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United Breweries Ltd.

BSE: 532478 Sector: Consumer
NSE: UBL ISIN Code: INE686F01025
BSE 00:00 | 20 Jul 1078.25 -38.25






NSE 00:00 | 20 Jul 1070.90 -49.75






OPEN 1139.80
VOLUME 47380
52-Week high 1314.85
52-Week low 775.00
P/E 72.37
Mkt Cap.(Rs cr) 28,509
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1139.80
CLOSE 1116.50
VOLUME 47380
52-Week high 1314.85
52-Week low 775.00
P/E 72.37
Mkt Cap.(Rs cr) 28,509
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

United Breweries Ltd. (UBL) - Director Report

Company director report

Your Directors have pleasure in presenting this Annual Report on the business andoperations of the Company and the audited accounts of United Breweries Limited (‘UBL'or ‘your Company' or ‘the Company') for the Financial Year ended March 31 2017(‘the year under review' ‘the year' or ‘FY17').


Financial performance for the year ended March 31 2017 is summarized below:

(Amounts in Rupees million)
FINANCIAL RESULTS Year ended March 31
2017 2016
Gross Turnover 102282 96400
Other income 516 862
EBITDA 6928 7780
Depreciation and amortization 2870 2435
EBIT 4058 5345
Interest 587 811
Profit before Taxation 3471 4534
Provision for Taxation (1178) (1556)
Other Comprehensive Income (58) (43)
Profit after Tax available for appropriation 2235 2935
Dividend on Equity Shares (including taxes thereon) 366 318
Transfer to the General Reserve 229 295
Balance your Directors propose to carry to the Balance Sheet 1640 2322
Total appropriations 2235 2935

The financial statements for the year ended March 31 2017 have been prepared underIndian Accounting Standards ("Ind AS") pursuant to notification by the Ministryof Corporate Affairs under the Companies (Indian Accounting Standards) Rules 2015 forimplementation with effect from April 01 2016. The financial statements for the yearended March 31 2016 have been restated in accordance with Ind AS for comparativeinformation and to conform to Ind AS.

The Gross turnover of UBL grew by 6% on account of increased Sales ahead of industrygrowth. Interest cost decreased by 28% due to better working capital management. EBITDAfor the year under review stood at Rs. 6928 million as compared to Rs. 7780 million inthe previous year reflecting decrease of 11%. Depreciation for the year was Rs. 2870million as compared to Rs. 2435 million in the previous year.

Profit before Taxation for the year stood at Rs. 3471 million as compared to Rs. 4534million in the previous year reflecting a decrease of 23%. Profit after Taxation stood atRs. 2235 million as against Rs. 2935 million in the previous year.


We take pleasure in proposing a dividend of Rs. 1.15 per Equity Share of Re.1/- eachfor the year ended March 31 2017. The dividend declared for the previous year was Rs.1.15 per Equity Share of Re. 1/- each. The total dividend (including dividend tax) is Rs.366 million which amounts to about 16% of the Profit after Tax.


UBL proposes to transfer Rs. 229 million to the General Reserve.


The Authorized Share Capital of the Company stands at Rs. 9990 million comprisingEquity Share Capital of Rs. 4130 million and Preference Share Capital of Rs. 5860million. The Issued Subscribed and Paid-up Share Capital of the Company as on March 312017 remains unchanged at Rs. 264.4 million comprising 264405149 Equity Shares ofRe.1/- each.


Industry Overview

In a very difficult year marked by imposition of prohibition in Bihar Demonetizationpolitical turmoil in Tamil Nadu and the Supreme Court directive on closure of all outletswithin 500 meters of all highways across the country your Company gained close to 1%market share raising its market share to 51% and outperformed its competitors andindustry. However after many years of continuous growth business during the period underreview did not grow at the same pace as in the past. The Management is committed to putthe business back on growth path.

On the basis of alcohol content beer in India can be categorized into Strong and MildBeers. Strong beer which has an alcohol content between 6% and 8% dominates the beermarket accounting for over 85% of the total beer consumed in India. The Super Premium beersegment within both the Strong and Mild beer categories has been growing faster than theoverall beer industry and has grown at a Compounded Annual Growth Rate (CAGR) of almost 30per cent over the last three years. The Indian beer market continues to grow in line withexpectations albeit with some blips. Industry volumes grew at a CAGR of 8% during thelast five years.

Though the alcohol industry in India has been dominated by Spirits (IMFL and countryliquor) and Beer comprises about 11% of the total alcohol consumed in India Beer is thepreferred alcoholic beverage for young Indians and has a bright future. It has registeredrobust growth in the last 10 years with consumption having more than doubled. Two leadingplayers contribute over 70% of the total industry sales UBL being the market leader witha market share of over 51%.

There has been a trend of emergence of brew pubs in large cities such as BengaluruPune and Gurgaon over the last few years. These outlets have introduced consumers to newtypes of beers for e.g. wheat beer.

UBL has been successful in meeting all these challenges and is continuing to strengthenits position in the market.

The Industry remains highly regulated with high taxation. In many parts of the countrywholesale and/or retail distribution is controlled by State Government monopolies. Also in60% of the markets State Governments dictate the price at which beer can be sold.However in combination with the young demographics rising disposal incomes and warmclimate of the country we believe in the long term growth prospects of the beer marketnotwithstanding the constraints mentioned above.

Goods and Services Tax

Goods and Services Tax (GST) is a landmark reform which will have a long-lasting impacton the Indian economy and businesses which has been rolled out on July 01 2017. GST is adestination based tax on consumption of goods and services proposed to be levied at allstages right from manufacture up to final consumption with credit of taxes paid at theprevious stages available for setoff. The Central GST and the State GST would be leviedsimultaneously on every transaction of supply of goods and services except the exemptedgoods and services goods which are outside the purview of GST and the transactions whichare below the prescribed threshold limits.

The Government has kept alcoholic beverage industry outside the purview of GST.However the input/raw materials used by UBL would attract GST. This would result inhigher tax incidence on input materials pushing up our cost of production and will have acascading effect on the profit margin of your Company.

The Management has actively pursued remedial tax planning measures internally and alsowith the Government in order to mitigate the negative impact of the legislation on ourbusiness.

Sales and Marketing

UBL continues to lead in the Indian Beer market with a volume that is more than twicethe size of the nearest competitor.

Kingfisher Strong continues to be the single largest brand in the Indian beer marketwith sales of over 100 million cases. Kingfisher Premium continues to be the first choiceof mild beer consumers across the country. The super-premium brands in our portfolio viz.Kingfisher Ultra Kingfisher Ultra Max and Heineken Lager continue to be among the fastestgrowing brands in the Indian market. These brands have been established in India as worldclass super premium beer brands. Kingfisher Ultra brand is being promoted on the Fashionand Style platform. In addition we have launched Ultra Shorts a highly engaging webseries for the brand.

Heineken the fastest growing brand in UBL's portfolio has established itself asIndia's most premium brand. It is being promoted leveraging the Global marketing platformsof Football (UEFA Champions League) James Bond and Music. We are looking at creatingIndia specific communication for Heineken in the current fiscal.

The Company maintains sustainable investment in brand building activities forKingfisher in the fields of Sports Food Fashion and Music. We have a significant andmarket leading presence in the Indian Premier League T20 Cricket Tournament KingfisherEast Bengal Football Club Sunburn EDM festival and Formula One Racing. Our associationwith restaurants/bars/pubs/clubs/star hotels/night clubs is uninterrupted.

The Kingfisher Calendar continues to maintain its high aspirational value._We havecreated excitement around this property and leveraged it on digital platforms in a largeway. We have also launched Pitchers India's leading Nightlife App in Mumbai Delhi andBengaluru.

Supply Chain

Our manufacturing expenses for the FY17 amounted to Rs. 21942 million representing21% of sales as against Rs. 21389 million in the previous financial year whichconstituted 22% of sales. The relative decrease is due to tight cost control in themanufacturing process in an environment of relatively high inflation.

Bottles remain our biggest cost element. Our decision to move to dedicated bottles withTrade Mark and design registration has ensured tight control on the cost of recycledbottles. In our endeavour towards reducing environmental impact we have adopted NNPBtechnology (less weight less energy less environmental impact) in almost 50% of our newbottle purchases which allows the company to source new bottles with reduced weightbetter distribution of glass and with this the Company has got bottles at a reduced pricebetter stability and lower breakages.

Key material imports for Heineken brand have now been localized and substituted withHeineken approved local vendors. This has ensured lower procurement cost and greaterflexibility of sourcing. Softening of commodity prices coupled with better negotiationshave helped us contain prices.

We are continuing our efforts to develop new varieties of barley in association withleading Government Institutes. We work with farmers in helping them cultivate barley andprovide them with good quality seeds and offer a package of good practices in order toincrease productivity.

Research and Development

UBL's Research and Development function continues to support our growth strategy with afocus on new capabilities development of new products enhancement of existing productsproductivity improvement and cost reduction.

Human Resources

People are your Company's biggest and most valuable asset. Your Company provides acongenial working environment which enables success through ownership camaraderiefreedom of thought and action. Your Company nurtures its human resources throughmentoring coaching learning & development programs etc. Your Company believes incelebrating milestones both big and small and encourages its people to connectcommunicate and collaborate through various platforms enabled by the Company. Your Companyhas people friendly policies viz. leave travel medical etc. which keeps your employeeshappy and productive. The talent pool is refreshed from time to time by infusing new hiresfrom premier colleges of the Country. Industrial Relations continued to be harmonious andpeaceful at all levels and at all locations of the Company.

UBL has 2758 people on its rolls across all locations. The Company has not offered anystock options to the employees during the year under review. All the wage agreements havebeen renewed in a timely manner and are valid and subsisting. Operatives and unionssupport implementation of reforms that impact quality cost and improvements inproductivity across all locations which is commendable.

Total employee benefit expenses for the year stood at Rs. 3521 million as compared toRs. 3343 million in the previous year. This constituted 3.4% of sales. Employee benefitexpenses were higher on account of salary increases.

Your Directors place on record their sincere appreciation to all employees for theircontribution towards the continuous success of the organization.


UBL firmly believes in sustainable development which is interpreted as growing thebusiness in a socially and environmentally responsible way while meeting the legitimateinterests of the stakeholders. Your Company and its employees are committed to thecommunity it works with and the environment it extracts its resources from. While India isa very large Country with multitude of social issues and concerns your Company hasdecided to focus on the communities residing in the vicinity of its breweries as astarting point for its Corporate Social Responsibility (CSR) interventions. The Companyhas integrated CSR in its corporate strategy and intends to drive it with a vision tobring about sustainable social development for its co-communities. The CSR Policy of theCompany is posted on its website and is available through the link

Under the Safe Drinking Water programme initiated last year 35 villages in the statesof Karnataka Telangana Haryana and Maharashtra around six of our breweries have beencovered. Through this initiative we have been successful in providing safe drinking waterto nearly 110000 individuals. For regions that have been drought prone or haveinsufficient water we have invested our efforts in water conservation so as to supplementthe efforts of the communities in meeting the basic water requirements. Your Companyaspires to be a water conservative organisation by 2025 and we are constantly workingtowards achieving this.

In addition to implementing rainwater harvesting and watershed management projects inand around our breweries we also undertake recycling of treated waste water within thebreweries. These efforts are not limited to our breweries alone and we make extensiveefforts in generating awareness among the communities on the adoption of rainwaterharvesting practices and incorporation of the necessary infrastructure. The waterconservation efforts are underway in Bihar Haryana Karnataka Kerala MaharashtraOdisha Punjab Rajasthan Tamil Nadu and Telangana. By March 2016 we had been successfulin recharging 17% of all the freshwater we were consuming. At the end of March 2017 thisis at 33%. Our water conservation efforts have resulted in the recharge of over 1331220KL of water per year.

UBL endeavours to improve the education experience and quality for children especiallyfrom the underprivileged sections and the education initiatives are designed for the same.Our breweries across India have adopted neighbouring Government schools and support themin meeting their requirements on a regular basis. In addition to this we have focussededucation projects being implemented in Rajasthan and Karnataka. Your Company's efforts incertain backward regions of Alwar Rajasthan have been concentrated towards giving afacelift to ten Government Schools in terms of infrastructure as well as teaching-learningexperience. In Mysore district of Karnataka we have established seven first of theirkind mini science centres in Government schools to promote science education among thechildren. The education initiatives have benefitted over 11000 school children.

Accessing primary healthcare forms a substantial portion of a rural household's monthlyexpenditure and UBL's healthcare initiative is directed towards reducing this economicburden. A majority of our breweries provide primary healthcare to the neighbouringcommunities in the form of consultations and medicines free of cost through a healthcentre or mobile unit and medical camps. This year we have been able to provide medicalcare to around 35000 people.

A detailed Report on various aspects of CSR activities at UBL and the CSR activitiesundertaken by your Company is included in the Corporate Responsibility Report which isbeing sent separately. The Business Responsibility Report in the format prescribed underthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is annexed asAnnexure-A. Annual report on CSR activities in terms of the Companies Act 2013 andthe Companies (Corporate Social Responsibility) Rules 2014 is annexed as Annexure-B.


UBL's sustainability reporting articulates its perspective on the emerging forces inthe global sustainability landscape and UBL's response on multiple dimensions. For each ofthe three dimensions i.e. economic ecological and social sustainability we articulatekey issues as well as opportunities that emerge and update our engagements.

Towards sustainability UBL has undertaken proactive measures in water consumptionrain water harvesting and reduction in energy consumption thereby reducing the carbon footprint energy and fuel consumption.

Your Company has adopted various energy saving measures by switching over to renewablesource of energy. Towards this end your Company has commissioned Photovoltaic Solar Systemwith a capacity of 55.2 KW at Dharuhera brewery. The system consists of 178 solar modulesof 310W each. During FY17 the Company generated 80000 Units of electricity from thesolar system. Further your Company has started utilizing wind power at breweries locatedat Nelamangala Mangalore and Nanjangud. Your Company has started receiving Wind Power tothe tune of 3470000 units from the Installation point. With the wheeling of wind energythe renewable energy component for these three breweries in Karnataka is 75% of theirtotal power consumption. On account of the shift from conventional sources to renewableenergy the Company has achieved carbon foot print reduction to the tune of 3351 tonnes ofcarbon di-oxide.


The Company's breweries at Mallepally Hyderabad bagged the Frost & Sullivan'sSustainability Award in the Leaders Award – Large Business Category and brewery atTaloja Maharashtra bagged the Frost & Sullivan's Sustainability Award –Certificate of Merit in the Believers Category. The brewery at Rajasthan has beenrecognised for its contribution through corporate social responsibility by the AlwarDistrict Administration and conferred a Bhama Shah Award for school education initiatives.

Brewery at Palakkad bagged the Excellence Award under medium-large Scale IndustriesCategory. Karnataka State Pollution Control Board Mangalore division has recognisedbrewery at Mangalore for its "Green Contribution" on the occasion of WorldEnvironment day 2016. Brewery at Ludhiana was awarded the environmental award by‘National Green Corps' an NGO working for bio-diversity towards active involvementin tree plantation and converting a 3 acres of waste land into a lush green park used bythe nearby residents for walking jogging and yoga.


In terms of revenue beer accounts for around 11% of the Indian alcoholic beveragemarket. Compared to various international markets such a low penetration in beerconsumption offers an opportunity for substantial growth in the future. Your Company viewstremendous opportunity in meeting the ever increasing demand armed with a consistentexpansion programme each year.

The main drivers for the growth of beer consumption in India are:

Young growing middle class: Apart from being the second most populous country in theworld India has over 50% of its population below the age of 25 and more than 65% belowthe age of 35. This demographic enters the category through beer.

Base effect: Our current per capita consumption of beer at 2 litres is well below theGlobal average of around 30 litres and can only grow.

Changing cultural mores: Drinking in bars is "fast becoming part of the socialmilieu" in urban India though alcohol consumption (predominantly spirits of variouskinds) is still frowned upon in rural India.

In order to cater to new consumers capture market opportunities compete with newlaunches by competitors and in its continuous endeavour to offer new product ranges to itsconsumers UBL has added to its portfolio Kingfisher Storm strong beer in the premiumsegment. Kingfisher Storm which has been launched in the large profitable markets ofKarnataka Maharashtra and West Bengal has received an overwhelming response fromconsumers. Your Company will be launching this brand in other important markets in aphased manner over the next few months.

UBL faces a challenge in the form of consolidation of competition. The world's largestbeer maker AB InBev took over its closest rival SAB Miller thereby enhancing itscombined presence to control nearly a third of the global market.

There are a variety of taxes & levies in each state. These along with priceregulation inadequate market infrastructure and restrictions in interstate movement ofbeer pose a great challenge to the industry. Roughly one-fifth of most state governmentbudgets are funded by the_alcoholic beverage category. Despite drivers of growth being inplace government intervention in distribution high taxation restricted communicationand increased cost of raw materials remain some of the negatives faced by the industry.

The threat to sales in some territories in the country arises due to changes ingovernment regulations and the threat of prohibition which stems from constant changes inthe political climate in the country. The industry as a whole faces the threat of droughtin a few states resulting in severe shortage of water supply.


UBL is the leading player in the industry with a market share of about 51%. Effectivemarketing strategies have helped us reinforce our position as the clear market leader inthe Country. Our flagship brand Kingfisher is almost synonymous with beer in India.

Despite many challenges the Indian market provides a huge opportunity with itsextremely low per capita consumption when compared to other countries in the world likeChina and US which consume 37 litres and 78 litres of beer respectively per person perannum. We believe that favourable demographics rising disposable incomes urbanizationand rising acceptability of drinking will bring winds of change to the industry. Beerindustry is expected to grow at 6% to 8% p.a. for the next few years.

Also what augurs well for the Indian beer industry is our Country's large populationand the fact that over 50% of the population is under 25 years of age. As per industryreports India is expected to overtake China to become the most populous nation in theworld by 2025. All this will result in India reaping a huge demographic dividend.

Consumer acceptance of beer has led to innovations such as new products introductionsand the success of brew pubs selling freshly brewed beer in cities like BengaluruGurgaon and Pune. Growth in premium modern trade and on premise outlets in metropolitancities has increased the range of availability of products and improved the retailenvironment. In few States the Government has issued separate licenses for sale of beerwhich signals good growth prospects for the industry.

UBL has invested significantly in brand visibility to sustain its "top ofmind" recall with consumers. High profile sponsorships and brand activations haveensured that its brands especially Kingfisher retain their iconic status. The Companyhas a strong route-to-market combined with a portfolio of market leading brands.

We have through a series of strategic investments taken steps to enhance ourleadership in the industry in this unfolding scenario. UBL continues to invest in bothcapacities and brands. Though already established efficiency programmes apply to allaspects of our business there is a constant drive towards continuous identification ofnew ways of improving organizational capabilities and speed whilst reducing cost.

Even in a highly competitive scenario your Company has not only successfully overcomethe challenges of the industry but also outpaced several global beer brands that haveentered India in the recent past and has constantly maintained its leadership position.

Risk Management

Your Company has in place a robust framework for managing and mitigating various risks.Considering the risks affecting our industry UBL continuously assesses and updates therisk management framework based on changes in the level of risk. To achieve this controlUBL performs risk assessment in which Strategic Operative Information TechnologyFinancial and other Risks are analysed. This is reviewed regularly by the Internal Auditteam Risk Management Committee and the Board. The Management Committee meets regularly toaddress various risks and mitigation thereof. UBL has evolved a framework for managementof business risk. We periodically assess risks in the internal and external environmentalong with the potential cost of the risks and incorporate risk management plans in ourstrategy business and operational plans.

UBL has explored a variety of avenues to contain the risk of continued increase inbasic costs and has entered into a few long term agreements for sourcing vital inputs.There has been a continuous review of the long term strategy for procurement at aneconomical cost.

In order to mitigate the risk of water shortages most of our breweries haveimplemented ground water recharge. As part of our Corporate Social Responsibilityinitiatives UBL has committed to availability of safe drinking water for communitiesresiding in the vicinity of each of its 21 owned breweries. We have been continuouslyworking towards water conservation and minimising water waste by recycling and reutilizingto the extent possible. All our breweries have rainwater harvesting systems in place. Froma consumption level of about 6 litres of water per litre of beer produced about a decadeago we are at a level of about 3.4 litres per litre of beer today. This is lower than theworld average of about 4 litres. Some of our newer breweries are even at a level of 2.5– 2.8 litres of water per litre of beer. This would place your Company amongst theelite of world breweries in the area of water consumption.

UBL has constituted a Risk Management Committee comprising senior Board members.Further the Assurance Committee comprising functional Heads periodically reviews theidentified risks and takes mitigating actions. The Company has formulated a RiskManagement Policy and the management has laid down procedures for risk assessmentidentification minimization and mitigation which are presented to the Audit Committee andthe Board of Directors on a periodical basis.

Internal Control System

UBL has established a robust system of Internal Controls to ensure that assets aresafeguarded and transactions are appropriately authorized recorded and reported. With theintroduction of Internal Controls in Financial Reporting (ICFR) in the Companies Act2013 we have made an evaluation of functioning and quality of internal controls. TheInternal Financial Control framework of your Company is established in accordance withCOSO (Committee of Sponsoring Organizations) framework and is commensurate with the sizeand operations of your Company's business. In addition to statutory mandate InternalAudit evaluates and provides assurance of its adequacy and effectiveness through periodicreporting.

Controls in place are routinely evaluated and certified by the Internal and StatutoryAuditors and gaps are identified by the Auditors through a detailed testing exercise. Therevised process of internal control ensures orderly and efficient conduct of businesssafeguarding of assets prevention and detection of frauds and errors accuracy andcompleteness of accounting records and timely preparation of reliable financialinformation. Financial Statements are prepared on the basis of the Significant AccountingPolicies that are carefully selected by management. The Accounting Policies are reviewedand updated from time to time. These in turn are supported by a set of Standard OperatingProcedures (SOPs) that have been established for the business. The SOPs and controls arereviewed by management and audited periodically.

Internal Control evaluates adequacy of segregation of duties transparency inauthorization of transactions adequacy of records and documents accountability &safeguarding of assets and reliability of the management information system. Periodicreviews are carried out for identification of control deficiencies and opportunities forbridging gaps with best practices along with formalization of action plans to minimizerisks.

The Company believes that the overall internal control system is dynamic and reflectsthe current requirements at all times thereby ensuring that appropriate procedures andoperating and monitoring practices are in place.


Subsidiary Company

Maltex Malsters Limited is the only subsidiary in which your Company holds 51% ofequity capital. Maltex Malsters Limited is a non-listed entity and is not a materialnon-listed subsidiary as defined in Regulation 16(1)(c) of the Listing Regulations.

UBL has formulated a policy for determining material subsidiaries which is placed onthe website of the Company and is available through the link

The consolidated financial statement of the company including the financial statementof its subsidiary forms part of this Report in terms of the Companies Act 2013 and theListing Regulations. A statement containing the salient features of the financialstatement of the subsidiary/associate is attached as Annexure-C to this Report.

Cash Flow Statement

A Cash Flow Statement for the year ended March 31 2017 is appended.

Particulars of Loans Guarantees or Investments

Details of loans guarantees and investments covered under section 186 of the CompaniesAct 2013 are given in the notes to the Financial Statements.

Listing requirements

Your Company's Equity Shares are listed on the BSE Limited (formerly Bombay StockExchange Limited) and National Stock Exchange of India Limited. The listing fees have beenpaid to all these Stock Exchanges for the year 2017-2018.

Depository System

The trading in the Equity Shares of the Company is under compulsory dematerializationmode. The Company has entered into an agreement with National Securities DepositoryLimited and Central Depository Services (India) Limited in accordance with the provisionsof the Depositories Act 1996 and as per the directions issued by the Securities andExchange Board of India. As the depository system offers numerous advantages members arerequested to take advantage of the same and avail the facility of dematerialization of theCompany's shares.


There were no outstanding deposits at the end of the previous financial year. TheCompany has not invited any deposits during the year.

Additional statutory information

Particulars of Employees & Managerial Remuneration

Information required under sub-section (12) of Section 197 of the Companies Act 2013read with Rule 5(2) of The Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 in respect of employees of the Company forms part of this Report.Details of remuneration of managerial personnel as required under sub-section (12) ofSection 197 of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 also forms part of this Report.

In terms of first proviso to sub-section (1) of Section 136 of the Companies Act 2013the reports and accounts are being sent to the shareholders excluding the aforesaidinformation. Any shareholder interested in inspection of the documents pertaining to aboveinformation or desires a copy thereof may write to the Company Secretary.

Cautionary Statement

Statements in this Report particularly those which relate to ‘ManagementDiscussion and Analysis' and ‘Opportunities Threats Risks and Concerns' describingthe Company's objectives projections estimates and expectations may constitute‘forward looking statements' within the meaning of applicable laws and regulations.Actual results might differ materially from those either expressed or implied.

Employees Stock Option Scheme and Sweat Equity Shares

The Company has not offered any shares to its employees or Key Managerial Personnelunder a scheme of Employees' Stock Option and has also not issued any Sweat Equity Sharesat any time.

Related Party Transactions

Details of transactions with related parties as defined in the Companies Act 2013 andthe Rules framed thereunder the Listing Regulations and Accounting Standard 18 of theCompanies (Accounting Standards) Rules 2006 have been reported in the Notes to financialstatements. Approval of the Audit Committee and the Board of Directors as required underthe Listing Regulations has been obtained for such transactions. The Company hasformulated a policy on materiality of Related Party Transactions and also on dealing withRelated Party Transactions which is placed on the website of the and is available through the link transactions entered by the Company during FY17 with related parties were in theordinary course of business and on an arm's length basis. During the year the Company hasnot entered into any transaction with related parties which could be considered materialin accordance with the policy of the Company on materiality of related party transactions.

Familiarization programme for Independent Directors

The existing Board comprises Executive Independent and Non-Executive Directors whohave been at the helm of Management of the Company for several years and are fullyconversant with the business and operations of the Company. The Familiarization programmefor new Independent Directors as and when inducted shall aim to familiarize them with theCompany their roles rights responsibility in the Company market business model of theCompany etc. The Board of Directors has complete access to the information within theCompany.

Presentations are regularly made to the Board of Directors/Audit Committee/Nomination& Remuneration Committee on various related matters where Directors get anopportunity to interact with Senior Managers. The Company has issued appointment lettersto the Independent Directors which also incorporates their role duties andresponsibilities.

Whistle Blower Policy

The Company has adopted vigil mechanism which is a channel for receiving and redressingof complaints about any misconduct actual or suspected fraud actual or potentialviolations of the Company's code of conduct and any other unethical unlawful or improperpractices acts or activities within the Company. The Company has formulated a WhistleBlower Policy for Employees & Directors and has ensured adequate safeguards againstvictimization of whistle blowers. The details of establishment of the vigil mechanism aredisclosed on the Website of the Company.

None of the Employees & Directors have been denied access to the Chairman of theAudit Committee.

Conservation of Energy

The Company is taking continuous steps to conserve energy. Its"Sustainability" initiatives are disclosed separately as part of this Report.

The information on conservation of energy technology absorption foreign exchangeearnings and outgo as stipulated under Clause (m) of sub-section (3) of Section 134 ofthe Companies Act 2013 read with The Companies (Accounts) Rules 2014 is set out herewithas Annexure-D to this Report.

Code of Business Conduct and Ethics

The Board of Directors of UBL have adopted a Code of Business Conduct and Ethics interms of the Listing Regulations which has been posted on the website of the Company

Code for Prevention of Insider Trading

Your Company has adopted a comprehensive ‘Code of Conduct to Regulate Monitor andReport of Trading by Insiders' and also a ‘Code of Practices and Procedures for FairDisclosure of Unpublished Price Sensitive Information' under the provisions of theSecurities Exchange Board of India (Prevention of Insider Trading) Regulations 2015.


The Board of Directors of UBL comprises two Executive Directors and a balancedcombination of Independent and Non-Executive Directors.

The Securities and Exchange Board of India vide its order dated January 25 2017 (the"SEBI Order") has restrained Dr. Vijay Mallya from holding position as Directoror Key Managerial Person of any listed company. The Company had received (i) emails datedJanuary 25 2017 January 27 2017 and January 30 2017 from the National Stock Exchangeadvising it to comply with the SEBI Order and take necessary steps; and (ii) email datedJanuary 27 2017 from Bombay Stock Exchange seeking an update on the action taken oraction proposed to be taken by the Company with respect to the SEBI Order. In complianceon February 6 2017 the Independent Directors of the Company resolved not to sendnotices/agendas relating to the Company's Board meetings and/or other privilegedinformation to Dr. Mallya till such time the SEBI Order remains in force. Subsequently onFebruary 8 2017 the Board of Directors took on record the minutes of the meeting of theIndependent Directors. Effectively through these measures Dr. Mallya was restrained fromacting as a Director in the Company in accordance with the SEBI Order. Further by aseparate communication Dr. Mallya was requested to step down from the Board withimmediate effect until the SEBI Order is stayed or vacated.

As the SEBI Order has not been vacated as on date Dr. Mallya continues to berestrained from being on the Board of the Company. Pursuant to the decision of the Boardat its meeting held on July 4 2017 the Company has communicated on July 6 2017 to Dr.Mallya and his associate companies (promoters of the Company) to nominate a director onthe Board in his place in terms of the Articles of Association of the Company.

SEBI has issued a letter dated August 4 2017 to the Company observing that VijayMallya has still been disclosed as Non-Executive Director and Chairman of United BreweriesLimited (UBL) on the BSE Website and advised the Company to provide information on (a)Whether Vijay Mallya has acted/ is acting as Director of UBL from the date of passing ofSEBI Order and (b) Steps taken by UBL to comply with the SEBI Order with respect todirections of restraining Vijay Mallya from holding any position as director in any listedcompany. The steps taken by the Company have been communicated to SEBI on August 10 2017.

Further the Board has also unanimously resolved and authorized filing of statutoryforms / intimations to applicable statutory authorities under the Companies Act 2013 andother relevant statutes notifying Dr. Mallya's cessation from holding the position ofDirector in the Company.

The Independent Directors viz. Mr. Chhaganlal Jain Mr. Chugh Yoginder Pal Mr. SunilAlagh Ms. Kiran Mazumdar Shaw Mr. Madhav Bhatkuly and Mr. Stephan Gerlich have beenappointed for a period of five years till September 03 2019. During the year twomeetings of Independent Directors were convened on May 30 2016 and February 06 2017. AllIndependent Directors have given a declaration that they meet the criteria of Independenceas laid down under Section 149(6) of the Companies Act 2013.

Meetings of the Board of Directors and Committees of the Board

The meetings of the Board and Committees are pre-scheduled and a tentative calendar ofthe meetings finalized in consultation of the Directors is circulated to them in advanceto facilitate them to plan their schedule. In case of special and urgent business needsapproval is taken by passing resolutions through circulation. During FY17 six (6) BoardMeetings were held. Other details including composition of the Board and variousCommittees and Meetings thereof held in FY17 are given in the Corporate Governance Reportforming part of this Report.

Audit Committee

The Audit Committee of the Board of Directors is constituted to act in accordance withthe terms of reference and perform roles as prescribed under the Companies Act 2013 andListing Regulations. The composition of the Audit Committee its terms of reference rolesand details of meetings convened and held during the year under review is given in theCorporate Governance Report forming a part of this Report.

During the year all the recommendations of the Audit Committee were accepted by theBoard.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee is constituted to act in accordance with theterms of reference and perform roles as prescribed under the Companies Act 2013 andListing Regulations. The composition of the Nomination and Remuneration Committee itsterms of reference roles and details of meetings convened and held during the year underreview is given in the Corporate Governance Report forming a part of this Report.

Performance Evaluation of Directors

Performance evaluation of non-Independent Directors Independent Directors Chairmanthe Board as a whole and Committees of the Board was carried out in accordance with thestatutory provisions as contained in the Act and Listing Regulations. Responses fromindividual Directors were submitted through an electronic platform and were keptconfidential.

To ensure an effective Board evaluation process the Nomination and RemunerationCommittee (NRC) has put in place a robust evaluation framework for conducting the exercisewith key steps and practices defined clearly. As part of this process customizedquestionnaires were circulated to all Directors of the Company. Each Director wasrequired to undertake self-assessment and assessment of the Chairman. Additionally theeffectiveness of the Board and Committees was also evaluated by each member of the Board.

Performance of the Board was evaluated on various parameters such as compositionstrategy tone at the top risk and controls and diversity. Similarly a questionnaire forCommittees was framed on parameters such as adherence to the terms of reference andadequate reporting to the Board. Parameters for the Directors included intellectualindependence of the Director participation in formulation of business plans constructiveengagement with colleagues and understanding of the risk profile of the company. Chairmanwas evaluated on parameters such as leadership style and motivation of Directors.

In order to maintain confidentiality of the entire process a summary of responsesreceived from non-Independent Directors were placed and discussed at a meeting ofIndependent Directors. Further responses received from Independent Directors were placedbefore the Board. Recommendations arising from this entire process were considered toimprove its overall effectiveness.

Policy on Performance Evaluation

UBL has formulated a Performance Evaluation Policy inter alia prescribing evaluationcriteria for Independent Directors and the Board of Directors of the Company. The Policyalso lays down criteria for appointment of Directors and the remuneration of Directors/KeyManagerial Personnel. The Policy is posted on the website of the and is available through the link Criteria for making payment tonon-executive Directors is placed on the website of the Company

Foreign Exchange Earnings and Outgo

During FY17 total foreign exchange earnings of the Company stood at Rs.48 million(Previous Year: Rs.44 Lakhs) and foreign exchange outgo stood at Rs.1488 million(Previous Year: Rs.1882 million).

Corporate Governance Report

Report on Corporate Governance forms a part of this Report along with the Certificatefrom the Company Secretary in Practice.

Annual Return

As required under sub-section (3) of Section 92 of Companies Act 2013 and Rule 12(1)of Companies (Management and Administration) Rules 2014 an extract of the Annual Returnin Form MGT-9 is annexed as Annexure-E to this Report.

Auditors and the Auditor's Report

In terms of the provisions contained in the Companies Act 2013 read with the Companies(Audit and Auditors) Rules 2014 Messrs S.R. Batliboi & Associates LLP CharteredAccountants were appointed Statutory Auditors of UBL at the 15th Annual GeneralMeeting held on September 04 2014 for a period of three years i.e. from the conclusion of15th Annual General Meeting till the conclusion of 18th AnnualGeneral Meeting. The Auditors hold office till conclusion of the ensuing AGM and it isproposed to re-appoint them for another term of five years under the provisions of theCompanies Act 2013 and Rules framed thereunder. The Auditors have given their consent forre-appointment and have also confirmed that their re-appointment if made would be withinthe limits prescribed under the Companies Act 2013. Their appointment in the office ofStatutory Auditors during the said period shall be subject to ratification by Members atevery Annual General Meeting.

There are no qualifications or adverse remarks in the Auditor's Report.

Secretarial Audit

Pursuant to the Section 204 of the Companies Act 2013 and Rule 9 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s. Sudhir Hulyalkar Company Secretaries to undertake Secretarial Audit ofthe Company for the FY17. The Secretarial Audit Report forms part of this Report and isannexed as Annexure- F.

There are no qualifications reservations or adverse remarks in the Secretarial AuditReport.

Details of Significant and Material Orders

Save and except the following no order has been passed or stringent action taken byany regulator or court or tribunal impacting the going concern status of the Company. TheCompany has complied with the requirements of the regulators on matters related tostakeholders as applicable. (i) It is in public domain that United Breweries (Holdings)Limited (UBHL) a promoter of your Company which holds 10.72% equity has been ordered tobe wound up by Hon'ble Karnataka High Court Order vide dated February 07 2017. UBHL hassince filed an appeal against the said Winding-up Order which is pending.

(ii) In connection with the proceedings under the Prevention of Money Laundering Act2002 against Kingfisher Airlines Limited (KFA) and Dr. Vijay Mallya in the capacity ofPrincipal Officer of KFA it is reported in news-media that the Enforcement Directoratehas attached Equity Shares held by certain promoter entities of your Company which arecontrolled by Dr. Vijay Mallya directly or indirectly. However your Company has notreceived any communication from the Enforcement Directorate in this matter.

(iii) The State Government of Bihar had imposed a ban on sale and consumption ofalcoholic beverages in the State and permitted manufacture of alcoholic beverages forexport out of the State effective April 05 2016. The notification of Bihar Governmentimposing ban was struck down by Patna High Court. The State Government of Bihar haschallenged such decision of Patna High Court in Supreme Court which is pending.Subsequently effective April 01 2017 total prohibition has been imposed in Bihar Stateand the commercial production at the Company's brewery located at Kopakalan NaubatpurDistrict Patna has been discontinued.

(iv) Allowing a Special Leave Petition seeking ban on sale of liquor on National andState Highways (the Highways) the Hon'ble Supreme Court has directed to shut all liquorshops hotels restaurants bars etc. on the Highways and within a distance of 500 or 220meters from the Highways as applicable. The Court has directed the States not to renewliquor licences after April 01 2017.

The orders/proceedings mentioned in (i) & (ii) above do not have any impact ongoing concern status of the Company. Impact of (iii) & (iv) has been addressed in thefinancial statements forming part of this Report.

Directors' Responsibility Statement

Pursuant to clause (c) of sub-section (3) of Section 134 of the Companies Act 2013the Board of Directors report that:

(a) in the preparation of the Annual Accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

(b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit of the Company for that period;

(c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Directors have prepared the annual accounts on a going concern basis;

(e) the Directors have laid down internal financial controls to be followed by theCompany and ensured that such internal financial controls are adequate and were operatingeffectively and

(f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and ensured that such systems were adequate and operatingeffectively.


Your Directors take this opportunity to thank UBL's customers shareholders suppliersbankers business partners and associates financial institutions and central and stategovernments for their consistent support and encouragement to the Company. Finally yourDirectors would like to convey sincere appreciation to all the employees of the Companyfor their hard work and commitment.

By Authority of the Board
Shekhar Ramamurthy Steven Bosch
August 10 2017 Managing Director Director & CFO
Mumbai DIN: 00504801 DIN: 07573930