Annual Report 2011-12 - SABMiller India

SKOL Breweries LimitedAnnual Report2011-12Our people are our enduring advantage

SKOL Breweries LimitedAnnual Report 2011-12SKOL Breweries Limitedis nowSABMiller India LimitedWe thought it pertinent tochange the name to reflect theworldwide SABMiller identity inIndia. The change in name iseffective from June 22, 2012.SABMiller is the secondlargest brewer in the worldwith more than 200 beerbrands and some 70,000employees in over 75countries. We also havegrowing businesses in softdrinks and we are one of theworld's largest bottlers ofCoca-Cola products.

SKOL Breweries LimitedAnnual Report 2011-12Saanjhi UnnatiProgress through PartnershipSKOL Breweries Limited recognizes the role andcontribution of its business partners in the growth of theCompany. In recognition, the Company has beenresponding to its business partners in various ways likeAwareness Campaign on HIV / AIDs to Truck Drivers whotransport millions of tonnes of raw materials and finishedgoods for the Company. One such initiative has been toimprove the life of farmers who supply our main rawmaterial Barley. Towards this end, SKOL BreweriesLimited launched Saanjhi Unnati Programme in 2005.The majority of 1.5 million tons ofbarley grown each year in India isfeed grade and does not command apremium price. Hence, farmers donot consider it a priority crop and donot invest in appropriate seeds andinputs to improve their yield.The Saanjhi Unnati Programmeprovides farmers with access tocertified seeds, agronomical advice,training, customized support fromagricultural specialists on properirrigation, fertilizer usage andharvesting to enhance the quality oftheir crops. Further, farmers cansource government certified seedsand sell their crops in the SaanjhiUnnati Center.This programme is extended tofarmers in Rajasthan and providesfarmers with assured market for theircrop, transparent transaction and fairpricing. The Programme hascontributed significantly to improvefarmers yield and income. Barleyyields have grown by 20% to 25%and the farmers commandpreferential price which is 5% on anaverage higher than price paid byintermediaries and traders. Since2005, the number of farmers whohave registered as members of theprogramme has increased from 1,574to over 8,000.The programme also promotescommunity development by offeringextension workshops. More than5,000 non-members have derivedadvantage of free agricultural adviceand assistance provided by thecenters and through vocationaltraining camps for rural youth andanimal health treatment camps.The company also benefited as itcould more than double the amount ofbarely procured from this programmeas yields under the programme weremuch higher.

SKOL Breweries LimitedAnnual Report 2011-12General InformationBOARD OF DIRECTORSMr. Harald Harvey - Chairman - w.e.f. 8th Mar 2012Mr. Ari MervisMs. Sue ClarkMr. T.S.R. SubramanianMr. Paolo Lanzarotti - Managing DirectorMr. Mathew DunnAUDIT COMMITTEEMr. Mathew Dunn - ChairmanMr. Harald HarveyMr. Ari MervisMr. Paolo LanzarottiMs. Sue ClarkREGISTERED OFFICEUnit No. 1021, 2nd FloorSolitaire Corporate Park 10Chakala, Andheri Kurla RoadSurvey No. 131 - AAndheri (East)Mumbai - 400093STATUTORY AUDITORSB S R & Co.Chartered AccountantsMaruthi Info-Tech Centre11-12/1, Inner Ring RoadKoramangalaCORPORATE OFFICEJalahalli Camp RoadYeshwanthpur, Bangalore - 560022BANKERSStandard Chartered BankRoyal Bank of ScotlandCiti Bank N.AFirst Rand Bank LimitedREGISTRAR AND SHARE TRANSFER AGENTSharepro Services (India) Pvt. Ltd.Samhita Warehousing ComplexGala No- 52 to 56, Bldg No. 13 A-BNear Sakinaka Telephone ExchangeAndheri - Kurla Road, SakinakaMumbai - 400072BREWERIESCharminar Breweries, Medak, APHaryana Breweries, Sonepat, HaryanaMysore Breweries, Bangalore, KarnatakaPals Distilleries, Aurangabad, MaharashtraMalabar Breweries, Chalakudy, KeralaEast Coast Breweries & Distilleries, Cuttack, OrissaSICA Breweries, PuducherrySABMiller Breweries, Aurangabad, MaharashtraRochees Breweries, Neemrana, RajasthanCentral Distilleries & Breweries, Meerut, UP01

SKOL Breweries LimitedAnnual Report 2011-12DIRECTORSMr. Ari MervisDirector andMember Audit CommitteeMr. Harald HarveyChairman andMember Audit CommitteeMs. Sue ClarkDirector andMember Audit CommitteeMr. T S R SubramanianDirectorMr. Paolo LanzarottiManaging Director andMember Audit CommitteeMr. Mathew DunnDirector andChairman Audit Committee02

SKOL Breweries LimitedAnnual Report 2011-12Company & GroupProfile03

SKOL Breweries LimitedAnnual Report 2011-12Company and Group ProfileSKOL Breweries LimitedSKOL Breweries Limited is the main operating entity inIndia of SABMiller Group. SABMiller started it's journeyin India in the year 2000 and in just a few years, it hasgrown to corner 23% of the Indian beer market withbrands such as Foster's, Hayward's 5000, RoyalChallenge, Knock Out, Indus Pride and Miller HighLifeunder its portfolio. A careful brand renovationprogramme, backed by highly proactive marketingsupport, has put these brands on a steep growth path.With 10 high quality breweries located strategicallyacross 9 States in India, SKOL Breweries Limited iswell placed to service the markets quickly andefficiently with a dedicated workforce of over 3,500people. SKOL Breweries Limited plans to continue towork on creating a national footprint for its brands(both in terms of quality and content) by modernizingand improving efficiencies of plants, introducing newtechnologies, improving brand performance in the keybeer markets and make forays into newer territories.SABMiller plc, London, the ultimate holding companyholds indirectly 99.26% equity in SKOL BreweriesLimited.04

SKOL Breweries LimitedAnnual Report 2011-12Company and Group ProfileSABMiller plcSABMiller plc is the second largest brewer withbrewing interests and distribution agreements acrosssix continents. It owns more than 200 brands,including international premium brands such asGrolsch, Miller Genuine Draft, Peroni Nastro Azzurroand Pilsner Urquell and leading regional brands suchas Haywards 5000 (India), Aguila (Colombia), Castle(Africa), Miller Lite (USA), Snow (China) and Tyskie(Poland). SABMiller plc is listed on the London andJohannesburg stock exchanges. SABMiller is also theworld's largest bottlers of Coca-Cola products.The group's revenue in the financial year ending March2012 was US $21,760 million. Its reach extends to 6continents, 139 breweries, 239 million hectoliters ofbeer and about 70,000 employees.05

SKOL Breweries LimitedAnnual Report 2011-12Vision and MissionOur VisionOur MissionTo be among the 3 most admired beveragecompanies in IndiaTo own and nurture local and internationalbrands that are the first choice of the consumerOur Values and Group behavioursOur people are our enduring advantageAccountability is clear and personalWe work and win in teamsWe understand and respect our customers and consumersOur reputation is indivisible06

SKOL Breweries LimitedAnnual Report 2011-12Our BrandsThe year was marked byinnovation whichdelighted consumers07

SKOL Breweries LimitedAnnual Report 2011-12Now you can enjoyMiller in IndiaSABMiller brings "Miller HighLife"premium award winning AmericanStyle beer from USA which wasintroduced in 1903Besides being crispy and insanely refreshing, each drop ofMiller High Life gives you a taste of the American culture -'Work hard - Party hard'One should enjoy work as much asone enjoys having funBe good to yourself, drink responsibly. To make an informed choice about alcohol, log on to www.talkingalcohol.com08

SKOL Breweries LimitedAnnual Report 2011-12Mild or Stronggoes down smooth and easyRoyal Challenge Strongis the newest addition inour Portfolio. Selectedhops and the best qualitybarley which is subjectedto a long brewing processgives the consumer asilky smooth drinkingexperienceLong brew withcarefully selectedbarley in RoyalChallenge, a PremiumLager gives theconsumer that distinctand smooth tasteBe good to yourself, drink responsibly. To make an informed choice about alcohol, log on to www.talkingalcohol.com09

SKOL Breweries LimitedAnnual Report 2011-12Haywards 5000 was the first strong beer which other beerbrands copied. It is for those men with the strength ofcharacterHar KadamHausla BulandThe brand saw an anthem befitting thediscerning consumers of this brandlaunched during the year. The Anthem "HarKadam Hausla Buland" was penned bygreat lyricist Javed Akhtar and renownedsinger Kailash Kher lent his voice. TheAnthem represents true stories of grit andresolve of common men across Indiacollected through Hausla Rath whichtravelled across 59 cities / towns.Be good to yourself, drink responsibly. To make an informed choice about alcohol, log on to www.talkingalcohol.com10

SKOL Breweries LimitedAnnual Report 2011-12Knock Out - the ever refreshing strongbeer is now in a new avatar true to itsrefreshing tasteThe thermo chromatic label, first of its kind inIndia enables customers to differentiate betweenwarm and cold beerBe good to yourself, drink responsibly. To make an informed choice about alcohol, log on to www.talkingalcohol.com11

SKOL Breweries LimitedAnnual Report 2011-12The Art of Chilling has more options now. Foster'sfans can now enjoy this uniquely Australian beer instrong and draught formyeah ! its strong and mildBe good to yourself, drink responsibly. To make an informed choice about alcohol, log on to www.talkingalcohol.com12

SKOL Breweries LimitedAnnual Report 2011-12Managing Director'sStatement13

SKOL Breweries LimitedAnnual Report 2011-12Managing Director's StatementDear Shareholders,I extend hearty greetings to you and present the Annual Report for the year 2011-12. At the outset, I am delightedto inform you that the name of your company has now been changed to SABMiller India Limited.The year that wasThe year 2011-12 was bothchallenging and encouraging and Iam happy to state that we have comethrough it well. Several internal andexternal factors have contributed tohigher sales revenues vis-à-vis theprevious year. I am also happy toshare that some of our strategies haveproved successful in attracting newconsumers and thereby contributingto increase in sales. While theindustry growth and supply constraintliberalization in few States helped usin garnering higher value share,Andhra Pradesh Government'srevision of sourcing policy based onconsumer preference added to theincrease.Your Company launched aninternational premium brand - MillerHighLife which saw good acceptancefrom the markets it was launched in.Fosters Strong and Royal ChallengeStrong were launched and the samehave been received well by theconsumers and trade. Your companyalso launched a first of its kindinnovation, Thermo chromatic labelsfor the Knock Out brand. The label willchange colour when the beer reachesthe optimum temperature for a greatdrinking experience, as well asenabling consumers to confirm thatthe beer he is buying is cold. Further,the strategy to launch beer in PETbottles is finding favour withconsumers and is showing increasingsales trend. We expect good growth inthis area as we extend thegeographical distribution of this pack.During the year under review, KnockOut and Foster's witnessed growth of17% and 5% respectively in volumes.However, Hayward's volume droppedmarginally by 0.2% and RoyalChallenge declined by 29% due tolower off take in AP & UP.Considering that the Beer industrygrew only at about 5% during the yearunder review, your Company's brandshave performed reasonably well.14

SKOL Breweries LimitedAnnual Report 2011-12Managing Director's Statement continuedWe have also successfullyimplemented many cost savinginitiatives including changes inproduction technology andoptimization of brewing processes inthe aftermath of increased rawmaterial cost. These initiatives alongwith introduction of our proprietarybottle have contributed to substantialreduction in operating cost.As a responsible corporate and as amark of giving back to the community,we have contributed to the enhancingof ground water in the areas weoperate. Water conservation andrecharge is done by constructingWater structure for farmers in Chomu,Rajasthan and projects are underwayat other locations. We havesuccessfully driven home themessage of Responsible Drinking byorganizing effective communicationand innovative schemes inassociation with public authorities in anumber of States. Further we havealso partnered with retail outlets toprovide a safe trip home by tying upwith agencies providing drivers andwith cab services. Our initiatives onawareness on HIV / AIDS expandedto many States since its launch in2008 with particular focus on truckerswho are a part of our supply chainservice providers.Sustainable DevelopmentYour company continues to layemphasis on sustainabledevelopment in line with our Group's"Ten Priorities, One Future"programme. We continued to seeimprovement in our water usage andenergy consumption levels. Waterusage stood at 4.4 HL / HL againstGroup's global standard of 4.66 HL /HL while energy usage was at 202.3MJ / HL against Group's globalstandard of 204.5 MJ / HL.15

SKOL Breweries LimitedAnnual Report 2011-12Managing Director's Statement continuedArea of focusI take this opportunity to convey myconcern in the GST arena specificallywith respect to its treatment towardspotable alcohol industry. The CentralGovernment has chosen to keep thepotable alcohol industry out of theGST in the 115th ConstitutionAmendment Bill. Exclusion of ourindustry will severely impact ourperformance on account of doubletaxation as we would be deniedcredit of taxes which we aregenuinely entitled to. We have madeseveral representations to theGovernment and we continue with ourefforts to inform the Government ofthe negative impact of GST on theindustry.FutureWe are increasingly focused ondriving initiatives in areas where wecan directly influence our own destiny.Going forward our performancecontinues to depend on manyexternal factors.I take this opportunity to thank mycolleagues on the Board, ourBusiness Partners, Financiers,Employees, Government Authoritiesand the Shareholders for their supportand look forward to their continuedpartnership in our journey ahead.Cheers!Paolo Lanzarotti16

SKOL Breweries LimitedAnnual Report 2011-12Notice to MembersNOTICE is hereby given that the23rd Annual General Meeting of themembers of the Company will be heldat Juhu Jagruthi Seminar Hall, 1stFloor, Mithibai College, JVPD Road,Vile Parle (W), Mumbai 400 056 onWednesday, the 29th August, 2012 at4.00 p.m. to transact the followingbusiness:Ordinary Business1. To receive, consider and adopt theAudited Balance Sheet as at 31stMarch, 2012 and the Statement ofProfit & Loss for the year ended onthat date and the Report of theDirectors and Auditors thereon.2. To appoint a Director in place ofMr. Mathew James Dunn, whoretires by rotation at this meetingand being eligible, offers himselffor re-appointment.3. To appoint a Director in place ofMr. T S R Subramanian, who retiresby rotation at this meeting andbeing eligible, offers himself for reappointment.4. To appoint Auditors for the periodcommencing from the conclusionof 23rd Annual General Meeting tillthe conclusion of next AnnualGeneral Meeting and fix theirremuneration.RESOLVED THAT M / s. B S R &Co., Chartered Accountants (ICAIfirm registration number 101248W),who retire at the conclusion of thisAnnual General Meeting be andare hereby appointed as StatutoryAuditors of the Company till theconclusion of next Annual GeneralMeeting at a remuneration to befixed by the Board of Directorsand billed progressively.Special Business5. To consider appointment ofMr. Harald Graham Harvey asDirector of the Company.To consider and if thought fit, topass, with or withoutmodification(s) the followingresolution as an OrdinaryResolution:RESOLVED THAT Mr. HaraldGraham Harvey, who wasappointed as an Additional Directorof the Company by the Board interms of Section 260 of theCompanies Act, 1956, who holdsoffice till the date of this AnnualGeneral Meeting, and in respect ofwhom a notice has been receivedfrom a member under Section 257of the said Act, be and is herebyappointed a Director of theCompany liable to retire by rotation.6. To consider increase in BorrowingPowers.To consider and if thought fit, topass, with or withoutmodification(s), the followingResolution as a Special Resolution:RESOLVED THAT pursuant toSection 293(1)(d) of theCompanies Act, 1956 and otherenabling and applicableprovisions, if any, of the said Act,consent be and is herebyaccorded to the Board of Directorsof the Company for borrowing anysum or sums of money from time totime from one or more persons,firms, body corporates, banks,financial institutions or from othersby way of cash credit, advances,deposits or other loans whethersecured or unsecured bymortgage, charge, hypothecation,lien or pledge of the Company'sassets and properties whethermovable and/or immovable orstock-in-trade (including bookdebts, bills, raw materials, storesand spare parts and componentsin stock or in transit) work-inprogressand debts and advancesnotwithstanding that the sum orsums so borrowed together withthe moneys, if any, alreadyborrowed by the Company (apartfrom the temporary loans obtainedfrom the Company's bankers in theordinary course of business) mayexceed in the aggregate the paidupcapital of the Company and itsfree reserves which have not beenset apart for any specific purposebut so that the total amount uptowhich the moneys may be soborrowed shall not at any timeexceed Rs. 2,500 Crores.BY ORDER OF THE BOARDPlace: BangaloreDate: 15th May, 2012Sridhar SCompany Secretary17

SKOL Breweries LimitedAnnual Report 2011-12Notice to Members continuedNOTES1. A member entitled to attend andvote at the meeting is entitled toappoint a proxy to attend and voteon a poll in his/her stead. A proxyneed not be a member of theCompany. Proxies in order to beeffective must be deposited at theregistered office of the Companynot less than forty-eight hoursbefore the meeting. A blank proxyform is enclosed.2. For convenience of members anattendance slip is also annexed.Members are requested to affixtheir signature at the spaceprovided therefore and hand overthe same at the place of Meeting.The Proxy of a member shouldmark on the attendance slip asProxy. Members are also requestedto bring their copies of the AnnualReport to the venue of the Meeting.3. All queries relating to non-receipt ofshare certificates after transfer/transmission/dematerialization/rematerialization, mandates,change of address, nomination etc.may be sent to the Registrar &Share Transfer Agents, ShareproServices (India) Pvt. Ltd., SamhitaWarehousing Complex, Gala No.52to 56, Bldg No.13 A-B, NearSakinaka Telephone Exchange,Andheri-Kurla, Road, Sakinaka,Mumbai - 400 072, Tel:022-67720300 / 67720400 Fax No: 022-28591568/28508927, E-mail:sharepro@shareproservices.com4. The Ministry of Corporate Affairs(MCA) has permitted Companies toissue Notices of General Meetingsand Annual Report to theShareholders through electronicmode via emails and publish onthe Websites of the Company.Accordingly, with a view to supportthis green initiative of the MCA, theCompany proposes to give optionto its Shareholders to receivenotices and Annual Report inelectronic mode. The Shareholdersare requested to communicatetheir email IDs to which thecommunication can be sent. ACommuniqué is attached at theend of this Annual Report on theprocedure to be followed forregistering your email ID.Explanatory Statementpursuant to Section 173(2)of the Companies Act,1956.Item No. 5Mr. Harald Graham Harvey is holdinga degree of Bachelor of SocialScience (Honours) in Sociology. Sincejoining SABMiller in 2009, Mr. Harveyhas been responsible for corporatestrategy, pricing and revenuemanagement, as well as legalservices and compliance. Prior tojoining us, he worked with The MonitorGroup as Managing Director, Africa &Global Senior Partner.None of the directors are eitherdirectly or indirectly concerned orinterested in the said Resolution.Resolution is commended for theconsent of the shareholders.Item No.6At the Annual General Meeting of theCompany held on 15th September,2009, the Members empowered theBoard of Directors under Section293(1)(d) of the Companies Act, 1956to borrow monies for the businesspurposes of the Company upto a limitof Rs. 2,000 Crores. Keeping in viewthe Company's business requirementsand its investment and growth plans,it is considered desirable to increasethe said borrowing limits to Rs.2,500Crores as outlined in the resolution.In terms of the provisions of Section293(1)(d) of the Companies Act,1956, approval of the members issought through the resolution underitem no.6 for such increase in limits.None of the directors are eitherdirectly or indirectly concerned orinterested in the said Resolution.Resolution is commended for theconsent of the shareholder.18

SKOL Breweries LimitedAnnual Report 2011-12Directors'Report11 19

SKOL Breweries LimitedAnnual Report 2011-12Directors' ReportDear Members,Your Directors have pleasure in presenting their 23rd Report and the Statement ofaccounts for the year ended 31st March 2012.Financial ResultsGross RevenueProfit/(Loss) before taxationLess: Provision for taxationProfit/(Loss) after taxationOperationsFinancial Year2011-122,987.07(119.26)0.15(119.41)The revenue of your Company duringthe year 2011-12 has significantlyimproved. The turnover increased by20% to Rs. 2,987 Crores (includesRs. 205 Crores of demerged beerbusiness of SABMiller BreweriesPrivate Limited) from Rs. 2,487 Croresin the previous year. Increase involume is mainly contributed byincreasing market share in AndhraPradesh, leveraging of industrygrowth in Rajasthan and Karnataka,innovation led growth in Maharashtraand also the addition of sales ofSABMiller Breweries Private Limitedwhose Brewery business wasdemerged and transferred to yourcompany. Cash losses for the yearare mainly due to high interest cost onworking capital to meet higher salesvolume and borrowings for capitalexpenditure, unplanned maintenancework in breweries, higher actuarialvaluation of leave salary and gratuityand absorption of loss incurred bybrewing business of SABMiller(Rupees in Crores)Financial Year2010-112,487.86(60.36)(0.22)(60.14)In this annual report, the current year figures are not comparable with the previous year, in view ofdemerger of beer business of SABMiller Breweries Private Limited into your company during thecurrent yearBreweries Private Limited. There is athrust on reduction in operatingexpenses by stringent controls andmonitoring. Due to rising interest costand utilisation of short-term fundstowards long-term purposes, yourcompany is evaluating various optionsof recapitalising the business.The capacity of the company hasbeen augmented by entering intocontract packing arrangements in theStates of Orissa and Punjab. Theintroduction of proprietary bottle hasalso paid rich dividend and thecompany is able to obtain return of itsbottles at competitive rates. Efforts byother brewers to use the bottlesintroduced by the company havebeen successfully defended.Your company has introduced manyinnovations and variants during theyear under review and has expandedits portfolio. Miller HighLife, FostersStrong and Royal Challenge Strongbeers have been launched. YourCompany also introduced beer inconvenient packs of 250 ml. All thesebrands and variants have shownencouraging trends in the marketsthey have been introduced.Your Board enjoys the unqualifiedsupport of all its financiers whoseconfidence in the future of yourcompany is evidenced by the fact thatall borrowings have been madewithout the bankers taking anycharges over your company's assetsand are used for both short term andlong term purposes.Demerger of Beer businessof SABMiller BreweriesPrivate Limited into yourCompanyDuring the year under review, thebeer business of SABMiller BreweriesPrivate Limited, a company ofSABMiller Group has been demergedinto your Company vide the Orderpassed by the Hon'ble High Court of20

SKOL Breweries LimitedAnnual Report 2011-12Directors' Report continuedBombay on 29th March 2012 sanctioningthe Scheme of Arrangement.Consequent to the demerger, the beerbusiness of SABMiller Breweries PrivateLimited which inter alia includes all theassets and liabilities, employees, alllicences and permits of the beerbusiness stand transferred to yourCompany. Accordingly, all the breweriesof the SABMiller Group in India are nowunder the control of your company.Material changes subsequentto financial year endThere are no material changes since thefinancial year end which would affect thefinancial position of the company.DividendAs the Company has incurred loss during the year, theDirectors do not recommend any dividend on the equitycapital.Sustainable Development and CorporateSocial ResponsibilityAs a part of "Ten Priorities One Future" sustainabledevelopment programme of the SABMiller Group, yourcompany continued with many corporate socialresponsibility initiatives during the year under review.Campaign on Responsible DrinkingTo promote responsible consumption, your companyinitiated a number of awareness programmes andpartnerships with community stakeholders across thecountry."Respect the Road" campaign was launched in Gurgaonto address increase in cases of drunken driving inpartnership with Gurgaon Traffic Police. Specialmessaging around festivals such as Holi and New Yearwere carried out.Phase two of the mass communication campaign onresponsible drinking in Puducherry in partnership with alocal NGO (SONIC) was launched in October.21

SKOL Breweries LimitedAnnual Report 2011-12Directors' Report continuedContributing to reductionof HIV / AIDSThe Company is working towards thereduction of HIV / AIDS throughvarious initiatives targeting differentsections of society. The Companyunderstands that awareness is crucialfor HIV / AIDS control. Company'sinterventions are targeted towards keystakeholders, which includes high riskstakeholders as being truck driverswho transport tonnes of raw materialsand our products to the market.AIDS Awareness Programme underthe banner "Humsafar" launched in2008 in Rajasthan particularlytargeting the truck drivers iscontinued with vigour and now standsextended to many more breweriesincluding Karnataka, Puducherry,Haryana and Andhra Pradesh. TruckDrivers have shown keen interest inknowing the consequences of personafflicted with HIV and how to avoidsuch a situation. We believe that ourprogrammes have benefited manytruckers and their families.Water ProjectsYour company continued with itsinitiatives for conservation of waterand in this direction Waterassessment for six breweries hasbeen carried out and Water structurehas been constructed in Chomu inJaipur District of Rajasthan.The ground water managementinitiative of your company inNeemrana, Rajasthan has led to riseof water to approximately 24 feetaround three ground water rechargestructure. Further, your company'ssaid initiatives recharged the entireamount of ground water of 30,000cubic meter extracted in 2010.Barley DevelopmentYour company's attempt at improvingthe quality of its barley procurementand simultaneously raising the qualityof farmers has shown good result.With a view to securing good qualitybarley, your company initiated stepswith farmers to provide them accessto good quality seeds, agronomicaladvice and training to enhance thequality of the crops. Farmers are alsoprovided information on properirrigation, fertilizer usage andharvesting.22

SKOL Breweries LimitedAnnual Report 2011-12Directors' Report continuedSuch steps enabled farmers to haveassured market for their product,transparent transactions and fairpricing. The programme has improvedbarley yield by 20% to 25% and betterprice realization to farmers as they selldirectly to your company avoiding theintermediaries. Better yield coupled withpreferential price translate into realincome hike for farmers.DirectorsIn accordance with the Articles ofAssociation, Mr. Mathew James Dunnand Mr. T S R Subramanian, Directorsof the Company retire by rotation atthis Annual General Meeting andbeing eligible, offer themselves for reappointment.During the year Mr. Harald GrahamHarvey was appointed as anAdditional Director of the Company,whose term of office expires at thisAnnual General Meeting and iseligible for re-appointment.Audit CommitteePursuant to the provisions of Section292A of the Companies Act, 1956 theAudit Committee has been reconstituted.The present members ofthe Committee are Mr. Harald Harvey,Mr. Ari Mervis, Mr. Mathew Dunn,Ms. Sue Clark and Mr. PaoloLanzarotti. Mr. Mathew Dunn is theChairman of the Committee.AuditorsM/s B S R & Co., CharteredAccountants, retiring Auditors, havesignified their willingness to bereappointed as Statutory Auditors ofthe Company. They have confirmedthat their reappointment, if made, willbe within the limits prescribed underSection 224(1B) of the CompaniesAct, 1956. Your Directors recommendtheir appointment at the ensuingAnnual General Meeting.Public DepositDuring the year, the Company has notaccepted any public deposits asdefined in the Companies(Acceptance of Deposits) Rules,1975.Particulars of EmployeesThe details of employees coveredunder the provisions of Section 217(2A) of the Companies Act, 1956 andthe rules framed there under, asamended to date are enclosed as anAnnexure to the Report.Conservation of Energy,Technology Absorption,Foreign ExchangeEarnings and OutgoThe Statement pursuant to Section217 (1) (e) of the Companies Act,1956 read with the Companies(Disclosure of Particulars in the Reportof Board of Directors) Rules, 1988 tothe extent applicable are set out in theannexure hereto.Directors' ResponsibilityStatement under Section217(2AA) of theCompanies Act, 1956Your Directors state that:1. The financial statements have beenprepared in conformity with thegenerally accepted accountingprinciples and applicableaccounting standards in India.2. The Directors have selected suchaccounting policies as areapplicable and have applied themconsistently and made reasonableand prudent judgment andestimates so as to give a true andfair view of the state of affairs of thecompany at the end of the financialyear and of the profit or loss for theyear.3. The Directors have taken proper andsufficient care for the maintenance ofadequate accounting records inaccordance with the provisions ofthe Companies Act for safeguardingthe assets of the company and forpreventing and detecting fraud andother irregularities.4. The financial statements have beenprepared on the basis of "GoingConcern" considering the ability ofthe Company to carry on itsbusiness in the foreseeable future.The internal controls are operatingeffectively. During the year, twoemployees misappropriated funds ofthe company. With internal controls inplace this was detected at an earlystage and financial loss was restrictedto Rs.7,35,630. Services of theemployees were immediatelyterminated.23

SKOL Breweries LimitedAnnual Report 2011-12Directors' Report continuedAcknowledgementYour Directors wish to place on recordtheir appreciation for contributionmade by employees at all levels. TheDirectors would also like toacknowledge the continued supportextended by Bankers, Distributors,Shareholders, Customers andSuppliers.FOR AND ON BEHALF OF THE BOARDHarald HarveyPlace: BangaloreDate: 15th May, 2012Paolo LanzarottiDisclosure as per theCompanies (Disclosure ofParticulars in the Report ofDirectors) Rules, 1988A. Conservation of EnergyEnergy efficiency in breweries isachieved through a process ofcontinuous improvement. The Companycontinues to identify opportunitiesthrough benchmarking globally againstbreweries of the SABMiller group.The company has a robust energymanagement practice that involves:1. Extensive benchmarking againstglobal standards across SABMillergroup.2. Energy collaboration forum started toshare knowledge and implementcross brewery best-in-classpractices very quickly.3. Routine reviews of investments forenergy improvements initiatives. Forexample Variable Speed Drives onrefrigeration equipment, resizing ofthe Boilers are done on a continuousbasis. Such investments are madeat appropriate times after a thoroughreview of benefits, costs, existingpractices and people capabilities.4. Manufacturing way (Mway)introduced in most of the breweriesin India. Mway is a global SABMillerpractice that targets systematicimprovement of operationefficiencies through practices likeTeamwork and Asset care. Asignificant part of energy savings isdue to such improved operationpractices.5. We continue to invest in our people.Four of our operation personnelhave been certified as accreditedEnergy Auditors / Energy Managersfrom the Bureau of Energy Efficiencyto drive continuous improvement inenergy utilization in breweries.B. Technology AbsorptionThe company has not made anypurchases of technology or madepayments towards transfer oftechnology during the year underreview.C. Foreign Exchange Earnings andOutgoDuring the year, the Company hasearned Rs.32.03 Crores in foreignexchange. An amount of Rs.64.54Crores was incurred in foreignexchange.FOR AND ON BEHALF OF THE BOARDHarald HarveyPlace: BangaloreDate: 15th May, 2012Paolo Lanzarotti24

SKOL Breweries LimitedAnnual Report 2011-12Annual FinancialStatements25

SKOL Breweries LimitedAnnual Report 2011-12Auditors' ReportTo the Members of SKOL BreweriesLimitedWe have audited the attachedbalance sheet of SKOL BreweriesLimited ("the Company") as at 31March 2012, the statement of profitand loss and the cash flow statementfor the year ended on that dateannexed thereto. These financialstatements are the responsibility ofthe Company's management. Ourresponsibility is to express an opinionon these financial statements basedon our audit.We conducted our audit inaccordance with auditing standardsgenerally accepted in India. Thosestandards require that we plan andperform the audit to obtainreasonable assurance about whetherthe financial statements are free ofmaterial misstatement. An auditincludes examining, on a test basis,evidence supporting the amountsand disclosures in the financialstatements. An audit also includesassessing the accounting principlesused and significant estimates madeby management, as well asevaluating the overall financialstatement presentation. We believethat our audit provides a reasonablebasis for our opinion.As required by the Companies(Auditor's Report) Order, 2003, asamended, ("the Order") issued by theCentral Government of India in termsof sub-section (4A) of Section 227 ofthe Companies Act, 1956, weenclose in the Annexure a statementon the matters specified inparagraphs 4 and 5 of the Order.Further to our comments in theAnnexure referred to above, wereport that:(i) we have obtained all theinformation and explanations,which to the best of ourknowledge and belief werenecessary for the purpose of ouraudit;(ii) in our opinion, proper books ofaccount as required by law havebeen kept by the Company so faras appears from our examinationof those books;(iii) the balance sheet, the statementof profit and loss and the cashflow statement dealt with by thisreport are in agreement with thebooks of account;(iv) in our opinion, the balance sheet,the statement of profit and lossand the cash flow statement dealtwith by this report comply withthe accounting standardsreferred to in sub-section (3C) ofSection 211 of the CompaniesAct, 1956;(v) on the basis of writtenrepresentations received from thedirectors of the Company as on31 March 2012, and taken onrecord by the Board of Directors,we report that none of thedirectors is disqualified as on 31March 2012 from beingappointed as a director in termsof clause (g) of sub-section (1) ofSection 274 of the CompaniesAct, 1956;(vi) In our opinion and to the best ofour information and according tothe explanations given to us, thesaid accounts give theinformation required by theCompanies Act, 1956, in themanner so required and give atrue and fair view in conformitywith the accounting principlesgenerally accepted in India:a. in the case of the balancesheet, of the state of affairs ofthe Company as at 31 March2012;b. in the case of the statement ofprofit and loss, of the loss ofthe Company for the yearended on that date; andc. in the case of the cash flowstatement, of the cash flows ofthe Company for the yearended on that date.for B S R & Co.Firm registration number: 101248WChartered AccountantsZubin ShekaryPartnerMembership No. 48814BangaloreDate: 15 May 201226

SKOL Breweries LimitedAnnual Report 2011-12Auditors' Report continuedAnnexure to the Auditors' reportAnnexure referred to in the Auditors'Report to the Members of SKOLBreweries Limited ("the Company") forthe year ended 31 March 2012. Wereport that:i. (a) The Company has maintainedproper records showing fullparticulars, includingquantitative details andsituation of fixed assets.(b)(c)The Company has a regularprogramme of physicalverification of its fixed assetsby which all fixed assets areverified over a period of threeyears. In our opinion, thisperiodicity of physicalverification is reasonablehaving regard to the size of theCompany and the nature of itsassets. No materialdiscrepancies were noticed onsuch verification.Fixed assets disposed offduring the year were notsubstantial, and therefore, donot affect the going concernassumption.ii. (a) The inventory, except for goodsin-transitand stock lying withthird parties, has beenphysically verified by themanagement during the year.In our opinion, the frequency ofsuch verification is reasonable.For stocks lying with thirdparties at the year-end, writtenconfirmations have beenobtained.(b) The procedures for the physicalverification of inventoriesfollowed by the managementare reasonable and adequatein relation to the size of theCompany and the nature of itsbusiness.(c) The Company is maintainingproper records of inventory.The discrepancies noticed onverification between thephysical stocks and the bookrecords were not material.iii. The Company has neither grantednor taken any loans, secured orunsecured, to or from companies,firms or other parties covered inthe register maintained undersection 301 of the CompaniesAct, 1956.iv. In our opinion and according to theinformation and explanationsgiven to us, there is an adequateinternal control systemcommensurate with the size of theCompany and the nature of itsbusiness with regard to purchaseof inventories and fixed assetsand with regard to the sale ofgoods. We have not observed anymajor weakness in the internalcontrol system during the courseof the audit.v. (a) In our opinion and according tothe information andexplanations given to us, theparticulars of contracts orarrangements referred to inSection 301 of the CompaniesAct, 1956 have been entered inthe register required to bemaintained under that section.(b)In our opinion and according tothe information andexplanations given to us, thetransactions made inpursuance of contracts andarrangements referred toabove and exceeding thevalue of Rs. 5 lakh with anyparty during the year havebeen made at prices which arereasonable having regard tothe prevailing market prices atthe relevant time.vi. The Company has not acceptedany deposits from public.vii. In our opinion, the Company hasan internal audit systemcommensurate with its size andnature of its business.viii. We have broadly reviewed thebooks of accounts maintained bythe Company pursuant to rulesprescribed by the CentralGovernment for maintenance ofcost records under section209(1)(d) of the CompaniesAct,1956 and are of the opinionthat prima facie, the prescribedaccounts and records have beenmade and maintained. However,we have not made a detailedexamination of the records.ix. (a) According to the informationand explanations given to usand on the basis of ourexamination of the records ofthe Company, amountsdeducted/ accrued in thebooks of account in respect ofundisputed statutory duesincluding Provident Fund,Employees' State Insurance,Income-tax, Sales Tax/ ValueAdded Tax, Wealth Tax,Service Tax, Customs Duty,Excise Duty, Cess and othermaterial statutory dues have27

SKOL Breweries LimitedAnnual Report 2011-12Auditors' Report continuedgenerally been regularlydeposited during the year bythe Company with theappropriate authorities thoughthere has been a slight delay ina few cases. As explained tous, the Company did not haveany dues on account ofInvestor Education andProtection Fund.There are no dues on accountof Cess under section 441A ofthe Companies Act, 1956 sincethe date from which theaforesaid section comes intoforce has not yet been notifiedby the Central Government.According to the informationand explanations given to us,there are no undisputedamounts payable in respect ofProvident Fund, Employees'State Insurance, Income-tax,Wealth Tax, Service Tax, SalesTax/ Value Added Tax,Customs Duty, Excise Duty,Cess and other materialstatutory dues which were inarrears as at 31 March 2012 fora period of more than sixmonths from the date theybecame payable.(b) According to the informationand explanations given to us,there are no dues of WealthTax and Cess which have notbeen deposited with theappropriate authorities onaccount of any dispute. Thefollowing dues of Income-tax,Sales Tax/ Value Added Tax,Service Tax, Customs Duty andExcise Duty have not beendeposited by the Company onaccount of disputes.Name of the StatuteNature of the DuesAmount (Rs.)Period to which theamount relatesForum where disputeis pendingPunjab Excise Act,1914Duty on beer loss11,245,2361974-75 to 1990-91FinancialCommissioner,HaryanaOrissa and BiharExcise Act, 1965Interest on excise loandraw back scheme3,222,7051988 - 89Orissa High CourtAdhesive label fees10,877,0282001-02 to 2004-05Orissa High CourtDuty on sediment beer1,284,9362002 -03Orissa High CourtOvertime wages ofexcise staff327,2312005-06Orissa High CourtBombay ProhibitionAct, 1949Supervision chargesof excise staff550,9301983-84 to 1988-89Bombay High CourtDuty on expired beer1,037,0852000-01Commissioner ofState Excise,MaharashtraKarnataka Excise Act,1965Overtime wages ofexcise staff3,005,0621998-99 to 2004-05Commissioner ofState Excise,Karnataka28

SKOL Breweries LimitedAnnual Report 2011-12Auditors' Report continuedName of the StatuteNature of the DuesAmount (Rs.)Period to which theamount relatesForum where disputeis pendingKarnataka VAT Act,2003Taxes on bottledeposit217,154,152April 2005 to March2011Karnataka High CourtOrissa Sales Tax Act,1947Sales Tax35,029,0241994-95 to 2000-01Sales Tax Tribunal,OrissaOrissa Entry Tax Act,1999Sales Tax242,5082000-01Sales Tax Tribunal,OrissaDelhi Sales Tax Act,1975Sales Tax576,4862002-03AssistantCommissioner ofCommercial Taxes(Appeals), New DelhiSales Tax217,200,9132007-08AdditionalCommissioner-II,Department of Trade& Taxes, New DelhiBombay Sales TaxAct, 1959Sales Tax1,514,9431992-93Appellate Tribunal,MaharashtraSales Tax4,139,1541995-96Sales Tax Tribunal,MaharashtraSales Tax1,433,0602008-09AdditionalCommissioner(Appeals),MaharashtraSales Tax1,445,5371996-97Sales Tax Tribunal,MaharashtraBombay Sales TaxAct, 1959 & CentralSales Tax Act, 1956Sales Tax12,317,4952001-02Sales Tax Tribunal,MaharashtraSales Tax8,050,9222002-03Joint Commissioner(Appeals), MumbaiSales Tax4,984,2902002-03Joint Commissioner(Appeals), Mumbai29

SKOL Breweries LimitedAnnual Report 2011-12Auditors' Report continuedName of the StatuteNature of the DuesAmount (Rs.)Period to which theamount relatesForum where disputeis pendingAndhra PradeshGeneral Sales Tax Act,1957Sales Tax3,675,6771991-92 to 1992-93Andhra Pradesh HighCourtPondicherry GeneralSales Act, 1967Sales Tax11,982,0001981-82 to 1984-85,1997-98 to 1998-99Assessing Authority,PondicherryHaryana Sales TaxAct, 1973Sales Tax754,3491989-90 to 1996-97,1998-99 to 2003-04Sales Tax Tribunal,HaryanaKerala Sales Tax ActPenalty221,6342005-06 to 2007-08Sales Tax Tribunal,KeralaUttar Pradesh Tax onEntry of Goods Act,2000Entry Tax14,114,5782003-04 to 2011-12Supreme CourtHaryana Local AreaDevelopment Tax Act,2000Local AreaDevelopment Tax10,050,4262000-01 to 2003-04Chandigarh HighCourtFinance Act, 1994Service Tax andpenalty32,129,6402006-07 to 2007-08Customs Excise andService Tax AppellateTribunal, MumbaiService Tax andpenalty34,795,634April 2008 to March2010Customs Excise andService Tax AppellateTribunal, MumbaiCustoms Act, 1962Customs Duty261,5552007-08Customs Excise andService Tax AppellateTribunal, MumbaiIncome-tax Act, 1961Fringe benefit tax53,308,3412006-07Commissioner ofIncome tax (Appeals)Income-tax60,253,7602007-08Income Tax AppellateTribunal, MumbaiNote: The amounts paid under protest have been reduced from the amounts demanded in arriving at the aforesaid disclosure.30

SKOL Breweries LimitedAnnual Report 2011-12Balance SheetNote As at 31 March 2012 As at 31 March 2011Rs.EQUITY AND LIABILITIESShareholders' fundsShare capital 2.1 2,311,837,450 2,311,837,450Shares pending allotment to the shareholdersof the Transferor company 2.23 72,419,910 -Reserves and surplus 2.2 1,415,155,878 2,276,922,7753,799,413,238 4,588,760,225Non-current liabilitiesLong-term borrowings 2.3 2,346,223,893 1,821,580,950Long-term provisions 2.4 481,508,090 472,658,732Other long term liabilities 2.5 8,349,563 21,008,5682,836,081,546 2,315,248,250Current liabilitiesShort-term borrowings 2.6 8,545,818,645 7,682,377,290Trade payables 2.7 1,966,338,378 1,643,966,807Other current liabilities 2.8 3,506,607,600 2,351,725,628Short-term provisions 2.9 33,919,456 27,093,47514,052,684,079 11,705,163,20020,688,178,863 18,609,171,675ASSETSNon-current assetsFixed assetsTangible assets 2.10 8,510,354,658 8,480,202,138Intangible assets 2.10 2,407,873,120 2,574,859,380Capital work-in-progress 371,316,219 158,768,00011,289,543,997 11,213,829,518Investments 2.11 11,489,057 11,391,402Long-term loans and advances 2.12 774,417,631 672,808,75412,075,450,685 11,898,029,674Current assetsInventories 2.13 2,742,344,715 2,187,251,686Trade receivables 2.14 4,652,810,767 3,454,566,614Cash and bank balances 2.15 178,924,814 380,499,623Short term loans and advances 2.16 1,038,647,882 688,824,0788,612,728,178 6,711,142,001Significant accounting policies 1Notes to the financial statements 2The notes referred to above form an integral part of the balance sheet20,688,178,863 18,609,171,675As per our report of even date attachedfor B S R & Co.Firm registration number : 101248WChartered Accountantsfor SKOL Breweries LimitedZubin Shekary Paolo Lanzarotti Harald HarveyPartner Managing Director DirectorMembership No. 48814Paul D’SilvaSridhar SChief Financial OfficerCompany SecretaryBangaloreBangaloreDate: 15 May 2012 Date: 15 May 201232

SKOL Breweries LimitedAnnual Report 2011-12Statement of Profit and LossNote For the year ended For the year ended31 March 2012 31 March 2011Rs.IncomeRevenue from operations 2.17 29,870,679,866 24,878,609,679Less: Excise duty (11,463,150,947) (8,686,862,970)Less: Discounts (1,744,677,186) (1,332,453,508)16,662,851,733 14,859,293,201Other income 2.18 46,072,530 114,216,012Expenses16,708,924,263 14,973,509,213Cost of materials consumed 8,604,113,675 7,436,922,729Purchase of stock in trade 2,371,323 10,127,036Changes in inventories of finished goods,work-in-progress and traded goods 2.19 (66,405,610) 130,889,053Employee benefits expense 2.20 1,400,216,555 1,144,002,591Finance cost 2.21 1,152,899,787 818,568,659Depreciation and amortisation 2.10 872,589,246 950,690,263Reversal of impairment loss 2.42 (17,103,108) -Other expenses 2.22 5,952,827,718 5,085,948,15317,901,509,586 15,577,148,484Loss before tax (1,192,585,323) (603,639,271)Tax expense:- current tax - -- pertaining to earlier years (reversal) - (2,286,091)- fringe benefit tax pertaining to earlier years 2.36 1,546,002 -- deferred tax (credit)/ charge - -- wealth tax - 19,197Loss for the year (1,194,131,325) (601,372,377)Earnings per equity share (par value; Rs.10 each)- Basic and diluted 2.28 (5.01) (2.60)Significant accounting policies 1Notes to the financial statements 2The notes referred to above form an integral part of the statement of profit and lossAs per our report of even date attachedfor B S R & Co.Firm registration number : 101248WChartered Accountantsfor SKOL Breweries LimitedZubin Shekary Paolo Lanzarotti Harald HarveyPartner Managing Director DirectorMembership No. 48814Paul D’SilvaChief Financial OfficerSridhar SCompany SecretaryBangaloreBangaloreDate: 15 May 2012 Date: 15 May 201233

SKOL Breweries LimitedAnnual Report 2011-12Notes to the financial statements1. Significant accounting policiesBackgroundSKOL Breweries Limited ("theCompany" or "SKOL") wasincorporated as a private limitedcompany under the Companies Act,1956 on 18 November 1988. TheCompany is primarily engaged in thebusiness of brewing, packaging,distribution, marketing and sale ofbeer.1.1 Basis of preparationThe financial statements havebeen prepared and presentedunder the historical costconvention on the accrual basisof accounting. The financialstatements have been preparedto comply in all material respectswith the mandatory AccountingStandards ('AS') prescribed byCompanies (AccountingStandards) Rules, 2006 and therelevant provisions of theCompanies Act, 1956, to theextent applicable. These financialstatements are prepared andpresented in Indian Rupees.1.2 Going concernThese financial statements havebeen prepared on a goingconcern basis, notwithstandingaccumulated losses and relianceon short term borrowings due tothe following considerations:– Expected steady future growthreflected in financialprojections prepared by themanagement;– Expected continual technicaland financial support by theSABMiller group; and– Subsequent renewal of shortterm borrowings from banks.These financial statements,therefore, do not include anyadjustments relating torecoverability and classificationof asset amounts or toclassification and amount ofliabilities that may benecessary if the Company wasunable to continue as a goingconcern.1.3 Use of estimatesThe preparation of financialstatements in conformity withgenerally accepted accountingprinciples in India requiresmanagement to make estimatesand assumptions that affect thereported amounts of assets andliabilities and disclosure ofcontingent liabilities on the date ofthe financial statements and theresults of operations during thereporting period end. Actualresults could differ from thoseestimates. Any revision toaccounting estimates isrecognised prospectively incurrent and future periods.1.4 Revenue recognitionRevenue is recognised to theextent that it is probable that theeconomic benefits will flow to theCompany and the revenue can bemeasured reliably.(i) Sale of goodsRevenue from sale ofmanufactured and tradedgoods is recognised ontransfer of all the significantrisks and rewards ofownership to the buyer whichnormally takes place ondespatch of goods. Theamount recognised as sale isnet of sales tax, sales returnsand trade discount. Sales arepresented both gross and netof excise duty.(ii) Income from contract bottlingIncome from contract bottlingis recognised when the rightto receive bottling fee isestablished which normallytakes place on dispatch ofgoods by contract bottlers toits customers.(iii) InterestInterest income is recognisedusing the time proportionbasis taking into account theamount outstanding and theinterest rate applicable.(iv) Sale of spent malt and scrapRevenue from sale of spentmalt and scrap is recognisedon transfer of all thesignificant risks and rewardsof ownership to the buyerwhich normally takes place ondespatch of goods. Theamount recognised as sale isnet of sales tax and salesreturns.1.5 Fixed assetsFixed assets are carried at cost ofacquisition or construction lessaccumulated depreciation andprovision for impairment of assets.The cost of fixed assets includesfreight, duties, taxes and otherincidental expenses related to theacquisition or construction of therespective assets. Borrowingcosts directly attributable toacquisition or construction ofthose fixed assets whichnecessarily take a substantialperiod of time to get ready fortheir intended use are capitalised34

SKOL Breweries LimitedAnnual Report 2011-12Notes to the financial statements1. Significant accounting policiesto the extent they relate to theperiod till such assets are readyto be put to use. Intangibleassets are recorded at theiracquisition cost.The costs of the fixed assets,which are not ready for theirintended use on such date, aredisclosed as capital work-inprogress.1.6 DepreciationDepreciation on fixed assets isprovided on the straight-linemethod as per the rates and inthe manner prescribed inSchedule XIV to the CompaniesAct, 1956. The rates ofdepreciation prescribed inSchedule XIV to the CompaniesAct, 1956 are considered asminimum rates. However, wherethe management's estimate of theuseful life of a fixed asset at thetime of acquisition of the asset orof the remaining useful life on asubsequent review is shorter thanthat envisaged in the aforesaidschedule, depreciation isprovided at a higher rate basedon the management's estimate ofuseful life/ remaining useful life.Freehold land is not depreciated.Leasehold land is amortised overthe lease term. Leaseholdimprovements are amortised overthe lease term or its estimateduseful life of 5 years, whichever islower.Pro-rated depreciation is providedon all assets purchased or soldduring the year. Assets, costingindividually Rs 5,000 or less, aredepreciated in full in the year ofpurchase.The useful life of brands, whichprimarily represent brandspurchased, have beendetermined based onmanagement's assessment ofmarket conditions in India, intentto use and ability to maintainthese assets, previous history ofthese brands and internationallyaccepted practices.1.7 ImpairmentThe Company periodicallyassesses whether there is anyindication that an asset or a groupof assets comprising a cashgenerating unit may be impaired.If any such indication exists, thePursuant to this policy the following fixed assets are depreciated to theirresidual value over their estimated useful life:Class of assetsNumber of yearsBuildings 28Plant and machinery- Chillers 5- Crates 2- Wooden pallets 3- Others 14-18Computer equipment 4Furniture, fittings & office equipment 6Motor vehicles 5Brands 20Computer software 4Company estimates therecoverable amount of the asset.For an asset or group of assetsthat does not generate largelyindependent cash inflows, therecoverable amount isdetermined for the cashgenerating unit to which the assetbelongs. If such recoverableamount of the asset or therecoverable amount of the cashgenerating unit to which the assetbelongs is less than its carryingamount, the carrying amount isreduced to its recoverableamount. The reduction is treatedas an impairment loss and isrecognised in the profit and lossaccount. The recoverableamount is higher of the asset's netselling price and value in use.After recognition of impairmentloss, depreciation is provided onthe revised carrying amount of theasset, less its residual value (ifany), over its remaining useful life.If at the balance sheet date thereis an indication that if a previouslyassessed impairment loss nolonger exists, the recoverableamount is reassessed and theasset is reflected at therecoverable amount subject to amaximum of depreciablehistorical cost. An impairment lossis reversed only to the extent thatthe carrying amount of asset doesnot exceed the net book valuethat would have been determined,if no impairment loss had beenrecognised.35

SKOL Breweries LimitedAnnual Report 2011-12Notes to the financial statements1. Significant accounting policies1.8 Borrowing costsBorrowing costs directlyattributable to acquisition orconstruction of those fixed assets,which necessarily take asubstantial period of time to getready for their intended use, arecapitalised. Other borrowingcosts are accounted as anexpense.1.9 InvestmentsLong-term investments arecarried at cost less any otherthan-temporarydiminution in thevalue, as determined bymanagement on commercialconsideration determinedseparately for each individualinvestment.1.10 InventoriesInventories are valued at lower ofcost and net realisable value.Cost of inventories comprisespurchase price, costs ofconversion and other costsincurred in bringing theinventories to their presentlocation and condition.The methods of determination of cost of various categories ofinventories are as follows:Raw materials, packingmaterials, stores and sparesand traded goodsWork-in-progress and finishedgoods (including goods intransit)- First-in-first-out ('FIFO')method- FIFO method. Productionoverheads are allocated onthe basis of normalcapacity of productionfacilitiesMaintenance spares, which are in regular use and are not anintegral part of any fixed asset, are treated as inventory andvalued at cost.The comparison of cost and netrealisable value is made on anitem-by-item basis. The netrealisable value of work-inprogressis determined withreference to the selling prices ofrelated finished goods in theordinary course of business, lessestimated cost of completion andestimated costs necessary tomake the sale. Raw materials,packing materials and othersupplies held for use inproduction of inventories are notwritten below cost except incases where material prices havedeclined, and it is estimated thatthe cost of the finished productswill exceed their net realisablevalue.1.11 Foreign exchangeForeign exchange transactionsare recorded at the rates ofexchange prevailing on the dateof the respective transactions.Exchange differences arising onforeign exchange transactionssettled during the year arerecognised in the profit and lossaccount for the year.Monetary assets and liabilitiesdenominated in foreigncurrencies as at the balancesheet date are translated at theclosing exchange rate on thatdate and the resultant exchangedifferences are recognised in theprofit and loss account.Forward contracts and otherderivatives are entered into tohedge the foreign currency risk ofthe underlying outstanding at thebalance sheet date. Thepremium or discount on all suchcontracts arising at the inceptionof each contract is amortised asincome or expense over the life ofthe contract. Any profit or lossarising on the cancellation orrenewal of forward contracts isrecognised as income or asexpense for the period.The exchange difference on theforward exchange contractentered into to hedge the foreigncurrency risk of the underlyingoutstanding at the balance sheetdate, is calculated as thedifference between the foreigncurrency amount of the contracttranslated at the exchange rate atthe reporting date, or thesettlement date where thetransaction is settled during thereporting period, and thecorresponding foreign currencyamount translated at the later ofthe date of inception of theforward exchange contract andthe last reporting date. Suchexchange differences arerecognised in the profit and lossaccount in the reporting period inwhich the exchange rateschange.36

SKOL Breweries LimitedAnnual Report 2011-12Notes to the financial statements1. Significant accounting policiesFor forward exchange contracts andother derivatives that are not coveredby AS 11 - 'The Effects of Changes inForeign Exchange Rates' and thatrelate to a firm commitment or highlyprobable forecast transactions, theCompany has adopted the principlesof AS 30 - 'Financial Instruments:Recognition and Measurement' witheffect from 1 April 2008. Derivativefinancial instruments, which qualify forcash flow hedge accounting andwhere Company has met all theconditions of cash flow hedgeaccounting, are fair valued at balancesheet date and the resultantexchange loss/ gain isdebited/credited to the hedgereserve. This loss/ gain would berecorded in profit and loss accountwhen the underlying transactionsaffect earnings. Other derivativeinstruments that relate to a firmcommitment or a highly probableforecast transaction and that do notqualify for hedge accounting havebeen recorded at fair value at thereporting date and the resultantexchange loss/ gain has beendebited/ credited to profit and lossaccount for the year.1.12 Employee benefits(i) Contributions to providentfund, which is a definedcontribution scheme, arecharged to the profit and lossaccount on an accrual basis.(ii) The Company has anarrangement with LifeInsurance Corporation ofIndia to administer itssuperannuation scheme,which is a definedcontribution scheme. Thecontributions to the saidscheme are charged to theprofit and loss account on anaccrual basis.(iii) Gratuity, which is a definedbenefit scheme is providedfor based on an actuarialvaluation carried out by anindependent actuary as at thebalance sheet date. Actuarialgains/ losses are recognisedimmediately in the profit andloss account and are notdeferred. Only such changesin legislation are taken intoaccount while providing forgratuity that have beenenacted upto the balancesheet date.(iv) Compensated absences areprovided for based on anactuarial valuation carried outby an independent actuary asat the balance sheet date.1.13 LeasesLeases where the lessoreffectively retains substantially allthe risks and rewards ofownership of the leased asset areclassified as operating leases.Operating lease payments arerecognised as an expense in theprofit and loss account on astraight-line basis over the leaseterm.1.14 Provisions and contingentliabilitiesThe Company recognises aprovision when there is a presentobligation as a result of anobligating event that probablyrequires outflow of resources anda reliable estimate can be madeof the amount of the obligation. Adisclosure of a contingent liabilityis made when there is a possibleobligation or a present obligationthat may, but probably will not,require an outflow of resources.When there is a possibleobligation or a present obligationthat the likelihood of outflow ofresources is remote, no provisionor disclosure is made.Provisions for onerous contracts,i.e. contracts where the expectedunavoidable costs of meeting theobligations under the contractexceed the economic benefitsexpected to be received under it,are recognised when it isprobable that an outflow ofresources embodying economicbenefits will be required to settle apresent obligation as a result ofan obligating event, based on areliable estimate of suchobligation.1.15 TaxationIncome-tax expense comprisescurrent tax (i.e. amount of tax forthe year determined inaccordance with the Income-taxlaw) and deferred tax charge orcredit (reflecting the tax effects oftiming differences betweenaccounting income and taxableincome for the year). The deferredtax charge or credit and thecorresponding deferred taxliabilities or assets are recognisedusing the tax rates that have beenenacted or substantively enactedby the balance sheet date.Deferred tax assets arerecognised only to the extentthere is reasonable certainty thatthe assets can be realised infuture; however, where there isunabsorbed depreciation orcarried forward business lossunder taxation laws, deferred tax37

SKOL Breweries LimitedAnnual Report 2011-12Notes to the financial statements1. Significant accounting policiesassets are recognised only ifthere is a virtual certainty ofrealisation of such assets.Deferred tax assets are reviewedas at each balance sheet dateand written down or written up toreflect the amount that isreasonably/ virtually certain (asthe case may be) to be realised.The Company offsets, the current(on a year on year basis) anddeferred tax assets and liabilities,where it has a legally enforceableright and where it intends to settlesuch assets and liabilities on anet basis.Minimum Alternative Tax ('MAT')credit is recognised as an assetonly when and to the extent thereis convincing evidence that theCompany will pay normal Incometaxduring the specified period.In the year in which the MATcredit becomes eligible to berecognised as an asset inaccordance with therecommendations contained inthe Guidance Note issued by theInstitute of CharteredAccountants of India ('ICAI'), thesaid asset is created by way of acredit to the profit and lossaccount. The Company reviewsthe same at each balance sheetdate and writes down the carryingamount of MAT credit entitlementto the extent there is no longerconvincing evidence to the effectthat Company will pay normalIncome-tax during the specifiedperiod.1.16 Earnings per shareThe basic earnings per share iscomputed by dividing the netprofit or loss attributable to equityshareholders for the year by theweighted average number ofequity shares outstanding duringthe year. The number of equityshares used in computing dilutedearnings per share comprises theweighted average number ofshares considered for derivingbasic earnings per share, andalso the weighted averagenumber of equity shares, whichwould have been issued onconversion of all potentiallydilutive equity shares. Potentialdilutive equity shares are deemedconverted as of the beginning ofthe year, unless they have beenissued at a later date. Thepotentially dilutive equity shareshave been adjusted for theproceeds receivable had theshares been actually issued at afair value (i.e. the average marketvalue of the outstanding shares).In computing the dilutive earningsper share, only potential equityshares that are dilutive and thateither reduces the earnings pershare or increases loss per shareare included.1.17 Employee stock compensationcostThe Company applies intrinsicvalue method of accounting forstock options granted by theultimate holding company to theemployees of the Company after1 April 2005. The intrinsic valueof the employee servicesreceived in exchange for thegrant of such options isrecognised as an expense. Theamount recognised is spreadover the vesting period which isalso the period over which someof the scheme performancecriteria relate. At each balancesheet date, the estimates of thenumber of options that areexpected to become exercisableare revised. It recognises theimpact of the revision of theoriginal estimates, if any, in theprofit and loss account over theremaining vesting period. Theeffect of uncertainty as to whetherany performance criteria of shareoptions will be met is dealt withby estimating the probability ofshares vesting and therefore thecost is adjusted and readjustedfor the probability of vesting in thevesting period.1.18 Cash flow statementCash flows are reported using theindirect method, whereby the netprofit before tax is adjusted forthe effects of transactions of anon-cash nature and anydeferrals or accruals of past orfuture cash receipts or payments.The cash flows from regularrevenue generating, investingand financing activities of theCompany are segregated.38

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.1 Share capital As at As at31 March 2012 31 March 2011Authorised300,000,000 (previous year: 300,000,000) equity shares of Rs. 10 each 3,000,000,000 3,000,000,000Issued, subscribed and paid up3,000,000,000 3,000,000,000231,183,745 (previous year: 231,183,745) equity shares of Rs. 10 eachfully paid up 2,311,837,450 2,311,837,4502,311,837,450 2,311,837,450Rs.(a) List of persons holding more than 5 percent shares in the CompanyName of the share holder As at 31 March 2012 As at 31 March 2011No. of shares % holding No. of shares % holdingSABMiller Breweries Private Limited 142,067,977 61.45 142,067,511 61.45SABMiller Asia BV 87,341,038 37.78 87,341,038 37.78(b) Reconciliation of the number of shares outstanding at the beginning and at the end of the yearParticulars As at As at31 March 2012 31 March 2011Number of shares at the beginning of the year 231,183,745 231,183,745Number of shares issued during the year - -Number of shares bought back during the period - -Number of shares outstanding at the end of the year 231,183,745 231,183,745Of the above, 142,067,977 (previous year: 142,067,511) equity shares of Rs. 10 each are held by SABMiller Breweries Private Limited,the immediate holding company. 87,341,038 (previous year: 87,341,038) equity shares of Rs. 10 each are held by SABMiller Asia BV.SABMiller plc is the ultimate holding company.The Company has issued only one class of equity shares having a par value of Rs. 10 each. All equity shares carry similar voting rightsof 1:1 and similar dividend rights.There have been no buyback of shares, issue of shares pursuant to contract without payment being received in cash for the period offive years immediately preceding the balance sheet date.2.2 Reserves and surplus As at As at31 March 2012 31 March 2011Capital reserve 2,000,000 2,000,0002,000,000 2,000,000Securities premium account 6,138,637,748 6,138,637,748Amalgamation adjustment reserve/ (deficit) account6,138,637,748 6,138,637,748Opening balance (1,457,236,076) (1,457,236,076)Add: On account of scheme of arrangement (refer to note 2.23(b)) 427,492,946 -(1,029,743,130) (1,457,236,076)39

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsRs.2.2 Reserves and surplus continued As at As at31 March 2012 31 March 2011Surplus/ (deficit)General reserveOpening balance 1,218,399,316 1,218,399,316Add/(Less): Movement during the year - -1,218,399,316 1,218,399,316Debit balance in profit and loss account brought forward (3,624,878,213) (3,023,505,836)Add: Loss for the year (1,194,131,325) (601,372,377)Add: Losses of Demerged Undertaking for the period from1 April 2009 to 31 March 2011 transferred as per the schemeof arrangement (refer to note 2.23(c)) (95,128,518) -(4,914,138,056) (3,624,878,213)(3,695,738,740) (2,406,478,897)1,415,155,878 2,276,922,7752.3 Long-term borrowings As at As at31 March 2012 31 March 2011UnsecuredTerm loans- external commercial borrowings from banks 2,292,142,686 1,771,759,478Loans and advances from related party (refer to note 2.35) 54,081,207 49,821,472(a)(b)(c)Corporate guarantees have been given by SABMiller Plc for the external commercialborrowings from banks.Terms of repayment:(i) External commercial borrowings from Standard Chartered Bank are repayableafter a period of 5 years from each drawdown date. Of the above outstandingbalance in the current year, Rs. 1,402,355,186 and Rs. 889,787,500 are due forrepayment in the financial year 2015-16 and 2016-17 respectively.(ii) Tenure and terms for repayment have not been specified for loans and advancesfrom related party.There have been no defaults in repayment of principal and interest during the currentyear and previous year.2,346,223,893 1,821,580,9502.4 Long-term provisions As at As at31 March 2012 31 March 2011Provision for gratuity (refer to note 2.32) 81,541,629 66,381,856Provision for compensated absences 36,723,981 35,104,636Provision for claims 363,242,480 371,172,240481,508,090 472,658,7322.5 Other long term liabilities As at As at31 March 2012 31 March 2011Derivative financial liabilities 8,349,563 21,008,5688,349,563 21,008,56840

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.6 Short-term borrowings As at As at31 March 2012 31 March 2011Loan from banks repayable on demandUnsecured:(a) from banks- bank overdraft 125,818,645 309,538,851(b) from related parties- loans from holding company (refer to note 2.35) - 2,338,439Other loans and advancesUnsecured:Working capital loan from banks 8,420,000,000 7,370,500,000(a) Working capital loan from banks are due for repayment or renewal within a period of 12months.(b) There has been no defaults in repayment of principal and interest during the current yearand previous year.8,545,818,645 7,682,377,2902.7 Trade payables As at As at31 March 2012 31 March 2011Trade payables- Dues to micro and small enterprises (refer to note 2.39) 31,187,466 14,901,889- Dues to other creditors 1,831,407,743 1,500,694,708- Acceptances 103,743,169 128,370,2101,966,338,378 1,643,966,807Rs.2.8 Other current liabilities As at As at31 March 2012 31 March 2011Current maturities of long term debts 572,488,800 -Interest accrued but not due on borrowings 81,039,779 53,521,311Payable to related parties (refer to note 2.35) 193,904,976 291,103,184Deposits from customers and del credre agents 237,095,214 217,478,239Book overdraft 39,787,220 1,456,327Excise duty payable 353,136,730 317,697,956Other liabilities- statutory 434,368,757 242,166,580- derivative financial liabilities 8,041,959 399,544- for expenses 1,586,744,165 1,227,902,4873,506,607,600 2,351,725,6282.9 Short-term provisions As at As at31 March 2012 31 March 2011Provision for gratuity (refer to note 2.32) 275,801 -Provision for compensated absences 10,584,963 4,593,346Provision for fringe benefit tax (net of advance tax) 5,047,648 4,489,085Provision for income-tax (net of advance tax and tax deducted at source) 18,011,044 18,011,04433,919,456 27,093,47541

2. Notes to the financial statements2.10 Fixed assets Rs.Description Gross block Accumulated depreciation Provision forAs at1 April 2011Acquired onscheme ofarrangement(refer note iibelow)Additions Deletions As at31 March 2012As at1 April 2011Acquired onscheme ofarrangement(refer note iibelow)Charge Deletions As at31 March 2012impairment asat31 March 2012(refer note iiibelow)As at31 March 2012As at31 March 2011Tangible assetsFreehold land 405,346,807 - - - 405,346,807 - - - - - 16,600,000 388,746,807 388,746,807Leasehold land 15,831,621 13,095,299 30,758,966 - 59,685,886 7,605,730 2,146,422 824,942 - 10,577,094 - 49,108,792 8,225,891Leasehold improvements 10,196,909 8,083,434 - - 18,280,343 6,307,926 2,289,285 2,250,511 - 10,847,722 - 7,432,621 3,888,983Buildings 2,309,742,428 93,402,982 50,070,942 6,131,887 2,447,084,465 347,449,594 35,018,167 83,977,675 5,298,540 461,146,896 10,043,449 1,975,894,120 1,951,532,720Plant and machinery 8,672,567,836 476,183,516 371,221,028 122,984,311 9,396,988,069 2,517,827,318 326,109,939 559,837,625 98,604,263 3,305,170,619 72,835,054 6,018,982,396 6,063,130,683Net block42Computer equipment 130,205,588 6,410,154 31,504,123 32,228,166 135,891,699 96,618,382 6,367,165 20,365,213 29,813,901 93,536,859 860,707 41,494,133 32,726,499Furniture, fittings andoffice equipment87,622,963 6,908,556 6,264,562 11,146,478 89,649,603 56,673,846 5,991,954 9,037,032 10,974,742 60,728,090 787,113 28,134,400 30,162,004Motor vehicles 16,954,678 233,335 - 8,998,701 8,189,312 14,928,789 86,111 455,201 8,079,516 7,390,585 237,338 561,389 1,788,55111,648,468,830 604,317,276 489,819,621 181,489,543 12,561,116,184 3,047,411,585 378,009,043 676,748,199 152,770,962 3,949,397,865 101,363,661 8,510,354,658 8,480,202,138Intangible assetsBrands 3,410,920,245 - - - 3,410,920,245 890,971,373 - 170,546,012 - 1,061,517,385 - 2,349,402,860 2,519,948,872Computer software 145,025,202 - 28,854,787 - 173,879,989 90,114,694 - 25,295,035 - 115,409,729 - 58,470,260 54,910,5083,555,945,447 -28,854,787 - 3,584,800,234 981,086,067 - 195,841,047 - 1,176,927,114 - 2,407,873,120 2,574,859,380Total 15,204,414,277 604,317,276 518,674,408 181,489,543 16,145,916,418 4,028,497,652 378,009,043 872,589,246 152,770,962 5,126,324,979 101,363,661 10,918,227,778 11,055,061,518Previous year 14,208,781,789 - 1,033,569,734 37,937,246 15,204,414,277 3,112,513,576 - 950,690,263 34,706,187 4,028,497,652 120,855,107 11,055,061,518(i) The company does not have any asset purchased on finance lease.(ii) Additions on scheme of arrangement represent gross block of assets and accumulateddepreciation acquired on 31 March 2009 from the demerged Company (refer note 2.23).Further the table above includes additions and deletions from the period 1 April 2009 to 31March 2011 as follows:Rs.(iii) Provision for impairmentRs.DescriptionGross block Accumulated depreciationDescriptionProvision for impairmentAdditions Deletions Charge DeletionsAs at 1 April2011(Reversal) Deletion As at 31March 2012Tangible assets Freehold land 16,600,000 - - 16,600,000Leasehold land - - 309,050 - Buildings 10,760,114 - 716,665 10,043,449Leasehold improvements - - 612,816 - Plant and machinery 91,609,835 (17,103,108) 1,671,673 72,835,054Buildings 406,080 - 6,844,870 - Computer equipment 860,707 - - 860,707Plant and machinery 10,959,193 1,903,448 65,395,688 1,419,215Furniture, fittingsand office equipment787,113 - - 787,113Computer equipment - 206,510 530,255 206,510 Motor vehicles 237,338 - - 237,338Furniture, fittings andoffice equipment22,222 - 1,111,121 - Total 120,855,107 (17,103,108) 2,388,338 101,363,661Motor vehicles 233,335 - 86,111 - Previous year 122,920,799 - 2,065,692 120,855,107Total 11,620,830 2,109,958 74,889,911 1,625,725SKOL Breweries LimitedAnnual Report 2011-12

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.11 Investments As at As at31 March 2012 31 March 2011Rs.Non-current investmentsNon trade - at costInvestment in equity shares - unquoted1 (previous year:1) fully paid up equity shares of Rs. 10 each ofMBL (AP) Breweries Limited 1 112,000 (previous year: 12,000) fully paid up equity shares ofRs. 10 each of Shushruta Medical Aid and Research Hospitals Limited 12,000 12,0005,000 (previous year: 5,000) fully paid up equity shares of Rs. 10 eachof Maini Granites Limited 5,000 5,000300 (previous year: 300) fully paid up equity shares of Rs. 10 eachin AP Heavy Machinery & Engineering Limited 300 30010,000 (previous year: 10,000) fully paid up equity shares ofRs. 10 each in Anusha International Limited 10,000 10,0001,700 (previous year: 1,700) fully paid up equity shares ofRs. 100 each in Maa Communication Bozel Limited 1,700 1,7007,000 (previous year: 7,000) fully paid up equity shares ofRs. 10 each in Sachdev International Limited 7,000 7,00012,500 (previous year: 12,500) fully paid up equity shares ofRs. 10 each in Scarlet Flowers and Agritech Limited 12,500 12,500100 (previous year: 100) fully paid up equity shares ofRs. 10 each in Indana Spices and Food India Limited 100 10080,000 (previous year: 80,000) fully paid up equity shares ofRs. 3 (previous year: Rs. 10) each in Vulcan Leasing andInvestments Limited 80,000 80,0005,005 (previous year: 5,005) fully paid up equity shares ofRs. 100 each in Janata Sahakari Bank Limited 500,500 500,500295 (previous year: 295) fully paid up equity shares of Rs. 100 eachin Haryana State Cooperative Bank Limited 29,500 29,50050,000 (previous year: 50,000) fully paid up equity shares ofRs. 10 each in SDF Industries Limited 50,000 50,000708,601 708,601Less: Provision for, other than temporary, diminution in the value ofinvestments (530,000) (530,000)178,601 178,60143

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.11 Investments continued As at As at31 March 2012 31 March 2011Investment in equity shares - quoted30,000 (previous year: 30,000) fully paid up equity shares ofRe. 1 each in ITC Limited 2,619,750 2,619,750400 (previous year: 400) fully paid up equity shares of Rs. 10 each inUltratech Cement Limited 400,060 400,060400 (previous year: 80) fully paid up equity shares of Rs 2(previous year Rs. 10) each in Tata Motors Limited 56,944 56,94415,000 (previous year: 15,000) fully paid up equity shares of Rs. 2 eachin Gujarat Ambuja Cement Limited 2,115,000 2,115,0002,000 (previous year: 2,000) fully paid up equity shares of Rs. 2 eachin Larsen & Toubro Limited 2,598,850 2,598,8501,400 (previous year: 1,400) fully paid up equity shares of Rs. 2 each inin Satyam Computer Services Limited 633,500 633,5008,600 (previous year: 8,600) fully paid up equity shares of Rs. 10 each inSyndicate Bank Limited 700,470 700,470Investment in government or trust securities9,124,574 9,124,574National Savings Certificates 2,159,332 2,061,677Indira Vikas Patra 26,550 26,5502,185,882 2,088,22711,489,057 11,391,402Aggregate market value of quoted investments 13,791,790 12,649,890Aggregate provision for diminution in value of investments (530,000) (530,000)2.12 Long-term loans and advances As at As at31 March 2012 31 March 2011Unsecured, considered goodCapital advances 157,105,895 159,166,904Security deposits 32,458,389 33,705,936Rental deposits 40,232,216 46,598,197Deposit made under protest 203,660,993 195,164,631Loans and advances to related parties (refer to note 2.35) - 4,332,527Other loans and advances- Prepaid expenses 8,407,549 11,867,249- Derivative financial assets 270,662,446 179,760,918- Others 61,890,143 42,212,392774,417,631 672,808,754Unsecured, considered doubtfulOther loans and advances 182,031,074 160,027,863Less: Provision for doubtful advances (182,031,074) (160,027,863)774,417,631 672,808,754Rs.44

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.13 Inventories As at As at31 March 2012 31 March 2011Raw materials 1,508,018,557 1,136,711,036Goods in transit - raw materials 6,702,202 4,292,906Work-in-progress 222,427,908 175,549,615Finished goods 786,209,024 688,242,227Goods in transit - finished goods 2,944,830 4,010,399Stores and spares 216,042,194 178,445,503Refer note 1.10 of significant accounting policies for disclosure of mode ofvaluation of inventories2,742,344,715 2,187,251,6862.14 Trade receivables As at As at31 March 2012 31 March 2011UnsecuredOutstanding for a period exceeding six monthsConsidered good 100,123,157 97,284,527Considered doubtful 363,750,746 368,986,442OthersConsidered good 4,552,687,557 3,357,282,087Considered doubtful 37,285,013 -5,053,846,473 3,823,553,056Less: Provision for doubtful debts (401,035,706) (368,986,442)4,652,810,767 3,454,566,614Rs.2.15 Cash and bank balances As at As at31 March 2012 31 March 2011Cash and cash equivalentsBalances with banks:- in current accounts 151,359,691 344,521,445- in exchange earners foreign currency ('EEFC') account 3,791,882 21,452,755Cash on hand 43,798 -155,195,371 365,974,200Other bank balancesBalances with banks:- in margin money deposit accounts maturing within 12 months 23,729,443 14,525,42323,729,443 14,525,423178,924,814 380,499,62345

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.16 Short term loans and advances As at As at31 March 2012 31 March 2011Unsecured, considered goodLoans and advances to related parties (refer to note 2.35) 1,625,430 157,254Advance tax and tax deducted at source, net of provision for tax 170,910,550 148,143,821Fringe benefit tax, net of provision for tax 1,973,463 1,973,463MAT credit recoverable 3,250,000 -Others- Loans and advances to employees 10,366,971 30,165,612- Trade advances 28,005,906 33,634,414- Advances for supply of goods and rendering of services 60,133,127 76,269,795- Derivative financial assets 218,822,387 9,016,925- Duty drawback receivable 8,695,263 8,150,175- Prepaid expenses 193,565,519 145,070,171- Balances with excise and other government authorities 339,928,414 234,195,036- Interest accrued but not due 1,370,852 2,047,4121,038,647,882 688,824,0782.17 Revenue from operations For the year ended For the year ended31 March 2012 31 March 2011Sale of manufactured goods, gross 29,570,530,463 24,518,276,272Sale of traded goods, gross 3,565,763 20,263,108Income from contract bottling 23,598,443 96,157,876Sale of spent malt and scrap 239,827,615 210,761,292Duty draw back on export 8,928,196 11,189,664Royalty income 24,229,386 21,961,46729,870,679,866 24,878,609,6792.18 Other income For the year ended For the year ended31 March 2012 31 March 2011Interest income 10,037,446 1,232,376Dividend income 338,320 356,800Net gain on foreign currency translation and transactions 21,082,293 64,407,000Other non-operating income- Sale of raw materials - 43,421,571- Profit on sale of fixed assets, net - 331,347- Net gain on sale of investments 560,000 290,000- Miscellaneous income 14,054,471 4,176,91846,072,530 114,216,012Rs.46

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.19 Changes in inventories of finished goods, For the year ended For the year endedwork-in-progress and traded goods 31 March 2012 31 March 2011Opening stockWork-in-progress 175,549,615 195,653,564Finished goods 692,252,626 837,464,559Stock in trade - 652,570Add: Opening stock of Demerged Undertaking as at 1 April 2011Work-in-progress 10,606,637 -Finished goods 5,775,714 -884,184,592 1,033,770,693Rs.Less: Excise duty on opening stock 336,255,945 371,335,344Less: Excise duty on opening stock of DemergedUndertaking as at 1 April 2011 4,272,151 -Closing stock(A) 543,656,496 662,435,349Work-in-progress 222,427,908 175,549,615Finished goods 789,153,855 692,252,6261,011,581,763 867,802,241Less: Excise duty on closing stock 401,519,657 336,255,945(B) 610,062,106 531,546,296(Increase)/ decrease in work-in-progress and finished goods (A-B) (66,405,610) 130,889,0532.20 Employee benefits expense For the year ended For the year ended31 March 2012 31 March 2011Salaries and wages 1,288,188,454 1,063,209,762Contributions to- provident and other funds 41,812,978 37,244,541- gratuity 19,373,804 18,383,041Compensated absences 11,183,457 (9,867,230)Staff welfare expense 39,657,862 35,032,4771,400,216,555 1,144,002,5912.21 Finance cost For the year ended For the year ended31 March 2012 31 March 2011Interest expense 1,122,390,967 794,873,067Other borrowing costs 30,508,820 23,695,5921,152,899,787 818,568,65947

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.22 Other expenses For the year ended For the year ended31 March 2012 31 March 2011Rs.Sales scheme expenses 862,471,251 708,440,897Commission on sales 288,741,263 189,064,600Freight outward 1,022,245,509 919,465,723Power and fuel 793,649,206 631,240,693Advertisement and publicity 955,881,741 816,765,684Management group service charge 297,667,534 251,702,115Rates and taxes 173,246,118 119,994,864Legal and professional 191,207,276 183,252,209Clearing and forwarding 194,430,896 153,542,012Travel and conveyance 151,036,214 128,502,451Consumption of stores and spares 120,943,276 74,117,778Rent 172,602,843 176,129,469Repairs- buildings 9,042,229 4,728,358- plant and machinery 93,029,205 76,248,769- others 117,270,503 130,708,421Telephone and other communication 61,344,904 56,639,395Training and development 55,804,660 46,610,789Insurance 44,065,018 38,810,518Loss on sale/ adjustment of fixed assets, net 22,757,024 -Printing and stationery 13,034,681 12,030,545Provision for doubtful debts 21,518,746 62,073,989Provision for doubtful loans and advances 14,765,425 14,794,046Bad and doubtful debt written off 748,062 -Advances written off 4,766,301 159,412Provision for claims, net 51,585,497 42,184,266Miscellaneous 218,972,336 248,741,1505,952,827,718 5,085,948,15348

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.23 Scheme of arrangement withSABMiller Breweries PrivateLimitedDuring the year, vide a Scheme ofArrangement ('the Scheme') underSection 391 to 394 of the CompaniesAct, 1956 between the Company ('theResulting Company') and SABMillerBreweries Private Limited ('theDemerged Company'), the brewerybusiness ('the Demerged Undertaking')of the Demerged Company vested withthe Company retrospectively from 1April 2009 ('the Appointed Date'). TheDemerged Undertaking comprises ofthe business of brewing, packaging,distributing, marketing and sale of beerand includes all assets (whethermovable or immovable, tangible orintangible, real or personal, corporeal orincorporeal, present, future orcontingent) and liabilities, which relatethereto or are necessary therefore,including items specifically, set out indetail in the Scheme.a) Salient features of the SchemeSalient features of the Scheme asapproved by the Honourable HighCourt of Bombay ('the Court') on29 March 2012 and filed with theRegistrar of Companies ('ROC') on18 April 2012 ('the Effective Date')are given below:(i) the business of the DemergedUndertaking together with allrelated assets, liabilities andemployees, including termsspecifically listed in the Schemewould be vested with theCompany with retrospectiveeffect from the Appointed Date;(ii) all debts, liabilities, duties andobligations of the DemergedUndertaking as on theAppointed Date shall betransferred to the Company;(iii) all suits, actions and proceedingsby or against the DemergedUndertaking pending and/ orarising on or before the EffectiveDate continue and be enforcedby or against the Company;(iv) with effect from the AppointedDate and up to the EffectiveDate the Demerged Companycarried on the business andactivities of the DemergedUndertaking in trust for theCompany;(v) with effect from the AppointedDate, all profits, incomes, lossesand expenditure of DemergedUndertaking have been treatedas profits, incomes, losses andexpenditure of the Company;and(vi) the Company shall issue andallot 7,241,991 fully paid upequity shares of Rs. 10 each atpar on a proportionate basis tothe equity shareholders of theDemerged Company by allotting5,590,817 and 1,651,174 equityshares to SABMiller IndiaHoldings, Mauritius andAustindia Pty Limited, Australiarespectively based on valuationas at 31 March 2011.b) Accounting treatment in thebooks of the Company, as perthe approved Scheme(i) all the assets and liabilities of theDemerged Undertaking shall berecorded at their respectivebook values;(ii) the nominal value of equityshares issued and allotted to theshareholders of the DemergedCompany shall be credited tothe Equity Share Capitalaccount;(iii) the obligations in respect ofamount of inter-companybalances between theDemerged Undertaking and theCompany shall come to an end;(iv) all costs, charges and expenses(other than stamp duty andregistration charges, if any, of orin respect of any deed,document, instrument or ordersof the Court which shall beborne by the ResultingCompany alone) in relation to orconnection with negotiationsleading up to this Scheme andof carrying out andimplementing the terms andprovisions of this Scheme shallbe borne and paid by theCompany; and(v) the difference between theamount representing the surplusof assets and liabilities of theDemerged Undertakingrecorded in the Company'sbooks of account and theaggregate value of equity sharecapital issued by the Companyshall be treated asAmalgamation Reserve and shallnot be utilised for the purpose ofdeclaring dividend by theCompany in future.49

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsBased on the accounting treatment prescribed above, the following assets and liabilities of the Demerged Undertaking havebeen incorporated in the books of account of the Company as on 1 April 2009:ParticularsAs per the book value of the DemergedCompany as at 31 March 2009Assets acquiredFixed assets including capital work-in-progress 292,283,844Inventories 62,210,403Trade receivables 149,869,295Cash and bank balances 20,900,000Loans and advances 255,778,743Total (A) 781,042,285Liabilities acquiredCurrent liabilities 247,989,569Provisions 33,139,860Total (B) 281,129,429Net assets acquired (A - B) 499,912,856Less: Nominal value of 7,241,991 equity shares of Rs. 10 each tobe issued to the shareholders of the Demerged Company 72,419,910Net surplus transferred to Amalgamation adjustment reserve 427,492,946c) Results of the Demerged Undertaking for the period 1 April 2009 to 31 March 2011ParticularsAmount (Rs.)IncomeRevenue (includes inter-company Rs. 16,182,276) 1,247,985,993Other income (includes inter-company Rs. 28,436,962) 54,950,441Total (A) 1,302,936,434ExpenditureCost of materials (includes inter-company Rs. 36,211,985) 835,758,627Employee benefits expense 55,518,187Other expenses (includes inter-company Rs. 150,954,720) 431,531,426Depreciation 74,889,911Finance cost 366,801Total (B) 1,398,064,952Loss before tax (A - B) (95,128,518)Tax expense -Loss after tax (95,128,518)Losses of Demerged Undertaking for the period from 1 April 2009 to 31 March 2011 have been added to the debit balance in the profit and loss account and shownunder reserves and surplus in note 2.2 to the financial statements thus eliminating the effect of inter-company transactions aggregating to Rs. 142,547,467.50

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.24. Contingent liabilities and other commitmentsRs.Particulars As at As at31 March 2012 31 March 2011(i) Contingent liabilitiesClaims against the Company not acknowledged as debts in respect of:a) Sales tax matters 75,031,39094,261,168b) Excise matters 92,146,97294,448,957c) Service tax matters 158,536,768153,442,644d) Custom matters 261,555261,555e) Other matters 23,145,57559,784,812(ii) Commitmentsa) Estimated amount of contracts remaining to be executed oncapital account (net of advances) and not provided for 296,507,580220,663,923b) Other commitments- Purchase of Hops 29,619,0718,938,9122.25. Income from contract bottling operations pertains to the revenue share the Company has earned on sales made by the tie-upunits ('contract bottlers'). These revenues are recorded on a net basis in order to comply with relevant statutory regulations,where by tie-up units raise invoices on their customers, account for collections in their books of accounts, discharge statutorydues and taxes and record sales on a gross basis in the financial statements. The contract bottling agreement furtherspecifies that the dealing between the Company and the contract bottlers is on a principal to principal basis. The abovepractice is consistent with prevalent industry practice.2.26. Auditors' remuneration, net of service tax (included under legal and professional expenses)ParticularsFor the year ended For the year ended31 March 2012 31 March 2011As auditor- Statutory audit 10,100,000 9,200,000- Tax audit 1,400,000 1,000,000Reimbursement of expenses 452,223 443,728Rs.51

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.27. Additional information pursuant to the provisions of paragraph 5 of general instructions for preparation of thestatement of profit and loss as per revised Schedule VI to the Companies Act, 1956:(a) Details of finished goods (including goods in transit) and turnover (gross)Beer For the year ended For the year ended31 March 2012 31 March 2011Opening stock 692,252,626 838,117,129Add: Opening stock of demerged undertaking 5,775,714 -Sales (gross of excise duty and discounts) 29,570,530,463 24,518,276,272Closing stock 789,153,854 692,252,626(b) Details of traded goodsRs.Beer For the year ended For the year ended31 March 2012 31 March 2011Opening stock - 652,570Purchases 2,371,323 9,474,466Sales (gross of excise duty and discounts) 3,565,763 20,263,108Closing stock - -(c) Consumption of raw materials and packing materialsParticulars For the year ended For the year ended31 March 2012 31 March 2011Malt 1,502,684,640 1,290,141,575Bottles 3,750,538,524 3,209,076,886Others * 3,350,890,511 2,937,704,268* It is not practicable to furnish quantitative information in view of the large number of itemswhich differ in size and nature, each being less than 10% in value of the total consumption.8,604,113,675 7,436,922,729Rs.Rs.(d) Consumption of imported and indigenous raw materials and packing materialsParticulars For the year ended For the year ended31 March 2012 31 March 2011Amount (Rs.) % Amount (Rs.) %Imported 136,382,345 2 140,574,830 2Indigenous 8,467,731,330 98 7,296,347,899 988,604,113,675 100 7,436,922,729 100(e) Consumption of imported and indigenous stores and sparesParticulars For the year ended For the year ended31 March 2012 31 March 2011Amount (Rs.) % Amount (Rs.) %Imported 14,480,468 12 10,281,516 14Indigenous 106,462,808 88 63,836,262 86120,943,276 100 74,117,778 10052

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.28. Earnings per share(Figures in Rs. except number of shares)Particulars For the year ended For the year ended31 March 2012 31 March 2011Loss for the year attributable to equity shareholders (1,194,131,325) (601,372,377)Weighted average number of equity shares of Rs. 10 eachused for calculation of basic and diluted earnings per share * 238,425,736 231,183,745Basic and diluted earnings per share (5.01) (2.60)* Since the economic benefits under the Scheme have accrued from the appointed date, the number of equityshares to be issued pursuant to the scheme has also been considered as of the beginning of the year for thepurpose of calculation of earnings per share.2.29. Value of imports on CIF basisParticulars For the year ended For the year ended31 March 2012 31 March 2011Raw materials 69,907,234 78,446,536Stores and spares 28,208,921 25,642,280Capital goods 115,715,962 204,940,031213,832,117 309,028,847Rs.2.30. Expenditure in foreign currency (accrual basis)Particulars For the year ended For the year ended31 March 2012 31 March 2011Travel and conveyance 13,663,640 13,068,301Management group service charge* 297,667,534 251,702,115Salaries, wages and bonus 53,078,184 61,933,979Interest expense ** 227,439,048 115,360,052Professional and consultation fees 30,266,456 20,319,541Others 23,248,687 67,117,565* Includes withholding taxes of Rs. 29,766,755 (previous year: Rs 25,170,212)** Includes withholding taxes of Rs. 16,711,146 (previous year: Rs. 7,803,184)645,363,549 529,501,553Rs.2.31. Earnings in foreign currency (accrual basis)Rs.Particulars For the year ended For the year ended31 March 2012 31 March 2011Export sales at FOB value 320,337,094 223,483,1182.32. GratuityThe Company has a gratuity plan for the employees of the Company. Every employee who has completed 5 years or more ofservice is eligible for gratuity on separation, worked out at 15 days salary (last drawn salary) for each completed year ofservice. The obligation under the scheme is partially funded by contributions being made towards qualifying insurancepolicies obtained from the insurer.53

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsProfit and loss accountNet employee benefits expense (recognised in employee benefits expense)Particulars For the year ended For the year ended31 March 2012 31 March 2011Current service cost 11,357,527 8,047,190Interest cost on defined benefit obligation 8,286,322 6,389,264Expected return on plan assets (2,183,837) (2,399,102)Net actuarial loss/ (gain) recognised for the year 1,913,792 (6,654,500)Past service cost - 13,000,189Net benefits expense 19,373,804 18,383,041Actual return on plan assets 2,034,888 2,963,123Rs.Balance sheetDetails of provision for gratuityRs.Particulars As at As at31 March 2012 31 March 2011Defined benefit obligations 114,415,667 96,375,972Fair value of plan assets 32,598,237 29,994,116Plan liabilities 81,817,430 66,381,856Changes in the present value of the defined benefit obligationRs.Particulars For the year ended For the year ended31 March 2012 31 March 2011Opening defined benefit obligation 96,375,972 77,776,137Add: Opening defined benefit obligation of the Demerged Undertaking 2,492,033 -Current service cost 11,357,527 8,047,190Interest cost 8,286,322 6,389,264Benefits paid (5,861,030) (2,746,329)Past service cost - 13,000,189Actuarial loss / (gain) on obligation 1,764,843 (6,090,479)Closing defined benefit obligation 114,415,667 96,375,97254

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsChanges in the fair value of plan assetsParticulars For the year ended For the year ended31 March 2012 31 March 2011Opening fair value of plan assets 29,994,116 28,919,458Expected return on plan assets 2,183,837 2,399,102Actuarial (loss)/ gain on plan assets (148,949) 564,021Contributions by employer 6,430,263 857,864Benefits paid (5,861,030) (2,746,329)Closing fair value of plan assets 32,598,237 29,994,116Rs.Major categories of plan assets as a percentage of the fair value of total plan assetsParticulars As at As at31 March 2012 31 March 2011Qualifying insurance policies from the insurer 100% 100%Rs.Principal assumptions used in determining gratuity benefit obligations for the Company's planParticulars As at As at31 March 2012 31 March 2011Discount rate 8.35% 8.15%Expected rate of return on plan assets 7.50% 7.50%Salary increase 11% for Executives 10% for Executives7% for Others 7% for OthersEmployee turnover 19% for Executives 21% for Executives2% for Workers 2% for WorkersRetirement age 58 Years 58 YearsRs.The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and otherrelevant factors such as supply and demand factors in the employment market.The overall expected rate of return on plan assets is determined based on the market prices prevailing on that date, applicable tothe period over which the obligation is to be settled.55

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsAmounts for the current and previous four yearsParticulars As At As At As At As At As At31 March 2012 31 March 2011 31 March 2010 31 March 2009 31 March 2008Defined benefit 114,415,667 96,375,972 77,776,137 75,152,540 62,980,939obligationPlan assets 32,598,237 29,994,116 28,919,458 22,454,555 18,491,154Deficit (81,817,430) (66,381,856) (48,856,679) (52,697,985) (44,489,785)Experienced adjustments (593,065) (3,036,056) 4,845,181 (2,341,056) (293,399)on plan liabilitiesExperienced adjustments (148,949) 564,021 4,370,791 641,263 (250,707)on plan assetsRs.2.33. Segmental reportingBusiness segmentsThe Company's sole business segmentis 'Manufacture and Sale of Beer'.Consequently, the requirement forseparate business segment disclosuresas required under AS 17 - 'SegmentReporting' is not applicable.Geographical segmentsThe Company operates in two principalgeographical areas of the world: Indiaand Rest of the world.The accounting principles used in thepreparation of the financial statementsare also consistently applied to recordincome and expenditure in individualsegments. Income and directexpenses in relation to segments arecategorised based on items that areindividually identifiable to that segment,while the remainder of costs areapportioned on an appropriate basis.Certain expenses are not specificallyallocable to the individual segments asthese expenses are common in nature.The Company therefore believes that itis not practicable to provide segmentdisclosure relating to such expensesand accordingly such expenses areseparately disclosed as unallocated anddirectly charged against total income.Certain segment assets and liabilitiesare directly attributable to the segment.Segment assets include all operatingassets used by the segment andconsist principally of fixed assets,inventories, trade receivables and loansand advances. Segment liabilitiesinclude trade payables and otheroperating liabilities and provisions.Certain assets and liabilities that are notspecifically allocable to the individualsegments have been separatelydisclosed as unallocated.Revenue (net of duties, taxes and discount) For the year ended For the year ended31 March 2012 31 March 2011Rs.India 16,045,930,999 14,295,739,784Rest of the world 320,337,094 223,483,11816,366,268,093 14,519,222,90256

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsSegment asset As at As at31 March 2012 31 March 2011India 20,688,178,863 18,605,653,377Rest of the world - 3,518,29820,688,178,863 18,609,171,675Rs.Capital expenditure (on cash basis) As at As at31 March 2012 31 March 2011India 674,698,949 794,849,667Rest of the world - -674,698,949 794,849,667Rs.2.34. Provision for claimsThe provisions are utilised to settle previously anticipated and determined adverse outcomes of legal cases against theCompany. The provision is based on independent advice obtained by the Company from external legal counsel. The timeframe of utilisation of the provision is determined by the course of the legal proceedings.Rs.Particulars For the year ended For the year ended31 March 2012 31 March 2011Provision for indirect-tax casesOpening balance 285,165,018 256,915,091Add: Addition during the year 34,638,592 39,622,823Less: Unused amounts reversed during the year (10,813,392) (11,372,896)Closing balance 308,990,218 285,165,018Provision for water chargesOpening balance 86,007,222 72,072,883Add: Opening balance of the Demerged Undertaking 39,643,367 -Add: Addition during the year 27,760,297 13,934,339Less: Utilised during the year (99,158,624) -Closing balance 54,252,262 86,007,222363,242,480 371,172,24057

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsProvision for indirect-tax casesDetails of provisions made during the year:A. Value Added Tax ('VAT'):The Andhra Pradesh VAT authorities had raised a demand to levy VAT on sale of spent malt (residue product arising from thebeer manufacturing process) for the period from April 2003 to March 2005 and January 2009 to December 2010. The authoritieshad raised a demand including interest and penalty. The Company has filed an appeal and the matter is pending before theTribunal. However from January 2011 onwards, the Company has started paying VAT under protest with a correspondingprovision for the same on a monthly basis. During the year the Company has provided for Rs. 7,370,846 (previous year:Rs.6,667,550).B. Entry Tax:(i) The Government of Haryana has abolished the local area development tax ('LADT') and has introduced entry tax on inter-statepurchases. However, the Government of Haryana is yet to frame rules for payment of entry tax due to which entry tax is notbeing paid. As the rules may have retrospective effect, the Company assesses the probability of an adverse outcome of thecase and has accordingly made a provision. During the current year the Company has made an additional provision forRs. 24,041,395 (previous year: Rs. 26,008,144) towards entry tax on barley procured from other states.(ii) Entry tax is a disputed matter in the state of Uttar Pradesh. The Honourable Allahabad High Court has upheld the validity ofthe levy of entry tax and the VAT Authorities have encashed bank guarantees provided by the Company in lieu of entry tax forthe period July 2009 to November 2011. From December 2011 onwards, the Company has been paying entry tax underprotest and is making a corresponding provision for the same. The Company has made additional provision of Rs. 1,588,651during the year.C. Excise Duty:The Uttar Pradesh State Excise Department has raised a demand against non-submission of Excise Verification Certificates('EVC') for the year 2010-11. The EVC are required to be submitted to the department within 90 days from the date of sale.Based on an assessment of possibility of collection of the EVC, the Company has provided Rs. 1,637,700 against the saidliability.Details of amounts reversed during the year:Based on the outcome of the various other miscellaneous matters, the Company has reversed the provisions amounting toRs. 10,813,392 during the current year.Provision for water chargesThe Maharashtra Industrial Development Corporation ('MIDC') had, vide order number EE/E&M/785/2005 dated 25 May 2005,made a demand for increase in water charges with retrospective effect from 1 November 2011. Waluj Industries Association ('theAssociation') of which the Company is a member has filed a writ petition against such demand in the Honourable High Court ofBombay. The Honourable High Court of Bombay has passed an order against the appeal and has directed the Association torelease the demand amount with retrospective effect. Accordingly the Company has made the payment of the principal amountoutstanding. However with respect to interest, the Association has given a representation on behalf of the Company for waiver ofinterest demanded by MIDC.58

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.35. Related parties(i) Names of related parties and description of relationship with the Company:Enterprises where control existsUltimate holding companyHolding companySignificant influenceSABMiller plcSABMiller Breweries Private LimitedSABMiller Asia & Africa BVOther related parties with whom transactions have taken place during the yearFellow subsidiariesS.p.A. Birra PeroniSABMiller India LimitedSABMiller Management (IN) BVSABMiller Africa & Asia (Pty) LimitedSABMiller VietnamSABMiller Europe AGSABMiller (Asia) LimitedSABMiller International Brands LimitedSABMiller African Breweries LimitedTrinity Procurement GmbHSABMiller Management BVSABMiller India HoldingsAustindia Pty LimitedKey managerial personnel(ii) Related party transactionsPaolo Lanzarotti, Managing DirectorFor the year ended For the year ended31 March 2012 31 March 2011Rs.SABMiller Breweries Private Limited (Also refer to note 2.23 to thefinancial statements)Income from contract bottling - 83,337,284Purchase of stock in trade - 6,991,654Purchase of raw materials - 12,390,267Sale of raw materials - 43,421,571Reimbursement of expenses incurred on behalf of the Company - 902,250Reimbursement of expenses incurred on behalf of other companies - 17,110,679Loan repaid, net - 164,696,538Unsecured loan cancelled pursuant to Scheme of Arrangement 2,338,439 -59

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements(ii) Related party transactions continuedRs.For the year ended For the year ended31 March 2012 31 March 2011SABMiller Asia & Africa (Pty) LimitedReimbursement of expenses incurred on behalf of the Company 600,846 6,237,854Reimbursement of expenses incurred on behalf of other companies 999,735 3,618,701Purchase of raw materials - 426,323Purchase of stores and spares 525,890 -SABMiller plcReimbursement of expenses incurred on behalf of the Company - 26,318Reimbursement of expenses incurred on behalf of other companies 1,896,333 -SABMiller Management (IN) BVManagement group service charge 297,667,534 251,702,115Reimbursement of expenses incurred on behalf of the Company 289,037 -S.p.A. Birra PeroniPurchase of stock in trade 2,371,323 2,482,812SABMiller India LimitedInterest expense 4,733,040 2,875,871Unsecured loan taken, net 4,259,736 1,890,284SABMiller Management BVSalaries, wages and bonus 53,078,184 61,933,979SABMiller VietnamReimbursement of expenses incurred on behalf of other companies - 649,236Purchase of raw materials 3,848,262 -SABMiller (Asia) LimitedReimbursement of expenses incurred on behalf of other companies 1,253,488 164,866SABMiller International Brands LimitedReimbursement of expenses incurred on behalf of other companies 306,430 -SABMiller African Breweries LimitedReimbursement of expenses incurred on behalf of the Company 710,450 -Trinity Procurement GmbHCommission paid on purchase of raw materials 11,375,252 -Paolo LanzarottiRemuneration 38,031,468 27,288,632Advance given - 2,861,23660

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements(iii) Amount outstanding as at the balance sheet date:As atAs at31 March 2012 31 March 2011Rs.SABMiller Breweries Private LimitedShort-term borrowings - 2,338,439SABMiller plcShort term loans and advances 1,180,394 18,648SABMiller Asia & Africa (Pty) LimitedOther current liabilities - 8,770,916SABMiller India LimitedLong-term Borrowings 54,081,207 49,821,472SABMiller Management (IN) BVOther current liabilities 63,515,574 220,398,289SABMiller Europe AGShort term loans and advances 18,095 18,095SABMiller VietnamShort term loans and advances 120,511 120,511SABMiller International Brands LimitedShort term loans and advances 306,430 -SABMiller African Breweries LimitedOther current liabilities 710,450 -Trinity Procurement GmbHOther current liabilities 2,237,282 -SABMiller Management BVOther current liabilities 127,441,671 61,933,979Paolo LanzarottiLong-term loans and advances - 4,332,527(iv) Corporate guarantees have been given by SABMiller plc for loan facility obtained by the Company as at the balance sheet dateamounting to Rs. 2,891,998,590 (previous year: Rs. 4,065,250,300).(v) SABMiller plc operates a variety of equity-settled share-based compensation plans for few select employees of the Company,costs of which are not re-charged to the Company.61

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements2.36. Deferred tax assets/ (liabilities)Particulars As at As at31 March 2012 31 March 2011Rs.Deferred tax assetsInvestments 171,959 176,053Trade receivables 122,767,082 115,044,144Loans and advances 52,635,872 46,580,190Provision for retirement benefits 41,895,052 35,237,070Provision for claims 81,429,312 87,639,083Unabsorbed depreciation 1,174,499,144 1,130,608,4181,473,398,421 1,415,284,958Deferred tax liabilitiesFixed assets 1,473,398,421 1,415,284,9581,473,398,421 1,415,284,958Deferred tax asset/ (liabilities), net - -In view of the accumulated losses and in accordance with AS 22 - "Accounting for taxes on income", deferred tax assets onunabsorbed depreciation and other temporary timing differences have been recognised only to the extent of those timingdifferences, the reversal of which will result in sufficient taxable income.2.37. Derivative instruments and un-hedged foreign currency exposureDerivative instrumentsParticulars Purpose As at As at31 March 2012 31 March 2011Forward contract Towards repayment of trade payables GBP 546,455 Euro 997,288USD 5,636,046 USD 429,950Forward contract Towards repayment of interest on foreign currency loans JPY 247,518,612 JPY 231,069,320USD 2,342,007Currency Towards repayment of foreign currency loans JPY 3,218,455,000 JPY 3,218,455,000swap contract USD 17,500,00062

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsUn-hedged foreign currency exposuresUnderlying As at 31 March 2012 As at 31 March 2011asset/liability Foreign currency Amount (Rs.) Foreign currency Amount (Rs.)amountamountRs.Balances with banks USD 73,851 3,791,882 USD 480,192 21,450,176JPY 4,685 2,579Trade receivables - - USD 78,762 3,518,298Trade payables USD 91,059 (4,675,411) USD 17,054 (761,798)EURO 238,373 (16,260,453) ZAR 7,948 (53,808)CHF 49,090 (2,817,933) GBP 7,332 (527,415)EURO 25,310 (1,600,589)Payable to related parties ZAR 14,440 (710,450) ZAR 1,294,738 (8,770,916)USD 2,525,647 (129,678,953) USD 6,320,400 (282,332,268)(150,351,318) (269,075,741)2.38. Operating leasesThe Company is obligated under non-cancellable operating leases for a brewing facility and other office premises which arerenewable at the option of both the lessor and lessee. Total rental expense under non-cancellable operating leases amounted toRs.77,118,180 (previous year: Rs. 79,218,180) for the year ended 31 March 2012. Future minimum lease payments under noncancellableoperating leases are as follows:Rs.Period As at As at31 March 2012 31 March 2011Not later than 1 year 70,120,413 77,118,180Later than 1 year and not later than 5 years 55,251,750 125,372,163Later than 5 years - -The Company is also obligated under cancellable lease for residential and office premises and motor vehicles which are renewableat the option of both the lessor and lessee. Total rental expense under cancellable operating leases amounted to Rs. 95,484,663(previous year: Rs. 96,911,289) for the year ended 31 March 2012.2.39. Based on the confirmations received from the suppliers who provide goods and services to the Company regarding theirstatus under the Micro, Small and Medium Enterprises Development Act, 2006, the Company has prepared the following disclosureas required under the said Act. The Company however has not received any claim for interest from any supplier under the said Act.63

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsParticulars As at As at31 March 2012 31 March 2011Rs.(i) The principal amount remaining unpaid to any supplier as at the end ofeach accounting year; 28,722,418 12,960,563(ii) The amount of interest paid by the Company along with the amounts of thepayment made to the supplier beyond the appointed day during the year; - -(iii) The amount of interest due and payable for the period of delay in makingpayment (which have been paid but beyond the appointed day during theyear) but without adding the interest specified under this Act; 181,532 147,148(iv) The amount of interest accrued and remaining unpaid at the end ofthe year; and 2,465,047 1,941,326(v) The amount of further interest remaining due and payable even in thesucceeding years, until such date when the interest dues as above areactually paid to the small enterprise. 2,283,515 1,794,1782.40. Amalgamation adjustment reserve accountWith effect from 21 May 2003, the erstwhile direct and step down subsidiaries ('Transferor Companies') of the Company wereamalgamated into the Company. The Company had accounted for amalgamation adjustment reserve as per the Scheme approvedby the Honourable High Courts. Opening balance of Amalgamation adjustment reserve account represents excess of the carryingvalue of investments, over the share capital of the Transferor Companies.2.41. The Company has established a comprehensive system of maintenance of information and documents as required by thetransfer pricing legislation under sections 92-92F of the Income-tax Act, 1961. Management is of the opinion that its internationaltransactions are at arm's length so that the aforesaid legislation will not have any impact on the financial statements, particularly onthe amount of tax expense and that of provision for taxation.2.42. Reversal of impairment lossDuring the year ended 31 March 2008, based on physical verification, the management had identified certain fixed assets as havingbeen rendered redundant/ idle as a result of significant capacity expansions at certain breweries then and consequently recognisedan impairment loss.However during the year, the Company put to use certain items of fixed assets, which were impaired in earlier years. Accordingly,the management has reassessed the recoverable value of these assets and reversed an impairment loss amounting toRs.17,103,108 being the lower of recoverable value or the carrying amount of fixed assets determined (net of depreciation) had noimpairment loss been recognised in prior accounting periods.2.43. Employee stock compensation costGuidance Note on "Accounting for Employee Share Based Payments" issued by the ICAI ('the Guidance Note') establishes financialand reporting principles for employees share based payments plans. The Guidance Note applies to employee share basedpayment plans, the grant date in respect of which falls on or after 1 April 2005. SABMiller plc ('the Group') operates a variety ofequity-settled share-based compensation plans for the employees of the Company.(i) During the year ended 31 March 2012, the Group had the following share-based payment arrangements for the employees ofthe Company.64

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsExecutive Share Option Scheme [Approved and (No 2) Scheme]Particulars As at As at31 March 2012 31 March 2011Date of grant 1 June 2011 1 June 2010Number of shares granted 173,150 155,000Method of settlement Equity EquityContractual life 10 years 10 yearsVesting period 3 years 3 yearsVesting conditions Achievement of a Achievement of atarget growth in target growth inearnings per share earnings per shareInternational Performance Share Award Sub-SchemeParticulars As at As at31 March 2012 31 March 2011Date of grant 1 June 2011 1 June 2010Number of shares granted - -Method of settlement Equity EquityContractual life 10 years 10 yearsVesting period 3 years 3 yearsVesting conditions Achievement of a Achievement of atarget growth in target growth inearnings per share earnings per shareSABMiller plc Share Award Plan 2008Particulars As at As at31 March 2012 31 March 2011Date of grant 1 June 2011 1 June 2010Number of shares granted 9,000 9,000Method of settlement Equity EquityContractual life 10 years 10 yearsVesting period 3 years 3 yearsVesting conditions Achievement of a Achievement of atarget growth in target growth inearnings per share earnings per share65

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statements(ii) Details of the activity of shares issued after 1 April 2005 under Executive Share Option Scheme [Approved and (No 2) Scheme]are as follows:Particulars 31 March 2012 31 March 2011Number Weighted Number Weightedof options average of options averageexerciseexerciseprice (Rs.)price (Rs.)Outstanding at the beginning of the year 374,750 1,107 364,700 961Granted during the year 173,150 1,672 155,000 1,313Transferred in/ (out) during the year* 10,468 1,117 (49,300) (924)Lapsed during the year 55,500 1,286 14,000 1,024Exercised during the year 96,650 1,017 81,650 972Outstanding at the end of the year 406,218 1,314 374,750 1,107Exercisable at the end of the year 24,168 1,031 16,850 921* The options transferred represents options relating to employees transferred from companies within the SABMiller Groupduring earlier years.The weighted average share price at the date of exercise for stock options exercised during the year was Rs. 1,893 (previous year:Rs. 1,471). The options outstanding as at 31 March 2012 had a weighted average remaining contractual life of 8.1 years (previousyear: 8.2 years).The details of the activity of shares issued after 1 April 2005 under International Performance Share Award Sub-Scheme are asfollows:Particulars 31 March 2012 31 March 2011Number Weighted Number Weightedof options average of options averageexerciseexerciseprice (Rs.)price (Rs.)Outstanding at the beginning of the year 8,000 - 14,000 -Granted during the year - - - -Transferred in during the year - - - -Lapsed during the year 1,000 - - -Exercised during the year 7,000 - 6,000 -Outstanding at the end of the year - - 8,000 -Exercisable at the end of the year - - - -The weighted average share price at the date of exercise for stock options exercised during the year was Rs. Nil (previous year: Rs.Nil). The options outstanding as at 31 March 2012 had a weighted average remaining contractual life of Nil years (previous year: 7.1years).The weighted average fair value of stock options granted during the year is Rs. 531 (previous year: Rs. 439). The estimate of fairvalue on the date of the grant was made using the Binomial model valuation and Monte Carlo model with the followingassumptions:66

SKOL Breweries LimitedAnnual Report 2011-122. Notes to the financial statementsParticulars For the year ended For the year ended31 March 2012 31 March 2011Share price at the grant date Rs. 1,667 Rs. 1,311Exercise price at the grant date Rs. 1,672/ Rs. Nil Rs. 1,313/ Rs. NilExpected volatility 26.70% 28.10%Contractual life (vesting and exercise period) in years 10 years 10 yearsExpected dividends 2.35% 2.48%Average risk-free interest rate 2.27% 3.58%The expected volatility was determined based on historical daily share price volatility of SABMiller plc share price.(iii) Since the Company uses the intrinsic value method, the impact on the reported net loss and earnings per share is computed byapplying the fair value based method. The Guidance Note requires the proforma disclosures of the impact of the fair valuemethod of accounting of employee stock compensation in the financial statements. Applying the fair value based method definedin the said Guidance Note, the impact on the reported net loss and earnings per share would be as follows:Rs.Particulars For the year ended For the year ended31 March 2012 31 March 2011Net loss as reported (1,194,131,325) (601,372,377)Add: Employee stock compensation under intrinsic value method - -Less: Employee stock compensation under fair value method (48,384,193) (44,563,640)Proforma net income (1,242,515,518) (645,936,017)Earnings per share as reported- Basic (5.01) (2.60)- Diluted (5.01) (2.60)Proforma earnings per share- Basic (5.21) (2.79)- Diluted (5.21) (2.79)2.44. Till the year ended 31 March 2011, the Company was using pre-revised Schedule VI to the Companies Act 1956, forpreparation and presentation of its financial statements. During the year ended 31 March 2012, the revised Schedule VInotified under the Companies Act 1956, has become applicable to the Company. The Company has reclassified previous yearfigures to conform to this year's classification. The adoption of revised Schedule VI does not impact recognition andmeasurement principles followed for preparation of financial statements. However, it significantly impacts presentation anddisclosures made in the financial statements, particularly presentation of balance sheet.As per our report of even date attachedfor B S R & Co.Firm registration number : 101248WChartered Accountantsfor SKOL Breweries LimitedZubin Shekary Paolo Lanzarotti Harald HarveyPartner Managing Director DirectorMembership No. 48814Paul D'SilvaChief Financial OfficerBangaloreBangaloreDate: 15 May 2012 Date: 15 May 2012Sridhar SCompany Secretary67

SKOL Breweries LimitedAnnual Report 2011-12Cash flow statementFor the year ended For the year ended31 March 2012 31 March 2011Cash flows from operating activitiesLoss before tax (1,192,585,323) (603,639,271)Adjustments:Depreciation 872,589,246 950,690,263Dividend income (338,320) (356,800)Interest and financing charges 1,141,585,138 801,858,363Interest income (10,037,446) (1,232,376)Loss/ (Profit) on sale/ adjustment of fixed assets 22,757,024 (331,347)Net gain on sale of investments (560,000) (290,000)Reversal of impairment loss (17,103,108) -Unrealised foreign exchange difference (43,666,243) (36,851,191)Operating cash flows before working capital changes 772,640,968 1,109,847,641Increase in trade receivables (1,115,370,797) (183,933,832)Increase in loans and advances (105,577,348) (286,321,991)Increase in inventories (490,539,908) (199,830,105)Increase in current liabilities and provisions 550,037,691 492,105,231Cash (used in)/ generated from operations (388,809,394) 931,866,944Taxes paid, net of refund (20,193,232) (17,073,525)Net cash (used in)/ provided by operating activities a (409,002,626) 914,793,419Cash flows from investing activitiesPurchase of fixed assets (674,698,949) (794,849,667)Proceeds from sale of fixed assets 3,573,219 1,496,715Dividend income 338,320 356,800Interest received 10,937,922 1,432,579Sale of investments 462,345 2,258,323Net cash used in investing activities b (659,387,143) (789,305,250)Cash flows from financing activitiesProceeds from borrowings 30,203,939,735 19,867,755,607Repayment of borrowings (28,483,558,645) (19,244,769,676)Interest and financing charges paid (1,114,066,670) (778,378,368)Net cash provided by/ (used in) financing activities c 606,314,420 (155,392,437)Effect of exchange rate changes on cash and cash equivalents d (214,162) 103,049Net decrease in cash and cash equivalents a+b+c+d (462,289,511) (29,801,219)Cash and cash equivalents at the beginning of the year 380,499,623 410,300,842Cash and cash equivalents transferred on scheme of arrangement 260,714,702 -Cash and cash equivalents at the end of the year * 178,924,814 380,499,623Net decrease in cash and cash equivalents (462,289,511) (29,801,219)Rs.* Includes Rs. 23,729,443 (previous year: Rs.14,525,423) in margin money deposit account.As per our report of even date attachedfor B S R & Co.Firm registration number : 101248WChartered Accountantsfor SKOL Breweries LimitedZubin Shekary Paolo Lanzarotti Harald HarveyPartner Managing Director DirectorMembership No. 48814Paul D’SilvaSridhar SChief Financial OfficerCompany SecretaryBangaloreBangaloreDate: 15 May 2012 Date: 15 May 201268

SKOL Breweries LimitedUnit No. 1021, 2nd FloorSolitaire Corporate Park 10, Chakala, Andheri Kurla RoadSurvey No. 131 - A, Andheri (East), Mumbai - 400093www.sabmiller.in