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EQUITY - MARKET SCREENER

Setco Automotive Ltd
Industry :  Auto Ancillaries
BSE Code
ISIN Demat
Book Value()
505075
INE878E01021
12.0218832
NSE Symbol
P/E(TTM)
Mar.Cap( Cr.)
SETCO
0
224.06
EPS(TTM)
Face Value()
Div & Yield %
0
2
0
 

As on: Jan 22, 2022 05:53 PM

Dear Members,

Your Directors are pleased to present the Thirty Sixth Annual Report together with the audited financial statements for the financial year (FY) ended March 31, 2019. This report states compliance as per the requirements of the Companies' Act, 2013 ("the Act"), the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations") and other rules and regulations as applicable to the Company.

FINANCIAL PERFORMANCE

The highlights of the financial performance for the year under review as compared to the previous financial year are given below:

The equity shares of the Company continue to be listed on BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE"). The stipulated listing fees for FY2019-20 have been paid to both stock exchanges.

DIVIDEND

The Board of Directors have recommended payment of Rs.1.00 (Rupee One Only) i.e @ 50% per equity share of the face value of Rs. 2/- (Rupee Two Only) each as final dividend for the financial year 2018-19. The amount of Dividend and Tax thereon aggregate to Rs.1611.50 lakhs. The dividend on equity shares, subject to the approval of shareholders at the Annual General Meeting (AGM) to be held on September 27, 2019 will be paid on or after September 28, 2019 to the Members whose

(Rs. in Cr. Except for EPS)

Particulars

Standalone

Consolidated

2018-19 2017-18 2018-19 2017-18
Revenue from Operation & Other Income 628.54 547.72 686.26 603.58
Gross Profit before Finance Cost & Depreciation 106.34 84.94 102.85 83.08
Less: Finance Cost 33.98 31.25 52.58 50.41
Less: Depreciation 19.30 17.76 33.51 32.20
Profit/(Loss) before Tax 53.06 28.90 16.76 0.47
Less: Provisions for Tax Expenses 16.83 -- 17.31 1.43
Profit/ (Loss) from continuing operations 36.22 28.81 (0.55) (0.96)
Other Comprehensive Income 0.20 0.09 (0.25) 0.03
Profity(Loss) after Taxes including other Comprehensive Income 36.02 -- (0.79) (0.93)
Less: Non-Controlling Interest -- -- (3.67) (4.72)
Profit/(Loss) for the Year attributable to Equity Holders of the parent 36.02 28.90 2.88 3.79
Earning Per Shares (Rs.) 2.71 2.16 0.23 0.28

During the financial year 2018-19 Revenue from operations on standalone basis increased to Rs. 628.54 crores as against Rs. 546.32 crores in the previous year - a growth of 15.05%.

The Profit after Tax for the current year is Rs. 36.02 crores against Rs. 28.90 crores in the previous year - a growth of 24.63%.

The Financial Results of the Company are discussed in detail in the Management Discussion & Analysis Report.

INCREASE IN SHARE CAPITAL

During the year under review, your Company has issued and allotted in aggregate 80,600 equity shares of the Company to eligible employees on exercise of options granted under Setco Employees Stock Option Scheme formulated by the Company. Consequent to the aforesaid, the issued, subscribed and paid-up capital of the Company increased from 13,35,96,675 equity shares of Rs. 2/- each to 13,36,77,275 equity shares of Rs. 2/- each. names appear in the Register of Members as of the close of business hours on Friday, September 20, 2018 [Adjusted as Members' Register and Share Transfer Books shall be closed from Saturday, September 21, 2019 to Friday, September 27, 2019 (both days inclusive)].

Shares that may be allotted on exercise of stock options granted under the Setco Employees Stock Options Scheme, 2015 before the book closure date for payment of dividend will rank pari-passu with the existing shares and be entitled to receive the dividend.

FIXED DEPOSITS

During the year under review, the Company has not acceptedany deposit within the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014 (including any statutory modification(s) orre- enactment(s) thereof for the time being in force).

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans granted, guarantees provided and investments made by the Company under the provisions of Section 186 of the Act read with the Companies (Meeting of Board and its Powers) Rules, 2014, are provided in the Notes to Standalone Financial Statements of the Company, forming part of this Annual Report.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

The Company undertakes various transactions with related parties in the ordinary course of its business. All transactions entered into with related parties as defined under the Companies Act, 2013 during the financial year, were in the ordinary course of business and on an arm's length pricing basis and do not attract the provisions of Section 188 of the Companies Act, 2013.

All Related Party Transactions are placed before the Audit Committee as also the Board for approval. The transactions entered into pursuant to the omnibus approval so granted and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval on a quarterly and annual basis.

There were no materially significant transactions with the related parties during the financial year, which were in conflict with the interest of the Company and hence, enclosing of Form AOC-2 is not required. Suitable disclosure as required by the Accounting Standard (AS-18) has been made in the notes to the Financial Statements.

The Policy on materiality of related party transactions and dealing with related party transactions may be accessed on the Company's website at the link http://www.setcoauto. com/statutory-policies.

The details of related party transactions as per Indian Accounting Standards (IND AS) - 24 are set out in Note 37 to the Standalone Financial Statements of the Company.

EMPLOYEE STOCK OPTION PLAN (ESOPS)

The Company implemented the Employee Stock Option Scheme ("Scheme") in accordance with the Securities & Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (‘the SEBI (SBEB) Regulations') as a measure to reward and motivate the employees by creating an employee ownership as also to attract and retain talent.

Disclosures pertaining to the Scheme of the Company pursuant to SEBI (SBEB) Regulations are placed on the company's website: www.setcoauto.com. Details of options vested, exercised and cancelled are provided in the Notes to the standalone financial statements. No employee has been issued stock options, during the year, equal to or exceeding 1% of the issued capital of the company at the time of grant.

The Company has received a certificate from the Statutory Auditors of the Company that the Scheme have been implemented in accordance with the SEBI (SBEB) Regulations and the resolution passed by the shareholders of the Company. The certificate would be placed at the Annual General Meeting for inspection of the members.

There has been no material change in the subsisting scheme. In terms of the provisions of the SEBI (SBEB) Regulations, the details of the Stock Options granted under the ESOP Scheme is annexed herewith as Annexure 1.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

In accordance with the applicable provisions of Companies Act, 2013 read with Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 ("IEPF Rules"), all unclaimed dividends are required to be transferred by the Company to the IEPF, after completion of seven (7) years.

Further, according to IEPF Rules, the shares on which dividend has not been claimed by the shareholders for seven (7) consecutive years or more shall be transferred to the demat account of the IEPF Authority. The details relating to amount of dividend transferred to the IEPF and corresponding shares on which dividends were unclaimed for seven (7) consecutive years, are provided in the General Shareholders Information section of this Annual Report.

MATERIAL CHANGES AFFECTING THE COMPANY

There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year 2018-19 and the date of this report. There has been no change in the nature of business of the Company.

MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis as stipulated under the Listing Regulations is presented in a separate section forming part of this Annual Report. It provides details about the overall industry structure, global and domestic economic scenarios, developments in business operations/ performance of the Company's, internal controls and their adequacy, risk management systems and other material developments during the financial year 2018-19.

SUBSIDIARIES

Performance of Company's subsidiaries is elaborated in detail under ‘Management Discussion & Analysis'.

Your Company has five subsidiaries across the globe which includes Lava Cast Private Ltd. (CIN: U27205GJ2011 PTC100777), Setco Automotive (UK) Ltd (SAUL), Setco Automotive (NA) Inc. (SANAI), Setco MEA DMCC, Dubai and WEW Holdings Ltd (Mauritius).

In accordance with Section 136 of the Companies Act, 2013 has exempted companies from attaching the annual reports and other particulars of its subsidiary Companies with the annual report of the Company. Accordingly, the Annual Reports of the subsidiaries are not attached with this Annual Report. However, statement containing salient features of financial statements of subsidiaries as per 129 (3) of the Act, is also included in this Annual Report in form AOC-1 as Annexure 2 to the Directors' Report. The financial statements of the subsidiary companies are available for inspection of the shareholders at the Registered Office of the Company between 11.00 a.m. to 3.00 p.m. on all working days except Tuesdays, up to and including the date of the Meeting.

The Policy for determining material subsidiaries as approved may be accessed on the Company's website at the link http://www.setcoauto.com/statutory-policies.

INTERNAL FINANCIAL CONTROLS

The Company has appropriate internal control system in place to ensure reliability of financial reporting, orderly and efficient conduct of business, compliance with policies, procedures, safeguarding of assets and economical and efficient use of resources. Appropriate review and control mechanisms are in place to ensure that such control systems are adequate and operate effectively.

Audit Committee and the Board review these internal control systems to ensure they remain effective and are achieving their intended purpose. The Company's internal audit team conducts periodic audits, checks and has laid down controls to prevent, detect and correct any irregularities in the operations of the Company.

INDIAN ACCOUNTING STANDARDS (IND AS) 2015

The financial statements up to the year ended March 31, 2017 were prepared in accordance with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act.

The annexed financial statements comply in all material aspects with the Indian Accounting Standards (Ind AS) notified under section 133 of the Act [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Companies Act, 2013 (hereinafter referred to as "the Act"), Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as "Listing Regulations") and applicable Accounting Standards, the Audited Consolidated Financial Statements of the Company for the financial year 2018-19, together with the Auditors' Report form part of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company primarily works through Setco Foundation and also supports other NGOs, towards supporting projects to facilitate a neighborhood to ensure full access to healthcare, nutrition, education and opportunity for growth. We strongly believe that, as a model corporate citizen, our Corporate Social Responsibility (CSR) activities should CSR - Care, Support and Revive. It is our way of giving back to the community and environment which has helped us grow and thrive. Details of the CSR activities are more particularly exhibited at the link http://setcofoundation.org/what-we-do/.

The Corporate Social Responsibility Committee (CSR Committee) formulated and recommended to the Board, the Corporate Social Responsibility Policy (CSR Policy) of the Company indicating therein the CSR activities to be undertaken by the Company. The CSR Policy has been approved by the Board of Directors.

The CSR Policy may be accessed on the Company's website at the link http://www.setcoauto.com/statutory-policies.

During the year under review, the Company has spent Rs.151.72 lakhs on CSR activities. The Annual Report on CSR activities is given at Annexure 3 hereto.

HUMAN RESOURCES

Your Company takes great pride in its Human Capital and takes significant effort in hiring, advancing and retaining the talent.The Company's comprehensive Human resource strategy takes into cognizance the key aspects of people development such as employee engagement, talent management, performance management capability development and progressive industrial relations. Training and consequent learning, therefore, forms an important element of each employee's career growth. The endeavor is to build and strengthen organizational capabilities there by enabling the Organization to sustain attractive growth in a dynamic business environment.

Setco ensure that there is full adherence to the code of ethics and fair business practices. It provides an equal opportunities employer and employees are evaluated solely on the basis of their qualifications and performance. The Human Resource function is a business partner that focusses on improving the way of life, work culture, employee engagement, productivity, effectiveness and efficiency. The Company believes in developing an efficient and committed employee base that is aware and empowered.

Industrial relations with the employees have continued to remain cordial.

PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT OF WORKMEN AT WORKPLACE

In accordance with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the company has framed a Policy on Prevention of Sexual Harassment at Workplace and constituted an Internal Complaints Committee for Prohibition, Prevention and Redressal of Sexual Harassment and matters connected therewith or incidental thereto covering all the related aspects.

All employees (permanent, contract, temporary, trainees) are covered under the policy. During the year under review, there were no cases reported under the said scheme.

VIGIL MECHANISM

The Company has a robust vigil mechanism through its Whistle Blower Policy approved and adopted by Board of Directors of the Company in compliance with the provisions of Section 177 (10) ofthe Act and Regulation 22 of the Listing Regulations.

The Policy also provides protection to the employees and business associates who report unethical practices and irregularities.

Your Company has adopted a Vigil Mechanism / whistle blower Policy to enable employees to raise concerns about unacceptable, improper practices and/or any unethical practices being carried out in the organisation without the knowledge of management. This Whistle Blower Policy will also be applicable to the Directors of the Company.

The Audit Committee oversees the vigil mechanism. No employee has been denied access to the Audit Committee. The Audit Committee reviews on a quarterly basis, reports made under this policy and implements corrective actions, wherever necessary. The policy has been appropriately communicated to all the employees and posted on the Company's website at the link http://www.setcoauto.com/ statutory-policies. No such fraud or wrongful conduct was reported during the year under review.

RISK MANAGEMENT

The Company has a well-defined process in place to ensure appropriate identification and mitigation of risks. Risk identification exercise is inter-woven with the annual planning cycle which ensures both regularity and comprehensiveness. The identification and mitigation of strategic, business, operational and process risks are carried out for all functions. Your Company is committed to managing the risks in a proactive and efficient manner.

Your Company, through its risk management process, strives to contain impact and likelihood of the risks within the risk appetite as agreed from time to time with the Board of Directors.

INDUSTRIAL RELATIONS

The relations with the employees have continued to remain cordial.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The composition of the Board of Directors of the Company is furnished in the Corporate Governance Report annexed to this report.

Changes in the Board

During the year the Board of Directors appointed Mr. Bhalchandra Naik (DIN:02490022) as an Additional Director of the Company w.e.f. May 30, 2018 in the category of NoExecutive and Independent Directors. Mr. Bhalchandra

Naik (DIN:02490022), resigned w.e.f. October 31, 2018 on personal grounds. The Board places on records its appreciation of the contribution made Mr. Bhalchandra Naik as Director of the Company.

During the year, in order to strengthen the Board, on the recommendation of Nomination and Remuneration Committee, the Board of Directors appointed Mr. Arun Tiwari (DIN: 05345547) as an Additional Director of the Company w.e.f. July 31, 2018 in the category of Non-Executive and Independent Director. The Shareholder in their meeting held on 28th September 2018 have appointed Mr. Arun Tiwari (DIN: 05345547) as Director of the Company in the category of Non-Executive and Independent Director for the period of 5 years.

As on date of this report, Company's Board comprises of 8 (eight) Directors, out of which 5 (five) are Non-Executive Directors (NEDs) including 1 (one) Woman Director. NEDs represent 63% of the total strength. Out of 5 (five) NEDs, 4 are independent directors.

Retirement by rotation and subsequent re-appointment

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Shvetal Vakil, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment as a Director.

The disclosure in pursuance of Schedule V to the Companies Act, 2013 and SEBI Listing Regulations pertaining to the remuneration, incentives etc. to the Directors is given in the Corporate Governance Report.

Re-appointment of Independence Directors:

Dr. Arun Arora, Mr. Ashok Kumar Jha and Mrs. Suhasini Sathe were appointed as an independent directors at the 31st Annual General Meeting (AGM) held on 9th September, 2014 for a period of five years. Based on the recommendation of the Nomination and Remuneration Committee, their reappointment for a second term of five years is proposed at the ensuing AGM for the approval of the Members by way of special resolution.

The Notice convening forthcoming Annual General Meeting includes the proposal for appointment/re-appointment of the aforesaid Directors. A brief resume of the Directors seeking appointment/re-appointment at the forthcoming AGM and other details as required to be disclosed in terms of Regulation 36(3) of the SEBI Listing Regulations and Secretarial Standard on General Meetings (SS-2) forms part of the Notice calling the AGM.

As on 31st March, 2019, none of the Directors are disqualified for appointment/re-appointment under Section 164 of the Companies Act, 2013.

Declaration of independence from Independent Directors:

The Independent Directors hold office for a fixed term of five years and are not liable to retire by rotation. In accordance with Section 149(7) of the Act, each Independent Director has given a written declaration to the Company confirming that he/she meets the criteria of independence as mentioned under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations.

BOARD EFFECTIVENESS:

FAMILIARIZATION PROGRAM FOR THE INDEPENDENT DIRECTORS

In compliance with the requirement of the Listing Regulations, the Company has put in place a familiarization programme for the Independent Directors to familiarize them with their roles, rights, responsibilities as directors, nature of the industry in which the Company operates, business model of the Company and related matters. The details of familiarization programmes are explained in the Corporate Governance Report.The said details are also available on the website of the Company at the link http://www.setcoauto. com/statutory-policies.

PERFORMANCE EVALUATION OF BOARD

In line with the statutory requirements enshrined under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board carried out a performance evaluation. A formal evaluation of performance of the Board, its Committees, the Chairman and that of the individual Directors was carried out for the financial year 2018-19.

The evaluation of Individual Directors was done taking into consideration the role played by each Director as a member at the respective meetings, in pursuit of the purpose and goals, participation at the meetings, independent views and judgement, initiative, ownership of value building.

The performance of the Committees was evaluated by the Board after seeking inputs from the Committee members on the basis of the criteria such as the composition of Committees, effectiveness of Committee meetings, information shared and participation of members. In respect of evaluation for performance of the Board, the parameters inter alia comprised of key areas such as Board composition, competency of Directors, diversity, frequency of Board and Committee meetings, information sharing and disclosures made to the Board and its Committees. The responses received on evaluation of the Board and its Committees and that of the individual Directors were shared with the Chairman.

The overall performance evaluation process for functioning of Board and its Committees was based on discussions amongst the Board Members, Committee Members and responses shared by each Member. The Board found that there was considerable value and richness in the discussions and deliberations. Based on the outcome of the evaluation, the Board and Committees have agreed for possible continuous improvisation to ensure better effectiveness and functioning of the Board and Committees.

Similarly, the Board at its meeting assessed the performance of the Independent Directors. The Directors were quite satisfied with the results of the performance evaluation of the Board & its Committees, Chairman and individual directors.

KEY MANAGERIAL PERSONNEL

The following persons have been designated as Key managerial Personnel of the Company pursuant to section 2(51) and section 203 of the Act, read with the Rules framed thereunder:

• Mr. Harish Sheth, Chairman & Managing Director

• Mr. Shvetal Vakil, Executive Director

• Mrs. Urja Shah, Executive Director

• Mr. Jatinder Bir Singh Gujral, Chief Executive Officer

• Mr. Vinay Shahane, Vice President Finance (Chief Financial Officer)

• Mr. Chandra Kant Sharma, Company Secretary and Compliance officer. (w.e.f. May 6, 2019)

Mr. Nishant Javlekar, the earlier Company Secretary of the Company and KMP resigned from the services of the Company w.e.f. August 31, 2018.

Policy on Remuneration of Directors, KMPs and Senior Managerial Personnel and criteria for matters under Section 178 of the Act

Information regarding the Policy on Remuneration of Directors, KMPs and Senior Managerial Personnel and criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of Section 178 of the Companies Act, 2013 and SEBI Listing Regulations adopted by the Board is appended as Annexure 4 to the Directors' Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013, the Directors confirm that:

a) in the preparation of the annual accounts for the financial year ended 31st March, 2019, the applicable accounting standards and Schedule III of the Companies Act, 2013, have been followed and there are no material departures from the same;

b) the Directors 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 your Company as at 31st March, 2019 and of the profit and loss of the Company for the financial year ended 31st March, 2019;

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the annual accounts have been prepared on a ‘going concern' basis;

e) proper internal financial controls laid down by the Directors were followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f) proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.

MEETINGS

A calendar of meetings is prepared and circulated in advance, to the Directors.

MEETINGS OF THE BOARD OF DIRECTORS AND ITSCOMMITTEES

The Board of Directors met 7 (Seven) times during the financial year 2018-19. The details of composition of the Board and its Committees, their meetings held during the year under reviewand the attendance of the Directors/ Committee Members at the respective meetings are provided in the Corporate Governance Report which forms part of this Annual Report.

During the year under review, all the recommendations made by the Audit Committee were accepted by the Board. The Board evaluates the recommendations made by Audit Committee and seeks further information as they may require. There were no instances where the Board has not accepted any recommendation of Audit Committee.

The Company also has CSR Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee, Finance & Operation Committee, Selection Committee, Shares allotment Committee and Qualified Institutional Placement Committee. The constitution and details of their meetings are given in the report on Corporate Governance.

AUDITORS

Statutory Auditors

M/s. V. Parekh & Associates, Chartered Accountants (Firm Registration No. 107488W) were appointed as the Statutory Auditors of the Company to hold office from the conclusion of the 34th Annual General Meeting of the Company held on September 27, 2017 until the conclusion of the 39th Annual General Meeting of the company to be held in the financial year 2021-22.

M/s. V. Parekh & Associates, Chartered Accountants have confirmed that they are not disqualified from continuing as Auditors of the Company.

Directors' comments on Auditors Qualification in Consolidated Auditors Report:

The Auditors have made qualification in their Report on the Consolidated Accounts for not having ascertained and eliminated the unrealized profit element in the stocks lying with the subsidiaries out of inter-company transactions, in terms of the Accounting Standard-21, "Consolidated Financial Statements".

In view of the accounting method followed at the subsidiaries, it was very difficult / not possible to segregate the stock from different sources and work out its valuation. However, the steps are being taken to modify the accounting software to enable the extraction of the relevant information. This will enable the subsidiaries to provide information on unrealized profits in the stocks received from the Company.

SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Act and Rules thereunder, the Company had appointed M/s. P. P. Shah & Co., Practicing Company Secretaries, (Membership No.1483, CP No. 436) as the Secretarial Auditor to conduct Secretarial Audit for the financial year 2018-19. The Secretarial Audit Report for the financial year ended March 31, 2019 is annexed herewith marked as Annexure 5 in Form MR-3 to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Directors' comments on Secretarial Auditors Qualification in Appointment of Company Secretary:

As per Section 203 (1) (ii), the Company is required to appoint Company Secretary. The Company Secretary has resigned on 15th September, 2018. In this regard the management of the Company has provided the following reply:

The Company is required to appoint Company Secretary within 6 months of vacancy i.e. by 15th March, 2019. The Company has made efforts for appointment of Company Secretary but no suitable candidate was found during this period. The non-compliance is for 17 days only.

SECRETARIAL STANDARDS

The Directors state that applicable Secretarial Standards i.e. SS -1 and SS -2, relating to ‘Meeting of the Board of Directors' and ‘General Meeting', respectively, have been duly followed by the Company.

CORPORATE GOVERNANCE

A report on Corporate Governance alongwith a certificate from the Secretarial Auditors of the Company regarding the compliance with provisions of corporate governance as stipulated under Schedule V of the Listing Regulations forms a part of this Annual Report.

All Board members and senior management personnel have affirmed compliance with the Code of Conduct for the year 2018-19. A declaration to this effect signed by the Chairman & Managing Director of the company is contained in this Annual Report.

The Chairman & Managing Director and CFO have certified to the Board with regard to the financial statements and other matters as required under Regulation 17(8) of the SEBI LODR Regulations and the said certificate is contained in this Annual Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

A. Conservation of Energy: The operations of the Company are not energy - intensive. However, the Company takes necessary steps wherever applicable, to conserve energy. To this extent, employees and operators are regularly educated about saving energy.

B. Technology Absorption: The Company's product i.e. clutches for commercial vehicles are manufactured under the proprietary technology and heritage ‘Lipe' Brand. Most of the components for manufacturing clutches are procured indigenously except for certain critical components, for offering better quality at a competitive price to customers, being imported.

C. Foreign Exchange Earnings and Outgo: Details of foreign exchange earnings and outgo during the financial year 2018-19, are provided in the Notes to Standalone Financial Statements of the Company, forming part of this Annual Report.

QUALITY STANDARD ACCREDIATION

Your Company is ISO 9002 as well as TS 16949 certified in line with the global requirements of the automotive sector by Bureau Veritas Certification (formerly BVQI).

Further, the Company's Unit is accredited with Environmental Management System (EMS) (ISO 14001) as well as Occupational Health, Safety Standards (OHSAS 18001) and VDA 6.3 Certification.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return of the Company as on 31st March, 2019 in Form MGT - 9 in accordance with Section 92 (3) of the Act read with Companies (Management and Administration) Rules, 2014, is available on the website of the Company at https://www.Setcoauto.com/investors/ financial- results.html and is set out in Annexure 6 to this Report.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to the remuneration of Directors, KMPs and employees under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are provided under Annexure 7, which is annexed to this Report.

In terms of the provisions of Section 136 of the Act, the copy of the Financial Statements of the Company, including the Consolidated Financial Statements, the Auditors' Report and relevant Annexures to the said financial statements and reports are being sent to the Members and other persons entitled therefor, excluding the information in respect of the said employees containing the particulars as specified in Rule 5(2) of the said Rules, which is available for inspection by the Members at Registered Office of the Company during all working days except on Tuesday, Public Holidays and National Holidays between 10.00 a.m. and 5.00 p.m. upto the date of the AGM. If any member is interested in obtaining a copy thereof, he/ she may write to the Company Secretary and the same shall be provided.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Issue of equity shares with differential rights as to dividend, voting or otherwise.

2. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report.

3. Neither the Managing Director nor the Whole-time Directors of the Company received any remuneration or commission from any of its subsidiaries.

4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

5. None of the Auditors of the Company have reported any fraud as specified under the second proviso of Section 143 (12) of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force).

6. The Company does not have any scheme or provision of money for the purchase of its own shares by employees/ Directors or by trustees for the benefit of employees/ Directors.

ACKNOWLEDGEMENTS:

The Board of Directors place on record sincere gratitude andappreciation for all the employees at all levels for their hardwork, solidarity, cooperation and dedication during the year.

The Board conveys its appreciation for its customers, shareholders, suppliers as well as vendors, bankers, business associates, regulatory and government authorities for their continued support

For and on behalf of the Board

Harish Sheth

Chairman and Managing Director

DIN: 01434459

Place: Mumbai

Date:13th August, 2019

ANNEXURE 1 TO DIRECTORS' REPORT

Disclosure pursuant to Regulation 14 of SEBI (Share Based Employee Benefits) Regulations, 2014 as amended.

A General Disclosure

Disclosures in terms of the Guidance note on accounting for employee share-based payments or any other relevant accounting standards: For details please refer to notes to Financial Statement mentioned in Annual Report 2018-19.

B Summary

Description
1 Date of Shareholders Approval June 5, 2015 - Extra Ordinary General Meeting
2 Total number of options approved under the scheme* 25,00,000 stock options were approved under the Setco Employee Stock Option 2015
3 Date of Grant May 30, 2016
4 Options Granted 6,10,000 stock options
5 Vesting Schedule 20% of the total options - 30.5.2017
30% of the total options - 30.5.2018
50% of total options - 30.5.2019
6 Pricing Formula The options are granted to Eligible Employees and Directors of the Company at an Exercise Price of Rs. 16/- per share (as against closing price of Rs.31.95/- as on May 27, 2016) in accordance with the provisions of the Scheme.
7 Maximum Term of Options Granted Four years from the date of grant
8 Source of Shares Primary
9 Variation in terms of Options --
10 Method used for Accounting of ESOP Fair Value Method
11 Where the Company has calculated the employee compensation cost using the intrinsic value of the stock option, the difference between employee compensation cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the option, shall be disclosed. The impact of this difference on profits and on EPS of the Company shall also be disclosed. The Company is following accounting as per (Indian Accounting Standard) Ind-As 102 issued by the Ministry of Corporate Affairs
12 Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with (IND-AS) Earnings Per Share The diluted EPS of the Company after considering the effect of potential equity shares arising on account of exercise of options is Rs. 2.71 per share
13 Weighted average exercise price and weighted average fair value of the options shall be disclosed separately for options whose exercise price either equals or is less than the market price for the stock. Weighted average exercise price : Rs. 16.00 Weighted average fair value of options based on Black Scholes methodology: Rs. 16.48

C Options Movement During the year

Description
1 Number of Options outstanding at the beginning of the Period 4,35,000
2 Number of Options granted during the year Nil
3 Number of Options forfeited / lapsed during the year 69,600
4 Number of Options vested during the year 87,000
5 Number of Options exercised during the year 80,600
6 Number of shares arising as a result of exercise of Options 80,600
7 Money realized by exercise of Options 12,89,600
8 Number of options outstanding at the end of the year 2,84,800
9 Number of Options exercisable at the end of the year 1,06,800

D Options granted to Senior Management Personnel/s

The company has not granted any options during the current financial year under the ESOP scheme to Senior Management Personnel/s.

E Options granted to any employee during the year amounting to 5% or more of options granted during the year

The company has not granted options during the current financial year under the ESOP scheme to employees during the year amounting to 5% or more of options.

F Options granted to any employee equal to or exceeding 1% of the issued capital of the company at the time of grant

The company has not granted options during the current financial year under the ESOP scheme to any employee equal to or exceeding 1% of the issued capital of the company.

G A description of the method and significant assumption used during the year to estimate the fair values of options.

For share options granted to employees, in many cases market prices are not available, because the options granted are subject to terms and conditions that do not apply to traded options. If traded options with similar terms and conditions do not exist, the fair value of the options granted shall be estimated by applying a Black Scholes option pricing model.

The inputs to the model are:

• Underlying price of the shares as on the date of the grant

• Exercise price of the options

• Expected life of the options

• Expected volatility of the options

• Expected dividend yield of the option

• Risk free rate of interest

*The Shareholders at the Extra Ordinary General Meeting of the Company held on June 5, 2015 had approved the 5,00,000 (Five Lakhs) stock options under the Setco Stock Option scheme 2015 of Rs. 10/- each. Further, at the Annual General meeting of the Company held on September 28, 2015, the shareholders approved the sub- dividsion of shares from face value Rs.10/- each into five equity shares of Rs. 2/- each w.e.f. December 17, 2015, consequently the number of options now stands at 25,00,000 (Twenty Five lakhs) of Rs.2/- each.

Annexure 2 to Directors' Report

Form AOC-1

Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 of Companies (Accounts) Rules, 2014 Statement containing salient features of the financial statement of subsidiaries/associate companies/joint ventures

PART "A": Subsidiaries

Name of the Subsidiary Reporting period for the subsidiary concerned, If different from the company's reporting period Reporting currency and Exchange rate as on the last date of the relevant Financial year In the case of foreign subsidiaries* Share Capital Reserve and Surplus Total Assets Total Liabilities Invest ments Turnover Profit before taxation Provision for taxation Profit after taxation Proposed Dividend % of share holding
WEW Holdings Limited Same as Holding Company 1 GBP = Rs. 90.43 576.80 -23.75 568.64 15.60 568.64 - -12.58 - -12.58 - 100.00
Lava Cast Private Limited Same as Holding Company INR 10,556.00 -6,414.11 23,214.63 19,072.75

-

10,616.03 -2,823.81 -0.22 -2,828.60

-

87.24
Setco Automotive (UK) Ltd. Same as Holding Company 1 GBP = Rs. 90.43 2,472.60 -3,380.60 6,380.31 7,288.31 1,483.11 3,250.28 -1,097.57 -15.54 -1,082.02

-

100.00
Setco Automotive (NA) Inc Same as Holding Company 1 USD = Rs. 69.39 1,821.49 -263.17 5,427.54 3,869.22

-

4,823.06 276.12 63.16 212.96

-

100.00
SETCO MEADMCC Same as Holding Company lAED = Rs. 18.34 18.34 -15.80 628.32 625.79 - 393.68 28.42 - 28.42 - 100.00

*Rates as on March 31 2019

ANNEXURE 4 TO DIRECTORS' REPORT

Appointment & Remuneration Policy

1. Introduction:

Setco Automotive Limited (SAL) recognizes the importance of aligning the business objectives with specific and measureable individual objectives and targets. The Company has therefore formulated the remuneration policy for its directors, key managerial personnel and other employees keeping in view the following objectives:

(a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate, to run the company successfully;

(b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and

(c) remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals.

2. Scope:

This Policy sets out the guiding principles for the Nomination and Remuneration Committee for identifying persons who are qualified to become Directors and to determine the independence of the Independent Directors; and for recommending to the Board the remuneration of the directors, key managerial personnel and other employees of the Company.

3. Criteria for Determining Qualifications, Positive Attributes & Independence of Director:

(a) Qualifications of Directors:

A director shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, operations or other disciplines related to the Company's business.

In evaluating the suitability of individual Board members, the NRC may take into account factors, such as:

- General understanding of the Company's business dynamics, global business and social perspective;

- Educational and professional background;

- Standing in the profession;

- Personal and professional ethics, integrity and values;

- Willingness to devote sufficient time and energy in carrying out their duties and responsibilities effectively.

(b) Positive attributes of Directors:

An independent director shall be a person of integrity, who possesses relevant expertise and experience and who shall uphold ethical standards of integrity and probity; act objectively and constructively; exercise his responsibilities in a bona-fide manner in the interest of the Company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in implementing the best corporate governance practices.

(c) Independence of Independent Directors:

An Independent director shall meet the requirements of the Companies Act, 2013 and Listing Regulation concerning independence of directors.

4. Remuneration Policy:.

(a) Remuneration to Executive Directors and Key Managerial Personnel:

The Board, on the recommendation of the Nomination and Remuneration Committee (NRC), shall review and approve the remuneration payable to the Executive Directors of the Company within the overall limits approved by the shareholders.

The Board, on the recommendation of the NRC, shall also review and approve the remuneration payable to the Key Managerial Personnel of the Company.

(b) Remuneration to Non-Executive Directors (NEDs):

The Board, on the recommendation of the NRC shall review and approve the remuneration payable to the Non-Executive Directors of the Company within the overall limits approved by the shareholders. Non-Executive Directors shall be entitled to sitting fees for attending the meetings of the Board and the Committees thereof. In addition to the sitting fees, the Non-Executive Directors shall also be entitled to Commission based on the profit of the Company.

(c) Remuneration to other employees:

Employees shall be assigned grades according to their qualifications and work experience, competencies as well as their roles and responsibilities in the organization. Individual remuneration shall be determined within the appropriate grade and shall be based on various factors such as job profile, skill sets, seniority, experience and prevailing remuneration levels for equivalent jobs.

ANNEXURE 7 TO DIRECTORS REPORT

Details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

a) The percentage increase in remuneration of each Director, Chief Financial Officer, Company Secretary and Managing Director during the financial year 2018-19, ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2018-19 are as under:

Sr. Name of Director/ No. KMP and Designation Remuneration of Director/ KMP for Financial Year 2018-19 excluding PF (Rs. in Lakhs) % increase/ (decrease) in Remuneration for Financial year 2018-19 Median Remuneration (Rs. in Lakhs) Ratio of remuneration of each to median Director remuneration of employees
1. Mr. Harish Sheth - 385.04 220.87% 2.70 142.61
Chairman & Managing Director
2. Mr. Shvetal Vakil 144.75 41.97% 2.70 53.61
Executive Director
3. Mrs. Urja Shah 42 35.48% 2.70 15.56
Executive Director
4. Mr. Jatinder Gujaral 107.64 16.94% 2.70 39.87
Chief Executive Officer
5. Mr. Vinay Shahane 50.76 10.78% 2.70 18.80
Chief Financial Officer
6. Mr. Nishant Javlekar* 4.38 N.A. 2.70 N.A.
Company Secretary

* Resigned w.e.f. 15th September 2018.

b) Percentage increase in the median remuneration of employees in the financial year

In the financial year 2018-19, there was an increase of 9.21% in the median remuneration of employees.

c) Number of permanent employees on the rolls of Company

There were 708 Permanent employees on the rolls of Company as on 31st March, 2019.

d) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

The average percentage increase made in the salaries of employees other than the managerial personnel for the financial year i.e. 2018-19 was 13.01% whereas the increase in the managerial remuneration for the same financial year was 15.77%.

e) Affirmation that the remuneration is as per the remuneration policy of the Company:

It is hereby affirmed that the remuneration paid is as per the Remuneration Policy of the Company.

f) The Statement containing particulars Employees who if employed throughout the year or part thereof was in receipt of remuneration in that year which in the aggregate is in excess of that drawn by the Chairman & Managing Director and CEO & Senior Executive Director.- Not Applicable

g) There were no employees who being employed throughout Financial Year were in receipt of remuneration not less than one crore and two lakh rupees except Mr. Harish Sheth, Mr. Shvetal Vakil and Mr. Jatinder Gujaral and the details are as follows:

Sr. No. Name of the Employee Designation Remuneration received (in Lakhs) Nature of Employment whether Contractual or otherwise Qualifications and experience of the Employee Date of Commencement of Employment Age Last employment held by such Employee
1 Mr. Harish Sheth Chairman & Managing Director 413.85 Contractual Bachelor's degree in Mechanical Engineering from the University of Michigan, Ann Arbor and an MBA (Finance) from the Columbia University, New York 05/05/1982 72
2 Mr. Shvetal Vakil Executive Director 154.83 Contractual Bachelor's degree from Mumbai University and Advanced Management Programme from IIM, Ahmedabad 01/11/2006 68 Bunge India Private Limited
3 Mr. Jatinder Gujaral Chief Executive Officer 120.28 Contractual Bachelor's degree in Mechanical Engineering from the Punjab University 29/09/2011 57 Goodyear Tire and Rubber Company

h) There were no employees who being employed for a part of Financial Year were in receipt of remuneration not less than eight lakh and fifty thousand rupees per month.