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United Breweries Ltd.

You can view full text of the latest Director's Report for the company.
Market Cap. (₹) 36027.85 Cr. P/BV 11.07 Book Value (₹) 123.04
52 Week High/Low (₹) 1491/1032 FV/ML 1/1 P/E(X) 64.00
Bookclosure 17/09/2018 EPS (₹) 21.29 Div Yield (%) 0.18
Year End :2018-03 

Directors' Report

The Directors have pleasure in presenting this Annual Report on the business and operations 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, 2018 ('the year under review', 'the year' or 'FY18').

Financial performance for the year ended March 31, 2018 is summarized below:

(Amounts in Rupees million)


Year ended March 31



Gross Turnover



Net Turnover



Other Income






Depreciation and amortization









Profit before Taxation



Provision for Taxation



Profit after Tax available for appropriation




Dividend on Equity Shares (including taxes thereon)



Transfer to the General Reserve



Other Comprehensive Income



Balance your Directors propose to carry to the Balance Sheet



Total appropriations



The Gross turnover of UBL grew by 21% on account of increased volume, higher realizations, favorable state and brand mix as well as price increase in certain markets during the year. The Net turnover increased by 19%.

EBITDA for the year under review stood at Rs.9,141 million as compared to Rs.6,928 million in the previous year, reflecting an increase of 32%. Depreciation for the year was Rs.2,596 million as compared to Rs.2,870 million in the previous year. Growth in operating profit was achieved by implementing strict cost control, higher capacity utilization and remedial measures taken to mitigate the negative impact of Goods and Services Tax where possible. Robust cost initiatives helped in eliminating unproductive costs which resulted in better margins. Interest cost decreased by 19% due to better working capital management and lower debt levels, as well as lower interest rates.

Profit before Taxation for the year stood at Rs.6,068 million as compared to Rs.3,471 million in the previous year, reflecting an increase of 75%. Profit after Taxation stood at Rs.3,940 million as against Rs.2,293 million in the previous year.


We take pleasure in proposing a dividend of Rs.2 per Equity Share of Re.1/- each for the year ended March 31, 2018. 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.638 million, which amounts to about 16% of the Profit after Tax.


UBL proposes to transfer Rs.394 million to the General Reserve.


The Authorized Share Capital of the Company stands at Rs.9,990 million, comprising Equity Share Capital of Rs.4,130 million and Preference Share Capital of Rs.5,860 million. The Issued, Subscribed and Paid-up Share Capital of the Company as on March 31, 2018 remains unchanged at Rs.264.4 million comprising 26,44,05,149 Equity Shares of Re.1/- each.

_management discussion and analysis_

Industry Overview

During FY18 your Company delivered robust financial results despite significant regulatory hurdles and challenges faced by the Industry as a whole. In specific, the ban on sale of liquor on highways, lagging effects of demonetization, as well as increases in excise duties and changes in the route-to-market by certain States were several impediments against growth. Further, implementation of Goods and Services Tax (GST) effective July 01, 2017 contributed to increased input costs.

The most significant regulatory change was the introduction of the highway ban, which came into effect on April 01, 2017 and impacted growth in the first quarter of the year in particular. In the second quarter, some relief came from a Supreme Court clarification that States could de-notify highways passing through city limits, such that the ban would not apply to outlets located within city limits. This clarification resulted in a recovery of the industry and growth in sales volume.

Over the last five years, on an average, the beer industry recorded a steady growth of about 7% in volume terms. The per capita consumption of beer in India has increased by about 30% during that period. Given the favourable demographics in India, higher disposable income and affordability, changing cultural attitudes and a young, increasingly affluent population, consumption of beer is set to continue the steady growth pattern going forward. According to research by CISION, the Indian beer market is projected to grow at a CAGR over 7.6% during the period 2018-2024 driven by these factors.

The beer industry in India remains highly regulated with high taxation and government intervention in trade. In many parts of the country, wholesale and/or retail distribution is controlled by State Government monopolies. Also in over 60% of the markets, the respective State Government dictates the price at which beer can be sold. From time to time, significant regulatory restrictions and changes including prohibition pose a great challenge to the Industry as a whole. Conservative government policies, licensing regulations, restrictions on the sale of alcohol in certain states and a preference towards hard liquor are key reasons for the relatively slow development of India's beer market.

With about 2 liter per capita, beer consumption is extremely low as compared to above 21 liters in other Asian countries. Spirits like whisky, vodka, brandy and rum are highly preferred by consumers in India. However, a growing segment of consumers is shifting towards beer owing to its lower alcohol content. Whilst the strong beer segment far exceeds the mild beer segment in terms of volume, mild beer is expected to outperform the strong beer segment in terms of growth, driven by health-conscious consumers and moderate drinkers who opt for lower alcohol content.

Off-trade contributes a significant share of the volume of the industry on account of more reasonable pricing as compared to the on-trade. However, on-trade channels are anticipated to exhibit high growth rates in the coming years, owing to rising income levels. Canned beer is gaining momentum as it is easier to handle and can be easily transported from one place to another. Moreover, freshly brewed, on-tap beer is demonstrating healthy growth. There has been a trend of emerging brew pubs in large cities such as Bengaluru, Pune and Gurgaon over the last few years. These outlets have introduced consumers to new types of beers, e.g. wheat beer and India Pale Ale.

During the FY 2017-18 your Company added about 1.5% market share over the previous year volume and grew by 10%. This was the first double-digit volume growth since FY 2010-11. UBL's sales volume improved in key profitable markets, with strong market share gains in most large states across the country, especially in Telangana, Andhra Pradesh, Rajasthan, Orrisa, Tamil Nadu and Karnataka.

Kingfisher Premium Lager and Kingfisher Strong continued to add market share in their respective categories. Your Company's super premium brands continued to be among the fastest growing brands in the country, fueled by Ultra, Ultra Max, Heineken and a range of imported beer brands. Benefiting from a strong brand portfolio, established infrastructure, a highly skilled and dedicated workforce and several other factors, your Company continues to outperform the industry.

Impact of Goods and Services Tax

Goods and Services Tax (GST) was made effective on July 01, 2017. GST is a destination based tax on consumption of goods and services levied at all stages right from manufacture up to final consumption with credit of taxes paid at the previous stages available for setoff. The Central GST and the State GST are levied simultaneously on every transaction of supply of goods and services except on exempted goods and services.

The Government has kept alcoholic beverage industry outside the purview of GST. Since input materials used by UBL attract GST, it has resulted in higher tax incidence on input materials pushing up our cost of production with no tax credit availability. This has also resulted in a cascading effect on the profits of your Company.

The Management, however, has actively mitigated the negative impact through better commercial negotiation with the suppliers.

Sales and Marketing

UBL continues to lead in the Indian Beer market, with a volume that is more than twice that of its nearest competitor. Kingfisher Strong continues to be the single largest brand in the Indian beer market with sales recording more than 100 million cases for the first time. Kingfisher Premium continues to be the first choice of mild beer consumers across the country. The super-premium brands in our portfolio viz., Kingfisher Ultra, Kingfisher Ultra Max and Heineken are the top three fastest growing brands in the Indian market. These brands have been established in India as world class super premium beer brands. Kingfisher Ultra and Kingfisher Ultra Max are associated with Fashion and Style platform. Ultra Shorts web series had several stories and episodes released with combined views of over 30 million.

Heineken, one of the fastest growing brands in UBL's portfolio, has established itself as India's most premium brand. It leverages the Global marketing platforms of Football (UEFA Champions League), by associating with James Bond and Music. We have also created a highly successful India specific digital film for Heineken which achieved 20 million views across platforms.

The Company continues sustainable investment in brand building activities for Kingfisher in the fields of Sports, Food, Fashion and Music. We have a significant and market leading presence in the Indian Premier League T20 Cricket Tournament, the Indian Super League Football tournament, Kingfisher East Bengal Football Club and the Sunburn EDM festival. Our association with restaurants, bars, pubs, clubs and star hotels is uninterrupted. We have additional digital and television communication around the food platform with three interesting films.

The Kingfisher Calendar continues to maintain its high aspiration value. We have created excitement around this property and leveraged it on digital platforms in a large way. We have also launched Pitchers, India's leading Nightlife App, in Mumbai, Delhi, Gurugram, Bengaluru, Hyderabad and Pune.

We have also launched a highly differentiated and exciting new beer brand, Kingfisher Storm. The brand has been received very favourably by consumers and has achieved 1 million cases' sales in its first year. Going ahead, as we roll out to other markets, the prospects for this brand are very promising.

Catering to the growing demand for a premium, strong quality beer in the Indian market, your Company recently launched the iconic Dutch beer brand Amstel, a new International super premium strong beer in the Indian market. Amstel is a slow brewed and extra matured lager, internationally appreciated for its quality and enjoyed in over 100 countries across the globe. This launch brings another major imported brand into the UBL product portfolio. Currently launched in Karnataka, Amstel will be available pan-India in current financial year.

Supply chain

Our manufacturing expenses for the FY18 amounted to Rs.26,412 million, representing 21% of sales, as against Rs.21,942 million in the previous financial year, which also constituted 21% of sales. This has been achieved through tight cost control in the manufacturing process in an environment of relatively high inflation.

Bottles remain our biggest cost element. Our decision to move to dedicated bottles with Trade Mark and design registration has ensured tight control on the cost of recycled bottles. In our endeavour towards reducing our environmental impact, we have adopted NNPB technology (less weight, less energy, less environmental impact) in about two-third of our new bottle purchases, which allows the company to source new bottles with reduced weight, better distribution of glass and with this the Company has got bottles at a reduced price, better stability and lower breakages.

Barley-malt is the basic raw material in the manufacture of beer. Barley prices in India fluctuate widely and availability is also scarce. Apart from procuring Barley-malt locally, your Company also imports barley from other countries to meet the demand.

Key material imports for the Heineken brand (bottles & labels) have now been localized and substituted with Heineken approved local vendors. This has ensured lower procurement cost and greater flexibility of sourcing. Softening of commodity prices coupled with better negotiations have helped us contain prices.

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

Research and Development

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

Human Resources

Employees are your Company's biggest and most valuable asset. UBL provides a congenial working environment which enables success through ownership, camaraderie, freedom of thought and action. We nurture our human resources through mentoring, coaching, learning & development programs etc. We believe in celebrating milestones, both big and small and encourages its employees to connect, communicate and collaborate through various platforms enabled by the Company. We have employee friendly policies viz., leave, travel, medical etc. which keeps UBL employees happy and productive. The talent pool is refreshed from time to time by infusing new hires from premier colleges of the Country. Industrial Relations continued to be harmonious and peaceful at all levels and at all locations of the Company.

UBL has 2,837 employees on its rolls across all locations. The Company has not offered any stock options to the employees during the year under review. All the wage agreements have been renewed in a timely manner and are valid and subsisting. Workers and unions support implementation of reforms that impact quality, cost and improvements in productivity across all locations, which is commendable.

Total employee benefit expenses for the year stood at Rs.3,946 million, as compared to Rs.3,521 million in the previous year. This constituted 3.18% of revenue from operations. Employee benefit expenses were higher on account of salary increases. Your Directors place on record their sincere appreciation to all employees for their contribution towards the continuous success of the organization.

_corporate social responsibility and sustainability_

Over the years, UBL has striven towards sustainable development. It is interpreted as growing the company in a socially and environmentally responsible manner, while meeting the legitimate interests of the stakeholders. After all, to be truly successful, companies need to have a corporate mission that is bigger than just making profit. Your company and its employees are committed to the community we work with and the environment we extract our resources from.

With a population of 1.3 billion, India, with its diversity, faces multitude of social issues and ecological concerns. Your Company, as part of its Corporate Social Responsibility (CSR), works with the communities residing near its breweries as a starting point. Your Company has integrated CSR in its corporate strategy and intends to drive it with a vision to bring about sustainable social development for its co-communities. The CSR Policy of the Company is posted on the website and is available through the link

Under the Safe Drinking Water Programme initiated in 2015, we have covered another 28 villages in the states of Haryana and Odisha, during the year under review. Through this initiative, we have been successful in providing access to safe drinking water to nearly 75,600 individuals in these villages. Another project has been launched in Mysore, Karnataka. Until now, your Company has reached out to 59 villages covering nearly 1.54 lac individuals.

In addition to implementing rainwater harvesting and watershed management projects in and around our breweries, we have also undertaken recycling of the treated waste water within the breweries. With extensive measures, the practice of harvesting rainwater has been extended to the nearby communities by incorporating the necessary infrastructure.

Your Company intends to be a Water Neutral Organization by 2025 and our efforts have been focused in this direction. We initiated new projects in Haryana, Punjab and Karnataka. Ponds have been adopted for rejuvenation in these states and in Karnataka, rooftop rainwater harvesting has been undertaken in several houses in villages around Nandi hills. In our efforts to recharge the freshwater consumed by our breweries, by March 2018, we were able to recharge 53% water. Our water conservation efforts have resulted in the recharge of over 25,61,930 KL water per year.

UBL's initiatives in the field of education have been in tandem with its endeavors to enhance the educational experience and improve the quality of primary education for children, especially from the underprivileged sections. Our breweries across the country have adopted neighboring Government schools and supported them in meeting their requirements on a regular basis. In addition to this, we have focused education projects being implemented in Rajasthan and Karnataka. Your Company's efforts in certain backward regions of Alwar, Rajasthan have been concentrated towards giving a facelift to 10 Government Schools in terms of infrastructure and gradually to improve the teaching-learning experience. Last year, we re-built another Government Primary school in Gandharpalya in Karnataka along with the provision of a mini science centre. We established another mini science centre in Aslimpur, Rajasthan, in the Government High School, with 80 running science models. The education initiatives benefit over 11,000 school children.

In the last quarter, your Company, conducted a week long awareness programme on "Responsible Consumption of Alcohol" for truck drivers associated with UBL, at four of our breweries in Karnataka and Telangana. The awareness programme was conducted with a goal to make them aware of the implications of drunk driving on their financial and social wellbeing and received an overwhelming response in terms of positive feedback from the truck drivers.

Your Company continues to provide primary healthcare services to the communities where the need has been expressed. Health camps with the community and in schools have been conducted during the year. Mid-day meals have been supported for 1,666 children in Government schools of Mangalore.

The Business Responsibility Report in the format prescribed under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations") is annexed as Annexure - A. Annual report on CSR activities in terms of the Companies Act, 2013 ("the Act") and the Companies (Corporate Social Responsibility) Rules, 2014, is annexed as Annexure - B.


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

Towards sustainability, UBL has undertaken proactive measures in water consumption, rain water harvesting and reduction in energy consumption thereby reducing the carbon foot print, energy and fuel consumption.

Your Company has adopted various energy saving measures by switching over to renewable sources of energy. During FY18, the Company generated 22,11,539 units of electricity from the roof top solar power plants set up at Mallepally (near Hyderabad), Aurangabad , Mumbai, Srikakulam and Dharuhera (Haryana) breweries. Further, your Company has started utilizing wind power at breweries located at Bengaluru, Mangalore and Mysore to the tune of around 71% of the total power consumption at these breweries. A total of 1,29,55,000 units from wind power was wheeled in to these breweries in this financial year. Your company started utilizing wind power at breweries located near Chennai. A total of 26,67,600 units from wind power was wheeled into these breweries in this financial year. On account of the shift from conventional sources to renewable energy, UBL has achieved a carbon foot print reduction to the tune of 15,159 tonnes of carbon di-oxide.

The overall renewable energy contribution for FY18 out of the total power consumption stands at 15.36% for our own breweries and 12.88% of the total power consumption for own and contract breweries.

UBL is in the process of rolling out its first Sustainability Report in the current financial year and the same will be posted on the website of the Company.


1) Pollution control Board: Our brewery at Palakkad bagged Kerala State Pollution Control Board Award and ranked in First position under Large Scale Industries category.

2) confederation of Indian Industry (cil): CII has conferred following awards to our brewery at Nanjungud.

i. "Outstanding Performance in Food Safety Excellence" in the Category of 'Large Manufacturing Food Businesses - Alcoholic Beverages', for the year 2017. For the first time in India, an alcoholic beverage company has been awarded with this prestigious award.

ii. Environment, Health and Safety excellence award and five star rating from Confederation of Indian Industry by standing 1st among 130 companies in South India in Food and agro sector.

3) Kaizen Institute: Our brewery at Aurangbad won second prize in National Operational Excellence conference "Indizen" organized by Kaizen Institute at Pune. We presented a case study on "Power reduction". This is the first time UBL has participated in this event wherein 32 case studies from various FMCG companies were presented.

_opportunities, threats, risks & concerns_

Compared to various International markets and even compared to other markets in Asia, beer penetration is very low in India. In India, beer account for very low share of consumption compared to other alcohol products. Such low consumption along with cultural change, higher disposable income and demographics offers a great opportunity.

While Indian beer industry presents considerable opportunities for growth, the overall growth is slowed down due to heavy regulatory environment, lack of retail formalization, restrictions in trade, negative industry tag, etc. For the States, one of the easiest ways to get higher revenue is to increase tax and duties on liquor products resulting into higher end consumer prices, thereby impacting growth.

Government regulations in particular pose a significant risk to the overall alcohol market in India, including for beer. Examples include the ban imposed by the Supreme Court on sale of liquor within half a kilometre of state and national highways, prohibition imposed in Bihar effective April 2016 followed by ban on exports imposed in April 2017. Higher duties imposed by States on liquor also remains a major concern which is beyond the control of the manufacturers.

Despite these challenges, favourable demographics of India is attracting foreign brewers to invest in beer market in the country. The combination of two international brewers in India recently has the potential to pose stiff competition. However, your Company is adequately protected from these risks and concerns due to its robust brand portfolio and a loyal consumer base.

Emerging Craft Beer Culture - Influenced by trends from Europe and the US, India is rapidly developing its own craft beer culture with brands such as Bira 91 becoming popular among Indian consumers. Although India's craft beer industry is still nascent, the craft beer segment and demand for premium beer in general is estimated to be growing at a strong double digit rate albeit from a low base. Your Company is preparing a craft and variety beer offering of its own to capture growth in this segment.

Also, the concept of microbreweries is growing rapidly in the country. So far only a few States have issued licenses for microbreweries. However, with tremendously growing consumer demand for craft beer, other States are also planning to allow microbreweries in their regions.

Whilst the beer market continues to expand, your Company is looking at the larger beverage consumption occasions to further drive the growth of the business. For most adults the beverage choices for non-alcoholic occasions are limited. We have been working on tapping into this opportunity with a portfolio of non-alcoholic beers that deliver on refreshment and taste. These new offerings will also enable us to enter a much larger retail universe that is today closed to us. Our new offerings will be produced at our brewery in Bihar and are scheduled to be test marketed commencing the 3rd quarter of the current financial year.

A separate vertical has been created to drive this business in a focused manner so as to unlock its full potential. We see this business contributing significantly to the company in the years to come.

Whilst these type of products have been introduced by beer companies around the world, your Company will be a pioneer in India.


With a market share of about 52%, UBL continues to remain a market leader in the beer industry in India. Young demographics with 50% of the population below 25 years of age and 65% below the age of 35 years, changing culture and very low per capita consumption are key drivers of growth of beer in India. The industry has been expanding regularly and it is expected that the next year too, the Industry will grow by about 6 to 8%. UBL shall continue its focus on innovative and effective marketing to lead the market. Your Company is hopeful of outperforming the industry in 2018-19 as well.

Growth in premium retail trade and on premise outlets in metropolitan cities has increased the range of beers and improved the retail environment. In a few States, the Government has issued separate licenses for sale of beer in super markets which signals good growth prospects for the industry. Innovative introductions also help in penetrating untapped markets and your Company's new introductions have fared well. Effective marketing strategies have helped us reinforce our position as the clear market leader in the Country. Our flagship brand, Kingfisher is almost synonymous with beer in India.

UBL continues to invest significantly in brand visibility to sustain high recall for its brands amongst consumers. High profile sponsorships and brand activations have ensured that its brands, especially Kingfisher, retain their iconic status. The Company has a strong route-to-market, combined with a portfolio of market leading brands. UBL also continues to invest in both, capacities and brands.

Even in a highly competitive market, your Company has not only successfully overcome the challenges of the industry, but also outpaced several global beer brands that have entered 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 the beer industry, UBL continuously assesses and updates the risk management framework based on changes in the level of risk. To achieve this control, UBL performs risk assessment in which Strategic, Operational, Information Technology, Financial and other Risks are analysed. This is reviewed regularly by the Internal Audit team, Risk Management Committee and the Board. The Management Committee meets regularly to address various risks and mitigation thereof. UBL has evolved a framework for management of business risks. We periodically assess risks in the internal and external environment, along with the potential cost of the risks and incorporate risk management plans in our strategy, business and operational plans.

UBL has explored a variety of avenues to contain the risk of continued increase in basic 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 an economical cost.

As part of our Corporate Social Responsibility initiatives, UBL has committed to availability of safe drinking water for communities residing in the vicinity of each of its 21 owned breweries. We have been continuously working towards water conservation and minimizing water waste by recycling to the extent possible. All our breweries have rainwater harvesting systems in place. From a consumption level of about 6 litres of water per litre of beer produced about a decade ago, we are at a level of about 3.24 litres per litre of beer today. This is lower than the world average of about 4 litres. Some of our newer breweries are at a level of 2.5-2.8 litres of water per litre of beer. This would place your Company amongst the elite of world breweries in the area of water consumption.

UBL has constituted a Risk Management Committee comprising senior Board members. The Committee reviews the risk impact matrix comprising strategic, preventable, external, internal, operational and compliance risks associated with business objectives and the actions taken to address these risks. Mitigation plans for such risks are in place and are reviewed periodically. Further, the Assurance Committee comprising functional Heads, reviews identified risks and takes mitigating actions on a quarterly basis. The Company has formulated a Risk Management Policy and has laid down procedures for risk assessment, identification, minimization and mitigation which are presented to the Audit Committee and the Board of Directors on a periodical basis.

Internal control System

UBL has established a robust system of Internal Controls to ensure that assets are safeguarded and transactions are appropriately authorized, recorded and reported. With the introduction of Internal Controls in Financial Reporting (ICFR) in the Act, we have made an evaluation of functioning and quality of internal controls.

The Internal Financial Control framework of your Company is established in accordance with COSO (Committee of Sponsoring Organizations) framework and is commensurate with the size and operations of your Company's business. In addition to statutory mandate, Internal Audit evaluates and provides assurance of its adequacy and effectiveness through periodic reporting. Controls in place are routinely evaluated and certified by the Internal and Statutory Auditors and gaps are identified by the Auditors through a detailed testing exercise. The process of internal control ensures orderly and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management. The Accounting Policies are reviewed and updated from time to time. These, in turn are supported by a set of Standard Operating Procedures (SOPs) that have been established for the business. The SOPs and controls are reviewed by management and audited periodically.

Internal Control evaluates adequacy of segregation of duties, transparency in authorization of transactions, adequacy of records and documents, accountability & safeguarding of assets and reliability of the management information system. Periodic reviews are carried out for identification of control deficiencies and opportunities for bridging gaps with best practices along with formalization of action plans to minimize risks.

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


Subsidiary company

Maltex Malsters Limited is the only subsidiary in which your Company holds 51% of equity capital. Maltex Malsters Limited is a non-listed entity and is not a material non-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 on the website of the Company and is available through the link on%20Determination%20Material%20Subsidiaries-PDF.pdf.

The consolidated financial statement of the Company including the financial statement of its subsidiary forms part of this Report in terms of the Act and the Listing Regulations. A statement containing the salient features of the financial statement 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, 2018 is appended.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees and investments covered under Section 186 of the Act are given in the notes to the Financial Statements.

Listing requirements

Your Company's Equity Shares are listed on the BSE Limited (formerly Bombay Stock Exchange Limited) and National Stock Exchange of India Limited. The listing fees have been paid to all these Stock Exchanges for the year 2018-2019.

Depository System

The trading in the Equity Shares of the Company is under compulsory dematerialization mode. The Company has entered into an agreement with National Securities Depository Limited and Central Depository Services (India) Limited in accordance with the provisions of the Depositories Act, 1996 and as per the directions issued by the Securities and Exchange Board of India. As the depository system offers numerous advantages, Members are requested to take advantage of the same and avail the facility of dematerialization of the Company's shares.


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

Ratio of Remuneration and Particulars of Employees

In terms of sub-section (1) of Section 136 of the Act, the Company has opted to provide full version of financial statements including consolidated financial statements, auditor's report and other documents required to be annexed to such financial statements excluding the details relating to ratio of the remuneration of each Director to the median employee's remuneration and remuneration drawn by certain employees over the threshold etc. as provided in subsection (12) of Section 197 of the Act read with Rule 5(1) & 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The details provided by the Company are in compliance with Section 136(1) of the Act and includes salient features of Form AOC-3A.

Also, in terms of second proviso to this Section, the Company shall keep open for inspection for all Members, statement relating to above details at its registered office. Any Member interested in inspection of the documents pertaining to above information or desires a copy thereof may write to the Company Secretary. The above details be treated as part of this Annual Report.

cautionary Statement

Statements in this Report, particularly those which relate to 'Management Discussion and Analysis' and 'Opportunities, Threats, Risks and Concerns', describing the 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 Personnel under a scheme of Employees' Stock Option and has also not issued any Sweat Equity Shares at any time.

Related Party Transactions

Details of transactions with related parties as defined in the Act and the Rules framed thereunder, the Listing Regulations and Accounting Standard 18 of the Companies (Accounting Standards) Rules, 2006, have been reported in the Notes to financial statements. Approval of the Audit Committee and the Board of Directors as required under the Listing Regulations has been obtained for such transactions.

The Company has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions which is placed on the website of the Company and is available through the link

All transactions entered by the Company during FY18 with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company has not entered into any transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

Familiarization programme for Independent Directors

During this year the Company has not appointed any new independent Director. The existing Board comprises Executive, Independent and Non-Executive Directors who have been at the helm of Management of the Company for several years and are fully conversant with the business and operations of the Company. The Familiarization programme for new Independent Directors as and when inducted shall aim to familiarize them with the Company, their roles, rights, responsibility in the Company, market, business model of the Company etc. The Board of Directors has complete access to the information within the Company.

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

Whistle Blower Policy

The Company has adopted vigil mechanism which is a channel for receiving and redressing of complaints about any misconduct, actual or suspected fraud, actual or potential violations of the Company's code of conduct and any other unethical, unlawful or improper practices, acts or activities within the Company. The Company has formulated a Whistle Blower Policy for Employees & Directors and has ensured adequate safeguards against victimization of whistle blowers. The details of establishment of the vigil mechanism are disclosed on the Website of the Company.

None of the Employees & Directors have been denied access to the Chairman of the Audit 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 exchange earnings and outgo, as stipulated under Clause (m) of sub-section (3) of Section 134 of the Act read with The Companies (Accounts) Rules, 2014 is set out herewith as Annexure - D to this Report.

code of Business conduct and Ethics

The Board of Directors of UBL has adopted a Code of Business Conduct and Ethics in terms of the Listing Regulations which has been posted on the website of the Company viz.,

code for Prevention of Insider Trading

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


The Board of Directors (the Board) of UBL comprises two Executive Directors and a balanced combination of Independent and Non-Executive Directors.

The Independent Directors viz., Mr. Chhaganlal Jain, Mr. Chugh Yoginder Pal, Mr. Sunil Alagh, Ms. Kiran Mazumdar Shaw, Mr. Madhav Bhatkuly and Mr. Stephan Gerlich have been appointed for a period of five years till September

03, 2019. During the year, one meeting of Independent Directors was convened on June, 05, 2017. All Independent Directors have given a declaration that they meet the criteria of Independence as laid down under Section 149(6) of the Act.

Mr. Sijbe Hiemstra, a Heineken nominee Director resigned from the Board of the Company w.e.f. November 08, 2017 following his formal retirement from Heineken. In his place Mr. Christiaan A J Steenbergen was appointed as an additional Director on the Board w.e.f. November 08, 2017. Mr. Christiaan holds office of the Director till conclusion of forthcoming Annual General Meeting (AGM). Resolution for his appointment has been proposed for approval of Members in the Notice of AGM to be convened on September 17, 2018. Mr. Frans Erik Eusman, Director retires by rotation at this AGM and, being eligible, offers himself for re-appointment. Mr. Eusman is a Heineken nominee Director. Brief profiles of Mr. Eusman and Mr. Steenbergen form part of the Notice convening AGM.

Vide Order dated 25.01.2017 passed by the Securities and Exchange Board of India (SEBI) Dr. Vijay Mallya was restrained from holding the position as Director or Key Managerial Personnel of any listed company with effect from the date of said Order. Thereafter, Dr. Mallya did not participate in any Board Meetings and was not involved in taking business decisions of the Company.

At its meeting held on August 10, 2017, the Board of Directors of the Company observed that in normal course, Dr. Mallya, as Director would have come up for retirement by rotation at the AGM on September 23, 2017 in terms of Section 152(6)(d) of the Act. In the circumstances that SEBI had restrained Dr. Vijay Mallya from holding position as Director or Key Managerial Personnel of any listed entity, neither could Dr. Mallya offer himself for re-appointment nor could the Board of Directors recommend his re-appointment as Director of the Company at that AGM till such time the restraint imposed by SEBI Order was vacated or disposed off in favour of Dr. Mallya.

Thereafter, the Company filed requisite forms / intimations with the Ministry of Corporate Affairs, BSE Limited, National Stock Exchange of India Limited and other authorities notifying Dr. Mallya's cessation from holding the position of Director in the Company. The e-form filed by the Company in this regard with the Ministry of Corporate Affairs was approved by the Registrar of Companies, Karnataka.

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 of the meetings finalized in consultation of the Directors is circulated to them in advance to facilitate them to plan their schedule. In case of special and urgent business needs, approval is taken by passing resolutions through circulation. During FY18, five (5) Board

Meetings were held. Other details including composition of the Board and various Committees and Meetings thereof held in FY18 are given in the Corporate Governance Report forming part of this Report.

Audit committee

The Audit Committee of the Board of Directors is constituted to act in accordance with the terms of reference and perform roles, as prescribed under the Act and Listing Regulations. The composition of the Audit Committee, its terms of reference, roles and details of meetings convened and held during the year under review is given in the Corporate Governance Report forming part of this Report.

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

Nomination and Remuneration committee

The Nomination and Remuneration Committee is constituted to act in accordance with the terms of reference and perform roles, as prescribed under the Act and Listing Regulations. The composition of the Nomination and Remuneration Committee, its terms of reference, roles and details of meetings convened and held during the year under review is given in the Corporate Governance Report forming part of this Report.

Policy on Performance Evaluation

UBL has formulated a Performance Evaluation Policy inter-alia prescribing evaluation criteria for Independent Directors and the Board of Directors of the Company. The Policy is posted on the website of the Company and is available through the link

Performance Evaluation of Directors

Performance evaluation of non-Independent Directors, Independent Directors, the Board as a whole and Committees of the Board has been carried out in accordance with the statutory provisions as contained in the Act and Listing Regulations.

To ensure an effective evaluation process, the Nomination and Remuneration Committee (NRC) has put in place a robust framework for conducting the exercise with key steps and practices defined clearly. Performance of the Board is evaluated on various parameters such as composition, strategy, tone at the top, risk and controls and diversity. Also a questionnaire for Committees is framed on parameters such as adherence to the terms of reference and adequate reporting to the Board. Parameters for the Directors included intellectual independence of the Director, participation in formulation of business plans, constructive engagement with colleagues and understanding of the risk profile of the Company.

Keeping in view the sensitivity and confidentiality associated with the exercise, an external agency was engaged to anchor the process. As part of this process, customized questionnaires, were circulated to all Directors of the Company. Each Director was required to undertake self-assessment. Additionally, the effectiveness of the Board and Committees was also evaluated by each member of the Board and Committee. Responses from Directors were submitted through an electronic platform and were kept confidential.

In order to maintain confidentiality of the entire process, the exercise was carried out on an anonymous basis and summary of responses received from Directors was placed and discussed at a Board meeting and individual scores circulated to the Director concerned. Discussions on a one-to-one basis with individual Directors were also organized for those Directors who wanted a more in-depth understanding. Recommendations arising from this entire process will be considered to improve overall effectiveness of individual Director, Board and Committees.

Remuneration Policy

UBL has formulated a Remuneration Policy laying down the criteria for appointment and removal of Directors, Key Managerial Personnel (KMP) and Senior Management. The Policy also prescribes the criteria and manner for fixation and approval of remuneration payable to Directors, KMPs and other employees. The Policy is posted on the website of the Company and is available through the link

Foreign Exchange Earnings and Outgo

During FY18 total foreign exchange earnings of the Company stood at Rs.2,233 million (Previous Year: Rs.48 million) and foreign exchange outgo stood at Rs.2,694 million (Previous Year: Rs.1,488 million).

corporate Governance Report

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

Annual Return

As required under sub-section (3) of Section 92 of the Act as amended by the Companies (Amendment) Act, 2017, the company has placed a copy of the Annual Return in Form MGT-9 on its website and is available through the link

Auditors and the Auditor's Report

Messrs S. R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No.101049W/ E300004) were re-appointed as Auditors of the Company by the Members at Annual General Meeting (AGM) held on September 23, 2017 to hold office till the conclusion of the 23rd AGM. In terms of Section 139 of the Act as amended by the Companies (Amendment) Act, 2017, notified on May 7, 2018, appointment of Auditors need not be ratified at every AGM. Therefore, the Notice convening the ensuing AGM does not carry any resolution for ratification of appointment of Statutory Auditors. The Auditors have confirmed that they continue to fulfil the criteria for appointment as Auditor of the Company as prescribed under the Act and the Rules framed thereunder.

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

Secretarial Audit

Pursuant to the Section 204 of the Act and Rule 9 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Sudhir Hulyalkar, Company Secretaries, to undertake Secretarial Audit of the Company for the FY18. The Secretarial Audit Report forms part of this Report and is annexed as Annexure - E.

There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report.

Details of significant and material Orders

No Order/s have been passed or stringent action taken by any Regulator or Court or Tribunal impacting the going concern status of the Company. However, we bring to your attention the following developments.

(i) It is in public domain that United Breweries (Holdings) Limited (UBHL), a promoter of your Company has been ordered to be wound up by Hon'ble High Court of Karnataka vide dated February 07, 2017. We understand UBHL has since filed an appeal against the said Winding-up Order which is pending.

(ii) As per disclosures received by UBL in May 2018 under SEBI (Prohibition of Insider Trading) Regulations, 2015 and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 from a few Promoter companies controlled by Dr. Vijay Mallya, we are informed that 41315690 Equity Shares held by such entities in UBL constituting 15.63% of the total paid up capital have been transferred to the demat account of Enforcement Directorate, Mumbai, Government of India. Earlier, in August 2017, 1389068 Equity Shares constituting 0.52% of the total paid up capital were also transferred to the demat account of Enforcement Directorate, Mumbai, Government of India. The Enforcement Directorate now holds 42704758 constituting 16.15% Equity Shares in the Company. However, UBL has not received any communication from the Enforcement Directorate so far in this regard.

As per the legal opinion obtained by the Company, with respect to such transfer of shares, it is opined that, the Enforcement Directorate has only taken possession of the Equity Shares under the provisions of Prevention of Money Laundering Act, 2002 and these Equity Shares have not been confiscated by the Enforcement Directorate. The transfer of shares, therefore, may not constitute a transfer of ownership.

(iii) Pursuant to Order of Debt Recovery Tribunal, Karnataka, Bangalore, dated September 30, 2015, dividend for the financial year 2016-2017 and thereafter, if declared and payable to Dr. Vijay Mallya and United Breweries (Holdings) Limited shall be withheld till further Orders.

(iv) Effective April 05, 2016, the State Government of Bihar had imposed a ban on sale and consumption of alcoholic beverages in Bihar though it had permitted manufacture of alcoholic beverages for export out of the State vide Notification dated April 05, 2016. The said Notification of Bihar Government imposing ban was struck down by Patna High Court vide Judgement dated September 30, 2016. The State Government of Bihar has challenged the Judgement of Patna High Court in Supreme Court which is pending. Subsequently, effective April 01, 2017, total prohibition has been imposed in Bihar State and the commercial production at the Company's brewery located at Kopakalan, Naubatpur, District Patna has been discontinued.

The orders/proceedings mentioned in (i), (ii) & (iii) above do not have any impact on going concern status of the

Company. Impact of (iv) has been addressed in the financial statements forming part of this Report.

Directors' Responsibility Statement

Pursuant to Clause (c) of Sub-section (3) of Section 134 of the Act, the Board of Directors report that:

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

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

(c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets 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 the Company and ensured that such internal financial controls are adequate and were operating effectively, and

(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and ensured that such systems were adequate and operating effectively.

_acknowledgements and appreciation_

Your Directors take this opportunity to thank UBL's customers, shareholders, suppliers, bankers, business partners and associates, financial institutions and central and state governments for their consistent support and encouragement to the Company. Finally, your Directors would like to convey sincere appreciation to all the employees of the Company for their hard work and commitment.

By Authority of the Board

Shekhar Ramamurthy Steven Bosch

August 10, 2018 Managing Director Director & CFO

Bengaluru DIN: 00504801 DIN: 07573930

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