Directors' Report

united breweries limited

Your Directors have pleasure in presenting this Annual Report on the business and operations of the Company and the audited accounts of United Breweries Limited ('UBL' or 'your Company' or 'the Company') for the Financial Year ended March 31, 2015 ('the year under review', 'the year' or 'FY 15').

EBITDA for the year under review stood at Rs.6,584 million as compared to Rs.6,116 million in the previous year, reflecting an increase of 8%. This growth in EBITDA is to a large extent the result of our ability to increase prices in open markets, improve our product mix, volume growth and the effective management of input cost, fixed costs and overheads.

Interest paid during the year amounted to Rs.730 million and was comparable to the amounts paid in the previous year. Depreciation for the year was Rs.2,074 million as compared to Rs.1,977 million in the previous year.

Profit before Taxation for the year stood at Rs.3,780 million as compared to Rs. 3,341 million in the previous year, reflecting an increase/decrease of almost 13%. Profit after Taxation finally resulted in an amount of Rs. 2,596 million as against Rs. 2,256 million in the previous year.

DIVIDEND

We take pleasure in proposing a dividend of Re.1/- per Equity Share of Re.1/- each for the year ended March 31, 2015. The dividend declared for the previous year was Re.0.90 per Equity Share of Re.1/- each.

The Company paid a dividend on Cumulative Redeemable Preference Shares ('CRPS') at the rate of 3% under the terms of the issue of 7.4 million CRPS held by Scottish & Newcastle India Limited, amounting to Rs. 27 million. The outstanding CRPS have been redeemed on March 31, 2015 on its due date.

The total dividend (including dividend tax) is Rs.318 million, which amounts to about 12% of the Profit after Tax.

RESERVES

Your Company proposes to transfer Rs.260 million to the General Reserve. Redemption of CRPS was carried out after transfer of profits to Capital Redemption Reserve in terms of applicable regulations.

CAPITAL

The Authorized Share Capital of the Company stands at Rs.9,990 million, comprising Equity Share Capital of Rs.4,130 million and Preference Share Capital of Rs.5,860 million. The Company has redeemed 74,07,000 Series-B, Cumulative Redeemable Preference Shares of Rs.100 at par on March 31, 2015 as per the terms of allotment. Post such redemption, the Issued, Subscribed and Paid-up Share Capital of the Company as on March 31, 2015 stood at Rs.264.4 million comprising 26,44,05,149 Equity Shares of Re.1 each.

MANAGEMENT DISCUSSION AND ANALYSIS

Industry Overview

The Indian beer market continues to grow in line with expectations. Industry volumes grew at a Compounded Annual Growth Rate (CAGR) of 8% during the last five years. During the year 2014-15, the Indian beer market grew 8%, to reach 280 million cases. The strong beer segment continues to lead the growth and is now estimated to account for 85% of the beer market. Apart from this, the premium beer segment continues to grow at about 30%.

In most countries, beer is the preferred alcoholic beverage, and one that has been consumed for several centuries. After water and tea, it is the third most popular beverage. Compared to the global per capita statistical average consumption of about 7 litres, the per capita consumption in India is below 2 litres. The global beer market is dominated by Europe and other western markets, where the growth of the beer market is expected to be moderate or even flat. However, the scope for growth in India and other Asian countries continues to remain positive given the warm climate, young demographics and increasing disposable income.

The Indian alcoholic beverages market is predominantly a hard liquor market. Though the industry in India has been dominated by spirits (IMFL and country liquor) and Beer comprises just five per cent of the total alcohol consumed in India. However, recent surveys show that beer is the preferred alcoholic beverage for young modern Indians and hence it is one of the fastest growing segments of the industry. It has registered robust growth in the last 10 years. From a total industry consumption of about 100 million cases in 2005, the consumption has nearly tripled to 280 million cases in 2015. Two leading players contribute over 70% of the total industry sales, with our company being the market leader with a market share of about 51% and sales of 147 million cases in FY 2014-2015.

United Breweries Limited is successfully dealing with the challenges of the industry and outpaced several global beer brands that have entered India in the recent past. In the process, it has increased and consolidated its market share.

On the basis of alcohol content, beer in India can be categorized into Strong and Mild Beers. Strong beer which has an alcohol content between 6% and 8% dominates the beer market accounting for over 85% of the total beer consumed in India, reinforcing its popularity and preference. The premium beer segment within both the strong and mild beer categories has been growing faster than the overall beer industry, and has grown at a Compounded Annual Growth Rate (CAGR) of almost 30 per cent over the last two years.

The Industry remains highly regulated with a variety of taxes being levied at each point of sale and on cross border movements. Besides, in many parts of the country, wholesale and/or retail distribution is controlled by State Governments monopolies. Moreover, in about 70% of India, State Governments dictate the price at which beer can be sold. As the economy develops, disposable incomes will keep rising. In combination with the young demographics and warm climate of the country, we believe in the long term growth prospects of the beer market notwithstanding the constraints mentioned above.

The Indian Government has been considering to introduce a harmonized Goods and Services Tax (GST) regime for a number of years now. So far the terms of this law have not been concluded. Most notably, there is a likelihood that the alcoholic beverages industry may be excluded from GST altogether, though exclusion of an industry is against the foundation of GST and would not achieve the stated objective of creating a uniform market with uniform taxes.

The GST is a humongous reform that will alter the very face of fiscal federalism in India bringing about a fundamental shift in the allocation of taxation powers between the Centre and the States. It repeals the powers to levy duties/taxes unilaterally and replaces them by the concurrent powers to levy the dual GST through a collective body, the GST Council thereby putting an end to ad hoc and whimsical policymaking and non-transparent tax administration. However, the exclusion of certain sectors including alcohol from the scope of GST would mean no setoff would be allowed for the GST charged on raw materials, machinery and equipment etc. in respect of excluded sectors resulting in loss of investment and productivity. This will negate the boost in GDP that GST could provide and the negative effects thereof would be felt in excluded sectors. A good and simple GST should ideally be imposed on all sectors.

Sales and Marketing

Our national market share in FY15 has exceeded 51%, which is double the size of the nearest competitor.

Kingfisher Strong continues to lead the Indian beer market with a market share of 39.4% in strong beer category. Kingfisher Premium continues to grow market share and is the first choice for mild beer consumers across the country. Kingfisher Ultra crossed 1.42 million cases sales in FY15 and commands a market share of 3.1% in super premium category. It has become the most aspirational super premium mild beer in the country and is ubiquitously present all over India.

Heineken is the fastest growing brand in our company's portfolio, and is now available in over 15 states in the country. The brand has established itself in India as a world class super premium beer, with a focus on international marketing platforms like the UEFA Champions League football, James Bond and Music.

Net sales for the year ended March 2015 stood at Rs.46,923 million as against Rs.42,355 million in the previous year, registering a growth of 11%. Our strong beer portfolio achieved 112.7 million cases in sales in the FY15 setting a new benchmark. Kingfisher Strong achieved 94.5 million cases in sales.

The Company maintains sustainable investment in brand building activities for Kingfisher in the fields of Sports, Food, Music and Fashion. We have a significant and market leading presence in the Indian Premier League T20 Cricket Tournament, Kingfisher East Bengal Football Club, the Kingfisher Derby, Formula One Racing, Mumbai Marathon,

Delhi Half Marathon, and the World 10K Race in Bengaluru. Our association with restaurants / bars / pubs / clubs / star hotels / night clubs remains uninterrupted. The Kingfisher Calendar, which is as always preceded by the hunt for the Kingfisher Supermodels on NDTV has grown in popularity and reach and we also continue to partner with national and city based fashion weeks across the country. The Great Indian Octoberfest, which was held in Bengaluru continues to draw a huge number of visitors with a combination of international rock bands, famed DJs, Bollywood artists, flea markets, and consumer contests.

In 2014 Kingfisher has been selected as one of the 100 most valuable brands for its credibility and huge customer following by the World Consulting and Research Corporation.

During the period under review, the Company has spent 17% of net sales on selling and brand promotions, which is comparable to the previous year. The selling and promotion expenses stood at Rs.7,750 million.

Supply Chain

Our manufacturing expenses for the FY15 amounted to Rs.19,091 million, representing 40.68% of net sales, as against Rs.17,491 million in the previous financial year, which constituted 41.3% of net sales. The relative decrease is due to tight cost control in the manufacturing process in an environment with relatively high inflation.

To cater to the increasing demand for our products, we have further expanded our capacity with the greenfield brewery near Patna in Bihar that has commenced operations in the course of the year. With the opening of this new brewery further cost advantages will be achieved as a result of us being close to our Bihar market. To further augment capacities in Rajasthan, we have acquired brewery assets in a strategic location near Shahjahanpur which will commence production later this year following refurbishment and overhaul. UBL will continue to expand capacity either at its existing breweries or by acquisition or building of new ones where required.

Bottles remain the biggest cost element. Reuse of bottles which contain our trademarks and design registration can be used by us exclusively and have resulted in stability in supplies and containment of cost since its introduction. We will continue to infuse new bottles into the market in order to secure availability of sufficient bottles for production and to obtain further efficiencies in the overall cost of packaging. Since bottles contain our brand names and logo, they cannot be used by other brewers and are to be necessarily supplied back to UBL. This strategy has seen positive results, with the cost of recycled patented bottles being significantly lower when compared to the earlier practice which was based on usage of standard "Industry" bottles.

We have successfully entered into a long term contract with an international glass supplier, whose new plant was commissioned in India in April 2014. This has helped us ensure sufficient supplies and capture cost advantages. Similarly a long term arrangement for supply of Cans has ensured sustainable cost advantages.

Pan-India, necessary infrastructure has been built up to automate handling operations of key raw materials like malt, adjuncts and sugar. Bulk handling systems have been commissioned in our key units.

In an effort to secure deliveries, improve service levels and meet all opportunities in the market, we have invested in dedicated vehicles in key locations with GPS facility ensuring transport of our finished goods and ferry of used bottles during its return haul. Inflation has fueled increase in input costs thereby leading to an increase in the cost price of beer particularly on account of barley prices. A sudden appreciation of dollar vis-a-vis rupee has resulted in an increase in cost of Cans and Hops. Aluminum is imported for the making of Cans by our vendors. Various energy saving initiatives as well as dedicated power feeders, has helped in reducing energy cost at our breweries thereby offsetting inflationary push on energy. The initiatives on efficient operation in breweries ensured reduction of raw material wastage by about 10% thereby improving recoveries. The focus on Total Productivity Management has helped breweries improve throughputs and line efficiencies.

Research and Development

Your company's technology function continues to support our growth strategy with a focus on new capabilities and technology development, the development of new products, enhancement of existing products and productivity improvement and cost reduction.

Human Resources

In order to enhance the competitive advantage and create a transparent and open working environment, your Company's main focus has been on people development. Anchoring developmental conversations at every level and ensuring that all managers are skilled in holding developmental conversations, has received senior management attention. Several initiatives for continuous and prompt feedback have been established for Senior Leadership Team. The HR Strategy continues to aim at talent acquisition, development, motivation and retention. The HR team effectively assists in integrating and aligning all people to business priorities.

Employee Relations continues to be a principal focus of your Company and several initiatives were rolled out for promoting the core value of being a trusted, fair and caring employer. Your company has enjoyed extremely cordial relations with its employees and workers. Industrial Relations continued to be harmonious and peaceful at all levels and at all locations of the company.

Your Company employs 2896 people across all locations. We have not offered any stock option to the employees during the year under review. All the wage agreements have been renewed in a timely manner and are all valid and subsisting. Operatives and 'unions' support in implementation of reforms that impact quality, cost erosion and improvements in productivity across all locations which is commendable.

Total employees benefit expenses for the year stood at Rs.2,974 million, as compared to Rs.2,595 million in the previous year. This constituted 6.34% of net sales. Employee benefit expenses were higher on account of revision in actual valuation assumptions.

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY

Corporate Social Responsibility is based on the principle of "trusteeship" whereby business houses are looked upon as trustees of the resources they draw from society and thus are expected to return them to the society manifold. CSR is extremely important for sustainable development of all stakeholders. Proponents of CSR argue that CSR distracts from the economic role of businesses, nevertheless, the importance of CSR cannot be undermined.

As a responsible corporate citizen focused on inclusive growth, United Breweries Limited has been steadfast in following a proactive policy on Corporate Social Responsibility (CSR). Your Company has been engaged in focused initiatives aimed at upliftment of the communities residing in the vicinity of its brewing facilities. We at UBL believe that the communities where we operate are an integral part of our business and therefore it is our responsibility to give support in achieving larger societal goals in the interest of public at large and the communities in which we operate. The Company is not only committed towards profitable growth but also towards social initiative, protection of environment and renewal of resources where possible.

Your Company has also laid down clear guidelines in its CSR policy for undertaking comprehensive social development programs under identified thrust areas viz. primary education, primary health and water management. The CSR Policy of the Company is posted on its website www.unitedbreweries.com  and is available through the link www.unitedbreweries.com/investors/policies

A detailed Report on various aspects of CSR activities at UBL and the CSR activities undertaken by your Company is included in the Business Responsibility Report which is annexed as Annexure - A to this report. The said report in the format prescribed under the Lisitng Agreement is attached as Annexure - B. Annual report on CSR activities in terms of the Companies Act, 2013 and the Companies (Corporate Social Responsibility) Rules, 2014, is annexed as Annexure - C.

The Company is in the process of structuring its existing CSR activities, areas of operation and also identifying larger projects within the chosen area of CSR operation so that impact/benefits available for the people is on a larger scale. Amounts earmarked shall be spent on few larger projects instead of smaller projects. Therefore, your Company could not spend the prescribed minimum of average profits on CSR activities during the year. However, your Company is not only committed towards profitable growth, but also towards social initiatives, protection of environment and renewal of resources where possible.

Sustainability

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

Awards in the field of CSR and Sustainability

UBL's Palakkad brewery won the first place under the "Medium Scale Category A" award from Kerala State Pollution Control Board for pollution control. UBL's brewery in Hyderabad was bestowed the "Green Manufacturing Excellence Awards 2014" under the category Challengers Award-Medium Business from Frost & Sullivan's. UBL has received awards for their three units located at Hyderabad, Chennai and Nanjungud under Food Safety Management Systems certifications towards providing consumers excellent quality products.

OPPORTUNITIES, THREATS, RISKS & CONCERNS

In the FY 2014-15, industry grew 8% in line with growth expectations to cross a volume of 282 million cases. The per capita consumption in India remains low at about 1.8 litres. This is far below the global average and indicates potential for long term growth. In terms of revenue, beer accounts for only 7% of the Indian alcoholic beverage market and it is a mere 5% of the global average in per capita consumption terms. This low penetration in beer consumption in comparison to international levels offers an opportunity for substantial growth in the coming decades.

Increased urbanization and evolving consumer attitudes towards alcohol consumption will provide further levers for growth. With urban consumers being more exposed to different lifestyles, there has been a positive shift in consumer behaviour towards alcohol consumption. Social habits are undergoing a transformation and with further urbanization, the acceptance of beer as a keenly acceptable refreshment will further increase, even as we focus on responsible consumption of alcohol. The Indian beer market is one of the fastest growing in the world today and with the aforementioned growth drivers in place, an extended period of growth can be expected.

Despite drivers of growth being in place, government intervention in distribution, high taxation, restricted communication, and increased cost of raw materials are some negatives that the industry faces. Regulation and taxation of alcoholic beverages is a state subject with different policies and regulations in almost every state. Extremely high levels of regulation result in lengthy and cumbersome processes for obtaining licences for manufacture, distribution and sale of beer. Specific regulations on cross border movements, retail sales and pricing make the operating environment even more challenging. The cost of beer is much higher in India than in most other countries when benchmarked to per capita incomes. Even though beer contains only 5-7% of alcohol by volume and spirits contain over 40% of alcohol, both are for historic reasons considered as liquor under the various State Excise policies and taxed on a similar basis. This is the key reason for the price of beer being very high in comparison to the price of spirits on an equivalent alcohol basis.

The industry faces challenges in the form of ban on direct advertising and very poor state of market infrastructure. Due to the industry being under the purview of individual states, the industry struggles with multiplicity of taxes and lack of uniformity in regulations.

However, it is expected that the Indian beer market will continue to grow steadily, driven by urbanization, increase in disposable incomes and preference of the younger generation for mild alcoholic beverages, even as social acceptance for beer increases. United Breweries Limited has maintained its clear market leadership in the Indian beer market, overcoming the challenges of the highly regulated industry and increasing competition from global brewers.

Prospects

Our Company is the leading player in the industry with a market share of about 51%. Effective marketing strategies have helped us reinforce our position as the clear market leader in the country. Our flagship brand, Kingfisher is almost synonymous with beer in India.

Despite many challenges, the Indian market leaves a sea of opportunities with its extremely low per capita consumption when compared to other countries in the world like China and US which consume 37 litres and 78 litres of beer per person per annum, as compared to about 1.8 litres in India. We believe that favorable demographics, rising disposable incomes, urbanization and rising acceptability of drinking will bring the winds of change for the industry. Beer industry is expected to grow at about 10% year on year and reach a size of about 450 million cases by 2020.

The strength of the beer industry in being recession proof is reinforced by the fact that the alcohol consumption generally remains unaffected by economic swings. Also, what augurs well for the Indian beer industry is our large population and the fact that over 50% of the population is under 25 years of age. India is expected to overtake China to become the most populous nation in the world by 2025. All this will result in India reaping a huge demographic dividend.

With a relatively younger population and rising income levels, India is seeing an increase in acceptance of beer as a lifestyle product. Growth in the sector has also been fuelled by the increasing social acceptability of mild alcohol consumption. Consumer acceptance of beer has led to innovations, such as new products introductions and success of brewpubs selling freshly brewed beer in cities like Bengaluru, Gurgaon and Pune. Growth in premium modern trade and on-premise outlets in metropolitan cities has increased the range of availability of products and improved the retail environment. Some state governments, notably Maharashtra, Uttar Pradesh and Kerala, offer separate licenses for beer sale further boosting growth prospects for the industry.

Your Company has invested significantly in brand visibility to sustain its "top of mind" recall with consumers. High profile sponsorships and brand activations have ensured that your Company's brands, especially Kingfisher, retain their iconic status. The company has a strong route to market combined with a portfolio of market leading brands.

We have through a series of strategic investments, taken steps to enhance our leadership in the industry in this unfolding scenario. Your company continues to invest in both capacities and brands. Though already established efficiency programs apply to all aspects of our business, there is a constant drive towards continuous identification of new ways of improving organizational capabilities and speed, whilst reducing cost.

To meet the growing demand, to offer high quality beer, and maintain our market leadership position, your company also proposes to continuously invest in technology and enhance capacity. To cater to the increasing demand, your Company has set up a state of the art greenfield brewery in Patna, Bihar with a capital investment of about 200 crores. This brewery has been made operational from April 2015. To augment capacities in the state of Rajasthan, the Company has acquired brewery assets in a strategic location. Your Directors are hopeful that your Company will sustain its leadership position, grow ahead of the market and realize continuous growth and improve its profitability in the years to come.

Even in a highly competitive scenario, your Company has not only successfully overcome the challenges of the industry, but also outpaced several global beer brands that have entered India in the recent past and has constantly maintained its leadership position.

Risk Management

Your Company believes that Risk aversion is a control action taken to avoid or eliminate the risk, regulate or modify the activities to reduce the magnitude and/or frequency of adverse effects.

Risk management is a core part of the financial and operational management of your Company. It is effected through a "Three Lines of Defence model", where the local operational units and the functions, with their local/functional set of internal controls and local risk identification and mitigation serve as the first line; the centralized controls and IT-systems integrated controls, Internal and Legal Audit and the central Planning & Reporting and risk assessment processes serve as the second line of defence and finally the independent Statutory Audit, the Board and it's Committee are the third line of defence.

Risk Management is the essence of an organization and management of risk is fundamental to being able to generate profits consistently and sustainably. Risk management at UBL is directed to the effective implementation and functioning of Governance and Internal Controls and the effective management of Risks. The onus of identifying the critical business risks and implementing fit-for-purpose risk responses is delegated to the Management through the implementation of the Risk Management Policy.

Your Company has constituted a Risk Management Committee comprising of senior Board members. An Assurance Committee comprising Executive Directors and functional Heads has also been constituted inter alia to review the risks identified, preparing the risk matrix and actions of mitigation taken. The Risk management committee has laid down procedure for risk assessment, identification, minimization and mitigation process which are presented to the Audit Committee and the Board of Directors on a periodical basis. The Company has also formulated a Risk Management Policy to identify the elements of risk and mitigation thereof. This policy is evolved to manage business risks. To achieve the objective, risk assessment is performed in which strategic risk, operative risks, including information technology risks, external risks and other risks are considered and risk mitigating factors are identified.

Internal control system

Your Company has established a robust system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorized, recorded and reported. Internal Audit evaluates the functioning and quality of internal controls and provides assurance of its adequacy and effectiveness through periodic reporting. Our internal control system is robust and is routinely tested and certified by internal auditors. The process adopted provides reasonable assurance regarding the effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations.

In order to continuously upgrade the internal control system, to be in line with international best practices and to ensure proper corporate governance, your Company has implemented risk assessment, control self-assessment and legal compliance management. These have been updated during the year under review.

The internal control system evaluates adequacy of segregation of duties and reliability of management information systems, including controls in the area of authorization procedures and steps for safeguarding assets. Periodic reviews are carried out for identification of control deficiencies and opportunities for bridging gaps with best practices along with formalization of action plans to minimize risks.

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

Internal Audit reports to the Audit Committee and recommends control measures from time to time.

OTHER INFORMATION

Subsidiary Companies

Maltex Malsters Limited is the only subsidiary in which your Company holds 51% of equity capital. Maltex Malsters Limited is a non-listed entity and is not a material non-listed subsidiary as defined in Clause 49 of the Listing Agreement. UBL has formulated a policy for determining material subsidiaries which is placed on the website of the Company and is available through the link www.unitedbreweries.com/investors/policies

The consolidated financial statement of the company including financial statement of its subsidiary forms part of this Report in terms of the Companies Act, 2013 and the Listing Agreement with Stock Exchanges. A statement containing the salient features of the financial statement of the subsidiary/associate is attached as Annexure - D to this Report.

Cash Flow Statement

A Cash Flow Statement for the year ended March 31, 2015 is appended.

Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013

Details of loans, guarantees and investments covered under section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

Listing requirements

Your Company's Equity shares are listed on the BSE Limited (formerly Bombay Stock Exchange Limited) and National Stock Exchange of India Limited. The listing fees have been paid to all these Stock Exchanges for the year 2015-2016. The Bangalore Stock Exchange has been derecognized under the relevant provisions of the Securities and Exchange Board of India Act, 1992 and the Securities Contracts (Regulation) Act, 1956.

Depository System

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

Deposits

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

Additional statutory information

Particulars of Employees & Managerial Remuneration

Information required under sub-section (12) of Section 197 of the Companies Act, 2013 read with Rule 5(2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, in respect of employees of the Company, forms part of this Report. Details of remuneration of managerial personnel as required under sub-section (12) of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 also forms part of this Report.

In terms of first proviso to sub-section (1) of Section 136 of the Companies Act, 2013, the reports and accounts are being sent to the shareholders excluding the aforesaid information. Any shareholder interested in inspection of the documents pertaining to above information or desires a copy thereof may write to the Company Secretary.

Cautionary Statement

Statements in this Report, particularly those which relate to 'Management Discussion and Analysis' and 'Opportunities, Threats, Risks and Concerns', describing the Company's objectives, projections, estimates and expectations, may constitute 'forward looking statements' within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

Employees Stock Option Scheme and Sweat Equity Share

The Company has not offered any shares to its employees or Key Managerial Personnel under a scheme of Employees' Stock Option and has also not issued any Sweat Equity Shares at any time.

Related Party Transactions

Details of transactions with related parties as specified in the Companies Act, 2013 and the Rules framed thereunder, the Listing Agreement and the Accounting Standard 18 of the Companies (Accounting Standards) Rules, 2006, have been reported in the Notes to financial statements. Approval of the Audit Committee and the Board of Directors as required under the Listing Agreement and the Companies Act, 2013 has been obtained for such transactions.

The Company has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions which is placed on the Website of the Company and is available through the link www.unitedbreweries.com/investors/policies .

All transactions entered by the Company during the FY15 with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company has not entered into any transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

Familiarization programme for Independent Directors

The existing Board comprises of Executive, Independent and Non-Executive Directors who have been at the helm of Management of the Company for several years and are fully conversant with the business and operations of the Company. The Familiarization program for new Directors as and when inducted shall aim to familiarize them with the company, their roles, rights, responsibility in the Company, market, business model of the Company etc.

The existing Board of Directors have complete access to the information within the Company.

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

Whistle Blower Policy

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

None of the Employees & Directors have been denied access to the Chairman of the Audit Committee. Conservation of Energy

The company is taking continuous steps to conserve energy. Its "Sustainability" initiatives are disclosed separately as part of this Annual Report.

Details of the conservation of energy, technology absorption, foreign exchange earnings and outgo, as required under Clause (m) of sub-section (3) of Section 134 of the Companies Act, 2013 read with The Companies (Accounts) Rules, 2014 is annexed as Annexure - E to this report.

Code of Business Conduct and Ethics

The Board of Directors of your Company have adopted a Code of Business Conduct and Ethics in terms of Clause 49 of the Listing Agreement which has been posted on the website of the Company i.e. www.unitedbreweries.com .

Code for Prevention of Insider Trading

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

Directors

The Board of Directors of your Company comprise of twelve Directors, with a balanced combination of Independent and Promoter Directors.

Dr. Vijay Mallya retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

Mr. Duco Reinout Hooft Graafland and Mr. Roland Pirmez, Heineken Nominee Directors resigned from the Board and in their place Mr. Sijbe Hiemstra and Mr. Frans Erik Eusman have been appointed as Additional Directors with effect from July 23, 201 5 and August 01, 2015 respectively.

Mr. Shekhar Ramamurthy replaces Mr. Kalyan Ganguly as Managing Director effective August 01, 2015. The Managing Director, Chief Financial Officer and the Company Secretary are Key Managerial Personnel in terms of the Companies Act, 2013.

Independent Directors viz., Mr. Chhaganlal Jain, Mr. Chugh Yoginder Pal, Mr. Sunil Alagh, Ms. Kiran Mazumdar Shaw, Mr. Madhav Bhatkuly and Mr. Stephan Gerlich have been appointed for a period of five years till September 03, 2019.

Declaration from Independent Director

All Independent Directors have given declaration that they meet the criteria of Independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Meetings of the Board of Directors and Committees of the Board

The meetings of the Board and Committees are pre-scheduled and a tentative calendar of the meetings finalized in consultation of the Directors is circulated to them in advance to facilitate them to plan their schedule. In case of special and urgent business needs, approval is taken by passing resolutions through circulation. During FY 15, four (4) Board Meetings were held. Other details including composition of Board and various Committees and Meetings thereof held in FY 15 are given in the Corporate Governance Report forming part of this Report.

Audit Committee

The Audit Committee of the Board of Directors is constituted to act in accordance with the terms of reference and perform roles, as prescribed under the Companies Act, 2013 and Clause 49 of the Listing Agreement. The composition of the Audit Committee, its terms of reference, roles and details of meetings convened and held during the year under review is given in Corporate Governance Report forming part of this Report.

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

Nomination and Remuneration Committee

Nomination and Remuneration Committee is constituted to act in accordance with the terms of reference and perform roles, as prescribed under the Companies Act, 2013 and Clause 49 of the Listing Agreement. The composition of the Nomination and Remuneration Committee, its terms of reference, roles and details of meetings convened and held during the year under review is given in Corporate Governance Report forming part of this Report.

Evaluation Mechanism for Directors, Policy on Directors appointment and Remuneration of Directors/Key Managerial Personnel

The Nomination and Remuneration Committee of the Board of Directors has formulated a Performance Evaluation Policy inter alia prescribing an evaluation criteria for the Independent Directors and the Board of Directors of the Company. The Policy also lays down criteria for appointment of Directors and the remuneration of Directors/Key Managerial Personnel. The Policy is available through the web-link: www.unitedbreweries.com/investors/policies .

In line with corporate governance requirement, evaluation of all Board Members is done by the Independent Directors. The evaluation focuses on the performance and effective functioning of the Board, Committees of the Board, participation. The evaluation process also considers the time spent by each of the Board Members, competencies and accomplishment of specific responsibilities and expertise.

Foreign Exchange Earnings and Outgo

During the FY 15 total foreign exchange earnings of the Company stood at Rs.467 Lakhs (Previous Year Rs.271 Lakhs) and foreign exchange outgo stood at Rs.16,808 Lakhs (Previous Year Rs.12,350 Lakhs).

Corporate Governance Report

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

Annual Return

As required under sub-section (3) of Section 92 of Companies Act, 2013 and Rule 12(1) of Companies (Management and Administration) Rules, 2014, an extract of Annual Return in Form MGT-9 is annexed as Annexure - F to this report.

Auditors and the Auditor's Report

In terms of the provisions contained in the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, Messrs S R Batliboi & Associates LLP, Chartered Accountants were appointed Statutory Auditors of your Company at 15th Annual General Meeting held on September 04, 2014 for a period of three years i.e. from the conclusion of 15th Annual General Meeting till conclusion of 18th Annual General Meeting. Their appointment in the office of Statutory Auditors during the said period is subject to ratification by Members at every Annual General Meeting.

There are no qualifications or adverse remarks in the Auditors' Report which requires any clarification or explanation.

Secretarial Audit

Pursuant to the Section 204 of the Companies Act, 2013 and Rule 9 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Sudhir Hulyalkar, Company Secretaries, to undertake Secretarial Audit of the Company for the FY 15. The Secretarial Audit Report forms part of this Report and is annexed as Annexure - G.

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

Details of significant and material orders

No order has been passed or stringent action taken by any regulator or court or tribunal impacting the going concern status of the Company. The Company has complied with the requirements of the regulators on matters related to stakeholders, as applicable.

Directors' Responsibility Statement

Pursuant to clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, your Board of Directors report that:

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

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

(c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Directors have prepared the annual accounts on a going concern basis;

(e) the Directors have laid down internal financial controls to be followed by the Company and ensured that such internal financial controls are adequate and were operating effectively, and

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

ACKNOWLEDGEMENTS AND APPRECIATION

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

By Authority of the Board

Kalyan Ganguly

Managing Director

Henricus Petrus van Zon

Director and CFO

New Delhi

July 22, 2015