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AUDITOR'S REPORT

United Breweries Ltd.

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Market Cap. (₹) 33743.39 Cr. P/BV 10.60 Book Value (₹) 120.41
52 Week High/Low (₹) 1491/1083 FV/ML 1/1 P/E(X) 59.94
Bookclosure 22/08/2019 EPS (₹) 21.29 Div Yield (%) 0.20
Year End :2019-03 

independent Auditor's Report

To the Members of United Breweries Limited

Report on the Audit of the Standalone ind AS Financial Statements Opinion

We have audited the accompanying standalone Ind AS financial statements of United Breweries Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss, including the Statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone Ind AS financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013, as amended ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, its profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs) as specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the 'Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements' section of our report. We are independent of the Company in accordance with the 'Code of Ethics' issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Emphasis of Matter

We draw attention to below mentioned notes to the accompanying standalone Ind AS financial statements:

(a) Note 35(c) which more fully describes the uncertainty relating to the future outcome of ongoing investigation by the Competition Commission of India ("CCI"); and

(b) Note 43 which more fully describes the uncertainty relating to the outcome of special leave petition filed by the Bihar State Government before the Honorable Supreme Court of India and the consequential impact thereof.

Our opinion is not qualified in respect of aforesaid matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone Ind AS financial statements for the financial year ended March 31, 2019. These matters were addressed in the context of our audit of the standalone Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the standalone Ind AS financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Ind AS financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone Ind AS financial statements.

Key audit matters

How our audit addressed the key audit matter

Revenue recognition from sale of products

(as described in Note 2.1(v) and 21 of the standalone Ind AS financial statements)

Revenue from the sale of products is recognized when control of the products has transferred to the customer and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Revenue from the sale of products is measured at the fair value of the consideration received or receivable, net of returns and allowances, discounts and incentives.

Significant judgment is required in estimating accruals relating to allowances, discounts and incentives recognized in relation to sales made during the year.

- Our audit procedures included, amongst others, assessing the Company's revenue recognition accounting policies, including those relating to allowances, discounts and incentives.

- We understood, evaluated and tested the operating effectiveness of internal controls over recognition of revenue, discounts, and incentives.

- We performed test of details, on a sample basis, and inspected the underlying documents relating to sales and accrual of discounts and incentives.

- We tested sales transactions near year end date as well as credit notes issued after the year end date.

- We discussed and evaluated management assessment of estimates relating to allowances, discounts and incentives.

- We assessed the disclosures in the standalone Ind AS financial statements in respect of revenue.

Provision for trade receivables

(as described in Note 2.1(v), 9 and 40(b) of the standalone Ind AS financial statements)

Trade receivable balances represent significant portion of the total assets as at March 31, 2019. Trade receivables include dues from state government corporations, distributors, retailers and contract manufacturing units. The Company creates provision for all unsecured trade receivables based on management estimates.

Timing of collection of dues from the customers may differ from the actual credit period. Significant judgment is required by the management to estimate the amounts unlikely to be ultimately collected.

- We understood, evaluated and tested the operating effectiveness of internal controls over trade receivables.

- We performed audit procedures on existence of trade receivables, which included reading and comparing balance confirmations with books, testing subsequent receipts and sales transactions for audit samples.

- We evaluated the assumptions used to calculate the provision for trade receivables through analysis of ageing and past trend of bad debts write off.

- We discussed and evaluated management assessment for receivables which were due for more than their respective credit periods.

- We considered the disclosures in the standalone Ind AS financial statements for compliance with disclosure requirements.

Key audit matters

How our audit addressed the key audit matter

impairment of investment in subsidiary

(as described in Note 2.1(v) and 5 of the standalone Ind AS financial statements)

The Company has investment of Rs. 4,500 Lakhs in equity shares of Maltex Malsters Limited ('MML'), subsidiary, against which an provision for impairment of Rs. 1,959 Lakhs is carried as at March 31, 2019.

Management has undertaken an impairment assessment as at year end which involve use of significant estimates and assumptions.

- We discussed and evaluated management assessment of impairment of investment in subsidiary.

- We evaluated the objectivity and independence of Company's specialists involved in the valuation process.

- We assessed the valuation method used and evaluated the key assumptions used by the management.

- We considered the disclosures in the standalone Ind AS financial statements for compliance with disclosure requirements.

Tax provisions and contingencies

(as described in Note 2.1(v), 16, 30 and 35(a) of the standalone Ind AS financial statements)

The Company has received various income tax demand orders and notices relating to transfer pricing, disallowance of certain expenses, etc. and has also received various indirect tax and other demand orders and notices, which are under litigation. The Company is contesting these demands and has made provision where the outflow of resources embodying economic benefits is considered to be probable.

Significant judgments’ and estimates are required to assess impact of these litigations on the financial position, results of operations and cash flows.

- We assessed the design, implementation and operative effectiveness of management's key internal controls over recognition / disclosure of tax provisions and contingencies.

- We read the confirmations from the Company's external legal counsel on significant litigations. We evaluated the independence, objectivity and competency of the Company's specialists involved.

- We read relevant tax and other laws and discussed with the management, to understand the underlying matters in the demand orders / notices and basis for management judgment and estimates.

- We included tax specialists in our team to perform an evaluation of assumptions used and relevant judgments’ passed by the authorities.

- We assessed the related disclosures in the standalone Ind AS financial statements for compliance with disclosure requirements.

Other information

The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the directors' report and the corporate governance report, but does not include the standalone Ind AS financial statements and our auditor's report thereon.

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

In connection with our audit of the standalone Ind AS financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone Ind AS financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Management and Those Charged with Governance for the Standalone ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone Ind AS financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Charged with Governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Standalone ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind AS financial statements as a whole are free from material misstatement, whether due 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 audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Ind AS financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the standalone Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone Ind AS financial statements for the financial year ended March 31, 2019 and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in "Annexure 1" a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by section 143(3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;

(e) The matter described in paragraph (a) of Emphasis of Matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;

(f) On the basis of the written representations received from the directors as on March 31, 2019 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 from being appointed as a director in terms of section 164(2) of the Act;

(g) With respect to the adequacy of the internal financial controls over financial reporting of the Company with reference to these standalone Ind AS financial statements and the operating effectiveness of such controls, refer to our separate report in "Annexure 2" to this report;

(h) In our opinion, the managerial remuneration for the year ended March 31, 2019 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act; and

(i) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer Note 16 and 35(a) to the standalone Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts; and

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

ANNEXURE 1 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE IND AS

FINANCIAL STATEMENTS OF UNITED BREWERIES LIMITED

Statement on the matters specified in paragraphs 3 and 4 of the Companies (Auditor's report) Order, 2016

(“the Order”)

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification.

(c) According to the information and explanations given by the management and confirmation from banks relating to title deeds of immovable properties mortgaged with the banks (refer Note 14 to the accompanying standalone Ind AS financial statements for details) for securing the borrowings raised by the Company, the title deeds of immovable properties included in property, plant and equipment are held in the name of the Company, except for 1 immovable property of 9.04 acres (forming part of land parcel of 23.87 acres with gross book value of Rs. 211 Lakhs) where registration of title deed is pending, 2 immovable properties aggregating to 0.54 acres (forming part of land parcel of 142.96 acres with gross book value of Rs. 4,309 Lakhs) for which title deeds are under dispute and pending resolution at the Civil Courts as at March 31, 2019 and 3 immovable properties aggregating to 106.80 acres (with gross book value of Rs. 1,696 Lakhs) for which title deeds are held in the name of erstwhile merged entities.

(ii) The management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies were noticed on such physical verification. Inventories lying with outside parties have been confirmed by them as at March 31, 2019 and no material discrepancies were noticed in respect of such confirmations.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013 ("the Act"). Accordingly, the provisions of clause 3(iii)(a),(b) and (c) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to us, provisions of section 186 of the Act in respect of investments made by the Company have been complied with. The Company has not advanced loans to directors / to a company in which the director is interested to which provisions of section 185 of the Act apply and has not given loans /guarantees/ provided security to which the provisions of section 186 of the Act apply and hence not commented upon.

(v) The Company has not accepted any deposits within the meaning of sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.

(vi) To the best of our knowledge and as explained, the Central Government has not specified the maintenance of cost records under section 148(1) of the Act, for the products/services of the Company.

(vii) (a) Undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, service tax, goods and services tax, duty of customs, duty of excise, value added tax, cess and other statutory dues have generally been regularly deposited with the appropriate authorities. Also refer Note 35(d) to the standalone Ind AS financial statements relating to the Supreme Court judgment on Provident Fund.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees' state insurance, income-tax, sales-tax, service tax, goods and services tax, duty of customs, duty of excise, value added tax, cess and other statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the dues outstanding of income tax, sales-tax, service tax, goods and services tax, duty of customs, duty of excise, value added tax and cess on account of any dispute, are as follows:

Name of the statute

Nature of the dues

Amount (including interest and penalty) (Rs. in Lakhs)

Payment under protest (Rs. in Lakhs)

Period to which the amount relates

Forum where the dispute is pending

The Income Tax Act, 1961

Income tax/tax deducted at source

13,685

6,244

FY 2002-03 to 2009-10, 2012-13 and 2013-14

Income Tax Appellate Tribunal

5,278

1,200

FY 2002-03 to 2010-11

Commissioner of Income Tax (Appeals)

2,795

FY 2014-15

Dispute Resolution Panel

2,759

458

FY 2001-02 to 2009-10

High Court of Madras

2,159

664

FY 2003-04 to 2008-09

High Court of Karnataka

20

FY 2007-08 to 2017-18

Commissioner of Income Tax (TDS)

The Finance Act, 1994

Service tax

7,220

2004-05 to 2010-11

Customs, Excise and Service Tax Appellate Tribunal

2,273

2010-11

Commissioner of Service Tax, Bangalore

2,192

96

2009-10 to 2011-12

Commissioner of Customs and Central Excise, Aurangabad

1

2012-13 to 2015-16

Deputy Commissioner (Audit) Central Excise, Customs & Service Tax

The Central Excise Act, 1944

Excise duty/ disallowance of cenvat credit

82

2010-11 to 2015-16

Commissioner of Customs, Central Excise & Service tax Appellate Tribunal

67

9

2005-06 to 2007-08, 2013-14 and 2014-15

Customs, Excise and Service Tax Appellate Tribunal

28

2009-10 to 2015-16

Commissioner of Customs, Central Excise & Service tax (Appeals)

16

2010-11 to 2014-15

Commissioner (Appeals), Central Excise

1

2007-08

Commissioner (Appeals) Central Excise, Chandigarh

State Excise (various statutes)

Excise duty, Storage and privilege fee, etc.

10,929

2015-16

Deputy Commissioner Revenue, Bangalore

969

969

2013-14, 2017-18 and 2018-19

High Court of Rajasthan

218

150

1999-00 to 2005-06

High Court of Karnataka

56

2015-16

Deputy Commissioner, Guwahati

43

13

1988-89

High Court of Calcutta

Name of the

Nature of the

Amount

Payment

Period to which

Forum where the dispute is

statute

dues

(including interest and penalty) (Rs. in Lakhs)

under protest (Rs. in Lakhs)

the amount relates

pending

State Excise

Excise duty,

38

38

2011-12 to 2015-16

High Court of Bombay at Goa

(various statutes) (Continued)

Storage and privilege fee, etc.

19

5

2008-09 to 2012-13

High Court of Madhya Pradesh

3

2000-01 to 2003-04

Excise Commissioner, Karnataka

Sales Tax (various

Sales tax/Value

5,883

2,394

2001-02 to 2013-14

Rajasthan Tax Board, Ajmer

statutes)

added tax/Entry tax

4,253

6

2008-09 to 2013-14

Joint Commissioner of Commercial Taxes (Appeal), Maharashtra

579

24

2012-13

The Appeal Authority, Commercial Taxes, Alwar

472

2014-15 and 2015-16

Assistant Commercial Tax Officer, Ponda.

438

2006-07 and 2007-08

The West Bengal Sales Tax Appellate and Revisional Board

274

45

2006-07, 2009-10, 2012-13 and 2015-16

Karnataka Appellate Tribunal

262

2008-09 to 201112, 2013-14 and 2014-15

Joint Commissioner of Commercial Taxes (Appeal), Patna

246

20

2010-11, 2011-12 and 2013-14

Joint Commissioner of Commercial Taxes (Appeal), Bengaluru

224

126

2006-07 to 2008-09, 2010-11 to 2012-13 and

2014-15 to 2015-16

Joint Commissioner of Commercial Taxes (Appeal), Mangaluru

166

2

2014-15 and 2015-16

Additional Commissioner of Sales Tax, West Bengal

84

2007-08 and 2008-09

Supreme Court of India

63

2002-03

Jt. Excise and Taxation Commissioner (Appeals), Faridabad

27

2014-15 to 2017-18

Appellate Deputy Commissioner, Andhra Pradesh

22

8

2003-04 and 2006-07

Maharashtra Sales Tax Tribunal

21

2011-12 and 2012-13

Commissioner of Commercial Taxes, Bihar

17

1

2011-12 to 2016-17

Deputy Commissioner Appeals, Alwar

13

2008-09 and 2011-12

The Commercial Taxes Tribunal, Bihar

10

4

2005-06 to 2007-08

Sales Tax Appellate Tribunal, Andhra Pradesh

7

2013-14 and 2014-15

Additional Commissioner of Commercial taxes (Appeal), Berhampur

(viii) In our opinion and according to the information and explanations given by the management, the Company has not defaulted in repayment of loans or borrowings to financial institution or banks. The Company did not have loans or borrowings from government or any outstanding dues in respect of debenture holders during the year.

(ix) In our opinion and according to information and explanations given by the management, monies raised by the Company by way of term loans were applied for the purposes for which loans were obtained. The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) and hence not commented upon.

(x) As more fully described in Note 42 to the standalone Ind AS financial statements, we were informed by the management of allegations received by the Company against an employee relating to his involvement in certain irregularities in the procurement of packing materials from certain select vendors. We were further informed by the management that based on an initial inquiry, the service of the said employee was terminated, the Company is conducting a detailed investigation on this matter which is currently in progress and the amount involved is not expected to be material. Other than the aforesaid allegation, based upon the audit procedures performed for the purpose of reporting the true and fair view of the standalone Ind AS financial statements and according to the information and explanations given by the management, we report that no fraud by the Company or no material fraud on the Company by the officers and employees of the Company has been noticed or reported during the year.

(xi) According to the information and explanations given by the management, the managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) In our opinion, the Company is not a nidhi company. Therefore, the provisions of clause 3(xii) of the Order are not applicable to the Company and hence not commented upon.

(xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with section 177 and 188 of the Act, where applicable, and the details have been disclosed in the notes to the standalone Ind AS financial statements, as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on an overall examination of the balance sheet, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and hence reporting requirements under clause 3(xiv) are not applicable to the Company and, not commented upon.

(xv) According to the information and explanations given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him as referred to in section 192 of the Act.

(xvi) According to the information and explanations given to us, the provisions of section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.

ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE IND AS FINANCIAL STATEMENTS OF UNITED BREWERIES LIMITED

Report on the Internal Financial Controls under clause (i) of sub-section 3 of section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of United Breweries Limited ("the Company") as of March 31, 2019, in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internal financial controls based on the internal controls over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting with reference to these standalone Ind AS financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing as specified under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting with reference to these standalone Ind AS financial statements was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting with reference to these standalone Ind AS financial statements and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting with reference to these standalone Ind AS financial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal controls based on the assessed risk. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the internal financial controls over financial reporting with reference to these standalone Ind AS financial statements.

Meaning of Internal Financial Controls Over Financial Reporting with Reference to these Standalone Ind AS Financial Statements

A company's internal financial controls over financial reporting with reference to these standalone Ind AS financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial controls over financial reporting with reference to these standalone Ind AS financial statements includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting with Reference to these Standalone Ind AS Financial Statements

Because of the inherent limitations of internal financial controls over financial reporting with reference to these standalone Ind AS financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting with reference to these standalone Ind AS financial statements to future periods are subject to the risk that the internal financial controls over financial reporting with reference to these standalone Ind AS financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Qualified Opinion

According to the information and explanations given to us and based on our audit, the following material weakness has been identified in the operating effectiveness of the Company's internal financial controls over financial reporting with reference to these standalone Ind AS financial statements as at March 31, 2019:

The Company's internal financial control over evaluation and selection of vendors for procurement of packing materials was not operating effectively and requires further strengthening. This could potentially result in misstatements in the financial statements.

A 'material weakness' is a deficiency, or a combination of deficiencies, in internal financial controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

In our opinion, the Company has, in all material respects, maintained adequate internal financial controls over financial reporting with reference to these standalone Ind AS financial statements as of March 31, 2019, based on the internal controls over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the Institute of Chartered Accountants of India, and except for the possible effects of the material weakness described above on the achievement of the objectives of the control criteria, the Company's internal financial controls over financial reporting with reference to these standalone Ind AS financial statements were operating effectively as of March 31, 2019.

Explanatory Paragraph

We also have audited, in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India, as specified under section 143(10) of the Act, the standalone Ind AS financial statements of the Company, which comprise the Balance Sheet as at March 31, 2019, and the related Statement of Profit and Loss, including the Statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information. The aforesaid material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2019 standalone Ind AS financial statements of the Company and this report does not affect our report dated May 20, 2019, which expressed an unqualified opinion on those standalone Ind AS financial statements.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Mahendra Jain

Partner

Membership Number: 205839

Place of signature: Bengaluru

Date: May 20, 2019

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