THE MEMBERS OF
SETCO AUTOMOTIVE LIMITED
Report on the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of SETCOAUTOMOTIVE LIMITED ("the company") which comprise the Balance Sheet as at31st March 2018 the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Cash flows and the Statement of Changes in Equityfor the year then ended and a summary of significant accounting policies and otherexplanatory information.
Management's Responsibility for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) prescribedunder Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended.
This responsibility also includes the maintenance of adequate accounting records inaccordance with the provision of the Act for safeguarding of the assets of the Company andfor preventing and detecting the frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial control that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone Ind AS financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made there under and the Orderissued under section 143(11) of the act.
We conducted our audit of the Standalone Ind AS Financial Statements in accordance withthe Standards on Auditing specified under section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalone Ind AS financial statements are freefrom material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the standalone Ind AS financial statements. The procedures selected dependon the auditor's judgment including the assessment of the risks of material misstatementof the standalone Ind AS financial statements whether due to fraud or error. In makingthose risk assessments the auditor considers internal financial control relevant to theCompany's preparation of the standalone Ind AS financial statements that give true andfair view in order to design audit procedures that are appropriate in the circumstances.An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of the accounting estimates made by Company's Directors as well asevaluating the overall presentation of the standalone Ind AS financial statements.
We believe that the audit evidence obtained by us is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31st March 2018 and its profit the total comprehensive incomeits cash flows and the changes in equity for the year ended on that date.
The financial Information of the Company for the year ended March 31 2017 and thetransition date opening Balance Sheet as at April 01 2016 included in these StandaloneInd AS Financial Statements are based on the previously issued statutory financialstatements for the year ended March 31 2017 and March 31 2016 prepared in accordancewith the Companies (Accounting Standards) Rules 2006 (as amended) which were audited byprevious auditors on which they expressed an unmodified opinion dated May 30 2017 andMay 30 2016 respectively. The adjustments to those financial statements for thedifferences in accounting principles adopted by the Company on transition to the Ind AShave been audited by us.
Emphasis of Matters
We draw attention to the following matters in the Notes to the standalone Ind ASfinancial statements:
a) Trade payables' balances are under reconciliation process. Necessary adjustments ifany will be accounted when the same is reconciled. In respect of Trade receivables andother debit/credit balances balance confirmations have not been obtained and thereforeare subject to reconciliation and adjustment if any. (Refer Note No. 43 of Standalone IndAS Financial Statements).
b) The Company has invested Rs. 2199.43 lakhs (Rs. 2199.43 lakhs) in Equity &Preference shares of wholly owned ultimate foreign subsidiaries and also has outstandingreceivables in form of loans & advances and debts (net) aggregating Rs. 7178.59 lakhs(Rs.5671.72 lakhs) from them as at 31.03.2018. Apart from company's direct investmentsinto these wholly owned ultimate foreign subsidiaries referred to above the company'sultimate wholly owned subsidiary M/s Setco Automotive (UK) Ltd has an exclusiveinvestment of Rs. 1342.90 lakhs into equity shares of its step down wholly ownedsubsidiary M/s. Setco Automotive (N.A.) Inc. These wholly owned ultimate foreignsubsidiaries incurred consolidated accumulated losses of Rs. 2884.60 lakhs (Rs. 2404.48lakhs) as at 31.03.2018 resulting into erosion of fair portion of their consolidated networth. The management is of the opinion that this is a temporary phase consideringbusiness plans future projected profitable operations asset base the investment beingstrategic in nature going concern basis and solvency of subsidiaries supported by theParent company (i.e. Setco Automotive Ltd) no provision is required to be made fordiminution in value of these investments made in loans & advances & debts duefrom the said subsidiaries and they are considered good. The carrying value of company'sinvestment in equity & preference shares is also supported by valuation report ofIndependent Chartered Accountant. (Refer Note No. 46 (ii) of Standalone Ind AS FinancialStatements).
c) The company has in earlier years invested Rs. 1535.00 lakhs in 3070000 equityshares of SE Transstadia Private Limited a sports and entertainment infrastructurecompany. The said company has completed the project and has commenced commercialoperations in March 2017. The company has accumulated loss of Rs. 1768.86 lakhs (Rs.1236.18 lakhs in F.Y. 2015-2016) as per latest audited financial statements as at31.03.2017. In the opinion of the management this investment is strategic in nature whichhas long term perspective and has comparatively long gestation period. This situationbeing a temporary phase and considering the future business plans assets base and otherdevelopments despite accumulated losses the management firmly believes that there is noerosion in value of its investment in said related entity. The carrying value of Company'sinvestment in equity shares of said related entity is also supported by valuation reportobtained from independent chartered accountant. (Refer Note No. 46 (iii) of Standalone IndAS Financial Statements).
d) The company has invested Rs. 8359.00 lakhs (Rs. 5315.50 lakhs) in 83590000(53155000) equity shares of Rs. 10/- each in its partly owned subsidiary Lava CastPrivate Limited. The company's second year of commercial production ended on 31stMarch 2018 resulting in accumulated loss of Rs. 4659.36 lakhs (Rs. 2281.99 lakhs). Themanagement is of the opinion that this being a temporary phase and Company is in initialyears of operations and considering the future business plans assets base etc. noprovision is required to be made for diminution in the value of this investment made inthe said subsidiary. The carrying value of Company's investment in equity shares of saidrelated entity is also supported by valuation report obtained from independent charteredaccountant. (Refer Note No. 46 (iv) of the Standalone Ind AS Financial Statements).
e) Pursuant to the Central Government Notification No. F.No.10(1)/2017-DBA-11/NER dated05th October 2017 the company has recognised Rs. 549 lakhs as income beingeligible reimbursement of Central Goods & Service Tax (CGST)/Integrated Goods &Service Tax (IGST) for its unit situated in Uttarakhand. The Company has furtherrecognised Rs. 398 lakhs as income being reimbursement of Central Goods & Service Tax(CGST)/Integrated Goods & Service Tax (IGST) share of State for the said Uttarakhandunit pending notification of incentives by the State Government. The Company believes theissuance of notification for Goods & Service Tax (GST) benefits by the StateGovernment is certain based on the notification already issued by the Central Government.The Company shall lodge its formal claims after issue of notification by the StateGovernment. (Refer Note No. 27 of the Standalone Ind AS Financial Statements).
Our opinion is not modified in respect of these matters.
Report on other Legal and Regulatory Requirements
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 givein the Annexure -A a statement on the matters specified in paragraphs 3 and 4 of the saidOrder to the extent applicable.
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 bestof 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 theCompany so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Cash Flow and the Statement of Changes in Equity dealt with bythis Report are in agreement with the books of account.
d) In our opinion the aforesaid standalone Ind AS financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act.
e) In our opinion the matters described under the Emphasis of Matters paragraph aboveprima facie do not appear to have any adverse impact on the functioning of the Company.
f) On the basis of written representations received from the directors as on 31stMarch 2018 and taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2018 from being appointed as a director interms of Section 164(2) of the Act.
g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure - B.
h) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i) The Company has disclosed the impact of pending litigations as at 31stMarch 2018 on its financial position in standalone Ind AS financial statements. (ReferNote No. 42 (B) of the Standalone Ind AS Financial Statements);
ii) The Company did not have any long-term contracts including derivative contracts asat 31st March 2018 for which there were any material foreseeable losses;
iii) There has been no delay in transferring the amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
ANNEXURE TO INDEPENDENT AUDITORS' REPORT
Referred to in paragraph under the heading "Report on Other Legal and RegulatoryRequirements" of our report of even date to the Members of Setco Automotive Limitedon the Ind As Financial Statements as of and for the year ended on March 31 2018
1. In respect of its fixed assets:
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
b) As per the information and explanations given to us there is a phased program ofphysical verification of fixed assets as adopted by the Company which in our opinion isreasonable having regard to the size of the company and the nature of its assets. Asinformed 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 tothe Ind AS Financial Statements except self-generated immovable properties are held in thename of the Company.
2. According to the information and explanations given to us inventories (excludingstocks with third parties) were physically verified during the year by the management atreasonable intervals and no discrepancies were noticed during such verification. Inrespect of inventory lying with third parties these have been substantially beenconfirmed by them.
3. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013 except loans given to its wholly owned ultimate foreign subsidiarycompanies.
a) The terms and conditions of such loans are not prima facie prejudicial to theCompany's interest.
b) No schedule of repayment of principal or interest has been stipulated for suchloans.
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 compliedwith 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 notaccepted any deposits under the directives issued by the Reserve Bank of India or withinthe meaning of section 73 to 76 or any other relevant provisions of the Companies Act2013 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 Companies Act 2013.
7. According to the information and explanations given to us and on the basis of ourexamination of books of account:
a) The Company has been generally regular in depositing undisputed statutory dues withappropriate authorities including Provident Fund Employees' State Insurance Income TaxProfessional Tax Central Sales Tax Service Tax Custom Duty Excise Duty Value AddedTax Goods and Service Tax Cess and Tax Deducted at source except few Instances ofdelays observed in deposition of Provident Fund Income Tax Professional Tax ServiceTax Tax Deducted at Source Custom Duty and Goods and Service Tax. According to theinformation and explanations given to us there are no undisputed items outstanding as at31st March 2018 for more than six months from the date they became payable.
b) According to information and explanations given to us and records of the companyexamined by us there were disputed dues of Income Tax as of 31st March 2018which have not been deposited as per following details:
|Sr. No. ||Name of the Statute ||Nature of the dues ||Amount (Rs. In Lakhs) ||Period to which the amount related ||Forum where dispute is pending ||Remark if any |
|1. ||Income Tax Act 1961 ||Penalty u/s. 271(1) (c) ||12.01 ||A.Y. 2004 - 05 ||ITAT Ahmedabad. || |
|2 ||Income Tax Act 1961 ||Demand u/s 156 ||590.13 ||A.Y. 2011-12 ||Commissioner of Income Tax (Appeals) - Vadodara. || |
|3. ||Income Tax Act 1961 ||Income Tax dues ||Nil (Note : 1) ||A.Y. 2013 - 14 A.Y. 2014 - 15 ||Commissioner of Income Tax (Appeals) - Vadodara. ||Refer Note no. 42 (B) of Standalone Financial Statements. |
|4 ||Income Tax Act 1961 ||Income Tax dues as per Intimation u/s 143(1) ||394.48 ||A.Y. 2015-16 ||CPC Bengaluru. || |
1. The Company has preferred an appeal at ITat - Ahmedabad for both the years i.e.A.Y. 2013-14 & 2014-15 for the disallowance of depreciation amount of productdevelopment by the department. Since the Company pays tax under Minimum Alternate Tax(MAT) i.e. Section 115JB there is no additional demand due but the Minimum Alternate Tax(MAT) credit has been reduced due to the demand raised by the Income Tax Department.
2. In our opinion and according to the information & explanations given to us thecompany has not defaulted in repayment of loans or borrowing obtained from banks andfinancial institutions. The company has neither taken any loan from government nor issuedany debentures. In our opinion and according to the information and explanations given tous and examination of records of the company the company has not raised moneys by wayinitial 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 moneyraised by way of term loans have been applied for the purpose for which they wereobtained.
3. During the course of our examination of the books and records of the company andaccording to the information and explanations given to us no fraud by the Company or onthe Company by its officers or employees were noticed or reported during the year.
4. The company has paid/provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of section 197 read with schedule V of theAct.
5. As the company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provision of Para 3(xii) of the Order is not applicable.
6. As per the information and explanation given to us the transactions with therelated parties are in compliance with Section 177 and 188 of the Act and the detailsthere of have been disclosed in the Ind AS financial statements as required under IndianAccounting Standard (Ind AS) 24 "Related Party Disclosures" specified undersection 133 of the Act (Refer Note No. 37 of the Standalone Ind AS Financial Statements).
7. As per the information and explanation given to us the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the period under review.
8. As per the information and explanation given to us the Company has not entered intoany non-cash transactions with directors or persons connected with him.
9. The Company is not required to be registered under Section 45-IA of the Reserve Bankof India Act 1934.
| ||For V. Parekh & Associates |
| ||Chartered Accountants |
| ||(Firm Registration No. 107488W) |
| ||(Rasesh V. Parekh) |
|Place : Mumbai ||Partner |
|Date : May 23 2018 ||Membership No. 038615 |
ANNEXURE B TO INDEPENDENT AUDITORS' REPORT
Referred to in paragraph (g) under the heading "Report on Other Legal andRegulatory Requirements" by Section 143(3) of the Act" of our report of evendate.
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 SetcoAutomotive Limited ("the Company") as of 31st March 2018 inconjunction with our audit of the Ind AS financial statements of the Company for the yearended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing deemed to be prescribedunder section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial Controls and bothissued by the Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial 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 toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of Ind AS financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of Ind ASfinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the Ind ASfinancial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects a reasonably adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31st March 2018 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India. However such internal financial controls over financialreporting need to be improved and strengthened further in future.
| ||For V. Parekh & Associates |
| ||Chartered Accountants |
| ||(Firm Registration No. 107488W) |
| ||(Rasesh V. Parekh) |
|Place : Mumbai ||Partner |
|Date : May 23 2018 ||Membership No. 038615 |