CONTENTS · Directors’ Report 10 ... CONTENTS. PIONEER DISTILLERIES LIMITED 3 Proof Dt.27-08-2009...

PIONEER DISTILLERIES LIMITED

Page No.

Company Information 3

Chairman’s Message 4

Notice to the Shareholders 5

Directors’ Report 10

Report on Corporate Governance 15

Management Discussion & Analysis Report 28

Corporate Governance Certifications 33

Auditor’s Report 35

Balance Sheet 38

Profit & Loss Account 39

Cash Flow Statement 40

Schedules to Balance Sheet and Profit and Loss Account 41

Notes on Accounts 48

Balance Sheet Abstract & Business Profile 54

ECS Mandate Form 55

Attendance Slip and Proxy Form 57

CONTENTS


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Proof Dt.27-08-2009 (Notice Change)

BOARD OF DIRECTORS:

Sri K.V. Rajeshwar Rao Chairman

Sri K. Sudhir Rao Vice Chairman

Sri K. Suhan Rao Managing Director

Sri L. Venkateswara Rao Non-Executive Director

Sri V. Subramanian Non-Executive Independent Director

Sri C.V. Kamalaker Non-Executive Independent Director

Sri H. Anantha Krishnan Non-Executive Independent Director

Sri C.V. Krishnaiah Non-Executive Independent Director

STATUTORY AUDITORS: Alapati Vadde & Co.8-3-728, Flat # 102, Sai Sandilya Apartments,Yellareddyguda, Ameerpet,Hyderabad- 500 073, Andhra Pradesh

INTERNAL AUDITORS: N G Rao & Associates6-3-1186/A/6, IInd Floor,Chinna Balareddy BuildingBegumpet, Hyderabad - 500016

SENIOR EXECUTIVES:

Sri A. N. Kadam GM - Operations

Sri Shyam Sunder M Vyas GM - Admin

Sri K. Hari Narayana Rao AGM - Finance and Accounts

CS Ms M. Amala Company Secretary

REGISTERED OFFICE: # 8-2-311/C, Mithila Nagar, Road No.10, Banjara Hills,Hyderabad - 500 034. Andhra PradeshPhone : +91-40-23542895, 23542920Fax: +91-40-23542921Email: [email protected]

FACTORY ADDRESS: Balapur Village, Dharmabad TalukNanded District, Maharashtra- 431 809.Phone : 02465-280695/280686, Fax: 02645-280688Email: [email protected]

BANKERS: State Bank of Mysore, (Industrial Finance Branch)Greenlands, Hyderabad, Andhra Pradesh

State Bank of Indore, Triveni Complex,Abids, Hyderabad. Andhra Pradesh

FINANCIAL INSTITUTIONS: Industrial Development Bank of India

Life Insurance Corporation of India

REGISTRARS AND Venture Capital and Corporate Investments Pvt LtdSHARE TRANSFER AGENTS: #12-10-167, Bharat Nagar, Hyderabad -500 018.

Phone : 040-23818475/76, Fax: 040-23868024

LISTED WITH: The Bombay Stock Exchange Limited

The Pune Stock Exchange Limited

WEB SITE : www. pioneerdistilleries.in

Company Information

16th Annual Report 2008-09

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Chairman’s Message

Dear Stakeholders,

I thank all of you for the privilege bestowed on me to serve as theChairman of the Company, since its inception. You are aware that theperformance of the Company has been good in terms of the FinancialResults.

During the financial year 2008-09, the turnover of the Company registereda growth of 4.89% at Rs. 80.32 Crores as against the turnover ofRs. 76.57 Crores during the previous financial year 2007-08 and theprofit after tax was of the order of Rs. 7.86 Crores. The performance of the Company during thefinancial year 2008-09 is moderate compared to the growth it had achieved in the previous financialyear. The factor has been the Global Recession which has affected your Company’s performanceresulting in its moderate profitability this Financial Year. Your company has been proactive in managingthe cost situation and has been able to defend its margin under these extremely unreceptive conditionsof the market.

Your Company has explored the possibility of using the grains as raw material for the manufacture ofalcohol and has started implementing steps for setting up a 60 KLPD Grain based Alcohol Facility.

Your Company is also contemplating to manufacture Barley Malt Spirit and for setting up of a BottlingPlant.

Your Company continues to strive to keep all the Stakeholders fully satisfied by presenting a transparentPolicy, with the best Corporate Governance so that it will continue as a prosperous Organization withall your support.

I take this opportunity to express my gratitude and thanks to the Board of Directors, our Bankers andFinancial Institutions, all the Regulatory Authorities, Esteemed Customers, Suppliers, Auditors,Consultants, Business Associates and dear fellow Shareholders. I would also like to sincerely thankthe employees of the Company at various levels for their loyalty, dedication and support to realize thegoals of the Company and I look forward for persistent support and dedication in the years to come.

Thanking you,

K.V. RAJESHWAR RAOChairman

K.V. RAJESHWAR RAOChairman


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NOTICE is hereby given that the 16th AnnualGeneral Meeting of the Members of PioneerDistilleries Limited will be held on Wednesday the30th day of September 2009 at 3.30 P.M. atHotel Green Park, Greenlands, Begumpet,Hyderabad - 500 016 to transact the followingbusiness:

Ordinary Business

1. To receive, consider and adopt the AuditedBalance Sheet as at 31st March, 2009 and theProfit and Loss Account for the year ended31st March, 2009 together with the Auditors’Report and Directors’ Report thereon.

2. To declare Dividend for the Year ended 31st

March 2009.

3. To appoint a Director in place ofSri K V Rajeshwar Rao, who retires by rotationand being eligible, offers himself forreappointment.

4. To appoint a Director in place ofSri V Subramanian, who retires by rotation andbeing eligible, offers himself for reappointment.

5. To appoint M/s Alapati Vadde & Co asStatutory Auditor who shall hold office fromthe conclusion of this Annual General Meetingtill the conclusion of the next Annual GeneralMeeting and to authorize the Board ofDirectors to fix the Statutory Auditor’sRemuneration.

Special Business

6. To consider and if thought fit, to pass, with orwithout modification(s) the followingresolution as an ORDINARY RESOLUTION:

“RESOLVED THAT Sri. H. Anantha Krishnanwho was appointed as an Additional Directorby the Board of Directors and who holds officeup to the date of this Annual General Meetingand in respect of whom the Company hasreceived notice under Section 257 of theCompanies Act, 1956 from member signifyingintention to propose Sri. H. Anantha Krishnanas a candidate for the office of Director of theCompany be and is hereby appointed as aDirector of the Company.

Notice

FURTHER RESOLVED THAT the Board ofDirectors of the Company be and are herebyauthorized to file necessary forms with theRegistrar of Companies and other Statutoryauthorities and to do all other acts, deeds, thingsas may be deemed expedient to give effect tothe aforesaid resolution.”

7. To Consider and if thought fit, to pass,with or without modification(s), thefollowing Resolution as an ORDINARYRESOLUTION.

“RESOLVED THAT Sri. C. V. Krishnaiah whowas appointed as an Additional Director bythe Board of Directors and who holds officeup to the date of this Annual General Meetingand in respect of whom the Company hasreceived notice under Section 257 of theCompanies Act, 1956 from member signifyingintention to propose Sri. C. V. Krishnaiah as acandidate for the office of Director of theCompany be and is hereby appointed as aDirector of the Company.

FURTHER RESOLVED THAT the Board ofDirectors of the Company be and are herebyauthorized to file necessary forms with theRegistrar of Companies and other Statutoryauthorities and to do all other acts, deeds, thingsas may be deemed expedient to give effect tothe aforesaid resolution.”

8. To consider and, if thought fit, to pass, withor without modification(s), the followingresolution as a SPECIAL RESOLUTION:

“RESOLVED THAT pursuant to Sections198, 269, 302, 309, 311, read with ScheduleXIII and other applicable provisions, if any, ofthe Companies Act 1956, including anystatutory modification(s) or enactment(s)thereof, for the time being in force, and subjectto the approval of the Central Governmentand such other approvals as may be required,the consent of the Company be and is herebyaccorded for continuation of payment ofremuneration of an amount of Rs. 6,80,000/-per month with other applicable perquisitesand allowances, to Sri K. Sudhir Rao, ViceChairman of the Company till 28.02.2010,


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being the term of office as approved by themembers in the Annual General Meeting heldon 25th August, 2005, on the terms andconditions as approved by the members bypassing special resolution through postal balloton 15th November 2008.

FURTHER RESOLVED THAT the Board ofDirectors of the Company be and are herebyauthorized to file necessary forms with theRegistrar of Companies and other StatutoryAuthorities and to do all other acts, deeds,things as may be deemed expedient to giveeffect to the aforesaid resolution.”

9. To consider and, if thought fit, to pass, withor without modification(s), the followingresolution as a SPECIAL RESOLUTION:

“RESOLVED THAT pursuant to Sections198, 269, 302, 309, 311, read with ScheduleXIII and other applicable provisions, if any, ofthe Companies Act 1956, including anystatutory modification(s) or enactment(s)thereof, for the time being in force, and subjectto the approval of the Central Governmentand such other approvals as may be required,the consent of the Company be and is herebyaccorded for continuation of payment ofremuneration of an amount of Rs. 6,80,000/-per month with other applicable perquisitesand allowances, to Sri K. Suhan Rao,Managing Director of the Company till28.02.2010, being the term of office asapproved by the members in the AnnualGeneral Meeting held on 25th August, 2005,on the terms and conditions as approved bythe members by passing special resolutionthrough postal ballot on 15th November 2008.

FURTHER RESOLVED THAT the Board ofDirectors of the Company be and are herebyauthorized to file necessary forms with theRegistrar of Companies and other StatutoryAuthorities and to do all other acts, deeds,things as may be deemed expedient to giveeffect to the aforesaid resolution.”

By order of the Board of DirectorsFor PIONEER DISTILLERIES LIMITED

Place: Hyderabad M. AMALADate: 27th June 2009 Company Secretary

NOTES:

1. An Explanatory Statement pursuant to Section173(2) of the Companies Act, 1956 in respectof special business items is annexed hereto.

2. A member entitled to attend and vote is entitledto appoint a proxy to attend and vote insteadof himself/herself and such proxy need not bea Member of the Company. A blank proxyform is enclosed which, to be valid, should beduly completed, stamped and deposited withthe Company at least 48 hours before thecommencement of the meeting.

3. Members/Proxies are requested to produce atthe entrance of the venue duly filled attendanceslip along with their copy of Annual Reportfor attending the Meeting.

4. Corporate members intending to send theirauthorized representatives are requested tosend a duly certified copy of the BoardResolution authorizing their representative toattend and vote on their behalf at the AnnualGeneral Meeting.

5. The Register of Members and Share TransferBooks of the Company will remain closed from25th September 2009 to 30th September 2009(both days inclusive) for the purpose ofDividend & Annual General Meeting.

6. The dividend as recommended by the Boardof Directors for the year ended 31st March 2009,when declared at the Annual General Meetingwill be paid on or after 30th September 2009 tothe members whose names appear :

a. As Beneficial owners in respect of sharesheld in electronic form as per the data asmay be made available by the NationalSecurities Depository Limited and theCentral Depository Services (India)Limited.

b. As Members of the Company on 30th

September 2009 in respect of shares held inphysical form after giving effect to validtransfers in respect of transfer requestslodged with the Company up to the end ofbusiness hours on 24th September 2009.


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7. Bank Mandates:

In order to provide protection againstfraudulent encashment of the dividendwarrants, members holding shares in physicalform are requested to intimate to the Registrar& Share Transfer Agent under the signatureof the Sole / First holder, the followinginformation to be incorporated on the DividendWarrants:

i. Name of the Sole / First and Joint holderand Folio Number.

ii. Particulars of the Bank Account:

a. Name of the Bank, its branch andcomplete address of the Bank with Pincode

b. Account type, whether Savings (SB) orCurrent Account (CA)

c. Bank Account Number allotted by thesaid Bank

8. Members holding shares in electronic form arehereby informed that bank particulars registeredagainst respective depository accounts will beused by the company for payment of dividend.The Company or its registrars cannot act onany request received directly from the membersholding shares in electronic form for any changeof Bank particulars, or bank mandates. Suchchanges are to be advised only to the DepositoryParticipant of the Members.

9. Members holding shares in physical form arerequested to intimate immediately any changein their addresses to the Company’s Registrar& Share Transfer Agent, M/s Venture Capitaland Corporate Investments Private Limited,#12-10-167, Bharat Nagar, Hyderabad – 500018,mentioning their Folio Number. Membersholding shares in electronic form must sendthe advice about the change of address to theirrespective depository participant only and notto the Company or the Company’s Registrar &Share Transfer Agents, mentioning their ClientID and DP ID.

10. Non-Resident Indian Members are requestedto inform the Company’s Registrar andTransfer Agent, Venture Capital and CorporateInvestments Private Limited, immediately:

a. The change in the residential status onreturn to India for permanent settlementand

b. The particulars of Bank Accountmaintained in India with complete name,branch, account type, account number andaddress of the Bank, if not furnished earlier.

11. A Member desirous of getting any informationon the accounts or operations of the Companyis requested to forward his/her queries to theCompany at the Registered Office: 8-2-311/C,Mithila Nagar, Road No. 10, Banjara Hills,Hyderabad -500034, at least seven days priorto the date of the meeting for consideration ofthe management to deal at the meeting.

12. In case of Joint Holders attending the meeting,only such joint holder who is higher in theorder of name shall be entitled to vote.

13. Electronic Clearing Service (ECS) facility:

With respect to payment of dividend, theCompany provides the facility of ECS to themembers residing in the following cities:

Ahmedabad, Bangalore, Bhubaneswar,Chennai, Delhi, Guwahati, Hyderabad, Jaipur,Kanpur, Kolkata, Chandigarh, Mumbai,Nagpur, Patna, Trivendrum

Members holding shares in physical form, whowish to avail ECS facility, may authorize theCompany with their ECS mandate in theprescribed form given at the end of this AnnualReport, and requests for payment of dividendthrough ECS should be lodged with M/sVenture Capital and Corporate InvestmentsPrivate Limited on or before 25th September2009.

At the ensuing Annual General Meeting,Sri K V Rajeshwar Rao and Sri V Subramanianretire by rotation and being eligible offerthemselves for re-appointment. The Board ofDirectors appointed Sri H. Anantha Krishnanand Sri C. V. Krishnaiah as Additional Directorsof the Company. The information or detailspertaining to these Directors are provided interms of Clause 49 of the Listing Agreementwith the Stock Exchanges.


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Explanatory Statement Pursuant to Section 173(2) of the Companies Act, 1956.

ITEM NO.6

Sri H. Anantha Krishnan is Graduate in Bachelor of Commerce and a Fellow Chartered Accountant andhas vast experience of about 40 years in Finance, Insurance, Accounts and Taxation matters. He is a retiredExecutive Director of Life Insurance Corporation (LIC) of India. He worked as Nominee Director of LICon the Board of our Company from 27.05.1999 to 10.09.2008.

Sri H. Anantha Krishnan was appointed as an Additional Director by the Board of Directors of the Companyon 31st January 2009 and your management feels that his experience and services will immensely be beneficialto the Company in view of the ever increasing compliance of provisions under the Companies Act, SEBIRegulations and other related statutory provisions. In accordance with the norms of the Listing agreement,Sri H. Anantha Krishnan will be an Independent Director on the Board of the Company making it morebroad based.

Notice has been received from the member under Section 257 of the Companies Act, 1956 proposing hisappointment as a Director on the Board of the Company. Your approval for the purpose is solicited.

None of the Directors of your Company is interested, either directly or indirectly in the said resolution.

The relevant documents, registers and documents are available for inspection during the business hours onworking days till the date of this Annual General Meeting.

ITEM NO.7

Sri C.V. Krishnaiah is Science Graduate (B.Sc) and a Bachelor of Engineering in Electrical and Electronics(B.E). He is the retired Chief Engineer (Electrical) in APGENCO and served on APSE Board and APGENCOin different capacities from Assistant Engineer to Chief Engineer for a period of 34 years at various places.He had received the Gold Medal Shield presented by His Excellency Hon’ble APJ Abdul Kalam for thehighest PLF bagged by KTPS Stage V Units for the financial year 2003-04.

Sri C.V. Krishnaiah was appointed as an Additional Director by the Board of Directors of the Company on2nd March 2009 and your management feels that his experience and services will immensely be beneficial tothe Company. In accordance with the norms of the Listing Agreement, Sri C V Krishnaiah will be anIndependent Director on the Board of the Company making it more broad based.

Notice has been received from the member under Section 257 of the Companies Act, 1956 proposing hisappointment as a Director on the Board of the Company. Your approval for the purpose is solicited.

None of the Directors of your Company is interested, either directly or indirectly in the said resolution.

The relevant documents, registers and documents are available for inspection during the business hours onworking days till the date of this Annual General Meeting.

ITEM NOS. 8 & 9

Sri K Sudhir Rao and Sri K Suhan Rao were appointed as Vice-Chairman and Managing Director of theCompany respectively in the Twelfth Annual General Meeting held on 25th August 2005 for a period offive years w.e.f. 1st March 2005 by special resolutions passed for the purpose.

The Members of the Company through postal ballot passed special resolutions for variation in terms ofremuneration payable to Sri K Sudhir Rao, Vice-Chairman and Sri K Suhan Rao, Managing Directorincreasing the remuneration to Rs. 6,80,000/- per month, with other applicable perquisites, allowances andcommission, which shall be subject to the overall ceilings laid down in Sections 198 and 309 of theCompanies Act, 1956 w.e.f. 1st April 2008. The results of postal ballot were declared on the 15th November2008.


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As per Sections 198, 269, 302, 309, 311 read with Schedule XIII and other applicable provisions, if any, ofthe Companies Act 1956, and due to inadequacy of profits for the financial year ended 31st March 2009(Accounts Audited), the Company has applied to Central Government for its approval for continuation ofpayment of remuneration to Sri K. Sudhir Rao, Vice-Chairman and Sri K Suhan Rao, Managing Directoron the terms and conditions as approved by the members by passing special resolutions through postalballot on the 15th November 2008 up to the term as approved by the members in the Annual GeneralMeeting held on the 25th August 2005. i.e., up to 28th February 2010.

As per the provisions of Sections 198, 269, 309 read with Schedule XIII to the Companies Act, 1956, thepayment of the remuneration to Whole-Time Director or Managing Director requires the approval ofShareholders in General Meeting by way of Special Resolution.

The Board of Directors recommends the resolutions for your approval as set out under Item No.8 & 9.

None of the Directors except Sri K. Sudhir Rao, Sri K. Suhan Rao, Sri K.V. Rajeswhar Rao andSri L. Venkateswara Rao are deemed to be concerned or interested in the said resolutions.

The information provided herein may be deemed to be an abstract as referred to under Section 302 of theCompanies Act, 1956.

Particulars of Directors seeking appointment / re-appointment at the forthcoming Annual GeneralMeeting pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges:

Brief resume of the Directors, Nature of their expertise in specific functional areas, Names of companies inwhich they hold directorships and the memberships of Committees of the Board, and shareholding in thecompany are given below:

1) Sri K.V. Rajeshwar Rao aged 72 years is the Non-Executive Chairman of the Company and isinstrumental in setting up of the distillery unit in Balapur Village of Nanded District of Maharashtra. Heis one of the main promoters of the Company and his contribution to the Company’s growth anddevelopment since inception is invaluable. He is also a Director of Pioneer Infra Ventures Limited. Heholds 6,59,340 (5.61%) equity shares in the Company as on the 31st March 2009.

2) Sri V. Subramanian aged 63 years is a Chartered Accountant by profession and has vast experience ofabout 35 years in various industries. At present he is rendering services as an advisor to many Companiesin the areas of Finance. He also possesses rich experience in Accounts and Banking Relations. He is alsoa Director of Pioneer iServe Limited. He does not hold any shares in the Company as on the 31st March2009.

3) Sri H. Anantha Krishnan aged 68 years is Graduate in Bachelor of Commerce and a Fellow CharteredAccountant and has vast experience of about 40 years in Finance, Insurance, Accounts and Taxationmatters. He is retired Executive Director of Life Insurance Corporation (LIC) of India. He does nothold any shares in the Company as on the 31st March 2009.

4) Sri C. V. Krishnaiah aged 60 years is Science Graduate (B.Sc) and a professional degree holder inBachelor of Engineering in Electrical and Electronics (B.E). He is retired Chief Engineer (Electrical) inAPGENCO and served APSE Board and APGENCO in different capacities from Assistant Engineer toChief Engineer for a period of 34 years at various places. He does not hold any shares in the Companyas on the 31st March 2009.

By order of the Board of DirectorsFor PIONEER DISTILLERIES LIMITED

M. AMALACompany Secretary

Place: HyderabadDate: 27th June 2009


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Dear Shareholders,

Your Directors have pleasure in presenting the16th Annual Report of your Company and theAudited Statement of Accounts for the year ended31st March 2009.

Financial Results

The working of your Company for the year 2008-09 under review is as under:

(Rs. in lakhs)

Particulars 2008-09 2007-08

Gross Sales 8031.66 7657.06Net Sales 7595.92 7089.29Other income 70.15 233.43Total Income 7666.07 7322.72Profit before depreciation,interest and tax 1638.29 2275.70Interest 212.56 286.01Depreciation 360.20 347.68Profit/Loss before Tax 1065.53 1642.01Add: Exceptional Items(MAT credit adjustment) 162.05 0Provision for Taxation :Current Tax 283.44 186.58Fringe Benefit Tax 4.53 6.67Deferred Tax 152.86 161.91Income Tax 2005-06 0.92 0Profit After Tax 785.82 1286.85APPROPRIATIONS:1. Equity Dividend 235.16 223.422. Preference Dividend 11.75 11.753. Dividend Distribution Tax 41.96 39.974. Transfer to General Reserve 70.40 108.665. Balance carried to Balance Sheet 426. 54 903.05

Operations

Your Company has registered a Turnover (GrossSales) of Rs. 8031.66 (Net Sales of Rs. 7595.92lakhs) for the financial year ended 31st March 2009.There has been an increase in Net Sales ofRs.506.63 lakhs compared to the Net Sales ofRs.7089.29 lakhs for the previous financial year.The Profit Before Tax of your Company duringthe financial year amounted to Rs. 1065.53 lakhs.

Directors’ Report

Dividend

Your Directors have recommended a dividend ofRs. 2.00 per Equity Share (20 percent) aggregatingto Rs. 275.13 lakhs (including dividend distributiontax) to the Equity Shareholders of the Companyfor the financial year ended the 31st March 2009,subject to the approval of the shareholders at theensuing Annual General Meeting.

The Directors recommended a dividend @ 5% on23,50,000 5% Cumulative Redeemable PreferentialShares Rs.10/- each for the year ended the 31st

March, 2009 amounting to Rs. 13.74 lakhs(including dividend distribution tax) to thePreference Shareholders of the Company.

Changes in Share Capital Structure

i) During the financial year 2008-09, 5,87,000equity convertible warrants of Rs.10/- eachissued at a premium of Rs.11/- per warranton the 5th May 2007, were converted into5,87,000 Equity Shares of Rs.10/- each on the31st July 2008 resulting in increase in the paid-up capital of the Company fromRs.11,17,12,000/- to Rs. 11,75,82,000/-.

ii) In accordance with the resolution passed bythe shareholders at the Extraordinary GeneralMeeting held on the 25th October, 2007, theCompany allotted 7,00,000 Equity convertiblewarrants @Rs.53/- per warrant on the 3rd

December, 2007 on preferential basis to thepromoters & non promoters of the Company.The non-promoters of the Company haveexercised the option of conversion of 30,000warrants into 30,000 Equity Shares ofRs. 10/- each on the 6th May 2009, increasingthe paid up share capital from Rs. 11,75,82,000/- toRs. 11,78,82,000/-.

iii) The other warrant holders have not exercisedtheir right for conversion on the remaining6,70,000 warrants (out of 7,00,000 warrantsissued) within the stipulated period of 18months i.e., on or before 2nd June 2009 andthe issued warrants expired and accordinglythe amount of Rs. 96,32,527/- being theamount received upfront from the warrantholders, which is more than 10% of the issueprice was forfeited, as per the terms of theissue.


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iv) The Board of Directors approved on 5th June2009 for issue of 16,00,000 warrants convertibleinto 16,00,000 equity shares of face value ofRs. 10/- each at an issue price calculated asper SEBI (DIP) Guidelines, 2000 onpreferential basis to the promoters & nonpromoters of the Company, which will beconverted into equity shares within 18 monthsfrom the date of allotment. After conversion,the paid up share capital of the Company willincrease from Rs. 11,78,82,000/- toRs.13,38,82,000/-.

Expansion Activity

Though the Company had, in the then scenariovisualized and presented to you, amongst others,an increase in the production of Alcohol in phasesfrom 100 KLPD to 200 KLPD, the ENA productionto 150 KLPD from 100 KLPD, the Ethanolproduction to 130 KLPD from 30 KLPD and theproduction of Acetic Acid and Ethyl Acetate to 30MT and 20 MT per day respectively, due to impactof unexpected global recession on the productionand demand for its products, the vision has beenshelved for the present.

A new opportunity has opened up as some of thecompanies prefer to use grain based alcohol formanufacturing their brands and your Company isimplementing a 60 KLPD Grain Based AlcoholFacility for production of alcohol from grains suchas maize, jowar and broken rice. The Civil worksand erection activity with regard to the expansionis being carried on at the factory premises and thecommercial production is expected to commencefrom April 2010. This expansion would not onlyenable the company to substantially increase itsprofitability, but also enhance its share in the nichemarkets for grain based alcohol. Due to theeconomies of scale, the Company would acquire abetter bargaining power resulting in the improvedprofit margins.

The total cost of the Project works out to Rs. 40.14Crores. The project has since been appraised andthe State Bank of Mysore, Industrial FinanceBranch, Hyderabad has sanctioned a Term loan ofRs. 26 crores for funding the project. The projectinvolves the Civil and Structural works, installationof Plant & Machinery such as Grinding Mill,Fermentation, Distillation, Evaporator, DDGSdryer etc., Electricals & Fittings, preliminary and

pre-operative expenses and other incidentalexpenses thereto.

Transfer to Reserves

The Company proposes to transfer Rs. 70,40,084/-to the General Reserve out of the amount availablefor appropriations. After appropriations, thebalance amount of Rs.4,26,54,024/- is proposedto be carried to Balance Sheet.

Directors

Sri K V Rajeshwar Rao and Sri V Subramanianretire by rotation in accordance with Article 132 ofthe Articles of Association of your Company andas per provisions of Sections 255, 256 and otherapplicable provisions, if any, of the Companies Act,1956, at the ensuing Annual General Meeting andbeing eligible, offer themselves for reappointment.

During the year, IDBI and LIC have withdrawntheir Nominee Directors i.e., Sri D Sudhakar Raoand Sri H Anantha Krishnan respectively from theBoard. The Board placed on record, theappreciation of the services rendered and thecontributions made by them, during their tenureas Directors on the Board.

The Board at its meeting held on 31st January 2009appointed Sri H Anantha Krishnan as anAdditional Director (Non-executive Independent)of the Company. The Board has also appointedSri C V Krishnaiah as an Additional Director (Non-executive Independent) of the Company w.e.f. 2nd

March 2009. The appointments of Sri H AnanthaKrishnan and Sri C V Krishnaiah as Directors underSection 257 of the Companies Act, 1956 are placedfor approval of the Members.

Statutory Auditors

The firm M/s Alapati Vadde & Co, CharteredAccountants, the Statutory Auditors of theCompany holds office until the conclusion of theensuing Annual General meeting and is eligiblefor re-appointment. The Company has receivedletter from the Auditors to the effect that their re-appointment, if made, would be within theprescribed limits under Section 224(1B) of theCompanies Act, 1956. Accordingly, the proposalfor their appointment has been placed for theapproval of Members at the ensuing AnnualGeneral Meeting.


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Particulars of Employees

Information as required under Section 217 (2A) ofthe Companies Act, 1956 read with the Companies(Particulars of Employees) Rules, 1975, as amendedforms integral part of this report as Annexure I.

Fixed Deposits

The Company has not accepted or invited anyDeposits from the public during the year and henceno deposit is due for repayment as on 31st March,2009.

Directors’ Responsibility Statement

Pursuant to the requirements under Section217(2AA) of the Companies, Act, 1956, with respectto Directors’ responsibility statement, it is herebyconfirmed that:

(i) in the preparation of the annual accounts,the applicable accounting standards have beenfollowed along with proper explanationrelating to material departures.

(ii) the directors have selected such accountingpolicies and applied them consistently andmade judgments and estimates that arereasonable and prudent so as to give a trueand fair view of the state of affairs of theCompany at the end of the financial year andof the profit or loss of the Company for thatperiod.

(iii) the directors have taken proper and sufficientcare for the maintenance of adequateaccounting records in accordance with theprovisions of the Companies Act, 1956 forsafeguarding the assets of the Company andfor preventing and detecting fraud and otherirregularities; and

(iv) the directors have prepared the AnnualAccounts of the Company on a going concernbasis.

Disclosure as per the Listing Agreement

The Company’s shares are listed on the BombayStock Exchange Limited, Phiroze JeejeebhoyTowers, Dalal Street, Mumbai and the Pune StockExchange Limited at Shivleela Chambers, 752,Sadashivpeth, R.B. Kumthekar Marg, Pune. Theannual listing fees to both the Stock Exchanges

have been paid. The Company has applied toNational Stock Exchange Limited, Mumbai forlisting of its securities.

Energy, Technology and Foreign Exchange

Energy conservation is a focus area for theCompany from the angles of both cost control andsocial responsibility. Information in accordance withthe provisions of Section 217(1)(e) of theCompanies Act, 1956, read with the Companies(Disclosure of Particulars in the Report of Boardof Directors) Rules, 1988 in respect ofConservation of Energy, Technology Absorptionand Foreign Exchange Earnings and Outgo formspart of this Report as Annexure II.

Corporate Governance Report andManagement Discussion and Analysis Report

As required under Clause 49 of the ListingAgreement with the Stock Exchanges, CorporateGovernance and Management Discussion andAnalysis Report forms part of this Annual Report.A certificate from the Statutory Auditors of theCompany confirming compliance of the CorporateGovernance is appended to the Report onCorporate Governance.

Acknowledgements

Your Directors take this opportunity toacknowledge with grateful appreciation the co-operation and support received from the FinancialInstitutions and Bankers and look forward for theircontinuous assistance and support to theCompany. We also convey our sincere thanks andgratitude to all our customers, suppliers, auditors,shareholders and the concerned governmentdepartments for their continued support to yourCompany. Your Directors wish to place on recordtheir deep sense of appreciation for the dedicationof all the executives, staff and workers of theCompany.

For and on behalf of the Board of Directors

K. SUDHIR RAO K. SUHAN RAOVice Chairman Managing Director



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ANNEXURE I

Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars ofEmployees) Rules, 1975 and forming part of the Directors Report for the year ended 31st March, 2009.

K.Sudhir Rao Vice MS in 49 17 25.11.1992 94,94,400.00 FirstChairman Computers Employment

K.Suhan Rao Managing Mechanical 44 17 25.11.1992 94,94,400.00 FirstDirector Engineer Employment

Name Designation Qualification Age Experience Date ofEmployment

Remune-ration

in Rupees*

LastEmployment

held

* Gross remuneration includes Salary, HRA, Perks and PF in terms of Schedule XIII to the CompaniesAct, 1956.




ANNEXURE IICONSERVATION OF ENERGY

FORM- A

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

A. Power and Fuel Consumption:

Electricity:

(a) Purchased 2008-2009 2007-2008Rs. Rs.

Total Units (KWH) 2864160 1101628Total Amount 15506640 9530347Rate per Unit (in Rs)(inclusive of demand charges) 5.41 8.65

(b) Own generation (Through Rice Husk)Total Units (KWH) 6070377 6760309Units per ton of rice husk 149 149Total Amount 23749526 18388041Rate/Unit – Rs. 3.91 2.72

(c) Own generation (Through Diesel Oil)Total Units (KWH) 279965 304523Units per litre of Diesel 2.54 2.76Total Amount 4021979 5322405Rate/Unit (in Rs) 14.37 17.48


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FORM B

DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

a) Research and Development (R & D) :

1. Specific areas in which R & D carried out by the company : NIL2. Benefits derived as a result of the above R&D : NIL3. Future plan of action : To further develop more value

added products and improve thequality of the products.

4. Expenditure on R & D : NIL

b) Technology, absorption, adaptation and innovation

The Company is making continuous efforts for improving productivity, quality and manufacture ofvalue added products.

FORM C

Foreign Exchange Earnings and outgo: 2008-2009 2007-2008Rs. Rs.

a. Earnings in Foreign Exchange Nil Nil

b. Expenditure in Foreign Currency Nil Nil




B. Consumption per unit of production:2008-2009 2007-2008

Rs. Rs.Power (KWH/Litre of Alcohol) 0.38 0.27Cost of Power (Rs./Litre of Alcohol) 1.76 1.10


15


Report on Corporate GovernanceCorporate Governance is a system by which Companies are directed and managed. Corporate Governanceis about Code of Conduct in the business. A good Corporate Governance ensures high standards oftransparency, accountability, ethical operating practices and professional management.

1. Company’s Philosophy on Corporate Governance:

The Company adheres to good corporate practices and is constantly striving to better them and adoptthe best practices. The philosophy on Corporate Governance is to ensure transparent and timelydisclosure of financial and management information, compliance of applicable statute, continuousimprovements of internal controls and sound investor relations. Your Company has complied with themandatory provisions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement(as amended) with a view to bring transparency in its operations and maximizing stakeholders value.The Company will continue to focus its resources, strengths and strategies to achieve its vision, whileupholding the core values of transparency, integrity, honesty and accountability, fundamental to theCompany.

Your Company has laid down a Code of Conduct for its Board Members and Senior ManagementPersonnel. All the Directors and the Senior Management Personnel have affirmed compliance with thesaid Code of Conduct.

Your Board of Directors present the Corporate Governance Report for the year 2008-09 in accordancewith Clause 49 of the Listing Agreement with the Stock Exchanges.

2. Board of Directors:

a) Composition of Board

The Board of Directors of the Company (“the Board”) as on the 31st March, 2009 comprises of8 Directors, which includes a Non-executive Chairman Sri K V Rajeshwar Rao, five Non-executiveDirectors, viz., Sri V Subramanian, Sri C V Kamalaker, Sri H Anantha Krishnan,Sri C.V. Krishnaiah and Sri L Venkateswara Rao out of which first four are Independent Directorsand two Executive Directors, viz., Sri K Sudhir Rao, Vice-Chairman and Sri K Suhan Rao,Managing Director.

The Non-executive Chairman is the promoter of the company and the Board complies with therequirement of at least half of the Board to be of Independent Directors.

b) Attendance of each Director at Board Meetings during the financial year 2008-09, at the lastAnnual General Meeting and number of other Directorships and Chairmanships / Membershipsof Committees of each Director in various companies are given hereunder:

During the financial year 2008-09, seven Board Meetings were held.

Sri K.V. Rajeshwar Rao Non-Executive 7 Yes 1 Nil Nil

Sri K. Sudhir Rao Executive 7 Yes 2 Nil Nil

Name of theDirector Category

Number ofother

Directorships

Number ofcommittee

positions held inpublic companies

(other thanPioneer)

No. of BoardMeetings

during the year2008-09

Attendanceat

last AGM

Attended Chairman Member


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Sri K. Suhan Rao Executive 7 Yes 2 Nil Nil

Sri L. Venkateswara Rao Non-Executive 7 Yes Nil Nil Nil

Sri V. Subramanian Non-Executive 7 Yes Nil Nil NilIndependent

Sri C.V. Kamalaker Non-Executive 5 No Nil Nil NilIndependent

Sri H. Anantha Krishnan* Non-Executive 3 No Nil Nil NilIndependent

Sri D. Sudhakar Rao** Nominee 2 No Nil Nil NilDirector

Sri C.V. Krishnaiah# Non-Executive Nil No Nil Nil Nil

Name of theDirector Category

Number ofother

Directorships

Number ofcommittee

positions held inpublic companies

(other thanPioneer)

No. of BoardMeetings

during the year2008-09

Attendanceat

last AGM

Attended Chairman Member

* LIC has withdrawn their Nominee Director, Sri H Anantha Krishnan, w.e.f. the 10th September 2008. The Board of Directors of the Companyhas appointed Sri H Anantha Krishnan as Additional Director on the Board on the 31st January 2009.

** IDBI has withdrawn their Nominee Director, Sri D Sudhakar Rao w.e.f. 1st September 2008.

# Appointed as an Additional Director on the Board w.e.f 2nd March 2009.

c) Other provisions as to Board and Committees

(i) Number of Board Meetings held and the dates on which held:During the financial year 7 Board Meetings were held. The details of the Board Meetingsare as under:

Date of the Meeting Board Strength No. of Directors present

21st April 2008 8 5

31st May 2008 8 8

31st July 2008 8 8

21st August 2008 8 5

27th September 2008 7 6

31st October 2008 6 6

31st January 2009 7 7

(ii) None of the Directors on the Board of the Company is either a member in more than tenCommittees or act as Chairmen of more than five companies across all the Companies inwhich they are Directors.

(iii) During the financial year 2008-09, two Independent Directors (Nominee Directors) i.e.,Sri D Sudhakar Rao and Sri H Anantha Krishnan were withdrawn by IDBI and LICrespectively, from the Board.


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1. Sri D Sudhakar Rao was withdrawn as IDBI nominee w.e.f. 1st September 2008 and isreplaced by Sri H Anantha Krishnan on the 31st January 2009.

2. Sri H Anantha Krishnan withdrawn as LIC Nominee w.e.f. the 10th September 2008 andis replaced by Sri C V Krishnaiah on 2nd March 2009.

The new Independent Directors were appointed within a period of not more than 180 daysfrom the dates of resignation.

d) Code of Conduct

The Code of Conduct was circulated among all the Board Members and Senior ManagementPersonnel and was affirmed on an annual basis. The content of the Code of Conduct is posted onthe Company’s Website at www.pioneerdistilleries.in. A declaration to this effect by Sri K SuhanRao, Managing Director of the Company is given below:

DECLARATION OF COMPLIANCE OF CODE OF CONDUCT

Pursuant to Circular No.SEBI/CFD/DIL/CG/1/2004/12/10 dated 29th October 2004, it is hereby declaredthat the Company has adopted a Code of Conduct for its Board Members and Senior ManagementPersonnel. I hereby confirm that the Company has in respect of the financial year ended 31st March 2009,received from the Senior Management Personnel of the Company and the Members of the Board, adeclaration of compliance with the Code of Conduct as applicable to them.

For PIONEER DISTILLERIES LIMITED

Place: Hyderabad K.SUHAN RAODate: 27th June 2009 Managing Director

3. Audit Committee

a) Brief description of terms of reference:

The Audit Committee of the Company consists of 4 Directors of whom 3 are IndependentDirectors. All the members of the Committee are Non-Executive Directors with the Chairman ofthe Committee Sri. V. Subramanian being an Independent Director.

The terms of reference / powers of the Audit Committee have been specified by the Board ofDirectors as under:

1. To investigate any activity within its terms of reference;

2. To seek information from any employee;

3. To obtain outside legal or other professional advice; and

4. To secure attendance of outsiders with relevant expertise, if it considers necessary.

The Role of the Audit Committee includes the following:

1. Oversight of the company’s financial reporting process and the disclosure of its financialinformation to ensure that the financial statement is correct, sufficient and credible.

2. Recommending to the Board, the appointment, re-appointment and, if required, thereplacement or removal of the Statutory Auditor and the fixation of audit fees.

3. Approval of payment to Statutory Auditors for any other services rendered by the StatutoryAuditors.


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4. Reviewing, with the management, the annual financial statements before submission to theboard for approval, with particular reference to:a. Matters required to be included in the Director’s Responsibility Statement forming part

of the Board’s report in terms of clause (2AA) of section 217 of the Companies Act,1956;

b. Changes, if any, in accounting policies and practices and reasons for the same;c. Major accounting entries involving estimates based on the exercise of judgment by

management;d. Significant adjustments made in the financial statements arising out of audit findings;e. Compliance with listing and other legal requirements relating to financial statements;f. Disclosure of any related party transactions; andg. Qualifications in the draft audit report.

5. Reviewing, with the management, the quarterly financial statements before submission tothe board for approval

5A. Reviewing, with the management, the statement of uses / application of funds raised throughan issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized forpurposes other than those stated in the offer document/prospectus/notice and the reportsubmitted by the monitoring agency monitoring the utilization of proceeds of a public orrights issue, and making appropriate recommendations to the Board to take up steps in thismatter.

6. Reviewing, with the management, performance of Statutory and Internal Auditors, andadequacy of the internal control systems.

7. Reviewing the adequacy of Internal Audit function, if any, including the structure of theinternal audit department, staffing and seniority of the official heading the department,reporting structure coverage and frequency of internal audit.

8. Discussion with Internal Auditors any significant findings and follow up there on.

9. Reviewing the findings of any internal investigations by the internal auditors into matterswhere there is suspected fraud or irregularity or a failure of internal control systems of amaterial nature and reporting the matter to the board.

10. Discussion with Statutory Auditors before the audit commences, about the nature andscope of audit as well as post-audit discussion to ascertain any area of concern.

11. To look into the reasons for substantial defaults in the payment to the shareholders (in caseof non payment of declared dividends) and creditors.

12. Carrying out such other function as is mentioned in the terms of reference of the AuditCommittee.

13. To review the following information:

Management discussion and analysis of financial condition and results of operations;

Statement of significant related party transactions submitted by management;

Management letters / letters of internal control weaknesses issued by the StatutoryAuditors;

Internal Audit reports relating to internal control weaknesses; and

The appointment, removal and terms of remuneration Internal Auditors.


19


b) Composition, Names of Members and Chairman:

The constitution of the Audit Committee and the attendance of each member is given below:

Name Designation Category

Sri V. Subramanian Chairman Non-Executive Independent Director

Sri L. Venkateswara Rao Member Non-Executive Director

Sri C.V. Kamalaker Member Non-Executive Independent Director

Sri H. Anantha Krishnan Member Non-Executive Independent Director

The Company continued to derive immense benefit from the deliberations of the AuditCommittee. Sri V. Subramanian, who is heading the Audit Committee as Chairman is having richexperience and professional knowledge in Finance, Accounts and Company Law. The othermembers of the Committee with their knowledge and experience contributed to the performanceof the Company. Minutes of each Audit committee are placed before the Board and discussed inthe meeting.

Ms. M. Amala, Company Secretary is the Secretary to the Audit Committee.

c) Meetings of the Audit Committee and attendance during the year:

During the financial year, four Audit Committee meetings were held and the dates on whichthe meetings were held are given below:

Sl. # 1 2 3 4

Date of the Meeting 31-05-2008 31-07-2008 30-10-2008 31-01-2009

Attendance Record – 2008-09

Sl. # Name of the Director No. of Meetings attended

1. Sri V. Subramanian 4

2. Sri C. V. Kamalaker 4

3. Sri L.Venkateswara Rao 4

4. Sri H. Anantha Krishnan 2*

* LIC has withdrawn their Nominee Director, Sri H Anantha Krishnan, w.e.f. 10th September 2008 and the Board of Directors of the

Company inducted Sri H Anantha Krishnan as Member of the Audit Committee on 31st January 2009.

4. Remuneration Committee

a) Brief description of terms of reference.

To formulate a remuneration policy and approve the remuneration or review the remunerationpayable to the Whole-time Directors, based on their performance.


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b) Composition, Name of Members and Chairman:

All the members of the Remuneration Committee are Non Executive Independent Directors,the details whereof are as follows:

Name Designation Category

Sri V. Subramanian Chairman Non-Executive Independent Director

Sri C.V. Kamalaker Member Non-Executive Independent Director

Sri H. Anantha Krishnan* Member Non-Executive Independent Director

* LIC has withdrawn their Nominee Director, Sri H Anantha Krishnan, w.e.f. 10th September 2008 and the Board of Directors of the

Company inducted Sri H Anantha Krishnan as Member of the Remuneration Committee on 31st January 2009.

c) Attendance during the year

During the Year under review, One Meeting was held on 27-09-2008. Sri V. Subramanian andSri C V Kamalaker attended the meeting.

d) Remuneration Policy

To recommend/review the remuneration package, of the Managing and Whole-time Directors.The remuneration policy is in consonance with the existing Industry Practice and also with theprovisions of the Companies Act, 1956.

e) Details of remuneration paid during the year 2008-2009 to the Directors are furnished hereunder.

i) Executive Directors

Name Salary & HRA(Rs.) Contribution to PF (Rs.) Total (Rs.)

Sri K. Sudhir Rao 87,60,000 7,34,400 94,94,400

Sri K. Suhan Rao 87,60,000 7,34,400 94,94,400

ii) Non-Executive Directors: The Company paid only sitting fees for attending Board andCommittee meetings. The details of sitting fee paid during the Year under review is asfollows:

Name of Director Sitting Fee (Rs)

Sri K.V. Rajeshwar Rao 56,000

Sri L. Venkateswara Rao 88,000

Sri V. Subramanian 1,04,000

Sri C.V. Kamalaker 88,000

Sri H. Ananthakrishnan 48,000*

Sri D. Sudhakar Rao 16,000**

Sri C.V. Krishnaiah Nil***

* LIC has withdrawn their Nominee Director, Sri H Anantha Krishnan, w.e.f. the 10th September 2008. The Board of Directors of theCompany has appointed Sri H Anantha Krishnan as Additional Director on the Board on the 31st January 2009.

** IDBI has withdrawn their Nominee Director Sri D Sudhakar Rao w.e.f. the 1st September 2008.

*** Sri C V Krishnaiah was appointed as an Additional Director on the Board by the Board of Directors w.e.f. 2nd March 2009.


21


f) The number of shares held by Non-Executive Directors in the Company is as follows:

Sl. # Name of the Director No. of Equity Shares held

1. Sri K.V. Rajeshwar Rao 659340

2. Sri L.Venkateswara Rao 461880

3. Sri V. Subramanian Nil

4. Sri C.V. Kamalaker Nil

5. Sri H. Anantha Krishnan Nil

6. Sri C.V. Krishnaiah Nil

g) The Company does not have any stock option plan or performance linked incentive for theExecutive Directors. The appointments are made for a period of five years on the terms andconditions in the respective resolution passed by the Members in the General Meetings.

None of the Non-Executive Directors are paid any remuneration apart from sitting fees paid forattendance at the Board Meetings and Committee Meetings.

Besides dividend on the Equity Shares held by the Directors, and payments as mentioned above,no other payments have been made to the Directors of the Company.

5. Share Transfer and Shareholders / Investor Grievance Committee:

i) A Share Transfer and Shareholders / Investors Grievance Committee of Directors was constitutedto specifically look into the matters relating to investors grievances such as transfer, transmission,split and consolidation of investors holding, replacement of lost/mutilated/stolen share certificates,etc. The main object of the Committee is to strengthen relations among investors.

ii) The Shareholders’ Grievance Committee constituted by the Board of Directors comprises ofSri L. Venkateswara Rao, Non- Executive Director, Sri K. Sudhir Rao, Vice Chairman andSri K. Suhan Rao, Managing Director. During the year, the Committee met 4 times on 06.08.2008,29.08.2008, 29.10.2008 & 29.12.2008.

iii) Share Transfers during the year : 8500. There are no outstanding complaints as on the31st March 2009.

iv) The Committee processes all the Share Certificates received for transfers, consolidation, splittingin accordance with the provisions of the Companies Act and the Listing Agreement. TheCompliance Certificate in accordance with Clause 47(c) of the Listing Agreement with regard tothe transfers/splitting/ consolidation is obtained by the Company from a Practicing CompanySecretary every six months and submitted to the Stock Exchanges.

v) Ms. M Amala, Company Secretary, is the Compliance Officer of the Company.


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6. General Body Meetings

a. The details of previous Annual General Meetings of the Company held are as under:

Year AGM Date Location Time No. of SpecialResolutions

Passed

2007-08 15th AGM 07.08.2008 Kohinoor II, Taj Deccan, 3.30 P.M NilRoad No.1, Banjara Hills,

Hyderabad – 500034

2006-07 14th AGM 19.09.2007 Hotel Green Park, 10.30 AM 2Green Lands, Ameerpet,

Hyderabad

2005-06 13th AGM 22.06.2006 Balapur Village, 12.00 2Dharmabad Taluk, NoonNanded District,

Maharashtra

b. During the financial year 2008-09, Special Resolutions were passed for the following itemsthrough postal ballot:

(i) Alteration in the other objects clause by addition of new clauses 12(a) & 12(b) under“Other Objects” of the Memorandum of Association of the Company: The SpecialResolution was approved by more than 3/4th majority of members and the result of thePostal Ballot was declared on the 27th September 2008. Sri V. Ahalada Rao, CompanySecretary in Practice acted as Scrutinizer to the Postal Ballot process.

(ii) Variation of terms of remuneration payable to Sri K Sudhir Rao, Vice-Chairman and toSri K Suhan Rao, Managing Director of the Company: The Special Resolutions wereapproved by the Members by more than 3/4th majority, the result of Postal Ballot wasdeclared on 15th November 2008. Sri V. Ahalada Rao, Company Secretary in Practiceacted as Scrutinizer to the Postal Ballot process.

At the ensuing Annual General Meeting, there are no resolutions proposed to be passed byPostal Ballot.

7. Disclosures

(i) There are no materially significant related party transactions, which have potential conflict withthe interests of the Company at large. Transactions with related parties are disclosed in Note No3 of Schedule 21 to the Accounts in the Annual Report.

(ii) The Company has complied with the requirements of Stock Exchanges/SEBI or any other StatutoryAuthority on matters related to capital markets as applicable from time to time.

(iii) The Company has complied with the mandatory requirements of Clause 49 of the ListingAgreement (as amended).

(iv) The Managing Director of the Company certified that the Company has complied with theprovisions of Clause 49(V) of the Listing Agreement.

8. Means of Communication

Quarterly / Half yearly results: The Quarterly, Half Yearly and Annual Audited Financial results of theCompany are communicated to the Stock Exchanges immediately after the same are approved by the


23


Board and are published in prominent English and Telugu News papers namely, Economic Times,Business line, Business Standard, Vaartha and Andhra Prabha.

Website: The Company’s website www.pioneerdistilleries.in contains a separate section “InvestorRelations” where shareholders information is available.

Annual Report: Annual Report containing inter-alia Audited Annual accounts, Financial Statements,Director’s Report, Auditor’s Report, Management Discussion and Analysis (MD&A) Report, Reporton Corporate Governance and other important information is circulated to Members and othersentitled thereto.

Management Discussion and Analysis report forms part of the Annual Report.

9. General Shareholder Information

i) Annual General Meeting:

Date and Time : At 3.30 P.M. on Wednesday the 30th day of September 2009

Venue : Hotel Green Park, Greenlands, Begumpet, Hyderabad - 500 016 (A.P)

ii) Financial Calendar (tentative)

The financial year of the company begins from 1st April to 31st March. The following is thetentative financial calendar for the financial year 2009-10 of the Company, which is subject tochange:

1st Quarter results by Last week of July 2009

2nd Quarter /Half-year results by Last week of October 2009

3rd Quarter results by Last week of January 2010

4th Quarter & Annual results by Last week of June 2010

AGM for the year 2009-10 September 2010

iii) Date of Book Closure

The dates of book closure are from 25th September 2009 to 30th September 2009 inclusive of bothdays.

iv) Dividend Payment Date

Within 30 days from the date of declaration of dividend at the Annual General Meeting (subjectto the approval of shareholders at the ensuing Annual General meeting)

v) Company’s shares are listed on the following Stock Exchanges

(i) The Bombay Stock Exchange LimitedPhiroze Jeejeebhoy TowersDalal Street, Mumbai – 400001.Tel: 022-22721233/4

(ii) The Pune Stock Exchange LimitedRegd. Office: Shivleela Chambers,First Floor, 752 Sadashiv Peth,R.B.Kumathekar Marg, Pune – 411030Phone: 020- 24461228

Note: Annual listing fees for the year 2009-10 (as applicable) has been paid by the company to therespective Stock Exchanges.


24


vi) Stock Code:

The Bombay Stock Exchange Limited 531879 PIONEE DISTL

The Pune Stock Exchange Limited 160202 PIODI

vii) Market Price Data:

High/Low share price during each month of the financial year 2008-09 on BSE

Month High (Rs) Low (Rs)

April 2008 93.20 64.15

May 2008 87.65 64.00

June 2008 77.00 43.85

July 2008 51.40 37.50

August 2008 54.40 42.60

September 2008 56.50 34.65

October 2008 36.95 20.05

November 2008 33.40 22.50

December 2008 27.75 21.85

January 2009 28.45 19.90

February 2009 21.55 18.55

March 2009 22.90 14.05

viii) Share Price Performance in comparison with BSE Sensex:


25


ix) Registrar and Transfer Agents: Venture Capital and Corporate Investments Private Limited is theRegistrar and Share Transfer Agent of the Company responsible for both physical and DEMATshare transaction processing.

Venture Capital and Corporate Investments Private Ltd#12-10-167, Bharat Nagar,Hyderabad -500 018.Ph: 040-23818475/23818476/23868023Fax: 040-23868024Email: [email protected]: www.vccilindia.com

x) Share Transfer System: The share transfer process is carried out by Venture Capital and CorporateInvestments Private Limited within 30 days from the date of the receipt of the shares for transfer.Once the transfers are processed, the details thereof are furnished to the Company for approval.The Board has delegated the authority for approving transfer, transmission etc of the company’ssecurities to the sub committee called Share Transfer Committee. Summaries of share transfer/transmission of the securities of the company so approved by the company are placed at everyBoard Meeting.

The company obtains half yearly Certificate of Compliance with the Share Transfer formalities asrequired under Clause 47(C) of the Listing Agreement with Stock Exchanges from a CompanySecretary in Practice and the same is submitted to the Stock Exchanges within the period prescribed.

xi) Distribution of Shareholding as on 31st March, 2009

Share holding of nominal Share holders Share Amountvalue of

Rs Rs Number % to Total In Rs. % to TotalNos Amount

(1) (2) (3) (4) (5)

Upto to 5,000 2869 77.43 46,86,550 3.98

5,001 to 10,000 465 12.55 41,71,740 3.54

10,001 to 20,000 169 4.56 28,41,530 2.41

20,001 to 30,000 76 2.05 19,66,280 1.67

30,001 to 40,000 25 0.67 9,03,620 0.76

40,001 to 50,000 29 0.78 13,88,550 1.18

50,001 to 1,00,000 25 0.67 18,12,890 1.54

1,00,001 And Above 47 1.26 9,98,10,840 84.88

TOTAL 3705 100.00 11,75,82,000 100.00


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Shareholding Pattern as on 31st March, 2009

Category No. of shares held Percentage ofShareholding

Promoters 6122380 52.07

Banks, Financial Institutions 423699 3.60

Companies (Central/State Govt.Institutions/Non- Govt.Institutions — —

FIIs — —

Private Corporate Bodies 161531 1.37

Indian Public 2492350 21.20

NRI’s & FCB’s 2558240 21.76

Total 11758200 100.00

xii) Demat ISIN in NSDL & CDSL for Equity Shares: INE889E01010

xiii) Dematerialization of Shares and Liquidity: The Company has entered into tripartite agreementswith NSDL and CDSL and Venture Capital and Corporate Investments Private Limited inaccordance with the SEBI Guidelines.

86.16 % of the Company’s paid-up capital has been dematerialized as on 31st March 2009. Thetrading of equity shares of the company is permitted only in dematerialized form as per thenotification issued by SEBI.

Total shares in Demat and Physical form

Category No. of Holders Total Shares % to Equity

NSDL 2383 8909251 75.77

CDSL 1092 1221739 10.39

PHYSICAL 230 1627210 13.84

TOTAL 3705 11758200 100.00

The Company issued 5% Redeemable Preference Shares to Financial Institutions viz, IDBI(17,00,000 shares) and LIC (6,50,000 shares). These shares have been issued in dematerializedform and are held in NSDL. However, these Preference Shares are not listed on the StockExchanges and hence are not tradable.

xiv) Outstanding GDR’s / ADR’s / Warrant or any Convertible Instruments, conversion date andlikely impact on Equity:

In accordance with the resolution passed by the shareholders at the Extraordinary General Meetingheld on 25th October 2007, the committee of the board allotted 30,000 Equity Shares to Non-promoters of the Company against 30,000 convertible warrants of Rs. 10/- each at a premium ofRs. 43/- per share on 6th May 2009 out of total 7,00,000 convertible warrants allotted to promotersand non-promoters of the Company on preferential basis. On conversion, Equity Capital increasedby Rs. 3.00 Lakhs and Securities premium increased by Rs. 12.9 Lakhs.


27


Remaining 6,70,000 convertible warrants allotted to Promoters and Non-promoters of the Companywere not exercised for conversion by the warrant holders and accordingly the warrants werecancelled and the amount of Rs. 96,32,527/- being the amount received upfront from the warrantholders which is more than 10% per warrant was forfeited, as per the terms of the issue.

xv) Plant Location: The factory of the Company is located at Balapur Village, Dharmabad Taluk,Nanded District, Maharashtra 421809.

xvi) Address for correspondence:

xvii) CEO and CFO Certification:The certification as per Clause 49(V) of the Listing Agreement submitted by the CEO andAsst. General Manager (F&A) of the Company to the Board of Directors forms part of theAnnual Report.

xviii)With regard to non-mandatory requirements,

Remuneration Committee

The Company has set up Remuneration Committee with Non-Executive Independent Directorsas members of the Committee.

Sl.No. Shareholders correspondence for Addressed to

1. Transfer / Dematerialization /Consolidation / Split of shares, Issueof Duplicate Share Certificates, Non-receipt of dividend etc., change ofaddress of Members and BeneficialOwners and any other query relatingto the shares of the Company.

2. Investor Correspondence / Queries onAnnual Report, Revalidation ofDividend Warrants, Sub-Division, etc.

Venture Capital and CorporateInvestments Private Limited#12-10-167, Bharat Nagar,Hyderabad - 500 018.Tel: 040-2381 8475/76Fax: 040-2386 8024Email: [email protected]

M. Amala, Company SecretaryRegd. Office : # 8-2-311/C, Mithila Nagar,Road No.10, Banjara Hills,Hyderabad - 500 034.Ph No: +91-40-2354 2895, 2354 2920Fax: 040-2354 2921Email: [email protected]





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Management Discussion and Analysis ReportThe management discussion and analysis report has been included in adherence to the spirit enunciatedin the code of Corporate Governance approved by the Securities and Exchange Board of India. TheManagement presents herein the Business Review, Industry structure and development, Future expansionactivities, Opportunities and Threats, Initiatives by the Company and overall strategy of the Company andits outlook for the future. This outlook is based on assessment of the current business environment whichmay vary due to future economic and other developments both in India and abroad.

Statements in this Management Discussion and Analysis of Financial Condition and Results of Operationsof the Company describing the Company’s objectives, expectations or predictions may be forward lookingwithin the meaning of applicable securities laws and regulations. Forward Looking statements are basedon certain assumptions and expectations of future events. The Company cannot guarantee that theseassumptions and expectations are accurate or will be realized. Actual results could differ materially fromthose expressed or implied. Important factors that could make a difference to the Company’s operationsinclude economic conditions affecting demand/supply and price conditions in the domestic markets inwhich the Company operates, changes in the Government regulations, tax laws and other statutes andother incidental factors. Further, the discussion following herein reflects the perceptions on major issuesas on date and the opinions expressed here are subject to change without notice. The Company undertakesno responsibility to publicly update or revise any of the opinions or forward-looking statements expressedin this report, on the basis of any subsequent developments, new information, future events, or otherwise.

BUSINESS REVIEW

Pioneer Distilleries Limited is running a 100 KLPD Extra Neutral alcohol (ENA) manufacturing facility atDharmabad Taluk, Nanded District, Maharashtra. The Plant has been operating at maximum capacityutilization. The other products of the Company are Absolute Alcohol (Ethanol), Rectified Spirit (RS) andSpecial Denatured Spirit (SDS). The Company also produces commercial grade Carbon-di-oxide (CO

2)

from the gas released out of the fermentation process.

The Company has an 7.825 MW Power Plant (4.725 MW out of biogas for sale and 3.1 MW from thesteam turbine for captive consumption). All these facilities are supported by a state of the art EffluentTreatment Plant recently installed. The Company has also installed an Evaporator suitable for a standalonedistillery unit to ensure zero pollution.

INDUSTRY, STRUCTURE AND DEVELOPMENT

ALCOHOL

Distilleries may be considered as an allied industry of Sugar industry as it supplies the basic raw material,molasses for alcohol production. Majority of Distilleries in India use molasses as basic raw material.

The Alcohol Industry in India can be divided into the following categories:-

1. Industrial Alcohol

2. Potable Alcohol

3. Mixed Distilleries (Industrial and Potable Alcohol)

4. Bottling Plants (purchasing alcohol and bottling alcoholic beverages)

5. Distilleries producing alcohol from Sugar Cane Molasses

6. Distilleries producing alcohol from substrates other than molasses.

Industrial alcohol finds usage in manufacture of chemical solvents & intermediates, while potable alcoholis used in IMFL, Country liquor, Beer and Wine Domestic.


29


ETHANOL

India imports nearly 70% of its annual crude petroleum requirement, impacting in a big way, the country’sforeign exchange reserves. The petroleum industry now looks very committed to the use of ethanol asfuel, as it is expected to benefit sugarcane farmers as well as the oil industry in the long run. Ethanol (FuelEthanol) can also be produced from wheat, corn, beet, sweet sorghum etc. Ethanol is one of the best toolsto fight vehicular pollution, contains 35% oxygen that helps complete combustion of fuel and thus reducesharmful tailpipe emissions. It also reduces particulate emissions that pose a health hazard.

At present, the government allows blending of five percent ethanol with petrol. In the next phase, this maygo up to 10 percent, giving a boost to the industry. Ethanol is used as an automotive fuel by itself and canbe mixed with gasoline to form what has been called “gasohol”. Fuel Ethanol- the most common blendscontain 10% ethanol and 85% ethanol mixed with gasoline. Over 1 billion gallons of ethanol are blendedwith gasoline every year in the United States. Because the ethanol molecule contains oxygen, it allows theengine to more completely combust the fuel, resulting in fewer emissions. Since ethanol is produced fromplants that harness the power of the sun, ethanol is also considered a renewable fuel. Therefore, ethanolhas many advantages as an automotive fuel.

(CARBON-DI-OXIDE) CO2

The fermentation of molasses results in the emission of carbon dioxide. Normally this carbon dioxide is letoff into the atmosphere as waste from the production process. Your Company had set up a Plant to collect,pressurize and sell CO

2 to industries. This will directly add to the bottom-line of the company and

generate another stream of revenue.

RAW MATERIAL FOR MANUFACTURING ALCOHOL AND ETHANOL

Molasses, a by-product of sugar manufacturing, is the preferred raw material for manufacturing Alcoholand Ethanol in India. Presently, the main raw material for the existing manufacturing process of Alcoholand Ethanol is molasses. Due to lack of irrigation facilities and rain dependency in the backward regionsof Maharashtra like Marathwada and Vidarbha, farmers in these regions mainly produce crops like jawar,bajara, maize, etc. In order to increase the alcohol production from grains and to avoid losses to farmers,it has become very much essential to promote and encourage distillery units which produce alcohol fromgrains, thereby benefiting the farmers.

Your Company has explored the possibilities of using grains as the raw material for the production ofAlcohol and is implementing a separate Grain Based Alcohol Facility. As regards the new facility, the majorraw materials are

• Jowar (sorghum),

• Maize and

• Broken rice

All these grains are available plenty in and around the area.

Jowar :

Maharashtra, has large acreages under jowar and this trend is expected to rise in the near future. Sincethis crop is capable of being cultivated in dry lands they are also predominantly grown in Marathwadaand Vidarba regions. The factory which is located in Nanded district, which is a part of the Marathwadaregion, the availability of this raw material is ensured throughout the year.

Maize:

The major production centre and the markets for maize is Nizamabad district, Andhra Pradesh, whichis only 45 kms from the factory. Hence the Company foresees no problem in sourcing this raw material.


30


Broken rice:

There are over 600 rice mills in and around Nizamabad and Karimnagar districts which are the majorrice producing centres. They are at close proximity to the factory location. Hence, the availability ofbroken rice will not pose a problem.

POWER GENERATION FROM BIO-MASS AND BIO-GAS

Electricity which has a very high and persisting demand is one of the products. The bio-mass, a by-productin waste management system in alcohol manufacturing is utilized to generate power of 3.1 MW fromSteam Turbine, for captive consumption. The 4.725 MW bio-gas based power is for sale to M/s Tata PowerTrading Company Limited, for which the Company has entered into an agreement.

The activity of production of power is eligible for carbon credits, being the idea of Kyoto Protocol andClean Development Mechanism for preventing atmosphere pollution by reducing emissions and on a longrange, the incentive benefits that can accrue therefrom in terms of saleable Carbon Credit Units. For thisprocess, steps are being taken to tie-up with a reputed organization for getting the registration withUNFCCC. The process of registration is in an advanced stage.

EXPANSION PLAN UNDER IMPLEMENTATION

GRAIN BASED ALCOHOL FACILITY: The Company is implementing a separate Grain Based AlcoholFacility for production of Alcohol from Grains such as maize, jowar and broken rice as a part of itsexpansion activity. This expansion would not only enable the Company to substantially increase theprofitability, but also enhance the market share of the Company by foraying into the niche markets of grainbased alcohol.

FUTURE EXPANSION ACTIVITIES

The Company, to get economies of scale, proposes to set up fresh production facilities, which are asfollows:

i) Malt Spirit Facility for Production of Malt Spirit with Malted Barley as raw material.

ii) Indian Made Foreign Liquor (IMFL) Bottling plant to manufacture, sell, distribute all types of Liquor.

OPPORTUNITIES AND THREATS

OPPORTUNITIES

The Company took the opportunity to use grains as raw material for the manufacture of Alcohol andthe setting up of the facility is under implementation. The project cost is estimated at Rs. 40.14 croresand the management is planning to complete the civil and erection works by end of this calendar yearand expects to start commercial production in the next Financial year.

The proposal to use barley as raw material for the manufacture of Malt Spirit has been explored and itis proposed to set up a separate Malt Spirit Facility at the factory premises.

The branded bottled alcohol market which is a logical extension of the existing business offers a hugevalue addition opportunity.

The Company can go in for creating in house facilities for incremental production of Alcohol as ameasure of backward integration which, at present, is planned to be procured from outside sourcesafter the expansion. This would enable the Company to further improve its bottom line.


31


THREATS

Inadequate availability of Molasses at affordable prices

Availability of Molasses, the basic raw material for Alcohol production has put pressure on profitabilityon the Company

There is a stiff competition in the market for sale of RS, ENA and Denatured spirit. There are so manycompanies in the market with already established brand names, which pose a risk to the sale of theproducts.

Delays in execution and commissioning of the new projects would impact the performance of theCompany.

Any drastic change in the policies of the Government and pollution laws can be considered as possiblethreats to the industry.

The Company believes that the ensuing competition in the emerging market will have to be met squarelyby not only developing production systems based on cost efficiency and high productivity, but also onmodern technology, quality assurance and timely deliveries.

Accordingly, your Company is gearing itself to exploit the opportunities by constantly modernizing themachinery, installation of balancing equipments and developing innovative product applications. Constantefforts are being made to meet the stringent quality requirements. With the dedication of the managementtowards exploring new opportunities coupled with the Company’s competitiveness and product quality,your Company will continue to explore and pursue the new opportunities.

FUTURE OUTLOOK

Keeping in view the emerging demand for Grain Based Alcohol, the Company has planned for furtherexpansion activity by implementing a separate Grain Based facility as well as proposing a fresh productionfacility for Malt Spirit. The Company also proposes to set up an IMFL Bottling plant as part of its furtherexpansion activities.

The expansion would not only enable the Company to substantially increase the profitability, but alsoenhance the market share of the company.

While the Company continues to be a significant player in the ENA market, it continuously endeavors tomake special efforts to tap new markets, apart from traditional markets. The company sees a very goodpotential for growth in all the products in the coming years.

As a result of further expansion plans/programmes and diversification into value added products, weexpect to report stupendous growth in the turnover and profitability in future.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The product-wise performance of the Company is given hereunder:

(i) Extra-Neutral Alcohol (ENA): Production of ENA during the financial year 31st March, 2009 has beenof the order of 1,92,07,964 BL.

(ii) Rectified Spirit (RS): Production of RS during the financial year 31st March, 2009 has been of the orderof 2,45,46,961 BL.

(iii) Absolute Alcohol (Ethanol): Production of Absolute Alcohol during the financial year 31st March, 2009has been of the order of 14,46,781 BL.

(iv) Special Denatured Spirit (SDS): Production of Special Denatured Spirit during the financial year31st March, 2009 has been of the order of 27,96,000 BL.


32


(v) Technical Alcohol (Faint Spirit): Production of Technical Alcohol during the financial year 31st March,2009 has been of the order of 16,47,901 BL.

(vi) Carbon-di-Oxide(CO2): Production of Carbon-di-Oxide(CO2) during the financial year 31st March,2009 has been of the order of 30,63,655 KG.

FINANCIAL AND OPERATIONAL PERFORMANCE

The financial statements of the Company are prepared in compliance with the provisions of the CompaniesAct, 1956 and the Generally Accepted Accounting Principles of India. In terms of Clause 49 of the ListingAgreement, the management accepts the responsibility for the integrity and objectivity of the financialstatements and the basis for various estimates used in preparing such financial statements.

The turnover (net sales) of the Company during the current financial year stands at Rs. 7595.92 Lacs witha profit after tax of Rs. 785.82 Lacs.

During the year, the Company has made all the payments to term loan lending institutions in accordancewith the schedules of repayment. The working capital requirements of the Company are financed by theState Bank of Mysore, IFB, Hyderabad.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has in place well defined objectives and control system for its operations. The internalcontrol system is supplemented by effective monthly Internal Audit. The internal control system providesreasonable assurance that the transactions are properly recorded and are executed in accordance withproper management authorization and that the assets are safeguarded against loss from unauthorized useor disposition and that the accounting records are adequate for preparation of financial statements andother financial information. The top management and the Audit Committee of the Board of Directorsregularly review the findings, recommendations and functions of Internal Auditors. The Company hasappointed Practicing Chartered Accountants as Internal Auditors.

HUMAN RESOURCES

The management believes that continued success of the Company will depend on its ability to hire,assimilate and retain skilled and quality personnel. The Company trusts that the quality of its employeesis the key to its success in the long run. Therefore, the Company provides necessary human resourcedevelopment and training opportunities to enable them to adapt to contemporary technologicaladvancements. Further, every effort is made to provide excellent staff welfare measures to promoteemployee satisfaction and thereby attract and retain efficient manpower.





33


Certificate on Compliance of conditions of Corporate GovernanceBy the Statutory Auditor

ToThe Members ofPioneer Distilleries Limited

I have examined the compliance of conditions of Corporate Governance by Pioneer Distilleries Limited,Hyderabad for the period ended 31st March, 2009 as stipulated in Clause 49 of the Listing Agreement ofthe said Company with the Stock Exchange(s).

The compliance of conditions of Corporate Governance is the responsibility of the Management. Myexamination was limited to procedures and implementation thereof, adopted by the Company for ensuringthe compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression ofopinion on the financial statements of the Company.

In my opinion and to the best of my information and according to the explanations given to me,

I certify that the Company has complied with the conditions of Corporate Governance asstipulated in the above-mentioned Listing Agreement.

I state that no investor grievances are pending against the Company for a period exceeding onemonth as per records maintained by the Company.

I further state that such compliance is neither an assurance as to the future viability of theCompany nor the efficiency or effectiveness with which the management has conducted theaffairs of the Company.

For Alapati Vadde & CoChartered Accountant

Visswanath VaddeProprietorMembership No. 208360



34


CEO and CFO CertificationCertificate pursuant to Clause 49(V) of the Listing Agreement

We, K Suhan Rao, Managing Director and K Hari Narayana Rao, Asst. General Manager (F&A) ofPioneer Distilleries Limited, certify that:

(a) We have reviewed financial statements and the cash flow statement for the year and that to the bestof their knowledge and belief:

(i) these statements do not contain any materially untrue statement or omit any material fact orcontain statements that might be misleading;

(ii) these statements together present a true and fair view of the Company’s affairs and are incompliance with existing accounting standards, applicable laws and regulations.

(b) There are, to the best of their knowledge and belief, no transactions entered into by the Companyduring the year which are fraudulent, illegal or violative of the Company’s code of conduct.

(c) We accept responsibility for establishing and maintaining internal controls for financial reporting andwe have evaluated the effectiveness of internal control systems of the Company pertaining to financialreporting and we have disclosed to the auditors and the Audit Committee, deficiencies in the designor operation of such internal controls, if any, of which we are aware and the steps we have taken orpropose to take to rectify these deficiencies.

(d) We have indicated to the auditors and the Audit Committee

(i) significant changes in internal control over financial reporting during the year;

(ii) significant changes in accounting policies during the year and the same have been disclosed inthe notes to the financial statements; and

(iii) that there have been no instances of significant fraud of which we have become aware, and theinvolvement therein, if any, of the management or an employee having a significant role in theCompany’s internal control system over financial reporting.

K Suhan RaoManaging Director

Place: Hyderabad K Hari Narayana RaoDate: 27th June 2009 Asst. General Manager (F&A)


35


Auditors’ Reportto the Members of Pioneer Distilleries Limited

I have audited the attached Balance Sheet ofM/s. PIONEER DISTILLERIES LIMITED (theCompany) as at March 31, 2009 and the Profitand Loss Account of the company for the yearended on that date annexed thereto and the CashFlow Statement for the year ended on that date.These financial statements are the responsibilityof the Company’s Management. My responsibilityis to express an opinion on these financialstatements based on my audit.

I conducted my audit in accordance with auditingstandards generally accepted in India. ThoseStandards require that I plan and perform the auditto obtain reasonable assurance about whether thefinancial statements are free of materialmisstatement. An audit includes examining, on atest basis, evidence supporting the amounts anddisclosures in the financial statements. An auditalso includes assessing the accounting principlesused and significant estimates made bymanagement, as well as evaluating the overallfinancial statement presentation. I believe thatmy audit provides a reasonable basis for myopinion.

As required by the Companies (Auditors’ Report)Order, 2003 issued by the Central Government ofIndia in terms of sub-section (4A) of Section 227of the Companies Act, 1956, I enclose in theAnnexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

Further to my comments in the Annexure referredto above, I report that:

i. I have obtained all the information andexplanations, which to the best of myknowledge and belief were necessary for thepurpose of my audit;

ii. In my opinion, proper books of account asrequired by law have been kept by theCompany so far as it appears from myexamination of the books;

iii. The Balance Sheet, Profit and Loss Accountand Cash Flow Statement dealt with by thisreport are in agreement with the books ofaccount;

iv. In my opinion, the Balance Sheet, the Profit& Loss Account and cash flow statementdealt with by this report comply with theaccounting standards referred to in sub-section 3(C) of Section 211 of the CompaniesAct, 1956 to the extent applicable;

v. On the basis of written representationreceived from the directors, as on 31st March2009, and taken on record by the Board ofDirectors, I report that none of the directorsare disqualified as on March 31, 2009 frombeing appointed as a director in terms ofclause (g) of sub-section (1) of section 274of the Companies Act, 1956; and

vi. In my opinion and to the best of myinformation and according to theexplanations given to me, the said accountsgive the information required by theCompanies Act, 1956 in the manner sorequired and give a true and fair view inconformity with the accounting principlesgenerally accepted in India:

a) In the case of Balance Sheet, of thestate of affairs of the Company as atMarch 31, 2009;

b) In the case of Profit and Loss Account,of the profit of the Company for theyear ended on that date; and

c) In the case of Cash Flow Statement,of the cash flows of the Company forthe year ended on that date.

for Alapati Vadde & CoChartered Accountants

VISSWANATH VADDEProprietorMembership No.: 208360



36


The Annexure referred to in the auditors’ reportto the members of Pioneer Distilleries Limited(“the Company”) for the year ended March 31,2009. I report that:

1. (a) The Company has maintained properrecords showing full particulars,including quantitative details andsituation of Fixed Assets.

(b) The Company has a phased programmeof physical verification of its fixed assetswhich, in my opinion, is reasonablehaving regard to the size of theCompany and the nature of its assets.In accordance with this programme,certain fixed assets were physicallyverified by management during the yearand no material discrepancies wereidentified during such verification.

(c) As per the information and explanationgiven to us on our enquiries, thedisposal of assets during the year werenot substantial and would not have animpact on the operations of theCompany.

2. The inventories have been physically verifiedby the management at reasonable intervalsduring the year and at the close of the year.

3. In my opinion, the procedures of physicalverification of inventories followed bymanagement are reasonable and adequatein relation to the size of the Company andthe nature of its business.

4. The company has maintained proper recordsof inventory. The discrepancies noticedduring physical verification of inventories ascompared to book records were not materialand have been properly dealt with in thebooks of account.

5. The Company has neither granted nor takenany loans, secured or unsecured to/fromcompanies, firms or other parties covered inthe register maintained under Section 301of the Companies Act, 1956. Consequentlyclauses 4(iii)(a) to 4(iii)(d) of the Companies

Annexure to the Auditor’s Report

(Auditor’s Report) Order, 2003 are notapplicable to the Company.

6. In my opinion and according to theinformation and explanations given to me,there are adequate internal controlprocedures commensurate with the size ofthe Company and the nature of its businessfor purchase of inventory and fixed assetsand for the sale of goods. In my opinion andaccording to the information andexplanations given to me, there is nocontinuing failure to correct majorweaknesses in internal controls.

7. Based on the audit procedures performedby me and according to the information andexplanations given by the management, I amof the opinion that transactions that needto be entered into the register maintainedunder Section 301 of the Companies Act,1956 have been so entered and thetransactions have been made at prices whichare reasonable having regard to the prevailingmarket prices at the relevant time.

8. The Company has not accepted any depositsfrom the public and consequently, thedirectives issued by the Reserve Bank of Indiaand the provisions of Section 58A and 58AAof the Companies Act, 1956 and the rulesframed there under are not applicable to theCompany.

9. In my opinion, the company has an internalaudit system commensurate with the sizeand nature of its business.

10. I have broadly reviewed the books of accountmaintained by the Company pursuant to therules prescribed by the Central Governmentfor maintenance of cost records underSection 209(1) (d) of the Companies Act,1956, and are of the opinion that prima faciethe prescribed accounts records have beenmade and maintained. I have not, howevermade a detailed examination of the recordswith a view to determining whether they areaccurate or complete.


37


11. According to the information andexplanations given to me and on the basisof my examination of the books of account,the Company has been generally regular indepositing undisputed statutory duesincluding Provident Fund and EmployeeState Insurance, Income tax, Sales tax, Exciseduty, Cess and any other material statutorydues during the year with the appropriateauthorities.

12. According to the information andexplanations given to me, there are noundisputed amounts of Income Tax, SalesTax, Wealth Tax, Customs Duty, Excise Dutywhich are outstanding as at 31st March, 2009for a period of more that six months fromthe date that they become payable.

13. According to the records of the Company,there are no dues of sales tax, income-taxand excise duty which have not beendeposited with the appropriate authoritieson account of any dispute.

14. The Company does not have anyaccumulated losses at the end of thefinancial year and has not incurred cashlosses in the financial year and in theimmediately preceding financial year.Accordingly paragraph 4(x) of the Order isnot applicable.

15. The company has been repaying the loaninstallments regularly as per the negotiatedsettlement agreed to by IDBI and LIC.

16. The company has not granted loans andadvances on the basis of security by way ofpledge of shares, debentures and otherSecurities. Accordingly, clause 4(xii) of theOrder is not applicable.

17. In my opinion and according to theinformation and explanations given to me,the company is not a chit fund / nidhi /mutual benefit fund / society. Accordingly,clause 4(xiii) of the Order is not applicable.

18. In our opinion and according to theinformation and explanations given to me,the Company is not dealer or trader in shares,Securities, Debentures and otherinvestments. Accordingly, clause 4(xiv) of theOrder is not applicable.

19. According to the information andexplanations given to me, the Company hasnot given any guarantee for loans taken byothers, from banks or financial institutions.Accordingly, clause 4(xv) of the Order is notapplicable.

20. According to the information andexplanations given to me and on the basisof our examination of the books of account,the term loans obtained by the Companywere applied for the purpose for which suchloans were obtained.

21. According to the information andexplanations given to me and on an overallexamination of the balance sheet of theCompany, I am of the opinion that no fundsraised by the Company on short-term basishave been, prima facie, used for long-terminvestment.

22. The Company has not issued anydebentures. Accordingly, clause 4(xix) of theOrder is not applicable.

23. According to the information andexplanations given to me, no fraud on or bythe Company has been noticed or reportedduring the course of our audit.

for Alapati Vadde & CoChartered Accountants

VISSWANATH VADDEProprietorMembership No.: 208360



38


Balance Sheet as at 31st March 2009

ScheduleAs At As At

31.03.2009 31.03.2008Rs. Rs. Rs. Rs.

SOURCES OF FUNDS :

Shareholders Funds :

Share Capital 1 141394000 135524000Warrant Application Money 11222527 12829728Reserves and Surplus 2 206839935 359456462 150597793 298951521

Loan Funds :

Secured Loans 3 564422483 333092633Unsecured Loans 4 281565537 252521831

Sub-total 845988020 585614464

Deferred Tax Liability 5 84590462 69304491

TOTAL 1290034944 953870476

APPLICATION OF FUNDS :

Fixed Assets :

Gross Block 6 791069446 703491063Less: Depreciation 214267641 178727697Net Block 576801806 524763367Capital Work in Progress 425290109 186057729

1002091915 710821096

Investments: 8 40135789 65975359

Current Assets and Loans & Advances :

Inventories 7 172346506 95541958Sundry Debtors 9 11754106 24637803Cash and Bank Balances 10 4514432 9856337Loans and Advances 11 201144505 151268421

Sub-total 389759549 281304519

Less: Current Liabilitesand Provisions 12 142733603 106867168

Net Current Assets 247025946 174437351

Miscellaneous Expenditure 13 781294 2636670(to the extent not written off)

TOTAL 1290034944 953870476

Notes on Accounts 21

As per my report of even date attached For and on behalf of the BoardFor Alapati Vadde & Co.,Chartered Accountants

Visswanath Vadde K. SUDHIR RAO K. SUHAN RAOProprietor Vice Chairman Managing DirectorMembership No : 208360

Date : 27th June 2009 K. HARI NARAYANA RAO M. AMALAPlace : Hyderabad Asst. General Manager (F&A) Company Secretary


39


Profit and Loss Account for the year ended 31st March 2009

ScheduleYear Ended Year Ended

31st March 2009 31st March 2008Rs. Rs.

INCOME:

Gross Sales 803166280 765706314Less: Excise Duty 13158042 15867721Less: Sales Tax 30415927 40909224

Net Sales 759592311 708929369Other Income 15 7014705 23342582Increase/(Decrease) in Stocks 19 27677643 (12308488)

TOTAL 794284659 719963464

EXPENDITURE:Material consumed 16 394994273 254507736Power and Fuel 109407533 114996384Employee Remuneration 17 25831819 18123275Other Expenses 18 100222215 104766758

TOTAL 630455839 492394152

Profit Before Interest, Depreciation andAmortisation 163828820 227569312Less: Interest 20 21255945 28601148

Depreciation 35539944 34287229Preliminary Expenses Written off 480376 480376

Profit/(Loss) for the Period 106552554 164200558Add: MAT credit Adjustment 16205137 0Less: Provision for Fringe Benefit Tax 453200 666598Less: Income Tax 2005-06 92761 0Less: Provision for Taxation 28343948 18658350

Profit/(Loss) after Current Tax 93867782 144875611Less: Provision for Deferred Taxation 15285971 16190510

Profit/(Loss) after Tax 78581811 128685100Appropriations:Preference Dividend 1175000 1175000Equity Dividend 23516400 22342400Dividend Distribution Tax 4196303 3996783Transfer to General Reserve 7040084 10865671Balance Carried to Balance Sheet 42654024 90305246

78581811 128685100

Earning per Share - Basic (Rs.) 7.98 12.97Earning per Share - Diluted (Rs.) 6.65 10.71As per my report of even date attached For and on behalf of the BoardFor Alapati Vadde & Co.,Chartered Accountants




40


Cash Flow Statement for the year ended 31st March 2009(pursuant to Clause 32 of the Listing Agreement)

PARTICULARS 2008 - 2009 2007 - 2008Rs. Rs. Rs. Rs.

A. CASHFLOW FROM OPERATING ACTIVITIESNet Profit/(Loss) beore tax 106552554 164200558Adjustment for

Depreciation 35539944 34287229Interest 21255945 28601148Misc.exps written off 480376 480376Provision for doubtful debts 271761 178134Sundry Balances written off (209605) 732587Profit/Loss on sale of assets 0 291733

163890975 228771765OPERATING PROFIT BEFORE WORKING CAPITAL CHANGESAdjustment for

Inventories (76804548) 15105819Trade and Other Receivables 12611936 (17553928)Trade Payables 36076040 12085994Loans and Advances (49876084) (40166641)Working Capital Finance 86928495 608912

CASH GENERATED FROMOPERATIONS BERORE TAX 172826813 198851922Direct Taxes paid (28343948) (18658350)FBT paid (453200) (666598)MAT credit reversal 16205137 0Income tax 2005-06 (92761) 0Dividend paid (24691400) (23517400)Dividend Tax paid (4196303) (3996783)

NET CASH GENERATED FROM OPERATIONS 131254338 152012791

B. CASH FLOW FROM INVESTMENT ACTIVITIESPurchase of Fixed Assets (87578383) (8950054)Capital Work in Progress (239232379) (163383757)Purchase of Investments 25839570 (58181683)Deferred revenue expenses 1375000 1375000Sale of Fixed Assets 0 (299596193) 220000 (228920494)

C. CASH FLOW FROM FINANCING ACTIVITIESIncrease in

Share Capital 5870000 5580000Capital Reserve (Profit on issue of Shares) 6548034 6138000Warrant Application Money (1607201) 12829728Borrowings from Banks & FI 142788628 53870890Unsecured Loans 29043706 28792951Interest Paid (19643217) 162999950 (27335677) 79875892

Net increase in cash and cash equivalents (5341905) 2968179Opening Balance as at 1st April, 2008 9856337 6888158Closing Balance as at 31st March, 2009 4514432 9856337





41


Schedules forming part of the Balance Sheet

As at As at31.03.2009 31.03.2008

Rs. Rs.

SCHEDULE 1: SHARE CAPITALAuthorised:25,00,000 - Preference Shares of Rs.10/- each 25000000 250000001,75,00,000 - Equity Shares of Rs.10/- each 175000000 175000000

(Previous year 1,75,00,000 @ Rs.10/- each)200000000 200000000

Issued and subscribed:23,50,000 - 5% Redeemable Preference

Shares of Rs.10/- each 23500000 235000001,18,20,600 - Equity Shares of Rs.10/- each 118206000 112336000

(Previous year 1,12,33,600 @ Rs.10/- each)141706000 135836000

Paid up:23,50,000 - 5% Redeemable Preference 23500000 23500000

Shares of Rs.10/- each1,17,58,200 - Equity Shares of Rs.10/- each 117582000 111712000

(Previous year 1,11,71,200 @ Rs.10/- each)(5,87,000 shares issued on 31.07.2008 @Rs.10/- each)(Forfeited Shares( 62,400 @Rs.5/- each)) 312000 312000

141394000 135524000SCHEDULE 2: RESERVES AND SURPLUSShare Premium Account 19076600 12619600(5,87,000 shares issued on 31.07.2008 premium @ Rs.11/- each)Capital Reserve 9074000 9074000General Reserve 17905755 10865671Profit & Loss Account balance 160783580 118038522

206839935 150597793SCHEDULE 3: SECURED LOANSTerm Loan - IDBI 28566860 42049265Term Loan - LIC 4593669 11148433Term Loan - SBM - I 5299787 14599787Term Loan - SBM - II 18548523 31673523Term Loan - SBM - Short Term Loan 45000000 0Term Loan - SBM -POWER PROJECT 279987278 125292066Term Loan - SBIN 21875000 35000000Interest Accrued and Due 3690718 2077990SKODA CAR LOAN 0 454138CRV HONDA CAR LOAN-KOTAK 154536 1019813Working Capital Loan from Banks 156706112 69777618

564422483 333092633SCHEDULE 4: UNSECURED LOANSSales Tax Deferment 278386740 249343034From Directors 3178797 3178797

281565537 252521831SCHEDULE 5: DEFERRED TAXDefferred Tax Liability 69304491 53113981Add: Timing Difference orginating during the year 15285971 16190510

84590462 69304491


42


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43



As at As at31.03.2009 31.03.2008

Rs. Rs.

SCHEDULE 7 : INVENTORIES(As Verified and certified by Management)

Stores and Spares 10404449 3479615

Raw Material 90261549 48059478

Stocks under Process 9540641 7586701

Finished Goods 62139866 36416164

172346506 95541958

SCHEDULE 8 : INVESTMENTS

Investments in Securities 40135789 65975359

40135789 65975359

SCHEDULE 9 : SUNDRY DEBTORS(Unsecured )

Outstanding for more than six months 271761 178134

Other Debtors 11754106 24637803

12025867 24815937

Less: Provision for doubtful debts 271761 178134

11754106 24637803

SCHEDULE 10 : CASH AND BANK BALANCES

Cash in hand 1313223 1665737

Balance with scheduled banks

In current accounts 751643 3359792

In deposit accounts 2449567 4830809

4514432 9856337

SCHEDULE 11 : LOANS AND ADVANCES(Unsecured and Considered good)

Advance - Raw material 18199820 38253474

Advance - Stores and Consumables 296199 2067330

Advance - Others 2982288 895260

Prepaid Expenses 1580892 3724093

Deposits 1664162 10762038

Balances with Excise Department 59246092 53017913

Sales tax Recivable 91764289 26348977

Advance Tax paid 9205625 16199336

MAT credit 16205137 0

201144505 151268421


44


As at As at31.03.2009 31.03.2008

Rs. Rs.


SCHEDULE 12 : CURRENT LIABILITIES AND PROVISIONS

A. Current Liabilites

Creditors - Capital Goods 31340381 19815215

Creditors - Raw Material & Chemicals 9866833 17675176

Creditors - Stores and Spares 6876663 3202830

Creditors - Others 3112599 2453197

Creditors - Transporters 4675526 7144851

Creditors - Expenses 10798441 19941846

Trade Deposits 18831509 3531266

Total - A 85501952 73764381

B. Provisions

Provision for Taxation 28343948 18658350

Provision for Preference Dividend 1175000 1175000

Provision for Equity Dividend 23516400 11171200

Distribution Tax 4196303 2098237

Total - B 57231651 33102787

Total ( A + B ) 142733603 106867168

SCHEDULE 13 : MISCELLANEOUS EXPENDITURE (TO THE EXTENT NOT WRITTEN OFF)

Preliminary Expenses not written off 1261670 3117046

Add: Expenses incurred during the year 0 0

Less: Preliminary Expenses written off 480376 480376

781294 2636670

SCHEDULE 14 : PROFIT AND LOSS ACCOUNT

Net Profit / (Loss) Brought Forward 118129556 27733276

Add : Net Profit/(Loss) as per P& L A/c 42654024 90305246.00

Profit / (Loss) Carried to Balance Sheet 160783580 118038522


45


For the Year ended For the Year ended31st March 2009 31st March 2008

Rs. Rs.

SCHEDULE 15 : OTHER INCOME

Interest on Fixed Deposits 896056 96043

Sale of Husk Ash 1241717 1267771

Profit on sale of shares 3921802 19865657

Dividend received 283328 717914

Misc. Income 671802 1395197

7014705 23342582

SCHEDULE 16 : RAW MATERIAL CONSUMED

Molasses Consumed

Opening Stock 47487349 49535003

Add: Purchases 362813006 163957650

Less: Closing Stock 85539991 47487349

Consumption of Molasses 324760364 166005304

Chemicals Consumed 10130589 12458157

Consumption of Raw Material 334890953 178463461

SCHEDULE 17 : EMPLOYEE REMUNERATION

Salaries and Wages 18957766 13762846

Contribution to PF and other Funds 3953219 2492377

Other Welfare Expenses 2920834 1868052

25831819 18123275

Schedules forming part of the Profit and Loss Account


46



Rs. Rs.

SCHEDULE 18 : OTHER EXPENSES

[Manufacturing Expenses]Repairs and Maintenance 31044468 35708089Labour Charges 1991768 2064243Ash Removing Expenses 6370710 4330379Stores and Spares 7880163 15420203

[General and Administrative Expenses]Rent 789876 732600Rates and Taxes 1573467 473461Insurance 3727153 3804759Bank Charges 531760 1275710Restructuring Fee 1375000 1375000Travelling and Conveyance 3868799 4235636Office Maintenance 2268496 2305074Books and Periodicals 107900 268092Printing and Stationery 690701 488017Sundry Expenses 956618 1475608Communication Cost 1131154 934340Safety and Security 3756662 2158156Legal and Professional 1377262 2504437Supervision Charges 1162832 668529Hire Charges 1226809 543148Sales Promotion Expenses 127779 322851Directors’ Remuneration 17520000 5760000Director’s commission 11866855Directors’ Sitting Fee 392000 350000Auditors’ Remuneration:

As Auditors 50000 45000For tax audit 35000 15000For Certifications and taxation matters 99927 32500

Board Meeting Expenses 78416 82397Advertisement 1181941 882006Loss on Sale of Asset 5337206 291733Sundry Balances written off 0 732587Charity and Donations 2851298 2940436Vehicle Maintenance 445290 501778Provision for doubtful debts 271761 178134

TOTAL 100222215 104766758



47


SCHEDULE 19 : (INCREASE) / DECREASE IN STOCKS

Opening Stock

Finished Goods 36416164 46893192Work-in-Process 7586701 9418161

Closing Stock

Finished Goods 62139866 36416164Work-in-Process 9540641 7586701

(Increase)/ Decrease in stocks (27677643) 12308488

SCHEDULE 20 : INTEREST

On Term Loans to Banks and Institutions 11108547 8757070On Working Capital Loans to Banks & Others 10147398 19844078

21255945 28601148


Rs. Rs.






48


SCHEDULE NO.21 : NOTES TO ACCOUNTS

1. SIGINIFICANT ACCOUNTING POLICIES

a) Basis of preparation of financial statements: The accompanying financial statements havebeen prepared in accordance with the Generally Accepted Accounting Principles (GAAP) underthe historical cost convention on the accrual basis and in compliance with the requirements ofthe Companies Act, 1956 and as per the guidelines issued by the Securities and Exchange Boardof India.

b) Fixed Assets : Fixed Assets are stated at cost less accumulated depreciation. Direct costs arecapitalized until fixed assets are ready for use. The cost of fixed assets included taxes duties,freight and other incidental expenses related to the acquisition and installation of the respectiveassets.

Borrowing costs directly attributable to acquisition or construction of those fixed assets whichnecessarily take a substantial period of time to get ready for their intended use are capitalizedas required by Accounting Standard (AS – 16) issued by the Institute of Chartered Accountantsof India.

Capital Work-in-progress comprises outstanding advances paid to acquire fixed assets and thecost of fixed assets that are not yet ready for their intended use at the balance sheet date.

c) Depreciation : Depreciation on fixed assets is provided using the straight-line method based onthe useful life of the assets as estimated by Management. Depreciation for assets purchased/sold during the period is proportionately charged.

d) Revenue Recognition : Revenue from sale of goods is recognized when significant risks andrewards in respect of ownership of products are transferred to the customers. Revenue fromproduct sales is stated exclusive of excise duty, sales tax, transport pass fee and export pass fee

e) Expenditure : Purchases of Raw Material (Molasses) does not include excise duty, VAT, butinclusive of central sales tax, transportation charges and other incidental expenses. Provisionsare made for all known losses and liabilities.

f) Inventories : Inventories are valued at the lower of cost and net realizable value. Cost ofinventories comprises all cost of purchase, cost of conversions, and other costs incurred inbringing the inventories to their present location and condition.

The methods of determining cost of various categories of inventories are as follows:

a) Raw Materials : Weighted average method.

b) Finished Goods : FIFO and appropriate share of production overheads(Cost of ENA includes Excise Duty Liability)

c) Stores & Spares : At Cost

d) Work-in-process : Cost of Raw Material Plus proportionate overheads

g) Miscellaneous expenditure: Preliminary and Pre-Operative expenditure is being written off overa period of ten years. During the financial year 2005-06, the company has incurred an amount ofRs. 50,00,000/- and Rs.5,00,000/- on IDBI (SASF) and LIC term loans respectively towardsRestructuring fees which is a result of negotiated settlement. The above mentioned fee hasbeen treated as deferred revenue expenditure which is to be written off over a period of fouryears in consonance with the loan repayment period.

h) Employee Retirement Benefit:

i) Provident Fund: Contributions payable to the recognized provident fund, which is a definedcontribution scheme, is charged to the profit and loss account.


49


ii) Gratuity: Contribution payable to an approved gratuity fund (a defined benefit plan),determined by an independent actuary at the balance sheet date, are charged to profit andloss account.

iii) Leave encashment: Leave encashment cost which is a defined benefit is accrued on actualvaluation at the balance sheet date.

2. SEGMENT REPORTING :

The Company is primarily engaged in the business of Rectified Spirit, Extra Neutral Alcohol andallied products. Since the inherent nature of both these activities are integrated and governed by thesame set of risk and returns and operating in the same economic environment, these have beengrouped as a single segment in the financial segments. The said treatment is in accordance with theAccounting Standard (AS 17) on “Segment Reporting”

3. RELATED PARTY DISCLOSURES :

a)Names of Related Parties & relationship

Party Name Relation

1. Pioneer i Serve Limited Associate(formerly Raynolds Infovision Ltd.)

2. Pioneer Infra Ventures Limited Associate(formerly Pioneer Urban Developers Ltd)

3. K. Sudhir Rao Key Management Personnel (Vice-Chairman)

4. K. Suhan Rao Key Management Personnel (Managing Director)

b)Transactions with related parties :

Name of the Pioneer Pioneer Infra K. Sudhir Rao K. Suhan RaoRelated Party i Serve Ltd Ventures Ltd.

Description of the Associate Associate Key KeyRelationship between Management Managementthe parties Personnel Personnel

(Vice-Chairman) (Managing Director)

Volume of the transactions NIL 6,32,65,000 NIL NILEither as an amount or as For civil worksappropriate proportion at Factory

Any other elements of the NIL NIL NIL NILRelated party transactions

The amounts or appropriateProportions of outstanding items NIL NIL NIL NILPertaining to related partiesat the Balance Sheet date

Provisions for doubtful debtsDue from such parties at that NIL NIL NIL NILDate and amounts written off orWritten back in the period inrespect of debts due from or torelated parties


50


Transactions with Key Management Personnel

Particulars of remuneration and other benefits paid to key management personnel during the yearended 31st March 2009

(Amount in Rs.)

Name Salary Contributions to Total RemunerationProvident andother Funds

K. SUDHIR RAO 87,60,000 7,34,400 94,94,400

K. SUHAN RAO 87,60,000 7,34,400 94,94,400

TOTAL 1,75,20,000 14,68,800 1,89,88,800

4. Income Tax :

Income Taxes are computed using the tax effect accounting method, where taxes are accrued in thesame period the related revenue and expenses arise. A provision is made for income tax annually basedon the tax liability computed after considering tax allowances and exemptions. Provisions are recordedwhen it is estimated that a liability due to disallowances or other matters is probable.

The differences that result between the profits offered for income taxes and the profit as per thefinancial statements are identified and thereafter a deferred tax asset or deferred tax liability is recordedfor timing differences. The tax effect is calculated on the accumulated timing differences at the end ofan accounting period based on prevailing enacted regulations of the Indian Income Tax Act, 1961.Deferred tax assets are recognized only if there is reasonable certainty that they will be realized.

Deferred Tax Liability :(Amount in Rs.)

Opening Deferred Tax Liabilityas on 31st March 2009 6,93,04,491

Add: Tax effect of timing differencesoriginating during the year 1,52,85,971

Closing Deferred Tax Liabilityas on 31st March 2009 8,45,90,462

5. Secured Loans :

a) Term Loan : Term Loans from Industrial Development Bank of India, Life Insurance Corporationof India, State Bank of Mysore and State Bank of Indore are secured by first charge by way ofequitable mortgage by deposit of title deeds to cover all immovable properties of the company andhypothecation of all movable properties both present and future subject to prior charges created/to be created in favour of Company’s bankers for securing borrowings for working capitalrequirements. The mortgage/charges created above shall rank pari-passu with the charges created/to be created in favour of the Financial Institutions/Banks.

The above said loans are also guaranteed by promoter directors of the Company in their personalcapacities.

All the above loans were utilized for the purpose of establishment and expansion of the distilleryunit and related acquisition of Fixed Assets.


51


b) Working Capital loan :

Cash credit facility with State Bank of Mysore is secured by hypothecation of stocks of rawmaterials, semi-finished and finished goods, consumable stores and book debts; and

Secured by second charges on fixed assets of the Company ranking pari passu, inter-se with termloan lenders; and

The above said loan is also guaranteed by promoter directors of the Company in their personalcapacities.

6. Excise Duty :

The company is availing CENVAT credit on purchase of raw materials and is being utilized on sale ofSpecial Denatured Spirit (SDS),Co2 and Ethanol. Excise duty paid on the quantum of raw-materialsused for production of Extra Neutral Alcohol (ENA) and Rectified Spirit (RS) is reversed by debitingto Profit and Loss Account as required under sub-rule (3) (a) (i) of Rule 6 of CENVAT Credit Rules,2004.

7. There are no overdue amounts exceeding Rs. 1.00 lakh which are outstanding for more than 30 dayspayable to Small Scale Industrial Undertaking(s) as at 31st March, 2009.

8. Contingent Liabilities :

Estimated amount of Contracts remaining to be executed on account of Capital Account and notprovided for (net of advances) is Rs. Nil.

9. Managerial Remuneration Paid/Payable :

2008-09 2007-08Rs. Rs.

Salary 1,63,20,000 48,00,000

HRA 12,00,000 9,60,000

PF 14,68,800 5,76,000

COMMISSION ON PROFIT NIL 1,18,66,855

1,89,88,800 1,82,02,855

Note: The managerial remuneration has been calculated as per provisions of Sections198,296,302,309,311 and Schedule–XIII of Companies Act 1956 and the Company has filed an applicationwith Central Government for its approval.

10. Cash Flow Statement :

Cash Flows are reported using the indirect method, whereby net profit before tax is adjusted for theeffects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receiptsor payments. The cash flows from regular revenue generating, investing and financing activities of theCompany are segregated.

Closing balance of cash as per cash flow statement represents the following:

Rs.

Cash-in-hand 13,13,223

Bank Balances:

In current accounts 7,51,642

In Deposit accounts 24,49,567

45,14,432


52


11. Additional information as required under part II of Schedule VI to the Companies Act, 1956.

2008-09 2007-08Qty Qty

(in lakh Ltrs) (in lakh Ltrs)

Installed Capacity * 365.00 365.00Alcohol (Ltrs)

Actual Production 245.47 303.31Alcohol (Ltrs)

* The figures are as certified by the management and not verified by the Auditors, being a technicalmatter.

2008-2009 2007-2008Qty. Value Qty. Value

(in Lakh Ltrs) (in Lakh Rs.) (in Lakh Ltrs) (in Lakh Rs.)A. Turnover

ENA 187.88 6409.96 239.99 5911.83RS 6.20 203.60 8.60 177.89SDS 22.53 432.15 25.98 291.42ETHANOL 14.83 450.71 19.36 594.28F.O 0.07 1.05 0.06 1.59Co

2 (Kgs) 29.90 98.45 32.08 112.28

B. Opening Stock of Finished Goods :

ENA 4.20 76.75 9.62 206.23RS 12.86 234.73 11.02 236.26SDS 2.34 42.65 1.18 25.28FO 0 0 0 0ETHANOL 0.55 10.03 0.05 1.16

C. Closing stock of Finished Goods:

ENA 6.91 195.52 4.20 76.75RS 12.03 340.40 12.86 234.73SDS 2.94 83.30 2.34 42.65FO 0.00 0.00 0.00 0.00Ethanol 0.08 2.18 0.55 10.03

D. Consumption of Material:

i) Molasses (M.T)

Opening Stock 12242 474.87 12739 495.35Purchases 88994 3628.13 125634 1639.58Consumption 89026 3247.60 126131 1660.06Closing Stock 12210 855.40 12242 474.87

ii) Rice Husk (M.T)Opening Stock 273 3.85 574 7.52Purchases 37710 868.67 70146 987.14Consumption 36458 837.50 70447 990.81Closing Stock 1525 35.02 273 3.85


53


12. There are no foreign exchange earnings during the year.

13. The Company determines liability on Sales Tax Deferment on a Net Present Value basis and accordinglyprovision is made. Provision will be made in each year for the incremental liability. Amount Shownunder the head Unsecured Loans (Schedule 4) includes sales tax amounting to Rs.2,783.87 lakhscollected under deferral scheme of Maharashtra State Government and is repayable in 14 years startingfrom the end of the 10th year in which it is so collected and earliest year to start repayment is 2009-2010.

14. Earning Per Share : 2008-09 2007-08

a. Calculation of weighted average no. ofEquity shares of Rs.10/- each:

Number of equity share at the beginning of the year 1,11,71,200 1,06,13,200

Number of 5% Preference shares issued during the year 0 0

Number of equity shares issued during the year 5,87,000 5,58,000

Number of shares outstanding at the end of the year5% Preference Shares 23,50,000 23,50,000

Equity Shares 1,17,58,200 1,11,71,200

Weighted average number of shares outstandingduring the year 1,41,08,200 1,35,21,200

b. Net profit after tax (Rs.) 9,38,67,782 14,48,75,611

c. Basic earnings per share of Rs. 10/- each 7.98 12.97

d. Diluted Earnings per share 6.65 10.71

15. Paise rounded off to nearest rupee.

16. Previous years figures have been regrouped or reclassified wherever necessary to be in conformitywith the current year’s classification.

17. Schedules 1 to 20 form an integral part of the Balance Sheet and Profit and Loss Account.





54


I. Registration Details

Registration No. State CodeBalance Sheet Date Month Year

II. Capital Raised during the year (Amount in Rs. Thousands)

Public Issue Right IssueBonus Issue Private PlacementReissue of forfeited shares

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities Total Assets

Sources of Funds

Paid-up Capital Reserves & SurplusSecured Loans Unsecured Loans

Application of Funds

Net Fixed Assets InvestmentsNet Current Assets Misc.ExpenditureAccumulated Losses

IV. Performance of the Company (Amount in Rs. Thousands)

Turnover Total Expenditure(Includes Other Income)

+ - Profit before Tax + - Profit after Tax

Earnings Per Share in Rs. (Diluted) Dividend Rate %

V. Generic Name of Principal Product / Service of the Company

Item Code No. (ITC Code)Production Description

18. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE:[Additional Information Pursuant to Part IV of Schedule VI of Companies Act, 1956 (as amended)]

5 5 1 0 8

3 1 0 3 2 0 0 9

N I L

N I L

5 8 7 0

1 4 1 3 9 4 2 0 6 8 4 0

6 . 6 5 2 0

2 2 0 . 0 0

E X T R A N E U T R A L A L C O H O L

5 6 4 4 2 2 2 8 1 5 6 6

N I L5 7 6 8 0 2

2 4 7 0 2 6

7 6 6 6 0 7

1 0 6 5 5 3 7 8 5 8 2

1 2 9 0 0 3 5 1 2 9 0 0 3 5

7 8 1

6 0 2 7 7 8

N I L

N I L

0 1




N I L

ELECTRONIC CLEARING SERVICE (CREDIT CLEARING) MANDATEFORM FOR PAYMENT OF DIVIDEND

To ,Venture Capital and Corporate Investments LimitedUnit :Pioneer Distilleries Limited#12-10-167, Bharat Nagar,Hyderabad- 500 018.Tel: 040- 23818475/76Fax: 040-23868024

Shareholder’s authorisation to receive dividends through Electronic Credit Clearing Mechanism.

I hereby, declare that the particulars given above are correct and complete. If the payment transaction isdelayed or not effected at all for any reasons, including but not limited to incomplete or incorrectinformation, I will not hold PIONEER DISTILLERIES LIMITED responsible. I agree to discharge theresponsibility expected of me as a participant under the scheme.I, further undertake to inform the Company of any subsequent change(s) in the above particulars.Place : ..............................Date : Signature of the First / Sole ShareholderNote:1. Please fill in the Mandate form and send it to:

a. The Depository Participant who is maintaining your Demat account in case you hold shareselectronically.

b. Registrar & Share Transfer Agent in case you hold shares in Physical form.2. Please attach a blank cancelled cheque or photocopy of a cheque.3. In case of more than one folio / demat account please complete details on separate sheets.4. The information provided by you will be treated confidential and would be utilised only for the

purpose of effecting the payments meant for you. You also have a right to withdraw from this modeof payment by providing the company with an advance notice of 6 weeks.

5. The members located at centres other than those approved by RBI will continue to receive theDividend Warrants, despite ECS Mandate.

Registered Folio No.: ECS Ref. No.:(for Office use only)

Name of the first/sole shareholder

Bank NameBranch Address & Telephone No. of BranchBank Account Number(As appearing on the Cheque Books)

9 digit code number of the Bank and Branchappearing on the MICR cheque issued by theBank. (Please attach a blank cancelled cheque,or a photocopy of a cheque issued to you byyour Bank, for verification of the aboveparticulars)

Account Type(Saving / Current / Cash Credit Account)Bank Account Ledger Folio No. (If any)Effective date of this mandate

59


INTENTIO

NALLY L

EFT BLA

NK

PIONEER DISTILLERIES LIMITEDRegd. Office : 8-2-311/C, Mithila Nagar, Road No.10, Banjara Hills, Hyderabad - 34.

PROXY FORM

Folio No. / Client ID:

DP ID:

I/We ______________________________________________________________________________________

_____________________________________________________________________________ being a member

of Pioneer Distilleries Limited hereby appoint Mr/Ms ___________________________________________

of _______________________________ or failing him / her Mr/Ms_________________________________ of

as my/our proxy to vote for me/us on my/our behalf for or against any resolution, at the Sixteenth Annual

General Meeting of the Company to be held on Wednesday, the 30th day of September 2009 at 3.30 PM and

at any adjournment thereof.

Signed this _________________________________________ day of _____________________________ 2009

Signed by the said _____________________________________

Note: This form duly completed should be deposited at the Registered Office of the Company not less than48 hours before the time for holding the Meeting.

PIONEER DISTILLERIES LIMITEDRegd. Office : 8-2-311/C, Mithila Nagar, Road No.10, Banjara Hills, Hyderabad - 34.

ATTENDANCE SLIP

Please complete this attendance slip and hand it over at the entrance of the Meeting Hall. Only Members ortheir Proxies are entitled to be present at the meeting.

Folio No. / Client ID:

DP ID:

Name & Address ____________________________________________________________________________

___________________________________________________________________________________________

No.of Shares held: ___________________

I hereby record my present at the Sixteenth Annual General Meeting held at Hotel Green Park, Greenlands,Begumpet, Hyderabad - 500 016 at 3.30 PM on Wednesday,the 30th day of September 2009.

Members/Proxy’s Name Signature of the Member/Proxy*

* Strike out whichever is not applicable

AffixRs.1/-

RevenueStamp

INTENTIO

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CONTENTS · Directors’ Report 10 ... CONTENTS. PIONEER DISTILLERIES LIMITED 3 Proof Dt.27-08-2009...

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Transcript of CONTENTS · Directors’ Report 10 ... CONTENTS. PIONEER DISTILLERIES LIMITED 3 Proof Dt.27-08-2009...