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United Spirits Ltd.

BSE: 532432 Sector: Consumer
NSE: MCDOWELL-N ISIN Code: INE854D01024
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OPEN 561.00
PREVIOUS CLOSE 563.20
VOLUME 88250
52-Week high 716.00
52-Week low 443.00
P/E 165.78
Mkt Cap.(Rs cr) 40,115
Buy Price 552.05
Buy Qty 100.00
Sell Price 553.00
Sell Qty 20.00
OPEN 561.00
CLOSE 563.20
VOLUME 88250
52-Week high 716.00
52-Week low 443.00
P/E 165.78
Mkt Cap.(Rs cr) 40,115
Buy Price 552.05
Buy Qty 100.00
Sell Price 553.00
Sell Qty 20.00

United Spirits Ltd. (MCDOWELL-N) - Auditors Report

Company auditors report

To the Members of United Spirits Limited

Report on the audit of the Standalone Financial

Statements

Opinion

1. We have audited the accompanying standalone financial statements ofUnited Spirits Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2020 the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Changes in Equity and the Statement of Flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information.

2. In our opinion and to the best of our information and according tothe explanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 (the "Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under Section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020its total comprehensive income (comprising of profit and other comprehensive income)changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

3. We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing (SAs) specified under Section 143(10) of theAct. Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

Emphasis of Matter

4. We draw attention to the following matters:

a) We draw attention to Note 58 to the standalone financial statementswhich explains the management's assessment of the financial impact due to the lockdown andother restrictions related to the COVID-19 pandemic situation and that the eventualoutcome in the subsequent period may be different than that estimated due to theuncertainties involved.

b) As explained in Note 41 to the standalone financial statements uponcompletion of the Initial Inquiry which identified references to certain AdditionalParties and certain Additional Matters the MD & CEO pursuant to the direction of theBoard of Directors had carried out an Additional Inquiry that revealed transactionsindicating actual and potential diversion of funds from the Company and its Indian andoverseas subsidiaries to in most cases Indian and overseas entities that appear to beaffiliated or associated with the Company's erstwhile non-executive Chairman and otherpotentially improper transactions. The amounts identified in the Additional Inquiry havebeen fully provided for or expensed by the Company and/or its subsidiaries in earlierperiods. Management is currently unable to estimate the financial impact on the Companyif any arising from potential non-compliances with applicable laws in respect of theabove.

c) As explained in Note 42(a) to the standalone financial statementsthe Company has commenced the rationalisation process for divestment/liquidation/ mergerof certain overseas subsidiaries including step down subsidiaries. The completion of theabove process is subject to regulatory and other approvals (in India and overseas). Atthis stage it is not possible for the management to estimate the financial impact on theCompany if any arising out of potential historical noncompliances with applicable lawsif established.

d) As explained in Note 44 to the standalone financial statements theManagerial remuneration for the year ended March 31 2015 included an amount paid inexcess of the limit prescribed under the provisions of Schedule V to the Act by INR 134million to the former Executive Director and Chief Financial Officer (ED & CFO). TheCompany has initiated steps including by way of filing a suit for recovery before thejurisdictional court to recover such excess remuneration from the former ED & CFO.

e) Note 45 to the standalone financial statements which describes thevarious regulatory notices and

communications received from Securities Exchange Board of India('SEBI') Ministry of Corporate Affairs ('MCA')/ Registrar of Companies Karnataka (the'Registrar') Directorate of Enforcement ('ED') and Company's authorised dealer banks('AD') to which the Company has responded to.

f) As explained in Note 46 to the standalone financial statements theCompany is in litigation with a bank ("the bank") that continues to retain thepledge of certain assets of the Company and of the Company's shares held by USL BenefitTrust (of which the Company is the sole beneficiary) despite the Company prepaying theterm loan to that bank along with the prepayment penalty and further depositing anadditional sum of INR 459 million demanded by the bank and as directed by the Hon'ble HighCourt of Karnataka (the "Court"). In June 2019 a single judge bench of theCourt has issued an order dismissing the writ petition filed by the Company. The Companydisputed the order and filed an appeal against this order before a division bench of theCourt. During the quarter ended September 30 2019 the division bench of the Courtreinstated the interim order in the writ petition thereby granting a stay on the disposalof the pledged assets of the Company by the bank. In January 2020 the division bench ofthe Court admitted the writ appeal and extended the interim stay. Based on managementassessment supported by external legal opinions the Company has disclosed the aforesaidamount of INR 459 million under Other Non-current financial assets

as recoverable from the bank. In a separate proceeding before the DebtRecovery Appellate Tribunal the bank's appeal against the judgement awarded by DebtRecovery Tribunal in favour of the Company in respect of attachment of the aforesaidpledged shares for recovery of the loans advanced by the bank to Kingfisher AirlinesLimited is pending disposal.

g) As explained in Note 47 to the standalone financial statements theCompany came across information suggesting continuing past practices resulting indifferences in reporting to the relevant Regulatory Authorities of yields of certainnon-potable intermediates and associated process losses in the liquor manufacturingprocess. Related actions taken and monitoring of future development by the Company in thisrespect have been described in the said note.

Our opinion is not modified in respect of the matters described

under paragraph 4 above.

5. Key audit matters are those matters that in our professionaljudgment were of most significance in our audit of the standalone financial statements ofthe current period. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters.

Key audit matters

Key audit matter How our audit addressed the key audit matter
a) Assessment of Expected Credit Loss (ECL) provision in respect of Loans to subsidiaries

(Refer Note 5 and 31 to the standalone financial statements)

Our audit procedures included the following:
• Understood evaluated and tested the design and operating effectiveness of Company's controls to assess the adequacy of credit loss on loans to subsidiaries.
The Company has outstanding loans due from some of its subsidiaries aggregating to INR 62943 million (March 312019: INR 60616 million) as at year end against which it carries a provision of INR 59123 million (March 312019: INR 54363 million).
• Tested the methodology applied in the credit loss provision estimation by comparing it to the requirements of the relevant accounting standard.
• Tested the mathematical accuracy of management's model used to calculate credit loss provision.
These loans to subsidiaries fall within the scope of Ind AS 109- Financial Instruments and are measured at amortised cost using effective interest method. A credit loss provision is recorded to adjust the balance to the present value of estimated cash flows. During the year the Company has made a (net) provision for credit loss of INR 478 million.
• Examined the repayment terms by reference to the loan agreements with subsidiaries and evaluated key underlying assumptions such as expected growth in revenue cost savings timing and ability to repay loans by evaluation of forecasts of future cash flows.
• Evaluated the adequacy of disclosures made in the standalone financial statements.
We considered provisioning for credit loss on loans to subsidiaries as a key audit matter as estimation of credit loss provision requires management to make significant assumptions on forward looking information for subsidiaries such as financial projections other resources and the ability of the subsidiaries to repay those loans.
Based on above audit procedures performed we did not note any significant exception to ECL provision in respect of loans to subsidiaries.
Key audit matter How our audit addressed the key audit matter
b) Assessment of the appropriateness of provisions recognised and contingent liabilities disclosed in respect of certain tax matters (Refer notes 8 17 and 49 to the standalone financial statements and Appendix 1 to Annexure A of the Audit Report) Our audit procedures included the following:
• Understood assessed and tested the design and operating effectiveness of the Company's controls in respect of identifying potential tax exposures and/or the accounting and disclosures thereof.
As at March 31 2020 the Company has significant tax exposures and is subject to periodic assessments/ challenges by tax authorities on transfer pricing income tax and a range of indirect tax matters. Consequent to such tax assessments and demands relating to past several years the Company has paid certain amounts under protest at various dates. The Company has also filed appeals with various appellate authorities against such demands.
• Evaluated the related accounting policy for provisioning for tax exposures/disclosure of contingent liabilities by comparing it to the requirements of the relevant accounting standards.
• Obtained management's assessment in respect of tax demands on whether tax outflow is either probable possible or remote.
• Evaluated the management's assessment with the help of auditors' experts where necessary as follows:
Management judgement is involved in assessing the likelihood of ultimate outcome of the tax disputes to decide on the accounting/ disclosure requirements. In certain complex matters the probable amount of the outflows determined by management is supported by opinions obtained from external tax counsels/experts (management tax experts).
o For the samples selected read the correspondences received during the year from the tax authorities/orders from appellate authorities.
o Read views provided by the management/management tax experts as applicable.
We considered this a key audit matter as: o Assessed management's positions on significant tax exposures in accordance with tax laws and past precedents of tax judgements.
• The amounts involved are significant to the standalone financial statements.
o Ensured completeness of litigations by inquiring with the management review of board minutes and review of significant legal expenses.
• Change in the management's judgements and estimates may significantly affect the provisions recognised or contingent liabilities disclosed.
o Evaluated the objectivity competence and capabilities of the management tax experts.
• Matters of disputes are complex in some cases due to the industry in which the Company operates and may lack clarity under tax laws.
o Evaluated the adequacy of disclosures made in the standalone financial statements.
Based on the above procedures we considered the management's assessment in recognising provisions and disclosing contingent liabilities in respect of the stated tax matters as reasonable.
c) Sufficiency of procedures performed for obtaining comfort over existence and condition of inventory (Refer note 10 to the standalone financial statements) Our procedures included the following:
• Understood assessed and tested the design and operating effectiveness of the Company's controls in respect of cycle count of inventory and perpetual inventory system.
As at March 31 2020 the Company has inventory comprising raw materials packing materials work in progress finished goods stock in trade and stores and spares aggregating to INR 18361 million spread across multiple locations.
• We tested the controls by way of inspection of reports issued by the consultant during the year and by way of physical verification of cycle counts performed at certain locations subsequent to the year end.
The Company has a cycle count programme to verify inventories between one to four times a year based on the value of inventory in each location during the year. Such cycle counts until February 2020 covering substantial inventory by value were performed by a third party firm ("consultant") appointed by management.
• For certain other locations having high value of inventory where we could not observe physical verification due to travel restrictions imposed by the Government we relied on the inventory observation by an independent local firm of chartered accountants appointed by the Management.
However the remaining cycle counts planned in the month of March 2020 for certain locations could not be completed by the management/consultant due to COVID-19 travel restrictions and lockdown. Post the relaxation of the lockdown restrictions the Management completed the remaining cycle counts in the months of April and May 2020. Management also performed the necessary roll back procedures to obtain comfort over existence and condition of inventories at such locations as at March 312020. • We tested the workings performed by management to obtain evidence about whether changes in inventory between the count date and the date of standalone financial statements are properly recorded and supported by underlying documents.

90

Key audit matter How our audit addressed the key audit matter
We considered this a key audit matter as:
• The value of inventory including the inventory held at the aforesaid locations is significant to the standalone financial statements.
• As our attendance at the inventory count at the aforesaid locations was impracticable during the month of March 2020 we had to perform alternative audit procedures to obtain sufficient appropriate evidence regarding the existence and condition of inventory at those locations.

Other Information

6. The Company's Board of Directors is responsible for preparation ofthe other information. The other information comprises the information included in theReport of the Directors Business Responsibility Report Corporate Governance Report andManagement Discussion and Analysis but does not include the standalone financialstatements and our auditor's report thereon.

7. Our opinion on the standalone financial statements does not coverthe other information and we do not express any form of assurance conclusion thereon.

8. In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis information we are required to report that fact.

We have nothing to report in this regard.

Responsibilities of management and those charged

with governance for the Standalone Financial

Statements

9. The Company's Board of Directors is responsible for the mattersstated in Section 134(5) of the Act with respect to the preparation of these standalonefinancial statements that give a true and fair view of the financial position financialperformance (including other comprehensive income) changes in equity and cash flows ofthe Company in accordance with the Ind AS and other accounting principles generallyaccepted in India. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate implementation and maintenance of accounting policies; makingjudgments and estimates that are reasonable and prudent; and design

implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

10. In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so. The Board of Directors is alsoresponsible for overseeing the Company's financial reporting process.

Auditor's responsibilities for the audit of the

Standalone Financial Statements

11. Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

12. As part of an audit in accordance with SAs we exerciseprofessional judgment and maintain professional scepticism throughout the audit.

13. We also:

a) Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient

and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resultingfrom error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.

b) Obtain an understanding of internal control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under Section143(3)(i) of the Act we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls with reference to the standalonefinancial statements in place and the operating effectiveness of such controls.

c) Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

d) Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.

e) Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

14. We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal controls that we identify during ouraudit.

15. We also provide those charged with governance with a statement thatwe have complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

16. From the matters communicated with those charged with governancewe determine those matters that were of

most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

17. As required by the Companies (Auditor's Report) Order 2016 issuedby the Central Government of India in terms of Section 143(11) of the Act ("theOrder") and on the basis of such checks of the books and records of the Company aswe considered appropriate and according to the information and explanations given to uswe give in the "Annexure A" statement on the matters specified in paragraphs 3and 4 of the Order to the extent applicable.

18. As required by Section 143(3) of the Act we report that:

a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.

b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet the Statement of Profit and Loss (including othercomprehensive income) the Statement of Changes in Equity and the Statement of Cash Flowsdealt with by this Report are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements complywith the Accounting Standards specified under Section 133 of the Act.

e) On the basis of the written representations received from thedirectors as on March 312020 and taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2020 from being appointed as a director in termsof Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls withreference to the standalone financial statements of the Company and the operatingeffectiveness of such controls refer to our separate Report in "Annexure B".

g) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in

our opinion and to the best of our information and according to theexplanations given to us:

i. The Company has disclosed the impact if any of pending litigationsas at March 31 2020 on its financial position in its standalone financial statements -Refer Notes 8 17 43 44 46 and 49 to the standalone financial statements;

ii. The Company has long-term contracts for which there are no materialforeseeable losses. The Company did not have derivative contracts as at March 312020 -Refer Note 55 to the standalone financial statements;

iii. The Company has transferred amounts required to be transferred tothe Investor Education and Protection Fund by due dates during the year ended March 312020 except for three instances aggregating to INR 1 million with delays ranging from 1 to28 days; and

iv. The reporting on disclosures relating to Specified Bank Notes isnot applicable to the Company for the year ended March 312020.

19. The Company has paid/provided for managerial remuneration inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V to the Act.

For Price Waterhouse & Co Chartered Accountants LLP

Firm Registration Number: 304026E/E-300009

Pradip Kanakia

Partner

Membership Number: 039985 UDIN: 20039985AAAACF1843

Place : Bengaluru Date : May 27 2020

Annexure A to Independent Auditors' Report

Referred to in paragraph 17 of the Independent Auditors' Report of evendate to the members of United Spirits Limited on the standalone financial statements as ofand for the year ended March 31 2020

i. (a) The Company is maintaining proper records showing fullparticulars including quantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the Managementaccording to a phased programme designed to cover all the items over a period of threeyears which in our opinion is reasonable having regard to the size of the Company andthe nature of its assets. Pursuant to the programme a portion of the fixed assets hasbeen physically verified by the Management during the year and no material discrepancieshave been noticed on such verification.

(c) The title deeds of immovable properties as disclosed in Note 3.1to the standalone financial statements (Property plant and equipment) are held in thename of the Company or in the names of the companies which got amalgamated into theCompany through various schemes approved by the courts in earlier years except asdisclosed below:

Particulars Freehold land Buildings
Number of properties 1 1
Gross carrying amount as at March 312020 (INR millions) 1 339
Net carrying amount as at March 31 2020 (INR millions) 1 310

The above table does not include certain immovable properties for whichthe management has furnished photocopies of the title deeds and other corroborativedocuments to evidence the ownership of the properties.

ii. The physical verification of inventory including stocks withcertain third parties and excluding stock-in-transit have been conducted at reasonableintervals by the Management during the year or after the year end for certain locationswhere the count could not be performed in March 2020 in view of the lockdown consequent tothe outbreak of Covid-19 pandemic. In respect of inventory lying with the third partiesthese have substantially been confirmed by them. The discrepancies noticed on physicalverification of inventory as compared to book records were not material.

iii. There are no companies covered in the register maintained underSection 189 of the Act for the purpose of loans granted by the Company.

iv. In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of Section 185 and 186 of theAct in respect of the loans and investments made. The Company has not provided anyguarantees or security to parties covered under Section 185 and 186 of the Act.

v. In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of Sections 73 74 75 and 76 orany other relevant provisions of the Act and the Rules framed thereunder to the extentnotified with regard to the deposits accepted from the public. According to theinformation and explanations given to us no order has been passed by the Company LawBoard or National Company Law Tribunal or Reserve Bank of India or any Court or any otherTribunal on the Company in respect of the aforesaid deposits.

vi. The Central Government of India has not specified the maintenanceof cost records under Section 148 (1) of the Act for any of the products of the Company.

vii. (a) According to the information and explanations given

to us including management's assessment in respect of the providentfund matter as referred to in Note 49 (d) to the standalone financial statements and therecords of the Company examined by us in our opinion the Company is generally regular indepositing the undisputed statutory dues in respect of employees' state insurance valueadded tax and professional tax though there has been slight delay in a few cases and isregular in depositing other undisputed statutory dues in respect of tax deducted atsource tax collected at source sales tax duty of excise income tax duty of customsand other material statutory dues as applicable with appropriate authorities. Furtherfor the period March 1 2020 to March 312020 the company has paid Goods and Service Taxand filed GSTR- 3B after the due date but within the timelines allowed by Central Board ofIndirect Taxes and Customs under the Notification number 32/2020 and Circular no.136/06/2020 dated April 3 2020 on fulfilment of conditions specified therein.

(b) According to the information and explanations given to us and therecords of the Company examined by us the particulars of dues of income tax sales taxvalue added tax service tax duty of customs duty of excise and entry tax as at March31 2020 which have not been deposited on account of a dispute are disclosed in Appendix 1to this report. There have been no dues of goods and services tax which have not beendeposited on account of a dispute.

viii. According to the records of the Company examined by us and theinformation and explanations given to us the Company has not defaulted in repayment ofloans or borrowings to any financial institution or bank or Government or dues todebenture holders as at the balance sheet date.

ix. The Company has not raised any moneys by way of initial publicoffer further public offer (including debt instruments) and term loans. Accordingly theprovisions of Clause 3(ix) of the Order are not applicable to the Company.

x. During the course of our examination of the books and records of theCompany carried out in accordance with the generally accepted auditing practices inIndia and according to the information and explanations given to us we have neither comeacross any instance of material fraud by the Company or on the Company by its officers oremployees noticed or reported during the year nor have we been informed of such case bythe Management.

xi. The Company has paid/provided for managerial remuneration inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V to the Act. Also refer to paragraph 19 of the main audit report.

xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014are not applicable to it the provisions of Clause 3(xii) of the Order are not applicableto the Company.

xiii. The Company has entered into transactions with related parties incompliance with the provisions of Sections 177 and 188 of the Act. The details of suchrelated party transactions have been disclosed in the standalone financial statements asrequired under Indian Accounting Standard (Ind AS) 24 Related Party Disclosures specifiedunder Section 133 of the Act.

xiv. The Company has not made any preferential allotment of shares orfully or partly convertible debentures during the year. Accordingly the provisions ofClause 3(xiv) of the Order are not applicable to the Company.

xv. The Company has not entered into any non-cash transactions with itsdirectors or persons connected with them. Accordingly the provisions of Clause 3(xv) ofthe Order are not applicable to the Company.

xvi. The Company is not required to be registered under Section 45-IAof the Reserve Bank of India Act 1934. Accordingly the provisions of Clause 3(xvi) ofthe Order are not applicable to the Company.

For Price Waterhouse & Co. Chartered Accountants LLP

Firm Registration Number: 304026E/E-300009

Pradip Kanakia

Partner

Membership Number: 039985

UDIN: 20039985AAAACF1843

Place : Bengaluru

Date : May 27 2020

Annexure A to Independent Auditors' Report (Continued)

Appendix 1 - Particulars of Tax dues not deposited on account of adispute *

Referred to in paragraph vii(b) of Annexure A to the IndependentAuditors' Report to the members of United Spirits Limited on the standalone financialstatements as of and for the year ended March 31 2020

Name of the Statute Nature of Dues disputed Amount (INR millions) Amount Paid (INR millions) Unpaid Amount (INR millions) Financial year to which the amount relates Forum where the dispute is pending
Income Tax Act 1961 Income Tax 631 616 15 2006-07 to 2008-09 Assessing Officer of Income Tax
Income Tax Act 1961 Income Tax 501 414 87 2005-06 2009-10 2012-13 and 2013-14 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income Tax 7878 - 7878 2015-16 Dispute

Resolution Panel

Income Tax Act 1961 Income Tax 23836 9627 14209 1988-89 1989-90

1991-92 1993-94 1995-06 to 2000-012002-03 to 2008-09 2010-11 to 2014-15

Income Tax

Appellate

Tribunal

Income Tax Act 1961 Income Tax 4256 850 3406 1985-86 to 2004-05 High Courts of various states
Customs Act 1962 Custom Duty 0 - 0 1997-98 Commissioner of Customs
Customs Act 1962 Custom Duty 2 - 2 1993-94 to 1995-96 Madras High Court
Service Tax - Finance Act 1994 Service Tax 1344 - 1344 2006-07 to 2015-16 Commissioner of Service Tax
Service Tax - Finance Act 1994 Service Tax 678 31 647 2004-05 to 2006-07 2008-09 to 2010-11 Customs Excise and Service Tax Appellate Tribunal
Service Tax - Finance Act 1994 Service Tax 2 - 2 2012-13 High Court of Kerala
Service Tax - Finance Act 1994 Service Tax 2 - 2 2005-06 Supreme Court
Central Excise Act 1944 Central Excise Duty 1473 84 1389 1994-95 1999-2000 and 2017-2018 Commissioner of Central Excise
Central Excise Act 1944 Central Excise Duty 2 2 1999-2000 Deputy

Commissioner of Central Excise

Karnataka Sales Tax Act 1957 Sales Tax/ Value Added Tax 3 3 2006-07 Civil Court Karnataka
West Bengal Sales Tax Act 1994 Sales Tax/ Value Added Tax 766 766 2015-16 Commissioner of Commercial Taxes
Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 11 4 7 2015-16 2016-17 Assessing Officer
Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 32 6 26 1993-94 to 1997-98 2010-11 to 2014-15 Commercial Tax Officer

* As represented by the management

# '0' indicates that the amounts involved are below INR five lakhs andthe sign '-' indicates that amounts are Nil

Appendix 1 - Particulars of Tax dues not deposited on account of adispute *

Referred to in paragraph vii(b) of Annexure A to the IndependentAuditors' Report to the members of United Spirits Limited on the standalone financialstatements as of and for the year ended March 31 2020

Name of the Statute Nature of Dues Disputed amount (INR millions) Amount Paid (INR millions) Unpaid Amount (INR millions) Financial year to which the amount relates Forum where the dispute is pending
Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 129 41 88 1994-95 to 1996-97 2005-06 2006-07 2009-10 to 2013-14 2015-16 Assistant Commissioner of Commercial Taxes
Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 23 1 22 2003-04 2004-05 2006-07 to 2013-14 2016-17 and 2017-18 Additional Commissioner of Commercial Taxes
Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 200 52 148 1985-86 1989-90 2004-05 to 2013-14 and 2015-16 and 2017-18 Deputy Commissioner of Commercial Taxes
Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 1561 515 1046 2000-01 to 2014-15 Joint

Commissioner of Commercial Taxes

Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 237 47 190 1987-881990-91 1992-93 to 2000-012004-05 2005-06 2007-08 2009-10 to 2013-14 Commercial Taxes Appellate Tribunal
Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 15 15 1993-94 2003-04 2005-06 Commercial Taxes Appellate Tribunal and Revisionary Board
Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 198 157 41 1978-79 to 1984-85 1988-89 1989-90 1992-93 1993-94 1996-97 to 2001-02 2007-08 and 2009-10 to 2011-12 High Courts of various states
Various Entry Tax Acts Entry Tax 0 - 0 1989-90 Assessing Officer
Various Entry Tax Acts Entry Tax 37 37 2010-11 to 2012-13 Deputy Commissioner of Commercial Taxes
Various Entry Tax Acts Entry Tax 7 1 6 2007-08 to 2010-11 Joint

Commissioner of Commercial Taxes

Various Entry Tax Acts Entry Tax 24 16 8 2000-012004-05 and 2007-08 Commercial Taxes Appellate Tribunal

* As represented by the management

# '0' indicates that the amounts involved are below INR five lakhs andthe sign '-' indicates that amounts are Nil

Referred to in paragraph vii(b) of Annexure A to the IndependentAuditors' Report to the members of United Spirits Limited on the standalone financialstatements as of and for the year ended March 31 2020

Name of the Statute Nature of Dues disputed Amount (INR millions) Amount Paid (INR millions) Unpaid Amount (INR millions) Financial year to which the amount relates Forum where the dispute is pending
Various Entry Tax Acts Entry Tax 298 - 298 2005-06 2009-10 High Courts of various states
Various Entry Tax Acts Entry Tax 39 30 9 2003-04 to 2013-14 Supreme Court
Bengal Excise Act 1909 and Bengal Excise (Amendment) Act 2012 State Excise 13 13 1993-94 Civil Court West Bengal
Bengal Excise Act 1909 and Bengal Excise (Amendment) Act 2012 State Excise 1 1 1994-95 and 2014-15 Collector of State Excise West Bengal
Bengal Excise Act 1909 and Bengal Excise (Amendment) Act 2012 State Excise 1 1 2016-17 Additional

District

Magistrate West Bengal

Various State Excise Acts State Excise 26 - 26 2010-11 to 2017-18 Superintendent of State Excise
Various State Excise Acts State Excise 66 33 33 2001-02 2002-03 2015-16 Principal Secretary Excise
Various State Excise Acts State Excise 149 14 135 1974-75 to 1988-89 1993-94 to 1998-99 2002-03 to 2009-10 2011-12 2013-14 to 2016-17 Commissioners of State Excise
Various State Excise Acts State Excise 2 1 1 1987-88 Additional Commissioners of Excise
Various State Excise Acts State Excise 10 - 10 1994-95 2001-02 and 2003-04 to 2007-08 State Taxation Tribunals
Various State Excise Acts State Excise 311 135 176 1972-73 1973-74 1980-81 1982-83 1997-98 1998-99 2001-02 2002-03 2010-11

2012-13 to 2015-16

High Courts of various states
Various State Excise Acts State Excise 1498 80 1418 1971-72 1992-93 1996-97 2002-03 2004-05 Supreme Court

* As represented by the management

# '0' indicates that the amounts involved are below INR five lakhs andthe sign '-' indicates that amounts are Nil

Referred to in paragraph 18(f) of the Independent Auditors' Report ofeven date to the members of United Spirits Limited on the standalone financial statementsas of and for the year ended March 31 2020

Report on the Internal Financial Controls with reference to FinancialStatements under Section 143(3)(i) of the Act

1. We have audited the internal financial controls with reference tothe financial statements of United Spirits Limited ("the Company") as of March312020 in conjunction with our audit of the standalone financial statements of theCompany for the year ended on that date.

Management's Responsibility for Internal Financial Controls

2. The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India ("ICAI"). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under the Act.

Auditors' Responsibility

3. Our responsibility is to express an opinion on the Company'sinternal financial controls with reference to financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingdeemed to be prescribed under Section 143(10) of the Act to the extent applicable to anaudit of internal financial controls both applicable to an audit of internal financialcontrols and both issued by ICAI. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls with reference to financialstatements were established and maintained and if such controls operated effectively inall material respects.

4. Our audit involves performing procedures to obtain audit evidenceabout the adequacy of the internal financial controls system with reference to financialstatements and their operating effectiveness. Our audit of internal financial controlswith reference to financial statements included obtaining an understanding of internalfinancial controls with reference to financial statements assessing the risk that amaterial weakness exists and testing and evaluating the design and operatingeffectiveness of internal controls based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system with reference to the financial statements.

Meaning of Internal Financial Controls with reference to FinancialStatements

6. A company's internal financial control with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial control with reference to financial statements includes those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton the financial statements.

Inherent Limitations of Internal Financial Controls with reference toFinancial Statements

7. Because of the inherent limitations of internal financial controlswith reference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial control with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

Opinion

8. In our opinion the Company has in all material respects anadequate internal financial controls system with reference to financial statements andsuch internal financial controls with reference to financial statements were operatingeffectively as of March 31 2020 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note issued by ICAI.

For Price Waterhouse & Co. Chartered Accountants LLP

Firm Registration Number: 304026E/E-300009

Pradip Kanakia

Partner

Membership Number: 039985

UDIN: 20039985AAAACF1843

Place : Bengaluru Date : May 27 2020

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