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Setco Automotive Ltd.

BSE: 505075 Sector: Auto
NSE: SETCO ISIN Code: INE878E01021
BSE 00:00 | 02 Jul 10.97 0.13
(1.20%)
OPEN

11.15

HIGH

11.19

LOW

10.85

NSE 00:00 | 02 Jul 10.90 0.10
(0.93%)
OPEN

11.15

HIGH

11.25

LOW

10.85

OPEN 11.15
PREVIOUS CLOSE 10.84
VOLUME 30499
52-Week high 20.10
52-Week low 5.45
P/E 7.84
Mkt Cap.(Rs cr) 147
Buy Price 10.60
Buy Qty 3500.00
Sell Price 10.97
Sell Qty 300.00
OPEN 11.15
CLOSE 10.84
VOLUME 30499
52-Week high 20.10
52-Week low 5.45
P/E 7.84
Mkt Cap.(Rs cr) 147
Buy Price 10.60
Buy Qty 3500.00
Sell Price 10.97
Sell Qty 300.00

Setco Automotive Ltd. (SETCO) - Auditors Report

Company auditors report

TO THE MEMBERS OF SETCO AUTOMOTIVE LIMITED

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

OPINION

We have audited the standalone financial statements of Setco Automotive Limited (the Company) which comprise the balance sheet as at 31st March 2019 and the Statement of Profit and Loss (including Other Comprehensive Income) Statement of Changes in Equity and Statement of Cash Flows for the year then ended and notes to the standalone financial statements including a summary of significant accounting policies and other explanatory information (the standalone financial statements).

In our opinion and to the best of our information and according to the explanations given to us the aforesaid standalone financial statements give the information required by The Companies Act 2013 (the Act') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rule 2015 as amended (Ind AS) and other accounting principles generally accepted in India of the state of affairs of the Company as at March 31 2019 and profit and total comprehensive income changes in equity and its cash flows for the year ended on that date.

BASIS FOR OPINION

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act 2013. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statement

EMPHASIS OF MATTER

We draw attention to the following matters in the Notes to the standalone Ind AS financial statements :

a) Trade payables' balances are under reconciliation process. Necessary adjustments if any will be accounted when the same is reconciled. In respect of trade receivables and other debit/ credit balances for which balance confirmation have been received are under reconciliation process and necessary adjustment if any will be accounted when the same is reconciled. While others are subject to reconciliation and adjustment if any. (Refer Note No. 42 of Standalone Ind AS Financial Statements).

b) The Company has invested Rs. 2217.19 lakhs (Rs. 2199.44 lakhs) in Equity & Preference shares of wholly owned ultimate foreign subsidiaries and also has outstanding receivables in form of loans & advances and debts (net) aggregating Rs. 7236.56 lakhs (Rs. 7178.59 lakhs) from them as at 31.03.2019. Apart from company's direct investments into these wholly owned ultimate foreign subsidiaries referred to above the company's ultimate wholly owned subsidiary M/s Setco Automotive (UK) Ltd has an exclusive investment of Rs. 1483.11 lakhs into equity shares of its step down wholly owned subsidiary M/s. Setco Automotive (N.A.) Inc. These wholly owned ultimate foreign subsidiaries incurred consolidated accumulated losses of Rs. 3747.23 lakhs (Rs. 2884.60 lakhs) as at 31.03.2019 resulting into erosion of fair portion of their consolidated net worth. The management is of the opinion that this is a temporary phase considering business plans future projected profitable operations asset base the investment being strategic in nature going concern basis and solvency of subsidiaries supported by the Parent company (i.e. Setco Automotive Ltd) no provision is required to be made for diminution in value of these investments made in loans & advances & debts due from the said subsidiaries and they are considered good. The carrying value of company's investment in equity is supported by valuation report of Independent Valuer. (Refer Note No. 45 (ii) of Standalone Ind AS Financial Statements).

c) The company has in earlier years invested Rs. 1535.00 lakhs in 3070000 equity shares of SE Transstadia Private Limited a sports and entertainment infrastructure company. The said company has completed the project and has commenced commercial operations in March 2017. The company has accumulated loss of Rs. 11180.08 lakhs (Rs. 1768.86 lakhs in F.Y. 2016-17) as per latest audited financial statements as at 31.03.2018. In the opinion of the management this investment is strategic in nature which has long term perspective and has comparatively long gestation period. This situation being a temporary phase and considering the future business plans assets base and other developments despite accumulated losses the management firmly believes that there is no erosion in value of its investment in said related entity. The carrying value of Company's investment in equity shares of said related entity is also supported by valuation report obtained from independent Valuer. (Refer Note No. 45 (iii) of Standalone Ind AS Financial Statements).

d) The company has invested Rs. 9209.00 lakhs (Rs. 8359.00 lakhs) in 92090000 (83590000) equity shares of Rs. 10/- each in its partly owned subsidiary Lava Cast Private Limited. The company's third year of commercial production ended on 31st March 2019 resulting in accumulated loss of Rs. 7487.97 lakhs (Rs. 4659.36 lakhs). The management is of the opinion that this being a temporary phase and company is in initial years of operations and considering the future business plans assets base etc. no provision is required to be made for diminution in the value of this investment made in the said subsidiary. The carrying value of Company's investment in equity shares of said related entity is also supported by valuation report obtained from independent Valuer. (Refer Note No. 45 (iv) of the Standalone Ind AS Financial Statements).

e) In F.Y. 2017-18 The Company has recognised Rs. 398 Lakhs as income being reimbursement of Central Goods & Service Tax (CGST)/Integrated Goods & Service Tax (IGST) share of State for the Uttarakhand unit pending notification of incentives by the State Government. The Company believed the issuance of notification for Goods & Service Tax (GST) benefits by the State Government was certain based on the notification already issued by the Central Government. In absence of any notification in the said matter till date and based on legal opinion the Company has filed writ petition claiming refund of said amount & has continued to show this as asset recoverable in accounts. (Refer Note No. 13 of the Standalone Ind AS Financial Statements).

Our opinion is not modified in respect of these matters.

KEY AUDIT MATTERS

Key audit matters are those matters that in our professional judgment were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters.

KEY AUDIT MATTERS

Accuracy of recognition measurement presentation and disclosure of revenue and other related balances in view of adoption of Ind AS 115 Revenue from contracts with customers (New revenue accounting standarad)

The company has adopted IND AS - 115 Revenue from contracts with customer From 1st April 2018 using the modified retrospective approach with cumulative effect of initially applying the standard to be adjusted to the opening retained earning under equity on 1 April 2018 and therefore the comparative information has not been restated and continues to be reported under Ind AS - 18.

HOW THE MATTER WAS ADDRESSED IN THE AUDIT

Our audit procedures on adoption of Ind AS 115 includes-

 Evaluation of Internal control policy and process designed to recognise revenue as per Ind AS - 115.

 Analysed existing contract with customers performance obligation assumed terms of delivery and current revenue recognition policy with respect to those contract.

 Analysed the cumulative effect of IND AS 115 adjustment and its recognition in accounts.

 Analysed the complete appropriate and arithmetical accuracy of disclosure as per IND AS 115.

Refer to note no. 35 of the accompanying standalone financial statement.

KEY AUDIT MATTERS

Intangible Assets: Product development The Company conducts a significant level of development activities and has to apply judgments in identifying product development expenses meeting the criteria for capitalization under the requirements of accounting standards. Expenditure Identifiable and reliably measurable incurred on product development yielding future economic benefits is capitalized as Product Development Expenses. We identified the capitalization of Product development costs as a key audit matter due to significant management judgments about the future performance and viability of the products.

HOW THE MATTER WAS ADDRESSED IN THE AUDIT

 Testing management's controls over capitalization of Product development costs.

 Evaluating the nature of the type of development expenses incurred that are capitalized into product development expenses;

 Assessing the reasonableness of the capitalization based on success of the product

 Verifying amortization of capitalization after commercial production commences as per consistent policy of company to amortise it in 10 years.

 Fair valuation of product development expenses was done by independent valuer.

Refer to note no. 2 (ii) of the accompanying standalone financial statement.

INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON

The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Company's annual report i. e. Corporate Information Board of Directors Management Discussion and Analysis Directors Report and Corporate Governance Report but does not include the standalone financial statements and our auditors' report thereon. The above information is yet to be provided to us.

MANAGEMENT'S RESPONSIBILITIES FOR THE STANDALONE FINANCIAL STATEMENTS

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position financial performance total comprehensive income changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company's financial reporting process.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the standalone financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3) (i) of the Companies Act 2013 we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the standalone financial statements or if such disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Company to cease to continue as a going concern.

 Evaluate the overall presentation structure and content of the standalone financial statements including the disclosures and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditor's Report) Order 2016 (the Order) issued by the Central Government of India in terms of section 143 (11) of the Act we give in Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

2. As required by Section 143(3) of the Act we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books

c) The Balance Sheet the Statement of Profit and Loss including Other Comprehensive Income the Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31st March 2019 taken on record by the Board of Directors none of the directors is disqualified as on 31st March 2019 from being appointed as a director in terms of Section 164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure B. Our report express an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.

g) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note 41 B to the financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company.

For V. Parekh & Associates
Chartered Accountants
(Firm Registration No. 107488W)
(Rasesh V. Parekh)
Partner
Membership No. 038615
Place : Mumbai
Date : 30th May 2019

ANNEXURE A TO INDEPENDENT AUDITORS' REPORT

Referred to in paragraph under the heading Report on Other Legal and Regulatory Requirements of our report of even date to the Members of Setco Automotive Limited on the Standalone Financial Statements as of and for the year ended on March 31 2019

1. In respect of its fixed assets :

a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets on the basis of available information.

b) The Company has a program of verification to cover all the items of fixed assets in phased manner which in our opinion is reasonable having regard to the size of the company and the nature of its assets. During the year the company has verified certain fixed assets in accordance with this program. According to the information and explanation given to us no material discrepancies were noticed on such verification.

c) The title deeds of immovable properties disclosed in Note No. 2 on Fixed Assets to the Standalone Financial Statements are held in the name of the company. In respect of leased hold land that have been taken on lease and disclosed as fixed assets in the standalone financial statements the lease agreements are in the name of the company.

2. According to the information and explanations given to us inventories (excluding stocks with third parties) were physically verified during the year by the management at reasonable intervals. The discrepancies noticed on verification between the physical stock and book records were not material. In respect of inventory lying with third parties these have substantially been confirmed by them.

3. According to the information and explanations given to us the Company has not granted any loanssecured or unsecured to companies firms limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act 2013 except loans given to its wholly owned ultimate foreign subsidiary companies and Indian subsidiary company.

a) The terms and conditions of such loans are not prima facie prejudicial to the Company's interest.

b) No schedule of repayment of principal or interest has been stipulated for such loans.

c) In view of (b) above the question of any overdue amount does not arise.

4. According to the information and explanations given to us the Company has complied with the provisions of section 185 and 186 of the Act with respect to Loans & Investments made.

5. According to the information and explanations given to us the Company has not accepted any deposits under the directives issued by the Reserve Bank of India or within the meaning of section 73 to 76 or any other relevant provisions of the Act and the rules framed there under.

6. We have been informed that company is not required to maintain cost records u/s. 148 (1) of the Act.

7. According to the information and explanations given to us and on the basis of our examination of books of account :

a) The Company has been generally regular in depositing undisputed statutory dues with appropriate authorities including Provident Fund Employees' State Insurance Income Tax Professional Tax Custom Duty Cess and Tax Deducted at source except few Instances of delays observed in deposition of Provident Fund Income Tax Professional Tax Tax Deducted at Source Custom Duty and Goods and Service Tax. According to the information and explanations given to us there are no undisputed items outstanding as at 31st March 2019 for more than six months from the date they became payable.

b) According to information and explanations given to us and records of the company examined by us there were disputed dues of Income Tax as of 31st March 2019 which have not been deposited as per following details :

Sr. No.Name of the StatuteNature of the duesAmount (Rs. In Lakhs)Period to which the amount relatedForum where dispute Is pendingRemark If any
1.Income Tax Act 1961Penalty u/s. 271(l)(c)12.01A. Y. 04-05ITAT AhmedabadRefer Note no. 41 (B) of
2.Income Tax Act 1961Demand u/s 156590.13A. Y. 11-12CIT (A) - Vadodara
3.Income Tax Act 1961Income Tax dues as per394.48A. Y. 15-16CPC Bengluru.Financial Statements.
4.Income Tax Act 1961Intimation u/s 143(1}486.02A. Y. 16-17CPC Bengluru.
5.Income Tax Act 19616.07A. Y. 17-18CPC Bengluru.

8. In our opinion and according to the information & explanations given to us the company has not defaulted in repayment of loans or borrowing obtained from banks and financial institutions. The company has neither taken any loan from government nor issued any debentures.

9. In our opinion and according to the information and explanations given to us and examination of records of the company the company has not raised moneys by way initial public offer or further public offer (including debt instruments) during the year. In our opinion and according to the information and explanations given to us the money raised by way of term loans have been applied for the purpose for which they were obtained.

10. During the course of our examination of the books and records of the company and according to the information and explanations given to us no fraud by the Company or on the Company by its officers or employees were noticed or reported during the year.

11. The company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V of the Act.

12. As the company is not a Nidhi Company and hence reporting under clause 3(xii) of the Order is not applicable to the Company.

13. As per the information and explanation given to us the transactions with the related parties are in compliance with Section 177 and 188 of the Act and the details there of have been disclosed in the standalone financial statements as per Ind AS 24 Related Party Disclosures. (Refer Note No. 36 of the Standalone Financial Statements).

14. As per the information and explanation given to us the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the period under review.

15. As per the information and explanation given to us the Company has not entered into any non-cash transactions with directors or persons connected with him.

16. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

For V. Parekh & Associates
Chartered Accountants
(Firm Registration No. 107488W)
(Rasesh V. Parekh)
Partner
Membership No. 038615
Place : Mumbai
Date : 30th May 2019

ANNEXURE B TO INDEPENDENT AUDITORS' REPORT

Referred to in paragraph (g) under the heading Report on Other Legal and Regulatory Requirements by Section 143(3) of the Act of our report of even date.

REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER SECTION 143(3)(I) OF THE ACT.

We have audited the internal financial controls over financial reporting of Setco Automotive Limited (the Company) as of 31st March 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Company's management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the ICAI. These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Act.

AUDITORS' RESPONSIBILITY

Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) and the Standards on Auditing deemed to be prescribed under section 143(10) of the Act to the extent applicable to an audit of internal financial controls both applicable to an audit of Internal Financial Controls and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the Ind AS financial statements whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls system over financial- reporting.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company's assets that could have a material effect on the standalone financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

Because of the inherent limitations of internal financial controls over financial reporting including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

OPINION

In our opinion the Company has in all material respects an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2019 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI. However such internal financial controls over financial reporting need to be improved and strengthened further in future.

For V. Parekh & Associates
Chartered Accountants
(Firm Registration No. 107488W)
(Rasesh V. Parekh)
Partner
Membership No. 038615
Place : Mumbai
Date : 30th May 2019