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United Breweries (Holdings) Ltd.

BSE: 507458 Sector: Others
NSE: UBHOLDINGS ISIN Code: INE696A01025
BSE 16:01 | 19 Mar United Breweries (Holdings) Ltd
NSE 05:30 | 01 Jan United Breweries (Holdings) Ltd
OPEN 10.78
PREVIOUS CLOSE 10.78
VOLUME 103486
52-Week high 11.90
52-Week low 0.00
P/E 15.85
Mkt Cap.(Rs cr) 72
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 10.78
CLOSE 10.78
VOLUME 103486
52-Week high 11.90
52-Week low 0.00
P/E 15.85
Mkt Cap.(Rs cr) 72
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

United Breweries (Holdings) Ltd. (UBHOLDINGS) - Auditors Report

Company auditors report

To

The members of

UNITED BREWERIES (HOLDINGS) LIMITED.

1. Report on the Financial Statements

We have audited the accompanying stand-alone financial statements of UNITEDBREWERIES (HOLDINGS) LIMITED (‘the Company’) which comprise the BalanceSheet as at 31st March 2016 the Statement of Profit and Loss and the Cash Flow Statementand a summary of the significant accounting policies and other explanatory information forthe year then ended.

2. Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparationand presentation of these stand-alone financial statements that give a true and fair viewof the financial position financial performance and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the company and for preventing and detecting frauds and irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

3. Auditor’s Responsibility

Our responsibility is to express an opinion on these stand-alone financial statementsbased on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor’s judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error.

In making those risk assessments the auditor considers internal financial controlrelevant to the Company’s preparation of the financial statements that give a trueand fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of the accounting estimates made by theCompany’s Directors as well as evaluating the overall presentation of the financialstatements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the stand-alone financial statements.

4. Basis for qualified opinion

a. The company had extended corporate guarantees of Rs. 87072 million in favour oflenders/lessors/creditors of Kingfisher Airlines Limited (KFA) an erstwhile subsidiary ofthe company (Refer note no. 31 to financial statements). The beneficiaries of suchguarantees have invoked the guarantees and are pursuing recovery actions against thecompany. This may result in loss to the company (Refer note no. 31 to financialstatements). No provision has been made in the accounts for such possible loss.

b. The company carries investments in certain subsidiaries. The carrying value of suchinvestments is Rs. 1472 million. There are significant declines in the carrying value ofthese investments. The company has not provided for such declines. (Refer note 33(h) tofinancial statements).

c. Certain subsidiaries owe to the company Rs. 754 million. Net-worths of thesecompanies are eroded impairing the recovery of such loans and advances. Company has notprovided for the possible loss on this count. (Refer note 39 to financial statements).

d. The company has shown Rs. 358 million as due from a banker who has unilaterallyencashed company’s deposits lying with it and appropriated the amount towards itsclaims against a group company. The possible loss on account of this development has notbeen recognised in the financial statements (Refer note 42 to financial statements).

e. An amount of Rs. 8074 million is shown as dues from a contributory trust("Trust") managed by a financial company which had sold the company’sinvestments that were pledged with it and had appropriated part of the sale proceedsagainst dues from KFA (Ref note no. 43 & 33(e)). Further the said Trust still holdscustody of 59150000 shares in KFA belonging to the company (Ref note no. 33(c)). Thecompany has petitioned the City Civil Court of Calcutta and High Court of Karnatakachallenging the validity of the pledge and for rendering full accounts. Pending outcome ofthe petitions the company has shown the above amounts as good and recoverable. Should thecompany fail to get the reliefs as sought there would be losses. The company has notprovided for any possible losses in this regard.

According to the management it is not possible to estimate the losses if any andconsequently quantify the amount of provisions required in the above cases.

Had the company estimated and provided for the losses as mentioned in paragraphs 4(a)to 4(e) above the loss stated in the Statement of Profit and Loss would have been higherby such amount; the liabilities in the Balance Sheet would have been higher by the amountof provision with respect to item mentioned in paragraph 4(a) above; the carrying value ofinvestments in the Balance Sheet would have been lower by the amount of provision withrespect to item mentioned in paragraph 4(b) above; the amount of loans and advances in theBalance Sheet would have been lower by the amount of provision with respect to itemmentioned in paragraph 4(c) above and the amount of other current assets in the BalanceSheet would have been lower by the amount of provisions with respect to items mentioned inparagraphs 4(d) and 4(e) above.

f. Winding up petitions filed against the Company have been admitted by the HonourableHigh Court of Karnataka and are being heard [Ref. note no. 44]; the Honourable High Courtof Karnataka has restrained the Company from disposing of any of its assets [Ref. note no.50.]; the Company is a defendant in recovery suits instituted by certain creditors/lendersfor recovery of their dues of Rs. 62033 million [Ref. note no. 37] (which is part of theamount mentioned at Sl No. 4(a) above); some of the lenders have recovered their dues bydisposing of the securities pledged by the company.[Ref. note no. 37]. On theconsideration that it shall defend legal cases successfully the company has prepared itsfinancial statements on going concern basis for the reasons stated in note no. 50. Theappropriateness of preparation of financial statements on going concern basis is subjectto the Company being able to successfully defend itself in the petitions/suits filedagainst it and obtaining substantial reliefs in the suits filed by it as mentioned in noteno. 44.

g. The Company has not recognised in its financial statements disputed liabilitiesamounting to Rs. 77309 million (which is part of the amount mentioned at Sl No. 4(a)above) arising out of invocation of its corporate guarantees [Ref. note no. 31]. Had thecompany recognised the above current liabilities in the Balance Sheet would have beenhigher guarantees under contingent liabilities would have been lower and amountsrecoverable under other current assets would have been higher by Rs. 77309 million.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matters described in the "Basis forQualified Opinion" paragraphs above the aforesaid stand-alone financialstatements give the information required by the Act in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at 31st March 2016 and its loss and itscash flows for the year ended on that date.

6. Emphasis of Matter

Attention is invited to the following:

a. A term deposit for Rs. 609 million with a banker representing part of the saleproceeds of shares in United Spirits Limited in favour of Diageo group which had been keptdeposited to comply with the direction of the Honourable High Court of Karnataka to theeffect that the sale proceeds shall be kept invested in term deposits with banks has beenpre-closed by the bank by exercising its general lien and it has adjusted an amount of Rs.494 million (a part of which is referred in paragraph 4(d)) and encumbered an amount ofRs. 115 million against the borrowings from one of the group companies which had beenguaranteed by the Company [Ref note no. 42];

b. The ‘status quo’ with respect to the transaction of sale of 10141437 no.of shares in United Spirits Limited in favour of Diageo group as ordered by theHonourable Supreme Court of India continues;

c. The Company has written off an amount of Rs. 579 million due from an associate.[Ref. note no. 39];

d. The lenders of Kingfisher Airlines Limited have taken possession of theCompany’s property in Goa to recover its dues [Ref. note no. 32(d)];

e. Note no. 48 regarding non-accrual of interest payable to the extent of Rs. 1904million (out of that Rs. 634 million pertaining to earlier year) on account of the lendercompany’s shareholders not approving the agreement granting the loan.

7. Report on Other Legal and Regulatory Requirements

i. As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Government of India in terms of sub-section (11) of section143 of the Act we give in the Annexure A a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

ii. 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 purposes 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 the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account;

d. Except for the effects of the matters described in the Basis for Qualified Opinionparagraphs above in our opinion the aforesaid stand-alone financial statements complywith the Accounting Standards specified under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014;

e. The matters described in the Basis for Qualified opinion paragraphs above in ouropinion may have an adverse effect on the functioning of the company;

f. On the basis of the written representations received from the directors as on 31stMarch 2016 and taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2016 from being appointed as a director in terms of Section164(2) of the Act;

g. We have issued a separate report on the adequacy of the internal financial controlsover financial reporting of the Company and the operating effectiveness of such controls.The said report can be found in "Annexure B" to this report.

h. With respect to the other matters to be included in the Auditor’s Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information 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 44 to the financial statements;

ii. The company has made provision as required under the applicable law or accountingstandards for material foreseeable losses except for the matters specified in theBasis for Qualified Opinion paragraphs;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For Vishnu Ram & Co.
Chartered Accountants
S.Vishnumurthy
Proprietor
Place: Bangalore Membership No. 22715
Date: 31-08-2016 Firm Registration No.004742S

Annexure to the Independent Auditor's Report

Re: United Breweries (Holdings) Limited

Referred to in paragraph 7(i) of our report of even date;

(i) (a) The company has maintained proper records showing full particularsincluding quantitative details and situation of its fixed assets.

(b) Most of the assets have been physically verified by the management during the year.Some of the assets have not been verified. However there is a regular programme ofphysical verification whereunder every asset gets verified atleast once every threeyears. In our opinion such verification is reasonable having regard to the size of thecompany and the nature of its assets. Discrepancies noticed on verification during theyear have been properly dealt with in the books of account.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.

(ii) The physical verification of inventory has been conducted at reasonable intervalsby the management. The discrepancies noticed on verification between the physical stocksand the book records have been properly dealt with in the books of account.

(iii) As explained to us the company has not granted any loans secured or unsecuredduring the year to companies firms or other parties covered in the register maintainedunder section 189 of the Companies Act 2013. Therefore the provisions of clause3(iii)(a) to 3(iii)(c) of the Companies (Auditor’s Report) Order 2016 are notapplicable to the company.

(iv) According to the information and explanation given to us and based on ourexamination of the records of the company the company has not given any loans made anyinvestments provided any guarantee/security to any persons during the year. Thereforethe provisions of clause 3(iv) of the Companies (Auditor’s Report) Order 2016 arenot applicable to the company.

(v) In our opinion and according to the information and explanations given to us thecompany has complied with the directives issued by the Reserve Bank of India and theprovisions of sections 73 to 76 and other relevant provisions of the Companies Act and therules framed there under. No order has been passed by the Company Law Board or NationalCompany Law Tribunal or Reserve Bank of India or any Court or any other Tribunal inrelation to the deposits accepted by the company.

(vi) In our opinion and according to the information and explanations given to us theprovisions with regard to maintenance of cost records under section 148(1) of theCompanies Act 2013 are not applicable to the company.

(vii) (a) In our opinion and according to the information and explanations given to usthe company is generally regular in depositing with appropriate authorities undisputedstatutory dues including dues in respect of provident fund employees state insuranceincome tax sales tax duty of customs duty of excise value added tax and other materialstatutory dues. However there have been delays in depositing dues of service tax and taxdeducted at source with the appropriate authorities.

According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees state insurance income tax sales taxduty of customs duty of excise service tax value added tax and other material statutorydues etc. were in arrears as at 31-3-2016 for a period of more than six months from thedate they became payable.

(c) According to the information and explanations given to us following is the list ofdues on account of taxes which have not been deposited on account of disputes.

Name of the Statute Nature of dues Disputed amount (Rs. in million) Forum where dispute is pending
Income Tax Act 1961 Income tax for the A.Y. 2007-08. 69.535 CIT (Appeals)
Income Tax Act 1961 Income tax for the A.Y. 2008-09. 171.040 CIT (Appeals)
Income Tax Act 1961 Income tax for the A.Y. 2010-11. 99.710 CIT (Appeals)
Income Tax Act 1961 Income tax for the A.Y. 2011-12. 1144.949 Income Tax Appellate Tribunal
Foreign Trade (Development & Regulation) Act 1992 Penalty 5.000 High Court of Judicature Madras

(viii) As per the information and explanations given to us the company hasdefaulted in repayment of dues to a bank and a Non Banking Financial Company. The unpaiddues to the bank as at March 31 2016 were Rs. 1519 million and unpaid dues to the NonBanking Financial Company were Rs. 695.686 million. Out of this Rs. 17 million has beenrepaid to bank in April 2016. The company is in negotiation with the banker. The companyhas not issued any debentures.

(ix) The company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Therefore theprovisions of clause 3(ix) of the Companies (Auditor’s Report) Order 2016 are notapplicable to the company.

(x) According to the information and explanations given to us no fraud by the companyor on the company by its officers or employees has been noticed or reported during thecourse of our audit.

(xi) The company has not paid/provided any managerial remuneration during the year.Therefore the provisions of clause 3(xi) of the Companies (Auditor’s Report) Order2016 are not applicable to the company.

(xii) In our opinion and according to the information and explanations given to us thecompany is not a nidhi company. Therefore the provisions of clause 3(xii) of theCompanies (Auditor’s Report) Order 2016 are not applicable to the company.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

(xiv) According to the information and explanation given to us and based on ourexamination of the records of the company the company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

(xv) According to the information and explanation given to us and based on ourexamination of the records of the company the company has not entered into non-cashtransactions with directors or persons connected with him. Therefore the provisions ofclause 3(xv) of the Companies (Auditor’s Report) Order 2016 are not applicable tothe company.

(xvi) According to the information and explanation given to us and based on ourexamination of the records of the company the company is not required to be registeredunder section 45-IA of the Reserve Bank of India Act 1934.

For Vishnu Ram & Co.
Chartered Accountants
S.Vishnumurthy
Proprietor
Place: Bangalore Membership No. 22715
Date: 31-08-2016 Firm Registration No.004742S

Annexure – B to the Auditor’s report

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 (HOLDINGS) LIMITED ("the Company") as of 31st March 2016 inconjunction with our audit of the financial statements of the Company for the year endedon that date.

Management’s Responsibility for Internal Financial Controls

The Company’s 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 (‘ICAI’). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company’s policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company's 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 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects. Our audit involves performingprocedures to obtain audit evidence about the adequacy of the internal financial controlssystem over financial reporting and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor’s judgment including the assessment of the risks of materialmisstatement 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 Company’s internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures 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 thecompany's 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.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For Vishnu Ram & Co.
Chartered Accountants
S.Vishnumurthy
Proprietor
Place: Bangalore Membership No. 22715
Date: 31-08-2016 Firm Registration No.004742S