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Directors Report of Setco Automotive Ltd.

Mar 31, 2015

Dear Members,

The Directors have the pleasure in presenting this Thirty Second Directors' Report together with the audited Financial Statements of the Company for the financial year ended March 31,2015.

FINANCIAL PERFORMANCE

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

(Rs. in Cr.)

Particulars Standalone Consolidated

2014-15 2013-14 2014-15 2013-14

Net Sales 458.13 328.79 524.23 389.92

Operating EBIDTA 64.89 47.64 68.30 47.62

Profit before Taxation 28.22 24.33 26.09 17.87

Profit after Taxation 23.51 23.20 20.67 18.23

Earnings Per Share tin Rs.) (basic & considering exceptional items) 8.81 8.70 7.75 6.83

No amount is proposed to be transferred to reserves.

AUTOMOTIVE INDUSTRY

The Indian Automotive industry's growth is directly linked to the growth of economic activity of our country. Indian economy after 2 subdued years rebound and registered a growth of approximately 5% in FY 2014- 15. This was mainly on account revival of the construction and mining activity, reduced interest cost and lower fuel prices. Moreover, increased confidence in the new Government contributed to the economic turnaround in India.

Compared to a decline of 9% in FY 2013-14, the auto industry bounced back by registering an overall growth of 8% in FY 2014 - 15. Within the auto industry, the commercial vehicle segment declined by approximately 1.3% mainly on account of a sharp decline in the Light Commercial Vehicles (LCV) segment. However, the Medium & Heavy Commercial Vehicles (MHCV) segment, where the Company enjoys a dominant position, grew by an impressive 17% compared to a massive decline of 25% in the FY 2013-14. This phenomenon is expected to continue in the future.

Taking forward the leadership position in the MHCV clutch segment, the Company's Original Equipment Manufacturers (OEM) segment grew by 45% compared to the industry growth of 17%. The Company expanded its OEM customer base by starting supplies of its LIPE brand clutches to renowned vehicle manufacturers like

MAN India and Mahindra & Mahindra. The Independent Aftermarket segment grew by 38% and the international business grew by 17%. Thus, an overall growth of 39% was registered in the year under review compared to the previous year.

With the Company's dominant presence in both OEM and Aftermarket segments, the Company is well placed to deal with the cyclical vagaries of the industry.

DIVIDEND

During the financial year 2014-15, interim dividend at 15% (Rs. 1.50/- per Equity Share of Rs. 10/- each) was declared by the Board of Directors and was paid to the shareholders. Your Directors are pleased to recommend for the approval of the shareholders the Final Dividend for the financial year 2014-15 at 15% (Rs. 1.50/- per Equity Share of Rs. 10/- each) on equity shares for the year ended March 31, 2015.

Accordingly, the dividend payout for the financial year 2014-15 will aggregate to 30% from 26.50% for the financial year 2013-14, subject to the approval of shareholders at the ensuing annual general meeting of the Company. The aggregate Dividend distribution would result in cash outflow of Rs. 9.61 crore (including Dividend Distribution Tax).

SHARE CAPITAL

During the financial year 2014-15, the Company issued 41,311 Equity Shares of face value Rs. 10/- each under Setco Automotive Limited Employees Stock Option Scheme, 2010, thereby increasing the paid-up Share Capital to Rs. 26,71,93,350/-.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year and as such no amount of interest and principal fixed deposit was outstanding as on the balance sheet date.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Your Directors have analyzed Company's operations, state of affairs and financials in detail in Management Discussion and Analysis in a separate section forming part of this Annual Report. Material changes and commitments, if any, affecting the financial position of the Company between the end of the year under review and the date of this Report are also mentioned therein.

SUBSIDIARIES

During the year under review, Lava Cast Private Limited, a joint venture between the Company and Lingotes Especiales S.A. became a subsidiary of the Company. Implementation of the project is in progress as per schedule.

Company's overseas subsidiaries have performed well during the year under review despite continued slowdown, elaborated in detail under Management Discussion & Analysis Report.

A report on the performance and financial position of each of the subsidiaries, associates and joint venture companies in the prescribed format AOC-1 is provided as Annexure 1 to the Directors' Report.

The Policy for determining material subsidiaries as approved may be accessed on the Company's website at the link http://www.setcoauto.com/statutory-information.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of the subsidiaries of the Company are available on the website of the Company www.setcoauto.com.

These documents shall also be available for inspection at the Registered Office of the Company between 11.00 a.m. to 1.00 p.m. on all working days except Tuesdays, up to and including the date of the Meeting.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

Changes in the Board

At the Annual General Meeting held on September 9, 2015, the members approved the re-appointments of Mr. Harish Sheth as the Chairman and Managing Director, Mr Udit Sheth and Mr Shvetal Vakil as Executive Directors. At the same Meeting, the members also approved the appointments of Mr Arun Arora, Mr Ashok Kumar Jha,

Mr Bhalchandra Naik, Mr Pratap Merchant and Mrs. Suhasini Sathe as Independent Directors.

Mr. Harshal Shah, Non-Executive Director of the Company resigned from the Board effective from November 11, 2014. During his tenure on the Board, his vast and rich experience was very useful in formulating Company's strategies. The Board places on record its deep appreciation and gratitude for his guidance and contribution to the Company.

Mrs. Urja Shah was appointed as an Additional Director with effect from November 11,2014 in pursuance of Sections 196 and 197 of the Companies Act, 2013 ('the Act'), subject to the approval of the members. In accordance with Section 161 of the Companies Act, 2013 and the Articles of Association of the Company, Mrs. Urja Shah holds office up to the date of the forthcoming Annual General Meeting of the Company. Resolution for appointment of Mrs. Urja Shah as Executive Director for the term of 3 years with effect from November 11,2014 is placed in the Notice for the ensuing Annual General Meeting for consideration / approval of the members. Your Directors recommend her appointment and remuneration as set out in the Notice.

Mr. Udit Sheth has been re-designated by the Board of Directors of the Company as the Joint Managing Director of the Company with effect from July 15, 2015 subject to the approval of the shareholders of the Company. Resolution for the same is placed in the Notice for the ensuing Annual General Meeting for consideration / approval of the members. Your Directors recommend re-designation of Mr. Udit Sheth as the Joint Managing Director of the Company.

Re-appointment

In terms of the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Shvetal Vakil, Executive Director of the Company retires by rotation as Executive Director at the ensuing Annual General Meeting and being eligible, offers himself for re- appointment.

Your directors recommend reappointment of Mr. Shvetal Vakil as Executive Director of the Company. A resolution to the effect is placed in the Notice for the ensuing Annual General Meeting for consideration / approval of the members.

The information on the particulars of Directors seeking appointment / re-appointment in terms of provisions of Clause 49 of the Listing Agreement of the Stock Exchange is provided in Report on Corporate Governance annexed to this report. The disclosure in pursuance of Schedule V to the Companies Act, 2013 and Clause 49 of the Listing Agreement pertaining to the remuneration, incentives etc. to the Directors is given in the Corporate Governance Report.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and Clause 49 of the Listing Agreement with the Stock Exchanges.

The Board has carried out an evaluation of its own performance, the directors individually as well as the evaluation of the working of its Committees. The evaluation process and criteria has been explained in the Corporate Governance Report.

The details of programs for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link http://www.setcoauto.com/statutory-information.

The policy of the Company on directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement adopted by the Board is appended as Annexure 2 to the Directors' Report. We affirm that the remuneration paid to the directors is as per the terms laid out in the Remuneration Policy of the Company.

AUDITORS

Statutory Auditors

M/s. Manesh Mehta & Associates, Chartered Accountants, the Statutory Auditors of the Company hold office from the conclusion of the 31st Annual General Meeting till the conclusion of the 34th Annual General Meeting, subject to ratification of their appointment by the members at the Annual General Meetings.

Your directors recommend ratification of appointment of M/s. Manesh Mehta & Associates, Chartered Accountants as Statutory Auditors of the Company from the conclusion of the 32nd Annual General Meeting until the conclusion of the 33rd Annual General Meeting of the Company pursuant to Section 139 of the Companies Act, 2013 and the rules made thereunder. A resolution to the effect is placed for your consideration and approval in the Notice for the ensuing Annual General Meeting. They have confirmed their eligibility to the effect that the ratification of their appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for re-appointment.

Directors' comments on Auditors Qualification in Consolidated Auditors Report:

The Auditors have made qualification in their Report for the Consolidated Accounts on having not ascertained and eliminated the unrealized profit element in the stocks lying with the subsidiaries out of inter-company transactions, in terms of the Accounting Standard-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 the extraction of the relevant information. This will enable the subsidiaries to provide information on unrealized profits in the stocks received from the Company.

Internal Financial Controls

The Company has in place effective internal financial controls with reference to the preparation of Financial Statements. The scope of the Company's internal audit team includes conductings periodic audits, checks and laying down controls to prevent, detect and correct any irregularities in the operations of the Company.

The Company has in place effective internal financial controls with reference to the Financial Statements. The Company's internal audit team conducts periodic audits, checks and has laid down controls to prevent, detect and correct any irregularities in the operations of the Company.

Secretarial Auditor

The Board has appointed M/s. P P Shah & Co., Practicing Company Secretaries, to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith marked as Annexure 3 to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act 2013, your Directors state that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with no material departures;

(b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profit of the Company for the year ended on that date;

(c) the Directors have 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;

(d) the Directors have prepared the annual accounts on a 'going concern' basis;

(e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

CORPORATE GOVERNANCE

A report on Corporate Governance along with a certificate from M/s. P P Shah & Co., Practicing Company Secretaries regarding the compliance with provisions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement is annexed to this Report.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

During the year, the Nomination and Remuneration (Compensation) Committee allotted 41,311 equity shares of Rs.10/- each of your Company on exercise of stock options by the employees. The details of shares issued to Directors under the Scheme are provided in the Corporate Governance Report attached herewith.

The disclosure, under Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Regulations, 2015 ('SEBI Regulations') and Companies Act, 2013 is set out in Annexure 4 to this Report.

The Company confirms that no options were granted to key managerial personnel during the year under review and that no employees have been issued share options during the year equal to or exceeding 1% of the issued capital of the Company at the time of the grant.

A certificate from the Statutory Auditors of the Company certifying that the Setco Automotive Limited Employee Stock Option Scheme, 2010 has been implemented in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines 1999, as also the resolution passed by the members would be placed before shareholders at the Annual General Meeting for inspection of the Members.

Setco Employee Stock Option Scheme, 2015

The Members of the Company at the Extra-ordinary General Meeting held on June 5, 2015 have approved the Setco Employee Stock Option Scheme, 2015 for issue and allotment of not more than 5,00,000 equity shares under the Scheme to senior management staff and such equity shares shall rank pari-passu in all respects with the then existing equity shares of the Company. The members have also approved extension of such Scheme to the employees of holding company and subsidiary companies of the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Corporate Social Responsibility Committee (CSR Committee) formulated and recommended to the Board, the Corporate Social Responsibility Policy (CSR Policy) of the Company indicating therein the CSR activities to be undertaken by the Company. The CSR Policy has been approved by the Board of Directors.

The CSR Policy may be accessed on the Company's website at the link http://www.setcoauto.com/ statutory-information.

During the year under review, the Company has spent Rs. 61.15 lac on CSR activities. The Annual Report on CSR activities is given at Annexure 5 hereto.

Even before the statutory provisions in respect of mandatory CSR expenditure by the companies were enacted, your company has aimed to contribute 5% of its annual net profits or Rs.50 lacs, whichever is higher to CSR activities, demonstrating a sense of responsibility towards society.

Our CSR initiatives are focused towards preventing malnutrition, improving pre-school education standards and empowering women to become economically more independent and confident. Malnutrition ratio in the areas covered by the Anganwadis has fallen to less than 15% as compared to state level average of more than 40%. Today, your company has built and upgraded 12 Anganwadis covering around 1200 children below 6 years and around 250 nursing & expecting mothers from economically weaker sections of the society.

RISK MANAGEMENT

The Company has framed the risk management policy and has identified therein the elements of risk and the measures to minimise and mitigate the major risks. Adequate risk management framework capable of addressing the risks is in place.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis and that the provisions of Section 188 of the Companies Act, 2013 were not attracted. Thus, disclosure in Form AOC 2 is not required. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material related party transaction under the provisions of the Companies Act, 2013 or the Listing Agreement.

The Policy on materiality of related party transactions and dealing with related party transactions may be accessed on the Company's website at the link http://www.setcoauto.com/statutory-information.

The details of related party transactions are given in Note 29 to the financial statements.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

In terms of the provisions of Section 197(12) of the Companies Act, 2013 (the Act) read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014,

Mr. Harish Sheth, Chairman and Managing Director, Mr. Udit Sheth, Joint Managing Director and Mr. Shvetal Vakil, Executive Directors draw remuneration in excess of the limits set out in the said rules. The details of remuneration paid to them is detailed in the Corporate Governance Report.

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

DISCLOSURES:

CSR Committee

The CSR Committee of the Board of Directors comprises of Mr. Udit Sheth, Joint Managing Director (Chairman), Mrs. Urja Shah, Additional Director, Mrs. Suhasini Sathe, Independent Director and Mr. Arun Arora, Independent Director.

Audit Committee

The Audit Committee comprises of Independent Directors namely Mr B. L. Naik, (Chairman), Mr Ashok Kumar Jha and Mr. Arun Arora. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism

The Vigil Mechanism of the Company, also incorporates a whistle blower policy in terms of the Listing Agreement.

The Policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link http://www.setcoauto.com/statutory-information. I think we have to mention whether any complaints / matters were referred under this and final outcome. Is it right?

Meetings of the Board

During the year, four meetings of the Board of Directors were held, the details of which are given the report on Corporate Governance.

Particulars of Loans, Guarantees or Investments

Particulars of loans given, investments made, guarantees given and securities provided are provided in the notes to the standalone financial statement.

Extract of Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure 6 to this 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. To this extent, employees and operators are regularly educated about saving energy.

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

C. Foreign Exchange Earnings and Outgo: Details of foreign exchange earnings and outgo during the financial year 2014-2015 are furnished in Notes to the Accounts.

QUALITY STANDARD ACCREDIATION

Your Company is ISO 9002 as well as TS 16949 certified in line with the global requirements of the automotive sector by Bureau Veritas Certification (formerly BVQI).

Further, the Company's Unit is accredited with Environmental Management System (EMS) (ISO 14001) as well as Occupational Health and Safety Standards (OHSAS 18001) Certification.

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. Issue of equity shares with differential rights as to dividend, voting or otherwise.

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

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

4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

APPRECIATIONS:

Your Directors take this opportunity to thank the customers, shareholders, suppliers, bankers, business partners/associates, financial institutions and Central and State Governments for their consistent support and encouragement to the Company. The Board places on record its appreciation for the dedication and commitment of the employees at all levels, which has continued to be our major strength.

For and on behalf of the Board

Harish Sheth

Chairman and Managing Director

Place: Mumbai Date : July 15, 2015




Mar 31, 2014

Dear Members,

The Directors have the pleasure in presenting this Thirty First Directors'' Report together with the audited Annual Accounts of the Company for the financial year ended March 31, 2014.

The Companies Act, 2013

The long awaited Companies Bill, 2012 got its assent in the Lok Sabha on December 18, 2012 and in the Rajya Sabha an August 8, 2013. After having obtained the assent of the President of India on August 29, 2013, it has now become the Companies Act, 2013 ("the Act") which replaced the Companies Act, 1956.

Since this report pertains to the financial year that commenced prior to April 1, 2014, the contents therein are governed by the relevant provisions / schedules / rules of the Companies Act, 1953, in compliance with General Circular No. 08/2014 dated April 4, 2014 issued by the Ministry of Corporate Affairs.

FINANCIAL PERFORMANCE

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

(Rs. in Cr.)

Particulars Standalone Consolidated

2013-14 2012-13 2013-14 2012-13

Net Sales 323.79 340.78 389.92 399.36

Operating EBIDTA 47.40 56.29 47.16 61.48

Profit before Taxation, 24.33 29.75 17.87 29.45

Profit after Taxation 23.20 27.34 18.23 26.14

Earnings Per Share (in Rs.)

[basic & considering exceptional items] 8.70 10.28 6.83 9.83

DIVIDEND

Your Directors are pleased to recommend Dividend at 26.50% (Rs. 2.65/- per Equity Share of Rs. 10/- each) on equity shares for the year ended March 31, 2014. maintaining the dividend outflow as per the previous year, subject to the approval of shareholders at the ensuing annual general meeting of the Company. The Dividend distribution would result in cash outflow of Rs. 8.27 Cr [including Dividend Distribution Tax].

SHARE CAPITAL

During the financial year 2013-14, the Company issued 5911 Equity Shares of face value Rs. 10/- each under Setco Automotive Limited Employees Stock Option Scheme 2010. thereby increasing the paid up Share Capital to Rs. 26,67,80,240/-.

OPERATIONS AND FINANCE

Your directors have analyzed Company''s operations and financials in detail in Management Discussion and Analysis.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year and as such no amount of interest and principal fixed deposit was outstanding as on the balance sheet date.

AUTOMOTIVE INDUSTRY

As a result of prolonged economic slowdown that the country faced for second consecutive year, India''s GDP growth was around 4.7 per cent for the Financial Year 2013-14, much below the expectations. Continued slowdown along with lack of fresh investments in the infrastructure and manufacturing sectors, had the auto component industry facing an uphill task in FY 2013-14 also. For the year, MHCV segment recorded 25% decrease in sales as compared to previous year.

Amidst the overall gloom in the economy, the Company continued to focus on expanding customer base and product range. Company''s entry into Direct After Market not only expanded company''s presence in clutch lifecycle but helped it to dilute the impact of drop in OEM sales.

SUBSIDIARIES

During the year under review, performance of Company''s subsidiaries has been impacted due to local economic conditions, elaborated in detail under Management Discussion & Analysis''.

BOARD OF DIRECTORS

Charges in the Board

Mr Satish Deshpande, Independent Director of the Company resigned from the Board Effective from May 29. 2013. During his tenure on the Board, his vast and rich experience was very useful in formulating Company''s strategies. The Board places on record its deep appreciation and gratitude for his guidance and contribution to the Company.

Pursuant to the provisions of Sections 149, 152 read with Schedule IV of the Companies Act, 2013 and rules made thereunder and Clause 49 of the Listing Agreement, Mr. Arun Arora, Mr Ashok Kumar Jha and Mr Bhalchandna Naik, thE Independent Directors of the Company are proposed to be appointed as Independent Directors of your Company for a period of 5 [five) consecutive years from the conclusion of 31st Annual General Meeting of the Company The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013. Resolutions in this behalf are placed for your consideration.

The Board at its meeting held on November 7, 2013 appointed Mr. Pratap Merchant as an Additional Director of the Company. Further, the Board at Its meeting held an February 12, 2014 appointed Mrs. Suhasini Sathe as an Additional Director of the Company. In accordance with Section 161 of the Companies Act, 2013 and Article 173 of Articles of Association of the Company, Mr. Pratap Merchant and Mrs. Suhasini Sathe hold office up to the date of forthcoming Annual General Meeting of the Company. The Company has received declarations from both the Directors confirming that they meet with the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013. Your Directors recommend appointing Mr. Pratap Merchant and Mrs. Suhasini Sathe as Independent Directors on thE Board of your Company pursuant to the provisions of Sections 149, 152 read with Schedule IV of the Companies Act, 2013 and rules made thereunder and Clause 49 of the Listing Agreement. Resolutions in this behalf are placed for your consideration.

Mr. Harish Sheth, Chairman and Managing Director. Mr. Udit Sheth and Mr. Shvetal Vakil, Executive Directors were appointed for a period of 5 years with effect from January 1, 2010 by the members of the Company at the Annual General Meeting of the Company held on September 24, 2009. The term of appointment of these directors expires on December 31, 2014. The Board of Directors at its meeting held on August 5, 2014 has proposed to re-appoint Mr Harish Sheth as the Chairman and Managing Director, Mr Udit Sheth and Mr Shvetal Vakil as the Executive Directors of the Company for a period of 3 years w.e.f January 1, 2015 subject to the approval of Members. Resolutions to this effect are placed in the Notice for this Annual General Meeting for consideration / approval of the members. Your Directors recommend their appointment and remuneration as set out in the Notice.

Re-appointment

In terms of the provisions of the Companies Act, 2013 and the Articles of Association of the Company.

Mr. Harshal Shah, Director of the Company retires by rotation as Director at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

Your directors recommend reappointment of Mr. Harshal Shah as Director of thE Company. A resolution to the effect is placed for your consideration and approval.

The information on the particulars of Directors seeking appointment / re-appointment in terms of provisions of Clause 49 of the Listing Agreement of the Stack Exchange is provided in Report an Corporate Governance annexed to this report.

COMPANY SECRETARY

Mr. Mihir Mehta the erstwhile Company Secretary of the Company resigned during the financial year 2013- 14. Mr. Naveen Manghani has joined as Company Secretary of the Company effective from June 10, 2014.

AUDITORS

M/s. Manesh Mehta & Associates, Chartered Accountants, the Statutory Auditors of the Company will be retiring at the ensuing Annual General Meeting.

Your directors recommend reappointment of M/s. Manesh Mehta & Associates, Chartered Accountants as Statutory Auditors of the Company for a period of three years for the financial years 2014-15. 2015-16 and 2016-17 pursuant to Section 139 of the Companies Act, 2013 and the rules made thereunder A resolution to the effect is placed for your consideration and approval.

M/s. Manesh Mehta & Associates have confirmed their eligibility and willingness to accept the aforesaid reappointment as Statutory Auditors Dimeters'' comments on Auditors Qualification in Consolidated Auditors Report:

The Auditors have made qualification in their Report for the Consolidated Accounts on having not ascertained and eliminated thE unrealized profit element in the stocks lying with the subsidiaries out of inter-company transactions, in terms of the Accounting Standard-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 the extraction of the relevant information. This will enable the subsidiaries to provide information an unrealized profits in the stocks received from the Company.

Directors'' Responsibility Statement

Your Directors, in compliance of Section 217 (2AA) of the Companies Act, 1956, and to the best of their knowledge and belief, hereby confirm that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been consistently followed by the Company as stated in the Significant Accounting Policies and that no material departure was made.

(ii) Accounting policies have been consistently applied and your Directors made judgment and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year, March 31, 2014 and the profit of the Company for the year ended on that date

(iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The annual accounts have been prepared on a going concern basis.

Declaration under Section 212 of the Companies Act, 1956

Pursuant to Section 212 of the Companies Act, 1956, a summary of key financials of subsidiaries viz. Setco Automotive (UK) Ltd., (SAUL), Setco Automotive (NA), Inc, (SANAI), WEW Holdings Limited, is provided in this Annual Report.

In terms of circular dated February 8, 2011 issued by the Ministry of Corporate Affairs, the Board of Directors has granted requisite approval for not attaching the balance sheet, profit & loss account, report of the board of directors and report of the auditors of each of the subsidiary companies to the accounts of the Company.

The Company will make available these documents to the members on a request.

CORPORATE GOVERNANCE

A report on Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance with provisions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement is annexed to this Report.

Employee Stack Option Plan (ESOPs)

During the year, the Remuneration (Compensation) Committee allotted 5911 equity shares of Rs. 10/- each of your Company upon exercise of stock options by the employees. The details of shares issued to Directors under the Scheme are provided in the Corporate Governance Report attached herewith.

The disclosure, under Clause 12 of Securities and Exchange Board of india (Employee Stock Option Scheme and Employee Stock Purchase Scheme] Guidelines 1999 is set out in Annexure I to this Report.

The Company confirms that no employees have been issued share options during the year equal to or exceeding 1% of the issued capital of the Company at the time of the grant.

A certificate from the Statutory Auditors of the Company certifying that the Setco Automotive Limited Employee Stock Option Scheme - 2010 has been implemented in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme] Guidelines, 1999 as also the resolution passed by the members would be placed before shareholders at the Annual General Meeting for perusal.

Particulars of Employees

The information relating to the particulars of employees as required pursuant to Section 217 (2A) of the Companies Act, 195B read with Companies [Particulars of Employees] Rules 1975, as amended, are set out in the Annexure to Directors Report. However, as per Section 219(1)(b)(iv) of the Act, the Directors'' Report is circuited to all members excluding the aforesaid information about the employees. Any shareholder interested in obtaining a copy of said information may write to the Company Secretary at the Company''s Registered Office.

CORPORATE SOCIAL RESPONSIBILITY (COR]

Section 135 of the Companies Act, 2013 concerning Corporate Social Responsibility along with the Rules thereunder and revised Schedule VII were notified on February 27, 2014 to come into effect from April 1, 2014.

This is a welcome initiative which will embrace responsibility for corporate actions and encourage a positive impact through its activities on environment, consumers, employees, communities and all other members in public sphere who also are part of the stakeholders.

The company, being covered under the provisions of the said Section, has formed a Committee of Directors, titled Corporate Social Responsibility Committee'' comprising of following three Directors as its members:

1. Mr. Udit Sheth, Chairman

2. Mr. Harshal Shah

3. Mrs. Suhasini Sathe

The purpose of the Committee is to formulate and monitor the CSR policy of the Company.

Even before the above statutory provisions were enacted, your company has aimed to contribute 5% of its annual net profits to CSR activities, demonstrating a sense of responsibility towards society.

Today, we have built and upgraded twelve Anganwadis covering around 1400 children below 6 years and 250 nursing & expecting mothers from economically weaker sections of the society.

Our CSR initiatives are focused towards preventing malnutrition, improving pre-school education standards and empowering women to become economically more independent and confident. Malnutrition ratio in the areas covered by our anganwadis has fallen to less than 5% as compared to state level average of more than 40%. Infant mortality rate has also become nil.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

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

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

C. Foreign Exchange Earnings and Outgo: Details of foreign exchange earnings and outgo during the financial year 2013-2014 are furnished in Nates to the Accounts.

QUALITY STANDARD ACCREDIATION

Your Company is ISO 9002 as well as TS 16949 certified in line with the global requirements of the automotive sector by Bureau Veritas Certification (formerly BVQI).

Further, the Company''s Unit is accredited with Environmental Management System (EMS) (ISO 140011) as well as Occupational Health and Safety Standards (OHSAS 18001) Certification.

APPRECIATIONS:

Your Directors take this opportunity to thank the customers, shareholders suppliers, bankers, business partners/assatiates, financial institutions and Central and State Governments for their consistent support and encouragement to the company. The Beard places on record its appreciation for the dedication and commitment of the employees at all levels, which has continued to be our major strength.

For and on behalf of the Board

Sd/- Harish Sheth Chairman and Managing Director

Place: Mumbai Date: August 5, 2014


Mar 31, 2013

Dear Members,

The Directors have the pleasure in presenting this Thirtieth Directors'' Report together with the audited Annual Accounts of the Company for the financial year ended March 31, 2013.

FINANCIAL PERFORMANCE

The highlights of the financial position for the year under review as compared to the corresponding period in the previous year are given below: .

[Rs. in Cr.] Particulars Standalone Consolidated 2012-13 2011-12 2012-13 2011-12

Net Sales 340.78 365.37 399.36 417.65

Operating EBIDTA 56.26 69.78 61.48 78.48

Profit before Taxation 29.75 42.32 29.45 46.10

Profit after Taxation 27.34 42.42 26.14 45.47

Earnings Per Share (in Rs.) (basic S. considering exceptional items) 10.28 16.03 9.83 17.18

DIVIDEND

Your Directors are pleased to recommend Dividend at 26.5% (Rs. 2.65/- per Equity Share of Rs. 10/- each) on equity shares for the year ended March 31, 2013, maintaining the dividend outflow as per the previous year, subject to the approval of shareholders at the ensuing annual general meeting of the Company. The Dividend distribution would result in cash outflow of Rs. 8.27 Cr (including Dividend Distribution Tax).

SHARE CAPITAL

The Authorised Share Capital of the Company was increased from Rs. 30 Crores divided into 3 Crore equity shares of Rs. 10/- each to Rs. 50 Crores divided into 5 Crores equity shares of face value of Rs. 10/- each.

Post March 31, 2013, the Company issued 5,368 Equity Shares of face value Rs. 10/- each between the period April 2013 to August 2013 under Setco Automotive Limited Employees Stock Option Scheme 2010, thereby increasing the paid up Share Capital to Rs. 266,774,810/-.

OPERATIONS AND FINANCE

Your Directors have analyzed Company''s operations and financials in detail in Management Discussion and Analysis.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year and as such no amount of interest and principal fixed deposit was outstanding as on the balance sheet date.

AUTOMOTIVE INDUSTRY

Faced with global uncertainty, cyclical and structural factors, India''s growth slowed down to 5 per cent for the Financial Year 2012-13. The slowdown in growth coupled with lack of investments in the mining and manufacturing sectors, high interest rates has led to worsening situations in auto component industry in FY 2012-13. For the year, M&HCV segment recorded a 11% decrease in sales as compared to previous year.

Amidst the overall slowdown in the economy, the focus area of the Company, continued the stable growth. Consequently, clutch demand in Aftermarket segment grew, an area which is core to the Company''s operations. With broad-basing of economic activities in the Aftermarket, it is expected that the Company will continue to grow in the next few years.

SUBSIDIARIES

During the year under review, Company''s subsidiaries have performed well despite slowdown in the global economies.

BOARD OF DIRECTORS

Changes in the Board

Mr. Pratap Merchant, Independent Director of the Company resigned from the Board effective from July 6, 2012 and Mr. Satish Deshpande, Independent Director of the Company resigned from the Board effective from May 29, 2013.

During their tenure on the Board, their vast and rich experience was very useful in directing the Company''s strategies. The Board places on record its deep appreciation and gratitude for their guidance and contribution to the Company.

Re-appointment

In terms of the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. B.L Naik and Mr. Ashok Kumar Jha, Directors of the Company retire by rotation as Director at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Your Directors recommend re-appointment of Mr. B.L. Naik and Mr. Ashok Kumar Jha as Directors of the Company. A resolution to the effect is placed for your consideration and approval.

The information on the particulars of Directors seeking appointment / re-appointment as required under Clause 49 of the Listing Agreement of the Stock Exchange is provided in Report on Corporate Governance annexed to this report.

AUDITORS

M/s. Manesh Mehta S. Associates, Chartered Accountants, the Statutory Auditors of the Company will be retiring at the ensuing Annual General Meeting. M/s. Manesh Mehta & Associates have confirmed their eligibility and willingness to accept appointment as Statutory Auditors for Financial Year 2013-2014.

Your Directors recommend re-appointment of M/s. Manesh Mehta S. Associates, Chartered Accountants as Statutory Auditors of the Company for the financial year 2013-14. A resolution to the effect is placed for your consideration and approval.

Director''s comments on Auditors Qualification in Consolidated Auditors Report:

The Auditors have given a qualified opinion in the consolidated accounts on the Auditors Report for the year under review. As per the opinion, the unrealized profits in the stocks lying with the subsidiaries out of inter-company transactions, is unascertained and not eliminated, which was required to be eliminated as per Accounting Standard-21, "Consolidated Financial Statements.

In view of the method of accounting followed and the stock valuation adopted, it was not possible to bifurcate the different sources of stock. However, the steps are being taken to modify the method and the accounting software being modified to enable the extraction of the relevant information. This will enable the subsidiaries to provide information on unrealized profits in the stocks received from the Company.

Directors'' Responsibility Statement

Your Directors, in compliance of Section 217 C2AA) of the Companies Act, 195S, and to the best of their knowledge and belief, hereby confirm that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been consistently followed by the Company as stated in the Significant Accounting Policies and that no material departure was made.

[ii] Accounting policies have been consistently applied and your Directors made judgment and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year, March 31, 2013 and the profit of the Company for the year ended on that date.

tiii) Proper and sufficient care, has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The annual accounts have been prepared on a going concern basis.

Declaration under Section 212 of the Companies Act 1956

Pursuant to Section 212 of the Companies Act, 1956, a summary of key financials of subsidiaries viz. Setco Automotive (UK) Ltd., [SAUL), Setco Automotive tNA), Inc, [SANAD, WEW Holdings Limited, is provided in this Annual Report.

In terms of circular dated February 8, 2011 issued by the Ministry of Corporate Affairs, the Board of Directors have granted requisite approval for not attaching the balance sheet, profit & loss account, report of the board of Directors and report of the auditors of each of the subsidiary companies to the accounts of the Company.

The Company will make available these documents to the members on a request.

CORPORATE GOVERNANCE

A report on Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance with conditions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement are annexed to this Report.

HUMAN RESOURCES

With rapid changing economy and ever increasing competition, HR plays significant role by renovating itself from a traditional role to a strategic value-added role. This requires transition from the conventional delivery of HR services, to the adoption of those practices and roles through which HR adds competitive value to the business.

The Company follows affirmative action for attracting, developing and retaining the right talent to help deliver our commitment. The HR function aims to create a stimulating environment that demands performance and nurtures creativity, recognizes achievements individually and collectively.

At Setco, our team sources the right talent and provides them with immense opportunities for exciting and rewarding careers ahead. Great emphasis is placed on skill building both technical and soft skills. Employees at all levels undergo a minimum number of days training during the year.

Employee''s relations have remained cordial and there have been no instances of strikes, lockouts or any other disruptive labour disputes. We provide various benefits to our employees, addressing their social and security needs such as Personal Accident and Healthcare Coverage for employees and their dependents. The wages and benefits of our blue collared employees are generally established by collective bargaining agreement with Workers Committee democratically elected.

The Company also continued its practice of felicitating and rewarding employees for participating in Kaizen competitions, Suggestions Schemes etc. contributing towards improving efficiencies and reducing costs. The Company has instituted Good Service Awards to recognise employees rendering long service.

Company has ambitious growth plans going forward and for realising these, it substantially depends on quality and support of our human capital.

Employee Stock Option Plan (ESOPs)

During the year, the Remuneration [Compensation] Committee allotted 168,082 equity shares of Rs. 10/- each of your Company upon exercise of stock options by the employees. Post financial year, the Committee allotted 5,368 equity shares of face value of Rs. 10/- each under Setco Automotive Limited Employee Stock Option Scheme - 2010. The details of shares issued to Directors are provided in the Corporate Governance Report attached herewith.

The disclosure, under Clause 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is set out in Annexure I to this Report,

The Company confirms that no employees have been issued share options during the year equal to or exceeding 1% of the issued capital of the Company at the time of the grant.

A certificate from the Statutory Auditors of the Company certifying that the Setco Automotive Limited Employee Stock Option Scheme - 2010 has been implemented in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the resolution passed by the members is attached to this report and will also be placed before shareholders at the Annual General Meeting for perusal.

Particulars of Employees

The information relating to the particulars of employees as required pursuant to Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees Rules, 1975, as amended, are set out in the Annexure to Directors Report. However, as per Section 219(1)(b)(iv) of the Act, the Directors'' Report is circulated to all members excluding the aforesaid information about the employees. Any shareholder interested in obtaining a copy of said information may write to the Company Secretary at the Company''s Registered Office.

CORPORATE SOCIAL RESPONSIBILITY (CSR1

Setco which contributes 5% of its annual net profits to its CSR activities believes in voluntarily giving back to the stakeholders at large and the community we work with by improving the quality of life as a whole. Through our CSR initiatives we have been able to bring about significant progress in the community by reducing child malnutrition, improving school readiness and empowering women to become more independent, confident and involved in their family and community decision making

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

A. Conversation of Energy: The operations of the

Company are not energy - intensive. However, the Company takes necessary steps wherever applicable, to conserve energy. To this extent, employees and operators are regularly educated about saving energy.

B. Technology Absorption: The Company''s product i.e. clutches for commercial vehicles are manufactured under the proprietary technology and heritage ''LIPE'' Brand. Most of the components for manufacturing clutches are procured indigenously. Certain critical components are imported in order to offer better quality to customers and at a competitive price.

C. Foreign Exchange Earnings and Outgo: Details of foreign exchange earnings and outgo during the financial year 2012-2013 are furnished in notes to the accounts.

QUALITY STANDARD ACCREDITATION

Your Company is ISO 9002 as well as TS 16949 certified in line with the global requirements of the automotive sector by Bureau Veritas Certification (formerly BVQU.

Further, the Company''s Unit is accredited with Environmental Management System [EMS] [ISO 14001) as well as Occupational Health and Safety Standards EOHSAS 18001) Certification.

APPRECIATIONS

Your Directors take this opportunity to thank the customers, shareholders, suppliers, bankers, business partners/associates, financial institutions and Central and State Governments for their consistent support and encouragement to the Company. The Board places on record its appreciation for the dedication and commitment of the employees at all levels, which has continued to be our major strength.



For and on behalf of the Board

Sd/-

Harish Sheth

Chairman and Managing Director

Place: Mumbai

Date: August 12, 2013


Mar 31, 2012

The Directors have the pleasure in presenting this Twenty Nineth Directors' Report together with the audited Annual Accounts of the Company for the financial year ended March 31, 2012.

FINANCIAL PERFORMANCE

The highlights of the financial position for the year under review as compared to the corresponding period in the previous year are given below:

(Rs. in Mn)

Standalone Consolidated Particulars 2011-12 2010-11 2011-12 2010-11

Net Sales 3708.0 3026.5 4230.7 3529.1

Operating EBIDTA 697.8 591.7 785.0 670.0

Profit before Taxation 423.2 424.1 461.1 439.5

Profit after Taxation 424.2 328.7 454.7 335.0

Earnings Per Share (in Rs.) (basic) 24.04 18.63 25.77 18.99

DIVIDEND

Your Directors are pleased to recommend Dividend at 40% (Rs. 4/- per Equity Share of Rs. 10/- each) on equity shares for the year ended March 31, 2012, maintaining the dividend rate as per the previous year, subject to the approval of shareholders at the ensuing annual general meeting of the Company. The Dividend distribution would result in cash outflow of Rs. 82 Mn (including Dividend Distribution Tax).

BONUS ISSUE

Your Directors are also pleased to state that the Shareholders in the Extra Ordinary General Meeting (EGM) held on August 6, 2012 have approved issue of bonus shares in the ratio of 1 (One) bonus equity share of face value Rs. 10/- each fully paid up for every 2 (two) equity shares of face value Rs. 10/- each fully paid up, to be held on the record date. However, the bonus shares would not be eligible for dividend for the financial year 2011-12.

SHARE CAPITAL

The Company issued 76783 Equity Shares of face value Rs. 10/- each between the period April 2012 to July 2012 under Setco Automotive Limited Employees Stock Option Scheme 2010, thereby increasing the paid up Share Capital to Rs. 177,205,430/-.

OPERATIONS AND FINANCE

Your directors have analyzed Company's operations and financials in detail and the same is provided in the attached report on Management Discussion and Analysis.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year and as such no amount of interest and principal fixed deposit was outstanding as on the balance sheet date.

AUTOMOTIVE INDUSTRY

Rs.1600 billion Indian Auto Component Industry, witnessed moderation in revenue growth and decelerated sales volume growth. This was mainly on account of increase in interest costs, high inflation on the domestic front, fuel price rise and to an extent European Crisis.

The Automotive Industry registered a growth of 13.7 % in 2011-12. This growth was driven by approx 19% growth in commercial vehicle segment.

While the outlook of the industry still remains strong for the long run, the industry faced strong challenges in the form of threat of low cost imports, currency volatility and ability to invest on product development to be able to move up the value chain.

Despite macro-economic challenges like inflation, high interest rates and rising fuel prices, the Company still drove double digit revenue growth at 20 % on consolidated and 22% on standalone basis in 2011-12, which was mainly supported by

(i) Expanding product portfolio;

(ii) Changing product mix in favour of higher realization products;

(iii) Exports to Europe for CV applications supported by a favourable exchange rate scenario;

(iv) increased sales to domestic replacement market; and

(v) diversifying into light commercial vehicle segment.

SUBSIDIARIES

During the year under review, Company's subsidiaries have performed well despite slowdown in the global economies.

BOARD OF DIRECTORS

Changes in the Board

The Board at its meeting held on November 14, 2011 appointed Mr. D. Rajagopalan as an Additional Director of the Company.

However, in view of his appointment as Chief Information Commissioner of the State of Gujarat, Mr. Rajagopalan tendered his resignation w.e.f. November 23, 2011 as pursuant to the provisions of Right to Information Act, Mr. D. Rajagopalan cannot hold any office of profit or pursue any profession.

The Board acknowledges the guidance provided by Mr. Rajagopalan during his short association with the Company.

Mr. Pratap Merchant, Independent Director of the Company resigned from the Board effective from July 6, 2012. During a long tenure of eleven years that Mr. Merchant was on the Board, his contributions were immense. His vast and rich experience was very useful in directing the Company's strategies. The Board places on record its deep appreciation and gratitude for his guidance and contribution to the Company.

Re-appointment

In terms of the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Harshal Shah and Mr. Arun Arora, Directors of the Company retire by rotation as Director at the ensuing Annual General Meeting and being eligible, offer themselves for re- appointment.

The Information on the particulars of Directors seeking appointment / re-appointment as required under Clause 49 of the Listing Agreement of the Stock Exchange is provided in Report on Corporate Governance annexed to this report. Your directors recommend reappointment of Mr. Harshal Shah and Mr. Arun Arora as Directors of the Company. A resolution to the effect is placed for your consideration and approval.

AUDITORS

M/s. Manesh Mehta & Associates, Chartered Accountants, the Statutory Auditors of the Company will be retiring at the ensuing Annual General Meeting. M/s. Manesh Mehta & Associates have confirmed their eligibility and willingness to accept appointment as Statutory Auditors for Financial Year 2012-2013.

Your directors recommend reappointment of M/s. Manesh Mehta & Associates, Chartered Accountants as Statutory Auditors of the Company for the financial year 2012-13.

A resolution to the effect is placed for your consideration and approval.

Directors' Responsibility Statement

Your Directors, in compliance of Section 217 (2AA) of the Companies Act, 1956, and to the best of their knowledge and belief, hereby confirm that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been consistently followed by the Company as stated in the Significant Accounting Policies and that no material departure was made for the same.

(ii) Accounting policies have been consistently applied and your Directors made judgment and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year, March 31, 2012 and the profit of the Company for the year ended on that date.

(iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The annual accounts have been prepared on a going concern basis.

Declaration under Section 212 of the Companies Act 1956

Pursuant to Section 212 of the Companies Act, 1956, a summary of key financials of subsidiaries viz. Setco Automotive (UK) Ltd., (SAUL), Setco Automotive (NA), Inc, (SANAI), WEW Holdings Limited, is provided in this Annual Report.

Pursuant to notification issued by Ministry of Corporate Affairs, the companies are now exempted from attaching the copy of the Balance Sheet, Profit & Loss Account, Directors' Report, Auditors' Report of the subsidiaries with the Balance Sheet of the Company on fulfillment and disclosure of necessary information as stated in the said notification.

The Company will make available these documents upon request by any member of the Company.

INVESTMENTS

The members at its general meeting held on September 20, 2007 had authorized the Board to make investments up to Rs. 50 crores as required under the provisions of the Companies Act, 1956.

Considering the net worth on March 31, 2012, the eligible amount up to which the Company can invest is more than the earlier sanction. The Company proposes to invest its surplus funds in suitable investment avenues from time to time.

CORPORATE GOVERNANCE

Your Company is driven with belief in transparency, better corporate governance practices and compliances, not restricting to the requirement of Clause 49 of the Listing Agreement but extending / strengthening internal norms of compliance and reporting.

As required, the Management Discussion and Analysis Report and the Corporate Governance Report along with Auditors' Certificate thereon form part of this Report is attached herewith.

EMPLOYEES RELATIONS

The industrial relation during the period under review remained cordial. The Company has received full cooperation from its employees at all levels during the year. The efforts made by them in achieving all round improvements in operations and management is commendable and your company sincerely appreciates their contribution.

HUMAN RESOURCES

With globalization, saturation of the job market due to recent downturn in global economies, various Companies started concentrating wider attention to its human capital. Further, to develop a competitive edge over competitors, the Companies leveraged workforce as a competitive weapon.

At Setco, we believe that machines are important in the production process but the man behind the machines is more important. He transforms the lifeless factors of production into useful products. Following this strategy, the Company continued concentrating on providing regular training, education and developments needs and better working facilities to ensure that the employee are more competent, able and highly productive.

This is reflected with number of our employees who are associated with the Company for more than 15 years is growing year on year.

The Company also continued its practice of felicitating and rewarding employees for their contributions and participation in Suggestion Schemes, Kaizens etc. These have contributed favorably in terms of cost reduction and improvement in efficiencies. The Company also rewards employees for their long services on completion of 15 years as well as 25 years in service.

EMPLOYEE STOCK OPTION PLAN (ESOPS)

Details of shares issued under the Setco Automotive Limited Employee Stock Option Scheme 2010 as also the disclosures in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended from time to time, are set out as follows:

Particulars Grant I Grant II

a) Total number of Options granted

- For Financial Year 2010-11 92,250 115,750

- For Financial Year 2011-12 Nil Nil

b) Pricing Formula Fair Market Value of the Shares as on the date prior to the date of meeting of the Compensation Committee in which Options would be granted to the Eligible Employees.

(c) Options Vested during the year 45,677 35,041

(d) Options Exercise during the year Nil Nil

(e) Total number of shares arising as a result of exercise of Nil Nil Option

(f) Options lapsed 1,424 10650

(g) Variation of terms of Options N.A. N.A.

(h) Money realized by exercise of Options Nil N.A.

(i) Total number of Options in force 90,826 105,100

(j) Grant to Senior Management Nil during the financial year 2011-12

(k) Employees receiving 5% or more of the total number of None Options granted during the year

(l) Employees granted Option equal to or exceeding 1% of None the issued capital

(m) Diluted earnings per share pursuant to issue of shares Rs. 24.01 per share on exercise of Options calculated in accordance with Accounting Standard (AS) 20 'Earnings Per Share'

(n) Method of calculation of Employee compensation cost The employee compensation cost has been calculated using the intrinsic value method of accounting for Options issued under the Scheme.

(o) The Difference between the employee compensation Employee compensation cost would have been higher cost computed using intrinsic value of the stock options, by Rs. 22,28,648 during the year, had the Company used and the fair value of the options and the impact of this fair value method for accounting the options issued difference on profits and EPS under ESOS.

(p) Impact of this difference on Profits and on EPS of the Profits would have been lower by Rs. 22,28,648 and Company E.P.S. would have been lower by Rs. 0.13 during the year, had the Company used fair value method of accounting the options issued under ESOS.

(q) Weighted average exercise price Rs.93 Rs.124

(r) Weighted average fair value of options based on Black Rs.46.31 Rs.38.28 Scholes methodology

(s) Significant assumptions used to estimate fair value of options including weighted average

i. Risk free interest rate 8.36% 8.28%

ii. Expected life 2.00 2.51

iii. Expected volatility 43.61% 46.88%

iv. Expected dividends 1.73% 1.73%

v. Closing market price of share on a date prior to Rs.119.90 Rs.119.90 date of grant

No employees have been issued share options during the year equal to or exceeding 1% of the issued capital of the Company at the time of the grant.

The Remuneration Committee at its meetings held on April 10, 2012, May 14, 2012 and July 5, 2012 allotted 61,199 equity shares, 11,062 equity shares and 4,522 equity shares respectively aggregating to 76783 equity shares of face value of Rs. 10/- each under Setco Automotive Limited Employee Stock Option Scheme - 2010. The aggregate amount realized from exercising these shares was Rs. 8.14 Mn. The details of shares issued to Directors are provided in the Corporate Governance Report attached herewith.

A certificate from the Statutory Auditors of the Company certifying that the Setco Automotive Limited Employee Stock Option Scheme - 2010 has been implemented in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the resolution passed by the members will be placed before shareholders at the Annual General Meeting for perusal.

Particulars of Employees

The information relating to the particulars of employees as required pursuant to Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees Rules, 1975, as amended, are set out in the Annexure to Directors Report. However, as per Section 219(1)(b)(iv) of the Act, the Directors' Report is circulated to all members excluding the aforesaid information about the employees. Any shareholder interested in obtaining a copy of said information may write to the Company Secretary at the Company's Registered Office.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company realizes its moral obligation towards corporate social responsibility and has committed to spend up to 5% of its net profits towards CSR.

The Company operated Anganwadis (Nand Ghar) in the Kalol district of Gujarat. These Anganwadi's provide for the basic food / nutrition, education and well being of children between the age group of 3 years to 6 years. They also cater to the nutritional and medical requirements of under privileged expectant mother in the surrounding villages. Inspired by this noble cause, our European supplier M/s. Miba Frictec GmbH has sponsored two additional Anganwadi's during the year thus bringing the total to five. Currently these Anganwadi's support approx 360 Children between the age group of 3 years to 6 years and about 70 expectant mothers from economically weaker section are availing the aforesaid facilities. Further, around 100 women in the surrounding area were given self employment and supportive training.

The Company is identifying centres to build additional Anganwadis to cater to a larger section of this community. The company has been encouraging its employees to educate their children by sponsoring the entire education cost. This program has been a great success and approx 50 students have completed their academic studies and have started their professional lives. Currently there are approx 500 students at different levels of their academic career who are taking advantage of this facility.

The Company has signed MOU with the Government of Gujarat for developing K-12 school with sports academy. The Company is awaiting allotment of land by the Government.

During the year the Company has associated itself with Agnihotri K-G Vyas Charitable Trust to provide Education Annakshetra (Food for disabled), Medical Aid and Preserving & Uplifting of Culture through a more than 100 years old organization named "Shri Krishnashram".

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

A. Conversation of Energy: The operations of the

Company are not energy - intensive. However, the Company takes necessary steps wherever applicable, to conserve energy. To this extent, employees and operators are regularly educated about saving energy.

B. Technology Absorption: The Company's product i.e. clutches for commercial vehicles are manufactured under the proprietary technology and heritage 'Lipe' Brand. Most of the components for manufacturing clutches are procured indigenously. Certain critical components are imported in order to offer better quality to customers and at a competitive price.

C. Foreign Exchange Earnings and Outgo: Details of foreign exchange earnings and outgo during the financial year 2011-2012 are furnished in notes to the accounts.

QUALITY STANDARD ACCREDIATION

Your Company is ISO 9002 as well as TS 16949 certified in line with the global requirements of the automotive sector by Bureau Veritas Certification (formerly BVQI).

Further, the Company's Unit was accredited with Environmental Management System (EMS) (ISO 14001) as well as Occupational Health and Safety Standards (OHSAS 18001) Certification.

APPRECIATIONS:

Your Directors place on record their sincere appreciation for the assistance and guidance from all our stakeholders including financial institutions and banks associated with the Company. Your Company's employees are instrumental in your Company's scaling new heights year after year. The commitment of the each and every Setco Family Member are appreciated and deeply acknowledged. We look forward to delivering more value to every stakeholder.

For and on behalf of the Board

Harish Sheth

Chairman and Managing Director

Mumbai

August 6, 2012


Mar 31, 2010

The Directors have pleasure in presenting this Twenty Seventh Directors Report together with the audited Annual Accounts of the Company for the financial year ended March 31, 2010.

FINANCIAL PERFORMANCE

Your Company outperformed industry expectations during the Financial Year 2009-10 with net sales increased by 30.5% from Rs. 1,602.2 Mn in the previous year to Rs. 2,091.0 Mn, the Net Profit after Tax increased by 55.14% from Rs. 114.7 Mn in the previous year to Rs. 178.1 Mn and Earning Per Share increased by 55.1% at Rs. 20.18 from that of Rs. 13.01 in previous year. The highlights of the financial position for the year under review as compared to the corresponding period in the previous year are given below:

(Rs. in Mn)

Standalone Consolidated

Particulars

2009-10 2008-09 2009-10 2008-09

Net Sales 2,091.03 1,602.18 2,558.52 2,320.03

Operating Profit 394.18 264.30 395.25 327.59

Profit before Taxation 246.29 142.30 197.25 165.91

Profit after Taxation 178.06 114.75 143.14 133.22

DIVIDEND

With the robust performance of the Company, your Directors recommend Dividend at 30 % (Rs. 3/- per Equity Share of Rs. 10/- each) for the year ended March 31, 2010 increased from 25 % (Rs 2.5 per share) in the previous year. The Dividend distribution would result in cash outflow of Rs. 30.9 Mn (including Dividend Distribution Tax).

OPERATIONS AND FINANCE

Your directors have analysed the Companys Operations and Finances. A detailed report has been provided in the attached Management Discussion and Analysis.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits and as such no amount of interest and principal fixed deposit was outstanding as on the balance sheet date.

AUTOMOTIVE INDUSTRY

Despite the global slowdown, the Indian Industry managed to come out of it relatively unscathed. Various measures taken by the government and the central monetary agency helped the Indian economy to reverse the trend particularly from the 2nd half of 2009-2010 with economic recovery becoming more visible from the third quarter of the year. However, rising inflation on account of the increase in the price of food products was a cause of concern. The increase in interest rates to control the rise in inflation as well as the appreciation of the Rupee, particularly from last quarter of the year were some of the worrying issues.

Meanwhile, the OEM segment recorded robust growth in M&HCV segment, especially in the second half, with production and sales during 2009-2010 increasing by 30% and 34% respectively YoY. The Aftermarket segment also registered steady growth during the year. As a part of this upward trend, the auto and auto component sectors have also seen a major improvement in their markets. The international market is yet to really bounce back into shape, however with strong internal demand, the automobile industry is expected to continue to do well, with the auto component industry also receiving its due share in this growing market.

BOARD OF DIRECTORS

The composition of Board of Directors is a combination of Independent and Non Independent Directors, constituted in compliance of Companies Act, 1956, Listing Agreement with the Stock Exchange and the best practices in Corporate Governance. The Board functions either as full Board or through various committees, namely, Audit Committee, Shareholders / Investors Grievance Committee and Remuneration Committee.

DIRECTORS

Appointment of Director under Section 260

The Board at its meeting held on January 22, 2010 appointed Mr. Ashok Kumar Jha as an Additional Director of the Company. In accordance with Section 260 of the Companies Act, 1956 and Article 173 of Articles of Association, Mr. Ashok Kumar Jha holds office up to the date of forthcoming Annual General Meeting of the Company. The Company has received notice under section 257 of the Companies Act, 1956 from a shareholder proposing Mr. Ashok Kumar Jha be appointed as a Director.

Reappointment of Directors by Rotation

In terms of the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Arun Arora and Mr. Bhalachandra L. Naik, Directors of the Company retire by rotation at the ensuing Annual General Meeting and being eligible, offers themselves for re-appointment

AUDITORS

M/s. Manesh Mehta & Associates, Chartered Accountants, the Statutory Auditors of the Company will be retiring at the ensuing Annual General Meeting. M/s. Manesh Mehta & Associates have confirmed their eligibility and willingness to accept office as Statutory Auditors for Financial Year 2010-2011.

In compliance of Section 217 (3) of the Companies Act, 1956, your directors report that the notes to the Accounts in Schedule 18 and the Directors Responsibility Statement in this report are self explanatory as regards to their comments on the Auditors remarks and should be taken accordingly.

Directors Responsibility Statement:

Your Directors, in compliance of Section 217 (2AA) of the Companies Act, 1956, and to the best of their knowledge and belief, hereby confirm that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been consistently followed by the Company as stated in the Significant Accounting Policies and Notes to the Accounts, Schedules 17 and 18 alongwith proper explanation relating to material departures wherever necessary.

(ii) Selected accounting policies were applied consistently and the Directors made judgment and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year, 31st March 2010 and the profit of the Company for the year ended on that date.

(iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The annual accounts have been prepared on a going concern basis.

Corporate Governance:

Your Company is committed to observing the best Corporate Governance practices and ensuring all compliances with the requirement of Clause 49 of the Listing Agreement relating to Corporate Governance. The Company has complied with all the norms and disclosures

as per the provisions of the Clause 49 of the Listing Agreement with Stock Exchange. The Management Discussion and Analysis Report and the Corporate Governance Report along with Auditors Certificate thereon form part of this Report.

The Company has adopted the Setco Automotive Limited Code of Conduct for Prevention of Insider Trading, which enlightens the Companys commitment to transparency and fairness in dealing with all stakeholders and in ensuring adherence to all laws and regulations.

Particulars of Employees:

The information relating to the particulars of employees as required pursuant to Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, are to be set out as Annexure to this Directors Report. However, as per Section 219(l)(b)(iv) of the Act, the Directors Report is circulated to all members excluding the above information about the employees. Any shareholder interested in obtaining a copy of said information may write to the Company Secretary at the Companys Registered Office.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

A. Conversation 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. The Companys maximum requirements for producing clutches are procured indigenously. However, certain critical components are continued to be imported in order to offer better quality to customers and at a competitive price.

C. Foreign Exchange Earnings and Outgo: Details of foreign exchange earnings and outgo during the financial year

2009-2010 are set out in Note 21 of Schedule 18 of the

Annual Accounts.

QUALITY STANDARD ACCREDITATION

Your Company is ISO 9002 as well as TS 16949 certified in line with the global requirements of the automotive sector by Bureau Veritas Certification (formerly BVQI). Your Company expects to soon receive certification for Environmental Management System (EMS) (ISO 14001) as well as Occupational Health and Safety Standards (OHSAS 18001).

EMPLOYEES RELATIONS

The industrial relations during the period under review remained cordial. Company has received full cooperation from its employees at all levels during the year. The effort made by them in achieving all round improvements in operations and management is commendable and your company sincerely appreciates their contribution.

Human Resources:

Setco believes that its employees are its true assets. Special care is taken in continuously providing training to the employees at all levels to develop and improve their skills and ensure greater productivity. Such trainings are arranged in-house as well as by deputing the employees for specialised courses. The management takes care in allocating a special budget to training while formulating its yearly budget.

During the year, the managements move to reward employees who provided innovative ways and means on cost effectiveness and process improvement etc received immense response from the operators and employees at the operating level. Through this manner the company was able to improve the process control and increase cost effectiveness without any compromise on quality. The exercise also helped to develop a sense of "Participative Management".

Declaration under Section 212 of the Companies Act 1956

The statement pursuant to Section 212 of the Companies Act,

1956 containing details of the Companys subsidiaries viz. Setco Automotive (UK) Ltd., (SAUL), Setco Automotive (NA), Inc, (SANAI), WEW Holdings Limited, is provided in this Annual Report.

The Company was exempted from attaching the copy of the Balance Sheet, Profit & Loss Account, Directors Report, Auditors Report of the subsidiaries with the Balance Sheet of the Company in the preceding financial years. A similar application for exemption in the current financial year was also made to Ministry of Corporate Affairs and the approval is awaited. Any member interested in obtaining the above may write to The Company Secretary and upon receipt of such request, these documents will be made available.

The summary of financial performances of subsidiaries has been separately furnished forming part of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) In addition to setting up and running the 3 Anganwadis set up last year, the company is working on constructing 7 more Anganwadis. Over 240 Children from economically backward classes avail the facilities offered by Anganwadis. At an average 48 pregnant women who cannot otherwise afford, special health checkups and dietary supplements are also provided here. Nearly 40 women from this area attend vocational classes here to develop skills such as stitching.

To create awareness about the Environment, Setco, on World Environment Day, undertook a tree plantation drive this year with the children from the Anganwadi.

The Companys employees, in a bid to give something back to the Society, participated in Blood Donation Drive. 184 employees donated blood at the event which was organised under the banner of Red Cross Society.

As a part of our effort to encourage education, we provide scholarships for the children of all employees with special incentives for girls.

The ITI in Zalod (Gujarat) that was adopted by the company meanwhile continues to remain a priority with the company. This project was taken up with the aim of providing quality technical education in order to create gainful employment opportunities for youth from this economically backward tribal region.

In a bid to take its focus on education to the next level, a blueprint is being worked out for setting up a school and a sports complex to cater to classes uptol2th standard specially targeting children from underprivileged backgrounds.

ACKNOWLEDGEMENTS

The Directors express their deep sense of gratitude to the Companys bankers and associated financial institutions. Their unstinted and continued support has great values for the Company in achieving the success it has recorded.

The Directors also like to thank the Companys stakeholders, supply chain partners and other business associates for their continued co-operation and support and look forward for the current year and in the coming years as well.

The Directors would also like to place on record, the dedication and contribution made by employees at all levels, who through their dedication and hard work have enabled the Company to post a remarkable performance year after year and look forward to their support in future as well.

For and on behalf of the Board

Sd/-

Harish Sheth

Chairman and Managing Director

Mumbai

August 12, 2010

 
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