setco automotive ltd share price Directors report


Dear Members,

Your directors are pleased to present the 40th (Fortieth) Annual Report on the business operations together with the annual audited financial statements for the financial year (FY) ended March 31, 2023. This report states compliance as per the requirements of the Companies Act, 2013 ("the Act"), the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations") and other rules and regulations as applicable to the Company.

FINANCIAL PERFORMANCE

The Companys financial performance (standalone and consolidated) for the financial year ended March 31, 2023 is summarised below:

(Rs. in Lakhs Except for EPS)

Particulars

Standalone

Consolidated

2022-23 2021-22 2022-23 2021-22
Revenue from Operation & Other Income 288.48 16,194.11 55,006.01 44,489.97
Gross Profit before Finance Cost & Depreciation 150.92 (636.00) 4,476.70 (595.57)
Less: Finance Cost 5.26 2,516.03 15,473.75 10,832.24
Less: Depreciation - 977.60 3,844.65 3,744.67
Profit/(Loss) before Tax 145.66 (4,130.00) (16,114.51) (25,412.10)
Less: Provisions for Tax Expenses 1027.41 (78.52) 3,111.14 335.95
Profit/ (Loss) from continuing operations (881.75) (8,949.06) (19,225.65) (25,748.05)
Other Comprehensive Income - (153.50) 188.14 (183.44)
Profit/(Loss) after Taxes including other Comprehensive Income (881.75) (17,481.53) (19,037.51) (25,931.49)
Less: Non-Controlling Interest - - (4,005.82) (3,323.57)
Profit/(Loss) for the Year attributable to Equity Holders of the parent (881.75) (17,481.53) (15,031.69) (22,607.92)
Earning Per Shares (Rs.) (0.66) (12.95) (11.40) (16.77)

BUSINESS OPERATIONS

During the year under review, your Company has recorded consolidated revenue from operations of Rs. 54,557 Lakhs as against revenue from operations of Rs. 43,500 Lakhs in the previous year. EBITDA of the Company is Rs. 4,028 Lakhs i.e. 7.4% as against EBITDA loss of Rs. (1,585) Lakhs, thereby improving EBITDA margins by 1100 bps, main reasons for improvement in EBITDA is on account of reduction in variable cost and tight control over fixed cost along with increased in sales of ~25%. Higher interest costs and depreciation led to net loss for the year.

A detailed discussion on the business performance and future outlook is included in Management Discussion & Analysis which forms part of the Directors Report.

SHARE CAPITAL

There was no change in the Share Capital of the Company during the financial year. As on March 31, 2023, the issued and paid-up capital of the Company was Rs. 26,75,34,550/- divided into 13,37,67,275 equity shares of face value of Rs. 2/- each. Your Company has not issued shares with differential voting rights, nor granted employee stock options, sweat equity or bonus shares. The Company does not have any Preference Shares as on March 31, 2023.

The equity shares of the Company continue to be listed on BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE"). The stipulated listing fees for FY2023-24 have been paid to both stock exchanges.

REGISTRAR AND SHARE TRANSFER AGENT

Link Intime India Private Limited is the Registrar and Share Transfer Agent of the Company.

DIVIDEND

Since there were no profits during the year, the Board of Directors has not recommended any dividend, for the financial year ended on March 31,2023.

TRANSFER TO RESERVES

The Board of Directors has decided not to transfer any amount to the reserve during FY 2022-2023 in view of loss during the financial year.

FIXED DEPOSITS

The Company has not accepted any Deposit covered under Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposit) Rules, 2014 during the year under review. Hence, the requirement for furnishing of details relating to deposits covered under Chapter V of the Act or the details of deposits which are not in compliance with the Chapter V of the Act is not applicable.

PARTICULARS OF LOANS, GUARANTEES, INVESTMENTS OR SECURITY

Details of loans granted, guarantees provided and investments made by the Company under the provisions of Section 186 of the Act read with the Companies (Meeting of Board and its Powers) Rules, 2014, are provided in the Notes to Financial Statements of the Company, forming part of this Annual Report. The Company has not provided any security in terms of Section 186 of the Act.

MANAGEMENTS DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis as stipulated under the Listing Regulations is presented in a separate section forming part of this Annual Report. It provides details about the overall industry structure, global and domestic economic scenarios, developments in business operations / performance of the Companys, internal controls and their adequacy, risk management systems and other material developments during the financial year 2022-23.

CHANGE IN NATURE OF BUSINESS

There is no change in the nature of business of the Company during FY 2022- 23.

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN END OF THE FINANCIAL YEAR TO WHICH THE FINANCIAL STATEMENTS RELATE AND THE DATE OF THIS REPPORT

There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this report.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES:

As on 31st March 2023, your Company has in total six subsidiaries across the globe which includes Setco Auto Systems Private Limited (CIN: U35100GJ2010PTC062770), Lava Cast Private Ltd. (LCPL) (CIN: U27205GJ2011PTC100777), Setco Automotive (UK) Ltd (SAUL), Setco Automotive (NA) Inc. (SANAI), Setco MEA DMCC, Dubai and WEW Holdings Ltd (Mauritius).

Performance of subsidiary Companies is elaborated in detail under Management Discussion & Analysis.

The Policy for determining material subsidiaries as approved may be accessed on the Companys website at the link https://setcoauto.com/policies-code-of-conduct/.

BOARD OF DIRECTORS, COMMITTEES AND MANAGEMENT COMPOSITION

The composition of the Board of Directors and its Committees, viz., Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility Committee, are constituted in accordance with Companies Act, 2013 ("the Act") and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"). The Corporate Governance Report contains the composition of the Board of Directors of the Company and its Committees.

All the Directors have affirmed compliance with the Code of Conduct of the Company. The Independent Directors have affirmed that they satisfy the criteria laid down under section 149(6) of the Act and Regulation 25 and other applicable regulations of the Listing Regulations, as amended from time to time. Further, in terms of Section 150 of the Act read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, Independent Directors of the Company have confirmed that they have registered themselves with the databank maintained by the Indian Institute of Corporate Affairs (IICA) and have passed the proficiency test, if applicable to them. The Board of Directors at its first meeting of FY 2022-23 has taken on record the declarations and confirmations submitted by the Independent Directors. During the year, the Board had not appointed any person as an Alternate Director for an Independent Director on the Board. The Company has obtained a certificate from a Company Secretary in Practice that none of the Directors on the Board of the Company has been debarred or disqualified from being appointed or continuing as Directors of Companies by the SEBI / Ministry of Corporate Affairs or any such statutory authority.

During the year under review there has been no change in the constitution of Board i.e. the structure of the Board remains the same.

The Board is of the opinion that the Independent Directors of the Company possess requisite qualifications, experience and expertise in the fields of finance, people management, strategy, auditing, tax advisory services and they hold highest standards of integrity.

DIRECTOR RETIRING BY ROTATION

In accordance with the Articles of Association of the Company and Section 152 of the Act read with the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) Mrs. Urja Harshal Shah, Executive Director (DIN: 02675341) is due to retire by rotation at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment.

A brief profile of Mrs. Urja Harshal Shah is provided in the Notice of the ensuing Annual General Meeting of the Company.

KEY MANAGERIAL PERSONNEL

The following persons have been designated as the Key Managerial Personnel of the Company pursuant to Section 2(51) and 203 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014:

- Mr. Harish Sheth, Chairman & Managing Director

- Mr. Udit Sheth, Vice Chairman

- Mrs. Urja Shah, Executive Director

- Mr. Shrinivasan Sivasubrahmanyan Iyer, Chief Financial Officer (Appointed w.e.f. November 14, 2022)

- Mr. Hiren Vala, Company Secretary and Compliance officer.

During the year under review, Mr. Rovinder Singla resigned as Chief Financial Officer of the Company with effect from May 30, 2022 and Mr. Jatinder Bir Singh Gujral retired as Chief Executive Officer of the Company with effect from October 31,2022. Since Chairman and Managing Director is also designated as Chief Executive Officer, it is not considered necessary to appoint a fresh Chief Executive Officer on resignation of Mr. Jatinder Bir Singh Gujral as Chief Executive Officer.

BOARD AND COMMITTEE MEETINGS

The schedule of meetings of the Board of Directors and Committees of the Board is circulated to the Directors in ad-

vance. During the year, four (4) Board Meetings were convened and held, the details of which are given in the Corporate Governance Report. The time gap between the Board Meeting convened on 12th February, 2022 and 6th July, 2022 was 144 days which is more than the prescribed time limit of 120 days. Accordingly, the Company has not complied with Section 173 of the Companies Act, 2013, Para 2.1 on Secretarial Standards - 1 on Board Meetings and Regulation 17 (2)_of SEBI (LODR) Regulations, 2015. However, the Company has convened 4 Board Meetings during the financial year ended 31st March, 2023. The details of Committee meetings are provided in the Corporate Governance report. For eligible matters, the Board / its Committees may also accord approvals through resolutions passed by circulation, between two meetings.

DECLARATION BY INDEPENDENT DIRECTORS

As stipulated under the provisions of Section 149(6) of Act and Regulation 25 of Listing Regulations, the requisite declarations have been received from the Independent Directors regarding meeting the criteria of Independence as laid down under those provisions. In terms of Regulation 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

The Board took on record the declaration and confirmation submitted by the independent directors regarding their meeting the prescribed criteria of independence, after undertaking due assessment of the veracity of the same as required under Regulation 25 of the Listing Regulations.

PERFORMANCE EVALUATION OF BOARD

In line with the statutory requirements enshrined under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board carried out a performance evaluation. A formal evaluation of performance of the Board, its Committees, the Chairman and that of the individual Directors was carried out for the financial year 2022-23.

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

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

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

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

FAMILIARIZATION PROGRAM FOR THE INDEPENDENT DIRECTORS

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

NOMINATION AND REMUNERATION POLICY

In terms of requirements prescribed under Section 178 of the Companies Act, 2013, the Company has framed a Nomination and Remuneration Policy for appointment and remuneration of the Directors, Key Managerial Personnel and Senior Management (the "Policy").

The purpose of this Policy is to establish and govern the procedure as applicable inter alia in respect to the following:

a. To evaluate the performance of the members of the Board.

b. To ensure remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goals.

c. To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons and create competitive advantage.

The Policy is available on the website of the Company - https://setcoauto.com/policies-code-of-conduct/

AUDIT AND ALLIED MATTERS AUDIT COMMITTEE

The composition, terms of reference and meetings of the Audit Committee are disclosed in the Corporate Governance Report section of the Annual Report. The Audit Committee of the Board acts in accordance with the terms of reference, which is in compliance with the provisions of Section 177 of the Act and Regulation 18 of Listing Regulations and other applicable provisions of Listing Regulations, as amended from time to time.

STATUTORY AUDITOR

In accordance with the provisions of the Companies Act, 2013 and rules thereunder, M/s. Sharp & Tannan Associates, Chartered Accountants, were appointed Auditors of the Company for a period of 3 years to hold office from the conclusion of the 39th Annual General Meeting (AGM) held on September 19, 2022 until the conclusion of the AGM to be held in the year 2025. The statutory auditors have confirmed that they are not disqualified from continuing as auditors of the Company.

AUDITORS QUALIFICATION IN CONSOLIDATED AUDITORS REPORT

a. Basis for Qualified Opinion issued by Statutory Auditors on the subsidiary viz. Lava Cast Private Limited (LCPL) vide their report on the standalone Ind AS financial statement of LCPL, to the extent the same are found significant as per the Guidance issued by the Institute of Chartered Accountants of India, from time to time and which also forms the basis for qualified opinion in their audit report on the accompanying consolidated Ind AS financial Statements of the Group:

"The Company has received a recall notice on 16 January 2023 from its lender i.e. Bank of Baroda for outstanding loan facilities of Rs. 145.85 Crores (Refer Note No. 14 and Note No 17 to the financial results). The Balance reflected as per Companys books of accounts is Rs. 112.53 Crores. As informed to us, the difference is subject to reconciliation and Companys management is in the process of discussing and resolving this matter with the lender. In light of the above, we are unable to quantify the consequential impact on Companys total borrowings, interests and other charges accrued on the results for the quarter and year ended on March 31, 2023".

b. Basis for Qualified Opinion issued by independent auditor on the subsidiary viz. WEW Holding Limited (WEWHL) vide their audit report on the standalone financial statement of WEWHL, to the extent the same are found significant as per the Guidance issued by the Institute of Chartered Accountants of India, from time to time and which also forms the basis for qualified opinion in our audit report on the accompanying consolidated Ind AS financial Statements of the Group:

"As state in note 6 to the financial statements, Secto Automotive (UK) Limited is a subsidiary of the Company. Consolidated financial statements have not been prepared as required by International Financial Reporting Standards (IFRS) 10, Consolidated Financial Statements. In our opinion, consolidated financial statements are necessary for a proper understanding of the Groups state of affairs".

c. Basis for Qualified Opinion issued by independent auditor on the subsidiary viz. SETCO MEA DMCC, UAE, vide their audit report on the standalone financial statement, to the extent the same are found significant as per the Guidance issued by the Institute of Chartered Accountants of India, from time to time and which also forms the basis for qualified opinion in our audit report on the accompanying consolidated Ind AS financial Statements of the Group:

"As state in note 2(a) to the financial statements, there is deficiency of net assets of AED 1,944,407/- as accumulat-

ed losses up to 31 March 2023 of AED 2,078,821/- exceeds share capital of AED 100,000/-. The continuance of the business as going concern is dependent upon the Companys ability to carry on the business and to generate the profits and the continuous financial support from the shareholder".

DIRECTORS COMMENTS ON AUDITORS QUALIFICATION IN CONSOLIDATED AUDITORS REPORT:

a. The difference in figures of liabilities as per Companys records and the record of the bank is probably an account of penal interest recognized by the bank in past years when the account was treated as Non-Performing Asset (NPA). In view of the companys application to the bank for a restructuring of the liabilities, on reconciliation of the account the difference on either side will be recognized accordingly.

b. The Subsidiaries accounts (WEW Holding Ltd. and Setco Automotive (UK) Ltd.) are not compiled in accordance with IFRS, Since the there is no major business activities. Since these accounts are ultimately consolidated with that of the parent Company (Setco Automotive Ltd) which complies with applicable Accounting Standards (Ind - AS) and the purpose of disclosures and compliances of Accounting Standards are served.

c. The Setco MEA, DMCC, foreign subsidiary has prepared its financial statement on a going concern basis. However, the foreign subsidiary has eroded its entire net-worth due to accumulated losses. In view of review of the revised plan based on potential of the business and the support of its parent Company, position to meet its liabilities in the near future, the going concern status of the subsidiary will improve.

COST AUDIT & MAINTENANCE OF COST RECORDS

The appointment of Cost Auditor is not applicable to the Company under Companies (Cost Records and Audit) Rules, 2014. Further, the maintenance of cost records as prescribed under provisions of Sec 148(1) of the Companies Act, 2013 are not applicable for the business activities carried out by the Company.

SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT

Your Company has undertaken Secretarial Audit for the financial year 2022-23 which, inter alia, includes audit of compliance withtheCompaniesAct,2013and theRulesmade undertheAct,SEBIListingRegulationsandapplicableRegulationsprescribed by the Securities and Exchange Board of India and Secretarial Standards issued by the Institute of the Company Secretaries of India. Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors had appointed M/s. P P Shah & Co., Practicing Company Secretaries (Membership No.1483, CP No. 436) to conduct the Secretarial Audit of the Company for financial year 2022-23.

The Secretarial Audit Report for the financial year ended March 31, 2023 is annexed herewith marked as Annexure A in Form MR-3 to this Report.

Pursuant to Regulation 24A of the Listing Regulations, the Company has obtained Annual Secretarial Compliance Report from M/s. P P Shah & Co. on compliance of all applicable SEBI Regulations and circulars / guidelines issued there under and the same were submitted with the Stock Exchanges.

The observations and comments given by the Secretarial Auditor in the Report are self - explanatory and hence do not call for any further comments under section 134 of the Act.

SECRETARIAL AUDIT OF MATERIAL UNLISTED INDIAN SUBSIDIARY

Pursuant to provisions of Regulation 24A of SEBI Listing Regulations, Secretarial Audit was undertaken for our material unlisted subsidiary - Setco Auto Systems Private Limited and Lava Cast Private Limited. The Secretarial Audit Report for aforesaid material unlisted subsidiary company is available on Companys website, www.setcoauto.com.

SECRETARIAL STANDARDS

During the year under review, the company has complied with all applicable Secretarial Standards issued by The Institute of Company Secretaries of India.

CREDIT RATINGS

The Company has not issued any securities and does not have any fixed deposit programme/borrowing or any scheme or proposal involving mobilization of funds in India or abroad during the financial year ended 31st March 2023, the Company was not required to obtain credit ratings in respect of the same.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 134(5) of the Act with respect to Directors Responsibility Statement, it is hereby confirmed that:

i. In the preparation of the annual accounts for the financial year ended 31st March, 2023, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at 31st March, 2023 and of the profit and loss of the Company for the financial year ended 31st March, 2023;

iii. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. The Directors had prepared the annual financial statements for the financial year ended March 31, 2023 on a going concern basis;

v. The Directors had laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and are operating effectively; and

vi. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

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

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

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

The Policy on materiality of related party transactions and dealing with related party transactions may be accessed on the Companys website at the link https://setcoauto.com/policies-code-of-conduct/.

The details of related party transactions as per Indian Accounting Standards (IND AS) - 24 are set out in Note 32 to the Standalone Financial Statements of the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has constituted the Corporate Social Responsibility (CSR) Committee in compliance with Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The CSR Committee has formulated a Corporate Social Responsibility Policy (CSR policy) indicating the activities to be undertaken by the Company.

The CSR policy may be accessed on the Companys website at the link https://setcoauto.com/policies-code-of-conduct/.

At present, the CSR Committee of the Board consists of namely Mrs. Urja Harshal Shah, as Chairperson, Mr. Udit Sheth, Dr. Arun Arora and Ms. Suhasini Sathe, Directors, as members.

The disclosure with respect to CSR activities forming part of this report is given as Annexure - B.

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

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

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

C. Foreign Exchange Earnings and Outgo: Details of foreign exchange earnings and outgo during the financial year 2022-23, are provided in the Notes to Standalone and Consolidated Financial Statements of the Company, forming part of this Annual Report.

CORPORATE GOVERNANCE

We comply with the Securities and Exchange Board of India (SEBI)s guidelines on Corporate Governance. A report on Corporate Governance alongwith a certificate from the Secretarial Auditors of the Company regarding the compliance with provisions of corporate governance as stipulated under Schedule V of the Listing Regulations forms a part of this Annual Report.

All Board members and senior management personnel have affirmed compliance with the Code of Conduct for the year 2022-23. A declaration to this effect signed by the Chairman & Managing Director of the company is contained in this Annual Report.

The Chief Executive Officer/Chief Financial Officer (CEO/CFO) certification as required under SEBI Listing Regulations and the said certificate is contained in this Annual Report.

RISK MANAGEMENT

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

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

ANNUAL RETURN

Pursuant to the provisions of Section 134(3) (a) of the Act, the draft annual return as on 31st March, 2023 prepared in accordance with the provisions of Section 92(3) of the Act is made available on the website of your Company and can be assessed using the link https://www.setcoauto.com/Investors.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

As per section 124 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and subsequent amendments thereto ("the Rules"), all shares in respect of which dividends have not been paid or claimed for seven consecutive years or more shall be transferred to Investor Education and Protection Fund (IEPF). In line with the aforesaid provisions, during the year, unclaimed interim dividend declared for the FY 2014-15 & unclaimed final dividend declared for the FY 2014-15 along with the underlying shares on which dividend has not been claimed for seven years have been transferred to IEPF. The List of shareholders whose dividends/ shares have been transferred to IEPF is available on the website of the company https://setcoauto.com/ investor-education-protection-fund/ and also the procedure for claiming such unclaimed dividends/ shares from IEPF has been made available on website of the company https://setcoauto.com/investor-education-protection-fund/

INTERNAL CONTROLS

The Company has in place a well-established and robust internal control systems which are commensurate with the nature of its business, size & scale and complexity of its operations. Internal control systems comprising of policies and procedures are designed to ensure sound management of the Companys operations, safe keeping of its assets, optimal utilisation of resources, reliability of its financial information and compliance. Systems and procedures are periodically reviewed to keep pace with the growing size and complexity of the Companys operations. The Audit Committee also periodically reviews the adequacy and effectiveness of internal control systems and provides guidance for further strengthening them.

During the year under review, no material observation has been made by the Internal Auditor or Statutory Auditors of the Company in relation to the efficiency and effectiveness of such controls.

INTERNAL FINANCIAL CONTROLS

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

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

INDIAN ACCOUNTING STANDARDS (IND AS) 2015

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

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements of your Company for the financial year ended 31st March 2023 have been prepared in accordance with the provisions of the Companies Act, 2013, Listing Regulations and the Accounting Standards. The audited consolidated financial statements, together with the Auditors Report, form a part of the Annual Report. However, a statement containing salient features of financial statements of subsidiaries as per 129 (3) of the Act, is included in this Annual Report in form AOC-1 as Annexure - C to the Directors Report. Pursuant to the provisions of Section 136 of the Companies Act, 2013 the financial statements, the consolidated financial statements, along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company and can be assessed using the link https://setcoauto.com/financial-statements-of-subsidiaries/.

During the financial year under review, no Company has become or ceased to be your Companys subsidiary or associate. The Company does not have any Joint Venture.

HUMAN RESOURCES

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

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

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

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

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

VIGIL MECHANISM / WHISTLE BLOWER POLICY

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

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

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

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

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There are no significant or material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its operations in future.

INDUSTRIAL RELATIONS

The relations with the employees have continued to remain cordial.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

All the employees of Setco Automotive Limited were transferred to Setco Auto Systems Private Limited w.e.f. 7th September, 2021 and therefore the provisions of section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are not applicable to the company.

PROCEEDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE 2016 (‘IBC)

The Bank of Baroda has filed NCLT petition against the Company as a Corporate Guarantor and its Subsidiary Lava Cast Private Limited as a Corporate Debtor under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. The same has not been admitted by NCLT till date.

GENERAL

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

1. The Company does not Issue equity shares with differential rights as to dividend, voting or otherwise.

2. One time settlement of loan obtained from the Banks or Financial Institutions.

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

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

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

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

ACKNOWLEDGEMENTS:

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

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

For and on behalf of the Board
Harish Sheth
Chairman and Managing Director
Date: August 14, 2023 DIN: 01434459
Place: Kalol