annual report

1

Report of the Directors

Your Directors have pleasure in presenting the AnnualReport of your Company and the audited accounts for theyear ended March 31, 2007.

At the outset, your Directors are pleased to report thestrategically important acquisition on May 16, 2007 ofWhyte and Mackay Limited, the 4th largest Scotch Distillersin the World. The acquisition of this Glasgow (UK) basedCompany for an enterprise value of GBP 595 Million wasdone through a wholly owned subsidiary, United Spirits(Great Britain) Limited.

Consequent to the consolidation of the spirits business byamalgamation, inter alia, of Herbertsons Limited, ShawWallace Distilleries Limited, Baramati Grape IndustriesLimited and Triumph Distillers & Vintners Private Limitedwith the Company, your Company has registered amilestone sale of more than 66 Million cases during thefinancial year 2006-07.

FINANCIAL RESULTS

Rupees in Millions2006-07 2005-06

The working of your Company forthe year under review resulted in

• Profit from operations 3,898.186 921.192• Exceptional and Other

Non-Recurring Item 2,627.424 -6,525.610 921.192

Less:• Depreciation 309.350 409.002• Taxation

(including deferred tax) 1,276.066 91.992• Profit after tax 4,940.194 420.198

Profit B/F from previous year 256.572 574.238Profit available for appropriation 5,196.766 994.436Your Directors have made thefollowing appropriations:

To General Reserve 500.000 50.000

To Capital Redemption Reserve- 464.446

Proposed Dividend:Preference Shares 6.975 6.975Equity Shares - Interim 141.723 -

- Final 98.966 188.963Corporate Tax on ProposedDividend 37.881 27.480

Balance carried to the BalanceSheet 4,411.221 256.572EPS – Basic - Rupees 52.20 4.80

Your Directors declared an interim dividend on equityshares of the Company @15% in March 2007.

Your Directors take pleasure in proposing a final Dividendof 10% to make a total equity dividend distribution of 25%for the year ended March 31, 2007.

The proposed final dividend of 10% is on the equity sharesincluding on 4,484,397 equity shares allotted as of date bythe Company on conversion of 78,960 Foreign CurrencyConvertible Bonds (Bonds) subsequent to March 31,2007, pursuant to the Offering Circular dated March 24,2006.

Your Directors also propose a dividend @ 9% on 7,750,0009% Non-Cumulative Non-Convertible RedeemablePreference Shares of Rs.10 each fully paid-up, whichwere outstanding on March 31, 2007 but redeemed onJuly 11, 2007.

CAPITAL

The Authorised Capital of your Company remainedunchangedatRs.120,00,00,000/-divided into11,00,00,000equity shares of Rs.10/- each and 1,00,00,000 PreferenceShares of Rs.10/- each.

During the current year, the Issued, Subscribed and Paidup Equity Share Capital of your Company increased fromRs. 944,819,300/- divided into 94,481,930 equity shares ofRs. 10/- each to Rs. 989,663,270/- divided into 98,966,327equity shares of Rs. 10/- each on conversion of 78,960Bonds into 4,484,397 equity shares.

The paid-up Preference Capital of your Company becameNil consequent upon the redemption of 7,750,000 9%Non-Cumulative Non-Convertible Redeemable Preferenceshares of Rs.10/- each on July 11, 2007.

PERFORMANCE OF THE COMPANY

The integration of the Shaw Wallace operations, theactive efforts at capitalising on the uptrend of consumerpreferences, and relentless cost control, have all helpedyour company to turn in a sterling performance during theyear under review.

Operating Profits were consequently up about 400% fromRs. 921 Million to Rs. 3,898 Million.

Adding to the results for the year were profits fromsale of part of the Treasury Stocks which resulted inNon-Recurring profits of Rs. 2,627 Million.

2

Report of the Directors (Contd.)

PROSPECTS

Barring unforseen circumstances, your Directors expectcontinuing increase in the profitable conduct of thecompany's business.The recent acquisitions of the Scotchdistiller, Whyte and Mackay Ltd. and Liquidity Inc. in thecurrent year and Bouvet Ladubay, a wine manufacturingCompany in France in the year under review, are expectedto provide sustained opportunities in the future.

Profits for the first six months of the current year are 51%higher than the corresponding period of the year underreview.

SUBSIDIARIES

During the year under review, the following Companiesbecame subsidiaries of your Company :

Four Seasons Wines Limited; United Alcobev Limited;United Vintners Limited; McDowell Beverages Limited;USL Holdings Limited; Spring Valley InvestmentsHoldings Inc.; USL Holdings (UK) Limited; United Spirits(UK) Limited; United Spirits (Great Britain) Limited andHerbertsons Limited.

Subsequent to the Balance Sheet date, followingCompanies have become subsidiaries of your Company:

McDowell & Company Limited; Liquidity Inc.; Whyte andMackay Group Limited; Whyte and Mackay Limited; Whyteand Mackay Warehousing Limited; Bruce & CompanyLimited; Charles Mackinlay & Company Limited; DalmoreDistillers Limited; Dalmore Whyte & Mackay Limited;Edinburgh Scotch Whisky Company Limited; Ewen &Company Limited; Fettercairn Distillery Limited; FindlaterScotch Whisky Limited; Glayva Liqueur Limited; GlentallaLimited; GPS Realisations Limited; Grey Rogers &Company Limited; Hay & MacLeod Limited; InvergordonDistillers (Holdings) Limited; Invergordon Gin Limited;Isle of Jura Distillery Company Limited; Jarvis Halliday& Company Limited; John E McPherson & Sons Limited;KI Trustees Limited; Kensington Distillers Limited; KyndalSpirits Limited;Leith Distillers Limited;Loch Glass DistillingCompany Limited; Longman Distillers Limited; Lycidas(437) Limited; Pentland Bonding Company Limited;Ronald Morrison & Company Limited; St. Vincent Street(437) Limited; Tamnavulin-Glenlivet Distillery CompanyLimited; TDL Realisations Limited; The InvergordonDistillers Group Limited;The Invergordon Distillers Limited;The Sheep Dip Whisky Company Limited; W & S StrongLimited; Watson & Middleton Limited; Wauchope Moodie& Company Limited;Whyte and Mackay de Venezuela CA;

Whyte & Mackay Distillers Limited; Whyte and MackayHoldings Limited; Whyte and Mackay Property Limited;William Muir Limited and WMB Realisations Limited;

Consequent to the dissolution without winding up of ShawWallace Financial Services Limited upon its amalgamationwith Shaw Wallace Breweries Limited, in terms of theOrders of the Hon’ble High Courts of Calcutta and Bombay,Shaw Wallace Financial Services Limited ceased to be asubsidiary of your Company in the current year.

In terms of the approval received from the Governmentof India pursuant to Section 212(8) of the CompaniesAct, 1956, the Balance Sheet, Profit & Loss Account,Directors’ Report, Auditors’ Report and other particularsof the subsidiary companies as on March 31, 2007 havenot been attached with the accounts of the Company. Thedocuments/details will be made available to any Memberof the Company upon request to the Company.The annualaccounts of the subsidiary Companies as on March 31,2007 will also be kept for inspection by any member atthe Registered Office of the Company and that of thesubsidiary Companies concerned.

The Accounting year of McDowell Nepal Limited (MNL)(which has been converted into a Private Limited Companyand renamed as United Spirits Nepal Private Limited, inthe current year), your Company’s Subsidiary in Nepalis from mid-July to mid-July every year. Accordingly,Accounting year of 2005-06 of MNL ended on July 16,2006 and the Accounting Year 2006-07 ended on July 16,2007, i.e., after the end of the close of the financial yearof your Company which ended on March 31, 2007. Forthe purpose of compliance under Accounting Standard– 21, relating to “Consolidated Financial Statement,” theAccounts of MNL has been drawn up to March 31, 2007.

For the purpose of compliance under Accounting Standard21-“Consolidated Financial Statement” presented bythe Company includes the financial information of itssubsidiaries.

DEPOSITORY SYSTEM

The trading in the equity shares of your Company is undercompulsory dematerialisation mode. As of date, equityshares representing 94.01% of the equity share capitalare in dematerialised form. As the depository systemoffers numerous advantages, members are requestedto take advantage of the same and avail of the facility ofdematerialisation of the Company’s shares.

3

DIRECTORS

Mr. P K Kakodkar resigned from the Board with effectfrom June 01, 2007. Your Directors place on recordtheir appreciation of the valuable services rendered byMr. P K Kakodkar during his tenure as a Director of yourCompany.

Mr.SudhindarKrishanKhannawasappointedasAdditionalDirector on June 01, 2007 and will hold office in terms ofSection 260 of the Companies Act, 1956 up to the date ofthe ensuing Annual General Meeting.

A Notice in writing has been received by your Companyfrom a member signifying his intention to propose theappointment of Mr. Sudhindar Krishan Khanna as Directorat the Annual General Meeting.

Dr. Vijay Mallya and Mr. S R Gupte retire by rotation andbeing eligible, offer themselves for re-appointment.

AUDITORS

M/s. Price Waterhouse, your Company’s Auditors, areeligible for re-appointment at the Annual General Meetingand it is necessary to fix their remuneration.

TAX AUDITORS

Your Directors have appointed M/s.Lodha & Co., CharteredAccountants as the Tax Auditors of the Company to carryout the tax audit of the Company for the year ended March31, 2007.

LISTING OF SHARES OF THE COMPANY

The equity shares of your Company are listed on BangaloreStock Exchange Limited (Regional Exchange), BombayStock Exchange Limited, National Stock Exchange ofIndia Limited, Madras Stock Exchange Limited, The DelhiStock Exchange Association Limited, The Calcutta StockExchange Association Limited and Ahmedabad StockExchange Limited. The listing fees for the year 2007-08have been paid to all these Stock Exchanges.

During the year under review, 34,010,521 Equity sharesof Rs.10/- each issued and allotted to the shareholdersof the Transferor companies, in terms of the CompositeScheme of Arrangement sanctioned by the HonourableHigh courts of Karnataka and Bombay, have been listedon the stock exchanges where the existing equity sharesof the Company are presently listed. Your Company hasdistributed the net sale proceeds of fractional shares tothe eligible shareholders in proportion to their respectivefractional entitlements.

Further, Your Directors have allotted during the currentyear 4,484,397 Equity shares upon conversion of Bonds interms of the Offering circular for issue of US$100,000,0002.00 per cent Convertible Bonds due 2011 (Bonds). Outof these equity shares allotted 3,862,039 have been listedon the Bombay Stock Exchange Limited (BSE) and theNational Stock Exchange of India Limited (NSE). Similarapprovals from other Stock Exchanges concerned are atdifferent stages.

As the equity shares of the Company are mainly tradedon Bombay Stock Exchange Limited (BSE) and TheNational Stock Exchange of India Limited (NSE), theBoard of Directors have decided to voluntarily de-list theequity shares of the Company from the Stock Exchangessituated at Ahmedabad, Chennai, Kolkata and New Delhisubject to the approval of the shareholders at the ensuingAnnual General Meeting, in order to entail savings inrecurring Annual Listing Fees and other administrativecosts. The equity shares would continue to be listed onBSE, NSE and Bangalore Stock Exchange Limited (theregional stock exchange).

ISSUE OF GLOBAL DEPOSITARY SHARES

Your Company had issued 17,502,762 Global DepositaryShares (GDSs) representing 8,751,381 Equity Sharesranking pari-passu in all respects with the existing paidup equity shares, 2 GDSs representing 1 equity shareof par value of Rs.10/- each at US$7.4274 per GDSaggregating to US$ 130 mn.These GDSs are listed on theLuxembourg Stock Exchange.

As on date, there is an outstanding of 235,004 GDSsrepresenting 117,502 equity shares.

ISSUE OF FOREIGN CURRENCYCONVERTIBLE BONDS

Your Company had issued US$ 100,000,000 2%Convertible Bonds Due 2011 (Bonds) convertible intoequity shares or GDSs (2 GDSs representing 1 equityshare).These Bonds are listed on the Singapore ExchangeSecurities Trading Limited (SGX).

In terms of the Offering Circular dated March 24, 2006, yourCompany has allotted during the current year 4,484,397equity shares on conversion of 78,960 Bonds. As on datethere are 21,040 Bonds outstanding to be converted intoequity shares or GDSs.


4

ANNUAL GENERAL MEETINGThe Company has obtained from The Registrar ofCompanies, Karnataka, Bangalore extension of time forholding the Annual General Meeting for the financial yearended March 31, 2007 upto November 30, 2007.

CORPORATE GOVERNANCEA report on the Corporate Governance is annexedseparately as part of this Report along with a certificateof compliance from a Company Secretary in practice.Necessary requirements of obtaining certifications/declarations in terms of Clause 49 have been compliedwith.

MANAGEMENT DISCUSSION AND ANALYSISPursuant to Clause 49 of the Listing Agreement with theStock Exchanges, Management Discussion and AnalysisReport is annexed and forms an integral part of the AnnualReport.

FIXED DEPOSITSFixed Deposits from the public and shareholders, stoodat Rs. 668.010 Million as at March 31, 2007. Matureddeposits for which disposal instructions had not beenreceived from concerned depositors stood at Rs. 14.069Million as at March 31, 2007. Of this, a sum of Rs. 2.397Million has since been paid as per instructions receivedafter the year-end.

TRANSFER TO INVESTOR EDUCATION ANDPROTECTION FUND

Pursuant to the provisions of Section 205A(5) and 205Cof the Companies Act, 1956, the Unclaimed Dividend,Debentures and Deposits, remaining unclaimed andunpaid for more than 7 years, have been transferred tothe Investor Education and Protection Fund.

HUMAN RESOURCESEmployee relations remained cordial at all Company’slocations.

The Voluntary Retirement Scheme introduced for thepermanent employees of the Company received moderateresponse.

During the year under review, your Company introduced anew Flexi Compensation Package to replace the existingpackage and also introduced a Long Term IncentiveScheme for select senior executives.

Particulars of employees drawing an aggregateremuneration of Rs.2,400,000 or above per annum orRs.200,000 or above per month, as required under Section217(2A) of the Companies Act, 1956 are annexed.

EMPLOYEE STOCK OPTION SCHEMEThe Company has not offered any stock option to theEmployees during the year 2006- 2007 either under theMcD ESOP Scheme or McD- Employee Stock OptionScheme – 2002.

CONSERVATION OF ENERGY & TECHNOLOGYABSORPTION, ETC.

In accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956, read with Companies(Disclosure of Particulars in the Report of the Board ofDirectors), Rules, 1998 the required information relatingto Conservation of Energy, Technology Absorption andForeign Exchange earnings and outgo is annexed.

DIRECTORS’ RESPONSIBILITY STATEMENTPursuant to Section 217 (2AA) of the Companies Act,1956, in relation to financial statements for the year 2006-07, the Board of Directors reports that:

• in the preparation of the annual accounts, theapplicable accounting standards have been followedalong with proper explanation relating to materialdepartures;

• accounting policies have been selected and appliedconsistently and that the judgements and estimatesmade are reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company asat the end of the financial year and of the profit of theCompany for the year ended March 31, 2007;

• proper and sufficient care have been taken for themaintenance of adequate accounting records inaccordance with the provisions of the Companies Act,1956, for safeguarding the assets of the Companyand for preventing and detecting fraud and otherirregularities;

• the annual accounts have been prepared on a goingconcern basis.

THANK YOUYour Directors place on record their sincere appreciationfor the continued support from shareholders, customers,suppliers, banks and financial institutions and otherbusiness associates. A particular note of thanks to allemployees of your Company, without whose contribution,your Company could not have achieved the year’sperformance.

By Authority of the Board

Bangalore Dr. VIJAY MALLYAOctober 31, 2007 Chairman


5


ANNEXURE TO DIRECTORS’ REPORT

[Additional information given pursuant to requirement of Section 217(1)(e) of the Companies Act, 1956]

CONSERVATION OF ENERGYWith regard to energy conservation and cost reduction, the steps taken by your Company were as follows:

• Upgradation of anaerobic digester for increased methane gas generation and utilization in boiler to conservefuel.

• Commissioning of Steam Turbines to produce electricity at new locations and upgrading existing ones forincreased electricity generation.

• Upgradation of composting system to ensure full utilization of multi-pressure distillation plant resulting insubstantial saving in steam consumption.

• Replacement of existing Furnace Oil Fired Boilers with alternate bio-fuel (Husk, Bagasse) fired to reduce fuelcost.

• Reduction in steam consumption in distillation process by optimizing the operating parameters viz., refluxratios.

RESEARCH & DEVELOPMENT (R&D)As an ongoing process the Company carries out research in its State-of-the-art in-house Research and DevelopmentCentre for development of new-age products, new innovative packaging materials and analytical method for qualitymanagement.

Expenditure on R & D: (in Rs. in Million)(a) Capital - 0.013(b) Recurring - 8.004(c) Total - 8.017(d) Total R & D expenditure as a percentage of total turnover–0.02%

TECHNOLOGY ABSORPTIONTechnology imported during the last 5 years: Nil

During the year, even though the Company has not imported any technology, your Company has been the first in offeringalcohol beverage in Tetra packs in India.The machinery and technology related to packaging of alcohol beverage in Tetrapacks is sourced from Tetra Pack India Limited, which is a subsidiary of Tetra Pack, Sweden.

FOREIGN EXCHANGE EARNINGS/OUTGO(Rupees in Millions)

2006-07 2005-06

1 Exports & Foreign Exchange earnings Nil 109.370

2 Imports/Expenditure in Foreign Currency 686.397 726.241

BangaloreOctober 31, 2007


Dr. VIJAY MALLYAChairman

6

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STATEMENT OF PARTICULARS OF EMPLOYEES AS REQUIRED UNDER SECTION 217(2A) OF THECOMPANIES ACT, 1956 AND COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975


1 Abhay Kewadkar * 47 Senior Vice President - Wines 1,597,848 B.TECH (CHEM) 25 23-Aug-06 Vice President & Wine Maker - GroverVineyards Ltd.

2 Alok Gupta 41 Executive Vice President -Marketing & Brand India

6,082,372 B.COM, PGDM 19 21-Feb-95 Deputy General Manager - ShawWallace & Company Ltd.

3 Anant Iyer 48 Divisional Vice President -Institutional & Trade Marketing

3,767,448 M.SC., MMS 23 15-Jun-92 Controller Marketing, ConsolidatedDistilleries Ltd.

4 Anil Kumar Kush 51 Chief Executive - Vittal MallyaScientific Research Foundation

5,868,316 Ph.D, MBA 23 13-May-05 Scientific Director - GenesisManagement Consultants

5 Arun Bopaiah 56 Divisional Vice President -Manufacturing

2,547,930 B.SC, LLB 26 27-Oct-93 Manager - Personnel & Admin,Karnataka Jewels Ltd.

6 Arvind Jain 45 Divisional Vice President - Sales 2,803,312 PGDM 23 12-Apr-91 Area Manager-Titan Watches Ltd.

7 Ashok Capoor 54 Chief Operating Officer - RegionalProfit Centre (West)

7,575,774 B.A. (ECO), MBA 32 12-May-92 Chief Operating Officer - ErstwhileHerbertsons Ltd.

8 Ashwin Malik 49 Chief Operating Officer - RegionalProfit Centre (North)

8,564,662 B.A. (ECO), MBA 27 1-Nov-88 VP Sales & Mktg, Carew Phipson Ltd.

9 C. Chandrashekar 52 Divisional Vice President -Materials

3,151,082 MBA 31 25-Apr-83 Buyer, Hindusthan Motors Ltd.

10 Debabratha Banerjee 48 Senior Vice President -Sales, UB Global

3,861,189 PGDBM 26 1-Nov-96 Chief Operating Officer - ErstwhileHerbertsons Ltd.

11 Debashish Shyam 39 Assistant Vice President -Marketing

2,702,086 B.SC., PGDBM 16 20-Sep-04 Head - Marketing & Alliances (InternetServices), Bharti Infotel Ltd, New Delhi

12 Debashis Das 50 Divisional Vice President-Manufacturing (S)

2,640,747 B.SC., B.Tech.,PGDBM

24 20-Aug-84 Chemist - Eastern Distilleries Pvt. Ltd.

13 Dharmarajan S. 49 Divisional Vice President -Finance & Accounts

2,938,979 B.COM, ACA,LLB

23 7-Nov-86 Consultant, N M Raiji & Co, Mumbai

14 Dr. Binod K Maitin 58 Senior Vice President - QualityAssurance & Technical

3,882,641 M.SC., PH.D., 36 14-Dec-88 Sr. Research Officer & Head, AnalyticalResearch Group, Shriram InstituteFor Ind. Research

15 Dr. Subratha Bhattacharaya 68 Divisional Vice President -Research and Development

4,909,704 M.SC, P.hD 36 1-Apr-05 Vice President - Research andevelopment, Erstwhite Shaw WallaceDistilleries Ltd.

16 Gerald G D'Souza 58 Senior Vice President - HR 4,448,169 MA, PERS 33 16-Aug-90 Manager Pers & MP Devpt - Pfizer

17 Harisha Bhat A. 53 Executive Vice President -Corporate Finance

7,562,527 CA 29 22-Nov-90 Manager Treasury - DigitalEquipment (I) Ltd.

18 I.P. Suresh Menon 50 Senior Vice President - Planning& Control

4,598,145 BA (HONS),MMS

29 1-Apr-85 Secretary & Finance Manager , UBElectronic Instruments Ltd.

19 Kaushik Chatterjee* 47 Chief Operating Officer - RegionalProfit Centre (East)

2,691,507 B.COM 23 27-Apr-06 Chief Executive Officer-Indian Operations,Mason and Summers Alcobev Pvt Ltd.

20 Laxmi Narasimhan 38 Divisional Vice President - Sales 2,645,119 B.E, PGDM 13 8-Dec-03 Regional Manager, Coca Cola India

21 Mongia S. K. 66 Divisional Vice President -Business Promotion

2,887,595 M.SC, DEF SC. 49 2-Aug-93 Commodore-Indian Navy

22 Mathew Xavier 43 Divisional Vice President -Marketing & Innovations

5,185,148 B COM, PGDM 18 1-Apr-05 Vice President - Marketing, ErstwhileShaw Wallace Distilleries Ltd.

23 N R Rajsekher 51 Chief Operating Officer - RegionalProfit Centre (AP)

6,873,693 B.SC 28 8-Apr-82 VP - Sales, Erstwhile Shaw WalllaceDistilleries Ltd.

24 Navratan Dugar 64 Executive Vice President-Procurement Planning &Manufacturing

7,435,622 B.COM, M.COM,MBA, MCIM

38 1-May-01 Adviser - Balaji Group Companies.

25 P A Murali 49 Executive Vice President & ChiefFinancial Officer

7,574,174 B.COM, ACA 26 5-Jul-93 Executive Vice President - Finance andAccounts, United Breweries Ltd.

7

STATEMENT OF PARTICULARS OF EMPLOYEES AS REQUIRED UNDER SECTION 217(2A) OF THECOMPANIES ACT, 1956 AND COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975

* Employed part of the year

Notes:No employee is on contract employment. Other terms and conditions are as per service rules of the Company from time to time.None of the above mentioned employees is related to any Director of the Company.Remuneration as shown above includes salary, house rent allowance, Company’s contribution to PF and Superannuation Fund, value of residentialaccomodation, bonus, medical and other facilities.


Bangalore DR. VIJAY MALLYAOctober 31, 2007 Chairman


26 P. N. Poddar 54 Senior Vice President -Manufacturing

3,533,303 M.TECH, DMS 31 1-Jan-88 Production Manager, Union Carbide (I)Ltd.

27 Philip Sargunar A. B. 58 Chief Operating Officer - RegionalProfit Centre (South)

7,034,406 B.A., M.A. 37 20-Nov-02 Executive Director & Chief ReputationOfficer, The Empee Distilleries Ltd.

28 R Satsangi 50 Divisional Vice President -Regional Manufacturing Head (N)

2,802,277 B.TECH (MECH) 28 19-Feb-96 Plant Manager, Pepsico India Holding

29 R.N. Pillai 51 Divisional Vice President -Finance

3,101,925 CA 31 1-Mar-86 Accountant, Royal Oman Police

30 Raghunathan A. 55 Executive Vice President-Finance & Accounts

6,082,717 B.COM, ACA 32 24-Sep-79 Executive Vice President - Finance &Accounts, Erstwhile Herbertsons Limited

31 Ravi Nedungadi A.K. 50 President & Chief Financial officer- UB Group

21,540,007 B.COM (HONS),AICWA, ACA

28 1-Jan-90 Group Finance Director, UB InternationalLtd., U.K.

32 S.D. Lalla 64 Joint President - OverallOperations

11,790,901 LC & SE, AMIE(CIVIL)

45 5-Apr-94 Managing Director - ErstwhileHerbertsons Limited

33 S.K. Rastogi 55 Divisional Vice President - QualityControl

2,972,719 M.SC., 35 14-Nov-82 Quality Control Officer -Jagatjit Industries Ltd.

34 Sharma V. K. 64 Executive Director -Chairman's office

4,998,802 B.COM, MA, LLB 33 5-Oct-84 Executive Director - Chairman’s OfficeErstwhile Herbertsons Limited

35 Surendra Choudhary 53 Divisional Vice President - Finance 4,096,201 B COM, LLB,ACA

28 1-Apr-05 Vice President - Finance, ErstwhileShaw Wallace Distilleries Ltd.

36 S.C. Singhal 54 Divisional Vice President-Manufacturing (E)

2,715,958 B.SC., DIFAT 30 1-Sep-89 Assistant Manager - Works, Shri ShadilalEnterprises Ltd.

37 S.N. Prasad 49 Assistant Vice President - Finance 2,850,217 B.COM., ACA,ACS

23 7-Mar-91 Deputy Manager - Finance, UBHoppecke Energy Products Ltd.

38 S.R. Jayakumar* 51 General Manager - Finance 3,031,239* M.COM. 31 20-Jan-84 Deputy Manager - Finance, LVR Seeds& Minerals Pvt. Ltd.

39 T. K. Subramanian 56 Divisional Vice President -Systems

3,542,808 B.SC., DMS 36 16-Mar-83 Controller - Systems, UBICS Ltd.

40 T.V. Subramanian 52 Assistant Vice President -Business Development

2,778,351 M.COM, ICWA 29 16-June-86 Manager Branch Services - DeccanMarketing Limited

41 V. K. Rekhi 62 Managing Director 22,752,770 MA (Hons),PGDBA

36 3-Jan-72 Regional Director, UB International Ltd.,U.K.

42 V. S. Venkataraman 53 Company Secretary andSenior Vice President

4,169,797 B.COM (Hons.),ACS

35 20-Aug-82 Deputy Company Secretary, UnitedBreweries Ltd.

43 V. Murali 45 Senior General Manager -Distillery

3,252,401 ME (CHEM),DBA

21 4-Oct-90 Manager - Technical Service, AssociatedDrug Co P Ltd., Jagdale Group

44 Vijay Kumar Arora* 55 Director - Sales 2,400,102 B.A. (Hons) 36 1-Jan-03 Director Sales - Erstwhile TriumphDistillers & Vintners Pvt. Ltd.

45 Vivek Prakash 47 Senior Vice President -CSD Sales

3,455,508 B.COM, LLB 25 15-Jun-98 Dy General Manager - Shaw Wallace &Company Ltd.

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Corporate Governance Report

1. COMPANY’S PHILOSOPHY ON CODE OFCORPORATE GOVERNANCE

Your Company is committed to excellence incorporate governance practices and recognizes thatgood corporate governance is a continuous exercise.Your Company aims at achieving transparency,accountability, equity and ethics in all facets of itsoperations and in all interactions with its stakeholders.Your Company believes that all its operations andactions must result in enhancement of the overallshareholders value over a sustained period of timewithout compromising in any way compliance with thelaws and regulations.

2. BOARD OF DIRECTORS

The Board of Directors comprises a Non - Executive

Chairman, a Managing Director and five other NonExecutive Directors.

During the financial year under review, Ten BoardMeetings were held i.e., on April 28, 2006; July 6,2006; July 14, 2006; September 19, 2006; September28, 2006; October 30, 2006; November 6, 2006;December 28, 2006; January 23, 2007 and March 16,2007.

Attendance of each Director at the Board Meetingsand the last Annual General Meeting and detailsof number of outside Directorship and Committeeposition held by each of the Directors as on date aregiven below:

Name of Director Category of Directorship No. ofBoard

Meetingsattended

Attendanceat last AGM

held on28.12.2006

No. of otherCompanies

in whichDirector

No of committees(other than the

company) in whichChairman/ Member

Dr. Vijay Mallya Non Executive Chairman 8 Yes 21 1 (Chairman of 1)

Mr. S.R.Gupte Non Executive Vice Chairman 9 Yes 12 7 (Chairman of 4)

Mr. V.K.Rekhi Executive/Managing Director 7 Yes 2 Nil

Mr. M.R.Doraiswamy Iyengar Independent Non Executive Director 9 Yes 5 Nil

Mr. P.K.Kakodkar* Independent Non Executive Director 7 Yes 1 Nil

Mr. B.M.Labroo Independent Non Executive Director 9 Yes 8 Nil

Mr. Sreedhara Menon Independent Non Executive Director 3 Yes 1 Nil

Mr. Sudhindar Krishan Khanna** Non Executive Director N.A. N.A. Nil Nil

NOTE: The above details are in respect of their Directorship only in Indian Companies.

a) Out of 21 other Companies in which Dr. Vijay Mallya is a Director, 7 are Private Limited Companies and 3,Section 25 Companies.

b) Out of 12 other Companies in which Mr. S.R. Gupte is a Director, 2 are Private Limited Companies and 1Section 25 Company.

c) Out of 5 other Companies in which Mr. M.R. Doraiswamy Iyengar is a Director, 4 are Private LimitedCompanies.

d) Out of 8 other Companies in which Mr. B.M. Labroo is a Director, 4 are Private Limited Companies.

*e) Mr. P. K. Kokodkar resigned from the Board with effect from June 1, 2007.

**f) Mr. Sudhindar Krishan Khanna was appointed as Additional Director with effect from June 1, 2007.

9

DISCLOSURES REGARDING APPOINTMENT ANDREAPPOINTMENT OF DIRECTORS

Directors retiring by rotation and being reappointed

Dr. Vijay Mallya

Dr. Vijay Mallya (Dr.Mallya), aged 51 years, who holdsa Ph.D. in Business Administration, is a well-knownIndustrialist and a Member of the Parliament (Council ofStates). He took over the reins of the United BreweriesGroup in 1983 at the young age of 28, which today is amulti-national conglomerate. Dr. Mallya is the Chairmanof several public companies both in India as well asoverseas.

Dr. Mallya has won wide recognition from distinguishedinstitutions throughout the span of his career, whichincludes:

• The Fellowship Award 2003 – the Institute of Directors,New Delhi

• Global Leader for Tomorrow – World EconomicForum, Davos, Switzerland

• Sir M. Visvesvaraya Memorial Award instituted by theFederation of Karnataka Chambers of Commerce.

Details of Dr. Mallya’s directorships in other Indiancompanies and Committee Memberships are as under:-

Other Directorships Position held

1. Aventis Pharma Limited Chairman2. Bayer CropScience Limited Chairman3. Mangalore Chemicals &

Fertilizers Limited Chairman4. McDowell Holdings Limited Chairman5. Shaw Wallace & Company Limited Chairman6. United Breweries Limited Chairman7. United Breweries (Holdings) Limited Chairman8. Four Seasons Wines Limited Chairman9. Kingfisher Airlines Limited Chairman &

ManagingDirector

10. Shaw Wallace Breweries Limited Chairman11. United Racing and Bloodstock

Breeders Limited Chairman12. Kamsco Industries Private Limited Chairman

13. Mallya Private Limited Chairman14. Millennium Alcobev Private Limited Director15. Pharma Trading Company Private

Limited Chairman16. The Gem Investment & Trading

Co.Pvt.Ltd. Chairman17. United East Bengal Football Team

Pvt.Ltd. Chairman18. United Mohun Bagan Football Team

Pvt.Ltd Chairman19. Motorsports Association Managing

of India CommitteeMember

20. Royal Western India Turf ManagingClub Limited Committee

Member21. Shaw Wallace Executives’ Welfare Patron

and Benefit Company (Chairman)

Dr.Mallya is the Chairman of the Remuneration Committeeof Millennium Alcobev Pvt. Ltd.

Dr. Mallya holds 10 equity shares in the Company.

Mr. Subhash Raghunath Gupte

Mr.Subhash Raghunath Gupte (Mr.Gupte), aged 68 years,is a Chartered Accountant. Mr. Gupte has worked withCaltex India Limited for 5 ½ years in various capacities.Mr. Gupte has also worked with Air India for 24 years andtook over as Acting Chairman and Managing Director fromJuly 17, 1990. He was also Chairman of Hotel Corporationof India till November, 1991. Mr. Gupte has been with theUB Group for the last 15 years.

Mr.Gupte has varied experience in financial, administrationand personnel fields as he was heading these fields in AirIndia.

Details of Mr. Gupte’s directorships in other IndianCompanies and Committee Memberships are as under:

Other Directorship Position held

1. Associated Breweries & Distilleries Limited Director

2. Aventis Pharma Limited Director

3. Kingfisher Airlines Limited Director

4. Mangalore Chemicals & Fertilizers Limited Director

Corporate Governance Report (Contd.)

10

5. Millennium Beer Industries Limited Director

6. Shaw Wallace & Company Limited Director

7. Shaw Wallace Breweries Limited Director

8. UB Electronic Instruments Limited Chairman9. Federation of Indian Chambers of Executive

Commerce & Industry, New Delhi CommitteeMember

10. Shaw Wallace Executives’ Welfare & ManagementBenefit Company Committee

Member11. VJM Media Pvt. Limited Chairman12. United Helicharters Pvt. Limited Chairman

Mr. Gupte is a member of the following Committees:

Name of the Committee Position held

Audit Committee

Aventis Pharma Limited ChairmanMillennium Beer Industries Limited ChairmanMangalore Chemicals & Fertilizers Limited MemberShaw Wallace & Company Limited Member

Shareholders / Investors Grievance Committee

Aventis Pharma Limited ChairmanMillennium Beer Industries Limited ChairmanShaw Wallace & Company Limited Member

Mr. Gupte does not hold any share in the Company.

New Director

Mr. Sudhindar Krishan Khanna

Mr. Sudhindar Krishan Khanna (Mr. Khanna), aged 54,is a qualified Chartered Accountant. He ranked 3rd in theUK in the Intermediate Examination of the Institute ofChartered Accountants in England & Wales and 1st in theFinals with the prize of the best paper in Law. Mr. Khannajoined Accenture, London as a Senior Consultant in theyear 1977 and promoted to Partner in 1986.

Mr. Khanna possesses a very large range of experience inadvising clients in strategy, reengineering and technologyacross a range of industries at the Chairman/CEO level inapproximately 20 countries. Mr. Khanna was responsiblefor setting up all of Accenture business in India which

today is approximately 40,000 people, and is the largestgeography for Accenture. He recently retired fromAccenture after 30 years – his last position being GlobalManaging Partner Outsourcing, based in London.

Mr. Khanna also speaks at a variety of global conferencesand interacts with the media globally. Mr. Khanna is aCharter Member of TIE which is a Global TechnologyNetworking/ Mentoring Organization. He is also on theBoard of IBPN (Indo British Partnership) and on theBoard of the India Advisory Group, which advise the UKand Indian Government on strengthening India – Britisheconomic ties.

Mr. Khanna was appointed as additional Director of theCompany on June 01, 2007 and will hold office as Directorup to this Annual General Meeting.

Mr. Khanna does not hold any share in the Company.

3. AUDIT COMMITTEE

The Audit Committee constituted on April 19, 2001to meet the requirements under both the ListingAgreement and Section 292A of the Companies Act,1956, comprises at present the following Directors:

Mr. M.R. Doraiswamy Iyengar(Chairman)

Non ExecutiveIndependentDirector

Mr. B.M. Labroo Non ExecutiveIndependentDirector

Mr. S.R. Gupte Non ExecutiveDirector

Mr. P. K. Kakodkar ceased to a member of the AuditCommittee with effect from June 1, 2007 consequentto his resignation from the Board of Directors of theCompany.

The terms of reference of the Audit Committee coversall matters specified under the Listing Agreementas well as the provisions of Section 292A of theCompanies Act, 1956 and inter alia, includes thefollowing:

a) Oversight of the Company’s financial reportingprocess and the disclosure of its financialinformation to ensure that the financial statementis correct, sufficient and credible.


11

b) Recommending the appointment and removalof external auditor, fixation of audit fee and alsoapproval for payment for any other services.

c) Reviewing with management the annual financialstatements before submission to the Board,focusing primarily on:

• Any changes in accounting policies andpractices

• Major accounting entries based on exerciseof judgment by management

• Qualifications in draft audit report

• Significant adjustments arising out of audit

• Compliance with Stock Exchange andlegal requirements concerning financialstatements

• Disclosure of any related party transactions .

d) Reviewing with the management, external andinternal auditors, the adequacy of internal controlsystems.

e) Reviewing the adequacy of internal audit functionincluding the structure of the internal auditdepartment, staffing and seniority of the officialheading the department, reporting structurecoverage and frequency of internal audit.

f) Discussion with internal auditors any significantfindings and follow up thereon.

g) Reviewing the findings of any internalinvestigations by the internal auditors into matterswhere there is suspected fraud or irregularity ora failure of internal control systems of a materialnature and reporting the matter to the Board.

h) Discussion with statutory auditors before the auditcommences nature and scope of audit as well ashave post-audit discussions to ascertain any areaof concern.

i) To look into the reasons for substantial defaults inthe payment to the depositors, debenture holders,shareholders (in case of non payment of declareddividends) and creditors.

The Committee, inter alia, has reviewed the financialstatements including Auditors’ Report for the yearended March 31, 2007 and has recommended itsadoption. In addition, the Committee has also reviewedquarterly results for June 30, 2006, quarterly andhalf yearly results for September 30, 2006, quarterlyresults for December 31, 2006 and quarterly resultsfor March 31, 2007, which were subjected to a LimitedReview by the Statutory Auditors of the Company.

During the financial year, five meetings were held oni.e., April 28, 2006, July 14, 2006, October 30, 2006,November 6, 2006 and January 23, 2007. The detailsof attendance by members of the Committee are asbelow:

Name of the Director No. ofMeetings

Meetingsattended

Mr. M.R. DoraiswamyIyengar (Chairman)

5 5

Mr. S.R. Gupte 5 4Mr. B.M. Labroo 5 5Mr. P.K. Kakodkar 5 5

4. COMPENSATION COMMITTEE

The Compensation Committee constituted bythe Company comprises at present the followingDirectors:-

Mr. B.M. Labroo ChairmanMr. S.R. GupteMr.M.R.Doraiswamy Iyengar

Mr. P. K. Kakodkar ceased to be a member of theCompensation Committee with effect from June 1,2007 consequent to his resignation from the Board ofDirectors of the Company.

The Committee is authorised, inter alia to deal withthe matters related to compensation by way of salary,perquisites, benefits etc. to the Managing/WholeTime Directors of the Company, and set guidelinesfor salary, performance pay and perquisites to othersenior employees from the level of Executive VicePresident and above.

The Committee is also empowered to formulate andimplement the Scheme for grant of Stock Option toemployees.


12

During the financial year, one meeting was held onOctober 30, 2006 which was attended by all themembers of the Committee.

Remuneration of Directors:

The details of Remuneration paid/payable to theDirectors during the Financial Year April 1, 2006 toMarch 31, 2007 are given below:

a) Executive Directors

Managing Director: Mr. V.K.Rekhi

Salary &Allowances

PerformanceLinked incentive

Perquisites RetirementBenefits

Rs. 1,17,43,656 Rs. 53,85,085 Rs. 26,37,316 Rs. 29,86,713

Notes:

1. Mr. V.K.Rekhi (Mr. Rekhi) was appointed asthe Managing Director of the Company for aperiod of five years with effect from April 19,2001. The reappointment for a further periodof five years with effect from April 19, 2006and the remuneration payable have beenapproved by the Members at the AnnualGeneral Meeting held on December 28, 2006.The terms and conditions of appointment andremuneration of Mr. Rekhi are as set out inthe resolution and as per the rules of theCompany as applicable.

2. The employment of Mr. Rekhi is terminableby giving six months notice on either side asper the rules of the Company.

3. There is no severance fee.

4. No stock option was granted during the year.

b) Non – Executive Directors

Sitting Fees are paid to Non-Executive Directorsfor attending Board/ Committee Meetings. Theyare also entitled to reimbursement of actual travelexpenses, boarding and lodging, conveyance andincidental expenses incurred for attending suchmeetings.

Name of the Director Sitting feesDr Vijay Mallya NilMr. S.R. Gupte 2,30,000Mr. V.K.Rekhi NilMr. M.R.Doraiswamy Iyengar 2,65,000Mr. P.K. Kakodkar* 1,90,000Mr. B.M. Labroo 1,65,000Mr. Sreedhara Menon NilMr. Sudhindar Krishan Khanna** NA

* Resigned on June 1, 2007** Appointed as an Additional Director with effect

from June 1, 2007.

Non Executive Directors are also eligible forCommission on Profits as approved by theshareholders at the Annual General Meeting heldon September 23, 2005 to remain in force fora period of five years from April 1, 2006. SuchCommission may be apportioned amongst theDirectors in any manner they deem fit.

The commission of Rs. 3,69,91,460 on profitsfor the year ended March 31, 2007 will be paidafter adoption of Accounts by Shareholders at theAnnual General Meeting to be held on November28, 2007 and apportioned amongst the Directorsin any manner they deem fit.

c) Particulars of Equity Shares of the Companycurrently held by the Directors, are furnishedbelow:

Name of the Director No. of Shares heldDr Vijay Mallya 10Mr. S.R. Gupte NilMr. V.K.Rekhi* 6100Mr. M.R.Doraiswamy Iyengar 21Mr. P.K. Kakodkar ** NilMr. B.M. Labroo*** 1,16,200Mr. Sreedhara Menon NilMr. S. K. Khanna **** Nil

* held jointly** resigned on June 1, 2007*** held singly and jointly**** appointed as an Additional Director with effect

from June 1, 2007.


13

5. SHAREHOLDERS / INVESTORS GRIEVANCECOMMITTEE

A Shareholders/Investors Grievance Committee wasconstituted on April 19, 2001, to operate in terms of theprovisions related thereto in the Listing Agreementswith the Stock Exchanges and /or the provisions asprescribed or as may be prescribed in this regard bythe Companies Act, 1956.

The Committee comprises at present the followingDirectors:

Mr. M.R. Doraiswamy Iyengar, Chairman

Mr. B.M. Labroo

Mr. V.S. Venkataraman, Company Secretary is theCompliance Officer.

Mr. P. K. Kokadkar ceased to be the Chairman &member of the Shareholders/Investors’ GrievanceCommittee consequent upon his resignation fromthe Board of Directors of the Company with effectfrom June 1, 2007. Mr. M. R. Doraiswamy Iyengarwas appointed as Chairman and Member of theCommittee with effect from June 1, 2007.

During the financial year four meetings were held onApril 28, 2006, July 14, 2006, October 30, 2006 andJanuary 23, 2007 which were attended by both Mr. P.K. Kakodkar and Mr. B. M. Labroo, members of theCommittee.

The Company/ Company’s Registrars received 350complaints during the financial year, all of whichwere resolved to the satisfaction of shareholders/investors.

The company had 4 requests for transfer of 439shares pending at the close of the financial year,owing to signature difference and these have beenregistered subsequently within the stipulated time.

The Company also has a Committee of Directorswith authority delegated by the Board of Directors,inter alia, to approve transfer and transmission ofshares, issue of new share certificates on account ofcertificates lost, defaced, etc., and for other routineoperations such as issue of powers of attorney,operation of bank accounts etc.

The Committee comprises at present the followingDirectors:

Mr. S.R. Gupte

Mr. M.R.Doraiswamy Iyengar and

Mr. V.K.Rekhi

Mr. P.K. Kakodkar ceased to be member of theCommittee with effect from June 1, 2007.

The Company has a Committee of Directors consistingof the following Directors of the Board in connectionwith the issue of Global Depository Shares (GDS)/Foreign Currency Convertible Bonds (FCCB), whichhas been delegated, inter alia, power to issue andallot shares on conversion of FCCB into fully paidequity shares of the Company or GDS, in terms ofthe Offering Circular dated March 24, 2006:

Mr. S.R.Gupte,

Mr. V.K. Rekhi,

Mr. M.R. Doraiswamy Iyengar and

Mr. B.M. Labroo

6. GENERAL BODY MEETINGS

The details of the last three Annual General Meetingsheld are furnished as under:

FinancialYear ended

Date Time Venue

March 31,2004

September29, 2004

11.00a.m.

Dr. B.R. AmbedkarBhavana, Miller’sRoad, Vasanthanagar,Bangalore 560 052

March 31,2005

September23, 2005

12.15p.m.


March 31,2006

December,28, 2006

11.00a.m.


All the resolutions set out in the Notices, includingSpecial Resolutions were passed by theShareholders.


14

POSTAL BALLOT

The Company has not passed any resolution at theabove Annual General Meetings held, which wasrequired to be passed through postal ballot as per theprovisions of the Companies Act, 1956 (the Act) andthe rules framed thereunder.

During the financial year 2005-06, pursuant to Section192A of the Companies Act, 1956, the Companyhad conducted the postal ballot exercise followingthe provisions and rules framed under the Act forconducting Postal Ballot.

The details/results of the postal ballot exercise soconducted are as under:

Date ofNotice

of PostalBallot

Date ofscrutinizer’s

reportDescription Result

October26, 2005

December13, 2005

Special Resolutionunder Section 17 of theCompanies Act, 1956,to amend Clause III(B)of the Objects Clauseof the Memorandumof Association ofCompany by insertinga new clause

Carried withr e q u i s i t emajority.No. of votescast in favour2 7 , 0 7 0 , 3 6 9and no.of votescast against20,885

The postal ballot exercise, was conducted by Mr.M R Gopinath, a Company Secretary in practice,scrutinizer appointed for the purpose and his reportswere filed with the Office of Registrar of Companies,Karnataka, Bangalore.

At this meeting also there is no Ordinary or SpecialResolution requiring passing by way of Postal Ballot.

7. DISCLOSURES

During the financial year ended March 31, 2007,there were no materially significant related partytransactions with its promoters, the Directors or themanagement, their subsidiaries or relatives, etc. thatmay have potential conflict with the interests of theCompany at large.Details of related party transactionsform part of Notes on Accounts.

The Company has complied with all the statutoryrequirements comprised in the Listing Agreements/Regulations/Guidelines/Rulesof theStockExchanges/SEBI/other statutory authorities.

There were no instances of non-compliance by theCompany nor have any penalties, strictures beenimposed by Stock Exchanges or SEBI or any otherstatutory authority since incorporation of the Companyon any matter related to capital markets.

8. MEANS OF COMMUNICATION

The unaudited quarterly and half-yearly results aresent to all the Stock Exchanges where the sharesof the Company are listed. The results are normallypublished in ‘The Asian Age’, Business Standard and‘Kannada Prabha’. The results are displayed on theCompany’s Website www.unitedspirits.in.

The results are also posted in the websitewww.sebiedifar.nic.in of the Securities and ExchangeBoard of India.

9. MANAGEMENT DISCUSSION AND ANALYSISREPORT

Management Discussion & Analysis Report formspart of this Annual Report.

10. GENERAL SHAREHOLDER INFORMATION

a) AGM Date, Time and Venue Wednesday, November 28, 2007 at 3.30 p.m. atGood Shepherd Auditorium,Opp. St.Joseph’s Pre-University College,Residency Road, Bangalore-560 025.

b) Financial Year April 1 to March 31First Quarterly Results By July 31Second Quarterly Results By October 31Third Quarterly Results By January 31Fourth Quarterly Results By April 30


15

c) Date of Books closure Thursday, November 22, 2007 to Wednesday, November 28, 2007(both days inclusive)

d) Dividend payment date After November 28, 2007e) Listing on Stock Exchanges: The shares of the Company are listed on the following Stock Exchanges:

1. Bangalore Stock Exchange Limited (BgSE)2. Bombay Stock Exchange Limited, (BSE)3. National Stock Exchange of India Limited (NSE)4. Madras Stock Exchange Limited (MSE)5. The Delhi Stock Exchange Association Ltd. (DSE)6. The Calcutta Stock Exchange Association Ltd. (CSE)7. Ahmedabad Stock Exchange Limited (ASE)

The listing fees for the years 2006–07 and 2007-08 have been paid to all the Stock Exchanges.

As the equity shares of the Company are mainly traded on Bombay Stock Exchange Limited (BSE) and The NationalStock Exchange of India Limited (NSE), the Board of Directors have decided to voluntarily de-list the equity sharesof the Company from the Stock Exchanges situated at Ahmedabad, Chennai, Delhi and Kolkata, subject to theapproval of the shareholders at the ensuing Annual General Meeting, in order to entail savings in recurring AnnualListing Fees and other administrative costs. The equity shares would continue to be listed on BSE, NSE andBangalore Stock Exchange Limited (the regional stock exchange).

f) Stock Code

BSE Demat 532432 Physical 32432

NSE SYMBOL-McDOWELL-N

DSE 13044

ASE 36311

MSE McDowell

CSE 23926 & 10023926

BgSE McDowell

g) ISIN No. INE854D01016

h) Market price data (As per Annexure A)

i) Stock performance incomparison to BSE sensex

(As per Annexure B)

j) Registrar and Transfer Agents Alpha Systems Private LimitedRegistered Office:30, Ramana Residency, 4th Cross, Sampige Road, Malleswaram,Bangalore 560 003

k) Share Transfer System The power to consider and approve share transfers /transmission /transposition / consolidation/ subdivision etc has been delegated to aCommittee of Directors as indicated under the heading Shareholders/Investors Grievance Committee. The Committee meets generally oncein a fortnight. The requirements under the Listing Agreement / Statutoryregulations in this regard are being followed.

l) Distribution of Shareholding As per Annexure C

m) Dematerialisation of shares 94.01% of paid up share capital is held in dematerialised form


16

n) Outstanding GDRs/ ADRs/Warrants or any otherConvertible instruments

378,904 Global Deposity Shares (GDSs) representing 189,452 EquityShares of Rs. 10/- each as on March 31, 2007 (2 GDSs representing oneequity share of Rs. 10/- each)

o) Plant Locations 1. Cherthala (Kerala)2. Hyderabad (Andhra Pradesh)3. Ponda (Goa)4. Hathidah (Bihar)5. Kumbalgodu (Karnataka)6. Rosa (Uttar Pradesh)7. Udaipur (Rajasthan)8. Serampore (West Bengal)9. Bhopal - I (Madhya Pradesh)10. Bhopal - II (Madhya Pradesh)11. Asansol (West Bengal)12. Nasik-I (Maharashtra)13. Nasik-II (Maharashtra)14. Pondicherry (Pondicherry)15. Alwar (Rajasthan)16. Aurangabad (Maharashtra)17. Meerut (Uttar Pradesh)18. Hospet (Karnataka)19. Pathankot (Punjab)20. Palwal (Hariyana)21. Gopalpur - on - sea (Orissa)22. Palakkad (Kerala)23. Baddi (Himachal Pradesh)24. Badrakali (West Bengal)25. Baramati (Maharashtra)26. Zuari Nagar (Goa)

p) Address for correspondence Shareholder correspondence should be addressed to the Company’sRegistrars and Transfer Agents:Alpha Systems Private LimitedRegistered Office:30, Ramana Residency, 4th CrossSampige RoadMalleswaram, Bangalore 560 003Tel. Nos. (080) 2346 0815-818Fax No. (080) 2346 0819Investors may also write or contact Mr. V.S. Venkataraman, CompanySecretary or Mr. Maloy Kumar Gupta, Manager-Secretarial atthe Registered Office of the Company at No. 51, Richmond Road,Bangalore 560 025Tel. Nos. (080) 3051 0600Fax No. (080) 2227 2973In compliance with the provisions of Clause 47(f) of the ListingAgreement with the Stock Exchange, an exclusive email id, viz,[email protected] has been designated for registering complaintby the Investor, which has been displayed on the website of the Companywww.unitedspirits.in.


17

NON MANDATORY REQUIREMENTS

a) Chairman of the Board Dr. Vijay Mallya

Whether Chairman of the Board is entitledto maintain a Chairman’s Office at theCompany’s expenses and also allowedreimbursement of expenses incurred inperformance of his duties

The Company maintains the Chairman's Officeat Company's expenses and also reimburses theexpenses incurred in performance of his duties.

b) Remuneration Committee The Company has formed a CompensationCommittee.

c) Shareholders Rights:The half-yearly declaration of financialperformance including summary of thesignificant events in the last 6 months shouldbe sent to each household of shareholders.

The Company’s half-yearly results are published inEnglish and Kannada Newspapers. Hence the sameare not sent to the shareholders.

The Company has not adopted Whistle Blower Policy being non-mandatory.


18

ANNEXURE A : MARKET PRICE PERFORMANCE

Month High Low Close Volume Month High Low Close VolumeMar-07 870.00 663.00 827.60 1,404,386 Mar-07 870.00 662.25 832.20 5,350,839Feb-07 967.90 720.00 742.60 1,582,959 Feb-07 967.00 710.05 743.75 6,356,751Jan-07 924.00 777.00 909.80 3,185,440 Jan-07 924.20 793.05 911.45 7,998,952Dec-06 914.00 760.00 864.00 6,575,832 Dec-06 914.50 761.30 864.45 10,571,675Nov-06 895.00 741.05 810.35 8,150,785 Nov-06 895.50 732.75 811.75 20,883,467Oct-06 772.00 583.50 753.05 5,748,520 Oct-06 770.00 534.65 752.15 13,675,163Sep-06 727.45 566.05 618.50 5,984,443 Sep-06 728.30 565.00 619.75 13,246,777Aug-06 613.00 521.05 572.40 2,688,221 Aug-06 611.90 520.00 570.70 5,739,965Jul-06 552.70 400.00 529.80 3,682,654 Jul-06 553.45 401.00 529.40 8,109,665

Jun-06 553.00 362.00 426.75 2,628,714 Jun-06 555.95 363.20 424.20 5,459,295

May-06 812.70 507.35 520.30 2,309,123 May-06 812.00 508.15 520.00 5,232,791

Apr-06 894.70 707.00 793.75 6,640,899 Apr-06 896.70 706.00 794.70 15,599,235

United Spirits Limited - Monthly BSE United Spirits Limited - Monthly NSE

ANNEXURE B : UNITED SPIRITS LIMITED - STOCK PERFORMANCE COMPARED TO BSE INDEX

ValuewiseShareholding

of nominal value ofShareholders Share Capital

Rs. Number% toTotal

In Rs.% toTotal

(1) (2) (3) (4) (5)Upto - 5,000 72913 97.13 68,569,830 7.265,001 - 10,000 1168 1.56 8,960,490 0.95

10,001 - 20,000 478 0.64 6,923,450 0.73

20,001 - 30,000 150 0.20 3,825,260 0.4030,001 - 40,000 76 0.10 2,671,690 0.2840,001 - 50,000 57 0.08 2,699,480 0.2950,001 - 100,000 78 0.10 5,405,460 0.57

100,001 and above 150 0.20 845,763,640 89.52

Total 75070 100.00 944,819,300 100.00

ANNEXURE C : DISTRIBUTION OF SHARE HOLDINGS AS ON MARCH 31, 2007


Categorywise

Category No ofshares

%of Equity

Promoter Group 36,628,260 38.77

Resident Body Corporate 14,790,713 15.65

Banks/FI/FII/MF/Trust 29,871,341 31.62

NRI/OCB/FFI 3,587,805 3.80

G D S 189,452 0.20

Resident Individuals 9,414,359 9.96

Total 94,481,930 100.00

0

2000

4000

6000

8000

10000

12000

14000

16000

Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07

200.00

400.00

600.00

800.00

1,000.00

BSE USL

19

Certificate on Corporate Governance

The Members of,United Spirits Limited

We have examined the compliance of conditions of Corporate Governance by United Spirits Limited (formerly knownas McDowell & Company Limited), for the year ended on March 31, 2007, as stipulated in Clause 49 of the ListingAgreement, as amended with effect from December 31, 2005 of the said company with Stock Exchanges in India.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examinationwas limited to procedures and implementation thereof, adopted by the company for ensuring the compliance of theconditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements ofthe company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that thecompany has complied with the conditions of Corporate Governance as stipulated in the above mentioned ListingAgreement.

We state that in respect of investor grievances received during the year ended on March 31, 2007, no grievances arepending against the company as per records maintained by the company and presented to the Shareholders’/Investors’Grievance Committee.

We further state that such compliance is neither an assurance as to future viability of the company nor the efficiency ofeffectiveness with which the management has conducted the affairs of the company.

Bangalore M.R. GopinathOctober 31, 2007 Company Secretary

(in practice)

FCS 3812 CP 1030

20

CEO / CFO Certificate

In terms of the requirement of the amended Clause 49, the certificates from CEO / CFO have been obtained.

Bangalore On behalf of the Board of DirectorsOctober 31, 2007 V.K. Rekhi

Managing Director

Declaration Regarding affirmation of Code of Conduct

In terms of the requirement of the amended Clause 49 of the Listing Agreement, Code of Conduct as approvedby the Board of Directors of the Company on December 30, 2005 had been displayed at the Company’s websitewww.unitedspirits.in. All the members of the Board and the senior management personnel had affirmed compliance withthe Code for the year ended March 31, 2007.

Bangalore V.K. REKHIOctober 31, 2007 Managing Director

21

Annexure to Report of the Directors

A. INDUSTRY OVERVIEW:

The India Growth Story is one of a trillion dollareconomy growing @ about 9% p.a. Currently the4th largest economy in the world in terms ofPurchasing Power Parity (PPP), its economic growthrate is expected to continue, driven by boomingconsumer demand and investments in infrastructure.A young economy, India is entering the demographicwindow with over half the country’s population of1.1 billion under 25 years of age. This is in contrastto most developed nations which are faced withgreying populations and low or negative birth rates.The middle class is already in excess of 300 millionand rapid urbanization, changing life styles, higherdisposable income and shifts in expenditure patterns,particularly of the youth, are all contributing togrowing demand for all manner of products includingalcoholic beverages.

The alcoholic beverages industry in India comprises5 key segments, viz. Beer, Wine, Indian Made ForeignLiquor (IMFL), Bottled In Origin (BIO) AlcoholicProducts and Country Liquor. Your Company operatesprimarily in the IMFL space with clearly chalked outplans for the Wine and BIO sectors. In 2006-07, theIMFL industry grew over 16% to register sales ofover 157 million cases of 9 Bulk Litres (BL) each. Theindustry was particularly buoyant with the opening upof the key Northern markets of Punjab, Haryana andChandigarh. Changes in the alcohol policy in theseStates opened up the industry from one controlledby a few large syndicates to wide-spread ownership,thereby paving the way for reasonable prices and freeplay of market forces.

The country liquor segment is an unorganizedbusiness area and at best ‘guesstimates’ of themarket size alone are available. These ‘guesstimates’place the size of the industry at between 200 and225 million cases of 9 BL each. However, post theyear under review, Karnataka, a large and the onlyremaining bastion of country liquor in South India,decided to close down the country liquor marketeffective July 2007. This is expected to translate to aspurt in demand for IMFL, albeit at the bottom end ofthat market.

Despite an impressive 21% growth in WhiteSpirits led by a phenomenal 44% growth in theVodka segment, White Spirits, comprising Gins,

MANAGEMENT DISCUSSION & ANALYSIS REPORT

White Rums and Vodkas continue to remain a mere5% of the industry. In sharp contract to global trends,brown spirits continue to dominate the Indian IMFLspace – Whisky at 57%, Brandy at 16% and Rum at22% - together aggregating 95% of this 157 mn c/smarket.

For the very same reasons that are shaping theIndian growth story, the demand for alcoholicbeverages is expected to continue to be buoyantwith a large population base and a growing numberof new entrants into the legal drinking age category.The progressive prohibition of country liquor in manymarkets is only expected to further propel the growthof the IMFL industry.

B. REGULATORY ENVIRONMENT:

The Constitution of India has placed the regulationand taxation of the alcoholic beverages industrywithin the purview of the State Governments and notof the Federal Government. The Central Governmentcontinues to licence green-field manufacturingunits and impose customs duties on inputs. Everyother activity dealing with production, movement,distribution, sale and taxation are controlled by thestates. The multiplicity of regulation legislated bydifferent Governments and indeed by different arms ofthe same Government, make it a highly complex andchallenging regulatory environment which undergoeschanges virtually every year.

The dual control on the industry often creates aposition of falling between two stools with bothGovernments' unwillingness to give up their statedpositions due to the revenue implications of anydecision. Progressive legislations of the recent pastlike VAT often do not include the alcoholic beveragesindustry within their ambit; a similar case is that ofCENVAT credit not being available to the industrydespite the large contributions made by it towardsExcise Duty and other taxes.

C. BUSINESS ANALYSIS:

Though raw material (molasses) prices have comeoff their highs of the previous year, the averageprice during the year remained higher than average.However, there are signs of continuing softeningwhich will benefit operations of the current year.Counterbalancing this is the pressure of increaseddiversion of spirit towards ethanol spiking of fuel asmandated from time to time.

22

Annexure to Report of the Directors (Contd.)

Fuel prices during the year though have been steadyalthough with the rise in crude prices they have seena quantum upward shift vis-à-vis previous years.

When prices of the primary raw materials hadescalated, your Company had consciously decidedto de-emphasize both production and sale of the low-end brands whose profitability was under strain dueto the rise in input costs. In FY’07 too, this positioncontinued to be the guiding principle for the business,with the result that the business took a drop of 2.95million cases in sales of the low-end products. Despitethis, overall volumes rose by 6.99 million cases to alevel of 66.4 million cases.

The Company’s Key Premium Brands grew by 19%;deliberate de-emphasis of the low-end range however,pulled down the average growth to 12%.

D. MARKETING:

McDowell’s No.1 is arguably the largest umbrellabrand in the alcoholic beverages business. Offered inthe flavours of Whisky, Brandy, Rum and White Rum,the brand sold over 22 million cases during FY’07, a32% growth over the previous fiscal. Bagpiper Whiskycontinued to remain the world’s largest selling non-Scotch whisky - with a 25% growth, its volumes werenearly 14 million cases.

Continuous revamping of the key packaging elementsto make the brands trendy and contemporary has beenone of the main reasons why the Company’s productsare viewed as ‘best of breed’. During the fiscal year,new packaging innovations like substitution of theNip glass bottle by international class Tetra packpackaging caught the fancy of the customer in thestates of Maharashtra and Karnataka where thesewere introduced.

As part of the brand-building exercise, the Companycontinues to promote key music and sporting eventslike the sponsorship of international singing eventslike Shakira, Deep Purple, Iron Maiden, etc.

The brands are also continuing their association withupmarket sports like Golf.

E. RISKS & CONCERNS, OPPORTUNITIES & THREATS:

Favourable demographies, increasing prosperity anddisposable income coupled with attitudinal changestowards consumption indicate strong and sustaineddemand for many years ahead. The “feel good” factoramongyoung Indians translates intosteadyup-trading.The Company has witnessed double digits growth inthe 1st line range of products. This trend is expectedto continue. There is a clearly visible, though slowprocess of deregulation taking place and over timeit is expected that these will result in increased retailpenetration as also elimination of several infructuousregulations that add to the cost of doing business.

The Alcoholic Beverages industry is the favouritewhipping boy of the Governments, both Central &State, when they need to balance their budgets. Asa result, the industry suffers from the twin impact ofover-regulation and excessive taxation. Nearly 2/3of the price of a bottle of alcohol goes to the Stateand local Governments towards taxes and duties.The unreasonable levels of taxation show no signof abatement and continue to impede profitabilitydespite continuing growth in market demand.

The Govt. of India, in keeping with its commitment tothe WTO, has been consistently reducing the importtariff on Bottled in Origin (BIO) spirits. Post the endof the fiscal year, additional Customs Duty on BIOproducts was removed by the Central Government.The State Governments however, offer some measureof protection to the domestic industry through the levyof countervailing duties on BIO products. ServiceTax on the industry’s manufacturing arrangementscontinues to be a contentious issue. Legal opinionobtained by the Company indicates that the CentralGovt. would be outside its jurisdiction in attemptingto impose service tax on the ‘tie-up manufacturing’arrangements under which the products aremanufactured by contract manufacturers across thecountry.

It has been mentioned earlier in this report that theprices of Molasses / Rectified spirit / Extra NeutralAlcohol has seen a quantum jump from the levels ofthe previous years. This is despite a drop in 2005-06

23

from the ‘high’ of FY05. A process of dialogue withthe State Governments to enable movement of spiritfrom surplus states to deficit states as also throughselective imports and strategic stock build-up, helpedthe Company cushion the impact of the rise in inputcosts. In view of its considerably reinforced positionas the industry leader, the Company was able toforce price increases in the market place. Howeverthe duty structure and continuing reluctance on thepart of State monopolies to give price increases willcontinue to pose serious challenges to the industry.It is hoped that over time, buoyancy of tax collectionand consumer demand will lead to a less intrusiverole of Governments.

F. OUTLOOK:

In a market where over 50% of the volume is soldto Government agencies who administer the pricesof your Company’s products, price increases, evento cover normal inflation, are difficult to come about.This has a bearing on the Company’s profits. TheCompany has, through a judicious mix of strategyand cost control / cost cutting, been able to ensure arise in overall profitability.

G. INTERNAL CONTROL SYSTEM:

The company has a robust system of internal controlwhich has been incorporated in the enterprise-wideSAP system, which, post the end of the fiscal year,has been rolled out to the merging companies also.

Additional checks of the Company’s systems arecarried out by the independent auditors as also bythe Company’s own Operations Review team and bythe UB Group’s Internal Audit Department.

H. INTERNATIONAL OPERATIONS:

During the current year, the Company launchedits international operations with the acquisition ofM/s. Bouvet-Ladubay S.A., a 3.2 mn bottle wineryin the Saumur Valley in the Loire region of France.This Company is now a subsidiary of your Company.The Company’s products are well received in France,Germany and other European markets as also in theU.S. Plans are underway to expand the reach of itsproducts including into the Indian market in BIO form.The expertise of M/s. Bouvet-Ladubay is also beingobtained by the Company to set up a state-of-the-artwinery in Western India.

Subsequent to the close of the year, United SpiritsLimited acquired the entire capital of Whyte andMackay Limited, Glasgow, the 4th largest producer ofScotch in the World. The Indian consumer, for whomWhisky comprises the most popular and widespreadflavour, Scotch is seen as the most aspirationalproduct. As your Company pursues "up trading",increasing numbers of consumers demand Scotch.Increasing disposable income also makes thissegment more affordable. To cater to this emergingopportunity as also to have a perennial source ofScotch to use as blending material for the IMFLproducts, this acquisition is seen as a strategicallyvital one.

I. HUMAN RESOURCES:

The integration of 2 giant organizations whichtraditionally have had their daggers drawn in thefiercely competitive market-place was a mammothtask. To the credit of the Company, this has beenachieved successfully with very little turbulence. TheHR Department is geared to lend its support to theeffort to make the Company a ‘preferred employer ofchoice’ in the Indian market place.

The Company’s human capital now exceeds 7,000employees including factory workmen. There hasbeen no loss of production at any of the manufacturingfacilities due to industrial unrest.

J. FORWARD LOOKING STATEMENTS:

This Report contains forward-looking statementsthat involve risks and uncertainties. Your Companyundertakes no obligation to publicly update or reviseany forward-looking statements, whether as a resultof new information, future events, or otherwise. Actualresults, performances or achievements could differmaterially from those expressed or implied in suchforward-looking statements. Readers are cautionednot to place undue reliance on these forward-looking statements that speak only as of their dates.This Report should be read in conjunction with thefinancial statements included herein and the notesthereto.


Bangalore Dr. VIJAY MALLYAOctober 31, 2007 Chairman

Annexure to Report of the Directors (Contd.)

24

1. We have audited the attached Balance Sheet ofUnited Spirits Limited, as at March 31, 2007, andthe related Profit and Loss Account and Cash FlowStatement for the year ended on that date annexedthereto, which we have signed under referenceto this report. These financial statements are theresponsibility of the Company’s management. Ourresponsibility is to express an opinion on thesefinancial statements based on our audit.

2. We conducted our audit in accordance with theauditing standards generally accepted in India.Those Standards require that we plan and performthe audit to obtain reasonable assurance aboutwhether the financial statements are free of materialmisstatement. An audit includes examining, on atest basis, evidence supporting the amounts anddisclosures in the financial statements. An audit alsoincludes assessing the accounting principles usedand significant estimates made by management,as well as evaluating the overall financial statementpresentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report)Order, 2003, as amended by the Companies (Auditor’sReport) (Amendment) Order, 2004 (together the‘Order’), issued by the Central Government of Indiain terms of sub-section (4A) of Section 227 of ‘TheCompanies Act, 1956’ of India (the ‘Act’) and onthe basis of such checks of the books and recordsof the Company as we considered appropriate andaccording to the information and explanations givento us, we give in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the saidOrder.

4. Further to our comments in the Annexure referred toin paragraph 3 above, we report that:

4.1. We have obtained all the information andexplanations, which to the best of our knowledgeand belief, were necessary for the purpose ofour audit;

4.2. In our opinion, proper books of account asrequired by law have been kept by the Companyso far as appears from our examination of thosebooks;

Auditors' Report to the Members of United Spirits Limited

4.3. The Balance Sheet, Profit and Loss Account andCash Flow Statement dealt with by this reportare in agreement with the books of account;

4.4. In our opinion, the Balance Sheet, Profit andLoss Account and Cash Flow Statement dealtwith by this report comply with the accountingstandards referred to in sub-section (3C) ofSection 211 of the Act;

4.5. On the basis of written representations receivedfrom the directors, as on March 31, 2007, andtaken on record by the Board of Directors of theCompany, we report that none of the directorsis disqualified as on March 31, 2007 from beingappointed as a director in terms of clause (g) ofsub-section (1) of section 274 of the Act;

4.6. In our opinion and to the best of our informationand according to the explanations given to us,the said financial statements, together withthe notes thereon and attached thereto, give,in the prescribed manner, the informationrequired by the Act and give a true and fair viewin conformity with the accounting principlesgenerally accepted in India:

i) in the case of the Balance Sheet, of thestate of affairs of the Company as at March31, 2007;

ii) in the case of the Profit and Loss Account,of the profit for the year ended on that date;and

iii) in the case of the Cash Flow Statement, ofthe cash flows for the year ended on thatdate.

J. MajumdarPartner

Membership Number – F 51912For and on behalf of

Price WaterhouseChartered Accountants

Place: Bangalore

Date : October 31, 2007

25

Annexure to the Auditors' Report

Annexure to the Auditors’ Report referred to in paragraph 3 of our report of even date:

1. (a) The Company is maintaining proper recordsshowing full particulars including quantitativedetails and situation of fixed assets.

(b) The fixed assets are physically verified by themanagement according to a phased programmedesigned to cover all the items over a period ofthree years, which in our opinion is reasonablehaving regard to the size of the Company and thenature of its assets. Pursuant to the programme,a portion of the fixed assets has been physicallyverified by the management during the year andno material discrepancies between the bookrecords and the physical inventory have beennoticed.

(c) In our opinion and according to the informationand explanations given to us, a substantial partof fixed assets has not been disposed of by theCompany during the year.

2. (a) The inventory (except those in transit at the year-end amounting to Rs.37.504 Million) has beenphysically verified by the management during theyear. In our opinion, the frequency of verificationis reasonable.

(b) In our opinion, the procedures of physicalverification of inventory followed by themanagement are reasonable and adequate inrelation to the size of the Company and the natureof its business.

(c) In our opinion, and according to the informationand explanations given to us, the Company ismaintaining proper records of inventory. Thediscrepancies between the physical inventoryand the book records as noticed on physicalverification are not material and have beenproperly dealt with in the books of account.

3. (a) The Company has not granted any loans, securedor unsecured, to companies, firms or other partiescovered in the register maintained under Section301 of the Act and, accordingly, sub clauses (b),(c) and (d) of clause (iii) of Paragraph 4 of theOrder are not applicable.

(b) The Company has not taken any loans, securedor unsecured, from companies, firms or otherparties covered in the register maintained underSection 301 of the Act and accordingly subclauses (f) and (g) of clause (iii) of Paragraph 4 ofthe Order are not applicable.

4. In our opinion and according to the informationand explanations given to us, having regard to theexplanation that certain items purchased are of specialnature for which suitable alternative sources do notexist for obtaining comparative quotations, there isan adequate internal control system commensuratewith the size of the Company and the nature of itsbusiness for the purchase of inventory, fixed assetsand for the sale of goods and services. Further, onthe basis of our examination of the books and recordsof the Company, and according to the informationand explanations given to us, we have neither comeacross nor have been informed of any continuingfailure to correct major weaknesses in the aforesaidinternal control system.

5. (a) In our opinion and according to the informationand explanations given to us, the particulars ofcontracts or arrangements referred to in Section301 of the Act have been entered in the registerrequired to be maintained under that section.

(b) In our opinion and according to the information andexplanations given to us, the transactions madein pursuance of such contracts or arrangementsand exceeding the value of Rupees Five Lakhs inrespect of any party during the year have beenmade at prices which are reasonable havingregard to the prevailing market prices at therelevant time except for sale of goods aggregatingto Rs.385.636 million and purchase of servicesaggregating to Rs.127.808 million as there areno market prices comparable to those sold/purchased, which, however, are considered to beof special nature as explained by the managementof the Company.

6. In our opinion and according to the information andexplanations given to us, the Company has compliedwith the provisions of Sections 58A and 58AA or anyother relevant provisions of the Act and the Companies(Acceptance of Deposits) Rules, 1975 with regardto the deposits accepted from the public. Accordingto the information and explanations given to us, noOrder has been passed by the Company Law Boardor National Company Law Tribunal or Reserve Bankof India or any Court or any other Tribunal on theCompany in respect of the aforesaid deposits.

7. In our opinion, the Company has an internal auditsystem commensurate with its size and nature of itsbusiness.

26

Annexure to the Auditors' Report (Contd.)

8. According to the information and explanations givento us, the Central Government of India has notprescribed the maintenance of cost records underclause (d) of sub-section (1) of Section 209 of the Actfor any of the products of the Company.

9. (a) According to the information and explanationsgiven to us and the records of the Companyexamined by us, in our opinion, the Company isgenerally regular in depositing the undisputedstatutory dues including provident fund, investoreducation and protection fund, employees’ stateinsurance, sales-tax, wealth tax, service tax,customs duty, excise duty and cess, and any othermaterial statutory dues, as may be applicable,with the appropriate authorities except dues inrespect of Income Tax.The extent of the arrears ofstatutory dues outstanding as at March 31, 2007,for a period of more than six months from the datethey became payable, in respect of income tax isas follows:

Nameof thestatute

Nature ofdues

Amount(Rs.

Million)

Period towhich theamountrelates

Due date Date ofPayment

IncomeTax Act,1961

TaxDeductedat Source(TDS)

6.306July toSeptember2006

August toOctober2006

September 7,2007

(b) According to the information and explanationsgiven to us and the records of the Companyexamined by us, the particulars of dues ofincome-tax, sales-tax, wealth tax, service tax,customs duty, excise duty and cess as at March31, 2007, as may be applicable, that have notbeen deposited on account of a dispute, are givenin Appendix-1.

10. The Company has neither accumulated losses asat March 31, 2007 nor has it incurred any cash losseither during the financial year ended on that date orin the immediately preceding financial year.

11. According to the records of the Company examinedby us and the information and explanation given tous, the Company has not defaulted in repayment ofdues to any financial institution or bank or debentureholders as at the balance sheet date.

12. The Company has not granted any loans andadvances on the basis of security by way of pledge ofshares, debentures and other securities.

13. The provisions of any special statute applicable tochit fund/ nidhi/ mutual benefit fund/ societies are notapplicable to the Company.

14. In our opinion, the Company is not a dealer ortrader in shares, securities, debentures and otherinvestments.

15. In our opinion and according to the information andexplanations given to us, the terms and conditionsof the guarantees given by the Company, for loanstaken by others from banks or financial institutionsduring the year, are not prejudicial to the interest ofthe Company.

16. In our opinion, and according to the information andexplanations given to us, on an overall basis, the termloans have been applied for the purposes for whichthey were obtained except for certain term loans forcapital expenditure/general purposes/working capitalaggregating to Rs.1,500 million, which have beenput in general pool of funds, where end-use is notascertainable.

17. On the basis of an overall examination of the balancesheet of the Company, in our opinion and accordingto the information and explanations given to us, thereare no funds raised on a short-term basis which havebeen used for long-term investment.

18. The Company has not made any preferential allotmentof shares to parties and companies covered in theregister maintained under Section 301 of the Actduring the year.

19. The Company has not issued any debenture duringthe year.

20. The company has not raised any money by publicissues during the year.

21. During the course of our examination of the books andrecords of the Company carried out in accordance withthe generally accepted auditing practices in India andaccording to the information and explanations givento us, we have neither come across any instanceof fraud on or by the Company, noticed or reportedduring the year, nor have we been informed of suchcase by the management.

J. MajumdarPartner

Membership Number – F 51912For and on behalf of

Price WaterhouseChartered Accountants

Place: BangaloreDate: October 31, 2007

27

Appendix 1 to the Auditors' Report

[Referred to in paragraph 9(b) of the Annexure to the Auditors’ report of even date to the members of UnitedSpirits Limited on the financial statements for the year ended March 31, 2007]

Name of the Statute Amount*(Rs. Million)

Forum where dispute ispending

Year To Which The Amount Relates

The Income-Tax Act,1961

120.647 Commissioner of Income-TaxAppeals

2003-04 to 2004-05

4.140 Appellate Tribunal 2004-050.330 Assessing Officer 2001-02, 2003-04

The Wealth-Tax Act,1957

0.514 Commissioner of Income-TaxAppeals

1993-94, 1995-96, 1997-1998.

Central and RespectiveState Sales Tax Acts

172.762 Supreme Court 1999 to 2005-06

42.452 High Court 1982-83,1984-85,1985-86,1988-89,1989-90,1991-92,1993-94,1994-95,1995-96,1996-97,2003-04,2005-06.

118.415 Appellate Tribunal 1974-75 to 1975-76,1984-85,1985-86,1986-87,1987-88, 1988-89,1989-90,1990-91,1991-92,1992-93,1993-94,1994-95, 1995-96,1996-97,1997-98,1998-99,1999-00to 2000-01, 2002-03.

8.978 Joint Commissioner 1982-83, 1983-84, 2001-200216.840 Deputy Commissioner 1984-85,1985-86,1986-87,1987-88,1988-89,1990-91,

1991-92,1992-93,1993-94,1994-95,1995-96,1997-98,1998-99,1999-00,2000-01,2002-03,2003-04,2004-05.

1.709 Assistant Commissioner 1974-75 to 1975-76,1995-96,1996-97,1999-00, 2002-03,2003-04.

0.200 Assessing Officer 1985-860.637 Appellate and Revisional

Court1993-94

Respective State ExciseActs

4.642 Supreme Court 1971-72,1973-74,1977-78,1978-79,1979-80,1980-81,1981-82,1981-82 to 2005-06.

59.636 High Court 1972-73,1973-74,1985-86, 1986-87,1987-88,1988-89,1989-90,1990-91,1991-92,1993-94,1995-96 to 1999-00,1996-97,2000-01,2001-02,2002-03,2004-05,2005-06.

0.425 Board of Revenue 1976-77,1977-78,1984-85,1985-86,1986-87.232.929 Excise Commissioner 1974-75 to 1980-81,1981-82 to 1983-84,1984-85,

1985-86, 1986-87,1987-88,1988-89,1989-90,1991-92 to1995-96,1995-96 to 1997-98,1999-00,2000-01,2001-02to 2005-06.

12.170 The Assistant District Judge 1981-82 to 1983-841.631 Superintendent of Excise 1999-000.387 Distillery Officer 1988-898.158 Collector 1994-95

The Central Excise Act,1944

25.635 High Court 1989-90 to 1996-97,2004-05

1.348 Commisioner of CentralExcise

1995-96

0.481 Assistant Commissioner ofCustoms

1995-96

* Net of amounts paid under protest or otherwise.

28

Rs. Million

Schedule 2007 2006

SOURCES OF FUNDS

Shareholders' Funds

Share Capital 1 1,022.319 604.714

Share Capital Suspense 1A - 417.605

Reserves and Surplus 2 12,397.905 7,938.654

Loan Funds

Secured Loans 3 9,485.226 10,047.313

Unsecured Loans 4 5,192.566 5,274.693

Deferred Tax Liability (Net) [Schedule 18 Note 18(b)] 7.935 70.569

28,105.951 24,353.548

APPLICATION OF FUNDS

Fixed Assets 5

Gross Block 5,862.048 5,637.160

Less: Depreciation 1,323.350 1,038.428

Net Block 4,538.698 4,598.732

Capital Work in Progress 106.102 26.021

4,644.800 4,624.753

Investments 6 6,624.619 7,022.648

Current Assets, Loans and Advances

Inventories 7 2,936.496 2,818.605

Sundry Debtors 8 3,552.463 3,003.733

Cash and Bank Balances 9 3,735.750 2,234.415

Other Current Assets 10 1,112.095 637.783

Loans and Advances 11 11,294.735 11,193.139

22,631.539 19,887.675

Less: Current Liabilities and Provisions 12

Liabilities 5,330.672 6,796.459

Provisions 464.335 385.069

5,795.007 7,181.528

Net Current Assets 16,836.532 12,706.147

28,105.951 24,353.548

Statement on Significant Accounting Policies 17

Notes on Accounts 18

The Schedules referred to above and the notes thereon form an integral part of the Accounts.

This is the Balance Sheet referred to in our report of even date

VIJAY MALLYA V.K.REKHIChairman Managing Director

J. MAJUMDAR M.R.DORAISWAMY IYENGAR P.A.MURALIPartner Director Chief Financial OfficerFor and on behalf ofPriceWaterhouse V.S.VENKATARAMANChartered Accountants Company Secretary

Bangalore Bangalore

October 31, 2007 October 31, 2007

Balance Sheet as at March 31, 2007

29

Rs. MillionSchedule 2007 2006

INCOME

Sales (Gross) 43,857.790 33,408.555Less: Excise Duty 19,491.007 15,462.219

24,366.783 17,946.336Income arising from Sale by Manufacturers under 'Tie-up'agreements (Tie-up units) 2,128.106 1,749.853Income from Brand Franchise 710.341 783.326Other Income 13 703.547 488.771

27,908.777 20,968.286EXPENDITURE

Materials 14 14,263.215 10,504.868Manufacturing and Other Expenses 15 8,679.742 7,875.937Interest and Finance charges 16 1,067.634 1,666.289

24,010.591 20,047.094Profit before Prior Period, Exceptional and OtherNon-Recurring Items, Depreciation andTaxation 3,898.186 921.192Depreciation 309.350 409.002Profit before Prior period, Exceptional and Other 3,588.836 512.190Non-Recurring Items andTaxationPrior period, exceptional and other non recurring items (Net) 2,627.424 -[Schedule 18 Note 11]Profit before Taxation 6,216.260 512.190Provision for Taxation:

Current Tax 1,302.920 93.502Deferred Tax (Credit) (61.354) (63.622)Fringe Benefit Tax 34.500 62.112

Profit after Taxation 4,940.194 420.198Profit brought forward from previous year 256.572 574.238

5,196.766 994.436Appropriations:Proposed Dividend

Preference Shares 6.975 6.975Equity Shares - Interim 141.723 -Equity Shares - Final 98.966 188.963Corporate Tax on Proposed Dividend 37.881 27.480Transfer to Capital Redemption Reserve - 464.446Transfer to General Reserve 500.000 50.000

Profit carried to Balance Sheet 4,411.221 256.572Basic and Diluted Earnings Per Share (Rs.) 52.20 4.80Statement on Significant Accounting Policies 17

Notes on Accounts 18

The Schedules referred to above and the notes thereon form an integral part of the Accounts.This is the Profit and Loss Account referred to in our report of even date


J. MAJUMDAR M.R.DORAISWAMY IYENGAR P.A.MURALIPartner Director Chief Financial OfficerFor and on behalf ofPriceWaterhouse V.S.VENKATARAMANChartered Accountants Company Secretary

Bangalore Bangalore


Profit and Loss Account for the year ended March 31, 2007

30

Cash Flow Statement for theYear Ended March 31, 2007

Rs. Millions

2007 2006

A. CASH FLOW FROM OPERATING ACTIVITIES

Net profit before prior period, exceptional and

other non-recurrings items and taxation and

Non- recurring items

3,588.836 512.190

Adjustments for :

Depreciation 309.350 409.002

Unrealised Foreign Exchange Loss / (Gain) (43.571) (33.299)

Bad Debts/ Advances written off 49.434 16.765

Loss/(Gain) on Fixed Assets Sold/Written Off (Net) 14.954 (27.148)

Loss/(Gain) on Sale of Investments (Net) (0.794) (79.582)

Liabilities no longer required written back (390.687) (141.020)

Provision for Doubtful Debts/Advance/Deposits 78.805 137.827

Provision for diminution in value of Investments

(Net)0.264 -

Provision - Others 48.937 16.857

Interest Expense & Finance charges 1,218.670 1,733.055

Income from investments (22.109) (42.893)

Interest Income (151.036) 1,112.217 (66.766) 1,922.798

Operating profit before working capital changes 4,701.053 2,434.988

(Increase)/decrease in Trade and other receivables (139.854) (525.668)

(Increase)/decrease in Inventories (117.891) (410.046)

Increase/(decrease) in Trade payables (1,081.155) (1,338.900) 783.321 (152.393)

Cash generated from operations 3,362.153 2,282.595

Direct taxes paid (1,077.296) (265.633)

Fringe Benefit taxes paid (32.114) (35.383)

Cash flow before prior period, Exceptional and

other Non - recurring items2,252.743 1,981.579

Exceptional and Non - recurring items 3,007.199 -

Cash flow before and after extraordinary items

and net cash from operating activities 5,259.942 1,981.579

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (328.951) (346.971)

Sale of fixed assets 8.709 75.994

Finance Lease Payments (7.785) (1.195)

Purchase of long term investments - (4.627)

Purchase of current Investments (703.646) (327.762)

Sale of long term investments 1.784 69.036

Sale of current investments 700.001 327.200

Investments in Subsidiaries (132.582) (10,548.691)

Disposal of Investments in Subsidiaries - 4,876.097

31

Rs. Millions

2007 2006

Loan given to:

Subsidiaries (1,362.807) (9,457.197)

Realisation of Loan from:

Subsidiaries 50.957 2,191.662

Interest received 111.956 68.218

Dividend received 21.646 42.893

Net cash used in investing activities (1,640.718) (13,035.343)

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from issue of rights shares by a

subsidiary company- 535.559

Proceeds from Preference Shares of a subsidiary

company- 500.000

Redemption of Preference Shares of a subsidiary

company- (1,000.000)

Proceeds from issue of Global Depositary Shares

(GDS)- 5,796.051

Proceeds from issue of 2% Foreign Currency

Convertible Bonds (FCCB)- 4,458.500

Expenses incurred on issuance of GDS & FCCB - (242.569)

Expenses relating to Amalgamation - (306.192)

Proceeds/(Repayment) of long term loans:

Proceeds 3,830.041 9,805.724

Repayment (4,281.999) (9,058.807)

Proceeds/(Repayment) of fixed deposits (52.284) 17.610

Proceeds/(Repayment) of Inter Corporate Deposits:

Proceeds - -

Repayment - (207.370)

Working Capital Loan/Cash Credit from Banks (net) (143.266) 748.085

Interest and Finance Charges paid

[including on Finance Lease Rs 0.681 Million] (1,171.053) (1,709.140)

Dividends paid (251.972) (142.274)

Corporate Tax on distributed profit (47.356) (14.507)

Net cash used in financing activities (2,117.889) 9,180.670

Net (Decrease)/ Increase in cash and cash

equivalents 1,501.335 (1,873.094)

Cash and cash equivalents as at March 31, 2006 2,234.415 424.888

Cash and Cash Equivalents of Transferor

companies as at April 1, 2005- 3,682.621

Cash and cash equivalents as at March 31, 2007 3,735.750 2,234.415

1,501.335 (1,873.094)

Cash Flow Statement for theYear Ended March 31, 2007 (Contd.)

32

Cash Flow Statement for theYear Ended March 31, 2007 (Contd.)

Notes :

1. The above Cash Flow Statement has been compiled from and is based on the Balance Sheet as at March 31, 2007

and the related Profit and Loss Account for the year ended on that date.

2. The above cash flow statement has been prepared under the indirect method as set out in the Accounting

Standard - 3 on Cash Flow Statements issued by The Institute of Chartered Accountants of India and reallocation

required for this purpose are as made by the Company.

3. Previous year's figures have been regrouped wherever necessary in order to confirm to this year's presentation.

This is the Cash Flow Statement referred to in our report of even date.

VIJAY MALLYA V.K.REKHI

Chairman Managing Director

J. MAJUMDAR M.R.DORAISWAMY IYENGAR P.A.MURALI

Partner Director Chief Financial Officer

For and on behalf of

PriceWaterhouse V.S.VENKATARAMAN

Chartered Accountants Company Secretary

Bangalore Bangalore


33

Rs. Million

2007 2006

1. SHARE CAPITAL

Authorised

110,000,000 (2006: 110,000,000) Equity Shares of Rs.10/- each 1,100.000 1,100.000

10,000,000 (2006: 10,000,000) Preference Shares of Rs.10/- each 100.000 100.000

Issued, Subscribed and Paid-up

94,481,930 (2006: 60,471,409) Equity Shares of Rs.10/- each fully paid up. 944.819 604.714

7,750,000 (2006: Nil) 9% Non-Cumulative Non-Convertible Redeemable

Preference Shares of Rs.10/- each fully paid up. 77.500 -

1,022.319 604.714

Notes :

Of the above,

1. 51,719,968 (2006: 51,719,968) Equity Shares were allotted as fully paid up on

July 9, 2001 to the shareholders of the erstwhile McDowell & Co. Ltd.,

pursuant to the schemes of Amalgamation for consideration other than cash.

2. 34,010,521 (2006: Nil) Equity Shares were alloted as fully paid on November 6, 2006

to Equity Shareholders of erstwhile Herbertsons Limited, Triumph Distillers & Vintners

Private Limited, Baramati Grape Industries Limited, United Distillers India Limited

and Shaw Wallace Distilleries Limited pursuant to a Scheme of Amalgamation for

consideration other than cash.

3. 8,751,381 (2006: 8,751,381) Equity shares of Rs.10/- each fully paid up

represent 17,502,762 (2006: 17,502,762) Global Depository Shares issued by

the Company on March 29, 2006.

4. 7,750,000 (2006: Nil) 9% Non-Cumulative Non-Convertible Redeemable

Preference Shares of Rs 10/- each were issued as fully paid up on November 6, 2006

to 9 % Non-Cumulative Non-Convertible Redeemable Preference Shareholders

of erstwhile Shaw Wallace Distilleries Limited pursuant to a Scheme of

Amalgamation for consideration other than cash.

The above 7,750,000 (2006: Nil) 9% Non-Cumulative Non-Convertible Redeemable

Preference Shares of Rs 10/- each have been redeemed at par on July 11, 2007

1A. SHARE CAPITAL SUSPENSE

Equity Share Suspense

Nil (2006: 34,010,521) Equity Shares of Rs.10/- each to be issued as fully paid up

to the equity shareholders of Transferor Companies pursuant to the

Scheme of Amalgamation for consideration other than cash - 340.105

Preference Share Suspense

Nil (2006: 7,750,000) 9% Non-Cumulative Non-Convertible Redeemable

Preference shares of Rs.10/- each to be issued as fully paid up to 9%

Non-Cumulative Non-Convertible Redeemable Preference Shareholders

of erstwhile Shaw Wallace Distilleries Limited pursuant to the Scheme of

Amalgamation for consideration other than cash - 77.500

The above 7,750,000 9% Non-Cumulative Non-Convertible Redeemable

Preference shares of Rs.10/- each to be issued will be redeemable at

par on July 11, 2007.

- 417.605

Schedules forming part of Balance Sheet as at March 31, 2007

34

Schedules forming part of Balance Sheet as at March 31, 2007 (Contd.)

Rs. Million2007 2006

2. RESERVES AND SURPLUS

Central SubsidyAs per last Balance Sheet 1.500Received during the year 1.500

1.500 1.500Capital Redemption ReserveAs per last Balance Sheet 464.446 -Transferred from the Profit and Loss Account on

redemption of Preference Shares- 464.446

464.446 464.446Securities Premium AccountAs per last Balance Sheet 5,505.775Addition during the year:(a) On issue of Global Depository Shares - 5,708.537(b) On conversion of 6,500,000 9% Cumulative Convertible

Preference shares of Rs. 10/- each fully paid in ShawWallace Distilleries Limited, a Transferor Company - 41.786

5,505.775 5,750.323Less: Adjustments during the year:(a) Expenses incurred on issuance of Global Depository

Shares (GDS) and 2% Convertible Bonds in Foreign

Currency (FCCB)Legal and Professional - (116.760)Underwriting Fee and Other costs - (141.122)Miscellaneous Income - 15.313

(b) Premiuim payable on Redemption of FCCB (47.963) (1.979)5,457.811 5,505.775

Foreign Currency Translation ReserveAddition during the year (Schedule 18 Note 5) (144.912) -

Contingency ReserveAs per last Balance Sheet 110.000 110.000

General ReserveAs per last Balance sheet 1,600.361 1,673.368Add: Addition during the year:(a) Reserve arising on appreciation (net of diminuition) in

value of certain assets of the Company- 770.650

(b) Transferred from Profit and Loss Account 500.000 50.0002,100.361 2,494.018

Less:(a) Adjustments relating to Demerger - (435.758)(b) Adjustment on Amalgamation - (151.707)(c) Expenses relating to Amalgamation - (306.192)(d) Adjustment on adoption of Accounting Standard on

'Employee Benefits'[net of deferred tax credit of Rs 1.280 Million (2006: Nil)]

[Schedule18 Note 12(a)](2.522) -

2,097.839 1,600.361Surplus in Profit and Loss account 4,411.221 256.572

12,397.905 7,938.654

35


Rs. Million

2007 2006

3. SECURED LOANS

Term Loans

From Banks [Note (i)] 6,192.267 6,286.876

[Repayable within one year: Rs.733.068 Million (2006: Rs.425.318 Million)]

From Others [Note (ii)] - 375.000

[Repayable within one year: Rs. Nil (2006: Rs.42.500 Million)]

Working Capital Loan / Cash Credit from Banks [Note (iii) ] 3,215.824 3,359.090

Finance Lease [Note (iv)] 28.713 12.390

Interest accrued and due 48.422 13.957

9,485.226 10,047.313

Notes:

(i) Out of the above loans:

(a) Secured by charge on certain fixed assets of the Company including

Land and Building. 489.910 1,178.527

(b) Secured by charge on certain fixed assets of the Company,

pledge of certain shares held by the Company and also by pledge of

certain investments held by other companies. 3,688.816 500.000

(c) Foreign Currency Borrowings secured by charge on fixed assets of

the company, pledge of certain shares held by the Company and also

by pledge of certain investments held by other companies. 282.349 -

(d) Secured by a second charge on certain fixed assets of the Company

including Land and Building. 187.500 3,000.000

(e) Secured by charge on a brand 6.600 21.000

(f) Foreign Currency External Commercial Borrowings secured by

charge on specific fixed assets and a brand 1,522.850 1,561.350

(g) Secured by hypothecation of specific fixed assets acquired under

respective agreements. 14.242 25.999

(ii) Out of the above loans:

(a) Secured by a charge on certain fixed assets of the Company

and pledge of certain shares and properties of other companies - 320.000

(b) Secured by charge on certain fixed assets of the Company including

Land and Building - 55.000

(iii) (a) Secured by charge on certain fixed assets of the Company including

Land and Building and hypothecation of inventories, book debts and

other current assets. - -

(b) Includes Foreign Currency Non-Resident [FCNR(B)] Loans 396.331 841.515

(iv) Secured against assets acquired under lease agreements

4. UNSECURED LOANS

Fixed Deposits 668.010 713.204

[Repayable within one year Rs.187.112 Million (2006: Rs. 196.371 Million)]

From Banks 100.000 100.000

[Repayable within one year Rs.100.000 Million (2006: Rs.100.000 Million)]

2% Convertible Bonds in Foreign Currency 4,423.643 4,461.000

Interest accrued and due 0.913 0.489

5,192.566 5,274.693

36

Rs.

Million

5.FIXEDASSETS

GROSSBLOCK

DEPRECIATION

NETBLOCK

2006

Revalua

tion

On

Amalga

mation

Additions

Deletion/

Adjustmen

ts2007

2006

Forthe

year

Deletion/

Adjustmen

ts2007

2007

2006

Tang

ible

Land

(Note1be

low):

Free

hold

1,52

5.35

4-

-28

.811

9.35

71,544.808

--

--

1,544.808

1,52

5.35

4

Leaseh

old

213.02

7-

--

-213.027

--

--

213.027

213.02

7

Buildings

(Notes

2an

d3be

low)

1,17

4.48

6-

-40

.141

-1,214.627

163.77

952

.938

-216.717

997.910

1,01

0.70

7

Plan

t&Machine

ry2,33

7.72

5-

-14

5.40

912

.490

2,470.644

671.37

419

7.47

52.37

6866.473

1,604.171

1,66

6.35

1

Furniture

&Fixturean

d

Office

Equipm

ents:

Fina

nceLe

ase

13.585

--

19.504

-33.089

1.13

27.04

5-

8.177

24.912

12.453

Others

195.77

9-

-18

.621

19.413

194.987

89.330

20.954

18.675

91.609

103.378

106.44

9

Vehicles:

Fina

nceLe

ase

--

-4.60

4-

4.604

-0.02

6-

0.026

4.578

-

Others

177.20

4-

-12

.435

3.37

7186.262

112.81

330

.912

3.37

7140.348

45.914

64.391

5,63

7.16

0-

-26

9.52

544

.637

5,862.048

1,03

8.42

830

9.35

024

.428

1,323.350

4,538.698

4,59

8.73

2

2006

2,82

9.79

881

1.66

21,70

0.70

039

4.15

699

.156

5,637.160

678.14

740

9.00

248

.721

1,038.428

Cap

italWork-in-Progress(includ

ingAd

vances)

106.102

26.021

4,644.800

4,62

4.75

3

Notes:

1.

TheCompanyisintheprocess

ofregisteringcertainfreeholdandleaseholdlandinits

ownname.

2.

Costofbuildingsincludesthefollowingpaymentsmadeforthepurpose

ofacquiringtherightofoccupationofMumbaigodownspace

:

i)660equity

shares(unquoted)ofRs.100each

fully

paid

inShreeMadhuIndustrialEstate

LimitedRs.0.066Million(2006:Rs.0.066Million).

Applicationhasbeenmadeforduplicate

Share

certificatesandthesameisintheprocess.

ii)1996%

Debentures(unquoted)ofRs.1,000each

fully

paid

inShreeMadhuIndustrialEstate

LimitedRs.0.199Million(2006:Rs.0.199

Million).

Applicationhasbeenmadeforduplicate

Debenturescertificatesandthesameisintheprocess.

iii)

Depositwith

ShreeMadhuIndustrialE

state

LimitedRs.0.132Million(2006:R

s.0.132Million)

3.

Includevalueoffully

paidsharesRs.0.003Million(2006:R

s0.003Million)heldinCo-operativeHousingSocieties.

Sch

edulesform

ingpartofBalan

ceSheetas

atMarch

31,2007(Contd.)

37


6. INVESTMENTS

Rs. Million

ParticularsFace

ValueNos. 2007 Nos. 2006

Rs.

CURRENT

Quoted Investments

Units (Fully Paid)

SBI Mututal Fund 10 419,767 4.207 56,051 0.562

Total Current Investments 4.207 0.562

LONGTERM

Quoted Investments

A.Trade

Fully Paid Equity Shares

Mangalore Chemicals & Fertilizers Limited (Note 2) 10 6,150 0.032 6,150 0.032

United Breweries (Holdings) Limited (Rs. 377) [Note 4] 10 480 0.000 267 0.000

United Breweries Limited (Rs.251) [Note 5] 1 1,600 0.000 178 0.000

McDowell Holdings Limited 10 50,000 0.500 - -

In Subsidiary Company

ShawWallace & Company Limited 10 15,072,311 4,888.877 15,072,311 4,888.877

4,889.409 4,888.909

B. Non-Trade


Vijaya Bank 10 42,100 0.466 42,100 0.466

Whirlpool of India Limited 10 - - 150 0.001

Bank of India Limited 10 - - 9,000 0.405

Premier Fertilizers Limited (Note 3) 100 300 0.001 300 0.001

Radico Khaitan Limited 10 107,570 2.043 107,570 2.043

Khaitan Chemicals & Fertilizers Limited 10 13,880 0.725 13,880 0.725

Rampur Fertilizers Limited (Note 3) 10 27,760 0.527 27,760 0.527

IndusInd Bank Limited 10 10,400 0.468 10,400 0.468

Indo Lowenbraw Breweries Limited (Notes 2 and 3) 10 18 - 18 -

Hero Honda Motors Limited 2 175 0.035 175 0.035

Rampur Engineering Co., Limited (Notes 2 and 3) 10 1,001 0.010 1,001 0.010

Shree Synthetics Limited (Rs.350) (Notes 2 and 3) 10 35 0.000 35 0.000

Gammon India Limited (Note 2) 10 1,000 - 1,000 -

Ashok Leyland Limited (Rs. 117) 10 10 0.000 10 0.000

Crompton Greaves Limited 10 40 0.005 40 0.005

Daewoo Motors Limited (Note 3) 10 50 0.001 50 0.001

Exide Industries Limited (Rs.132) 10 2 0.000 2 0.000

Gec Alsthom (I) Limited (Rs.387) (Note 3) 10 6 0.000 6 0.000

Harrisons Malayalam Limited 10 20 0.002 20 0.002

Hindustan Motors Limited (Rs.51) (Note 3) 10 2 0.000 2 0.000

38

6. INVESTMENTS (Contd.)

Rs. Million

ParticularsFaceValue

Nos. 2007 Nos. 2006

Rs.

Indian Rayon and Industries Limited (Note 3) 10 10 0.003 10 0.003

MRF Limited 10 5 0.004 5 0.004

Nirlon Limited (Rs.254) 10 12 0.000 12 0.000

Rallis India Limited 10 28 0.003 28 0.003

Siemens (India) Limited 10 15 0.008 15 0.008

Units (Fully Paid)

Unit Trust of India (Note 1)

- 6.75% Tax Free US 64 Bonds 100 312,246 31.224 312,246 31.224

- UTI Balance Fund -Income -Retail (formerly known

as US 2002) 10 294,945 3.175 426,318 2.711

38.702 38.643

Total Quoted Investments (A+B) 4,928.111 4,927.552

Unquoted Investments

C.Trade

Fully paid Equity Shares

Goa Fruit Distilleries Pvt Limited 100 350 0.035 350 0.035

Madhav Co-operative Housing Society Limited(Rs.250)

50 5 0.000 5 0.000

North West Distilleries Pvt Limited 10 1,000 0.010 1,000 0.010

Phipson & Co. (Pakistan) Limited (Rs.1) (Note 6) 100 3,942 0.000 3,942 0.000

Sangam Bhavan Cooperative Housing Society Limited 50 10 0.001 10 0.001

Utkal Distilleries Limited 100 10,700 7.448 10,700 7.448

U.B. Electronics Instruments Limited 100 1,996 0.129 1,996 0.129

Baramati Teluka Fruits Growers Fed Limited 100 5,000 0.500 5,000 0.500

Shaw Scott Distilleries Private Limited 100 1 0.001 1 0.001

Stridewell Leather India Private Limited (Rs.20) 10 2 0.000 2 0.000

Ashoka Securities Private Limited 10 25 0.003 25 0.003

McDowell Holdings Limited 10 - - 50,000 0.500

In Subsidiary Companies

Asian Opportunities & Investments Limited US$1 4,998,706 301.000 4,998,706 301.000

McDowell Nepal LimitedNRS100

67,716 65.626 67,716 65.626

Primo Distributors Private Limited 10 3,920,010 1,030.000 3,920,010 1,030.000

Zelinka Limited CYP 1 1,000 0.101 1,000 0.101

Four Seasons Wines Limited 10 50,000 0.500 - -

McDowell Scotland Limited £ 1 1,575,000 125.505 - -

Daffodils Flavours & Fragrances Private Limited 10 10,000 0.100 - -


39


Rs. Million

ParticularsFaceValue

Nos. 2007 Nos. 2006

Rs.

United Vintners Limited 10 50,000 0.500 - -

USL Holdings Limited US$ 1 100,000 4.437 - -

McDowell Beverages Limited 10 50,000 0.500 - -

United Alcobev Limited 10 50,000 0.500 - -

Herbertsons Limited 10 54,000 0.540 - -

Fully paid Preference Shares

11% Redeemable Preference Shares of

Ganges Soap Works Private Limited 100 2,000 - 2,000 -

9.3% Cumulative Redeemable Preference Shares of

Rampur Engineering Company Limited 10 25,000 0.250 25,000 0.250

1,537.686 1,405.604

D. Non-Trade

In Government Securities

Indira Vikas Patra 0.003 0.003

National Savings/Plan/Def. Certificates 0.702 0.812

(Deposited with Govt.Authorities)

In Fully Paid Debentures

Non-Redeemable

6.5% Bengal Chamber of Commerce & Industry 0.002 0.002

5%Woodland Hospital & Medical Centre Limited 0.007 0.007

Fully paid Equity Shares

McDowell & HRB Emp. Co-op Society Limited 200 10 0.002 10 0.002

Koel Manufacturing and Investment (P) Limited 10 1 0.002 1 0.002

Janata Sahakari Bank Limited., Pune 100 - - 4,750 0.475

Maltings Limited 10 695 - 695 -

Central Investment (P) Limited 10 305 - 305 -

Consolidated Breweries Limited 10 750 - 750 -

Goa Urban Co-Operative Bank Limited 50 199 0.010 199 0.010

Mapusa Urban Co-Operative Bank Limited (Rs.130) 25 5 0.000 5 0.000

The Cosmas Co-op Bank Limited 20 71,875 1.438 71,875 1.438

Baramati Sahakari Bank Limited 100 9 0.001 9 0.001

Thane Janta Sahakari Bank Limited 50 10 0.001 10 0.001

Rupee Co- op Bank Limited 25 40 0.001 40 0.001

2.168 2.754


40


Rs. Million

ParticularsFace

ValueNos. 2007 Nos. 2006

Rs.

E. Others

Interest as Sole Beneficiary in USL Benefit Trust 153.536 687.001

153.536 687.001

Total Unquoted Investments (C+D+E) 1,693.390 2,095.359

Total LongTerm Investments (A+B+C+D+E) 6,621.501 7,022.911

Total Current and LongTerm Investments 6,625.708 7,023.473

Less: Provision for diminution in the value of

investments1.089 0.825

Total 6,624.619 7,022.648

Aggregate value of Quoted Investments:

- Book value 4,931.229 4,927.289

- Market value 1,794.536 2,824.094

Aggregate Book value of Unquoted Investments 1,693.390 2,095.359

Notes:

1. Investments in units of Unit Trust of India amounting to Rs.34.399 Million represent those made under Rule 3A of

the Companies (Acceptance of Deposit) Rules, 1975.

2. An application has been made for duplicate certificate.

3. Market Quotations are not available.

4. Bonus shares issued in the ratio of 1:1 for each equity share of Rs.10 held in United Breweries (Holdings) Limited.

5. Each equity share of face value of Rs.10 held in United Breweries Limited has been split into 10 equity shares of

Rs.1 each during the year.

6. The erstwhile amalgamating Carew Phipson Limited has submitted its claim to Custodian of Enemy Property

for India towards the full payment of the value of shares of which 25% was received and the balance value of

investment was written off in the books in 1977, retaining a token amount of Re.1 in the books pending disposal of

the representation to the custodian for final payment in this regard.

7. Also Refer Schedule 18 Note 8.


41


Rs. Million

2007 2006

7. INVENTORIES

Raw Materials including materials in transit 513.730 564.244

Packing Materials, Stores and Spares 370.850 294.537

Finished goods including goods in transit 996.638 1,207.853

Work-in-Progress 1,055.278 751.971

2,936.496 2,818.605

8. SUNDRY DEBTORS

(Unsecured)

Exceeding six months

Considered Good 103.985 27.383

Considered Doubtful 86.706 282.812

190.691 310.195

Others: Considered Good 3,448.478 2,976.350

3,639.169 3,286.545

Less: Provision for doubtful debts 86.706 282.812

3,552.463 3,003.733

9. CASH AND BANK BALANCES

Cash on Hand 6.074 5.824

Remittances-in-Transit/ Cheques on Hand 8.065 117.903

Balances with Scheduled Banks:

On Current Accounts [Note (i)] 331.148 614.967

On Unpaid Dividend Account 104.779 18.881

On Deposit Account [Notes (ii), (iii) and (iv)] 3,285.684 1,476.840

3,735.750 2,234.415

Notes:

(i) includes Rs. 27.271 Million (2006: Rs. 28.438 Million) in Exchange Earners Foreign Currency (EEFC) Account

and Rs.18.052 Million (2006: Rs. 0.611 Million) in Foreign Currency.

(ii) includes Rs. 0.214 Million (2006: Rs. 3.899 Million) pledged with Government Departments.

(iii) includes Rs. Nil (2006: Rs.6.433 Million) kept as margin against letter of credit and Rs. 0.550 Million

(2006: Rs.0.692 Million) as margin against Bank Guarantee.

(iv) includes Nil (2006: Rs.1,114.625 Million) deposits in Foreign Currency.

42

Rs. Million

2007 2006

10. OTHER CURRENT ASSETS

(Unsecured, Considered Good except where otherwise stated)

Income accrued on Investments and Deposits 41.470 2.390

Other Deposits - Considered Good 1,067.835 632.603

- Considered Doubtful 7.125 7.125

Fixed assets held for sale 2.790 2.790

1,119.220 644.908

Less: Provision for Doubtful Deposits 7.125 7.125

1,112.095 637.783

11. LOANS AND ADVANCES

(Unsecured, Considered Good except where otherwise stated)

Loans and Advances to Subsidiaries 8,888.068 8,562.879

Advances recoverable in cash or in kind or for value to be received:

Advances to Tie-up units - Considered Good 643.581 977.955

Advances to Tie-up units - Considered Doubtful 21.519 19.448

Advance Income Tax (Net of Provisions) 51.359 276.983

Advance Fringe Benefit Tax (Net of Provisions) - 1.845

Other Advances - Considered Good 1,711.727 1,373.477

Other Advances - Considered Doubtful 101.282 11.362

11,417.536 11,223.949

Less: Provision for Doubtful Advances 122.801 30.810

11,294.735 11,193.139


43


Rs. Million

2007 2006

12. CURRENT LIABILITIES AND PROVISIONS

A. Liabilities

Acceptances * 643.214 512.486

Sundry Creditors

Due to Small Scale Industrial (SSI) undertakings 115.867 99.983

[Schedule 18 Note 9(a)]

Others 3,719.199 5,050.203

Dues to Directors 37.434 5.960

Investor Education and Protection Fund [Schedule 18 Note 10]

Unclaimed Debentures 7.997 8.570

Unclaimed Dividends 19.757 18.809

Unclaimed Fixed Deposits 14.069 21.158

Security Deposit ** 136.379 224.900

Advances Received from Customers 124.024 245.193

Interest accrued but not due 71.331 58.603

Other Liabilities 441.401 550.594

5,330.672 6,796.459

* Includes bills drawn against inland letters of credit of

Rs.113.031 Million (2006: Rs.331.696 Million)and secured by

a charge on debtors, inventories and other current assets.

** Includes due to a subsidiary Rs. 48.000 Million (2006 : Nil)

B. Provisions

Proposed Dividend

Preference Shares 6.975 6.975

Equity Shares - Interim 84.741 -

Equity Shares - Final 98.966 188.963

Corporate Tax on Proposed Dividend 18.005 27.480

Fringe Benefit Tax (Net of Payments) 0.541 -

Provision for redemption premium 49.943 1.979

Employee Benefits 205.164 159.672

464.335 385.069

44

Schedules forming part of Profit & Loss Account for the year endedMarch 31, 2007

Rs. Million

2007 2006

13. OTHER INCOME

Income from Investments:

Dividend income from Subsidiary (Gross) 12.697 30.484

[Tax deducted at source Rs.0.635 Million (2006: Rs. 0.799 Million)]

Dividend income from trade investments - 2.185

Dividend income from other investments 9.412 10.224

Profit on Sale of Fixed Assets (Net) 0.296 35.134

Profit on Sale of Investments 0.794 79.582

Liabilities no longer required written back 390.687 141.020

Exchange Gain (Net) 101.240 -

Bad debts/advances recovered 18.993 0.591

Scrap Sales 91.165 64.860

Insurance Claims 18.404 0.195

Export Incentive - 7.034

Miscellaneous 59.859 117.462

703.547 488.771

14. MATERIALS

Raw Materials Consumed 5,762.873 4,580.528

Purchase of Finished Goods 3,324.762 1,562.709

Packing Materials Consumed 5,472.588 4,534.553

Movement in Stocks

Opening Stock:

Work-in-Progress 751.971 537.048

Finished Goods 1,207.853 332.959

1,959.824 870.007

Add : Taken over on Amalgamation

Work-in-Progress - 225.080

Finished Goods - 444.677

- 669.757

Closing Stock:


Finished Goods 996.638 1,207.853

2,051.916 1,959.824

(Increase)/ Decrease in Stocks (92.092) (420.060)

Excise Duty on Opening/Closing Stock of Finished Goods (net) (204.916) 247.138

14,263.215 10,504.868

45

Schedules forming part of Profit & Loss Account for the year endedMarch 31, 2007 (Contd.)


15. MANUFACTURING AND OTHER EXPENSESEmployee Cost:

Salaries, Wages and Bonus 1,472.704 1,313.108Contribution to Provident and Other Funds 239.484 242.253Workmen and Staff Welfare 87.435 93.677Voluntary Retirement Scheme Compensation 8.476 15.600

Power and Fuel 144.435 189.473Stores and Spares Consumed 45.881 74.984Repairs and Maintenance:

Buildings 38.221 13.883Plant and Machinery 51.672 66.271Others 45.204 88.878

Rent 107.135 105.535Rates and Taxes 186.560 188.580Insurance 43.955 46.639Travelling and Conveyance 384.279 535.641Legal and Professional 269.034 292.309Freight Outwards 516.498 531.278Advertisement and Sales Promotion 2,908.588 2,234.419Commission on Sales 215.889 326.943Royalty/ Brand Fee/ Trade Mark Licence Fees 294.792 216.365Cash Discount 191.426 221.347Sales Tax 138.243 96.131Fixed Assets Written Off 15.250 7.986Directors' Remuneration:

Sitting Fee 1.520 0.855Commission [Schedule 18 Note 20] 36.991 5.517

Exchange Loss (Net) - 27.004Bad Debts and Advances Written Off 49.434 16.765Provision for Doubtful Debts/ Advances/Deposits 78.805 137.827Provision for Diminution in Value of Investments 0.264Research and Development 8.004 12.920Others

Personnel and Administration 258.127 179.337Selling and Distribution 670.977 384.693Miscellaneous 170.459 209.719

8,679.742 7,875.937

16. INTEREST AND FINANCE CHARGESInterest on :

Fixed Loans 866.932 978.680Other Loans 257.867 278.591Finance Charges (Including Bill Discounting) 93.871 475.784

1,218.670 1,733.055Less : Interest Income :

On Investments 2.234 2.121On Deposits and Other Accounts (Gross) 144.878 64.560[Tax Deducted at Source Rs.20.192 Million (2006: Rs.8.907 Million)]On Income Tax Refunds 3.924 0.085

1,067.634 1,666.289

46

Schedules forming part of account for the year ended March 31, 2007

17. STATEMENT ON SIGNIFICANT ACCOUNTING POLICIES

1. Basis of preparation of Financial Statements

The Financial Statements of the Company are prepared under historical cost convention, except as otherwise

stated, in accordance with the Generally Accepted Accounting Principles (GAAP) in India, the Accounting

Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies

Act, 1956.

2. Fixed Assets

(a) Fixed assets are stated at their original cost of acquisition and subsequent improvements thereto including

taxes, duties, freight and other incidental expenses related to acquisition and installation of the assets

concerned, except amounts adjusted on revaluation and amalgamation. Interest on borrowings attributable

to qualifying assets are capitalised and included in the cost of fixed assets as appropriate.

(b) The costs of Fixed Assets acquired in amalgamations are determined at their fair values, on the date of

acquisition or nearer thereto, or as approved under the schemes of amalgamation.

(c) Assets held for disposal are stated at their net book value or estimated net realisable value, whichever is

lower.

3. Leases

Assets acquired under Leases where the Company has substantially all the risks and rewards of ownership are

classified as finance leases. Such leases are capitalised at the inception of the lease at lower of the fair value

or the present value of the minimum lease payments and a liability is created for an equivalent amount. Each

lease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic rate

of interest on the outstanding liability for each period.

Assets acquired as leases where a significant portion of the risk and rewards of ownership are retained by the

lessor are classified as operating leases. Lease rentals are charged to the Profit and Loss Account on accrual

basis.

4. Depreciation and Amortisation

a) Depreciation is provided on the Straight Line Method, including on assets revalued, at rates prescribed

in Schedule XIV to the Companies Act, 1956 except for the following, which are based on management’s

estimate of useful life of the assets concerned:

i) Computers and Vehicles over a period of three and five years respectively;

ii) In respect of certain items of Plant and Machinery eligible for triple shift allowance, depreciation is

provided for the full year on triple shift basis.

b) Fixed assets acquired on amalgamation over the remaining useful life computed based on rates prescribed

in Schedule XIV to the Companies Act, 1956, as below:

Buildings 1 to 30 years

Plant & Machinery 1 to 20 years

Vehicles 1 to 4 years

Computers 1 to 2 years

c) Assets taken on finance lease are depreciated over their estimated useful lives or the lease term, whichever

is lower.

47

Schedules forming part of account for the year ended March 31, 2007 (Contd.)

d) Leasehold Land are not amortised.

e) Goodwill arising on amalgamation is charged to the Profit and Loss Account in the year of amalgamation.

Depreciation charged as above is not less than the minimum specified as per Schedule XIV of the Companies

Act, 1956.

5. Impairment

Impairment loss, if any, is provided to the extent the carrying amounts of assets exceed their recoverable

amount.

Recoverable amount is higher of the net selling price of an asset and its value in use.Value in use is the present

value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal

at the end of its useful life.

6. Investments

Long-term Investments are stated at cost to the Company. Provision for diminution in the value is made to

recognise a decline, other than temporary, in the value of long-term investments.

Current investments are valued at cost or market value, whichever is less.

7. Inventories

Inventories are valued at lower of cost and net realisable value. The costs are, in general, ascertained under

Weighted Average Method. Finished goods andWork-in-Progress include appropriate manufacturing overheads

and borrowing costs, as applicable. Excise/Customs duty payable on stocks in bond is added to the cost. Due

allowance is made for obsolete and slow moving items.

8. Revenue Recognition

Sales are recognised when goods are despatched from distilleries / warehouses of the Company in accordance

with the terms of sale except where such terms provide otherwise, where sales are recognised based on such

terms. Gross Sales are inclusive of excise duty but are net of trade discounts and sales tax, where applicable.

Income arising from sales by manufacturers under “Tie-up” agreements (Tie-up units) and income from

brand franchise are recognised in terms of the respective contracts on sale of the products by the Tie-up unit/

Franchisees. Income from brand franchise is net of service tax, where applicable.

Dividend income on investments are recognised and accounted for when the right to receive the payment is

established.

9. Foreign Currency Transactions

Transactions in foreign currency are recognised at the rates of exchange prevailing on the dates of the

transactions.

Liabilities/ assets in foreign currencies are reckoned in the accounts as per the following principles:

Foreign currency liabilities contracted for acquiring fixed assets from a country outside India are restated at the

rates ruling at the year end and all exchange differences arising as a result of such restatement are adjusted to

the cost of fixed assets.

Exchange differences arising on a monetary item that, in substance, forms part of an enterprise’s net investment

in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the enterprise’s

financial statements until the disposal of the net investment.

48

All other monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the

year end and all exchange gains/ losses arising therefrom are adjusted to the Profit and Loss Account, except

those covered by forward contracted rates where the premium or discount arising at the inception of such

forward exchange contract is amortised as expense or income over the life of the contract.

Exchange differences on forward contracts are recognised in the Profit and Loss Account in the reporting period

in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward

contracts is recognised as income or expense for the year.

Also refer Note 5 on Schedule 18.

10. 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 with the government, superannuation fund and certain state plans like Employees’ State

Insurance and Employees’ Pension Scheme.The Company’s payments to the defined contribution plans are

recognised 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 (the 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

recognised immediately in the Profit and Loss Account as income or expense.

Provident Fund:

Company’s Provident Funds administered by trusts set up by the Company where the Company’s obligation

is to provide the agreed benefit to the employees and the actuarial risk and investment risk fall, in substance,

on the Company are treated as a defined benefit plan. Liability with regard to such provident fund plans are

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 recognised immediately in the Profit and Loss

Account as income or expense.

Death Benefit:

Death Benefit payable at the time of death is actuarially ascertained at the year-end and provided for in the

accounts.

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 recognised 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.


49


d) Short term employee benefits:

Undiscounted amount of short term employee benefits expected to be paid in exchange for the services

rendered by employees is recognised during the period when the employee renders the services. These

benefits include compensated absences such as paid annual leave and performance incentives.

11. Expenditure on account of Voluntary Retirement Scheme

Expenditure on account of Voluntary Retirement Scheme of employees is expensed in the period in which it is

incurred.

12. Research and Development

Revenue expenditure on research and development is charged to Profit and Loss Account in the period in which

it is incurred. Capital Expenditure is included as part of fixed assets and depreciated on the same basis as other

fixed assets.

13. 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 period.

Deferred tax is recognised 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 recognised and carried forward to the extent that there is a reasonable / virtual certainty

that sufficient future taxable income will be available against which such deferred tax asset can be realised.

Fringe Benefit Tax is determined at current applicable rates on expenses falling within the ambit of “Fringe

Benefit” as defined under the Income Tax Act, 1961.

14. Earnings per Share

Earning per equity share (basic/diluted) is arrived at based on Net Profit after taxation available to equity

shareholders to the basic/weighted average number of equity shares.

15. Provisions

A provision is recognised when an enterprise has a present obligation as a result of a past event and it is

probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable

estimate can be made. Provisions, other than employee benefits, are not discounted to their present value and

are determined based on management estimate 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.

16. Contingencies

Liabilities which are material and whose future outcome cannot be ascertained with reasonable certainty are

treated as contingent and, to the extent not provided for, are disclosed by way of notes on the accounts.

17. Share / Foreign Currency Convertible Bonds [FCCB] issue expenses and Premium on Redemption of

FCCB :

Share/ Foreign Currency Convertible Bonds issue expenses incurred are expensed in the same year and

premium payable on FCCBs is expensed over the currency of FCCBs. Both are adjusted to the Securities

Premium Account as permitted by Section 78(2) of the Companies Act, 1956.

18. Expenditure

Expenses are net of taxes recoverable, where applicable.

50

18. NOTES ON ACCOUNTS

1. Contingent Liabilities

(Rs. Million)

2007 2006

a) (i) Guarantee given on behalf of other bodies corporate (including

performance guarantees) 31.250 250.000

(ii) Guarantees given by the Company’s bankers for which Counter Guarantees

have been given by the Company

98.012 75.778

b) Disputed claims against the Company not acknowledged as debts, currently

under appeal / sub judice:

(i) Excise demands for excess wastages and distillation losses 214.841 181.650

(ii) Other miscellaneous claims 217.549 232.904

(iii) Income Tax demand (including interest) under appeal 79.499 44.407

(iv) Sales Tax demands under appeal in various states 438.350 387.331

c) Bills Receivables discounted - since fully settled - 120.899

d) Co-accepted bills of Tie-up Units - since fully settled 71.651 67.940

e) Claims from suppliers not acknowledged as debts 58.583 45.865

The Management is hopeful of succeeding in the above appeals / disputes based on legal opinions / legal

presidents.

2. (a) Under a Scheme of Arrangement sanctioned by the Hon’ble High Courts of Karnataka and Bombay (“the

Scheme”), amalgamation of eight companies into erstwhile McDowell & Company Limited and demerger of

investment business into a resulting company (McDowell Holdings Limited) became effective from October

5, 2006 with the appointed date as April 1, 2005 and the name of the company was changed from McDowell

& Company Limited to United Spirits Limited.

Pursuant to “the Scheme”, the Company at their meeting held on November 6, 2006, allotted 34,010,521

Equity Shares of Rs.10/- each fully paid up and 7,750,000 9%Non Cumulative Non Convertible Redeemable

Preference Shares of Rs.10/- each fully paid up to the shareholders of the transferor companies. The

Company has also received the listing and trading permission for the equity shares from the National

Stock Exchange of India Limited, Bombay Stock Exchange Limited, Bangalore Stock Exchange Limited,

Ahmedabad Stock Exchange Limited and Madras Stock Exchange Limited, The Delhi Stock Exchange

Association Limited and the Calcutta Stock Exchange Association Limited.

Subsequent to the end of the financial year, the Non-Cumulative Non-Convertible Redeemable Preference

Shares have been fully redeemed.

(b) Board of Directors of the erstwhile Central Distilleries & Breweries Limited (CDBL) (amalgamated with

SWDL in an earlier year) on April 29, 1986 decided to issue 134,700 Equity Shares of Rs.10 each, the

allotment whereof was stayed by the Hon’ble High Court of Delhi on September 13,1988. The Hon’ble High

Court of Delhi has vacated its order and has ordered to keep in abeyance the allotment on 72,556 shares

and the matter is subjudice. The holders, in exchange of these shares will be entitled to 17,776 equity

shares of Rs.10 each of the Company pursuant to the Scheme. Necessary adjustments in this respect will

be carried out on disposal of the matter pending before the aforesaid Court.

(c) Pursuant to the Scheme, the bank accounts, agreements, licences, Investments and certain immovable

properties are in the process of being transferred in the name of the Company.

(d) The Company has also distributed the proceeds towards the sale of fractional shares entitlement to theeligible shareholders.


51

3. a) The Company had issued, during 2006, 100,000, 2% Convertible Bonds in Foreign Currency (FCCB)

denominated in Bond certificates of US$1,000 each aggregating US$ 100 Million. The FCCBs are, at the

option of FCCB holders, convertible into fully paid Equity Shares of Rs.10/- of the Company (Equity Share)

or Global Depository Shares (GDS), with two GDS representing one Equity Share, at any time on or after

May 9, 2006 upto the close of business on March 15, 2011 at an initial conversion price of Rs.858 per share

with a fixed rate of exchange on conversion of Rs.44.43 equal to US$ 1.00, subject to adjustments in the

manner specified in the Offering Circular (OC) dated March 29, 2006 upon occurrence of certain events.

The Company, subject to fulfilment of certain conditions, has an option to mandatorily convert these FCCBs

into Equity Shares, in whole but not in part, at any time on or after September 29, 2007 but not less than

seven business days prior to the Maturity Date (March 30, 2011), at a conversion price to be determined

in the manner specified in the OC. The Company, subject to fulfilment of certain conditions and obtaining

requisite approvals, has an option to redeem these FCCBs, in whole but not in part, at an Early Redemption

Amount, to be determined in the manner specified in the OC so that together with any interest and unpaid

interest it represent a gross yield of 6.50 percent to the FCCB holders, on a semi annual basis, together with

accrued or unpaid interest.The outstanding FCCBs on the Maturity Date (March 30, 2011) will be redeemed

at 127.07 percent of the principal amounts of the FCCBs.

The initial conversion price of Rs.858 per share has been adjusted in the manner specified in the OC and

new conversion price of Rs.781 per share is effective from June 8, 2007.

b) Subsequent to the year end, 78,960 Bonds aggregating to US$ 78.960 Million have been converted into

4,484,397 Equity shares. Consequently, the paid up equity share capital increased from 94,481,930 equity

shares of Rs.10/- each to 98,966,327 equity shares of Rs.10/- each as of date.

c) Since the market price of the Company’s Equity Shares is less than the initial conversion price of FCCB, the

option embedded in the said FCCB to subscribe to Equity Shares is, at the year-end, anti-dilutive

4. a) Subsequent to the year end, the Company acquired through its wholly owned subsidiary, United Spirits

(Great Britain) Limited, the entire share capital of Whyte and Mackay Group Limited, which in turn holds the

entire share capital of Whyte and Mackay Limited, a Scotland based Spirits manufacturing company. The

Company has provided security / guarantee on behalf of the above wholly owned subsidiary for a sum of

US $ 618.915 Million in favour of the lenders.

b) Consequent upon the above acquisition, the following companies became wholly owned subsidiaries of the

Company.

Whyte and Mackay Group Limited, Whyte and Mackay Limited, Whyte and Mackay Warehousing Limited,

Bruce & Company (Leith) Limited, Charles Mackinlay & Company Limited, Dalmore Distillers Limited,

Dalmore Whyte & Mackay Limited, Edinburgh Scotch Whisky Company Limited, Ewen & Company Limited,

Fettercairn Distillery Limited, Findlater Scotch Whisky Limited, Glayva Liqueur Limited, Glentalla Limited,

GPS Realisations Limited, Grey Rogers & Company Limited, Hay & MacLeod Limited, Invergordon

Distillers (Holdings) Limited, InvergordonDistillersGroup Limited, InvergordonDistillers Limited, Invergordon

Gin Limited,Isle of Jura Distillery Company Limited, Jarvis Halliday & Company Limited, John E McPherson

& Sons Limited, Kensington Distillers Limited, Kyndal Spirits Limited, Leith Distillers Limited, Loch Glass

Distilling Company Limited, Longman Distillers Limited, Lycidas (437) Limited, Pentland Bonding Company

Limited, Ronald Morrison & Company Limited, St The Sheep Dip Whisky Company Limited, Vincent Street

(437) Limited, Tamnavulin-Glenlivet Distillery Company Limited, TDL Realisations Limited, W & S Strong

Limited, Watson & Middleton Limited, Wauchope Moodie & Company Limited, Whyte & Mackay Distillers

Limited, William Muir Limited, WMB Realisations Limited, Whyte and Mackay Property Limited, Whyte and

Mackay de Venezuela CA and KI Trustees Limited.


52

5. The Company, in earlier year, granted interest free loans in foreign currency aggregating to Rs.7,356.189

Million to Zelinka Limited (Zelinka), Cyprus, a subsidiary of the Company, for acquisition of long term strategic

investment in ShawWallace & Company Limited.Management is of the view that these loans, from the inception

of the grant of loan, in substance, form part of the Company’s net investment in Zelinka as the settlement of

these loans is neither planned nor likely to occur in the foreseeable future and management intends to convert

this loan into investment in share capital of Zelinka in near future. Accordingly, in accordance with AS 11 - The

Effects of Changes in Foreign Exchange Rates (AS 11), exchange difference aggregating to Rs.144.912 Million

[including exchange difference aggregating to Rs.36.478 Million recognised in the Profit and Loss Account in

the previous year reversed during the year and disclosed as Prior Period Item in Note 11(a) below] arising on

such loans has been accumulated in a foreign currency translation reserve, which at the time of the disposal of

the net investment in Zelinka would be recognised as income or as expenses.

6. Fixed Assets

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of

advances) - Rs.143.321 Million (2006: Rs.12.688 Million).

7. Current Assets, Loans and Advances

a) Loans and Advances include:

i) Rs. 8,769.805 Million (2006: Rs.7,604.592 Million) given as loan to the subsidiaries. Out of the above,

loan of Rs.262.898 Million (2006: Rs.248.403 Million) is interest bearing.

ii) Rs.118.263 Million (2006: Rs. 958.286 Million) given as an advance to a subsidiary, which is also a Tie

up unit.

iii) An amount of Rs.336.462 Million (2006: Rs. 307.873) due from a Tie-up unit secured by the assets of the

Tie-up unit.

iv) Share application money of Rs.17.746 Million (2006: Rs.Nil) paid to USL Holdings Limited for which the

share allotment is still pending.

v) Rs.3 Million (2006: Rs.3 Million) being amount paid to BDA Limited (BDA) towards reassignment

of certain Liquor Brands/ Trade Marks pursuant to a Memorandum of Understanding dated

March 20, 1992. Pending execution of the deed for such assignments and judicial resolutions of various

disputes with BDA pertaining to control of BDA and ownership of the ‘Officers Choice’ and other brands

currently sub-judice at the various courts, the advance given to the party has been provided for as a

matter of prudence. All consequential adjustments arising out of the above matters will be made as and

when ascertained.

vi) Due from an Officer of the Company Rs.1.223 Million (2006: Rs.0.974 Million). Maximum amount

outstanding at any time during the year Rs.1.223 Million (2006: Rs.0.974 Million).

vii)Due from the Managing Director of the Company Rs.2.595 Million (2006: Rs.2.359 Million). Maximum

amount outstanding at any time during the year Rs.2.595 Million (2006: Rs.2.359 Million).

b) Certain confirmation of balances fromSundry Debtors, Loans and Advances, Deposits and Sundry Creditors

are awaited and the account reconciliations of some parties where confirmations have been received are in

progress. Adjustment for differences, if any, arising out of such confirmations/reconciliations would be made

in the accounts on receipt of such confirmations and reconciliation thereof.TheManagement is of the opinion

that the impact of adjustments, if any, is not likely to be significant. In the opinion of the management, all

current assets, loans and advances including advances on capital accounts would be realised at the values

at which these are stated in the accounts, in the ordinary course of business.


53

8. Investment

a)

Face

ValuePurchased During the

yearSold during the year

Nos Rs. Million Nos Rs. Million

CURRENT

Units (Fully Paid)

SBI Mutual funds Investments(Including dividend Reinvestment -Units: 8,62,097.302; Value: Rs.8.648 Million)

10 70,136,953 703.646 69,773,237 700.001

LONGTERM

A. Quoted


Trade

United Breweries (Holdings) Limited (Rs.42) 10 - - 54 0.000

United Breweries Limited (Rs.28) 10 - - 18 0.000

Non-Trade

Whirlpool India Limited 10 - - 150 0.001

Bank of India Limited 10 - - 9,000 0.405

Units (Fully Paid)

US 2002 (Transferred to UTI Balance Fund - Income- Retail on November 21,2006)

10 - - 426,318 2.711

UTI Balance Fund - Income - Retail(Including Dividend Reinvestment - Units: 24,754.497;Value: Rs.0.464 Million)

10 294,945 3.175 - -

B. Unquoted


In Subsidiary Companies

Four Seasons Wines 10 50,000 0.500 - -

McDowell Scotland Limited £ 1 1,575,000 125.505 - -

Daffodils Flavours & Fragrances Private Limited 10 10,000 0.100 - -

United Vintners Limited 10 50,000 0.500 - -

USL Holdings Limited US$ 1 100,000 4.437 - -

McDowell Beverages Limited 10 50,000 0.500 - -

United Alcobev Limited 10 50,000 0.500 - -

Herbertsons Limited 10 54,000 0.540 - -

NonTrade

Janata Sahakari Bank Limited.Pune 100 - - 4,750 0.475

NonTrade other Investments:

In Government Securities

National Savings/Plan/Def. Certificates(Deposited with Government Authorities)

- - - 0.110

Total 839.403 703.703

Interest as Sole Beneficiary in USL Benefit Trust - 533.465

839.403 1,237.168


54

8. Investment (Cont’d)

b) The carrying cost of investment in Shaw Wallace & Company Limited (SWCL), a subsidiary Company,

amounting to Rs.4,888.877 Million, substantially exceeds the net worth and the market value of shares in

SWCL. Considering that the acquisition of the Shaw Wallace Group has given to the Company access to

very valuable brands, critical distilling and manufacturing capacities and distribution capabilities in important

markets in India and abroad, the management of the Company believes that this reflects intrinsic value far in

excess of the carrying cost of investments in SWCL and that such shortfall in net worth / decline in market

value of shares in SWCL is purely temporary in nature and, hence, no provision is considered necessary for

the same.

9. a) Names of Small Scale Industrial (SSI) Undertakings to whom the Company owes any sum which is

outstanding for more than thirty days as on March 31, 2007 is given below:

Abhijeet Chemicals; Adarsh Packagers; Akash Multipack; Anupama Industries; Astra Packaging Private

Limited; Avasas Pack & Print; Better Pac Industries; Bhargav Packaging; Brilliant Packing; Carto Pack;

Ceekay Enterprise; Chandigarh Chemicals; Chemline India Private Limited; Chromaprint (India) Private

Limited; Citizen Packaging Industries; Classic Image Offset Private Limited; Cliffton Metal Closures;

Competent Metal Closures; Dastagir Packaging Industries; De Simran Cartons; Dolphin Impressions

Private Limited; Dwarakamai Packaging; Excel Prints & Packs; Excellent Packaging; Ghandhar Marketing;

Global Packaging; Graphic Prints; J K Packaging; K & G Packaging; K.G. Printpack Private Limited; Kamala

Board Box; Kamani Packaging Industries; Kengeri Packers Private Limited; Kishor Bottles; Kolkata Closures

Private Limited; Krishna Cap Box Private Limited; Lawande Packaging; Lotus Packaging; M.B.Packers; Sai

Prasanthi Container; Ritesh Packaging; Subhodaya Paper; Magnaa Corrugators; Mahabir Cartons & Co;

Mahima Packaging; Mahima Packwell; Manohar Canister Private Limited; Manohar Packaging; Manohar

Packagings Private Limited; Margaret Packaging; Mega Packaging; Modern Packaging Industries; Nancy

Packages PrivateLimited; P.N.Mukherjee,Calcutta; Pack Care Products; Pack-In-Box; Peninsulars Packes

Private Limited; Perfect Packaging Inds; Premraj Packaging Industries; Priya Packaging; Quality Cartons;

Quality Packaging and alliedIndustries Limited; R. R. Roto Packaging Industries; Raghava Containers; Raj

Seals & Pack; Raja Lakshmi Packaging; Rajshil Papers Private Limited; Ruby Corrugated Products; S V

Printers & Packagers; Shah Pack & Print; Shakunta Packers; Shakunta Industries; Sharada Packaging

Private Limited; Shree Packwell Industries; Sree Kailas Paper Cartons; Sreyas Packaging Industries; Sri

Lakshmi Venkateswara; Standard Packaging; Standard Pack & Plastic; Subhodaya Enterprise; Subhodaya

Packaging;Surinder & Co;Swastik Packaging & Allied Industries;The Flavors India Private Limited;Tirumala

Corrugated Packaging Private Limited; Uday Kartons; United Packers; V N Box Process

The above information and that disclosed in Schedule 12 - “Current Liabilities and Provisions” regarding

SSI undertakings has been determined to the extent such parties have been identified on the basis of

information provided by the Company, which has been relied upon by the auditors.

b) This being the first year of applicability, the Company is in the process of compiling the additional information

required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006. The

management does not envisage any material impact on the financial statement in this regard, which has

been relied upon by the auditors.

10. As required under Section 205C of the Companies Act, 1956, the Company has transferred Rs. 2.966 Million

(2006: Rs. 3.890 Million) to the Investor Education and Protection Fund (IEPF) during the year. On March 31,

2007, no amount was due for transfer to the IEPF.


55

11. a) Prior period, exceptional and other non recurring items [(Debit)/Credit] include:

Rs. Million

Sl.No. Particulars 2007 2006

Prior period items

i) Provision for Gratuity (23.739) -

ii) Provision for leave encashment 16.492 -

iii) Exchange difference [Note 5 above] 36.478 -

Total 29.231 -

Exceptional and other non recurring items

iv) The surplus being excess of net sale proceeds over corresponding

carrying value of interest in the USL Benefit Trust. [Note 11(b)

below]

(2,473.735) -

v) Provision for doubtful debts written back (182.920) -

Total (2,656.655) -

GrandTotal (2,627.424) -

b) USL Benefit Trust, formed in terms of the Scheme approved by the Hon’ble High Courts of Karnataka and

Bombay, sold during the year 3,500,000 equity shares of the Company held by it. Being the sole beneficiary

of the Trust, the Company received net sale proceeds from the Trust. The surplus of Rs.2,473.735 Million

being the excess of net sale proceeds over corresponding carrying value of interest in the Trust has been

shown under Exceptional and other non recurring Items.


The Institute of Chartered Accountants of India issued Accounting Standard 15 (revised 2005) (AS 15R) on

Employee Benefits, which supersedes the earlier accounting standard on retirement benefits. The Company

adopted the provisions of AS 15R effective April 1, 2006. Consequent to early adoption of AS15R, following

disclosure have been made as required by the Standard:

a) The Company has reviewed and revised its accounting policy in respect of accumulating leaves to the

credit of its employees. Accordingly, an amount of Rs.2.522 Million (net of deferred tax credit Rs.1.280

Million) being resultant increase in net liability as on April 1, 2006 has been recognised with corresponding

adjustment to opening balance of General Reserve and an additional liability for the current year amounting

to Rs.0.894 Million has been recognised in the Profit and Loss Account having consequential effect on the

net profit for the year.

b) Defined Contribution Plans

The Company offers its employees defined contribution plans in the form of Provident Fund (PF) and

Employees’ Pension Scheme (EPS) with the government, Superannuation Fund (SF) and certain state

plans such as Employees’ State Insurance (ESI). PF and EPS cover substantially all regular employees

while the SF covers certain executives and the ESI covers certain workers. Contribution to SF is made to

trust managed by the Company, while other contributions are made to the Government’s funds.While both

the employees and the Company pay predetermined contributions into the provident fund and the ESI

Scheme, contributions into the pension fund and the superannuation fund are made only by the Company.

The contributions are normally based on a certain proportion of the employee’s salary.


56

During the year, the Company has recognised the following amounts in the Profit and Loss Account, which

are included in Contribution to Provident and other funds in Schedule 15:

Rs.Million

Provident Fund and Employee’s Pension Scheme * 40.182

Superannuation Fund 24.933

Employees’ State Insurance 7.309

72.424

* Excluding contribution to PF made to trusts managed by the Company

c) Defined Benefit Plans

Gratuity:

The Company provides for gratuity, a defined benefit plan, (the Gratuity Plan) to certain categories of

employees.TheGratuity Plan provides a lump sum payment to vested employees at retirement or termination

of employment, an amount based on the respective employee’s last drawn salary and years of employment

with the Company. The Company has employees’ gratuity funds managed by the Company as well as by

Insurance Companies.

Provident Fund:

For certain executives and workers of the Company, contributions are made as per applicable Indian laws

towards Provident Fund to certain Trusts set up and managed by the Company, where the Company’s

obligation is to provide the agreed benefit to the employees and the actuarial risk and investment risk fall,

in substance, on the Company. Having regard to the assets of the Fund and the return on the investments,

shortfall in the assured rate of interest notified by the Government, which the Company is obliged to make

good is determined actuarially.

Death Benefit:

TheCompany provides forDeathBenefit, a defined benefit plan, (theDeathBenefit Plan) to certain categories

of employees. The Death Benefit Plan provides a lump sum payment to vested employees on Death, an

amount based on the respective employee’s last drawn salary and remaining years of employment with the

Company after adjustments for any compensation received from the insurance Company and restricted to

limits set forth in the said plan. The Death Benefit Plan is Non-Funded.

Rs. Million

Funded Non-Funded

Gratuity PF Death-Benefit

A) Reconciliation of opening and closing balances of

the present value of the defined benefit obligation

Obligation at the beginning of the year 408.428 699.831 3.092

Contributions by plan participants - 60.767 -

Current service cost 58.275 50.044 0.433

Interest cost 32.674 61.419 -

Actuarial (gain)/ loss on obligations 1.249 - -

Benefits paid (49.399) (72.428) -

Obligation at the end of the year 451.227 799.633 3.525


57

Rs. Million

Funded Non-Funded

Gratuity PF Death-Benefit

B) Reconciliation of opening and closing balances of

the fair value of plan assets

Plan Assets at the beginning of the year 313.827 699.831 -

Prior period adjustment 23.739 - -

Contributions by plan participants 107.141 60.767 -

Contributions by the Company - 39.029 -

Expected return on plan assets 27.005 56.839 -

Actuarial gains / (losses) (7.492) (36.842) -

Benefits paid (49.399) (72.428) -

Plan assets at the end of the year 414.821 747.196 -

C) Reconciliation of present value of defined benefit

obligation and the fair value of plan assets to the

assets and liabilities recognised in the balance

sheet:

Present value of obligation at the end of the year 451.227 799.633 3.525

Fair value of plan assets at the end of the year 414.821 747.196 -

Liability/(Net Asset) Recognised in Balance Sheet

[Included under Provisions in Schedule 12(B)] 36.406 52.437 3.525

D) Expenses recognised in the Profit and Loss

Account

Current service cost 58.275 50.044 0.433

Interest cost 32.674 61.419 -

Expected return on plan assets (27.005) (56.839) -

Prior period adjustment (23.739) - -

Actuarial (gains)/losses 6.243 36.842 -

Total Expenses recognised in the Profit and Loss

Account 46.448 91.466 0.433

Included in:

Contribution to Provident and Other Funds in Schedule

15 70.187 91.466 -

Workmen and Staff Welfare in Schedule 15 - - 0.433

Prior period item in the Profit and Loss Account (23.739) - -

46.448 91.466 0.433

E) Investment details of plan assets

Government securities 19% 32%

Securities guaranteed by Government 35% 0%

Private Sector Bonds 2% 0%

Public Sector / Financial Institutional Bonds 1% 41%

Special Deposit Scheme 7% 22%

Fund balance with Insurance Companies 30% 0%

Others (including bank balances) 6% 5%

100% 100%


58

Based on the above allocation and the prevailing yields on these assets, the long term estimate of

the expected rate of return on fund assets has been arrived at. Assumed rate of return on assets is

expected to vary from year to year reflecting the returns on matching government bonds.

F) Actual return on plan assets 6.94% 8.19%

G) Assumptions

Discount Rate (per annum) 8.00% 8.00%

Expected Rate of Return on Plan Assets 8.00% 8.19%

Rate of increase in Compensation levels 5.00% Not Applicable

Average past service of employees (years) 14.46 Not Applicable

Mortality rates LIC 1994-

96 ultimate

table

LIC 1994-

96 ultimate

table

The estimates of future increase in compensation levels, considered in the actuarial valuation, have

been taken on account of inflation, seniority, promotion and other relevant factors such as supply and

demand in the employment market.

As this is the first year in which AS 15R has been applied the amounts of the present value of the

obligation, fair value of the plan assets, surplus or deficit in the plan and experience adjustment arising

on plan liabilities and plan assets for the previous periods have not been furnished.

As per the best estimate of the management, contribution of Rs.105 Million is expected to be paid to the

plans during the year ending March 31, 2008.

13. Borrowing Costs

Rs. Million

2007 2006

a) Interest capitalised on fixed assets - 0.957

b) Interest included in the Closing Stock of Malt and Grape Spirit under maturation46.145 48.801

14. Segment Reporting

The Company is engaged in the business of manufacture, purchase and sale of Beverage Alcohol (Spirits

and Wines) including through Tie-up units/ brand franchise, which constitutes a single business segment. The

Company’s operations outside India did not exceed the quantitative threshold for disclosure envisaged in AS

17 on ‘Segment Reporting’ issued by the Institute of Chartered Accountants of India. In view of the above,

primary and secondary reporting disclosures for business/geographical segment as envisaged in AS-17 are not

applicable to the Company.


59

15. Related Party Disclosures

a) Names of related parties and description of relationship

Enterprise where there is control Associates with

whom transactions

have taken place

during the year

Key

Management

personnel

Employees’ Benefit Plans

where there is significant

influence

(i) Subsidiary companies:

Asian Opportunities & Investment Limited

(AOIL)

Utkal Distillers

Limited (Utkal)

Mr.V.K.Rekhi

Managing

Director

Mc Dowell & Company

Limited Staff Gratuity Fund

(McD SGF)

Bouvet - Ladubay S.A.S (BL) *^

Chapin Landais S.A.S (CL) *^

Zelinka Limited

McDowell & Company

Limited Officers’ Gratuity

Fund (McD OGF)Montrose International SA (MI) ^

Palmer Investment Group Limited (PIG) ^

SWDL Group Officers

Gratuity Fund (SWDL OGF)

JIHL Nominees Limited (JIHL) ^

RG Shaw & Company Limited (RGSC) ^

SWDL Employees Gratuity

Fund (SWDL EGF)

Shaw Derby & Company Limited (SDC) ^

Shaw Scott & Company Limited (SSC) ^

McDowell Nepal Limited (MNL)

Herbertsons Limited

Employees Gratuity Fund

(HL EGF) ^

Thames Rice Milliing Company Limited

(TRMCL) ^

Shaw Wallace Breweries Limited (SWBL)^

Phipson & Company Limited

Management Staff Gratuity

Fund. (PCL SGF)

ShawWallace & Company Limited (SWCL)

ShawWallace Overseas Limited (SWOL)^

Phipson & Company Limited

Gratuity Fund. (PCL GF)

Ramanretti Investment & Trading Limited

(RITL) ^

Carew & Company Ltd.

Gratuity Fund (CCL GF)

Primo Distributors Private Limited (PDPL) McDowell & Company

McDowell Scotland Limited (MSL) * Limited Provident Fund

McDowell Beverages Limited (MBL) * (McD PF)

USL Holdings Limited (USLHL) *^ Herbertsons Limited

Spring Valley Investment Holdings Inc

(SVIHI) *^

Executives Provident Fund

(HL EPF)USL Holdings (UK) Limited *^ The Bengal Distilleries

United Spirits (UK) Limited *^ Company Limited Staff

United Spirits (Great Britain) Limited *^ Provident Fund (BD PF)Daffodils Fragrance and Flavours Private

Limited (DFFPL) *

Four Seasons Wines Private Limited

(FSWPL) *

Herbertsons Limited (HL) *^

United Vintners Limited (UVL) *

United Alcobev Limited (UAL) *

(ii) USL Benefit Trust [Note 11(b) above]

* Became a subsidiary during the year

^ No transactions during the year


60

b) Summary of the transactions with related parties:

Rs. Million

2007 2006Sl.No.

Nature of transactions ** Entitieswherethere iscontrol

Assoc

iates

Key

Man

agem

ent

person

nel

Employees’Benefit

Plans wherethere is

significantinfluence

Total Entitieswherethere iscontrol

Assoc

iates

Key

Man

agem

ent

person

nel

Employees’Benefit Planswhere thereis significantinfluence

Total

a) Purchase of goods

- SWCL 3.145 - - - 3.145 2.819 - - - 2.819

- Utkal - - - - - - 0.522 - - 0.522

b) Sale of goods

-SWCL 36.578 - - - 36.578 - - - - -

- Primo 126.430 - - - 126.430 222.666 - - - 222.666

- AOIL - - - - - 75.789 - - - 75.789

- Utkal - - - - - - 3.691 - - 3.691

- Others 12.647 - - - 12.647 62.868 - - - 62.868

c) Income from sale byTie-up Units.

- SWCL 369.140 - - - 369.140 318.499 - - - 318.499

- Utkal - 79.469 - - 79.469 - 22.521 - - 22.521

d) Income from BrandFranchise

- MNL 12.296 - - - 12.296 19.205 - - - 19.205

- Utkal - - - - - 7.542 - - 7.542

e) Purchase of Investment inPDPL

- SWFSL - - - - - 1030.000 - - - 1030.000

f) Sale of Investment inPDPL- SWFSL - - - - - 4612.758 - - - 4612.758

g) Sale/ (Purchase) of fixedassets-Utkal - - - - - - 0.077 - - 0.077

h) Other Income

- MNL 12.697 - - - 12.697 15.412 - - - 15.412

- SWCL - - - - - 15.072 - - - 15.072

i) Commission on Sales

- Others - - - - - 12.407 - - - 12.407

j) Royalty and Brand Fee

- SWCL 227.384 - - - 227.384 216.365 - - - 216.365

- AOIL 9.294 - - - 9.294 - - - - -

k) Interest Income (net)

- AOIL 12.760 - - - 12.760 11.682 - - - 11.682

l) Rental Deposit - - 2.595 - 2.595 - - 2.359 - 2.359

m) Interest as Sole Beneficiaryin USL Benefit Trust 153.536 - - - 153.536 687.001 - - - 687.001

n) Receipt from USL BenefitTrust [Note 11(b)]

3,007.200 - - - 3,007.200 - - - - -


61

2007 2006Sl.No.

Nature of transactions ** Entitieswherethere iscontrol

Associates

Key

Man

agem

ent

person

nel

Employees’Benefit

Plans wherethere is

significantinfluence

Total Entitieswherethere iscontrol

Associates

Key

Man

agem

ent

person

nel

Employees’Benefit Planswhere thereis significantinfluence

Total

o) Finance (including loansand equity contributions incash or in kind)-SWCL (1061.435) - - - (1061.435)

-Zelinka (10.910) - - - (10.910) 7,356.189 - - - 7,356.189

-AOIL 965.398 - - - 965.398 - - - - -

-Utkal - (24.384) - - (24.384) - 27.669 - - 27.669

-Others 27.118 - - - 27.118 (22.212) - - - (22.212)

p) Guarantees andCollaterals given-MNL 31.250 - - - 31.250 250.000 - - - 250.000

q) Managing Directors’Remuneration

- - 22.753 - 22.753 20.772 - 20.772

r) Rent - - 2.536 - 2.536 - - 2.305 - 2.305

s) Contribution to GratuityFund- McD OGF - - - 38.506 38.506 - - - 56.376 56.376

- McD SGF - - - 18.311 18.311 - - - 26.867 26.867

- SWDL OGF - - - 15.339 15.339 - - - - -

- SWDL EGF - - - 33.866 33.866 - - - - -

t) Contribution to ProvidentFund- McD PF - - - 34.772 34.772 - - - - -

- HL EPF - - - 1.803 1.803 - - - - -

- BD PF - - - 2.454 2.454 - - - - -

u) Dividend Paid - - - - -

- PDPL 4.573 - - - 4.573 - - - - -

- SWCL 20.565 - - - 20.565 - - - - -

- USL Benefit Trust 3.229 - - - 3.229 - - - - -

v) Amount due from

- AOIL 1,217.268 - - - 1,217.268 259.858 - - - 259.858

- Utkal - 336.462 - - 336.462 - 335.894 - - 335.894

- Zelinka 7345.279 - - - 7,345.279 7,356.189 - - - 7,356.189

-SWCL 163.994 - - - 163.994 958.286 - - - 958.286

- Others 209.528 - - - 209.528 32.077 - - - 32.077

w) Amount due to

- PDPL 48.000 - - - 48.000 39.009 - - - 39.009

** Excludes Reimbursement of Expenses and Cost sharing arrangements.

The above information has been determined to the extent such parties have been identified on the basis of information provided by the

Company, which has been relied upon by the auditors.

b) Summary of the transactions with related parties (Contd.):

Rs. Million


62

16. (a) The Company’s significant leasing arrangements in respect of operating leases for premises (residential,

office, stores, godown, etc), which are not non-cancellable, range between 11 months and 3 years generally

(or longer in certain cases) and are usually renewable by mutual consent on mutually agreeable terms.The

aggregate lease rentals payable are charged as Rent under Schedule 15 to the accounts.

Leasing arrangements entered into prior to April 1, 2001 have not been considered for treatment under AS

19 ‘Accounting for Leases’.

(b) The Company has acquired computer equipment and cars on finance leases. The lease agreement is for a

primary period of 48 months for computer equipments and 36 months to 60 months for cars. The Company

has an option to renew these leases for a secondary period. There are no exceptional/restrictive covenants

in the lease agreements.

The minimum lease payments and their present value, for each of the following periods are as follows:

Rs. Million

2007 2006

ParticularsPresentValue of

payments

Minimumlease

payments

PresentValue of

payments

Minimumlease

payments

Later than one year and not later than five

years 16.850 18.150 8.042 8.368

Later than five years - - - -

16.850 18.150 8.042 8.368

Not later than one year 11.863 13.711 4.348 4.782

28.713 31.861 12.390 13.150

Less: Finance Charges 3.148 0.760

Present value of net minimum lease

payments 28.713 12.390

17. Earnings Per Share:

2007 2006

a) Net Profit after tax (Rs. Million) 4,940.194 420.198

Less: Proposed Dividend on Preference Shares (including

Corporate tax thereon) (Rs. Million) 8.160 7.953

Net Profit available for equity shares (Rs. Million) 4,932.034 412.245

b) Basic number of Equity Shares of Rs.10 each outstanding

during the year 94,481,930 *94,481,930

c) Weighted Average number of Equity Shares of Rs.10 each

outstanding during the year 94,481,930 *85,802,478

d) Basic/Diluted Earnings Per Share (Rs.)** 52.20 4.80

* including Equity shares to be issued and included under Share Capital Suspense in Schedule 1A

** Also refer Note 3 above.


63

18. Taxes on Income:

a) Current Taxation

Rs. Million

Provision for current taxation includes:

2007 2006

i) Income Tax [including relating to earlier year Rs. Nil

(2006: 81.502 Million)]

1,291.720 81.502

ii) Wealth Tax 11.200 12.000

Total 1,302.920 93.502

b) Deferred Taxation

The net DeferredTax (Asset) / Liability as onMarch 31, 2007 amounting to Rs.7.935Million (2006:Rs.70.569

Million) has been arrived at as follows:

Rs. Million

Particulars

Deferred Tax

(Assets) /

Liabilities as

on 1.4.2006

Current

Year charge

/ (credit)

Deferred Tax

(Assets) /

Liabilities

as on

31.03.2007

Difference between book and tax depreciation296.243 (40.871) 255.372

Provision for Doubtful Debts (118.527) 44.894 (73.633)

Unabsorbed Business Loss/ Depreciation Allowance(44.758) 44.758 -

Others (62.389) (110.135) (172.524)

Total 70.569 (61.354) 9.215

Add: Adjustment on adoption of Accounting Standard

on ‘Employee Benefits’

[Note 12(a) above] - (1.280) (1.280)

70.569 (62.634) 7.935

19. Remuneration paid/payable to Managing Director

Rs. Million

2007 2006

Salary and Allowances 11.744 11.083

Incentives paid 5.385 4.491

Contribution to Provident and other Funds * 2.987 2.825

Value of Perquisites 2.637 2.373

22.753 20.772

* Provision for contribution to employee retirement/post retirement and other employee benefits which are

based on actuarial valuation done on an overall Company basis are excluded above.


64

20. Directors’ Commission

Rs. Million

2007 2006

Computation of Net Profits under Section 198 of the Companies Act, 1956

Net Profit before Taxation 6,216.260 512.190

Add: Depreciation as per Books 309.350 409.002

Remuneration to Managing Director 22.753 20.772

Directors’ Fees 1.520 0.855

Directors’ Commission 36.991 5.517Book deficit/(surplus) on fixed assets sold,

written-off, etc (net) as per books 14.954 (27.148)Provision for Doubtful Debts - 137.827

Diminution in value of Investments 0.264 -

6,602.092 1,059.015

Less: Depreciation under Section 350 of the

Companies Act, 1956 309.350 409.002Profit on Sale of Investments 0.794 79.582

The surplus being excess of net sale proceeds over corresponding carrying

value of interest in the USL Benefit Trust [Note 11(b) above]2,473.735 -

Deficit/(Surplus) on disposal of fixed assets under

Section 349 of the Companies Act, 1956 14.954 18.711

Provision for Doubtful debts written back (including Rs.182.920 Million

credited to prior period items [Note 11(a) above])104.115 -

Net profit 3,699.146 551.720

Commission 1% thereof 36.991 5.517

The total remuneration as stated above is within the maximum permissible limit under the Companies Act, 1956.

21. Quantitative Information in respect of goods manufactured and sold by the Company

a. Particulars of Capacity and Production:

2007 2006

Description UnitLicensed

Capacity

Installed

Capacity

Actual

Production

Licensed

Capacity

Installed

Capacity

Actual

Production

Beverage

Alcohol

[Note (i)]

Ltrs 164,560,592 192,150,600 161,374,408 164,560,592 192,150,600 147,654,722

Notes:

i. Includes alcohol produced and bottled out of purchased rectified spirit. This activity is not considered as

manufacture under the Industries (Development and Regulation) Act, 1951.

ii. The Company’s applications for the Carry On Business licenses for other Units are still pending with the

authority.

iii. The Licenced and Installed Capacity has been certified by the Company’s management and relied upon

by the Auditors, this being a technical matter.


65

b. Particulars of opening stock of Finished Goods:


Description Unit Quantity Value Quantity ValueBeverage Alcohol Cases 1,271,147 1,092.814 362,103 326.311Others 115.039 6.648Total 1,207.853 332.959

c. Particulars of stock of Finished Goods acquired on amalgamation

Description Unit Quantity Value Quantity ValueBeverage Alcohol Cases - - 527,920 444,227Others - 0.450Total - 444.677

d. Particulars of closing stock of Finished Goods:

Description Unit Quantity Value Quantity ValueBeverage Alcohol Cases 967,072 996.638 1,271,147 1,092.814Others (including by-products) - 115.039

996.638 1,207.853

e. Particulars of Turnover:

Description Unit Quantity Value Quantity ValueBeverage Alcohol Cases 33,991,350 43,019.761 28,712,847 31,768.267Others (including by-products) 838.029 1,640.288

43,857.790 33,408.555

f. Particulars of purchase of traded goods:

Description Unit Quantity Value Quantity ValueBeverage Alcohol Cases 2,300,070 3,324.762 1,741,873 1,562.315Others - 0.394

3,324.762 1,562.709

22. Particulars of Raw Materials Consumed:

2007 2006

Description Unit Quantity Value Quantity Value

Spirits Litres 109,192,051 3,609.765 91,731,198 2,985.405

Malt Kg. 8,925,070 194.249 8,409,250 155.262

Molasses Kg. 128,136,220 496.441 143,262,618 684.564

Others 1,462.418 755.297

5,762.873 4,580.528

% Value % Value

Whereof:

Imported 6 321.420 5 278.930

Indigenous 94 5,441.453 95 4,301.598

100 5,762.873 100 4,580.528


66

23. Consumption of Packing Material, Stores and Spares:

(including stores consumed in Repairs and Maintenance expenses) Rs. Million

2007 2006% Value % Value

Imported 1 27.250 1 1.716Indigenous 99 5,505.716 99 4,627.402

100 5,532.966 100 4,629.118

24. Value of Imports on C.I.F. basis:

2007 2006Raw Materials and Packing Materials 248.637 238.237Components and Spare Parts 2.972 1.716Plant and Machinery - 3.377

251.609 243.330

25. Earnings in Foreign Currency:

2007 2006FOB value of Export sales - 94.058Others (net)* 47.009 42.717

47.009 136.775

* includingRs.Nil (2006:Rs.15.312Million) towards reimbursement of expenses on issue of Global Depository

Shares credited to Share Premium Account.

26. Expenditure in Foreign Currency:

2007 2006Interest 327.766 211.352Others (Royalty, Travelling, Subscription, Professional fees, Foreign Travel

Expenses, Advertisement, Bank Charges, Finance Charges, etc.)* 107.022 271.559434.788 482.911

* Including Rs. Nil (2006: Rs.230.293 Million) towards Professional Fees for Share/ Foreign Currency

Convertible Bonds issued.

27. Auditors’ Remuneration *

2007 2006

Statutory Audit ** 8.200 5.300

Tax Audit Fee - 0.500

Other Services 4.300 7.251

Out-of-pocket Expenses (including service tax) 1.856 0.440

14.356 13.491

* Included under Legal and Professional Charges in Schedule 15, except Rs. Nil (2006: Rs.4.201 Million) and

Rs. Nil (2006: Rs.0.500 Million) debited to Share Premium Account and General Reserve respectively.

** Including relating to earlier year Rs. 1.200 Million (2006 : Nil)


67

Rs. Million

2007 2006

28. (a) Repairs to Plant and Machinery include:

Wages 1.960 1.468

Stores Consumed 12.929 17.825

14.889 19.293

(b) Repairs to Building include:

Wages 0.036 0.493

Stores consumed 1.568 1.756

1.604 2.249

29. Research and Development expenses comprise the following:

2007 2006

Salaries and Wages 4.413 8.115

Contribution to Provident Fund and other Funds 0.445 1.270

Staff Welfare Expenses 0.220 0.230

Rent 0.954 1.894

Miscellaneous Expenses 1.972 1.411

8.004 12.920

30. Previous year’s figures have been regrouped / rearranged wherever necessary.

VIJAY MALLYA V.K.REKHI

Chairman Managing Director

J. MAJUMDAR M.R.DORAISWAMY IYENGAR P.A.MURALI

Partner Director Chief Financial Officer


PriceWaterhouse V.S.VENKATARAMAN

Chartered Accountants Company Secretary

Bangalore Bangalore



68

Statement PursuantTo Section 212(1)(e) OfThe Companies Act, 1956As At March 31, 2007

a) No of shares held at the endof the financial year of thesubsidiary

b) Extent of holding Net aggregate Profit/loss of the subsidiary so faras it concerns the members of the company

% % a) Not dealt with in theaccounts of the company

b) Dealt with in theaccounts of the company

Sl.no.

Name of the subsidiary United SpiritsLtd

Othersubsidiarycompanies

UnitedSpirits Ltd


(i )for thesubsidiary'sfinancialyear ended31.03.2007

(ii )for the previousfinancial yearsof the subsidiarysince it becamea subsidiary

(i )for thesubsidary'sfinancialyear ended31.03.2007


(Rs. Million)

1 2 3 4 5 6 7 8 9

1 Asian Opportunities &Investments Ltd

4,998,706Shares

- 100% - (34.733) (1.002) - -

2 McDowell Nepal Ltd 67,716 Shares - 82.46% - 22.675 15.541 - -

3 Zelinka Ltd 1,000 Shares - 100% - 2.568 (13.623) - -

4 Shaw Wallace &Company Ltd

15,072,311Shares

18,601,288Shares

31.40% 38.75% 820.768 468.603 - -

5 Ramanreti Investments &Trading Ltd

- 50,000Shares

- 100% (0.070) (0.064) - -

6 Shaw Wallace BreweriesLtd

- 152,615,018Shares

- 100% 207 1229.396 - -

7 Primo Distributors PrivateLtd

3,920,010Equity Shares

- 100% - 10.250 6.723 - -

8 Palmer Investment GroupLtd

- 15,000,000Shares

- 100% (0.315) (0.127) - -

9 RG Shaw & CompanyLtd

- 7,690,180Shares

- 100% (0.969) 7.547 - -

10 Shaw Scott & CompanyLtd

- 105,609Shares

- 100% (0.134) 2.037 - -

11 Shaw Darby & CompanyLtd

- 130,845Shares

- 100% (0.035) 1.991 - -

12 Thames Rice MillingCompany Ltd

- 90,160Shares

- 100% (0.303) 1.583 - -

13 ShawWallace OverseasLtd

- 357,745Shares

- 100% (0.291) 0.377 - -

14 JIHL Nominees Ltd - 10 Shares - 100% (0.101) 2.544 - -

15 Montrose InternationalS.A

- 500 Shares - 100% 6.542 8.755 - -

16 Bouvet Ladubay - 3,600,000Shares

- 100% 39.610 - - -

17 Chapin Landais - 5,000 Shares - 100% (0.247) - - -

18 McDowell & Co.(ScotLand) Ltd

- 1,575,000Shares

- 100% (10.195) - - -

19 Spring Valley InvestmentsHoldings Inc

- 50,000Shares

- 100% (0.051) - - -

69

a) No of shares held at the endof the financial year of thesubsidiary

b) Extent of holding Net aggregate Profit/loss of the subsidiary so faras it concerns the members of the company

% % a) Not dealt with in theaccounts of the company

b) Dealt with in theaccounts of the company

Sl.no.

Name of the subsidiary United SpiritsLtd


UnitedSpirits Ltd


(i )for thesubsidiary'sfinancialyear ended31.03.2007


(i )for thesubsidary'sfinancialyear ended31.03.2007


(Rs. Million)

1 2 3 4 5 6 7 8 9

20 United Spirits (GreatBritain) Ltd

- 100Shares

- 100% (0.051) - - -

21 USL Holdings Ltd - 100,000Shares

- 100% (0.055) - - -

22 USL Holdings (UK) Ltd - 100,000Shares

- 100% (0.051) - - -

23 United Spirits (UK) Ltd - 100,000Shares

- 100% (0.051) - - -

24 Daffodils Flavours &Fragrances Pvt Ltd

10,000 Shares - 100% - - - - -

25 Four Seasons Wines Ltd 50,000 Shares - 100% - (0.040) - - -

26 Herbertsons Ltd 54,000 Shares - 90% - (0.012) - - -

27 McDowell Beverages Ltd 50,000 Shares - 100% - - - - -

28 United Alcobev Ltd 50,000 Shares - 100% - (0.011) - - -

29 United Vintners Ltd 50,000 Shares - 100% - (0.023) - - -

Statement PursuantTo Section 212(1)(e) OfThe Companies Act, 1956

As At March 31, 2007 (Contd.)

Statement Pursuant To Section 212(1)(f) Of The Companies Act, 1956

As At March 31, 2007Material changes that have occurred between the close

of subsidiary's financial year and March 31, 2007

Sl.no

Name of thesubsidiary

SubsidiaryFinancialyear endedon

Company'sInterestin theSubsidiary

Subsidiary'sFixedAssets

Subsidiary'sInvestments

Moneyslent by theSubsidiary

Moneys borrowed by thesubsidiary for the purposesother than that of meetingcurrent liabilities

(Rs. Million)

1 McDowell Nepal Limited 16.07.2006 82.46% (1.699) - - 18.750

V.S.VENKATARAMAN VIJAY MALLYA V.K.REKHICompany Secretary Chairman Managing Director

M.R.DORAISWAMY IYENGAR P.A.MURALIDirector Chief Financial Officer

BangaloreOctober 31, 2007

70

Nam

eof

theSub

sidiary

R.G.S

haw&

Com

pany

Limited

Palmer

Investmen

t

Group

Limited

Shaw

Wallace

&

Com

pany

Limited

Mon

trose

Internationa

lS.A.

ShawScott

&Com

pany

Limited

ShawDarby

&

Com

pany

Limited

Tha

mes

Rice

MillingCom

pany

Limited

GBP

INR

USD

INR

INR

USD

INR

GBP

INR

GBP

INR

GBP

INR

1.Cap

ital

0.07

76.08

115

.000

654.45

048

0.06

10.50

021

.815

0.10

68.35

10.13

110

.347

0.09

07.12

9

2.Reserves

0.61

248

.238

1.22

353

.400

774.29

2-

--

--

-0.01

91.39

7

3.TotalA

ssets

0.78

662

.575

20.013

872.70

22,34

0.79

50.52

723

.000

0.10

68.96

60.09

510

.347

0.10

98.52

7

4.TotalLiabilities

0.78

662

.575

20.013

872.70

22,34

0.79

50.52

723

.000

0.10

68.96

60.09

510

.347

0.10

98.52

7

5.Investmen

ts0.72

056

.972

16.234

708.28

91,58

6.94

0-

0.09

77.71

60.10

98.58

70.12

39.70

2

6.Turnover

--

--

2,32

1.46

80.87

538

.081

--

--

--

7.Profitbe

fore

Taxation

(0.011

)(0.969

)(0.007

)(0.315

)1,14

8.06

90.15

06.54

2(0.002

)(0.133

)(0.000

)(0.035

)(0.004

)(0.303

)

8.Provision

forTaxation

--

--

327.30

1-

--

--

--

-

9.ProfitafterTaxation

(0.011

)(0.969

)(0.007

)(0.315

)82

0.76

80.15

06.54

2(0.002

)(0.133

)(0.000

)(0.035

)(0.004

)(0.303

)

10.P

ropo

sedDividen

d-

--

-72

.009

--

--

--

--

Nam

eof

theSub

sidiary

JIHLNom

inee

s

Limited

Primo

Distributors

Private

Limited

USLHolding

s

(UK)Limited

SpringValley

Investmen

ts

Holding

Inc.

USLHolding

s

Limited

UnitedSpirits

(Great

Britain)

Limited

UnitedSpirits(UK)

Limited

USD

INR

INR

GBP

INR

USD

INR

USD

INR

GBP

INR

GBP

INR

1.Cap

ital

0.00

00.00

076

.200

0.01

00.08

70.05

02.21

80.10

04.77

90.00

00.00

00.00

00.00

0

2.Reserves

0.04

72.05

372

.465

--

--

--

--

--

3.TotalA

ssets

0.05

02.05

314

8.66

50.22

719

.453

0.44

819

.579

0.10

04.77

90.22

719

.400

0.22

719

.400

4.TotalLiabilities

0.05

02.05

314

8.66

50.22

719

.453

0.44

819

.579

0.10

04.77

90.22

719

.400

0.22

719

.400

5.Investmen

ts-

-55

.010

0.00

00.00

00.00

20.08

70.05

02.21

8-

-0.00

00.00

0

6.Turnover

--

473.66

7-

--

--

--

--

-

7.Profitbe

fore

Taxation

(0.002

)(0.100

)13

.419

(0.001

)(0.051

)(0.001

)(0.051

)(0.001

)(0.055

)(0.001

)(0.051

)(0.001

)(0.051

)

8.Provision

forTaxation

--

3.16

9-

--

--

--

--

-


(0.002

)(0.100

)10

.250

(0.001

)(0.051

)(0.001

)(0.051

)(0.001

)(0.055

)(0.001

)(0.051

)(0.001

)(0.051

)

10.P

ropo

sedDividen

d-

--

--

--

--

--

--

Detailsof

Subs

idiary

Com

panies

(AmountinMillions)

71

Details

ofSu

bsidiary

Com

panies

(Con

td.)

(AmountinMillions)

Nam

eoftheSubsidiary

Ram

anreti

Investmentsand

TradingCom

pany

PrivateLtd

McD

owellN

epal

Limited

Asian

Opportunities

andInvestments

Limited

Shaw

Wallace

Overseas

Limited

Shaw

Wallace

Breweries

Limited

Four

Seasons

Wines

Limited

United

Vintners

Limited

United

Alcobev

Limited

McD

owell

Beverages

Limited

INR

NRS

INR

USD

INR

INR

INR

INR

INR

INR

INR

1.Capital

0.500

8.212

5.132

4.999

239.987

30.500

1,645.850

0.500

0.500

0.500

0.500

2.Reserves

-106.379

66.487

--

--

--

--

3.TotalA

ssets

23.139

146.669

91.668

33.200

1,444.532

30.500

4,524.412

32.336

0.730

0.530

0.530

4.TotalLiabilities

23.139

146.669

91.668

33.200

1,444.532

30.500

4,524.412

32.336

0.730

0.530

0.530

5.Investments

16.860

--

21.004

970.259

-1,971.798

--

--

6.Turnover

-334.398

208.998

1.612

70.158

0.483

261.277

--

--

7.ProfitbeforeTaxation

(0.069)

51.331

32.082

(0.798)

(34.733)

(0.239)

242.842

(0.040)

(0.023)

(0.011)

(0.011)

8.Provision

forTaxation

-15.051

9.407

--

-35.819

--

--


(0.069)

36.280

22.675

(0.798)

(34.733)

(0.239)

207.023

(0.040)

(0.023)

(0.011)

(0.011)

10.P

roposedDividend

-24.635

15.397

--

--

--

--

Nam

eoftheSubsidiary

McD

owell

(Scotland)Limited

BouvetLadubay

S.A.S

ChapinLandiasS.A.S

Herbertsons

Limited

Zelinka

Limited

Daffodils

Flavours&

Fragrances

PrivateLimited

GBP

INR

EURO

INR

EURO

INR

INR

USD

INR

INR

1.Capital

1.575

131.780

3.600

212.015

0.100

5.889

0.600

0.002

0.099

0.100

2.Reserves

--

4.566

259.784

0.064

3.450

--

--

3.TotalA

ssets

2.886

246.014

8.890

501.303

0.164

9.586

0.600

168.826

7,345.647

17.699

4.TotalLiabilities

2.886

246.014

8.890

501.303

0.164

9.586

0.600

168.826

7,345.647

17.699

5.Investments

--

0.145

8.451

0.143

0.830

-162.071

7,071.181

-

6.Turnover

--

10.633

616.268

1.514

87.730

-0.128

5.580

-

7.ProfitbeforeTaxation

(0.120)

(10.195)

1.120

63.612

(0.049)

(0.287)

(0.012)

0.071

3.080

-

8.Provision

forTaxation

--

0.437

25.319

0.007

0.041

-0.012

0.512

-


(0.120)

(10.195)

0.683

38.293

(0.042)

(0.246)

(0.012)

0.059

2.568

-

10.P

roposedDividend

--

--

--

--

--

72

Balance Sheet Abstract

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

I Registration Details

Registration No. 0 8 - 2 4 9 9 1

Balance Sheet Date 3 1 0 3 2 0 0 7

II Capital Raised during the period (Rs. Million)

Public issue N I L Rights issue N I L

Bonus Shares N I L Private Placement N I L

Others 4 1 7 . 6 0 5 Naked Warrants / Pref. offer N I L

III Position of Mobilisation and Deployment of Funds (Rs. Million)

Total Liabilities 2 8 1 0 5 . 9 5 1 Total Assets 2 8 1 0 5 . 9 5 1

Sources of funds

Paid-up Capital 1 0 2 2 . 3 1 9 Reserves & Surplus 1 2 3 9 7 . 9 0 5

Share Capital N I L

Suspense Secured Loans 9 4 8 5 . 2 2 6

Deferred Tax

Unsecured Loans 5 1 9 2 . 5 6 6 Loans Liability (Net) 7 . 9 3 5

Application of Funds

Net Fixed Assets 4 6 4 4 . 8 0 0 Investments 6 6 2 4 . 6 1 9

Net Current Assets 1 6 8 3 6 . 5 3 2 Misc. Expenditure N I L

Accumulated Losses N I L

IV Performance of Company (Rs. Million)

Turnover 2 7 9 0 8 . 7 7 7 Total Expenditure 2 4 0 1 0 . 5 1 9

(Gross Revenue)

(+) Profit / (-) Loss (+) Profit / (-) Loss

Before Tax + 6 2 1 6 . 2 6 0 After Tax + 4 9 4 0 . 1 9 4

(incl. Deferred Tax)

Earnings (Diluted) per Share in Rs. 5 2 . 2 0 Dividend rate % 2 5

V Generic Name of Three Principal Products / Services of Company (as per monetary items)

Item Code No. (ITC Code) 2 2 0 8 3 0 0 0

Product Description W H I S K Y


Product Description B R A N D Y


Product description R U M

VIJAY MALLYA V.K. REKHI M.R. DORAISWAMY IYENGAR

Chairman Managing Director Director

Bangalore P.A. MURALI V.S.VENKATARAMAN

October 31, 2007 Chief Financial Officer Company Secretary

73

Auditors' Report to the Board of Directors of United Spirits Limited

1. We have audited the attached Consolidated Balance

Sheet of United Spirits Limited and its subsidiaries

(United Spirits Limited Group) as at March 31,

2007, the Consolidated Profit and Loss account for

the year ended on that date annexed thereto, and

the Consolidated Cash Flow Statement for the year

ended on that date, which we have signed under

reference to this report.These Consolidated Financial

Statements are the responsibility of the United Spirits

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 Consolidated 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. We did not audit the financial statements of certain

subsidiaries, whose financial statements reflect total

assets of Rs.17,918.973 Million as at March 31, 2007,

total revenues of Rs.3,378.851 Million and net cash

inflow/(outflow) amounting to Rs.669.089 Million for

the year ended on that date and associates whose

financial statements reflect the United Spirits Limited

Group’s share of loss of Rs.0.109 Million for the year

ended on that date as considered in the Consolidated

Financial Statements. These financial statements and

other information of these subsidiaries and associates

have been audited by other auditors, whose reports

have been furnished to us, and our opinion, insofar as

it relates to the amounts included in respect of these

subsidiaries, is based solely on the report of the other

auditors.

4. We report that the Consolidated Financial Statements

have been prepared by United Spirits Limited’s

management in accordance with the requirements

of Accounting Standard 21, Consolidated Financial

Statements and Accounting Standard 23, Accounting

for Investments in Associates in Consolidated

Financial Statements, issued by The Institute of

Chartered Accountants of India.

5. Based on our audit and on consideration of the reports

of other auditors on separate financial statements and

on the other financial information of the components,

in our opinion and to the best of our information and

according to the explanations given to us, the attached

Consolidated Financial Statements, give a true and

fair view in conformity with the accounting principles

generally accepted in India:

i) in the case of the Consolidated Balance Sheet,

of the state of affairs of the United Spirits Limited

Group as at March 31, 2007;

ii) in the case of the Consolidated Profit and Loss

account, of the profit for the year ended on that

date; and

iii) in the case of the Consolidated Cash Flow

Statement, of the cash flows for the year ended

on that date.

J. Majumdar

Partner

Membership Number – F 51912


PriceWaterhouse

Chartered Accountants

Place: Bangalore

Date: October 31, 2007

74


SOURCES OF FUNDSShareholders' Funds

Share Capital 1 828.930 604.714Share Capital Suspense 1A - 224.216Reserves and Surplus 2 12,863.346 7,588.850

Minority Interest 1,712.285 1,285.164Loan Funds

Secured Loans 3 9,507.589 10,081.142Unsecured Loans 4 5,294.050 5,350.285

Deferred Tax Liability (Net) [Schedule 18 Note 20(b)] 18.618 85.81030,224.818 25,220.181

APPLICATION OF FUNDSa) Fixed Assets 5

Gross Block 6,821.724 6,056.444Less: Depreciation 1,764.466 1,218.172Net Block 5,057.258 4,838.272Capital Work in Progress 133.227 26.106

5,190.485 4,864.378

b) Goodwill on Consolidation 11,324.130 10,835.286Investments 6 2,044.080 2,484.518Current Assets, Loans and Advances

Inventories 7 3,552.856 2,945.268Sundry Debtors 8 3,991.387 3,220.063Cash and Bank Balances 9 5,778.013 3,611.420Other Current Assets 10 1,218.462 727.892Loans and Advances 11 4,389.510 3,908.470

18,930.228 14,413.113Less: Current Liabilities and Provisions 12

Liabilities 6,049.607 6,309.169Provisions 1,214.498 1,067.945

7,264.105 7,377.114Net Current Assets 11,666.123 7,035.999

30,224.818 25,220.181Statement on Significant Accounting Policies 17Notes on Accounts 18

The Schedules referred to above and the notes thereon form an integral part of the Accounts.This is the Consolidated Balance Sheet referred to in our report of even date


J. MAJUMDAR M.R.DORAISWAMY IYENGAR P.A.MURALIPartner Director Chief Financial OfficerFor and on behalf ofPrice Waterhouse V.S.VENKATARAMANChartered Accountants Company Secretary

Bangalore BangaloreOctober 31, 2007 October 31, 2007

Balance Sheet as at March 31, 2007Consolidated Financial Statement

75


INCOMESales (Gross) 47,646.449 35,400.085Less : Excise Duty 20,867.652 16,406.439

26,778.797 18,993.646Income arising from Sale by Manufacturers under 'Tie-up'agreements (Tie-up units) 1,531.581 1,716.672Income from Brand Franchise 938.716 774.343Other Income 13 875.518 595.096

30,124.612 22,079.757EXPENDITURE

Materials 14 16,046.969 11,331.911Manufacturing and Other Expenses 15 8,844.500 8,229.663Interest and Finance charges 16 873.405 1,524.206

25,764.874 21,085.780Profit before Prior Period, Exceptional and OtherNon-Recurring Items, Depreciation and Taxation 4,359.738 993.977Depreciation 337.861 425.621Profit before Prior period, Exceptional and OtherNon-Recurring Items and Taxation 4,021.877 568.356Prior period, exceptional and other non recurring items (Net) 3,134.686 -[Schedule 18 Note 14(a)]Profit before Taxation 7,156.563 568.356Provision for Taxation:

Current Tax 1,077.621 130.518Deferred Tax (65.912) (71.277)Fringe Benefit Tax 37.599 63.625

Profit after Taxation and before share in 6,107.255 445.490Profits / (Losses) of AssociatesShare in Profits / (losses) of Associates (Net) (0.254) (4.777)Profit before Minority Interest 6,107.001 440.713Minority Interest in (Profit ) / Loss (437.478) 813.085Net Profit for the year 5,669.523 1,253.798Profit brought forward from previous year 932.348 416.481

6,601.871 1,670.279Appropriations:Proposed Dividend

Equity Shares - Interim 101.163 -Equity Shares - Final 85.596 188.963Corporate Tax on Proposed Dividend 50.119 34.522Transfer to Capital Redemption Reserve - 464.446Transfer to General Reserve 542.648 50.000

Profit carried to Balance Sheet 5,822.345 932.348Basic and Diluted Earnings Per Share (Rs.) 68.40 16.38Statement on Significant Accounting Policies 17Notes on Accounts 18

The Schedules referred to above and the notes thereon form an integral part of the Accounts.This is the Consolidated Profit and Loss Account referred to in our report of even date


J. MAJUMDAR M.R.DORAISWAMY IYENGAR P.A.MURALIPartner Director Chief Financial OfficerFor and on behalf ofPrice Waterhouse V.S.VENKATARAMANChartered Accountants Company Secretary


Profit and Loss Account for the year ended March 31, 2007Consolidated Financial Statement

76

Cash Flow Statement for the Year Ended March 31, 2007Consolidated Financial Statement


A. CASH FLOW FROM OPERATING ACTIVITIESNet profit / (loss) before Prior Period, Exceptional and OtherNon-recurring items and Taxation

4,021.877 568.356

Adjustments for :Depreciation 337.861 425.621Unrealised Foreign Exchange Loss / (Gain) (150.466) 56.158Bad Debts/ Advances written off 43.476 37.010Loss/(Gain) on Fixed Assets Sold/Written Off (Net) (79.230) (42.959)Loss/(Gain) on Sale of Investments (Net) (0.794) (91.961)Liabilities no longer required written back (400.537) (177.509)Provision for Doubtful Debts 96.828 137.827Provision for diminution in value of Investments written back (1.098) -Provision - Others 142.434 18.844Interest and Finance Charges 1,230.950 1,772.357Income from investments (106.632) (12.315)Interest Income (357.545) 755.247 (248.151) 1,874.922

Operating profit before working capital changes 4,777.124 2,443.278

(Increase)/decrease in Trade and other receivables (1,590.403) (1,307.635)(Increase)/decrease in Inventories (117.721) (331.671)Increase/(decrease) in Trade payables (151.741) (1,859.865) 402.005 (1,237.301)

Cash generated from operations 2,917.259 1,205.977Direct taxes paid (559.274) (648.822)Fringe Benefit taxes paid (63.787) (36.896)

Cash flow before Prior Period, Exceptional and OtherNon-recurring items

2,294.198 520.259

Prior Period, Exceptional and Other Non-recurring items 3,007.199 -Cash flow before and after extraordinary itemsand net cash from operating activities 5,301.397 520.259

B CASH FLOW FROM INVESTING ACTIVITIESPurchase of fixed assets (403.074) (371.344)Sale of fixed assets 154.564 118.357Finance Lease Payments (7.785) (1.195)Purchase of long terms investments (698.612) (1,004.742)Purchase of current investments (795.468) (327.762)Consideration paid on acquisitions of shares in Subsidiaries (1,070.778) (9,312.913)[net of cash and cash equivalent on the acquisition dateRs. 27.202 Million (2006 : Rs. 7,259.504 Million)Sale of long term investments 754.612 398.292Sale of current investments 700.001 327.200Disposal of Investments in Subsidiaries - 263.339Sale of Preference Shares in Subsidiary - 68.192Loan given to :

Inter Corporate Deposits - (362.107)Interest received 320.638 257.004Dividend received 106.169 12.315

Net cash used in investing activities (939.733) (9,935.364)

77

Cash Flow Statement for the Year Ended March 31, 2007 (Contd.)Consolidated Financial Statement


C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from issue of rights shares by a subisidary company - 339.700Proceeds from Preference Shares of a subsidiary company - 500.000Redemption of Preference Shares of a subsidiary company - (1,000.000)Net Proceeds from issue of Global Depositary Shares (GDS) - 5,796.051Net Proceeds from issue of 2% Foreign Currency ConvertibleBonds (FCCB)

- 4,458.500

Expenses incurred on issuance of GDS and FCCB - (242.569)Expenses relating to Amalgamation - (306.192)Proceeds / (Repayment) of long term loans

Proceeds 3,830.041 9,808.849Repayment (4,285.349) (9,059.023)

Proceeds / (Repayment) of fixed deposits (52.283) 15.951Proceeds / (Repayment) of short terms loans (69.507) (1,477.500)Working Capital Loan / Cash Credit from Banks (net) (159.587) 715.495Interest and Finance charges Paid (1,183.813) (1,748.837)Dividends paid (222.927) (177.754)Tax on distributed profit (51.646) (27.039)

Net cash used in financing activities (2,195.071) 7,595.632

Net increase in cash and cash equivalents 2,166.593 (1,819.473)

Cash and cash equivalents as at April 1 (Opening Balance) 3,611.420 5,087.996Cash and Cash Equivalents of Transferor companies as atApril, 2005

- 342.897

Cash and Cash Equivalents as at March 31 (ClosingBalance)

5,778.013 3,611.420

2,166.593 (1,819.473)

Notes :

1. The above Consolidated Cash Flow Statement has been compiled from and is based on the Consolidated Balance Sheet as atMarch 31, 2007 and the related Consolidated Profit and Loss Account for the year ended on that date.

2. The above Consolidated Cash Flow Statement has been prepared under the indirect method as set out in the AccountingStandard - 3 on Cash Flow Statements issued by The Institute of Chartered Accountants of India and reallocation required forthis purpose are as made by the Group.

3. Previous year's figures have been regrouped wherever necessary in order to confirm to this year's presentation.

This is the Consolidated Cash Flow Statement referred to in our report of even date.


J. MAJUMDAR M.R.DORAISWAMY IYENGAR P.A.MURALIPartner Director Chief Financial OfficerFor For and on behalf ofPrice Waterhouse V.S.VENKATARAMANChartered Accountants Company Secretary


78



1. Share CapitalAuthorised110,000,000 (2006:110,000,000) Equity Shares ofRs.10/- each

1,100.000 1,100.000

10,000,000 (2006:10,000,000) Preference Shares ofRs.10/- each

100.000 100.000

Issued, Subscribed and Paid-up94,481,930 (2006: 60,471,409) Equity Shares of Rs.10/-each fully paid up.

944.819 604.714

Less:-11,588,984 (2006: Nil)Equity Shares held by Subsidiaries 115.889

828.930 604.714

7,750,000 (2006:Nil) 9%, Non Cumulative Non ConvertibleRedeemablePreference Shares of Rs.10/- each fully paid up 77.500 -Less:7,750,000 (2006:Nil) 9%, Non Cumulative Non ConvertibleRedeemablePreference Shares held by a subsidiary 77.500 -

- -Notes :Of the above,1. 51,719,968 (2006: 51,719,968) Equity Shares were allotted as fully

paid upon July 9, 2001 to the shareholders of the erstwhile McDowell &Co. Ltd., pursuant to the schemes of Amalgamation for considerationother than cash.

2. 34,010,521 (2006: Nil) Equity Shares were alloted as fully paid onNovember 6, 2006 to Equity Shareholders of erstwhile HerbertsonsLimited, Triumph Distillers & Vintners Private Limited, BaramatiGrape Industries Limited, United Distillers India Limited andShaw Wallace Distilleries Limited pursuant to a Scheme ofAmalgamation for consideration other than cash.

3. 8,751,381 (2006: 8,751,381) Equity shares of Rs.10/- each fullypaid up represent 17,502,762 (2006: 17,502,762) Global DepositoryShares issued by the Company on March 29, 2006.

4. 7,750,000 (2006: Nil) 9% Non-Cumulative Non-ConvertibleRedeemable Preference Shares of Rs 10/- each are issued as fullypaid up on November 6, 2006 to 9 % Non-Cumulative Non-ConvertibleRedeemable Preference Shareholders of erstwhile Shaw WallaceDistilleries Limited pursuant to the scheme of Amalgamation forconsideration other than cash.

The above 7,750,000 (2006: Nil) 9% Non-Cumulative Non-ConvertibleRedeemable Preference Shares of Rs 10/- each have been redeemed atpar on July 11, 2007

Consolidated Financial Statement

79



1A. Share Capital Suspense

Equity Share SuspenseNil (2006: 34,010,521) Equity Shares of Rs.10/- each to beissued as fully paid up to the equity shareholders of TransferorCompanies pursuant to theScheme of Amalgamation for consideration other than cashLess: Nil (2006: 11,588,984) Equity shares to be issued toSubsidiaries

- 340.105

- 115.889

- 224.216Preference Share SuspenseNil ( 2006: 7,750,000) 9% Non-Cumulative Non-ConvertibleRedeemablePreference shares of Rs.10/- each to be issued as fully paidup to 9%Non-Cumulative Non-Convertible Redeemable PreferenceShareholders of erstwhile Shaw Wallace Distilleries Limitedpursuantto the Scheme of Amalgamation for consideration other thancash

- 77.500

Less: Preference shares to be issued to Subsidiaries - - (77.500) -

The above 7,750,000 9% Non-Cumulative Non-ConvertibleRedeemablePreference shares of Rs.10/- each to be issued will beredeemable atpar on July 11, 2007. - 224.216


80


2. RESERVES AND SURPLUSCentral Subsidy

As per last Balance Sheet 1.500 -Received during the year - 1.500

1.500 1.500Capital Redemption Reserve -

As per last Balance Sheet 464.446Transferred from the Profit and Loss Account onredemption of Preference Shares

- 464.446

464.446 464.446Securities Premium Account

As per last Balance Sheet 5,505.775 -Addition during the year:(a) On issue of Global Depository Shares - 5,708.537(b) On conversion of 6,500,000 9% Cumulative Convertible

Preference shares of Rs. 10/- each fully paid in ShawWallace Distilleries Limited, a Transferor Company - 41.786

5,505.775 5,750.323Less: Adjustments during the year:

(a) Expenses incurred on issuance of Global DepositoryShares (GDS) and 2% Convertible Bonds in ForeignCurrency (FCCB)Legal and Professional Fees - (116.760)Underwriting Fee and Other costs - (141.122)Miscellaneous Income - 15.313

(b) Premiuim payable on Redemption of FCCB (47.964) (1.979)5,457.811 5,505.775

Employee Housing FundAs per last Balance Sheet 0.625 0.625

Foreign Currency Translation Reserve [Schedule 18 Note 7] (107.368) 0.295

Contingency ReserveAs per last Balance Sheet 110.000 110.000

General ReserveAs per last Balance sheet 573.861 1,683.868Add: Addition during the year:(a) Reserve arising on appreciation (net of diminuition) in

value of certain assets of the Company- 770.650

(b) Adjustment including reversal of Goodwill and Minorityinterest relating to Subsidiaries and an Associate,on amalgamation / demerger - 116.687

(c) Transferred from Profit and Loss Account 542.648 50.0001,116.509 2,621.205

Less:(a) Adjustments relating to equity share dapital to be issued

to Subsidiaries- (1,153.687)

(b) Adjustments relating to Demerger - (435.758)(c) Reserve arising on Amalgamation - (151.707)(d) Expenses relating to Amalgamation - (306.192)(e) Adjustment on adoption of Accounting Standard on

'Employee Benefits'[net of deferred tax credit of Rs 1.280 Million (2006: Nil)][Schedule18 Note 9(a)]

(2.522) -

1,113.987 573.861Surplus in Profit and Loss account 5,822.345 932.348

12,863.346 7,588.850

Schedules forming part of Balance Sheet as at March 31, 2007Consolidated Financial Statement

81


3. SECURED LOANSTerm Loans

From Banks [Note (i)] 6,192.267 6,290.225[Repayable within one year: Rs.733.068 Million (2006: Rs.425.318 Million)]From Others [Note (ii)] - 375.000[Repayable within one year: Rs. Nil (2006: Rs.42.500 Million)]

Working Capital Loan / Cash Credit from Banks [Note (iii) ] 3,238.187 3,389.570Finance Lease [Note (iv)] 28.713 12.390Interest accrued and due 48.422 13.957

9,507.589 10,081.142Notes:(i) Out of the above loans:

(a) Secured by charge on certain fixed assets of the Company includingLand and Building 489.910 1,178.527

(b) Secured by charge on certain fixed assets of the Company,pledge of certain shares held by the Company and also by pledge ofcertain shares of other companies. 3,688.816 500.000

(c) Foreign Currency Borrowings secured by charge on fixed assets ofthe company, pledge of certain shares held by the Company and alsoby pledge of investments held by other companies. 282.349 -

(d) Secured by a second charge on certain fixed assets of the Companyincluding Land and Building. 187.500 3,000.000

(e) Secured by charge on a brand 6.600 21.000(f) Foreign Currency External Commercial Borrowings secured by

charge on specific Fixed Assets and a Brand 1,522.850 1,561.350(g) Secured by hypothecation of specific fixed assets acquired under

respective agreements. 14.242 25.999(ii) Out of the above loans:

(a) Secured by a charge on certain fixed assets of the Companyand pledge of certain shares and properties of other companies - 320.000

(b) Secured by charge on certain fixed assets of the Company includingLand and Building - 55.000

(iii) (a) Secured by charge on certain fixed assets of the Company includingLand and Building and hypothecation of inventories, book debts andother current assets. - -

(b) Includes Foreign Currency Non-Resident [FCNR(B)] Loans 396.331 841.515(iv) Secured against assets acquired under lease agreements - -

4. UNSECURED LOANSFixed Deposits 668.010 713.204

[Repayable within one year Rs.187.112 Million (2006: Rs. 196.371 Million)]From Banks 117.388 100.000[Repayable within one year Rs.100.000 Million (2006: Rs.100.000 Million)]2% Convertible Bonds in Foreign Currency [Schedule 18 Note 5(a)] 4,423.643 4,461.000From others 43.503 35.000

Interest accrued and due 41.506 41.0815,294.050 5,350.285


82

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6. INVESTMENTSRs. Million

Particulars 2007 2006

CURRENTQuoted InvestmentsUnits (Fully Paid)Mutual Funds Investments 796.030 0.562

Total Current Investments 796.030 0.562

LONG TERMQuoted Investments

A.TradeFully Paid Equity Shares 0.033 0.033

B. Non-TradeFully Paid Equity Shares 4.554 5.344

4.587 5.377

Units (Fully Paid) (Note 1) 35.317 34.855

Total Quoted Investments (A + B) 39.904 40.232

Unquoted Investments

C.TradeFully paid Equity Shares (Note 2) 2.621 2.648

Associates ** 7.199 7.199 -Add : Accumulated Profits / (Losses) of Associates

(net of dividend received)(3.778) (3.524)

** Including Goodwill on cquisition of Associates 3.421 3.675

Rs. 7.310 Million (2006 : Rs. 7.310 Million)

Fully paid Preference Shares9.3% Cumulative Redeemable Preference Shares of

Rampur Engineering Company Limited 0.250 0.250

6.292 6.573

D. Non-TradeIn Government Securities 1,000.960 1,751.323

In Fully Paid Debentures 0.048 0.009

Fully paid Equity Shares 8.182 1.929

1,009.190 1,753.261


84

Rs. Million

Particulars 2007 2006

E. Others (Note 3) 194.676 687.001

194.676 687.001

Total Unquoted Investments (C+D+E) 1,210.159 2,446.835

Total Long Term Investments (A+B+C+D+E) 1,250.062 2,487.067

Total Current and Long Term Investments 2,046.092 2,487.629

Less: Provision for diminution in the value of investments 2.013 3.111

Total 2,044.080 2,484.518

Aggregate value of Quoted Investments

- Book value 833.921 39.969

- Market value 852.023 131.785

Aggregate Book value of Unquoted Investments 1,210.159 2,444.548

Acquired on acquisition 7.006 2,010.531

Additions during the year 1,495.052 1,332.042

Adjustments to Investments - Demerger - (437.648)

Adjustments to Investments (Note 3(b) below 41.140 -

Sold during the year 1,984.735 984.837

Notes:

1. Investments in units of Unit Trust of India amounting to Rs.34.398 Million represent those made under Rule 3A ofthe Companies (Acceptance of Deposit) Rules, 1975.

2. The erstwhile amalgamating Carew Phipson Limited has submitted its claim to Custodian of Enemy Propertyfor India towards the full payment of the value of shares of which 25% was received and the balance value ofinvestment was written off in the books in 1977, retaining a token amount of Re.1 in the books pending disposal ofthe representation to the custodian for final payment in this regard.

3. Others include :

a) Rs.153.536 million (2006:Rs.687.001 million) pertaining to 2,152,660 equity shares (2006: 5,652,660) of Rs.10each fully paid up issued to USL Benefit Trust pursuant to the scheme of amalgamation, to hold such shares withall addition or accretion there to in trust for the benefit of the company.

b) Rs.41.140 million being interest in SWFSL Benefit Trust referred to in Note 3 on Schedule 18.


85


7. INVENTORIESRaw Materials including materials in transit 654.622 585.731Packing Materials, Stores and Spares 412.162 331.010Finished goods including goods in transit 1,063.708 1,267.500Work-in-Progress 1,422.364 761.027

3,552.856 2,945.268

8. SUNDRY DEBTORS(Unsecured)Exceeding six monthsConsidered Good 113.020 124.072Considered Doubtful 108.618 285.141

221.638 409.213Others : Considered Good 3,878.367 3,095.991

4,100.005 3,505.204Less : Provision for Doubtful debts 108.618 285.141

3,991.387 3,220.063

9. CASH AND BANK BALANCESCash on Hand 7.044 6.870Remittance-in-Transit/ Cheques on Hand 8.065 217.903Balances with Scheduled Banks:

On Current Accounts [Note (i)] 490.214 711.687On Unpaid Dividend Account 104.779 18.881On Deposit Account [Notes (ii) 5,167.911 2,656.079

5,778.013 3,611.420

Notes:

(i) includes Rs.27.271 Million (2006: Rs. 28.438 Million) in Exchange Earners Foreign Currency (EEFC) Account andRs.18.052 Million (2006 : Rs. 0.611 Million) in Foreign Currency.

(ii) (a) includes Rs. 0.214 Million (2006: Rs. 3.899 Million) pledged with Government Departments.

(b) includes Rs. Nil (2006 : Rs. 6.433 Million) kept as margin against letter of credit and Rs. 0.550 Million (2006:Rs.0.692 Million) as margin against Bank Guarantee.

(c) includes Rs. Nil (2006 : Rs.1,114.625 Million) deposits in Foreign Currency.

(d) includes Rs. 1,092.205 Million (2006 : 1,066.833 Million) in escrow account in terms of a separate agreementdated May 27, 2005 between SWBL and MBL.


86


10. OTHER CURRENT ASSETS(Unsecured, Considered Good except where otherwise stated)Income accrued on Investments and Deposits 45.321 8.414Other Deposits - Considered Good 1,170.351 713.317

- Considered Doubtful 9.999 8.777Fixed assets held for sale 2.790 6.161

1,228.461 736.669Less : Provision for Doubtful Deposits 9.999 8.777

1,218.462 727.892

11. LOANS AND ADVANCES(Unsecured, Considered Good except where otherwise stated)Advances recoverable in cash or in kind or for value to be received:Advances to Tie-up units - Considered Good 643.581 977.955

- Considered Doubtful 21.519 19.448Advance Income Tax (Net of Provisions) - 129.794Advance for Acquisition of Trade Mark (Schedule 18 Note 12(a) (ii)] 217.493 223.030Other Advances - Considered Good 3,528.436 2,577.691

- Considered Doubtful 130.119 42.9814,541.148 3,970.899

Less : Provision for Doubtful Advances 151.638 62.4294,389.510 3,908.470

12. CURRENT LIABILITIES AND PROVISIONSA. Liabilities

Acceptances * 643.214 512.486Sundry Creditors 4,439.423 4,639.494Dues to Directors 37.434 5.960Investors Education and Protection Fund [Schedule 18 Note 13]

Unclaimed Debentures 7.997 8.570Unclaimed Dividends 19.757 22.229Unclaimed Fixed Deposits 14.069 21.158

Security Deposit 99.653 235.715Advances Received from Customers 125.192 246.452Interest accrued but not due 71.331 59.083Other Liabilities 591.537 558.022

6,049.607 6,309.169* Includes bills drawn against inland letters of credit of Rs. 113.031 Million

(2006: Rs. 331.696 Million) and secured by a charge on debtors,inventories and other current assets.

B. ProvisionsProposed Dividend

Equity Shares - Interim 87.319 -Equity Shares - Final 85.596 188.963

Corporate Tax on Proposed Dividend 30.242 28.715Taxation (net of payments) 388.553 -Fringe Benefit Tax (Net of Payments) 0.541 26.729Provision for redemption premium 49.493 1.979Provision for Contingencies [Schedule 18 Note 4 (c)] 284.788 615.000Employee Benefits 287.966 206.559

1,214.498 1,067.945


87

Rs. Million

2007 2006

13. OTHER INCOME

Income from Investments:

Dividend income from trade investments - 2.185

Dividend income from other investments 106.632 10.130

Lease Rent - 1.269

Profit on Sale of Fixed Assets (Net) 94.480 50.945

Profit on Sale of Investments 0.794 91.961

Liabilities no longer required written back 400.537 177.509

Provision for Diminution in Value of Investment written back 1.098 -

Exchange Gain (Net) 60.229 -

Bad debts/advances recovered 18.993 0.591

Scrap Sales 91.355 64.860

Insurance Claims 18.404 0.195

Export Incentive - 7.034

Miscellaneous 82.996 188.417

875.518 595.096

14. MATERIALSRaw Materials Consumed 6,689.816 4,869.985

Purchase of Finished Goods 3,554.982 1,571.075

Packing Materials Consumed 5,974.641 4,864.212

Movement in Stocks

Opening Stock:


Finished Goods 1,267.500 495.247

2,028.527 1,040.813

Add : Taken over on Amalgamation / Acquisition


Finished Goods 5.771 494.721

489.867 730.971

Closing Stock:


Finished Goods 1,063.708 1,267.500

2,486.072 2,028.527

(Increase)/ Decrease in Stocks 32.322 (256.743)

Excise Duty on Opening/Closing Stock of Finished Goods (Net) (204.792) 283.382

16,046.969 11,331.911

Consolidated Financial StatementSchedules forming part of Profit & Loss Account for the year ended March 31, 2007

88

Schedules forming part of Profit & Loss Account for the year ended March 31, 2007Rs. Million

2007 2006

15. MANUFACTURING AND OTHER EXPENSESEmployee Cost :

Salaries, Wages and Bonus 1,655.531 1,385.978Contribution to Provident and Other Funds 271.969 246.090Workmen and Staff Welfare 95.812 97.333Voluntary Retirement Scheme Compensation - 15.600

Power and Fuel 174.774 215.948Stores and Spares Consumed 46.039 75.139Repairs and Maintenance :

Buildings 40.786 15.527Plant and Machinery 59.273 73.683Others 47.163 89.282

Rent 111.876 115.574Rates and Taxes 210.627 198.245Insurance 50.798 51.697Travelling and Conveyance 427.882 543.376Legal and Professional 420.857 328.015Freight Outwards 577.829 541.385Advertisement and Sales Promotion 2,942.247 2,260.893Commission on Sales 215.889 386.364Cash Discount 191.426 221.347Sales Tax 138.243 96.131Fixed Assets Written Off 15.250 7.986Directors' Remuneration:

Sitting Fee 2.633 0.855Commission 36.991 5.517

Exchange Loss (Net) - 185.237Bad Debts and Advances Written Off 43.476 37.010Provision for Doubtful Debts/ Advances/Deposits 96.828 137.827Research and Development 8.004 12.920Others :

Personnel and Administration 357.880 173.207Selling and Distribution 384.270 401.777Miscellaneous 220.147 309.720

8,844.500 8,229.663

16. INTEREST AND FINANCE CHARGESInterest on :

Fixed Loans 866.932 978.680Other Loans 270.147 317.893Finance Charges (Including Bill Discounting charges) 93.871 475.784

1,230.950 1,772.357Less : Interest Income :

On Investments 2.234 2.121On Deposits and Other Accounts (Gross) 351.387 176.104[Tax Deducted at Source Rs. 36.482 Million (2006 : Rs. 14.669 Million)]On Income Tax Refunds 3.924 69.926

873.405 1,524.206


89


Schedules forming part of Accounts for the year ended March 31, 2007

17. STATEMENT ON SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Preparation of Consolidated Financial Statements

The Consolidated Financial Statements relate to United Spirits Limited (the Company) and its subsidiaries

and associates (the Group). The Consolidated Financial Statements are prepared in accordance with

Accounting Standard (AS 21) on Consolidated Financial Statements and Accounting Standard (AS 23) on

Accounting for Investments in Associates in Consolidated Financial Statement issued by the Institute of

Chartered Accountants of India. 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. Accounting policies have

been consistently applied except where a newly-issued accounting standard is initially adopted or a revision

to an existing accounting standard requires a change in the accounting policy hitherto in use.

On occasion, a subsidiary company whose financial statements are Consolidated may issue its shares to

third parties as either a public offering or private placement at per share amounts in excess of or less than the

Company’s average per share carrying value.With respect to such transactions, the resulting gains or losses

arising from the dilution of interest are recorded as Capital Reserve/Goodwill. Gains or losses arising on the

direct sale by the Company of its investment in its subsidiaries or associated companies to third parties are

transferred to the profit and loss account. Such gains or losses are the difference between the sale proceeds

and the net carrying value of the investments.

2. Subsidiary and Associate Companies considered in the Consolidated Financial Statements:

(A) Subsidiary Companies:

Name of the Company Country of

Incorporation

Proportion of

owner-ship

interest (%)

Proportion of

voting power

held directly

or indirectly, if

different from

proportion of

ownership

interest(%)

2007 2006 2007 2006

1 Asian Opportunities & Investments Limited

(AOIL)

Mauritius 100 100 - -

2 McDowell Nepal Limited (MNL) Nepal 82.47 82.47 - -

3 Zelinka Limited (ZL) Cyprus 100 100 - -

4 Shaw Wallace & Company Limited (SWCL) India 75 75 - -

5 Ramanretti Investments & Trading Ltd. (RITL) India 75 75 100 100

6 ShawWallace Financial Services Ltd.

(SWFSL) (i)

India - 75 - 100

7 ShawWallace Breweries Limited (SWBL) India 75 75 100 100

8 Primo Distributors Pvt. Ltd. (PDPL) India 100 100 - -

9 Palmer Investment Group Ltd.(PIG) British Virgin

Islands100 100 - -

10 RG Shaw & Company Ltd. (RGSC) U.K. 100 100 - -

90


Schedules forming part of Accounts for the year ended March 31, 2007 (Contd.)

Name of the Company Country ofIncorporation

Proportion ofowner-shipinterest (%)

Proportion ofvoting powerheld directlyor indirectly, ifdifferent fromproportion ofownershipinterest(%)

2007 2006 2007 2006

11 Shaw Scott & Company Ltd. (SSC) U.K. 100 100 - -

12 Shaw Darby & Company Ltd. (SDC) U.K. 100 100 - -

13 Thames Rice Milling Company Limited

(TRMC)

U.K. 100 100 - -

14 ShawWallace Overseas Limited (SWOL) U.K. 75 75 100 100

15 JIHL Nominees Limited(JIHL) Jersey Islands 100 100 - -

16 Montrose International S.A (MI) Panama 100 100 - -

17 USL Holdings Limited (UHL)(ii) British Virgin

Islands100 - - -

18 Spring Valley Investments Holding

Inc.(SVIH) (ii)

British Virgin

Islands100 - - -

19 USL Holdings (UK) Limited (UHUKL) (ii) U.K 100 - - -

20 United Spirits (UK) Limited (USUKL) (ii) U.K 100 - - -

21 United Spirits (Great Britain) Limited

(USGBL) (ii)

U.K 100 - - -

22 Four Seasons Wines Limited (FSWL) (ii) India 100 - - -

23 United Vintners Limited (UVL) (ii) India 100 - - -

24 United Alcobev Limited (UAL) (ii) India 100 - - -

25 McDowell Beverages Limited (MBL) (ii) India 100 - - -

26 McDowell (Scotland) Limited (MSL) (iii) Scotland 100 - - -

27 Bouvet Ladubay S.A.S (BL) (iii) France 100 - - -

28 Chapin Landias S.A.S (CL) (iii) France 100 - - -

29 Herbertsons Limited (HL) (ii) India 90 - 100 -

30 Daffodils Flavours & Fragrances Private

Limited (DFFPL) (ii)

India 100 - - -

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2. Subsidiary and Associate Companies considered in the Consolidated Financial Statements:

(B) Associate Companies (Note (iv) below)

Name of the Company Country ofIncorporation

Proportion of owner-ship interest(%)

2007 20061 Utkal Distillery Limited (Utkal) India 43 43

(i) Ceased to be subsidiary due to amalgamation of the same with SWBL w.e.f. April 1, 2005 .

(ii) Became subsidiaries during the year.

(iii) Acquired during the year ( Refer schedule 18 Note 10 )

(iv) Consolidated Financial Statements also include USL Benefit Trust and SWFSL Benefit Trust.

3. Principles of Consolidation

These Consolidated Financial Statements have been prepared by consolidation of the financial statements of theCompany and its subsidiaries on a line-by-line basis after fully eliminating the inter-Company transactions.

4. Accounting for Investment in Associates

a) Accounting for Investments in Associate Companies has been carried out under the Equity Method ofaccounting prescribed under AS 23 wherein Goodwill/Capital Reserve arising at the time of acquisition andthe Group’s share of profits or losses after the date of acquisition have been adjusted in the investmentvalue.

b) U B Distilleries Limited (UBDL)UBDL, which was an associate company of erstwhile HL in view of significant influence, ceased its operationsin 2003-04, consequent to the order of the Hon’ble Supreme Court of India vesting the distillery unit with thestate of Bihar. Since the Company does not have any investments/significant influence in respect of UBDL,the same has not been accounted for as an associate in these Consolidated Financial Statements under theEquity Method. .

5. Basis of presentation of Financial Statements

The Consolidated Financial Statements of the Group have been prepared under historical cost convention,except as otherwise stated, in accordance with the Generally Accepted Accounting Principles (GAAP) in India,the Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions ofthe Companies Act, 1956.

6. Fixed Assets

(a) Fixed assets are stated at their original cost of acquisition and subsequent improvements thereto includingtaxes, duties, freight and other incidental expenses related to acquisition and installation of the assetsconcerned, except amounts adjusted on revaluation and amalgamation. Interest on borrowings attributableto qualifying assets are capitalised and included in the cost of fixed assets as appropriate.

(b) The costs of Fixed Assets acquired in amalgamations are determined at their fair values, on the date ofacquisition or nearer thereto, or as approved under the schemes of amalgamation.

(c) Assets held for disposal are stated at their net book value or estimated net realisable values, whichever islower.

(d) Goodwill represents the difference between the Company’s share in the net worth of a subsidiary and costof acquisition at each point of time of making the investment in the subsidiary. Negative goodwill is shown

separately as Capital Reserve on consolidation.

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7. Leases

Assets acquired under Leases where the Company has substantially all the risks and rewards of ownership areclassified as finance leases. Such leases are capitalised at the inception of the lease at lower of the fair valueor the present value of the minimum lease payments and a liability is created for an equivalent amount. Eachlease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic rate ofinterest on the outstanding liability for each period.

Assets acquired as leases where a significant portion of the risk and rewards of ownership are retained by thelessor are classified as operating leases. Lease rentals are charged to the Profit and Loss Account on accrualbasis.

8. Depreciation and Amortisation

a) Depreciation is provided on the Straight Line Method, including on assets revalued, at rates prescribedin Schedule XIV to the Companies Act, 1956 except for the following, which are based on management’sestimate of useful life of the assets concerned:

i) Computers and Vehicles over a period of three and five years respectively;

ii) In respect of certain items of Plant and Machinery eligible for triple shift allowance, depreciation isprovided for the full year on triple shift basis;

b) Fixed assets acquired on amalgamation over the remaining useful life computed based on rates prescribedin Schedule XIV to the Companies Act, 1956, as below:

Buildings 1 to 30 yearsPlant & Machinery 1 to 20 yearsVehicles 1 to 4 yearsComputers 1 to 2 years

c) Assets taken on finance lease are depreciated over its estimated useful life or the lease term whichever islower.

d) Leasehold Land are not amortised.

e) Goodwill arising on amalgamation is charged to the Profit and Loss Account in the year of amalgamation.

f) Goodwill arising on Consolidation is not amortised.

Depreciation charged as above is not less than the minimum specified as per Schedule XIV of the CompaniesAct, 1956.

9. Impairment

Impairment loss, if any, is provided to the extent, the carrying amount of assets exceeds their recoverableamount.

Recoverable amount is higher of the net selling price of an asset and its value in use. Value in use is thepresent value of estimated future cash flows expected to arise from the continuing use of an asset and fromits disposal at the end of its useful life.

10. Investments

Long-term Investments are stated at cost to the Company.Provision for diminution in the value ismade to recognisea decline, other than temporary, in the value of long-term investments.

Current investments are valued at cost or market value, whichever is less.

93



11. Inventories

Inventories are valued at lower of cost and net realisable value. The costs are, in general, ascertained under

Weighted Average Method. Finished goods and Work-in-Progress include appropriate manufacturing overheads

and borrowing costs, as applicable. Excise/Customs duty payable on stocks in bond is added to the cost. Due

allowance is made for obsolete and slow moving items.

12. Revenue Recognition

Sales are recognised when goods are despatched from distilleries / warehouses of the Company in accordance

with the terms of sale except where such terms provide otherwise, where sales are recognised based on such

terms. Gross Sales are inclusive of excise duty but are net of trade discounts and sales tax, where applicable.

Income arising from sales by manufacturers under “Tie-up” agreements (Tie-up units) and income from brand

franchise are recognised in terms of the respective contracts on sale of the products by theTie-up unit/Franchisees.

Income from brand franchise is net of service tax, where applicable.

Dividend income on investments are recognised and accounted for when the right to receive the payment is

established.

13. Foreign Currency Translation

Transactions in foreign currency are recognised at the rates of exchange prevailing on the dates of the

transactions.

Liabilities/ assets in foreign currencies are reckoned in the accounts as per the following principles:

Foreign currency liabilities contracted for acquiring fixed assets from a country outside India are restated at the

rates ruling at the year end and all exchange differences arising as a result of such restatement are adjusted to

the cost of fixed assets.

Exchange differences arising on a monetary item that, in substance, forms part of an enterprise’s net investment in

a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements

until the disposal of the net investment.

All other monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the

year end and all exchange gains/ losses arising therefrom are adjusted to the Profit and Loss Account, except

those covered by forward contracted rates where the premium or discount arising at the inception of such forward

exchange contract is amortised as expense or income over the life of the contract.

Exchange differences on forward contracts are recognised in the Profit and Loss Account in the reporting period in

which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward contracts

is recognised as income or expense for the year.

Foreign Company

In respect of overseas subsidiary companies, Income and Expenses are translated at average exchange rate for

the year. Assets and Liabilities, both monetary and non-monetary, are translated at the year-end exchange rates.

The differences arising out of translation are included in the foreign currency translation reserve. Any Goodwill or

Capital reserve arising on acquisition of non integral operation is translated at closing rate.

94




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 with the government, superannuation fund and certain state plans like Employees’ State Insurance and

Employees’ Pension Scheme. The Company’s payments to the defined contribution plans are recognised 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, (the 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 at the balance sheet date, carried out by an independent actuary. Actuarial Gains and Losses

comprise experience adjustments and the effect of changes in the actuarial assumptions and are recognised

immediately in the Profit and Loss Account as income or expense.

Provident Fund:

Group’s Provident Funds administered by trusts set up by the group, where the group’s obligation is to

provide the agreed benefit to the employees and the actuarial risk and investment risk fall, in substance,

on the Company are treated as a defined benefit plan. Liability with regard to such provident fund plans are

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 recognised immediately in the Profit and Loss Account

as income or expense.

Death Benefit:

Death Benefit payable at the time of death is actuarially ascertained at the year-end and provided for in the

accounts.

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 recognised as a liability at the present value of the

defined benefit obligation at the balance sheet date based on actuarial valuation being carried out at each

balance sheet date.

d) Short term employee benefits:

Undiscounted amount of short term employee benefits expected to be paid in exchange for the services

rendered by employees is recognised during the period when the employee renders the services. These

benefits include compensated absences such as paid annual leave and performance incentives.

95



15. Expenditure on account of Voluntary Retirement Scheme

Expenditure on account of Voluntary Retirement Scheme of employees is expensed in the period in which it is

incurred.

16. Research and Development

Revenue expenditure on research and development is charged to Profit and Loss Account in the period in which

it is incurred. Capital Expenditure is included as part of fixed assets and depreciated on the same basis as other

fixed assets.

17. 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 period in accordance with applicable laws.

Deferred tax is recognised 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 recognised and carried forward to the extent that there is a reasonable / virtual certainty

that sufficient future taxable income will be available against which such deferred tax asset can be realised.

Fringe Benefit Tax is determined at current applicable rates on expenses falling within the ambit of “Fringe Benefit”

as defined under the Income Tax Act, 1961.

18. Earnings per Share

Earning per equity share (basic/diluted) is arrived at based on Net Profit after taxation available to equity

shareholders to the basic/weighted average number of equity shares.

19. Provisions

A provision is recognised when an enterprise has a present obligation as a result of past event and it is probable

that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can

be made. Provisions, other than employee benefits, are not discounted to their present value and are determined

based on management estimate 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.

20. Contingencies

Liabilities which are material and whose future outcome cannot be ascertained with reasonable certainty is treated

as contingent and, to the extent not provided for are disclosed by way of notes on the accounts.

21. Share / Foreign Currency Convertible Bonds [FCCB] issue expenses and Premium on Redemption of

FCCB :

Share/ Foreign Currency Convertible Bonds issue expenses incurred are expensed in the same year and premium

payable on FCCBs is expensed over the currency of FCCBs.Both are adjusted to the Securities Premium Account

as permitted by Section 78(2) of the Companies Act, 1956.

96



22. Expenditure

Expenses are net of taxes recoverable, where applicable.

23. Government grants

Government grants related to revenue is recognised on a systematic basis in the profit and loss account over the

periods necessary to match them with the related costs which they are intended to compensate.

97

18. Notes on Accounts

1. Contingent Liabilities

(Rs. Million)

2007 2006

a) (i) Guarantee given on behalf of other bodies corporate (includingperformance guarantees) - 250.000

(ii) Guarantees given by the Company’s bankers for which CounterGuarantees have been given by the Company 729.130 542.199

b) Disputed claims against the Company not acknowledged as debts,currently under appeal / sub-judice:

(i) Excise demands for excess wastages and distillation losses 239.091 197.015

(ii) Other miscellaneous claims 437.264 446.768

(iii) Income Tax demand (including interest) under appeal 1504.867 65.475

(iv) Sales Tax demands under appeal in various states 492.628 448.277

c) Bills Receivables discounted – since fully settled - 136.798

d) Co-accepted bills of Tie-up Units - since fully settled 71.651 67.940

e) Claims from suppliers not acknowledged as debts 58.583 45.865

f) Minority share of dividend on 11% Cumulative RedeemablePreference shares 2.750 -

The Management is hopeful of succeeding in the above appeals /disputes based on legal opinions / legal

precedents.

2. (a) Under a Scheme of Arrangement sanctioned by the Hon’ble High Courts of Karnataka and Bombay (“the

Scheme”), amalgamation of eight companies into erstwhile McDowell & Company Limited and demerger

of investment business into a resulting company (McDowell Holdings Limited) became effective from

October 5, 2006 with the appointed date as April 1, 2005 and the name of the company was changed from

McDowell & Company Limited to United Spirits Limited.

Pursuant to “the Scheme”, the Company at their meeting held on November 6, 2006, allotted 34,010,521

EquityShares ofRs.10/- each fully paid upand7,750,0009%NonCumulativeNonConvertibleRedeemable

Preference Shares of Rs.10/- each fully paid up to the shareholders of the transferor companies. The

Company has also received the listing and trading permission for the equity shares from the National

Stock Exchange of India Limited, Bombay Stock Exchange Limited, Bangalore Stock Exchange Limited,

Ahmedabad Stock Exchange Limited and Madras Stock Exchange Limited, The Delhi Stock Exchange

Association Limited and the Calcutta Stock Exchange Association Limited.

Subsequent to the end of the financial year, the Non-Cumulative Non-Convertible Redeemable Preference

Shares have been fully redeemed.



98



(b) Board of Directors of the erstwhile Central Distilleries & Breweries Limited (CDBL) (amalgamated with

SWDL in an earlier year) on April 29, 1986 decided to issue 134,700 Equity Shares of Rs.10 each and

allotment whereof was stayed by the Hon’ble High Court of Delhi on September 13,1988. The Hon’ble

High Court of Delhi has vacated its order and has ordered to keep in abeyance the allotment on 72,556

shares and the matter is subjudice. The holders, in exchange of these shares will be entitled to 17,776

equity shares of Rs.10 each of the Company pursuant to the Scheme. Necessary adjustments in this

respect will be carried out on disposal of the matter pending before the aforesaid Court.

(c) Pursuant to the Scheme, the bank accounts, agreements, licences, Investments and certain immovable

properties are in the process of being transferred in the name of the Company.

(d) The company has also distributed the proceeds towards the sale of fractional shares entitlement to the

eligible shareholders.

3. a) Under a Scheme of Amalgamation sanctioned by the Hon’ble High Courts of Bombay and Calcutta

(“the Scheme”), amalgamation of SWFSL into SWBL became effective from December 1, 2006 with the

appointed date as April 1, 2005 and SWFSL ceases to be a subsidiary of SWCL and the Company

effective April 1, 2005.,

b) The Consolidated Financial Statements of the Group for the year ended March 31, 2006 incorporated

unaudited Consolidated Financial Statements of SWCL as provided by the management of the subsidiary

company which were prepared before the amalgamation of SWFSL with SWBL became effective.

Accordingly, based on audited consolidated financial statements of SWCL, the Scheme has been given

effect to and following adjustments have been made in these Consolidated Financial Statements:

(i) Excess provision for Income Tax amounting to Rs. 628.62 millions has been written back in the Profit

and Loss Account.

(ii) 72,416,505 Equity Shares of SWBL whose beneficial ownership vested with SWFSL are kept with

escrow agents in view of court orders. Pursuant to the Scheme of amalgamation, such beneficial

interest are held in trust by the trustees of SWFSL Benefit Trust for the benefit of SWBL which have

been accounted as Investment at book value of such investments amounting to Rs.41.14 million.

Accordingly, necessary adjustments have been made to Goodwill and Minority Interest arising on

acquisition of SWCL on June 14, 2005.

4. The status of various income tax demands and matters relating to SWCL, pending before various authorities

are as follows:

a) SWCL’s application for settlement of income tax matters pertaining to the financial years 1986-1987 till

August 27, 1996 pertaining to block assessment and financial years 1995-96, 1997-98 to 2002-2003, has

been disposed during the year by the Settlement Commission, Calcutta Bench (the Commission) vide its

order dated March 6, 2007.

Moreover, in respect of the other financial years (including 1993-94 and 1994-95) the matters have been

decided by the Income Tax Appellate Tribunal and refunds have been granted to SWCL. However, appeals

before the High Court filed by SWCL and the income tax department in respect of these are pending for

disposal.

99



In view of the above, the liability for income tax as provided for in the accounts in earlier years has been

reviewed and differential liability of Rs.135.40 million has been provided during the year.

On disposal of SWCL’s application as above and as directed by the Commission in its order dated

March 6, 2007, the Bank Guarantee of Rs.600.00 million has been released and the Declaration

made under section 281 (1) and Distraint Order under section 225 (5), declaring certain

transaction undertaken by the company as void and not effective, have been revoked, by the Department,

subsequent to the year-end.

b) With a view to achieve expeditious completion of assessment and quantification of liability for tax, SWCL

has filed another application before the Settlement Commission, Calcutta Bench for the Financial Years

2003-04 to 2005-06 and the same has been admitted.The additional tax liability for these years amounting

to Rs.97.30 millions as admitted, has been paid / adjusted against the refunds due and has been provided

for and included under “Provision for tax for earlier years (net)” in these accounts.

c) In view of the above, Contingency provision of Rs.615.00 million made in earlier years have been reviewed

and Rs.330.212 millions being no longer required have been written back and included under exceptional

and other non recurring items [Refer Note 14(a) below] . The remaining amount of Rs.284.788 million has

been kept as a matter of abundant caution to meet liabilities arising in future on account of various claims

and other disputes pending against SWCL.

5. a) The Company had issued, during 2006, 100,000, 2% Convertible Bonds in Foreign Currency (FCCB)

denominated in Bond certificates of US$1,000 each aggregating US$ 100 Million. The FCCBs are, at the

option of FCCB holders, convertible into fully paid Equity Shares of Rs.10/- of the Company (Equity Share)

or Global Depository Shares (GDS), with two GDS representing one Equity Share, at any time on or after

May 9, 2006 upto the close of business on March 15, 2011 at an initial conversion price of Rs.858 per

share with a fixed rate of exchange on conversion of Rs.44.43 equal to US$ 1.00, subject to adjustments

in the manner specified in the Offering Circular (OC) dated March 29, 2006 upon occurrence of certain

events. The Company, subject to fulfilment of certain conditions, has an option to mandatorily convert

these FCCBs into Equity Shares, in whole but not in part, at any time on or after September 29, 2007 but

not less than seven business days prior to the Maturity Date (March 30, 2011), at a conversion price to be

determined in the manner specified in the OC.The Company, subject to fulfilment of certain conditions and

obtaining requisite approvals, has an option to redeem these FCCBs, in whole but not in part, at an Early

Redemption Amount, to be determined in the manner specified in the OC so that together with any interest

and unpaid interest it represent a gross yield of 6.50 percent to the FCCB holders, on a semi annual basis,

together with accrued or unpaid interest. The outstanding FCCBs on the Maturity Date (March 30, 2011)

will be redeemed at 127.07 percent of the principal amounts of the FCCBs.

The initial conversion price of Rs.858 per share has been adjusted in the manner specified in the OC and

new conversion price of Rs.781 per share is effective from June 8, 2007.

b) Since the market price of the Company’s Equity Shares is less than the initial conversion price of FCCB,

the option embedded in the said FCCB to subscribe to Equity Shares is, at the year-end, anti-dilutive.

c) Subsequent to the year end, 78,960 Bonds aggregating to US$ 78,960 million have been converted into

4,484,397 Equity shares. Consequently, the paid up equity share capital increased from 94,481,930 equity

shares of Rs.10/- each to 98,966,327 equity shares of Rs.10/- each as of date.

100



6. a) Subsequent to the year end, the Company acquired through its wholly owned subsidiary, United Spirits

(Great Britain) Limited, the entire share capital of Whyte and Mackay Group Limited, which in turn holds

the entire share capital of Whyte and Mackay Limited, a Scotland based Spirits manufacturing company.

The Company has provided security / guarantee on behalf of the above wholly owned subsidiary for a sum

of US $ 618.915 million in favour of the lenders.

b) Consequent upon the above acquisition, the following companies became wholly owned subsidiaries of

the Company.

Whyte and Mackay Group Limited, Whyte and Mackay Limited, Whyte and Mackay Warehousing Limited,

Bruce & Company (Leith) Limited, Charles Mackinlay & Company Limited, Dalmore Distillers Limited,

DalmoreWhyte &Mackay Limited, Edinburgh ScotchWhisky Company Limited, Ewen & Company Limited,

Fettercairn Distillery Limited, Findlater Scotch Whisky Limited, Glayva Liqueur Limited, Glentalla Limited,

GPS Realisations Limited, Grey Rogers & Company Limited, Hay & MacLeod Limited, Invergordon

Distillers (Holdings) Limited, Invergordon Distillers Group Limited, Invergordon Distillers Limited,

Invergordon Gin Limited,Isle of Jura Distillery Company Limited, Jarvis Halliday & Company Limited, John

E McPherson & Sons Limited, Kensington Distillers Limited, Kyndal Spirits Limited, Leith Distillers Limited,

Loch Glass Distilling Company Limited, Longman Distillers Limited, Lycidas (437) Limited, Pentland

Bonding Company Limited, Ronald Morrison & Company Limited, St The Sheep Dip Whisky Company

Limited, Vincent Street (437) Limited, Tamnavulin-Glenlivet Distillery Company Limited, TDL Realisations

Limited, W & S Strong Limited, Watson & Middleton Limited, Wauchope Moodie & Company Limited,

Whyte & Mackay Distillers Limited, William Muir Limited, WMB Realisations Limited, Whyte and Mackay

Property Limited, Whyte and Mackay de Venezuela CA and KI Trustees Limited.

7. The Company, in earlier year, granted interest free loans in foreign currency aggregating to Rs.7,356.189

million to Zelinka Limited, Cyprus, a subsidiary of the Company (Zelinka), for acquisition of long term

strategic investment in Shaw Wallace & Company Limited. Management is of the view that these loans,

from the inception of the grant of loan, in substance, form part of the Company’s net investment in Zelinka

as the settlement of these loans is neither planned nor likely to occur in the foreseeable future and

management intends to convert this loan into investment in share capital of Zelinka in near future. Accordingly,

in accordance with AS 11 - The Effects of Changes in Foreign Exchange Rates (AS 11), exchange differences

amounting to Rs.144.912 million debit [including / net of exchange difference aggregating to Rs.36.478

Million recognised in the Profit and Loss Account in the previous year reversed during the year and disclosed

as Prior Period Item in Note 14(a) below arising on the loan has been accumulated in a foreign currency

translation reserve, which at the time of the disposal of the net investment in Zelinka would be recognised as

income or as expenses.

8. Interest on unsecured loans – others where negotiation / settlement has not been finalised, has been

provided in terms of the decree and / or otherwise considered adequate by the management. In the opinion

of the management, interest so far provided is adequate and no further provision is necessary in this respect.

Adjustments, if any, are carried out as and when the amounts are determined on final disposal / settlement of

the matter.

101




The Institute of Chartered Accountants of India issued Accounting Standard 15 (revised 2005) (AS 15R) on

Employee Benefits, which supersedes the earlier accounting standard on retirement benefits. The Company

adopted the provisions of AS 15R effective April 1, 2006. Consequent to early adoption of AS15R, following

disclosure have been made as required by the Standard:

a) The Company has reviewed and revised its accounting policy in respect of accumulating leaves to the

credit of its employees. Accordingly, an amount of Rs.2.522 million (net of deferred tax credit Rs.1.280

million) being resultant increase in net liability as on April 1, 2006 has been recognised with corresponding

adjustment to opening balance of General Reserve and an additional liability for the current year amounting

to Rs.0.894 million has been recognised in the Profit and Loss Account having consequential effect on the

net profit for the year.

b) Defined Contribution Plans

The Company offers its employees defined contribution plan in the form of Provident Fund (PF) with the

government, Superannuation Fund (SF) and certain state plans such as Employees’ State Insurance

(ESI) and Employees’ Pension Scheme (EPS). PF and EPS cover substantially all regular employees

while the SF covers certain executives and the ESI covers certain workers. Contribution to SF is made to

trust managed by the Company, while other contributions are made to the Government’s funds.While both

the employees and the Company pay predetermined contributions into the provident fund and the ESI

Scheme, contributions into the pension fund and the superannuation fund are made only by the Company.

The contributions are normally based on a certain proportion of the employee’s salary.

During the year, the Company has recognised the following amounts in the Profit and Loss Account, which

are included in Contribution to Provident and other funds in Schedule 15:

Rs.Million

Provident Fund and Employees’ Pension Scheme* 42.631

Superannuation Fund 25.091

Employees’ State Insurance 7.474

75.196

*Excluding contribution to PF made to trusts managed by the Company.

102



c) Defined Benefit Plans

Gratuity:

The company provides for gratuity, a defined benefit plan, (the Gratuity Plan) to certain categories

of employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement or

termination of employment, an amount based on the respective employee’s last drawn salary and years

of employment with the Company.The Company has employees’ gratuity funds managed by the Company

as well as by Insurance Companies. In certain subsidiaries gratuity plan is funded.

Retirement Bonus:

The allowance for retirement bonus to be given to the employees on the retirement calculated on actuarial

basis.

Provident Fund:

For certain executives and workers of the Company, contributions are made as per applicable Indian laws

towards Provident Fund to certain Trusts set up and managed by the Company, where the Company’s

obligation is to provide the agreed benefit to the employees and the actuarial risk and investment risk fall,

in substance, on the Company. Having regard to the assets of the Fund and the return on the investments,

shortfall in the assured rate of interest notified by the Government, which the Company is obliged to make

good is determined actuarially.

Death Benefit:

The Company provides for Death Benefit, a defined benefit plan, (the Death Benefit Plan) to certain

categories of employees. The Death Benefit Plan provides a lump sum payment to vested employees

on Death, an amount based on the respective employee’s last drawn salary and remaining years of

employment with the Company after adjustments for any compensation received from the insurance

Company and restricted to limits set forth in the said plan. The Death Benefit Plan is Non-Funded.

103



c) Defined Benefit Plans – contd.

(in Rs.Million)

Funded Non-FundedTotal

Particulars Gratuity PF Gratuity DeathBenefit

A) Reconciliation of opening and closing balancesof the present value of the defined benefitobligation

Obligation at the beginning of the year 434.691 911.667 5.255 3.092

Contribution by Plan Participants - 68.616 - -

Current service cost 59.428 69.072 0.010 0.433

Interest cost 33.195 72.721 0.004 -

Actuarial (gain)/loss on obligations 1.312 - 0.000 -

Benefits paid (49.963) (159.453) - -

Obligation at the end of the year 478.663 962.623 5.269 3.525

B) Reconciliation of opening and closingbalances of the fair value of plan assets

Plan Assets at the beginning of the year 322.915 911.667 - -

Prior period adjustment 23.739 - - -

Contribution by Plan Participants 10.797 68.616 - -

Contribution by the Company - 44.055 - -

Expected return on plan assets 27.707 69.241 - -

Actuarial gains / (losses) (7.642) (38.020) - -

Benefits paid (49.963) (159.453) - -

Plan assets at the end of the year 427.553 896.106 - -

C) Reconciliation of present value of definedbenefit obligation and the fair value of planassets to theassetsand liabilities recognisedin the balance sheet:

Present value of obligation at the end of the year 478.663 962.623 5.269 3.525

Fair value of plan assets at the end of the year 427.553 896.106 - -

Liability/(Net Asset) Recognised in Balance Sheet[Included under Provisions in Schedule 12(B)] 51.110 66.517 5.269 3.525

104




Funded Non-FundedTotal

Particulars Gratuity PF Gratuity DeathBenefit

D) Expenses recognised in the Profit andLoss AccountCurrent service cost 59.428 69.072 0.010 0.433Interest cost 33.195 72.721 0.004 -Expected return on plan assets (27.707) (69.241) - -Prior period adjustments (23.739) - - -Actuarial (gains)/losses 6.330 38.020 - -Total Expenses recognised in the P & LAccount 47.507 110.572 0.014 0.433

Included in:Contribution to Provident and Other Funds inSchedule 15 71.246 110.572 0.014 -

Workmen and Staff Welfare in Schedule 15 - - - 0.433Prior period item in the Profit and Loss Account (23.739) - - -

47.507 110.572 0.014 0.433E) Investment details of plan assetsGovernment securities 18% 28%Securities guaranteed Government 35% 0%Private Sector Bonds 2% 0%Public Sector / Financial Institutional Bonds 1% 34%Special Deposit Scheme 7% 34%Fund balance with Insurance Companies 31% 0%Others (including bank balances) 6% 4%

100% 100%Based on the above allocation and the prevailing yields on these assets, the long term estimate of theexpected rate of return on fund assets has been arrived at. Assumed rate of return on assets is expectedto vary from year to year reflecting the returns on matching government bonds.

F) Actual return on plan assets 6.51% 7.70%

G) AssumptionsDiscount Rate (per annum) 8% 8%Expected Rate of Return on Plan Assets 8% 7.98%

Rate of increase in Compensation levels 5% NotApplicable

Average past service of employees (years) 14.04 NotApplicable

Mortality rates LIC1994-96ultimatetable

LIC1994-96ultimatetable

105




The estimates of future increase in compensation levels, considered in the actuarial valuation, have been

taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand

in the employment market.

As this is the first year in which AS 15R has been applied the amounts of the present value of the

obligation, fair value of the plan assets, surplus or deficit in the plan and experience adjustment arising on

plan liabilities and plan assets for the previous periods have not been furnished.

As per the best estimate of the management, contribution of Rs105 million is expected to be paid to the

plan during the year ending March 31, 2008.

10. MSL, BL and CL became subsidiaries of the Company during the year. The figures of the current year include

figures relating to these subsidiaries as given below :

Rs. Million

Liabilities:Secured Loans 3.613Unsecured Loans 150.715Current Liabilities 343.360Provisions 24.272Deferred Tax Liability -

Assets:

Net Block of Fixed Assets 321.809

Goodwill on Consolidation 488.844Investments 9.281Inventories 510.307Sundry Debtors 174.654Cash and Bank Balances 58.883Other Current Assets 30.321Loans and Advances 4.638

Profit/(Loss) after tax for the year* 27.851

* Profit/ (Loss) after tax for the period before minority interest, where-ever applicable

11. Fixed Assets

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of

advances) - Rs. 143.818 Million (2006: Rs. 13.188 Million).

106



12. Current Assets, Loans and Advances

a) Loans and Advances include:

i) An amount of Rs 336.462 Million (2006: Rs. 307.873 Million) due from a Tie-up Unit secured by the

assets of the Tie-up unit.

ii) Advance for acquisition of trade marks amounting to Rs.217.493 Million (2006: Rs. 223.030 Million) paidby AOIL pursuant to a license agreement entered on December 30, 2002 with Guinness United Distillers& Vintners Amsterdam, BV to use its license trade marks in specific territories. AOIL will acquire title tothe trade marks only upon the expiry of the licence agreement of 5 years or termination thereof, whicheveris earlier and the same has been confirmed by an independent legal opinion.

b) Certain confirmation of balances from Sundry Debtors, Loans and Advances, Deposits and Sundry Creditorsare awaited and the account reconciliations of some parties where confirmations have been received are inprogress. Adjustment for differences, if any, arising out of such confirmations/reconciliations would be madein the accounts on receipt of such confirmations and reconciliation thereof. The Management is of the opinionthat the impact of adjustments, if any, is not likely to be significant. In the opinion of the management, allcurrent assets, loans and advances including advances on capital accounts would be realised at the valuesat which these are stated in the accounts, in the ordinary course of business.

13. As required under Section 205C of the Companies Act, 1956, the Company has transferred Rs. 2.966 Million(2006: Rs. 3.890 Million) to the Investor Education and Protection Fund (IEPF) during the year. On March 31,

2007, no amount was due for transfer to the IEPF.

14. a) Prior period, exceptional and other non recurring items [(Debit)/Credit] include: Rs. Million

Sl.No. Particulars 2007 2006Prior period items

i) Provision for Gratuity (23.739) -ii) Provision for leave encashment 16.492 -iii) Exchange difference (140.572) -

Total (147.819) -

Exceptional and other non recurring items

iv)The surplus being excess of net sale proceeds over correspondingcarrying value of interest in the USL Benefit Trust. [Note 14(b)below]

(2,473.735) -

v) Provision for doubtful debts recovered (182.920) -vi) Contingency Provision [Note 4(c) above] (330.212)

Total (2,986.867) -

Grand Total (3,134.686) -

b) USL Benefit Trust, formed in terms of the Scheme approved by the Hon’ble High Courts of Karnataka and

Bombay, sold during the year 3,500,000 equity shares of the Company held by it. Being the sole beneficiary

of the Trust, the Company received net sale proceeds from the Trust. The surplus of Rs.2,473.735 million

being the excess of net sale proceeds over corresponding carrying value of interest in the Trust has been

shown under Exceptional and other non recurring Items.

107



15. Borrowing Costs Rs. Million

2007 2006

a) Interest capitalised on fixed assets - 0.957

b) Interest included in the Closing Stock of Malt and Grape Spirit

under maturation 46.145 48.801

16. Segment Reporting

The Group is engaged in the business of manufacture, purchase and sale of Beverage Alcohol (Spirits and

Wines) including through Tie-up Manufacturing/ brand franchise, which constitutes a single business segment.

The Group’s other operations and operations outside India did not exceed the quantitative threshold for disclosure

envisaged in AS-17 on ‘Segment Reporting’ issued by the Institute of Chartered Accountants of India. In view

of the above, primary and secondary reporting disclosures for business/geographical segments, as envisaged in

AS-17 are not applicable to the Group.

17 Related Party Disclosures

a) Names of related parties and description of relationship

Associates

with whom

transactions

have taken

place during

the year

Key

Management

Personnel

Employees’ Benefit Plans where there is significant

influence

Utkal Distillers

Limited (Utkal)

UB Distilleries

Limited

[Schedule 17

Note 4(b)]

Mr.V.K.Rekhi

Managing

Director

Mr. S. D Lalla,

Executive

Director of

SWCL

Mc Dowell & Company Limited Staff Gratuity Fund (McD SGF)

McDowell & Company Limited Officers’ Gratuity Fund (McD OGF)

SWDL Group Officers Gratuity Fund (SWDL OGF)

SWDL Employees Gratuity Fund (SWDL EGF)

Herbertsons Limited Employees Gratuity Fund (HL EGF)

Phipson & Company Limited Management Staff Gratuity Fund. (PCL

SGF)

Phipson & Company Limited Gratuity Fund. (PCL GF)

Carew & Company Ltd. Gratuity Fund (CCL GF)

McDowell & Company Limited Provident Fund(McD PF)

Herbertsons Limited Executives Provident Fund (HL EPF)

The Bengal Distilleries Company Limited Staff Provident Fund (BD PF)

Shaw Wallace & Associated Companies Employees’ Gratuity Fund

Shaw Wallace & Associated Companies Executive Staff Gratuity Fund

Shaw Wallace & Associated Companies Provident Fund

108



17 b) Summary of the transactions with related parties:

Rs. Million

2007 2006

Sl.

No.

Nature of

transactions **

Associ-

ates

Key Manage-

ment

personnel

Employees’

Benefit Plans

where there

is significant

influence

TotalAssoci-

ates

Key

Manage-

ment

personnel

Employees’

Benefit Plans

where there

is significant

influence

Total

a) Purchase of goods

- Utkal - - - - 0.522 - - 0.522

b) Sale of goods

-Utkal - - - - 3.691 - - 3.691

c) Income from sale by

Tie-up Units.

- Utkal 79.469 - - 79.469 22.521 - - 22.521

d) Income from Brand

Franchise

- Utkal - - - - 7.542 - - 7.542

e) Sale/ (Purchase) of

fixed assets

-Utkal - - - - 0.077 - - 0.077

f) Rental Deposit - 2.595 - 2.595 - 2.359 - 2.359

g) Finance (including

loans and equity

contributions in cash or

in kind)

-Utkal (24.384) - - (24.384) 27.669 - - 27.669

h) Managing Directors’

Remuneration- 22.753 - 22.753 20.772 - 20.772

i) Rent - 2.536 2.536 - 2.305 - 2.305

j) Amount due from

- Utkal 344.448 - - 344.448 335.894 - - 335.894

k) Contribution to Gratuity

Fund

-McD OGF

-McD SGF

-SWDL OGF

-SWDL EGF

-

-

-

-

-

-

-

-

38.506

18.311

15.339

33.866

38.506

18.311

15.339

33.866

-

-

-

-

-

-

-

-

56.376

26.867

-

-

56.376

26.867

-

-

l) Contribution to

Provident Fund

-McD PF

-HL EPF

-BD PF

-

-

-

-

-

-

34.772

1.803

2.454

34.772

1.803

2.454

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

** Excludes Reimbursement of Expenses and Cost sharing arrangements.

The above information has been determined to the extent such parties have been identified on the basis of

information provided by the Company, which has been relied upon by the auditors.

109

18 (a) The Group’s significant leasing arrangements in respect of operating leases for premises (residential, office,

stores, godown, etc), which are not non-cancellable, range between 11 months and 3 years generally (or

longer in certain cases) and are usually renewable by mutual consent on mutually agreeable terms. The

aggregate lease rentals payable are charged as Rent under Schedule 15 to the accounts.

Leasing arrangements entered into prior to April 1, 2001 have not been considered for treatment under AS 19

‘Accounting for Leases’.

(b) During the year, the Company has acquired computer equipment and cars on finance leases. The lease

agreement is for a primary period of 48 months for computer equipments and 36 months to 60 months for

cars. The Company has an option to renew these leases for a secondary period. There are no exceptional/

restrictive covenants in the lease agreements.

The minimum lease payments and their present value, for each of the following periods are as follows:

Rs. Million

2007 2006

Particulars Present

Value of

payments

Minimum

lease

payments

Present

Value of

payments

Minimum

lease

payments

Later than one year and not later than five

years 16.850 18.150 8.042 8.368

Later than five years - - - -

16.850 18.150 8.042 8.368

Not later than one year 11.863 13.711 4.348 4.782

28.713 31.861 12.390 13.150

Less: Finance Charges 3.148 0.760

Present value of net minimum lease payments

28.713 12.390

19 Earnings Per Share :

2007 2006

a) Net Profit after tax and Profit/Loss attributable to

Minority (Rs. Million) 5,669.523 1,253.798

b) Basic number of Equity Shares of Rs.10 each and

outstanding during the year.* 82,892,946 82,892,946

c) Weighted Average number of Equity Shares

of Rs.10 each and outstanding during the

year.** 82,892,946 *76,563,042

d) Basic/Diluted Earnings Per Share after Loss

attributable to Minority (Rs.)*** 68.40 16.38

* Including Equity Shares to be issued and included under Share Capital Suspense in Schedule IA

** Net of 11,588,984 Equity shares held by subsidiaries.

*** Also refer Note 5 above.



110

20. Taxes on Income:

a) Current Taxation Rs. Million

Provision for current taxation includes:

2007 2006

i) Income Tax [including relating to earlier year Rs.249.227Million (2006:

81.502 million) and net of write back of provision relating to earlier year

Rs.628.626 (2006: Nil) ]1066.421 118.518

ii) Wealth Tax 11.200 12.000

Total 1,077.621 130.518

b) Deferred Taxation

The net Deferred Tax (Asset) / Liability as on March 31, 2007 amounting to Rs.18.618 Million (2006:

Rs. 85.810 Million) has been arrived at as follows

Rs. Million

Particulars Deferred Tax

(Assets) /

Liabilities as on

1.4.2006

Current Year

charge / (credit)

Deferred Tax

(Assets) /

Liabilities as

on 31.03.2007

Difference between book and tax depreciation 322.965 (40.441) 282.524

Provision for Doubtful Debts (118.527) 44.894 (73.633)

Unabsorbed Business Loss/ Depreciation

Allowance

(44.758) 44.758

Others (73.870) (115.123) (188.993)

Total 85.810 (65.912) 19.898

Add: Adjustment on adoption of Accounting

Standard on ‘Employee Benefits’

[Note 9(a) above] - (1.280) (1.280)85.810 (67.192) 18.618

21. Housing Fund provided in earlier years have been disposed off in accordance with an agreement reached with the

“McDowell Nepal Limited Exec. Staff &Worker’s Kalyankari samiti” amount required for construction has, however,

left in the fund account.

22. Previous year’s figures have been regrouped / rearranged wherever necessary.

J. MAJUMDAR VIJAY MALLYA V.K.REKHIPartner Chairman Managing DirectorFor and on behalf ofPriceWaterhouseChartered Accountants M.R.DORAISWAMY IYENGAR P.A.MURALI

Director Chief Financial Officer

V.S.VENKATARAMANCompany Secretary




Documents

annual report