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Setco Automotive Ltd.

BSE: 505075 | NSE: SETCO |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE878E01021 | SECTOR: Auto Ancillaries

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Annual Report

For Year :
2018 2016 2015 2014 2013 2012 2011 2010 2009

Director’s Report

Dear Members,

The Directors are pleased to present the Thirty Fifth Annual Report together with the audited financial statements for the financial year (FY) ended March 31, 2018. 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.


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

(Rs. in Cr. except for EPS)








Revenue from Operation & Other Income





Gross Profit before Finance Cost & Depreciation





Less: Finance Cost





Less: Depreciation





Profit/(Loss) before Tax





Less: Provisions for Tax Expenses





Profit/ (Loss) from continuing operations





Other Comprehensive Income





Profit/(Loss) after Taxes including other Comprehensive Income





Less: Non-Controlling Interest





Profit/(Loss) for the Year attributable to Equity Holders of the parent





Earning Per Share (Rs.)





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


During the financial year 2017-18, there was no change in the paid up share capital of the Company. Total paid up share capital of the Company stands at 13,35,96,675 Equity Shares of Rs.2/- each aggregating to Rs. 26,71,93,350/-. Details of Directors’ shareholding as on March 31, 2018 are mentioned in the Annexure to this Directors’ Report in ‘Form MGT - 9’.

The equity shares of the Company continue to be listed on BSE Limited (“BSE”) and National Stock Exchange (“NSE”). The stipulated listing fees for FY2018-19 have been paid to both stock exchanges.


The Board of Directors at its meeting held on May 23, 2018 has recommended a dividend of Rs. 0.80 paisa i.e. @ 40% per equity share for the year ended March 31, 2018. The amount of Dividend and Tax thereon aggregate to Rs. 1288.50 lakhs. The dividend on equity shares, subject to the approval of shareholders at the Annual General Meeting (AGM) to be held on September 28, 2018 will be paid on or after September 29, 2018 to the Members whose names appear in the Register of Members as of the close of business hours on Friday, September 21, 2018 [Adjusted as Members’ Register and Share Transfer Books shall be closed from Saturday, September 22, 2018 to Friday, September 28, 2018 (both days inclusive)].

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


Your Company has not accepted any fixed deposits including from the public and, as such, no amount of principle or interest was outstanding as of the Balance Sheet date.


The particulars of loans, guarantees and investments covered under Section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, form part of the Notes to the financial statements provided in this Annual Report.


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 Indian Accounting Standard (Ind AS-24) 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

The details of related party transactions are given in Note 37 to the financial statements.


(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: 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.


In terms of the provisions of Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management’s Discussion and analysis is set out in this Annual Report.


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: U27205GJ2011PTC100777), Setco Automotive (UK) Ltd (SAUL), Setco Automotive (NA) Inc. (SANAI), Setco MEA DMCC, Dubai and WEW Holdings Ltd.

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


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.


The financial statements up to the year ended March 31, 2017 were prepared in accordance with the Indian 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.

These financial statements are the first financial statements of the Company under Ind AS.

Detailed information on the impact of the transition from the previous GAPP to Ind AS is provided in the annexed financial statements. CONSOLIDATED ACCOUNTS

The consolidated financial statements of your Company for the financial year 2017-18, are prepared in compliance with applicable provisions of the Companies Act, 2013, Indian Accounting Standards (Ind AS) and LODR as prescribed by the Securities and Exchange Board of India (SEBI). The consolidated financial statements have been prepared on the basis of audited financial statements of the Company and its subsidiaries as approved by their respective Board of Directors.


The Company primarily works through Setco Foundation and also supports other NGOs, towards supporting projects to facilitate a neighbourhood 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

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:

During the year under review, the Company has spent Rs. 88.70 lakhs on CSR activities. The Annual Report on CSR activities is given at Annexure 3 hereto.


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 thereby 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.


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.


The Company believes to conduct its affairs in a fair and transparent manner by adopting highest standards of professionalism, integrity, honesty and ethical behaviour. The Company is committed to developing a culture where it is safe for all employees to raise concerns about any wrongful conduct.

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 No such fraud or wrongful conduct was reported during the year under review.


The Company has a well-defined risk management policy and framework in place to ensure proper identification and treatment of risks. 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.


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, Mr. Pratap Merchant (DIN 00022223), Independent Director of the Company, resigned w.e.f. May 30, 2017 on personal grounds. The Board places on records its appreciation of the contribution made Mr. Merchant as Director of the Company.

During the year, at the 34th (thirty fourth) Annual General Meeting, Mr. Harish Sheth (DIN 01434459), Mr. Udit Sheth (DIN 00187221), Mr. Shvetal Vakil (DIN: 00140956) and Mrs. Urja Shah (DIN: 02675341) were re-appointed as directors.

Mr. Bhalchandra Naik (DIN: 02490022), Independent Director of the Company, resigned w.e.f. March 08, 2018 due to his pre-occupations.

Mr. Udit Sheth (DIN 00187221) was re-designated as Non-Executive Director of the Company vide circular resolution of the Board of Directors on March 9, 2018.

In order to strengthen the Board and to continue to avail the benefit of his vast experience, on the recommendation of Nomination and Remuneration Committee, 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 Non-Executive and Independent Directors.

Further, 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.

In accordance with Section 161 of the Act, aforesaid Additional Directors hold office upto the date of the forthcoming Annual General Meeting of the Company and being eligible, offer their candidature for re-appointment as Directors. Your approval for their appointment as Directors in the category of Non-Executive Independent Directors has been sought in the Notice convening the forthcoming Annual General Meeting of the Company.

As on date of this report, Company’s Board comprises of 9 (nine) Directors, out of which 5 (five) are Non-Executive Directors (NEDs) including 1 (one) Woman Director. NEDs represent 56% of the total strength. All 5 (five) NEDs are independent directors.


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

The information as required to be disclosed under Regulation 36 of SEBI (LODR) Regulations in case of re-appointment of the said director is provided in the notice of the ensuing Annual General Meeting.

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

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.


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


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.

As per the SEBI Guidance note on Board Evaluation, a Board effectiveness assessment questionnaire was designed for the performance evaluation of the Board, its Committees, Chairman and individual directors and in accordance with the criteria set and covering various aspects of performance including structure of the board, meetings of the board, functions of the board, role and responsibilities of the board, governance and compliance, evaluation of risks, grievance redressal for investors, conflict of interest, stakeholder value and responsibility, relationship among directors, director competency, board procedures, processes, functioning and effectiveness. The said questionnaire was circulated to all the directors of the Bank for the annual performance evaluation.

Based on the assessment of the responses received to the questionnaire from the directors on the annual evaluation of the Board, its Committees, Chairman and the individual Directors, the Board Evaluation Report was placed before the meeting of the Independent Directors for consideration.

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.


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. Jatinder Bir Singh Gujral, Chief Executive Officer (w.e.f. July 1, 2017)

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

- Mr. Nishant Javlekar, Company Secretary and Compliance officer. (w.e.f. May 2, 2018)

- Mr. Bhautesh Shah, the earlier Company Secretary of the Company and KMP resigned from the services of the Company w.e.f. August 14, 2017.

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 Regulation adopted by the Board is appended as Annexure 4 to the Directors’ Report.


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, 2018, 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, 2018 and of the profit and loss of the Company for the financial year ended 31st March, 2018;

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.


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


During the year, seven meetings of the Board of Directors were convened and held, the details of which are given the report on Corporate Governance. The intervening gap between the meetings was within the period prescribed under the Act and SEBI (LODR) Regulations, 2015.


The Company has in place an Audit Committee in terms of the requirements of the Act read with the Rules made thereunder and Regulation 18 of the Listing Regulations. The details relating to the same are given in the Report on Corporate Governance with forms part of this Annual Report.

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 fifth consecutive Annual General Meeting of the company to be held in the financial year 2021-22, subject to ratification of their appointment by the Members at every AGM held after the AGM held on September 27, 2017.

As required under the provisions of Section 139(1) of the Act, the Company has received a written consent from M/s. V. Parekh & Associates, Chartered Accountants and a certificate to the effect that their appointment, if made, would be in accordance with the provisions of the Act and the Rules framed thereunder and that they satisfy the criteria provided in Section 141 of the Act.

The Members are requested to ratify the appointment of the Statutory Auditors and fix their remuneration.

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 Indian Accounting Standard-110, “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.


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) to conduct Secretarial Audit for the financial year 2017-18. The Secretarial Audit Report for the financial year ended March 31, 2018 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.


A report on Corporate Governance along with 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 2017-18. 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.


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 2017-18 are furnished in Notes to the Accounts.


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

Extract of Annual Return, as provided under Section 92(3) of the Act, in Form MGT-9 is annexed herewith as Annexure 6 to this Report.


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, is detailed in the Corporate Governance Report.

In terms 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 of the Company at its Registered Office.

The information required pursuant to Section 197 of the Act read with Rule 5(1)(i) of the Companies (Appointment and Remuneration) Rules, 2014 in respect of ratio of remuneration of each director to the median remuneration of the employees of the Company for the year under review will be made available for inspection at the Registered Office of the Company during the working hours of the Company for a period of 21 days before the date of the Annual General Meeting of the Company pursuant to Section 136 of the Companies Act, 2013 and any member interested in obtaining such information may write to the Company and the same will be furnished on request.


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.


The Board of Directors takes this opportunity to thank its Customers, Suppliers, Bankers, Members, Business Partners / Associates and the Government Authorities for the support and cooperation received by the Company. The Board would also like to place on record their appreciation to employees at all levels for their hard work, dedication and commitment.

For and on behalf of the Board

Harish Seth

Place: Mumbai Chairman and Managing Director

Date: July 31, 2018 DIN: 01434459

Director’s Report