from such alleged UB Group entity in respect of such advance, it could withhold from the amounts payable by it to the Company, and such party has said that it would not pay its dues to the Company to the extent of the amounts claimed by it from such alleged UB Group entity as mentioned above, unless it received repayment of the amount advanced by it to such alleged UB Group entity along with interest.

(ii) Certain parties (which fall under [(a) and (b)] above), who owe certain amounts to the Company, have disputed an aggregate amount of Rs. 984.5 Million (including interest claimed by them as due from certain alleged UB Group entities), alleging that they had advanced monies to such alleged UB Group entities and that, to the extent of such dues from such alleged UB Group entities, they would not repay the amounts owed by them to the Company unless they received repayment of the amounts advanced by them to such alleged UB Group entities.

(iii) Certain other parties (which fall under [(b) and (c)] above) changed their original stand and acknowledged that their dues from the alleged UB Group entities were based on transactions that were independent of their dealings with the Company. These parties have subsequently provided appropriate confirmations of the relevant balances due from them to the Company. The related balances are Rs. 2,681.8 Million.

(iv) In addition to the above, there is an additional party, being a TMU, whose allegations are on a similar basis to those of the parties mentioned at (iii) above and who has subsequently provided an appropriate confirmation of the balance due from it to the Company. However, this party''s undertaking has closed down and the related balance of Rs. 648.5 Million (including interest) has been provided in the current year.

(v) The claims made in relation to the advances to the parties (including the additional party) mentioned above 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 alleged UB Group entities. The aforesaid, however can only be confirmed by a detailed inquiry which has been authorized by the Board as mentioned below.

(vi) The Company is proposing to more fully inquire into the allegations or claims by the parties in detail and does not acknowledge the correctness of the same. In any event, the Management does not believe that the parties referred to above are entitled to withhold payment / repayment to the Company as claimed by them. The Management further believes that the Company is entitled to recover all the above amounts, including those disputed by certain parties as mentioned in notes (i) and (ii) above, as and when due from these parties. However, the Management has also examined the financial capability of some of these parties, based on which the Management has concluded that the ability of these parties to pay, and consequently the recoverability of, the relevant amounts is doubtful. After considering the above and other considerations and though the above claims were received only when the Company sought balance confirmations from the relevant parties for the year ended 31 March 2014, as a matter of prudence, a provision has been made in the accounts in respect of the dues from these parties (including interest claimed up to the various dates of the balance confirmations from these parties) as detailed below, and as these transactions relate to the period prior to 1 April 2013 they have been reflected as prior period items in the financial statements:

Based on the current knowledge of the Management, the Management believes that the aforesaid provision is adequate and no additional material adjustments are likely to be required in relation to this matter.

As mentioned in Note 26(c), 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.

Pending completion of the inquiry mentioned in note 26(c), the Company is unable to determine whether, on completion of the inquiry, there could be any impact on these financial statements; and these financial statements should be read and construed accordingly.

26(b) Certain pre-existing loans / deposits / advances due to the Company and its wholly-owned subsidiaries from United Breweries (Holdings) Limited (UBHL) which were in existence as on 31 March 2013, had been taken into consideration in the consolidated annual accounts of the Company drawn up as of that date. Pursuant to a previous resolution passed by the board of directors of the Company on 11 October 2012, such 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. Further, the amounts owed by UBHL to wholly-owned subsidiaries have been assigned by such subsidiaries to the Company and are recorded as loan from such subsidiaries in the books of the Company. The merger of one of such subsidiaries with the Company is currently under process. The interest rate under the above mentioned loan agreement dated 3 July 2013 is at 9.5% p.a. to be paid at six months intervals starting at the end of 18 months from the effective date of the loan agreement. The loan has been granted for a period of 8 years and is payable in three annual installments commencing from the end of 6th anniversary of the effective date of the loan agreement.

Certain lenders have filed petitions for winding up against UBHL. UBHL has provided guarantees to lenders and other vendors of Kingfisher Airlines Limited (KFA), a UB Group entity. Most of these guarantees have been invoked and are being challenged in Courts. The Company has also filed its affidavit opposing the aforesaid winding up petitions and the matter is sub-judice.

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 abovementioned 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. 963.069 million and has provided Rs. 3,303.186 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. 9,956.806 million, though the Company will attempt to recover the entire amount of Rs. 14,223.061 million. However, the Management will continue to assess the recoverability of the said loan on an ongoing basis.

* The Board has directed a detailed and expeditious inquiry in relation to the matters stated in Notes 26(a), 26(b) and 30(f), 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 in relation to such transactions. The Board has directed the Managing Director ("MD") to engage independent advisers and specialists as required for 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 that inquiry. On the basis of the 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 this note. However, pending completion of the detailed inquiry mentioned above, the Company is unable to determine the impact on the financial statements (if any), on completion of such detailed inquiry, and these financial results should be read and construed accordingly.

* During the year, on 8 November 2013, the Board of Directors have approved the scheme of arrangement between United Spirits Limited and Enrica Enterprises Private Limited (''Enrica'') and its shareholders and creditors as the case may be (''the Scheme'') in respect of transfer of undertaking of the Company in Tamil Nadu by way of slump sale on a going concern basis under Section 391 read with Section 394 of the Companies Act, 1956 with Appointed Date of 1 April 2013. The Scheme has been approved by the Equity Shareholders, Secured Creditors and Unsecured Creditors at their Court convened meeting held on 16 June 2014. The relevant Petition have been filed before the respective jurisdictional High Courts by the Company and Enrica and awaiting for their approval.

The Company has also entered into a Franchise Agreement with Enrica which prescribes a royalty payment to the Company for grant of manufacturing, marketing, distribution and sale rights to Enrica in defined territories. From the Appointed Date up to the Effective Date, the royalty payable shall be a fixed amount per case or the Franchisee''s profit (before tax and royalty) in respect of the franchised products, whichever is lower. Subsequent to the Effective Date royalty at net sales realization linked slab rate will accrue to the Company as per the Franchise Agreement.

Subsequent to the Balance Sheet date, as per the explanatory statement dated 9 May 2014 sent to the members,

(i) Further to Diageo plc''s undertakings offered to UK''s Office of Fair Trade (now called Competition and Markets Au- thority, UK), in January 2014, the Company''s Board of Directors decided to initiate a process based on the outlined time-table provided in connection with the decision of the OFT to explore a potential sale of all or part of Whyte and Mackay. As a culmination of this process, subsequent to the year end, on 9 May 2014 the Company''s wholly owned subsidiary, United Spirits (Great Britain) Limited (seller or USGBL) entered into a Share Sale and Purchase agreement (SPA) with Emperador UK Limited and Emperador Inc. in relation to the sale of the entire issued share capital of Whyte and Mackay Group Limited (WMG) for an Enterprise Value of £430 Million (calculated with a normalized level of work- ing capital) from which deduction has been made for the payment of a warranty and indemnity insurance premium of £0.85 Million agreed between the seller and the purchaser. The Company has also obtained an opinion from a leading merchant banker and considers that the Enterprise Value is fair from a financial point of view of the Company.

(ii) The aggregate consideration for the sale of share capital of WMG payable to USGBL is approximately £429.15 Million ("Aggregate Consideration"), which is subject to adjustments following completion of the sale pursuant to the terms of the SPA ("Completion") reflecting : (a) movements in net working capital (above or below a pre-agreed threshold), net indebtedness and cash of the WMG between signing and Completion; and (b) an agreed sum of £ 19.2 Million in relation to the defined pension scheme deficit, net of pensions contributions for the period commencing 1 April 2014 ("Completion Accounts"). Further, the seller has given warranties and indemnities which are customary for a transac- tion of this nature and these are not currently expected to have any financial implication and will be reassessed at each reporting date.

(iii) The financial closure of the proposed transaction as contemplated by the terms of the SPA (as may be amended and modified from time to time), is subject to satisfaction of certain conditions precedent.

(iv) The equity shareholders of the Company have approved the proposed sale of WMG by USGBL. The Company has filed an application with Reserve Bank of India (through authorized dealer of the Company) for approval. Further to the signing of the SPA, the following provisions have been recorded as an exceptional item.

Scheme of amalgamations

During the current year, the Board of Directors at their meeting held on 8 January 2014, have approved the amalgamation of:

i) Tern Distilleries Private Limited, a wholly owned subsidiary of the Company (TERN) with the Company pursuant to a Draft Rehabilitation Scheme and applicable provisions of Sick Industrial Companies (Special Provisions) Act, 1985 with the appointed date 1 April 2013 (TERN Scheme). The entire operations of TERN comprise transactions with the Company. The net impact on the financial statements of the Company from such amalgamation is expected to be insignificant when effected. The equity shareholders of the Company have approved the TERN Scheme at their Extraordinary General Meeting held on 18 March 2014 and the approval by the Board For Industrial and Financial Reconstruction (BIFR) is in progress. Pending approval of the TERN Scheme, no effect has been given in the financial statement. A summary of statement of profit and loss and the statement of assets and liabilities of TERN for the year ended 31 March 2014 is as below:

ii) SW Finance Co. Limited (SWFCL), a wholly owned subsidiary of the Company with the Company with the appointed date 1 January 2014 (SWFCL Scheme) pursuant to the applicable provisions of the Companies Act, 1956, and sub- ject to the sanction of the Hon''ble jurisdictional High Courts/any such competent authority. The accounting for the above amalgamation shall be done upon receiving the necessary sanctions / approval from various regulatory au- thorities including the Registrar of Companies. Upon the SWFCL Scheme becoming effective, the SWFCL will stand merged with the Company. Pending approval of the SWFCL Scheme, no effect has been given in the financial state- ment. The operations of SWFCL are predominetly with the Company. The net impact on the financial statements of the Company from such operations is expected to be immaterial when effected. A summary of statement of profit and loss and the statement of assets and liabilities of SWFCL for the year ending 31 March 2014 is as below:

Capital and other commitments

a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advanc- es) Rs. 284.990 Million (2013: Rs. 403.793 Million).

(b) Other commitments relating to advertisement, sales promotion and trade mark fee Rs. 8,393.593 Million (2013: Rs. 1383.516 Million).

(c) The Company has also given letter of support to Sovereign Distilleries Limited and Pioneer Distilleries Limited to conduct their operations in such a manner as to enable to meet its obligations.

Contingent liabilities

Rs. Million As at As at 31-March-2014 31-March-2013

(a) (i) Guarantee given on behalf of other bodies corporate 2,179.275 43,192.010

(ii) Guarantees given by the Company''s bankers for which counter guarantees have been given by the Company. 259.344 305.063

(b) Disputed claims against the Company not acknowledged as debts, currently under appeal / sub judice:

(i) State Excise demands for excess wastages and distillation losses 221.536 268.408

(ii) Central Excise demands under appeal 6.534 32.650

(iii) Service tax demands under appeal 233.384 693.725

(iv) Other miscellaneous claims [Refer note 25(b)] 744.376 231.941

(v) Income tax demand (including interest) under appeal 2,361.363 668.546

(vi) Sales tax demands under appeal in various states 547.373 792.075

(c) Bills receivables discounted 426.307 897.126

(d) Co-accepted bills of Tie-up units 349.832 509.757

(e) Claims from suppliers not acknowledged as debts 96.010 83.257

The Management is hopeful of succeeding in the above appeals / disputes based on legal opinions / legal precedents.

(f) 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 it had given loans amounting to Rs.2,000 Million to KFA at an interest rate of 15% p.a. purportedly on the basis of agreements executed in December 2011 and January 2012. This matter came to the knowledge of the Board for the first time only after the Management informed the Board of the letter dated 5 May 2014. The letter alleges that amongst several obligations under these purported agreements, certain investments held by the Company were subject to a lien, and requires the Company, pending the repayment of the said loan, to pledge such investments in favour of the Alleged Claimant to secure the aforesaid loans. The Company has responded to this letter received from the lawyers of the Alleged Claimant vide its letter dated 3 June 2014, wherein the Company has disputed the claim and denied having created the alleged security or having executed any document in favour of the Alleged Claimant. The Company has reiterated its stand vide a follow-up letter dated 28 July 2014 and has asked for copies of purported documents referred to in the letter dated 5 May 2014. Subsequent to the above, the Company has received a letter dated 31 July 2014 from the Alleged Claimant stating that in light of certain addendums to the aforesaid purported agreements (which had inadvertently not been informed to their lawyers) the Alleged Claimant has no claim or demand of any nature whatsoever against inter alia the Company, including any claim or demand arising out of or connected with the documents / agreements referred to their lawyer''s letter dated 5 May 2014. The Company has replied to the Alleged Claimant vide a letter dated 6 August 2014, noting the above mentioned confirmation of there being no claim or demand against the Company, and asking the Alleged Claimant to immediately provide to the Company all the alleged documents referred to in the letter dated 5 May 2014 and the addendum referred to in the letter dated 31 July 2014, and to also confirm the identity and capacity of the signatory to the letter dated 31 July 2014.

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 of the Company at the relevant time had not approved or ratified any such purported agreement. The Management has represented to the Board that till the receipt of scanned copies of the purported agreements in September 2014, the Company had no knowledge of these purported agreements. The Management, based on legal advice received, does not expect any liability or obligation to arise on the Company out of these purported agreements.

Tie-up manufacturing arrangement:

The Company has entered into arrangements with certain distilleries and bottling units (Tie-up units) for manufac- ture and marketing of its own brands. The Tie-up units have necessary license and regulatory permits to manufacture beverage alcohol. The arrangements stipulates the obligations of each party and the entire manufacturing activity is carried out under the close supervision of the Company executives. It is the responsibility of the Company to Market its products and ensure adequate finance to the tie-up units for its operations. The risk and reward of the activity lies with the Company. In the circumstances, it is considered appropriate to disclose the following information (Unaudited), as applicable to such activities.

Appointment of CEO and Managing Director

Subsequent to the balance sheet date, Board of directors of the Company at is meeting held on 14 August 2014 have appointed Mr. Anand Kripalu as the Managing Director & Chief Executive Officer of the Company, subject to the share- holders'' approval with effect from 14 August 2014.


Mar 31, 2013

1. (a) Defined Contribution Plans

The Company offers its employees defined contribution plans in the form of Provident Fund (PF) and Employees'' Pension Scheme (EPS) with the government, Superannuation Fund (SF) and certain state plans such as Employees'' State Insurance (ESI). PF and EPS cover substantially all regular employees while the SF covers certain executives and the ESI covers certain workers. Contribution to SF is made to trust managed by the Company, while other contributions are made to the Government''s funds. While both the employees and the Company pay predetermined contributions into the provident fund and the ESI Scheme, contributions into the pension fund and the superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee''s salary.

(b) Defined Benefit Plans Gratuity:

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employee''s last drawn salary and years of employment with the Company. The Company has employees'' gratuity funds managed by the Company as well as by Insurance Companies.

Provident Fund:

For certain executives and workers of the Company, contributions are made as per applicable Indian laws towards Provident Fund to certain Trusts set up and managed by the Company, where the Company''s obligation is to provide the agreed benefit to the employees and the actuarial risk and investment risk fall, in substance, on the Company. Having regard to the assets of the Fund and the return on the investments, shortfall in the assured rate of interest notified by the Government, which the Company is obliged to make good is determined actuarially.

Death Benefit:

The Company provides for Death Benefit, a defined benefit plan (the Death Benefit Plan), to certain categories of employees. The Death Benefit Plan provides a lump sum payment to vested employees, on death, of an amount based on the respective employee''s last drawn salary and remaining years of employment with the Company after adjustments for any compensation received from the insurance company and restricted to limits set forth in the said plan. The Death Benefit Plan is Non-Funded.

2. Leases

a) Finance Lease

The Company has acquired computer equipment and cars on finance leases. The lease agreement is for a primary period of 36 to 48 months for computer equipment and 36 months to 60 months for cars. The Company has an option to renew these leases for a secondary period.

b) Operating Lease

The Company''s significant leasing arrangements in respect of operating leases for premises (residential, office, stores, godown, manufacturing facilities etc) and plant and machineries, which includes both cancellable and non cancellable leases and range between 11 months and 3 years generally (or longer in certain cases) and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as Rent under Note 18 to the accounts.

Leasing arrangements entered into prior to April 1, 2001 have not been considered for treatment under AS 19 ''Accounting for Leases''.

3. Segment Reporting

The Company is engaged in the business of manufacture, purchase and sale of Beverage Alcohol (Spirits and Wines) including through Tie-up Manufacturing units/ brand franchise,which constitutes a single business segment. The Company is primarily organised into two main geographic segments namely India and Outside India. However, the Company''s operations outside India did not exceed the quantitative threshold for disclosure envisaged in AS-17 on "Segment Reporting" notified under the Companies (Accounting Standard) Rules 2006. In view of the above, both primary and secondary reporting disclosures for business/geographical segment as envisaged in AS-17 are not applicable to the Company.

4 Related Party Disclosures

(a) Names of related parties and description of relationship Enterprise where there is control

(i) Subsidiary Companies:

1) United Spirits Nepal Private Limited (USNPL), 2) Asian Opportunities & Investment Limited (AOIL), 3) Bouvet -Ladubay S.A.S (BL), 4) Chapin Landais S.A.S (CL)A, 5) Palmer Investment Group Limited(PIG)A, 6) Montrose International SA (MI)a, 7) UB Sports Management Overseas Limited (UBSMOL) [Formerly known as JIHL Nominees Limited (JIHL)]a, 8) RG Shaw & Company Limited (RGSC)aaa, 9) Shaw Darby & Company Limited (SDC)aaa, 10) Shaw Scott & Company Ltd (SSC)aaa, 11) Thames Rice Milling Company Limited (TRMCL)aaa, 12) Shaw Wallace Overseas Limited (SWOL)a, 13) McDowell (Scotland) Limited (MSL), 14) USL Holdings Limited (USLHL), 15) Royal Challengers Sports Private Limited (RCSPL), 16) USL Holdings (UK) Limited, 17) United Spirits (UK) LimitedA, 18) United Spirits (Great Britain) LimitedA, 19) SW Finance Co. Limited (SWFCL)aa, 20) Ramanreti Investment & Trading Limited (RITL)aaa, 21) Daffodils Fragrance and Flavours Private Limited (DFFPL)aaa, 22) Four Seasons Wines Limited (FSWL), 23) United Vintners Limited (UVL)aaa, 24) United Alcobev Limited (UAL)aaa , 25) McDowell Beverages Limited (MBL)aaa, 26) McDowell & Company LimitedAAA, 27) Jasmine Flavours and Fragrances LimitedAAA, 28) Liquidity Inc, 29) Whyte and Mackay Group LimitedA, 30) Whyte and Mackay Holdings LtdA, 31) Whyte and Mackay Limited (W&M), 32) Whyte and Mackay Warehousing LimitedA, 33) Bruce & Company (Leith) LimitedA, 34) Charles Mackinlay & Company LimitedA, 35) Dalmore Distillers LimitedA, 36) Dalmore Whyte & Mackay LimitedA, 37) Edinburgh Scotch Whisky Company LimitedA, 38) Ewen & Company LimitedA, 39) Fettercairn Distillery LimitedA, 40) Findlater Scotch Whisky LimitedA, 41) Glayva Liqueur LimitedA, 42) Glentalla LimitedA, 43) gps Realisations LimitedA, 44) Grey Rogers & Company LimitedA, 45) Hay & MacLeod LimitedA, 46) Invergordon Distillers (Holdings) LimitedA, 47) Invergordon Distillers Group LimitedA, 48) Invergordon Distillers LimitedA, 49) Invergordon Gin LimitedA, 50) Isle of Jura Distillery Company LimitedA, 51) Jarvis Halliday & Company LimitedA, 52) John E McPherson & Sons LimitedA, 53) Kensington Distillers LimitedA, 54) Kyndal Spirits LimitedA, 55) Leith Distillers LimitedA, 56) Loch Glass Distilling Company LimitedA, 57) Longman Distillers LimitedA, 58) Lycidas (437) LimitedA, 59) Pentland Bonding Company LimitedA, 60) Ronald Morrison & Company LimitedA, 61) st The Sheep Dip Whisky Company LimitedA, 62) Vincent Street (437) LimitedA, 63) Tamnavulin-Glenlivet Distillery Company LimitedA, 64) TdL Realisations LimitedA, 65) w & S Strong LimitedA, 66) Watson & Middleton LimitedA, 67) Wauchope Moodie & Company LimitedA, 68) Whyte & Mackay Distillers LimitedA, 69) William Muir LimitedA, 70) WMB Realisations LimitedA, 71) Whyte and Mackay Property LimitedA, 72) Whyte and Mackay de Venezuela CAa, 73) KI Trustees LimitedA, 74) usl Shanghai Trading Company LimitedA 75) Tern Distillery Private Limited(Tern) 76) Sovereign Distilleries Limited 77) Pioneer Distilleries Limited. 78) Whyte and Mackay Americas Limited 79) Whyte and Mackay Singapore* 80) BDL Distilleries Private Ltd.AAA

ii) USL Benefit Trust

* Became a subsidiary during the year. a No transactions during the year.

aa Shaw Wallace Breweries Limited renamed as " SW Finance Co. Limited" W.E.F. January 16, 2013 aaa Ceased to be subsidiary during the year

Associates:

Wine Soc. of India Private LimitedA

Promoter Holding together with its Subsidiary is more than 20%.

United Breweries (Holdings) Limited

a No transactions during the year.

Key Management personnel:

Mr Ashok Capoor

Employees'' Benefit Plans where there is significant influence:

Mc Dowell & Company Limited Staff Gratuity Fund (McD SGF), McDowell & Company Limited Officers'' Gratuity Fund (McD OGF), Phipson & Company Limited Management Staff Gratuity Fund. (PCL SGF), Phipson & Company Limited Gratuity Fund. (PCL GF), Carew & Company Ltd. Gratuity Fund (CCL GF), McDowell & Company Limited Provident Fund (McD PF), Shaw Wallace & Associated Companies Employees Gratuity Fund (SWCEGF), Shaw Wallace & Associated Companies Executive Staff Fund (SWCSGF), Shaw Wallace & Co. Associated Companies Provident Fund (SWCPF), Balaji Distilleries Employees Gratuity Trust.

5. During the year :

a) Palmer Investment Group Limited and UB Sports Management Overseas Limited (both wholly owned subsidiaries of the Company), USL Benefit Trust (of which the Company is a beneficiary), SWEW Benefit Company, United Breweries (Holdings) Limited and Kingfisher Finvest India Limited (both promoters of the Company) had executed to a Share Purchase Agreement, with Relay B.V. and Diageo PLC, on November 9, 2012, for the sale of 25, 226,839 equity shares constituting approximately 19.29% of the present paid up equity share capital of the Company and approximately 17.36% of the paid up equity share capital of the Company following the preferential allotment referred to in paragraph (b) below, at a price of Rs. 1,440/- per equity share.

b) Simultaneously with the execution of the Share Purchase Agreement, a Preferential Allotment Agreement between Relay B.V. the Company and Diageo PLC has been entered with, for issue of 14,532,775 equity shares of face value of Rs.10/- of the Company, each constituting 10% of the post-issue equity share capital of the Company to Relay B.V. an indirect wholly owned subsidiary of Diageo PLC on a preferential allotment basis at a price of Rs.1,440 per equity share.

c) The consummation of the transaction 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.

d) As a consequence, inter alia, of the transactions referred to in (a) and (b) above, Relay B.V., acting through JM Financial Institutional Securities Private Limited, has made an open offer which commenced on April 10, 2013 and ended on May 13, 2013, to acquire up to 37,785,214 equity shares from the public shareholders of the Company pursuant to Regulation 3(1) and 4 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. Relay B.V., has acquired 58,668 equity shares constituting 0.04% of paid up capital of the Company pursuant to the open offer.

6. The Company has directly advanced loans and provided a deposit to a group company and one of its wholly owned subsidiary has further advanced loans to this entity. The amounts recoverable from the group company and the investment and loan to said subsidiary aggregate to Rs.11,554.77 million as at March 31, 2013. The group company has assets with significant market value and has a track record of disposing off assets, if required to settle its dues. The group company has currently provided significant corporate guarantees to lenders and other vendors of its related party, of which certain corporate guarantees have been invoked and are currently being challenged at appropriate forums. The Management is reasonably confident that no material liability, if any, would eventually devolve upon the group company and based on the assets it owns and future business prospects, the Company will be able to recover the amounts stated above, as per the agreed terms and that no provision is considered necessary for these amounts as at 31 March 2013.

7. Capital and other commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.403.793 Million (2012: Rs. 341.114 Million).

(b) Other commitments relating to Advertisement and Sales Promotion Rs.1,383.516 Million (2012: Rs. 523.950 Million).

8. Contingent Liabilities

Rs. Million

2013 2012

(a) (i) Guarantee given on behalf of other bodies corporate 43,192.010 43,470.560

(ii) Guarantees given by the Company''s bankers for which Counter Guarantees have been given by the Company 305.063 456.828

(b) Disputed claims against the Company not acknowledged as debts, currently under appeal/ subjudice:

(i) Excise and Service tax demands for excess wastages and distillation losses 992.911 286.899

(ii) Other miscellaneous claims 231.941 252.063

(iii) Income Tax demand (including interest) under appeal 668.546 723.113

(iv) Sales Tax demands under appeal in various states 792.075 726.507

(c) Bills Receivables discounted - since fully settled 897.126 880.319

(d) Claims from suppliers not acknowledged as debts 83.257 87.044

The Management is hopeful of succeeding in the above appeals/ disputes based on legal opinions/ legal precedents.

9. Previous year''s figures have been regrouped / rearranged wherever necessary.


Mar 31, 2012

1. Leases

a) Finance Lease

The Company has acquired computer equipments and cars on finance leases. The lease agreements are for a primary period of 36 to 48 months for computer equipments and 36 to 60 months for cars. The Company has an option to renew these leases for a secondary period.

b) Operating Lease

The Company's significant leasing arrangements in respect of operating leases for premises (residential, office, stores, godown, manufacturing facilities etc) and plant and machineries, which includes both cancellable and non cancellable leases and range between 11 months and 3 years generally (or longer in certain cases) and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as Rent under Note 18 to the accounts.

Leasing arrangements entered into prior to April 1, 2001 have not been considered for treatment under AS 19 'Accounting for Leases'.

2. Segment Reporting

The Company is engaged in the business of manufacture, purchase and sale of Beverage Alcohol (Spirits and Wines) including through Tie-up units/ brand franchise, which constitutes a single business segment. The Company's operations outside India did not exceed the quantitative threshold for disclosure envisaged in AS 17 on 'Segment Reporting' specified in the Companies (Accounting Standard) Rules 2006. In view of the above, primary and secondary reporting disclosures for business/geographical segment as envisaged in AS-17 are not applicable to the Company.

3 Related Party Disclosures

(a) Names of related parties and description of relationship Enterprise where there is control (i) Subsidiary Companies:

1) United Spirits Nepal Private Limited (USNPL), 2) Asian Opportunities & Investment Limited (AOIL), 3) Bouvet -Ladubay S.A.S (BL)^, 4) Chapin Landais S.A.S (CL)^, 5) Palmer Investment Group Limited(PIG)^, 6) Montrose International SA (MI)^, 7) JIHL Nominees Limited (JIHL)^, 8) RG Shaw & Company Limited (RGSC)^, 9) Shaw Darby & Company Limited (SDC)^, 10) Shaw Scott & Company Ltd (SSC)^, 11) Thames Rice Milling Company Limited (TRMCL)^, 12) Shaw Wallace Overseas Limited (SWOL)^, 13) McDowell (Scotland) Limited (MSL), 14) USL Holdings Limited (USLHL), 15) Royal Challengers Sports Private Limited (RCSPL), 16) USL Holdings (UK) Limited, 17) United Spirits (UK) Limited^, 18) United Spirits (Great Britain) Limited^, 19) Shaw Wallace Breweries Limited (SWBL), 20) Ramanreti Investment & Trading Limited (RITL)^, 21) Daffodils Fragrance and Flavours Private Limited (DFFPL), 22) Four Seasons Wines Limited (FSWL), 23) United Vintners Limited (UVL), 24) United Alcobev Limited (UAL) , 25) McDowell Beverages Limited (MBL), 26) McDowell & Company Limited, 27) Jasmine Flavours and Fragrances Limited, 28) Liquidity Inc, 29) Whyte and Mackay Group Limited^, 30) Whyte and Mackay Holdings Ltd^, 31) Whyte and Mackay Limited (W&M), 32) Whyte and Mackay Warehousing Limited^, 33) Bruce & Company (Leith) Limited^, 34) Charles Mackinlay & Company Limited^, 35) Dalmore Distillers Limited^, 36) Dalmore Whyte & Mackay Limited^, 37) Edinburgh Scotch Whisky Company Limited^, 38) Ewen & Company Limited^, 39) Fettercairn Distillery Limited^, 40) Findlater Scotch Whisky Limited^, 41) Glayva Liqueur Limited^, 42) Glentalla Limited^, 43) GPS Realisations Limited^, 44) Grey Rogers & Company Limited^, 45) Hay & MacLeod Limited^, 46) Invergordon Distillers (Holdings) Limited^, 47) Invergordon Distillers Group Limited^, 48) Invergordon Distillers Limited^, 49) Invergordon Gin Limited^, 50) Isle of Jura Distillery Company Limited^, 51) Jarvis Halliday & Company Limited^, 52) John E McPherson & Sons Limited^, 53) Kensington Distillers Limited^, 54) Kyndal Spirits Limited^, 55) Leith Distillers Limited^, 56) Loch Glass Distilling Company Limited^, 57) Longman Distillers Limited^, 58) Lycidas (437) Limited^, 59) Pentland Bonding Company Limited^, 60) Ronald Morrison & Company Limited^, 61) St The Sheep Dip Whisky Company Limited^, 62) Vincent Street (437) Limited^, 63) Tamnavulin-Glenlivet Distillery Company Limited^, 64) TDL Realisations Limited^, 65) W & S Strong Limited^, 66) Watson & Middleton Limited^, 67) Wauchope Moodie & Company Limited^, 68) Whyte & Mackay Distillers Limited^, 69) William Muir Limited^, 70) WMB Realisations Limited^, 71) Whyte and Mackay Property Limited^, 72) Whyte and Mackay de Venezuela CA^, 73) KI Trustees Limited^, 74) USL Shanghai Trading Company Limited^ 75) Tern Distillery Private Limited(Tern) 76) Sovereign Distilleries Limited* 77) Pioneer Distilleries Limited*. 78) Whyte and Mackay Americas Limited*

ii) USL Benefit Trust

* Became a subsidiary during the year. ^ No transactions during the year.

Associates:

Wine Soc. of India Private Limited^

Promoter Holding together with its Subsidiary is more than 20%.

United Breweries (Holdings) Limited

^ No transactions during the year.

Key Management personnel:

a) Mr V K Rekhi - April 01, 2011 to April 18, 2011

b) Mr Ashok Capoor - May 02, 2011 onwards

Employees' Benefit Plans where there is significant influence:

Mc Dowell & Company Limited Staff Gratuity Fund (McD SGF), McDowell & Company Limited Officers' Gratuity Fund (McD OGF), Phipson & Company Limited Management Staff Gratuity Fund. (PCL SGF), Phipson & Company Limited Gratuity Fund. (PCL GF), Carew & Company Ltd. Gratuity Fund (CCL GF), McDowell & Company Limited Provident Fund (McD PF), Shaw Wallace & Associated Companies Employees Gratuity Fund (SWCEGF), Shaw Wallace & Associated Companies Executive Staff Fund (SWCSGF), Shaw Wallace & Co. Associated Companies Provident Fund (SWCPF), Balaji Distilleries Employees Gratuity Trust.

4. Capital and other commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.341.114 Million (2011: Rs.351.264 Million).

(b) Other Commitments relating to Advertisement and Sales Promotion as on March 31, 2012 - Rs.523.950 Million.

5. Contingent Liabilities

Rs Million 2012 2011

(a) (i) Guarantee given on behalf of other bodies corporate. 43,470.560 4,460.000 (ii) Guarantees given by the Company's bankers for which Counter Guarantees have been given by the Company. 456.828 217.832

(b) Disputed claims against the Company not acknowledged as debts, currently under appeal/ sub judice:

(i) Excise demands for excess wastages and distillation losses 286.899 235.001

(ii) Other miscellaneous claims 252.063 185.212

(iii) Income Tax demand (including interest) under appeal 723.113 516.221

(iv) Sales Tax demands under appeal in various states 726.507 704.693

(c) Bills Receivables discounted - since fully settled 880.319 746.215

(d) Claims from suppliers not acknowledged as debts 87.044 74.417

The Management is hopeful of succeeding in the above appeals/ disputes based on legal opinions/ legal precedents.

6. Previous Years Figures

The financial statements for the year ended March 31, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Compa- nies Act, 1956, the financial statements for the year ended March 31,2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year's classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements. Previous years financial statements were audited by another firm of Chartered Accountants.


Mar 31, 2011

1. Contingent Liabilities

Rs. Million

2011 2010

a) (i) Guarantee given on behalf of other bodies corporate (including performance guarantees) 4,460.000 -

(ii) Guarantees given by the Company's bankers for which Counter Guarantees have been given by the Company 217.832 172.335

b) Disputed claims against the Company not acknowledged as debts, currently under appeal/ sub judice:

(i) Excise demands for excess wastages and distillation losses 235.001 190.338

(ii) Other miscellaneous claims 185.212 250.475

(iii) Income Tax demand (including interest) under appeal 516.221 452.575

(iv) Sales Tax demands under appeal in various states 704.693 557.912

c) Bills Receivables discounted - since fully settled 746.215 480.150

d) Claims from suppliers not acknowledged as debts 74.417 57.511

The Management is hopeful of succeeding in the above appeals/ disputes based on legal opinions/ legal precedents.

2. A. The rehabilitation scheme inter alia containing the scheme of arrangement between Balaji Distilleries Limited

(BDL), Chennai Breweries Private Limited ('CBPL') and the Company (the Scheme) and their respective shareholders and creditors with April 01, 2009 as the appointed date has been approved by the Honourable Appellate Authority for Industrial and Financial Reconstruction (AAIFR), vide its order dated November 29, 2010. Upon necessary filing with the Registrar of Companies, the scheme has become effective on December 27, 2010 and the effect thereof have been given in these accounts. Consequently,

a) In terms of the Scheme the entire business and undertaking of BDL, as a going concern (post transfer of the brewery division undertaking to its wholly owned subsidiary CBPL) ("Balaji") stand transferred to and vested in the Company with effect from April 1, 2009 being the Merger Appointed Date.

b) In consideration of the amalgamation, the Company has issued 5,200,639 equity shares of Rs. 10/- each aggregating to Rs. 52.006 Million in the ratio of 2 (Two) fully paid up Equity shares of the face value of Rs. 10/- each of the Company for every 55 (Fifty Five) fully paid up equity shares of Rs. 10/- each held in BDL.

(I) Pursuant to the scheme, the Authorised share capital of the Company stands increased and reclassified, without any further act or deed on the part of the company, including payment of stamp duty and Registrar of Companies fees, by Rs. 2,250.000 Million, being the authorised share capital of the transferor company, and Memorandum of Association and Articles of Association of the Company stand amended accordingly without any further act or deed on the part of the company.

(II) Accounting for Amalgamation :

The amalgamation of the Transferor Companies with the Company is accounted for on the basis of the Purchase Method as envisaged in the Accounting Standard (AS) -14 on Accounting for Amalgamations specified in the Companies (Accounting Standard) Rules 2006 and in terms of the scheme, as below,

a) All tangible asset and liabilities of the BDL at their respective Fair Values.

b) Rs. 325.404 Million being the difference between the value of net assets of the Transferor Companies transferred to the Company (determined as stated above) and the face value of equity shares allotted in BDL is adjusted to General Reserve of the Company. This accounting treatment of the reserve has been prescribed in the Scheme and approved by AAIFR. Had the scheme not prescribed this treatment, this amount would have been debited to Goodwill, which would have been charged to the profit & loss account as per the accounting policy of the Company having corresponding impact on the results for the year ended March 31,2011.

d) Pursuant to the Scheme, the bank accounts, agreements, licences and certain immovable properties are in the process of being transferred in the name of the Company.

B. The Board of Directors of the erstwhile Central Distilleries & Breweries Limited (CDBL) (amalgamated with erstwhile Shaw Wallace Distilleries Ltd. , which was amalgamated with the Company in an earlier year) on April 29, 1986 decided to issue 134,700 Equity Shares of Rs. 10 each, the allotment whereof was stayed by the Hon'ble High Court of Delhi on September 13,1988. The Hon'ble High Court of Delhi had vacated its order and has ordered to keep in abeyance the allotment on 72,556 shares and the matter is sub-judice. The holders, in exchange of these shares will be entitled to 17,776 equity shares of Rs. 10 each of the Company pursuant to a Scheme of Arrangement. Necessary adjustments in this respect will be carried out on disposal of the matter pending before the aforesaid Court.

3. Fixed Assets

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 351.264 Million (2010: Rs. 83.709 Million).

4. Current Assets, Loans and Advances

a) Loans and Advances include:

i) Rs. 39,825.429 Million (2010: Rs. 44,262.147 Million) given as interest free loans to subsidiaries.

ii) An amount of Rs. 498.991 Million (2010: Rs. 733.982 Million) due from the Tie-up units secured by the assets of the Tie-up unit and/or equity shares of the Tie-up unit.

iii) Rs. 3 Million (2010: Rs. 3 Million) being amount paid to BDA Limited (BDA) towards reassignment of certain Liquor Brands/ Trade Marks pursuant to a Memorandum of Understanding dated March 20, 1992. Pending execution of the deed for such assignments and judicial resolutions of various disputes with BDA pertaining to control of BDA and ownership of the 'Officers Choice' and other brands currently sub-judice at various courts, the advance given to BDA has been provided for as a matter of prudence. All consequential adjustments arising out of the above matters will be made as and when ascertained.

iv) Due from an Officer of the Company Rs. 1.777 Million (2010: Rs. 1.407 Million). Maximum amount outstanding at any time during the year Rs. 1.777 Million (2010: Rs. 1.407 Million).

v) Due from the Managing Director of the Company Rs. 3.799 Million (2010: Rs. 3.454 Million). Maximum amount outstanding at any time during the year Rs. 3.799 Million (2010: Rs. 3.454 Million).

vi) Rs. 156.120 Million paid towards Preference Shares application money to subsidiary of the company.

b) Subsequent to the Balance Sheet date, the Company has acquired 73,22,280 equity shares from the Promoters of Pioneer Distilleries Limited (PDL) on May 24, 2011 pursuant to the Share Purchase Agreement dated September 13, 2010 and 26,77,640 equity shares under the Open offer as per the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997 and SEBI (Prohibition of Insider Trading) Regulations, 1992. Consequent to the above, Loans and Advances includes Rs. 1,039.820 Million paid towards cost of Investment as on March 31, 2011.

c) Bank Balance with scheduled bank includes Rs. 177.343 Million (2010: Rs. 168.069 Million) out of the proceeds of the beer business of erstwhile Shaw Wallace & Company Ltd.(SWCL), sold in an earlier year which has been kept under escrow pending resolution of various taxation matters.

d) The Company has, granted interest free loans in foreign currency amounting to Rs. 36,857.536 Million [2010: Rs. 39,557.598 Million), to USL Holdings Limited, BVI (USL Holdings) a subsidiary of the Company, for acquisition of long term strategic investments. Management is of the view that out of these loans, Rs. 33,411.109 Million (2010: Rs. 33,435.283 Million), from the inception of the grant of loans, in substance, form part of the Company's net investment in the subsidiary, as the settlement of these loans is neither planned nor likely to occur in the foreseeable future and management intends to convert these loans into investment in share capital of the subsidiary in near future. Accordingly, in line with AS 11 - The Effects of Changes in Foreign Exchange Rates (AS 11), exchange difference aggregating to Rs. 2,271.244 Million (debit) [2010: Rs. 2,247.069 Million (debit)] arising on such loans has been accumulated in a foreign currency translation reserve, which at the time of the disposal of the net investment in these subsidiaries would be recognised as income or as expenses.

b) Investment in USL Benefit Trust represents beneficial interest of the Company in the Trust. Trust holds 3,459,090 (2010: 3,459,090) equity shares of Rs. 10 each of the Company, with all additions or accretions thereto for the benefit of the Company.

c) The carrying cost of investment in Palmer Investment Group Limited amounting to Rs. 6,917.801 Million, substantially exceeds the year end net worth and the market value of shares held by the Company directly and indirectly through its subsidiary. The management of the Company believes that this reflects intrinsic value far in excess of the carrying cost of investments and that such shortfall in net worth / decline in market value of such shares is purely temporary in nature and, hence, no provision is considered necessary for the same.

d) During the year, the Company has acquired 41.54% of equity stake in Karnataka based Sovereign Distilleries Limited (SDL). SDL is engaged in manufacture and sale of Extra Neutral Alcohol (ENA) and Indian Made Foreign Liquor (IMFL). SDL has become associate of the Company with effect from March 31, 2011.

e) The Board of CBPL, a wholly owned Subsidiary of the Company, at its meeting held on March 11, 2011 has considered and approved the amalgamation of CBPL into United Breweries Limited (UBL) with effect from close of business hours of March 31, 2011,being the Appointed date and hence the Investment is held with the intention to transfer to UBL.

The above information has been determined to the extent such parties have been identified on the basis of information provided by the Company, which has been relied upon by the auditors.

5. As required under Section 205C of the Companies Act, 1956, the Company has transferred Rs. 2.801 Million (2010: Rs. 2.882 Million) to the Investor Education and Protection Fund (IEPF) during the year. On March 31, 2011, no amount was due for transfer to the IEPF.

6. Inter corporate deposit and Interest accrued and due thereon Rs. 75.592 Million (2010: Rs. 75.592 Million) included under Unsecured Loan in Schedule 4 represents an obligation acquired on amalgamation of SWCL in an earlier year, where negotiation/ settlement has not been finalised and the same has been provided in terms of the decree and / or otherwise considered adequate by the management. In the opinion of the management, interest so far provided is adequate and no further provision is necessary in this respect. Adjustments, if any, shall be carried out as and when the amounts are determined on final disposal / settlement of the matter.

7. Employee Benefits

a) Defined Contribution Plans

The Company offers its employees defined contribution plans in the form of Provident Fund (PF) and Employees' Pension Scheme (EPS) with the government, Superannuation Fund (SF) and certain state plans such as Employees' State Insurance (ESI). PF and EPS cover substantially all regular employees while the SF covers certain executives and the ESI covers certain workers. Contribution to SF is made to trust managed by the Company, while other contributions are made to the Government's funds. While both the employees and the Company pay predetermined contributions into the provident fund and the ESI Scheme, contributions into the pension fund and the superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee's salary.

b) Defined Benefit Plans

Gratuity:

The Company provides for gratuity a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employee's last drawn salary and years of employment with the Company. The Company has employees' gratuity funds managed by the Company as well as by Insurance Companies.

Provident Fund:

For certain executives and workers of the Company, contributions are made as per applicable Indian laws towards Provident Fund to certain Trusts set up and managed by the Company, where the Company's obligation is to provide the agreed benefit to the employees and the actuarial risk and investment risk fall, in substance, on the Company. Having regard to the assets of the Fund and the return on the investments, shortfall in the assured rate of interest notified by the Government, which the Company is obliged to make good is determined actuarially.

Death Benefit:

The Company provides for Death Benefit, a defined benefit plan (the Death Benefit Plan), to certain categories of employees. The Death Benefit Plan provides a lump sum payment to vested employees, on death, of an amount based on the respective employee's last drawn salary and remaining years of employment with the Company after adjustments for any compensation received from the insurance company and restricted to limits set forth in the said plan. The Death Benefit Plan is Non-Funded.

8. Foreign Currency Transactions

a) As on March 31, 2011, the Company has the following derivative instruments outstanding :

Interest and currency swap arrangement (USD-INR) amounting to USD Nil (2010 : USD 35 Million fully settled during the year).

b) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are as under:

Loans and Advances to Subsidiaries USD 732.290 Million, GBP 60.655 Million, Euro 28.750 Million (2010:USD 794.290 Million, GBP 59.450 Million, Euro 27.750 Million).

9. Segment Reporting

The Company is engaged in the business of manufacture, purchase and sale of Beverage Alcohol (Spirits and Wines) including through Tie-up units/ brand franchise, which constitutes a single business segment. The Company's operations outside India did not exceed the quantitative threshold for disclosure envisaged in AS 17 on 'Segment Reporting' specified in the Companies (Accounting Standard) Rules 2006. In view of the above, primary and secondary reporting disclosures for business/geographical segment as envisaged in AS-17 are not applicable to the Company.

10. Related Party Disclosures

a) Names of related parties and description of relationship Enterprise where there is control i) Subsidiary Companies:

1)United Spirits Nepal Private Limited (USNPL), 2) Asian Opportunities & Investment Limited (AOIL), 3) Bouvet -Ladubay S.A.S (BL)^, 4) Chapin Landais S.A.S (CL)^, 5) Palmer Investment Group Limited(PIG), 6) Montrose International SA (MI)^, 7) JIHL Nominees Limited (JIHL), 8) RG Shaw & Company Limited (RGSC), 9) Shaw Darby & Company Limited (SDC), 10) Shaw Scott & Company Ltd (SSC), 11) Thames Rice Milling Company Limited (TRMCL), 12) Shaw Wallace Overseas Limited (SWOL)^, 13) McDowell (Scotland) Limited (MSL), 14) USL Holdings Limited (USLHL), 15) Royal Challengers Sports Private Limited (RCSPL), 16) USL Holdings (UK) Limited^, 17) United Spirits (UK) Limited^, 18) United Spirits (Great Britain) Limited^, 19) Shaw Wallace Breweries Limited (SWBL), 20) Ramanretti Investment & Trading Limited (RITL)^, 21) Daffodils Fragrance and Flavours Private Limited (DFFPL), 22) Four Seasons Wines Limited (FSWL), 23) United Vintners Limited (UVL), 24) United Alcobev Limited (UAL) ,

25) McDowell Beverages Limited (MBL), 26) McDowell & Company Limited, 27) Jasmine Flavours and Fragrances Limited, 28) Liquidity Inc, 29) Whyte and Mackay Group Limited^, 30) Whyte and Mackay Holdings Ltd^, 31) Whyte and Mackay Limited (W&M), 32) Whyte and Mackay Warehousing Limited^, 33) Bruce & Company (Leith) Limited^, 34) Charles Mackinlay & Company Limited^, 35) Dalmore Distillers Limited^, 36) Dalmore Whyte & Mackay Limited^, 37) Edinburgh Scotch Whisky Company Limited^, 38) Ewen & Company Limited^, 39) Fettercairn Distillery Limited^, 40) Findlater Scotch Whisky Limited^, 41) Glayva Liqueur Limited^, 42) Glentalla Limited^, 43) GPS Realisations Limited^, 44) Grey Rogers & Company Limited^, 45) Hay & MacLeod Limited^, 46) Invergordon Distillers (Holdings) Limited^, 47) Invergordon Distillers Group Limited^, 48) Invergordon Distillers Limited^, 49) Invergordon Gin Limited^, 50) Isle of Jura Distillery Company Limited^, 51) Jarvis Halliday & Company Limited^, 52) John E McPherson & Sons Limited^, 53) Kensington Distillers Limited^, 54) Kyndal Spirits Limited^, 55) Leith Distillers Limited^, 56) Loch Glass Distilling Company Limited^, 57) Longman Distillers Limited^, 58) Lycidas (437) Limited^, 59) Pentland Bonding Company Limited^, 60) Ronald Morrison & Company Limited^, 61) St The Sheep Dip Whisky Company Limited^, 62) Vincent Street (437) Limited^, 63) Tamnavulin-Glenlivet Distillery Company Limited^, 64) TDL Realisations Limited^, 65) W & S Strong Limited^, 66) Watson & Middleton Limited^, 67) Wauchope Moodie & Company Limited^, 68) Whyte & Mackay Distillers Limited^, 69) William Muir Limited^, 70) WMB Realisations Limited^, 71) Whyte and Mackay Property Limited^, 72) Whyte and Mackay de Venezuela CA^, 73) KI Trustees Limited^, 74) USL Shanghai Trading Company Limited 75) Tern Distillery Private Limited(Tern) 76) Balaji Distillery Private Limited(BDPL)* 77) Chennai Breweries Private Limited(CBPL)* 78) Spring Valley Investment Holding Inc(SVIHI)^^ 79)Herbertsons Limited(HL)^^.

ii) USL Benefit Trust

* Became a subsidiary during the year.

^ No transactions during the year.

^^ Ceased to be a subsidiary during the year.

Associates

Wine Soc. of India Private Limited^ Sovereign Distilleries Limited (SDL)* I

Promoter Holding together with its Subsidiary is more than 20%

United Breweries (Holdings) Limited

* Became an associate during the year.

^ No transactions during the year..

Key Management personnel:

Mr.VK.Rekhi, Managing Director

Employees' Benefit Plans where there is significant influence:

Mc Dowell & Company Limited Staff Gratuity Fund (McD SGF), McDowell & Company Limited Officers' Gratuity Fund (McD OGF), Phipson & Company Limited Management Staff Gratuity Fund. (PCL SGF), Phipson & Company Limited Gratuity Fund. (PCL GF), Carew & Company Ltd. Gratuity Fund (CCL GF), McDowell & Company Limited Provident Fund (McD PF), Shaw Wallace & Associated Companies Employees Gratuity Fund (SWCEGF), Shaw Wallace & Associated Companies Executive Staff Fund (SWCSGF), Shaw Wallace & Co. Associated Companies Provident Fund (SWCPF), Balaji Distilleries Employees Gratuity Trust.

11. (a) The Company's significant leasing arrangements in respect of operating leases for premises (residential, office, stores, godown, manufacturing facilities etc), which are not non-cancellable, range between 11 months and 3 years generally (or longer in certain cases) and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as Rent under Schedule 15 to the accounts.

Leasing arrangements entered into prior to April 1, 2001 have not been considered for treatment under AS 19 'Accounting for Leases'.

(b) The Company has acquired computer equipment and cars on finance leases. The lease agreement is for a primary period of 48 months for computer equipment and 36 months to 60 months for cars. The Company has an option to renew these leases for a secondary period. There are no exceptional/restrictive covenants in the lease agreements.

12. Previous year's figures have been regrouped / rearranged wherever necessary.


Mar 31, 2010

Rs. Million

2010 2009

1. Contingent Liabilities

a) (i) Guarantee given on behalf of other bodies corporate (including performance guarantees) - 31,397.558

(ii) Guarantees given by the Companys bankers for which Counter Guarantees have been given by the Company 172.335 172.217

b) Disputed claims against the Company not acknowledged as debts, currently under appeal/ sub judice:

(i) Excise demands for excess wastages and distillation losses 190.338 238.384

(ii) Other miscellaneous claims 250.475 244.274

(iii) Income Tax demand (including interest) under appeal 452.575 305.186

(iv) Sales Tax demands under appeal in various states 557.912 604.036

c) Bills Receivables discounted - since fully settled 480.150

d) Co-accepted bills of Tie-up Units - since fully settled - 15.016

e) Claims from suppliers not acknowledged as debts 57.511 45.449

The Management is hopeful of succeeding in the above appeals/ disputes based on legal opinions/ legal precedents.

2. A. The Scheme of Amalgamation of Shaw Wallace & Company Limited (SWCL) and Primo Distributors Private Limited (Primo) with the Company (Scheme) sanctioned by the Honble High Court of Karnataka at Bangalore, the Honble High Court of Judicature of Bombay and the Honble High Court at Calcutta, has become effective on July 6, 2009. Pursuant to the Scheme, 7,749,121 equity shares of Rs.10 each fully paid up in the Company have been allotted to the eligible shareholders of SWCL on July 24, 2009, resulting in the increase of the paid up share capital of the Company to Rs.1,079,123,770 divided into 107,912,377 equity shares of Rs.10 each fully paid up. As Primo was a wholly owned subsidiary of the Company, no consideration was payable.

B. On June 30, 2009 SWCL sold 10,282,553 equity shares of Rs.10 each, held by it in the Company in the open market through the Stock Exchanges. However, as the aforesaid equity shares, in terms of the Scheme, vest with USL Benefit Trust, of which the Company is the Beneficiary, the resulting surplus of Rs.699.953 Million, being the excess of the net sale proceeds over corresponding carrying value of these shares, has been shown as Exceptional and other non-recurring item in the Profit and Loss Account.

C. The Board of Directors of the Company at their meeting held on November 29, 2008 have approved the proposal of merger of Balaji Distilleries Limited (BDL) with the Company with effect from April 1, 2009 as per the Scheme of Arrangement between BDL, Chennai Breweries Private Limited (CBPL) and the Company, subject to necessary approvals (the Scheme).

At an Extraordinary General Meeting held on April 21, 2010, the Equity Shareholders of the Company have approved, by way of a Special Resolution, the Scheme and the Draft Rehabilitation Scheme (DRS) of BDL as circulated by the Honble Board for Industrial and Financial Reconstruction (the BIFR), formed under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985, vide Order dated February 19, 2010.

The Scheme and the DRS are pending with the Honble BIFR for approval. The accounting effect of the scheme and the DRS shall be given in the year in which the same are approved and become effective.

D. The Board of Directors of the erstwhile Central Distilleries & Breweries Limited (CDBL) (amalgamated with erstwhile SWDL, which was amalgamated with the Company in an earlier year) on April 29, 1986 decided to issue 134,700 Equity Shares of Rs.10 each, the allotment whereof was stayed by the Honble High Court of Delhi on September 13,1988. The Honble High Court of Delhi had vacated its order and has ordered to keep in abeyance the allotment on 72,556 shares and the matter is sub-judice. The holders, in exchange of these shares will be entitled to 17,776 equity shares of Rs.10 each of the Company pursuant to a Scheme of Arrangement. Necessary adjustments in this respect will be carried out on disposal of the matter pending before the aforesaid Court.

3. During the year the Company has raised funds amounting to Rs.16,156 Million (equivalent to US$350 Million) by allotment of 17,681,952 Equity Shares of Rs.10 each at a price of Rs.913.70 per Equity Share (including a premium of Rs.903.70 per Equity Share) on October 23, 2009 to certain Qualified Institutional Buyers (QIBs) through a Qualified Institutions Placement (QIP) under the provisions of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital And Disclosure Requirements) Regulations, 2009 (“the SEBI Regulations”). Consequently, the issued, subscribed and paid-up Equity Share Capital of the Company stands increased from Rs.1,079,123,770 divided into 107,912,377 equity shares of Rs.10 each to Rs.1,255,943,290 divided into 125,594,329 equity shares of Rs.10 each.

The net proceeds of Rs.15,459.726 Million from the issue to QIBs has been utilised for part repayment of certain debt incurred upon the acquisition of Whyte and Mackay Group Limited, capital expenditure and other general corporate purposes.

4. Fixed Assets

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.83.709 Million (2009: Rs.106.562 Million).

5. Current Assets, Loans and Advances

a) Loans and Advances include:

i) Rs. 44,262.147 Million (2009: Rs.11,093.202 Million) given as interest free loans to subsidiaries.

ii) An amount of Rs.733.982 Million (2009: Rs. 736.429 Million) due from the Tie-up units secured by the assets of the Tie-up unit and/or equity shares of the Tie-up unit.

iii) Rs.3 Million (2009: Rs.3 Million) being amount paid to BDA Limited (BDA) towards reassignment of certain Liquor Brands/ Trade Marks pursuant to a Memorandum of Understanding dated March 20, 1992. Pending execution of the deed for such assignments and judicial resolutions of various disputes with BDA pertaining to control of BDA and ownership of the Officers Choice and other brands currently sub-judice at various courts, the advance given to BDA has been provided for as a matter of prudence. All consequential adjustments arising out of the above matters will be made as and when ascertained.

iv) Due from an Officer of the Company Rs 1.407 Million (2009: Rs.1.193 Million). Maximum amount outstanding at any time during the year Rs.1.407 Million (2009: Rs.1.193 Million).

v) Due from the Managing Director of the Company Rs. 3.454 Million (2009: Rs. 3.140 Million). Maximum amount outstanding at any time during the year Rs. 3.454 Million (2009: Rs. 3.140 Million)

b) Certain confirmation of balances from Sundry Debtors, Loans and Advances, Deposits and Sundry Creditors are awaited and the account reconciliations of some parties where confirmations have been received are in progress. Adjustment for differences, if any, arising out of such confirmations/ reconciliations would be made in the accounts on receipt of such confirmations and reconciliation thereof. The Management is of the opinion that the impact of adjustments, if any, is not likely to be significant. In the opinion of the management, all current assets, loans and advances including advances on capital accounts would be realised at the values at which these are stated in the accounts, in the ordinary course of business.

c) Bank Balance with scheduled bank includes Rs.168.069 Million (2009: Rs.154.000 Million) out of the proceeds of the beer business of erstwhile SWCL, sold in an earlier year which has been kept under escrow pending resolution of various taxation matters.

d) The Company has, granted interest free loans in foreign currency amounting to Rs.39,557.598 Million [2009: Rs. 7,435.245 Million), to USL Holdings Limited, BVI (USL Holdings) a subsidiary of the Company, for acquisition of long term strategic investments. Management is of the view that out of these loans, Rs.33,435.283 Million (2009: Rs.3,630.300 Million), from the inception of the grant of loans, in substance, form part of the Companys net investment in the subsidiary, as the settlement of these loans is neither planned nor likely to occur in the foreseeable future and management intends to convert these loans into investment in share capital of the subsidiary in near future. Accordingly, in line with AS 11 - The Effects of Changes in Foreign Exchange Rates (AS 11), exchange difference aggregating to Rs.2,247.069 Million (2009: Rs. 463.905 Million) arising on such loans has been accumulated in a foreign currency translation reserve, which at the time of the disposal of the net investment in these subsidiaries would be recognised as income or as expenses.

6. Investment

b) Investment in USL Benefit Trust represents beneficial interest of the Company in the Trust. Trust holds 3,459,090 (2009: 13,741,643) equity shares of Rs 10 each of the Company, with all additions or accretions thereto for the benefit of the Company.

c) The carrying cost of investment in Palmer Investment Group Limited amounting to Rs.6,917.801 Million, substantially exceeds the year end net worth and the market value of shares held by the Company directly and indirectly through its subsidiary. The management of the Company believes that this reflects intrinsic value far in excess of the carrying cost of investments and that such shortfall in net worth / decline in market value of such shares is purely temporary in nature and, hence, no provision is considered necessary for the same.

d) During the year, the Company has acquired the entire share capital of Tern Distilleries Private Limited (Tern), a Company in Andhra Pradesh having a manufacturing unit at Visakhapatnam District. Accordingly, Tern has become a wholly owned subsidiary of the Company with effect from November 23, 2009.

e) During the year, Four Seasons Wines Limited ceased to be a wholly owned Subsidiary of the Company.

7. As required under Section 205C of the Companies Act, 1956, the Company has transferred Rs. 2.882 Million (2009: Rs. 4.678 Million) to the Investor Education and Protection Fund (IEPF) during the year. On March 31, 2010, no amount was due for transfer to the IEPF.

8. Interest on inter corporate deposit Rs. 40.592 Million (2009: Rs. 40.592 Million) included under Unsecured Loan - Other in Schedule 4 represents an obligation acquired on amalgamation in an earlier year, where negotiation/ settlement has not been finalised and the same has been provided in terms of the decree and / or otherwise considered adequate by the management. In the opinion of the management, interest so far provided is adequate and no further provision is necessary in this respect. Adjustments, if any, shall be carried out as and when the amounts are determined on final disposal / settlement of the matter.

9. Employee Benefits

a) Defined Contribution Plans

The Company offers its employees defined contribution plans in the form of Provident Fund (PF) and Employees Pension Scheme (EPS) with the government, Superannuation Fund (SF) and certain state plans such as Employees State Insurance (ESI). PF and EPS cover substantially all regular employees while the SF covers certain executives and the ESI covers certain workers. Contribution to SF is made to trust managed by the Company, while other contributions are made to the Governments funds. While both the employees and the Company pay predetermined contributions into the provident fund and the ESI Scheme, contributions into the pension fund and the superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employees salary.

b) Defined Benefit Plans

Gratuity:

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employees last drawn salary and years of employment with the Company. The Company has employees gratuity funds managed by the Company as well as by Insurance Companies.

Provident Fund:

For certain executives and workers of the Company, contributions are made as per applicable Indian laws towards Provident Fund to certain Trusts set up and managed by the Company, where the Companys obligation is to provide the agreed benefit to the employees and the actuarial risk and investment risk fall, in substance, on the Company. Having regard to the assets of the Fund and the return on the investments, shortfall in the assured rate of interest notified by the Government, which the Company is obliged to make good is determined actuarially.

Death Benefit:

The Company provides for Death Benefit, a defined benefit plan (the Death Benefit Plan), to certain categories of employees. The Death Benefit Plan provides a lump sum payment to vested employees, on death, of an amount based on the respective employees last drawn salary and remaining years of employment with the Company after adjustments for any compensation received from the insurance company and restricted to limits set forth in the said plan. The Death Benefit Plan is Non-Funded.

10. Foreign Currency Transactions

a) As on March 31, 2010, the Company has the following derivative instruments outstanding :

Interest and currency swap arrangement (USD-INR) amounting to USD 35 Million (2009 : USD 35 Million), which has been since fully settled.

b) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are as under :

Loans and Advances to Subsidiaries USD 794.290 Million, GBP 59.450 Million, Euro 27.750 Million (2009:USD 76.086 Million, GBP 55.200 Million, Euro 24.750 Million).

11. Segment Reporting

The Company is engaged in the business of manufacture, purchase and sale of Beverage Alcohol (Spirits and Wines) including through Tie-up units/ brand franchise, which constitutes a single business segment. The Companys operations outside India did not exceed the quantitative threshold for disclosure envisaged in AS 17 on Segment Reporting specified in the Companies (Accounting Standard) Rules 2006. In view of the above, primary and secondary reporting disclosures for business/geographical segment as envisaged in AS-17 are not applicable to the Company.

Trading Company Limited 77) Tern Distillery Private Limited(Tern)*

ii) USL Benefit Trust

* Became a subsidiary during the year No transactions during the year.

Associates :

Wine Soc. of India Private Limited^

^ No transactions during the year.

Key Management personnel :

Mr.V.K.Rekhi, Managing Director

Employees Benefit Plans where there is significant influence:

Mc Dowell & Company Limited Staff Gratuity Fund (McD SGF), McDowell & Company Limited Officers Gratuity Fund (McD OGF), Phipson & Company Limited Management Staff Gratuity Fund (PCL SGF), Phipson & Company Limited Gratuity Fund (PCL GF), Carew & Company Ltd. Gratuity Fund (CCL GF), McDowell & Company Limited Provident Fund (McD PF), Shaw Wallace & Associated Companies Employees Gratuity Fund (SWCEGF), Shaw Wallace & Associated Companies Executive Staff Fund (SWCSGF), Shaw Wallace & Co. Associated Companies Provident Fund (SWCPF).

12. (a) The Companys significant leasing arrangements in respect of operating leases for premises (residential, office, stores, godown, manufacturing facilities etc), which are not non-cancellable, range between 11 months and 3 years generally (or longer in certain cases) and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as Rent under Schedule 15 to the accounts.

Leasing arrangements entered into prior to April 1, 2001 have not been considered for treatment under AS 19 Accounting for Leases.

(b) The Company has acquired computer equipment and cars on finance leases. The lease agreement is for a primary period of 48 months for computer equipment and 36 months to 60 months for cars. The Company has an option to renew these leases for a secondary period. There are no exceptional/restrictive covenants in the lease agreements.

13. Previous years figures have been regrouped / rearranged wherever necessary.

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