United Spirits

The Directors have pleasure in presenting the Annual Report of your
 Company and the audited accounts for the year ended March 31, 2008
 
 FINANCIAL RESULTS
 
                                                      Rupees in Million
 
                                            2007-08         2006-07
 
 The working of your Company for
 the year under review resulted in
 
     Profit from operations                 5,175.774      3,898.186
     Exceptional and Other
     Non-Recurring Item                             -      2,627.424
                                            5,175.774      6,525.610
     Less:
     Depreciation                             326.112        309.350
     Taxation
 (including deferred tax)                   1,736.903      1,276.066
     Profit after tax                       3,112.759      4,940.194
 Profit brought forward from previous year  4,411.221        256.572
 Profit available for appropriation         7,523.980      5,196.766
 Your Directors have made the
 following appropriations:
 To General Reserve                           250.000        500.000
 To Capital Redemption Reserve                 77.500
 Proposed Dividend:
 Preference Shares                              1.930          6.975
 Equity Shares                                150.331        240.689
 Corporate Tax on Proposed
 Dividend                                      25.877         37.881
 Balance carried to the Balance Sheet       7,018.342      4,411.221
 EPS - Basic - Rupees                           31.84          52.20
 EPS - Diluted - Rupees                         31.40          52.20
 
 Your Directors propose a Dividend on equity shares @ 15%.
 
 Your Directors also propose a dividend @ 9% on 7,750,000 9%
 Non-Cumulative Non-convertible Redeemable Preference Shares of Rs.10/-
 each fully paid-up (redeemed on July 11, 2007), for the period from
 April 1, 2007 to July 10, 2007
 
 CAPITAL
 
 The Authorised Capital of your Company remained unchanged at
 Rs.1,200,000,000 divided into 110,000,000 equity shares of Rs.10/- each
 and 10,000,000 Preference Shares of Rs.10/- each
 
 During the year under review, the Issued, Subscribed and Paid-up Equity
 Share Capital of your Company increased from Rs. 944,819,300 divided
 into 94,481,930 equity shares of Rs.10/- each to Rs.1,001,632,560
 divided into 100,163,256 equity shares of Rs.10/- each, upon conversion
 of the entire US0,000,000 2% Convertible Bonds Due 2011, into
 5,681,326 equity shares of Rs. 10/- each
 
 The entire paid-up Preference Share Capital consisting of 7,750,000 9%
 Non-Cumulative Non-Convertible Redeemable Preference shares of Rs.10/-
 each had been redeemed on July 11, 2007
 
 PERFORMANCE OF THE COMPANY
 
 Brand Sales were up 11% while Sales Income at Rs.31,731 million grew
 17%. This is a reflection of the increase in sales at the upper end of
 the brand spectrum as a result of a concerted drive by the Company to
 ‘premiumise’ its portfolio with resultant increase in profits.
 
 Operating profits at Rs.5,176 million were up 32% from the Rs.3,898
 million in the previous year
 
 While Cost of Goods has moved up a few notches as a result of the
 step-up in the price of the Company’s 3 main ingredients, Spirit
 (Molasses/Rectified Spirits/ Extra Neutral Alcohol), Malt Spirit and
 Glass Containers, your Company, through a mix of strategic buying, use
 of alternate packaging and flexing its large buying scale, is pulling
 out all stops to contain this vital element of cost.  Advertising and
 Sales Promotion expenditure has seen the use of innovation and
 cost-efficient methods of advertising including at the point of
 sale/consumption which should help build brand equity in an environment
 where product advertising as is commonly understood, is banned
 
 AMALGAMATION
 
 In terms of a Scheme of Amalgamation (“Scheme”), Shaw Wallace & Company
 Limited and Primo Distributors Private Limited, both subsidiaries of
 the Company, are proposed to be amalgamated with your Company with
 effect from April 1, 2007, being the Appointed Date. While the Hon’ble
 High Court of Karnataka at Bangalore and the Hon’ble High Court of
 Judicature at Bombay have sanctioned the Scheme, similar sanction is
 awaited from the Hon’ble High Court at Calcutta
 
 Zelinka Limited, a wholly owned subsidiary of the Company in Cyprus, is
 also proposed to be amalgamated with the Company with effect from April
 1, 2007, being the Appointed Date. The required sanction for the
 amalgamation from the Hon’ble High Court of Karnataka at Bangalore has
 been received. The Amalgamation will become effective after compliance
 by Zelinka Limited of the necessary and applicable laws of Cyprus
 
 PROSPECTS
 
 Demographic dividend of India in terms of young educated and discerning
 population with higher disposable income would give your Company a
 continued growth in its addressable consumer base. In view of this,
 your Directors expect continued and profitable increase in demand for
 the Company’s products. However, the unprecedented increase in input
 costs and the general economic downturn could have some impact on the
 profitability Through a combination of strategic buying, revenue
 increases, cost paring and other cost mitigation measures, the Company
 expects to show increased profits despite a recessionary economy. The
 hardening of Scotch prices and the growing demand for good quality wine
 are expected to improve the business prospects and profitability of
 Whyte & Mackay and Bouvet Ladubay, respectively.
 
 Profits for the first 6 months for the current year are 26% higher than
 the corresponding period of the year under review.
 
 SUBSIDIARIES
 
 During the year under review, the following Companies became
 subsidiaries of your Company:
 
 Liquidity Inc.; Whyte and Mackay Group Limited; Whyte and Mackay
 Limited; Whyte and Mackay Warehousing Limited; Bruce & Company (Leith)
 Limited; Charles Mackinlay & Company Limited; Dalmore Distillers
 Limited; Dalmore Whyte & Mackay Limited; Edinburgh Scotch Whisky
 Company Limited; Ewen & Company Limited; Fettercairn Distillery
 Limited; Findlater Scotch Whisky Limited; Glayva Liqueur Limited;
 Glentalla Limited; GPS Realisations Limited; Grey Rogers & Company
 Limited; Hay & MacLeod Limited; Invergordon Distillers (Holdings)
 Limited; Invergordon Gin Limited; Isle of Jura Distillery Company
 Limited; Jarvis Halliday & Company Limited; John E McPherson & Sons
 Limited; KI Trustees Limited; Kensington Distillers Limited; Kyndal
 Spirits Limited; Leith Distillers Limited; Loch Glass Distilling
 Company Limited; Longman Distillers Limited; Lycidas (437) Limited;
 Pentland Bonding Company Limited; Ronald Morrison & Company Limited;
 
 St. Vincent Street (437) Limited; Tamnavulin- Glenlivet Distillery
 Company Limited; TDL Realisations Limited; Invergordon Distillers Group
 Limited; Invergordon Distillers Limited; The Sheep Dip Whisky Company
 Limited; W & S Strong Limited;
 
 Watson & Middleton Limited; Wauchope Moodie & Company Limited; Whyte
 and Mackay de Venezuela CA; Whyte & Mackay Distillers Limited; Whyte
 and Mackay Holdings Limited; Whyte and Mackay Property Limited; William
 Muir Limited; WMB Realisations Limited; McDowell & Company Limited;
 Jasmine Flavours & Fragrances Private Limited and Royal Challengers
 Sports Private Limited
 
 Consequent to the dissolution without winding up of Shaw Wallace
 Financial Services Limited upon its amalgamation with Shaw Wallace
 Breweries Limited, in terms of the Orders of the Hon’ble High Courts of
 Calcutta and Bombay, Shaw Wallace Financial Services Limited ceased to
 be a Subsidiary of your Company in the year under review.
 
 Subsequent to the Balance Sheet date, United Spirits (Shanghai) Trading
 Company Limited became a wholly owned subsidiary of your Company
 
 In terms of the approval received from the Government of India pursuant
 to Section 212(8) of the Companies Act, 1956, the Balance Sheet, Profit
 & Loss Account, Directors Report, Auditors Report and other
 particulars of the Subsidiary Companies as on March 31, 2008 have not
 been attached with the accounts of the Company. The documents/details
 will be made available to any Member of the Company upon request to the
 Company. The annual accounts of the Subsidiary Companies as on March
 31, 2008 will also be kept for inspection by any member at the
 Registered Office of the Company and that of the Subsidiary Companies
 concerned.
 
 The Accounting year of United Spirits Nepal Private Limited (USNPL)
 (previously known as “McDowell Nepal Limited” which has been converted
 into a Private Limited Company and renamed as United Spirits Nepal
 Private Limited, during the year), your Company’s Subsidiary in Nepal
 is from mid-July to mid-July every year. Accordingly, Accounting year
 of 2006-07 of USNPL ended on July 16, 2007 and the Accounting Year
 2007-08 ended on July 15, 2008, i.e., after the end of the close of the
 financial year of the Company which ended on March 31, 2008. For the
 purpose of compliance under Accounting Standard - 21, relating to
 “Consolidated Financial Statement” the Accounts of USNPL has been drawn
 up to March 31, 2008
 
 For the purpose of compliance under Accounting Standard - 21,
 “Consolidated Financial Statement” presented by the Company includes
 the financial information of its subsidiaries
 
 DEPOSITORY SYSTEM
 
 The trading in the equity shares of your Company is under compulsory
 dematerialisation mode. As of date, equity shares representing 94.51%
 of the equity share capital are in dematerialised form. As the
 depository system offers numerous advantages, members are requested to
 take advantage of the same and avail of the facility of
 dematerialisation of the Company’s shares
 
 DIRECTORS
 
 Mr. P.K. Kakodkar, who resigned as a Director on June 1, 2007, expired
 on June 1, 2008. The Board of Directors express their profound grief
 and sorrow on the demise of Mr. P.K. Kakodkar and place on record their
 deep appreciation of his long association and valuable contribution
 during his tenure as a Director of your Company.
 
 Mr. M.R. Doraiswamy Iyengar and Mr. B.M. Labroo retire by rotation and
 being eligible, offer themselves for re-appointment.
 
 AUDITORS
 
 M/s. Price Waterhouse, your Companys Auditors, are eligible for
 re-appointment at the Annual General Meeting and it is necessary to fix
 their remuneration.
 
 TAX AUDITORS
 
 Your Directors have appointed M/s. Lodha & Co., Chartered Accountants
 as the Tax Auditors of the Company to carry out the tax audit of the
 Company for the year ended March 31, 2008.
 
 LISTING OF SHARES OF THE COMPANY
 
 At the Annual General Meeting of your Company held on November 28,
 2007, the Shareholders had approved delisting of your Company’s equity
 Shares from the Stock Exchanges at Ahmedabad, Chennai, Delhi and
 Kolkata. While the shares have been delisted from the Stock Exchanges
 at Ahmedabad, Chennai and Kolkata, delisting approval is awaited from
 The Delhi Stock Exchange Limited. The Equity Shares of your Company
 will continue to remain listed with Bangalore Stock Exchange Limited,
 Bombay Stock Exchange Limited and National Stock Exchange of India
 Limited. The listing fees for the year 2008-09 have been paid to all
 these Stock Exchanges.
 
 Your Directors have allotted 5,681,326 equity shares of Rs.  10/- each
 during the year, upon conversion of Bonds in terms of the Offering
 circular for issue of US0,000,000 2.00 per cent Convertible Bonds
 due 2011 (Bonds). The equity shares so allotted have been listed on
 Bangalore Stock Exchange Limited, Bombay Stock Exchange Limited and the
 National Stock Exchange of India Limited. Listing approval for 227,550
 equity shares from The Delhi Stock Exchange Limited is awaited
 
 GLOBAL DEPOSITARY SHARES
 
 Your Company had issued 17,502,762 Global Depositary Shares (GDSs)
 representing 8,751,381 Equity Shares ranking pari-passu in all respects
 with the existing paid up equity shares, 2 GDSs representing 1 equity
 share of par value of Rs.10/- each at US.4274 per GDSs aggregating to
 US$ 130 mn. These GDSs are listed on the Luxembourg Stock Exchange.
 
 As on date, there is an outstanding of 41,462 GDSs representing 20,731
 equity shares.
 
 FOREIGN CURRENCY CONVERTIBLE BONDS
 
 Your Company had issued US0,000,000 2% Convertible Bonds Due 2011
 (Bonds) convertible into equity shares or GDSs (2 GDSs representing 1
 equity share) and listed on the Singapore Exchange Securities Trading
 Limited (SGX)
 
 In terms of the Offering Circular dated March 24, 2006 (which included
 Notice by the Company for Mandatory Conversion of outstanding Bonds),
 your Company has allotted, during the year under review, 5,681,326
 equity shares of Rs. 10/- each on conversion of the entire Bonds and as
 such, there are no outstanding Bonds
 
 CREDIT RATING
 
 ICRA Limited (ICRA) has assigned “LA-” (pronounced LA minus) rating on
 the long term scale to the Long Term Debt Programme of the Company
 (Basel II) and also assigned “A1” (pronounced A One) rating on the
 short term scale to the Short Term Debt Programme of the Company.
 
 ANNUAL GENERAL MEETING
 
 The Company has obtained from The Registrar of Companies, Karnataka,
 Bangalore, extension of time for holding the Annual General Meeting for
 the financial year ended March 31, 2008 upto December 31, 2008.
 
 CORPORATE GOVERNANCE
 
 A report on the Corporate Governance is annexed separately as part of
 this report along with a certificate of compliance from a Company
 Secretary in practice. Necessary requirements of obtaining
 certifications/declarations in terms of Clause 49 have been complied
 with
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 Pursuant to Clause 49 of the Listing Agreement with the Stock
 Exchanges, Management Discussion and Analysis Report is annexed and
 forms an integral part of the Annual Report.
 
 FIXED DEPOSITS
 
 Fixed Deposits from the public and shareholders, stood at Rs.564.41
 million as at March 31, 2008. Matured deposits for which disposal
 instructions had not been received from concerned depositors stood at
 Rs.11.025 million as at March 31, 2008. Of this, a sum of Rs.2.761
 million has since been paid as per instructions received subsequent to
 the Balance Sheet date.
 
 TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND 
 
 Pursuant to the provisions of Section 205A(5) and 205C of the Companies
 Act, 1956, the Unclaimed Dividend, Debentures and Deposits, remaining
 unclaimed and unpaid for more than 7 years, have been transferred to
 the Investor Education and Protection Fund.
 
 SHIFTING OF REGISTERED OFFICE
 
 The Registered Office of the Company has been shifted from 51, Richmond
 Road, Bangalore - 560 025 to ‘UB Tower’, #24, Vittal Mallya Road,
 Bangalore - 560 001 with effect from March 1, 2008.
 
 HUMAN RESOURCES
 
 Employee relations remained cordial at all Company’s locations.
 
 Particulars of employees drawing an aggregate remuneration of
 Rs.2,400,000 or above per annum or Rs.200,000 or above per month, as
 required under Section 217(2A) of the Companies Act, 1956, are annexed
 
 EMPLOYEE STOCK OPTION SCHEME
 
 The Company has not offered any stock option to the Employees during
 the year 2007-2008 either under the McD ESOP Scheme or McD-Employee
 Stock Option Scheme - 2002
 
 CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION, ETC.
 
 In accordance with the provisions of Section 217(1)(e) of the Companies
 Act, 1956, read with Companies (Disclosure of Particulars in the Report
 of the Board of Directors), Rules, 1988 the required information
 relating to Conservation of Energy, Technology Absorption and Foreign
 Exchange earnings and outgo is annexed
 
 DIRECTORS’ RESPONSIBILITY STATEMENT
 
 Pursuant to Section 217 (2AA) of the Companies Act, 1956, in relation
 to financial statements for the year 2007-08, the Board of Directors
 reports that:
 
 - in the preparation of the annual accounts, the applicable accounting
 standards have been followed along with proper explanation relating to
 material departures;
 
 - accounting policies have been selected and applied consistently and
 that the judgements and estimates made are reasonable and prudent so as
 to give a true and fair view of the state of affairs of the Company as
 at the end of the financial year and of the profit of the Company for
 the year ended March 31, 2008;
 
 - proper and sufficient care have been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956, for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities;
 
 - the annual accounts have been prepared on a going concern basis.
 
 THANK YOU
 
 Your Directors place on record their sincere appreciation for the
 continued support from shareholders, customers, suppliers, banks and
 financial institutions and other business associates.  A particular
 note of thanks to all employees of your Company, without whose
 contribution, your Company could not have achieved the year’s
 performance
 
                                               By Authority of the Board
 
 Bangalore                     V.K. REKHI        M.R. DORAISWAMY IYENGAR
 November 29, 2008          Managing Director                   Director