Mar 31, 2016
b. Terms and rights attached to equity shares
The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting. The rights of shareholder is governed by the Articles of Association of the company and the Companies Act, 2013.
a. Nature of security and terms of repayment for secured borrowings
Nature of security
(1) Vehicle loan from HDFC Bank amounting to Rs. 0.204 million (Pr. year Rs.2.519 million) is secured by hypothecation of vehicle.
(2) Loan from Yes Bank Limited amounting to Rs.. 1,502.033million (Pr. year Rs.2,246.800 million) is sucured by subservient charge on all current assets and movable fixed assets of the company, both present and future, deposit in debt service reserve account equal to the total amount of scheduled interest payment due for one month and pledge of 2,726 shares in United Spirits Limited, 8,794,000 shares in United Breweries Limited held by the company, 46,45,000 shares in United Breweries Limited held by McDowell Holdings Limited.
(3) Loan from HDFC Limited (including foreign currency denominated loan of USD) amounting to Rs 101.863 million (Pr year Rs 1,521.720 million) are secured by the pledge of 317,030 shares in McDowell Holdings Limited held by the company, mortgage by deposit of title deed of the company''s land in Bangalore, the superstructure thereon and assignment of the rent receivable from the property let out, securitization of future sale proceeds from the luxury residential building "Kingfisher Towers
- Residences in UB City", pledge of 10,50,000 shares in United Spirits Limited held by a subsidiary company.
b. Terms of repayment for Unsecured borrowings
(1) Public deposits amounting to Rs 19.396 million
2) Loan from group company
Amounting to Rs.20 million
(3) Loan from Others
a) Amounting to Rs.5 million
b) Amounting to Rs.200 million
Terms of repayment
Repayable in 60 equated monthly installments from the date of loan (May 2011) along with interest of 10.25% p.a. Last installment due in April 2016. Loan is since repaid in full and closed.
Moratorium of 24 months followed by 12 equal quarterly installments from the date of each respective disbursement i.e. March 30, 2013. Interest @ 15.00 %. Additional interest rate of 2% for delay in interest payment. Further, 7% p.a on loan is payable as fees. Overdue interest of Rs. 17.114 million is since paid. Although, the loan has been recalled in January 2014 and is overdue for payment as on Balance Sheet date. The Company is negotiating for restoration of the facility.
Loan of Rs.101.863 million is repayable in 119 monthly installments from February 2012. Loan has been fully repaid in April 2016.
Repayable within 1 to 3 years from the date of deposit and not on demand or notice except at the sole discretion of the company. Rate of interest is 11- 11.5%
Overdue for repayment. Rate of interest @ 12% p.a. Extension of Loan term being negotiated with the lender.
Overdue for repayment. Rate of interest @ 12% p.a. Extension of Loan term being negotiated with the lender.
Overdue for repayment. Rate of interest @ 18% p.a. Extension of Loan term being negotiated with the lender.
c) Amounting to Rs.13,374.095 million
d) Amounting to Rs.869.451 million
Repayable in 3 equal installments in March 2019,March 2020 and March 2021. Interest rate is @ 9.50% p.a. Interest payment starts from January 2015. Following the non approval of the loan by shareholders of USL at their EGM on 28th November 2014, the company has stopped accruing interest on this loan w.e.f 1st October 2014.
Repayable as and when company sells its share of units in "Kingfisher Towers - Residences in UB City" and to the extent the sale proceeds are over and above Rs.20,000/- per sft, however, that the entire loan is repayable before the company takes possession of its full share. Rate of interest @ 12%.
a. Terms of repayment for unsecured borrowings
1. Loan from group companies amounting to Rs. 5,834.815 million
2. Loan from others includes Rs.250 million (Pr Rs. 250 million) from LKP Finance Ltd, secured through pledge of shares held by a third party.
3. Short term loan from LKP Finance Limited amounting to Rs.331.420 million (Pr year Rs. 358.049 million) secured through pledge of shares held by a third party.
Note :
1. The possession of KF Villa which was offered as security to SBI and other consortium banks to secure their loan to KFA has been taken over by SBI and others under S AR FE SI Act. Accordingly, amount attributable to land and building of KF Villa has been reduced as above. Since in the Sub Registrar records, the above land and building are shown in the name of the Company, a notional value of ?1 is shown against these assets.
2. The Directorate of Enforcement (ED), Ministry of Finance-Dept. of Revenue, Government of India, vide its Provisional Attachment Order No. 11/2016 dated June 11, 2016, received by the Company, has provisionally attached the immovable properties of the Company based in Bangalore and Mumbai under Section 5(1) of Prevention of Money Laundering Act, 2002 for a period of 180 days from the date of the Order in connection with investigation against Dr. Vijay Mallya, Kingfisher Airlines Limited & Others. The Company is in consultation with its Legal Counsels for taking appropriate steps that may be required including defending the case before the Adjudicating Authority in Delhi pursuant to a Show Cause Notice dated 11th July 2016 received from the Adjudicating Office in this regard.
3. UB City Luxury residential Project
The Company has executed a Joint Development Agreement with a Developer on 26th April, 2010 for development of a luxury residential building to be named as "Kingfisher Towers - Residences at UB City". The development of the above project (in which the Company is entitled to 55% share of super built up area) is under progress.
The Company has issued allotment letters in respect of seven residential units in Kingfisher Towers by collecting booking amounts of Rs.1,582.900 million (Pr year Rs.1,545.184 million).
4. Estimated amount of contracts remaining to be executed on capital account as at 31st March 2016 and not provided for is Rs.27.1 50 million (net of advances) (Pr year Nil ).
Certain aircraft lessors and vendors of Kingfisher Airlines Limited (KFA) have invoked the corporate guarantees given by the company on behalf of KFA. The total amount invoked and outstanding as on March 31, 2016 is Rs.15,275.400 million (Pr year Rs.15,275.400 million) and KFA is under negotiation with the beneficiaries. Also, Consortium of KFA bankers have invoked Company''s corporate guarantee and demanded payment of Rs.62,033.500 million due from KFA along with interest, if any, decided by the Court. This matter is being contested by the Company in various Courts. Accordingly, the Company continues to recognize these obligations as only ''contingent liabilities''. Based on management''s opinion, no provision is presently considered necessary. In any event, the amount is not quantifiable.
5. Fixed Assets
a) The Company has revalued its land & buildings in Bangalore, as on March 31, 2014 at their Fair Market Value based on Valuation Report of an independent approved valuer and the carrying values of the respective assets have been adjusted accordingly. The incremental appreciation in the value of land arising out of the aforesaid revaluation is ''5,835.605 million and that of building is ''1,672.987 million. The incremental appreciation of ''7,508.592 million has been credited to the Fixed Assets revaluation reserve.
b) The Company owns a valuable trademark which is in the form of the Company logo carried at NIL value. This logo has been licensed to certain Group Company and an erstwhile Group Company, and the Company is earning Logo fee on the same.
c) The Company''s share in the constructed area and proportionate share of land in the UB City property had been charged to secure a loan from HDFC Limited. The said loan stands fully repaid, after the balance sheet date.
d) After protracted litigation, SBICAP Trustee Limited, acting as Trustees of the Consortium of Banks of KFA, was permitted to take possession of Kingfisher Villa on 13th May 2016 pursuant to an order of the Hon''ble District Magistrate dated 11thMay 2016 passed under Section 14 of the SARFAESI Act. The Company has since filed an Appeal against the aforesaid order dated 11th May, 2016 before DRT, Mumbai on 18th August 2016. The matter is yet to be listed for hearing and is pending. Although the possession of the KF Villa property has been taken over by the Consortium of Banks, the legal ownership of the property continues to remain with the Company.
6. Investments:
a) The Company has pledged 16,41,570 shares of United Spirits Limited, 4,753,881 shares of Mangalore Chemicals & Fertilizers Limited, 3,17,030 shares of McDowell Holdings Limited, 8,794,000 shares of United Breweries Limited to secure the borrowings of the company along with the borrowings of subsidiary companies and an erstwhile associate company.
b) The Company filed a Suit against ICICI Bank Ltd (hereinafter referred to as "ICICI") and 3i Infotech Trusteeship Services Ltd (hereinafter referred to as "3i Infotech") challenging ICICI''s alleged right to sell the 20,14,000 shares (the "NDU shares") of United Breweries Limited by their notice dated 9th February, 2015 on the ground that the Loan Purchase Agreement (LPA) dated 21st December, 2010 entered into with ICICI has ceased to operate consequent upon ICICI transferring, assigning and/or novating all its rights and obligations under the MDRA to a third party and that the claim of Rs.1,462.906 million by ICICI cannot be proceeded against the 20,14,000 shares as the LPA has worked itself out. Although, 3i Infotech and ICICI were restrained from selling the NDU shares initially, subsequently by orders of the Court there was no hindrance for ICICI to sell the said NDU shares. On 5th January 2016, ICICI transferred 19,58,000 NDU shares in their Demat Account. However, on an Application filed by the Consortium of Banks, the DRT vide its order dated 11th January 2016 restrained ICICI from transferring and utilizing the sale proceeds without permission of the DRT. This restraint order is still in force. Pending this, as a matter of prudence the Company has recognized the expense of Rs.1,858.063 million in the books. Further, the balance 56,000 shares of United Breweries Limited are held as investments in the books of the company.
c) Investments as on 31st March, 2016 include 59,1 50,000 shares of Kingfisher Airlines Limited, held in custody of a lender after they have invoked the pledge of the shares.
d) The Preference Shares held in an overseas subsidiary, UB Overseas Limited are to be redeemed anytime at the option of the Company or at the end of 10 years from the date of allotment of shares. The Company also has the option for partial / full conversion of Preference shares into equity shares of UB Overseas Limited, in the ratio of 1 equity share for one preference share held, at face value of USD 1 each to be determined and issued by the Issuer.
e) SREI Infrastructure Finance Limited (SREI) one of the Company''s lenders in the previous year, had invoked the Company''s pledge and sold 500,000 shares of United Spirits Limited. They had used a portion of the sale proceeds to retire the loan outstanding. SREI was holding a balance of ''99.09 crores against their purported dues from KFA. Out of this, Rs.15 crores has been refunded to the Company. From the balance amount of Rs.84.09 crores, SREI has informed that it has further appropriated an amount of Rs.25 crores towards the purported settlement of their dues from KFA. While this appropriation is being contested by the company, efforts are on for recovery of the entire amount of '' 84.09 crores due from SREI. As a matter of accounting prudence, the amount of Rs.25 crores has been provided by the company.
f) The Company had pledged 92,250 shares of United Spirits Limited, to lenders, to secure the borrowings of the Company. The lenders have invoked these shares and the realization thereof has been utilized for the purpose of liquidating the loans of the Company.
g) The Debt Recovery Tribunal has restrained Mangalore Chemicals and Fertilizers Limited ("MCF") and United Breweries Limited vide its order dated 30th September 2015, from disbursement of dividend to the Company, declared at their respective AGM for FY 2014-15. Accordingly, the dividend of ''107.016 million declared by MCF is shown as receivable.
h) Based on a critical review during the year of the carrying value of long term strategic investments, the management has provided an amount of Rs.212.464 million, as disclosed in the accounts, as a matter of commercial prudence. While in respect of other investments the matter will be reviewed during the following year based on business plans, investor funding and potential opportunities.
7. Sale of shares in United Spirits Limited (USL)
The Division Bench of the Hon''ble High Court of Karnataka, vide its Order dated 20th December 2013 has set aside the permission granted by the Hon''ble Company Judge under Section 536(2) of the Companies Act 1956 to dispose of the shares of USL in favour of Diageo Plc / Relay BV The Company and Diageo Plc have approached the Hon''ble Supreme Court by way of SLPs challenging the Order of the Division Bench. Pending disposal of the Company''s SLP''s, the Hon''ble Supreme Court has by its Order dated 10th February, 2014 directed that status quo be maintained in respect of the transaction of sale of shares to Diageo. While this status quo order is still continuing, the adjudication of the Suit is still in progress.
8. Tax provision
There is no income tax liability since the Company has incurred loss for the year. Further, having regard to the adjustments required to be made to the book profit in respect of write-off of certain advances against the provision made for such advances, there would also not be any liability on account of Minimum Alternate Tax.
9. Exceptional items.
Exceptional items comprised of :
a) Profit of Rs.227.458 million on account of sale of 92,250 pledged equity shares in United Spirits Limited by the Company''s lenders.
b) A lender to Kingfisher Airlines Limited has sold 19,58,000 pledged equity shares held by the Company in United Breweries Limited. Pursuant to this sale, a profit of Rs.1,773.305 million, along with a loss /expense of Rs. 1,858.063 million and writing down the carrying value of the investments, have been recognized in the accounts.
c) Potential Loss of Rs.70.155 million on account of KFA lender taking over possession of the Company''s fixed assets under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (SARFAESI Act), which has been provided. However, the legal ownership still vest with the Company.
10. (i) KFA lenders have invoked Company''s Corporate Guarantee and demanded payment of dues from KFA amounting to Rs.62,033.500 million. The Original Application filed by the Lenders before the Hon''ble DRT is continuing. In one of the Applications preferred by the Consortium of KFA Bankers, the Hon''ble DRT has passed an order lifting the corporate veil of its wholly owned subsidiary. Although this order of the Hon''ble DRT has been stayed by the Hon''ble High Court of Karnataka, the process of adjudicating the Appeal in Hon''ble DRAT is in progress and a decision is awaited.
(ii) The Consortium of KFA Bankers, have sold in periodical lots certain investments belonging to the Company pursuant to the purported pledge. The Company and others have filed a suit in the Hon''ble Bombay High Court (Bombay Suit) against the consortium of lenders, who have advanced loans to KFA, inter alia, challenging the validity of the Corporate Guarantee. The Company has also filed a Notice of Motion in the said Suit for a decree on admission that the extent of the liability under the Corporate Guarantee is restricted to Rs.1,601.43 crores based on admissions by the consortium of lenders. The said Suit and Notice of Motion are pending adjudication in the Hon''ble Bombay High Court.
11. Confirmation of balances from certain Sundry Debtors and Sundry Creditors are awaited. Adjustment for differences, if any, arising out of confirmation and reconciliation thereof would be made in the current year. The Management is of the opinion that the effect of adjustments, if any, is not likely to be significant.
12. The Company has advanced Rs.754 million (Pr year Rs.1,333,240 million to overseas subsidiaries and a domestic associate) to overseas subsidiaries, which have not yet been repaid. In respect of the domestic associate, after a further assessment of its financial condition, the company has decided, as a matter of prudence to write off its dues of Rs.578.960 million after withdrawing the provision made in the previous year. In respect of overseas subsidiaries, no provision has been considered at this stage.
13. Cash in hand includes foreign currency notes.
14. As required under Section 125 (2)(e) of the Companies Act, 2013, the Company has transferred ''0.600 million (Pr year Rs.0.777 million) to the Investor Education and Protection Fund (IEPF) during the year. As on March 31, 2016, no amount was due to be transferred to the IEPF.
15. Claim against a banker for restitution of deposits of Rs.609.60 million, which were unilaterally encashed and thereafter appropriated towards their claims against a Group Company is being pursued before the Hon''ble High Court of Karnataka. Appropriate amounts are being shown as recoverable from the said bank.
16. The Company and Kingfisher Finvest India Limited (KFIL) have filed a suit, inter alia, against IDBI Trusteeship Services Limited (IDBI Trusteeship), Indian Global Competitive Fund (IGCF) and SREI Venture Capital Limited (SREI), in the City Civil Court at Calcutta for a declaration that the Security Trustee Agreement dated 30th June, 2008 and the Consolidated Deed of Pledge dated 21st December, 2010 (in respect of pledged shares of United Spirits Limited and KFA held by the Company and KFIL) are void, unenforceable and of no effect. The said suit is pending.
SBICAP Trustee and the Consortium of Banks, which have advanced loans to KFA have filed a suit, inter alia, against IDBI Trusteeship Services Limited, SREI Venture Capital Limited, UBHL and KFIL in the Court of City Civil Judge in Bangalore to enforce their alleged rights under the Release of Residual Interest Agreement dated 21st December, 2010 in respect of sale proceeds remaining after appropriation of USL and KFA shares. On 10th June 2014, IDBI Trusteeship Services Limited transferred the pledged shares to IGCF who in turn sold 4,937,395 shares of United Spirits Limited ("Sold Shares") held by UBHL and KFIL. By an Order of the Hon''ble High Court of Karnataka filed by the Consortium of Banks and which has now been disposed off, IGCF deposited the surplus/balance sales proceeds from the Sold Shares with the Hon''ble High Court of Karnataka and has been restrained from disposing off Rs.690 crores retained by it. The suit is still in progress.
The Company, after taking into account, various issues involved, has, as a matter of prudence and without prejudice to the rights and contentions of the Company in the legal proceedings as well as the stand adopted by KFA against the purported recall of its loans by the lenders, pursuant to which shares pledged by the Company were sold by the lenders, has debited a portion of the sale proceeds of the IGCF sale of investments of Rs.106.30 crores to KFA and written off the same as unrealizable, along with other dues from KFA in the previous year. The balance sale proceeds of Rs.807.46 crores continues to be disclosed as due from IGCF.
Meanwhile, the Consortium of Banks have filed another Application before the Court of the XXVIII Addl. City Civil Judge, Bangalore to direct that a sum of Rs.651.15 crores deposited in the account of Registrar General, Hon''ble High Court of Karnataka as per order dated 20-6-2014 in W.P. No. 25877 be transferred to the credit of SBICAP Trustee Company Limited for appropriation towards the dues payable to the Banks. After hearing the Suit on merits, the Applications preferred by the Consortium of Banks was dismissed.
17. Litigation:
a) The litigation regarding Consortium of Banks filing a suit before the Hon''ble DRT is mentioned in details in para 37(i).
b) Further, three lenders who have extended pre-delivery payment (PDP) loans to KFA for purchase of aircrafts from M/s. Airbus S.A.S. and who claim to be beneficiaries of Corporate Guarantees of the Company, have filed proceedings before the DRT for recovery of total dues amounting to Rs.192.51 crores. By an ex-parte order dated February 4, 2014, in I.A. No. 543/2014, the Hon. DRT has passed an ad-interim order attaching pre-delivery payments made by KFA to M/s. Airbus S.A.S. up to Rs.192.51 crores. Thereafter, vide final order dated 28th March 2016 issued a Demand Notice directing the Company to pay an amount of Rs.192,51,08,484.67. Aggrieved by the final order of the Hon''ble DRT, the Company preferred a Writ Petition before the Hon''ble High Court of Karnataka and by way of an interim Order dated 16th June 2016, the Hon''ble High Court of Karnataka was pleased to stay the order of the DRT. This stay is still continuing.
c) The litigation regarding Kingfisher Villa property is mentioned in details in para 32(d).
d) In addition to two winding up petitions instituted by purported beneficiaries of Corporate Guarantees issued by the Company, which are being challenged before the Hon''ble Supreme Court and the Karnataka High Court respectively, six more winding up petitions filed by certain creditors of KFA, who are purported beneficiaries of Corporate Guarantees for winding of the Company, have been admitted by the Hon''ble High Court of Karnataka vide combined Order dated 2nd January, 2015. The Company has filed appeals before the Division Bench of the Karnataka High Court to challenge three of the aforesaid six admission Orders of the single judge and such appeals are pending admission. No Order for appointment of a provisional Liquidator or Order of winding up of the Company, has been passed till date. The Suits are still in progress.
e) The Company has filed a suit claiming an amount of USD 210,400,000 along with Rs.162,10,00,000/- by way of Damages against one of the above Petitioners who have filed a winding up Petition against the Company in the City Civil Court, Bangalore and the same is pending adjudication. However, applications filed by the said Petitioner challenging the jurisdiction of the Suit has since been dismissed vide order of the Hon''ble City Civil Court dated 30th April 2016.
f) The litigation with ICICI Bank regarding 20,14,000 shares of UBL is mentioned in details in para 33(b).
(g) Pursuant to a Corporate Guarantee given by the Company to BIAL, the Company deposited 50% of the Guarantee amount of Rs.83.533 million with the Hon''ble High Court of Karnataka pursuant to order passed by the Hon''ble Supreme Court consequent to filing of SLP by the Company. The Suit is still in progress.
(h) The Company has appealed to SAT challenging the communication dated 27th April 2015 by SEBI to restate the Company''s accounts for Financial Years 2012-13 and 2013-14. By its Order dated 29th May, 2013, the SAT has stayed the operation, implementation and effect of the communication dated 27th April, 2015. In view of the resolution passed in the SEBI Board Meeting dated 12th March 2016 and the subsequent press release issued by SEBI, the counsel of SEBI has before the Hon''ble SAT stated that the order dated 27th April 2015 may be quashed with liberty to SEBI to pass appropriate orders in accordance with law. Accordingly, orders passed by SEBI dated 27th April 2015 have been set aside vide order of the Hon''ble SAT vide its order dated 29th March 2016.
(i) Due to restraint orders passed by the High Court of Karnataka, rentable commercial office space could not be leased out resulting in continued loss of significant rental revenue. The Company has filed an Application vide CA No. 1428 of 2014 in COP 185/12 with a prayer to permit the Company to lease/rent out the vacant premises at UB City and grant such other further orders as are just. This application is pending.
18. The Company does not have a Managing Director since 18th April 2014. The Company has appointed a Chief Financial Officer, subsequent to the Balance Sheet date, on 20th April 2016.
The operations of the Company for the year under review were carried out by the President of the Company under the guidance of the Chairman of the Board and financial matters were monitored by the Group Chief Financial Officer under the guidance of the Chairman of the Board. The Group Chief Financial Officer has since retired.
19. Zuari Fertilizers and Chemicals Limited ("Zuari") through an open offer process has become the majority shareholder of Mangalore Chemicals & Fertilizers Limited ("MCF") and currently it is holding 53.03% of the paid up equity share capital of MCF. Consequently, MCF ceased to be an Associate of the Company. Since certain disputes have arisen out of the Shareholders Agreement ("SHA") with Zuari Group, the UB Group has invoked the arbitration clause in the SHA and have referred the dispute to an Arbitrator. The arbitration proceedings are pending.
20. Due to certain non-compliances under Listing Agreement with Stock Exchanges, the trading in the equity shares of KFA and UB Engineering Ltd. has been "suspended from trading" w.e.f 1st December 2014 and the suspension is still continuing.
21. Certain pre-existing loans from United Spirits Limited ("USL") and its wholly owned subsidiaries extended to UBHL and which were in existence as on 31st March 2013 aggregating to Rs.1337.41 crores were consolidated into and recorded as an unsecured loan by way of an Agreement entered into by the Company with USL on 3rd July 2013. This loan has been granted for a period of 8 years and is payable in 3 annual installments commencing from the 6th Anniversary of the effective date of the Loan Agreement. At an EGM of United Spirits Limited on 28th November 2014, the said loan agreement between the Company and United Spirits Limited, was not approved. The Company has not accounted for any interest on the loan since October 2014.Consequent to non-compliance of the terms of the Agreement, USL claimed payment of the entire principal amount of Rs.1337.41 crores together with outstanding interest. Meanwhile vide its letter dated 14th July 2016, USL has invoked the arbitration clause in the agreement and have appointed one arbitrator. Similarly the Company has also appointed one arbitrator in terms of the agreement. The process of arbitration has commenced.
22. One of the Group Company has raised a claim of Rs.175.42 crores upon the Company. This amount consists of loans given to the company and the proceeds of invocation and sale of their pledged shares by a bank, the realization of which was utilized by the bank for the purpose of liquidating the dues of the company. The loan has become overdue as on 31st March 2016.
23. Going Concern
The Company is defending recovery proceedings by the Consortium of Banks of KFA based on corporate guarantees, the validity of which is being contested. As stated herein above, the Company has filed before the Hon''ble Bombay High Court, a suit seeking to declare the corporate guarantee null, void ab initio and non-est. The suit is still pending adjudication. (Refer note no. 31 and 37). Certain winding up petitions in this regard are pending before the Karnataka High Court and which are contested by the company.
The company has filed a suit for damages against the aircraft engine manufacturers for supply of inherently defective engines, both in design and manufacture, to KFA. The Application filed by the engine manufacturers challenging the jurisdiction has been dismissed by the Hon''ble City Civil Court, Bangalore vide its order dated 30th April 2016. The company is pursuing without prejudice, negotiations with two of the creditors who have filed winding up petitions against the Company, to try and settle the disputes amicably. Two members of the Consortium of Bankers of KFA have assigned their debt to an Asset Reconstruction Company (ARC).
Under direction of Court pending resolution of various disputes, amounts totaling Rs.794.38 crores are held as cash deposits.
The market value of the Company''s properties and investments is significantly higher than the carrying value. The operations of UBGC (a Division of the Company), are generating substantial revenues on a regular basis. Further, revenues are being generated from the Logo fee contracts with various other companies. The Company is also receiving dividends on its investments. Added to it is the fact that the rental revenue is also generating cash inflows, and this would substantially increase when the embargo to renew or take on fresh lease, is lifted by the High Court.
Having regard to the totality of all the above facts and also the substantial assets of the Company which can be monetized in case of necessity, the financial statements for the year ended 31st March 2016 have been presented on principles applicable to Going Concern.
24. The Company had advanced Rs.20 crores to a vendor. Due to the demise of the owner of the vendor company, the supply arrangement could not be consummated. Discussions are on with the legal heirs for the recovery of the advance. However, as a matter of prudence the Company has provided for the advance.
25. Events occurring after the date of the Balance Sheet
(a) The Directorate of Enforcement (ED), Ministry of Finance-Dept. of Revenue, Government of India, vide its Provisional Attachment Order No. 11/2016 dated 11th June 2016, received by the Company, has provisionally attached the immovable properties of the Company based in Bangalore and Mumbai under Section 5(1) of Prevention of Money Laundering Act, 2002 for a period of 180 days from the date of the Order in connection with investigation against Dr. Vijay Mallya, Kingfisher Airlines Limited & Others. The Company is in consultation with its Legal Counsels for taking appropriate steps that may be required including defending the case before the Adjudicating Authority in Delhi pursuant to a Show Cause Notice dated 11th July 2016 received from the Adjudicating Office in this regard.
(b) The Company executed a Joint Development Agreement ("JDA") with Prestige Estates Projects Limited ("Prestige"), a reputed Developer based in Bangalore, on April 26, 2010 for development of a luxury residential building named as "Kingfisher Towers - Residences at UB City" in the available land in UB City. Due to certain delay in construction, the Company claimed an amount of Rs.66 crores from Prestige up to 31st March 2016 and reserved its rights to claim further claims beyond 31st March 2016 till the receipt of the Occupancy Certificate.
26. Remuneration to Chairman, Managing Director and Managerial Personnel
(i) The Chairman of the Company has received remuneration from two subsidiaries, amounting to USD 120,000 (Pr year USD 120,000) and GBP 89,600 (Pr year GBP 89,600) during the year 2015-16.
The estimates of future salary increases considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
27. Details of dues to Micro, Small and Medium Enterprises and Small Scale Industries.
Based on the response received by the Company, there are no outstanding as at March 31, 2016 to suppliers, as defined under the Micro, Small & Medium Enterprises Development Act, 2006.
Amount due to Micro and Small Enterprises is Nil to the extent of information disclosed by creditors.
28. The Company has recognized the rent from cancellable operating leases in accordance with the terms of the lease deed. In respect of the non-cancellable operating leases, the Company recognizes the rent on a straight line basis over the non- cancellable lease term. Future minimum lease payments receivable under non-cancellable operating lease Rs.Nil (Pr year Nil).
Notes :
1 Income under the segment "investments" represents dividends received, profit on sale of investments.
2 Income under the segment "property development" represents lease rent and profit on sale of immovable property.
3 Segment results represents profit/(loss) before interest expenses, other income, tax and exceptional items.
4 Capital expenditure represents the gross additions made to fixed assets during the year.
5 Segment assets include Non-Current Assets and Current Assets except income tax assets and increase in value of land and building due to revaluation.
6 Segment Liabilities include Non-Current Liabilities and Current Liabilities except provision for tax.
29. Disclosures required by Accounting Standard (AS) 29-"Provisions, Contingent Liabilities and Contingent Assets Provisions:
Year and quantum of outflow of cash in respect of the above contingent claims is not presently ascertainable. Time of outflow of cash on account of leave encashment is contingent upon the time of employee''s separation from the Company.
*Based on actuarial valuation from an approved valuer.
30. The Company has not entered into any speculative derivative transactions. Hedging is restricted to the business needs of the Company. As at the Balance Sheet date, foreign currency receivable / payable that is not hedged by any derivative instrument or otherwise are as under:
31. All amounts are in Rupees million, unless otherwise stated.
32. Previous year''s figures have been regrouped wherever necessary.
Mar 31, 2015
1. The Company has executed a Joint Development Agreement with a
Developer on 26th April, 2010 for development of a luxury residential
building to be named as "Kingfisher Towers  Residences at UB City". The
development of the above project (in which the Company is entitled to
55% share of super built up area) is under progress.
The Company has issued allotment letters in respect of seven
residential units in Kingfisher Towers by collecting booking amounts of
Rs. 1,545.184 million (Pr year Rs. 1,385.302 million).
2. Estimated amount of contracts remaining to be executed on capital
account as at 31st March 2015 and not provided for is Rs. Nil million
(net of advances) (Pr year Rs. 6.600 million).
Certain aircraft lessors and vendors of Kingfisher Airlines Limited
(KFA) have invoked the corporate guarantees given by the company on
behalf of KFA. The total amount invoked and outstanding as on March 31,
2015 is Rs. 15,275.400 million (Pr year Rs. 15,275.400 million) and
Kingfisher Airlines Limited is under negotiation with the beneficiaries.
Also, Consortium of KFA bankers have invoked Company's corporate
guarantee and demanded payment of Rs. 62,033.500 million due from KFA
along with interest, if any, decided by the Court. This matter is being
contested by the Company in various Courts. Accordingly, the Company
continues to recognize these obligations as only 'contingent
liabilities'. Based on management's opinion no provision is presently
considered necessary. In any event, the amount is not quantifiable.
A claim has been made for Rs. 1,462.900 million by a Bank towards share
recompense amount. The company has obtained legal advice that this claim
is not enforceable and accordingly the amount is presently shown above
as "claims against the Company not acknowledged as debt."
3. Fixed Assets
a) The Company has revalued its land & buildings in Bangalore, as on
March 31, 2014 at their Fair Market Value based on Valuation Report of
an independent approved value and the carrying values of the
respective assets have been adjusted accordingly. The incremental
appreciation in the value of land arising out of the aforesaid
revaluation is Rs. 5,835.605 million and that of building is Rs. 1,672.987
million. The incremental appreciation ofRs. 7,508.592 million, has been
credited to the Fixed Assets revaluation reserve
b) The Company owns a valuable trademark which is in the form of the
Company logo carried at NIL value. This logo has been licensed to Group
companies.
c) The Company's UB City property and the land, in which residential
properties are being developed, are under charge in favor of HDFC
Limited, for facilities granted to the Company
d) KFA lenders have sent a notice purportedly under the SARFAESI Act in
respect of the Company's property in Goa. The Company has responded to
the notice issued to it purportedly under the SARFAESI Act challenging
the same Pending adjudication of the suit, the Goa property continues
to remain as an asset of the Company
4. Investments:
a) The Company has pledged 1,713,820 shares of United Spirits Limited,
4,753,881 shares of Mangalore Chemicals & Fertilizers Limited, 317,030
shares of McDowell Holding Limited, 8,794,000 shares of United
Breweries Limited to secure the borrowings of the company along with
the borrowings of subsidiary companies and an associate company. The
Company has also given undertaking in favor of it's lender and that of
an associate company, for non-disposal of 2,014,000 shares held in
United Breweries Limited
b) Investments as on 31st March, 2015 include 59,150,000 shares of
Kingfisher Airlines Limited, held in custody of a lender after they have
invoked the pledge of the shares
c) The Company's investment of Rs. 26.512 million with IDFC Mutual Fund
is under a lien, to secure the borrowings of a third party
d) The Preference Shares held in an overseas subsidiary, UB Overseas
Limited are to be redeemed anytime at the option of the Company or at
the end of 10 years from the date of allotment of shares. The Company
also has the option for partial / full conversion of Preference shares
into equity shares of UB Overseas Limited, in the ratio of 1 equity
share for one preference share held, at face value of USD 1 each to be
determined and issued by the Issuer.
e) Based on a critical review during the year of the carrying value of
long term strategic investments, the management has provided an
aggregate amount of Rs. 2,809.619 million, as disclosed in the accounts,
as a matter of commercial prudence. While in respect of other
strategic investments the matter will be reviewed during the following
year based on business plans, investor funding and potential
opportunities.
f) SREI Infrastructure Finance Limited, one of the Company's lenders,
has invoked the Company's pledge and sold 500,000 shares of United
Spirits Limited. They have used a portion of the sale proceeds to
retire the loan outstanding and holding a balance of Rs. 99.09 crores
against their purported dues from KFA, which is being contested
5. Sale of shares in United Spirits Limited
The Division Bench of the Hon'ble High Court of Karnataka, vide its
Order dated 20th December 2013 has set aside the permission granted by
the Hon'ble Company Judge under Section 536(2) of the Companies Act
1956 to dispose of the shares of USL in favor of Diageo Plc / Relay
BV. The Company and Diageo Plc have approached the Hon'ble Supreme
Court by way of SLPs challenging the Order of the Division Bench.
Pending disposal of the Company's SLP's, the Hon'ble Supreme Court has
by its Order dated 10th February, 2014 directed that status quo be
maintained in respect of the transaction of sale of shares to Diageo.
6. Tax provision
There is no income tax liability on the profits of the year, taking
into account the exempted Profit on sale of securities. Further, having
regard to the adjustments required to be made to the book profit in
respect of write off of certain advances against the provision made for
such advances, there would also not be any liability on account of
Minimum Alternate Tax.
7. Exceptional Items
Exceptional items comprised of
a) Profit (net) of Rs. 6,257.344 million on sale of 3,497,985 equity
shares in United Spirits Limited, 639,280 equity shares in McDowell
Holdings Limited and 72,368,897 equity shares in Kingfisher Airlines
Limited by lenders of Kingfisher Airlines Limited
b) Profit of Rs. 3,392.665 million on sale of 1,271,158 equity share in
United Spirits Limited by the Company's lenders
8. a) The Consortium of KFA lenders, have sold certain investments
belonging to the Company pursuant to the purported pledge
b) KFA lenders have invoked Company's Corporate Guarantee and demanded
payment of dues from KFA amounting to Rs. 62,033.500 million
c) The Consortium of KFA Bankers, have sold in periodical lots certain
investments belonging to the Company pursuant to the purported pledge.
The Company and others have filed a suit in the Hon'ble Bombay High
Court, being Suit No. 311 of 2013 (Bombay Suit) against the consortium
of lenders, who have advanced loans to KFA, inter alia, seeking the
following reliefs:-
(a) "For a declaration that the Corporate Guarantee dated 21st
December, 2010 given by the Company and the Pledge Agreement dated 21st
December, 2010, are void ab-initio and non-est;
(b) For a permanent order and injunction restraining the consortium of
bankers, their servants, agents or assigns, or any other person
claiming by, through or under them or any of them, from acting upon, in
furtherance or in any manner giving effect to the impugned Notice dated
16th March, 2013, or from taking any other or further steps to act upon
or in furtherance of the Pledge Agreement dated 21st December, 2010,
save and except in accordance with the procedure set out in clause 8.1
of the MDRA, including issuing a notice there under.
(c) For a permanent order and injunction restraining the consortium of
bankers, their servants, agents or assigns, or any other person
claiming by, through or under them or any of them, from acting upon or
in furtherance of the Corporate Guarantee dated 21st December, 2010
given by the Company and the Pledge Agreement dated 21st December,
2010;
(d) That an order and decree of damages of the sum of Rs. 3,199.68 crores
as set out in the Particulars of Claim be awarded to the Plaintiffs."
The Company has also filed a Notice of Motion in the said Suit, being
Notice of Motion 306 of 2014 inter alia, for a decree on admission that
the extent of the liability under the Corporate Guarantee is restricted
to Rs. 1601.43 crores based on admissions by the consortium of lenders.
The said Suit and Notice of Motion are pending adjudication in the
Hon'ble Bombay High Court.
9. Confirmation of balances from certain Sundry Debtors and Sundry
Creditors are awaited. Adjustment for differences, if any, arising out
of confirmation and reconciliation thereof would be made in the current
year. The Management is of the opinion that the effect of adjustments,
if any, is not likely to be significant.
10. The Company has advanced Rs. 1,333.240 million (Pr year Rs. 1,306.049
million) to overseas subsidiaries and a domestic associate, which have
not yet been repaid. In case of the associate, the Company has made a
further assessment of its financial condition, considering its
operations for the current year, and has decided, as a matter of
prudence, to provide for Rs. 578.960 million (Pr year Rs. Nil) due from it.
In respect of overseas subsidiaries, no provision has been considered
at this stage
11. The Company has accrued interest of Rs. 17.962 million (Pr year Rs.
88.020 million) on loans to associate / overseas subsidiary, as per
Loan Agreements signed with them. Considering the income stream of
those companies, realizability of this interest could possibly take
protracted period of time beyond those stipulated in the Loan
Agreement.
12. Cash in hand includes foreign currency notes
13. As required under Section 205C of the Companies Act, 1956, the
Company has transferred Rs. 0.777 million (Pr year Rs. 0.330 million) to
the Investor Education and Protection Fund (IEPF) during the year. As
on March 31, 2015, no amount was due to be transferred to the IEPF
14. Claim against a banker for restitution of deposits of Rs. 609.60
million, which were unilaterally encased and thereafter appropriated
towards their claims against a Group Company is being pursued before
the Hon'ble High Court of Karnataka Appropriate amounts are being shown
as recoverable from the said bank.
15. The Company and Kingfisher Finevest India Limited (KFIL) have filed a
suit, inter alia, against IDBI Trusteeship Services Limited (IDBI
Trusteeship), Indian Global Competitive Fund (IGCF) and SREI Venture
Capital Limited (SREI), in the City Civil Court at Calcutta, being T.S.
No. 966 of 2013, inter alia, for a declaration that the Security
Trustee Agreement dated 30th June, 2008 and the Consolidated Deed of
Pledge dated 21st December, 2010 (in respect of pledged shares of
United Spirits Limited and KFA held by the Company and KFIL) are void,
unenforceable and of no effect. The said suit is pending
SBICAP Trustee and the Consortium of Banks, which have advanced loans
to KFA have filed a suit, inter alia, against IDBI Trusteeship Services
Limited, SREI Venture Capital Limited, UBHL and KFIL in the Court of
City Civil Judge in Bangalore, being O.S. No. 25877 of 2013 to enforce
their alleged rights under the Release of Residual Interest Agreement
dated 21st December, 2010 in respect of sale proceeds remaining after
appropriation of USL and KFA shares. On 10th June 2014, IDBI
Trusteeship Services Limited transferred the pledged shares to IGCF who
in turn sold 4,937,395 shares of United Spirits Limited ("Sold Shares")
held by UBHL and KFIL. By an Order dated 20th June, 2014 in Writ
Petition No. 28577 of 2014, filed by the Consortium of Banks and which
has now been disposed off, IGCF deposited the surplus/balance sales
proceeds from the Sold Shares with the Hon'ble High Court of Karnataka
and has been restrained from disposing off Rs. 690 crores retained by it.
The Company is defending the aforesaid O.S. No. 25877 of 2013 and the
ex-parte ad-interim orders passed therein
During the pendency of the Writ Petition No. 28577 of 2014, the
Consortium of Banks filed an application seeking to amend the plaint.
The amendment application was heard and allowed vide Order dated
15.10.2014. The Company and KFIL have filed separate Writ Petitions
against the said Order allowing the amendment application. The Company
and KFIL have also filed applications for rejection of the suit on
account of suit being barred by law and insufficient court fee
The company, after taking into account, various issues involved, has,
as a matter of prudence and without prejudice to the rights and
contentions of the Company in the legal proceedings as well as the
stand adopted by KFA against the purported recall of its loans by the
lenders, pursuant to which shares pledged by the company were sold by
the lenders, has debited a portion of the sale proceeds of the IGCF
sale of investments of Rs. 106.30 crores to KFA and written off the same
as unrealizable, along with other dues from KFA. The balance sale
proceeds of Rs. 847.46 crores continues to be disclosed as due from IGCF
16. Litigation
a) The lenders of Kingfisher Airlines Limited (KFA) have, pursuant to
certain Corporate Guarantees given by the Company (the validity of
which is disputed as set out hereinafter), demanded from the Company,
their alleged dues from KFA amounting to Rs. 6,203.35 crores with further
interest and other dues from 01/06/2013 and have moved the Debt
Recovery Tribunal ("DRT"), Bangalore for recovery of these alleged dues
by way of an Original Application (OA). The Interim Application filed by
the Company before the DRT seeking to reject the said OA on the ground
of jurisdiction has been dismissed by the Tribunal vide its Order dated
12th November, 2013. The Company's appeal before the DRAT, Chennai
challenging the DRT Order is pending.
b) Further, three lenders who have extended pre-delivery payment (PDP)
loans to KFA for purchase of aircrafts from M/s. Airbus S.A.S. and who
claim to be beneficiaries of Corporate Guarantees of the Company, have
filed proceedings before the DRT for recovery of total dues amounting to
Rs. 192.51 crores. By an ex-parte order dated February 4, 2014, in I.A.
No. 543/2014, the Hon. DRT has passed an ad-interim order attaching
pre-delivery payments made by KFA to M/s. Airbus S.A.S. up to Rs. 192.51
crores. This ad-interim order is still in force. The Company is
defending the said proceedings
c) In a suit filed by United Spirits Limited ("USL"), the Goa Senior
Division Court, by an Order dated 26th April, 2013 has granted an
ad-interim injunction against any coercive action by lenders of KFA in
respect of the Company's property in Goa, tenanted to USL. USL has also
deposited Rs. 35 crores in the Hon'ble Court pursuant to the said order.
Aggrieved by the Interim Order, the lenders filed an appeal in the High
Court of Bombay at Goa, being Appeal from Order No. 76 of 2013 praying
inter alia, that the Interim Order granting ad-interim injunction be
quashed and set aside. On 18th July, 2014, the Hon'ble High Court of
Bombay at Goa disposed off the appeal. The impugned order does not
preclude the Banks from initiating proceedings under the Securitization
and Reconstruction of Financial Assets and Enforcement of Security
Interests Act, 2002 (SARFAESI Act). It has been by the High
Court that the Interim Orders of 26th April and 4th May, 2013 shall
continue to operate until disposal of the application for temporary
injunction before the Learned Judge, Mapusa, subject to the right of
the Banks to proceed under the SARFAESI Act in accordance with law.
Pursuant to the Order dated 18th July, 2014, passed by the Hon'ble
Bombay High Court at Goa, the banks have filed an application under Sec.
14 of the SARFAESI Act before the District Magistrate. The Interim
Order dated 26th April, 2013 passed by the Goa Senior Division Court is
still in force and pending adjudication of the suit, the Goa property
continues to remain with the Company (and continues to be in the
possession of USL) with a purported charge in favor of Consortium of
KFA Bankers
d) In addition to two winding up petitions instituted by purported
beneficiaries of Corporate Guarantees issued by the Company, which are
being challenged before the Hon'ble Supreme Court and the Karnataka
High Court respectively, six more winding up petitions filed by certain
creditors of KFA, who are purported beneficiaries of Corporate
Guarantees for winding of the Company, have been admitted by the
Hon'ble High Court of Karnataka vide combined Order dated 02nd January,
2015. The Company has filed appeals before the Division Bench of the
Karnataka High Court to challenge three of the aforesaid six admission
Orders of the single judge and such appeals are pending admission. No
Order for appointment of a provisional Liquidator or Order of winding
up of the Company, has been passed till date
e) The Company has filed a suit for damages claiming an amount of Rs.
1,319.30 crores against one of the above Petitioners who have filed a
winding up Petition against the Company in the City Civil Court,
Bangalore and the same is pending adjudication.
f) The Company filed a Suit (L) No. 290 of 2015 in the High Court of
Judicature at Bombay against ICICI Bank Ltd (hereinafter referred to as
"ICICI") and 3i Info tech Trusteeship Services Ltd (hereinafter referred
to as "3i Info tech") challenging ICICI's alleged right to sell the
20,14,000 shares (the "NDU shares") of United Breweries Limited by
their notice dated 9th February, 2015 on the ground that the Loan
Purchase Agreement dated 21st December, 2010 entered into with ICICI
has ceased to operate consequent upon ICICI transferring, assigning
and/or innovating all its rights and obligations under the MDRA to a
third party and that the claim of Rs. 146.29 crores by ICICI cannot be
proceeded against the 20,14,000 shares as the LPA has worked itself
out.
Accordingly, the following ad-interim reliefs were sought in the Suit:
(i) That pending the hearing and final disposal of the Suit, for a
temporary order and injunction restraining the Defendants (3i Info tech
and ICICI), their servants, agents or assigns, or any other person
claiming by, through or under them or any of them, from acting on the
basis or in any manner giving effect to the Power of Attorney dated
12th November 2011, or from taking any other or further steps to act
upon or in furtherance of the Non Disposal Arrangement, dated 12th
November 2011.
(ii) That pending the hearing and final disposal of the Suit, for an
Order appointing a court receiver to take custody of 20,14,000 shares
of United Breweries Limited, held by the Company and which are the
subject matter of the Non Disposal Arrangement dated 12th November
2011.
By an Order dated 16th April, 2015, the Hon'ble Judge restrained both
3i Info tech and ICICI from selling the NDU shares and directed ICICI to
deposit the NDU shares with the Porto notary & Senior Master of Hon'ble
High Court of Bombay within a period of 2 weeks from the date of
pronouncement of the judgment/. This Order has been challenged in an
appeal filed by ICICI before the Division Bench of the Hon'ble Bombay
High Court which had only stayed the portion of the Order which directs
ICICI to deposit the NDU shares with the Porto notary & Senior Master
of Hon'ble Bombay High Court. However, the restraint Order on ICICI for
sale of NDU shares continues. Pending adjudication of the Suit and
without prejudice to the Company's rights and contentions therein ICICI
purported claim of Rs. 146.29 crores is disclosed as a contingent
liability
17. Events occurring after the date of the Balance Sheet
The Company has appealed to Securities Appellate Tribunal (SAT)
challenging the communication dated 27th April 2015 by SEBI to restate
the Company's accounts for Financial Years 2012-13 and 2013-14. By its
Order dated 29th May, 2013, the SAT has stayed the operation,
implementation and effect of the communication dated 27th April, 2015
till the next date of hearing
18. The Company's Rupee loan from HDFC Limited was converted into a
"Dollar Denominated Loan' at concessional rate of interest in Financial
Year 2011-12. A portion of the foreign currency translation difference
has been recognized as interest in terms of AS16 - 'Borrowing costs',
and the balance is kept in Foreign Currency Monetary Item Translation
Difference Account which is amortized over the life of the loan but not
beyond March 2020, as provided in Government of India Notification No
G.S.R.913 (E) (FNo. 17/133/208-CL. Vj, Dated 29.12.2011). Accordingly
an amount of Rs. 178.197 million is charged to the Statement of Profit and
Loss and the Balance of Rs. 183.463 Million is carried in Foreign
Currency Monetary Item Translation Difference Account.
19. The position of Managing Director fell vacant on 17th April 2014
and efforts are being made to identify a successor. The Company
presently does not have any Managerial Personnel namely Managing
Director and Chief Financial Officer. The day to day operations of the
Company are managed by Senior Executives of the Company under
directions of the Group Chief Financial Officer and Chairman of the
Board
20. Zuari Fertilizers and Chemicals Limited ("Acquirer") together with
Zuari Agro Chemicals Limited as the person acting in concert ("PAC")
with the Acquirer, by way of an Open Offer in terms of the SEBI
guidelines, acquired 43,329,000 fully paid-up equity shares of face
value of INR 10 (Rupees ten) each, comprising 36.56% of the equity
share capital, from the public shareholders of Mangalore Chemicals &
Fertilizers Limited ("MCF"). Post this open offer, the shareholding of
Acquirer in MCF increased from 16.47% to 53.03%. However, in terms of
the an Agreement entered into between the UB Group with the Acquirer,
the UB Group have an option to purchase such number of shares from the
Acquirer so as to equalize the respective shareholdings of both UB
Group and Zuari Group. The Board has resolved to exercise this option
in due course.
21. Due to certain non-compliances under Listing Agreement with Stock
Exchanges, the trading in the equity shares of KFA and UB Engineering
Ltd. has been "suspended from trading" w.e.f 1st December 2014 and the
suspension is still continuing
22. The Company had entered into a loan agreement with United Spirits
Limited on July 3, 2013 under which, an amount of Rs. 1,337.41 crores is
outstanding as on March 31, 2015. The loan is for a period of 9 years.
At an EGM of United Spirits Limited on November 28, 2014, the said loan
agreement between the Company and United Spirits Limited, was not
approved. The Company is examining the impact and consequences of such
non-approval and has not accounted for any interest on the loan in
Quarter 3 and 4 of the current financial year.
23. Going Concern
a) The Company is defending recovery proceedings by the consortium of
banks of KFA based on corporate guarantees, the validity of which is
being contested. As stated herein above, the company has filed in
Bombay High Court, a suit seeking to declare the corporate guarantee
null, void ab initio and non-est. The suit is still pending
adjudication
b) Connected with the Corporate Guarantees, the winding up petitions
filed in Hon'ble Karnataka High Court referred to in the Directors
report, in the opinion of Counsel, can be successfully resisted
c) The company has filed a suit for damages against the aircraft engine
manufacturers for supply of inherently defective engines, both in
design and manufacture, to KFA. The suit is pending. The company is
pursuing without prejudice, negotiations with two of the creditors who
have filed winding up petitions against the Company, to try and settle
the disputes amicably. Two members of the Consortium of Bankers of KFA
have assigned their debt to an Asset Reconstruction Company (ARC).
d) Under direction of Court pending resolution of various disputes,
amounts totaling Rs. 794.38 crores are held as cash deposits
e) Due to restraint orders passed by the High Court of Karnataka,
rentable commercial office space could not be leased out resulting in
continued loss of significant rental revenue. The Company has filed an
Application vide CA No. 1428 of 2014 in COP 185/12 with a prayer to
permit the Company to lease/rent out the vacant premises at UB City and
grant such other further orders as are just. Also, high value
residential units in Kingfisher Towers, could not be sold which has
impacted the cash flow. The said application is pending
Having regard to the totality of all the above facts and also the
substantial assets of the Company which can be monetized in case of
necessity, the financial statements for the year ended 31st March 2015
have been presented on principles applicable to Going Concern
24. The Company has had advanced Rs. 20 crores to a vendor. Due to the
demise of the owner of the vendor company, the supply arrangement could
not be consummated. Discussions are on with the legal heirs for
recovery of the advance.
25. Remuneration to Chairman, Managing Director and Managerial
Personnel
(i) The Chairman of the Company has received remuneration from two
subsidiaries, amounting to USD 120,000 (Pr year USD 120,000) and GBP
89,600 (Pr year GBP 89,600) during the year 2014-15
(ii) Mr. V Shashikanth who held office as a Managing Director till 17th
April 2014 received remuneration of Rs. 1.376 million
26. Details of dues to Micro, Small and Medium Enterprises and Small
Scale Industries.
Based on the response received by the Company, there are no outstanding
as at March 31, 2015 to suppliers, as defined under the Micro, Small &
Medium Enterprises Development Act, 2006.
Amount due to Micro and Small Enterprises is Nil to the extent of
information disclosed by creditors.
27. The Company has recognized the rent from cancellable operating
leases in accordance with the terms of the lease deed. In respect of
the non-cancellable operating leases, the Company recognizes the rent
on a straight line basis over the non- cancellable lease term. Future
minimum lease payments receivable under non-cancellable operating lease
Rs. Nil (Pr year Nil).
i) Name of the Related Parties and description of relationship
Subsidiaries
Bangalore Beverages Limited, Bestride Consultancy Pvt Limited, City
Properties Maintenance Company Bangalore Limited, Kingfisher Finevest
India Limited, Kingfisher Training and Aviation Services Limited,
Kingfisher Aviation Training Limited, Kingfisher Good times Private
Limited, UB Electronic Instruments Limited, UB Infrastructure Projects
Limited, UB international Trading Limited, UB Sports Limited, Rigby
International Corp., United Breweries of America Inc, Delaware,
inversions Mirabel, S.A, Mendocino Brewing Co. Inc, USA, United
Breweries International [UK] Limited, Kingfisher Beer Europe Limited
(formerly known as UBSN Limited), Rubic Technologies, Inc, Relate
Brewing Company LLC, UB Overseas Limited, UBHL (BVI) Limited.
Associates
UB Engineering Limited, WIE Engineering Limited (Under Liquidation),
Pixar India Limited, UB Pharma (Kenya) Limited.
28. The Company has not entered into any speculative derivative
transactions. Hedging is restricted to the business needs of the
Company. As at the Balance Sheet date, foreign currency receivable /
payable that is not hedged by any derivative instrument or otherwise
are as under:
29. All amounts are in Rupees million, unless otherwise stated
30. Previous year's figures have been regrouped wherever necessary.
Mar 31, 2014
CORPORATE INFORMATION:
United Breweries (Holdings) Limited (UBHL), headquartered in UB City,
Bangalore is the holding company of the UB Group of Companies. It holds
investments in the Groups alcoholic beverages business through United
Spirits Limited and United Breweries Limited. UBHL also holds
investments in Mangalore Chemicals & Fertilizers Limited, Kingfisher
Airlines Limited and UB Engineering Limited. In addition to financing
Group Companies by way of capital, loans and provision of corporate
guarantees, it also exports alcoholic beverages, leather goods,
garments and processed foods.
1. Financial statements have been prepared on basis similar to last
year in view of the clarifications issued by Ministry of Corporate
Affairs, Govt. of India, vide its Circular no. 1/19/2013-CL-V dated 4th
April 2014.
2. UB City Luxury residential Project
The Company has executed a Joint Development Agreement with a Developer
on 26th April, 2010 for development of a luxury residential building to
be named as "Kingfisher Towers - Residences at UB City". The
development of the above project (in which the Company is entitled to
55% share of super built up area) is under progress and is expected to
be completed in 2015.
The Company has issued allotment letters in respect of seven
residential units in Kingfisher Towers by collecting booking amounts of
Rs. 1,385.302 million (Pr year Rs. 1,135.222 million)
3. Estimated amount of contracts remaining to be executed on capital
account as at 31st March 2014 and not provided for is Rs. 6.600 million
(net of advances) (Pr year Rs. 2.190 million).
4. Contingent liabilities: Rs.in million
As at As at
March 31, 2014 March 31, 2013
a) Guarantees given by the
Company on behalf of
subsidiaries to banks
and Nil 1,500.000
financial institutions
and others
b) Guarantees given by the
Company on behalf of
associates to banks and 88,280.760 90,852.200
financial institutions
and others (The enforce
-ability of the Guarantees
issued for Kingfisher
Airlines Ltd
beneficiaries are being
contested in appropriate
Courts of law)
c) Claim against the company
not acknowledged as debt 1,462.900 -
d) Demand raised by Income
Tax authorities against
which the Company has 786.774 948.793
preferred appeals
Certain aircraft lessors and
vendors of Kingfisher Airlines Limited (KFA) have invoked the corporate
guarantees given by the company on behalf of KFA. The total amount
invoked and outstanding as on March 31, 2014 is Rs. 15,275.400 million
(Pr year Rs. 9,874.600 million) and Kingfisher Airlines Limited is
under negotiation with the beneficiaries. Also, Consortium of KFA
bankers have invoked Company''s corporate guarantee and demanded payment
of Rs. 64,932.900 million due from KFA. This matter is being contested
by the Company in various Courts. Accordingly, the Company continues to
recognize these obligations as only ''contingent liabilities''.
A claim has been made for Rs. 1,462.900 million by a Bank towards share
recompense amount. The company has obtained legal advice that this
claim is not enforceable and accordingly the amount is presently shown
above as "claims against the Company not acknowledged as debt."
5. Fixed Assets
a) The Company has revalued its land & buildings in Bangalore, as on
March 31, 2014 at their Fair Market Value based on Valuation Report of
an independent approved valuer and the carrying values of the
respective assets have been adjusted accordingly. The incremental
appreciation in the value of land arising out of the aforesaid
valuation is Rs. 5,835.605 million and that of building is Rs.
1,672.987 million. The total incremental appreciation of Rs. 7,508.592
million has been credited to the Fixed Assets revaluation reserve.
b) The Company owns a valuable trademark in the form of the company
logo which is carried at NIL value. This logo has been licenced to
Group companies.
c) The Company''s UB City property and the land, in which residential
properties are being developed, are under charge in favour of HDFC
Limited, for facilities granted to the Company.
d) KFA lenders have sent a notice purportedly under the SARFAESI Act in
respect of the Company''s property in Goa. The Company has responded to
the notice issued to it purportedly under the SARFAESI Act challenging
the same.
Pending adjudication of the suit, the Goa property continues to remain
as an asset of the Company. .
6. Investments:
a) The Company has pledged 8,090,787 shares of United Spirits Limited,
13,753,881 shares of Mangalore Chemicals & Fertilizers Limited,
6,269,728 shares of UB Engineering Limited, 59,150,000 shares of
Kingfisher Airlines Limited, 16,274,122 shares of United Breweries
Limited and 317,030 shares of McDowell Holdings Limited to secure the
borrowings of the Company along with the borrowings of subsidiary
companies and an associate company. The Company has also given
undertaking in favour of it''s lender and that of an associate company,
for non disposal of 4,000,000 shares held in Mangalore Chemicals &
Fertilizers Limited and 3,105,000 shares held in United Breweries
Limited.
b) Investments as on 31st March, 2014 includes 72,368,897 shares of
Kingfisher Airlines Limited, 639,280 shares of McDowell Holdings
Limited and 360,000 shares of United Spirits Limited held in custody of
lenders after they have invoked the pledge of the shares. Of the above,
72,368,897 shares of Kingfisher Airlines Limited, 639,280 shares of
McDowell Holdings Limited and 1,125 shares of United Spirits Limited,
have been sold by them, subsequent to Balance Sheet date.
c) The Company''s investment of Rs. 26.512 million with IDFC Mutual Fund
is under a lien, to secure the borrowings of an associate company.
d) The Preference Shares held in an overseas subsidiary, UB Overseas
Limited are to be redeemed anytime at the option of the Company or at
the end of 10 years from the date of allotment of shares. The Company
also has the option for partial / full conversion of Preference shares
into equity shares of UB Overseas Limited, in the ratio of 1 equity
share for one preference share held, at face value of USD 1 each to be
determined and issued by the Issuer. During the year, the Company has
made additional investment of USD 1 Million preference of USD 1 each.
e) Investments in subsidiaries (including step down subsidiaries) and
associates are presently considered as long term and strategic in
nature and diminution in their carrying cost, though significant, is
considered temporary and accordingly no provision has been considered
necessary.
f) The Company along with its subsidiaries has significant financial
exposure on various counts to Kingfisher Airlines Limited (KFA).
Although KFA''s license has expired on December 31, 2012, under civil
aviation regulations, KFA has a period of 24 months to reinstate the
same. As at March 31, 2014, the financial exposure includes equity
investment of Rs. 8,424.300 million and corporate guarantees to
banks/aircraft lessors, some of which have been invoked. Such
invocations are being contested in court. The Company considers the
diminution in the value of this investment to be temporary and as such
no provision has been considered in the accounts.
7. The Company, over the years advanced significant amounts to
subsidiaries aggregating to Rs. 27,596.573 million.
The Company has made a critical appraisal of the amount recoverable
from certain subsidiaries and taking into consideration the net worth
of those companies a sum of Rs. 24,505.944 million due from those
subsidiaries have been written off.
8. The Board of Directors has reviewed the significant amounts due
from KFA and in the light of KFA''s liquidity constraints and as a
matter of prudence, has made a provision for the amounts due of Rs.
12,597.072 million.
Additionally provision has also been made for a sum of Rs. 119.982
million due from a subsidiary.
9. Sale of shares in United Spirits Limited
a) Pursuant to the Share Purchase Agreement entered into by the Company
and its subsidiary Kingfisher Finvest India Ltd (KFIL) for sale of
16,716,987 equity shares held by it in United Spirits Ltd to Relay BV,
an indirect wholly owned subsidiary of Diageo plc., the Company, on
July 4, 2013, with leave of the Hon''ble. High Court of Karnataka under
sec. 536(2) of the Companies Act, 1956 sold 10,141,437 Equity shares.
Appeals were filed by the petitioners in the Winding up petition before
the Karnataka High Court seeking to set aside the above Order of the
Company Judge. The Division Bench of the Hon''ble High Court of
Karnataka vide its order dated 20th December 2013 has set aside the
permission granted by the Hon''ble Company Judge under Section 536(2) of
the Companies Act, 1956 to dispose of the shares of USL in favour of
Diageo Plc / Relay BV. The Company and Diageo Plc have approached the
Hon''ble Supreme Court by way of SLPs challenging the order of the
Division Bench. Pending disposal of the Company''s SLP''s, the Hon''ble
Supreme Court has directed that status quo be maintained in respect of
the transaction of sale of shares to Diageo. Accordingly the company
has accounted for the said sale of shares in its books.
The Hon''ble Supreme Court also stated that the proceedings for winding
up of the Company may continue before the learned Company Judge.
b) The leave of the Court under section 536 (2), also mandated the
Company to keep a sum of Rs. 2,500 million deposited with the Court.
Accordingly, the Company has deposited Rs. 2,500 million with The
Registrar General, High Court of Karnataka, Bangalore and the same is
included under "Other Current Assets".
c) Further, the order granting permission to sell the shares as above,
mandated the Company to keep the net sales proceed remaining after
paying off the permitted secured lenders, transaction costs and taxes,
invested in bank deposits until further orders. Accordingly, the
Company has kept deposited a sum of Rs. 3,797.506 million with a Bank,
which has been shown under " Other Current Assets".
10. Tax provision
The Company has received tax opinion that amounts due from subsidiaries
which have been written off, are tax admissible and consequently, no
provision for tax has been made in the accounts.
11. Exceptional Items
Exceptional items includes :
a) Profit of Rs. 14,128.830 million on sale of 10,141,437 equity shares
in United Spirits Limited, to Diageo Plc / Relay BV.
b) Profit (net) of Rs. 2,136.259 million on sale of 2,469,098 equity
shares in United Spirits Limited, 11,207,729 equity shares in Mangalore
Chemical and Fetrilizers Limited, 2,471,125 equity shares in McDowell
Holdings Limited and 62,714,658 equity shares in Kingfisher Airlines
Limited by lenders of Kingfisher Airlines Limited
c) Profit of Rs. 3,613.817 million on sale of 1,432,086 equity share in
United Spirits Limited and 193,300 equity share in United Breweries
Limited by the Company''s lenders
12. i) The Consortium of KFA Bankers, have sold certain investments
belonging to the Company pursuant to the purported pledge.
ii) KFA lenders have invoked Company''s Corporate Guarantee and demanded
payment of dues, due from KFA amounting to Rs. 64,932.900 million.
iii) The Company and others have filed a suit in the Hon''ble Bombay
High Court, being Suit No. 311 of 2013 (Bombay Suit) against the
consortium of bankers, who have advanced loans to Kingfisher Airlines
Limited ("KFA"), inter alia, seeking the following reliefs:-
(a) For a declaration that the Corporate Guarantee dated 21st December,
2010 given by the Company and the Pledge Agreement dated 21st December,
2010, are void ab-initio and non-est;
(b) For a permanent order and injunction restraining the consortium of
bankers, their servants, agents or assigns, or any other person
claiming by, through or under them or any of them, from acting upon, in
furtherance or in any manner giving effect to the impugned Notice dated
16th March, 2013, or from taking any other or further steps to act upon
or in furtherance of the Pledge Agreement dated 21st December, 2010,
save and except in accordance with the procedure set out in clause 8.1
of the MDRA, including issuing a notice there under.
(c) For a permanent order and injunction restraining the consortium of
bankers, their servants, agents or assigns, or any other person
claiming by, through or under them or any of them, from acting upon or
in furtherance of the Corporate Guarantee dated 21st December, 2010
given by the Company and the Pledge Agreement dated 21st December,
2010.
(d) That an order and decree of damages of the sum of Rs. 3,199.68
Crores as set out in the Particulars of Claim be awarded to the
Plaintiffs.
The Company has also filed a Notice of Motion in the said Suit, being
Notice of Motion 306 of 2014 inter alia, for a decree on admission that
the extent of the liability under the Corporate Guarantee is restricted
to Rs. 1,601.43 crores based on admissions by the consortium of
bankers. The said Suit and Notice of Motion are pending adjudication in
the Hon''ble Bombay High Court.
The gross sale proceeds from the sale of securities by the lenders of
KFA, have been adjusted by the said lenders against their dues from
KFA. The Management has obtained legal advice that the company has a
potential claim against lenders for recovery of the above sale
proceeds. Without prejudice to the rights and contentions of the
Company in the pending legal proceedings, the sale proceeds
appropriated by the lenders against KFA''s dues is included under Loans
and Advances recoverable from KFA.
13. Confirmation of balances from certain Sundry Debtors and Sundry
Creditors are awaited. Adjustment for differences, if any, arising out
of confirmation and reconciliation thereof would be made in the current
year. The Management is of the opinion that the effect of adjustments,
if any, is not likely to be significant.
14. The Company has advanced Rs. 1,556.049 million (Pr year Rs.
1,709.556 million) to overseas subsidiaries and an associate, which
have not yet been repaid. Even though there is erosion in the net worth
of these subsidiaries/ associate, the Management is of the view that
all the amounts are ultimately recoverable, taking into consideration
their business plans and growth strategies.
15. The Company has accrued interest of Rs. 88.020 million (Pr year
Rs. 1,046.459 million) on loans to associate / overseas subsidiary, as
per Loan Agreements signed with them. Considering the income stream of
those companies, realisability of this interest could possibly take
protracted period of time beyond those stipulated in the Loan
Agreement.
16. Cash in hand includes foreign currency notes.
17. As required under Section 205C of the Companies Act, 1956, the
Company has transferred Rs 0.330 million (Pr year Rs. 0.237 million) to
the Investor Education and Protection Fund (IEPF) during the year. As
on March 31, 2014, no amount was due to be transferred to the IEPF.
18 Events occurring after the date of the Balance Sheet
a) Between 17th June and 26th June 2014, HDFC Limited, a lender to the
Company, has sold 482,000 shares of United Spirits Ltd, held by the
Company and 1,748,000 shares of United Spirits Ltd, held by a
subsidiary by invoking the pledge created in its favour to secure the
Company''s borrowings.
b) On 12th May 2014, the Company (along with other constituents of the
UB Group) entered into agreement with Adventz Group in respect of their
respective shareholding in Mangalore Chemicals and Fertilizers Limited.
Further, the Company joined Zuari Fertilisers and Chemicals Limited (a
constituent of the Adventz Group) in making a competing offer under
Regulation 20 of SEBI (SAST) Regulations, 2011, as amended, for
acquisition of up to 30,813,939 equity shares of Rs. 10 each from the
public shareholders of Mangalore Chemicals and Fertilizers Limited, at
a price of Rs. 68.55 per equity share. In terms of the agreement, Zuari
Fertilisers and Chemicals Limited (Zuari), has agreed to subscribe to
all the shares that will be tendered in the competing offer and all
financial obligations, costs, charges and expenses including payment of
consideration to public shareholders in terms of the Takeover
Regulations will be borne by the Zuari alone. Management control,
however, will continue to be with UB Group. SEBI has issued its no
objection for the Open Offer subject to receipt of approval from
Competition Commission of India (CCI).
c) On June 30th and July 3rd 2014, Term Deposits of Rs. 609.674 million
kept by the Company with a bank, pursuant to Court order, has been
unilaterally pre-closed by the bank by exercising its general lien, to
adjust a claim arising out of a Corporate Guarantee issued by the
Company, in favour of a Group company. The Company has initiated legal
action for restitution of the said deposits.
d) On 10th June 2014, IDBI Trusteeship Services Limited have
transferred 4,937,395 shares of United Spirits Limited held by the
Company and its subsidiary, pledged in their favour to secure the
borrowings of KFA, to IGCF who in turn sold the said shares. Earlier,
the Company and it''s subsidiary, Kingfisher Finvest India Limited
(KFIL) had filed a suit, inter alia, against IDBI Trusteeship Services
Limited (IDBI Trusteeship), Indian Global Competitive Fund (IGCF) and
SREI Venture Capital Limited (SREI), in the City Civil Court at
Calcutta, being T.S. No. 966 of 2013, inter alia, for declaring the
Security Trustee Agreement dated 30th June, 2008 and the Consolidated
Deed of Pledge dated 21st December, 2010 (in respect of shares of
United Spirits Limited and KFA held by the Company and KFIL) as void,
unenforceable and of no effect. The said suit is pending.
SBICAP Trustee and the Consortium of Banks, which have advanced loans
to KFA had also filed a suit, inter alia, against IDBI Trusteeship
Services Limited, SREI Venture Capital Limited, UBHL and KFIL in the
Court of City Civil Judge in Bangalore, being O.S. No. 25877 of 2013 to
enforce their alleged rights under the Release of Residual Interest
Agreement dated 21st December, 2010 in respect of the aforesaid USL and
KFA shares.
On 27th July 2013, the Consortium of Banks filed Writ Petition No.
28577 of 2014 in the Hon''ble Karnataka High Court praying for deposit
of excess sales proceeds of the pledged shares with the court. By an
order dated 20th June, 2014 the Hon''ble High Court of Karnataka ordered
India Global Competitive Fund to deposit the surplus/ balance sales
proceeds from the aforesaid sale of shares in court. The Company is
contesting the aforesaid Writ Petition No. 28577 of 2014, O.S. No.
25877 of 2013 and the ex-parte ad-interim orders passed therein.
20. Litigation
a) The lenders of Kingfisher Airlines Limited (KFA) have, pursuant to
certain Corporate Guarantees given by the Company (the validity of
which is disputed as set out hereinafter), demanded from the Company,
their dues from KFA amounting to Rs. 6,493.29 crores with further
interest and other dues from 01/06/2013 and have moved the Debt
Recovery Tribunal ("DRT") for recovery of these dues by way of Original
Application (OA). The Interim Application filed by the Company before
the DRT seeking to reject the said OA on the ground of jurisdiction has
been dismissed by the Tribunal vide its order dated 12th November,
2013. Further, the Writ Petition against the DRT dismissal order,
preferred by the Company, has also been disposed of by the Hon''ble High
Court of Karnataka on 4th February, 2014, with liberty to move the
Debts Recovery Appellate Tribunal for suitable reliefs by way of
appeal. The Company has already preferred an Appeal before the Hon''ble
DRAT challenging the DRT dismissal Order and the same is pending
adjudication.
Further, 3 lenders who have extended pre delivery payment (PDP) loans
to KFA and who claim to be beneficiaries of Corporate Guarantees of the
Company; for purchase of aircrafts from M/s. Airbus S.A.S., have filed
proceedings before the DRT for recovery of total dues amounting to Rs.
192.51 crores. By an ex-parte order dated February 4, 2014, in I.A. No.
543/2014, the Hon. Tribunal has passed an ad-interim order attaching
pre-delivery payments made by KFA to M/s. Airbus S.A.S. up to Rs.
192.51 crores. This ad-interim order is continuing.
b) KFA lenders have sent a notice purportedly under the SARFAESI Act in
respect of company''s property in Goa (Goa property) which was mortgaged
to secure KFA borrowings. The Company has responded to the notice
challenging the same.
Pending adjudication of the suit, the Goa property continues to remain
as an asset of the Company.
c) Winding up Petitions
The Company is contesting nine winding up petitions filed by certain
creditors of KFA under Section 433/434 of the Companies Act, 1956
before the Hon''ble High Court of Karnataka.
Certain alleged Corporate Guarantees on behalf of KFA have been invoked
and certain purported beneficiaries of Corporate Guarantees issued on
behalf of KFA including the Consortium of Banks have filed petitions
against the Company under Sections 433/434 of the Companies Act 1956.
On 19th November, 2013, the Hon''ble Karnataka High Court admitted
Company Petition No. 248 of 2013 filed by BNP Paribas, one of the
purported beneficiaries under the purported Corporate Guarantee. The
Company filed Original Side Appeal No. 52 of 2013 before the Division
Bench of the Karnataka High Court challenging the judgment and order
dated 19th November, 2013 which appeal was dismissed by ajudgment and
order dated 16th December, 2013. The Company has now filed a Special
Leave Petition in the Hon''ble Supreme Court of India, being Special
Leave Petition No. 1163 of 2014 challenging the order of the Karnataka
High Court dated 16th December, 2013. The said Special Leave Petition
is pending.
On 13th December, 2013, the Hon''ble Karnataka High Court also admitted
Company Petition No. 185 of 2012 filed by Avions De Transport
Regionale, one of the other purported beneficiaries of a purported
Corporate Guarantee. Company has filed Original Side Appeal No. 18 of
2014 before the Division Bench of the Karnataka High Court challenging
the judgment and order dated 13th December, 2013. The said appeal is
still pending.
The Company has filed a suit for damages claiming an amount of Rs.
13,193.000 million against some of the above Petitioners in the City
Civil Court, Bangalore and the same is pending adjudication
21. The Company''s Rupee loan from HDFC Limited was converted into a
"Dollar Denominated Loan'' at concessional rate of interest in 2011-12.
A portion of the foreign currency translation difference has been
recognized as interest in terms of AS16 - ''Borrowing costs'', and the
balance is kept in Foreign Currency Monetary Item Translation
Difference Account which is amortised over the life of the loan but not
beyond March 2020, as provided in Government of India Notification No.
G.S.R.913 (E) (F.No. 17/133/208-CL. Vj, Dated 29.12.2011). Accordingly
an amount of Rs. 188.693 million is charged to the Statement of Profit
and Loss and the Balance of Rs. 361.660 Million is carried in Foreign
Currency Monetary Item Translation Difference Account.
BREWERIES
22. Going concern (HOLDINGS)
a) The Company is defending recovery proceedings by the consortium of
banks of KFA based on corporate guarantees, the validity of which is
being contested. The Company has filed in Bombay High Court, a suit
seeking to declare the corporate guarantee null, void ab initio and
non-est. The suit is still pending adjudication.
b) The Company has filed a suit for damages against the aircraft engine
manufacturers for supply of inherently defective engines, both in
design and manufacture, to KFA. The suit is pending. However, the
Company is pursuing without prejudice, negotiations to try and settle
the dispute amicably. Similarly, the Company is pursuing without
prejudice, negotiations with two of the creditors who have filed
winding up petitions against the Company, to try and settle the
disputes amicably. Two members of the Consortium of Bankers of KFA have
assigned their debt to a Asset Reconstruction Company (ARC). The ARC is
in discussion with the Company for settlement of these loans.
c) The total funds of the Company kept deposited with banks/courts
pursuant to direction of Court pending resolution of various disputes
amounts to Rs. 7,943.800 million.
d) Due to embargo by the High Court of Karnataka, rentable commercial
office space of 30,606 sq feet could not be leased out resulting in a
potential loss of revenue. Also, high value residential units in
Kingfisher Towers, could not be sold which has impacted the cash flow.
The Company is making a application to the court seeking approval for
leasing vacant space in UB City and for sale of it''s share of apartment
units in Kingfisher Towers.
Further, the company has substantial assets to monetize in case of
necessity.
Having regard to all the above facts, the financial statements for the
year ended March 31, 2014 have been presented on principles applicable
to Going Concern.
23. The Company is pursuing confirmation for an amount of Rs. 200.000
million advanced to a vendor. The confirmation has been delayed due to
the unexpected demise of the Owner of the business.
24. Remuneration to Chairman, Managing Director and Managerial
Personnel
i) The Chairman of the Company has received remuneration from two
subsidiaries, amounting to USD 120,000 (Pr year USD 120,000) and GBP
89,600 (Pr year GBP 89,600) during the year 2013-14.
ii) The Company has not paid any remuneration to its erstwhile Managing
Director, Mr. A Harish Bhat who held office up to 20th August 2013.
However, he has received remuneration of Rs. 1.347 million (Pr year Rs.
14.985 million) as executive of an associate company.
Mr. V Shashikanth was appointed as Managing Director with effect from
21st August 2013.
The Company has paid remuneration to the Managing Director, with effect
from 21st August 2013. He has received remuneration of Rs. 19.715
million.
iii) Subsidiaries have paid sitting fees of Rs. 0.055 million (Pr year
Rs. 0.090 million) to Directors including the Managing Director.
Description of the basis used to determine the overall expected rate of
return on assets including major categories of plan assets.
The expected return is calculated on the average fund balance based on
the mix of investments and the expected yield on them.
The estimates of future salary increases, considered in actuarial
valuation, take account of inflation, seniority, promotion and other
relevant factors such as supply and demand factors in the employment
market.
25. Details of dues to Micro, Small and Medium Enterprises and Small
Scale Industries.
Based on the response received by the Company, there are no outstanding
as at March 31, 2014 to suppliers, as defined under the Micro, Small &
Medium Enterprises Development Act, 2006.
Amount due to Micro and Small Enterprises is Nil to the extent of
information disclosed by creditors.
26. The Company has recognized the rent from cancellable operating
leases in accordance with the terms of the lease deed.
In respect of the non-cancellable operating leases, the Company
recognizes the rent on a straight line basis over the non- cancellable
lease term.
Future minimum lease payments receivable under non-cancellable
operating lease Rs. Nil (Pr year Nil)
Notes :
1 Income under the segment "investments" represents dividends received,
profit on sale of investments
2 Income under the segment "property development" represents lease rent
and profit on sale of immovable property.
3 Segment results represents profit/(loss) before interest expenses,
other income, tax and exceptional items.
4 Capital expenditure represents the gross additions made to fixed
assets during the year.
5 Segment assets include Non-Current Assets and Current Assets except
income tax assets and increase in value of land and building due to
revaluation.
6 Segment Liabilities include Non-Current Liabilities and Current
Liabilities except provision for tax and dividend.
7 Exceptional items represents profit on sale of shares in United
Spirits Limited in favour of Diageo Plc, profit (net) and sale of
pledged shares by lenders.
27. Related Party Transactions:
Key Management Personnel: Mr. A. Harish Bhat - Managing Director up to
August 20, 2013
Mr. V. Shashikanth - Managing Director from August 21, 2013
i) Name of the Related Parties and description of relationship
Subsidiaries
Bangalore Beverages Limited, Bestride Consultancy Pvt Limited, City
Properties Maintenance Company Bangalore Limited, Kingfisher Finvest
India Limited, Kingfisher Training and Aviation Services Limited,
Kingfisher Aviation Training Limited, Kingfisher Goodtimes Private
Limited, UB Electronic Instruments Limited, UB Infrastructure Projects
Limited, UB International Trading Limited, UB Sports Limited, Rigby
International Corp., United Breweries of America Inc, Delaware,
Inversiones Mirabel, S.A, Mendocino Brewing Co. Inc, USA, United
Breweries International [UK] Limited, Kingfisher Beer Europe Limited
(formerly known as UBSN Limited), Rubic Technologies, Inc, Releta
Brewing Company LLC, UB Overseas Limited, UBHL (BVI) Limited.
Associates
United Spirits Limited (*), Mangalore Chemicals & Fertilizer Limited
(**), UB Engineering Limited, WIE Engineering Limited (Under
Liquidation), McDowell Holdings Limited (***), Pixray India Limited, UB
Pharma (Kenya) Limited, Kingfisher Airlines Limited.
Subsidiary of an Associate
SW Finance Co. Limited (formerly Shaw Wallace Breweries Limited) (*),
Royal Challengers Sports Private Limited(*).
* upto 4th July 2013
** upto 30th April 2013
*** upto 9th January 2014
Mar 31, 2013
CORPORATE INFORMATION:
United Breweries (Holdings) Limited (UBHL), headquartered in UB City,
Bangalore is the holding company of the UB Group of Companies. It holds
investments in the Groups'' alcoholic beverages business through United
Spirits Limited and United Breweries Limited. UBHL also holds
investments in Mangalore Chemicals & Fertilizers Limited, Kingfisher
Airlines Limited and UB Engineering Limited. In addition to financing
Group Companies by way of capital and loans and advances, it also
exports alcoholic beverages, leather goods, garments and processed
foods.
1. UB City Luxury residential Project
The Company has executed a Joint Development Agreement with a Developer
on 26th April, 2010 for development of a luxury residential building to
be named as "Kingfisher Towers - Residences at UB City" in the
available land in UB City. The development of above project (in which
the Company is entitled to 55% share of super built up area) is under
progress and is expected to be completed in 2015.
The Company has issued allotment letters in respect of seven
residential units in Kingfisher Towers by collecting booking amounts of
Rs. 1,135.222 million (Pr year Rs. 826.925 million)
2. Estimated amount of contracts remaining to be executed on capital
account as at 31st March 2013 and not provided for is Rs. 2.190 million
(net of advances) (Pr year Rs. 5.357 million).
3. Contingent liabilities:
As at As at
March 31,
2013 March 31,
2012
a) Guarantees given by the Company on
behalf of subsidiaries to banks and 1500.000 1500.000
financial institutions and others
b) Guarantees given by the Company on
behalf of associates to banks and 90,852.200 77,228.600
financial institutions and others
(The enforceability of the
Guarantees issued for Kingfisher
Airlines Limited beneficiaries
are being contested in
appropriate Courts of law)
c) Demand raised by Income Tax
authorities against which the
Company has 948.793 234.210
preferred appeals
Certain beneficiaries have invoked the corporate guarantees given by
the company on behalf of Kingfisher Airlines Limited, an associate
company. The total amount invoked and outstanding as on March 31, 2013
isRs. 9,874.600 million (Pr year Rs. 8,357.700 million) and Kingfisher
Airlines Limited is under negotiation with the beneficiaries. The
Company continues to recognise these obligations as only Âcontingent
liabilities'' in view of the legal advice obtained by the company.
4. Fixed Assets
a) The Company''s land in Bangalore was revalued in August 2001, based
on an independent valuer''s report. Accordingly, the value of the land
was restated at Rs. 1,707 million, with a corresponding adjustment to the
Fixed Assets Revaluation Reserve. The amounts shown in the Balance
Sheet are after making adjustments for disposals.
b) The Company owns certain valuable trademarks which are carried at
NIL value. Some of these trademarks / logo have been licenced to Group
companies.
c) The Company''s UB City property and the land, in which residential
properties are being developed, are under charge in favour of HDFC
Limited, for facilities granted to the Company. ICICI Bank has second
charge in UB City properties for the loans granted by them.
d) The Company''s property in Goa is tenanted to an associate company
and is also under charges in favour of a bank for facilities granted to
another associate company. The lessee has obtained an injunction from
court restraining the lender from taking any coercive action in
enforcing the charge.
5. Investments:
a) The Company has pledged 22,451,587 shares of United Spirits Limited,
14,961,610 shares of Mangalore Chemicals & Fertilizers Limited,
6,269,728 shares of UB Engineering Limited, 194,633,555 shares of
Kingfisher Airlines Limited and 3,420,239 shares of McDowell Holdings
Limited to secure the borrowings of the company along with the
borrowings of subsidiary companies and an associate company.
b) Investment as on March 31, 2013, includes 21,870,156 shares of
Kingfisher Airlines Limited, 7,196 shares of McDowell Holdings
Limited,10,000,000 shares of Mangalore Chemicals & Fertilizers Limited
and 2,446,352 shares of United Spirits Limited held in custody of
lenders after they have invoked the pledge of these shares.
c) 21,870,156 shares of Kingfisher Airlines Limited, 215,000 shares of
McDowell Holdings Limited, 10,000,000 shares of Mangalore Chemicals &
Fertilizers Limited, 2,446,155 shares of United Spirits Limited held by
the Company and pledged with banks for credit facilities extended to
Kingfisher Airlines Limited have been sold by them, subsequent to
Balance Sheet date.
d) The Company''s investment of Rs. 26.512 million with IDFC Mutual Fund
is given as a lien to secure the borrowings of an associate company.
e) The investment in subsidiaries (including step down subsidiaries)
have been considered as long term strategic investments and diminution
in their market value / net worth, though significant is considered
temporary and hence no provision is considered necessary.
f) The Preference Shares held in an overseas subsidiary, UB Overseas
Limited are to be redeemed anytime at the option of the company or at
the end of 10 years from the date of allotment of shares. The company
also has the option for partial / full conversion of preference shares
into equity shares of UB Overseas Limited, in the ratio one equity
share for one preference share held, at face value of USD 1 each to be
determined and issued by the issuer. During the year, the subsidiary
has redeemed 1.600 million preference shares of USD 1 each.
6. Agreement to sell shares in United Spirits Limited
The Company and its wholly owned subsidiary Kingfisher Finvest India
Limited have entered into a share purchase agreement on 9th November,
2012 with Relay B.V. and Diageo plc. for the sale of 16,716,987 equity
shares of United Spirits Limited at a price of Rs. 1,440/- per equity
share. All the requisite permissions, including the leave of Hon'' ble
High Court of Karnataka have been obtained and it is expected that the
transaction of sale of shares will be consummated shortly.
7. Sale of pledged shares by lenders of Kingfisher Airlines Limited
Certain lenders of Kingfisher Airlines Limited (KFA) have disposed of
the securities in the form of shares pledged with them. These actions
on the part of the lenders are under challenge by the Company in legal
proceedings, including Suit No. 311 of 2013 filed, inter alia, by the
Company in the Hon'' ble Bombay High Court. These proceedings are
pending. Without prejudice to the rights and contentions of the Company
in various pending legal proceedings the profits arising on such sale
is included under "Profit on sale of investments". Although the sale
proceeds have been appropriated by the lenders against KFAs dues,
without prejudice to the right and contentions of the Company in the
legal proceedings as well as the stance adopted by KFA against the
purported recall of its loans by the lenders, pursuant to which the
shares pledged by the Company were sold by the lenders, it is included
under "Loans and advances" recoverable from KFA.
8. Confirmation of balances from certain sundry debtors and sundry
creditors are awaited. Adjustment for differences, if any, arising out
of confirmation and reconciliation thereof would be made in the current
year. The Management is of the opinion that the effect of adjustments,
if any, is not likely to be significant.
9. The Company, over the years has advanced significant amounts to
subsidiaries including overseas subsidiaries aggregating to Rs. 1,709.556
million (Pr year Rs. 1,627.300 million) which have not yet been repaid.
Even though there is erosion in the net worth of these subsidiaries,
the Management is of the view that all the amounts are ultimately
recoverable, taking into consideration their business plans and growth
strategies
10. The Company has accrued interest of Rs. 1,046.459 million (Pr year Rs.
1,285.272 million) on loans to associate /
1 subsidiaries, including overseas subsidiaries as per Loan Agreements
signed with them. Considering the income stream of those companies,
realisability of this interest could possibly take protracted period of
time beyond those stipulated in the Loan Agreements.
11. Cash in hand includes foreign currency notes.
12. As required under Section 205C of the Companies Act, 1956, the
Company has transferred Rs. 0.237 million (Pr year Rs. 0.132 million) to
the Investor Education and Protection Fund (IEPF) during the year. As
on March 31, 2013, no amount was due to be transferred to the IEPF
13. Events occurring after the date of the Balance sheet
a) Kingfisher Airlines Limited (KFA) lenders have sold the following
investments belonging to the company:
i) 2,446,155 equity shares in United Spirits Limited
ii) 215,000 equity shares in McDowell Holdings Limited
iii) 10,000,000 equity shares in Mangalore Chemicals & Fertilizers
Limited
iv) 21,870,156 equity shares in Kingfisher Airlines Limited
b) KFA lenders have invoked company''s Corporate Guarantee and demanded
payment of dues, due from KFA amounting to Rs. 64,932.900 million
c) the Company and others have filed a suit in Hon'' ble Bombay High
Court against the Consortium of lenders who have advanced loans to
Kingfisher Airlines Ltd, inter alia seeking the following reliefs:
i) for a declaration that the corporate guarantee agreement and pledge
agreement, both dated 21st December, 2010 and executed by the Company
are void ab-initio and non-est;
ii) for a permanent order and injunction, restraining Consortium of
Bankers, their servants, agents or assigns, or any other person
claiming by, through or under them or any of them, from acting upon, in
furtherance or in any manner giving effect to the impugned notices
dated 16th March, 2013, or from taking any other or further steps to
act upon or in furtherance of the Pledge Agreement dated 21st December,
2010 save and except in accordance with the procedure set out in clause
8.1 of the MDRA, including issuing a notice thereunder.
iii) for a permanent order and injunction restraining Consortium of
Bankers, their servants, agents or assigns, or any other person
claiming by or through or under or any of them, from acting upon or in
furtherance of the Corporate Guarantee dated 21st December, 2010 given
by the company and Pledge Agreement dated 21st December, 2010.
iv) that an order and decree for damages of sum of Rs. 31,996.800 million
as set out in the particulars of claim be awarded to the plaintiffs.
v) that the maximum limit under the Companys'' Corporate Guarantees be Rs.
16,014.300 million for reasons set out in the Suit.
14. Cash flows
The mis-match between the inflows and outflows of cash has resulted in
the company not being able to meet certain interest and loan
installments on due dates. Proceeds from the sale of certain shares to
Diageo plc. pursuant to an agreement dated 9th november 2012 is
expected to address the mis-match.
15. Winding up Petitions
Certain Aircraft lessors of KFA have invoked the company''s Corporate
Guarantees and have filed winding up petitions against the company.
These petitions are pending disposal before the Hon'' ble High Court of
Karnataka. The Company has filed a Suit for damages, claiming an
amount of Rs. 13,193.000 million against some of the above Petitioners in
the City Civil Court, Bangalore.
16. The Company along with its subsidiaries has significant financial
exposure on various counts to Kingfisher Airlines Limited (KFA).
Although KFAs license has expired on December 31, 2012, under civil
aviation regulations, KFA has period of 24 months to reinstate the
same. As at March 31, 2013, the financial exposure includes equity
investment ofRs. 20,953.043 million, loans and advances Rs. 23,592.484
million & other receivables Rs. 3,104.505 million & corporate guarantees
to banks/aircraft lessors, some of which have been invoked. Such
invocations are being contested in court. The Management is reasonably
confident that none of the guarantees would eventually devolve upon the
Company. The ultimate diminution of investments and non-recovery of
loans and advances are not presently quantifiable and hence no
provision has been considered in the accounts.
17. The Company has accrued interest ofRs. 83.756 million (Pr yearRs.
44.733 million) on loans to Kingfisher Airlines Limited (KFA) as per
loan agreement signed with them. Taking into account the financial
position of KFA and pending its recapitalisation, interest has not been
accrued on the outstanding loans with effect from 1st October 2012.
18. In view of Kingfisher Airlines Limited (KFA) being precluded by
its bankers from making payment of any guarantee commission arising out
of the corporate guarantee given and security commission arising out of
security pledged in favour of lenders of KFA and in view of the stand
taken by the Company and other Plaintiffs in the Suit, before the Hon''
ble Bombay High Court, guarantee commission arising out of the
corporate guarantee given and security commission arising out of
security pledged in favour of lenders of KFA have not been accounted
for, in the current financial year.
19. The Company''s Rupee loan from HDFC Limited was converted into a
"Dollar Denominated Loan" at concessional rate of interest in 2011-12.
A portion of the foreign currency translation difference has been
recognised as interest in terms of AS 16 Â ÂBorrowing costs'', and the
balance is kept in Foreign Currency Monetary Item Translation
Difference Account which is amortised over the life of the loan but not
beyond March 2020, as provided in Government of India Notification No
G.S.R.913 (E) (F.No. 17/133/208-CL. Vj, Dated 29-12-2011). Accordingly
an amount of Rs. 339.415 million is charged to the Statement of Profit
and Loss and the Balance of Rs. 214.043 million is carried in Foreign
Currency Monetary Item Translation Difference Account.
20. Remuneration to Chairman, Managing Director and Managerial
Personnel
i) The Chairman of the Company has received remuneration from two
subsidiaries, amounting to USD 120,000 (Pr year USD 120,000) and GBP
89,600 (Pr year GBP 89,600) during the year 2012-13.
ii) The Company has not paid any remuneration to the Managing Director.
However, he has received remuneration of Rs. 14.985 million as an
executive of an associate company.
iii) Subsidiaries have paid sitting fees of Rs. 0.090 million (Pr year Rs.
0.090 million) to Directors including the Managing Director.
21. Details of dues to Micro, Small and Medium Enterprises and Small
Scale Industries.
Based on the response received by the Company, there are no outstanding
as at March 31, 2013 to suppliers, as defined under the Micro, Small &
Medium Enterprises Development Act, 2006.
22. The Company has recognized the rent from cancellable operating
leases in accordance with the terms of the lease deed.
In respect of the non- cancellable operating leases, the Company
recognizes the rent on a straight line basis over the non- cancellable
lease term.
Future minimum lease payments receivable under non-cancellable
operating lease Rs. nil (Pr year Rs. nil)
23. Related Party Transactions:
Key Management Personnel: Dr. Vijay Mallya - Chairman
Mr. A. Harish Bhat - Managing Director
i) Name of the Related Parties and description of relationship
Subsidiaries
UB Electronic Instruments Limited*, UB Infrastructure Projects
Limited*, UB International Trading Limited*, Kingfisher Finvest India
Limited*, Kingfisher Training and Aviation Services Limited*,
Kingfisher Aviation Training Limited*, Kingfisher Goodtimes Private
Limited, City Properties Maintenance Company Bangalore Limited*,
Bangalore Beverages Limited*, UB Sports Limited*, Rigby International
Corp., United Breweries of America Inc., Delaware, Inversiones Mirabel,
S.A, Mendocino Brewing Co. Inc, USA, United Breweries International
[UK] Limited, Kingfisher Beer Europe Limited (formerly known as UBSN
Limited), Rubic Technologies, Inc, Releta Brewing Company LLC, UB
Overseas Limited*, UBHL (BVI) Limited*, Bestride Consultancy Pvt
Limited*.
Associates
United Spirits Limited*, Mangalore Chemicals & Fertilizers Limited*, UB
Engineering Limited*, WIE Engineering Limited (Under Liquidation),
McDowell Holdings Limited*, Pixray India Limited, UB Pharma (Kenya)
Limited, Kingfisher Airlines Limited*.
Subsidiary of an Associate
SW Finance Co. Limited* (formerly Shaw Wallace Breweries Limited),
Royal Challengers Sports Private Limited*. * With which there have
been transactions during the year.
24. The Company has not entered into any speculative derivative
transactions. Hedging is restricted to the business needs of the
Company. As at the Balance Sheet date, foreign currency receivable /
payable that is not hedged by any derivative instrument or otherwise
are as under:
25. All amounts are in Rupees million, unless otherwise stated.
26. Previous years'' figures have been regrouped wherever necessary.
Mar 31, 2012
1. UB City Luxury residential Project
The Company has executed a Joint Development Agreement with a Developer
on 26th April, 2010 for development of a luxury residential building
named as "Kingfisher Towers - Residences at UB City" in the available
land in UB City. The super built up area of the building would be
767,870 sq ft. The super built up area falling to the share of the
Company would be 418,388 sq. ft. The construction is in progress.
The Company has issued allotment letters in respect of five residential
units measuring 41,605 sq ft. in Kingfisher Towers by collecting
booking amounts of Rs. 826.925 million.
2. Estimated amount of contracts remaining to be executed on capital
account as at 31st March 2012 and not provided for is Rs. 5.357 million
(net of advances) (Pr year Rs. 23.550 million).
3. Contingent liabilities: As at As at
March 31, 2012 March 31, 2011
a) Guarantees given by the
Company on behalf of
subsidiaries to banks, 1500.000 1500.000
financial institutions and others
b) Guarantees given by the
Company on behalf of
associates to banks, 77,228.600 74,099.400
financial institutions and others
c) Demands raised by Income Tax
authorities against
which the Company 234.210 127.700
has preferred appeals
Certain beneficiaries have invoked the corporate guarantees given by
the company on behalf of Kingfisher Airlines Limited, an associate
company. The total amount invoked and outstanding as on June 30, 2012
is Rs. 8,357.700 million and Kingfisher Airlines Limited is under
negotiation with the beneficiaries. There has been no financial loss on
this count to the company.
4. Fixed Assets
a) The Company's land in Bangalore was revalued in August 2001, based
on an independent valuer's report. Accordingly, the value of the land
was restated atRs. 1,707 million, with a corresponding adjustment to the
Fixed Assets Revaluation Reserve.
b) The Company owns certain valuable trademarks which are carried at
NIL value. Some of these trademarks/ logo have been licenced to Group
companies.
c) The Company's UB City property is under charge in favour of HDFC Ltd
for facilities granted to the Company.
d) The Company's property in Goa is under charge in favour of a bank
for facilities granted to an associate.
5. Investments:
a) The Company has pledged 10,310,382 shares held in United Spirits
Limited, 11,207,729 shares held in Mangalore Chemicals & Fertilisers
Limited, 769,728 shares in UB Engineering Limited, 197,433,555 shares
in Kingfisher Airlines Limited and 3,903,209 shares held in McDowell
Holdings Limited to secure the borrowings of subsidiary companies and
associate companies.
b) 900,000 shares of Kingfisher Airlines Limited held by the Company
and pledged with a bank for credit facilities extended to an associate
company, have been sold by the bank, subsequent to the Balance Sheet
date, resulting in a loss of Rs. 30.333 million to the company.
c) An existing pledge of 1,310,472 shares of United Spirits Limited to
a bank have been further extended, subsequent to Balance Sheet date, to
secure the borrowings of associate companies.
d) Investments include 1,765,000 shares of Kingfisher Airlines Limited
and 197 shares of United Spirits Limited held in custody account of
lenders.
e) The Company's investment of Rs. 26.512 million in IDFC Mutual Fund is
given as a lien to secure the borrowings of an associate company.
f) The investment in subsidiaries (including step down subsidiaries)
have been considered as long term strategic investments and diminution
in their market value / net worth, though significant is considered
temporary and hence no provision is considered necessary.
g) The Preference Shares issued by a wholly owned overseas subsidiary,
UB Overseas Limited, are to be redeemed anytime at the option of the
shareholder or at end of 10 years from the date of allotment of the
shares. The Preference shareholder also has the option for partial /
full conversion into equity shares of the Company, at the rate of one
equity share for one preference share held, at face value of USD 1
each, to be determined and issued by the Issuer. During the year, 47
million preference shares of USD 1 each have been redeemed.
6. Confirmation of balances from certain Sundry Debtors and Sundry
Creditors are awaited. Adjustment for differences, if any, arising out
of confirmation and reconciliation thereof would be made in the current
year. The Management is of the opinion that the effect of adjustments,
if any, is not likely to be significant.
7. The Company, over the years has advanced significant amounts to
subsidiaries including overseas subsidiaries aggregating to Rs. 1,627.300
million which have not yet been repaid. Even though there is erosion in
the net worth of these subsidiaries, the Management of the view that
all the amounts are ultimately recoverable, taking into consideration
their business plans and growth strategies.
8. The Company has accrued interest of Rs. 1,285.272 million for the
year on loans to associate/ subsidiaries, including overseas
subsidiaries as per loan agreements signed with them. Considering the
income stream of those companies, realisability of this interest could
possibly take protracted period of time beyond those stipulated in the
loan agreements.
9. During the year UB Ajanta Breweries Private Limited and UB Nizam
Breweries Private Limited (collectively referred to as "APB India")
have been merged with United Breweries Limited pursuant to the scheme
of amalgamation approved by the Hon'ble High Court of Karnataka. As a
result, 427,740 shares in United Breweries Limited has been allotted to
the wholly owned overseas subsidiary, UB Overseas Limited.
10. Cash in hand includes foreign currency notes.
11. As required under Section 205C of the Companies Act, 1956, the
Company has transferred Rs. 0.132. million (Pr year Rs. 0.367 million) to
the Investor Education and Protection Fund (IEPF) during the year. As
on March 31, 2012, no amount was due to be transferred to the IEPF.
12. Guarantee Commission represents the commission charged by the
Company for the corporate guarantees provided on behalf of subsidiaries
and certain associate companies. Security Commission represents the
commission charged by the Company for the securities pledged on behalf
of a subsidiary and an associate company.
Guarantee commission of Rs. 521.143 million has been accrued during the
year based on contractual obligation although the recovery could take a
longer period of time than anticipated since the associate company for
whom these guarantees were given is presently precluded by its bankers
consortium to honour the obligation aggregating to Rs. 646.770 million
upto 31st March, 2012.
13. The company along with its subsidiaries has significant financial
exposure on various counts to Kingfisher Airlines Limited. Kingfisher
Airlines Limited has ceased to be a subsidiary of the company with
effect from 18th February, 2012 and has become an associate company
thereafter. As at March 31, 2012, such exposure include equity
investment of Rs 21,142.800 million, loans and advances Rs. 10,486.984
million and other receivables Rs. 2,090.837 million, and corporate
guarantees to banks/aircraft lessors Rs. 89,258.600 million. Certain
corporate guarantees have been invoked and Kingfisher Airlines Limited
is under negotiation in this regard with the beneficiaries. The
Management is reasonably confident that none of the guarantees would
eventually devolve upon the Company. The ultimate impairment of
investments and non-recovery of loans and advances are not presently
quantifiable and hence no provision has been considered in the
accounts.
14. During the year, the company converted an existing Rupee Loan of
Rs.5,369.816 million from HDFC Limited (secured against future sale
proceeds from the luxury residential building - Kingfisher Towers) into
a "Dollar Denominated Loan" at concessional rate of interest. The
repayment of Principal and interest payments, under the terms of this
loan are with reference to the dollar rate prevailing on the due dates.
The company has recognized part of the exchange difference as interest
in terms of AS 16 - Borrowing Costs and the balance difference is kept
in the Foreign Currency Monetary Item Translation Difference Account
which is amortised over the life of the loan but not beyond March 2020,
as provided in Government of India Notification no G.S.R.913(E)
(F.No.17/133/208-CL.Vj, Dated 29-12-2011). Accordingly an amount of
Rs.13.032 million is charged to the Statement of Profit and Loss and
the Balance of Rs. 219.631 million is carried in Foreign Currency
Monetary Item Translation Difference Account.
15. Remuneration to Chairman, Managing Director and Managerial Personnel
i) The Chairman of the Company has received remuneration from two
subsidiaries, amounting to USD 120,000 (Pr year USD 120,000) and GBP
89,600 (Pr year GBP 89,600) during the year 2011 -12.
ii) The Company has not paid any remuneration to the Managing Director.
However, he has received remuneration of Rs. 13.086 million as an
executive of an associate company.
iii) Subsidiaries have paid sitting fees of Rs. 0.090 million (Pr year Rs.
0.100 million) to Directors including the Managing Director.
The estimates of future salary increases, considered in actuarial
valuation, take account of inflation, seniority, promotion and other
relevant factors such as supply and demand factors in the employment
market.
16. Details of dues to Micro, Small and Medium Enterprises and Small
Scale Industries.
Based on the response received by the Company, there are no outstanding
as at March 31, 2012 to suppliers, as defined under the Micro, Small &
Medium Enterprises Development Act, 2006.
Amount due to Micro and Small Enterprises is nil to the extent of
information disclosed by creditors.
17. The Company has recognized the rent from cancellable operating
leases in accordance with the terms of the lease deed.
In respect of the non- cancellable operating leases, the Company
recognises the rent on a straight line basis over the non- cancellable
lease term.
Future minimum lease payments receivable under non-cancellable
operating lease Rs. Nil (Pr year nil)
18. Related Party Transactions:
Key Management Personnel: Mr. A. Harish Bhat - Managing Director
i) Name of the Related Parties and description of relationship
Subsidiaries
UB Electronic Instruments Limited, UB Infrastructure Projects Limited,
UB International Trading Limited, Kingfisher Finvest India Limited,
Kingfisher Training and Aviation Services Limited, Kingfisher Aviation
Training Limited, Kingfisher Goodtimes Private Limited, City Properties
Maintenance Company Bangalore Limited, Bangalore Beverages Limited, UB
Sports Limited, Rigby International Corp., United Breweries of America
Inc, Delaware, Inversiones Mirabel, S.A, Mendocino Brewing Co. Inc,
USA, United Breweries International [UK] Limited, Kingfisher Beer
Europe Limited (formerly known as UBSN Limited), Rubic Technologies,
Inc, Releta Brewing Company LLC, UB Overseas Limited, UBHL (BVI)
Limited, Best Ride Consultancy Pvt Limited.
Associates
United Spirits Limited, Mangalore Chemicals & Fertilizer Limited, UB
Engineering Limited, WIE Engineering Limited (Under Liquidation),
McDowell Holdings Limited, Pixray India Limited, UB Pharma (Kenya)
Limited, Kingfisher Airlines Limited.
Subsidiary of an Associate
Shaw Wallace Breweries Limited, Royal Challenger Sports Private
Limited.
19. All amounts are in Rupees million, unless otherwise stated.
20. Previous year's figures have been regrouped to conform to Schedule
VI (as amended) of the Companies Act, 1956.
Mar 31, 2011
1. UB City Luxury residential Project
The Company has executed a Joint Development Agreement with a Developer
on 26th April, 2010 for development of a luxury residential building
named as "Kingfisher Towers - Residences at UB City" in the available
land in UB City. The super built up area of the building would be
767,870 sq ft. The super built up area falling to the share of the
Company would be 418,388 sq. ft.
The Company has issued allotment letters in respect of two residential
units in Kingfisher Towers by collecting booking amounts of Rs. 20
million.
2. Estimated amount of contracts remaining to be executed on capital
account as at 31st March 2011 and not provided for is Rs. 23.550 million
(net of advances) (Pr year Rs. 85.699 million).
3. Secured Loans:
i) Details of securities provided for loans availed from banks :
a) Loan from The Lakshmi Vilas Bank Limited amounting to Rs. 323.228
million (Pr year Rs. 362.902 million) is secured by assignment of future
receivables for use of Pegasus logo by Group Companies. An amount of Rs.
45.198 million is repayable within one year.
b) Loan from State Bank of India amounting to Rs. 107.401 million is
secured by the pledge of 395,000 shares in United Spirits Limited held
by the Company. The entire amount of Rs. 107.401 million has been since
repaid.
c) Loan from Yes Bank Limited amounting to Rs. 2,001.429 million is
secured by subservient charge on all current assets and movable fixed
assets of the Company, both present and future, deposit in Debt Service
Reserve Account equal to a total amount of scheduled interest payment
due for one month and assignment of 4,434,000 shares in United
Breweries Limited and 1,285,000 shares in United Spirits Limited held
by the Company. No amount is repayable within one year.
d) Overdraft facility from HDFC Bank Limited amounting to Rs. 33.679
million is secured by pledge of 297,103 shares in United Spirits
Limited, 4,753,881 shares in Mangalore Chemicals & Fertilisers Limited
held by the Company, first charge on movable fixed assets ie. plant and
machinery, furniture & fixtures valued at Rs. 370 million and a lien
marked on a fixed deposit of Rs. 6.400 million.
e) Packing credit facility availed from Federal Bank Limited amounting
to Rs. 114.762 million is secured by hypothecation of current assets of
the Company.
ii) Details of securities provided for loans availed from others :
a) Loans from HDFC, amounting to Rs. 6,854.515 million (Pr year Rs.
1,943.242 million) are secured by the pledge of 1,585,154 shares in
United Spirits Limited, 317,030 shares in McDowell Holdings Limited
held by the Company, mortgage by deposit of title deeds of the
Company's land in Bangalore, the super structure thereon and assignment
of the rent receivable from the property let out, securitisation of
future sale proceeds from the luxury residential building "Kingfisher
Towers - Residences in UB City" and pledge of 5,000,000 shares in
United Spirits Limited and 35,222,231 shares in Kingfisher Airlines
Limited held by a subsidiary company. An amount of Rs. 563.645 million is
repayable within one year.
b) Loan from IL&FS Financial Services Limited amounting to Rs. 1,000
million (Pr year Rs. 1,500.410 million) is secured by the pledge of
1,000,000 shares in United Spirits Limited held by the Company and
pledge of 875,647 shares in United Spirits Limited held by a subsidiary
company. No amount is repayable within one year.
c) Loan from IFCI Limited amounting to Rs. 2,514.671 million (Pr year
Rs.2,512.937 million) is secured by the pledge of 1,237,477 shares in
United Spirits Limited and 7,673,422 shares in United Breweries Limited
held by the Company and pledge of 1,467,523 shares in United Spirits
Limited held by a subsidiary company. No amount is repayable within one
year.
4. Contingent liabilities:
2010-11 2009-10
a Guarantees given by the Company on
behalf of subsidiaries to banks and 72,321.000 72,897.227
financial institutions and others
b Guarantees given by the Company on
behalf of associates to banks 1,778.400 2,578.400
c Demand raised by Income Tax
authorities against which the Company has 127.700 - Nil -
preferred appeals
d) Loan from SICOM Limited amounting toRs. 540 million (Pr yearRs. 430
million) is secured by pledge of 400,000 shares in Kingfisher Airlines
Limited and 250,000 shares in United Spirits Limited held by the
Company and pledge of 17,600,000 shares in Kingfisher Airlines Limited
held by a subsidiary company. The facility has been availed for
revolving period of 3 years, renewable every year on a put-call option.
e) Loan from Future Capital Holdings Limited amounting to Rs. 1,009.321
million (Pr year nil) is secured by the pledge of 10,93,688 shares in
United Spirits Limited held by the Company and 363,312 shares in United
Spirits Limited held by a subsidiary company and a non-disposable
undertaking of 86,000 shares in United Spirits Limited held by the
Company and 667,000 shares in United Spirits Limited held by a
subsidiary company. No amount is repayable within one year.
f) Loan from L&T Finance Limited amounting to Rs. 33.578 million (Pr year
41.999 million) is secured by the fixed assets for which the loan was
taken. An amount of Rs. 9.669 million is repayable within one year.
g) Loan from ECL Finance Limited amounting to Rs. 500 million (Pr year Rs.
500 million) is secured by the pledge of 1,115,000 shares in United
Spirits Limited held by the Company. The entire amount of Rs. 500 million
has been since repaid.
h) Loan from Quant Capital and Investment Private Limited amounting to
Rs. 500 million (Pr year nil) is secured by the pledge of 870,000 shares
in United Spirits Limited held by the Company. The entire amount of Rs.
500 million is repayable within one year.
i) Loan from Religare Finvest Limited amounting to Rs. 1,000 million (Pr
year nil) is secured by the pledge of
2,052,683 shares in United Spirits Limited held by the Company. No
amount is repayable within one year.
4. Unsecured Loans
The Company, during the year has accepted fixed deposits from the
Public amounting to Rs. 62.355 million (Pr year Rs. 1,287.902 million). An
amount of Rs. 983.100 million is repayable within one year.
5. Events occurring after the Balance Sheet date
After the Balance Sheet date, the Company has issued the following
corporate guarantees :
a) Guarantees for Rs. 2,815.400 million in favour of lenders on behalf of
a subsidiary
b) Guarantees for Rs. 140.000 million in favour of others on behalf of an
associate.
6. Fixed Assets
a) The Company's land in Bangalore was revalued in August 2001, based
on an independent valuer's report. Accordingly, the value of the land
was restated at Rs. 1,707 million, with a corresponding adjustment to the
Fixed Assets Revaluation Reserve.
b) The Company owns certain valuable trademarks which are carried at
NIL value. Some of these trademarks / logo have been licenced to Group
companies.
c) The Company's UB City property is under charge in favour of HDFC for
facility granted to the Company.
d) The Company's property in Goa is under charge in favour of a bank
for facilities granted to a subsidiary.
7. Investments:
a) The Company has pledged 10,193,910 shares held in United Spirits
Limited, 10,000,000 shares held in Mangalore Chemicals & Fertilisers
Limited, 769,728 shares held in UB Engineering Limited, 85,985,156
shares held in Kingfisher Airlines Limited and 2,700,000 shares held in
McDowell Holdings Limited to secure the borrowings of subsidiary
companies and associate companies.
Subsequent to the Master Debt Recast Agreement [MDRA], executed by the
Company's Subsidiary, Kingfisher Airlines Limited with its Bankers, the
Company was allotted 113,213,399 equity shares of Kingfisher Airlines
Limited, which is since pledged to secure the borrowings of the
subsidiary company.
In addition to the above, the Company has given negative lien of shares
in United Breweries Limited amounting Rs. 1,250 million in favour of
ICICI Bank Limited to secure the borrowings of a subsidiary company.
b) The Company has given a letter of undertaking in favour of ICICI
Bank Limited, undertaking not to dispose of its investments in
Kingfisher Airlines Limited, till such time as there are borrowings
from ICICI Bank Limited to Kingfisher Airlines Limited.
c) The Company's investment of Rs. 160.000 million with IDFC Mutual Fund
is given as a lien to secure the borrowings of a subsidiary company.
d) The investment in subsidiaries (including step down subsidiaries)
have been considered as long term strategic investments and diminution
in their market value / net worth, though significant is considered
temporary and hence no provision is considered necessary.
e) The Redemption of the Preference Shares issued by a wholly owned
overseas subsidiary, UB Overseas Limited will be made at the end of 10
years from the date of allotment of the shares. The Preference
shareholder will have the option for partial / full conversion into
equity shares of the subsidiary, at the rate of one equity share for
one preference share held, at face value of USD 1 each to be determined
and issued by the Issuer.
8. A major subsidiary of the Company, Kingfisher Airlines Limited has
entered into a Master Debt Recast Agreement [MDRA] with its Bankers.
The terms of the MDRA include inter-alia:
a) Conversion of part of the outstanding loan into Compulsorily
Convertible Preference Shares [CCPS] and part into Cumulative
Redeemable Preference Shares [CRPS] redeemable at par after twelve
years.
b) The remnant loans will be repayable over a nine year period
including a two year moratorium and a graduated schedule over seven
subsequent years.
c) Interest for the period from July 2010 to March 2011 was converted
into a term loan repayable over five years.
d) The interest rate has been reduced by over 300 bps.
e) Sanction of additional loan of Rs. 7,680 million
The Company is a signatory to the MDRA
Simultaneously the Company has converted its existing loan of Rs. 6,330
million as well as Non Convertible Preference Shares [NCPS] of Rs. 970
million into Compulsorily Convertible Preference Shares [CCPS].
The Company's existing guarantees and pledge to secure the KFA debt
have been extended for the period of outstanding.
The Master Debt Recast Agreement [MDRA] executed by the Company's
Subsidiary, Kingfisher Airlines Limited [KFA] with its Banks has been
implemented in totality. The Company has exercised its option to
convert all its 730,000,000 Compulsorily Convertible Preference Shares
[CCPS] acquired at a cost of Rs. 7,300 million and KFA has allotted
113,213,399 equity shares to the Company. The shareholding of the
Company in KFA now stands at 40.09%. Along with the holding with its
Subsidiaries, the shareholding of the Company in KFA now stands at
55.57%. In terms of the MDRA, the entire share holding of the company
in KFA is pledged with the Security Trustee acting on behalf of
consortium of lenders.
9. Confirmation of balances from certain Sundry Debtors and Sundry
Creditors are awaited. Adjustment for differences, if any, arising out
of confirmation and reconciliation thereof would be made in the current
year. The Management is of the opinion that the impact of adjustments,
if any, is not likely to be significant.
10. The Company, over the years has advanced significant amounts to
subsidiaries including overseas subsidiaries aggregating Rs. 19,236.010
million (including Rs. 10,556.250 million advanced during the year).
Interest has not been charged on loans advanced aggregating Rs.
10,387.428 million. Considering, the income stream of those companies,
the repayment of loans could possibly take protracted period of time
beyond those stipulated in the Loan Agreements. The Directors are of
the view that all the amounts are ultimately recoverable with interest
wherever applicable taking into consideration their business plans and
growth strategies. Accordingly the advances to subsidiaries are
considered presently good and recoverable except to the extent of Rs. 20
million.
11. Strategic investment in APB India
During the year under review, your Company through its wholly owned
overseas subsidiary, UB Overseas Limited has acquired strategic
interest by way of acquisition of 50% of the issued and paid up capital
of UB Ajanta Breweries Private Limited and UB Nizam Breweries Private
Limited (collectively referred to as "APB India") from Heineken
International B.V., Netherlands.
12. Cash in hand includes foreign currency notes.
13. As required under Section 205C of the Companies Act, 1956, the
Company has transferred Rs 0.367 million (Pr year Rs.0.134 million) to
the Investor Education and Protection Fund (IEPF) during the year. As
on March 31, 2011, no amount was due to be transferred to the IEPF.
14. Guarantee Commission represents the commission charged by the
Company for the corporate guarantees provided on behalf of subsidiaries
and certain associate companies. Security Commission represents the
commission charged by the Company for the securities pledged on behalf
of a subsidiary and an associate company.
The Company has significant guarantee exposure on behalf of
subsidiaries and other associated companies. Wherever any guarantee has
been invoked, the guaranteed amount has been paid by the beneficiaries.
The Management is reasonably confident that none of the other
guarantees would eventually devolve upon the Company.
15. Given the nature of the Company's cash flow, the Company has been
borrowing from time to time. Management has comprehensive plans
including additional borrowings to ensure liquidity besides accelerated
sale of residential and/ or office space in the UB City. Accordingly
the accounts have been prepared on principles applicable to going
concern.
16. Remuneration to Chairman, Managing Director and Managerial
Personnel
i) The Chairman of the Company has received remuneration from two
subsidiaries, amounting to USD 120,000 (Pr year USD 120,000) and GBP
89,600 (Pr year GBP 89,600) for the year 2010-11.
ii) The Company as a policy does not pay any remuneration to the
Managing Director.
Mr. R.N. Pillai, who was the Managing Director of the Company up to the
close of business hours of August 20, 2010 did not draw any
remuneration and perquisites from the Company. However, he has received
remuneration of Rs. 1.455 million till August 2010 as an executive of an
associate company.
Mr. A. Harish Bhat was appointed as Managing Director of the Company
with effect from the close of business hours of August 20, 2010 in
place of Mr. R.N. Pillai without payment of any remuneration. However,
he has received remuneration of Rs. 6.015 million from September 2010 to
March 2011 as an executive of an associate company.
iii) Subsidiaries have paid sitting fees of Rs. 0.100 million (Pr year Rs.
0.155 million) to Directors including the Managing Director.
17. Details of outstanding to Micro, Small and Medium Enterprises and
Small Scale Industries.
Based on the response received by the Company, there are no outstanding
as at March 31, 2011 to suppliers, as defined under the Micro, Small &
Medium Enterprises Development Act, 2006.
Amount due to Small Scale Industries (SSI) is nil to the extent of
information disclosed by creditors.
18. The Company has recognised the rent from cancellable operating
leases in accordance with the terms of the lease deed.
In respect of the non- cancellable operating leases, the Company has
recognised the rent on a straight line basis over the non- cancellable
lease term.
Future minimum lease payments receivable under non-cancellable
operating lease up to one year Rs. Nil (Pr year nil)
3 Segment results represents profit/(loss) before finance expenses,
interest income and tax.
4 Capital expenditure represents the gross additions made to fixed
assets during the year.
5 Segment assets include Fixed Assets, Investments, Current Assets,
Loans & Advances except income tax assets.
6 Segment Liabilities include Secured and Unsecured Loans, Current
Liabilities and Provisions except provision for tax and dividend.
19. Related Party Transactions:
Key Management Personnel: Mr. R.N. Pillai - Managing Director up to
20.10.2010
Mr. A. Harish Bhat - Managing Director wef 21.10.2010
i) Name of the Related Parties and description of relationship
Subsidiaries
UB Electronic Instruments Limited *, UB Infrastructure Projects Limited
*, UB International Trading Limited *, Kingfisher Finvest India
Limited*, Kingfisher Airlines Limited *, Kingfisher Training and
Aviation Services Limited*, Kingfisher Aviation Training Limited*,
Kingfisher Goodtimes Private Limited, City Properties Maintenance
Company Bangalore Limited*, Bangalore Beverages Limited *, UB Sports
Limited*, Vitae India Spirits Limited, Rigby International Corp.,
United Breweries of America Inc, Delaware, Inversiones Mirabel, S.A,
Mendocino Brewing Co. Inc, USA, United Breweries International [UK]
Limited, Kingfisher Beer Europe Limited (formerly known as UBSN
Limited), Rubic Technologies, Inc, Releta Brewing Company LLC, UB
Overseas Limited *, UBHL (BVI) Limited *
Associates
United Spirits Limited *, Mangalore Chemicals & Fertilizer Limited *,
UB Engineering Limited*, WIE Engineering Limited (Under Liquidation),
McDowell Holdings Limited*, Pixray India Limited, UB Pharma (Kenya)
Limited, DCL Holdings Private Limited and UB Ajantha Breweries Private
Limited & UB Nizam Breweries Private Limited.
Subsidiary of an Associate
Shaw Wallace Breweries Limited*
* With which there have been transactions during the year.
20. With a view to facilitating the smooth business operation of its
subsidiary, Kingfisher Airlines Limited, the Company, as part of its
obligation as Holding Company has expressed its intention to honour the
financial obligations to the lending institutions on the due dates.
21. The Board of Directors have proposed a dividend of Re.1/- per
share (10%) for the year ended March 31, 2011 (previous year Re.1/- per
share).
22. All amounts are in Rupees million, unless otherwise stated.
23. Previous year's figures have been regrouped wherever necessary to
conform with the current year's classification/ presentation.
Mar 31, 2010
1. On cancellation of 4,415,999 equity warrants due to non-exercise of
option by a promoter group Rs. 490.165 million being 10% advance amount
was credited to Capital Reserve Account.
2. UB City Luxury Residential Project
The Company has executed a Joint Development Agreement with a Developer
on 26th April, 2010 for development of a luxury residential building in
the available land in UB City. The super built area of the building
would be not less than 5,00,000 sft. and shall be shared in the ratio
of 55% for the Company and 45% for the Developer.
3. Estimated amount of contracts remaining to be executed on capital
account as at March 31, 2010 and not provided for is Rs. 85.699 million
(net of advances) (Pr year Rs.328.782 million).
4. Secured Loans:
Details of the securities provided for loans availed from banks :
i) Loan from The Lakshmi Vilas Bank Limited amounting to Rs. 362.902
million is secured by assignment of future receivables for use of
Pegasus logo by group companies. An amount of Rs. 40.618 million is
repayable within one year.
ii) Details of securities provided for loans availed from others :
a) Loans from HDFC, amounting to Rs. 1,943.242 million (Pr year Rs.
4,675.015 million) are secured by the pledge of 1,585,154 shares in
United Spirits Limited, mortgage by deposit of title deeds of the
Companys land in Bangalore, the super structure thereon and assignment
of the rent receivable from the property let out. An amount of Rs.
636.376 million is repayable within one year.
b) Vehicle loans from others amounting to Rs. 0.114 million (Pr year
Rs. 0.483 million) are secured by the hypothecation of vehicles. An
amount of Rs.0.114 million is repayable within one year.
c) Loan from IL&FS Financial Services Limited amounting to Rs.
1,500.410 million (Pr year Rs. 1,500 million) is secured by the pledge
of 2,223,000 shares in United Spirits Limited held by the Company and
pledge of 1,050,000 shares in United Spirits Limited held by a
subsidiary company. Entire amount of Rs. 1,500.410 million is since
repaid.
d) Loan from IFCI Limited amounting to Rs. 2,512.937 million (Pr year
Rs.1,006.124 million) is secured by the pledge of 1,237,477 shares in
United Spirits Limited held by the company, 7,673,422 shares in United
Breweries Limited held by the Company and pledge of 1,467,523 shares in
United Spirits Limited held by a subsidiary company. No amount is
repayable within one year.
e) Loan from SICOM Limited amounting to Rs. 430 million (Pr year Rs.
440 million) is secured by the pledge of 400,000 shares in Kingfisher
Airlines Limited held by the Company and pledge of 20,800,000 shares in
Kingfisher Airlines Limited held by a subsidiary company. Entire amount
of Rs. 430 million is repayable within one year.
f) Loan from L&T Finance Limited amounting to Rs.41.999 million (Pr
year 49.985 million) are secured by the fixed assets for which the loan
was taken. An amount of Rs. 8.421 million is repayable within one year.
g) Loan from ECL Finance Limited amounting to Rs. 500 million (Pr year
nil) is secured by the pledge of 850,000 shares in United Spirits
Limited.
h) Loan from Multiflow Financial Services Limited amounting to Rs.
500.178 million (Pr year nil) is secured by pledge of 931,092 shares in
United Spirits Limited. Entire amount of Rs. 500.178 million is since
repaid.
5. Unsecured Loan
The Company, during the year accepted fixed deposits from the Public
amounting to Rs. 1,287.902 million. No amount is repayable within one
year.
6. Contingent liabilities:
2009-10 2008-09
1) Guarantees given by the Company on
behalf of subsidiaries to banks, 72,897.227 50,045.380
financial institutions and others
2) Guarantees given by the Company on
behalf of associates to banks 2,578.400 1,628.400
3> Claims against the Company not
acknowledged as debt -Nil- 23.329
4) Demands raised by Income Tax
authorities which the Company has
preferred -Nil- 32.997
appeals
7. Events occurring after the Balance Sheet date
After the Balance Sheet date, the Company has issued the following
further corporate guarantees :
a) Guarantees for Rs. 670.000 million in favour of banks on behalf of a
subsidiary.
b) Guarantees for Rs. 2,372.100 million in favour of lenders on behalf
of subsidiaries
c) Guarantees for Rs. 300.000 million in favour of banks on behalf of
an associate.
8. Fixed Assets
i) The Companys land in Bangalore was revalued during August 2001,
based on an independent valuers report. Accordingly, the value of the
land was restated at Rs.1,707 million, with a corresponding adjustment
to the Fixed Assets Revaluation Reserve.
ii) The Company owns certain valuable trademarks/logo which are carried
at nil value. Some of these trademarks /logo have been licenced to
Group companies.
iii) The Companys UB City property is under charge in favour of a
Financial Institution for facility granted to the Company and its
wholly owned subsidiary.
iv) The Companys property in Goa is under charge in favour of a bank
for facilities granted to a subsidiary.
9. Investments:
i) The Company has pledged 16,699,402 shares held in United Spirits
Limited, 10,000,000 shares held in Mangalore Chemicals & Fertilisers
Limited, 769,728 shares held in UB Engineering Ltd., 64,252,041 shares
in Kingfisher Airlines Limited and 4,305,030 shares held in McDowell
Holdings Limited to secure the borrowings of subsidiary companies and
associate companies.
In addition to the above, the Company has given negative lien of shares
of United Breweries Limited amounting Rs. 1,250 million in favour of
ICICI Bank Limited to secure the borrowings of a subsidiary company.
ii) The Company has given a letter of undertaking in favour of ICICI
Bank Limited, undertaking not to dispose of its investments in
Kingfisher Airlines Ltd., till such time as there are borrowings from
ICICI Bank Limited to Kingfisher Airlines Limited.
iii) The investment in subsidiaries (including step down subsidiaries)
have been considered as long term strategic investments and diminution
in their market value/net worth, though significant is considered
temporary and hence no provision is considered necessary.
10. Confirmation of balances from certain Sundry Debtors and Sundry
Creditors are awaited. Adjustment for differences, if any, arising out
of confirmation and reconciliation thereof would be made in the current
year. The Management is of the opinion that the impact of adjustments,
if any, is not likely to be significant.
11. The Company, over the years has advanced significant amounts to
subsidiaries including overseas subsidiaries aggregating Rs. 13,151.541
million (including Rs.3,302.755 million advanced during the year) which
have not yet been repaid. Interest has not been charged on loans
advanced aggregating Rs. 8,250.279 million. The net worth of an
overseas subsidiary has been fully eroded. Considering, the income
stream of those companies, the repayment of loans could possibly take
protracted period of time beyond those stipulated in the Loan
Agreements. The Directors are of the view that all the amounts are
ultimately recoverable with interest wherever applicable taking into
consideration their business plans and growth strategies. Accordingly
the advances to subsidiaries are considered presently good and
recoverable except to the extent of Rs. 20 million.
12. As required under Section 205C of the Companies Act, 1956, the
Company has transferred Rs. 0.134 million (Pr year Rs. 1.129 million)
to the Investor Education and Protection Fund (IEPF) during the year.
On March 31, 2010, no amount was due to be transferred to the IEPF.
13. Guarantee Commission represents the commission charged by the
Company for the corporate guarantees provided on behalf of subsidiaries
and certain associate companies. Security Commission represents the
commission charged by the Company for the securities pledged on behalf
of a subsidiary and an associate company.
The Company has significant guarantee exposure on behalf of
subsidiaries and other associated companies. Wherever any guarantee has
been invoked, the guaranteed amount has been paid by the beneficiaries.
The Management is reasonably confident that none of the other
guarantees would eventually devolve upon the Company.
14. Deposit amounting to Rs. 500 million with The Lakhmi Vilas Bank
Limited is pledged for facilities granted to a subsidiary company.
15. Advertisement and sales promotion expenses include Rs. 227.318
million paid to an overseas company for promotion of the Companys
logo.
16. Remuneration to Chairman, Managing Director and Managerial
Personnel
i) The Chairman of the Company has received remuneration from two
subsidiaries, amounting to USD 120,000 (Pr year USD 120,000) and GBP
89,600 (Pr year GBP 89,600) for the year 2009-10.
ii) The Company has not paid any remuneration to the Managing Director.
However, he has received remuneration of Rs. 3.882 million (Pr year
3.861 million) as an executive of an associate company. The Managing
Director of the Company has not received sitting fees from any
subsidiary company. The reappointment of Mr. R. N. Pillai as Managing
Director with effect from 18th March, 2010, without remuneration
requires approval of the shareholders at the ensuing Annual General
meeting.
iii) Subsidiaries have paid sitting fees of Rs.0.155 million (Pr year
Rs. 0.240 million) to Directors other than the Managing Director.
17. Details of outstanding to Micro, Small and Medium Enterprises and
Small Scale Industries Based on the response received by the Company,
there are no amount outstanding as at March 31, 2010 to suppliers, as
defined under the Micro, Small & Medium Enterprises Development Act,
2006.
Amount due to Small Scale Industries (SSI) is nil to the extent of
information disclosed by creditors.
18. The Company has recognized the rent from cancellable operating
leases in accordance with the terms of the lease deed.
In respect of the non- cancellable operating leases, the Company has
recognized the rent on a straight line basis over the non-cancellable
lease term.
Future minimum lease payments receivable under non-cancellable
operating leases up to one year Rs. Nil (Pr year Rs. 20.476 million)
19. Related Party Transactions:
Key Management Personnel: Mr. R. N. Pillai - Managing Director
i) Name of the Related Parties and description of relationship
Subsidiaries
UB Electronic Instruments Limited *, UB Infrastructure Projects Limited
*, UB International Trading Limited *, Kingfisher Finvest India Limited
(Formerly known as Kingfisher Radio Limited) *, Kingfisher Airlines
Limited (Formerly known as Deccan Aviation Limited) * , Kingfisher
Training and Aviation Services Limited (Formerly known as Kingfisher
Airlines Limited) *, Kingfisher Aviation Training Limited (Formerly
known as Kingfisher Training Academy Limited)
* , City Properties Maintenance Company Bangalore Limited *,Bangalore
Beverages Limited *, Vitae India Spirits Limited, Rigby International
Corp., United Breweries of America Inc, Delaware, Inversiones Mirabel,
S.A, Mendocino Brewing Co. Inc, USA, United Breweries International
[UK] Limited , UBSN Limited, Rubic Technologies, Inc, Releta Brewing
Company LLC, UB Overseas Limited *and UBHL (BVI) Limited *
Associates
United Spirits Limited *, Mangalore Chemicals & Fertilizer Limited *,
UB Engineering Limited* WIE Engineering Limited (Under Liquidation),
McDowell Holdings Limited , Pixray India Limited , UB Pharma (Kenya)
Limited and DCL Holdings Private Limited
* with which there have been transactions during the year
20. With a view to facilitating the smooth business operation of its
subsidiary, Kingfisher Airlines Limited, the Company, as part of its
obligation as Holding Company has expressed its intention to honour the
financial obligations to the lending institutions on the due dates.
21. Exceptional income represents the amount received from Heineken
Group (net of expenditure) in connection with the closure of all
pending disputes and settling the matters out of Court and ceding
certain management rights in United Breweries Limited in terms of the
settlement.
22. Given the time and nature of the Companys cash flow, the Company
has borrowed to meet immediate needs from time to time. Management has
initiated steps to improve the liquidity inter alia through sale of
luxury residential property being developed in the UB City. Accordingly
the annual accounts have been prepared on the basis of going concern.
23. The Board of Directors have proposed a dividend of Re. 1/- per
share (10%) for the year ended March 31, 2010.
24. All amounts are in Rupees million, unless otherwise stated.
25. Previous years figures have been regrouped wherever necessary to
conform with the current years classification/ presentation.