united breweries ltd share price Directors report


Your Company’s Directors are pleased to present this Annual Report on the business performance 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, 2022 (‘the year under review’, ‘the year’ or ‘FY22’).

Management Summary

The year 2021-22 was characterized by two high impact events - the second wave of COVID and the integration with HEINEKEN - which have reshaped your Company and ultimately made it stronger, more resilient and better prepared for the future.

• The Delta wave, a virulent incarnation of COVID, that swept the country in April and May 2021, had a devastating impact on companies and communities alike. Amidst the nation-wide spike in infections that brought us all to the grips of a public health emergency, your Company stood by two guiding principles - first, ensuring the health and safety of our colleagues, consumers and other stakeholders and second, extending support and relief to communities which were most impacted by the pandemic by means of medical support, donations and local aid. The resilience and commitment demonstrated by our colleagues and stakeholders was crucial for your Company to sail through these tough months. Your Company continued to engage its consumers and also practiced tight cost control measures to preserve cash. The work done during this period in terms of zero based cost management will stand your Company in good stead for the future.

• Your Company’s integration with HEINEKEN seeks to capitalize on our collective strengths to win in the market. With HEINEKEN having been a UBL Shareholder and an active member of the board for over a decade, there is continuity in business strategy and confidence in UBL’s market leadership, expertise and the growth potential of the beer market in India. Your Company is stronger together with HEINEKEN and well-poised to accelerate penetration, drive premiumization, unlock future growth and shape the Indian beer industry.

During the period, your Company delivered some strong results:

• Volumes in the December quarter recovered to pre-COVID levels thanks to continuous engagement with consumers and the opening of markets. The month of March saw a record sales volume with early onset of summer.

• The Company expanded its market share during the financial year, thereby solidifying its market leadership.

• With progressively recovering volumes throughout the year, financial results showed recovery vs prior year with net sales up 38% and EBIT up 157%.

• Robust underlying free operating cash flows at Rs.721 crores due to continued improvement in working capital and optimised investment levels.

 

(Given the strong liquidity position, the Board proposes a dividend significantly up to Rs.10.50 per Share, representing circa 76.06% pay out of profit after tax.)

During the year, your Company continued to invest in future growth drivers mapped to our strategic priorities. With an eye on driving category penetration and creating new opportunities for growth, your Company launched a new campaign to boost at-home beer consumption. The new and refreshed packaging for King_sher received a positive response from customers and consumers and is a significant step in our journey to retain the iconicity of our flagship brand. We continued to strengthen the premium portfolio by expanding our craft style Belgian wheat beer Ultra Witbier. The pandemic also reinforced the importance of working together as a collective force and during the year, your Company conducted trainings and workshops for colleagues and launched best-in-class inclusion and diversity policies with the objective of building a diverse, empowered and engaged workforce with the right culture and capabilities. Your Company strives to relentlessly drive productivity and capital efficiency and during the year implemented a combination of productivity and cost control measures. As a result, EBIT margin improved by 404 basis points to 8.7%. Strict cash and working capital management enabled the pre-payment of the remaining debt and year end bank balances are more than Rs. 850 Crores. We also continued to engage with external stakeholders to enable a fair regulatory environment for beer in India.

Our future depends on how we shoulder our present responsibilities and your Company, a responsible corporate citizen, aims to build an organization that not just delivers value to Shareholders but also works together to brew a better world with responsibility and sustainability at the heart of its agenda. During the year, we continued to work towards reducing our overall water consumption needs for the business and improve water stressed areas, with consumption per hl reducing by 5% to 3.4 hl/hl. In a phased manner, we are gradually moving to renewable energy sources to support our carbon footprint reduction in addition to recycling our packaging materials. Renewable energy usage for the year has reached 81%. We are pleased to share a comprehensive report on ESG as part of this annual report.

Overall, your Company is optimistic about the long-term growth drivers of the industry on the basis of GDP growth, climatic conditions, rapid urbanization, rising incomes and evolving consumer trends, and is brimming with renewed vigour to shape the future of Indian beer market together with HEINEKEN.

UBL & HEINEKEN: STRONGER TOGETHER!

FINANCIAL SUMMARY

Financial performance for the year ended March 31, 2022 is summarized below:

(Amount in Rupees million)
STANDALONE FINANCIAL RESULTS Year ended March 31
2022

2021

Gross Turnover 131,174

101,834

Net Turnover 58,319

42,407

Other Income 297

502

EBITDA 7,246

4,298

Exceptional Items —

(72)

Depreciation and amortization (2,169)

(2,319)

EBIT 5,077

1,907

Interest (148)

(227)

Profit before Taxation 4,929

1,680

Provision for Taxation (1,279)

(551)

Profit after Tax available for appropriation 3,650

1,129

Appropriations:
Dividend on Equity Shares (including taxes thereon) (132)

(661)

Transfer to the General Reserve —

(113)

Other Comprehensive Income/(Loss) 6

149

Balance carried to the Balance Sheet 3,524

504

The financial statements for the year ended March 31, 2022 have been prepared under Indian Accounting Standards ("Ind AS") pursuant to notification by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 as amended.

In a year, where the beer industry was again under pressure due to the second and third wave of COVID with consequent impact across businesses, your Company was able to increase its sales volumes and profits. The Gross turnover for

FY22 stood at Rs.131,174 million which grew by 29%. Your Company achieved a Net turnover (net of excise duty) of Rs.58,319 million during FY22 as against Rs.42,407 million during FY21. Despite two waves of COVID during FY22, your Company could achieve improved performance. Interest cost was contained with effective working capital management. EBITDA for the year under review stood at Rs.7,246 million as compared to Rs.4,298 million in the previous year, an increase of 68.6% over the previous year.

Profit before taxation for the year stood at Rs.4,929 million. Profit after taxation stood at Rs.3,650 million. Increased volumes, better operational management, and efficiently controlled costs resulted in higher sales and profits.

DIVIDEND

We take pleasure in proposing a dividend of Rs.10.50 per Equity Share of Re.1/- each for the year ended March 31, 2022. The dividend declared for the previous year was Re.0.50/- per Equity Share of Re.1/- each. The total dividend is Rs. 2776.3 million, which amounts to about 76.06 % of the Profit after Tax.

RESERVES

The Company does not propose to transfer any amount to General Reserve.

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 Issued, Subscribed and Paid-up Equity Share Capital of the Company as on March 31, 2022 remains unchanged at Rs. 264.4 million comprising 26,44,05,149 Equity Shares of Re.1/- each.

On June 23, 2021, Heineken International B.V. acquired an additional 3,96,44,346 Equity Shares of the Company being 14.99% of the Equity Share Capital from the Recovery Officer, DRT (under sale proclamation) through a block deal taking Heineken Group Shareholding in the Company from 46.52% to 61.52%. Heineken Group has therefore become a majority promoter shareholder.

MANAGEMENT DISCUSSION AND ANALYSIS

Industry Overview

Beer has been bringing people together for many years. In India, we believe our best days are ahead of us as young people continue to choose beer as a social lubricant. The beer market is gaining prominence owing to rising disposable incomes, preference for differentiated and immersive consumer experiences, the popularity of low-alcohol beverages and growing social acceptance.

During the FY22, business commenced in April 2021 on a good trend. However, government restrictions towards the last week of April following the spike in infection resulted in challenging market conditions. The next two months of the quarter witnessed muted volumes with some recovery towards the end of June as markets opened up gradually. Restrictions in the June quarter were less stringent compared to the previous year’s period, with almost all the markets partially functional in some form.

The second quarter saw volumes stabilize, with a number of markets achieving volumes comparable to or ahead of pre-COVID levels by September. The third quarter witnessed robust growth, resulting in quarterly volumes back to pre-COVID levels. January 2022 was impacted negatively by the third COVID wave, whereby market demand recovered during February, followed by a strong performance in March at the start of the peak season.

The industry’s potential is yet to be fully unlocked owing to factors such as a relatively limited outlet universe, various government regulations and high taxation policies in most states across India. Rapid urbanization, rising middle class, and change in societal perspective, along with the launch of new low-and no-alcohol variants of beer and technological advancements, are poised to propel market growth. The introduction of online ordering and ease of doorstep delivery in certain states could further enable wider distribution towards end consumers. Overall, the industry fundamentals remain very strong and your Company is convinced that with the current strategies in place, it can drive, lead and shape the beer market in India.

Sales and Marketing

The rise of the Delta variant, which led to the second wave of lockdowns throughout the summer and beyond, impacted business. Despite this, we continued to communicate with our consumers.

Our flagship brand King_sher engaged with consumers with relevant messaging on COVID-appropriate behavior anchored on optimism and hope. Our digital initiatives helped build linkages to at-home consumption and ensured relevant communication for our consumers. During the second half of the year, King_sher engaged with its consumers on the need to socialize responsibly in addition to topical messaging around festivities.

In 2021, our association with IPL continued, and our integrated communication helped drive positive consumer connections and improve brand health metrics. In the minds of our consumers, King_sher remained one of the top recalled brands with respect to the IPL.

King_sher also unveiled its new packaging in Goa in December 2021 and in multiple markets later. The new packaging has garnered an encouraging response from our trade partners and consumers.

The global sponsors of UEFA Champions League and Euro 2020, Heineken also brought the #SocialiseResponsibly and #BetterTogether campaigns for Euro 2020 and Champion’s League to Indian consumers. Heineken was also the official sponsor for the much-awaited offering from the James Bond franchise –’No Time to Die.’ The new Bond movie release was ampli_ed through release on the digital medium along with engaging James Bond and Heineken co-branded memorabilia. Heineken also activated Live Your Music (LYM) through its property ‘Krank’ in India and brought high-energy music sessions leading up to our signature New Year festival in Goa.

Amstel International Strong Beer continued its footprint expansion despite the operational challenges of navigating through a difficult year. Haryana, Telangana and Maharashtra were added to the list of Amstel markets post the gradual unlocking of markets last year.

King_sher Ultra led the premiumization agenda for brand King_sher and the brand was active on TV and digital media, with the versatile actor Farhan Akhtar anchoring the "Live the Ultra Life" thematic campaign. King_sher Ultra extended its offering in draught format in the Maharashtra market and promoted the new offering with an influencer-led campaign - ‘Smoothest Brew on Tap.’ The new format has gained a lot of appreciation, and we intend to expand it to other key metros in the coming year.

On-ground, Ultra continued its association with two prestigious Derby events in Bombay and Bangalore. With COVID restrictions being eased, the events operated with limited seating capacity and were aired live on Facebook and YouTube. King_sher Ultra accelerated to activate the main brand pillar of music with its music IP ‘Ultra Access,’ with a series of 13 events bringing in Indian and international artists across eight metros and creating a superlative experience. The brand also continued its partnership with the Satellite Beachside music festival during the year-end celebrations. The festival executed five pre-events, two mini festivals and a four-day main event, connecting with over 6,000 consumers across major metros.

Ultra Witbier, our craft-style beer brand, expanded its presence into nine markets across the country, covering most of the key markets. The brand introduction has largely been supported by digital media and has built good overall awareness.

London Pilsner went live with its ‘Taste of London in every sip’ campaign with cricketer Ben Stokes in the key markets. The campaign on digital and OOH generated good brand recall and association.

UB Export continued to build on its franchise and awareness in Karnataka with its ‘Innoba Star’ campaign with superstar – Rakshit Shetty.

Supply Chain

Manufacturing expenses for FY22 amounted to Rs.29,327 million, representing 50% of net sales, as against Rs.20,363 million in the previous financial year, which constituted 48% of net sales. The year was marred by two COVID waves. The supply chain team focused primarily on the safety of our colleagues in addition to ensuring that production and delivery of volumes were done safely and within the strict guidelines as per the Ministry of Home Affairs and relevant local authorities. The supply chain has delivered well against the set targets despite a challenging environment due to disrupted global supply chain, material shortages, and partial lockdowns. Tight cost control measures, planning, and initiation for material supply security for the 2022 season have remained top priorities.

The supply chain has also focused on expanding its specialty footprint to drive premiumization across key markets. In line with this strategy, we continued to expand the production of premium brands at various breweries to ensure product availability via Witbier capacity at Chamundi Brewery (Karnataka). The commercial supplies are expected by the second half of 2022.

With sustainability at the heart of our business, your Company initiated the commissioning of the "New Water" project in our brewery in Chopanki (Rajasthan). This is the first of its kind project in the alcobev space in India and will help breweries reach Zero Liquid Discharge (ZLD), significantly reducing our fresh consumption through recovery and reuse. More such projects are planned across other breweries in line with our ESG roadmap in the coming years. This is well on track to meeting the key deliverables and should be streamlined by the second half of 2022.

Your Company’s renewable energy usage for FY22 stands at 80.8%. UBL’s own units consumed 32.4% of electricity generated from renewable sources. In addition, 96% of thermal energy comes from renewable sources. This has led to a reduction of carbon footprint by 32,350 tons of Co2, equivalent to 1.59 Mio trees’ annual absorption capacity, a forward step towards our carbon emission goals.

Input material costs and availability have remained under stress during the entire year.

? Barley-malt has seen extremely high prices due to the reasons listed below.

? Competitive crops are trading at prices that are significantly higher vs. barley. This has led to more farmers shifting to alternative crops and hence a drop in area under barley cultivation. There is enhanced demand for barley by other industries which are looking for cheaper grain alternatives combined with global commodity inflation.

? Unseasonal showers impacted 2022 harvest quality in March, leading to lower-than-expected arrivals of malting barley in the market.

? Prices of all major packaging commodities like aluminum, paper, and steel continued to remain high globally, adversely impacting our packaging cost for cans, cartons, crowns, and labels.

? The biggest material cost element, ‘Bottles’ remained under stress as the recycled bottle supply chain was disrupted by COVID waves and higher cullet prices in certain states.

? There was higher focus on localization and value engineering for cost optimization

? Increased proportion of localized malt from imported barley with an equivalent reduction in direct usage of imported malt for some of our brands.

? Shifting to Kraft cartons in some of the premium brands.

Research and Development

Your Company’s Research and Development function continues to support its growth strategy with a focus on new capabilities, development of new products, enhancement of existing products, productivity improvement and cost reduction.

Human Resources

Human Resources (HR) develops UBL’s most important asset – our people. Your Company recognizes that the long-term success and sustainable growth of our organization depends on our capacity to attract, retain and develop our employees. We are committed to providing our employees across the country with a safe and healthy work environment and helping them realize their full potential. The organization fosters an open and transparent work culture that drives innovation and nurtures entrepreneurial spirit among all employees. Your Company believes in celebrating milestones, both big and small, and encourages people to connect, communicate and collaborate through various forums.

UBL has an inclusive culture and takes pride in being an equal opportunity employer. We encourage all forms of diversity and believe that it adds to building a more engaged workforce, thereby contributing to better business performance. In addition to the mandated policies to develop a conducive work environment, we have an Inclusion and Diversity Council that plays an active role in realizing our goal of nurturing an empowered workforce.

Learning is ingrained in our culture and employees are constantly encouraged and given ample opportunities to upgrade their knowledge and skill. On the job training is the principal source of learning in addition to curated initiatives to build talent and leadership with an aim to enhance the organizational capability to compete and win in the market. Apart from our mandatory programs, customized learning modules are also offered to build specific capabilities at various levels of the organization. The UBL Competency Framework helps in assessing the current and future talent capability. It also helps highlight the specific strengths to be further developed and _ags critical skills that can be sharpened. Your Company believes in ethical governance and abides by the robust policies laid down under the Code of Business Conduct. The guidelines laid down in the Code help our employees navigate difficult situations related to the business. Our employees and vendors can report any violation of the Code via an online platform named Speak-Up. The platform is managed by a third party to ensure that the identity of the whistleblower is protected.

UBL uses technology effectively in all stages of the employee life cycle from onboarding to retirement. This has resulted in standardized automated processes, improved productivity, and enhanced employee experience.

The inputs from our annual employee engagement survey help in continuous improvement of our people practices, policies and programs and lends an ear to the ground in terms of employee expectations.

Industrial Relations continue to be harmonious and peaceful at all levels and at all locations of the Company.

All the wage agreements have been renewed in a timely manner and are valid and subsisting. Workers and unions support the implementation of reforms that impact quality, cost, and improvements in productivity across all locations, which is commendable.

UBL has 2,837 employees on its rolls across all locations. The Company has not offered any stock options to the employees during the year under review.

Total employee benefit expenses for the year stood at Rs. 5,194 million, as compared to Rs. 4,823 million in the previous year. This constituted 3.96% of gross revenue from operations. Your Directors place on record their sincere appreciation to all employees for their contribution towards the continued success of the organization.

Significant changes in Key Financial Ratios

Following are the Key Financial Ratios, where variance of more than 25% is noticed as compared to the previous financial year, along with detailed explanations therefor, including.

Debtors Turnover: Improvement in Debtors Turnover ratio from 7.42 to 9.90 due to increase in sales as compared to previous year which was impacted by the pandemic and recoveries as per credit terms.

Inventory Turnover: Improvement in Inventory turnover ratio from 7.16 to 9.87 due to increase in sales as compared to previous year which was impacted by the pandemic and reduction in inventory levels in certain categories considering the timing of purchases.

Debt Service Coverage Ratio: Improvement in debt service coverage ratio from 1.61 to 2.21 due to increase in sales leading to increase in profits as compared to previous years which was impacted by the pandemic and repayment of debt in the current year.

Debt Equity Ratio: No debts at year end March 31, 2022 compared to 2,502 million as on March 31, 2021.

Net Profit Ratio: Net profit ratio increased from 1.11% in 2020-2021 to 2.78% in 2021-2022, primarily on account of increase in sales leading to increase in profits as compared to previous year which was impacted by the pandemic. Return on Equity: Return on Equity increases from 3% in 2020-2021 to 10% in 2021-2022 due to increase in sales leading to increase in profits as compared to previous year which was impacted by the pandemic.

Impact of COVID

The FY22 continued to be impacted following the second wave of COVID in April-May 2021. The human, social and economic impact from COVID has been severe, especially for the beer industry where volumes were lower compared to previous years. The third wave of COVID in January 2022 was fortunately less impactful.

The Company continues to place the health and safety of its stakeholders as the top priority, while also extending support to various communities in which it operates by means of medical support and relief.

Despite a challenging business environment, your Company remained focused on key strategic pillars: increasing category penetration, building a strong brand portfolio, managing costs and cash, ensuring further improvements on sustainability, while fostering a highly engaged and inclusive workforce that is supported by best-in-class processes. Although the trajectory of COVID is unknown, the Company is confident in successfully navigating such uncertainties with its leadership position, strong brand portfolio, and healthy financial position. The Company expanded its market share during the financial year thereby solidifying its leadership.

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY

United Breweries aims to brew a better world and firmly believes in growing the business in a socially and environmentally responsible and sustainable way while meeting the interests of all its stakeholders. Your Company is committed to improving the lives of the community it works with and reducing the impact of its operations on the environment it draws its resources from.

Thus, over the last year, we continued to support our core Corporate Social Responsibility (CSR) programs on water conservation, safe drinking water and community development initiatives while also focusing on the health and safety of our communities by responding to the COVID crisis. Through partnerships with credible implementation partners, we aim to build a more equitable and sustainable future for our co-communities.

UBL is committed to water stewardship and makes conscious efforts to conserve and replenish water. Last year, we spent more than 60% of our CSR funds on water initiatives through six large water conservation projects. In the next five years, we are focused on increasing this commitment to 75%. In addition to implementing large rainwater harvesting and watershed management projects in the vicinity of our breweries for water conservation, we also make extensive efforts to generate awareness in the communities on adopting rainwater harvesting practices, promoting climate-resilient practices for agriculture, and incorporating necessary infrastructure for water preservation. We undertook these projects in Tamil Nadu, Punjab, Rajasthan, Haryana, Telangana, Karnataka, and Kerala.

Our project to develop an Urban Dense Forest in the Waluj MIDC area in Aurangabad, Maharashtra, which was initiated in FY21, got completed last year. Under this project, we planted 75,000 trees in 75+ native species in an area of 5 acres and improved the biodiversity in this region using the Miyawaki technique of afforestation.

The COVID pandemic has impacted lives and livelihoods. As a responsible corporate citizen, our first response was to stand with our communities and ensure the supply of basic necessities during the lockdown. By initiating discussions with the Panchayat and the people on the ground, UBL galvanized its NGO partners to conduct a rapid needs assessment to find out the requirement of the community. With the help of our NGO partners, we made provisions for ambulances, oxygen cylinders, ICU beds, oxygen plants and ventilators for various locations. We also partnered with the NRAI (National Restaurant Association of India) under the H.E.A.L program to launch a country-wide vaccination program for essential workers of the restaurant industry. Over 2500 people were vaccinated through this initiative.

Your Company is committed to creating a more equal world, and this can only be achieved when women are given equal opportunities. During the year, we launched Pragati - our scholarship program to support meritorious female students across India in realizing their dreams of a fulfilling career. We provided scholarships from standard 9th to under-graduation as part of this project.

The Business Responsibility and Sustainability Report in the format prescribed under the Securities and Exchange Board of India ("SEBI") (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations") is annexed as Annexure-A. Annual Report on CSR activities in terms of the Companies Act, 2013 ("the Act") and the Companies (Corporate Social Responsibility) Rules, 2014, is annexed as Annexure-B.

Sustainability

Your Company aims to brew a better world with responsibility and sustainability at the heart of its agenda. United Breweries has framed long-term Environment, Social and Governance (ESG) sustainability goals on various Materiality Indices in order to make its place among the responsible organizations across the globe.

Water has been the focus of our business, and we are continuously working towards reducing our overall water consumption at the organization. We also monitor and work towards improving water-stressed areas.

Our energy consumption is gradually shifting to renewable sources, in a planned and phased manner, in both electricity and thermal, and these initiatives are supporting our carbon footprint reduction.

We continue to focus on recycling our packaging materials. More than 60% of bottles used by us are recycled by us and the remaining are also recycled by bottle manufacturers and others.

Our secondary packaging like carton is made by using more than 80% recycled paper. We have tied up with CPCB-approved plastic waste recyclers through Extended Producer Responsibility (EPR) guidelines to recycle 100% equivalent of the low-density polyethylene used in our manufacturing process.

Green Energy

Your Company has been consistently marching ahead in its journey of maximizing the usage of Green Energy. This journey demonstrates the organizational vision to lead the initiative by being proactive and contributing to environment protection. This is aligned with our long-term Sustainability Goals as part of ESG Roadmap. Total renewable energy usage for FY22 stood at 80.7%. UBL’s own units consumed 32.4% electricity generated from renewable sources. To supplement this, 96% of thermal energy came from use of renewable sources. The renewable electrical energy usage which is equivalent to 1.37 Mio trees. Our breweries in Karnataka is equivalent to carbon footprint of 32,350 tons of Co2

and Tamil Nadu are leading the Renewable Energy drive with Total Renewable energy usage of more than 80%.

Awards

1) Pollution Control Board:

Our brewery at Palakkad, Kerala won the Best Innovative Water Technology Industry.

2) Confederation of Indian Industry (CII) Environment, Health and Safety (EHS) Excellence Awards:

Our breweries at Palakkad, Kerala received EHS Bronze Category award for 2021.

3) Total Productive Management (TPM):

In our journey of operational excellence through process of TPM, we are on a continual improvement path and in FY22, we bagged 4 prestigious national level awards.

? Our Brewery at Taloja, Mumbai was awarded with Platinum award (Innovative Kaizen Category) at 40th CII National Level Competition.

? Our Brewery at Chopanki, Rajasthan was awarded with 2 Gold awards at Challengers Trophy (Innovative Kaizen Category) organized by CII Institute of Quality.

? Our Brewery at Palakkad, Kerala was awarded with 1 Gold award at Challengers Trophy (Autonomous Management Category) organized by CII Institute of Quality.

OPPORTUNITIES, THREATS, RISKS & CONCERNS

India is the second-most populous country in the world with over 1.3 billion people, i.e., more than a sixth of the world’s population. Over 50% of its population is below the age of 25 and more than 65% below the age of 35, as per statistics from the United Nations, Department of Economic and Social Affairs. The sheer size of India’s population provides a massive opportunity for growth.

Rapid urbanization, rising incomes, change in societal perspective, the launch of new low-and no-alcohol variant beer and technological advancements are a few factors that will propel market growth. The introduction of online order and ease of doorstep delivery in certain states could further drive the market. Should certain State Governments proactively open up and regulate the online sale of alcohol / home delivery, it would be favorable for the beer industry in the long term. India has all the necessary infrastructure required to further develop online sale of beer.

The consumption of alcoholic beverages is becoming more acceptable particularly among youth, working women and urban residents who are developing an appetite for beer, which is emerging as a social beverage in metros and tier two cities. Beer is gradually becoming a perfect after-work companion for corporate India as well.

Compared to various international markets including markets in Asia, beer penetration is very low in India. Beer accounts for a very low share of consumption compared to other alcohol products and along with the current cultural evolution, higher disposable income and demographics, there is a great long-term opportunity for your Company to shape the beer industry in India.

Threats, Risks and Concerns

But for the short-term impact due to COVID, the beer industry has been modestly _ourishing, with both new and old brands catering to a growing pool of beer enthusiasts across the country. As exciting as this is, there are also several challenges.

There is a perennial threat of competition introducing new brands in various segments like craft and premium beers. However, we compete fearlessly and healthily based on brand variants, product quality, distribution network, brand value and promotion strategies.

A variety of taxes & levies are imposed on beer during and after production, transport, and sale by each state. Pricing regulations, inadequate market infrastructure and restrictions as well as additional taxes on inter-state movement of beer continue to pose a challenge to the industry. Government intervention in distribution, ever increasing taxation, restricted communication, and increased cost of raw materials prices (glass, barley malt, other packaging material, etc.) and government restrictions applied on advertising also pose challenges to industry growth.

The threat of prohibitive actions, which stems from constant changes in the political climate in the country, is also present.

The distribution of beer in India is still largely controlled by the state-or state-owned corporations resulting in stricter regulations across various states so as to have better control over prices, consumption, and excise duty.

The market for beer is characterized by pricing and competitive pressures. The effects of social and economic cataclysms in the market often make it difficult to predict demand cycles. To overcome these challenges, we continue to remain cost conscious at all levels of operations, and work with a high level of agility and efficiency.

We continue to invest in and expand the brand portfolio while continuing to be cost-efficient and quality-focussed. We upgrade and adopt modern technologies and solutions to be able to respond with agility to current market demands, without losing focus on quality.

In order to cater to new consumers, capture market opportunities, compete with new launches by competitors and in continuous endeavor to offer new product ranges and cater to new occasions, your Company has expanded its

"King_sher Ultra Draft" offering in the lighthouse market of Maharashtra and has received an encouraging response from consumers. Your Company plans to launch this offering in other relevant Northern markets in a phased manner. The labor market in India is becoming more competitive. Your Company has taken various initiatives to be able to continue to attract the right talent, build a diverse and inclusive culture and continue to create an engaging place to work.

Non-availability of water, rationing of its supply and restrictions on withdrawal of ground water also pose major threat. We have built infrastructure which helps in reduction of water consumption in breweries as a sustainability initiative. We have pro-actively managed sustainability under our "3R" policy to reduce, recycle and recharge as well as look at opportunities for water conservation through Rainwater Harvesting to achieve a positive or at least neutral water balance.

The Company also focuses on secure IT operations and addressing risks of cyber security. This includes risks from IT security lapses, malware and ransomware attacks, disruptions in key Enterprise Processes and hacking, which could lead to disruptions in business operations and loss and/or leakage of confidential data.

Prospects

The growth rates of Indian beer industry compare favorably to the global beer industry average. Factors such as climatic conditions and younger population make the future more promising for the beer industry in India. With growth in GDP estimated beyond 5%, higher disposable income and growth in the middle and upper class, change in consumer behavior and examples of liberalization in retail / distribution, the beer market is expected to grow at a healthy pace. Your Company’s established brand equity provides a significant competitive advantage over other domestic and international brands. Your Company has the benefit of a strong distribution network across the length and breadth of the country and rapid growth can be expected year on year.

The competitive environment is expected to remain intense, and your Company shall continue to focus on robust innovations to solidify its market leadership. Though a challenging commodity inflation environment will have an impact on costs, your Company shall continually strive for appropriate price increase approvals and achieve high operational efficiencies to offset the increase in costs. Augmenting capacities in critical markets will continue to be a priority investment in the future too.

The Company seeks to drive beer category penetration, drive further premiumization, reinforce the iconicity of King_sher while building the overall brand in addition to continued focus on efficiency & compliance, execution of the ESG agenda, digitalization and people development to build a highly motivated and skilled workforce.

Through these actions, we are confident that your Company would continue its leadership position, drive growth of the overall market and expand profit margins in the years to come.

Growth in premium retail trade and on-premises outlets in metropolitan cities has increased the range of beers and improved the retail environment. In a few States, the Government has issued additional licenses for sale of beer which signals good growth prospects for the industry. Innovative introductions also help in penetrating untapped markets and consumer segments and your Company’s new introductions have fared well.

Risk Management

Though already established efficiency programmes apply to all aspects of our business, there is a constant drive for further efficiencies and reducing cost. Backed by strong internal control systems, the current Risk Management Framework consists of key elements laying down the roles and responsibilities in relation to risk management covering a range of responsibilities, from strategic to operational. These role definitions, inter alia, provide the foundation for appropriate risk management procedures, their effective implementation across your Company and independent monitoring and reporting. The Risk Management Committee, constituted by the Board, monitors, and reviews the strategic risk management plans of your Company as a whole and provides necessary directions on the same.

The Corporate Risk Management Cell, through focused interactions with businesses, facilitates the identification and prioritization of strategic and operational risks, development of appropriate mitigation strategies and conducts periodic reviews of the progress on the management of identified risks.

The competitive environment is expected to remain intense. Your Company’s strategy and focus remains consistent to robustly strengthen its leadership and thereby maintain its position as the clear leader in the Indian Beer Market. In line herewith, your Company endeavours to continually sharpen its Risk Management systems and processes in line with a rapidly changing business environment.

The COVID pandemic has triggered new risks in business operations. While the impact of the pandemic continues to unfold, your Company pro-actively put in place Crisis / Contingency Management Teams, both at the breweries as well as at the Corporate office. These cross-functional teams, represented by senior management, continually review strategic, operational, financial matters as well as measures relating to employee well-being health and safety.

Detailed advisories have been issued to employees on how to safeguard themselves, their colleagues and associates, and their families both at the workplace as well as at their homes. These guidelines also provide details on social distancing norms and the organisational support system. Heightened safety protocols were implemented at all units that resumed operations, with end-to-end solutions from transportation of workmen, screening, regular deep cleaning and sanitisation, innovations to ensure safe distancing and strict adherence to hygiene standards and use of personal protective equipment where required.

Through these actions, your Directors are confident that your Company would sustain its leadership position, grow ahead of the market, and realize improved profitability in the years to come.

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. With the introduction of Internal Controls over Financial Reporting (ICFR) in the Act, we have made an evaluation of functioning and quality of internal controls and Corporate Governance Policy that guides the conduct of affairs of your Company and clearly delineates the roles, responsibilities, and authorities at each level of its governance structure and key functionaries involved in governance.

The Internal Financial Control framework of your Company is established in accordance with COSO (Committee of Sponsoring Organizations) framework and is commensurate with the size and operations of your Company’s business. In addition to statutory mandate, Internal Audit evaluates and provides assurance of its adequacy and effectiveness through periodic reporting. Controls in place are routinely evaluated and audited by the Internal and Statutory Auditors and gaps are identified by the Auditors through a detailed testing exercise. The process of internal control ensures orderly and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. Financial Statements are prepared based on Significant Accounting Policies that are carefully selected by management. The Accounting Policies are reviewed and updated from time to time.

These, in turn are supported by a set of Standard Operating Procedures (SOPs) that have been established for the business. Internal Control evaluates adequacy of segregation of duties, transparency in authorization of transactions, adequacy of records and documents, accountability & safeguarding of assets and reliability of the management information system. The systems, SOPs and controls are reviewed and audited by Internal Audit periodically for identification of control de_ciencies and opportunities, whose findings and recommendations are reviewed by the Audit Committee and tracked through till implementation.

Your Company believes that the overall internal control system is dynamic and reflects the current requirements at all times, thereby ensuring that appropriate procedures and operating and monitoring practices are in place by regular audit and review processes to ensure that such systems are reinforced on an ongoing basis.

OTHER INFORMATION

Subsidiary Company

Maltex Malsters Limited is the only subsidiary in which your Company holds 51% of its Equity Share Capital. Maltex Malsters Limited is a non-listed entity and is not a material non-listed subsidiary as defined in Regulation 16(1)(c) of the Listing Regulations.

UBL has formulated a policy for determining material subsidiaries which is placed on the website of the Company www.unitedbreweries.com and is available through the webpage: https://www.unitedbreweries.com/pdf/policyandcodes/Policy%20for%20Determining%20Material%20Subsidiaries-PDF.pdf The consolidated financial statements of the Company including the financial statements of its subsidiary forms part of this Report in terms of the Act and the Listing Regulations. A statement containing the salient features of the financial statements of the subsidiary and associate is attached as Annexure-C to this Report.

Cash Flow Statement

A Cash Flow Statement for the year ended March 31, 2022 is appended.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees and investments covered under Section 186 of the Act are given in the notes to the Financial Statements. The Company has not advanced loans to Directors / to a Company in which the Director is interested to which provisions of Section 185 of the Act apply and has not given loans / guarantees /provided security to which provisions of Section 186 of the Act apply.

Listing requirements

Your Company’s Equity Shares are listed on the BSE Limited and National Stock Exchange of India Limited. Listing fees have been paid to these Stock Exchanges for the year 2022-2023.

Depository System

The trading in the Equity Shares of the Company is under compulsory dematerialization mode. The Company has entered into an agreement with National Securities Depository Limited and Central Depository Services (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 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.

Ratio of Remuneration and Particulars of Employees

In terms of sub-section(1) of Section 136 of the Act, the Company has opted to provide full version of financial statements including consolidated financial statements, auditor’s report and other documents required to be annexed to such financial statements excluding the details relating to ratio of the remuneration of each Director to the median employee’s remuneration and remuneration drawn by certain employees over the threshold etc. as provided in sub-section(12) of Section 197 of the Act read with Rule 5(1) & 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The details provided by the Company are in compliance with Section 136(1) of the Act and includes salient features of Form AOC-3A.

Also, in terms of second proviso to this Section, the Company shall keep open for inspection for all Members, statement relating to above details at its registered office. Any Member interested in inspection of the documents pertaining to above information or desires a copy thereof may write to the Company Secretary. The above details be treated as part of this Annual Report.

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 defined in the Act and the Rules framed thereunder, the Listing Regulations and 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 Regulations 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 www.unitedbreweries.com and is available through the webpage http://unitedbreweries.com/pdf/policyandcodes/Policy%20on%20Related%20Party%20Transactions.pdf. All transactions entered by the Company during FY22 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

During the last financial year, the Company has not appointed any new Independent Director. The Company has inducted Ms. Geetu Gidwani Verma and Mr. Manu Anand with effect from May 29, 2022 as Independent Directors of the Company. The existing Board comprises Executive, Non-Executive, and Independent 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 programme for new Independent Directors upon induction shall aim to familiarize them with the Company, their roles, rights, responsibility in the Company, business model of the Company etc. The Board of Directors has complete access to requisite information within the Company.

Familiarization will be undertaken during the year for new Independent Directors. Also, at the Board Meeting itself business is discussed at length along with Industry dynamics, Strategic planning, and other relevant information. Presentations are regularly made to the Board of Directors / Audit Committee / Nomination & Remuneration Committee and other Committees on various related matters, where Directors get an opportunity to interact with Senior Management. The Company has issued appointment letters to the Independent Directors which also incorporates their role, duties, and responsibilities. The details of the Familiarization Programme for Independent Directors are disclosed on the Company’s website at the webpage: https://www.unitedbreweries.com/pdf/policyandcodes/Familiarisation-Programme-2022.pdf For new Independent Directors, the Company will issue appointment letters effective their date of appointment.

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 and Directors and has ensured adequate safeguards against victimization of whistle blowers. The details of establishment of the vigil mechanism are disclosed on the Website of the Company.

None of the Employees and Directors have been denied access to the Chairman of the Audit Committee. There are no whistle blowing complaints leading to material fraud or which have an impact on the financials of the Company.

Internal Complaints Committee

UBL has constituted an Internal Complaints Committee (ICC) at its Corporate / Registered Office and at all its breweries/ Regional Offices to consider and deal with all reported sexual harassment complaints. The constitution of the ICC is as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Investigations are conducted, and decision made by the ICC at the respective locations, and the constitution is as prescribed. Details of complaints pertaining to sexual harassment filed, disposed of, and pending during the financial year are provided in the Corporate Governance and Business Responsibility and Sustainability Report of this Annual Report.

Conservation of Energy

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

The information on conservation of energy, technology absorption, foreign exchange earnings and outgo, as stipulated under clause (m) of sub-section (3) of Section 134 of the Act read with the Companies (Accounts) Rules, 2014 is set out herewith as Annexure-D to this Report.

Code of Business Conduct and Ethics

The Board of Directors of UBL have adopted a Code of Business Conduct and Ethics in terms of the Listing Regulations which has been posted on the website of the Company viz., 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’ relating to the Company, under the provisions of the Securities Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.

The Board of Directors have approved and adopted the ‘Code of Conduct to Regulate, Monitor and Report of Trading by Insiders’ and a ‘Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information’.

Directors

The Board of Directors of UBL currently comprises of eight Directors with a balanced combination of Executive, Non-Executive, and Independent Directors.

Mr. Jan Cornelis van der Linden, a Non-Executive Director retires by rotation at this Annual General Meeting (AGM), and being eligible, has offered himself for re-appointment. Resolution for re-appointment of Mr. Jan Cornelis van der Linden is proposed at this AGM.

The Committee members expressed their grief over the sad demise of Mr. Ravi Nedungadi and Mr. C Y Pal, erstwhile Directors of the Company, and conveyed their heartfelt condolences to their families for their loss. Their contribution to the Board and the Company were acknowledged.

Mr. Berend Odink is a Director with effect from June 29, 2021.

Ms. Geetu Gidwani Verma and Mr. Manu Anand were appointed as an Additional Directors with effect from May 29, 2022 and the Resolutions for regularization of their appointment have been proposed for approval of Members at this AGM. Mr. Sunil Alagh and Mr. Stephan Gerlich, Independent Directors of the Company voluntarily resigned with effect from June 13, 2022. The Board of Directors place on record, its appreciation for Mr. Sunil Alagh and Mr. Stephan Gerlich for their invaluable contribution, guidance, and support provided by them during their tenure as Independent Directors of your Company.

Chief Financial Officer

Mr. Berend Odink, Director is also the Chief Financial Officer of the Company.

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 with 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 FY22, seven (7) Board Meetings were held. Other details including the composition of the Board and various Committees and Meetings thereof held in FY22 are given in the Corporate Governance Report forming part of this Report.

Meeting of the Independent Directors

During the year, one (1) Meeting of Independent Directors was held on November 08, 2021. All Independent Directors have given a declaration that they meet the criteria of Independence and in the opinion of the Board, the Independent Directors fulfill the condition of Independence as laid down under the Act and Listing Regulations.

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 Act and Listing Regulations. The composition of the Audit Committee, its terms of reference, roles and details of Meetings convened and held during the year under review are given in the Corporate Governance Report forming part of this Report.

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

Nomination and Remuneration Committee

The Nomination and Remuneration Committee is constituted to act in accordance with the terms of reference and perform roles, as prescribed under the Act and Listing Regulations. 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 are given in the Corporate Governance Report forming a part of this Report.

Policy on Performance Evaluation

UBL has formulated a Performance Evaluation Policy inter-alia prescribing evaluation criteria for Independent Directors and the Board of Directors of the Company. The Policy is posted on the website of the Company and is available through the webpage http://unitedbreweries.com/pdf/policyandcodes/Directors%20Performance%20Evaluation%20Policy.pdf.

Performance Evaluation of Directors

Performance evaluation of Non-Executive Directors including Independent Directors, the Board as a whole and Committees of the Board is being carried out in accordance with the statutory provisions as contained in the Act and Listing Regulations.

To ensure an effective evaluation process, the Nomination and Remuneration Committee has put in place a robust framework for conducting the exercise with key steps and practices defined clearly. Performance of the Board is evaluated on various parameters such as composition, strategy, tone at the top, risk and controls and diversity. Also, a questionnaire for Committees is framed on parameters such as adherence to the terms of reference and adequate reporting to the Board. Parameters for the Directors, including intellectual independence of the Director, participation in formulation of business plans, constructive engagement with colleagues and understanding of the risk profile of the Company. Keeping in view the sensitivity, confidentiality is ensured. As part of this process, customized questionnaires, were circulated to all Directors of the Company. Each Director is required to undertake a self-assessment. Additionally, the effectiveness of the Board and Committees is also evaluated by each Member of the Board and Committee through an electronic platform and kept confidential.

Summary of responses received from Directors was placed at a Board Meeting.

Remuneration Policy

The Company carries out periodic reviews of comparable Companies and through commissioned survey ascertains the remuneration level prevailing in these Companies. The Company’s Remuneration Policy is designed to ensure that the remuneration applicable to Managers in the Company is comparable with multinational Companies operating in Brewing or similar industry in India. In line with statutory requirements, the Board of Directors has adopted a Remuneration Policy for Directors, Key Managerial Personnel (KMP) and other employees of the Company. The Remuneration Policy lays down the criteria for appointment and removal of Directors, KMP and Senior Management. The Policy also prescribes the criteria and manner for fixation and approval of remuneration payable to Directors, KMP and other employees. The Policy is posted on the website of the Company www.unitedbreweries.com.

Dividend Distribution Policy

As required under Regulation 43A of the Listing Regulations, the Company has formulated a Dividend Distribution Policy. This policy can be viewed on the Company’s website at www.unitedbreweries.com.

Foreign Exchange Earnings and Outgo

During FY22 total foreign exchange earnings of the Company stood at Rs.1,684 million (Previous Year: Rs. 768 million) and foreign exchange outgo stood at Rs.1,117 million (Previous Year: Rs.1,641 million).

Corporate Governance Report

Report on Corporate Governance forms a 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 the Act as amended by the Companies (Amendment) Act, 2017, the Company has placed a copy of the Annual Return in Form MGT-9 on its website www.unitedbreweries.com and is available through the webpage: https://www.unitedbreweries.com/investors.

Auditors and the Auditor’s Report

Messrs S.R. Batliboi & Associates LLP., Chartered Accountants (Firm Registration Number 101049W/E300004), the current Statutory Auditors of the Company have completed their two terms of five consecutive years from 2012. They are statutorily not eligible for re-appointment and therefore they cannot continue as Statutory Auditors of the Company after the conclusion of this AGM. Your Board of Directors place on record their appreciation for the valuable services rendered by them during their tenure as Statutory Auditors of your Company.

It is proposed to appoint Messrs Deloitte Haskins & Sells, Chartered Accountants (Firm Registration Number 008072S), as the Statutory Auditors of your Company to hold office from the conclusion of this AGM till the conclusion of the 28th AGM.

Messrs Deloitte Haskins & Sells, Chartered Accountants, have consented to be the Statutory Auditors of your Company, if appointed by the Members at the AGM and have also confirmed that their appointment would be within the limits specified under Section 139 of the Act.

There are no qualifications or adverse remarks in the Auditor’s Report which require any clarification or explanation.

Secretarial Audit

Pursuant to Section 204 of the Act and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Sudhir Hulyalkar, Company Secretary in Practice, to undertake Secretarial Audit of the Company for the FY22. The Secretarial Audit Report forms part of this Report and is annexed as Annexure-E.

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

Reporting of frauds by auditors

During the year under review, under Section 143(12) of the Act, neither the statutory auditors nor the secretarial auditor have reported to the audit committee, any instance of fraud committed against the Company by its officers or employees, the details of which would be required to be mentioned in this Report.

Details of Significant and Material Orders

No order/s have been passed or stringent action taken by any Regulator or Court or Tribunal impacting the going concern status of the Company. However, we bring to your attention the following developments / orders for sake of transparency.

(i) It is in public domain that United Breweries (Holdings) Limited {UBHL}, a promoter of UBL was ordered to be wound up by Hon’ble High Court of Karnataka vide dated February 07, 2017. Appeal filed by UBHL against the said winding up order was dismissed by the Hon’ble Karnataka High Court on March 06, 2020. Against this dismissal, a special leave petition has been filed by UBHL before the Hon’ble Supreme Court of India. The Supreme Court on October 2, 2020 had also allowed the winding-up of UBHL. However, UBL has not received any confirmation from UBHL in terms of Supreme Court order of Winding-up.

(ii) As per disclosures received by UBL in May 2018 under SEBI (Prohibition of Insider Trading) Regulations, 2015 and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 from a few Promoter Companies controlled by Dr. Vijay Mallya, we notice that 4,13,15,690 Equity Shares held by such entities in UBL constituting 15.63% of the total paid up capital had been transferred to the demat account of Enforcement Directorate (ED), Mumbai, Government of India. Earlier, in August 2017, 13,89,068 Equity Shares constituting 0.52% of the total paid-up capital were also transferred to the demat account of ED. The ED thereby held 4,27,04,758 Equity Shares constituting 16.15% of the total paid-up capital in the Company. UBL did not receive any communication from the ED in this regard. These Equity Shares were later on transferred by ED to Recovery Officer-I, DRT-II, Bengaluru.

Recovery Officer-I, DRT-II, Bengaluru had transferred 74,04,932 Equity Shares comprising 2.80% of the total paid-up Equity Share capital of the Company in its name from the demat account of UBHL which is under liquidation. However, UBL did not receive any disclosure from UBHL in terms of SEBI (Prohibition of Insider Trading) Regulations, 2015 and SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011. The Recovery Officer-I, DRT-II, pursuant to a block deal through BSE / NSE on March 27, 2019 has transferred 74,04,932 constituting 2.80% Equity Shares of the Company to Heineken International B.V.

On June 23, 2021, the Recovery Officer-I, DRT-II, Bengaluru, had sold 3,96,44,346 (14.99%) Equity Shares out of 4,27,04,758 (16.15%) Equity Shares of the Company through the block deal window of the BSE Ltd. These Shares were purchased by the Heineken International B.V. a promoters’ Shareholder of the Company, in accordance with the terms of the proclamation issued by the Recovery officer and all applicable laws. As a result, the Heineken Group shareholding in the Company has been increased substantially from 46.52% to 61.52% of the total Equity Share capital of the Company.

We understand, as on date, the Recovery Officer-I, DRT-II, Bengaluru holds 30,60,412 Equity Shares constituting 1.16% of the total paid-up capital of the Company comprising 13,89,068 (0.53%) Equity Shares of United Breweries (Holdings) Limited and 16,71,344 (0.63%) Equity Shares of McDowell Holdings Limited, promoters of the Company. (iii) Pursuant to Order of Debt Recovery Tribunal, Karnataka, Bengaluru dated September 30, 2015, dividend for the financial years 2015-2016 onwards payable to Dr. Vijay Mallya and United Breweries (Holdings) Limited (UBHL) have been withheld till disposal of the O.A. The Recovery Officer-I, DRT-II, Bengaluru vide letter dated October 11, 2018 directed the Company to make payment of dividend for the financial year 2017-2018 on Equity Shares held by UBHL in the Company to the account of Recovery Officer-I, DRT-II. Thereafter, the Official Liquidator, vide letter dated October 26, 2018 informed the Company that the Hon’ble High Court of Karnataka has directed the Official Liquidator by Order dated August 29, 2018 to collect rent and other income due to UBHL, the Company which is in liquidation. The Official Liquidator also directed the Company to remit the dividend aggregating to Rs.7,83,89,631.10 for the financial years 2015-2016, 2016-2017 and 2017-2018 payable to UBHL to the account of Official Liquidator. Accordingly, the Company has remitted the aforesaid dividend amounts to the account of Official Liquidator.

Further, pursuant to letter dated October 12, 2021 from office of Official Liquidator, High Court of Karnataka for payment of dividend on shareholding of UBHL in United Breweries Limited, the Company has remitted Rs.13,66,19,990.70 toward dividend accrued on the shareholding of UBHL for the financial years 2017-2018 to 2020-2021 to the account of Official Liquidator.

(iv) Effective April 05, 2016, the State Government of Bihar had imposed a ban on sale and consumption of alcoholic beverages in Bihar though it had permitted manufacture of alcoholic beverages for export out of the State vide Notification dated April 05, 2016. The said Notification of Bihar Government imposing ban was struck down by Patna High Court vide Judgement dated September 30, 2016. The State Government of Bihar has challenged the Judgement of Patna High Court in Supreme Court which is pending. Subsequently, effective April 01, 2017, total prohibition (including export out of state) has been imposed in Bihar State and production of beer at the Company’s brewery at Kopakalan, Naubatpur, Patna was discontinued. The Company had then commenced manufacture of non-alcoholic beverages (NAB) at its above facility. Considering the economies in scale of operation in NAB products, and consequent impact, the Management has decided to close the operations of NAB manufactured out of Company’s unit in Naubatpur effective May 01, 2022. The Management has made alternate arrangements to manufacture NAB products by entering into a contract manufacturing arrangement.

(v) Pursuant to enquiry initiated by Competition Commission of India ("CCI") on October 10, 2018 in relation to allegations of price-fixation and cartelization, the office of the Director General, Competition Commission of India had completed its investigation in November 2019 and filed its investigation report (DG Report) with the CCI. UBL and other parties to the enquiry, filed their comments / objections to the DG Report and appeared for an oral hearing in the matter. Hearings were held on February 11, 2021 and March 12, 2021 respectively. UBL filed its response and argued during the oral hearings countering the DG report. Subsequently written submissions were filed with the CCI. Thereafter CCI issued an Order dated September 24, 2021 levying a penalty of Rs.75,183 lakhs for the contravention of provision of Section 3 of the Competition Act, 2002. UBL and individuals connected to UBL filed their Appeal before the NCLAT. After hearing the Company’s Interlocutory application, the NCLAT vide its order dated December 22, 2021 granted a stay of the CCI order subject to payment of deposit of 10% of penalty amount during the pendency of the appeal and the Company has deposited the said amount by way of Fixed Deposit Receipt (FDR). Based on the advice of the external legal experts, the Management is of the view that the Director General and the CCI have not considered all aspects of its submissions particularly considering the nature of the regulations governing the manufacture, distribution, and sale of beer in India. As advised by the Company’s external legal experts, the Company has a strong case on merits, there exists uncertainty relating to the final outcome in this matter, which is dependent on judicial proceedings; and that it is not in a position to reliably estimate the final obligation relating to penalties, if any.

The orders / proceedings mentioned above do not have any impact on going concern status of the Company.

Directors’ Responsibility Statement

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

(a) in the preparation of the annual accounts for the financial year ended March 31, 2022, 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.

All Annexures referred to in the Directors’ Report have been disclosed under the Statutory Information forming part of this Annual Report.

ACKNOWLEDGEMENT 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 would like to convey sincere appreciation to all the employees of the Company for their hard work and commitment.

By Authority of the Board
Rishi Pardal Berend Odink
Managing Director Director & CFO
DIN: 02470061 DIN: 09138421
April 26, 2022.
Bengaluru