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Notes to Accounts of Pioneer Distilleries Ltd.

Mar 31, 2017

Note:

(a) Working capital and short term loan outstanding as at March 31,2017 carries interest at 9.25% p.a. and 8.25% p.a. respectively.

(b) United Spirits Limited, the holding company has given Corporate Guarantee to the bank for the loans outstanding as at March 31, 2017.

(c) Loan outstanding as at March 31, 2016 and April 01, 2015 were secured by first charge over the entire current assets, i.e. raw materials, work-in-progress, finished goods, consumables and receivables, and second charge over the property, plant and equipment of the Company and issue of Corporate Guarantee by the holding Company, United Spirits Limited.

Disclosure of payable to vendors as defined under the "Micro, Small and Medium Enterprise Development Act, 2015" is based on the information available with the Company regarding the status of registration of such vendors under the said Act, as per the intimation received from them on requests made by the Company. There are no overdue principal amounts / interest payable amounts for delayed payments to such vendors at the reporting date. There are no delays in payment made to such suppliers during the year or for any earlier years and accordingly there is no interest paid or outstanding interest in this regard in respect of payments made during the year or brought forward from previous years.

1 Government grant

The Company is entitled to government grant from the State of Maharashtra for setting up projects in notified rural area. These grants are towards capital expenditure incurred, and are receivable mostly in the form of VAT refund.

Mega Subsidy Phase I Project:

The Company is entitled to government grant of up to Rs. 1448,94,000 under the Mega Phase I project. Upon receipt of Eligibility Certificate, the Company has recognised Rs. 165,51134 for the year ended March 31, 2017 under Other operating revenue ’in the Statement of profit and loss. Of the total Income from government grant, Rs. 118,397,000 has been received as of March 31 2017, and the balance outstanding of Rs. 340,57,000 will be received in due course and has been disclosed as Government grant.

Mega Subsidy Phase II Project:

The Company is entitled to government grant of up to Rs. 1820,000,000 under the Mega Phase II project. As of March 31 2017, the Company has made a capital expenditure of Rs. 175,110,595 under the Mega Subsidy Phase II Project and has made an application for government grant of Rs. 1431944,671 Pending receipt of Eligibility Certificate, the Company has deferred the recognition of Rs. 570,881307 relating to current year out of the aforesaid grant.

The Companys pending litigations comprise of claims against the Company and proceedings pending with tax and other authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not reasonably expect the outcome of these proceedings to have a material impact on its financial statements.

2 Segment Reporting

The Company''s Board of Directors consisting of Managing Director, senior level executive nominees from United Spirits Limited, the holding company together with the Chief Financial Officer has been identified as the Chief Operating Decision Maker (CODM) as defined under Ind AS 108 "Operating Segments". The CODM evaluates the Company''s performance and allocated the resources based on an analysis of various performance indicators . The Company is primarily engaged in the business of manufacture and sale of Extra Neutral Alcohol, Malt Spirit, Indian Made Foreign Liquor (IMFL) and allied products. Since all these segments meet the aggregation criteria as per the requirements of Ind AS 108 on Operating segments,’ the management considers these as a single reportable segment. Accordingly, disclosure of segment information has not been furnished.

The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the same method used to calculate the liability recognised in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.

Risk exposure:

Through its defined benefit plans, Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility

The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan asset investments is in government securities and pre-defined insurance plans. These are subject to interest rate risk and the fund manages interest rate risk through continuous monitoring to minimise risk to an acceptable level. A minimal portion of the funds are invested in equity securities. The equity securities are expected to earn a return in excess of the discount rate and contribute to the plan deficit. The Company has a risk management strategy where the aggregate amount of risk exposure on a portfolio level is maintained at a fixed range. Any deviations from the range are corrected by rebalancing the portfolio. The Company intends to maintain the above investment mix in the continuing years.

Change in bond yields

A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans'' bond holdings.

Inflation risks

In the post-employment plans, the payments are not linked to inflation, so this is a less material risk.

(d) Unabsorbed business losses

The Company has tax losses (including unabsorbed depreciation) of Rs. 2,353,930481 (March 31,2016: Rs. 1897,799,80 March 31,2015: Rs. 2,229,327,076) that are available for offsetting against future taxable profits. Business losses of Rs. 119,1,565,408 are available for offsetting for eight years and those will lapse after March 2022. Deferred tax asset has been recognised to the extent Company has reasonable certainty over future taxable profits as against virtual certainity under the previous GAAP.

3 Financial instruments

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

4 Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to short term maturities of these instruments.

5 Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.

Fair value estimation

For financial instruments measured at fair value in the Balance Sheet, a three level fair value hierarchy is used that reflects the significance of inputs used in the measurements. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).

The categories used are as follows:

•Level 1 quoted prices for identical instruments

•Level 2 directly or indirectly observable market inputs, other than Level 1 inputs; and •Level 3: inputs which are not based on observable market data.

There were no significant changes in classification and no significant movements between the fair value hierarchy classifications of financial assets and financial liabilities during the period.

6 Financial risk factors

The Company''s principal financial liabilities comprise loans and borrowings, advances and trade and other payables. The purpose of these financial liabilities is to finance the Companys operations and to provide to support its operations. The Companys principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations.

The Company''s activities exposes it to Liquidity Risk, Market Risk and Credit risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised as below

(a) Liquidity risk

The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk management implies maintenance sufficient cash including availability of funding through an adequate amount of committed credit facilities to meet the obligations as and when due.

The Company manages its liquidity risk by ensuring as far as possible that it will have sufficient liquidity to meet its short tem and long term liabilities as and when due. Anticipated future cash flows, undrawn committed credit facilities are expected to be sufficient to meet the liquidity requirements of the Company.

(b) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk includes investment, deposits, foreign currency receivables and payables. The Company''s treasury team manages the Market risk, which evaluates and exercises independent control over the entire process of market risk management.

(i) Foreign currency risk

Foreign currency risk can only arise on financial instruments that are denominated in a currency other than the functional currency in which they are measured. The Company''s functional and presentation currency is INR.

The Company does not have any foreign currency transactions and hence is not exposed to the Foreign Currency Risks.

(ii) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. The Company''s long term borrowings have fixed rate of interest and are carried at amortised costs. Hence, the Company is not subject to the interest rate risk since neither the carrying amount nor the future cash flows will change due to change in the market interest rates.

Working capital facility and loan from holding company are, as per contractual terms, primarily of long term nature, which does not exposes company to significant interest rate risk.

(c) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. The Company is exposed to credit risks from its operating activities, primarily trade receivables, cash and cash equivalents, deposits with banks and other financial instruments.Credit risk is managed by the Company through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business. Company''s major sales are to its holding company, United Spirits Limited (USL). USL has extended trade advance to support the operations of the Company. Hence, the credit exposure is assessed to be negligible.

Trade and other receivables

The Company considers the probability of default upon initial recognition of assets and whether there has been a significant increase in credit risks on an ongoing basis throughout each reporting period.

To assess whether there is a significant change increase in credit risk the Company compares the risks of default occurring on the assets as at the reporting date with the risk of default as at the date of initial recognition. It considers the reasonable and supportive forward looking information such as:

(i) Actual or expected significant adverse changes in business.

(ii) Actual or expected significant changes in the operating results of the counterparty.

(iii) Financial or economic conditions that are expected to cause a significant change to the counterparty''s ability to meet its obligations

(iv) Significant increase in credit risk on other financial instruments of same counterparty

7 (a) Financial risk factors

Capital risk management

The Companys objectives when managing capital are to :

* safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

* maintain an optimal capital structure to reduce the cost of capital

In order to maintain or adjust the capital structure, the Company may issue new shares, adjust the amount of dividends paid to shareholders etc.

The Company monitors capital using a gearing ratio being a ratio of net debt as a percentage of total capital.

D The holding company has given a Corporate Guarantee of Rs. 1000,000,000 to the Company''s Bank

for extending loan to the Company. Loan from Bank outstanding as on March 31, 2017 is Rs. 796,863332 (March 31, 2016: Rs. Nil).

8 Going Concern:

Considering the projects on bottling capacity expansion and completion of malt spirit plant, the Management is hopeful of reversing the losses in the coming years with the committed financial, technical and administrative support from the holding company. Accordingly, these financial statements have been prepared on a going concern basis.

9 Tie up manufacturing arrangements:

The Company has entered into tie up manufacturing arrangement with United Spirits Limited, holding company to manufacture brands owned by USL. The arrangements stipulates the obligations of each party and the entire manufacturing activity is carried out under the close supervision of the holding company. The risk and rewards of the activity lies with the holding company including responsibility to market these products. The Company has received adequate trade advance from the holding company to manage this activity. The Company is entitled to varying bottling fees per case based on the monthly activity achieved. During the year, the Company has recorded bottling fees of Rs. 44,58,66 (March 31, 2016 Rs. 24,202,694) which has been disclosed as ''Income under tie-up manufacturing agreement'' under ''Revenue from operations''.

Under Ind AS 8 on Revenue, there is an explicit guidance on assessment of principal-agent relationships.

The Company has assessed its relationship with the holding company and has identified its position to be that of agent as per explicit guidance available in Ind AS 8 on Revenue? Accordingly gross sales, excise duty and cost of goods sold (representing entire IMFL operations of the Company) hitherto are recorded on a net basis and the net working capital on same has been adjusted with the outstanding payable to the holding company.

10 Reference to Board for Industrial and Financial Reconstruction (BIFR) :

The Company in 202 had earlier made reference to the Board for Industrial and Financial Reconstruction (BIFR) in compliance with Section 5 of Sick Industrial Companies (Special Provisions) Act, 985 (SICA).

The matter was pending before BIFR for further orders. However during the year, consequent to the notification dated November 25, 2016 issued by the Ministry of Finance - Department of Financial Services, the BIFR stood dissolved. Consequently, the reference made by the Company to BIFR stood abated without further action.

11 First time adoption of Ind AS

The accounting policies set out in Note 1, have been applied in preparing the financial statements from the year ended March 31, 2017, the comparative information presented in these financial statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS balance sheet at April 01, 2015 (the Company''s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flows is set out in the following tables and notes.

Exemptions and exceptions availed

A. Ind AS optional exemptions

(i) Deemed Cost

The Company on first time adoption of Ind AS, has elected to continue with the carrying value for all of its property, plant & equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed costs as at the date of transition.

(ii) Government loan below market rate of interest

Ind AS D1 requires a first-time adopter to apply the requirements of Ind AS 109, Financial instruments and Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance, prospectively to government loans at below market rate of interest obtained after the date of transition to Ind AS. However, Ind AS D1 allows a first time adopter to apply the requirements of Ind AS retrospectively to any government loan originated before the date of transition to Ind AS provided that the information needed to do so had been obtained at the time of initially accounting for that loan. Consequently, if the company did not under its previous GAAP recognise and measure the government loan at below market rate of interest on a basis consistent with Ind AS requirements, it shall use its previous GAAP carrying amount of the loan at the date of transition to Ind AS as the carrying amount of the loan in the opening Ind AS balance sheet. Accordingly the company has applied the above requirement prospectively.

B. Ind AS mandatory exemptions

(i) Estimates

An entitys estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies).

Ind AS estimates as at April 01, 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Group made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

- Impairment of financial assets based on expected credit loss model.

(ii) Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

(iii) De-recognition of financial assets and financial liabilities

The Company has elected to apply derecognition requirements for financial assets and financial liabilities in Ind AS IB prospectively for transactions occurring on or after the date of transition to Ind AS.

C. Transition to Ind AS - Reconciliations

The following reconciliations provide a quantification of the effect of significant differences arising from the transition from previous GAAP to Ind AS in accordance with Ind AS D1

(i) Reconciliation of Balance sheet as at April 1, 2015 (Transition date)

(ii) A. Reconciliation of Balance sheet as at March 31, 2016

B. Reconciliation of total comprehensive income for the year ended March 31, 2016

(iii) Reconciliation of Equity as at April 1, 2015 and March 31,2016

The presentation requirements under previous GAAP differs from Ind AS and hence Previous GAAP information has been regrouped for ease of reconciliation with Ind AS. The regrouped previous GAAP information is derived from the Financial Statements of the Company prepared in accordance with previous GAAP.

(i) Refer note 38.

(ii) Sales tax deferment:

Sales tax deferment represents sales tax liability of the Company for sales effected during the sales tax deferral scheme period and is repayable without any interest. Under Ind AS, the benefit of Government loans below the market rate of interest are accounted as Government grants. The government grant is measured as the difference between the fair value of the loan and the actual proceeds received. The fair value of the long-term loan is measured at the present value of the future cash payments discounted using the prevailing market rate(s) of interest. Under the previous GAAP, this government loan is not treated as a grant and carried at book value as unsecured borrowing. All the conditions attached to the Government grant have been complied with, before the date of transition. As a result of this change, the amount of sales tax deferment has been reduced by Rs. 73,496,008 as at the transition date with a corresponding adjustment to Equity. The impact on the profit for the year March 31, 2016 is Rs. 16,934,044 due to the notional interest expenditure recognised on the interest free sales tax deferment.

(iii) Remeasurement of post employment benefit obligations

Under Ind AS, remeasurements i.e. acturial gains and losses and the return on plan assets, excluding amounts included in the interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year.

(iv) Adjustments to revenue:

Under previous GAAP, the Company accounted revenue net of trade discounts, sales taxes and excise duties. Under Ind AS, revenue is being recognised at fair value of consideration received or receivable, gross of excise duty. Excise duty is being charged under Other expenses. Any sales incentive, discounts or rebates in any form including cash discounts given to customer are being considered as reductions to seliing price and revenue is presented on net basis.

(v) Deferred taxes:

Under previous GAAP, deferred taxes were recognised based on profit and loss approach i.e. tax impact on difference between the accounting income and taxable income. Under Ind AS, deferred tax is being recognised by following balance sheet approach i.e. tax impact on temporary difference between the carrying value of asset and liabilities in the books and their respective tax base. Also, deferred tax have been recognised on the adjustments made on transition to Ind AS. Deferred tax asset has been recognised to the extent Company has reasonable certainty over future taxable profits as against virtual certainity under the previous GAAP.

12 Previous periods figures have been regrouped/ reclassified to conform to the current periods presentation for the purpose of comparability.


Mar 31, 2016

1. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 181,091,021/- (2015: Rs 257,670,478/-)

2. Employee Benefits :

Defined benefit plan - 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 a Insurance Company:

3. Segment Reporting :

The Company is primarily engaged in the business of Extra Neutral Alcohol and allied products. Since the inherent nature of all activities are integrated and governed by the same set of risk and returns and operating in the same economic environment, these have been grouped as a single segment in the financial segments. The said treatment is in accordance with the Accounting Standard (AS 17) on “Segment Reporting”

4.. Income Tax:

A) Current Taxation : Nil

B) Deferred Taxation

5. a) In the opinion of the management assets other than fixed assets have a value on realization in the ordinary course of business at least equal to the amount at which they are stated.

b) The accounts of certain Banks, Secured Loans, Trade Receivable, Trade Payable, Other Current Liabilities and Loans & Advances are however, subject to formal confirmations/reconciliation & consequent adjustments if any. The Management does not expect any material difference affecting the current period''s financial statements on such reconciliations/adjustments.

6. The Company has not received the intimation from the suppliers regarding their status under the Micro, Small and Medium enterprises development Act,2006 and hence disclosures, if any relating to amounts unpaid as at year and together with interest paid, payable as required under the said Act have not been given.

7. There are no foreign exchange earnings and outflows during the year.

8. The Company’s liability on Sales Tax Deferment provision made up to the year 2009-10 is Rs. 2,878.06 lakhs under the head Unsecured Loans (Schedule 4) which has been collected under deferral scheme of Maharashtra State Government and is repayable in 14 years starting from the end of the 10th year i.e 2010-11. During the year 2015-16 the company has repaid its 6th installment of Rs.24,602,020/-.

9. a. The reference made by the Company to the Hon''ble Board for Industrial and Financial Reconstruction (BIFR) in compliance with Section 15 of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) has been registered as Case No. 70/2012. The matter is pending before BIFR for further orders.

b. Considering the projects on bottling capacity expansion and completion of malt spirit plant, the management is hopeful of reversing the losses in the coming years with the committed Financial, Technical and Administrative support from the Holding Company. Accordingly, these financial statements have been prepared on a going concern basis.

10) a. Based on the expert opinion received and in accordance with the treatment prescribed under the Accounting Standard 12 -Government Grants, the Company has during the year recognized subsidy receivable pursuant to PSI Scheme 2007 of the Government of Maharashtra under the Income approach.

b. The Company is entitled to a Government Grant up to Rs. 14489.00 Lacs mostly in the form of VAT refund from the State of Maharashtra and which is being recognized as other operating income in the statement of Profit & loss on a systemic basis over the period it accrues. Until March 16, the Company has recognized Grant aggregating to Rs. 12834.04 Lacs (including Rs. 3117.02 Lacs in Quarter ended March-16; Rs. 8127.27 Lacs for the year ended 31st March 2016 and Rs. 3094.76 Lacs in the previous financial year ended on 31st Mar15).

11) Previous year’s figures have been regrouped or rearranged wherever necessary to be in conformity with the current year’s classification.


Mar 31, 2015

1. The Company's pending litigations comprise of claims against the Company and proceedings pending with Tax and other Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not reasonably expect the outcome of these proceedings to have a material impact on its financial statements.

2. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 257,670,478 (2014: Rs 274,165,165/-)

3. Employee Benefits :

Defined benefit plan – 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 a Insurance Company:

4. Segment Reporting :

The Company is primarily engaged in the business of Extra Neutral Alcohol and allied products. Since the inherent nature of all activities are integrated and governed by the same set of risk and returns and operating in the same economic environment, these have been grouped as a single segment in the financial segments. The said treatment is in accordance with the Accounting Standard (AS 17) on "Segment Reporting"

5. Related Party transaction :

Related parties and transactions with them, as identified by the management in accordance with the Accounting Standard 18, as notified by the Companies (Accounting standard) Rules 2006, are as follows:

United Spirits Limited : Holding Company

Mr. Ranjan Satsangi; Key Management Personnel

* During the year, in Q4, the holding company has raised a debit note aggregating to Rs.2077.64 lacs, with respect to interest for the period from 01.04.2012 to 31.03.2015,on advance granted to the Company of Rs.60 Crore in the year 2011-12.

6. Income Tax :

A) Current Taxation : Nil

B) Deferred Taxation

7. A) In the opinion of the management assets other than fixed assets have a value on realization in the ordinary course of business at least equal to the amount at which they are stated.

B) The accounts of certain Banks, Secured Loans, Trade Receivable, Trade Payable, Other Current Liabilities and Loans & Advances are however, subject to formal confirmations/reconciliation & consequent adjustments if any. The Management does not expect any material difference affecting the current period's financial statements on such reconciliations/adjustments.

8. The Company has not received the intimation from the suppliers regarding their status under the Micro, Small and Medium enterprises development Act,2006 and hence disclosures, if any relating to amounts unpaid as at year and together with interest paid payable as required under the said Act have not been given.

9. There are no foreign exchange earnings and outflows during the year.

10. The Company's liability on Sales Tax Deferment provision made up to the year 2009-10 is Rs. 2,878.06 lakhs under the head Unsecured Loans (Schedule 4) which has been collected under deferral scheme of Maharashtra State Government and is repayable in 14 years starting from the end of the 10th year i.e 2010-11. During the year 2014-15 the company has repaid its 5th installment of Rs.24,602,020/-.

11. (a) The reference made by the Company to the Hon'ble Board for Industrial and Financial Reconstruction (BIFR) in compliance with Section 15 of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) has been registered as Case No. 70/2012. The matter is pending before BIFR for further orders.

(b) Considering the future projects on bottling capacity expansion and completion of malt spirit plant ,the management is hopeful of reversing the losses in the coming years with the committed Financial, Technical and Administrative support from the Holding Company. Accordingly, these financial statements have been prepared on a going concern basis.

12. Based on the expert opinion received and in accordance with the treatment prescribed under the Accounting Standard 12 –Government Grants , the Company has during the year recognised subsidy receivable pursuant to PSI Scheme 2007 of the Government of Maharashtra under the Income approach.

13. Previous year's figures have been regrouped or rearranged wherever necessary to be in conformity with the current year's classification.


Mar 31, 2014

Nature of security

(i) Term loan from a bank Rs.2,55,07,062 (2012-13: Rs 10,23,11,748) are secured by a charge on fixed assets of the company including Plant & Machinery and building of Bio Gas Electricity Plant

(ii) Term loan from a bank Rs.15,48,53,285 (2012-13: Rs.20,66,18,614) are secured by a charge on fixed assets of the company including land and building

(iii) Term loan from a bank Rs.3,09,73,668 (2012-13: Rs.4,96,92,553) are secured by a charge on fixed assets of the company including land and building

(iv) Term loan from a bank Rs.29,34,34,213 (2012-13: Rs.29,64,34,147) are secured by a charge on entire fixed assets of the company including hypothecation charge over entire plant & Machinery ,building of the proposed expansion project

Terms of Repayment

Repayable in 5 equal quarterly installments

commencing from Mar-13 along with interest of 14.35% p.a.

Repayable in 13 equal quarterly installments

commencing from Mar-13 along with interest of 14.35% p.a.

Repayable in 9 equal quarterly installments

commencing from Mar-13 along with interest of 14.35% p.a.

Repayable in 21 equal quarterly installments

commencing from Mar-13 along with interest of 14.35% p.a.

Above loans are further secured by second charge over the entire current assets and by corporate guarantee issued by the Holding Company, United Spirits Limited

2. Contingent Liabilities:

i) Disputed Income Tax demand: Rs.Nil (2013: Rs. Nil)

ii) Disputed Central Excise demand: Rs. Nil (2013: Rs. Nil)

3. Commitments:

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.274,165,165/- (2013: Rs.135,866,669/-)

4. Employee Benefits :

Defined benefit plan - 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 a Insurance Company:

5. Segment Reporting :

The Company is primarily engaged in the business of Extra Neutral Alcohol and allied products. Since the inherent nature of all activities are integrated and governed by the same set of risk and returns and operating in the same economic environment, these have been grouped as a single segment in the financial segments. The said treatment is in accordance with the Accounting Standard (AS 17) on "Segment Reporting"

6. Related Party transaction :

Related parties and transactions with them, as identified by the management in accordance with the Accounting Standard 18, as notified by the Companies (Accounting standard) Rules 2006, are as follows:

United Spirits Limited : Holding Company

Tern Distilleries Private Limited: Fellow Subsidary

Mr. Ranjan Satsangi; Key Management Personnel

7. A) In the opinion of the management assets other than fixed assets have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated.

B) The accounts of certain Banks, Secured Loans, Trade Receivable, Trade Payable, Other Current Liabilities and Loans & Advances are however, subject to formal confirmations/reconciliation & consequent adjustments if any. The Management does not expect any material difference affecting the current period''s financial statements on such reconciliations/adjustments.

8. The Company has not received the intimation from the suppliers regarding their status under the Micro, Small and Medium enterprises development Act, 2006 and hence disclosures, if any relating to amounts unpaid as at year and together with interest paid /payable as required under the said Act have not been given.

9. There are no foreign exchange earnings and outflows during the year.

10. The Company''s liability on Sales Tax Deferment provision made up to the year 2009-10 is Rs. 2,878.06 lakhs under the head Unsecured Loans (Schedule 4) which has been collected under deferral scheme of Maharashtra State Government and is repayable in 14 years starting from the end of the 10th year i.e 2010-11. During the year 2013-14 the company has repaid its 4th installment of Rs.12,520,110/-.

11. a) The Company has made a reference to the Board for Industrial and Financial Reconstruction (BIFR) in compliance with Section 15 of Sick Industrial Companies (Special Provisions) Act, 1985, because the Company''s net worth has been fully eroded because of losses. This has been registered as Case No.70/2012, and the BIFR by order pronounced on February 08, 2014 has appointed IDBI Bank Limited to conduct Special Investigative Audit (SIA) for FY 2010-11, 2011- 12 and FY 2012-13. IDBI Bank Limited has appointed M/s. Dagliya & Company on April 25, 2014 to conduct the SIA ordered by BIFR.

b) Considering ongoing projects of bottling and malt spirit plant are on course, the management is confident of reversing the losses in the coming years with the committed Financial, Technical and Administrative support from the Holding Company. Accordingly, these financial statements have been prepared on a going concern basis.

12. Based on the expert opinion received and in accordance with the treatment prescribed under the Accounting Standard 12 -Government Grants , the Company has during the year recognised subsidy receivable pursuant to PSI Scheme 2007 of the Government of Maharashtra under the Income approach as against hitherto being accounted under capital approach. Accordingly, subsidy receivable under the said Scheme of Rs.161,200,144 (including Rs.61,944,014 for earlier years) has been credited to Other Operating income .

13. Previous year''s figures have been regrouped or rearranged wherever necessary to be in conformity with the current year''s classification.


Mar 31, 2013

1. Contingent Liabilities:

i) Disputed Income Tax demand: Rs. Nil (2012: Rs.12,13,281/-)

ii) Disputed Central Excise demand: Rs. Nil (2012: Rs.15,89,466/-)

2. Commitments:

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.13,58,66,669/- (2012: Rs.39,39,00,000/-)

3. Employee Benefits :

Defined benefit plan - Gratuity

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lumpsum 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 an Insurance Company:

4. Segment Reporting:

The Company is primarily engaged in the business of Extra Neutral Alcohol and allied products. Since the inherent nature of all activities are integrated and governed by the same set of risk and returns and operating in the same economic environment, these have been grouped as a single segment in the financials. The said treatment is in accordance with the Accounting Standard (AS 17) on "Segment Reporting"

5. Transaction with Related Party:

Related parties and transactions with them, as identified by the management in accordance with the Accounting Standard 18, as notified by the Companies (Accounting standard) Rules 2006, are as follows:

United Spirits Limited : Holding Company

Fellow Associates:

1) United Spirits Nepal Private Limited (USNPL), 2) Asian Opportunities & Investment Limited (AOIL),

3) Bouvet -Ladubay SA.S (BL), 4) Chapin Landais SA.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) SW Finance Co. Limited (SWFCL), 20) Ramanreti Investments & Trading Company Limited (RITCL), 21) Daffodils Flavours and Fragrances 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 Private 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 Distilleries Private Limited(Tern), 76) Sovereign Distilleries Limited, 77) Whyte & Mackay Americas Limited, 78) Whyte & Mackay Singapore Limited.

6. A) In the opinion of the management assets other than fixed assets have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated.

B) The accounts of certain Banks, Secured Loans, Trade Receivable, Trade Payable, Other Current Liabilities and Loans & Advances are however, subject to formal confirmations/reconciliation & consequent adjustments if any. The Management does not expect any material difference affecting the current period''s financial statements on such reconciliations/adjustments.

7. The Company has not received the intimation from the suppliers regarding their status under the Micro, Small and Medium enterprises development Act,2006 and hence disclosures, if any relating to amounts unpaid as at year and together with interest paid / payable as required under the said Act have not been given.

8. There are no foreign exchange earnings and outflows during the year.

9. The Company''s liability on Sales Tax Deferment provision made up to the year 2009-10 is Rs. 2,878.06 lakhs under the head Unsecured Loans (Schedule 4) which has been collected under deferral scheme of Maharashtra State Government and is repayable in 14 years starting from the end of the 10th year i.e 2010-11. During the year 2012-13 the company has repaid its 3rd installment of Rs.97,29,897/-.

10. The Company has became subsidiary of United Spirits Limited, the new promoter effective 24th May, 2011.

11. The Company has been incurring losses since last three years and its net worth has been fully eroded. Necessary orders are awaited in respect of reference made to Board for Industrial and Financial Reconstruction. Considering upcoming projects of bottling and malt spirit plant are on course, the management is confident of reversing the losses in the coming years with the committed Financial, Technical and Administrative support from the Holding Company. Accordingly, these financial statements have been prepared on a going concern basis.

12. Previous year''s figures have been regrouped or rearranged wherever necessary to be in conformity with the current year''s classification.


Mar 31, 2012

Government Subsidy A Package Scheme of Incentive

The Company's manufacturing facility at Balapur Village, Dharmabad, Nanded Distict has been granted "Mega Project Status" by Government of Maharashtra and therefore is eligible for Industrial Promotion Subsidy (IPS) under Packaged Scheme of Incentive (PSI) 2007. The company has been granted Eligibility Certificate for Rs 10,542.60 Lacs, issued by the Directorate of Industries, Government of Maharashtra in this regard. Entitlement of:

a. Electricity Duty exemption for the period of 7 years from date of commencement of commercial Production.

b. 100% exemption from payment of Stamp duty under the relevant Government resolution of Revenue and Forest Department

c. Taxes paid to the State Government within a period of 7 Years

d. 75% reimbursement of expenditure on account of contribution towards ESI & EPF schemes for a period of 5 years commencing from 01-April-2007 To 31-March-2012 limited to 25% of FCI Further, in terms of the Accounting Standard (AS 12) "Accounting for Government Grants" prescribed by Companies (Accounting Standards) Amendment Rules, 2006, eligible incentive is considered to be in the nature of promoters' contribution. Therefore, subsidy of Rs.1,63,50,700/- has been credited to the Capital Reserve

B Subsidy by Ministry of New and Renewable Energy

Subsidy of Rs 4,72,50,000/- received from MNRE towards installation of 4.725 MW power generation project using biogas being produced through Distillery waste through 100% biogas engines. The Incentive amount is considered to be in the nature of promoters' contribution, therefore has been Credited to Capital Reserve.

1. Contingent Liabilities

i) Disputed Income Tax demand: Rs 12,13,281/- (2011: Rs Nil)

ii) Disputed Central Excise demand: Rs 15,89,466/- (2011: Rs Nil)

2. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.39,39,00,000 /- (2011: Rs Nil)

3. Employee Benefits

Defined benefit plan - 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 an Insurance Company:

4. Segment Reporting :

The Company is primarily engaged in the business of Extra Neutral Alcohol and allied products. Since the inherent nature of all activities are integrated and governed by the same set of risk and returns and operating in the same economic environment, these have been grouped as a single segment in the financial segments. The said treatment is in accordance with the Accounting Standard (AS 17) on "Segment Reporting"

5. Transaction with Related Party:

Related parties and transactions with them, as identified by the management in accordance with the Accounting Standard 18, as notified by the Companies (Accounting standard) Rules 2006, are as follows:

United Spirits Limited : Holding Company Fellow Associates:

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 Flavors 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 Flavors and Fragrances Private 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) Fetter cairn Distillery Limited, 40) Findlater Scotch Whisky Limited, 41) Glayva Liqueur Limited, 42) Glentalla Limited, 43) GPS Realizations 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) Pent land 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 Realizations 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 Realizations 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) Chennai Breweries Private Limited(CBPL) 77) Sovereign Distilleries Limited, 78) USL Benefit Trust,,79) Wine Soc of India Pvt Ltd

The management is confident of reversing the losses in the coming years with the committed Financial, Technical and Administrative support from the Holding Company hence Deferred Tax Asset to the extent of 16,02,86,870 has been recognized.

6. A) In the opinion of the management assets other than fixed assets and non-current investments have a value on realization in the ordinary course of business at least equal to the amount at which they are stated.

B) The accounts of certain Banks, Secured Loans, Debtors, Creditors and Loans & Advances are however, subject to formal confirmations/reconciliation & consequent adjustments if any. The Management does not expect any material difference affecting the current period's financial statements on such reconciliations/adjustments.

7. The Company has not received the intimation from the suppliers regarding their status under the Micro, Small and Medium enterprises development Act,2006 and hence disclosures, if any relating to amounts unpaid as at year and together with interest paid / payable as required under the said Act have not been given.

8. There are no foreign exchange earnings and outflows during the year.

9. The Company's liability on Sales Tax Deferment provision made up to the year 2009-10 is Rs. 2,878.06 lakhs under the head Unsecured Loans (Schedule 4) which has been collected under deferral scheme of Maharashtra State Government and is repayable in 14 years starting from the end of the 10th year i.e 2010-11. During the year 2011-12 the company has repaid its 2nd installment of Rs.62,39,730/-.

10. The Company has become subsidiary of United Spirits Limited, the new promoters, effective 24th May 2011 consequent to acquisition of 10,977,132 equity shares constituting 81. 99% of the paid up capital of the Company

11. The management is confident of reversing the losses in the coming years with the committed Financial, Technical and Administrative support from the Holding Company. Accordingly these financial statements have been prepared on a going concern basis.

12. Previous year's figures have been regrouped or rearranged wherever necessary to be in conformity with the current year's classification.


Mar 31, 2010

1. Segment Reporting :

The Company is primarily engaged in the business of Rectified Spirit, Extra Neutral Alcohol and allied products. Since the inherent nature of both these activities are integrated and governed by the same set of risk and returns and operating in the same economic environment, these have been grouped as a single segment in the financial segments. The said treatment is in accordance with the Accounting Standard (AS 17) on "Segment Reporting"

2. Related Party disclosures :

a)Names of Related Parties & relationship Party Name Relation

i) Pioneer I Serve Limited Associate

(formerly Raynolds Infovision Ltd.)

ii) Pioneer Infra Ventures Ltd Associate

iii) Pioneer Gas Power Ltd Associate

iv) K. Sudhir Rao Key Management Personnel (Vice-Chairman)

v) K. Suhan Rao Key Management Personnel (Managing Director)

3. Income Tax :

Income Taxes are computed using the tax effect accounting method, where taxes are accrued in the same period the related revenue and expenses arise. A provision is made for income tax annually based on the tax liability computed after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable.

The differences that result between the profits offered for income taxes and the profit as per the financial statements are identified and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted regulations of the Indian Income Tax Act, 1961. Deferred tax assets are recognized only if there is reasonable certainty that they will be realized.

4. Secured Loans :

a) Term Loan : Term Loans from State Bank of Mysore and State Bank of Indore are secured by first charge by way of equitable mortgage by deposit of title deeds to cover all immovable properties of the company and hypothecation of all movable properties both present and future subject to prior charges created/to be created in favour of Companys bankers for securing borrowings for working capital requirements. The mortgage/charges created above shall rank pari-passu with the charges created/to be created in favour of the Banks.

The above said loans are also guaranteed by some of the directors of the Company in their personal capacities.

All the above loans were utilized for the purpose of establishment and expansion of the distillery unit and related acquisition of Fixed Assets.

b) Working Capital loan :

Cash credit facility with State Bank of Mysore & Indian Overseas Bank are secured by hypothecation of stocks of raw materials, semi-finished and finished goods, consumable stores and book debts; and

Secured by second charges on fixed assets of the Company ranking pari passu, inter-se with term loan lenders; and

The above said loan is also guaranteed by some of the directors of the Company in their personal capacities.

5. Excise Duty :

The company is availing CENVAT credit on purchase of raw materials and is being utilized on sale of Special Denatured Spirit (SDS),Co2 and Ethanol. Excise duty paid on the quantum of raw-materials used for production of Extra Neutral Alcohol (ENA) and Rectified Spirit (RS) is reversed by debiting to Profit and Loss Account as required under sub-rule (3) (a) (i) of Rule 6 of CENVAT Credit Rules, 2004.

6. There are no overdue amounts exceeding Rs. 1.00 lakh which are outstanding for more than 30 days payable to Small Scale Industrial Undertaking(s) as at 31st March, 2010.

7. Contingent Liabilities :

Estimated amount of Contracts remaining to be executed on account of Capital Account and not provided for (net of advances) is Rs. Nil.

8. There are no foreign exchange earnings during the year.

9. The Company determines liability on Sales Tax Deferment on a Net Present Value basis and accordingly provision is made. Provision will be made in each year for the incremental liability. Amount Shown under the head Unsecured Loans (Schedule 4) includes sales tax amounting to Rs.2,878.06 lakhs collected under deferral scheme of Maharashtra State Government and is repayable in 14 years starting from the end of the 10th year in which it is so collected and earliest year to start repayment is 2010-2011.

10. Paise rounded off to nearest rupee.

11. Previous years figures have been regrouped or reclassified wherever necessary to be in conformity with the current years classification.

12. Schedules 1 to 20 form an integral part of the Balance Sheet and Profit and Loss Account.

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