Pioneer Distilleries Ltd Directors Report.

Dear Members,

Your Directors have pleasure in presenting the 27th Annual Report of your Company and the audited financial statements for the year ended March 31, 2020.

FINANCIAL RESULTS

The Summary of Financial Performance of the Company for the year 2019-20 is as under:

Particulars 2019-20 2018-19
Gross sales 15,839.59 12,822.44
Add: Other operating revenue 1,314.24 1,015.70
Add: Other income 310.09 437.00
Total Income 17,463.92 14,275.14
Less: Cost of goods sold 13,698.63 9,356.65
Less: Other costs 5,152.00 4,143.33
Earnings before government grant, depreciation, interest and taxes -1,386.71 775.16
Add: Government grant 523.71 -2,686.18
Earnings before depreciation, interest and taxes -863.00 -1,911.02
Less: Interest costs 3,359.00 2,935.48
Less: Depreciation 4,690.00 4,861.00
Earnings before taxes -8,912.00 -9,707.50
Income tax expenses 6,007.00 -2,999.27
Other comprehensive income (Net of tax) 34.00 -13.00
Profit / (loss) available for appropriation -14,885.00 -6,721.23

DIVIDEND

In view of the accumulated losses, your Directors do not recommend any Dividend on the equity shares of the Company.

BOARD MEETINGS

During the year under review, Five Board Meetings were held. The details of the same are covered in the Corporate Governance Report.

STATE OF COMPANYS AFFAIRS

Except to the extent as stated under Material changes and Commitments, there have been no significant or material orders passed during the year by the regulators or Courts or Tribunals impacting the going concern status and the companys operations in future.

The net worth of the Company has eroded and the current liabilities exceed the current assets as at the year-end.

However, the Management and the Board of Directors have reviewed the cash flow months and based on the letter of financial support obtained from United Spirits Limited, the holding company, have concluded that there is no material uncertainty on the ability of the Company to continue as a going concern.

PERFORMANCE OF THE COMPANY

The Company has achieved a gross - sales of INR 15,839.59 Lakhs for the financial year ended March 31, 2020 against the gross sales of INR 12,822.44 Lakhs for the financial year ended March 31, 2019. The Company has reported a loss of INR 8,912 Lakhs before tax due to intermittent breakdowns in plant machineries, external challenges leading to frequent shutdowns and delay in stabilization of operations.

DEPOSITORY SYSTEM

The trading in the equity shares of your Company is under compulsory dematerialization mode. As on March 31, 2020, equity shares representing 98.27% of the equity share capital are in dematerialization form. As the depository system offers numerous advantages, members are requested to of the facility of dematerialization of the Companys shares.

Members may please note that effective from 1st April 2019, shares of the listed entity can be traded only in dematerialized mode pursuant to SEBI notification SEBI/LAD-NRO/GN/2018/24 published on 08 June 2018.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Pursuant to the provisions of the Companies Act, 2013 (the Act), Mr. Sanjeev Kumar Gupta shall retire by rotation and, being eligible, offered themselves for re-appointment.

Mr. R. Krishnamurthy was appointed as an Independent Director with effect from July 13, 2015 for a period of 5 years. His tenure of directorship will be completed on July 12, 2020. Board of directors at their meeting held on 19th May 2020, re-appointed him as an independent director for a further period of 3 years subject to approval of the members of the Company at the ensuing Annual General Meeting of the Company. Accordingly, it is proposed before the members of the Company to approve the re-appointment of Mr. R. Krishnamurthy for a further period of three years with effect from July 12, 2020.

Mr Ravi Varma, Managing Director had tendered his resignation to the position of Director and Managing Director with effect from 1st July 2020 due to personal reasons. The resultant vacancy was filled by the Board of Directors at their meeting held on 11th June 2020 by appointing Mr Alokesh Biswas as a Director and Managing Director with effect from 1st July 2020 for a period of two years subject to approval of the members of the Company.

The Nomination and Remuneration Committee has recommended the appointment/re-appontment as stated above, which has been provided in the notice to AGM.

Brief profile of the directors being appointed/re-appointed, are provided in the Notice convening this AGM. As per declarations received, no Director of the Company is disqualified to be appointed as a Director of any Public Limited Company in terms of Section 164(2) of the Companies Act, 2013.

INDEPENDENT DIRECTORS

Your Company did not appoint any new Independent Director or Nominee Director financial year 2019-20. Criteria for selection/appointment or reappointment of Independent Directors include skills, expertise of the Director, qualifications, experience and domain knowledge. The required skills of Independent Directors are leadership, managerial experience, diversity, risk management and corporate governance. All our Independent Directors viz., Mr. R Krishnamurthy and Mrs. Srivathsala K N possess the aforesaid skills.

DECLARATION FROM INDEPENDENT DIRECTORS

In terms of Section 149(7) of the Companies Act, 2013, Independent Director(s) of the Company have submitted a declaration that they meet the criteria of Independence.

FAMILIARISATION PROGRAM UNDERTAKEN FOR INDEPENDENT DIRECTORS

The details of familiarization program of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link: http://www.pioneerdistilleries.com/policies.php

There have been meetings of Independent Directors at regular intervals which were conducted without the presence of other Directors.

REMUNERATION POLICY

The ratio of the remuneration of each director to the median employees remuneration, the names of the top ten employees in terms of remuneration drawn and other details during the financial year 2019-20 in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) & (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in Annexure 1 and also in the Corporate Governance Report and form MGT 9, which forms part of this report. As stated in the Corporate Governance Report, sitting fees were paid to Independent Directors for attending Board/Committee meetings. They are also entitled for reimbursement of actual travel expenses, boarding and lodging, conveyance and incidental expenses incurred in attending such meetings.

PERFORMANCE EVALUATION

Pursuant to the provisions of the Act and Regulation 17 of the SEBI Listing Regulations, 2015, the Board has been carrying out an annual performance evaluation of its own performance, the performance of its Directors individually, as well as that of the Board Committees. The evaluation process considers the effectiveness of the Board and the Committees with special emphasis on the performance and functioning of the Board and the Committees. The evaluation of the Directors is based on the time spent by each of the Board Members, core competencies, expertise and contribution to the effectiveness and functioning of the Board and the Committees.

MATERIAL CHANGES AND COMMITMENTS

The Company had on 26th November 2019 received directions from Maharashtra Pollution Control Board under section 33A of the Water (Prevention & Control of Pollution) Act 1974 and under section 31 A of the Air (Prevention and Control of Pollution) Act 1981 alleging pollution caused by the company and complaint received through Central Pollution Control Board in July 2019 .

The company had submitted reply with bank guarantee of 5 Lakh dated 02.01.2020 and other completion report which was completed before November 2018 and was submitted through letter dated 12.12.2018.

A suo moto case has been filed by district sessions court, Nirmal against the company based on the article published in the Local newspaper. After regular hearings in the Nirmal court, the company has submitted the affidavit.

The water board has substantially increased the tariff on water and changed the jurisdiction from Revenue department to Maharashtra Water Resources Regulatory Authority thereby giving the control of supply and collection of charges towards consumption to Water Resources Department. Looking at the substantial hike and impact, the company had approached high court to avoid any hostile actions such as stopping the water supply. After obtaining a stay order in favour of the company we have approached the appellate authority expressing difficulty on account of substantial increase in water tariff , the hearings are going Regulation Officer, Aurangabad to prove water source as a partly assured water supply and water consumption in the distillery as a process water.

The Management Discussion and Analysis Report read with the report on Risk Management contains impact on the business due to regulatory changes and due to recent COVID-19 Pandemic.

COMMITTEES

The Companies Act, 2013 provides for the formation and duties of various committees of the Board. The

Company has in place the required Committees with specific defined roles, duties and responsibilities. Details various committees, meetings held and attendance at the various committee meetings are given in the Corporate Governance Report which forms part of the Annual Report.

All the recommendations of the Audit and Risk Management Committee were accepted by the Board.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

There are no loans given, investments made, guarantees given, securities provided by the Company and acquired by way of subscription, purchase or otherwise securities of any other body corporate which are covered under the provisions of the Section 186 of the Companies Act, 2013.

INTERNAL FINANCIAL CONTROLS

Your Company has established and maintained a framework of Internal Financial Controls and compliance systems. Based on Boards review of the effectiveness of the policies and procedures adopted by the Company for ensuring orderly and efficient conduct of its business, including adherence to Companys policy, safeguarding its assets, prevention and detection of frauds and errors and completeness of accounting records and timely preparation of financial statements and the confirmation received from the external parties, the Board has satisfied itself that the Company has laid down internal financial controls, commensurate with size of the Company and that such internal financial controls are broadly adequate and are operating effectively. The certification by auditors on internal financial control forms part of the audit report.

AUDITORS

M/s. Price Waterhouse & Co., Chartered Accountants LLP (FRN 304026E/E-300009), were appointed as Statutory Auditors of your Company in the 24th AGM held on 28 July 2017 for a period of 5 years till the conclusion of the 29th AGM of the Company. Pursuant to provisions of the Companies (Amendment) Act 2017, ratification of the appointment made at the earlier Annual General Meeting is not required and hence dispensed with ratification the appointment of the auditors.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed Mr. Sudhir V. Hulyalkar, a Company Secretary in Practice (FCS: 6040 [CP No. 6137]) to undertake the Secretarial Audit of the Company for the Financial Year 2019-20. The Secretarial Audit Report is given as Annexure 2, forming part of this Report. In addition, the company has also obtained Secretarial Compliance Report for the year ended March 31, 2020 in terms of the SEBI Circular issued on February 08, 2019 which is annexed as Annexure 2A. The said report has been submitted to the stock exchanges and is also available on the Companys website www.pioneerdistilleries.com

RISK MANAGEMENT

The Company has a Risk Management framework. Risk evaluation by the management is an ongoing process within the organization and is periodically reviewed by the Board of Directors. Risk Management has been made part of Audit Committee by renaming the Audit Committee as Audit and Risk Management Committee. The Risk Management policy adopted by the Company has been explained in the Management Discussion and Analysis Report which forms part of this Annual Report.

WHISTLE BLOWER MECHANISM

The Company has a whistle-blower mechanism known as SpeakUp, operated by a third-party agency. Employees or representative acting on behalf of the Company, are encouraged to raise their compliance concerns through this mechanism, apart from other internal reporting channels viz. Line Manager or HR Business Partner, Legal Business Partner and Business Integrity member. The Company has a structured Breach Management Standard in place which is in line with Global standard, for timely and conclusive resolution of compliance concerns raised through the whistle blower mechanism. Access has been also provided to raise the concerns to the Chairman of the Audit Committee. The Whistle Blower Mechanism of the Company can be accessed on the website at the following link: www.diageospeakup.com

During the year, 5 cases have been reported through SpeakUp and other internal reporting channels. All five cases were investigated and resolved with 40% substantiation rate. The decision on sanctions on the reported breaches are determined and monitored by a Compliance Committee, in order to ensure that there is a collective and a fair decision-making process and consistent action in resolving the breaches. The quality of investigation reports and remedial actions are reviewed and monitored by the Global Business Integrity team.

As a part of the governance framework, the Board of Directors and the Audit Committee regularly review the strategy and operation of the compliance and ethics programme including the breaches reported, through the year. Regular updates are also provided to the senior leadership team on various aspects of the compliance program, not only to set the tone at the top but also as a part of managements commitment to continuous improvement in integrating compliance with the business.

RELATED PARTY TRANSACTIONS

The Company has formulated a Policy on dealing with Related Party Transactions (RPTs) which has been reviewed by the Audit Committee at regular intervals. The Policy is disclosed on the website of the Company at the web link: http://www.pioneerdistilleries.com/policies.php. All transactions entered with Related Parties as defined under the Companies Act, 2013 and Regulation 23 of the SEBI Listing Regulations during the year were in the ordinary course of business and at an arms length basis. There are no materially significant RPTs entered by the Company with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict of interest with the Company.

The details of the RPTs in Form AOC-2 is enclosed and marked as Annexure 3. In accordance with Ind AS 24, the RPTs are disclosed under Note 36 of the Financial Statements.

CORPORATE GOVERNANCE REPORT

A report on the Corporate Governance is annexed separately as part of this report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report is annexed separately as part of this report.

FIXED DEPOSITS

The Company has not accepted any deposits from the public during the year. There was no fixed deposit amount that remained unpaid/unclaimed as at the end of the year.

LISTING OF EQUITY SHARES OF THE COMPANY

The Equity Shares of your Company continue to be listed with BSE Limited and National Stock Exchange of India Limited. The Annual Listing fees for the year 2019-20 have been paid to these Stock Exchanges.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

In terms of Sections 124 and 125 of the Act (erstwhile Section 205A(5) and 205 C of the Companies Act, 1956), read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund)

Rules, 2016 (‘IEPF Rules), both of which were applicable with effect unpaid dividend remaining unclaimed/unpaid for a period of seven years, have been transferred to the IEPF. There were no amount pending to be transferred to the IEPF account for the financial year ended March 2020. Necessary compliance under Rule 3 of the Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012 have been complied with.

HUMAN RESOURCES

None of the employee draws remuneration in excess of the limit prescribed under rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

EMPLOYEES STOCK OPTION SCHEME

Your Company has not offeredany stock options to its employees during the year 2019-20 within the meaning of SEBI (Share Based Employee Benet) Regulations, 2014.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to Energy conservation, Technology absorption, Foreign exchange earnings and outgo, as required to be disclosed under the Act is given in Annexure 4 to this Report.

EXTRACT OF THE ANNUAL RETURN

Pursuant to the provisions of Section 134(3)(a) of the Companies Act 2013, an extract of the Annual Return in Form MGT-9 is given in Annexure 5 to this Report.

CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility (CSR) committee has been setup by the Company. The composition and other details have been provided in the Corporate Governance Report.

The Company and its employees have actively participated in engaging with stakeholders and regulatory authorities so as to create positive impact of our existence and operations. This has widely been applauded and reflected with true commitment of creating a sustainable socio-economicgrowth.Majorefforthas been initiated to minimize the impact on environment caused by burning of agricultural waste in the vicinity. This involves continuous counselling to the local as well as distant agricultural dwellings to stop burning the agri waste, and instead collect the same for processing as fuel in a controlled manner with relatively negligible emissions and separation of particulate matter largely benefitted by supplying their agri waste to the company as fuel instead of burning.

The company although did not generate profits in the previous financial year, the Company had reported profits in the earlier financial year 2017-18 in the backdrop of income booked with respect to Government Grant. This

Government Grant has not been fully received by the Company yet.

Operationally, the Company continues to report losses and is operating on working capital borrowed from banks and intercorporate loans and advances from the holding company. However, the company has spent 72.66 Lakhs as committed in the beginning of the year, towards the unspent CSR amount pertaining to the Financial Year ending March 2019.

Furthermore, as required by Section 135 of the Companies Act, 2013 and the rules made hereunder, additional information on the policy and implementation of CSR activities by your Company during the year are provided in Annexure 6 to this report.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

(PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has implemented a policy on Prevention of Sexual Harassment (POSH) at the Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Committee (IC) has been setup to redress complaints received regarding sexual harassment. No complaint was received by the Company during the year ended March 31, 2020. To build awareness in this area, the Company has been conducting induction, training programmes for employees, consultants, contract employees and permanent workers in the organisation on a continuous basis. IC has also conducted informal sessions to check the pulse at the grassroot levels.

RESPONSIBILITY STATEMENT

Pursuant to Section 134 (5) of the Companies Act, 2013 in relation to financial statements (together with the notes to such financial statements) for the year 2019-20, the Board of Directors report that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) 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 affairs of the view the state Company at the end of the financial year and of the profit/loss of the Company for that period;

(iii) the Directors have taken proper and sufficient care for the maintenance of accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the Directors have prepared the financial statements on a going concern basis;

(v) the Directors have laid down internal financial controls to be followed by the Company commensurate with the size and nature of its business and the complexity of its operations and that such internal financial controls are adequate and are operating effectively.

(vi) the Directors has devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and is operating effectively.

DISCLOSURE OF COMPLIANCE OF SECRETARIAL STANDARDS:

The relevant Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) related to the Board Meetings and General Meeting have been complied with by the Company.

ACKNOWLEDGMENT

Your Directors place on record their sincere appreciation for the support from employees, shareholders, customers, suppliers, banks, auditors, government of Maharashtra, Telangana & Karnataka and other business associates.

By Authority of the Board
Bengaluru R Krishnamurthy
June 11, 2020 Chairman