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Pioneer Distilleries

BSE: 531879|NSE: PIONDIST|ISIN: INE889E01010|SECTOR: Breweries & Distilleries
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Chairman's Speech (Pioneer Distilleries) Year : Mar '17

Managing Director’s Message

Dear Shareholders,

On behalf of the Board of Directors, we are pleased to present the Annual Report of Pioneer Distilleries Limited for the financial year ended 31 March 2017.

It has been 18 months since I joined the board of Pioneer Distilleries Limited (PDL)and , I am privileged to be part of PDL as Managing Director. The company has so much potential to bring value to the shareholders which I have shown in the previous year. This year the company has made a loss due to huge impact on COGS, fuel and revamping the utilities. The robust business plan and the new projects that will be commissioned in next year I am confident that the company can deliver the value to the shareholders.

The company has made improvement in the following points that I have mentioned last year: (i) the Company’s commitment to the highest standards of corporate governance, and intense focus on compliance and ethical conduct in everything we do, (ii) a strong move to strengthen commercial and operational controls and institute robust systems and processes and (iii) making the right investments in our manufacturing facilities. In all of the above, the Company has been fully supported by its principal shareholder and its holding company namely United Spirits Limited (USL).

Improving efficiencies

We are making strategies to bring efficiency into our supply chain to reduce the impact of COGS, also we have achieved efficiencies in terms of processes and we are focusing on the sustaining the efficiencies there by bringing down the operational expenses, better working capital management and improving the cash flow.

India presents one of the most exciting opportunities in the world. The country is forging ahead as the fastest growing economy. What makes India particularly attractive is not just the economic growth, but what constitutes and drives such growth. An upwardly mobile inspirational middle class and a vast number of consumers moving towards affluence is ensuring that the core consumption fundamentals remain robust.

We have made good strides in our transformational Journey, and while there is more work to be done to reduce complexity in the way we work and simplify the organization structure to deliver efficiency and growth, I am confident that every single building block we put in place last year has set us firmly on the runway to success.

Performance Overview

The year 2016-17 was indeed challenging, with less rainfall in Maharashtra in last year leading to shortage of availability of raw material viz., molasses and grain. Amidst this backdrop, the Company was able to deliver the end product to the market and huge growth in IMFL bottling volumes in 2016-17 as compared to 2015-16. For the financial year ended 31 March 2017, the Company recorded loss of Rs.302,004,640.

The Company has installed and commissioned additional IMFL bottling line during the year 2016-17. We have accrued Rs.16.5 Cr Government subsidy during the year 2016-17. As a proactive step to mitigate the process water non availability, the Company has developed rain water harvesting mechanism to store 60 Crore liter of rain water which can be utilized for 5 months without depending on other resources. We have re-commenced Molasses ENA plant operations since 30 January 2017. The same was disclosed to shareholders through our notifications dated 30 January 2017. The Company has commenced Malt spirit plant, DDGS plant, and 6.45 MW steam Turbine operations in March 2016, December 2016 and January 2017 respectively, this will help to utilize the company’s investments made in this facility. We have supplied fresh malt spirits to USL. We will be setting up malt maturation facility during 2017-18 and will be ready to sell matured malt spirit during the 2nd quarter of FY 2018-19.

The Company has developed business strategy up to 2020 and the same was approved by board to invest around Rs.200 Cr to enhance IMFL production from 7.2 lakh cases to 48 lakh cases per annum, setting up Malt production facility of 36 lakh liters per annum, malt maturation facility, up gradation of ENA plant facilities and expansion of capacity of utilities to improve efficiency and effectiveness of operations. We will be availing Mega subsidy from Maharashtra Government against these investments. We expect to complete the investments by December 2017. The Company’s performance is expected to improve significantly thereafter. Ultimately, we are committed towards maintaining our business strategy of prudent cost management, coupled with proactive investments for the future.

With alcohol being a state-controlled subject, the industry faces challenges in procuring numerous licenses and label approvals, varied excise regulations etc; this adds complexity, makes time lines uncertain, restricts products from being distributed freely nationally and inter-state taxes limit economies of scale. All this makes the business environment not just difficult, but also unpredictable.

Corporate Governance

As a responsible corporate citizen, we believe that transparency is an important value across our organization, including activities related to corporate social responsibility, which is our way of doing business.

A changing culture

As an organization that is fighting fit to deliver for today, our human capital is dynamically evolving to take on future opportunities. During the year, we continued to evolve our organizational design and structure, upgrading talent and building capabilities, while providing people with job rotation and growth opportunities. We also unveiled policy changes aimed at bringing about a shift in the cultural mindset, more openness and transparency in the organization, with more clarity and accountability for performance that is enabling the evolution of an organization that aims to become a better place to work.

Creating shared value /Corporate Social Responsibility

We believe that in order for us to create long-term value for our shareholders, it is imperative that we create value for the communities in which we operate. The Company focuses on two pillars which have the greatest potential for joint value creation with society: Water & Environment and Rural Development. As fundamental areas which are core to our business strategy and operations, these pillars are also part of our sustainability commitments which we aim to uphold and protect for generations to come.

As part of our dedication to environmental sustainability, the Company has commissioned 6.45Megawatt steam Turbine and power distribution system to support 100% captive power requirement.

The Company has built road from Jackwell to Allur village. The Company is also supported Government schools to implement digital class rooms to improve the quality of education. The company has also provided water facility stall in village during summer.

Appreciation

The Board would like to extend its deepest appreciation to the management team for their dedication and commitment in driving the Company forward. Our sincere thanks also goes to all employees for playing an important role in ensuring that the Company continues to be leading Distillery in Maharashtra. We would also like to express our gratitude to partners and customers for their support to our Company.

I thank you for your continued faith and support.

B V Krishna Reddy

Managing Director

Source : Dion Global Solutions Limited
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