Notes to the Consolidated Financial Statements (contd.)
Transcription
Notes to the Consolidated Financial Statements (contd.)
Board of Directors N. Srinivasan S. G. Ruparel V. K. Rekhi B. S. Patil Sidhartha V. Mallya M.S. Kapur Dr. Vijay Mallya Chairman The Team Dr. Vijay Mallya Chairman A. Harish Bhat Managing Director Kaushik Majumder Corporate Vice President Legal & Company Secretary CONTENTS Report of the Directors 1 Report on Corporate Governance 8 Auditor’s Report 21 Balance Sheet 24 Statement of Profit and Loss 25 Cash Flow Statement 26 Notes to the Financial Statements 28 Consolidated Financial Statement 58 Left to Right: Subhash R. Gupte, Ravi Nedungadi, V. Shashikanth and Anil Pisharody. Notice of Annual General Meeting NOTICE is hereby given of the Ninety-Sixth Annual General Meeting of the Members of UNITED BREWERIES [HOLDINGS] LIMITED to be held at Good Shepherd Auditorium, Opp. St. Joseph’s Pre-University College, Residency Road, Bangalore 560 025, on Thursday, September 27, 2012 at 11.30.a.m. to transact the following business: Ordinary Business 1. To consider and adopt the Audited Accounts for the year ended March 31, 2012 and the Reports of the Auditors and Directors thereon. 2. To appoint a Director in the place of Mr. Sidhartha V Mallya, who retires by rotation and, being eligible, offers himself for re-appointment. 3. To appoint a Director in the place of Mr. S G Ruparel, who retires by rotation and, being eligible, offers himself for re-appointment. 4. To appoint Auditors for the ensuing year and fix their remuneration. The retiring Auditors are eligible for re-appointment. Special Business 5. To consider and, if thought fit, to pass with or without modification, the following Resolution as an Ordinary Resolution : “RESOLVED THAT Mr. V. K. Rekhi be and is hereby appointed as a Director of the Company liable to retire by rotation.” Registered Office: UB Tower, Level 12, UB City No.24, Vittal Mallya Road Bangalore – 560 001 Mumbai August 24, 2012 By Order of the Board Kaushik Majumder Corporate Vice President – Legal & Company Secretary Notes: 1. A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and vote instead of himself / herself and such proxy need not be a Member of the Company. 2. [a] The instrument appointing a Proxy must be deposited with the Company at its Registered Office not less than 48 hours before the time of holding the meeting. [b]Corporate Members intending to send their authorized representative to attend the meeting are requested to send a certified copy of the Board Resolution authorizing their representative to attend and vote on their behalf at the Meeting. 3. The Register of Members and the Share Transfer Books of the Company will remain closed from September 25, 2012 to September 27, 2012 [both days inclusive]. 4. Members who have opted for the e-mailing of the Annual Report and the Accounts are kindly requested to bring the print out thereof when they attend the Annual General Meeting. 5. Members / Proxies are requested to bring their copy of the Annual Report and Attendance/Proxy Slip sent herewith duly filled in for attending the meeting to avoid inconvenience and delay at the time of registration and avoid being accompanied by non-members and children. Copies of Annual Report and Attendance slip will NOT be available for distribution at the venue of the Meeting. 6. The trading in the Company’s Shares has been made compulsory in dematerialized form effective August 28, 2000 for all class of investors. To enable us to serve our investors better, we request Members whose shares are in physical mode to dematerialize shares and to update their bank accounts with the respective depository participants. 1 Notice (contd.) 7. Members are requested to quote the Folio Number / Client ID /DP ID in all correspondence. The Company has designated an e-mail ID of the Compliance Officer viz., ubhlinvestor@ubmail.com exclusively for the purpose of registering complaints, if any, by Investors. 8. Members are requested to notify change in their address, quoting Folio number to the Company’s Registrars and Share Transfer Agents viz., Integrated Enterprises (India) Limited,30, Ramana Residency, 4th Cross, Sampige Road, Malleswaram, Bangalore 560 003. 9. Members holding shares in dematerialised form should address all their correspondence including change of address, nominations, ECS mandates, bank details to be incorporated on dividend warrants, powers of attorney, etc. to their Depository Participant. 10. The Securities and Exchange Board of India (SEBI) has mandated the submission of Permanent Account Number (PAN) by every participant in securities market. Members holding shares in electronic form are, therefore, requested to submit the PAN to their Depository Participants with whom they are maintaining their demat accounts. Members holding shares in physical form can submit their PAN details to the Company/Registrar and Share Transfer Agents. 11. As per the provisions of the amended Companies Act, 1956 facility for making nominations is now available for Members in respect of the shares held by them. Nomination forms can be obtained from the Registrars and Transfer Agents. 12. The relevant information relating to the Directors seeking appointment/re-appointment viz., Mr. Sidhartha V Mallya, Mr. S G Ruparel and Mr. V. K. Rekhi, are given in the Annexure to the Notice. Registered Office: UB Tower, Level 12, UB City No.24, Vittal Mallya Road Bangalore – 560 001 Mumbai August 24, 2012 By Order of the Board Kaushik Majumder Corporate Vice President – Legal & Company Secretary EXPLANATORY STATEMENT as required under Section 173 of the Companies Act, 1956. Item No. 5 Mr. V. K. Rekhi who was appointed Director by the Board w.e.f. August 2, 2011, to fill in the casual vacancy caused by the resignation of Mr. R. N. Pillai in terms of the Companies Act,1956 and the Articles of Association of the Company, vacates office at the ensuing Annual General Meeting. A Notice in writing has been received by the Company from a Member under Section 257 of the Companies Act, 1956, proposing the appointment of Mr. V. K. Rekhi as a Director of the Company at this meeting. Mr. V. K. Rekhi offers himself for appointment as a Director at this meeting having filed his consent with the Company to act as Director. Your Directors, therefore, feel that it will be in the interest of the Company to re-appoint him as a Director of the Company and accordingly recommend his re-appointment. 2 Particulars of Directors seeking Appointment/Re-Appointment: Name, brief Resume and Functional Expertise of the Director Mr. Sidhartha V Mallya Annexure to Notice Committee positions held in other Companies Appointment/ Directorships held in Investor ReAudit other Companies Grievance/ Appointment Committee Share Transfer Committee ReKamsco Industries Private Limited appointment Mallya Private Limited on retirement by rotation Royal Challengers Sports Private Limited Resume Qualification Expertise : B.Sc. Queen Mary University, London : Marketing and Brand Development Director : Since 2005 The Gem Investment & Trading Company Private Limited Shareholding in the Company : 28,25,358 shares held jointly with Dr. Vijay Mallya United Mohun Bagan Football Team Private Limited Relationship with any Director : Son of Chairman, Dr. Vijay Mallya Mr. S G Ruparel Resume Qualification Experience : Master’s Degree in Arts (Oxon) & Master’s Degree in Science (London) : Mr. S G Ruparel was the former Managing Director of Kolhapur Sugar Mills and on the Board of State Bank of India for 18 years. Held Chairmanship of various Companies and Joint Business of various bilateral business counsels. Expertise : Corporate Management Director : Since 1991 Shareholding in the Company : Nil Relationship with any Director : None Mr. V K Rekhi Resume Qualification Experience Expertise - - - Chairman - Member - Samrat Bottlers Private Limited - - Royal Challengers Sports Private Limited - - Royal Orchid Hotels Limited - - - - - - Whyte and Mackay Limited, UK - - Whyte and Mackay Group Limited, UK - - Whyte and Mackay Warehousing Limited, UK - - Liquidity Inc., USA - - - - ReMangalore Chemicals and appointment Fertilizers Limited on retirement McDowell Holdings Limited by rotation Pioneer Distilleries Limited Appointment as a Director of the Company : Bachelor of Arts (Hons) in Economics; Master’s liable to retire Degree in Business Administration from the by rotation Indian Institute of Management, Ahmedabad; Master’s Degree in Economics from the Delhi School of Economics. : Mr.V.K.Rekhi has been associated with the UB Group for over 39 years including its overseas operations and has had vast experience in the manufacturing, marketing and general management, particularly in the liquor industry. Mr. Rekhi has held senior positions in the Group including as President and Managing Director of United Spirits Limited. : Manufacturing, marketing and general management in liquor industry. - Four Seasons Wines Limited United Spirits Nepal Private Limited, Nepal (formerly known as McDowell Nepal Limited) Bouvet Ladubay SA, France Director : Since 2011 United Spirits (Shanghai) Trading Company Limited, China. Shareholding in the Company : Nil Relationship with any Director The Associated Chambers of Commerce and Industry of India, New Delhi. : None Member 3 UNITED BREWERIES [HOLDINGS] LIMITED Directors Dr. Vijay Mallya, Chairman Mr. Sidhartha V Mallya Mr. N Srinivasan Mr. S G Ruparel Mr. Piyush G Mankad [up to February 18, 2012] Mr. B S Patil Mr. M S Kapur Mr. V K Rekhi Mr. A Harish Bhat, Managing Director Executive Vice Chairman The UB Group Mr. S R Gupte President & Chief Financial Officer The UB Group Mr. Ravi Nedungadi Company Secretary and Compliance Officer Mr. Kaushik Majumder Auditors M/s Vishnu Ram & Co., Chartered Accountants No.12, Margosa Road, Malleswaram, Bangalore – 560 003 Registered Office UB Tower, Level 12, UB City, No.24, Vittal Mallya Road, Bangalore – 560 001 Registrars and Transfer Agents Integrated Enterprises (India) Limited No. 30, Ramana Residency, 4th Cross, Malleswaram, Bangalore – 560 003 1 Report of the Directors Your Directors have pleasure in presenting the 96th Annual Report of your Company together with the Audited Accounts for the year ended March 31, 2012. FINANCIAL RESULTS The summary of financial results of the Company for the financial year ended March 31, 2012 is as under: 2011-2012 2010-2011 The working for the year resulted in • Profit from Operations 185.315 720.186 Less: • Depreciation • Taxation 102.328 6.499 101.335 201.963 Profit after tax 76.488 416.887 Profit for the year 76.488 416.887 - 66.819 11.099 - 76.488 338.970 Your Directors have made the following appropriations: • Proposed Dividend • Tax on Proposed Dividend • Transfer to General Reserve Surplus carried to the Balance Sheet DIVIDEND SALE OF PROPERTY With a view to conserve resources for working capital, your Directors do not recommend any dividend for the year ended March 31, 2012. During the year, the Company sold Commercial Space OPERATIONS EXPORT BUSINESS The Company’s revenues comprise of sale/lease rentals of property at UB City, Bangalore, Export Sales, Trademark License Fees, Dividends, Guarantee Commission and Interest on Loans and Deposits. UB Global, the Export division of the Company was again PROPERTY DEVELOPMENT Karnataka Chambers of Commerce & Industry (FKCCI) The construction work for development of a luxury residential building named as “Kingfisher Towers – Residences at UB City” on the available land in UB City is progressing fast. The super built up area of the building would be 7,67,870 sq. ft. The super built up area falling to the share of the Company would be 4,18,388 sq. ft. When built, this residential development will become a landmark building in Bangalore and will also augment revenues by sale of the residential units. conferred the “Special Recognition Certificate – Merchant Arising from the economic slow down, several Lessees of rental space especially the retail lessees have re-negotiated the rentals. This has impacted the potential revenue of the 2 (` in million) Company. measuring 43,822.61 sq.ft. of saleable super built up commercial area in UB City. awarded the “Golden Trophy” by APEDA, in continued appreciation of its dominant export performance in the Beverage Alcohol category. Also, the Federation of Category” on UB Global, in recognition of its export excellence. The Export division registered its highest ever Revenues and Profits, despite severe economic volatility in key markets such as Europe and currency swings. High level of domestic inflation continues to remain a concern, as it increases input costs. The beverage alcohol business registered its highest ever sales Volume, Revenue and Profits. The distribution of Kingfisher Bohemia Wines was further widened, increasing its footprint in several developed markets. Report of the Directors (contd.) During the year, the apparel business performed exceedingly well and with the second factory in operation for the full year, turnover increased by 67%. The Company’s investments in Leather footwear business has continued in Ambur, the hub of Leather industry in South India. This has enabled manufacturing of high quality shoes. SUBSIDIARIES The following are the subsidiaries of the Company: A. Indian Subsidiary Companies 1. Bangalore Beverages Limited 2. Bestride Consultancy Private Limited 3. City Properties Maintenance Company Bangalore Limited 4. Kingfisher Finvest India Limited [Formerly Kingfisher Radio Limited] 5. Kingfisher Training and Aviation Services Limited [Formerly Kingfisher Airlines Limited] 6. Kingfisher Aviation Training Limited [Formerly Kingfisher Training Academy Limited] 7. Kingfisher Goodtimes Private Limited 8. UB Electronic Instruments Limited 9. UB Infrastructure Projects Limited 10. UB International Trading Limited 11. UB Sports Limited B.Overseas Subsidiary Companies 12. Inversiones Mirabel, S.A. 13. Mendocino Brewing Co. Inc, USA 14. Rubic Technologies Inc 15. Rigby International Corp 16. Releta Brewing Company LLC 17. UB Overseas Limited 18. UBHL [BVI] Limited 19. United Breweries of America Inc., Delaware 20. United Breweries International [UK] Limited 21. Kingfisher Beer Europe Limited (Formerly UBSN Limited) A summary of performance of all the above mentioned subsidiaries including turnover, profit before and after taxation are available in the statement under the heading Summarized Financials of Subsidiary Companies 2011 -12 is included in the Annual Report. The Company had invested in the above subsidiaries besides significant advances to them over the years. Being strategic long term investment and considering the respective business plans of the respective subsidiaries, no impairment is presently addressed. The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2/2011 dated February 8, 2011 has issued directions under Section 212(8) of the Companies Act, 1956 granting general exemption from applicability of the provisions of Section 212 of the Companies Act, 1956 in relation to the Subsidiary Companies, subject to fulfillment of the conditions specified in the said circular. The Company has availed the benefit of general exemption provided by the aforesaid circular and accordingly, the documents mentioned in Section 212(a) to (d) of the Companies Act, 1956 relating to the Company’s subsidiaries are not attached to the Accounts of the Company. In terms of the said circular, your Company shall fulfill the prescribed conditions, make the requisite disclosures and further undertake that the Annual Accounts of the Subsidiary Companies and the related detailed information shall be made available to Shareholders of the Company and its Subsidiary Companies seeking such information. These documents will also be available for inspection during business hours at the Registered Office of the Company and of the respective Subsidiary Companies concerned. Kingfisher Airlines Limited Kingfisher Airlines Limited [KFA] has ceased to be Company’s subsidiary as on February 18, 2012 consequent upon it allotting shares against Optionally Convertible Debentures. However, the Company is exposed to significant guarantees given on behalf of KFA. It is to be stated that till date no such guarantees has ultimately devolved on the Company. The Indian airline industry and KFA in particular is currently exposed to one of the toughest operating environments and is expected to struggle with profitability pressures. One of the highest prices for Jet Fuel in the world, high tax structure, recent depreciation of the rupee, and high cost of borrowing all contribute to the challenges facing domestic aviation. The Government of India is committed to usher in fiscal measures and reforms that will make the operating environment more conducive for a sustainable business. When these initiatives are implemented by the Government, KFA will undertake a phased and pragmatic approach to re-induction of capacity as well as further market expansion in future. 3 Report of the Directors (contd.) DIRECTORS Mr. Piyush G Mankad resigned as Director of the Company with effect from February 19, 2012. The Board placed on record the valuable services rendered by Mr. Mankad during his tenure as a Director of the Company. Mr. V K Rekhi who was appointed as Director of the Company in the casual vacancy caused by the resignation of Mr. R N Pillai with effect from August 2, 2011 vacates office at the ensuing Annual General Meeting. The Company has received a notice under Section 257 of the Companies Act, 1956 from a Member signifying his intention to propose Mr. V. K. Rekhi as a candidate for the office of the Director of the Company liable to retire by rotation. Mr. Sidhartha V Mallya and Mr. S G Ruparel, Directors, retire by rotation and, being eligible, offer themselves for re-appointment, as Directors liable to retire by rotation. A brief resume of the Directors proposed to be appointed/ re-appointed is given in the Annexure to the Notice. Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, Management Discussion and Analysis Report is appended and forms an integral part of the Report on Corporate Governance which is appended. FIXED DEPOSITS The Fixed Deposits accepted from the Public and Shareholders stood at ` 850.797 million as on March 31, 2012 (including an amount of ` 128.54 million accepted during the year under review). A sum of ` 0.498 million from Public and Shareholders remained unclaimed as at March 31, 2012. There have been no defaults in the repayment of fixed deposits during the year excepting occasional short delay for which interest had been paid along with matured deposits. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND re-appointment. Pursuant to the provisions of Section 205A[5] and 205C of the Companies Act, 1956, an amount of ` 0.167 million [Previous Year ` 0.367 million] being the aggregate of the Unclaimed Dividend and Deposits, remaining unclaimed and unpaid for more than 7 years, have been transferred to the Investor Education and Protection Fund. With reference to observations in the Auditors Report PARTICULARS OF EMPLOYEES regarding accrual of Guarantee/security commission from The information as are required to be provided in terms of Section 217[2A] of the Companies Act, 1956 read with the Companies [Particulars of Employees] Rules, 1975 is enclosed. AUDITORS AND AUDITORS’ REPORT Messrs. Vishnu Ram & Co., Chartered Accountants, retire as Auditors of the Company at the conclusion of the forthcoming Annual General Meeting and are eligible for an Associate Company (erstwhile subsidiary), inclusion of interest from Subsidiaries and Associates, non-provision for loans & advances to certain Subsidiaries an Associate Company and for decline in value of investment in certain Subsidiaries an Associate Company, the relevant notes to the accounts comprehensively explain the management’s views on such matters. LISTING OF SHARES OF THE COMPANY The shares of your Company are listed on Bangalore Stock Exchange Limited [Regional Exchange], The Bombay Stock Exchange Limited, Mumbai and National Stock Exchange of India Limited. 4 MANAGEMENT DISCUSSION AND ANALYSIS CORPORATE GOVERNANCE A report on Corporate Governance is annexed separately as part of the report along with a Certificate of Compliance from the Statutory Auditor. Necessary requirements of obtaining certifications / declarations in terms of Clause 49 of the Listing Agreements have been complied with. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Particulars of Conservation of Energy, Technology Absorption The Provisions of Section 217[1][e] of the Act relating to conservation of energy and technology absorption do not apply to this Company since it is not engaged in manufacturing activities. Foreign Exchange Earnings and outgo The particulars are given in the Notes to the Audited Accounts. DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to the requirement of Section 217[2AA] of the Companies Act, 1956 the Board of Directors hereby state that: Report of the Directors (contd.) (i) in the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures. (ii) accounting policies have been selected and applied consistently and the judgments and estimates made 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. (iii) proper and sufficient care have been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for prevention and detection of fraud and other irregularities. (iv) the Annual Accounts have been prepared on a going concern basis. GREEN INITIATIVE Annual Report is transmitted through Emails to those identifiable members while print version of the Annual Report are posted to others. The other details are available in the Company’s website www.theubgroup.com. ACKNOWLEDGEMENT Your Directors place on record the support received from Group Companies, shareholders, depositors, banks, financial institutions and employees. By Order of the Board Mumbai August 24, 2012 Dr. Vijay Mallya Chairman 5 Annexure to Directors’ Report Statement under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975. Employed throughout the year and in receipt of remuneration in aggregate of not less than ` 60,00,000 per annum. Sl. No. 1. 2. 3. 4. 5. Name Age Total Remuneration (`. in lacs) Anand Deepak 63 330.36 Ashoke Roy 55 Shashikanth V D. Banerjee K.V. Sreenath Educational Qualifications Experience in years Previous Employment President B.A. (Eco.) (Hons), A.C.A. 38 Director, A F Ferguson & Co, Mumbai 125.30 Deputy President – Internal Audit B.Com., A.C.A., ICMA, ICSA 28 51 141.00 Deputy President – Overseas Business B.E., PGDIT 28 Project Director, Bharat Forge Limited, Pune 53 80.70 Sr. Vice President B.Tech (Hons.) PGDM 28 United Spirits Limited 62.70 Senior General ManagerChairman’s Office B.Com 36 First Employment 56 Designation Senior Auditor, Philips India Limited Employed for part of the year and in receipt of remuneration at the rate of not less than ` 5,00,000 per month Sl. No. 1. Name Ramanujam S Age 60 Total Remuneration (` in lacs) Designation 148.50* Executive Vice President – Taxation Educational Qualifications B.Sc., A.C.A. Experience Previous Employment in years 34 Manager, Group Taxation, Investment Trust of India Limited, Chennai *includes retirement benefits Notes: 1. Remuneration shown above includes Salary, Allowance, Medical Leave, Travel Expenses and monetary value of perquisites as per Income Tax Rules. 2. None of the employees mentioned above is a relative of any Director of the Company. 3. None of the above mentioned employees is holding more than 2% of the Paid up Equity Capital of the Company. 6 Annexure to Directors’ Report (contd.) Statement pursuant to Section 212(1)(e) of the Companies Act, 1956 as at March 31, 2012 (` in million) No. of equity shares at the end of the financial year of the Company Percentage of holding Net Aggregate Profit/(Loss) of the Subsidiary so far as it concerns the Shareholders of the Company a) Not dealt with in the Accounts of the Company Sl. No. Name of the Subsidiary 1 2 1 Bangalore Beverages Limited 2 3 4 5 6 City Properties Maintenance Company Bangalore Limited Kingfisher Finvest India Limited Bestride Consultancy Private Limited Kingfisher Training and Aviation Services Limited Kingfisher Aviation Training Limited (i) United Breweries (Holdings) Limited United Other Other Breweries Subsidiary Subsidiary (Holdings) Companies Companies Limited 3 5 50,000 - 100.00 50,000 - 55.00 - 50,000 - 100.00 - 10,000 33,216 2,747 3,000,000 7 UB Electronic Instruments Limited. 280,976 8 UB Infrastructure Projects Limited. 9 UB International Trading Limited. 50,000 50,002 (ii) (1.891) 6 4.061 7 8 - - - - 4.411 1.002 - (787.552) (604.841) - - - 100.00 0.124 - - - 66.43 5.49 (17.048) (13.778) - - (0.278) (0.107) - - 3.324 2.977 - - 3.487 (1.093) (0.055) 2.974 - - 100.00 6,410 (i) For For the For previous For the previous subsidiary’s year of the subsidiary’s year financial subsidiary financial of the year ended since it year ended subsidiary March 31, became a March 31, since it 2012 subsidiary 2012 became a subsidiary 4 - (ii) b) Dealt with in the Accounts of the Company 96.25 2.19 100.00 100.00 10 UB Sports Limited 50,000 100 (0.080) (6.055) - - Kingfisher Goodtimes Private 11 Limited 9,960 99.6 (0.004) (0.004) - - 100.00 - (0.102) (0.089) - - 12 Rigby International Corp. 13 UB Overseas Limited 15,115,488 - 50 950 5.00 95.00 (32.842) (45.029) - - 5,500,000 - 100.00 - (0.010) (0.051) - - 15 UBHL (BVI) Limited United Breweries 16 International ( UK) Limited 17 Kingfisher Beer Europe Limited United Breweries of America 18 Inc., Delaware 238,370 - 100.00 - (195.674) (44.902) - - - 100,000 - 100.00 0.205 0.710 - - - 100,000 - 100.00 (1.996) (34.611) - - - 14,542 - 92.49 1.195 (0.548) - - 19 Relata Brewing Company LLC - 100 - 100.00 3.044 (0.174) - - 20 Inversiones Mirabel, S.A. Mendicino Brewering 21 Company Inc. USA - 2 - 100.00 (0.153) (0.134) - - - 8,587,818 - 68.10 0.615 12.873 - - 14 Rubic Technologies Inc. August 24, 2012 Dr. Vijay Mallya Chairman 7 Report on Corporate Governance 1. COMPANY’S POLICY ON CORPORATE GOVERNANCE The Company has always endorsed the principles of good Corporate Governance and has endeavored to follow these principles in their true letter and spirit. The Board of the Company, which is charged with the responsibility of ensuring true Corporate Governance, is always striving to ensure that the management protects the long term interests of all the stake-holders of the Company. 2. BOARD OF DIRECTORS Composition and Category of Directors In compliance of Clause 49 of the Listing Agreements with the Stock Exchanges, the Board consists of 4 Independent Directors and 4 Non-Independent Directors (including a Non Executive Chairman and a Managing Director). The requirement of the Listing Agreement that 50% of the Board should comprise of Independent Directors is met. The Company held Seven Board Meetings during 2011-12 and the gap between two meetings did not exceed four months. The Board Meetings were held on April 28, 2011, May 22, 2011, August 2, 2011, August 25, 2011, September 28, 2011, November 8, 2011 and February 13, 2012. The details of attendance of Directors at the Board meetings during the financial year 2011-12 and at the last Annual General Meeting (AGM) held on September 28, 2011, and also the number of Directorships and Committee positions held by them in other Companies as on date are given below: Name Category No. of Board Meetings Attended Attendance Directorship at the last in Other AGM held Public Limited on 28.9.2011 Companies No. of Committees (other than the Company) in which Member/Chairman Dr. Vijay Mallya Non-Executive Chairman 7 Yes 11 Nil Mr. Sidhartha V Mallya Non-Executive Director 6 Yes 1 Nil Mr. N Srinivasan Independent Director 7 Yes 14 9 (Chairman of 4) Mr. S G Ruparel Independent Director 6 Yes 3 2 (Chairman of 1) Mr. B S Patil Independent Director 6 Yes 9 6 (Chairman of 1) Mr. M S Kapur Independent Director 6 Yes 9 8 (Chairman of 3) Mr. Piyush G Mankad* Independent Director 4 No - - Mr. V K Rekhi Non-Executive Director 2 Yes 3 Nil Mr. A Harish Bhat Executive/ Managing Director 7 Yes 10 3 (Chairman of 1) *Mr. Piyush G Mankad resigned w.e.f. February 19, 2012. Notes: 1. Except Dr. Vijay Mallya and Mr. Sidhartha V Mallya none of the other Directors are inter-related. 2. None of the Directors has any business relationships with the Company. 3. The above numbers exclude Directorships in Private Limited Companies, Companies incorporated under Section 25 of the Act, Chamber and Committee. 8 Directors seeking Re-appointment The brief particulars of the Directors of the Company, seeking re-appointment at the ensuing Annual General Meeting are given in the Annexure to the Notice. Report on Corporate Governance (contd.) 3. COMMITTEES OF THE BOARD The Board of Directors has constituted Mandatory Committees viz., Audit Committee, and Shareholders’ and Investors’ Grievance Committee and Non-Mandatory Committees i.e. Remuneration Committee and General Committee of Directors. The functions of these Committees are summarized below. AUDIT COMMITTEE The powers of the Audit Committee are as mentioned in Clause 49(II) [c] and [d] of the Listing Agreement and Section 292A of the Companies Act, 1956. The terms of reference of this Committee are wide enough covering the matters specified for Audit Committees under the Listing Agreement. The Committee acts as a link between the Management, the Statutory and the Internal Auditors on one side and the Board of Directors of the Company on the other side and oversees the financial reporting process. The Executive Vice Chairman- The UB Group, The Chief Financial Officer-The UB Group, the Managing Director and the Internal Auditors are permanent invitees of the Audit Committee. The Statutory Auditors are also invited to attend the meetings. The Company Secretary acts as the Secretary to the Committee. Five Meetings of the Audit Committee were held during 2011-12 i.e., on April 28, 2011, August 2, 2011, August 25, 2011, November 8, 2011, and February 13, 2012. The composition and attendance of Members at the Meetings of the Audit Committee held during 2011-12 are as follows: Name Designation Mr. N Srinivasan Mr. S G Ruparel Mr. B S Patil Chairman Member Member Meetings held during 2011-12 5 5 5 Category Independent Director Independent Director Independent Director Meetings attended 5 5 4 SHAREHOLDERS’ / INVESTORS’ GRIEVANCE COMMITTEE The Shareholders’ / Investors’ Grievance Committee oversees the transfer of shares lodged for transfer, transmission, dematerialization / rematerialization, split and stock option allotments and complaints received from shareholders and other statutory bodies. The Company’s Registrars and Share Transfer Agents viz., Integrated Enterprises (India) Limited Bangalore, have adequate infrastructure to process the above mentioned activities. Majority of the complaints from Shareholders are received directly by Integrated Enterprises (India) Limited, Registrars & Share Transfer Agents, and those received by the Company are forwarded to them for immediate redressal. Six Meetings of the Shareholders’ / Investors’ Grievance Committee were held during 2011-12 i.e., on April 28, 2011, June 30, 2011, August 2, 2011, November 8, 2011, December 30, 2011, and February 13, 2012. The composition and attendance of Members at the Meetings of the Shareholders’/ Investors’ Grievance Committee held during 2011-12 are as follows: Name Designation Mr. S G Ruparel Mr. B S Patil Mr. A Harish Bhat Chairman Member Member Category Independent Director Independent Director Non-Independent Director Meetings held during 2011-12 6 6 6 Meetings attended 4 5 4 Mr. Kaushik Majumder, Corporate Vice President-Legal & Company Secretary is the Compliance Officer. Details of complaints resolved during the financial year 2011-12 are as follows: No. of Complaints Received during 2011-12 Resolved during 2011-12 Closing As per SEBI Category 20 20 Nil Other Correspondences 1059 1059 Nil None of the complaints were kept pending for more than one month. As on March 31, 2012, no share transfer requests or complaints were pending at our end. 9 Report on Corporate Governance (contd.) REMUNERATION / COMPENSATION COMMITTEE The Remuneration / Compensation Committee of the Board recommends to the Board, from time to time, compensation package for Whole-Time Directors. Composition of Remuneration Committee Name Designation Category Mr. S G Ruparel Chairman Independent Director Mr. N Srinivasan Member Independent Director Mr. B S Patil Member Independent Director There was no occasion for the Remuneration Committee to meet during the year 2011-12. Remuneration to Managing Director Mr. Harish Bhat, Managing Director of the Company does not draw any remuneration and perquisites from the Company. Remuneration to Non-Executive Directors Non-Executive Directors are being paid sitting fees of `20,000 per meeting of the Board and Audit Committee and ` 10,000 per meeting of the other Committees attended by them. The details of sitting fees paid to the Directors of the Company for attending the Board and Committee Meetings for the year 2011-12 are as follows: Name Fees Paid (`) Dr. Vijay Mallya 1,40,000 Mr. N Srinivasan 2,40,000 Mr. S G Ruparel 2,60,000 Mr. Sidhartha V Mallya 1,20,000 Mr. Piyush G Mankad* 80,000 Mr. B S Patil 2,50,000 Mr. M S Kapur 1,20,000 Mr. V .K. Rekhi 40,000 Mr. R.N. Pillai** 30,000 Total 12,80,000 *paid up to February 18, 2012; **paid up to August 2, 2011. The particulars of Equity Shares of the Company currently held by the Directors are furnished below: Name As on March 31, 2012 As on March 31, 2011 Dr. Vijay Mallya 5,284,978 5,284,978 Mr. N Srinivasan 120 120 Mr. S G Ruparel Nil Nil 600 600 Mr Sidhartha V Mallya Nil Nil Mr. B S Patil Nil Nil Mr. M S Kapur Nil Nil Mr. V K Rekhi Nil Nil Mr. A Harish Bhat 10 Number of Shares held Report on Corporate Governance (contd.) GENERAL COMMITTEE OF DIRECTORS In view of the difficulties in convening Board Meeting[s] with requisite quorum at short notice, for matters requiring immediate and prompt action, on behalf of the Company, the Board constituted a Committee of Directors on October 26, 2006 which was reconstituted on August 2, 2011. The powers to be delegated to the Committee of Directors consisting of Mr. N Srinivasan, Mr. A Harish Bhat and Mr. B S Patil are regulated by the Board of Directors from time to time. There was no occasion for the General Committee to meet during the year 2011-12. 4. SECRETARIAL AUDIT As required under Listing Agreement, Secretarial Audit was carried out by a qualified Practicing Company Secretary for reconciling the total admitted capital with National Securities Depository Limited [NSDL] and Central Depository Services (India) Limited and the total issued and listed capital. The audit confirms that the total issued/paid up capital is in agreement with the total number of shares held in physical form and the total number of dematerialized shares held with NSDL and CDSL. This audit is carried out every quarter and the report thereon is submitted to the Stock Exchanges, NSDL and CDSL and is also placed before the Board of Directors. 5. COMPLIANCE OFFICER Mr. Kaushik Majumder, the Company Secretary has been functioning as Compliance Officer for the purpose of complying with various provisions of Securities and Exchange Board of India Regulations, Listing Agreements with Stock Exchanges, Registrar of Companies and for monitoring the share transfer process etc. His email address is kmajumder@ubmail.com. 6. GENERAL BODY MEETINGS The last three Annual General Meetings (AGMs) of the Company were held on the following dates, time and venue: Financial Year 93rd Annual General Meeting April 2008 – March 2009 Date Thursday, September 10, 2009 94th Annual General Meeting April 2009 – March 2010 Thursday, September 30, 2010 Time Venue Special Resolutions passed 3.15.p.m. Good Shepherd 1. Alteration of Clause 112 of the Articles of Auditorium, Association to increase the minimum number Residency Road, of directors from 3 to 9. Bangalore 560 025 2. To restrict the FII limits at 26% and authorize the Board to amend or modify the percentage of FII investment as may be warranted. 10.30.a.m Good Shepherd 1. Re-appointment of Mr. R N Pillai as Auditorium, Managing Director of the Company, Residency Road, without remuneration, from March 18, Bangalore 560 025 2010 up to the close of business of August 20, 2010. 2. Appointment of Mr. A Harish Bhat as Managing Director of the Company, without remuneration, from the close of business hours of August 20, 2010 for a period of three years or date of superannuation whichever is earlier. 3. Conversion of loans given by the Company to Kingfisher Airlines Limited, into convertible instrument which is compulsorily convertible into equity shares. 95th Annual General Meeting April 2010 – March 2011 Wednesday, September 28, 2011 2.30.p.m. Good Shepherd Auditorium, Residency Road, Bangalore 560 025 Nil 11 Report on Corporate Governance (contd.) Postal Ballot Pursuant to Section 192A of the Companies Act, 1956, an Ordinary Resolution was passed by the Members through Postal Ballot: Date of Notice of Postal Ballot September 28, 2011 Date of Passing November 14, 2011 Description (i) by an Ordinary Resolution in Carried terms of Section 293(1)(d) of the majority Companies Act, 1956 for increase in the borrowing powers up to an aggregate limit of ` 3500 crores and for creation of mortgage(s) and/ or charge(s) in favour of banker(s), financial institution(s), Mutual Fund(s) or other lender(s) to secure the above borrowings in terms of Section 293(1)(a) of the Companies Act, 1956; (ii) by a Special Resolution in terms of Carried Result with requisite with requisite Section 372A of the Companies Act, majority 1956 for investment in UB Realty Limited up to a sum not exceeding `10 crores. The Postal Ballot exercise, under Section 192A of the Act, was conducted by Mr. M R Gopinath, a Company Secretary in practice, Scrutinizer appointed for the purpose. There is no Special Resolution at this meeting, which is required to be passed by way of Postal Ballot. 7. DISCLOSURES 12 Materially significant related party transactions All details relating to financial and commercial transactions where Directors may have a pecuniary interest are provided to the Board, and the interested Directors neither participate in the discussion, nor do they vote on such matters. Transactions with related parties as per the requirements of Accounting Standards 18 issued by The Institute of Chartered Accountants of India are disclosed in the relevant Schedule of Notes to Annual Accounts. Details of non-compliance There has been no instance of non-compliance with any legal requirements nor have there been any strictures passed by Stock Exchanges or SEBI, on any matters relating to the capital market over the last three years. Code of Conduct The Company has adopted a Code of Ethics for Board Members and Senior Management Personnel. This code is in addition to the Company’s Code of Business Conduct, applicable to all the designated employees of the Company. A copy of the said Code of Ethics for Board Members and Senior Management Personnel is available at the Company’s website, www.theubgroup.com. All the members of the Board and Senior Management Personnel have affirmed compliance with the Code of Ethics for Board Members and Senior Management Personnel and the Code of Business Conduct, as on March 31, 2012. Pursuant to the requirements of SEBI (Prohibition of Insider Trading) Regulations, 1992, the Company adopted a “Code of Conduct for Dealing in Securities” at the meeting of the Board of Directors held on September 30, 2002. The Company has updated the Code as per the requirements of SEBI and has made it applicable to all Directors and designated employees. The Code ensures prevention of dealing in shares by persons having access to unpublished price sensitive information. Report on Corporate Governance (contd.) Details of compliance with mandatory requirements and adoption of the non mandatory requirements of this clause The Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement. The details of these compliances have been given in the relevant sections of this Report. The status of compliance with the Non mandatory requirements is given at the end of the Report. 8. MEANS OF COMMUNICATION Website The Company has its own web-site and all vital information relating to the Company and its performance, including quarterly results, official press releases and presentation to analysts are posted on the web-site. The Company’s website address is www.theubgroup.com. Other means of communication Quarterly Results The Company’s quarterly results are published in English and Kannada newspapers. Press Releases are also issued which are carried by other newspapers. Hence, same are not sent to the residence of Shareholders. Newspapers in which Results are normally i) The Financial Express published in ii) Times of India/Kannada Prabha (Kannada) [a regional daily published from Bangalore] Any website where displayed www.theubgroup.com Whether it also displays official news releases Yes and the presentations made to Institutional Investors or to the analysts Whether Management Discussion and Analysis Yes is a part of the Annual Report Designated e-mail Address for Investor Services In terms of Clause 47[f] of the Listing Agreement, the designated e-mail address for investor complaints is ubhlinvestor@ubmail.com. 9. GENERAL SHAREHOLDER INFORMATION The particulars of the Annual General Meeting for the year ended March 31, 2012 is as under: Date of 96th Annual General Meeting September 27, 2012 Book Closure From Venue Time Good Shepherd Auditorium, Opp. St. Joseph’s Pre-University College, Residency Road, Bangalore 560 025 11.30 a.m. September 25, 2012 To September 27, 2012 The Company’s financial year begins on April 1 and ends on March 31 of the following year: Financial Calendar 1st Quarter April 1 to June 30 2nd Quarter July 1 to September 30 3rd Quarter October 1 to December 31 4th Quarter January 1 to March 31 Declaration of Unaudited Results By August 14th By November 14th By February 14th By May 15th 13 Report on Corporate Governance (contd.) Unclaimed Dividend Section 205A of the Companies Act, 1956, mandates that Companies transfer dividend that has been unclaimed for a period of seven years from the unpaid dividend account to the Investor Education and Protection Fund [IEPF]. In accordance with the following schedule, the dividend for the years mentioned below, if unclaimed within a period of seven years, will be transferred to IEPF. Financial Year Type of dividend 2003-04 Due date for transfer No Dividend Declared 2004-05 - No Dividend Declared - 2005-06 Interim / Final ` 0.50 per share September 30, 2006 October 28, 2013 2006-07 Final ` 1.00 per share November 28, 2007 December 26, 2014 2007-08 Final ` 1.00 per share December 26, 2008 January 24, 2015 2008-09 No Dividend Declared - 2009-10 Final ` 1.00 per share September 30, 2010 October 29, 2017 2010-11 Final ` 1.00 per share September 28, 2011 October 27, 2018 The Company has sent communications to the concerned shareholders, advising them to lodge their claims with respect to unclaimed dividend. Shareholders are advised that once unclaimed dividend is transferred to IEPF, no claim shall lie in respect thereof, either against the Company or against IEPF. Equity Shares in the Suspense Account As on March 31, 2012 there were 294770 unclaimed (returned undelivered) Equity Shares, in accordance with Clause 5A (I) of the Listing Agreement. The Registrars and Share Transfer Agent [Integrated Enterprises (India) Limited] had issued 3 reminder notices at the addresses of 8948 such shareholders, and as on the date of this report 988 responses for 44347 shares have been received from the concerned shareholders and the relevant share certificates were returned back to the said shareholders. Listing on Stock Exchanges and Stock Codes The Company’s Shares are currently listed and traded on the following Stock Exchanges: Sl. No. 14 Date of declaration Dividend per Share (`) Name of the Stock Exchanges Address No. 51, Stock Exchange Towers, Ist Cross, J C Road, Bangalore 560 027 Scrip Name, Scrip Code & Scrip ID UNITEDBRED 1 Bangalore Stock Exchange Limited [Regional Exchange] 2 The Bombay Stock Exchange Limited Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 001 United Brewr / 507458/ UBHOLDING 3 National Stock Exchange of India Bandra Kurla Complex, Bandra East, Limited Mumbai 400 051 UBHOLDINGS The Listing Fees for the year 2012-2013 has been paid to all the above Stock Exchanges. Report on Corporate Governance (contd.) Market Price Data The details of market price of the shares of the Company at the Bombay Stock Exchange Limited and National Stock Exchange of India Limited during the period from April 1, 2011 to March 31, 2012 are provided in the table hereunder. BSE Months High Low ` NSE Volume ` High Low ` ` Volume April, 2011 223.80 183.00 13,51,858 223.90 212.00 6,71,061 May, 2011 197.35 165.10 25,00,536 197.30 181.35 16,62,572 June, 2011 186.30 140.15 10,97,104 186.30 182.70 7,51,248 July, 2011 163.00 134.40 12,31,686 162.70 154.10 6,87,654 August, 2011 139.50 110.15 8,50,840 139.00 130.90 10,01,928 September, 2011 124.50 104.30 8,67,726 124.00 118.60 5,78,178 October, 2011 123.55 92.70 10,36,721 118.00 111.10 11,65,655 November, 2011 105.50 71.85 9,39,879 78.00 72.25 6,75,953 December, 2011 91.25 57.55 7,84,207 94.25 78.35 6,80,910 January, 2012 81.85 58.40 25,14,812 81.40 78.55 14,83,997 February, 2012 110.05 67.50 37,59,852 108.00 101.30 12,93,387 80.60 64.25 20,16,830 80.05 74.70 9,08,223 March, 2012 BSE Sensex Share Price NSE Nifty Share Price 15 Report on Corporate Governance (contd.) The stock performance in comparison to BSE Sensex and NSE Nifty are provided in the chart below. Registrars and Share Transfer Agents During the year under review, Integrated Enterprises India Limited, Bangalore, continued as the Company’s Registrars and Share Transfer Agents. All matters pertaining to Share Transfers / Transmissions were handled by Integrated Enterprises India Limited. Share Transfer requests were processed by them and a Memorandum of Transfer along with relevant documents sent to the Company for approval by the Investors’ / Shareholders’ Grievances Committee. Shares sent for physical transfer were effected after giving a 15 day notice to the seller for confirmation of the sale. The average time taken for processing Share Transfer requests including dispatch of Share Certificates was 21 days, while 10-12 days were required for processing dematerialisation requests. Share Transfer System The power of approving transfers up to 5000 shares has been delegated to the Company Secretary and two Directors. Transfers are approved every fortnight. Share transfers above 5000 shares are approved by the Board of Directors. Dematerialization of shares and liquidity United Breweries [Holdings] Limited shares are tradable compulsorily in electronic form and through Integrated Enterprises India Limited, Registrars and Share Transfer Agents. The Company has established connectivity with both the depositories i.e., National Securities Depository Limited [NSDL] and Central Depository Services (India) Limited [CDSL]. The International Securities Identification Number [ISIN] allotted to the Company’s Shares under the Depository System is INE696A01025. Percentage of Shares held in Physical & Electronic form as on March 31, 2012 Sl. No. Particulars 1 Demat Mode 2 No. of Shares % NSDL 22458 61424960 91.93 CDSL 7826 3646407 5.46 Total 30284 65071367 97.39 Physical Mode 16231 1747154 2.61 Grand Total 46515 66818521 100.00 ECS (Electronic Clearing Service) / Mandates / Bank Details Members may please note that ECS details contained in the BENPOS downloaded from the Depositories would be reckoned for payment of dividend. In order to avoid fraudulent encashment of dividend, please register either ECS mandate or Bank details for payment of dividend. Distribution of Shareholding as on March 31, 2012 Category Up to 5,000 5,001 - 10,000 10,001 - 20,000 20,001 - 30,000 30,001 - 40,000 40,001 - 50,000 50,001 - 1,00,000 1,00,001 and above 16 No. of Share Holders Total Number of Shareholders 46185 137 76 29 8 7 29 44 99.29 0.29 0.16 0.06 0.02 0.02 0.06 0.10 7730709 981586 1088447 720867 287866 314272 2123233 53571541 11.57 1.47 1.63 1.08 0.43 0.47 3.18 80.17 46515 100.00 66818521 100.00 % Number of Shares % Report on Corporate Governance (contd.) Total Foreign Share Holding as on March 31, 2012 is 27996900 Equity Shares i.e. 41.90% [FDI comprising of 27919563 Equity Shares representing 41.78 %] of total paid up Capital. Outstanding Global Depository Receipts (GDRs) / American Depository Receipts (ADRs) / Warrants or Convertible Bonds - Not Applicable - Shareholding Pattern as on March 31, 2012 Categories of Shareholding % Indian Promoters Dr. Vijay Mallya and his relatives 7.91 Kamsco Industries Private Limited 3.62 Mallya Private Limited 3.62 The Gem Investments and Trading Company Private Limited 1.60 Pharma Trading Company Private Limited 0.63 Vittal Investments Private Limited 0.15 Devi Investments Private Limited 0.69 McDowell Holdings Limited 7.87 Ganapathy Mallya Investments Private Limited - Rossi & Associates Private Limited - VJM Investments Private Limited - Foreign Promoters Watson Limited FirStart Inc 21.19 4.22 Total Promoters’ Holdings 51.50 Foreign Institutional Investors 15.91 Mutual Funds / UTI 7.07 Financial Institutions / Banks 0.03 Insurance Companies 1.18 Other Bodies Corporate 7.77 Individuals holding up to ` 1 lakh in nominal capital Individuals holding more than ` 1 lakh in nominal capital Others NRIs Total Non-Promoter’s Holdings Grand Total 11.35 3.90 0.72 0.57 48.50 100.00 17 Report on Corporate Governance (contd.) Plant Location The Company has no plants. Address for Correspondence For any assistance regarding Share Transfers, Transmissions, change of address, non- receipt of dividends, duplicate / misplaced Share Certificates and other relevant matters, shareholders may write to: Address for correspondence with Registrars and Share Transfer Agents Integrated Enterprises (India) Limited 30, Ramana Residency, 4th Cross, Sampige Road, Malleswaram, Bangalore – 560 003 Tel.No. : 080 – 23460815 – 18 Fax No. : 080 – 23460819 Contact Persons Mr. S Vijayagopal / Mr. S Rajaraman / Mr. Ramesh Chandra e-mail address vijayagopal@integratedindia.in; rajaraman@integratedindia.in; alfint@vsnl.com Address for correspondence with the Company The Company Secretary United Breweries (Holdings) Limited “UB Tower”, Level 12, UB City No.24, Vittal Mallya Road, Bangalore 560 001. Tel. No.: 080 - 3985 6079 / 3985 6097 / 3985 6094 Fax No.: 080 – 2227 4890 Address for correspondence for shareholders Shareholders holding shares in dematerialized form should address holding shares in dematerialised form all their correspondence (including change of address, nominations, ECS mandates, bank details to be incorporated on dividend warrants, powers of attorney, etc.) to their Depository Participant. 10. NON MANDATORY PROVISIONS Chairman of the Board The Chairman’s Office is maintained by the Company. Remuneration Committee The Company has in place a Remuneration Committee. 18 Shareholders Rights The Company’s half yearly results are published in English and Kannada newspapers. Hence the same are not sent to the shareholders. Training of Board Members Having regard to the seniority and expertise in their respective areas of specialization, their training is not considered necessary for the time being. Mechanism for evaluating non-executive Board Members The Board of Directors may consider adopting such a requirement in the future. Whistle Blower Policy The Board may consider adopting a separate mechanism for Whistle Blower Policy in future. Report on Corporate Governance (contd.) CEO/ CFO Certificate In terms of the requirement of the amended Clause 49, the certificates from CEO/ CFO have been obtained. Mumbai August 24, 2012 On behalf of the Board of Directors A Harish Bhat Managing Director Annexure Corporate Governance Report of United Breweries [Holdings] Limited Compliance with Code of Business Conduct and Ethics In accordance with Clause 49 of the Listing Agreements with the Stock Exchanges, the Board Members and Senior Management Personnel of the Company have confirmed compliance with the Code of Business Conduct and Ethics for the financial year ended March 31, 2012. Mumbai August 24, 2012 A Harish Bhat Managing Director CERTIFICATE To the Members of United Breweries (Holdings) Limited We have examined the compliance of conditions of Corporate Governance by United Breweries [Holdings] Limited (“the Company”), for the year ended on March 31,2012, as stipulated in Clause 49 of the Listing Agreement of the said Company with Stock Exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management of the Company. Our examination was limited to a review of the procedures and implementation thereof, adopted by the Company for ensuring the compliance with the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us and representations made by the Directors and the management of the Company, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of the above mentioned Listing Agreement. We state that no investor grievance is pending for a period exceeding one month as on March 31, 2012 against the Company as per the records maintained by the Shareholders / Investors Grievance Committee. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For Vishnu Ram & Co Chartered Accountants Firm Registration No. 004742S Mumbai August 24, 2012 S Vishnumurthy Proprietor Membership No. : 22715 19 Report on Corporate Governance (contd.) MANAGEMENT DISCUSSION AND ANALYSIS 1. OVERVIEW OF THE COMPANY The Company is the principal Holding Company of the UB Group, through which the Promoters and the Promoter Group own controlling interest in a number of Companies collectively forming the UB Group that have marketleading positions in a fast-growing consumer market. Through its holdings in United Spirits Limited and United Breweries Limited, the Company is one of the leading conglomerates in the consumer-oriented products and services industry in India, with leading market share in spirits and beer industries besides fertilizers market. The Company also holds a major stake in Kingfisher Airlines Limited, the aviation area of the Group. While the Company is primarily the investment arm of the UB Group, which is in the business of investing and funding various Group Companies, it also facilitates the UB Group’s entry into new business ventures. The Company also has a presence in the property development, fertilizer and engineering industries through UB City, Mangalore Chemicals and Fertilizers Limited, McDowell Holdings Limited and UB Engineering Limited. The Company derives income mainly from export sales, lease rentals, property development, dividend from Investee Companies, licensing fees, interest and guarantee commissions from Investee Companies. The Company owns several brands and trademarks, including the UB “Pegasus” and the “Kingfisher” brand under certain classes of the Trade Marks Act, 1999. 2. RISKS, CONCERNS AND MITIGATIONS a) Risk Identification process The Company has put in place a risk identification and mitigation process. This process generally involves the following steps: • • • • • b) Risks & Concerns Identifying risks inherent in the Group strategy Selecting the appropriate risk management strategy Implementing controls to manage the risks Monitoring the effectiveness of risk management processes and controls Periodically reviewing the Internal control effectiveness and effecting improvements to give reassurance to the Audit Committee. The Company is exposed to the following risks and concerns: i) Dividend distribution by Subsidiaries and Associate Companies would largely depend upon their dividend policy and development plans. The profitability of UB Global is subject to world economic scenario and volatility of various currencies including Indian rupees. Property values could reflect overall consumer sentiment. All these factors would have some bearing on the company’s future profitability. ii) The Holding Company is called upon to execute guarantees on behalf of Subsidiaries and Associate Companies. Although the Company has not been put to any financial loss on this account, such exposure could be a cause for concern. iii) Certain Subsidiaries for reasons beyond their control could incur financial losses impairing the carrying value of their equity. These investments are strategic in nature and close continuous monitoring is required to improve their performance which would also ensure that the advances given to them over a period of time are adequately protected together with the interest. iv) Even though part of Company’s investments in a Subsidiary and Associate Companies are under pledge with lending institutions, this by itself should not be a cause of concern since their intrinsic values are far above their carrying values. v) All the above issues of concerns are but common in holding – subsidiary relationships. The Company has in place adequate mechanism and checks and balances supported by effective internal control and audit. 20 c) Risk Mitigation The Chairman and the Managing Director oversee the functioning and performance of individual companies in the Group. 3. INTERNAL CONTROL SYSTEM The adequacy of the internal control system is reviewed by the Audit Committee of the Board of Directors. The Group Internal Audit Department evaluates the functioning and quality of internal controls and provides assurance of its adequacy and effectiveness through periodic reporting. Your Board believes that appropriate procedures, controls and monitoring assessment procedures are in place and considered adequate. Auditors' Report To The members of United Breweries (Holdings) Limited. 1. We have audited the attached Balance Sheet of United Breweries (Holdings) Limited, Bangalore (“the Company”), as at 31st March 2012, the Statement of Profit and Loss and also the Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (1 of 1956), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order. 4. Attention is invited to the following: (i) Note no 39 regarding inclusion in the income for the year, an amount of Rs. 521.143 million of guarantee/security commission charged to Kingfisher Airlines Limited (KFA). KFA has not accrued the charge in view of the restrictions imposed by its lenders for the period commencing from 1.1.2011. The total of such charge, accrued by the company for the period from 1.1.2011 to 31.3.2012 is Rs. 646.770 million. (ii) Note no 35 regarding inclusion in the income for the year, interest of Rs. 1,285.272 million charged to certain subsidiaries and associates, the ultimate realization of which may take protracted period of time. (iii) Note no 40 regarding significant financial exposure to KFA in the form of investments in equity, loans and advances and guarantees. KFA has considerably scaled down its operations and it is under severe financial stress. No provision has been made in the accounts for the probable loss that may arise due to non recovery of loans and advances and other receivables, decline in the value of investments and invocation of guarantees (iv) Note no 32(f) and Note no 34 regarding non provision for significant decline in the value of investments aggregating Rs. 700.610 million in certain subsidiaries whose networth is eroded/partially eroded besides non provision for probable loss that may arise due to non-recovery of outstanding Loans and advances of Rs. 1,627.300 million due from such subsidiaries. 5. Further to our comments in the annexure referred to in paragraph 3 above, we report that: i we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit; ii in our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; iii the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account; iv In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; v on the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31-03-2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and vi in our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the notes thereon and except for the effects of paragraph 4 above, which according to the management, is presently not quantifiable, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India; (a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31-03-2012; (b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Place: Mumbai Date : 24.08.2012 For Vishnu Ram & Co., Chartered Accountants, Firm Registration No. 004742S (S. Vishnumurthy) Proprietor. Membership No.22715 21 Annexure to the Auditor’s Report (Referred to in paragraph 3 of our report of even date) Re: United Breweries (Holdings) Limited (i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets (b) Most of the assets have been physically verified by the management during the year. Some of the assets have not been verified. However, there is a regular programme of physical verification where under, every asset gets verified atleast once every three years. In our opinion, such verification is reasonable having regard to the size of the company and the nature of its assets. Discrepancies noticed on verification during the year have been properly dealt with in the books of account. (c) During the year, the company has disposed off a portion of its land and building. In our opinion, this transaction has not affected the “going concern” status of the company. (ii) (a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and nature of its business. (c) In our opinion and according to the information and explanations given to us, the company is maintaining proper records of its inventory. The discrepancies noticed on physical verification of inventory have been properly dealt with in the books of account. (iii) (a) According to the information and explanations given to us, the company has granted unsecured loans to parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 944.188 million. The amount of such loans outstanding as at 31-3-2012 is Rs. 1,396.742 million. In our opinion, the rate of interest and other terms and conditions of loans given by the company are prima facie not prejudicial to the interest of the company. The repayments of the dues are in accordance with terms and conditions stipulated. (b) According to the information and explanations given to us, the company has taken unsecured loans from parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 2,510.389 million. The amount of loans outstanding as at 31-3-2012 is Rs. 2,401.279 million. In our opinion, the rate of interest and other terms and conditions of loans taken by the company are prima facie not prejudicial to the interest of the company. The repayments of the dues are in accordance with terms and conditions stipulated. (iv)In our opinion and according to the information and explanations given to us, there exists in the company an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system of the company. (v) (a) In our opinion and according to the information and explanations given to us, the particulars of all contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered. (b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. (vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 58A and 58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or Reserve Bank of India or any Court or any other Tribunal in relation to the deposits accepted by the company. (vii)In our opinion and according to the information and explanations given to us, the company has an internal audit system commensurate with the size and nature of its business. (viii) 22 In our opinion and according to the information and explanations given to us the provisions of section 209(1)(d) of the Companies Act, 1956 with regard to maintenance of cost records are not applicable to the company. (ix) (a) In our opinion and according to the information and explanations given to us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including dues in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax and other material statutory dues except service tax amounting to Rs. 24.254 million and custom duty of Rs. 0.700 million both of which are outstanding for more than six months. Annexure to the Auditor’s Report (contd.) (b) According to the information and explanations given to us, following is the list of dues on account of taxes, which have not been deposited on account of disputes. Name of the Statute Nature of dues Income Tax Act, 1961 Income Tax Act, 1961 Income Tax Act, 1961 Income Tax Act, 1961 Income Tax Act, 1961 Foreign Trade (Development & Regulation) Act, 1992 Income tax for the A.Y. 1997-98. Interest for A.Y 2001-02 Income tax for the A.Y. 2007-08. Income tax for the A.Y. 2008-09. Income tax for the A.Y. 2009-10. Penalty Disputed amount (Rs. in million) 31.998 1.929 130.340 171.040 106.510 5.000 Forum where dispute is pending. Supreme Court High Court of Karnataka CIT (Appeals) CIT (Appeals) CIT (Appeals) High Court of Judicature, Madras (x) The company does not have any accumulated losses. The company has not incurred cash losses during the financial year covered by our audit and during the immediately preceding financial year. (xi) Based on our audit procedures and as per the information and explanations given to us, the company has defaulted in repayment of dues to a financial institution and banks. The unpaid overdue installments and interest to banks and financial institutions as at March 31, 2012 were Rs. 91.740 million. The same has been paid in April 2012. The company has not issued any debentures. (xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company. (xiii) In our opinion and according to the information and explanations given to us, the company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company. (xiv) In our opinion and according to the information and explanations given to us, the company is not dealing in or trading in shares, securities, debentures or other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company. (xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company. (xvi) In our opinion and according to the information and explanations given to us, the term loans raised during the year have been applied for the purposes for which they were raised. (xvii) In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that amount of Rs. 2,580.389 million raised on short-term basis have been used for granting long-term loans and advances. (xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to any parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(xviii) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company. (xix) According to the information and explanations given to us, the company has not issued any debentures during the year. Therefore, the provisions of clause 4(xix) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company. (xx) According to the information and explanations given to us, the company has not raised any money during the year by public issue. Therefore, the provisions of clause 4(xx) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company. (xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit. Mumbai August 24, 2012 For Vishnu Ram & Co., Chartered Accountants, Firm Registration No. 004742S (S. Vishnumurthy) Proprietor. Membership No.22715 23 Balance Sheet as at March 31, 2012 ` in million Note No. As at March 31, 2012 2 668.185 668.185 Reserves and surplus 3 15,161.256 15,345.849 Non-current liabilities Long term borrowings Other long term liabilities 4 5 17,258.360 3,695.529 16,421.288 3,104.720 Long term provisions 6 71.261 61.248 7 8 9 10 3,958.005 300.431 4,979.812 1,006.966 4,099.411 422.777 3,047.806 1,077.821 47,099.805 44,249.105 11 2,041.948 1,033.068 2,166.456 925.627 Non current investments Long term loans and advances Other non current assets 12 13 14 16,464.497 22,583.267 68.852 18,636.024 19,502.533 65.690 Current assets Current investments Inventories Trade receivables Cash and cash equivalents Short term loans and advances Other current assets 15 16 17 18 19 20 26.512 255.817 303.549 408.364 1,407.794 2,506.137 431.701 74.651 393.785 769.264 1,211.075 72.299 47,099.805 44,249.105 Equity and Liabilities Shareholders’ funds Share capital Current liabilities Short term borrowings Trade payables Other current liabilities Short term provisions As at March 31, 2011 Assets Non-current assets Fixed assets Tangible assets Capital work in progress Significant Accounting Policies and other notes 1, 28 to 59 The accompanying notes are integral part of the accounts. This is the Balance Sheet referred to in our report of even date. 24 Dr. Vijay Mallya N. Srinivasan A. Harish Bhat Chairman Director Managing Director Mumbai Kaushik Majumder August 24, 2012 Company Secretary For Vishnu Ram and Co., Chartered Accountants Firm Registration No.004742S S.Vishnumurthy Proprietor Membership No. 22715 Statement of Profit and Loss for the year ended March 31, 2012 ` in million Note No. For the year ended March 31, 2012 March 31, 2011 Revenue Revenue from operations 21 5,020.475 3,881.949 Other income 22 1,610.393 1,245.061 6,630.868 5,127.010 1,922.262 1,438.144 Expenses Purchase of traded goods Cost of packing materials consumed 23 220.507 88.083 Change in inventories 24 (155.420) (31.099) Employee benefit expenses 25 233.857 189.285 Finance costs 26 3,516.672 2,226.330 Depreciation 11 102.328 101.335 Other expenses 27 707.675 496.083 6,547.881 4,508.161 82.987 618.849 Current tax 6.043 158.663 Earlier year 0.456 43.300 76.488 416.886 1.14 6.24 Profit before taxation Tax expense: Profit for the year Basic / Diluted Earnings Per Share (Face value of ` 10 each) Significant Accounting Policies and other notes 1, 28 to 59 The accompanying notes are integral part of the accounts. This is the Statement of Profit and Loss referred to in our report of even date. Dr. Vijay Mallya N. Srinivasan A. Harish Bhat Chairman Director Managing Director Mumbai Kaushik Majumder August 24, 2012 Company Secretary For Vishnu Ram and Co., Chartered Accountants Firm Registration No.004742S S.Vishnumurthy Proprietor Membership No. 22715 25 Cash Flow Statement for the year ended March 31, 2012 ` in million For the year ended March 31, 2012 For the year ended March 31, 2011 A: Cash Flow from Operating Activities Net profit before taxes 82.987 618.849 Adjustments for : Depreciation 102.328 101.335 Dividend income (112.735) (99.655) Profit on sale of investments (other than short term investments) (163.663) - (0.378) (0.113) Property development (500.959) (361.929) Interest and finance charges 3,516.672 2,226.330 (1,309.155) (1,169.899) (36.323) - - 5.403 (274.419) 4.199 Profit on sale of old assets Interest income Liabilities no longer required written back Provision for doubtful debts Unrealised exchange fluctuation (gain) / loss Loss on assets discarded Provision for diminution in value of Investments 0.022 0.118 - 26.558 Operating profit before working capital changes 1,221.390 732.347 1,304.377 1,351.196 Adjustments for :(Increase)/decrease in trade and other receivables (Increase) /decrease in inventories (Decrease) / increase in trade payable / other liabilities 65.390 (212.008) (181.166) (20.843) 276.050 103.212 160.274 (129.639) Cash from operations 1,464.651 1,221.557 Direct taxes paid (200.768) (256.344) Net cash from operating activities 1,263.883 965.213 B: Cash Flow from Investing Activities Purchase of fixed assets (including changes in capital work in progress) (172.200) (1,036.015) Sale of assets / advance for residential units 1,349.153 413.330 (1,745.209) (4,947.121) Loans given (net) Purchase of investments - (8,304.225) Sale of investments (other than short term investments) 172.605 - Dividend income 112.735 99.655 (Increase)/ decrease in fixed deposits with bank (61.509) 554.473 Net cash used in investing activities 26 (344.425) (13,219.903) Cash Flow Statement for the year ended March 31, 2012 (contd.) For the year ended March 31, 2011 For the year ended March 31, 2012 C: Cash Flow from Financing Activities Interest and finance charges Interest received Dividend and dividend distribution tax paid Short term borrowings: increase / (decrease) Bank borrowings : increase / (decrease) Long term borrowings and provisions : increase / (decrease) (3,096.779) (2,001.646) 23.883 8.708 (77.918) (77.918) (1,254.691) 4,060.678 897.543 2,612.413 1,760.906 7,322.934 Net cash (used in) / generated from financing activities (1,747.056) 11,925.168 Net increase / (decrease) in cash and cash equivalents (827.598) (329.522) Cash and cash equivalents at the beginning of the year 1,183.056 1,512.578 355.458 1,183.056 0.238 0.154 328.708 751.201 26.512 431.701 355.458 1,183.056 408.364 769.264 Less : Deposits maturing beyond 3 months 79.418 17.909 Add : Current investments 26.512 431.701 355.458 1,183.056 Closing balance of cash and cash equivalents Cash and Cash equivalents comprises of: Cash in hand (including foreign currencies) Balance with banks in current accounts Current investments Reconciliation of cash and cash equivalents as per Balance Sheet and Cash flow statement Cash and cash equivalents as per balance sheet Notes to the Cash Flow Statement 1. Short term investments represents amounts invested in mutual funds which are readily convertible into cash. 2. Balances with banks include ` 3.313 million being balances in unpaid dividend account which can not be used by the Company except for payment of unpaid dividend / transfer to Invester Education and Protection Fund. This is the cash flow statement referred to in our report of even date. For Vishnu Ram & Co., Chartered Accountants Firm Registration No. : 004742S Dr. Vijay Mallya Chairman N. Srinivasan Director Mumbai August 24, 2012 A. Harish Bhat Managing Director Kaushik Majumder Company Secretary S. Vishnumurthy Proprietor Membership No.: 22715 27 Notes to the Financial Statements 1. ACCOUNTING POLICIES i. Basis of preparation of financial statements: The financial statements of the Company have been prepared, unless otherwise stated, under historical cost convention, having due regard to the fundamental accounting assumptions of going concern, consistency, accrual and in compliance with the mandatory Accounting Standards as specified in the Companies (Accounting Standards) Rules, 2006. ii. Use of estimates: The preparation of financial statements in conformity with the Generally Accepted Accounting Principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon Management’s best knowledge of current events and actions, actual results could differ from these estimates. iii. Revenue recognition: Revenues are generally recognized on accrual basis except where there is an uncertainty of ultimate realization. a. Sales are recognized when the property in goods are transferred for a price and their collection is expected within the agreed time. b. Lease income from non-cancellable operating leases are recognized in the statement of Profit & Loss, on straight line basis, over the lease term. In respect of other operating leases, lease income is recognized in accordance with the terms of the lease deeds as modified based on negotiations from time to time. c. Interest is recognized on time proportion basis taking into account the amount outstanding and the rate applicable. d. Dividends and royalty income are accounted for, when the right to receive the payment is established. iv. Valuation of Inventories: Inventories are valued at lower of weighted average cost and net realizable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. v. Fixed Assets: Fixed assets are stated at cost less depreciation, wherever applicable. The land in Bangalore is stated at the revalued amount as adjusted in accordance with the revaluation done in August 2001 at the market value determined by approved valuers. All costs relating to the acquisition and installation of fixed assets are capitalised and such costs include borrowing cost relating to borrowed funds attributable to the acquisition of qualifying assets for the period upto the date of acquisition / installation. vi. Borrowing Cost: Borrowing costs that are attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of cost of such assets till such time as the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as an expense in the period in which they are incurred. vii. Depreciation: 28 Depreciation has been provided under written down value method at the rates prescribed under Schedule XIV to the Companies Act, 1956. Notes to the Financial Statements (contd.) viii.Effects of changes in Foreign Exchange rates : a. Transactions in foreign currencies are translated applying the following exchange rates: In respect of export transactions, at the average exchange rate prevailing in the month preceding month in which the transaction takes place. In respect of all other transactions at the rate of exchange prevailing on the date of transaction. b. Monetary assets and liabilities denominated in foreign currency are translated at the rates of exchange at the Balance Sheet date and the resultant gain or loss is recognized in the Statement of Profit & Loss except exchange differences arising on reporting of long term foreign currency monetary items which are accumulated in a Foreign Currency Monetary Item Translation Difference Account and amortised over the balance period of such long term asset/liability but not beyond March 31, 2020. c. Non monetary items are carried at historical cost denominated in foreign currency and these are translated using the exchange rate prevailing on the date of transaction. ix. Accounting for Government Grants : Government grants available to the Company are considered for inclusion in the accounts, where there is reasonable assurance that the Company will comply with the conditions attached to them and where such benefits have been earned by the Company and it is reasonably certain that the ultimate collection will be made. Grants of revenue nature are recognized in the Statement of Profit and Loss. x. Investments : i) Current investments refer to the investments that are readily realizable and intended to be held for not more than a year. ii) Trade investments refer to the investments made with the aim of enhancing the group’s business interest. iii) Long term investments are stated at cost. All expenses relating to acquisition of investments are capitalized. Diminution in the value of investments, if considered permanent, is provided for. iv) Current investments are stated at lower of cost and fair value on the Balance Sheet date. xi. Employee Benefits: a) Defined-contribution plans : These are plans in which the Company pays pre-defined amounts to separate funds and does not have any legal or informal obligation to pay additional sums. These comprise of contributions to the Employees’ Provident Fund, Superannuation Fund, Employees’ Pension Scheme and certain state plans like Employees’ State Insurance. The Company’s payments to the defined contribution plans are recognized as expenses during the period in which the employees perform the services that the payment covers. b) Defined-benefit plans: Gratuity: The Company provides for gratuity, a defined benefit plan (Gratuity Plan), to certain categories of employees. Liability with regard to gratuity plan is accrued based on actuarial valuation, based on Projected Unit Credit Method, carried out by an independent actuary, at the Balance Sheet date. Actuarial Gains and Losses comprise experience adjustments and the effect of changes in the actuarial assumptions and are recognized immediately in the Statement of Profit and Loss as income or expense. c) Other long term employee benefits: Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as a liability at the present value of the defined benefit obligation at the Balance Sheet date based on actuarial valuation carried out at each Balance Sheet date. 29 Notes to the Financial Statements (contd.) d) Short term employee benefits: Undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by the employees is recognized during the period when the employee renders the services. These benefits include compensated absences such as paid annual leave and performance incentives. xii. Segment reporting: The operations of the Company are divided into alcoholic beverages, leather products, readymade garments investments, guarantee services, property development and other activities. Accordingly, the primary segment reporting comprises the performance under these segments and the secondary segment reporting is based on geographical locations of customers. xiii.Related Party disclosures: Transactions between related parties are disclosed as per Accounting Standard 18- “Related Party Disclosures”. Accordingly, disclosures regarding the name of the transacting related party, description of the relationship between the parties, nature of transactions and the amount outstanding as at the end of the accounting year, are made. xiv.Taxes on Income: Provision for income tax comprises current taxes and deferred taxes. Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. Deferred tax assets are recognized and carried forward to the extent that there is reasonable / virtual certainty that sufficient future taxable income will be available against which such deferred tax asset can be realized. xv. Impairment of assets: The Company evaluates all its assets for assessing any impairment and accordingly recognises the impairment, wherever applicable, as provided in Accounting Standard 28- “Impairment of Assets”. xvi.Provisions and Contingencies: A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an out flow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on Management estimates required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current Management estimates. xvii. Earnings per share: 30 Earnings per equity share (basic / diluted) is arrived at by dividing the Net Profit or Loss for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year. Notes to the Financial Statements (contd.) ` in million 2. As at As at March 31, 2012 March 31, 2011 Share capital Authorised 100,000,000 (2011: 100,000,000 ) Equity Shares of ` 10/- each Issued, Subscribed and Paid-up 66,818,521 (2011: 66,818,521) Equity Shares of ` 10/each fully paid up. a. 1,000.000 1,000.000 1,000.000 1,000.000 668.185 668.185 668.185 668.185 Reconciliation of equity shares outstanding at the beginning and at the end of the reporting year As at the beginning of the year Issued during the year Outstanding at the end of the year No. of Shares 66,818,521 66,818,521 Amount No. of Shares 668.185 66,818,521 - Amount 668.185 - 668.185 668.185 66,818,521 b. Terms and rights attached to equity shares The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting. The rights of shareholder is governed by the Articles of Association of the Company and the Companies Act, 1956. c. Details of shareholders holding more than 5% shares in the company 31-03-2012 Dr. Vijay Mallya McDowell Holdings Limited Watson Limited Platinum Investment Management Limited Birla Sunlife Trustee Company Pvt Ltd d. Number of shares 5,284,978 5,260,002 14,159,986 % holding 7,213,505 - 31-03-2011 7.91 7.87 21.19 Number of shares 5,284,978 5,260,002 14,159,986 10.80 - 8,283,635 3,627,344 % holding 7.91 7.87 21.19 12.40 5.43 Aggregate number of shares issued for consideration other than cash during the period of five years immediately preceding the reporting date The Company has issued 29,720,949 bonus shares during the year 2006-07. 31 Notes to the Financial Statements (contd.) ` in million 3. As at As at March 31, 2012 March 31, 2011 Reserves and Surplus Capital reserve Securities premium account Fixed assets revaluation reserve : At the beginning of the year Less: Adjustment on sale of land and building 511.365 511.365 8,331.975 8,331.975 1,090.511 46.027 1,123.179 32.668 1,044.484 Foreign currency monetary item translation difference account (215.054) General reserve Surplus as per Statement of Profit and Loss : At the beginning of the year Add: profit for the year Less: Appropriations: Proposed dividend Tax on proposed dividend 32 1,090.511 75.000 75.000 5,336.998 76.488 5,413.486 4,998.029 416.887 5,414.916 - 66.819 11.099 5,413.486 5,336.998 15,161.256 15,345.849 Notes to the Financial Statements (contd.) ` in million As at March 31, 2012 March 31, 2011 4 Long term borrowings Secured From banks From others Unsecured Fixed deposits From bank From group companies From others 2,207.486 15,949.711 2,423.228 13,928.093 850.793 500.000 450.000 895.652 20,853.642 1,343.843 500.000 880.652 19,075.816 62.616 2,468.116 145.198 1,573.316 564.550 500.000 3,595.282 936.014 2,654.528 17,258.360 16,421.288 Less: Current maturities Secured From bank From others Unsecured Fixed deposits From bank a. Nature of security and terms of repayment for secured borrowings Nature of security Terms of repayment (1) Vehicle loan from HDFC Bank amounting to ` 8.201 million (Pr year ` nil) is secured by hypothecation of vehicle. Repayable in 60 equated monthly instalments from the date of loan (May 2011) along with interest of 10.25% p.a. Last instalment due on April 2016. (2) Loan from The Lakshmi Vilas Bank Limited amounting to ` 289.789 million (Pr year ` 323.228 million) is secured by assignment of future receivables for use of Pegasus logo by group companies. Repayable in 84 equated monthly instalments from the date of loan (February 2009) along with interest at the rate of BPLR + 0.75% (presently @ 18% p.a.) Last instalment due on December 2016. Overdue EMI of ` 16.618 million is since repaid. (3) Loan from Yes Bank Limited amounting to ` 1,424.496 million (Pr year ` 2,001.429 million) is secured by subservient charge on all current assets and movable fixed assets of the company, both present and future, deposit in debt service reserve account equal to the total amount of scheduled interest payment due for one month and pledge of 1,285,000 shares in United Spirits Limited held by the company. Repayment of ` 91.100 million on March 31, 2014 and repayment of ` 166.67 million every 3 months there after till March 30, 2016. Interest @ 3.50% above the Yes Bank Base rate prevailing from time to time (presently 14% p.a.). 33 Notes to the Financial Statements (contd.) 34 Nature of security (4) Loan from Yes Bank Limited amounting to ` 485 million (Pr year ` nil) (for securities refer point no. 3 above). Terms of repayment Moratorium of 24 months followed by 12 equal quarterly instalments from the date of each respective disbursement i.e. March 31, 2012. Interest @ 3.50% above the Yes Bank Base rate prevailing from time to time (presently 14% p.a.). (5) Loan from Future Capital Holdings Limited amounting to ` 950 million (Pr Year ` 1,009.321 million) is secured by the pledge of 1,279,688 shares in United Spirits Limited held by the company and 1,171,312 shares in United Spirits Limited held by a subsidiary company. Repayment of ` 450 million on March 31, 2013 and ` 500 million on June 30, 2013. Rate of interest @ 13.5% p.a. (6) Loan from L&T Finance Limited amounting to ` 23.909 million (Pr year ` 33.578 million) is secured by the fixed assets for which the loan was taken. Repayable in monthly instalments. Last instalment due on March 31, 2014. Rate of interest @ 14.01% p.a. (7) Loan from ECL Finance Limited amounting to ` 1,000 million (Pr year ` 500 million) is secured by the pledge of 2,215,000 share in United Spirits Limited held by the company. Repayable on the last day of 18th month period commencing from 1st drawdown date i.e May 4th, 2011. Rate of interest @ 15.25% p.a. Overdue interest of ` 6.657 million is since repaid. (8) Loan from Religare Finvest Limited amounting to ` 970 million(Pr year ` 1,000 million) is secured by the pledge of 2,052,683 shares in United Spirits Limited held by the company. Repayable on 14th October 2012. Rate of interest @ 17% p.a. (9) Loan from IFCI Limited amounting to ` 2,500 million(Pr year ` 2,500 million) is secured by the pledge of 1,237,477 shares in United Spirits Limited and 7,673,422 shares in United Breweries Limited held by the company and 1,467,523 shares in United Spirits Limited held by a subsidiary company. Repayable in 4 equal instalments of ` 625 million on April 15, 2013, July 15, 2013 October 15,2013 and January 15, 2014. Rate of interest @ 14.5% p.a. Overdue interest of ` 69.101 million is since paid. (10) Loan from IL & FS Financial Services Limited of ` 1,400 million (Pr year ` 1,000 million) is secured by the pledge of 2,319,000 shares in United Spirits Limited held by the company and 875,647 shares in United Spirits Limited held by a subsidiary company. Repayment of ` 1,000 million in Nov 2015 and ` 400 million in March 2015. Rate of interest @ 15.75% p.a. (11) Loan from Sicom Limited amounting to ` 540 million (Pr year ` 540 million) is secured by pledge of 400,000 shares in Kingfisher Airlines Limited, 9,000,000 shares in Mangalore Chemicals and Fertilizers Limited and 5,500,000 shares in UB Engineering Limited held by the company and 20,800,000 shares in Kingfisher Airlines Limited held by a subsidiary company. Repayment of ` 100 million in June 2013 and ` 440 million in May 2013. Rate of interest @ 15.75% p.a. on ` 100 million and 15.60% on ` 440 million. Notes to the Financial Statements (contd.) Nature of security (12) Loans from HDFC Limited amounting to ` 8,565.802 million (Pr year ` 6,854.515 million) are secured by the pledge of 1,585,154 shares in United Spirits Limited, 317,030 shares in McDowell Holdings Limited held by the company, mortgage by deposit of title deed of the company’s land in Bangalore, the superstructure thereon and assignment of the rent receivables from the property let out, securitisation of future sale proceeds from the luxury residential building “Kingfisher Towers - Residences in UB City”, now under construction, pledge of 5,000,000 shares in United Spirits Limited and 35,222,231 shares in Kingfisher Airlines Limited held by a subsidiary company. b. Terms of repayment Loan of ` 1886.500 million repayable in 120 monthly instalments from February 2012. Loan of ` 613.500 million is repayable in 119 monthly instalments starting from February 2012. Loan of ` 700 million is repayable in instalment of ` 400 million in September 2013 and ` 300 million in March 2014. Loan of USD 103.640 million repayable in 12 quarterly instalments commencing from April 2013. Overdue interest of ` 39.200 million is since paid. ( Rate of interest on loan of ` 5,369.816 million - 7.75% p.a., on loan of ` 700.00 million - 14.5% p.a., on ` 2,495.986 - 13.75% p.a.) (also refer note 41). Terms of repayment for unsecured borrowings (1) Loan from The Lakshmi Vilas Bank Limited amounting to ` 500 million (Pr year ` 500 milion) (2) Loan from group companies a) Amounting to ` 250 million b) Amounting to ` 20 million c) Amounting to ` 180 million (3) Loan from others a) Amounting to ` 15 million b) Amounting to ` 880. 652 million 4) Public deposits ` 850.793 Repayable in 2 instalments of ` 250 million each in April 2012 and July 2012. Interest at the rate of Base rate + 4.5% (presently 18% p.a.) Repayable in November 2013. Rate of interest @ 15.50% p.a. Repayable in October 2014. Rate of interest @ 12% p.a. Repayable in August 2013. Rate of interest @ 12% p.a. Repayable in December 2013. Rate of interest @ 12% p.a. Amount realised over and above ` 20,000 per sft from sale of owner units. Rate of interest @ 12% p.a. Repayable within 1 to 3 years from the date of deposit and not on demand or notice except at the sole discretion of the company. Rate of interest is 11, 11.5% p.a. As at March 31, 2012 March 31, 2011 5. 6. Other long term liabilities Trademark licence security deposits Lease security deposits Interest accrued but not due Refundable deposit Instalments from allottees for residential units Long term provisions For legal cases Leave encashment 2,425.000 350.617 25.487 67.500 826.925 2,035.000 885.883 96.337 67.500 20.000 3,695.529 3,104.720 37.428 33.833 37.428 23.820 71.261 61.248 35 Notes to the Financial Statements (contd.) ` in million As at March 31, 2012 March 31, 2011 7. Short term borrowings Secured Working capital loan / cash credit from banks From others 1,261.726 375.000 148.441 - Unsecured From a group company Inter corporate deposits 1,971.279 350.000 3,950.970 - 3,958.005 4,099.411 a. Nature of security and terms of repayment for secured borrowings Nature of security Terms of repayment 1) Loan from Religare Finvest Limited amounting to Repayable in instalments of ` 125 million on 16.3.2012 ` 375 million (Pr year ` Nil) (for security details, refer and ` 250 million on 8.5.2012. Overdue principal point no. 8 under Note no. 4) repayment of ` 125 million is partly paid and overdue interest of ` 5.160 million is since paid. Rate of interest @ 18.01% p.a. 2) Working capital loan from Bank is secured by pledge Averages rate of interest @ 13.5% p.a. of 662,103 shares in United Spirits Limited, 4,753,881 shares in Mangalore Chemicals and Fertilizers Limited held by the company, first charge on movable fixed assets i.e. plant and machinery, furniture and fixtures valued at ` 370 million. b. Terms of repayment for unsecured borrowings 1) Loan from a group company ` 1,971.279 million 2) Intercorporate deposits of ` 350 million 8. 36 Trade payables Trade creditors Repayment of ` 460 million on 7.9.2012, ` 729.6 million on 27.9.2012, ` 277.3 million on 27.11.2012, ` 504.3 million on 31.3.2013. Rate of interest @ 17.5% p.a. on ` 460 million and balance @ 12% p.a. Rate of interest @ 18% p.a. 300.431 422.777 300.431 422.777 Notes to the Financial Statements (contd.) ` in million As at March 31, 2012 March 31, 2011 9. Other current liabilities Current maturities of long term borrowings Interest accrued but not due Interest accrued and due Statutory dues Employee dues Security deposit Advertisement and sales promotion expenses payable Advances received from customers Claims payable Other liabilities Provision for expenses Investor Education and Protection Fund: Unclaimed public deposits/interest Unclaimed dividends Creditors for capital goods 10. Short-term provisions Proposed dividend Tax on proposed dividend Income tax Wealth tax 3,595.282 2,654.528 419.856 199.234 113.206 0.864 0.100 114.540 148.236 14.973 313.881 43.140 98.169 30.178 79.473 0.734 0.100 15.283 54.994 14.117 38.460 44.617 0.498 3.275 12.727 0.631 2.456 14.066 4,979.812 3,047.806 1,005.988 0.978 66.819 11.099 998.163 1.740 1,006.966 1,077.821 37 38 34.355 Office equipment 2,550.533 2,499.126 26.902 Vehicles TOTAL Previous Year 18.335 Computers 209.319 390.024 Plant & machinery Furniture and fixture 733.605 1,137.993 Building Land Description As on 01.04.11 11. TANGIBLE ASSETS (Refer note 31) 64.759 123.574 10.473 1.063 11.444 1.192 15.640 24.947 - Additions during the year 98.022 72.168 1.064 0.091 0.325 0.082 - 49.604 46.856 Deletions during the year COST / VALUATION 2,517.270 2,550.532 36.311 19.307 220.438 35.465 405.664 708.948 1,091.137 As on 31.3.12 - 384.076 290.835 21.495 12.677 85.086 11.778 123.960 129.080 01.04.11 - 11.082 8.095 0.868 0.057 0.227 0.009 - 9.921 Deductions during the year - 102.328 101.335 3.835 2.472 24.260 3.410 37.907 30.444 For the year DEPRECIATION - 475.322 384.076 24.462 15.092 109.119 15.179 161.867 149.603 As on 31.03.12 2,041.948 2,166.456 11.849 4.215 111.319 20.286 243.797 559.345 1,091.137 Net Value of Assets As on 31.03.12 2,166.456 2,208.290 5.407 5.659 124.232 22.576 266.065 604.524 1,137.993 Net Value of Assets As on 31.03.11 ` in million Notes to the Financial Statements (contd.) Notes to the Financial Statements (contd.) ` in million AS AT MARCH 31, 2012 AS AT MARCH 31, 2011 12. Non-current investments (Refer note 32 and 40) Particulars Number Of Shares Cost Number Of Shares 1 10 1,165.238 334.569 30,295,911 29,043,797 ` ` 1 10 1,165.238 334.569 10 10 10 10 692.950 23,881,821 146.038 4,392,691 424.928 6,345,554 9,315.321 199,598,555 ` ` ` ` 10 10 10 10 701.894 146.038 424.928 9,315.321 Face Value Face Value Cost TRADE INVESTMENTS IN FULLY PAID EQUITY SHARES: QUOTED United Breweries Limited Mangalore Chemicals & Fertilisers Limited United Spirits Limited McDowell Holdings Limited UB Engineering Limited Kingfisher Airlines Limited 30,295,911 ` 29,043,797 ` 23,577,490 4,392,691 6,345,554 199,598,555 ` ` ` ` UN-QUOTED In Equity Shares In Subsidiary Companies Kingfisher Training & Aviation Services Ltd UB Infrastructure Projects Limited UB Electronic Instruments Limited UB International Trading Limited Kingfisher Finvest India Limited Kingfisher Aviation Training Limited City Properties Maintenance Company Bangalore Limited UB Overseas Limited UBHL (BVI) Limited Rigby International Corp. Rubic Technologies Inc. 12,079.044 33,216 50,000 280,976 50,002 50,000 3,000,000 50,000 ` ` ` ` ` ` ` 50 USD 238,370 USD 15,115,488 USD 5,500,000 USD 12,087.988 10 10 100 10 10 10 10 0.332 0.500 27.209 0.500 0.500 30.000 0.500 33,216 50,000 280,976 50,002 50,000 3,000,000 50,000 ` ` ` ` ` ` ` 10 10 100 10 10 10 10 0.332 0.500 27.209 0.500 0.500 30.000 0.500 1 1 1 0.01 0.002 10.040 660.238 26.558 50 238,370 15,115,488 5,500,000 USD USD USD USD 1 1 1 0.01 0.002 10.040 660.238 26.558 756.379 In other Companies United Racing & Bloodstock Breeders Limited WIE Engineering Limited UB Pharma (Kenya) Limited 40,045 ` 10 0.400 306,860 ` 120,000 KS 10 100 1.419 7.616 9.435 756.379 40,045 ` 10 0.400 306,860 ` 120,000 KS 10 100 1.419 7.616 9.435 39 Notes to the Financial Statements (contd.) ` in million AS AT MARCH 31, 2012 PARTICULARS NUMBER OF SHARES FACE VALUE AS AT MARCH 31, 2011 COST NUMBER OF SHARES 1,155.633 2,500.000 72,115,605 USD 10,000,000 ` FACE VALUE COST In Preference Shares In Subsidiary Companies UB Overseas Limited - 0.001% Kingfisher Finvest India Limited Less : Provision for diminution in value of certain investments Aggregate amount of quoted investments Aggregate amount of un quoted investments Market value of quoted investments 40 25,115,605 USD 10,000,000 ` 1 1 1 1 3,318.216 2,500.000 3,655.633 5,818.216 16,500.491 18,672.018 35.994 35.994 16,464.497 18,636.024 12,079.044 12,087.988 4,385,453 6,548.036 35,600.262 49,586.910 Notes to the Financial Statements (contd.) ` in million 13. Long term loans and advances (Refer note 34, 35 and 40) Loans and advances to others Considered good Considered doubtful Less: Provision Loans and advances to subsidiaries Considered good Considered doubtful Less: Provision As at As at March 31, 2012 March 31, 2011 21.063 21.063 - 19,589.914 20.000 19,609.914 20.000 Loans and advances to associates Considered good Other receivables Considered good Considered doubtful Less: Provision 14. Other non-current assets Other deposits - considered good 15. Current investments Mutual funds 21.063 8.393 231.629 240.022 231.629 8.393 19,589.914 19,216.010 20.000 19,236.010 20.000 19,216.010 2,971.865 0.425 0.425 - 0.425 277.864 0.266 33.635 33.901 33.635 0.266 22,583.267 19,502.533 68.852 65.690 68.852 65.690 26.512 431.701 26.512 431.701 41 Notes to the Financial Statements (contd.) ` in million As at As at March 31, 2012 March 31, 2011 16. Inventories Raw materials Packing materials, stores and spares Finished goods including goods in transit 32.753 223.064 2.518 4.489 67.644 255.817 74.651 17. Trade receivables Unsecured Exceeding six months: Considered good Considered doubtful Less: Provision Others: considered good 18. Cash and cash equivalents Cash on hand Balances with scheduled banks: in Current accounts in Unpaid dividend accounts in Deposit accounts 19. Short term loans and advances Advances to suppliers Advance income tax Prepaid expenses Other receivables 20. Other current assets Receivable on account of redemption of preference shares Duty drawback receivable 42 34.063 4.758 38.821 4.758 34.063 27.360 7.941 35.301 7.941 27.360 269.486 366.425 303.549 393.785 0.238 0.154 325.395 3.313 748.707 2.494 79.418 17.909 408.364 769.264 189.774 1,156.002 4.585 57.433 108.858 954.670 19.018 128.529 1,407.794 1,211.075 2,404.357 - 101.780 72.299 2,506.137 72.299 Notes to the Financial Statements (contd.) ` in million Year ended March 31, 2012 March 31, 2011 21. Revenue from operations Sales Property development Dividends Guarantee commission Lease rent Income from property maintenance Licence fees Management service fees Profit on sale of investments Duty drawback 22. Other income Interest income Profit on sale of old assets Provisions/liabilities no longer required/payable written back Exchange gain Miscellaneous income 23. Cost of packing material Consumed Packing materials consumed 24. Changes in Inventories of Finished Goods and Work-in-Progress Opening Stock: Finished goods Closing Stock: Finished goods (Increase)/ decrease in stocks 2,715.431 1,967.727 500.959 112.735 543.568 461.976 92.713 197.320 26.000 200.316 169.457 361.929 99.655 608.177 408.591 87.392 203.770 25.700 9.892 109.116 5,020.475 3,881.949 1,309.155 0.378 36.323 256.005 8.532 1,169.899 0.113 30.959 44.090 1,610.393 1,245.061 220.507 88.083 220.507 88.083 67.644 36.545 67.644 36.545 223.064 67.644 223.064 67.644 (155.420) (31.099) 43 Notes to the Financial Statements (contd.) ` in million Year ended March 31, 2012 March 31, 2011 25. Employee benefits expenses Salaries, wages and bonus Contribution to provident and other funds Workmen and staff welfare 26. Finance costs Interest expense Processing charges and bank charges 27. Other expenses Rent including lease rent Rates and taxes Insurance premium Communication expenses Travel and conveyance Electricity charges Printing and stationery Repairs & maintenance i) Buildings ii) Machinery iii) Others Vehicle repairs and maintenance Property maintenance expenses Advertisement and sales promotion Brokerage Rebate and discount Commission paid to selling agents Freight charges Miscellaneous expenses Claims paid Professional charges Legal charges Directors’ sitting fees Auditors’ remuneration Advances written off Less: provision withdrawn Provision for diminution in value of investments Provision for bad and doubtful debts Loss on asset discarded Other expenses 44 265.264 265.264 171.496 145.790 33.968 18.133 28.393 25.362 233.857 189.285 3,324.422 192.250 2,016.053 210.277 3,516.672 2,226.330 27.903 24.194 4.027 9.910 29.764 3.285 3.441 12.511 29.806 2.116 6.944 26.505 1.739 5.156 14.038 2.871 0.913 6.463 72.775 132.519 23.265 8.467 21.839 210.712 14.211 3.552 61.781 12.233 1.274 2.815 11.486 1.532 1.072 5.620 63.942 51.932 3.853 5.519 8.314 148.133 12.688 0.082 16.043 33.420 1.520 3.429 0.022 15.401 26.558 5.403 0.118 10.642 707.675 496.083 Notes to the Financial Statements (contd.) 28. UB City Luxury residential Project The Company has executed a Joint Development Agreement with a Developer on 26th April, 2010 for development of a luxury residential building named as “Kingfisher Towers – Residences at UB City” in the available land in UB City. The super built up area of the building would be 767,870 sq ft. The super built up area falling to the share of the Company would be 418,388 sq. ft. The construction is in progress. The Company has issued allotment letters in respect of five residential units measuring 41,605 sq ft. in Kingfisher Towers by collecting booking amounts of ` 826.925 million. st 29. Estimated amount of contracts remaining to be executed on capital account as at 31 March 2012 and not provided for is ` 5.357 million (net of advances) (Pr year ` 23.550 million). 30. Contingent liabilities: As at As at March 31, 2012 March 31, 2011 a) Guarantees given by the Company on behalf of subsidiaries to banks, financial 1500.000 1500.000 institutions and others b) Guarantees given by the Company on behalf of associates to banks, financial 77,228.600 74,099.400 institutions and others c) Demands raised by Income Tax authorities against which the Company has 234.210 127.700 preferred appeals Certain beneficiaries have invoked the corporate guarantees given by the company on behalf of Kingfisher Airlines Limited, an associate company. The total amount invoked and outstanding as on June 30, 2012 is ` 8,357.700 million and Kingfisher Airlines Limited is under negotiation with the beneficiaries. There has been no financial loss on this count to the company. 31. Fixed Assets a) The Company’s land in Bangalore was revalued in August 2001, based on an independent valuer’s report. Accordingly, the value of the land was restated at ` 1,707 million, with a corresponding adjustment to the Fixed Assets Revaluation Reserve. b) The Company owns certain valuable trademarks which are carried at NIL value. Some of these trademarks / logo have been licenced to Group companies. c) The Company’s UB City property is under charge in favour of HDFC Ltd for facilities granted to the Company. d) The Company’s property in Goa is under charge in favour of a bank for facilities granted to an associate. 32. Investments: a) The Company has pledged 10,310,382 shares held in United Spirits Limited, 11,207,729 shares held in Mangalore Chemicals & Fertilisers Limited, 769,728 shares in UB Engineering Limited, 197,433,555 shares in Kingfisher Airlines Limited and 3,903,209 shares held in McDowell Holdings Limited to secure the borrowings of subsidiary companies and associate companies. b) 900,000 shares of Kingfisher Airlines Limited held by the Company and pledged with a bank for credit facilities extended to an associate company, have been sold by the bank, subsequent to the Balance Sheet date, resulting in a loss of ` 30.333 million to the company. c) An existing pledge of 1,310,472 shares of United Spirits Limited to a bank have been further extended, subsequent to Balance Sheet date, to secure the borrowings of associate companies. d) Investments include 1,765,000 shares of Kingfisher Airlines Limited and 197 shares of United Spirits Limited held in custody account of lenders. e) The Company’s investment of ` 26.512 million in IDFC Mutual Fund is given as a lien to secure the borrowings of an associate company. 45 Notes to the Financial Statements (contd.) f) The investment in subsidiaries (including step down subsidiaries) have been considered as long term strategic investments and diminution in their market value / net worth, though significant is considered temporary and hence no provision is considered necessary. g) The Preference Shares issued by a wholly owned overseas subsidiary, UB Overseas Limited, are to be redeemed anytime at the option of the shareholder or at end of 10 years from the date of allotment of the shares. The Preference shareholder also has the option for partial / full conversion into equity shares of the Company, at the rate of one equity share for one preference share held, at face value of USD 1 each, to be determined and issued by the Issuer. During the year, 47 million preference shares of USD 1 each have been redeemed. 33. Confirmation of balances from certain Sundry Debtors and Sundry Creditors are awaited. Adjustment for differences, if any, arising out of confirmation and reconciliation thereof would be made in the current year. The Management is of the opinion that the effect of adjustments, if any, is not likely to be significant. 34. The Company, over the years has advanced significant amounts to subsidiaries including overseas subsidiaries aggregating to ` 1,627.300 million which have not yet been repaid. Even though there is erosion in the net worth of these subsidiaries, the Management of the view that all the amounts are ultimately recoverable, taking into consideration their business plans and growth strategies. 35. The Company has accrued interest of ` 1,285.272 million for the year on loans to associate/ subsidiaries, including overseas subsidiaries as per loan agreements signed with them. Considering the income stream of those companies, realisability of this interest could possibly take protracted period of time beyond those stipulated in the loan agreements. 36. During the year UB Ajanta Breweries Private Limited and UB Nizam Breweries Private Limited (collectively referred to as “APB India”) have been merged with United Breweries Limited pursuant to the scheme of amalgamation approved by the Hon’ble High Court of Karnataka. As a result, 427,740 shares in United Breweries Limited has been allotted to the wholly owned overseas subsidiary, UB Overseas Limited. 37. Cash in hand includes foreign currency notes. 38. As required under Section 205C of the Companies Act, 1956, the Company has transferred ` 0.132. million (Pr year ` 0.367 million) to the Investor Education and Protection Fund (IEPF) during the year. As on March 31, 2012, no amount was due to be transferred to the IEPF. 39. Guarantee Commission represents the commission charged by the Company for the corporate guarantees provided on behalf of subsidiaries and certain associate companies. Security Commission represents the commission charged by the Company for the securities pledged on behalf of a subsidiary and an associate company. Guarantee commission of ` 521.143 million has been accrued during the year based on contractual obligation although the recovery could take a longer period of time than anticipated since the associate company for whom these guarantees were given is presently precluded by its bankers consortium to honour the obligation aggregating to ` 646.770 million upto 31st March, 2012. 40. The company along with its subsidiaries has significant financial exposure on various counts to Kingfisher Airlines Limited. Kingfisher Airlines Limited has ceased to be a subsidiary of the company with effect from 18th February, 2012 and has become an associate company thereafter. As at March 31, 2012, such exposure include equity investment of ` 21,142.800 million, loans and advances ` 10,486.984 million and other receivables ` 2,090.837 million, and corporate guarantees to banks/aircraft lessors ` 89,258.600 million. Certain corporate guarantees have been invoked and Kingfisher Airlines Limited is under negotiation in this regard with the beneficiaries. The Management is reasonably confident that none of the guarantees would eventually devolve upon the Company. The ultimate impairment of investments and non-recovery of loans and advances are not presently quantifiable and hence no provision has been considered in the accounts. 46 Notes to the Financial Statements (contd.) 41. During the year, the company converted an existing Rupee Loan of ` 5,369.816 million from HDFC Limited (secured against future sale proceeds from the luxury residential building – Kingfisher Towers) into a “Dollar Denominated Loan” at concessional rate of interest. The repayment of Principal and interest payments, under the terms of this loan are with reference to the dollar rate prevailing on the due dates. The company has recognized part of the exchange difference as interest in terms of AS 16 – Borrowing Costs and the balance difference is kept in the Foreign Currency Monetary Item Translation Difference Account which is amortised over the life of the loan but not beyond March 2020, as provided in Government of India Notification no G.S.R.913(E) (F.No.17/133/208-CL.Vj, Dated 29-12-2011). Accordingly an amount of ` 13.032 million is charged to the Statement of Profit and Loss and the Balance of ` 219.631 million is carried in Foreign Currency Monetary Item Translation Difference Account. 42. Remuneration to Chairman, Managing Director and Managerial Personnel i) The Chairman of the Company has received remuneration from two subsidiaries, amounting to USD 120,000 (Pr year USD 120,000) and GBP 89,600 (Pr year GBP 89,600) during the year 2011-12. ii) The Company has not paid any remuneration to the Managing Director. However, he has received remuneration of ` 13.086 million as an executive of an associate company. iii) Subsidiaries have paid sitting fees of ` 0.090 million (Pr year ` 0.100 million) to Directors including the Managing Director. 43. Remuneration to Auditors: Statutory Audit Tax Audit Limited Reviews Certification fees 2011-12 2.000 0.200 0.300 0.315 2010-11 2.000 0.200 0.300 0.929 2.815 3.429 31.03.2012 31.03.2011 56.175 52.042 Service cost 7.064 5.072 Interest cost 4.369 4.031 (9.549) (3.317) 4.565 (1.652) 62.624 56.175 63.625 61.678 5.028 4.802 (3.793) 0.463 - - Benefits settled (9.549) (3.317) Plans assets at period end, at fair value 55.264 63.625 44. Employee benefits Gratuity computations as on 31-03-2012 Disclosure as per AS 15 Defined benefit plans Reconciliation of opening and closing balances of the present value of the defined benefit obligation: Obligations at period beginning Benefits settled Actuarial (gain)/loss Obligations at period end Defined benefit obligation liability as at the balance sheet Is wholly funded by the Company Change in plan assets Plan assets at period beginning, at fair value Expected return on plan assets Actuarial gain/(loss) Contributions 47 Notes to the Financial Statements (contd.) 31.03.2012 31.03.2011 Fair value of plan assets at the end of the year 55.264 63.625 Present value of the defined benefit obligations at the end of the period 62.624 56.175 7.360 (7.450) Reconciliation of present value of the obligation and the fair value of the plan assets: Liability recognized in the Balance Sheet 31.03.2012 31.03.2011 Service cost 7.064 5.072 Interest cost 4.369 4.031 (5.028) (4.802) Details of Gratuity cost Expected return on plan assets Actuarial (gain) / loss Net gratuity cost Actual return on plan assets 8.357 (2.115) 14.762 2.186 1.235 5.264 Description of the basis used to determine the overall expected rate of return on assets including major categories of plan assets. The expected return is calculated on the average fund balance based on the mix of investments and the expected yield on them. Assumptions Interest rate Discount factor Estimated rate of return on plan assets Salary Increase Attrition rate Retirement age 8.50% 8.50% 8.00% 5.00% 1.00% 58 8.00% 8.00% 8.00% 5.00% 1.00% 58 The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. 45. Details of dues to Micro, Small and Medium Enterprises and Small Scale Industries. Based on the response received by the Company, there are no outstanding as at March 31, 2012 to suppliers, as defined under the Micro, Small & Medium Enterprises Development Act, 2006. Amount due to Micro and Small Enterprises is nil to the extent of information disclosed by creditors. 46. The Company has recognized the rent from cancellable operating leases in accordance with the terms of the lease deed. In respect of the non- cancellable operating leases, the Company recognises the rent on a straight line basis over the noncancellable lease term. Future minimum lease payments receivable under non-cancellable operating lease ` Nil (Pr year nil) 48 Notes to the Financial Statements (contd.) 47. The gross carrying amount, accumulated depreciation and net carrying value of leased building are as follows: Description Gross Block Less: Deletion Accumulated depreciation Less: Deletion Net Block 31.03.2012 507.320 49.604 116.778 9.921 31.03.2011 457.716 507.320 106.857 350.859 77.794 429.526 48. Deferred tax Particulars 31.03.2012 Deferred Tax Liability in respect of i) Depreciation on fixed assets 31.03.2011 - Total i) 9.210 9.210 - Deferred Tax Asset in respect of Depreciation of fixed assets 2.988 ii) Allowance for carried forward losses iii) Others 53.190 13.365 Total *69.543 9.210 **9.210 Note : *Deferred tax asset is not recognized as a matter of prudence ** Deferred tax asset is recognized only to the extent of deferred tax liability. 49. Quantitative Particulars Particulars of purchases and sales of goods traded by the Company Products Units Opening Stock Value Quantity 1. Alcoholic beverages 2. Leather products Cases 102,728 (104,655) 4,383 (610) 34.123 (26.529) 4.104 (0.480) Quantity 3,019,578 (2,433,006) 286,947 (284,124) 3. Processed Food Tons (-) (-) 2,543 (1,656) 129.648 (88.786) 1,961 (1,656) 4. Readymade garments 5. Pharmaceuticals Pcs 37,063 (14,974) - 8.584 (2.540) - 1,365,816 (1,029,804) 7,780 (29,360) 323.220 (263.750) 2.754 (9.377) 1,251,434 (1,007,715) 7,780 (29,360) Pairs Boxes EA Purchases Sales Value Quantity Value 957.251 2,818,363 1,695.500 (805.990) (2,434,933) (1,285.820) 354.388 291,330 379.640 (254.241) (280,351) (263.188) Closing Stock Quantity 303,943 (102,728 (4,383) Value 121.754 (34.123) (4.104) 167.460 (130.990) 582 - 36.638 - 426.470 (271.362) 3.148 (10.495) 151,445 (37,063) - 64.672 (8.584) - Figures in brackets relates to previous year 49 Notes to the Financial Statements (contd.) 50. Segment reporting: Segment-wise business performance for the year ended March 31, 2012 Primary Segment Information Segment Revenue a) Alcoholic beverages b) Leather products c) Readymade garments d) Investments e) Guarantee services f) Property development g) Others Total Other income Finance costs Segment Result 2011-12 1805.844 439.396 455.441 313.051 543.568 962.935 500.240 2010-11 1,350.703 288.184 291.648 109.659 608.177 770.521 463.057 2011-12 349.815 (16.934) 7.284 208.542 439.059 836.188 165.312 2010-11 285.288 16.422 (3.306) (7.260) 517.816 651.441 139.717 5,020.475 3,881.949 1,989.266 1,610.393 (3,516.672) 1,600.118 1,245.061 (2,226.330) 82.987 618.849 Profit before tax Other Information: a) Alcoholic beverages b) Leather products c) Readymade garments d) Investments e) Property development f) Others Total 2011-12 Segment Assets Segment Liabilities 2010-11 Segment Segment Assets Liabilities 2011-12 Capital DepreciExpendi-ture ation 2010-11 Capital Depreciat-ion Expenditure 439.444 464.615 688.012 384.665 - 0.032 - 0.070 314.938 45.550 304.958 145.237 36.233 11.561 49.717 4.559 290.921 6.835 401.899 5.500 4.528 9.663 31.0655 4.661 29,711.702 40,166.664 26,551.152 - 1,637.716 - - 13.081 0.920 30.912 70.696 23.999 67.991 41.872 61.133 45,943.804 30,263.398 43,294.622 27,157.250 64.760 102.328 123.574 101.335 43,271.225 1,517.079 110.197 34.696 95.373 Notes : 1 Income under the segment “investments” represents dividends received, profit on sale of investments/ assets. 2 Income under the segment “property development” represents lease rent and property development income. 3 Segment results represents profit/(loss) before interest expenses, other income and tax. 4 Capital expenditure represents the gross additions made to fixed assets during the year. 5 6 Segment assets include Fixed Assets, Investments, Current Assets, Loans & Advances except income tax assets. Segment Liabilities include Secured and Unsecured Loans, Current Liabilities and Provisions except provision for tax and dividend. Secondary segments, based on geographical locations Particulars Segment Segment Revenue Within India Outside India 2011-12 2,348.250 2,672.225 Total 5,020.475 Segment Assets 2010-11 2010-11 1,970.089 1,911.860 2011-12 40,876.702 5,067.102 38,477.863 4,816.759 3,881.949 45,943.804 43,294.622 Note: Segment Assets include Fixed Assets, Investments, Current Assets, Loans and Advances except income tax assets. 50 Notes to the Financial Statements (contd.) 51. Related Party Transactions: Key Management Personnel: Mr. A. Harish Bhat - Managing Director i) Name of the Related Parties and description of relationship Subsidiaries UB Electronic Instruments Limited, UB Infrastructure Projects Limited, UB International Trading Limited, Kingfisher Finvest India Limited, Kingfisher Training and Aviation Services Limited, Kingfisher Aviation Training Limited, Kingfisher Goodtimes Private Limited, City Properties Maintenance Company Bangalore Limited, Bangalore Beverages Limited, UB Sports Limited, Rigby International Corp., United Breweries of America Inc, Delaware, Inversiones Mirabel, S.A, Mendocino Brewing Co. Inc, USA, United Breweries International [UK] Limited, Kingfisher Beer Europe Limited (formerly known as UBSN Limited), Rubic Technologies, Inc, Releta Brewing Company LLC, UB Overseas Limited, UBHL (BVI) Limited, Best Ride Consultancy Pvt Limited. Associates United Spirits Limited, Mangalore Chemicals & Fertilizer Limited, UB Engineering Limited, WIE Engineering Limited (Under Liquidation), McDowell Holdings Limited, Pixray India Limited, UB Pharma (Kenya) Limited, Kingfisher Airlines Limited. Subsidiary of an Associate Shaw Wallace Breweries Limited, Royal Challenger Sports Private Limited. 51 Notes to the Financial Statements (contd.) ii) Transactions with Related Parties during the year: 2011-12 2010-11 Kingfisher Training and Aviation Services Ltd UB Realty Limited 2011-12 2010-11 2011-12 2010-11 UB Infrastructure Projects Ltd 2011-12 Kingfisher Aviation Training Ltd 2010-11 2011-12 2010-11 City Prperties Maintenance Company B’Lore Ltd 2011-12 2010-11 Purchase of goods ( finished or unfinished) - - - - - - - - - - - - - - Sale of goods ( finished or unfinished) - - - - - - - - - - - - - - 2011-12 2010-11 Purchase of fixed assets - - - - - - - - - - - - - - Receiving of services - - - 0.031 - - - - - - - - 13.814 10.753 0.619 Leasing arrangement - - - - - - - - - - - - 0.749 Investments Redeemed - - - - - - - - - - - - - - Licence Agreement - - - - - - - - - - - - - - Finance (including loans in cash or in kind ) paid 366.388 5,635.064 0.136 0.007 0.659 - 13.700 15.800 707.262 827.556 0.191 - 25.772 24.339 Finance (including loans in cash or in kind ) received 727.497 2,378.553 20.000 - - - 1.065 0.051 809.579 3,246.029 - - 18.666 26.200 Investments made - - - - - - - - - - - - - - Dividend received - - - - - - - - - - - - - - Guarantee Commission received - - - - - - 0.037 0.515 - - - - - - Deposit Received - - - - - - - - - - - - - 0.412 Interest Received - - - - - - 10.608 7.916 71.810 157.291 - - - - Interest Paid - - 1.200 - - - - - - - - - - - Guarantees and collaterals 1,500.000 1,500.000 - - - - - - - - - - - - Amount due from as on Mar 31, 2012 8,573.848 8,934.957 - - 0.659 - 111.794 88.513 972.096 1,002.603 383.489 383.298 1.793 7.670 Amount due to as on Mar 31, 2012 - - 21.088 0.024 - - - - - - - - 0.204 0.125 Associate Companies Mangalore Chemicals and Fertilisers Limited United Spirits Limited UB Engineering Limited Shawallace Breweries Limited ** Royal Challenger Sports Pvt Ltd ** Kingfisher Airlines Ltd Total Purchase of goods ( finished or unfinished) 656.993 469.445 - - - - - - - - - - 656.993 469.445 Sale of goods ( finished or unfinished) - - - - - - - - - - - - - - Purchase of fixed assets - - - - - - - - - - - - - - Receiving of services - - - - - - - - - 0.316 - - - 0.316 Rendering of Services Sale of Assets Licence Agreement Pegasus - - - - - - - - - - - - - - 541.471 392.444 - - - - - - - - - - 541.471 392.444 - - 60.000 60.000 25.796 27.770 - - 51.519 56.000 - - 137.315 143.770 Finance (including loans in cash or in kind) paid 1,933.582 3,674.606 0.042 0.127 2.366 5.358 4,303.422 5.640 938.279 5,751.159 1.539 - 7,179.229 9,436.890 Finance (including loans in cash or in kind ) received 1,503.705 2,799.683 39.663 69.815 77.938 6.729 2,080.389 3,950.970 - 2,671.652 250.000 - 3,951.695 9,498.849 6,330.000 Investments made - - - - - - - - - 6,330.000 - - - Dividend received 59.705 59.705 34.853 29.044 - - - - - - - - 94.557 88.748 7.513 8.532 - - 14.874 17.661 - - 521.143 580.095 - - 543.531 606.289 Deposit Received - 223.915 420.000 100.000 - 250.000 - - - - - - 420.000 573.915 Interest Received - - - - 12.600 12.600 - - 44.733 632.480 - - 57.333 645.080 1.887 282.286 - - - - 340.768 56.400 - - 15.393 - 358.048 338.686 Guarantee Commission received Interest Paid Guarantees and collaterals 550.000 550.000 - - 650.000 800.000 - - 89,258.600 91,351.700 - - 90,458.600 92,701.700 Management contracts including deputation of employees - - 26.000 25.700 - - - - - - - - 26.000 25.700 Amount due from as on Mar 31, 2012 - 118.156 62.421 16.042 121.364 143.667 - - 2,786.408 1,230.735 - - 2,970.194 1,508.599 1,661.569 2,086.565 520.000 100.000 250.000 250.000 2,119.465 4,001.730 - - 263.854 - 4,814.888 6,438.294 Amount due to as on Mar 31, 2012 ** Subsidiary of an associate 52 UB Electronic Instruments Limited Kingfisher Finvest India Ltd Subsidiary Companies Notes to the Financial Statements (contd.) UB International Trading Ltd 2011-12 UB Overseas Ltd 2010-11 2011-12 Bangalore Beverages Limited UBHL-BVI Ltd. 2010-11 2011-12 2010-11 2011-12 Kingfisher Beer Europe Ltd UB Sports Limited 2010-11 2011-12 2010-11 2011-12 Bestride Consultancy Pvt Ltd 2010-11 2011-12 2010-11 Total 2011-12 2010-11 354.388 254.241 - - - - - - - - - - - - 354.388 254.241 30.509 1.037 - - - - - - - - - - - - 30.509 1.037 - - - - - - - - - - - - - - - - - - - - - - - - - - 6.686 1.603 - - 20.500 12.386 - - - - - - - - - - - - - - 0.749 0.619 - - 2,404.356 - - - - - - - - - - - 2,404.356 - - - - - - - - - - - - - - - - - 386.400 281.038 - - - - 6,696.125 7,000.000 - 6.500 6.686 - 0.028 - 8,203.347 13,790.304 0.004 4.836 - - - - 5,988.924 327.255 0.150 - - - - - 7,565.883 5,982.924 - - - 1,974.225 - - - - - - - - - - - 1,974.225 - - - - - - - - - - - - - - - - - - - 1.373 - - - - - - - - - - 0.037 1.888 - - - - - - - - - - - - - - - 0.412 - - 30.709 28.030 - - 1,127.412 321.994 - - - - - - 1,240.539 515.232 - - - - - - - - - - - - - - 1.200 - - - - - - - - - - - - - - - 1,500.000 1,500.000 139.434 76.917 2,742.727 284.620 252.693 225.483 8,829.352 6,994.740 6.350 6.500 - - 0.028 - 22,014.264 18,005.301 - - - - - - - - - - - 1.603 - - 21.292 1.752 53 Notes to the Financial Statements (contd.) 52. Disclosures required by Accounting Standard (AS) 29-“Provisions, Contingent Liabilities and Contingent Assets” Provisions: 1 2 3 4 Particulars of disclosure Balance as on 1.04.11 Provision for contingent claims Provision for leave encashment Provision made during year Provision used during the year. 37.428 - 23.820 12.394 2.381 Balance as on 31.03.12 37.428 33.833 Year and quantum of outflow of cash in respect of the above contingent claims is not presently ascertainable. Time of outflow of cash on account of leave encashment is contingent upon the time of employee’s separation from the Company. 53. Earnings per Share Net profit after tax Number of equity shares Earnings per share (Basic)/ (Diluted) - in ` 54. Value of imports calculated on CIF basis Raw materials Packing materials Capital Goods Total 55. Expenditure in Foreign Currency: Foreign Travel expenses Commission to Agents Professional and Legal fees Imports of material and capital goods Others Investments Total 56. Earnings in Foreign Exchange Export of goods calculated on FOB basis Receivable on account of redemption of Preference shares Others Total 2011-12 76.488 66,818.521 2010-11 416.886 66,818.521 1.14 6.24 2011-12 78.123 1.761 9.597 2010-11 21.300 22.170 27.160 89.481 70.630 2011-12 4.517 0.729 0.098 89.481 36.388 - 2010-11 4.304 1.890 11.162 70.630 13.070 1,974.225 131.213 2,075.281 2011-12 2,572.197 2,404.357 - 2010-11 1,836.565 17.567 4,976.554 1,854.132 57. The Company has not entered into any speculative derivative transactions. Hedging is restricted to the business needs of the Company. As at the Balance Sheet date, foreign currency receivable / payable that is not hedged by any derivative instrument or otherwise are as under: Particulars 54 Currency USD GBP Euro USD GBP Net Receivable / (Payable) Foreign Currency Amount 2011-12 56.326 0.009 (0.049) (0.015) 2010-11 11.424 (0.017) (0.042) (0.022) Net Receivable / (Payable) Amount in local currency 2011-12 2,881.441 0.736 (3.349) (0.767) 2010-11 510.102 (1.090) (1.920) (1.638) Notes to the Financial Statements (contd.) 58. All amounts are in Rupees million, unless otherwise stated. 59. Previous year’s figures have been regrouped to conform to Schedule VI (as amended) of the Companies Act, 1956. For Vishnu Ram & Co., Chartered Accountants Firm Registration No. : 004742S Dr. Vijay Mallya N. Srinivasan A. Harish Bhat Chairman Director Managing Director S. Vishnumurthy Proprietor Membership No.: 22715 Mumbai Kaushik Majumder August 24, 2012 Company Secretary 55 COMPANY’S GENERAL BUSINESS PROFILE I II III Registration Details Registration / CIN : 740 /85110KA1915PLC000740 State Code : 08 Balance Sheet Date : 31.03.2012 Public Issue : Nil Rights Issue : Nil Private Placement : Nil Capital Raised during the year Bonus Issue : Nil Private Placement : Nil Position of Mobilisation and Deployment of Funds Total Liablities (` in thousands) 47,099,805 Sources of funds Application of Funds Paid up Capital 668,185 Net Fixed Assets 15,161,256 Investments 16,491,009 Secured Loans 18,157,197 Other assets 27,533,780 2,696,445 P&L a/c bal Other Liabilities - 10,416,722 Performance of the Company Turnover V 3,075,016 Reserves & surplus Unsecured Loans IV 47,099,805 6,630,868 Total Expenditure Profit Before Tax 82,987 Profit after Tax Earning per Share 1.14 Dividend Rate 6,547,881 76,488 Nil Generic Name of three Principal Products / Services of the Company 1. Trading in following goods ITC Code Beer 220300 Liquor : 220830 Leather Shoes : 640320 2. Real Estate Development and Investment holding 56 : Disclosure under Clause 32 of the Listing Agreement in the Books of the Holding Company United Breweries (Holdings) Limited ` in million Sl No Name of the Company Value of Investment Parent Company Subsidiaries Total Amount of Outstanding as at March 31,2012 Maximum amount outstanding during the year Subsidiaries 1 Bangalore Beverages Limited - 0.500 0.500 8,829.352 9,089.455 2 Bestride Consultancy Private Limited - 0.100 0.100 - - 3 City Properties Maintenance Company Bangalore Limited 0.500 - 0.500 7.670 23.123 4 Kingfisher Finvest India Limited 2,500.500 - 2,500.500 8,573.848 8,957.557 5 Kingfisher Aviation Training Limited 30.000 - 30.000 383.489 383.489 6 Kingfisher goodtimes Private Limited - 0.100 0.100 - - 7 Kingfisher Training and Aviation Services Limited 0.332 0.027 0.359 88.513 88.513 8 UB Electronic Instruments Limited 27.209 0.327 27.536 - - 9 UB Infrastructure Projects Limited 0.500 - 0.500 972.093 1,102.750 10 UB International Trading Limited 0.500 - 0.500 76.917 76.917 11 UB Sports Limited - 0.500 0.500 6.500 6.500 12 Rigby International Corp. 13 UB Overseas Limited 14 15 660.238 - 660.238 - - 3,318.218 0.038 3,318.256 284.619 284.619 Rubic Technologies Inc. 26.558 - 26.558 - - UBHL (BVI) Limited 10.040 - 10.040 225.482 235.330 6,574.595 1.592 6,576.187 19,448.483 20,248.253 Associates 1 United Spirits Limited 692.950 421.319 1,114.269 1,661.569 1,661.569 2 McDowell Holdings Limited 146.038 178.196 324.234 - - 3 Mangalore Checmicals & Fertilizer limited 334.569 - 334.569 457.579 457.579 4 United racing & Bloodstock Breeders Limited 0.400 - 0.400 24.974 24.974 5 Pixray India Limited - 0.153 0.153 - - 6 WIE Engineering Limited 1.419 - 1.419 - - 7 UB Pahrma (Kenya) Limited 8 UB Engineering Limited 9 Kingfisher Airlines Limited 7.616 - 7.616 - - 424.928 - 424.928 128.636 128.636 9,315.321 12,016.883 21,332.204 2,786.408 2,786.408 10,923.241 12,616.551 23,539.792 5,059.166 5,059.166 57 Auditor’s Report on Consolidated Financial Statements The Board of Directors, United Breweries (Holdings) Limited, Bangalore. 1. We have audited the attached Consolidated Balance Sheet of United Breweries (Holdings) Limited Group, as at 31st March 2012, and also the Consolidated Statement of Profit and Loss and the Consolidated Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the United Breweries (Holdings) Limited’s management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statements of certain subsidiaries, whose financial statements reflect total assets of ` 31,664.115 million as at 31st March 2012, total revenues of ` 2,252.706 million and net cash out flows amounting to ` 6.467 million for the year then ended. These financial statements and other financial information have been audited by other auditors whose reports have been furnished to us, and our opinion is based solely on the report of such other auditors. 4. Attention is invited to the following; Note no 30 regarding inclusion in the income for the year, an amount of ` 529.294 million of guarantee/security commission charged to Kingfisher Airlines Limited (KFA). KFA has not accrued the charge in view of the restrictions imposed by its lenders for the period commencing from 1.1.2011. The total of such charge, accrued for the period from 1.1.2011 to 31.3.2012 is ` 656.765 million. (i) (ii) Note no 31 regarding inclusion in the income for the year, interest of ` 634.916 million charged to an associate, the ultimate realization of which may take protracted period of time (iii) Note no 32 regarding significant financial exposure to KFA in the form of investments in equity, loans and advances and guarantees. KFA has considerably scaled down its operations and it is under severe financial stress. No provision has been made in the accounts for the probable loss that may arise due to non recovery of loans and advances and other receivables, decline in the value of investments and invocation of guarantees. 5. The auditors of an associate company have reported that in view of Explanation 1 to Paragraph 17 of Accounting Standard 22, they cannot express any independent opinion in the matter of recognition of deferred tax asset of ` 11,180.846 million (net) for the year by that associate. 6. The financial statements of certain associate companies mentioned in Sl No. 2 of Note 1 have not been considered in the Consolidated Financial Statements for the reasons stated against their names. 7. The financial statements of Kingfisher Airlines Limited, which was a subsidiary upto 18.02.2012 and became an associate thereafter has been considered for inclusion in the consolidated financial statements based on financial statements as prepared by the management for the period upto the date it was a subsidiary. These financial statements reflect a revenue of ` 54,828.710 million and a loss of ` 14,757.869 million. 8. The financial statements of certain associate companies, which reflect the group’s share of profit for the year of ` 575.192 million have been audited by other auditors and we have relied upon such audited financial statements for the purpose of our examination of the Consolidated Financial Statements. 58 Auditor’s Report on Consolidated Financial Statements (contd.) 9. We report that in our opinion the consolidated financial statements have been prepared by the United Breweries (Holdings) Limited’s management in accordance with the requirements of Accounting Standard (AS) 21 Consolidated Financial Statements and Accounting Standard (AS) 23 Accounting for Investments in Associates in Consolidated Financial Statements specified in the Companies (Accounting Standards) Rule, 2006. 10. Based on our audit and on consideration of reports of other auditors on separate financial statements and on the other financial information of the components, and to the best of our information and according to the explanations given to us, and except for the effects of paragraph 4 above, which according to the management, is presently not quantifiable and the effects of paragraphs 5 and 6 above, we are of the opinion that the attached Consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Consolidated Balance Sheet, of the state of affairs of the United Breweries (Holdings) Limited Group as at 31st March 2012; (b) in the case of the Consolidated Statement of Profit and Loss, of the loss for the year ended on that date; and (c) in the case of the Consolidated Cash Flow Statement, of the cash flows for the year ended on that date. Mumbai August 24, 2012 For Vishnu Ram & Co., Chartered Accountants Firm Registration No.004742S (S. Vishnumurthy) Proprietor Membership no. 22715 59 Consolidated Balance Sheet as at March 31, 2012 ` in million Note No. As at March 31, 2012 As at March 31, 2011 2 3 668.185 22,966.411 91.097 668.185 (6,857.557) 76.791 4 78,188.310 Equity and Liabilities Shareholders’ funds Share capital Reserves and surplus Minority interest Non-current liabilities Long term borrowings Deferred tax liabilities (net) Other Long term liabilities Long term provisions 5 6 22,253.875 3.063 3,694.028 76.961 Current liabilities Short-term borrowings Trade payables Other current liabilities Short-term provisions 7 8 9 10 8,909.781 774.759 5,439.338 1,087.553 8,412.237 29,576.039 21,857.913 1,506.627 65,965.051 136,764.357 13 14 2,637.496 1.903 1,033.068 434.537 38,531.255 19,716.715 104.758 18,305.650 203.954 7,338.712 21,766.660 16,408.361 29,274.486 17,069.205 10,516.046 15 16 17 18 19 20 26.512 448.200 624.776 475.182 1,828.869 101.780 431.701 2,103.920 5,077.770 3,337.337 2,745.239 2,185.316 65,965.051 136,764.357 3,153.421 182.391 Assets Non-current assets Fixed assets Tangible assets Intangible assets Capital work in progress Goodwilll on consolidation Non current investments Deferred tax assets (net) Long term loans and advances Other non current assets Current assets Current investments Inventories Trade receivables Cash and cash equivalents Short term loans and advances Other current assets 11 12 Significant Accounting Policies and other notes 1, 27 to 45 The accompanying notes are integral part of the accounts. This is the Consolidated Balance Sheet referred to in our report of even date. For Vishnu Ram & Co., Chartered Accountants Firm Registration No. : 004742S Dr. Vijay Mallya Chairman 60 N. Srinivasan Director Mumbai August 24, 2012 A. Harish Bhat Managing Director Kaushik Majumder Company Secretary S. Vishnumurthy Proprietor Membership No.: 22715 Statement of Consolidated Profit and Loss for the year ended March 31, 2012 ` in million Note No. For the year ended March 31, 2012 March 31, 2011 Revenue Revenue from operations 21 60,039.488 68,706.699 Other income 22 6,108.565 1,802.165 66,148.053 70,508.864 1,568.143 1,184.342 1,858.884 1,421.126 (168.881) (31.086) 48,048.689 45,075.109 Expenses Purchase of traded goods Cost of materials consumed 23 Change in inventories Aircraft fuel, lease rentals, maintenance & other expenses Employee benefit expenses 24 6,507.250 7,014.777 Finance costs 25 15,359.261 14,691.504 Depreciation 11 2,802.967 2,198.106 Other expenses 26 11,499.907 13,347.248 87,476.220 84,901.126 (21,328.167) (14,392.262) of - 912.465 Loss before tax and before share in profits/(losses) of associates (21,328.167) (15,304.727) Current tax 13.881 164.593 Earlier year 0.456 43.300 (5,650.632) (4,934.430) (15,691.872) (10,578.190) 581.589 1,750.968 (15,110.283) (8,827.222) (4.293) 9.278 (15,114.576) (8,817.944) (226.20) (131.97) Loss before exceptional items, taxation and before share in profits/(losses) of associates Less: Exceptional items Cost incurred on account lease/purchase contracts of premature termination Tax expense: Deferred tax Loss after tax and before share in profits/(losses) of associates Share in profits/(losses) of associates Loss before minority interest Share of minority interest Net loss for the year Basic / diluted earnings per share (Face value of ` 10 each) Significant Accounting Policies and other notes 1, 27 to 45 The accompanying notes are integral part of the accounts. This is the Consolidated Statement of Profit and Loss referred to in our report of even date. For Vishnu Ram & Co., Chartered Accountants Firm Registration No. : 004742S Dr. Vijay Mallya Chairman N. Srinivasan Director Mumbai August 24, 2012 A. Harish Bhat Managing Director Kaushik Majumder Company Secretary S. Vishnumurthy Proprietor Membership No.: 22715 61 Consolidated Cash Flow Statement for the year ended March 31, 2012 ` in million For the year ended March 31.2012 A. Cash flow from operating activities Net loss before taxation Adjustments for : Depreciation Loss pertainig to erstwhile subsidiary Dividend income Interest income (21,328.167) Increase/ (decrease) in provision for stock obsolescence Income on sale and lease back transaction Property development Loss on sale of assets Loss on sale of investments (other than short term investments) Interest and Finance Charges Liabilities no longer required Amortisation of initial cost on lease of aircrafts Amortisation of slot charges Provision for employee compensation Provision for frequent flyer scheme Provision for contingency Unrealised exchange fluctuation (gain)/loss Bad debts / advances written off Provision for bad and doubtful advances / debts Operating profit/(loss) before working changes Adjustment for changes in working capital: Increase in inventories Increase in trade and other receivables 62 generated from/(used in) 2,198.106 (500.959) 5.664 259.837 (10.000) (4.142) (361.929) 11.102 - 4,418.766 44.112 (288.330) 2.982 - 14,691.504 (733.337) 198.026 182.105 (45.310) 43.540 70.000 231.284 188.009 66.124 operating (144.146) (477.478) 22,510.059 16,103.458 1,181.892 798.731 (220.735) 45.990 1,758.948 Cash generated from/(used in) operations Less : taxes paid (including fringe benefit tax) (15,304.727) 186.358 20,408.218 (157.226) (1,869.362) capital Increase in current liabilities/other liabilities Net cash activities For the year ended March 31.2011 (271.019) 11,934.867) 1,584.203 7,349.983 (4,855.903) 2,766.095 (6.277) (4,057.173) (508.374) 2,759.818 (4,565.547) Consolidated Cash Flow Statement for the year ended March 31, 2012 (contd.) For the year ended March 31.2012 B. C. Cash flow from investing activities Purchase of Fixed Assets (Including changes in capital work in progress) Lease rentals for aircraft on finance lease (principal portion) Sale of fixed assets/advance for residential units Purchase of investments Sale of investments Loan to other companies Dividend income Interest received (Increase)/ decrease in fixed deposits with bank Net cash generated from /(used) in investing activities Cash flow from financing activities Proceeds from issue of shares Interest and finance Charges Dividend paid and corporate dividend tax paid Proceeds from loans from banks and others For the year ended March 31.2011 (253.991) (402.060) - (1,149.691) 1,390.133 449.026 (9,866.679) 157.226 303.988 (54.552) 400.002 (896.478) (267.622) 144.146 449.090 565.835 (7,874.850) 2.916 (3,831.218) (77.918) 8,221.536 (1,156.777) 13,032.000 (14,032.592) (77.918) 6,356.007 Net cash generated from financing activities 4,315.316 5,277.496 Net increase (decrease) in cash and cash equivalents (799.716) (444.828) Cash and cash equivalents at the beginning of the year Elimination on cessation of subsidiaries Exchange gain/ (loss) on opening cash/ cash equivalents Cash and cash equivalents at the end of the year 2,092.848 2,537.828 (882.169) 1.788 (0.152) 412.751 2,092.848 8.542 377.697 26.512 412.751 23.660 1,637.487 431.701 2,092.848 475.182 88.943 26.512 3.337.337 1,676.190 431.701 412.751 2,092.848 Cash and cash equivalents comprise of : Cash in hand Balance with banks in current accounts Short term investments Reconciliation of cash and cash equivalents as per Balance Sheet and Cash flow statement Cash and cash equivalents as per balance sheet Less : Deposits maturing beyond 3 months Add : Current investments Notes to the Consolidated Cash Flow Statement 1 2 Short term investments represents amounts invested in mutual funds which are readily convertible into cash Balances with banks include ` 3.313 being balances in unpaid dividend account which cannot be used by the Company except for payment of unpaid dividend / transfer to Invester Education and Protection Fund. For Vishnu Ram & Co., Chartered Accountants Firm Registration No. : 004742S Dr. Vijay Mallya Chairman N. Srinivasan Director Mumbai August 24, 2012 A. Harish Bhat Managing Director Kaushik Majumder Company Secretary S. Vishnumurthy Proprietor Membership No.: 22715 63 Notes to the Consolidated Financial Statements 1. SIGNIFICANT ACCOUNTING POLICIES ADOPTED IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS. i. Basis of Preparation of Consolidated Financial Statements: The consolidated financial statements relate to UNITED BREWERIES (HOLDINGS) LIMITED (the Company), its subsidiaries and associates (the Group). The consolidated financial statements are prepared in accordance with Accounting Standard 21“Consolidated Financial Statements” and Accounting Standard 23-“Accounting for Investments in Associates in Consolidated Financial Statements”. The consolidated financial statements are prepared by adopting uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible, in the same manner as the Company’s separate financial statement, except as otherwise stated. ii. The subsidiary companies considered in the consolidated financial statements are: Name of the Subsidiary 64 Ownership Percentage Country of Incorporation 1 Kingfisher Training and Aviation Services Limited 71.92 India 2 UB International Trading Limited 100.00 India 3 UB Electronic Instruments Limited 98.44 India 4 Kingfisher Finvest India Limited 100.00 India 5 UB Infrastructure Projects Limited 100.00 India 6 Kingfisher Aviation Training Limited 100.00 India 7 City Properties Maintenance Company (Bangalore) Limited 55.00 India 8 Bangalore Beverages Limited 100.00 India 9 Vitae India Spirits Limited (*) India 10 Kingfisher Airlines Limited (*) India 11 UB Sports Limited 100.00 India 12 Kingfisher Goodtimes Private Limited 71.92 India 13 Rigby International Corp. 100.00 British Virgin Islands 14 Rubic Technologies Inc. 100.00 British Virgin Islands 15 United Breweries of America Inc., Delaware 92.49 United States of America 16 Inversiones Mirabel, S.A. 100.00 Republic of Panama 17 Mendocino Brewing Company, Inc. 66.26 United States of America 18 United Breweries International [UK] Limited 66.26 United Kingdom 19 Kingfisher Beer Europe Limited (formerly known as UBSN Limited) 66.26 United Kingdom 20 Releta Brewing Company, LLC 66.26 United States of America 21 UB Overseas Limited 100.00 British Virgin Islands 22 UBHL [BVI] Limited 100.00 British Virgin Islands 23 Bestride Consultancy Private Limited 100.00 India (*) ceased to be subsidiary from 18.02.2012 Notes to the Consolidated Financial Statements (contd.) The associate companies required to be considered in the consolidated financial statements are: 1 2 3 4 5 6 7 8 Name of the Associate Company Kingfisher Airlines Limited(*) UB Engineering Limited Mangalore Chemicals & Fertilizers Limited United Spirits Limited McDowell Holdings Limited Pixray India Limited WIE Engineering Limited (under liquidation) UB Pharma (Kenya) Limited Ownership Percentage 47.89 37.18 24.51 27.72 42.15 30.36 25.88 50.00 Country of Incorporation India India India India India India India Kenya (*)With effect from 18.02.2012 The following companies are excluded from the consolidation for the year under review for reasons mentioned there against. Name of the Associate Company Reason for exclusion 1 WIE Engineering Limited Under liquidation proceedings 2 UB Pharma (Kenya) Limited Closed operations iii. Basis of Presentation of Financial Statements: The financial statements of the parent Company and that of its subsidiaries, UB Electronic Instruments Limited, Kingfisher Finvest India Limited, UB International Trading Limited, UB Infrastructure Projects Limited, Kingfisher Aviation Training Limited, Kingfisher Training and Aviation Services Limited, Kingfisher Goodtimes Pvt. Limited, City Properties Maintenance Company Bangalore Limited, Kingfisher Airlines Limited, Bestride Consultancy Private Limited, Bangalore Beverages Limited, UB Sports Limited and Vitae India Spirits Limited have been prepared in accordance with the Generally Accepted Accounting Principles (GAAP) applicable in India and the financial statements of Rigby International Corp, Rubic Technologies Inc, Inversiones Mirabel, S.A., Mendocino Brewing Company, Inc., United Breweries of America, Inc., Delaware, United Breweries International (UK) Limited, Kingfisher Beer Europe Limited (formerly known as UBSN Limited) , Releta Brewing Company LLC, UB Overseas Limited and UBHL [BVI] Limited have been prepared in accordance with the accounting / financial reporting standards applicable in their respective countries of incorporation and as realigned to GAAP applicable in India. The consolidated financial statements have been prepared based on such financial statements. iv. Principles of Consolidation: i) The financial statements of the parent Company and its subsidiaries have been consolidated on a line by line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intragroup balances and intra-group transactions. The result of operations of Kingfisher Airlines Limited is included in the consolidated statement of profit and loss until the date of cessation of the relationship i.e 18th February, 2012. ii) Unless otherwise stated, the financial statements of the parent Company and its subsidiaries have been consolidated using uniform accounting polices for like transactions and other events in similar circumstances. iii) Goodwill represents the difference between the group’s share in the networth of a subsidiary and the cost of acquisition at each point of time of making the investment in the subsidiary. Goodwill arising on consolidation is not amortised. For this purpose the group’s share of networth is determined on the basis of the latest financial statement prior to the acquisition after making necessary adjustments for material events between the date of such audited financial statement and the date of respective acquisition. Negative goodwill is recognised as capital reserve on consolidation. However for the purposes of consolidation, capital reserve arising on consolidation of subsidiaries is set off against the goodwill arising on consolidation. v. Accounting for Investment in Associates: Accounting for investments in Associate companies have been carried out under the Equity method of accounting prescribed under Accounting Standard 23- “Accounting for Investments in Associates”, wherein goodwill/ capital reserve arising on acquisition of an associate included in the carrying amount of the investment is disclosed separately. 65 Notes to the Consolidated Financial Statements (contd.) Name of the Associate Company Basis of inclusion 1 Kingfisher Airlines Limited Audited results for the year ended 31/3/12 2 UB Engineering Limited Audited results for the year ended 31/3/12 3 Mangalore Chemicals & Fertilizers Limited Audited results for the year ended 31/3/12 4 United Spirits Limited Audited results for the year ended 31/3/12 5 McDowell Holdings Limited Audited results for the year ended 31/3/12 6 Pixray India Limited Un-audited results for the year ended 31/3/12 vi. Valuation of Inventories: Inventories are valued at lower of costs and net realizable value. Cost of inventories comprise of cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. In respect of the parent Company and its Indian subsidiary, UB International Trading Limited, and its overseas subsidiaries, cost is determined under the weighted average cost method. vii. Revenue recognition: All revenues are generally recognized on accrual basis except where there is an uncertainty of ultimate realization. i) Sales are recognized when the property in goods are transferred for a price and it is reasonable to expect the ultimate collection. ii) Interest is recognized on time proportion basis taking into account the amount outstanding and the rate applicable. iii) Dividends and royalty income are accounted for, when the right to receive the payment is established. viii.Fixed Assets: i) Fixed Assets are stated at cost less depreciation, wherever applicable. The land in Bangalore is stated at the revalued amount as adjusted in accordance with the revaluation done in August 2001 at the market value determined by approved valuers. All costs relating to the acquisition and installation of fixed assets are capitalized and include borrowing cost relating to borrowed funds attributable to the acquisition of qualifying assets for the period upto the date of acquisition. ii) Capital work-in-progress comprise advances paid towards acquisition of fixed assets and cost of fixed assets that are not ready for intended use at the year-end. iii) Assets acquired under leases where the acquiring company has substantially all the risks and rewards of ownership are classified as assets acquired under finance leases. Such assets are capitalised at the inception of the lease at lower of the fair value or the present value of minimum lease payments. ix. Borrowing costs: Borrowing costs that are attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of cost of such assets till such time as the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as an expense in the period in which they are incurred. x. Depreciation: i) Depreciation has been provided at the rates prescribed under Schedule XIV of the Companies Act, 1956, under written down value method with regard to the parent Company and its Indian subsidiaries other than Kingfisher Training and Aviation Services Limited. ii) In respect of Kingfisher Training and Aviation Services Limited, a) Depreciation on fixed assets (other than computer software and interiors) is provided on straight-line method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956. b) Computer Software is amortized over a period of four years. c) Interiors in leased premises are amortized over a period of five years. iii) In respect of foreign subsidiaries, depreciation is provided on straight line basis. 66 Notes to the Consolidated Financial Statements (contd.) xi. Effect of changes in foreign exchange rates: i) Transactions in foreign currencies are translated applying the following exchange rates: a) In respect of export transactions of the parent Company, at the average exchange rate prevailing in the month preceding the month in which the transaction took place. b) In respect of all other transactions at the rate of exchange prevailing on the date of transaction. ii) Monetary assets and liabilities denominated in foreign currency are translated at the rates of exchange at the Balance Sheet date and the resultant gain or loss is recognized in the Statement of Profit and Loss except exchange difference arising on reporting of long term foreign currency monetary items which are accumulated in a Foreign Currency Monetary Translation Difference Account and amortised over the balance period of such long term asset / liability but not beyond March 31, 2020. iii) Financial statements of non-integral foreign operations are translated using the average rate of exchange for the year, in so far as their statement of profit and loss is concerned and the closing rate in so far as their Balance Sheet is concerned. iv) Exchange difference arising on translation of financial statements of non-integral foreign operations is accumulated in foreign currency translation reserve. xii. Accounting for Government Grants: Government grants available to the Company are considered for inclusion in the accounts, where there is reasonable assurance that the Company will comply with the conditions attached to them and where such benefits have been earned by the Company and it is reasonably certain that the ultimate collection will be made. Revenue grants are recognized in the Statement of Profit and Loss. xiii.Investments: i) Current investments refer to the investments that are readily realizable and intended to be held for not more than a year. ii) Trade investments refer to the investments made with the aim of enhancing the group’s business interest. iii) Long term investments are stated at cost. All expenses relating to acquisition of shares are capitalized. Diminution in the value of investment, if considered permanent, is provided for. iv) Current investments are stated at the lower of cost and fair value. xiv.Retirement Benefits: a) Defined-contribution plans These are plans in which the group pays pre-defined amounts to separate funds and does not have any legal or informal obligation to pay additional sums. These comprise of contributions to the Employees’ Provident Fund, Superannuation Fund and certain state plans like Employees’ State Insurance and Employees’ Pension Scheme. The group’s payments to the defined contribution plans are recognized as expenses during the period in which the employees perform the services that the payment covers. b) Defined-benefit plans Gratuity: The group provides for gratuity, a defined benefit plan (Gratuity Plan), to certain categories of employees. Liability with regard to gratuity plan is accrued based on actuarial valuation, based on Projected Unit Credit Method, carried out by an independent actuary, at the Balance Sheet date. Actuarial gains and losses comprise experience adjustments and the effect of changes in the actuarial assumptions are recognized immediately in the Statement of Profit and Loss as income or expense. c) Other long term employee benefits Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as a liability at the present value of the defined benefit obligation at the Balance Sheet date based on actuarial valuation carried out at each Balance Sheet date. d) Short term employee benefits Undiscounted amount of short term employees benefits expected to be paid in exchange for the services rendered by employees is recognized during the period when the employee renders the services. These benefits include compensated absences such as paid annual leave and performance incentives. 67 Notes to the Consolidated Financial Statements (contd.) xv. Segment reporting: The operations of the Group are divided into alcoholic beverages, leather products, readymade garments, investment, property development, maintenance, training, airlines and other activities. Accordingly, the primary segment reporting comprises the performance under these segments and the secondary segment reporting is based on geographical locations of customers. xvi.Related Party disclosures: Transactions between related parties is disclosed as per Accounting Standard 18, “Related Party Disclosure” , and disclosure regarding the name of the transacting related party, description of the relationship between the parties, nature of transactions and amount outstanding as at the end of the accounting year, are made. xvii. Taxes on Income: i) Tax expenses comprises of current and deferred tax. ii) Current income tax is measured at the amount expected to be paid to the tax authorities by the components (holding and subsidiary companies) and in accordance with the Income tax laws of the respective countries in which they are incorporated. iii) Deferred tax is recognized, on timing differences, being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. xviii. Accounting for Leases: In respect of the parent Company, Lease income from non cancellable operating leases are recognized in the statement of Profit and Loss Account, on straight line basis, over the non-cancellable lease term. In respect of other operating leases, lease income is recognized in accordance with the terms of the lease deeds as modified based on negotiations from time to time. xix. Impairment of assets: The group evaluates all the assets for assessing any impairment and accordingly recognizes the impairment wherever applicable as provided in Accounting Standards 28- “Impairment of Assets”. xx. Employee Stock Options Scheme: Stock Options granted to employees under the Employee Stock Option Plan are accounted as per the accounting treatment prescribed in the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock options using the Net Intrinsic Value Method. Compensation expense is amortized over the vesting period of the option. The accounting value of the options net of deferred compensation expense is disclosed as Employees Stock Option Outstanding. xxi. Provisions and Contingencies: A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an out flow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on Management estimates required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current management estimates. xxii. Maintenance costs: Payments for maintenance of aircraft to lessors and third party service providers as per the related maintenance agreements, comprising fixed period-based amounts and variable activity-based amounts, are expensed on accrual basis. In respect of aircraft acquired on finance lease, payments made to lessors for major maintenance expenditure in terms of the lease agreements are initially considered as Maintenance Deposits and expensed to Profit and Loss Account as and when maintenance expenditure is incurred. 68 xxiii. Earnings per share: Earnings per equity share (basic/diluted) is arrived at by dividing the net profit or loss for the period attributable to the equity share holders by the weighted average number of equity shares outstanding during the year. Notes to the Consolidated Financial Statements (contd.) ` in million As at March 31, 2011 As at March 31, 2012 2. Share Capital Authorised 100,000,000 (2011: 100,000,000 ) Equity Shares of ` 10/- each 1,000.000 1,000.000 1,000.000 1,000.000 668.185 668.185 668.185 668.185 Issued, Subscribed and Paid-up 66,818,521 (2011: 66,818,521) Equity Shares of ` 10/- each fully paid up. a. Reconciliation of equity shares outstanding at the beginning and at the end of the reporting year No. of Shares As at the beginning of the year Amount Amount 66,818,521 668.185 66,818,521 668.185 - - - - 66,818,521 668.185 66,818,521 668.185 Issued during the year Outstanding at the end of the year No. of Shares b. Terms and rights attached to equity shares The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting. The rights of shareholder is governed by the Articles of Association of the Company and the Companies Act, 1956. c. Details of shareholders holding more than 5% shares in the company 31 March 2012 31 March 2011 Number of shares % holding Number of shares Dr Vijay Mallya 5,284,978 7.91 5,284,978 7.91 McDowell Holdings Limited 5,260,002 7.87 5,260,002 7.87 14,159,986 21.19 14,159,986 21.19 7,213,505 10.80 8,283,635 12.40 3,627,344 5.43 Watson Limited Platinum Investment Management Limited Birla Sunlife Trustee Company Pvt Ltd - - % holding d. Aggregate number of shares issued for consideration other than cash during the period of five years immediately preceeding the reporting date The company has issued 29,720,949 bonus shares during the year 2006-07 69 Notes to the Consolidated Financial Statements (contd.) ` in million As at March 31, 2012 As at March 31, 2011 3. Reserves and Surplus Capital reserve 511.365 511.365 Securities premium account 8,331.975 8,331.975 Capital reserve arising on consolidation of associates 7,200.625 6,282.580 Fixed assets revaluation reserve At the beginning of the year Less: Adjustment on sale of land and building 1,090.511 46.027 1,123.179 1,044.484 32.668 1,090.511 Foreign currency monetary item translation difference account (215.055) - Foreign currency translation reserve (675.988) (358.044) Share options outstanding account At the beginning of the year 74.817 Less: Transferred to Statement of Profit & Loss (45.308) 29.509 Surplus as per Statement of Profit and Loss At the beginning of the year (22,745.453) (28,186.391) Less : Elimination of the brought forward loss of a subsidiary upon it ceasing to be a subsidiary 29,863.910 Share of brought forward loss transferred to minority on additional investment by minority 7.253 12,346.369 Adjustment on account of additional investment by parent company - 1,915.315 (15,114.574) (8,817.944) (7,988.864) (22,742.651) - 75.000 Add: Loss for the year Less: General reserve Less: On account of an associate being held for disposal - 0.116 14,757.869 - 6,769.005 (22,667.535) Proposed dividend - 66.819 Tax on proposed dividend - Less : Elimination of loss for the year of a subsidiary upon it ceasing to be a subsidiary Less: Appropriations 70 11.099 6,769.005 (22,745.453) 22,966.411 (6,857.557) Notes to the Consolidated Financial Statements (contd.) ` in million As at March 31, 2012 As at March 31, 2011 4 Long term borrowings Secured From banks From others Unsecured Fixed deposits From banks 8% Optionally convertible debentures From group companies From others 2,207.486 18,179.145 44,422.896 22,769.620 850.793 500.000 2,080.000 2,060.867 25,878.291 1,343.843 5,490.596 7,093.199 5,559.744 86,679.898 62.616 2,470.674 145.198 2,739.884 564.550 500.000 26.576 3,624.416 936.014 4,670.492 8,491.588 22,253.875 78,188.310 Less: Current Maturities Secured From banks From others Unsecured Fixed deposits From banks From others (Secured by pledge of shares held by the parent company and its subsidiary, deposit of title deed of the parent companys’ land and structures in Bangalore, charge on fixed assets , charge on current assets, securitisation of rent receivables from the property let out, assignment of receivables for use of trade marks and securitisation of sale proceeds from the luxury residential building.) 5. Other long term liabilities Trademark licence security deposits Lease security deposits Interest accrued but not due Refundable deposit Gain on sale and lease back Installments from allottees for residential units 6. Long term provisions For legal cases Employee benefits 2,425.000 350.204 24.399 67.500 826.925 2,035.000 885.470 96.337 67.500 49.114 20.000 3,694.028 3,153.421 37.428 39.533 37.428 144.963 76.961 182.391 71 Notes to the Consolidated Financial Statements (contd.) ` in million As at March 31, 2012 As at March 31, 2011 7. Short term borrowings Secured Working capital loan / cash credit from banks 1,371.753 3,083.334 From others 3,175.148 800.170 1,977.305 3,950.970 - 577.763 2,385.575 - 8,909.781 8,412.237 774.759 29,576.039 774.759 29,576.039 Unsecured From a group company From banks Intercorporate deposits 8. Trade payables Trade creditors 9. Other current liabilities Current maturities of long term borrowings 3,624.416 8,491.588 Interest accrued but not due 419.856 268.559 Interest accrued and due 272.858 294.015 Statutory dues 214.565 117.417 Employee dues 5.672 0.734 - 6,135.440 Forward sales Security deposit 0.100 0.100 Advertisement and sales promotion 114.540 15.283 Advances received from customers 155.287 54.994 Claims payable 14.973 14.117 Other liabilities 600.571 6,444.095 - 4.142 0.498 - Gain on sale and lease back Investor Education and Protection Fund: Unclaimed public deposits/interest Unclaimed Dividends 3.275 3.363 12.727 14.066 5,439.338 21,857.913 Proposed dividend - 66.819 Corporate tax on proposed dividend - 11.099 Frequent flyers scheme - 216.575 Creditor for capital supplies 10. Short term provisions Provision for contingencies Income tax Employee benefits 72 - 70.000 1,083.661 1,121.311 3.892 20.823 1,087.553 1,506.627 - 477.962 2,315.578 370.529 Aircrafts Vehicles 2.409 64.287 1,367.195 11,939.531 25,680.019 23,608.852 Ground support & other equipment Aircrafts acquired under financial lease Total tangible assets Previous year 2,310.065 1,693.206 - 17.726 4,169.802 Improvement to lease-hold aircrafts Improvement to lease-hold plants 1,484.924 379.386 6.818 31.618 - 12.558 33.112 9.992 69.102 - 24.947 - 68.183 14.214 Improvement to lease-hold buildings Tangible assets ( others) 718.928 586.852 Furniture & fixtures 213.802 Office eqipments Computers 90.389 932.220 Plant & machinery 1,357.345 Buildings Buildings on rented land 1,174.175 Land Tangible assets 546.145 Total intangible assets Previous year - 1.903 300.000 Non-compeitition fee Others - 24.646 Designs (aircraft interiors) 14.214 Additions during the year 219.596 01.04.11 As at 238.898 23,708.670 11,939.531 1,352.062 2.015 5,654.726 373.760 333.899 2,315.578 566.389 497.589 185.185 - 90.389 350.691 46.856 - 558.295 300.000 - 24.646 233.649 Deletion during the year Cost / Valuation Computer software Intangible Assets Description of Assets 11 FIXED ASSETS 25,680.020 3,664.556 - 32.859 64.681 - 12.444 68.248 - 33.022 254.450 38.608 1,001.322 - 1,031.602 1,127.320 546.145 2.064 - 1.903 - 0.161 31.03.12 As at 5,443.248 7,373.870 3,109.521 259.037 39.870 1,894.392 218.325 153.924 335.631 352.591 292.402 53.118 405.791 8.622 250.646 - 235.904 342.190 190.164 - 12.082 139.944 01.04.11 As at 2,091.819 2,713.486 591.888 56.402 4.508 1,558.187 71.366 33.889 114.792 76.497 55.965 11.800 93.362 1.304 43.526 - 106.286 89.482 53.115 - 3.117 33.250 Depreciation for the year - 11.407 39.209 - 11.240 49.250 - 25.781 114.308 16.503 499.153 - 259.709 - 342.190 0.161 - - - 0.161 31.03.12 As at 161.197 7,373.870 9,060.793 1,026.560 3,701.408 304.032 5.169 3,452.579 278.451 138.562 450.423 403.307 234.058 48.416 - 9.926 34.462 - - 431.511 243.279 - 15.199 173.033 Deductions during the year Depreciation 0.500 0.500 - - - - - - - - - - 0.500 - - - - - - - - - 1.03.11 ` in millions - - 8,830.010 1,108.158 24.417 2,275.410 161.061 216.605 1,979.947 234.261 426.526 160.683 525.929 81.768 1,106.700 1,174.175 242.058 203.954 109.836 1.903 12.563 79.652 31.03.11 18,165.104 2,637.496 18,305.650 - 21.452 25.472 - 1.204 18.998 - 7.241 140.142 22.105 501.669 - 771.893 1,127.320 203.954 1.903 - 1.903 31.03.12 As at Net value of Assets 0.500 18,305.650 0.500 - - - - - - - - - - 0.500 - - - - - - - - - 31.03.12 As at Impairment Notes to the Consolidated Financial Statements (contd.) 73 Notes to the Consolidated Financial Statements (contd.) ` in million As at March 31, 2012 As at March 31, 2011 12. Non current investments Long term investments In fully paid equity shares In associate companies 36,314.759 In other companies Less: Provision for diminution in value of investments 13,427.730 2,225.931 2,990.067 38,540.691 16,417.797 9.436 9.436 38,531.255 16,408.361 13. Long term loans and advances Loans and advances to others Considered good Considered doubtful 7,346.107 16,772.336 20.000 337.986 7,366.107 Less: Provision 20.000 17,110.322 7,346.107 337.986 16,772.336 Loans and advances to associates Considered good 12,370.183 296.603 0.425 0.266 19,716.715 17,069.205 Other receivables Considered good 14. Other non current assets Initial cost on leased aircraft Other deposits - considered good - 1,032.789 104.758 9,483.257 104.758 10,516.046 26.512 431.701 26.512 431.701 15. Current investments Mutual funds 74 Notes to the Consolidated Financial Statements (contd.) ` in million As at March 31, 2012 As at March 31, 2011 16. Inventories Raw materials 83.286 64.821 Packing materials, stores and spares 35.682 6.810 - 1,657.368 - (54.371) Rotables, tools consumables and engineering Less: Provision for obsolescene Work in progress Finished goods including goods in transit Inflight stores consumable 31.588 32.831 297.644 123.003 - 273.458 448.200 2,103.920 17. Trade receivables Unsecured Exceeding six months: Considered good Considered doubtful Less: Provision Others: considered good 47.261 254.532 4.758 15.941 52.019 270.473 4.758 47.261 15.941 254.532 577.515 4,823.238 624.776 5,077.770 8.542 23.660 374.384 1,634.755 18. Cash and cash equivalents Cash on hand Balances with banks: in current accounts in unpaid dividend account in deposit account 3.313 2.732 88.943 1,676.190 475.182 3,337.337 19. Short term loans and advances Advances to suppliers Advance income tax 211.707 108.858 1,486.531 1,441.110 Prepaid expenses 20.053 42.170 Other receivables 110.578 1,153.101 1,828.869 2,745.239 20. Other Current Assets Initial cost on leased aircraft - 225.608 Deposits - 440.973 101.780 1,518.735 101.780 2,185.316 Duty drawback receivable 75 Notes to the Consolidated Financial Statements (contd.) ` in million Year ended March 31, 2012 Year ended March 31, 2011 21. Revenue from operations Sales 4,625.323 3,618.409 53,048.165 62,333.790 Dividends 157.226 144.146 Guarantee commission 551.681 26.194 Lease rent 461.481 409.965 Income from property maintenance 223.375 199.645 Licence fees 205.681 147.770 Income from air passanger, cargo & other related services Management service fees 26.000 25.700 Duty drawback 169.457 1,371.733 Property development 500.959 371.821 70.140 57.526 60,039.488 68,706.699 1,869.362 477.478 Training 22. Other Income Interest income Profit on sale of fixed assets Provisions/liabilities no longer required/payable written back Income on sale and lease back transaction Exchange gain Miscellaneous income 0.229 0.113 1,258.586 733.337 3.107 4.142 2,490.192 - 487.089 587.095 6,108.565 1,802.165 1,638.377 1,333.043 220.507 88.083 1,858.884 1,421.126 23. Cost of material consumed Raw material consumed Packing materials consumed 76 Notes to the Consolidated Financial Statements (contd.) ` in million Year ended March 31, 2012 Year ended March 31, 2011 24. Employee benefits expenses Salaries, wages and bonus 6,175.024 6,706.129 Contribution to provident and other funds 201.429 192.853 Employee compensation expenses (25.550) (45.310) Workmen and staff welfare 156.347 161.105 6,507.250 7,014.777 15,166.905 13,150.186 192.356 1,541.318 15,359.261 14,691.504 Rent including lease rent 552.515 517.915 Rates and taxes 235.266 481.909 Insurance 668.696 767.620 Communication expenses 236.422 270.187 Travel and conveyance 555.826 687.642 General administrative expenses 127.779 276.613 Repairs & maintenance 249.757 305.551 6.569 5.620 25. Finance cost Interest expenses Processing charges and bank charges 26. Other expenses Vehicle repairs and maintenance Property maintenance expenses 73.355 71.344 Selling and promotion expenses 4,824.864 4,958.802 23.265 3.853 Brokerage Commission paid to selling agents 1,643.040 1,958.054 Freight charges/job charges 244.501 252.430 Miscellaneous expenses 278.807 360.049 3.552 0.082 562.379 947.447 2.377 2.940 Claims paid Legal & professional charges Directors’ sitting fees Auditor’s remuneration Bad debts Provision for contingencies Provision for bad and doubtful debts/advances Loss on sale of investments 3.792 16.271 90.956 188.009 - 70.000 81.500 66.124 223.184 - 42.185 11.215 Amortisation of initial cost on lease of aircraft 148.519 198.026 Amortisation of slot charges 143.565 182.105 Loss on sale of assets Recruitment expenses 15.195 14.975 Hire charges 319.604 433.809 Training expenses 142.437 181.520 - 117.136 11,499.907 13,347.248 Exchange loss 77 Notes to the Consolidated Financial Statements (contd.) 27.UB City Luxury residential Project The parent Company has executed a Joint Development Agreement with a Developer on 26th April, 2010 for development of a luxury residential building named as “Kingfisher Towers – Residences at UB City” in the available land in UB City. The super built up area of the building would be 767,870 sq ft. The super built up area falling to the share of the Company would be 418,388 sq. ft. The construction is in progress. The Company has issued allotment letters in respect of five residential units measuring 41,605 sq ft. in Kingfisher Towers by collecting booking amounts of ` 826.925 million. 28 Estimated amount of contracts remaining to be executed, on capital account as on 31.03.12 and not provided for, in the case of : a) The parent company is ` 5.357 million (net of advances) (Pr year ` 23.550 million) b) A subsidiary of the parent Company, UB International Trading Limited, ` Nil (Pr year ` 1.476 million) 29. Fixed Assets : i) The parent Company’s land in Bangalore was revalued in August 2001, based on an independent valuer’s report. Accordingly, the value of the land stood restated at ` 1,707 million, with a corresponding adjustment to the Fixed Assets Revaluation Reserve. ii) Depreciation has been charged under the written-down value method as per the rates prescribed under the Companies Act 1956, in respect of the parent Company and its Indian subsidiaries except Kingfisher Airlines Limited and Kingfisher Training and Aviation Services Limited. In respect of Kingfisher Airlines Limited and Kingfisher Training and Aviation Services Limited and the overseas subsidiaries, depreciation is charged under the straight-line method at the rates prescribed under the statute governing those subsidiaries. The net book value of fixed assets on which straight-line method of depreciation is used, is ` 555.957 million (Pr year ` 16,310.761 million). 30. Guarantee commission of ` 529.294 million has been accrued during the year based on contractual obligation although the recovery could take a longer period of time than anticipated since the associate company for whom these guarantees were given is presently precluded by its bankers consortium to honour the obligation aggregating to ` 656.765 million upto 31st March, 2012. 31. The Company has accrued interest of ` 634.916 million for the year on loans to associate as per loan agreements signed with them. Considering, the income stream of the company, realisability of this interest could possibly take protracted period of time beyond those stipulated in the loan agreements. 32. The company along with its subsidiaries has significant financial exposure on various counts to Kingfisher Airlines Limited. Kingfisher Airlines Limited has ceased to be a subsidiary of the company with effect from 18th February, 2012 and has become an associate company thereafter. As at March 31, 2012, such exposure include equity investment of ` 21,142.800 million, loans and advances ` 10,486.984 million and other receivables ` 2,090.837 million, and corporate guarantees to banks/aircraft lessors ` 89,258.600 million. Certain corporate guarantees have been invoked and Kingfisher Airlines Limited is under negotiation in this regard with the beneficiaries. The Management is reasonably confident that none of the guarantees would eventually devolve upon the Company. The ultimate impairment of investments and non-recovery of loans and advances are not presently quantifiable and hence no provision has been considered in the accounts. 33. Effect of Kingfisher Airlines Limited ceasing to be a subsidiary The Effect of Kingfisher Airlines Limited ceasing to be a subsidiary are as follows : Sl. No. 1 2 3 78 Description Reserves and surplus Liabilities Assets Increase 29,834.401 - Decrease 112,239.332 82,404.931 Notes to the Consolidated Financial Statements (contd.) 34. Upon Kingfisher Airlines Limited becoming an associate, the difference between investment in Kingfisher Airlines Limited and the share of equity of Company in Kingfisher Airlines Limited is treated as Goodwill and such Goodwill is not tested for impairment. 35. Disclosures pursuant to Accounting Standard 23-“Accounting for Investments in Associates in Consolidated Financial Statements”: The details of carrying value of investments in associates as on March 31, 2012 is as under. 1 2 3 4 5 Cost of investments in associates (excluding goodwill and capital reserve) Share of profits of associates up to 31.03.2012 Goodwill Movement in share of equity in Associates (Capital Reserve) Carrying value of investments in associates 2,168.360 5,613.569 21,332.205 7,200.625 36,314.759 36. a) Future Minimum Lease Payments (in respect of Finance Lease): Particulars Not later than one year Later than one year and not later than five years Later than five years Total As at March 31, 2012 3.832 6.532 - As at March 31, 2011 11.955 9.434 - 10.364 37. Employee benefit Disclosure as per AS 15 Defined benefit plans Reconciliation of opening and closing balances of the present value of the defined benefit obligation: Obligations at period beginning Less : pertaining to erstwhile subsidiary Service Cost Interest cost Past service cost – vested benefit Benefits settled Actuarial (gain)/loss Obligations at period end Defined benefit obligation liability as at the Balance Sheet is wholly funded by the respective company Change in plan assets Plans assets at period beginning, at fair value Expected return on plan assets Actuarial gain/(loss) Contributions Benefits settled Plan assets at period end, at fair value Reconciliation of present value of the obligation and the fair value of the plan assets: Fair value of plan assets at the end of the year Present value of the defined benefit obligations at the end of the period Liability recognized in the Balance Sheet Details of Gratuity cost Service cost Interest cost Post service cost – vested benefit Expected return on plan assets Actuarial (gain) / loss Net gratuity cost 21.389 203.790 (144.946) 7.628 4.595 (9.549) 4.478 65.996 157.677 38.781 14.901 0.850 (10.256) 1.838 203.790 63.625 5.028 (3.793) (9.549) 55.264 61.678 4.802 0.463 (3.317) 63.625 55.264 65.996 (10.732) 63.625 203.790 (140.165) 7.628 4.595 (5.028) 8.248 15.443 38.781 14.901 0.850 (4.802) 1.375 51.105 79 Notes to the Consolidated Financial Statements (contd.) Description of the basis used to determine the overall expected rate of return on assets including major categories of plan assets. The expected return is calculated on the average fund balance based on the mix of investments and the expected yield on them. Actual return on plan assets Assumptions Interest rate Discount factor Estimated rate of return on plan assets Salary Increase Retirement age ( years) 8.50% 8.50% 8.00% 5.00% 58 8.00% 8.00% 8.00% 5.00% 58 The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.. 38. Deferred Tax: a) The following deferred tax assets / liabilities are recognized for the year. Name of the Company Kingfisher Airlines Limited City Properties Maintenance Company Bangalore Limited UB Electronic Instruments Limited UB International Trading Limited Kingfisher Training and Aviation Services Limited Deferred tax Liability Total Total deferred tax asset(recognized in the Statement of Profit and Loss) 0.136 1.321 1.457 Deferred Tax Asset 5,650.349 0.330 0.089 1.321 5,652.089 5,650.632 b) Kingfisher Airlines Limited, an erstwhile subsidiary of the parent Company( presently associate) has recognized in its financial statements, deferred tax assets on unabsorbed depreciation and business losses on the basis of the business plan prepared by the Management, which takes into account certain future receivables arising out of contractual obligations. The Management of the erstwhile subsidiary is of the opinion that there is virtual certainty supported by convincing evidences that sufficient future taxable income will be available against which the deferred tax assets can be realized. 39. Segment Reporting: Segment-wise business performance for the year ended March 31, 2012 Primary Segment Information Segment Revenue: a) Alcoholic Beverages b) Leather products c) Readymade Garments d) Investments e) Airlines f) Property development g) Maintenance h) Training i) Others Total Revenue Other income Finance costs Exceptional item Net loss before tax 80 Segment Revenue 2011-12 2010-11 3,734.648 2,995.861 441.578 288.417 455.441 291.648 157.226 144.146 53,048.165 63,596.406 962.440 769.960 223.375 199.645 70.140 59.461 946.475 361.155 68,706.699 60,039.488 Segment Results 2010-11 2011-12 371.370 279.800 (17.835) 20.257 7.284 (3.306) (204.376) (27.438) (13,483.494) (3,470.640) 836.188 656.283 15.583 24.463 (10.405) (13.604) 408.214 1,031.262 (1,502.889) (12,077.471) 6,108.565 1,802.165 (15,359.261) (14,691.504) (912.465) (21,328.167) (15,304.727) Notes to the Consolidated Financial Statements (contd.) 2010-11 2011-12 Other Information a) Alcoholic Beverages b) Leather Products Readymade c) Garments d) Investments e) Airlines Property f) Development g) Maintenance h) Training i) Others Total Segment Assets Segment Assets Segment Liabilities 2010-11 2011-12 Segment Liabilities Capital Expenditure Depreciation Capital Expenditure Depreciation 1,830.725 1,682.388 1,469.245 1,072.655 49.907 66.822 26.827 50.686 379.349 84.349 412.471 179.122 40.099 15.250 60.771 8.728 290.921 6.835 27,146.352 29,454.300 4.528 9.663 31.065 4.661 59,327.436 - 39,058.352 - 2,616.609 - 110,644.129 1,581.589 - 51,641.628 2,209.446 2,028.602 1,517.079 - 1,637.716 - - 13.081 0.920 30.912 90.346 154.537 453.591 17.144 153.921 149.643 54.480 110.562 551.247 41.432 110.269 175.805 5.279 2.021 23.998 2.069 9.612 69.861 2.067 0.086 46.066 1.812 10.411 62.292 64,043.984 41,152.632 83,023.701 141,677.711 1,707.421 2,802.967 2,378.248 2,198.104 Notes : 1 Income under the segment “investments” represents dividends received, profit on sale of investments/ assets. 2 Income under the segment “property development” represents lease rent and property development 3 Segment results represents profit/(loss) before finance expenses, other income and tax. 4 Capital expenditure represents the gross additions made to fixed assets during the year. 5 Segment assets include Fixed Assets, Investments, Current Assets, Loans & Advances except goodwill and income tax assets. 6 Segment Liabilities include Secured and Unsecured Loans, Current Liabilities and Provisions except provision for tax and dividend. Secondary segments, based on geographical locations Particulars Segment Within India Outside India Total Segment Revenue 2010-11 2011-12 45,639.427 50,548.962 14,400.061 18,157.737 68,706.699 60,039.488 Segment Assets 2010-11 2011-12 62,338.808 80,894.941 1,705.176 2,128.760 83,023.701 64,043.984 Note: Segment Assets include Fixed Assets, Investments, Current Assets, Loans and Advances except goodwill and income tax assets. 40. Related Party Transactions: i. Key Management Personnel : Dr. Vijay Mallya, Chairman of the parent Company and Chairman & Managing Director of Kingfisher Airlines Limited, Mr. A. Harish Bhat - Managing Director Name of the Related Parties where control exists: Associates Kingfisher Airlines Limited*, United Spirits Limited *, Mangalore Chemicals & Fertilizer Limited *, UB Engineering Limited*, WIE Engineering Limited (Under Liquidation), McDowell Holdings Limited, Pixray India Limited, UB Pharma (Kenya) Limited. Subsidiary of Associates : Shaw Wallace Breweries Limited & Royal Challengers Sports Private Limited* * With which there have been transactions during the year. 81 Notes to the Consolidated Financial Statements (contd.) ii. Transactions with Related Parties during the year : Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Nature of Transactions Purchase of goods/services Rendering of services Leasing arrangement Licence Fees received Dividend received Guarantee commission received Interest received Interest paid Investment made Guarantees given Finance (including loans in cash or in kind paid) Finance (including loans in cash or in kind received) Payment of remuneration for employment Management contracts Deposit received Sale of assets Amount Due from as on March 31, 2012 Amount Due to as on March 31, 2012 Associates Subsidiaries of Associates Previous Current Year Year Current Year 656.993 37.591 137.315 126.248 543.531 660.938 5.230 90,458.600 13,006.431 Previous Year 469.445 30.478 87.770 120.439 26.194 12.888 282.286 175.129 1,350.000 3,680.091 356.161 56.400 4,304.961 5.640 4,006.786 2,876.227 2,330.389 3,950.970 - - 26.000 420.000 541.471 25.700 573.915 392.444 12,777.555 299.926 4,087.595 Key Management Personnel Previous Current Year Year 13.444 12.405 2,436.565 2,383.319 4,001.730 41. Contingent liabilities: 2010-11 Particulars 2011-12 i) Guarantees given 77,228.600 14,643.584 ii) Claims against the parent Company and its subsidiaries, not 0.961 5,855.893 acknowledged as debts 1,799.399 iii) Liability for deduction of tax at source on lease payments in respect of aircrafts and engines, where agreements were entered into with lessors prior to March 31, 2007 iv) Demands raised by Income Tax Authorities against which the subsidiaries 0.508 140.479 have preferred appeals v) Arrears of fixed cumulative preference dividends (including tax thereon) 430.589 vi) Demand raised by Income Tax authorities against which the parent 234.210 127.700 Company has preferred appeals vii) Demands raised by Service Tax Authorities against which the subsidiaries 10.752 10.752 have preferred appeals viii) Certain aircraft lessors and bankers have invoked, the corporate guarantees given by the parent company on behalf of KFA. The total amount invoked and outstanding as on June 30, 2012 is ` 8,357.700 million and KFA is under negotiation with the beneficiaries. 82 Notes to the Consolidated Financial Statements (contd.) 42. Earnings per Share: Loss for the year Weighted average number of equity shares Earnings per share (Basic / Diluted) - in ` 2011-12 (15,114.576) 66,818,521 (226.20) 2010-11 (8,817.944) 66,818,521 (131.97) 43. There are no speculative derivative transactions. Hedging is restricted to the business needs of the companies. As at the Balance Sheet date, foreign currency exposures that have not been hedged by any derivative instrument or otherwise are as follows: 2011-12 Capital advances Prepaid Maintenance Reserve Other assets Finance lease for aircraft and other term loan from financial institution Other liabilities - 2010-11 5,030.117 - 7,325.338 2,882.177 4,496.561 - 6,788.889 4.116 5,406.477 44. All amounts are in Rupees millions, unless otherwise stated. 45. Previous year’s figures have been regrouped to conform to Schedule VI (as amended) of the Companies Act, 1956. Previous year figures are not comparable since Kingfisher Airlines Limited has ceased to be a subsidiary and has become an associate with effect from 18.02.2012. Dr. Vijay Mallya N. Srinivasan A. Harish Bhat Chairman Director Managing Director Mumbai Kaushik Majumder August 24, 2012 Company Secretary For Vishnu Ram and Co., Chartered Accountants Firm Registration No.004742S S.Vishnumurthy Proprietor Membership No. 22715 83 Indian Subsidiaries Bangalore Beverages Limited Bestride Consultancy Private Limited City Properties Maintenance Company Bangalore Limited 4 Kingfisher Finvest India Limited 5 Kingfisher Aviation Training Limited 6 Kingfisher Goodtimes Private Limited 7 Kingfisher Training and Aviation Services Limited 8 UB Electronic Instruments Limited 9 UB Infrastructure Projects Limited 10 UB International Trading Limited 11 UB Sports Limited (209.461) (230.094) 271.999 (278.067) 804.282 225.783 0.001 784.123 17.358 7.476 (8.347) (6.135) 29.193 0.500 0.500 0.500 (0.849) (598.695) (28.388) (247.650) 13.181 (149.396) (958.068) 0.547 (0.078) 129.007 10.500 30.000 0.100 0.500 773.255 1,284.878 28.136 12.194 8.180 8.180 1.974 0.042 33.899 0.500 0.100 0.909 Reserves 703.892 295.052 284.174 1,039.625 773.255 3,468.115 0.004 22.889 46.159 203.649 56.603 985.655 156.362 0.852 10,538.759 415.358 0.051 104.676 15,821.365 1,035.316 88.364 Total Assets 109.070 299.363 12.174 533.569 0.849 2,781.933 0.256 258.345 24.798 344.865 10.052 977.680 164.209 6.488 Total Revenue 13.171 77.151 357.709 - 4.752 3.487 (0.957) (0.080) 517.854 284.174 318.451 4.694 325.294 537.780 1.338 4.594 (0.143) 4.476 773.255 (0.096) 3,435.030 0.001 (30.738) 0.046 8.366 (182.865) 24.468 91.359 1.213 - 1,182.813 (8.756) 300.000 - (1.891) 0.124 8.020 Profit before Tax 60.668 (787.552) (0.278) (0.005) 78.930 (23.704) 0.100 1,508.344 75.691 - 147.738 Details of Investments 1,486.326 10,433.314 384.811 0.030 (24.831) 0.100 5,818.891 1,035.174 53.557 Total Liabilities 3.377 3.487 (1.093) (0.080) 0.130 0.038 1.208 4.594 (0.143) 4.438 (0.096) - (30.738) - (182.865) 1.213 (8.756) 1.374 1.684 0.136 - - - - - - ` in million Proposed Dividend (1.891) 0.124 8.020 Profit after Tax - (787.552) (0.278) (0.005) 0.003 (23.704) 0.060 4.130 Tax Provision Note: 1 The exchange rate prevelant on the last day of the financial year has been taken for conversion for the balance sheet items while the conversion rate for the revenues has been the average rate for the period. 2 None of the above Companies has proposed any dividend. 3 The Anuual Report along with related information of the above companies shall be made available for investors of the Company and its subsidiaries seeking the Report /information at any point of time. 4 The Annual Report is also available for inspection of investors at the Registered Office of the Company and its Subsidiaries. 5 In respect of overseas subsidiaries, USD is valued at ` 51.16 and GBP at ` 81.79 as on 31.03.2012 (for Balance sheet items) and average rate at ` 47.80 for USD , ` 76.69 for GBP (for P&L account items). 1 2 3 4 5 6 Overseas Subsidiaries Rigby International Corp. UB Overseas Limited Rubic Technologies Inc. UBHL (BVI) Limited United Breweries International ( UK) Limited Kingfisher Beer Europe Limited (Formerly known as UBSN Ltd) 7 United Breweries of America Inc., Delaware 8 Relata Brewing Company LLC 9 Inversiones Mirabel, S.A. 10 Mendicino Brewering Company Inc. USA 1 2 3 Capital SUMMARISED FINANCIALS OF SUBSIDIARY COMPANIES 2011-12 84 Board of Directors N. Srinivasan S. G. Ruparel V. K. Rekhi B. S. Patil Sidhartha V. Mallya M.S. Kapur Dr. Vijay Mallya Chairman The Team Dr. Vijay Mallya Chairman A. Harish Bhat Managing Director Kaushik Majumder Corporate Vice President Legal & Company Secretary CONTENTS Report of the Directors x Report on Corporate Governance x Auditor’s Report xx Balance Sheet xx Profit and Loss Account xx Cash Flow Statement xx Schedules xx Significant Accounting Policies xx Balance Sheet Abstract xx Consolidated Financial Statement XX Left to Right: Subhash R. Gupte, Ravi Nedungadi, V. Shashikanth and Anil Pisharody.