RADICO-2008-2009.Pdf

From evoking mysteries to awakening untamed desires; from pioneering possibilities to moulding values, Radico continues to produce a kaleidoscope of time-honoured brands, inspired by innovation of all forms and shapes. Dauntless, legendary and valued, Radico Khaitan once again emerges a true virtuoso, creating an exciting invention that blends passion and perfection into a rich aesthetic experience.

Dear Friends,

It gives me great pleasure to present to you our financial achievements of 2008.

The past year has been rife with challenges, but India overcame them, and shone like a beacon through difficult times registering a 6.5% to 7% growth in its Gross Domestic Product. Reliable data shows investments rising from 35.9% last year to 37.1% this year. With these numbers, India’s future is bright and shows unquestionable evidence of moving forward swiftly.

The installation of stable Govt at the centre is huge positive development and is expected to usher in implementation of the long pending reforms and would enable the economy to achieve growth of 8.5% to 9% in coming years. With renewed focus on revival of rural economy and implementation of National Rural Employment Guarantee schemes & Bharat Nirman , more money shall be available in the hands of consumer to spend , which shall result into demand spiral across various segments of economy.

During the year, company consolidated its operations, where the volumes of all main line brands grew over last financial year.

Our company has shown great resilience through perseverance. We have proved ourselves once more by staying true to tradition along with being innovative and offering products that are unique. We are a force to reckon with in the domestic market; and maintain a strong presence in the international arena, taking in 75 Crores worth of business, in 2008.

The recent launch of our premium brandy, Morpheus, is a richly-layered, sterling X0 brandy – India’s first, with an exceptional aroma and aftertaste. We have positioned ourselves in a niche market previously unexplored by any other liquor manufacturer.

We entered the branded liquor business in 1998 with the now legendary 8 PM. It went on to become our best-seller, and the first millionaire brand from Radico.

As an organisation, we constantly strive to create value for our customers and stakeholders through exemplary products such as Magic Moments, Royal Whytehall, Contessa Rum, Old Admiral and Bermuda Rum.

Magic Moments as a brand has become a millionaire club brand and has already taken over 70% of the operating segment of Vodka and to strengthen its position we have introduced six new flavours – Green Apple, Lemon, Lemon Grass & Ginger, Raspberry, Orange and Chocolate.

It is our constant endeavour to give our customers products of the highest quality and build on our strong reputation in the Indian market.

Cheers !!! 8PM Magic Moments Green Apple Orange Lemon Grass & Ginger Raspberry Lemon and Chocolate Morpheus Royal Whytehall Contessa xxx Rum Old Admiral 8PM Bermuda xxx Rum The brand which continues to enhance Radico’s premium offering remains unparalleled in the industry. One with a taste that is best enjoyed in solitude or with friends.

This is none other than the company’s flagship brand 8 PM, adjudged the fastest growing brand in regular price segment. Launched in 1998 as a millionaire brand,

8PM spearheaded the company’s entry into the branded business and was an instant success.

Blended with scotch and aged to the peak of perfection, 8 PM enjoys a unique balance of strength and smoothness. Still considered as the people’s choice, 8 PM rules the taste buds and is ‘loved by all’. Finest quality ingredients, superior product experience and attractive packaging drive 8PM to explore different dimensions of its core promise

‘Thaath’. The brand has been positioned as a means to unwind and relax. The promise of

‘Aath Ke Thaath’ encourages the audience to live life in their own style at ‘8 PM’. A DIFFERENT MAN, No wonder, 8 PM is A DIFFERENT TASTE the first brand in the liquor industry to enter the Limca Book of Records by crossing one million cases mark in the first year of its operation. Magic Moments 8PM Green Apple Orange Lemon Grass & Ginger Raspberry Lemon and Chocolate Morpheus Royal Whytehall Contessa xxx Rum Old Admiral 8PM Bermuda xxx Rum Since the creation of Magic Moments, Radico has been quenching the burning zeal of ‘love’ in all ‘young at heart’. The brand which continues to symbolize the zing in life has added six new flavours – Orange, Green Apple, Lemongrass & Ginger, Lemon,

Chocolate and Raspberry. Flavours have not only added to the Magic Moments

Portfolio, but have also added freshness to the entire Magic Moment offering.

THERE IS ZING IN EVERY HEART Vibrant yet elegant, M2 welcomes the ‘young’ in a sensual embrace of ‘pure fun, pure luxury’. The brand’s uniqueness lies in its frosted bottle surface with printing on it – a first-of-its-kind in India. Magic Moments Green Apple Orange Lemon Grass & Ginger Raspberry Lemon and Chocolate 8PM Morpheus Royal Whytehall Contessa xxx Rum Old Admiral 8PM Bermuda xxx Rum Radico revels in the magic of going global with this popular vodka brand, now promising a burst of stimulating oranges, sweet apples, tangy gingers, lip-smacking chocolates and refreshing lemons. Magic Moments is the fastest growing vodka in the segment and is today available across 6 countries. The vodka that makes one enjoy the spirit of every evening is geared to blend the boundaries into a magical experience of purity.

Since its launch, Magic Moments has recorded steady growth – a success story in the semi premium segment with 75% market share in the operating category. Made from the finest, natural grain extracts, this international quality grain vodka can ‘Zing up life’ in every sip, pure in form and taste. Blended to perfection and widely accepted in other countries, Magic Moments will surely add an extra ‘Zing’ to the company’s exports. TIME TO REVEL IN THE MAGIC OF MOMENTS Morpheus 8PM Magic Moments Green Apple Orange Lemon Grass & Ginger Raspberry Lemon and Chocolate Royal Whytehall Contessa xxx Rum Old Admiral 8PM Bermuda xxx Rum Radico uncorks another surprise called Morpheus in the super premium segment.

This captured ‘spirit of France’ in a globlet promises ‘joie de vivre’ to all young achievers who love to relish every milestone with friends, fun and laughter.

The new taste matrix of brandy is ready to celebrate every dreamer’s aspirations, the joy of dreaming big and realizing those dreams. In every sip lies the seduction of success – the desires to win every goal, to rule the world, to quench every thirst at the fountain of achievement. With the French connect and exclusive packaging, the goblet shaped bottle makes a statement in the premium segment. Appearance meets flavour and exclusivity, making Morpheus a signature choice for the sophisticated.

With ‘Morpheus’ beginning to outshine expectations, surely it’s time for Radico to raise a toast to success! WONDERS WILL NEVER CEASE Royal Whytehall 8PM Magic Moments Green Apple Orange Lemon Grass & Ginger Raspberry Lemon and Chocolate Morpheus Contessa xxx Rum Old Admiral 8PM Bermuda xxx Rum Radico unveils its new Royal Whytehall – Premium Deluxe Whisky bringing a new refinement to the look of its trusted brand Whytehall – Classic Deluxe Whisky. Royal

Whytehall is Royalty redefined.

The redesigned packaging complements Whytehalls’s classic image, gracing the colour of the malt inside. Repositioned as ‘New Royalty’, the brand promises sophistication and refinement.

First introduced with the acquisition from Bacardi, Whytehall Classic Deluxe Whisky is a skillful blend of aged scotch malts and the finest Indian spirits. The result is a full- bodied whisky with a rich, REFINEMENT warm taste and a lingering AND after-note – distinctive enough ROYAL RICHNESS to overpower the taste bud.

Now revitalized with the new packaging and blend,

Radico once again reinforces Royal Whytehall’s quality credentials and its winning position in the market. Previously a Silver medal winner at the

International Wine & Spirit Competition (U.K),

Whytehall has received a gold medal at Monde

Selection 2008 (Belgium) for overall quality. Contessa xxx Rum 8PM Magic Moments Green Apple Orange Lemon Grass & Ginger Raspberry Lemon and Chocolate Morpheus Royal Whytehall Old Admiral 8PM Bermuda xxx Rum Contessa Rum enjoys a 21% market share in the defence segment and has won the prestigious medal at the Monde Selection 2008 in Brussels for its overall quality.It is in the regular segment.This is also a millionaire brand of Radico.

Contessa Rum was rewarded with Bronze medal at the International

Wine & Spirit Competition 2007 held at U.K

Contessa Rum has won a Silver medal at Monde Selection 2008 (Belgium) for overall quality. WE SALUTE THE FIGHTING SPIRIT Old Admiral 8PM Magic Moments Green Apple Orange Lemon Grass & Ginger Raspberry Lemon and Chocolate Morpheus Royal Whytehall Contessa xxx Rum 8PM Bermuda xxx Rum One of its flagship brands, ‘Old Admiral’, quite popular in South India, has received overwhelming response from the trade channel, consumers and has grown exponentially, defying the industry trends. The quality and consistency of taste is what attracts the consumers. Old Admiral delivers value through a top class blend and packaging. Old Admiral Rum has won a Bronze medal for overall quality at

Monde Selection (Belgium) in 2008.

THE TASTE OF LIFE WORTH PURSUING 8PM Bermuda xxx Rum 8PM Magic Moments Green Apple Orange Lemon Grass & Ginger Raspberry Lemon and Chocolate Morpheus Royal Whytehall Contessa xxx Rum Old Admiral 8 PM Bermuda Rum is an extension of our flagship whisky brand, 8 PM, into the rum segment. 8 PM is known for delivering quality and value, and these brand values find expression in 8 PM Bermuda Rum too. As the name suggests, 8 PM

Bermuda Rum is a Caribbean rum, warm, full-bodied and dark, blended to perfection and matured in old oak casks. 8 PM Bermuda Rum delivers the classic

Caribbean experience in every leisurely sip. It has recently won the silver medal at the prestigious Monde Selection award. THE SPIRIT OF THE CARIBBEAN MAN’S QUEST TO CONQUER NEVER ENDS... Radico Khaitan believes in expanding horizons and seeking new ways. It has recently set up its second grain based distillery in Aurangabad, Maharashtra. The plant with a production capacity of 30 million litres of molasses-based products will be the largest plant in Maharashtra in its category. In an endeavour to enhance the grain-based products, the company is investing in its already existing Rampur distillery. Corporate Profile

BOARD OF DIRECTORS: Dr. Lalit Khaitan Chairman & Managing Director Abhishek Khaitan Managing Director REGISTERED OFFICE: K.P. Singh Bareilly Road, Rampur - 244 901 UP. Wholetime Director Phone No. 0595-2350601, 2350602 Raghupati Singhania Fax No. 0595-2350009 Amit Burman E-mail: [email protected] Karna Singh Mehta Ashutosh Patra CORPORATE OFFICE: Sanjay Jalan AUDITORS: Plot No. J-1, Block B-1, M/s. V. Sankar Aiyar & Co. Head-Legal & Company Secretary Mohan Co-operative Industrial Area, Chartered Accountants Dr. Arun Mohan Bansal Mathura Road, New Delhi -110 044 Satyam Cinema Building, Ph.: +91-11-40975400, 40975500 2nd Floor Fax: +91-11-41678841/42 Ranjit Nagar Commercial Complex E-mail: [email protected] New Delhi- 110008

WORKS: INTERNAL AUDITORS: Rampur Distillery Grant Thornton Bareilly Road, Rampur - 244 901 UP. Member of Grant Thornton International L 41 Connaught Circus

Plot No. B-24, A-25, New Delhi 110001, India Shree Khatushyamji, BANKERS AND FINANCING Industrial Complex, RIICO, Reengus, INSTITUTIONS: Dist. Sikar, Rajasthan AXIS Bank Ltd. ABN AMRO Bank

B-3, UPSIDC Industrial Development Area, Bank of India Phase-l, Sultanpur Patti, Bajpur ING Vysya Bank Dist. Udham Singh Nagar, Uttaranchal Indian Overseas Bank Punjab National Bank

S-59, Timmapur Village, State Bank of India Palmakul Post - 509 325 State Bank of Travancore Shadnagar TQ, Dist. Mehboobnagar, AP Standard Chartered Bank State Bank of Hyderabad

44 KM Stone, Delhi-Rohtak Road, State Bank of Mysore Village & Post, Rohad. State Bank of Indore Bahadurgarh, Distt. Jhajjar - 124 501 State Bank of Patiala Haryana Yes Bank Ltd.

OUR WEBSITE: www.radicokhaitan.com Directors’ Report

Your Directors are pleased to present their 25th Annual Report The Company continues to be a one of the major player in together with the audited statement of accounts of the the Canteen Stores Department (CSD) market. During the year company for the year ended 31st March, 2009. the Company has introduced Magic Moments in CSD. ‘Contessa Rum’ remains one of the highest selling products FINANCIAL RESULTS: in the rum category and is highly established brand in the (Rs. in Million) defense forces. Strategy of establishing the grain ENA plant in Rampur is now 2008-2009 2007-2008 yielding expected results in view of the increasing prices of Sales (including sales from arrangements with 15752.45 16037.57 Molasses and is also acting as a hedge. Company has also other Distilleries / bottling units) implemented dual feed technology in its Grain Alcohol plant Gross Profit (before depreciation and tax) 354.88 581.26 at Rampur, which has enabled the company to leverage the Profit before tax 123.66 391.42 product mix, depending upon the cost benefit analysis Profit after tax 65.36 330.72 proposition as per the market situation. Prior period adjustments – – Surplus brought forward from last year 236.30 206.52 CAPITAL PROJECTS: Profit available for appropriation 301.66 537.24 Transfer to General Reserve 5.00 200.00 During the year your Company has incurred Rs.701.18 Million Proposed Dividend and tax thereon 36.03 100.95 on the various capital projects , It includes additional Molasses Balance carried forward 260.63 236.30 storage capacity, Bio gas Digesters, Printing Machines at bottle Printing Unit and Malt Maturation facility. OPERATIONS: Moreover Looking at the increasing acceptability of the Pet bottles in the liquor, Company has increased its Pet bottle 2008-09 was a year of consolidation for the Company in manufacturing capacity from 850 lacs bottles to more than all its business segments. Keeping in view of its strategy 1500 lacs bottles at its most modernized & State of Art plant, to mainly focus on growth of its mainline brands, your located in the tax holiday State of Uttaranchal. A sum of company closed the year with Sales volume of close to 13 Rs.194.09 Million is capitalized pursuant to the amendment million cases, where sales of all the key brands grew over the by way of addition of Para 46 to AS-11. last fiscal. Your Joint Venture Company, Radico NV Distilleries Due to significant fall in sugarcane production in the country Maharashtra Ltd. has successfully commissioned 36 million and increase in crude oil prices, cost of our main raw material, litres Distillery in Maharashtra in December 2008. Now your molasses and cost of glass containers saw an unprecedented Company has two of its own distilleries in major sugar increase. Despite the tough working environment, the producing belts of Uttar Pradesh and Maharashtra, having company was able to clock net sales growth of 9% to a level total alcohol manufacturing capacity of 146 million litres of of Rs.933 crores, including sales from contract bottling units. During the year the company was able to put the Alcohol, including 29 million litres of grain alcohol & malt spirit. ‘8 PM’ whisky back on growth path. Company has achieved another milestone on account of its Magic Moments brand in FUTURE STRATEGY AND GROWTH: the Vodka segment touching volume of 1 million cases in its rd 3 year of its launch. In the last one decade, Company was Liquor Industry in India is growing around 12% annually for able to create 4 millionaire brands in its branded portfolio. last 5 years with major growth coming in the white spirits The other flagship brand of the Company, ‘Old Admiral segment and in the category of premium and semi premium Brandy’ achieved sales of 2 million cases with growth of 37%. space. Your company also took innovative steps to redesign and Company plans to capture significant volumes into the high refurbish its ‘8 PM’ whisky brand with new look packaging & liquor consuming markets like Kerala, Tamil Nadu, Andhra ‘Royale Whytehall’ whisky was re-launched in Key markets Pradesh and also to increase its market share in the other with Blue mono-carton pack. Both these initiatives are well existing markets. Company aims to achieve sales volume of received in the market. more than 20 million cases per year in next 2 years. To meet the aspirations of young consumers, With the change in state policy recently, the Company has Company launched six new flavours in the ‘Magic Moments entered into bottling arrangement with a bottler in Tamil Nadu Vodka’ category i.e. Chocolate, Green Apple, Lemon, Lemon and production has started in May, 2009. Production is Grass & Ginger, Orange and Raspberry, where each flavour expected to go into full stream in next six months. has the potential to become a separate vertical in itself. Company has created a new price point for its flavoured Vodka Company has also re-launched its ‘Royale Whytehall’ whisky and has high growth expectations in the coming years. The in new pack in the key markets. Company believes that its youth icon of Indian Bollywood industry - Hrithik Roshan is branded portfolio constitutes significant value creation for its the brand Ambassador. shareholders.

1 Radico--22-32.p65 22 8/9/2009, 11:13 AM Looking to the potential of the market in the Brandy segment DIVIDEND: and consistent with its policy of premiumisation of brands, Company has recently launched, the ‘Morpheus’ brandy in Your directors are pleased to recommend a dividend @ 15% the Premium category. Results are encouraging and your on the paid-up capital of the Company i.e. Rs.0.30 per equity company expects to get good response in the coming years. share of Rs.2/- each (face value) to be appropriated from the Company also plans to launch new Brand in premium / semi profits of the year 2008-09 subject to the approval of the premium space to capitalize on the rapidly growing segment. shareholders at the ensuing Annual General Meeting. Your Directors are fully confident that execution of these DEMATERIALISATION: initiatives will put the company in high growth mode. More than 95.28% of the shares of the Company have now FUNDING THROUGH ISSUE OF FCCBs/CCPs/GDRs been dematerialized. Your Directors would request all the /ADRs: members who have not yet got their holdings dematerialized to do so to enable easy trading of the shares, as SEBI has The company has raised USD 50 million through an issue of made it compulsory for the shares of the Company to be in FCCBs on 26th July 2006 (USD 40 million) and 25th August dematerialized form for trading. 2006 (USD 10 million on exercise of green shoe option). The FCCBs are convertible into equity shares of the company at the option of the bondholder at a conversion price of Rs.159.20 PUBLIC DEPOSITS: per shares (original conversion price being Rs.172.50 reset on 6th August 2008 pursuant to clause 6.4 of the subscription During the year under review, your Company has neither agreement). The FCCBs carry a coupon rate of 3.50% per invited nor accepted any fixed deposits from the public. annum with a maturity of five years and one day from the date of issue and are listed on the Singapore stock exchange. SUBSIDIARY COMPANIES: Post buy back, the balance FCCBs unless previously converted, redeemed or cancelled are liable to be redeemed During the year under review, the Company has no subsidiary on the maturity date at a premium of 30.3961% of the principal Company. amount. TRANSFER TO INVESTOR EDUCATION & FCCB BUYBACK PROTECTION FUND:

th Pursuant to RBI circular dated 8 December 2008, your Pursuant to Section 205A of the Companies Act, 1956, as Company has repurchased/bought back the FCCBs to the amended by the Companies (Amendment) Act, 1999, extent of USD 14 million of the face value on a significant unclaimed dividend for the financial year ended st discount, leaving a balance outstanding as on 31 March 2009 31st December, 1996, 31st December 1997, 31st December of USD 36 million. 1998, 31st December 1999 and 31st December 2000 have been transferred to the Investors Education and Protection EMPLOYEE STOCK OPTION SCHEME: Fund established by Central Government under Sub Section (1) of Section 205 (C) during August, 2004, July 2005, August Your Company has always believed in rewarding the 2006, July 2007 and July 2008 respectively. Further, unclaimed employees for their continuous hardwork, dedication and dividend for the financial year ended 31.3.2002 will be support, which has led the Company on a growth path. To transferred to the said fund with in the stipulated time as enable the employees to have a sense of participation in the prescribed in the Companies Act, 1956 read with rules made Company ESOP Scheme was implemented in the year 2006. thereunder. The Compensation Committee, at its meeting held on 31st October 2008, granted 4,32,500 equity stock options to DIRECTORS: the eligible employees, as per the Employees Stock Option Scheme 2006. These options are granted at an exercise price Mr. Sanjay Jalan and Mr. Raghupati Singhania shall retire by based on the closing price of the shares of your Company on rotation at the forthcoming Annual General Meeting of the the National Stock Exchange of India Ltd. on the 30th October Company and being eligible, offer themselves for re- 2008 i.e. the last available closing price prior to the meting of appointment. Both Mr. Sanjay Jalan and Mr. Raghupati the Compensation Committee and shall be vested with the Singhania do not hold any shares in the company. concerned employees in three tranches. The particulars of the option as required by SEBI (employee AUDITORS: stock option scheme and employee purchase scheme) employee purchase scheme guidelines, 1999 are appended M/s. V. Sankar Aiyar & Co., Chartered Accountants, the as Annexure ‘A’ and forms part of this report. auditors of the company, retire at the conclusion of the ensuing

1 Radico--22-32.p65 23 8/9/2009, 11:13 AM annual general meeting and being eligible, offer themselves Reverse Osmosis Filtration plant to reduce the quantity of for re-appointment. effluent to about 50%. The remaining effluent is converted into Bio-Compost by mixing it with Press Mud purchased from AUDIT REPORT FOR THE YEAR ENDED 2008-09 sugar mills. The Bio-Compost is then sold to farmers as Bio- Manure. The managerial remuneration paid to the Chairman & Air pollutants- Out of our two operating boilers , one boiler is Managing Director, Managing Director and Whole Time operating at 100% bio-gas fuel , which is a clean fuel. However Director is subject to the approval of the Central Government. we have installed highly efficient Electro Magnetic Precipitator Other observations made in the Auditors Report are self (ESP) for control of suspended particles from the boiler explanatory and therefore do not call for any further comments wherein Rice Husk is used in combination with Bio-Gas in under Section 217 (3) of the Companies Act, 1956. order to eliminate the possibility of any kind of pollution from boiler flue gases. COST AUDITOR: The company is complying with all the prevailing During the year under review, your directors had with the environmental protection guide lines of Pollution control approval of the central government, appointed Mr. S.N. boards and consent for the year has already been obtained Balasubramanian, cost auditor, to carry out the cost audit in from State Pollution control Board. respect of the distillery units of the Company for the year 2008-2009. The cost audit for the year 2008-2009 shall be CORPORATE SOCIAL RESPONSIBILITY (CSR): completed within stipulated time as prescribed in the Companies Act, 1956 read with Cost Audit (Report) Rules, Events organized by Radico, Rampur in the Year 2008-09 2001. under Corporate Social Responsibility: 1. Three Eye Check-up Camps were organized by Radico AWARDS AND RECOGNITION: through K D Dalmia Eye Hospital at three places (Ajitpur, Chamrava & Nagar Palika Parishad). Approx 1200 Radico has received a series of awards and recognitions for patients were benefited through these Camps. achievements in the business and operations. 2. Blood Donation Camp was organized in factory • Dr. Lalit Khaitan was awarded the Inspirational Life Time premises. Achievement Award by Alcobev Magazine for 2008. 3. Academic Excellence Awards are awarded to the District • The Magic Moments was awarded best packaging Toppers for every Education Session. innovation for the year by Alcobev. • Mr. Abhishek Khaitan was conferred the top entrepreneur 4. Two Primary Schools are being run by the Company at of the year by Ambrosia Indspirit 2008. Panwaria Village & Baalmiki Mandir near City Ramlila • In the same event, the Magic Moments Vodka was Ground, Koshi Mandir Road, Rampur. awarded the best marketing initiative of the year. 5. Medicines & other facilities are provided to the Kustha • In the Monde Selection 2009, the following awards were Ashram. conferred: 6. Woolen pullovers & other amenities were provided to the Orphan House, Rampur. Blankets were distributed • Magic Moments Premium Grain Vodka - Gold Medal to the poor people of nearby area of Rampur during the • Magic Moments Flavored Green Apple Vodka – Winter Season. Company also arranged Bonfire at 18 Bronze Medal different roadside places in Rampur City for the poorer • Magic Moments Flavored Lemongrass & Ginger section of society. Vodka – Gold Medal. 7. Financial help was provided at Ajitpur Village for a ENVIRONMENTAL PROTECTION MEASURES concrete road in the interiors of Ajitpur Village, Rampur. TAKEN BY THE COMPANY: 8. Tree Plantation was carried out in & around 2 KM of the Factory Area. In view of the Corporate Responsibility on Environmental Protection company has adopted number of measures to DIRECTORS' RESPONSIBILITY STATEMENT: improve in the field of environment, safety and Health. Measures like Standard operating Procedures, Training In terms of provisions of Section 217 (2AA) of the Companies programmers for all levels of employees regarding resource Act, 1956 (Act), your Directors confirm that: conservation, house keeping, Green Belt development, onsite (i) In the preparation of the annual accounts, the applicable emergency plan etc. have been taken. accounting standards have been followed, along with Treatment of Liquid effluents- All the liquid effluent ( Spent proper explanation relating to material departures, wash) is treated in Bio Digesters wherein pollutants are wherever applicable. converted into Bio-Gas which is burn in the boilers to produce (ii) The Directors have selected such accounting policies steam and power for plant operations. and applied them consistently and made judgements and Effluent coming out of these digesters is passed through estimates that are reasonable and prudent so as to give

1 Radico--22-32.p65 24 8/9/2009, 11:13 AM a true and fair view of the state of affairs of the Company, under the Listing Agreement with the Stock Exchanges is as at the end of the accounting year and of the profit of enclosed and forms part of this report. the Company for that period. (iii) The Directors have taken proper and sufficient care for CORPORATE GOVERNANCE REPORT FOR THE the maintenance of adequate accounting records in YEAR 2008-2009: accordance with the provisions of this Act for safeguarding the assets of the Company and for Report on Corporate Governance along with the certificate preventing and detecting fraud and other irregularities. of statutory Auditors, M/s. V. Sankar Aiyar & Co., confirming compliance of conditions of Corporate Governance, as (iv) The Directors have prepared the annual accounts on a stipulated under Clause 49 of the Listing Agreement, forms going concern basis. part of the Annual Report.

PARTICULARS OF EMPLOYEES: ACKNOWLEDGEMENTS:

In accordance with the provisions of Section 217 (2A), read Your Directors would like to express their sincere appreciation with the Companies (Particulars of Employees) Rules, 1975, to the investors and bankers for their continued support during the names and other particulars of employees are to be set the year. Your Directors extend their sincere gratitude to all out in the Directors’ Report, as an addendum thereto. However, the Regulatory Authorities like SEBI, Stock Exchanges and as per the provisions of Section 219 (1) (b) (iv) of the other Central & State Government authorities / agencies, Companies Act, 1956, the Report and accounts, as therein Registrars for their support. set out, are being sent to all members of the /Company excluding the aforesaid information about the employees. Any Your Directors also place on record their appreciation for the member, who is interested in obtaining such particulars about dedicated services rendered by the employees at various employees, may write to the Company Secretary at the levies and look forward to their continued support in the future Registered Office of the Company. as well. We also take this opportunity to thank all the valued customers who have appreciated our products and have ENERGY CONSERVATION, TECHNOLOGY patronized them ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

As required by the Companies (Disclosure of Particulars in For & on behalf of the Board the Report of Board of Directors) Rules 1988, the relevant information and data is given at Annexure – B.

MANAGEMENT DISCUSSION AND ANALYSIS FOR THE Sd/- YEAR 2008-2009: Place : New Delhi Dr. Lalit Khaitan Management Discussion and Analysis Report, as required Date : 30 June 2009 Chairman & Managing Director

1 Radico--22-32.p65 25 8/9/2009, 11:13 AM ANNEXURE-A Disclosure as required under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as on March 31, 2009 Particulars ESOP Scheme 1 Number of options granted 2,590,000 2. The Pricing Formula First Grant – (for current eligible employees) who would have completed at least one year of service as on the date of the grant – Per Option – 30% discount to the lower of (a) latest available closing price, prior to the date of the meeting of the Compensation Committee in which options are granted, on the Stock Exchange on which the shares of the Company are listed and on which there is highest trading volume on the said date. (b) average of the weekly high and low prices of the equity shares of the Company during 2 weeks preceding the date of grant of option on the Stock Exchanges of which the shares are listed and on which there is highest trading volume on the said date. Subsequent Grants – (for future / new eligible employees) Per option – 15% discount to the latest available closing price, prior to the date of the meeting of the Compensation Committee in which options are granted, on the Stock Exchange on which the shares of the Company are listed and on which there is highest trading volume on the said date.

3. Number of options vested 366,306 4 Number of options exercised 246,003 5 Total number of shares arising as a result of exercise of options 246,003 6 Number of options lapsed 741,225 7 Variation in the terms of options NA 8 Money realised by exercise of options (Rs. In Million) 22.57 9 Total Number of Options in force 1,602,772

B. Employee-wise details of options granted to: NA (i) Senior managerial personnel Name No. of options granted

(ii) Employees who were granted, during any one year, options amounting to 5% or more of the options granted during the year Name No. of options granted MR. RAMESH KHATANHAR 30000 MR.RAJEEV JAIN 30000 MR. ARUN MOHAN BANSAL 30,000

(iii) Identified employees who were granted option, during any one year, equal or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant NA

1 Radico--22-32.p65 26 8/9/2009, 11:13 AM Name No. of options granted

C. Diluted Earnings Per Share pursuant to issue of shares on exercise of options calculated in accordance with Accounting Standard (AS) 20 0.64

D. The impact on the profits and EPS of the fair value method is given in the table below - (Rs. ‘000) Profit as reported 65,363 Add - Intrinsic Value Cost 23,573 Less - Fair Value Cost 30,053 Profit as adjusted 58,883

Earning per share (Basic) as reported 0.64 Earning per share (Basic) adjusted 0.57

Earning per share (Diluted) as reported 0.64 Earning per share (Diluted) adjusted 0.57

E. Weighted average exercise price of Options whose (a) Exercise price equals market price Nil (b) Exercise price is greater than market price Nil (c) Exercise price is less than market price 51.64

Weighted average fair value of options whose (a) Exercise price equals market price Nil (b) Exercise price is greater than market price Nil (c) Exercise price is less than market price 29.48

F. Method and Assumptions used to estimate the fair value of options granted during the year:

The fair value has been calculated using the Black Scholes Option Pricing model The Assumptions used in the model are as follows:

Date of grant 31-Oct-08 1. Risk Free Interest Rate 7.06% - 7.51% 2. Expected Life 2.5 - 5.5 years 3. Expected Volatility 48.58% - 49.04% 4. Dividend Yield 0.47% 5. Price of the underlying share in market at the time of the option grant (Rs.) 60.90

1 Radico--22-32.p65 27 8/9/2009, 11:13 AM ANNEXURE-B

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo:

The particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988, are as under: A. Conservation of Energy: (a) Energy conservation measures taken 1. Improvement of Power factor through installation of AFCR Panel with capacitor bank. 2. Power saving by changing the Cooling Tower Aluminum Casted fan blades to Aerodynamically designed FRP blades and Hub Assembly at Old Cooling Tower . 3. Modification in Fuel (Rice Husk) Feeding System in Boiler in Grain Spirit Plant by providing FD Fan Hot Air through nozzles which has improved the burning efficiency of highly moist Rice Husk resulting in improvement in evaporation ratio specially in rainy season. 4. Saving of approx 3% of total power at generation by reduction of frequency from 50.4 Hz to 49.5 Hz for TG . 5. Recovery of spent lees heat to preheat DM water for boiler in order to reduce steam consumption in preheating the boiler feed water. 6. Saving of power by replacing magnetic ballast light fittings with electronic ballast fittings. 7. Saving of power by replacing old inefficient electric motors with new highly energy efficient motors. (b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy 1. It is proposed to improve final steam temperature of TBW Boiler to improve the specific steam consumption of Turbine by modifying the flue gas path towards the Super Heater Coils. 2. Modification in under bed Biogas Firing System is proposed for CBL Boiler to improve the capacity of Biogas utilization through under bed burners in CBL Boiler. 3. To run two K- 09 machines with one oven with modification in out feed conveyors of both Machines. By doing this we can save power consumption (160 KW), one oven cost & better utilisation of space at Bahdurgarh bottle printing Unit. 4. After having successful trail of replacement of Cooling Tower Aluminum Casted fan blades to Aerodynamically designed FRP blades and Hub Assembly at Old Cooling Tower in RDL it proposed to Replace at all the Cooling Towers IN RDL & GSP Plants. (c) Impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods. 1. By improvement of Power factor through installation of capacitor bank in substation saving of approximate Rs. 2.5 lacs in year 2008-09 & estimated saving potential for next year is Rs. 6.00 Lacs. 2. By reducing the Turbine frequency from 50.4 Hz to 49.5 Hz, the estimated saving potential for the next year is expected to increase further by Rs. 20.00 Lacs. B. Technology Absorption: Process Improvement : 1) Increase in the alcohol % in fermentation house by improving the process parameters in the liquefaction & saccharification process regarding DS & Starch % & maintaining highest standards of hygienic condition at fermentation house resulting in better fermentation efficiency and higher production. 2) Optimised impure cut to 3.5% saving approx.59.04 lac for the year 2008-09 while it is planned to bring it below for 2.0% in the next financial year resulting in further increase in saving. 3) Reduced steam consumption in grain spirit process while it is proposed to bring it down further in the next year. Also reduced steam consumption in molasses Spirit process saving approx. 25.53 lac for the year 2008-09. 4) Reduced power consumption in grain Spirit production process resulting in total saving of approx. Rs. 102.49 lac for the year 2008-09. C. Foreign Exchange earning and outgo: Particulars of earnings and outgo of foreign exchange are given in Notes on Accounts in Schedule 20 (i) of the accounts.

Sd/- Place : New Delhi Dr. Lalit Khaitan Date : 30 June 2009 Chairman & Managing Director

1 Radico--22-32.p65 28 8/9/2009, 11:13 AM MANAGEMENT DISCUSSIONS AND ANALYSIS FOR THE YEAR 2008-09

GLOBAL SPIRITS MARKET OVERVIEW Australia - With a strong bias towards beer and wine, With stagnating growth in developed markets, emerging this market continues to suffer from a lack of interest in markets like India will serve as the stimulant for global alcohol spirits consumption. GLOBAL SPIRITS MARKET OUTLOOK Key Trends in the Global Spirits Market, Global Spirits Sales Branding and product innovation growing in importance Trend Growth despite constraints The spirits market is in a transitional phase, with many Forcast global spirits sales by volume (2008-2012) emerging trends that are reshaping the global spirits market The global spirits market is forecasted to show growth from landscape and forcing producers to constantly change and 2008 to 2012. Stricter regulations to curb drink-driving and tailor their strategies on various geographic, demographic excessive drinking will negatively affect sales. However, as and cultural lines. manufacturers continue to introduce new products and Increasing sales of alcohol through supermarkets/ promote brands targeted at capturing the interest of fashion- hypermarkets conscious younger consumers and new, contemporary drinking trends, volume sales is likely to continue to grow. The growing strength of supermarkets/hypermarkets are Furthermore, consumer's increasing sensitivity to status helping these mega-retailers establish themselves as the associated with brands will bolster the trend towards major channel of distribution for alcoholic beverages as well premiumisation. This is expected to contribute to increasing as spirits. value of sales. MARKET OVERVIEW BY REGION INDIAN INDUSTRY STRUCTURE AND OVERVIEW North America - One of the most premium spirits region The Indian Spirits Industry is poised for robust growth ahead, in the world in terms of consumer spend on per unit of riding on the underlying macro-economic scenario. The spirits. Growth is driven by increase in consumption in current slowdown hiccups notwithstanding, the India growth younger consumers as a result of successful marketing story is very much alive and kicking. and innovation by manufacturers who positioned spirits as a fashionable alternative. Growth in sale value was This is especially true of the IMFL (India Made Foreign Liquor) achieved due to a shift towards premium products. segment, which is set to see a surge in consumption in the next few years. While the spirits industry is set for strong growth Latin America - One of the fastest growing segments in across all categories -- with whisky, rum and brandy expected terms of value. Heightened economic activity in the region to grow in double digits despite their large base - smaller has doubled the Latin American market size over the last segments like vodka are likely to rise meteorically at about five years. This growth has primarily been led by sale of 25% in volume over the period 2009-2011. high value spirits with volume consumption growing by The whisky segment, which currently accounts for 57.8% by c. 22% during 2003-2008. volume (FY09), will continue as the market leader and is Western Europe - Market maturity and a shift towards expected to grow rapidly in view of premiumisation and finer lower alcohol content products due to increased health slicing within the segment. awareness led to stagnant volume sales in this region. HOW THE INDIAN ALCOHOLIC BEVERAGES However, the development of a trend towards premium MARKET IS SPLIT products led to robust growth in sales value. The Indian liquor industry can be broadly classified into five Eastern Europe - Eastern Europe witnessed decline in major categories: IMFL, beer, bottled at origin, wine and volume sales of spirits but in value of the spirits sale country liquor. increased over the period 2003-2008. This has been led by increasing shift towards premium segment The country liquor segment, which has for long dominated the market and is still the largest at about 225 million cases, Africa and Middle East - This region remains the smallest has been stagnant over the past couple of years. This segment market for spirits and is dominated by South Africa since is expected to either remain stagnant or decline as the growing consumption in other areas of this region suffer from low economic prosperity across India is making more and more levels of income, poor distribution systems and religious people trade up to IMFL on a more regular basis. beliefs (Islam prohibits consumption of alcohol) On the contrary, the IMFL segment has registered a volume Asia-Pacific - By far the largest spirits market in the world CAGR of 12% over the past five years and is the fastest in volume terms, accounting for nearly half of global sales. growing and most profitable segment in the alcoholic The size of the spirits market in this region is driven mainly beverages industry. Another important trend witnessed in this from the popularity of inexpensive, local products. In line segment is the premiumisation in brandy, whisky and vodka - with the global trend of consumers moving towards accounting for both value and volume growth in the segment. premium spirits, Asia-Pacific also witnessed c. 60% value growth and c. 10% volume growth in spirits The IMFL market's rapid growth is a result of several factors,

1 Radico--22-32.p65 29 8/9/2009, 11:13 AM including the overall economic growth, increase in population In addition to the demographic and economic factors, several of the young, easier availability of liquor at a growing number soft factors such as the growing acceptability of consuming of retail points, increase in on-premise consumption, transition alcohol in the Indian society in the wake of globalization; of liquor consumption from an addictive or male viewpoint greater social acceptability of drinking among women; and into a broader milieu of social drinking, rise in female more exposure of the youth and urban residents to western participation, product innovation, consumer specialization, media and lifestyle will help boost demand for liquor products and increasing restrictions on country liquor. in the country. Another key factor in the growth of IMFL is the provisioning of The market scenario is also conducive for growth of the liquor consumer items for armed forces by the Government of India's industry, which has been witnessing hectic merger and Canteen Stores Department (CSD). Liquor, especially rum, is acquisition activities for the past few years. The M&As are a major item among provisions. Rum is consumed by defence consolidating the industry structure and benefiting the market personnel. Radico is a prominent player in this segment. as a whole. It may be noted that there are high entry barriers for As per a WTO agreement, the Government of India has lowered introduction in the CSD market. For one, extensive screening import duties on liquor, which has led to introduction of some makes entry of a player very difficult. And even though CSD global liquor brands in India. Prices of imported super premium offers lifetime registration, brands have to maintain a certain liquors and scotch have also come down. This has resulted in value/volume. better choice for consumers, particularly at higher prices. KEY DRIVERS FOR GROWTH OF LIQUOR OUTLOOK FOR THE INDIAN SPIRITS INDUSTRY CONSUMPTION IN INDIA The outlook for the industry continues to remain robust, with Economic expansion and increasing urbanization is driving further move towards premiumisation. Since the Indian the emergence of a larger middle class that increasingly consumer is aspirational, consumption is fast moving to appreciates and is willing to pay for premium goods and premium segments across all product categories and flavours. services, including high-end spirits. The current demographic profile and increased spending India is one of the fastest growing economies in the world, power will drive the transition to whisky. At present, whisky is with GDP growth of 9% in 2007-08 and an impressive-despite- the biggest sub-segment in IMFL and will continue to be slowdown rate of 6.79% in 2008-09. With a stable government prominent in the next few years, with premium whisky at the centre and further liberalization of the economy, the witnessing major growth. Another trend in the whisky market GDP growth over the next five years can reasonably be is the continued shift from molasses-based to grain-based expected to be around 8% to 9%. products. Besides, whisky will move to a demand pull, with a greater role for branding and attractive packaging. The economic growth is leading to higher per capita income and a growing proportion of the 'consuming class' in the In the Vodka category, there will continue to be a meteoric overall population. The per capita income has increased from growth - on account of a smaller base as well as the changing US$450 in FY01 to an estimated US$781 in FY09. The number tastes of the Indian youth, who is more receptive to different of middle-high income households in the country is likely to types of alcoholic beverages. With innovative packaging and double during the next decade. marketing, coupled with the fact that there are inbuilt product benefits greatest of them being mix ability and hence can be We expect the growth in per capita income to increase the used in a variety of cocktails, Vodka is appealing to an ever disposable income at a much higher pace than the GDP wider audience (across men and women). growth, boosting demand for lifestyle products, including premium alcoholic beverages. The brandy sub-segment grew at 102% in FY08 (semi- premium brandy). This strong growth is expected to continue The demographic mix of India's population also points to the in premium brandy as it is considered aspirational. The rum high potential for growth of the IMFL segment. More than 60% category, too, will continue to appeal to a growing section of of India's population is in the age group of 15-45 years. While people and maintain its stronghold in the defence segment. nearly 850 million people come under the drinking age (the legal age for consumption of alcohol varies in India from 18- Overall, the liquor industry in India is set for high-spirited times 25 among various states), another 100 million are likely to be ahead. added to this target population in the next five years. Following BUSINESS STRATEGY: these favourable demographics, the demand for alcoholic beverages is set to rise in the country. The company would remain as a focussed and preferred quality product provider. Company’s aim is to gain significant Another statistic that indicates further growth potential of the market share in brown spirit and fastest growing white spirit Indian market is the fact that the per capita consumption of segments in the semi premium and premium category. alcoholic beverages in India is one of the lowest in the world Innovation in product launch by doing extensive cosumer (at 0.86 litre, India was ranked 150th among 184 countries as and market reaserch to meet growing aspiration of the young per a World Health Organisation Report on Alcohol in 2004). consumers is our special forte and same shall get further This may have increased marginally at present, but even a demonstrated in future by launch of more quality brands at small further increase in per capita consumption could various price points. Our vision is to consolidate our market significantly alter industry growth, given the large population share and achieve sale volume of more 20 Million c/s by base and the new additions to the drinking age population. 2010-11. Company shall fully capitalize on its strong pan

1 Radico--22-32.p65 30 8/9/2009, 11:13 AM India distribution net work & manufacturing network of five INTERNAL CONTROL SYSTEMS AND THEIR owned & thirty contract manufacturing units across the ADEQUACY: country. The Company has put in place adequate internal control We hope to build a strong portfolio of brands in all the preferred systems and procedures at all levels. Internal Control Systems categories to create value for all our stake holders. Thrust for are continuously strengthened through an ongoing review export shall be given in the continents like Africa, South East through highly qualified and experienced professionals in all Asia & Europe. fields including technical. The report of Internal audit is regularly discussed with the management and corrective KEY INITIATIVES UNDERTAKEN: measures, wherever required, are taken and continuously monitored. The management is reasonably satisfied about The business has become more robust .In the last year, the adequacy of these internal control systems. company has taken several measures on cost optimization, value engineering overhead control and has put the best The Audit Committee of the Board meets regularly to review management practices. We have adequate manufacturing the adequacy of internal controls, internal audit findings with infrastructure in place to take the benefit of increased volumes action taken reports and to advise the management with the in the coming years. corrective policies to be adopted by the company, if necessary. HUMAN RESOURCE AND INDUSTRIAL REVIEW OF OPERATIONS: RELATIONS: During the year, the company achieved sales of Rs. 6960 The Company is putting unremitting efforts to employ million from its own operations. The sales of the company's professionally qualified personnel in different hierarchy of products through arrangements with other distilleries / bottling administration. Further, requisite training is given to employees units spread all over the country stood at Rs. 2366 million for at different levels by identifying the needs. the year 2008-09. The Company has an extremely low labor turn over and The company's latest brand launch Magic Moments Vodka, continues to enjoy a healthy and productive relationship with in a brief span of around 24 months, have already become its employees. one of the fastest growing liquor brand in India with more There are no financial or commercial transactions that can than 41% sales growth over previous year. have a potential conflict of interest between personnel in the The company continues to strengthen its position as a major management and the Company. player in Indian liquor industry. OPPORTUNITIES AND THREATS: AWARDS AND RECOGNITIONS: The liquor industry is a regulated and highly taxed industry. Since, excise duty on liquor is a State subject, multiplicity of Awards received by Magic Moments Vodka in 2008: laws and regulations legislated by different State • Monde Selection 2008 governments, have contributed to an environment with • Magic Moments Vodka - Gold Medal different requirements across different states. • International Spirits Challenge 2008 The liquor market is growing rapidly owing to favorable • Magic Moments Remix Orange Vodka-Silver Medal demographics and rapid economic growth. With over 50% of • International Wine & Spirits Competition 2008 country's population below 25 years of age, the long term • Magic Moments Vodka- Silver outlook for liquor consumption in India is positive. Increasing • Magic Moments Flavoured Orange Vodka- Silver social acceptance of liquor consumption and greater western • Magic Moments Flavoured Green Apple Vodka influence have combined with rising disposable incomes in Silver (Best in Class) the hands of the population to drive a substantial pull in demand for IMFL. Exposures to western culture and habits • Magic Moments Vodka- Best Packaging Innovation- through electronic media have contributed to the changed Alcobev-2008 scenario. Awards received by Magic Moments Vodka in 2009: India's per capita consumption of alcoholic beverages is one • Monde Selection 2009 of the lowest in the world. According to industry data, per • Magic Moments Premium Grain Vodka - Gold Medal capita consumption of 'Indian made foreign liquor' (IMFL) is • Magic Moments Flavored Green Apple Vodka - 0.8 litres / p.a. compared with the global alcohol beverage Bronze consumption average of 3.1 litres / p.a. Even a small increase • Magic Moments Flavored Lemongrass & Ginger in per capita consumption could positively and significantly Vodka - Gold alter the growth of the Indian industry, given its large population base. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: The key drivers for growth of the company in future would be launching of new brands and increase in the volumes in The details of the financial performance of the Company are various markets, acquisitions of brands and creation of own appearing in the Balance Sheet, Profit & Loss Account and production facilities for bottling, major thrust to exports other financial statements attached with these accounts. including bottling arrangements abroad, driving operational Please refer to the Directors' Report for highlights. efficiencies and expanding spirit capacities.

1 Radico--22-32.p65 31 8/9/2009, 11:13 AM RISK AND CONCERNS/OPPORTUNITIES AND Factory to contain this risk. Recently, Company has also got THREATS price increase in some of the Key states for its IMFL products INDUSTRY RISK to protect its margins. Liquor business in general is not sensitive to the overall GEOGRAPHIC RISK economic environment. India is amongst the lowest per capita Company’s business is well diversified and multi locational consumer of Alcoholic beverages. Favourable demographies, and as such there is no specific geographic risk, which the increasing prosperity coupled with disposable income augur Company faces. Company is making all out efforts to improve well for the future of Industry. With Aam Admi focus of the its export performance in the coming years. Central Govt, the rural economy is going to see growth in the CURRENCY RISK coming years, which would translate into more spending power of the consumer thus benefiting the Industry in the Your company also has a portfolio of foreign currency debt, long term. Increasing consumer awareness through in respect of which it faces exposure to fluctuations in currency electronic media and desire for higher levels of standard of as well as interest rate risk. The company adheres to sound living is also propelling demand for premium products. risk management practices for its forex exposure. Due to WTO commitments, Central Govt has been consistently CAUTIONARY STATEMENT: reducing the custom duties on Bottled in Origin spirits(BIO) . Statements in this Management Discussion and Analysis However the same is somewhat cushioned with State describing the Company's objectives, projections, estimates Governments levying counterveiling duties on Bottled in and expectations may be forward looking statements within Origin products, thus offering some measure of protection the meaning of applicable laws and regulations. Actual results for the domestic Industry. Since these BIO products are in might differ substantially or materially from those expressed the higher MRP range, hence our Company is not likely to or implied important developments that could affect the face any major risk. Company's operations include unavailability of finance at Industry also suffers from high levels of duties and taxes, which competitive rates - global or domestic or both, reduction in is evident from the fact that for every bottle of liquor, which is number of viable infrastructure projects, significant changes sold from a retail outlet, almost two third goes to the exchequer in political and economic environment in India or key markets in the form of various levies. Despite this, the industry is abroad, tax laws, litigation, exchange rate fluctuations, interest growing at a steady pace of around 10% every year. and other costs. Higher prices of Molasses , a key input for producing spirit, is one of the risk factor. Lower Cane acerage due to drought For and on behalf of the Board conditions in some part of the UP has affected the Sugar Production with corresponding effect on Molasses output. Sd/- Company has been constantly monitoring the situation and Place : New Delhi Dr. Lalit Khaitan has installed a Dual feed Grain Spirit Plant at its Rampur Date : 30 June, 2009 Chairman & Managing Director

1 Radico--22-32.p65 32 8/9/2009, 11:13 AM Corporate Governance Report for the year 2008-2009

A. COMPANY’S PHILOSOPHY ON THE CODE OF GOVERNANCE:

Radico philosophy of Corporate Governance is aimed at safeguarding and adding value to the interest of the various stakeholders of the Company including shareholders, lenders, employees and public at large. Emphasis is laid on striking a balance between individual interests & corporate goals while operating within accepted norms of propriety, equity, fair plan and sense of justice. Under good Corporate Governance we are committed to ensure that all functions of the Company are discharged in a professionally sound, accountable and competent manner.

Over the years, governance processes and systems have been strengthened at Radico. In addition to complying with the statutory requirements, effective governance systems and practices towards improving transparency, disclosures internal controls and promotion of ethics at work place have been institutionalised.

Keeping in line with the above philosophy, the company has implemented the requirements of the code of corporate governance, as stipulated in clause 49 of the listing agreement. Given below are the requisite information relating to corporate functions of your company for the purpose of due transparency on this aspects.

B. BOARD OF DIRECTORS:

(a) Composition, Meetings and Attendance during the financial year 2008-2009:

During the year 2008-2009, the Board of Directors of Radico Khaitan Ltd. comprised of eight Directors. Dr. Lalit Khaitan, an Executive Promoter Director, who was the Managing Director of the Company, was the Chairman of the Board. During the said period, out of eight Directors, five Directors were Non-executive Independent directors, being more than half of the Board. As on 31.03.2009, the total numbers of Independent directors were five. The composition of the Board of Directors met the stipulated requirements of the Clause 49 of the Listing Agreement.

During the financial year 2008-2009, six Board Meetings of RKL were held on 29.05.2008, 30.06.2008, 30.07.2008, 31.10.2008, 6.1.2009 and 31.1.2009.

The Board of RKL was presented with all relevant information well in advance before each meeting on various matters affecting the working of the Company, as well as those that require deliberation at the highest level.

2 Radico-33-47.p65 33 8/9/2009, 11:13 AM The Board’s composition and categories were as under: -

Sl. Category Name No. of No. of Board No. of Whether Shares No. Director- Committee Board attended held ships Memberships Meetings last in other in other attended AGM companies companies Number %

1. Executive Dr. Lalit Khaitan Nil Nil 4 No 234295 0.23 Promoter Chairman & Managing Director

2. Executive Mr. Abhishek Khaitan Nil Nil 5 No 86065 0.08 Promoter Managing Director

3. Executive Non Mr. K.P. Singh 1 Nil 3 Yes Nil - Independent Whole time Director

4. Non-executive Mr. K.S. Mehta 11 Nil 3 No Nil - Independent Chartered Accountant

5. Non-executive Dr. Raghupati Singhania 8 Nil 1 No Nil - Independent Industrialist

6. Non-executive Mr. Ashutosh Patra Nil Nil 6 No Nil - Independent Solicitor & Legal Expert

7. Non-executive Mr. Sanjay Jalan Independent Chartered Accountant Nil Nil 6 No Nil -

8. Non-executive Mr. Amit Burman Independent Industrialist 5 Nil 1 No Nil -

(1) Private Limited Companies, Foreign Companies and companies under Section 25 of the Companies Act, 1956 are excluded for the above purposes. (2) Only Audit Committee and Shareholders’ Grievance Committee are considered for the purpose of Committee position as per Listing Agreement. (3) None of the Directors was a Member in more than 10 Committees nor a Chairman in more than five Committees across all companies in which he was a Director.

(b) Code of Conduct for Board of Directors and Senior Management Personnel:

The Board had at its meeting held on July 29, 2005, approved the Code of Conduct for Board of Directors and Senior Management Personnel of the Company.

This code has been displayed on the Company’s website viz. www.radicokhaitan.com

The Non-executive directors had no pecuniary relationship or transactions with the Company in their personal capacity during the financial year 2008-2009.

2 Radico-33-47.p65 34 8/9/2009, 11:13 AM (d) Details of remuneration to all the directors in the financial year 2008-2009:

(1) Executive Directors: - (Rs. in lacs) Sl. Name of Director Salary Commission Perquisites and Retiral Stock Tenure No. Allowances Benefits* Options** 1. Dr. Lalit Khaitan 142.50 NIL 29.84 32.40 NIL 5 Years 2. Mr. Abhishek Khaitan 114.00 NIL 26.00 25.92 NIL 5 Years 3. Mr. K.P. Singh 46.89 NIL 17.07 7.06 70000 5 Years * Contributions to Provident Fund and Superannuation Fund. ** Will be granted over the period of 4 years, 33% granted in 1st year, 22% granted (during the year) and balance 44% equally in next 2 years. (2) Non-Executive Directors: Sl. No. Name Sitting Fees (in Rs.) 1. Mr. K.S. Mehta 30,000/- 2. Mr. Ashutosh Patra 1,60,000/- 3. Dr. Raghupati Singhania 10,000/- 4. Mr. Sanjay Jalan 1,60,000/- 5. Mr. Amit Burman 10,000/-

Non-executive directors were paid sitting fees of Rs.10,000/- for attending each meetings of the Board and Committees thereof and reimbursement of local conveyance. Non executive directors were not paid any amount by way of salary, perquisites and other benefits including stock options except the above mentioned sitting fees. (3) Reappointment of Directors retiring by rotation: Mr. Sanjay Jalan and Dr. Raghupati Singhania retire by rotation at the ensuing Annual General Meeting of the Company and being eligible offers themselves for reappointment. A brief resume of Directors seeking appointment / re-appointment in the forthcoming AGM in terms of Clause 49 VI (A) of Listing Agreement is given below:

Name Mr. Sanjay Jalan Mr. Raghupati Singhania Date of Birth 18.04.1966 08.12.1946 Date of Appointment 28.01.2003 28.01.2003 Expertise in special functional areas Expert in the field of Finance & Accounts Industrialist with over 32 years of experience

Qualifications B. Com, F.C.A. B.Sc. FBIM (LON), F.Ins.D (LON)

List of outside directorship as on NIL (1) Fenner (India) Ltd. 31st March, 2009 (2) JKI Employees Welfare Association Ltd. (3) J.K. Tyre & Industries Ltd. (4) J.K. Lakshmi Cement Ltd. (5) J.K. Agri Genetics Ltd. (6) D.CM. Engineering Ltd. (7) Henry F. Cockill & Sons Ltd. (8) Bengal & Assam Company Ltd. Chairman / Member of the other Nil J.K. Lakshmi Cement Ltd. companies as on 31st March, 2009 No. of shares held Nil Nil

2 Radico-33-47.p65 35 8/9/2009, 11:13 AM (3) None of the Directors was a Member in more than 10 Committees nor a Chairman in more than five Committees across all companies in which he was a Director.

C. COMMITTEES OF THE BOARD DURING THE FINANCIAL YEAR 2008-2009: (1) AUDIT COMMITTEE: The Audit Committee of the Board of Directors of RKL was constituted in conformity with the requirements of Clause 49 of the Listing Agreement, as well as Section 292 A of the Companies Act, 1956. The terms of reference and the role of the Audit Committee was to overview the accounting systems, financial reporting and internal control of the Company. The power and role of the Audit Committee were as set out in the Listing Agreement and Section 292A of the Companies Act, 1956. (a) Composition, Name of Members and Chairperson, meetings and attendance during the year:

Sl. No. Name Chairman/Member/Others No. of meetings Attended 1. Mr. Sanjay Jalan Chairman of the Committee 6 2. Mr. Ashutosh Patra Member 6 3. Mr. Raghupati Singhania Member - Permanent Invitees: 4. Mr. Mukesh Agarwal Internal Advisor 5. Representatives of M/s. V. Sankar Aiyar & Co., External Auditors Chartered Accountants 6. Mr. S.N. Balasubramanian Cost Auditors

(b) All members of the Audit Committee are Independent, Non executive directors. By definition both Mr. Sanjay Jalan and Dr. Raghupati Singhania shall be considered to be persons having Accounting or related Financial Management expertise and Mr. Ashutosh Patra being a Legal expert, shall be considered as financially literate. (c) Six Audit Committee Meetings were held during the year. i.e. on 29.5.2008, 30.6.2008, 30.7.2008, 31.10.2008, 22.1.2009 and 31.1.2009. (d) The meetings were scheduled well in advance. In addition to the Members of the Audit Committee, the meetings of Audit Committee were attended by Heads of Finance and Internal Auditors, Statutory Auditors and Cost Auditors and other Executives, who were considered necessary for providing inputs to the Committee. (e) Quorum: Two independent Directors. (f) Secretary to the Committee: The Company Secretary acted as the Secretary to the Committee. (2) NOMINATION COMMITTEE: Nomination Committee of the Board of Directors of RKL was constituted in order to lay down the guidelines for appointment / reappointment of Directors on the Board of the Company. (a) Terms of reference: • To lay down the criteria/ guidelines for the appointment/ re-appointment of the Directors on the Board of Radico Khaitan Ltd. and deciding about the age limit, professional qualifications and experience, credentials and background etc. • To recommend the induction of the Board Members to various committees. • To decide about the sitting fees to be paid to the Directors for attending the Board Meetings and Committee Meetings from time to time. • To scrutinize the candidature of various professionals/ experts and recommend their appointment/ reappointment to the Board from the point of view of inducting new Directors and raising the profile of the Board.

2 Radico-33-47.p65 36 8/9/2009, 11:13 AM (b) Composition, Chairman, Meetings and Attendance during the year 2008- 2009: The Nomination Committee consisted of the following Members: -

Sl. No. Name Chairman/Member/Others 1. Dr. Lalit Khaitan Chairman 2. Mr. Ashutosh Patra Member 3. Mr. K.S. Mehta Member (c) No meeting of the Committee was held during the year. (d) Quorum: Two Directors. (3) SHAREHOLDERS’ GRIEVANCES COMMITTEE: Shareholders’ Grievances Committee of the Board of Directors of RKL was constituted to look into the redressal of shareholders and investors complaints. (a) Terms of Reference: The Terms of Reference of Shareholders’ Grievances Committee included investigation into any matter relating to redressal of shareholders’ / investors’ complaints pertaining to transfer of shares, non-receipt of Balance Sheet, non receipt of declared dividend, duplicate share certificates, dematerialisation / rematerialisation of shares etc. (b) Composition, Chairman, Meetings and Attendance during the year 2008-2009: The Shareholders Grievances Committee was composed of the following directors:

Sl. No. Name Chairman/Member No. of meetings attended 1. Mr. Ashutosh Patra Chairman 4 2. Mr. Sanjay Jalan Member 4 3. Mr. K.P. Singh Member 2 (c) Four meetings of the Committee were held during the said year on 29.5.2008, 30.7.2008, 31.10.2008 and 31.1.2009. (d) Quorum: Two Directors. (4) COMPENSATION COMMITTEE: a) Terms of Reference: The Terms of Reference of Committee of Directors included grant of stock options to the eligible employees, allotment of shares to employees on exercise of their stock options, ratifying the compensation to Executive Directors etc. b) Composition as of March 31, 2009

Sl. No. Name Chairman/Member No. of meetings attended 1. Mr. Ashutosh Patra Chairman 1 2. Mr. Sanjay Jalan Member 1 3. Mr. K.P. Singh Member 0

c) One meetings of the Committee was held during the year on 31.10.2008. (5) NAME AND DESIGNATION OF THE COMPLIANCE OFFICER: Dr. Arun Mohan Bansal Head – Legal & Company Secretary Radico Khaitan Limited Plot No. J-1, Block B-1, Mohan Co-operative Industrial Area, Mathura Road, New Delhi – 110 044. Tel. Nos. 40975400/444/500/555, Fax Nos.41678841-42 Email: [email protected]

2 Radico-33-47.p65 37 8/9/2009, 11:13 AM (6) SHAREHOLDER SERVICES, ENQUIRIES, COMPLAINTS: It is the endeavor of the Company to provide prompt, efficient and satisfactory services to its esteemed Shareholders. It takes special care in answering the queries of Shareholders within the shortest possible time frame in collaboration with the registrars M/s. Mas Services Ltd. The Company provided Shareholder services in the following time frame: -

Sl. No. Nature of Query No. of days for disposal 1. Share Transfers 15 days 2. Demat of Shares 15 days 3. Dividend revalidation/issue of Dividend Drafts 7 days 4. Change of Address/Bank Mandate 2 days 5. General queries 2 days

(7) No. of shareholders complaints received during the year 2008-2009: 38 (8) Total no. of complaints not resolved to the satisfaction of the shareholders: NIL (9) No. of pending Shares Transfers as on 31st March 2009: NIL (10) Warning against Insider Trading: Comprehensive guidelines advising and cautioning the Management and staff on the procedure to be followed while dealing with the shares of Radico Khaitan Ltd. are in place, in light of SEBI (Insider Trading) Amendment Regulations, 2002. The Code of Conduct and corporate disclosure practices framed by the company helps in ensuring compliances with the said Regulations. Distribution of Investors’ Communication received by the Company during the Financial year 2008-09

D. GENERAL BODY MEETINGS: GENERAL BODY MEETINGS OF RKL: (a) Annual General Meetings (last three):

Sl. No. Date of AGM Location Time No. of special resolutions passed 1. 25.09.2006 Rampur Distillery, Bareilly Road 12 noon NIL Rampur – 244 901 (U.P.) 2. 26.09.2007 -do- 12.30 p.m. NIL 3. 30.09.2008 -do- 12.30 p.m. 2

2 Radico-33-47.p65 38 8/11/2009, 12:09 PM (b) No Postal Ballots were used / invited for voting in above meetings. (c) It is not proposed to pass any special resolution by Postal Ballot in the forthcoming Annual General Meeting of the Company. E. DISCLOSURES: (a) Related party transactions: The Company has not entered into any transaction of material nature with promoters, directors or the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the Company at large. Disclosure of related party transactions as per Accounting Standard – 18 is given in Note No.13 of Notes forming part of Annual Accounts. All the transactions covered under related party transactions were fair, transparent and at arms length. (b) Compliances by the Company: The Company has complied with the requirements of the Stock Exchanges, SEBI and other statutory authorities on all matters related to capital markets during last 3 years. There were no non-compliance remarks by Stock Exchanges or SEBI or any statutory authority on any matter relating to capital markets during the last three years. F. MEANS OF COMMUNICATION: (a) Quarterly Results: • Quarterly results of RKL were taken on record by the Board of Directors within one month of the close of the quarter and were submitted to the Stock Exchanges in terms of the requirements of the Clause 41 of the Listing Agreement. • Quarterly results of RKL have been displayed on the Company’s web site www.radicokhaitan.com • Quarterly results taken on record and published in the newspapers during 2008-2009:

Quarter ended Date of Board Date of Publication in Newspapers Meetings Business Standard (English) Amar Ujala (Hindi) New Delhi edition Moradabad edition

30th June, 2008 30.07.2008 31.07.2008 01.08.2008 30th September, 2008 31.10.2008 01.11.2008 02.11.2008 31st December, 2008 31.01.2009 02.02.2009 02.02.2009 (b) Abstract of the terms of variation in remuneration of and re-appointment of Dr. Lalit Khaitan, Chairman & Managing Director, Mr. Abhishek Khaitan, Managing Director and Mr. K.P. Singh, Whole time Director of the Company were circulated to the Members pursuant to the provisions of Section 302 of the Companies Act 1956. (c) Presentations were made to institutional investors / analysts during the year 2008-2009 about the activities of the Company and its financial performance. Corporate presentation is displayed on the Company’s website. (d) Management Discussion and Analysis Report for the year 2008-09 has been reviewed by the Audit Committee at its meeting held on 30.06.2009 and approved by the Board at its meeting held on 30.06.2009 and forms part of the Annual Report. G. GENERAL SHAREHOLDER INFORMATION (a) Annual General Meeting: 15th September, 2009 at 12.30 p.m. at Rampur Distillery, Bareilly Road, Rampur – 244 901(U.P.). (b) Financial calendar for 2009-2010: (i) Proposed Board Meetings for taking on record quarterly financial results in the year 2009-2010.

Quarter ending 3rd/4th week of June 2009 July, 2009 September 2009 October, 2009 December 2009 January, 2010 March 2010 May, 2010 (Audited)

2 Radico-33-47.p65 39 8/9/2009, 11:13 AM (ii) Book Closure dates: September 8, 2009 to September 15, 2009 (both days inclusive). (iii) Dividend payment date: On or before October 14, 2009. (c) Listing on Stock Exchanges and Stock Codes: The Equity shares of RKL continue to be listed on the following Stock Exchanges with following stock codes:

Sl. No. Stock Exchange where listed Stock Code / Symbol 1. Bombay Stock Exchange Ltd.(BSE) 532497 2. National Stock Exchange of India Ltd. (NSE) RADICO

The listing fees for the year 2009-2010 to BSE and NSE has been paid in the month of April 2009. (d) Market Price Data: Performance of RKL shares at Bombay Stock Exchange Ltd. and National Stock Exchange of India Ltd.:

Year Mumbai Stock Exchange National Stock Exchange 2008-2009 Price (Rs.) Price (Rs.) High Low Volume High Low Volume

April, 2008 118.70 100.00 2184679 118.55 105.00 2763147 May, 2008 113.25 104.70 885701 113.00 104.50 1216564 June, 2008 109.00 80.25 594453 109.90 81.55 799679 July, 2008 108.40 74.00 1548284 95.85 71.00 2210456 August, 2008 81.90 68.25 2121739 82.40 68.30 2193571 September, 2008 72.45 56.80 5307093 72.85 52.95 5152795 October, 2008 64.75 49.35 2290972 64.95 49.60 3189221 November, 2008 62.00 53.80 2081767 62.45 54.10 2232013 December, 2008 73.05 53.00 1489817 73.90 53.40 2148117 January, 2009 76.85 64.20 2482139 78.00 64.10 3044726 February, 2009 72.25 54.00 4158480 72.80 54.20 5645165 March, 2009 69.80 54.50 2233956 69.80 51.20 2803434

Performance of RKL Scrip vis-a-vis BSE Index

2 Radico-33-47.p65 40 8/9/2009, 11:13 AM The shares of RKL are traded in the B1 category at BSE and are also actively traded on NSE.

(f) Registrar and Transfer Agents: In terms of the SEBI Order no. D&CC/FITTC/CIR-15/2002 dated December 27, 2002 for having a common agency for share transfer work and electronic connectivity and in terms of the directive of the Stock Exchanges, the company had appointed M/s. Mas Services Ltd., T-34, 2nd Floor, Okhla Industrial Area, Phase-2, New Delhi - 110 020, as the Registrar and Share Transfer Agents of the Company since March, 2003. For the sake of the convenience of the investors / shareholders, the Company shall continue to receive requests for share transfers and Demat of shares at its Corporate office at New Delhi.

(g) Share Transfer System: With a view to expedite process of share transfer, the Board of Directors has delegated the power of share transfer to Dr. Arun Mohan Bansal, Head – Legal & Company Secretary or Mr. Amit Manchanda, AGM – Legal & Secretarial, who have been authorised by the Board to supervise and approve share transfer / dematerialisation of the shares of the company and to sign endorsement on the reverse of the share certificates documents and other papers in relation thereto in conjunction with Registrar and Share Transfer Agent, M/s. Mas Services Ltd. The Company Secretary being the Compliance Officer, monitors the share transfer process in coordination with the Registrars and Share Transfer Agents and presents the report to the Company’s Board in each of its meetings, wherein the Board ratifies the transfers/ dematerialisation of shares as approved by the Company Secretary. The transfers are processed at an interval of every 15 days.

(h) Distribution of Shareholding of RKL as on 31st March, 2009:

Share Holding of Nominal Value of Shareholders Shares % Total Rs. Rs. Number % to Total Physical Dematerialised Total % to shares shares shares Total Upto 2500 31272 92.93 3230176 5573474 8803650 8.59 2501 5000 1525 4.53 912340 1884561 2796901 2.73 5001 10000 563 1.67 483415 1509388 1992803 1.95 10001 20000 157 0.47 132945 976566 1109511 1.08 20001 30000 26 0.08 21700 297643 319343 0.31 30001 40000 15 0.04 48050 212288 260338 0.25 40001 50000 7 0.02 – 161456 161456 0.16 50001 100000 25 0.07 31620 917298 948918 0.93 100001 ABOVE 63 0.19 – 86069299 86069299 84.00 Total 33653 100.00 4860246 97601973 102462219 100.00

2 Radico-33-47.p65 41 8/9/2009, 11:13 AM (i) Shareholding Pattern as on 31st March, 2009:

Sl. No. Category No. of Shares % of Holding

1. Promoters 49879231 48.68 2. Mutual Funds & UTI 12314125 12.02 3. Insurance Companies, Banks, State Financial Corporation 709265 0.69 4. FIIs 13151400 12.83 5. Private Corporate Bodies 8380204 8.18 6. Indian Public 16657276 16.26 7. NRIs/OCBs 1338547 1.31 8. Others 32171 0.03 Total 102462219 100.00

(j) Dematerialisation of Shares: The Company’s shares are tradable only in demat / electronic form in the depository system of National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL). As on 31st March, 2009, 9,76,01,973 equity shares of the Company, amounting to 95.26% of the equity capital, already existed in the electronic form.

Those shareholders who have still not got their shares dematerialised are advised to do so, as soon as possible, in view of a many advantages that exist therein and mandatory trading in shares of the Company in Demat form only.

(k) International Security Identification No.: NSDL and CDSL – INE944F01028

(l) Outstanding GDRs / ADRs / Warrants or any Convertible instruments, conversion date and likely impact on equity:

(a) The company has raised USD 50 million through an issue of FCCBs on 26th July 2006 (USD 40 million) and 25th August 2006 (USD 10 million on exercise of green shoe option). The FCCBs are convertible into equity shares of the company at the option of the bondholder at a conversion price of Rs.159.20 per shares (original conversion price being Rs.172.50 reset on 6th August 2008 pursuant to clause 6.4 of the subscription agreement). The FCCBs carry a coupon rate of 3.50% per annum with a maturity of five years and one day from the date of issue and are listed on the Singapore stock exchange. Post buy back, the balance FCCBs unless previously converted, redeemed or cancelled are liable to be redeemed on the maturity date at a premium of 30.3961% of the principal amount.

(b) Employee Stock Options:

During the year a total of 4,32,500 options have been granted under the Employees Stock Option Scheme 2006. Each option, upon exercise of the same, would give rise to one equity share of Rs.2/- each, fully paid up. The exercise would be made at the market price prevailing as on the dates of the grant plus applicable taxes as may be levied on the Company in this regard. These options will vest every year in proportion depending upon specified criteria.

2 Radico-33-47.p65 42 8/9/2009, 11:13 AM (c) Equity share warrants:

A total of 69,40,000 warrants were forfeited on non subscription by the promoter group in accordance with SEBI (Disclosure and Investor Protection) Guidelines, 2000.

(m) Plant Locations (n) Registered Office (o) Address for correspondence:

(1) Rampur Distillery Bareilly Road (1) For Retail Investors Bareilly Road Rampur – 244 901 (U.P.). Dr. Arun Mohan Bansal Rampur – 244 901 (U.P.). Head - Legal & Company Secretary (2) Plot No.B-24, Plot No. J-1, Block B-1 Mohan Co-operative A-25, Shree Khatushyamji Industrial Area, Mathura Road Industrial Complex New Delhi – 110 044. RIICO, Reengus Tel No.: 011 - 40975424 Dist. Sikar, Rajasthan. email: [email protected] (3) B-3, UPSIDC Industrial (2) For Institutional Investors Development Area Mr. Mukesh Agarwal Phase – I, Sultanpur Patti AVP – Finance & Treasury Bajpur, Dist. Udham Singh Plot No.J-1, Block B-1 Nagar, Uttaranchal. Mohan Co-operative, Industrial Area Mathura Road New Delhi – 110 044. (4) S. No. 59 Tel. No: - 011-40975423 Timmapur Village 9811340154 Palmakul Post - 509 325 email: [email protected] Shadnagar Tq. Mahaboobnagar Dist. Hyderabad, Andhra Pradesh. (5) 44 KM Stone Delhi Rohtak Road Village & Post Rohad, Bahadurgarh, Dist. Jhajjar 124501 Haryana.

For and on behalf of the Board

Sd/- Place : New Delhi Dr. Lalit Khaitan Date : 30.06.2009 Chairman & Managing Director

2 Radico-33-47.p65 43 8/9/2009, 11:13 AM AUDITORS’ REPORT ON CORPORATE GOVERNANCE to the shareholders of Radico Khaitan Limited

1. We have examined the compliance of conditions of Corporate Governance by Radico Khaitan Limited for the year ended 31st March 2009, as stipulated in Clause 49 of the listing agreement of the said Company with stock exchanges.

2. The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the Financial Statements of the Company.

3. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned listing agreement.

4. We state that in respect of investor grievances received during the year ended 31st March 2009, no investor grievances are pending for a period exceeding one month against the Company as per the records maintained by the Company.

5. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company.

For V. Sankar Aiyar & Co. Chartered Accountants

Sd/- Place : New Delhi V. Rethinam Date : 30th June, 2009 Partner Membership No. 10412

2 Radico-33-47.p65 44 8/9/2009, 11:13 AM Auditors’ Report To the Shareholders of Radico Khaitan Limited

1. We have audited the attached Balance Sheet of RADICO terms of section 274(1)(g) of the Companies Act, KHAITAN LIMITED as at 31st March, 2009 and also the 1956; annexed Profit and Loss Account and the Cash flow (f) Attention is drawn to the following: statement of the Company for the year ended on that date. These financial statements are the responsibility of i) Note No.6(iii) dealing with the buyback of FCCBs the Company’s management. Our responsibility is to resulting in a gain of Rs.2197.50 lakhs; express an opinion on these financial statements based on our audit. ii) Note No.7 regarding change in the method of treatment of foreign exchange fluctuation 2. We conducted the audit in accordance with auditing consequent to adopting para-46 of AS-11 on the standards generally accepted in India. Those standards Effects of Changes in Foreign Exchange Rates. require that we plan and perform the audit to obtain reasonable assurance about whether the financial (g) In our opinion and to the best of our information and statements are free of material misstatement. An audit according to the explanations given to us, the includes examining, on a test basis, evidence supporting accounts, subject to note 16 regarding managerial the amounts and disclosures in the financial statements. remuneration exceeding the limit and requiring the An audit also includes assessing the accounting approval of the Central Government and read with principles used and significant estimates made by the notes on accounts, give the information required management, as well as evaluating the overall financial by the Companies Act, 1956 in the manner so statement presentation. We believe that our audit provides required and give a true and fair view in conformity a reasonable basis for our opinion. with the accounting principles generally accepted in India: 3. As required by the Companies (Auditors’ Report) Order, i) in the case of the Balance Sheet, of the state of 2003 issued by the Department of Company Affairs, affairs of the Company as at 31st March, 2009; Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the annexure, a ii) in the case of Profit and Loss Account, of the statement on the matters specified in paragraphs 4 and profit for the year ended on that date; and 5 of the said Order on the basis of such checks as we considered appropriate and according to the information iii) in the case of Cash Flow Statement, of the cash and explanations given to us. flow for the year ended on that date. 4. Further to our comments in the annexure referred to in For V.Sankar Aiyar & Co. paragraph 3 above, we report that: - Chartered Accountants (a) We have obtained all the information and explanations, which to the best of our knowledge and Sd/- belief, were necessary for the purposes of our audit; (V.Rethinam) Place: New Delhi Partner (b) In our opinion, proper Books of Accounts as required Date: 30th June, 2009 M.No. 010412 by law have been kept by the Company so far as appears from our examination of the books; (c) The Balance Sheet, Profit and Loss Account and cash flow statement dealt with by this Report are in ANNEXURE REFERRED TO IN PARA 3 OF OUR REPORT agreement with the Books of Account; OF EVEN DATE TO THE SHAREHOLDERS OF RADICO (d) In our opinion, the Balance Sheet, Profit & Loss KHAITAN LTD. Account and cash flow statement dealt with by this report comply with the accounting standards referred 1. (a) The The Company has maintained proper records, to in subsection (3C) of section 211 of the Companies showing full particulars including quantitative details Act, 1956 to the extent applicable, except that and situation of fixed assets. information relating to previous year required in note (b) We are informed that major part of the fixed assets 11 of Schedule 18 B to the Accounts regarding AS15 located at the distillery at Rampur were physically on gratuity, being not available. verified once during the year. The assets in other (e) On the basis of written representations received from locations including Delhi Office have not been directors, as on 31st March, 2009 and taken on record physically verified. The assets physically verified are by the Board of Directors, we report that none of the under reconciliation with the book records and directors of the Company is, disqualified as on 31st discrepancies, if any, can be ascertained only after March, 2009 from being appointed as a director in reconciliation is complete.

2 Radico-33-47.p65 45 8/11/2009, 12:10 PM (c) Since there is no substantial disposal of fixed assets 7. During the year, outside Consultants have carried out during the year, the preparation of financial internal audit and submitted their reports. In our opinion, statements on a going concern basis is not affected the company has an internal audit system commensurate on this account. with its size and nature of its business. 2 (a) On the basis of information and explanations 8. We have broadly reviewed the books of account obtained, stocks of finished goods and raw materials maintained by the Company pursuant to the rules made of the distillery at all its locations have been under by the Central Government for the maintenance of cost physical check by the Excise Department in records under section 209(1)(d) of the Companies Act, coordination with the company’s supervisory staff at 1956 and are of the opinion that prima facie, the frequent intervals. Stocks at other locations, stores prescribed accounts and records have been maintained and spares have been physically verified by the and the required statements are in the process of management during the year at reasonable intervals. compilation. However, we have not made a detailed examination of the records with a view to determine (b) The procedures of physical verification of stocks whether they are accurate or complete. followed by the management are reasonable and adequate in relation to the size of the company and 9.(a) According to the records of the Company, the the nature of its business. Company has been generally regular in depositing with appropriate authorities the statutory dues (c) The Company is maintaining proper records of including Provident Fund, Investor Education and inventory. Discrepancies noticed on verification Protection Fund, Employees’ State Insurance, between the physical stock and book records were Income-tax, Sales tax, Wealth-tax, Service tax, not material. Customs duty, Excise duty, Cess and other statutory 3 (a) The Company has not granted any loans, secured dues. According to the information and explanations or unsecured, to companies, firms or other parties given to us, there are no undisputed amounts payable covered in the register maintained u/s.301 of the in respect of the aforesaid statutory dues, which have Companies Act, 1956. remained outstanding as at 31-03-2009 for a period of more than 6 months from the date they became (b) In respect of loans taken, the Company, under a payable. specific manufacturing and selling arrangement with a joint venture company covered in the register (b) As regards dues not deposited on account of required to be maintained u/s.301 of the Act, is disputes, the position as explained by the Company provided with interest-free working capital advance. is as under: This varies depending on the business requirement i. Sales Tax through the year. The amount outstanding at the year S. No. Year Amount Rupees Forum where end was Rs.558.66 lakhs. The terms and conditions in thousands pending of the advance availed by the Company are not 1 1998-99 & 127 Revision before Allahabad High Court prejudicial to its interest. 1999-00 4 In our opinion and according to the information and 2 1999-00 412 Trade Tax Tribunal, Moradabad explanations given to us, there are adequate internal 3 2008-09 1886 Writ petition before Allahabad control systems commensurate with the size of the High Court (Bank Guraantee issued for company and the nature of its business for the purchase Rs. 20 lakhs) of inventory and fixed assets and for the sale of goods. To the best of our knowledge, no major weaknesses in ii. Excise Duty internal control systems were either reported or noticed S. No. Year Amount Rupees Forum where pending during the course of our audit. in thousands 1 1981 1737 Allahabad High Court – Lucknow Bench 5 a) We are informed that the contracts or arrangements 2 1995 to 9238 Allahabad High Court – Lucknow Bench that are required to be entered into the register in 2005 (Bank Guarantee issued) pursuance of Sec.301 of the Act have been entered. 3 2005-06 to 4867 Allahabad High Court – Lucknow Bench b) In our opinion and according to information and 2008-09 explanations given to us, the transactions made in pursuance of contracts or arrangements referred to 10. The Company has no accumulated losses at the end of in (a) above and exceeding the value of Rs.5 lakhs the financial year. The Company has not incurred cash are for the specific requirements of the Company for losses either in the current year or in the immediately which suitable alternative sources are not available preceding financial year. for comparison of prevailing market prices. 11. On the basis of the verification of records and information 6. The Company has not accepted deposits from public and explanations given by the management, the within the meaning of Sec.58A/ 58AA of the Companies Company has not defaulted in repayment of dues to Act, 1956 or any other relevant provisions of the Act and financial institutions and banks. There are no debentures the rules framed thereunder. outstanding either at the beginning or at the end of the year.

2 Radico-33-47.p65 46 8/9/2009, 11:13 AM 12. The Company has not granted loans and advances on examined by us and information and explanations given the basis of security by way of pledge of shares, to us, on an overall examination of the balance sheet of debentures or other securities. the Company, we report that funds raised on short terms basis during the year have not been used for long term 13. The Company is not a chit fund/ nidhi/ mutual benefit investment. fund/ society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable 18. On the basis of information and explanations given to us, during the year, the Company has not made any 14. As regards dealing or trading in shares, securities, preferential allotment of shares to parties and companies debentures and other investments, proper records have covered in the register maintained under section 301 of been maintained of the transactions and contracts and the Act. timely entries made therein. The shares, securities, debentures and other investments have been held by 19. Since no secured debentures have been issued during the Company in its own name except to the extent the year, question of creating securities does not rise. mentioned in note no.4 of Schedule 7 of the Balance Sheet 20. Since there was no public issue of securities by the and to the extent of the exemption, granted under section Company during the year, verification of the end-use of 49 of the Act. the money does not arise. 15. The Company has an outstanding guarantee of USD 2.08 21. Based on the audit procedures performed and the million to Standard Chartered Bank on behalf of Radico representation obtained from the management, we report International DMCC and Rs.41.40 crores to State Bank that no fraud on or by the Company has been noticed or of India on behalf of Radico NV Distilleries Maharashtra reported during the year under audit. Ltd for loan facilities granted to them. On the basis of information and explanations given to us, in our opinion, For V. Sankar Aiyar & Co. the terms and conditions whereof, prima-facie, are not prejudicial to the interest of the Company. Chartered Accountants 16. According to the records of the Company, term loans taken during the year have been applied for the purpose Sd/- for which they were obtained. Place: New Delhi (V. Rethinam) 17. According to the cash flow statement and other records Date : 30.06.2009 Partner M.No. 010412

2 Radico-33-47.p65 47 8/9/2009, 11:13 AM Balance Sheet as at 31st March, 2009 SCHEDULE Rs. in ’000 Rs. in ’000 NO. AS AT AS AT 31-03-2009 31-03-2008

SOURCES OF FUNDS 1. SHAREHOLDERS’ FUNDS SHARE CAPITAL 1 204,924 204,924 RESERVES AND SURPLUS 2 REVALUATION RESERVE 94,103 94,739 OTHER RESERVES 2,007,190 2,101,293 2,095,889 2,190,628 EMPLOYEES STOCK OPTIONS OUTSTANDING 50,580 62,315 LESS: DEFERRED EMPLOYEE COMPENSATION 19,901 30,679 37,261 25,054 SHARE APPLICATION MONEY (SEE NOTE 5) 0 113,469 2. LOAN FUNDS SECURED 3 4,002,532 2,109,839 UNSECURED 4 3,001,106 3,290,451 7,003,638 5,400,290 3. DEFERRED TAX BALANCE (SEE NOTE 8(e)) 367,000 321,700 TOTAL 9,707,534 8,256,065

APPLICATION OF FUNDS 1. FIXED ASSETS 5 GROSS BLOCK 5,119,182 4,417,998 LESS: DEPRECIATION TO DATE 1,112,185 945,774 NET BLOCK 4,006,997 3,472,224 CAPITAL WORK IN PROGRESS 6 769,772 4,776,769 409,164 3,881,388

2. INVESTMENTS 7 525,866 335,713

3. FOREIGN CURRENCY MONETARY ITEM TRANSLATION DIFFERENCE ACCOUNT (SEE NOTE 7) 45,341 0

4. CURRENT ASSETS, LOANS & ADVANCES 8 a) ACCRUED INCOME 156,688 121,047 b) INVENTORIES 1,084,351 767,850 c) SUNDRY DEBTORS 1,700,268 1,389,748 d) CASH & BANK BALANCES 419,768 831,461 e) LOANS & ADVANCES 2,357,300 2,222,811 5,718,375 5,332,917 LESS: CURRENT LIABILITIES AND PROVISIONS LIABILITIES 9 866,177 804,571 PROVISIONS 10 492,640 489,382 1,358,817 1,293,953 NET CURRENT ASSETS 4,359,558 4,038,964 TOTAL 9,707,534 8,256,065

SIGNIFICANT ACCOUNTING POLICIES AND NOTES 18 ANNEXURE TO OUR REPORT OF DATE

For V. Sankar Aiyar & Co. Dr. Arun Mohan Bansal Dr. Lalit Khaitan Abhishek Khaitan Chartered Accountants Head Legal & Company Secretary Chairman & Managing Director Managing Director V. Rethinam Partner M. No. 010412 Place : New Delhi Ajay K. Agarwal Dilip K. Banthiya Sanjay Jalan Dated : June 30, 2009 Sr. Vice President (Finance & Accounts) Chief Financial Officer Director

3 Radico 48-57.p65 48 8/11/2009, 12:25 PM Profit and Loss Account for the year ended 31st March, 2009 SCHEDULE Rs. in ’000 Rs. in ’000 NO. CURRENT PREVIOUS YEAR YEAR

INCOME SALES & INCOME FROM OPERATIONS *@ 11 11,747,266 12,281,871 LESS: EXCISE DUTY 4,786,975 4,187,747 6,960,291 8,094,124 OTHER INCOME 12 349,986 141,023 ACCRETION/DECRETION TO STOCKS 13 106,338 46,500 7,416,615 8,281,647 EXPENDITURE PURCHASES AND MATERIALS CONSUMED @ 14 3,426,564 4,507,452 SALARIES, ALLOWANCES AND BENEFITS 15 552,452 496,471 OTHER EXPENSES 16 2,631,247 2,352,769 FINANCIAL EXPENSES 17 451,470 343,696 7,061,733 7,700,388 PROFIT BEFORE DEPRECIATION AND TAXATION 354,882 581,259 DEPRECIATION FOR THE YEAR 231,855 190,475 LESS:TRANSFER FROM REVALUATION RESERVE 636 231,219 636 189,839 PROFIT BEFORE TAXATION 123,663 391,420 PROVISION FOR TAXATION : CURRENT TAX 450 56,000 DEFERRED TAX -SEE NOTE: 8 (e) 45,300 57,500 FRINGE BENEFIT TAX 13,000 13,500 58,750 127,000 LESS:MAT CREDIT AVAILABLE FOR SET OFF 450 58,300 66,300 60,700 PROFIT AFTER TAXATION 65,363 330,720 ADD:SURPLUS BROUGHT FORWARD FROM LAST YEAR 236,298 271,844 LESS:TAX PAYMENTS ON THE BASIS OF ITSC ORDER (SEE NOTE 8 (d)) 0 236,298 65,320 206,524 PROFIT AVAILABLE FOR APPROPRIATION 301,661 537,244 TRANSFERS TO: GENERAL RESERVE 5,000 200,000 DIVIDEND ON : PREFERENCE SHARES @ 6.75% 0 35,042 PROVISION OF TAX ON ABOVE 0 5,955 PROPOSED DIVIDEND ON : FOR PREVIOUS YEAR 66 0 EQUITY SHARES @ 15% (PREVIOUS YEAR 25%) 30,739 51,231 PROVISION OF TAX ON ABOVE 5,224 8,718 36,029 100,946 BALANCE CARRIED TO BALANCE SHEET (SCHEDULE 2) 260,632 236,298 EARNING PER SHARE OF FACE VALUE Rs 2/- (SEE NOTE 15) BASIC & DILUTED : -BEFORE PRIOR PERIOD & EXTRA ORDINARY ITEMS 0.64 3.40 -AFTER PRIOR PERIOD & EXTRA ORDINARY ITEMS 0.64 3.40

*SALES THROUGH OTHER DISTILLERIES/BOTTLING UNITS UNDER ARRANGEMENT RS.46,777.48 LACS (PREVIOUS YEAR Rs.45,674.25 LACS) NOT INCLUDED IN THE ABOVE. (REFER NOTE 22 OF SCHEDULE 18).

@ DURING THE PERIOD 01.07.2007 to 31.03.2008, AS PER THE POLICY OF THE STATE GOVERNMENT OF UTTAR PRADESH, THE SALE OF COUNTRY LIQUOR WERE REQUIRED TO BE ROUTED THROUGH A DESIGNATED AGENCY, RESULTING IN INCREASE OF BOTH SALES & PURCHASES BY Rs.18174.56 LACS, HAVING AN IMPACT ON COMPARATIVES.

ANNEXURE TO OUR REPORT OF DATE

3 Radico 48-57.p65 49 8/11/2009, 12:25 PM Schedules to Statement of Accounts Rs. in ’000 Rs. in ’000 AS AT AS AT 31-03-2009 31-03-2008

1. SHARE CAPITAL AUTHORISED 170,000,000 EQUITY SHARES OF Rs 2 EACH 340,000 340,000 6,000,000 PREFERENCE SHARES OF RS 100 EACH 600,000 940,000 600,000 940,000

ISSUED AND SUBSCRIBED 102,462,219 EQUITY SHARES OF RS 2 EACH, FULLY PAID UP 204,924 204,924 (PREVIOUS YEAR 102,462,219) 204,924 769,724

Note : In terms of a scheme of rehabilitation of Abhishek Cement Ltd.(ACL) approved by BIFR vide order dated 30.12.2002, the then Radico Khaitan Ltd. was merged with ACL and on merger, the latter was renamed as Radico Khaitan Ltd. Post merger, the then existing share holders of Radico Khaitan Ltd. were issued shares of the amalgamated company aggregating to Rs 191,716 thousands. AS AT AS AT 31.03.2008 ADDITIONS DEDUCTIONS 31-03-2009 2. RESERVES AND SURPLUS REVALUATION RESERVE 94,739 0 636 94,103 CAPITAL RESERVE * (SEE NOTE BELOW) 7,899 113,469 0 121,368 SHARE PREMIUM ACCOUNT # 649,690 0 92,794 556,896 GENERAL RESERVE 1,200,000 5,000 138,708 1,066,292 PREFERENCE SHARES REDEMPTION RESERVE 2,002 0 0 2,002 1,954,330 118,469 232,138 1,840,661 SURPLUS 236,298 260,632 2,190,628 2,101,293

* NOTE : ADDITION ON ACCOUNT OF FORFEITURE OF APPLICATION MONEY. (SEE NOTE 5) # DEDUCTION ON ACCOUNT OF PREMIUM ON FCCBs.

3. SECURED LOANS

1. TERM LOANS - FROM FINANCIAL INSTITUTIONS/BANKS i). AXIS BANK LTD. (SEE NOTE 1 BELOW) 125,000 227,257 ii). G.E.CAPITAL SERVICES INDIA (SEE NOTE 7 BELOW) 0 5,000 iii). BANK OF INDIA,LONDON (FOREIGN CURRENCY LOAN) (SEE NOTE 1 BELOW) 49,797 133,477 iv). STANDARD CHARTERED BANK LTD.(FOREIGN CURRENCY LOAN) (SEE NOTE 1 BELOW) 60,865 95,928 v). STATE BANK OF INDIA (SEE NOTE 1 BELOW) 504,505 0 vi). STATE BANK OF HYDERABAD (SEE NOTE 1 BELOW) 399,997 0 vii). STATE BANK OF PATIALA (SEE NOTE 1 BELOW) 149,999 0 viii).STATE BANK OF TRAVENCORE (SEE NOTE 1 BELOW) 151,336 0 2. TERM LOANS - OTHERS BHW HOME FINANCE LIMITED (SEE NOTE 4 BELOW) 0 1,740 3. OTHER THAN TERM LOANS - FROM BANKS (SECURED BY HYPOTHECATION OF INVENTORIES AND BOOK DEBTS) (NOTE 3 BELOW) 2,561,033 1,646,437 4,002,532 2,109,839 NOTES: 1. SECURED BY A PARI-PASSU FIRST CHARGE ON GROSS BLOCK OF THE FIXED ASSETS OF THE COMPANY, BOTH PRESENT AND FUTURE. 2. SECURED IN ADDITION BY SECOND CHARGE ON CURRENT ASSETS OF THE COMPANY. 3. SECURED IN ADDITION BY SECOND CHARGE ON FIXED ASSETS OF THE COMPANY. 4. TO BE SECURED BY DEPOSIT OF TITLE DEED OF PROPERTY. 5. NON FUND BASED FACILITIES PROVIDED BY BANKS ARE ALSO SECURED BY A SECOND CHARGE ON THE FIXED ASSETS OF THE COMPANY. 6. AMOUNT DUE WITHIN ONE YEAR- Rs. 2696.68 LACS (PREVIOUS YEAR Rs 2469.08 LACS) 7. SECURED BY FIRST CHARGE ON MALT SPIRIT PLANT.

3 Radico 48-57.p65 50 8/11/2009, 12:26 PM Rs. in ’000 Rs. in ’000 AS AT AS AT 31-03-2009 31-03-2008

4. UNSECURED LOANS SHORT TERM - ( EXCEPT ITEM NO. (vii) - FCCB) (i) STATE BANK OF HYDERABAD 99,996 299,991 (ii) BANK OF RAJASTHAN LTD. 199,929 0 (iii) SBI FACTORS & COMMERCIAL SERVICES PVT. LTD. 120,538 71,655 (iv) COMMERCIAL PAPER 0 100,000 (v) ING-VYSYA BANK LTD. 0 175,305 (vi) TAMILNAD MERCANTILE BANK LTD. 97,482 200,000 (vii) FOREIGN CURRENCY CONVERTIBLE BONDS (SEE NOTE 6) 1,825,920 1,998,500 (viii)YES BANK LTD. 0 195,000 (ix) STATE BANK OF MYSORE 252,485 250,000 (x) AXIS BANK LTD 404,756 0 (GUARANTEED BY CHAIRMAN AND MANAGING DIRECTOR-SINCE 3,001,106 3,290,451 REPAID AND GUARANTEE STANDS CANCELLED)

5. FIXED ASSETS Rs. in ’000

DESCRIPTION OF COST/REVALUATION DEPRECIATION NET BLOCK ASSETS AS ON ADDITIONS DEDUCTIONS AS ON UPTO FOR THE WRITTEN UPTO AS ON AS ON 01.04.2008 31.03.2009 31.03.2008 YEAR BACK 31.03.2009 31.03.2009 31.03.2008

INTANGIBLE ASSETS BRANDS & TRADE MARKS 500,470 0 0 500,470 84,375 24,297 0 108,672 391,797 416,095 GOODWILL 95,500 0 0 95,500 19,100 4,775 0 23,875 71,625 76,400 TANGIBLE ASSETS FREEHOLD LAND 192,182 1,567 0 193,749 000 0 193,749 192,182 LEASEHOLD LAND 194,654 0 0 194,654 125,984 877 0 126,861 67,792 68,670 BUILDINGS 388,994 95,246 8,001 476,240 45,463 13,524 0 58,987 417,253 343,531 PLANT & MACHINERY 2,843,106 708,442 86,382 3,465,165 603,146 168,658 56,962 714,843 2,750,322 2,239,960 FURNITURE & FITTINGS 39,688 1,458 0 41,147 14,587 2,322 0 16,909 24,238 25,101 VEHICLES 92,089 6,111 17,257 80,943 25,686 8,009 8,482 25,212 55,731 66,403 LEASEHOLD IMPROVEMENTS 71,315 0 0 71,315 27,433 9,392 0 36,825 34,490 43,882 TOTAL 4,417,998 812,824 111,640 5,119,183 945,774 231,855 65,444 1,112,185 4,006,998 3,472,224 PREVIOUS YEAR 3,606,076 823,682 11,760 4,417,998 761,322 190,475 6,023 945,774 3,472,224 2,844,754

NOTES: 1. VALUES WRITTEN UP ON REVALUATION: (BASED ON APPROVED VALUERS’ REPORT) AS ON 31.12.1994/31.12.1998 AS ON 31.12.1985 FREEHOLD LAND 85,422 - LEASEHOLD LAND 122,828 - BUILDING - 15,292 (WDV Rs 9915 Thousands) PLANT & MACHINERY - 8,709 (WDV Rs NIL)

TOTAL 208,250 24,001

2. ADDITIONS INCLUDE Rs. 194,091 THOUSANDS ON ACCOUNT OF ADJUSTMENT OF FOREIGN EXCHANGE FLUCTUATION LOSS. (REFER NOTE NO 7) 3. VALUATION WAS MADE AT THE THEN FAIR MARKET VALUE - NO INDICES ATTACHED TO THE REPORT.

Rs. in ’000 Rs. in ’000 AS AT AS AT 31-03-2009 31-03-2008

6. CAPITAL WORK IN PROGRESS (AT COST) (i) PLANT & MACHINERY 73,926 12,566 (ii) ADVANCES TO VENDORS/CONTRACTORS (UNSECURED) (CONSIDERED GOOD) : (INCLUDING FOR ACQUISITION OF PROPERTY) 695,846 396,598

769,772 409,164

3 Radico 48-57.p65 51 8/11/2009, 12:26 PM Rs. in ’000 Rs. in ’000 AS AT AS AT 31-03-2009 31-03-2008

7. INVESTMENTS-LONG TERM (AT COST) (EXCEPT WHERE STATED OTHERWISE) FULLY PAID UP SHARES IN FACE VALUE No. of FACE VALUE No. of BODIES CORPORATE. Per Share (Rs.) Shares Rs. IN ‘000 Shares (A) TRADE - UNQUOTED - EQUITY 1. RADICO GLOBAL LTD - (SEE NOTE 5 BELOW) (INCORPORATED IN JEBEL ALI FREE ZONE,DUBAI) 103,045 103,045 89,964 SHARES OF AED 100 EACH (PREVIOUS YEAR 89,964) 2. RADICO NV DISTILLERIES MAHARASHTRA LTD 100 663,750 81,000 100 5,625 45.000 (INCLUDING 298,125 BONUS SHARES RECEIVED DURING THE YEAR) 3. DIAGEO RADICO DISTILLERY P LTD. 10 7,500,000 75,000 10 1,750,000 17,500 (B) TRADE - UNQUOTED - PREFERENCE SHARES RADICO NV DISTILLERIES MAHARASHTRA LTD 100 2,000,000 200,000 0 0 10% CUMULATIVE - NON CONVERTIBLE PREFERENCE SHARES (REDEEMABLE AFTER 17.08.2023) 459,045 165,545

(ii) NON-TRADE - QUOTED (SHORT TERM) 1. ADANI ENTERPRISES LTD. 0 0 0 1 550 391 2. ADITYA BIRLA NUVO LTD. 0 0 0 10 55 71 3. AIA ENGINEERING LTD. 0 0 0 2 467 149 4. ALSTOM PROJECTS (INDIA) LTD. 0 0 0 10 325 293 5. APTECH LTD. 0 0 0 10 1,500 568 6. BHARTI AIRTEL LIMITED 10 78 44 0 0 0 7. BASF INDIA LTD. 0 0 0 10 713 204 8. BILCARE LTD. 0 0 0 10 1,500 2,643 9. BEML LTD. 0 0 0 10 208 331 10. BHARAT HEAVY ELECTRICALS LTD. 0 0 0 10 100 179 11. CAIRN INDIA LTD. 0 0 0 10 2,000 434 12. CENTURY TEXTILES & INDUSTRIES LTD. 0 0 0 10 1,500 1,784 13. CONTAINER CORPORATION OF INDIA LTD 0 0 0 10 222 200 14. COROMANDEL FERTILIZERS LTD. 0 0 0 2 1,242 162 15. CROMPTON GREAVES LTD. 0 0 0 2 636 235 16. DISH TV INDIA LTD. 0 0 0 1 20,000 1,892 17. DLF LTD. 0 0 0 2 2,665 2,778 18. HINDUJA FOUNDRIES LTD. 10 1,190 348 10 5,000 1,462 19. EDUCOMP SOLUTIONS LTD. 10 70 232 0 0 0 20. EVINIX.ACCESSORIES LTD. 1 10,000 213 1 74,920 1,635 21. GAMMON INDIA LTD. 0 0 0 2 513 330 22. GMR INFRASTRUCTURE LTD. 2 2,000 499 2 10,000 2,497 23. GREAT EASTERN SHIPPING COMPANY LTD. 0 0 0 10 384 117 24. GREAT OFFSHORE LTD. 0 0 0 10 214 217 25. MAHINDRA LIFESPACE DEVELOPERS LTD. 0 0 0 10 500 502 26. HOUSING DEVELOPMENT FINANCE CORPORATION LTD. 10 100 187 10 112 315 27. HOUSING DEVELOPMENT & INFRASTRUCTURE LTD. 10 999 352 0 0 0 28. HAVELLS INDIA LTD. 0 0 0 5 5,000 3,505 29. HINDUSTAN DORR-OLIVER LTD. 0 0 0 2 1,231 193 30. HINDUSTAN PETROLEUM CORPORATION LIMITED 10 428 113 0 0 0 31. HMT LTD. 10 1,000 135 10 25,000 3,296 32. HDFC BANK LTD 10 74 66 0 0 0 33. ITC LIMITED 1 432 74 0 0 0 34. ICICI BANK LTD. 10 90 75 10 486 507 35. INDIABULLS REAL ESTATE LTD. 2 1,400 434 2 10,000 7,594 36. INDIABULLS FINANCIAL SERVICES LTD. 2 6,200 5,988 2 10,000 9,659 37. ION EXCHANGE (INDIA) LTD. 0 0 0 10 8,000 2,266 38. INDIA CEMENTS LTD.. 0 0 0 10 450 94 39. IFCI LTD. 0 0 0 10 20,000 1,953 40. IDBI BANK LTD. 0 0 0 10 12,500 2,088 41. INFRASTRUCTURE DEVELOPMENT FINANCE COMPANY LTD. 0 0 0 10 7,900 1,791 42. INDIA INFOLINE LTD. 0 0 0 2 1,000 1,944 43. ICRA LTD. 0 0 0 10 750 778 44. JAI CORP LTD. 1 14,500 6,586 1 24,865 8,470 45. J K CEMENT LTD. 0 0 0 10 5,000 1,245 46. JAIPRAKASH HYDRO-POWER LTD. 10 5,000 688 10 25,000 3,439 47. JAIPRAKASH ASSOCIATES LTD. 2 2,600 461 2 22,450 11,081 48. MPHASIS LIMITED 10 85 14 0 0 0 49. K.S. OILS LTD. 1 6,000 412 1 8,000 576 50. KARUTURI GLOBAL LTD. 1 8,000 188 1 50,000 824 51. KEC INTERNATIONAL LTD. 10 280 209 10 218 183 52. LARSEN & TOUBRO LTD. 2 700 238 2 224 766 53. MOSER BAER INDIA LTD. 0 0 0 10 101 29

3 Radico 48-57.p65 52 8/9/2009, 11:13 AM FACE VALUE No. of FACE VALUE No. of Per Share (Rs.) Shares Rs. IN ‘000 Shares

54. MCLEOD RUSSEL (INDIA) LTD. 5 967 84 0 0 0 55. NAVIN FLUORINE INTERNATIONAL LTD. 0 0 0 10 542 222 56. NETWORK18 MEDIA & INVESTMENTS LTD. 0 0 0 5 1,000 527 57. OIL & NATURAL GAS CORPORATION LTD. 10 244 162 10 600 587 58. PARSVANATH DEVELOPERS LTD. 0 0 0 10 1,700 780 59. PATEL ENGINEERING LTD. 0 0 0 1 434 179 60. PRAJ INDUSTRIES LTD. 2 2,785 479 2 10,970 2,646 61. PUNJ LLOYD LTD. 0 0 0 2 5,000 2,818 62. POWER GRID CORPORATION OF INDIA LTD. 0 0 0 10 4,500 649 63. RELIANCE COMMUNICATIONS LTD. 5 238 145 5 1,302 822 64. RELIANCE INDUSTRIAL INFRASTRUCTURE LTD. 0 0 0 10 6,500 8,734 65. RELIANCE INDUSTRIES LTD. 10 231 470 10 3,346 9,530 66. RELIANCE PETROLEUM LTD. 10 4,000 632 10 77,000 17,250 67. RELIANCE CAPITAL LTD. 10 545 803 10 2,880 7,089 68. RELIANCE INFRASTRUCTURE LTD. 10 310 390 10 6,340 13,542 69. RELIANCE POWER LTD. 10 7,000 1,329 0 0 0 70. RURAL ELECTIFICATION CORPORATION LTD. 10 766 52 0 0 0 71. RELIANCE NATURAL RESOURCES LTD. 5 1,500 274 5 28,000 4,821 72. SIEMENS LTD. 2 1,110 274 2 1,110 2,027 73. SESA GOA LTD. 1 500 105 1 500 1,914 74. SHREE RENUKA SUGAR LTD. 1 4,000 510 0 0 0 75. LANCO INFRATECH LTD. 10 3,000 1,361 0 0 0 76. MERCATOR LINES LTD. 1 8,000 931 0 0 0 77. UNITED BREWERIES (HOLDINGS) LTD. 10 1,500 972 10 6,750 4,375 78. UNITED SPIRITS LTD. 0 0 0 10 40 51 79. UNITED PHOSPHOROUS LTD. 2 397 37 0 0 0 80. WELSPUN GUJARAT STAHL ROHREN LTD. 0 0 0 5 388 173 81. YES BANK LTD. 0 0 0 10 4,000 759 82. GUJARAT NRE COKE LIMITED (BONUS SHARES) 10 1,600 0 0 0 0 26,566 161,165 ((B) NON-TRADE - UNQUOTED (i) UNITS OF MUTUAL FUNDS No. of Units No. of Units 1. HDFC PREMIER MULTICAP FUND 448,935 8,328 50,099 1,041 2. FRANKLIN INDIA BLUE CHIP FUND 50,264 8,339 7,174 1,044 3. TEMPLETON FLOATING RATE INCOME FUND 298 0 298 3 4. RELIANCE VISION FUND RETAIL PLAN 36,788 8,328 4,774 1,041 5. RELIANCE LIQUID FUND GROWTH 1,117 15 596 7 6. RELIANCE GROWTH FUND 567 1,600 567 200 7. RELIANCE LIQUID FUND WEEKLY DIVIDEND-RELIANCE PMS 58,230 892 13,331 204 8. SBI MAGNUM EQUITY FUND DIVIDEND 34,781 8,335 34,781 1,041 9. SBI MAGNUM INSTA CASH FUND-DIVIDEND 252 0 252 3 (ii) NONCONVERTIBLE REDEEMABLE DEBENTURES : -CITICORP FINANCIAL INDIA LTD 100 40,000 4,000 100 40,000 4,000 - SAI RAYALASEEMA PAPER MILLS LTD. 10 16,901 205 10 16,901 205 (iii) FULLY PAID UP EQUITY SHARES OF NEW URBAN COOPERATIVE BANK LTD. 25 2,388 60 25 2,388 60 C. NATIONAL SAVINGS CERTIFICATES (Face Value Rs. 153,000) 153 154 LODGED WITH GOVERNMENT DEPARTMENTS AS SECURITY 40,255 9,003 525,866 335,713

AGGREGATE VALUE OF INVESTMENTS: BOOK VALUE MARKET VALUE BOOK VALUE MARKET VALUE QUOTED 26,566 8,047 161,165 107,317 UNQUOTED 463,463 0 169,964 0 UNITS OF MUTUAL FUND (NAV Rs. 24630 THOUSANDS, PREVIOUS YEAR Rs 4450 THOUSANDS) 35,837 0 4,584 0 525,866 8,047 335,713 107,317

NOTE: (1) NO INVESTMENT IS HELD IN BODIES CORPORATE UNDER THE SAME MANAGEMENT. (2) INVESTMENTS ACQUIRED AND SOLD DURING THE YEAR. (SEE SCHEDULE 7-A) (3) PROVISION OF Rs 30,414 THOUSANDS ( PREVIOUS YEAR Rs 58580 THOUSANDS) IS HELD FOR DECLINE IN VALUE OF SHORT TERM INVESTMENTS. (4) INVESTMENTS HELD BY THIRD PARTY IN THEIR NAME UNDER PORTFOLIO MANAGEMENT: COST Rs 6,411 THOUSANDS (PREVIOUS YEAR Rs 8666 THOUSANDS).- SINCE STANDS CLOSED (5) NO PROVISION HAS BEEN MADE FOR DIMINUTION IN THE VALUE OF INVESTMENTS IN DIAGEO RADICO DISTILLERIES PVT. LTD., RADICO GLOBAL LTD. AND RADICO NV DISTILLERIES MAHARASHTRA LTD., AS, IN THE OPINION OF THE MANAGEMENT, THE INVESTMENTS HAVE BEEN MADE ON A LONG TERM BASIS AND THE DIMINUTION IS CONSIDERED TEMPORARY.

3 Radico 48-57.p65 53 8/11/2009, 12:43 PM NAME FACE NO OF PURCHASE VALUE SHARES COST PER SHARE Rs. in ’000

7-A DETAILS OF SECURITIES PURCHASED AND SOLD DURING THE YEAR 2008-09 AAB LIMITED 2 119 93 ABAN OFFSHORE LIMITED 2 1,357 3,823 ADANI ENTERPRISES LIMITED 1 1,800 1,147 ADLABS FILMS LIMITED 5 3,000 1,166 ALOK INDUSTRIES LIMITED 10 25,000 1,696 AXIS BANK LIMITED 10 3,985 3,266 BAJAJ HINDUSTAN LIMITED 1 2,000 345 BALRAMPUR CHINI MILLS LIMITED 1 5,000 410 BHARAT EARTH MOVERS LIMITED 10 76 48 BHARAT HEAVY ELECTRICAL LIMITED 10 900 1,523 CAIRN INDIA LIMITED 10 12,000 3,449 CROMPTON GREAVES LIMITED 2 153 32 DIVI’S LABORATORIES LIMITED 2 2,000 3,087 DLF LIMITED 2 800 314 EDUCOMP SOLUTIONS LIMITED 10 930 3,109 ENNORE COKE LIMITED 10 500 19 EVINIX ACCESSORIES LIMITED 1 4,840 74 GUJRAT NRE COKE LIMITED 10 8,100 972 HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED 10 65 98 HBL POWER SYSTEMS LIMITED 10 800 248 HOUSING DEVLOPMENT & INFRASTRUCTURE LIMITED 10 2,471 915 ICICI BANK LIMITED 10 2,651 2,288 INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION LIMITED 10 1,344 139 INDIA INFOLINE LIMITED 2 3,200 528 INDIABULLS REAL ESTATE LIMITED 2 3,200 993 INFOSYS TECHNOLOGIES LIMITED 5 100 160 JAIPRAKASH ASSOCIATES LIMITED 2 600 107 JINDAL SAW PIPE LIMITED 10 255 143 KARUTRI GLOBAL LIMITED 1 12,000 279 LANCO INFRATECH LIMITED 10 4,300 620 LARSEN & TOUBRO LIMITED 2 1,706 3,031 MCLEOD RUSSEL INDIA LIMITED 5 243 21 MERCATOR LINES LIMITED 1 2,000 233 NAVIN FLOURINE INTERNATIONAL LIMITED 10 53 12 OIL AND NATURAL GAS CORPORATION LIMITED 10 287 193 POWER FINANCE CORPORATION LIMITED 10 1,159 156 PRAJ INDUSTRIES LIMITED 2 9,315 1,820 PUNJ LLOYD LIMITED 2 3,836 810 PUNJAB NATIONAL BANK 10 207 94 RELIANCE CAPITAL LIMITED 10 2,455 3,289 RELIANCE COMMUNICATIONS LIMITED 5 2,797 912 RELIANCE INFRASTRUCTURE LIMITED 10 787 742 RELIANCE INDUSTRIES LIMITED 10 2,286 5,239 RELIANCE POWER LIMITED 10 3,000 570 RELIANCE PETROLEUM LIMITED 10 11,000 1,889 RURAL ELECTRIFICATION CORPORATION LIMITED 10 1,436 122 SESA GOA LIMITED 1 7,575 1,880 SHREE RENUKA SUGAR LIMITED 1 6,000 795 SIEMENS LIMITED 2 2,500 776 STATE BANK OF INDIA 10 155 170 TATA STEEL LIMITED 10 310 205 UNITED PHOSPHOROUS LIMITED 2 1,139 163 UNITED SPIRITS LIMITED 10 2,250 3,304 WELSPUN GUJARAT STAHL ROHREN LTD. 5 146 41 NO. OF UNITS OF VARIOUS MUTUAL FUND SCHEMES PURCHASED AND REDEEMED DURING THE YEAR 2008-09

NAME FACE NO OF PURCHASE VALUE UNITS COST Rs. in ’000

RELIANCE LIQUIDITY FUND GROWTH 10 584,933 7,272 FRANKLINE FLOATING RATE INCOEM 10 725,300 7,292 SBI MAGNUM INSTA FUND 10 679,910 7,292 BIRLA SUN LIFE LIQUID PLUS - INSTL. - DAILY DIVIDEND - REINVESTMENT 10 25,046,591 250,636 RELIANCE- LIQUID FUND- CASH PLAN (G) 10 9,079,290 130,000 RELIANCE LIQUID FUND WEEKLY DIVIDEND 10 162,841 2,494 Rs. in ’000 Rs. in ’000 AS AT AS AT 31-03-2009 31-03-2008 8- CURRENT ASSETS, LOANS AND ADVANCES (a) ACCRUED INCOME INTEREST ACCRUED ON INVESTMENT AND FIXED DEPOSITS 12,090 32,761 ACCRUED INCOME 144,598 88,286 156,688 121,047

3 Radico 48-57.p65 54 8/9/2009, 11:14 AM Rs. in ’000 Rs. in ’000 AS AT AS AT 31-03-2009 31-03-2008

b) INVENTORIES (i) MATERIALS (AT LOWER OF COST OR NET REALISABLE VALUE) RAW MATERIALS 416,302 222,672 PACKING MATERIALS 129,946 125,006 STORES & SPARE PARTS 50,585 180,531 38,336 163,342 TOOLS (AT COST) 0 656 (ii) STOCK IN TRADE (AT LOWER OF COST AND NET REALISABLE VALUE) FINISHED GOODS 408,606 330,872 STOCK IN PROCESS 78,912 487,518 50,308 381,180 1,084,351 767,850 c) SUNDRY DEBTORS (UNSECURED) DEBTS OUTSTANDING FOR A PERIOD EXCEEDING SIX MONTHS CONSIDERED GOOD 416,923 412,583 CONSIDERED DOUBTFUL 53,596 23,625 LESS : ADJUSTED AGAINST PROVISIONS 48,085 5,511 21,227 2,398 OTHER DEBTS CONSIDERED GOOD 1,277,834 974,767 1,700,268 1,389,748 d) CASH AND BANK BALANCES CASH IN HAND 4,800 2,240 CHEQUES IN HAND 686 26,747 BALANCE WITH SCHEDULED BANKS : CURRENT ACCOUNTS 147,739 109,029 DEPOSIT ACCOUNTS * 266,503 693,407 SAVINGS BANK ACCOUNTS (EMPLOYEES’ SECURITY DEPOSIT) 40 38 419,768 831,461 *(i) UNDER LIEN WITH GOVERNMENT DEPARTMENT AND BANKS AS SECURITY. 11,862 12,041 (ii) WITH BANK OF INDIA, LONDON (UNUTILISED PROCEEDS OF FCCB) 0 677,192 e) LOANS AND ADVANCES (UNSECURED-CONSIDERED GOOD, UNLESS OTHERWISE STATED). INTER CORPORATE LOANS 0 33,500 SHARE APPLICATION MONEY - DIAGEO RADICO DISTILLERIES PVT. LTD. 0 57,500 SHARE APPLICATION MONEY - RADICO NV DISTILLERIES 99,000 0 MAHARASTHRA LTD. (SINCE ALLOTED) ADVANCES RECOVERABLE IN CASH OR IN KIND OR FOR VALUE TO BE RECEIVED: CONSIDERED GOOD* 1,912,915 1,771,248 CONSIDERED DOUBTFUL 2,535 9,057 LESS : ADJUSTED AGAINST PROVISIONS 2,535 0 9,057 0 CLAIMS AND DUTIES RECOVERABLE FROM EXCISE DEPARTMENT 132 131 EXCISE AND OTHER DEPOSITS 152,399 166,130 INCOME TAX PAYMENTS (NET OF PROVISIONS) 191,217 193,097 SALES TAX PAID UNDER PROTEST 1,637 1,205 2,357,300 2,222,811 * INCLUDES RADICO NV DISTILLERIES MAHARASHTRA LTD., Rs 88,866 THOUSANDS. (PREVIOUS YEAR 38,107 THOUSANDS) 9. CURRENT LIABILITIES CREDITORS (DUE TO MICRO & SMALL ENTERPRISES 0 0 (SEE NOTE NO. 9) TRADE 461,125 336,064 OTHERS * 313,164 774,289 397,208 733,272 SECURITY DEPOSITS FROM DEALERS 21,888 17,617 SECURITY DEPOSITS FROM OTHERS 2,504 5,131 UNCLAIMED DIVIDEND ** 7,030 6,614 OTHER LIABILITIES 44,914 23,169 INTEREST ACCRUED BUT NOT DUE 15,552 18,768 866,177 804,571 * INCLUDES DIAGEO RADICO CREDIT BALANCE OF Rs 55866 THOUSANDS. **THE ACTUAL AMOUNT TO BE TRANSFERRED TO INVESTER EDUCATION AND PROTECTION FUND WILL BE DETERMINED ON THE DUE DATES.

10. PROVISIONS EQUITY DIVIDEND (INCLUDING TAX THEREON) 35,963 59,938 GRATUITY 11,919 0 LEAVE ENCASHMENT 40,469 43,106 PREMIUM ON REDEMPTION OF FCCB (SEE NOTE 6 (ii)) 295,194 202,400 AGST. FC GAIN ON FCCB LOAN/ BANK DEPOSITS (NET) 0 119,668 CONTINGENCIES FOR : DIMINUTION IN VALUE OF INVESTMENT 30,414 61,048 LOSS ON DERIVATIVES 0 2,486 LOSS ON PENDING FOREIGN EXCHANGE CONTRACTS 63,745 0 FOR OBSOLETE & NON MOVING INVENTORY 14,200 0 OTHERS 736 736 492,640 489,382

3 Radico 48-57.p65 55 8/11/2009, 12:27 PM Rs. in ’000 Rs. in ’000 CURRENT YEAR PREVIOUS YEAR

11. SALES & INCOME FROM OPERATIONS RECTIFIED SPIRIT AND OTHER ALCOHOLIC PRODUCTS. 10,412,325 10,913,792 PET BOTTLES 250,031 188,530 JAIVIK KHAD 5,599 2,275 INCOME FROM OPERATIONS THROUGH OTHER DISTILLERIES/BOTTLING UNITS 672,557 811,723 EXPORT INCENTIVES 48,302 67,359 CENVAT CREDIT UTILISED 58,311 60,474 SERVICE CHARGES (TDS Rs 490 THOUSANDS PREVIOUS YEAR Rs 5508 THOUSANDS) 9,847 43,701 EXCISE REVENUE SUBSIDY INCOME 56,312 39,586 OTHERS (INCL. SALE OF PRINTED BOTTLES,BLENDS,SCRAP & OTHERS) 233,982 154,431 11,747,266 12,281,871

12. OTHER INCOME DIVIDEND (TDS RS NIL) - NON TRADE - SHORT TERM 1,295 3,566 EXCESS PROVISIONS WRITTEN BACK 2,011 3,869 MISCELLANEOUS INCOME 569 654 CASH DISCOUNT FROM VENDORS 0 58 GAIN ON BUY BACK OF FCCBs (SEE NOTE 6 (iii)) 219,750 0 INTEREST ON DEBENTURES (TDS NIL) 199 0 INTEREST ON INCOME TAX REFUNDS 5,645 0 PROVISION NO LONGER REQUIRED WRITTEN BACK (SEE NOTE 7) 119,668 0 GAIN DUE TO FOREIGN EXCHANGE FLUCTUATION 0 119,668 LESS:PROVISION 00119,668 0 PROFIT ON SALE OF INVESTMENTS - NON TRADE - SHORT TERM 317 132,689 PROFIT ON SALE OF FIXED ASSETS 532 187 349,986 141,023

13. ACCRETION/(DECRETION) TO STOCKS OPENING STOCK FINISHED 330,872 291,455 STOCK IN PROCESS 50,308 381,180 43,225 334,680 CLOSING STOCK FINISHED 408,606 330,872 STOCK IN PROCESS 78,912 487,518 50,308 381,180 106,338 46,500

14. PURCHASES AND MATERIALS CONSUMED PURCHASES 56,687 1,819,245 RAW MATERIALS CONSUMED OPENING STOCK 222,672 257,447 ADD: PURCHASES 2,318,204 1,488,741 2,540,876 1,746,188 LESS: CLOSING STOCK 416,302 2,124,574 222,672 1,523,516 PACKING MATERIALS 1,134,189 1,059,558 STORES AND SPARES 111,114 105,133 3,426,564 4,507,452

15. SALARIES, ALLOWANCES AND BENEFITS SALARIES, WAGES & BONUS 455,817 422,620 GRATUITY 37,298 4,272 CONTRIBUTION TO PROVIDENT AND OTHER FUNDS 33,201 28,399 CONTRIBUTION UNDER EMPLOYEES STATE INSURANCE SCHEME 1,802 1,602 EMPLOYEES COMPENSATION (ESOP) - (SEE NOTE 10) 5,625 20,127 STAFF WELFARE EXPENSES 18,709 19,451 552,452 496,471

3 Radico 48-57.p65 56 8/11/2009, 12:27 PM Rs. in ’000 Rs. in ’000 CURRENT YEAR PREVIOUS YEAR

16. OTHER EXPENSES POWER AND FUEL 174,413 132,829 REPAIRS AND MAINTENANCE (INCLUDING STORES & SPARES CONSUMED) BUILDING 7,355 5,927 MACHINERY 50,494 35,115 OTHERS 7,463 65,312 7,848 48,890 MACHINERY AND OTHER HIRE CHARGES 7,187 5,766 INSURANCE 21,696 21,718 OTHER MANUFACTURING EXPENSES 22,264 44,683 RENT 21,544 21,477 RATES AND TAXES 159,493 187,087 SALES TAX / VALUE ADDED TAX 192,452 163,360 TRAVELLING EXPENSES DIRECTORS 4,022 10,042 OTHERS 66,666 70,688 92,430 102,472 DIRECTORS’ FEE 370 420 PROVISION FOR DOUBTFUL DEBTS / ADVANCES 28,094 18,203 PROVISION FOR DECLINE IN THE VALUE OF CURRENT INVESTMENT 0 58,580 LOSS / (GAIN) ON FOREIGN EXCHANGE FLUCTUATION 326,269 50,007 PROVISION FOR OBSOLETE & NON MOVING INVENTORY 14,200 0 CHARITY AND DONATION 2,047 1,510 BAD DEBTS / ADVANCES WRITTEN OFF 7,758 0 LESS : ADJUSTED AGAINST PROVISION 7,758 0 00 SUNDRY BALANCES WRITTEN OFF 3,074 5,905 WEALTH TAX 600 0 LOSS ON SALE OF SHARES (NET OF PROVISION OF Rs 30633 THOUSANDS THEIR AGAINST, ADJUSTED) 48,828 0 LOSS ON SALE OF ASSETS 27,790 2,963 BANK CHARGES AND INCIDENTAL EXPENSES 32,499 28,013 OTHER OVERHEADS 157,736 150,342 SELLING AND DISTRIBUTION EXPENSES: FREIGHT OUTWARDS 260,066 275,196 SUPERVISION CHARGES-AFTER SALES 64,069 106,589 SUPERVISION CHARGES TO SUPERVISORS 152,513 144,768 DISTRIBUTABLE SURPLUS PAID 30,511 90,592 REBATE DISCOUNT AND ALLOWANCE 190,177 286,262 ADVERTISEMENT & SALES PROMOTION 557,355 405,137 1,254,691 1,308,544 2,631,247 2,352,769

17. FINANCIAL EXPENSES INTEREST ON: -TERM LOANS 148,551 151,879 -OTHERS 376,751 309,433 525,302 461,312 LESS: INTEREST ON LOANS @ # 33,796 42,571 LESS: INTEREST ON BANK DEPOSITS @ # 40,036 75,045 451,470 343,696 @ INCLUDES TAX DEDUCTED AT SOURCE 8,069 8,902 # HAVING NEXUS TO BORROWINGS

3 Radico 48-57.p65 57 8/9/2009, 11:14 AM Schedules to the Balance Sheet & Profit and Loss Account 18. Significant Accounting Policies and Notes on Accounts-2008-09 (A) Significant Accounting Policies 1. Basis of Accounting The financial statements are prepared under historical cost convention, on a going concern basis in accordance with the applicable accounting standards prescribed in the Companies (Accounting Standards) Rules,2006 issued by the Central Government. 2. Use of Estimates The preparation of financial statements requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Differences between actual results and estimates are recognized in the period in which they materialise. 3. Valuation of Fixed Assets Fixed Assets are stated at cost except to the extent revalued. Borrowing costs attributable to the qualifying assets and all significant costs incidental to the acquisition of assets are capitalised . Freehold and Leasehold land at Rampur have been revalued by an approved valuer as on 1st January, 1999.Building, Plant & Machinery relating to Distillery Unit acquired/installed upto Dec, 1984 have been revalued as on 31st Dec 1985. 4. Depreciation a) Cost of Leasehold land and leasehold improvements are amortised over the period of lease. b) Depreciation is charged for the year on straight line method at the rates and in the manner specified in Schedule XIV of the Companies Act,1956

c) On additions costing less than Rs. 5000 , depreciation is provided on pro rata basis. d) Depreciation on amount added on revaluation of assets is transferred from Revaluation Reserve. e) The life of Brands of the value of Rs 21.00 crores and Goodwill of Rs. 9.59 crores arising out of merger during the year 2004-05 are taken to be 20 years and amortised. 5. Investments Investments are valued at Cost. Provision for diminution in value of long term investment is considered , if in the opinion of management, such a decline is considered other than temporary and in the case of current investments, provision is made for the shortfall. 6. Inventories Finished Goods and Stock in process are valued at lower of cost or net realisable value.Cost includes cost of conversion and other expenses incurred in bringing the goods to their location and condition.Raw materials,Packing Materials,Stores and spares are valued at lower of cost or net realisable value. Cost is ascertained on “moving average” basis for all inventories. 7. Revenue recognition Sales are recognised on delivery or on passage of title of the goods to the customers.They are accounted net of trade discounts and rebates but inclusive of excise duty and sales/trade tax.Excise revenue subsidy is accounted for based on the policy of the State Government of Uttar Pradesh.Duty draw back is accounted for on the basis of export sales effected during the year. Interest income is accounted on time proportion basis. Dividend income is accounted, when the right to receive is established. 8. Excise Duty In respect of stocks covered by central excise, excise duty is provided on closing stocks and also considered for valuation. In respect of other stocks, keeping in view that State excise duty payable on finished products is not determinable, as it varies depending on the places to which they are despatched. The excise duty on such stocks lying in factory is accounted for on clearances of such goods.The method of accounting has no impact on the results of the year. 9. Transfer pricing of Bio-Gas / Power Since it is not possible to compute the actual cost, inter unit transfer of bio-gas & power have been valued on the basis of savings in direct fuel cost / prevailing purchase price of power. The same has been considered for valuation of inventoreis. 10. Treatment of Employee benefits The Company makes regular contributions to duly constituted funds set up for Provident Fund, Family Pension Fund, Employees state insurance ,Superannuation and Gratuity , which are charged to revenue.The employees are allowed the benefit of leave encashment as per the rules of the Company,for which provision for accruing liability is made on actuarial valuation carried out at the end of the year. Contribution to gratuity is also determind on actuarial basis. 11. Impairment : At each Balance Sheet date, the Company reviews the carrying amount of its fixed assets to determine whether there are any indication that those assets have suffered an impairment loss. If any such indication exists, recoverable amount of the assets is estimated in order to determine the extent of impairment loss. 12 Foreign Currency Transactions Transactions in foreign currencies are accounted for at the exchange rate prevailing on the day of the transaction. The outstanding liabilities/receivables are translated at the year end rates. The resultant gain or loss are adjusted to the Profit & Loss Account. Non-monetary items denominated in foreign currency, (such as fixed assets) are valued at the exchange rate prevailing on the date of transaction. Any gain or losses arising due to exchange differences arising on translation or settlement are accounted for in the Profit and Loss Account. In case of forward exchange contracts, the premium or discount arising at the inception of such contracts, is amortised as income or expense over the period of contract and exchange difference on such contracts, i.e. difference between the exchange rate at the reporting / settlement date and the exchange rate on the date of inception / the last reporting date, is recognized as income / expenses for the period. 13 Derivative Transactions These transections have been undertaken to hedge the cost of borrowing and comprise of principal / interest rate swaps.The income / expenses are recognised when earned / incurred. In case of outstanding derivative contract at the year end date, loss is determined on marked to market (MTM) basis and provision made. 14 Provisions, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes to accounts. Contingent assets are neither recognized nor disclosed in the financial statements. 15 Research and Development Fixed assets used for Research and Development are depreciated in the same manner as in the case of similar assets; the revenue expenses are charged off in the year of incurrance. 16 Taxation Deferred tax is recognised , subject to consideration of prudence , on timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

4 Notes on Account 58-68.p65 58 8/9/2009, 11:14 AM Rs. in ’000 Rs. in ’000 CURRENT YEAR PREVIOUS YEAR

(B) Notes on Accounts

1. Estimated amount of Capital commitments (Net of advances) 129,653 145,011 2. Contingent Liabilities not provided for: i) Claims against the Company , not acknowledged as debts (a) Disputed liability relating to ESI Contribution 89 89 (b) Disputed liability relating to PF contribution of contractor labour 3,244 3,304 (c) Disputed liability relating to payment of late re-calibration fees on verification and stamping of manufaturing vats/tanks installed at distillery. 8,480 8,480 (d) Disputed claim relating to molasses purchased on credit (include interest of Rs.437,868) 561 561 (e) Disputed claim by APO for non - supply of rum 1,292 1,292 (f) Disputed claim relating to refund of export duty on rectified spirit 1,040 735 g) Disputed Entry Tax demand-matter under appeal 2,298 15,360 (h) Disputed Penalty U/S 10 for purchase of HSD ( Diesel) -matter under appeal 127 127 (i) Disputed Excise matters 16,305 11,505 (j) Disputed Stamp duty claim arising out of amalgamation, being contested 8,000 0 (k) Winding up petition filed by a UK company for enforcing an alleged guarantee given on behalf of Radico SPS UK Ltd. (Since liquidated) disputed and being contested. 82,705 0 124,141 41,453 In respect of the items above, future cash outflows are determinable only on receipt of judgements / decisionspending at various forums/authorities. ii) Guarantee given to a Bank on behalf of : (a) Radico International DMCC for loan facilities (USD 2.08 million - Previous year USD 5.0 million). 105,285 199,850 (b) Radico NV Distilleries Maharashtra Ltd. 414,000 360,000 iii) The The Company has entered into an agreement dated 23rd February, 2007 with Fortune Brand Promotion and Management Trust (the Trust), (of which the Company is the Settlor) for carrying out brand management services. In consideration of the same, the Company is required to pay brand management fee to the Trust. Sales promotion expenses of the year include Rs 1070.38 lacs (Previous year Rs 348.50 lacs) paid to the Trust on the basis of their invoices.The agreement is to continue for a period of seven years, unless terminated earlier. As per the terms of the Trust Deed and agreement, the trust fund is held for the benefit of the lenders in respect of their outstanding dues and the brand owners (the Company) in respect of residual interest. On termination of the agreement at any time, the Company will be liable to pay to the trust of its outstanding borrowing, as reduced by the funds available to the Trust and also the other costs and expenses towards closing of the Trust. As security, charge by way of hypothecation has been created on the trade marks and copy rights of two self generated brands of the Company in favour of Bank and registered in the office of Registrar of Companies as per section 125 of the Companies Act 1956. On the basis of information from the Trust, the outstanding loan as on the Balance Sheet date is 471,600 324,200 iv) Madhya Pradesh State Industrial Development Corporation Ltd. has demanded a sum of Rs. 168.09 lacs besides unspecified expenses arising out of the alleged non compliance of conditions relating to its holding of shares in Abhishek Cement Ltd. prior to the merger of Radico Khaitan Ltd. in the year 2002-03. Its action has resulted in a sum of Rs 72.84 lacs held in State Bank of India being attached. The recovery proceedings initiated by local Collector Office are stayed under the Orders of the Madhya Pradesh High Court. The Company is taking suitable steps to contest the recovery proceedings. 3. The share purchase agreement dt 01.04.2004 with the erstwhile shareholders (JM group) of Anab-e-Shahi Wines & Distilleries Ltd.,inter alia, provides that in the event of the actual liability for sales tax dues is less than Rs. 180 lacs provided in the books of accounts,the difference shall be refundable to the erstwhile shareholders with interest @ of 10% p.a w.e.f. Ist July 2004, besides payment of @ 10% p.a on the amount payble to the sales tax authorities till the date of actual discharge of the liability. In the event of the actual liabilty is in excess of Rs 180 lacs, the excess shall be met by the erstwhile shareholders and documentory evidence provided to the Company.Against the demand

4 Notes on Account 58-68.p65 59 8/9/2009, 11:14 AM notice of Rs 326.98 lacs in March 2006, on appeal, the Appelate Tribunal decided the matter in Company’s favour. Meanwhile, Andhra Pradesh Beverage Corporation Ltd., a state government owned company deducted a sum of Rs. 174.39 lacs from the Company’s receivable and remitted to the State Government. The Company is taking steps to claim back the Amount. 4 In the opinion of the Management and to the best of their knowledge and belief, the value on realisation of current assets, loans and advances in the ordinary course of business would not be less than the amount at which they are stated in the Balance Sheet. 5 The shareholders in the Extra Ordinary General Meeting held on 11th day of August, 2007 approved the issue of 69,40,000 share warrants on preferential basis to two of the promoter companies.Considering the economic meltdown and present market scenario, the promoters of the Company decided not to subscribe to the preferential warrants, convertible into equity shares at a conversion price of Rs. 163.50 each. A sum of Rs. 1134.69 lacs being 10% as application money received towards the said warrants stands forfeited by the Company in terms of Clause 13.1.2.3 (c) of SEBI (Disclosure & Investor Protection) Guidelines, 2000 and taken to Capital Reserve. 6 (I) The Company has raised USD 50 million through an issue of FCCBs on 26th July 2006 (USD 40 million) and 25th August 2006 ( USD 10 million on exercise of green shoe option by the manager to the issue). The FCCBs will be convertible into equity shares of the Company at any time during the currency of the bonds at the option of the bondholders at a conversion price of Rs. 159.20 per share (orginal conversion price being Rs. 172.50 per share reset on 6th August 2008 pursuant clause 6.4 of the subscrption agreement).These are listed on the Singapore Stock Exchange. They carry a coupon rate of 3.50% per annum and have a maturity of five years and one day from the date of issue. (ii) The FCCBs unless previously converted,redeemed, or cancelled, are liable to be redeemed on the maturity date at a premium of 30.3961% of the principal amount. The premium payable on redemption has been provided proportionately (over the life of bonds) and accordingly, Rs. 927.94 lacs for the year (out of the total redemption premium of Rs. 5550.08 lacs) on this account has been debited to Share Premium account. (iii) Pursuant to RBI circular dated 8th December 2008, the Company has repurchased / bought back the FCCBs to the extent of face value of USD 14 million till 31st March 2009 and cancelled in the record of the Trustee to the issue, leaving a balance outstanding of USD 36 million. The gain on re-purchase of bond has been credited to profit & loss account. The Company has been advised that this gain is not exigible to income tax liability under normal computation. 7 Upto 31.03.2008, the Company was charging foreign exchange differences arising on ‘long-term foreign currency items’ (LTFC) ( I.e., items having a term of twelve months or more at the time of origination) to profit and loss account (though considering the uncertainties of rupee-dollar exchange rate in regard to FCCBs and Fixed Deposits with bank of unutilised FCCBs, as a matter of prudence, a net provision of Rs. 1196.68 lacs comprising of Rs. 1810.00 lacs credit for loans and Rs. 613.32 lacs debit for deposits was made in the previous year). Pursuant to the amendment by way of addition of para 46 to AS-11 on effect of changes in foreign exchange rates, the Company has excercised the option of deferring the foreign exchange fluctuation gain/loss in respect of the accounting periods commencing from 01.04.2007. Further, such foreign exchange differences relating to acquisition of depreciable capital assets have been adjusted to the cost of such assets and to be depreciated over the balance life of the assets. As a result, foreign exchange gain of the financial year 2007-08 of Rs. 548.79 lacs relating to acquisition of depreciable capital assets and Rs. 838.29 lacs on other items have been adjusted from the general reserve. Out of the foreign currency monetary items translation difference account of Rs. 724.17 lacs, a sum of Rs 270.76 lacs has been amortised during the year. The balance of Rs. 453.41 lacs would be amortised over the next two financial years. In view of the amendment to AS-11, provision for foreign currency gain of Rs. 1196.68 lacs made as a matter of prudence in the previous year to meet the future liability, is no longer considered necessary and therefore has been written back to profit and loss account.

4 Notes on Account 58-68.p65 60 8/9/2009, 11:14 AM Had the Company continued the earlier basis of accounting for foreign exchange differences arising on long term foreign currency items, the profit after tax for the current year would have been lower by Rs. 2584.72 lacs, general reserve would have been higher by Rs. 1387.08 lacs, the net block of fixed assets would have been lower by Rs. 1940.91 lacs. 8. Income Tax - a ) Provision for Income Tax for the year has been made on book profits (MAT) under section 115 JB of the Income Tax Act, 1961. Advances recoverable includes Rs. 667.50 lacs on account of MAT credit available for set off, which the company can avail within the period provided in law. b ) In respect of assessment years 1993-94 and 1996-97 - the demands aggregate to Rs. 96.90 lacs.In view of the expected relief in appeals, no provision is considered necessary for the demand. However,these have been adjusted in full by the department against TDS/Advance tax refunds due to the Company. c ) The Company filed revised returns for the assessment years 1997-98 to 1999-2000, arising out of the merger of the then RKL with Abhishek Cements Ltd.. The assessments are pending as on date. d ) The Deputy Commissioner of Income Tax, while giving effect to the order of Income Tax Settlement Commission for the assesment years 2000-01 to 2006-07 has vide order dated 29th April,2008 charged penal interest under relevant provisions of the Income Tax Act 1961 aggregating to Rs. 335.23 lacs. This has been recovered out of the refunds due to the company. The Company has not accepted the levy of interest and no provision has been made therefore. The Company has filed a special leave petition before the Hon’ble Supreme Court of India, which is pending. e) Deferred tax liability (Net) Deferred Tax Current year Deferred Tax Liability/(Asset) Charge/(Credit) Liability/(Asset) as at 01.04.2008 as at 31.03.2009 Deferred Tax Liability Difference between Book and Tax Depreciation 345,232 124,195 469,427 Total 345,232 124,195 469,427 Deferred Tax Assets I) FCCB adjustment 0 (65,971) (65,971) II) Provision for leave encashment (14,618) (3,222) (17,840) III) Disallowance under section 40(a) (ia) 0 (1,462) (1,462) IV) Provision for doubtful debts and others (8,869) (8,237) (17,105) Total (23,487) (78,892) (102,379) Net 321,745 45,303 367,047 Rounded off (Rs. lakhs) 3,217 453 3,670 In line with the Accounting Standard AS-22 , deferred tax in respect of timing differences, which orginate and likely to be reversed during the tax holiday period under chapter VI A of the Act have not been recognised. 9. The Company has not received information from suppliers or service providers, whether they are covered under Micro, Small and Medium Enterprises (Development) Act, 2006 and hence it has not been possible to give the required information relating to amounts unpaid,if any, as at year end together with interest paid or payable to them. 10 The Company established Employee Stock Options Plan, duly approved by the shareholders in the meeting held on 25th May, 2006, which has become effective from 25th July, 2006.Accordingly, the Company has granted 2,157,500 equity options upto 31st March 2008 (at weighted average exercise price of Rs. 91.86) and also 432,500 equity options during 2008-09 (at exercise price of Rs. 51.64) , to the eligible employees as per the recommendations of the Compensation Committee, which will get vested over a period of 4 years from the date of the grant. The employees have the options to exercise the right within a period of 3 years from the date of vesting. The compensation cost of stock options granted to employees are accounted by the Company using the intrinsic value method. Summary of Stock Option No. of stock option

Option granted 2,590,000 Options forfieted upto March ‘09 741,225 Options exercised upto March ‘09 246,003 Option outstanding on 31.03.2009 1,602,772 In respect of Options granted under the Employee Stock Options plan, in accordance with the guidelines issued by SEBI, the accounting value of the options is accounted as deferred employee compensation, which is amortized on a straight line basis over the period between the date of grant of options and eligible dates for conversion into equity shares. Consequently the schedule of salaries & benefits includes Rs. 56.25 lakhs (Previous year Rs 201.27 lakhs) being the amortisation of deferred employee compensation.

4 Notes on Account 58-68.p65 61 8/9/2009, 11:14 AM 11. Employees Benefits : AS-15 (I) The Company has taken a policy with Life Insurance Corporation of India (LIC) for meeting the accruing liability on account of gratuity. The premium, actuarialy ascertained by LIC, is charged to the Profit and Loss account. The amount debited to profit & loss account is Rs. 372.98 lacs (includes Rs.250.23 lakhs relating to previous year). (ii) In respect of leave encashment, provision is made based on the actuarial valuation by an independent Actuary. The following information as required under AS-15 are based on the report of the Actuary / L.I.C. In respect of gratuity similar information is not available for the previous year and hence not given. LEAVE ENCASHMENT A Economic assumptions 31/03/2009 31/03/2008 i) Discounting rate 8.00% 8.00% ii) Future salary increase 5.50% 5.50% iii) Expected rate of return on plan assets 0.00% 0.00% B Break up of expenses a) Current service cost 5,391,071 5,275,863 b) Interest cost 3,452,648 2,592,615 c) Net actuarial (gain)/ loss recognized in the period (1,203,163) 7,880,467 d) Expenses recognized in the statement of profit & loss 7,640,556 15,748,945 C Change in present value of obligation a) Present value of obligation as at the beginning of the period 01/04/2008 43,158,097 32,407,698 b) Interest cost 3,452,648 2,592,615 c) Current service cost 5,391,071 5,275,863 d) Benefits paid (10,330,048) (5,050,754) e) Actuarial (gain)/loss on obligation (1,203,163) 7,880,467 f) Present value of obligation as at the end of period 31./03/2009 40,468,605 43,105,889 GRATUITY A Economic assumptions 31/03/2009 i) Discounting rate 8.00% ii) Future salary increase 7.00% iii) Expected rate of return on plan assets 9.10% B Break up of expenses a) Current service cost 4,760,054 b) Interest cost 3,623,496 c) Expenses return on plan assets (1,827,120) d) Net actuarial (gain)/ loss recognized in the period 5,718,393 e) Expenses recognized in the statement of profit & loss 12,274,823 C Change in present value of obligation a) Present value of obligation as at the beginning of the period 01/04/2008 45,293,696 b) Interest cost 3,623,496 c) Current service cost 4,760,054 d) Benefits paid (5,081,711) e) Actuarial (gain)/loss on obligation 5,718,393 f) Present value of obligation as at the end of period 31./03/2009 54,313,928 D Change in fair value of plan assets a) Fair value of plan assets at the beginning of the year 20,088,187 b) Expected return on plan assets 1,827,120 c) Contributions 25,560,992 d) Benefits paid (5,081,711) e) Fair value of plan assets at the end of the year 42,394,588 f) Liability recognised in the balance sheet 11,919,340 (iii) The Company in addition has recognised as expense the following:- 1 Contribution to recognised Provident Fund Trust. 21,972,019 18,868,955 2 Contribution to LIC towards Superannuation. 11,228,905 9,529,649 3 Farewell gifts to retired employees. 20,850 67,757 4 Medical insurance premium. 7,619,134 6,166,428 12. Segment reporting : Based on the guideline in Accounting Standard on segment reporting (AS- 17), the Company’s primary business segment is manufacture and trading in liquor. The liquor business incorporates the product groups, namely, rectified spirit, country liquor and IMFL which mainly have similar risks and returns. Therefore, segment reporting is not applicable. 13. Related party disclosure as per Accounting Standard -18 : A Related parties and their relationship : I Enterprises that directly, or indirectly through one or more intermediaries,control, or are controlled by, or are under common control with, the reporting enterprise: (1) Saphire Intrex Ltd.

II Associates and joint ventures (1) Diageo Radico Distilleries Private Limited (2) Radico NV Distilleries Maharashtra Limited (3) Radico Global Limited (an associate)

4 Notes on Account 58-68.p65 62 8/9/2009, 11:14 AM III Key Manangement personnel : (1) Dr. Lalit Khaitan , Chairman & Managing Director (2) Mr. Abhishek Khaitan , Managing Director (3) Mr. K.P. Singh, Whole Time Director Relatives : (1) Mrs. Deepshikha Khaitan (wife of Mr. Abhishek Khaitan) (2) Mrs. Sheela Singh (wife of Mr. K.P. Singh)

IV Enterprises over which key manangement personnel are able to exercise (1) Abhishek Fiscal Services Pvt. Ltd. significant influence : (2) Elkay Fiscal Services Pvt. Ltd. (3) Smita Fiscal Pvt. Ltd. B Transaction with above in the ordinary course of business :

Rs. in ‘000 Transactions with related parties: Key Management Enterprise in which Total Joint Venture Personnel & their Key Management Subsidiaries & Associates relatives have Personnel significant influence Remuneration 44,975 44,975 (32,846) (32,846) Sale of Goods 0 51,317 51,317 (173,876) (5,706) (179,582) Rent paid 381 6,000 6,381 (762) (6,000) (6,762) Interest received 0 0 (1,059) (1,059) Service Charges received 9,847 9,847 (47,311) (47,311) Royalty paid 30,511 30,511 (90,592) (90,592) Investment in share capital 0 293,500 293,500 (58,091) (0) (58,091) Share application money paid 99,000 99,000 (57,500) (57,500) Loans given 0 0 (20,000) (20,000) Loans given - repaid 0 0 (40,000) (40,000) Outstanding balances as at 31.03.2009 Loans / Advances 88,866 88,866 (38,107) (38,107) Debtors 0 2,764 2,764 (159,642) (65,961) (225,603) Payables 55,866 55,866 (102,663) (102,663) 14. The details of the Company’s interest in its Joint Ventures, having Joint Control, as per the requirements of AS-27 on Financial Reporting of Interest in Joint Ventures are as under : Particulars Diageo Radico Radico NV Distilleries Pvt. Ltd. Distilleries Maharashtra Ltd. % Ownership Interest 50.00% 36.00% a Assets 60,050 746,446 (89,251) (177,092) b Liabilities 265,714 551,449 (238,685) (145,555) c Income 21,517 82,100 (64,908) (432) d Selling & Distribution Expenses 26,493 22,585 (225,718) (0) e Other Expenses 50,635 133,944 (32,980) (3,619) f Contingent Liabilities 0 3,243 (0) (0) g Capital Commirments 0 1,833 (0) (190,034)

4 Notes on Account 58-68.p65 63 8/9/2009, 11:14 AM Rs. in ‘000 15. Earnings per share (EPS) as per Accounting Standard - 20 : Current Year Previous Year Profit after tax attributable to equity share holders (after deucting prior period and extra ordinary items, preference dividend and tax thereon 65,363 330,720 Weighted average no. of equity shares of Rs. 2/- each 102,462,219 97,157,466 Basic earning per share (Rs.) 0.64 3.40 Since the potential equity on account of ESOP, FCCB are anti dilutive, the diluted earning remains the same (Rs.) 0.64 3.40 Basic earning per share before prior period and extra ordinary items (Rs.) 0.64 3.40 16. i) Managerial Remuneration * Remuneration to Mr. L. K. Khaitan, Chairman & Managing Director Salary and Allowances 14,250 8,803 Contribution to Provident and other Funds. 3,240 2,377 Value of benefits, calculated as per Income Tax Rules. 2,984 3,052 ii) Remuneration to Mr. Abhishek Khaitan, Managing Director Salary and Allowances 11,400 7,469 Contribution to Provident and other Funds 2,592 2,017 Value of benefits, calculated as per Income Tax Rules. 2,600 2,250 iii) Remuneration to Mr. K.P.Singh, Wholetime Director Salary and Allowances 4,690 4,033 Contribution to Provident and other Funds. 706 583 Value of benefits, calculated as per Income Tax Rules. 1,707 1,336 44,169 31,920 *(1) Excluding contribution to gratuity and provision for leave encashment, which are provided on actuarial basis for the Company as a whole. Hence, no separate figures are available. *(2) Since the remuneration exceeds the limit of 10% for all the working directors put together, the Company will be making necessary application to the central government for approval and waiver of the excess amount paid. (3) Computation of net profit under the Companies Act,1956 for managerial Remuneration. In the absence of commission based on net profit, the computatation is not given. 17. Remuneration to Auditors Audit Fee 1,530 1,100 Certification of Statements 288 230 Service tax 193 166 Expenses for audit and other work 202 202 18. In the opinion of the management, there is no impairment of assets requiring provision in accordance with AS-28. 19. Previous year figures have been re-grouped, wherever necessary, to correspond to current year figures. 20. Quantitative and other information a) Particulars of Capacity and Production Licensed Installed* Unit Capacity per annum Production 1. Rectified spirit KL 75,000 75,000 55,362 (75,000) (75,000) (65,118) 2. Bio gas 000 ‘M3 No licence required 38,203 (42,770) 3. Pet bottles NOS./1000 No licence required 153,212 150,421 (85,103) (78,402) 4. Malt Spirit KL 460 460 544 (460) (460) (570) 5. Grain Spirit KL 27,000 27,000 24,380 (27000) (27000) (17,007) * As certified by the Management and not verified by the Auditors. Rs. in ‘000 b) Opening Stock, Closing Stock & Turnover OPENING STOCK CLOSING STOCK TURNOVER Unit QUANTITY VALUE (RS.) QUANTITY VALUE (RS.) QUANTITY VALUE (RS.) 1. Alcohol products (a) Rectified spirit KL/AL 842 15,670 949 22,906 7,095 184,627 (848) (17,219) (842) (15,670) (10,620) (195,176) (b) Silent spirit KL/AL 2,649 60,332 2,088 57,872 22,751 771,790 (1,067) (26,392) (2,649) (60,332) (24,314) (629,669) (c) Cane juice spirit KL/AL 106 5,039 (114) (3,375) (d) Malt spirit KL/AL 747 60,950 931 109,698 188 38,960 (630) (55,932) (747) (60,950) (152) (17,300) (e) Grain spirit KL/AL 1,541 45,063 2,578 86,248 13,466 474,201 (1,695) (50,689) (1,541) (45,063) (7,535) (209,779) (f) Ethanol KL/AL 818 16,568 598 14,783 10,210 225,403 (440) (9,675) (818) (16,568) (11,488) (252,809)

4 Notes on Account 58-68.p65 64 8/9/2009, 11:14 AM Rs. in ‘000 OPENING STOCK CLOSING STOCK TURNOVER Unit QUANTITY VALUE (RS.) QUANTITY VALUE (RS.) QUANTITY VALUE (RS.) 2. Other alcohol products (a) Denatured spirit KL/AL 1 29 10 224 1 36 (5) (117) (1) (29) (3) (125) (b) Indian made foreign liquor AL 837,788 82,684 831,800 90,150 19,197,111 5,358,601 (594,416) (53,390) (837,788) (82,684) (18,485,269) (4,908,894) (c) Country liquor AL 156,262 38,585 30,815 1,976 8,018,821 3,152,552 (198,851) (62,324) (156,262) (38,585) (7,545,990) (4,519,964) (d) Imported Alcoholic products BOTTLES 16,743 5,784 20,740 6,424 30,509 11,928 (Beer & Wine) (32,003) (13,625) (16,743) (5,784) (38,099) (15,963) 3. Pet bottles NOS. 856,249 1,819 3,040,462 4,922 65,140,118 246,767 (328,771) (959) (856,249) (1,819) (43,290,100) (185,907) 4. Jaivik Khad Qtls 55,787 3,388 221,648 13,405 100,373 5,599 (11,800) (1,133) (55,787) (3,388) (39,837) (2,275) 5. Others 233,982 (154,431) 7. Other operating income 845,329 (1,022,843) 330,872 408,606 11,554,814 Total (excluding sales tax) (291,455) (330,872) (12,118,511) CURRENT YEAR PREVIOUS YEAR Unit Quantity Value Quantity Value c) 1. Purchases: - Denatured spirit AL 0 0 0 0 - Indian Made Foreign Liquor CASES 77,187 53,721 0 0 - Country Liquor AL 0 0 5,281,977 1,817,456 - Imported Liquors (Wine & Beer) BOTTLES 34,800 2,966 22,908 1,789 56,687 1,819,245 d) Consumption of raw materials (i) Molasses Qtls 2,832,300 1,294,084 3,272,229 957,033 (ii) Cane juice Qtls 11,058 2,790 7,591 1,305 (iii) Barley Malt Qtls 17,910 40,757 18,356 30,821 (iv) Sorghum Qtls 675 380 72,224 54,975 (v) Wheat ( Damaged) Qtls 842 475 22,155 12,470 (vi) Broken Rice Qtls 116,755 105,167 0 0 (vii) Millet (Bajra) Qtls 435,254 307,723 239,366 151,762 (viii) Maiz Qtls 339 271 0 0 (ix) Malt /Malt Scotch/Grape/Graip Spirits 20,998 27,012 (x) Rectified spirit / Extra Neutral Alcohol 95,688 81,602 (xi) Resin KG 3,426,222 232,750 2,441,285 174,459 (xii) Others 23,491 32,077 2,124,574 1,523,516 e) Value of imports calculated on CIF basis: Raw materials 30,487 17,389 Components & spare parts 6,881 271 Purchases (Wine & Beer) 2,966 1,789 Capital goods 161,568 48,657 f) Expenditure in foreign currency on account of Foreign travel & subscriptions 5,671 7,265 Interest/Financial exp. on ECB/FCCB 94,742 110,106 Professsional fee 462 651 Investment in a foreign entity 0 58,091 Commission paid 2,182 2,254 Others 467 3,911 g) Value of imported and indigenous raw materials, RAW MATERIAL OTHERS spare parts components and stores consumed VALUE % OF TOTAL VALUE % OF TOTAL during the year CONSUMPTION CONSUMPTION Imported 30,487 1 6,881 1 (17,389) (1) (271) (0) Indigenous 2,094,087 99 1,238,422 99 (1,506,127) (99) (1,164,420) (100) 2,124,574 100 1,245,303 100 (1,523,516) (100) (1,164,691) (100)

4 Notes on Account 58-68.p65 65 8/9/2009, 11:14 AM h) Remittance in foreign currency (NIL)/ or to the mandate banks on account of dividends to non residents Equity shares (i). Number of non resident shareholders 29 (29) (ii). Number of shares held by them 28,000 (28,000) (iii). Dividend ( Rs in thousands ) 14 (14) (iv). Year to which the dividend relates 2007-08 (2006-07) i) Earnings in foreign exchange- Export of goods on FOB basis. 612,996 (564,712) - Interest on Bank deposits 26,140 (74,541) 21 Foreign currency exposure a Hedged by way of forward exchange contracts: i) ECB (Bank of India) US$: NIL (Previous year US$ 2,946,525) ii) Export Receivables- US$ NIL (Previous year US$ 8,000,000) iii) Balance with banks - US$ NIL (Previous year US$ 6,500,000) b Not hedged: 31-3-2009 31-3-2008 CurrencyAmount (Million) Currency Amount (Million) Borrowings - FCCB US$ 36.00 US$ 50.00 Interest payable on FCCB / ECB US$ 0.31 US$ 42 Borrowings - Others US$ 15.42 US$ 9.25 51.73 59.67 Export Receivables US$ 5.89 US$ 12.00 Balance with banks US$ 0.23 US$ 10.44 Interest receivable from banks US$ - US$ 0.66 6.12 23.10 c There are no derivative contracts outstanding as on the balance sheet date. 22. The Company has entered into arrangements with certain distilleries and bottling units in other states for manufacture and marketing of its own IMFL brands. The manufacture under the said arrangement, wherein each party’s obligations are stipulated, is carried out under it’s close supervision. The marketing is entirely the responsiblity of the Company and consequently the Company is required to bear bad debts arising on sales. The Company is also required to ensure adequate finance to the distilleries, where required. Accordingly, it is considered appropriate to disclose the following quantitative and value information for the year,as applicable to such activities. i) Income from operations through other distilleries / bottling units (Schedule-11) reflects the net contribution from the sales made by these Units and is detailed as under : Rs. in ‘000 CURRENT YEAR PREVIOUS YEAR Gross Sales 4,677,748 4,567,425 Net Sales 3,038,850 3,129,957 Cost of Sales 2,105,247 2,082,677 Gross Profit 933,604 1,047,280 Expenses 261,046 235,557 Income 672,558 811,723 ii) Quantitative information for operations under arrangements. (Unaudited) Current Year Previous Year Quantity Value Quantity Value (Cases) Rs.’000 (Cases) Rs.’000 Potable Alcohol a) Production 7,635,478 – 8,109,210 – b) Sales 7,646,666 4,677,748 8,086,950 4,567,425 c) Closing Stock 204,385 73,876 215,573 71,123 iii) The balance due from distilleries under the arrangement, Rs 1335047 thousands (Previous year Rs 1329477 thousands) is included under advances recoverable. This is on account of the financing by the company of inventories,debtors and other current assets net of current liabilities on behalf of the Units.

Note: Figures in brackets are those of previous year.

4 Notes on Account 58-68.p65 66 8/9/2009, 11:14 AM CASH FLOW FOR THE YEAR ENDED 31ST MARCH, 2009 2008-09 2007-08 (Rs.’000) (Rs.’000)

A. CASH FLOW FROM OPERATING ACTIVITIES NET PROFIT BEFORE PROVISION FOR TAX 123,663 391,420 ADD: DEPRECIATION 231,219 189,839 INTEREST ON BORROWINGS 525,302 461,312 EMPLOYEES COMPENSATION ( ESOP ) 5,625 20,127 LOSS ON SALE OF ASSETS 27,790 2,963 LOSS ON SALE OF SHARES 48,828 0 PROVISION FOR NON MOVING STOCK 14,200 0 PROVISION FOR DECLINE IN VALUE OF CURRENT INVESTMENTS 0 58,580 PROVISION FOR GAIN ON FOREIGN EXCHANGE FLUCTUATION 0 852,964 119,668 852,489 976,627 1,243,909 LESS: INTEREST INCOME 79,676 117,616 DIVIDEND ON INVESTMENTS 1,295 3,566 PROFIT ON SALE OF ASSETS 532 187 WRITE BACK OF PROVISION FOR GAIN ON FOREIGN EXCHANGE FLUCTUATION 119,668 0 PROFIT ON SALE OF INVESTMENT 317 (201,488) 132,689 (254,058) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 775,139 989,851 ADJUSTMENT FOR WORKING CAPITAL CHANGES: (INCREASE)/DECREASE IN INVENTORIES (316,501) (29,950) (INCREASE)/DECREASE IN TRADE RECEIVABLES (310,520) (93,938) (INCREASE)/DECREASE IN OTHER RECEIVABLES (35,641) 2,854 ADJUSTMENT RELATING TO FCMITD A/C. (129,169) 0 (INCREASE)/DECREASE IN LOANS AND ADVANCES (128,369) (317,209) (DECREASE)/INCREASE IN TRADE AND OTHER PAYABLES 101,513 111,439 (818,687) (326,804) (43,548) 663,047 LESS: DIRECT TAX & FBT PAYMENTS DURING THE YEAR 11,120 146,315 NET CASH FROM OPERATING ACTIVITIES (54,668) 516,732

B. CASH FLOW FROM INVESTING ACTIVITIES ADDITION TO: -FIXED ASSETS (INCLUDING WORK IN PROGRESS) (1,228,312) (790,530) PURCHASE OF INVESTMENTS (735,029) (696,731) APPLICATION MONEY FOR INVESTMENTS (99,000) (57,500) (INCREASE)/ DECREASE IN LOANS GIVEN 33,500 46,500 SALE OF FIXED ASSETS 18,938 2,961 SALE OF INVESTMENTS 553,865 746,597 INTEREST INCOME 79,676 117,616 DIVIDEND INCOME 1,295 3,566 687,274 917,240 NET CASH GENERATED (USED) IN INVESTING ACTIVITIES (1,375,067) (627,521) C. CASH FLOW FROM FINANCING ACTIVITIES INCREASE/(DECREASE) IN SHARE CAPITAL (INCLUDING SHARE PREMIUM) 0 136,035 SECURED LOANS 1,892,693 (673,860) UNSECURED LOANS (289,345) (28,218) 1,603,348 (566,043) INTEREST ON BORROWINGS (525,302) (461,312) DIVIDEND ON EQUITY SHARES(INCLUDING TAX) (60,004) (56,431) DIVIDEND ON PREFERENCE SHARES(INCLUDING TAX) 0 (63,776) NET CASH GENERATED (USED) IN FINANCING ACTIVITIES 1,018,042 (1,147,562) NET CHANGES IN CASH AND CASH EQUIVALENTS (411,693) (1,258,351) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS BALANCE AT THE BEGINNING OF THE YEAR 831,461 2,089,812 BALANCE AT THE END OF THE YEAR: 419,768 831,461

(411,693) (1,258,351)

4 Notes on Account 58-68.p65 67 8/9/2009, 11:14 AM BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE AS REQUIRED IN PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956.

I. Registration Details Registration No. : 27278 State Code : 20 Balance Sheet Date : 31.03.2009 II. Capital raised during the year Public Issue : Nil Rights Issue : Nil Bonus Issue : Nil Pvt. Placement : Nil III. Position of Mobilization and Total Liabilities : 11066351 Total Assets : 11066351 Deployment of Funds (Rs. in thousand) Source of Funds: Paid-up Capital : 204924 Reserves & Surplus: 2101293 Paid up Preference Share Capital : Nil Unsecured Loans : 3001106 Secured Loans : 4002532 Application of Funds: Net Fixed Assets : 4776769 Investments : 525866 Net Current Assets : 4359558 Misc. expenditure : Nil Accumulated Losses: Nil IV. Performance of Company Turnover and : 7310277 Total Expenditure : 7061733 (Amount in Rs. thousand) other Income Profit before tax : 123663 Profit after tax : 65363 Earning per share : 0.64 Dividend Rate % : 15 (in Rs). V. Generic Names of four 1. Alcohol Principal Products / Services of 2. Indian Made Foreign Liquor Company (as per monetary 3. Country Liquor terms) 4. Grain Based Vodka

For V. Sankar Aiyar & Co. Dr. Arun Mohan Bansal Dr. Lalit Khaitan Abhishek Khaitan Chartered Accountants Head-Legal & Company Secretary Chairman & Managing Director Managing Director V. Rethinam Partner M. No. 010412 Place : New Delhi Ajay K. Agarwal Dilip K. Banthiya Sanjay Jalan Dated : June 30, 2008 Sr. Vice President (Finance & Accounts) Chief Financial Officer Director

4 Notes on Account 58-68.p65 68 8/9/2009, 11:14 AM