On behalf of the Board of Directors we are pleased to present the Annual Report ofPioneer Distilleries Limited for the financial year ended March 31 2018. It has been twoand half years since I joined the board of Pioneer Distilleries Limited (PDL) and I amprivileged to be part of PDL as Managing Director. This year your Company reported profitdue to subsidy accrual of Rs 167 Crore and improvement of Cost of Goods Sold("COGS") due to softening of Molasses Grain fuel price and revamping ofutilities. The second phase project has been commissioned in December 2017 which is understabilization.
Your Company has made improvements on various points mentioned in previous year: (i)Company's commitment to the highest standards of corporate governance and strong focus oncompliance and ethical conduct in our actions (ii) a strong move to strengthen commercialand operational controls and institute robust systems and processes (iii) optimumutilization of resources (iv) acquiring new customers (Other than United Spirits Limited)for selling Extra Neutral Alcohol (ENA) and other by-products and (v) making the rightinvestments in our manufacturing facilities. In all the above your Company has been fullysupported by the holding company namely United Spirits Limited (USL).
As per our strategies to bring efficiency into our supply chain to reduce and sustainthe impact of COGS; we have achieved efficiencies in terms of processes and continue ourfocus on sustaining the efficiencies there by bringing down the operational expensesbetter working capital management and improving the cash flow. India presents one of themost exciting opportunities in the world and it is forging ahead as the fastest growingeconomy. What makes India particularly attractive is not just the economic growth but thedriving factor for such growth. An aspirational middle class and a vast number ofconsumers moving towards affluence is ensuring that the core fundamentals for consumptionremain robust.
We have made good strides in our transformational journey but there is more work to bedone. We need to reduce complexity in the way we work and simplify the organizationstructure to deliver efficiency that every single building block we put in placepreviously has set us firmly on the runway to success.
We have progressed when compared to previous years owing to good rainfall inMaharashtra leading to easy availability of raw material viz. molasses grain &water. Amidst this environment your Company was able to deliver an exponential growth inIndian Made Foreign Liquor (IMFL) bottling volumes during the year when compared to theprevious year. For the financial year ended March 31 2018 your Company recorded post taxprofit of Rs.70.43 Crore. Your Company had installed and commissioned additional IMFLbottling line during the previous year based on which it accrued Rs. 166.85 Cr Governmentsubsidy (after discounting as per Ind AS) during the year. As a proactive step to mitigatewater scarcity your Company has developed rain water harvesting mechanism to store 60Crore liters of rain water which can be utilized for 5 months without depending on othersources.
As you are aware your Company has invested in Fresh malt spirit (FMS) Production andmaturation facility with a capacity of 36 Lbl (lakhs bulk liters) per annum. This newproduct line has given opportunity of improving our revenue and Profit. We have startedmaturing malt spirits from October 2017 which will be supplied to USL after maturation.
Your company has developed business strategy up to 2021 and has begun takinginitiatives to stream line the operational performance of your Company. Ultimately we arecommitted towards maintaining our business strategy of prudent cost management coupledwith proactive investments for the future.
With Alcobev being a state-controlled subject the industry faces challenges inprocuring numerous licenses label approvals varied excise regulations etc; which adds tothe complexity making time lines uncertain thereby restricting products from beingdistributed freely across the nation and inter-state taxes limit economies of scale. Thesechallenges have made business environment difficult and unpredictable.
Your Company has assisted in recharging infrastructure for local water storage tanksfor farming supported government schools by providing digital infrastructure for classrooms distributed sewing machines to needy women to promote self-employment etc. YourCompany has also provided water facility in village during summer.
As part of our dedication to environmental sustainability your Company has streamlinedthe 6.45 Megawatt steam turbine and power distribution system to support 100% captivepower requirement. Your company has installed facilities for re use of process waterthereby reducing the water consumption in the process plant.
Your company has invested in facilities/equipment to achieve Zero liquid normsstipulated by pollution control board and it has also installed firefighting system toensure fire safety in the plant. Your Company has built infrastructure to improve safetyand security of the people and plant assets.
I hope and expect your company will progress steadily in the years to come and deliveras expected.
I am happy to mention that your Company has appointed Mr. R Krishnamurthy as Chairmanof the Board and also appointed two more directors Mr. Sanjeev Gupta (EVP-Manufacturingof United Spirits Limited) and Mr. Ajay Goel (EVP and Finance Controller of United SpiritsLimited) to strengthen the board composition and competencies.
On behalf of the Board I would like to extend our deepest appreciation to themanagement team for their dedication and commitment in driving your company forward. Oursincere appreciation also goes to all employees for playing an important role in ensuringthat your company continues to be one of the leading Distillery in Maharashtra. We wouldalso like to express our gratitude to all stakeholders partners and customers for theirsupport to your Company.
I thank you for your continued faith and support.
For Pioneer Distilleries Limited
B V Krishna Reddy