Pioneer Distilleries Ltd Directors Report.

Dear Members,

Your Directors have pleasure in presenting the 26th Annual Report of your Company and the audited financial statements for the year ended March 31, 2019.

FINANCIAL RESULTS

The Summary of Financial Performance of the Company for the year 2018-19 is as under:

(INR in Lakhs)

Particulars 2018-19 2017-18
Gross sales 12,822.44 12,370.03
Add: Other operating revenue 1,015.70 1,129.95
Add: Other income 437.00 281.33
Total Income 14,275.14 13,781.31
Less: Cost of goods sold 9,356.65 10,263.00
Less : Excise duty - 11.85
Less: Other costs 4,143.33 4,033.86
Earnings before government grant, depreciation, interest and taxes 775.16 -527.40
Add: Government grant -2,686.18 16,685.44
Earnings before depreciation, interest and taxes -1,911.02 16,158.04
Less: Interest costs 2,935.48 2,254.48
Less: Depreciation 4,861.00 3,661.16
Earnings before taxes -9,707.50 10,181.40
Income tax expenses -2,999.27 3,180.09
Other comprehensive income (Net of tax) -13.00 42.00
Profit / (loss) available for appropriation -6,721.23 7,043.31

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, seven 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.

PERFORMANCE OF THE COMPANY

The Companyhasachieved financialyear ended March 31, 2019 grosssalesofINR 12,822.44Lakhsforthe against the gross sales of INR 12,370.03 Lakhs for the financial year ended March 31, 2018. The Company has reported a loss of INR 9,707.50 Lakhs before tax due to intermittent breakdowns in plant machineries, external challenges leading to frequent shutdowns and delay in stabilisation of operations.

DEPOSITORY SYSTEM

The trading in the equity shares of your Company is under compulsory dematerialization mode. As on March 31, 2019, equity shares representing 98.18% of the equity share capital are in dematerialization form. 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 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. Ajay Goel retires by rotation and, being eligible, offered himself for re-appointment.

Mr. B.V Krishna Reddy, who was re-appointed as Managing Director with effect from September 21, 2018 had resigned due to personal reasons with effect from the close of business hours on October 2, 2018. The Board of directors at their meeting held on 1st October 2018, appointed Mr Ravi Varma as Managing Director in place of Mr B V Krishna Reddy with effect from October 3, 2018. The appointment of Ravi Varma as Managing Director was 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 appointment of Mr Ravi Varma as the Managing Director of the Company for a period of two years with effect from October 3, 2018.

Ms Junia Sebastian resigned due to personal reasons with effect from the close of business hours on October 1, 2018. She has confirmed that there are no material reasons other than specified reason.

Ms. Srivathsala K N was appointed as an Independent Director with effect from October 2, 2018. Her appointment is 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 appointment of

Ms. Srivathsala K N for a period of five years with effect from October 2, 2018.

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

A brief profile of Mr. Ajay Goel, Mr Ravi 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.

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 2018-19 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 July 26, 2018, received directions ("Closure Direction") from Maharashtra Pollution Control Board ("MPCB"), directing closure of manufacturing activity of the Company under Section 33A of The Water (Prevention & Control of Pollution) Act, 1974 and under Section 31A of The Air (Prevention

& Control of Pollution) Act, 1981 alleging pollution caused by the Company. The Company had filed a writ petition before the Honble High Court of Judicature of Bombay, Aurangabad Bench and subsequently approached National Green Tribunal ("NGT") at Delhi against the Closure Direction. NGT had, vide its order dated August 03, 2018 directed the Company to put forward its viewpoint for consideration before the MPCB in accordance with law. The MPCB after hearing the Company vide its direction dated August 29, 2018 was pleased to accept the Companys submissions subject to fulfilment of certain conditions within specified timelines. The Company has complied with the said conditions and has submitted final completion report to

MPCB on December 12, 2018.

During the year, the Company got approval of the members for shifting of Registered Office from the state of

Telangana to state of Karnataka for which order of the authority for formal approval was obtained.

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 of 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 the 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 of the appointment of 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 2018-19. 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, 2019 in terms of the SEBI Circular issued on February 08, 2019. 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 promotes ethical behaviour in all its business activities and has put in place a mechanism for reporting illegal or unethical behaviour. The Company has a Whistle blower mechanism under which the employees and directors are free to report violations of applicable laws and regulations and the Code of Conduct and as part of the mechanism all the employees are provided access 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

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 from September 07, 2016, the unclaimed/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 2019.

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.

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.

We as a genuine contributor to this cause, are pleased to inform that this year, we have witnessed increasing participation from the state governments traffic police and enforcement agencies in the Companys CSR activities. In our endeavour to create respect and trust in the society in which the Company is operating, your company is presently carrying out various activities under Corporate Social Responsibility ("CSR") Program.

The Company will continue to meet its social objectives by spending on the following CSR activities in the vicinity of the Companys factory:

1. Canal clean-up work near Balapur

2. Safe drinking water for people - "Pani Poi"

3. Hiring of Escavator and Tractor for desilting of nearby ponds.

4. Digging of borewells at Dharmabad.

The Company had reported profits in previous financial year in the backdrop of income

Government Grant. This Government Grant is not 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. The Company will spend the unspent CSR amount of INR 51.35 lacs, for the financial year ended March 31, 2019, once the operations are stabilised and the operations starts generating cash.

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 Complaints Committee has been setup to redress complaints received regarding sexual harassment. No complaint was received by the Company during the year ended March 31, 2019.

DIRECTORS 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 2018-19, 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 fair view of the state of affairs of the 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 sufficientcare for the maintenance of adequate accounting records in 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.

ACKNOWLEDGMENT

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