Independent Auditors Report
To the Members of United Breweries Limited
Report on the Financial Statements
We have audited the accompanying standalone financial statements of United BreweriesLimited ("the Company") which comprises the Balance Sheet as at March 31 2016the Statement of Profit and Loss the Cash Flow Statement for the year then ended and asummary of significant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
The Companys Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance withaccounting principles generally accepted in India including the Accounting Standardsspecified under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and the design implementation and maintenance of adequateinternal financial control that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made thereunder. We conducted our audit inaccordance with the Standards on Auditing issued by the Institute of CharteredAccountants of India as specified under section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selected depend on theauditors judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Companyspreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of theaccounting estimates made by the Companys Directors as well as evaluating theoverall presentation of the financial statements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our audit opinion onthe standalone financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the standalone financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2016 its profit and its cash flows for the year ended on that date.
Emphasis of Matter
We draw attention to Note 37 to the accompanying standalone financial statements whichmore fully describes the uncertainty related to the outcome of writ petition filed by theCompany with the Honourable High Court at Patna in relation to ban imposed by the BiharState Government on trade and consumption of foreign liquor in the state of Bihar witheffect from April 5 2016. Pending final disposal of the petition no adjustments areconsidered necessary in these financial statements. Our opinion is not qualified inrespect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in "Annexure 1" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
2. As required by section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet Statement of Profit and Loss and Cash Flow Statement dealt withby this Report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;
(e) On the basis of written representations received from the directors as on March 312016 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2016 from being appointed as a director in terms of section 164(2) of theAct;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2" to this report; (g) With respect to the othermatters to be included in the Auditors Report in accordance with Rule 11 of theCompanies (Audit and Auditors) Rules 2014 in our opinion and to the best of ourinformation and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements
Refer Note 7 and 19 to the financial statements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts Refer Note 7 to the financial statements;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
|For S.R. Batliboi & Associates LLP |
|Chartered Accountants |
|ICAI Firm Registration Number: 101049W/E300004 |
|per Mahendra Jain |
|Membership Number: 205839 |
|Place of signature: Mumbai |
|Date: May 13 2016 |
ANNEXURE 1 TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE STANDALONEFINANCIAL STATEMENTS OF UNITED BREWERIES LIMITED
Statement on the matters specified in paragraphs 3 and 4 of the Companies(Auditors report) Order 2016 ("the Order")
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) All fixed assets have not been physically verified by the management during theyear but there is a regular programme of verification which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets. No materialdiscrepancies were noticed on such verification.
(c) According to the information and explanations given by the management andconfirmation from banks relating to title deeds of immovable properties mortgaged with thebanks (refer Note 5 to the accompanying standalone financial statements for details) forsecuring the borrowings raised by the Company the title deeds of immovable propertiesincluded in fixed assets are held in the name of the Company except for 1 immovableproperty of 9.04 acres (forming part of land parcel of 23.87 acres with gross book valueof Rs. 211 Lakhs) where registration of title deed is pending 2 immovable propertiesaggregating to 1.8 acres (forming part of land parcel of 142.96 acres with gross bookvalue of Rs. 4309 Lakhs) for which titles are under dispute and pending resolution at theCivil Courts as at March 31 2016 and 4 immovable properties aggregating to 181.63 acres(with gross book value of Rs. 1754 Lakhs) for which title deeds are held in the name oferstwhile merged entities.
(ii) The inventory (excluding inventories with outside parties) has been physicallyverified by the management during the year. In our opinion the frequency of verificationis reasonable. Inventories lying with outside parties have been confirmed by them as atyear end and no material discrepancies were noticed in respect of such confirmations.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013 ("the Act"). Accordingly the provisions of clause3(iii)(a)(b) and (c) of the Order are not applicable to the Company and hence notcommented upon.
(iv) In our opinion and according to the information and explanations given to usprovisions of section 186 of the Act in respect of investments made by the Company havebeen complied with. The Company has not advanced loans to directors / to a company inwhich the director is interested to which provisions of section 185 of the Act apply andhas not given loans /guarantees/ provided security to which the provisions of section 186of the Act apply and hence not commented upon.
(v) The Company has not accepted any deposits from the public.
(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under section 148(1) of the Act for theproducts/services of the Company.
(vii) (a) Undisputed statutory dues including provident fund employees stateinsurance income-tax sales-tax service tax duty of custom duty of excise value addedtax cess and other material statutory dues have generally been regularly deposited withthe appropriate authorities.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees state insurance income-taxsales-tax service tax duty of custom duty of excise value added tax cess and othermaterial statutory dues were outstanding at the year end for a period of more than sixmonths from the date they became payable.
(c) According to the records of the Company the dues outstanding of income taxsales-tax service tax duty of custom duty of excise value added tax and cess onaccount of any dispute are as follows:
|Name of the statute ||Nature of the dues ||Amount (including interest and penalty) (Rs. in Lakhs) ||Payment under protest (Rs. in Lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|The Income Tax Act 1961 ||Income tax/ tax deducted at source ||15704 ||1333 ||FY 2002-03 and 2011-12 ||Commissioner of Income Tax (Appeals) |
| || ||114 || ||FY 2012-13 to 2014-15 ||Commissioner of Income Tax (TDS) |
| || ||4859 ||924 ||FY 2002-03 to 2009-10 ||Income Tax Appellate Tribunal |
| || ||2445 ||458 ||FY 2001-02 to 2009-10 ||High Court of Madras |
| || ||69 ||46 ||FY 2009-10 ||High Court of Andhra Pradesh and Telengana |
| || ||19 ||19 ||FY 2003-04 ||High Court of Karnataka |
|The Finance Act 1994 ||Service tax ||2192 ||96 ||2009-10 to 2011-12 ||Commissioner of Customs and Central Excise Aurangabad |
| || ||2273 || ||2010-11 ||Commissioner of Service Tax Bangalore |
| || ||7220 || ||2004-05 to 2010-11 ||Customs Excise and Service Tax Appellate Tribunal |
|The Central Excise ||Excise duty/ ||1 || ||2007-08 ||Commissioner (Appeals) |
|Act 1944 ||disallowance of || || || ||Central Excise Chandigarh |
| ||cenvat || || || || |
| || ||16 || ||2010-11 to ||Commissioner of Central |
| ||credit || || || || |
| || || || ||2014-15 ||Excise Customs & Service Tax |
| || || || || ||Aurangabad |
| || ||9 ||9 ||2005-06 to ||Customs Excise and Service |
| || || || ||2007-08 ||Tax Appellate Tribunal |
|State Excise ||Storage and ||3 || ||2000-01 to ||Excise Commissioner |
|(various statutes) ||privilege fees || || ||2003-04 ||Karnataka |
| ||excise duty etc. || || || || |
| || ||2 ||2 ||2013-14 ||Rajasthan Tax Board Ajmer |
| || ||218 ||150 ||1999-00 to ||High Court of Karnataka |
| || || || ||2005-06 || |
| || ||43 ||13 ||1988-89 ||High Court of Calcutta |
| || ||19 ||5 ||2009-10 to ||High Court of Madhya Pradesh |
| || || || ||2012-13 || |
|Sales Tax (various ||Sales tax/value ||3114 || ||2007-08 ||Department of Trade and |
|statutes) ||added tax/Entry || || || ||Taxes New Delhi |
| ||tax || || || || |
| || ||3001 ||1245 ||2001-02 to 2013-14 ||Rajasthan Tax Board Ajmer |
| || ||353 || ||2010-11 ||Deputy Commissioner of Commercial Taxes Dhanbad |
| || ||71 || ||2013-14 ||Assistant Commissioner of Commercial Taxes Patna |
|Sales Tax (various statutes) ||Sales tax/value added tax/ Entry tax ||69 ||6 ||2008-09 to 2010-11 ||Joint Commissioner of Sales Tax (Appeals) Maharashtra |
| || ||63 || ||2002-03 ||Jt. Excise and Taxation Commissioner (Appeals) Faridabad |
| || ||51 || ||2008-09 to 2011-12 ||Joint Commissioner of Commercial Taxes (Appeal) Patna |
| || ||26 || ||2011-12 to 2012-13 ||Commissioner of Commercial Taxes Bihar |
| || ||22 ||8 ||2003-04 and 2006-07 ||Maharashtra Sales Tax Tribunal |
| || ||10 ||4 ||2005-06 to 2007-08 ||Sales Tax Appellate Tribunal Andhra Pradesh |
| || ||5 || ||2011-12 ||Commercial Tax Tribunal Bihar |
| || ||3 || ||2008-09 ||The Commercial Taxes Tribunal Bihar |
| || ||426 || ||2006-07 to 2013-14 ||Supreme Court of India |
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of dues to a financial institutionor bank or government. The Company did not have any outstanding dues in respect ofdebenture holders during the year.
(ix) In our opinion and according to information and explanations given by themanagement monies raised by the Company by way of term loans were applied for thepurposes for which loans were obtained. The Company has not raised any money by way ofinitial public offer or further public offer (including debt instruments) and hence notcommented upon.
(x) We have been informed that an employee of the Company whose service has since beenterminated in collusion with certain transport operators had inflated freight invoicesraised on the Company resulting in a loss of Rs. 88 Lakhs to the Company as estimated bythe management. The Company has carried out a detailed investigation in respect of thismatter and has accordingly recovered Rs. 49 Lakhs from the concerned transport operators.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.
(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 of Actwhere applicable and the details have been disclosed in the notes to the financialstatements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company and not commented upon.
(xv) Accor ding to the information and explanations given by the management theCompany has not entered into any non-cash transactions with directors or persons connectedwith him as referred to in section 192 of the Act.
(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
For S.R. Batliboi & Associates LLP
ICAI Firm Registration Number: 101049W/E300004
per Mahendra Jain
Membership Number: 205839
Place of signature: Mumbai
Date: May 13 2016
ANNEXURE 2 TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE STANDALONEFINANCIAL STATEMENTS OF UNITED BREWERIES LIMITED
Report on the Internal Financial Controls under clause (i) of sub-section 3 of section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of UnitedBreweries Limited ("the Company") as of March 31 2016 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Companys policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
Our responsibility is to express an opinion on the Companys internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing as specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth applicable to an audit of Internal Financial Controls and both issued by theInstitute of Chartered Accountants of India. Those Standards and the Guidance Note requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial respects.
An audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls over financialreporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companys internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A companys internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompanys assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
According to the information and explanations given to us and based on our audit thefollowing material weakness has been identified in the operating effectiveness of theCompanys internal financial controls over financial reporting as at March 31 2016:The Companys internal financial controls with respect to obtaining customer/vendorconfirmations in certain cases and their reconciliation with books of accounts atregular intervals were not operating effectively which could potentially result inmisstatement of receivables/payables.
A material weakness is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the companys annual or interim financialstatements will not be prevented or detected on a timely basis.
In our opinion the Company has in all material respects maintained adequate internalfinancial controls over financial reporting as of March 31 2016 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India and except for the possible effects of the material weaknessdescribed above on the achievement of the objectives of the control criteria theCompanys internal financial controls over financial reporting were operatingeffectively as of March 31 2016.
We have considered the material weakness identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2016standalone financial statements of the Company and this report does not affect our reportdated May 13 2016 which expressed an unqualified opinion on those financial statements.
For S.R. Batliboi & Associates LLP
ICAI Firm Registration Number: 101049W/E300004
per Mahendra Jain
Membership Number: 205839
Place of signature: Mumbai
Date: May 13 2016