Your Directors are pleased to present the Thirty Sixth Annual Report together with theaudited financial statements for the financial year (FY) ended March 31 2019. This reportstates compliance as per the requirements of the Companies' Act 2013 ("theAct") the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 ("Listing Regulations") and other rules andregulations as applicable to the Company.
The highlights of the financial performance for the year under review as compared tothe 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 listingfees for FY2019-20 have been paid to both stock exchanges.
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 forthe financial year 2018-19. The amount of Dividend and Tax thereon aggregate to Rs.1611.50lakhs. The dividend on equity shares subject to the approval of shareholders at theAnnual General Meeting (AGM) to be held on September 27 2019 will be paid on or afterSeptember 28 2019 to the Members whose
| || || |
(Rs. in Cr. Except for EPS)
|Particulars || |
| ||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 increasedto Rs. 628.54 crores as against Rs. 546.32 crores in the previous year - a growth of15.05%.
The Profit after Tax for the current year is Rs. 36.02 crores against Rs. 28.90 croresin the previous year - a growth of 24.63%.
The Financial Results of the Company are discussed in detail in the ManagementDiscussion & Analysis Report.
INCREASE IN SHARE CAPITAL
During the year under review your Company has issued and allotted in aggregate 80600equity shares of the Company to eligible employees on exercise of options granted underSetco Employees Stock Option Scheme formulated by the Company. Consequent to theaforesaid the issued subscribed and paid-up capital of the Company increased from133596675 equity shares of Rs. 2/- each to 133677275 equity shares of Rs. 2/- each.names appear in the Register of Members as of the close of business hours on FridaySeptember 20 2018 [Adjusted as Members' Register and Share Transfer Books shall be closedfrom 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 SetcoEmployees Stock Options Scheme 2015 before the book closure date for payment of dividendwill rank pari-passu with the existing shares and be entitled to receive the dividend.
During the year under review the Company has not acceptedany deposit within themeaning 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 thetime being in force).
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Details of loans granted guarantees provided and investments made by the Company underthe provisions of Section 186 of the Act read with the Companies (Meeting of Board and itsPowers) Rules 2014 are provided in the Notes to Standalone Financial Statements of theCompany forming part of this Annual Report.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
The Company undertakes various transactions with related parties in the ordinary courseof its business. All transactions entered into with related parties as defined under theCompanies Act 2013 during the financial year were in the ordinary course of business andon an arm's length pricing basis and do not attract the provisions of Section 188 of theCompanies Act 2013.
All Related Party Transactions are placed before the Audit Committee as also the Boardfor approval. The transactions entered into pursuant to the omnibus approval so grantedand a statement giving details of all related party transactions is placed before theAudit Committee and the Board of Directors for their approval on a quarterly and annualbasis.
There were no materially significant transactions with the related parties during thefinancial year which were in conflict with the interest of the Company and henceenclosing of Form AOC-2 is not required. Suitable disclosure as required by the AccountingStandard (AS-18) has been made in the notes to the Financial Statements.
The Policy on materiality of related party transactions and dealing with related partytransactions 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") inaccordance with the Securities & Exchange Board of India (Share Based EmployeeBenefits) Regulations 2014 (the SEBI (SBEB) Regulations') as a measure to rewardand motivate the employees by creating an employee ownership as also to attract and retaintalent.
Disclosures pertaining to the Scheme of the Company pursuant to SEBI (SBEB) Regulationsare placed on the company's website: www.setcoauto.com. Details of options vestedexercised 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% ofthe issued capital of the company at the time of grant.
The Company has received a certificate from the Statutory Auditors of the Company thatthe Scheme have been implemented in accordance with the SEBI (SBEB) Regulations and theresolution passed by the shareholders of the Company. The certificate would be placed atthe Annual General Meeting for inspection of the members.
There has been no material change in the subsisting scheme. In terms of the provisionsof the SEBI (SBEB) Regulations the details of the Stock Options granted under the ESOPScheme is annexed herewith as Annexure 1.
INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
In accordance with the applicable provisions of Companies Act 2013 read with InvestorEducation and Protection Fund (Accounting Audit Transfer and Refund) Rules 2016("IEPF Rules") all unclaimed dividends are required to be transferred by theCompany to the IEPF after completion of seven (7) years.
Further according to IEPF Rules the shares on which dividend has not been claimed bythe shareholders for seven (7) consecutive years or more shall be transferred to the demataccount of the IEPF Authority. The details relating to amount of dividend transferred tothe IEPF and corresponding shares on which dividends were unclaimed for seven (7)consecutive years are provided in the General Shareholders Information section of thisAnnual Report.
MATERIAL CHANGES AFFECTING THE COMPANY
There are no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year 2018-19 and the date ofthis 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 ispresented in a separate section forming part of this Annual Report. It provides detailsabout the overall industry structure global and domestic economic scenarios developmentsin business operations/ performance of the Company's internal controls and theiradequacy risk management systems and other material developments during the financialyear 2018-19.
Performance of Company's subsidiaries is elaborated in detail under ManagementDiscussion & Analysis'.
Your Company has five subsidiaries across the globe which includes Lava Cast PrivateLtd. (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 fromattaching the annual reports and other particulars of its subsidiary Companies with theannual report of the Company. Accordingly the Annual Reports of the subsidiaries are notattached with this Annual Report. However statement containing salient features offinancial statements of subsidiaries as per 129 (3) of the Act is also included in thisAnnual Report in form AOC-1 as Annexure 2 to the Directors' Report. The financialstatements of the subsidiary companies are available for inspection of the shareholders atthe Registered Office of the Company between 11.00 a.m. to 3.00 p.m. on all working daysexcept Tuesdays up to and including the date of the Meeting.
The Policy for determining material subsidiaries as approved may be accessed on theCompany'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 offinancial reporting orderly and efficient conduct of business compliance with policiesprocedures safeguarding of assets and economical and efficient use of resources.Appropriate review and control mechanisms are in place to ensure that such control systemsare adequate and operate effectively.
Audit Committee and the Board review these internal control systems to ensure theyremain effective and are achieving their intended purpose. The Company's internal auditteam conducts periodic audits checks and has laid down controls to prevent detect andcorrect 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 inaccordance with the Accounting Standards notified under the Companies (AccountingStandards) Rules 2006 (as amended) and other relevant provisions of the Act.
The annexed financial statements comply in all material aspects with the IndianAccounting Standards (Ind AS) notified under section 133 of the Act [Companies (IndianAccounting 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 (ListingObligations and Disclosure Requirements) Regulations 2015 (hereinafter referred to as"Listing Regulations") and applicable Accounting Standards the AuditedConsolidated Financial Statements of the Company for the financial year 2018-19 togetherwith the Auditors' Report form part of this Annual Report.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company primarily works through Setco Foundation and also supports other NGOstowards supporting projects to facilitate a neighborhood to ensure full access tohealthcare nutrition education and opportunity for growth. We strongly believe that asa 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 environmentwhich has helped us grow and thrive. Details of the CSR activities are more particularlyexhibited at the link http://setcofoundation.org/what-we-do/.
The Corporate Social Responsibility Committee (CSR Committee) formulated andrecommended to the Board the Corporate Social Responsibility Policy (CSR Policy) of theCompany indicating therein the CSR activities to be undertaken by the Company. The CSRPolicy has been approved by the Board of Directors.
The CSR Policy may be accessed on the Company's website at the linkhttp://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.
Your Company takes great pride in its Human Capital and takes significant effort inhiring advancing and retaining the talent.The Company's comprehensive Human resourcestrategy takes into cognizance the key aspects of people development such as employeeengagement talent management performance management capability development andprogressive industrial relations. Training and consequent learning therefore forms animportant element of each employee's career growth. The endeavor is to build andstrengthen organizational capabilities there by enabling the Organization to sustainattractive growth in a dynamic business environment.
Setco ensure that there is full adherence to the code of ethics and fair businesspractices. It provides an equal opportunities employer and employees are evaluated solelyon the basis of their qualifications and performance. The Human Resource function is abusiness partner that focusses on improving the way of life work culture employeeengagement productivity effectiveness and efficiency. The Company believes in developingan 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 onPrevention of Sexual Harassment at Workplace and constituted an Internal ComplaintsCommittee for Prohibition Prevention and Redressal of Sexual Harassment and mattersconnected 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 has a robust vigil mechanism through its Whistle Blower Policy approved andadopted by Board of Directors of the Company in compliance with the provisions of Section177 (10) ofthe Act and Regulation 22 of the Listing Regulations.
The Policy also provides protection to the employees and business associates who reportunethical practices and irregularities.
Your Company has adopted a Vigil Mechanism / whistle blower Policy to enable employeesto raise concerns about unacceptable improper practices and/or any unethical practicesbeing carried out in the organisation without the knowledge of management. This WhistleBlower Policy will also be applicable to the Directors of the Company.
The Audit Committee oversees the vigil mechanism. No employee has been denied access tothe Audit Committee. The Audit Committee reviews on a quarterly basis reports made underthis policy and implements corrective actions wherever necessary. The policy has beenappropriately communicated to all the employees and posted on the Company's website at thelink http://www.setcoauto.com/ statutory-policies. No such fraud or wrongful conduct wasreported during the year under review.
The Company has a well-defined process in place to ensure appropriate identificationand mitigation of risks. Risk identification exercise is inter-woven with the annualplanning cycle which ensures both regularity and comprehensiveness. The identification andmitigation of strategic business operational and process risks are carried out for allfunctions. Your Company is committed to managing the risks in a proactive and efficientmanner.
Your Company through its risk management process strives to contain impact andlikelihood of the risks within the risk appetite as agreed from time to time with theBoard of Directors.
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 CorporateGovernance Report annexed to this report.
Changes in the Board
During the year the Board of Directors appointed Mr. Bhalchandra Naik (DIN:02490022) asan Additional Director of the Company w.e.f. May 30 2018 in the category of NoExecutiveand Independent Directors. Mr. Bhalchandra
Naik (DIN:02490022) resigned w.e.f. October 31 2018 on personal grounds. The Boardplaces on records its appreciation of the contribution made Mr. Bhalchandra Naik asDirector of the Company.
During the year in order to strengthen the Board on the recommendation of Nominationand 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 ofNon-Executive and Independent Director. The Shareholder in their meeting held on 28thSeptember 2018 have appointed Mr. Arun Tiwari (DIN: 05345547) as Director of the Companyin 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 ofwhich 5 (five) are Non-Executive Directors (NEDs) including 1 (one) Woman Director. NEDsrepresent 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 ofAssociation of the Company Mr. Shvetal Vakil retires by rotation at the ensuing AnnualGeneral 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 ListingRegulations pertaining to the remuneration incentives etc. to the Directors is given inthe Corporate Governance Report.
Re-appointment of Independence Directors:
Dr. Arun Arora Mr. Ashok Kumar Jha and Mrs. Suhasini Sathe were appointed as anindependent directors at the 31st Annual General Meeting (AGM) held on 9th September 2014for a period of five years. Based on the recommendation of the Nomination and RemunerationCommittee their reappointment for a second term of five years is proposed at the ensuingAGM for the approval of the Members by way of special resolution.
The Notice convening forthcoming Annual General Meeting includes the proposal forappointment/re-appointment of the aforesaid Directors. A brief resume of the Directorsseeking appointment/re-appointment at the forthcoming AGM and other details as required tobe disclosed in terms of Regulation 36(3) of the SEBI Listing Regulations and SecretarialStandard on General Meetings (SS-2) forms part of the Notice calling the AGM.
As on 31st March 2019 none of the Directors are disqualified forappointment/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 liableto retire by rotation. In accordance with Section 149(7) of the Act each IndependentDirector has given a written declaration to the Company confirming that he/she meets thecriteria of independence as mentioned under Section 149(6) of the Act and Regulation16(1)(b) of the Listing Regulations.
FAMILIARIZATION PROGRAM FOR THE INDEPENDENT DIRECTORS
In compliance with the requirement of the Listing Regulations the Company has put inplace a familiarization programme for the Independent Directors to familiarize them withtheir roles rights responsibilities as directors nature of the industry in which theCompany operates business model of the Company and related matters. The details offamiliarization programmes are explained in the Corporate Governance Report.The saiddetails 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 theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Boardcarried out a performance evaluation. A formal evaluation of performance of the Board itsCommittees the Chairman and that of the individual Directors was carried out for thefinancial year 2018-19.
The evaluation of Individual Directors was done taking into consideration the roleplayed by each Director as a member at the respective meetings in pursuit of the purposeand goals participation at the meetings independent views and judgement initiativeownership of value building.
The performance of the Committees was evaluated by the Board after seeking inputs fromthe Committee members on the basis of the criteria such as the composition of Committeeseffectiveness of Committee meetings information shared and participation of members. Inrespect of evaluation for performance of the Board the parameters inter alia comprised ofkey areas such as Board composition competency of Directors diversity frequency ofBoard and Committee meetings information sharing and disclosures made to the Board andits Committees. The responses received on evaluation of the Board and its Committees andthat of the individual Directors were shared with the Chairman.
The overall performance evaluation process for functioning of Board and its Committeeswas based on discussions amongst the Board Members Committee Members and responses sharedby each Member. The Board found that there was considerable value and richness in thediscussions and deliberations. Based on the outcome of the evaluation the Board andCommittees have agreed for possible continuous improvisation to ensure bettereffectiveness and functioning of the Board and Committees.
Similarly the Board at its meeting assessed the performance of the IndependentDirectors. The Directors were quite satisfied with the results of the performanceevaluation of the Board & its Committees Chairman and individual directors.
KEY MANAGERIAL PERSONNEL
The following persons have been designated as Key managerial Personnel of the Companypursuant to section 2(51) and section 203 of the Act read with the Rules framedthereunder:
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. May6 2019)
Mr. Nishant Javlekar the earlier Company Secretary of the Company and KMP resignedfrom the services of the Company w.e.f. August 31 2018.
Policy on Remuneration of Directors KMPs and Senior Managerial Personnel and criteriafor matters under Section 178 of the Act
Information regarding the Policy on Remuneration of Directors KMPs and SeniorManagerial Personnel and criteria for determining qualifications positive attributesindependence of a director and other matters provided under sub-section (3) of Section 178of the Companies Act 2013 and SEBI Listing Regulations adopted by the Board is appendedas 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 March2019 the applicable accounting standards and Schedule III of the Companies Act 2013have been followed and there are no material departures from the same;
b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of your Company as at 31st March 2019 and of the profitand 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 accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets 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 theCompany and that such internal financial controls are adequate and were operatingeffectively; and
f) proper systems to ensure compliance with the provisions of all applicable laws werein place and that such systems were adequate and operating effectively.
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. Thedetails of composition of the Board and its Committees their meetings held during theyear under reviewand the attendance of the Directors/ Committee Members at the respectivemeetings are provided in the Corporate Governance Report which forms part of this AnnualReport.
During the year under review all the recommendations made by the Audit Committee wereaccepted by the Board. The Board evaluates the recommendations made by Audit Committee andseeks further information as they may require. There were no instances where the Board hasnot accepted any recommendation of Audit Committee.
The Company also has CSR Committee Nomination & Remuneration CommitteeStakeholders Relationship Committee Finance & Operation Committee SelectionCommittee Shares allotment Committee and Qualified Institutional Placement Committee. Theconstitution and details of their meetings are given in the report on CorporateGovernance.
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 conclusionof the 34th Annual General Meeting of the Company held on September 27 2017 until theconclusion of the 39th Annual General Meeting of the company to be held in the financialyear 2021-22.
M/s. V. Parekh & Associates Chartered Accountants have confirmed that they are notdisqualified 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 fornot having ascertained and eliminated the unrealized profit element in the stocks lyingwith the subsidiaries out of inter-company transactions in terms of the AccountingStandard-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 theextraction of the relevant information. This will enable the subsidiaries to provideinformation 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 Companyhad appointed M/s. P. P. Shah & Co. Practicing Company Secretaries (MembershipNo.1483 CP No. 436) as the Secretarial Auditor to conduct Secretarial Audit for thefinancial year 2018-19. The Secretarial Audit Report for the financial year ended March31 2019 is annexed herewith marked as Annexure 5 in Form MR-3 to this Report. TheSecretarial Audit Report does not contain any qualification reservation or adverseremark.
Directors' comments on Secretarial Auditors Qualification in Appointment of CompanySecretary:
As per Section 203 (1) (ii) the Company is required to appoint Company Secretary. TheCompany Secretary has resigned on 15th September 2018. In this regard the management ofthe Company has provided the following reply:
The Company is required to appoint Company Secretary within 6 months of vacancy i.e. by15th March 2019. The Company has made efforts for appointment of Company Secretary but nosuitable candidate was found during this period. The non-compliance is for 17 days only.
The Directors state that applicable Secretarial Standards i.e. SS -1 and SS -2relating to Meeting of the Board of Directors' and General Meeting'respectively have been duly followed by the Company.
A report on Corporate Governance alongwith a certificate from the Secretarial Auditorsof the Company regarding the compliance with provisions of corporate governance asstipulated 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 theCode 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 tothe financial statements and other matters as required under Regulation 17(8) of the SEBILODR 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. Tothis extent employees and operators are regularly educated about saving energy.
B. Technology Absorption: The Company's product i.e. clutches for commercial vehiclesare manufactured under the proprietary technology and heritage Lipe' Brand. Most ofthe components for manufacturing clutches are procured indigenously except for certaincritical components for offering better quality at a competitive price to customersbeing imported.
C. Foreign Exchange Earnings and Outgo: Details of foreign exchange earnings and outgoduring the financial year 2018-19 are provided in the Notes to Standalone FinancialStatements 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 globalrequirements 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 6.3Certification.
EXTRACT OF ANNUAL RETURN
The extract of the Annual Return of the Company as on 31st March 2019 in Form MGT - 9in accordance with Section 92 (3) of the Act read with Companies (Management andAdministration) Rules 2014 is available on the website of the Company athttps://www.Setcoauto.com/investors/ financial- results.html and is set out in Annexure 6to this Report.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
Disclosures pertaining to the remuneration of Directors KMPs and employees underSection 197(12) of the Act read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided under Annexure 7 which isannexed to this Report.
In terms of the provisions of Section 136 of the Act the copy of the FinancialStatements of the Company including the Consolidated Financial Statements the Auditors'Report and relevant Annexures to the said financial statements and reports are being sentto the Members and other persons entitled therefor excluding the information in respectof the said employees containing the particulars as specified in Rule 5(2) of the saidRules which is available for inspection by the Members at Registered Office of theCompany during all working days except on Tuesday Public Holidays and National Holidaysbetween 10.00 a.m. and 5.00 p.m. upto the date of the AGM. If any member is interested inobtaining a copy thereof he/ she may write to the Company Secretary and the same shall beprovided.
Your Directors state that no disclosure or reporting is required in respect of thefollowing 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 underany scheme save and except ESOS referred to in this Report.
3. Neither the Managing Director nor the Whole-time Directors of the Company receivedany remuneration or commission from any of its subsidiaries.
4. No significant or material orders were passed by the Regulators or Courts orTribunals 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 thesecond proviso of Section 143 (12) of the Companies Act 2013 (including any statutorymodification(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 itsown shares by employees/ Directors or by trustees for the benefit of employees/ Directors.
The Board of Directors place on record sincere gratitude andappreciation for all theemployees at all levels for their hardwork solidarity cooperation and dedication duringthe year.
The Board conveys its appreciation for its customers shareholders suppliers as wellas vendors bankers business associates regulatory and government authorities for theircontinued support
For and on behalf of the Board
Chairman and Managing Director
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-basedpayments or any other relevant accounting standards: For details please refer to notes toFinancial Statement mentioned in Annual Report 2018-19.
|Description || |
|1 ||Date of Shareholders Approval ||June 5 2015 - Extra Ordinary General Meeting |
|2 ||Total number of options approved under the scheme* ||2500000 stock options were approved under the Setco Employee Stock Option 2015 |
|3 ||Date of Grant ||May 30 2016 |
|4 ||Options Granted ||610000 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 ||435000 |
|2 Number of Options granted during the year ||Nil |
|3 Number of Options forfeited / lapsed during the year ||69600 |
|4 Number of Options vested during the year ||87000 |
|5 Number of Options exercised during the year ||80600 |
|6 Number of shares arising as a result of exercise of Options ||80600 |
|7 Money realized by exercise of Options ||1289600 |
|8 Number of options outstanding at the end of the year ||284800 |
|9 Number of Options exercisable at the end of the year ||106800 |
D Options granted to Senior Management Personnel/s
The company has not granted any options during the current financial year under theESOP scheme to Senior Management Personnel/s.
E Options granted to any employee during the year amounting to 5% or more of optionsgranted during the year
The company has not granted options during the current financial year under the ESOPscheme 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 thecompany at the time of grant
The company has not granted options during the current financial year under the ESOPscheme 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 toestimate the fair values of options.
For share options granted to employees in many cases market prices are not availablebecause the options granted are subject to terms and conditions that do not apply totraded options. If traded options with similar terms and conditions do not exist the fairvalue of the options granted shall be estimated by applying a Black Scholes option pricingmodel.
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 52015 had approved the 500000 (Five Lakhs) stock options under the Setco Stock Optionscheme 2015 of Rs. 10/- each. Further at the Annual General meeting of the Company heldon September 28 2015 the shareholders approved the sub- dividsion of shares from facevalue Rs.10/- each into five equity shares of Rs. 2/- each w.e.f. December 17 2015consequently the number of options now stands at 2500000 (Twenty Five lakhs) of Rs.2/-each.
Annexure 2 to Directors' Report
Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 ofCompanies (Accounts) Rules 2014 Statement containing salient features of the financialstatement 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 ||10556.00 ||-6414.11 ||23214.63 ||19072.75 || |
|10616.03 ||-2823.81 ||-0.22 ||-2828.60 || |
|Setco Automotive (UK) Ltd. ||Same as Holding Company ||1 GBP = Rs. 90.43 ||2472.60 ||-3380.60 ||6380.31 ||7288.31 ||1483.11 ||3250.28 ||-1097.57 ||-15.54 ||-1082.02 || |
|Setco Automotive (NA) Inc ||Same as Holding Company ||1 USD = Rs. 69.39 ||1821.49 ||-263.17 ||5427.54 ||3869.22 || |
|4823.06 ||276.12 ||63.16 ||212.96 || |
|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
Setco Automotive Limited (SAL) recognizes the importance of aligning the businessobjectives with specific and measureable individual objectives and targets. The Companyhas therefore formulated the remuneration policy for its directors key managerialpersonnel and other employees keeping in view the following objectives:
(a) the level and composition of remuneration is reasonable and sufficient to attractretain and motivate to run the company successfully;
(b) relationship of remuneration to performance is clear and meets appropriateperformance benchmarks; and
(c) remuneration to directors key managerial personnel and senior management involvesa balance between fixed and incentive pay reflecting short and long-term performanceobjectives appropriate to the working of the company and its goals.
This Policy sets out the guiding principles for the Nomination and RemunerationCommittee for identifying persons who are qualified to become Directors and to determinethe independence of the Independent Directors; and for recommending to the Board theremuneration of the directors key managerial personnel and other employees of theCompany.
3. Criteria for Determining Qualifications Positive Attributes & Independence ofDirector:
(a) Qualifications of Directors:
A director shall possess appropriate skills experience and knowledge in one or morefields of finance law management sales marketing administration research corporategovernance operations or other disciplines related to the Company's business.
In evaluating the suitability of individual Board members the NRC may take intoaccount factors such as:
- General understanding of the Company's business dynamics global business and socialperspective;
- 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 andresponsibilities effectively.
(b) Positive attributes of Directors:
An independent director shall be a person of integrity who possesses relevantexpertise and experience and who shall uphold ethical standards of integrity and probity;act objectively and constructively; exercise his responsibilities in a bona-fide manner inthe interest of the Company; devote sufficient time and attention to his professionalobligations for informed and balanced decision making; and assist the Company inimplementing the best corporate governance practices.
(c) Independence of Independent Directors:
An Independent director shall meet the requirements of the Companies Act 2013 andListing 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 theCompany within the overall limits approved by the shareholders.
The Board on the recommendation of the NRC shall also review and approve theremuneration 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 remunerationpayable to the Non-Executive Directors of the Company within the overall limits approvedby the shareholders. Non-Executive Directors shall be entitled to sitting fees forattending the meetings of the Board and the Committees thereof. In addition to the sittingfees the Non-Executive Directors shall also be entitled to Commission based on the profitof the Company.
(c) Remuneration to other employees:
Employees shall be assigned grades according to their qualifications and workexperience competencies as well as their roles and responsibilities in the organization.Individual remuneration shall be determined within the appropriate grade and shall bebased on various factors such as job profile skill sets seniority experience andprevailing remuneration levels for equivalent jobs.
ANNEXURE 7 TO DIRECTORS REPORT
Details as required under Section 197(12) of the Companies Act 2013 read with Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014
a) The percentage increase in remuneration of each Director Chief Financial OfficerCompany Secretary and Managing Director during the financial year 2018-19 ratio of theremuneration of each Director to the median remuneration of the employees of the Companyfor 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 medianremuneration 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 themanagerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:
The average percentage increase made in the salaries of employees other than themanagerial personnel for the financial year i.e. 2018-19 was 13.01% whereas the increasein 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 ofthe Company.
f) The Statement containing particulars Employees who if employed throughout the yearor part thereof was in receipt of remuneration in that year which in the aggregate is inexcess of that drawn by the Chairman & Managing Director and CEO & SeniorExecutive Director.- Not Applicable
g) There were no employees who being employed throughout Financial Year were in receiptof 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 inreceipt of remuneration not less than eight lakh and fifty thousand rupees per month.