president & cfo - UB Group

Annexure to Report of the Directors (Contd.)situation both in terms of supply and price. However,the situation is partially offset by reduced demand foralchol from industrial users.In order to capitalize on an emerging segment in thealcoholic beverages space viz. wines, your Companyhad, in 2006, acquired M/s. Bouvet Ladubay SA, Franceand in fiscal 2007 invested in a subsidiary M/s. FourSeasons Wines Limited. The latter company has set up astate-of-the-art winery near Baramati in Maharashtrawith a capacity to produce 1 mio cases per annum. Twobrands, Zinzi (Red & White) and Four Seasons (whichwill be progressively available in 6 varietals) are beingproduced at this winery.Increased awareness through exposure gained fromthe media as also from global travel coupled withincreased consumer spending has pushed up the salesat the premium end of the market. Through a wellbalancedportfolio, both domestic and international,your Company is poised to drive significant advantagesfrom sales of products from the Whyte & Mackay stableusing the Bottled In Origin (BIO) and Bottled In India (BII)routes.The hardening of prices owing to reduced worldwideavailability of matured malt of the required vintage hasboosted business prospects at Whyte & Mackay. TheCompany is also focusing its branded spirits activityon select geographies including travel retail as againstan earlier strategy that attempted a presence in everymarket.F. OUTLOOK:Nearly 70% of the Company’s sales are made toGovernment buying agencies who are reluctant togrant price increases whatever the provocation. AndhraPradesh, the largest Indian market for IMFL, continues todeny the industry even inflation-linked price increases.Notwithstanding this, the Company’s efforts to convincestates and these buying agencies to adapt a morepragmatic approach continue. While the lack of suchincreases affects the profitability of your Company,particularly at a time of rising input costs, your Companyconsistently endeavours to work around the problemthrough a mix of strategy, higher volume throughputand cost control measures.G. INTERNAL CONTROL SYSTEM:The company has a robust system of internal controlwhich has been incorporated in the enterprise-wise SAPsystem.Additional checks of the Company’s systems are carriedout by the independent auditors as also by the Company’sown Operations Review team and by the UB Group’sInternal Audit Department.H. INTERNATIONAL OPERATIONS:Subsequent to the acquisition of Whyte & Mackay,Glasgow in fiscal 2008 your Company has reinforced themanagement and reorganized the selling operations.Products from Whyte & Mackay, as mentioned earlier,are available in India on both BIO & BII basis.The expansion of the winery at Bouvet Ladubay to acapacity of over 8 million bottles, has been completedduring the fiscal year at a cost of 12 million Euros.The Company’s sales which were around 4.5 millionbottles during the fiscal year continue to grow in thetraditional markets as also in India where they havebeen introduced on a BIO basis. The technical expertiseof the French wine-maker has also been used in settingup the FSWL winery near Baramati. However, sales ofthe BIO wines in India have been marginally hamperedthrough the unreasonable inter-state policies of certainState Governments.I. HUMAN RESOURCES:The Company’s human capital is now in excess of 7,000employees, including factory workmen. There has beenno loss of production at any of the manufacturingfacilities due to industrial unrest. The HR Departmentis geared to lend its support to the effort to make theCompany a ‘employer of choice’ in the Indian marketplace.J. FORWARD LOOKING STATEMENTS:This Report contains forward-looking statementsthat involve risks and uncertainties. Your Companyundertakes no obligation to publicly update or revise anyforward-looking statements, whether as a result of newinformation, future events, or otherwise. Actual results,performances or achievements could differ materiallyfrom these expressed or implied in such forward-lookingstatements. Readers are cautioned not to place unduereliance on these forward-looking statements thatspeak only as of their dates. This Report should be readin conjunction with the financial statements includedherein and the notes theretoBangaloreJuly 29, 2009By Authority of the BoardDr. VIJAY MALLYAChairman23 21