DIRECTORS’ REPORT

The Members,

Varun Beverages Limited.

Your Directors have pleasure in presenting the 18th Annual Report on the business and operations of the Company together with the Audited Accounts for the year ended 31st December 2012:

FINANCIAL RESULTS

                                                                                                                       (Rs. in Million)

OPERATIONS

During the year under review, the Company has achieved a net sale and other income of Rs. 14,979.47 million as against Rs. 11,400.33 million of the previous year, thereby registering a growth of 31.39%.

ACQUISITION OF BUSINESS FROM PEARL DRINKS LIMITED

During the year under review, the Company has acquired the business of Pearl Drinks Limited in the Union Territory of Delhi comprising of its plant situated at Greater Noida and three stores located at Mundka, Burari & Sultanpur.

ACQUISITION OF DELHI TERRITORY

The Company has been granted distribution rights by Pepsico India Holdings Private Limited and Pepsico Inc. USA, for manufacturing and distributing soft drinks and water under Pepsico’s brand names, apart from other territories, in parts of Delhi i.e. in Trans Yamuna areas. During the year under review, the Company has been granted distribution rights for the remaining parts of Delhi also.

DIVIDEND

Your Directors feel that it is prudent to plough back the profits for future growth of the Company and do not recommend any dividend for the year ended 31st December, 2012.

MERGER OF VARUN BEVERAGES (INTERNATIONAL) LIMITED with the Company

During the period under review, the company merged with itself Varun Beverages (International) Limited. The Scheme of Amalgamation has been sanctioned by the Hon’ble High Court of Delhi at New Delhi vide its order dated 12th March, 2013 and the order has taken effect retrospectively from 01st January, 2012.The Annual Report of your Company for the year ending December 31, 2012 has been prepared after giving effect to this amalgamation.

INCREASE IN SHARE CAPITAL

In accordance with the Scheme of Amalgamation of Varun Beverages (International) Limited with the Company sanctioned by the Hon’ble High Court of Delhi at New Delhi vide its order dated 12th March 2013, the authorized share capital of the Company stands increased from Rs. 86,00,00,000/- divided into 8,60,00,000 equity shares of Rs. 10/- each to Rs. 186,00,00,000/- divided into 18,60,00,000 equity shares of Rs. 10/- each. Further, as per the scheme of amalgamation, the Company has allotted 26,752,733 equity shares of Rs. 10/- each to the shareholders of Varun Beverages (International) Limited in the ratio of 100:31 on 13th May, 2013. Resultantly the paid-up share capital of the Company has also increased from Rs. 8,00,00,000/- to Rs. 26,75,32,330/-.

BONUS ISSUE

During the period under review, the Company issued 10,70,12,932  bonus shares of Rs. 10/- each, fully paid up, in the ratio of 4 (four) bonus shares for every existing 1(one) equity share of Rs. 10/- each and consequently the Paid-up equity Share Capital of the Company was increased from Rs. 26,75,32,330/- to Rs. 133,76,61,650. The bonus shares have been allotted in the meeting held on 14th May, 2013.

EMPLOYEE STOCK OPTION SCHEME

During the period under review, your Company has introduced a stock option scheme – the “Employee Stock Option Scheme 2013” (“Scheme”) for its permanent employees and directors including employees and directors of its subsidiary company(ies). The shareholders of the Company in their Extra Ordinary General Meeting held on 13th May, 2013, approved the issuance of  Options under the Scheme (including shares already allotted under the Scheme, but excluding any granted Options that are lapsed) capped at 5% of the fully diluted share capital of the Company.

STATUTORY DISCLOSURE

Noneof the Directors of the Company is disqualified as per provisions of section 274 (1)(g) of the Companies Act, 1956. The Directors of the Company have made necessary disclosures, as required under various provisions of the Act.

DIRECTORS

Mr. Varun Jaipuria, Director of the Company is liable to retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Your Directors recommend his re-appointment.

In terms of the Investment Agreement dated 18th July, 2011 and the Amendment and Supplemental Agreement dated 29th September, 2012 (collectively “Investment Agreement”) between Varun Beverages (International) Limited, its Promoters and Standard Chartered Private Equity Mauritius II Limited (“Investor”), which Agreement stood assigned in favour of the Company in accordance with the Scheme of Amalgamation of Varun Beverages (International) Limited with Varun Beverages Limited (“Merger Order”) sanctioned by the Hon’ble High Court of Delhi vide its order dated 12th March, 2013, Mr. Udai Dhawan was appointed as an Additional Director of the Company with effect from 13th May, 2013 in terms of section 260 of the Companies Act, 1956, as the nominee director of the Investor. The Company has received a notice in writing from a member signifying his intention to purpose the candidature of Mr. Udai Dhawan for the office of Director of the Company and the Board recommends his appointment.

During the period under review, Mr. Shankar Krishnan Iyer, Director tendered his resignation with effect from 2nd May, 2013 and the same was accepted by the Board. The Board places on record its appreciation and acknowledgement for the valuable services rendered by him during his tenure as Director.

AUDIT COMMITTEE

The Company has an Audit Committee, whose composition, role, functions and powers are in accordance with the requirements of the Companies Act, 1956. The Audit Committee of the company has been reconstituted on 13th May 2013 and the present Audit Committee comprises of Mr. Raj P. Gandhi, Mr. Udai Dhawan and Mr. Kapil Agarwal as members.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

i)          in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii)         they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;

iii)         they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv)        they have prepared the annual accounts on a going concern basis.

AUDITORS AND AUDITORS’ REPORT

M/s. O. P. Bagla & Co., Chartered Accountants, New Delhi retire at the conclusion of the ensuing Annual General Meeting of the Company, and being eligible, offer themselves for re-appointment. The Company has received a letter from them to the effect that their appointment, if made, would be within the limits prescribed under Section 224 (1-B) of the Companies Act, 1956. Your Directors recommend their re-appointment.

M/s Walker Chandiok & Associate, Chartered Accountants, are being proposed to be appointed as the Joint Statutory Auditors of the Company for the financial year commencing from 1st January 2013 at the ensuing Annual General Meeting and the Company has received a letter from them to the effect that their appointment, if made, would be within the limits prescribed under Section 224 (1-B) of the Companies Act, 1956.

AUDITORS’ REMARKS

The Auditors’ Report read along with the notes to accounts is self-explanatory and requires no further comments from the Board of Directors.

COST AUDITORS

M/s. S.P. Singh & Co., Cost Accountants, Gurgaon has been appointed as the Cost Auditors of the Company for auditing the cost records of the Company under the provisions of Section 233B of the Companies Act, 1956 for the financial year commencing from 1st January 2013 to 31st December 2013.

SUBSIDIARY COMPANY

Consequent to the merger of the Company with Varun Beverages (International) Limited, the subsidiary companies of Varun Beverages (International) Limited are now subsidiaries of the Company. Now the Company has 3 (three) subsidiaries namely Varun Beverages Nepal Private Limited, Nepal, Varun Beverages Morocco SA, Morocco and Varun Beverages Lanka (Private) Limited, Sri Lanka and one step down subsidiary namely Ole Spring Bottlers (Private) Limited, Sri Lanka.

As required under section 212 of the Companies Act, 1956, the accounts of the subsidiary companies along with the Auditors’ Report thereon and Directors’ Report (wherever applicable) are separately attached.

PARTICULARS OF EMPLOYEES AS PER SECTION 217(2A) OF THE COMPANIES ACT, 1956

As required by Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended from time to time, a statement of information relating to the employees has been given in annexure-I to this report and forms part of it.

PARTICULARS REGARDING CONSERVATION OF ENERGY ETC.

Information in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 regarding conservation of energy and foreign exchange earnings and outgo are annexed hereto as Annexure-II and forms part of this report.

PUBLIC DEPOSITS

During the year under review, your Company has not invited or accepted any deposits from the Public within the meaning of Section 58A of the Companies Act, 1956.

ACKNOWLEDGEMENT

The Board places on record its appreciation for the valuable support and cooperation of the Company’s Bankers, Government Agencies, Customers, Suppliers, Shareholders, Management Team and the entire work force and looks forward for their continued support in future.

                                    FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

                                                                        FOR VARUN BEVERAGES LIMITED

Place : Gurgaon

Date  : 14.05.2013                                                      DIRECTOR                    DIRECTOR

ANNEXURE –I TO THE DIRECTORS’ REPORT

INFORMATION AS PER SECTION 217 (2A) OF THE COMPANIES ACT, 1956, READ WITH COMPANIES (PARTICULARS OF THE EMPLOYEES) RULES 1975 & FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST DECEMBER, 2012

Notes:-

1.    Mr. Varun Jaipuria is the son of Mr. Ravi Kant Jaipuria, Chairman of the Board of Directors and holds 44,175,500 equity shares in the Company.

2.    Employment of Mr. Christopher White is on contractual basis.

ANNEXURE –II TO THE DIRECTORS REPORT FORM-A (RULE-2)

FOR DISCLOSURE OF PARTICULARS UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 FOR THE YEAR ENDED 31ST DECEMBER, 2012

I.    CONSERVATION OF ENERGY:

a)    Energy Conservation measures taken: As a part of Company’s endeavour towards conservation of energy and prevention of energy wastage, constant improvements are undertaken in order to conserve energy on an ongoing basis. A multi pronged approach is deployed in plants as well as products to infuse the concept of energy conservation. Continuous Energy Conservation measures are being taken on all locations and sites of the Company to reduce the expenditure on power & fuel. Some of the energy conservation measures being taken by the Company are as follows:

·         The companyuses frequency drive in ammonia compressor which results in saving of electric energy.

·         Heat is recovered from hot compressed gases and is used for heating water, thus saving energy.

·         Steam condensate is recovered upto 90% from steam heating coils/PHE’s, which ultimately saves fuel in steam generation boiler.

·         The Company uses florescent tubes and transparent sheets in warehouse roofing which saves electricity consumption during day time.

·         The Company has successfully replaced the usage of Furnace oil and Pet coke by Briquets prepared from agricultural waste (molasses) in 4-5 Plants of the Group, thereby reducing the replenishment of natural resources & is Environment Friendly.

b)    Additional investment and proposals being implemented for reduction of consumption of energy:NIL

c)    Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods: The energy conservation measure indicated above helped the Company to restrictthe impact of increase in the cost of energy thereby reducing the cost of production of goods to that extent.

d)    Total energy consumption and energy consumption per unit as per Form A of Annexure 1 in respect of industries specified in the Schedule thereto.

Rs. In Million

      i.        Activities relating to exports:  The Company is engaged in the business of export of preforms and caps to the beverage and aerated drink manufacturers.

     ii.        Initiatives taken to increase exports: The Company has confirmed tieups with overseas purchasers commensurate with its total production capacity. The Company does not have any idle capacity as such and no further initiative has been taken to increase exports.

    iii.        Development of new export markets for products and services: The Company at present is not developing new markets as it is restricting itself to its optimum production capacity.

   iv.        Export plan: It is dependent upon the requirement of Company’s existing customers operating from outside India.

FORM B

(See Rule 2)

I.      Research and Development (R&D)

1.     Specific areas in which R&D carried out by the Company

Due to the nature of business of the Company, it is not initiating any specific research. However to be acquainted with the latest technology available in the market or the future technologies, the Company is taking all necessary steps, i.e. employee trainings, organizing workshops, participating in seminars, conferences and various technology forums.

2.     Benefits derived as a result of the above R&D

By virtue of the above initiatives, the Company is able to choose/adopt appropriate technology(ies)/ product(s) for rendering better services at competitive prices.

3.     Future plan of action

The Company continues to evaluate and adopt innovative and high quality products and technologies to meet the ever changing consumer needs.

4.      Expenditure on R & D

Due to the nature of the business of the Company, the Company is not initiating any specific research and development.

II.      Technology, absorption, adoption and innovation

Your Company believes that sustained competitiveness for the future requires a deeper focus on Research and Development. The Company has adapted the technology to develop products in line with the huge potential opening up in these segments for several applications, also addressing the current issues in the global scenario for energy efficiency, eco friendliness and global warming. Your Company is well equipped with state-of-art machineries & infrastructure at all plants and sites for smooth operations with effective automation thereat.

However, there is no imported technology involved in the operation of the Company. The company continues to focus its attention towards the rapid technological changes in the fields of its activity and train the man power continuously to improve the productivity. The technologies being used are indigenous and the Company has evolved a training methodology to measure the extent of adaptation by its personnel and training needs are identified accordingly.

This has led to improved product quality, cost reduction, product development, import substitution, competitive products leading to customer satisfaction, enhanced global presence and export of quality products, new product development helped in improving market share and to satisfy customers requirements. By these benefits, the Company will be able to commercialize these products in domestic and international markets. The Company is continuously focusing on development of products to meet the specialized demands of customers.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

                                                                        FOR VARUN BEVERAGES LIMITED

Place : Gurgaon Date  : 14.05.2013                                                      DIRECTOR                    DIRECTOR

FINANCIAL RESULTS (Rs. in Million) ParticularsYear Ended 31.12.2012Year Ended 31.12.2011 Total Income Total Expenditure Profit/Loss before tax Less: Provision for Tax Provision for Deferred Tax Profit/Loss after tax Add: Balance brought forward from last year14,979.47 14,547.88 431.58 132.58 Nil 299.00 247.2311,400.33 11,279.09 121.23 43.44 Nil 77.80 992.70 Balance carried over to Balance sheet546.23247.23 OPERATIONS During the year under review, the Company has achieved a net sale and other income of Rs. 14,979.47 million as against Rs. 11,400.33 million of the previous year, thereby registering a growth of 31.39%. ACQUISITION OF BUSINESS FROM PEARL DRINKS LIMITED During the year under review, the Company has acquired the business of Pearl Drinks Limited in the Union Territory of Delhi comprising of its plant situated at Greater Noida and three stores located at Mundka, Burari & Sultanpur. ACQUISITION OF DELHI TERRITORY The Company has been granted distribution rights by Pepsico India Holdings Private Limited and Pepsico Inc. USA, for manufacturing and distributing soft drinks and water under Pepsico’s brand names, apart from other territories, in parts of Delhi i.e. in Trans Yamuna areas. During the year under review, the Company has been granted distribution rights for the remaining parts of Delhi also.

DIVIDEND Your Directors feel that it is prudent to plough back the profits for future growth of the Company and do not recommend any dividend for the year ended 31st December, 2012.

I. CONSERVATION OF ENERGY: a) Energy Conservation measures taken: As a part of Company’s endeavour towards conservation of energy and prevention of energy wastage, constant improvements are undertaken in order to conserve energy on an ongoing basis. A multi pronged approach is deployed in plants as well as products to infuse the concept of energy conservation. Continuous Energy Conservation measures are being taken on all locations and sites of the Company to reduce the expenditure on power & fuel. Some of the energy conservation measures being taken by the Company are as follows: · The company uses frequency drive in ammonia compressor which results in saving of electric energy. · Heat is recovered from hot compressed gases and is used for heating water, thus saving energy. · Steam condensate is recovered upto 90% from steam heating coils/PHE’s, which ultimately saves fuel in steam generation boiler. · The Company uses florescent tubes and transparent sheets in warehouse roofing which saves electricity consumption during day time. · The Company has successfully replaced the usage of Furnace oil and Pet coke by Briquets prepared from agricultural waste (molasses) in 4-5 Plants of the Group, thereby reducing the replenishment of natural resources & is Environment Friendly. b) Additional investment and proposals being implemented for reduction of consumption of energy: NIL c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods: The energy conservation measure indicated above helped the Company to restrict the impact of increase in the cost of energy thereby reducing the cost of production of goods to that extent. d) Total energy consumption and energy consumption per unit as per Form A of Annexure 1 in respect of industries specified in the Schedule thereto. Rs. In Million PARTICULARS YEAR ENDEDYEAR ENDED ON 31.12.12 ON 31.12.11 A.POWER AND FUEL CONSUMPTION 1ELECTRICITY : a)PURCHASED : Unit 45.59 45.21 Total Amount (Rs.) 277.69 234.70 Rate/Unit (Rs.) 6.09 5.19 b)OWN GENERATION : I. Through Diesel / FO Generator Amount(Rs.) 244.28 108.39 Units 21.16 10.53 Units per Ltr. of Diesel Oil 3.62 3.37 Cost/Unit (Rs.) 11.54 10.29 II. Through Steam Turbine/Generator Units N.A N.A Units per Ltr. of fuel oil/gas N.AN.A. Cost/unit (Rs.) N.AN.A. 2COAL (SPECIFY QUANTITY AND WHERE USED) Quantity (Tonnes) N.AN.A. Total Amount (Rs.) N.AN.A. Average Rate (Rs.) N.AN.A. 3a)FOR BOILER 1)FURNACE OIL/BRIQUETS/PET COKE Quantity (Ltrs) / Briquets (Kgs) 16.2610.04 Total Amount (Rs.) 88.0459.96 Average Rate (Rs.) 5.425.97 b)FOR ELECTRICITY GENERATION 1)DIESEL Quantity (ltrs) 5.172.22 Total Amount (Rs.) 208.9481.72 Average Rate (Rs.) 40.3836.80 2)FURNACE OIL Quantity (ltrs) 1.240.88 Total Amount (Rs.) 57.1131.59 Average Rate (Rs.) 46.0935.89 4OTHERS/INTERNAL GENERATION (LPG) Quantity (Kgs.) 0.440.44 Total Amount (Rs.) 29.3725.13 Average Rate (Rs.) 67.4856.30 B. CONSUMPTION PER UNIT OF PRODUCTION FOR BEVERAGES, SHELLS, LUGS, CAPS, CROWN AND CARTONS FINISHED GOODSSTANDARDSYEAR ENDED 31.12.2012YEAR ENDED 31.12.2011 Beverage per CaseC/s0.870.79 Cartons per 100 BoxesBox3.724.00 Crown per 100 GrossGross13.0714.29 Shells per PcNos - Lug Cap per PcNos0.0080.006 Preform per 100 PcsNos3.233.00

I. Technology, absorption, adoption and innovation Your Company believes that sustained competitiveness for the future requires a deeper focus on Research and Development. The Company has adapted the technology to develop products in line with the huge potential opening up in these segments for several applications, also addressing the current issues in the global scenario for energy efficiency, eco friendliness and global warming. Your Company is well equipped with state-of-art machineries & infrastructure at all plants and sites for smooth operations with effective automation thereat. However, there is no imported technology involved in the operation of the Company. The company continues to focus its attention towards the rapid technological changes in the fields of its activity and train the man power continuously to improve the productivity. The technologies being used are indigenous and the Company has evolved a training methodology to measure the extent of adaptation by its personnel and training needs are identified accordingly. This has led to improved product quality, cost reduction, product development, import substitution, competitive products leading to customer satisfaction, enhanced global presence and export of quality products, new product development helped in improving market share and to satisfy customers requirements. By these benefits, the Company will be able to commercialize these products in domestic and international markets. The Company is continuously focusing on development of products to meet the specialized demands of customers.

II. FOREIGN EXCHANGE EARNING AND OUTGO: (Rs. in Million) PARTICULARSYEAR ENDED 31.12.2012YEAR ENDED 31.12.2011 1. Earning in Foreign Currency220.3594.88 2. Outgo in Foreign Currency Value of Imports (CIF) - Capital Goods 659.72792.50 - Stores. Spares & Raw Material537.65409.53 Expenditure in Foreign Currency - Traveling & Others2.824.87 - Financial Charges74.367.22 i. Activities relating to exports: The Company is engaged in the business of export of preforms and caps to the beverage and aerated drink manufacturers. ii. Initiatives taken to increase exports: The Company has confirmed tieups with overseas purchasers commensurate with its total production capacity. The Company does not have any idle capacity as such and no further initiative has been taken to increase exports. iii. Development of new export markets for products and services: The Company at present is not developing new markets as it is restricting itself to its optimum production capacity. iv. Export plan: It is dependent upon the requirement of Company’s existing customers operating from outside India.

MERGER OF VARUN BEVERAGES (INTERNATIONAL) LIMITED with the Company During the period under review, the company merged with itself Varun Beverages (International) Limited. The Scheme of Amalgamation has been sanctioned by the Hon’ble High Court of Delhi at New Delhi vide its order dated 12th March, 2013 and the order has taken effect retrospectively from 01st January, 2012. The Annual Report of your Company for the year ending December 31, 2012 has been prepared after giving effect to this amalgamation. INCREASE IN SHARE CAPITAL In accordance with the Scheme of Amalgamation of Varun Beverages (International) Limited with the Company sanctioned by the Hon’ble High Court of Delhi at New Delhi vide its order dated 12th March 2013, the authorized share capital of the Company stands increased from Rs. 86,00,00,000/- divided into 8,60,00,000 equity shares of Rs. 10/- each to Rs. 186,00,00,000/- divided into 18,60,00,000 equity shares of Rs. 10/- each. Further, as per the scheme of amalgamation, the Company has allotted 26,752,733 equity shares of Rs. 10/- each to the shareholders of Varun Beverages (International) Limited in the ratio of 100:31 on 13.05.2013. Resultantly the paid-up share capital of the Company has also increased from Rs. 8,00,00,000/- to Rs. 26,75,32,330/-. BONUS ISSUE During the period under review, the Company issued 10,70,12,932 bonus shares of Rs. 10/- each, fully paid up, in the ratio of 4 (four) bonus shares for every existing 1(one) share of Rs. 10/- each and consequently the Paid-up Share Capital of the Company was increased from Rs. 26,75,32,330/- to Rs. 133,76,61,650. The bonus shares have been allotted in the meeting held on 14.05.2013.

I. Research and Development (R&D) 1. Specific areas in which R&D carried out by the Company Due to the nature of business of the Company, it is not initiating any specific research. However to be acquainted with the latest technology available in the market or the future technologies, the Company is taking all necessary steps, i.e. employee trainings, organizing workshops, participating in seminars, conferences and various technology forums. 2. Benefits derived as a result of the above R&D By virtue of the above initiatives, the Company is able to choose/adopt appropriate technology(ies)/ product(s) for rendering better services at competitive prices. 3. Future plan of action The Company continues to evaluate and adopt innovative and high quality products and technologies to meet the ever changing consumer needs. 4. Expenditure on R & D Due to the nature of the business of the Company, the Company is not initiating any specific research and development.

INFORMATION AS PER SECTION 217 (2A) OF THE COMPANIES ACT, 1956, READ WITH COMPANIES (PARTICULARS OF THE EMPLOYEES) RULES 1975 & FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST DECEMBER, 2012 S. No.NameDesignationRemuneration Received (Rs)AgeQualificationExperience in yearsLast Employ- mentDate of Joining 1Mr. Varun JaipuriaWhole-Time Director24,009,360/-25Graduate from Regent College, London4-01.07.2009 2Mr. Raj P. GandhiPresident & Group CFO12,371,400/-55FCA32Agra Beverages Corporation Ltd.01.04.2000 3Mr. Christopher WhiteChief Executive Officer14,519,074/-51LL.B29Nestle UK01.07.2008 4Mr. R.J.S. BaggaCOO6,859,668/-50M-Tec26Eveready Industries02.11.1995 Notes:- 1. Mr. Varun Jaipuria is the son of Mr. Ravi Kant Jaipuria, Chairman of the Board of Directors and holds 44,175,500 equity shares in the Company. 2. Employment of Mr. Christopher White is on contractual basis.

DIRECTORS’ RESPONSIBILITY STATEMENT In terms of section 217(2AA) of the Companies Act, 1956, your Directors confirm that: i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period; iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) they have prepared the annual accounts on a going concern basis.

The Auditors’ Report read along with the notes to accounts is self-explanatory and requires no further comments from the Board of Directors.

AUDITORS AND AUDITORS’ REPORT M/s. O. P. Bagla & Co., Chartered Accountants, New Delhi retire at the conclusion of the ensuing Annual General Meeting of the Company, and being eligible, offer themselves for re-appointment. The Company has received a letter from them to the effect that their appointment, if made, would be within the limits prescribed under Section 224 (1-B) of the Companies Act, 1956. Your Directors recommend their re-appointment. M/s Walker Chandiok & Associate, Chartered Accountants, are being proposed to be appointed as the Joint Statutory Auditors of the Company for the financial year commencing from 1st January 2013 at the ensuing Annual General Meeting and the Company has received a letter from them to the effect that their appointment, if made, would be within the limits prescribed under Section 224 (1-B) of the Companies Act, 1956. AUDITORS’ REMARKS The Auditors’ Report read along with the notes to accounts is self-explanatory and requires no further comments from the Board of Directors. COST AUDITORS M/s. S.P. Singh & Co., Cost Accountants, Gurgaon has been appointed as the Cost Auditors of the Company for auditing the cost records of the Company under the provisions of Section 223B of the Companies Act, 1956 for the financial year commencing from 1st January 2013 to 31st December 2013. SUBSIDIARY COMPANY Consequent to the merger of the Company with Varun Beverages (International) Limited, the subsidiary companies of Varun Beverages (International) Limited are now subsidiaries of the Company. Now the Company has 3 (three) subsidiaries namely Varun Beverages Nepal Private Limited, Nepal, Varun Beverages Morocco SA, Morocco and Varun Beverages Lanka (Private) Limited, Sri Lanka and one step down subsidiary namely Ole Spring Bottlers (Private) Limited, Sri Lanka. As required under section 212 of the Companies Act, 1956, the accounts of the subsidiary companies along with the Auditors’ Report thereon and Directors’ Report (wherever applicable) are separately attached.