Directors Report of Setco Automotive Ltd.

Mar 31, 2018

Dear Members,

The Directors are pleased to present the Thirty Fifth Annual Report together with the audited financial statements for the financial year (FY) ended March 31, 2018. 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 highlights of the financial performance for the year under review as compared to the previous financial year are given below:

(Rs. in Cr. except for EPS)

Particulars	Standalone		Consolidated
	2017-18	2016-17	2017-18	2016-17
Revenue from Operation & Other Income	547.72	549.86	603.58	607.92
Gross Profit before Finance Cost & Depreciation	84.94	72.03	83.09	59.21
Less: Finance Cost	31.25	31.32	50.41	51.04
Less: Depreciation	17.76	16.61	32.21	30.22
Profit/(Loss) before Tax	35.93	24.10	0.47	(22.05)
Less: Provisions for Tax Expenses	7.12	5.80	1.43	(8.45)
Profit/ (Loss) from continuing operations	28.00	18.30	(0.96)	(13.60)
Other Comprehensive Income	0.09	0.45	0.03	0.40
Profit/(Loss) after Taxes including other Comprehensive Income	28.90	18.75	(0.93)	(13.20)
Less: Non-Controlling Interest	-	-	(4.72)	(4.86)
Profit/(Loss) for the Year attributable to Equity Holders of the parent	28.90	18.75	3.79	(8.34)
Earning Per Share (Rs.)	2.16	1.37	0.28	(0.65)

The Financial Results of the Company are discussed in detail in the Management Discussion & Analysis Report.

SHARE CAPITAL

During the financial year 2017-18, there was no change in the paid up share capital of the Company. Total paid up share capital of the Company stands at 13,35,96,675 Equity Shares of Rs.2/- each aggregating to Rs. 26,71,93,350/-. Details of Directors’ shareholding as on March 31, 2018 are mentioned in the Annexure to this Directors’ Report in ‘Form MGT - 9’.

The equity shares of the Company continue to be listed on BSE Limited (“BSE”) and National Stock Exchange (“NSE”). The stipulated listing fees for FY2018-19 have been paid to both stock exchanges.

DIVIDEND

The Board of Directors at its meeting held on May 23, 2018 has recommended a dividend of Rs. 0.80 paisa i.e. @ 40% per equity share for the year ended March 31, 2018. The amount of Dividend and Tax thereon aggregate to Rs. 1288.50 lakhs. The dividend on equity shares, subject to the approval of shareholders at the Annual General Meeting (AGM) to be held on September 28, 2018 will be paid on or after September 29, 2018 to the Members whose names appear in the Register of Members as of the close of business hours on Friday, September 21, 2018 [Adjusted as Members’ Register and Share Transfer Books shall be closed from Saturday, September 22, 2018 to Friday, September 28, 2018 (both days inclusive)].

Shares that may be allotted on exercise of stock options granted under the Employees Stock Options Scheme before the book closure date for payment of dividend will rank pari-passu with the existing shares and be entitled to receive the dividend.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits including from the public and, as such, no amount of principle or interest was outstanding as of the Balance Sheet date.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The particulars of loans, guarantees and investments covered under Section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, form part of the Notes to the financial statements provided in this Annual Report.

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 arm’s 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 Indian Accounting Standard (Ind AS-24) 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 Company’s website at the link http://www.setcoauto.com/statutory-policies.

The details of related party transactions are given in Note 37 to the financial statements.

EMPLOYEE STOCK OPTION PLAN (ESOPS)

(The Company implemented the Employee Stock Option Scheme (“Scheme”) in accordance with the Securities & Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (‘the SEBI (SBEB) Regulations’) as a measure to reward and motivate the employees by creating an employee ownership as also to attract and retain talent.

Disclosures pertaining to the Scheme of the Company pursuant to SEBI (SBEB) Regulations are placed on the company’s website: www.setcoauto.com. Details of options vested, exercised and cancelled are provided in the Notes to the standalone financial statements. No employee has been issued stock options, during the year, equal to or exceeding 1% of the issued capital of the company at the time of grant.

The Company has received a certificate from the Statutory Auditors of the Company that the Scheme have been implemented in accordance with the SEBI (SBEB) Regulations and the resolution passed by the shareholders of the Company. The certificate would be placed at the Annual General Meeting for inspection of the members.

There has been no material change in the subsisting scheme. In terms of the provisions of the SEBI (SBEB) Regulations, the details of the Stock Options granted under the ESOP Scheme is annexed herewith as Annexure 1.

MANAGEMENT’S DISCUSSION AND ANALYSIS REPORT

In terms of the provisions of Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management’s Discussion and analysis is set out in this Annual Report.

SUBSIDIARIES

Performance of Company’s subsidiaries is elaborated in detail under ‘Management Discussion & Analysis’.

Your Company has five subsidiaries across the globe which includes Lava Cast Private Ltd. (CIN: U27205GJ2011PTC100777), Setco Automotive (UK) Ltd (SAUL), Setco Automotive (NA) Inc. (SANAI), Setco MEA DMCC, Dubai and WEW Holdings Ltd.

Section 136 of the Companies Act, 2013 has exempted companies from attaching the annual reports and other particulars of its subsidiary Companies with the annual report of the Company. Accordingly, the Annual Reports of the subsidiaries are not attached with this Annual Report. However, statement containing salient features of financial statements of subsidiaries as per 129 (3) of the Act, is also included in this Annual Report in form AOC-1 as Annexure 2 to the Directors’ Report. The financial statements of the subsidiary companies are available for inspection of the shareholders at the Registered Office of the Company between 11.00 a.m. to 3.00 p.m. on all working days except Tuesdays, up to and including the date of the Meeting.

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

INTERNAL FINANCIAL CONTROLS

The Company has appropriate internal control system in place to ensure reliability 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 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.

INDIAN ACCOUNTING STANDARDS (IND AS), 2015

The financial statements up to the year ended March 31, 2017 were prepared in accordance with the Indian Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act.

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.

These financial statements are the first financial statements of the Company under Ind AS.

Detailed information on the impact of the transition from the previous GAPP to Ind AS is provided in the annexed financial statements. CONSOLIDATED ACCOUNTS

The consolidated financial statements of your Company for the financial year 2017-18, are prepared in compliance with applicable provisions of the Companies Act, 2013, Indian Accounting Standards (Ind AS) and LODR as prescribed by the Securities and Exchange Board of India (SEBI). The consolidated financial statements have been prepared on the basis of audited financial statements of the Company and its subsidiaries as approved by their respective Board of Directors.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company primarily works through Setco Foundation and also supports other NGOs, towards supporting projects to facilitate a neighbourhood to ensure full access to healthcare, nutrition, education and opportunity for growth. We strongly believe that, as a model corporate citizen, our Corporate Social Responsibility (CSR) activities should CSR - Care, Support and Revive. It is our way of giving back to the community and environment which has helped us grow and thrive. Details of the CSR activities are more particularly exhibited at the link http://setcofoundation.org/what-we-do/.

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-policies

During the year under review, the Company has spent Rs. 88.70 lakhs on CSR activities. The Annual Report on CSR activities is given at Annexure 3 hereto.

HUMAN RESOURCES

Your Company takes great pride in its Human Capital and takes significant effort in hiring, advancing and retaining the talent. The Company’s comprehensive Human resource strategy takes into cognizance 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 employee’s 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 opportunities employer and 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.

Industrial relations with the employees have continued to remain cordial.

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

In accordance with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the company has framed a Policy 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

The Company believes to conduct its affairs in a fair and transparent manner by adopting highest standards of professionalism, integrity, honesty and ethical behaviour. The Company is committed to developing a culture where it is safe for all employees to raise concerns about any wrongful conduct.

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 Company’s website at the link http://www.setcoauto.com/statutory-policies. No such fraud or wrongful conduct was reported during the year under review.

RISK MANAGEMENT

The Company has a well-defined risk management policy and framework in place to ensure proper identification and treatment of risks. 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.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The composition of the Board of Directors of the Company is furnished in the Corporate Governance Report annexed to this report.

Changes in the Board

During the year, Mr. Pratap Merchant (DIN 00022223), Independent Director of the Company, resigned w.e.f. May 30, 2017 on personal grounds. The Board places on records its appreciation of the contribution made Mr. Merchant as Director of the Company.

During the year, at the 34th (thirty fourth) Annual General Meeting, Mr. Harish Sheth (DIN 01434459), Mr. Udit Sheth (DIN 00187221), Mr. Shvetal Vakil (DIN: 00140956) and Mrs. Urja Shah (DIN: 02675341) were re-appointed as directors.

Mr. Bhalchandra Naik (DIN: 02490022), Independent Director of the Company, resigned w.e.f. March 08, 2018 due to his pre-occupations.

Mr. Udit Sheth (DIN 00187221) was re-designated as Non-Executive Director of the Company vide circular resolution of the Board of Directors on March 9, 2018.

In order to strengthen the Board and to continue to avail the benefit of his vast experience, on the recommendation of Nomination and Remuneration Committee, the Board of Directors appointed Mr. Bhalchandra Naik (DIN:02490022) as an Additional Director of the Company w.e.f. May 30, 2018 in the category of Non-Executive and Independent Directors.

Further, in order to strengthen the Board, on the recommendation of Nomination and Remuneration Committee, the Board of Directors appointed Mr. Arun Tiwari (DIN: 05345547) as an Additional Director of the Company w.e.f. July 31, 2018 in the category of Non-Executive and Independent Director.

In accordance with Section 161 of the Act, aforesaid Additional Directors hold office upto the date of the forthcoming Annual General Meeting of the Company and being eligible, offer their candidature for re-appointment as Directors. Your approval for their appointment as Directors in the category of Non-Executive Independent Directors has been sought in the Notice convening the forthcoming Annual General Meeting of the Company.

As on date of this report, Company’s Board comprises of 9 (nine) Directors, out of which 5 (five) are Non-Executive Directors (NEDs) including 1 (one) Woman Director. NEDs represent 56% of the total strength. All 5 (five) NEDs are independent directors.

Re-appointment

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mrs. Urja Shah, retires by rotation at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment as a Director.

The information as required to be disclosed under Regulation 36 of SEBI (LODR) Regulations in case of re-appointment of the said director is provided in the notice of the ensuing Annual General Meeting.

The disclosure in pursuance of Schedule V to the Companies Act, 2013 and SEBI Listing Regulation pertaining to the remuneration, incentives etc. to the Directors is given in the Corporate Governance Report.

Independent Directors

The Independent Directors hold office for a fixed term of five years and are not liable to retire by rotation. In accordance with Section 149(7) of the Act, each Independent Director has given a written declaration to the Company confirming that he/she meets the criteria of independence as mentioned under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations.

BOARD EFFECTIVENESS: FAMILIARIZATION PROGRAM FOR THE INDEPENDENT DIRECTORS

In compliance with the requirement of the Listing Regulations, the Company has put in place a familiarization programme 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 programmes are explained in the Corporate Governance Report. The said details are also available on the website of the Company at the link http://www.setcoauto.com/statutory-policies.

EVALUATION PROCESS

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.

As per the SEBI Guidance note on Board Evaluation, a Board effectiveness assessment questionnaire was designed for the performance evaluation of the Board, its Committees, Chairman and individual directors and in accordance with the criteria set and covering various aspects of performance including structure of the board, meetings of the board, functions of the board, role and responsibilities of the board, governance and compliance, evaluation of risks, grievance redressal for investors, conflict of interest, stakeholder value and responsibility, relationship among directors, director competency, board procedures, processes, functioning and effectiveness. The said questionnaire was circulated to all the directors of the Bank for the annual performance evaluation.

Based on the assessment of the responses received to the questionnaire from the directors on the annual evaluation of the Board, its Committees, Chairman and the individual Directors, the Board Evaluation Report was placed before the meeting of the Independent Directors for consideration.

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.

KEY MANAGERIAL PERSONNEL

The following persons have been designated as Key managerial Personnel of the Company pursuant to section 2(51) and section 203 of the Act, read with the Rules framed thereunder:

- Mr. Harish Sheth, Chairman & Managing Director

- Mr. Jatinder Bir Singh Gujral, Chief Executive Officer (w.e.f. July 1, 2017)

- Mr. Vinay Shahane, Vice President Finance (Chief Financial Officer)

- Mr. Nishant Javlekar, Company Secretary and Compliance officer. (w.e.f. May 2, 2018)

- Mr. Bhautesh Shah, the earlier Company Secretary of the Company and KMP resigned from the services of the Company w.e.f. August 14, 2017.

Policy on Remuneration of Directors, KMPs and Senior Managerial Personnel and criteria for matters under Section 178 of the Act

Information regarding the Policy on Remuneration of Directors, KMPs and Senior Managerial Personnel and 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 SEBI Listing Regulation adopted by the Board is appended as Annexure 4 to the Directors’ Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013, the Directors confirm that:

a) in the preparation of the annual accounts for the financial year ended 31st March, 2018, the applicable accounting standards and Schedule III of the Companies Act, 2013, have been followed and there are no material departures from the same;

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 your Company as at 31st March, 2018 and of the profit and loss of the Company for the financial year ended 31st March, 2018;

c) proper and sufficient care has been taken 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 annual accounts have been prepared on a ‘going concern’ basis;

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

f) proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.

MEETINGS

A calendar of meetings is prepared and circulated in advance, to the Directors.

BOARD MEETINGS

During the year, seven meetings of the Board of Directors were convened and held, the details of which are given the report on Corporate Governance. The intervening gap between the meetings was within the period prescribed under the Act and SEBI (LODR) Regulations, 2015.

AUDIT COMMITTEE

The Company has in place an Audit Committee in terms of the requirements of the Act read with the Rules made thereunder and Regulation 18 of the Listing Regulations. The details relating to the same are given in the Report on Corporate Governance with forms part of this Annual Report.

The Company also has CSR Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee, Finance & Operation Committee, Selection Committee, Shares allotment Committee and Qualified Institutional Placement Committee. The constitution and details of their meetings are given in the report on Corporate Governance.

AUDITORS Statutory Auditors

M/s. V. Parekh & Associates, Chartered Accountants (Firm Registration No. 107488W) were appointed as the Statutory Auditors of the Company to hold office from the conclusion of the 34th Annual General Meeting of the Company held on September 27, 2017 until the conclusion of the fifth consecutive Annual General Meeting of the company to be held in the financial year 2021-22, subject to ratification of their appointment by the Members at every AGM held after the AGM held on September 27, 2017.

As required under the provisions of Section 139(1) of the Act, the Company has received a written consent from M/s. V. Parekh & Associates, Chartered Accountants and a certificate to the effect that their appointment, if made, would be in accordance with the provisions of the Act and the Rules framed thereunder and that they satisfy the criteria provided in Section 141 of the Act.

The Members are requested to ratify the appointment of the Statutory Auditors and fix their remuneration.

Directors’ comments on Auditors Qualification in Consolidated Auditors Report:

The Auditors have made qualification in their Report on the Consolidated Accounts for not having ascertained and eliminated the unrealized profit element in the stocks lying with the subsidiaries out of inter-company transactions, in terms of the Indian Accounting Standard-110, “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.

SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Act and Rules thereunder, the Company had appointed M/s. P. P. Shah & Co., Practicing Company Secretaries, (Membership No.1483, CP No. 436) to conduct Secretarial Audit for the financial year 2017-18. The Secretarial Audit Report for the financial year ended March 31, 2018 is annexed herewith marked as Annexure 5 in Form MR-3 to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

CORPORATE GOVERNANCE

A report on Corporate Governance along with 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 2017-18. A declaration to this effect signed by the Chairman & Managing Director of the company is contained in this Annual Report.

The Chairman & Managing Director and CFO have certified to the Board with regard to the financial statements and other matters as required under Regulation 17(8) of the SEBI (LODR) Regulations and the said certificate is contained in this Annual Report.

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

A. Conservation of Energy: The operations of the Company are not energy - intensive. However, the Company takes necessary steps wherever applicable, to conserve energy. 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 2017-18 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, Safety Standards (OHSAS 18001) and VDA 6.3 Certification.

Extract of Annual Return

Extract of Annual Return, as provided under Section 92(3) of the Act, in Form MGT-9 is annexed herewith as Annexure 6 to this Report.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to the remuneration of Directors, KMPs and employees under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is detailed in the Corporate Governance Report.

In terms of Section 136 of the Act, the copy of the Financial Statements of the Company, including the Consolidated Financial Statements, the Auditors’ Report and relevant Annexures to the said financial statements and reports are being sent to the Members and other persons entitled therefor, excluding the information in respect of the said employees containing the particulars as specified in Rule 5(2) of the said Rules, which is available for inspection by the Members at Registered Office of the Company during all working days except on Tuesday, Public Holidays and National Holidays between 10.00 a.m. and 5.00 p.m. upto the date of the AGM. If any member is interested in obtaining a copy thereof, he/she may write to the Company Secretary of the Company at its Registered Office.

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.

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 received 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.

ACKNOWLEDGEMENTS

The Board of Directors takes this opportunity to thank its Customers, Suppliers, Bankers, Members, Business Partners / Associates and the Government Authorities for the support and cooperation received by the Company. The Board would also like to place on record their appreciation to employees at all levels for their hard work, dedication and commitment.

For and on behalf of the Board

Harish Seth

Place: Mumbai Chairman and Managing Director

Date: July 31, 2018 DIN: 01434459

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Mar 31, 2016

Dear Members,

The Directors have the pleasure in presenting this Thirty Third Directors'' Report together with the audited Financier Statements for the financial year ended March 31. 2015.

Securities a and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015

The Securities and Exchange Board of India (SEBU vide its Notification No. SEEBI/NRO/GN/ /2015-16/013 dated 2nd September 2015 notified the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LOOR Regulations''). applicable with effect from 1st December 2015. This Report therefore states compliance as per the requirements of the Companies Act, 2EI1G (“the Act''"}, SEBI LODR Regulations and other rules £ regulations as applicable to the Company,

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		Con soli dated
	2015-16	£014-15	S015-16	2014-15
Net Sales	505.15	458.13	563.68	524.23
Operating EBIDTA	36 36	64.89	SO. SI	63,30
Profit before Taxation	40. RG	20.22	28.42	26.09
Profit after Taxation	33.42	23.51	23.20	20.67
Earnings Per Share (in Rs,) [Face value of Rs. 2/- each)	2.50	1.76	1.74	1.5b

No amount is proposed to he transferred to reserves.

DIVIDEND

Your Directors are pleased to recommend dividend at Rs. 10% i.e. (Rs. 0.80 per Equity share of Rs.2/- each) for the year ended March 31, 2016. 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. 12.66 crare [including Dividend Distribution Tax].

SHARE CAPITAL

During the financial year 2015-16. the Company sub divided its equity Shares from Rs-10/- each to Rs. 2/- each thereby altering its Memorandum of Association Post sub- division. the Authorized Share capital of t he Company now Stands at 25.00.00.000 Equity Shares of Rs. 2/-each aggregating to As. SO c no res: and the paid up share capital of the Company stands at 13.35,96.675 Equity Shares of Rs2/- each aggregating to Rs. £6.71.93.350/

FIXED DEPOSITS

\bur 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.

PARTICULARS OF LOAN&- GUARANTEES OH INVESTMENTS

The particulars of loans, guarantees and investments under Section 106 of the Act read with the Companies [Meetings of Board and its Powers! Rules. 2014. for the financial year 2015-16 are given in the Notes to the standalone hangout statement.

EMPLOYEE STOCK OPTION PLAN IEGDPS)

Your Company believes that equity based compensation schemes are an effective tool to reward the employees in the growth of the company, to create an employee ownership, to attract new talents, to retain the key resources in the organization and for the benefit of the present and future employees of the Company.

Board of Directors of your Company had approved the Setco Employee Stock Option Scheme 2015 which was subsequently approved by Die Company''s shareholders to the Extra Ordinary General Meeting of the Company held on June 5, 2015 for issue and allotment of nut mum than 5,00,000 equity shares (of face value of Rs ID/- each) under the Scheme to senior management staff and such equity shares shall rant pari-passu in all respects with the then existing equity shares of the Company Thu scheme covers the employees of Setco Limited, and the employees of the Holding I Subsidiary Company (ics) of Setco.

Subsequent to the sub-division of equity shares of Rs 10 each into equity shares of Rs 3 each, number of options under the scheme stand enhances to 35,00,000 equity shares of Rs 2 each,

During the year under review, no such Stock Options were granted. The Nomination and Remuneration Committee has on May 30, 2015 granted 6,10,000 stock options [of face value of Rs 2/- each) to the eligible employees of the Company at an exercise price of Rs. 16/- per option under Employees Stock Option Scheme 2015. This price is at a discount of Rs. 15.95/- on closing share price on the Bombay Stock Exchange on the last trading day before the grant of these options.

The nomination and Remuneration Committee administers these plans. The stock option plans are in compliance with Securities and Exchange Board of India (Share Based Employee Benefits Regulations, 2014 ["Employee Benefits Regulations’ and there have been no material changes to these plans during the financial year.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Your directors have analyzed Company''s operations, state of affairs and financings 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 posit ion of the Company between the end of the year under review and the dote of this Report are also mentioned therein

SUBSIDIARIES

Performance of Company''s subsidiaries is elaborated in detail under ''Management Discussion Analysis''.

A report on the performance and financial position of each of the subsidiaries, associates and joint venture companies in the.- prescribed format ACIC-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 - policies.

In accordance with Section 1 of the Companies Act, 2012. the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each to the subsidiaries of the Company are available on the website of the Company www.setcoauto.com. These documents shall also he available For inspection at the Registered Office of the Company between 11.00 a.m. to 3.00 p.m. on all working days except Tuesdays, up to and including the date of the Meeting.

INTERNAL FINANCIAL CONTROLS

The Company has in place well devised systems, policies and procedures / frameworks, which are currently operational within the Company for ensuring the orderly and efficient conduct of its business, which includes adherence to Company''s policies, safeguarding assets of the Company, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. Audit Committee and the Board reviews these internal control systems to ensure they remain effective and are achieving their intended purpose.

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.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Company''s CSF1 activities, jointly with government''s Integrated Child Development Scheme, are focused to ensure that every child and woman has full access to proper healthcare, nutrition, education and an opportunity for growth. Prime beneficiaries Of the programme are Pregnant and Nursing mothers. Adolescent girls and Children in the age of years old It covers over 1800 children and has significantly brought down the levels of malnutrition in the area to below 10% as compared to national average of around 45%. CSR activities also focus on sports as a tool to bring about personal and community development. Today, your company has built and upgraded 18 Anganwadis cowering around 1600 children below 6 years and 300 nursing & expecting mothers from economically weaker sections of the society.

The Corporate Social Responsibility Committee 1CSR Committee) formulated and recommended to the Board.

The Corporate Social Responsibility Policy (CSR Policy) of the Company indicating there in 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 fink http//www.setcoautD.com/statutory'' policies,

During the year under review, the Company has spent RS.70.59 lac on CSR activities. The Annual Report on CSR activities is given at Annexure 3 hereto.

HUMAN RESOURCES

Company''s human resource activities are focused towards mating the organization future read/ Company has a diverge pool of talent and experience in m each of the functional areas; to drive company''s business. Which a view Co sustain and enhance employee engagement, retention and work life balance, company has introduced various policies and programmers like Flexible working hours, diverse reward and recognition schemes and other employee interaction initiatives. Company continues to invest in its human capital to augment organizational and individual capabilities

Industrial relations with the employees have continued to remain cordial.

PREVENTION, PROHIBITION AND HE0RES5AL OF SEKUAL HARASSMENT AT WORKPLACE

Pursuant to the legislation ''Prevention. Prohibition and Redressal of Sexual harassment of Women at Workplace Act. 2013, the company has framed a Policy and Prevention of Sexual Harassment at Workplace.

All employees (permanent, contract, temporary, trainees) ere Covered under the policy, internal Complains Commie tee has been set up to redress complains received regarding sexual harassment. During the year under review, there were no cases reported.

VIGIL MECHANISM

The Company has m place a vigil mechanism for Directors and Employees. to report genuine concerns about any Wrongful conduct with respect to the Company or its business or affairs I his policy covers malpractices, misuse or abuse of authority fraud, violation of the Company''s policies or Rules, manipulations, negligence causing danger to public health and safety, misappropriation of money, and other matters or activity on account of which the interest of the Company is effected or is likely to be affected and Formally reported by whist by blowers. The Policy provides that all Protected Disclosures can be addressed to the Chairman to the Audit Committee. 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-policies. No such fraud or wrongful conduct was reported during the year under review.

RISK MANAGEMENT

The Company has a Risk Management policy and a supporting frame work which facilitates the identification and assessment to new risks and review of existing risks. The process is based on identified risks and the risk events or Factors which require regular assessment and quick response, Based on the probability and impact of the risk. The requisite controls and action plans are designed. The objective of risk management m the Company is to act as an enabler in maintaining Its knowledge edge, sustaining and expanding the business, being competitive and ensuring execution of projects which budgeted cost and time resulting in improved turnover and profitability,

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

Changes in the Board

At the Annual General Meeting held on September 28, 2015, the members approved the re designation of Mr. Udit Sheth from Executive Director to Joint Managing Director with effect from July 15, 2015. The Board of the Company is duly constituted with an appropriate mix of Executive and Non-Executive Directors as stipulated under the SEBI (LODR), Regulations, 2015 and Companies Act, 2013.

Re-appointment

In terms of the provisions of the Companies Act. 2013 and the Articles of Association of the Company. Mr. Harish Sheth, Chairman and Managing Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself For re-appointment.

Your directors recommend reappointment of Mr. Harish Sheth. Chairman and Managing Director of the Company. A resolution to the effect is placed in the Notice for the ensuring Annual General Meeting for consideration / approval of the members for your consideration and approval.

The information on the particulars of Directors seeking re appointment in terms of previsions of Companies Act, 2013 and SEBI Listing Regulation is provided in Report on Corporate Governance annexed to this report.

The disclosure in pursuance of Schedule V to the Companies Act. 2013 and SEBI Listing Regulation pertaining to the remuneration, incentives etc. to the Directors is given in the Corporate Governance Report.

All independent Directors have provided declarations that they meet the criteria of independence is laid ant under Section 149(6) of the Act and SEBI Listing Regulations

Board Effectiveness:

Feminization programme for the Independent Directors:

The details of programs For familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business mode) of the Company and related matters are put up on the website of the Company at the (ink ht tp://ww w. setcDauto.com/statutory-policies.

Evaluation of the performance of the Board, its Committees and the Directors

Pursuant to the provisions ot the Act and the SEBI LOOP, the Board has carried out an evaluation to 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 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 1 78 of the Companies Act, 2013 and SEBI Listing Regulation adopted by the Board is appended as Annexure 3 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.

Key Managerial Personnel

Thu following persons have been designated as Key managerial Personnel of the Company pursuant to section 2(51) and section 203 of the Act, read with the Rules framed there under:

- Mr. Harish Sheth. Chairman & Managing Director

- Mr. Vinay Shahane. Vice President Finance [Chief Financial Officer)

- Mr. Bheutesh Shah. Company Secretary and Compliance officer; During the year under review. Mr. Naveen Manghani ceased to be the Company Secretary and Key Managerial Personnel of the Company w.e.f -13.08.2015. Further, Mr. Hemal Shah was appointed as the Company Secretary and Compliance officer w.e.f September 15. 2015 till October 16, 2015. Subsequent to his resignation, the Board appointed Mr Bhautesh Shah as the Company Secretarial and Key Managerial Personnel wef. 6.1.2016.

Directors'' Remuneration Policy and Criteria for matt era under Section 178 of the Companies Act. 2013:

The policy of the Company on directors'' appointment and remuneration including criteria for determining purifications, positive attributes, independence of a director and other matters provided under sub-sect ion f31 of Section 178 of the Companies Act, 3013 and SFBI Listing Regulation adopted by the Board is appended as Annexure 3 to the Director¹ Report, We affirm that the remuneration paid to the directors is as per the terms laid out in the Remuneration Policy of the Company.

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 ,is to give a true and fair view of the state of affairs of the Company is at March 31, 2016 and of the profit of the Company for the year¹ ended on t fiat date:

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

Meetings:

A calendar of meetings is prepaid and circulated in advance, to the Directors.

Board Meetings

During- the year, six meetings of the Board of Directors were convened and held, the details of which are given the report on Corporate Governance The intervening gap between the meetings was within the period prescribed under the Act and SEBI LCIDR Regulations.

Audit Committee

The Audit Committee comprises of three Independent Directors as its members. All the recommendations made by the Audit Committee were accepted by the Board. During the year, four meetings of the Committee were convened and held, the details of which are given the report on Corporate Governance.

CSR Committee

The CSR Committee of the Board of Directors comprises four directors. of which two are Independent Directors, [he Committee met once during the veer. the details of which are given the report on Corporate Governance.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

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 ft statement giving details of all related part/ transactions is placed before the Audit Committee and the Board of Directors for their approval on a quarterly and annual basis.

All transactions entered into with related parties as defined undei¹ the Companies Act, 2013 during the financial year, were in the ordinary course of business and on an arm''s length pricing basis and do not attract the provisions of Section IBB of the Companies Act. 2013. There were no materially significant transactions with the related parties during the financial year, which were in conflict with the interest of the Company end 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 anti dealing with related party transactions may be accessed on t fie Company''s website at the link http://www.setcoauto, com/statutory - policies.

The details of related party transactions are given in Note 28 to the financial statements.

AUDITORS

Statutory Auditors

M/s. Manesh Mehta S Associates, Chartered Accountants, the Statutes"/ Auditors of the Company (Firm Registration No. 115332W) 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 33rd Annual General Meeting until the conclusion of the 34th Annual General Meeting of the Company pursuant to Section 141 of the Companies Act. 2013 and the rules formed there under 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 under Section 141 of the Act and the Rules framed 1 hereunder For reappointment of Auditors of the Company. As required under Regulation 33 of SEBI LGOR Regulations. the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India

Directors'' comments on Auditors Qualification in Consolidated Auditors R sport:

The Auditors have qualified their Report on the Consolidated Accounts for not having ascertained and eliminated the unrealized profit element in the stocks lying with the subsidiaries out of inter-company transactions, m 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 receded from the Cam pony.

Accounting Treatment

The Company had treated product development expenses of the Research £ Development centre as revenue expenditure till Financial Year 2014-15 since the recognition criteria for intangible assets as set out in Accounting Standard-26 "Intangible Assets" were not met. Based and the Accounting Expert''s opinion obtained by the Company, qualifying product development expense of the said RRH Centre which satisfy recognition criteria For intangible asset as set out in Accounting Staneford-26 Intangible Asset ore capitalized as Intangible Asset under Development, From the current yean

SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Act and the Companies [Appointment and. Remuneration of Managerial Personnel Rules, 2014, the Company has appointed M/s. R P Shah S Co.. Practicing Company Secretaries.(Membership No. 1483, CP No, 436) to conduct Secretarial Audit far the Financial year 2015-16 The Secretarial Audit Report for the Financial year ended March 31, 2016 is annexed here with marked as Annexure 4 to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

COHPORATE GOVERNANCE

Pursuant to Regulation 34 of the SEBI LODR Regulations, a separate report on Corporate Governance has been included in this Annual Report along with a certificate from the Secretarial Auditors of the Company regarding the compliance with provisions of Corporate Governance as also the Management discussion and Analysis Report Forms part of this Report.

All Board members and 3cnrDr management personnel have affirmed compliance with the Code of Conduct for the year 2015-16. A declaration to this effect signed by the Chairman S Managing Director of the company is contained in this Annual Report.

The Chairman 6. Managing Director and CFD have certified to the Board with regard to the financial statements and other matters as required under Regulation 17EB1 of the SEBI LODR Regulations and the said certificate is contained in this Annual Report

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

A. Conservation OF Energy: The operations of the Company are not energy - intensive. However, the Company takes necessary steps wherever applicable, to conserve energy. 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 proprietor technology and heritage ''Lip!'' Brand. Most of the commitments 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 2015-2016 are furnished m Notes to the Accounts.

DUAL IT V STANDARD ACCREDIATION

Your Company is ISO 9002 as well as TS 16343 certified in line with It the global requirements of the automotive sector by Bureau Veritas Certification(formerly BVDI).

Further, the Company''s Unit is accredited with Environmental Management System (EMS) (ISO 140011 as well as Occupational Health. Safety Standards (OHSAS 18001) and VDA 6.3 Certification.

Extract of Annual Return

Extract of Annual return. as provided under Section 92(3) of the Act, in Form MGTT-9 is annexed herewith as Annexure 5,to this Report.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to the remuneration and other details 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, is detailed in the Corporate Governance Report.

The information required pursuant to Section 197 of the Act read with Rule 5(1) of the Companies (Appointment end Remuneration) Rules. 2014 in respect of ratio of remuneration of each director to the median remuneration d 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 end the same will be Furnished on request.

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 cinder review:

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

2¹. Issue of shares [including sweat equity shares) to employees of the Company under any scheme save end except ESOS referred to m this Report.

3. Neither the Managing Director nor the Whole-time Directors of the Company received any remuneration or commission from any of its subsidence’s-

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.

APPRECIATIONS:

The Board pieces on record its appreciation or the support and cooperation your Company has received from its customers, suppliers, business partners, who are our partners in progress. Further it is the enthusiasm and determined efforts of the employees that have enabled the Company to remain at the forefront of the industry

The Directors acknowledge the support and assistance extended to us by Central and State Government, government, departments, financial institutions, bankers. stock exchanges, communities, shareholders and investors at large and look forward for their support in our future endeavours-

CAUTION ARY STATEMENT:

Statements in the Board''s Report and the Management Discussion and Analysis describing the company''s objectives, projections, estimates and expectations may constitute ''Forward locking statements'' within the meaning of applicable laws and regulations Actual results may differ materially from those either expressed or implied. Important factors that could affect the company''s operations include significant political and / or economic environment in India, downturn in commercial vehicles segment, exchange rate fluctuations, tax laws, litigations, labour relations, interest and other costs.

For and on behalf of the Board

Udit Sheth Shuetal Vakil

Joint Managing Director Executive Director

DIN: DD167221 DIN: 00140956

Place; Mumbai

Date: Ay gust 11, 2016

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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

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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

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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

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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

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Mar 31, 2011

Dear Members,

The Directors have the pleasure in presenting this Twenty Eighth Directors' Report together with the audited Annual Accounts of the Company for the financial year ended March 31, 2011.

FINANCIAL PERFORMANCE

During the Financial Year 2010-11, your Company's net sales increased by 43.1% from Rs. 2114.9 mn in the previous year to Rs. 3026.5 mn, thereby outperforming industry expectations. The Company's net profit after tax (PAT) increased by 84.6% from Rs. 178.0 mn in the previous year to Rs. 328.8 mn and earnings per share increased by 84.6% at Rs. 18.63 from that of Rs. 10.09 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)

Particulars Standalone Consolidated 2010-11 2009-10 2010-11 2009-10

Net Sales 3026.5 2114.9 3529.1 2586.3

Operating Profit 599.1 394.2 670.0 411.6

Profit before Taxation 424.1 243.6 439.5 194.5

Profit after Taxation 328.8 178.1 335.0 143.1

DIVIDEND

Your Directors are pleased to recommend Dividend at 40% (Rs. 4/- per Equity Share of Rs. 10/- each) on expanded equity shares for the year ended March 31, 2011, increased from 30% (Rs. 3/- per share) in 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).

OPERATIONS AND FINANCE

Your directors have analyzed Company's operations and financials in details 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.

CHANGES IN SHARE CAPITAL

During the year, the Company issued 8,821,880 bonus equity shares of Rs. 10/- each in the ratio 1:1 by capitalizing Securities Premium Account, thereby increasing the paid up Share Capital to Rs. 176,437,600/-.

During the year, the Company also increased the Authorised Share Capital from Rs. 200,000,000/- (Rupees Twenty Crore only) divided into 20,000,000 Equity Shares of Rs. 10/- each to Rs. 300,000,000/- (Rupees Thirty Crore only) divided into 30,000,000 Equity Shares of Rs. 10/- each.

AUTOMOTIVE INDUSTRY

Automotive industry occupies a prominent place in Indian Economy. With deep forward and backward linkages with several key segments of the economy, the automotive industry has a strong multiplier effect and is capable of being the driver of economic growth. The industry has grown steadily through the last decade positioning India as a Right Cost Country (RCC) for global manufacturing of products across segments such as Farming Equipment, Two & Four Wheelers, and the Commercial Vehicle Industry. A sound transportation system plays a pivotal role in the country's rapid economic and industrial development. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles - passenger cars, light, medium and heavy commercial vehicles and multi-utility vehicles.

Being one of the largest industries in India, the Automotive Industry has been witnessing impressive growth during the last two decades. It has been able to restructure itself, absorb newer technology, align itself to the global developments and realize its potential. This has significantly increased automotive industry's contribution to overall industrial growth in the country. Over a period of time the global automotive industry has not only positioned India as a manufacturing base but are also increasingly investing to make India its global R&D hub.

GROWTH DRIVERS OF INDIAN AUTOMOBILE MARKET

- Rising industrial and agricultural output

- Rising per capita income

- Favourable demographic distribution with rising working population and middle class Urbanisation

- Increasing disposable incomes in rural agri-sector

- Availability of a variety of vehicle models meeting diverse needs and preferences

- Greater affordability of vehicles

- Easy finance schemes

- Favourable government policies

- Robust production

- Infrastructure growth

BOARD OF DIRECTORS

The composition of Board of Directors comprises an optimum mix of executive and non executive Directors and in compliant with the Companies Act, 1956 and Listing Agreement with the Stock Exchange.

The Board functions either as full Board or through various committees constituted by the Board from time to time. The details of Directors, various committees of the Board, its compositions, remuneration, attendance is provided in the attached Report on Corporate Governance.

RE-APPOINTMENT

In terms of the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Pratap Merchant and Mr. Satish Deshpande, 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. Pratap Merchant and Mr. Satish Deshpande as Directors of the Company. A resolution to the effect is placed for your consideration.

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 2011- 2012.

Your directors recommend reappointment of M/s. Manesh Mehta & Associates, Chartered Accountants as Statutory Auditors of the Company for the financial year 2011-12. A resolution to the effect is placed for your consideration.

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 18 and 19.

(ii) Selected accounting policies were applied consistently and your 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, March 31, 2011 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 continues to be a pioneer in benchmarking corporate governance practices and ensures all compliances with the requirement of Clause 49 of the Listing Agreement relating to Corporate Governance.

The Management Discussion and Analysis Report and the Corporate Governance Report along with Auditors' Certificate thereon form part of this Report.

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(1)(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 Company's 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 Company's product i.e. clutches for commercial vehicles are manufactured under the proprietary technology and heritage 'Lipe' Brand. The Company's 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 2010-2011 are set out in Note 21 of Schedule 19 of the Annual 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).

The Company is also pleased to inform that during the year, the Company's Unit was accredited with Environmental Management System (EMS) (ISO 14001) as well as Occupational Health and Safety Standards (OHSAS 18001) Certification.

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 effort made by them in achieving all round improvements in operations and management is commendable and your company sincerely appreciates their contribution.

HUMAN RESOURCES

Human Capital Management is a critical function in the Setco DNA. Your company has laid special emphasis in this growth phase on recruitment, induction, training and development, and implementing a extremely strong performance management system.

During the year the company has restructured its human resources department by augmenting its capabilities by highly qualified individuals who understand the rigors of HR behind organizational growth. After all a near 43% CAGR can only be achieved through proper HR focus. This focus has created a group of driven team members who are prepared to undertake a higher level of work. This can only be done through various aspects that all people to accept opportunities for organized learning over a given period of time.

While the company has imbibed a lot of new team members over the last year and continues to do so to support the growth, a crucial area has been managing change. Each team members responsibility has changed and evolved and therefore to keep people motivated to meet future challenges has been important. As a policy, we identify potential, develop & encourage your company people and drive a robust performance management program.

A special Training Budget is also allocated to achieve desired standards by providing in-house training as well as sending employees for specialized courses for their personal & professional development. At Setco training is a continuous process where Graduate Engineer Trainees (GETs) and Management Trainees (MTs) are also inducted where they undergo an extensive training program to understand the company, its people, and its purpose; thus allowing them to settle and contribute faster.

Every year team members are motivated to come up with ways to reduce costs and increase productivity.

During the year 2010-11 the suggestion scheme was well received and every contributor was rewarded systematically. Setco also has a strong culture of loyalty and hence good service awards were given to all who completed 15 years as well as 25 years in service.

As a responsible organization, Setco has set aside upto 5% of its PAT through the Setco Foundation (SF) towards development of the community that it operates in. The company encourages employees to endow their children with better education where the SF provides financial help by way of scholarships to employees' children and also provides them with free books. Further the company has developed and developing anganwadis to provide education, nutrition and fitness advise to the people from the areas it operates in.

Certain Employee Engagement activities (Sports, Fun, Cultural & CSR activities etc) are also organized and to ensure proper planning, promotion & execution of various activities, dedicated committees are formed - Sports Committee, Fun committee & CSR committee across all units at various locations. The Company initiated activities like indoor and outdoor sports, monthly get-togethers, contests, etc. and received good response from the employees. These activities acted as a motivational tool and resulted in better team building, co-ordinations and proper communication. At Setco, the company has an evolving culture to absorb new ideas while simultaneously evolving existing ones.

EMPLOYEE STOCK OPTION PLAN (ESOPS)

Pursuant to approval of shareholders, your Company has instituted Setco Automotive Limited Employee Stock Option Scheme 2010 to create, offer, issue and allot options exercisable into equity shares, up to 3% of issued share capital to permanent employees and directors of the Company and its subsidiaries. The scheme is administered by the Compensation Committee (Remuneration Committee) of the Board and provides for issuance of options to the eligible employees and directors.

As per said Employee Stock Option Scheme, 7,000 Stock Options were granted to Mr. Shvetal Vakil, Executive Director and 3,000 Stock Options were granted to each of the Non Executive Directors of the Company. No Stock Options were granted to Promoter Directors of the Company. Each Option is convertible into an equity share of Rs. 10/- each. The Stock Options were granted at an Exercise Price of Rs. 124/- per equity share. A discount of 25% to the exercise price is given to employees falling under the category of 'Permanent Workers and Clerical Staff'.

The Options shall vest in three equal installments to the eligible employees other than permanent workers and clerical staff. The Options granted to permanent workers and clerical staff would vest in two equal installments.

SUBSIDIARIES

During the year under review, Company's subsidiaries in UK and USA have turnaround and posted profits during the year.

Declaration under Section 212 of the Companies Act 1956:

The statement pursuant to Section 212 of the Companies Act, 1956 containing details of the Company's 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 upon fulfillment and disclosure of necessary information as stated in the said notification. The required information is provided as an annexure to this Annual Report page on 100.

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)

To meet our Corporate Social Responsibility, Company has during the year under report, spent Rs. 4.56 mn (2.6% of the Net Profits of the FY 2009-10). The company has set aside upto 5% of its Net Profits annually to do the same.

In addition to current 3 Anganwadis, the Company has bid to construct 7 more anganwadis to fulfill our promise of 10. For the purpose nine centers are identified for selection by the local authority where these will be built for health and education purpose. From the presently operative anganwadis, about 240 Children and about 45 pregnant women from economically weaker section avail the facilities of medical check-up, dietary supplements. Celebration of various occasional days / national days, tree-plantation by the children at the anganwadis helps to create integration / awareness on environment. Such activities are regularly conducted. Training programme for the women from the surrounding area are conducted to train them in various activities in a bid to help them attaining economic self-support / family support; about 30 /35 women in the age group above 15 years takes the benefit.

On its birthday, your company also organizes the largest blood donation drive in the district collecting almost 150 bottle of blood for the local blood bank. Overwhelming participation from the employees at current year's event organized under the banner of Red-Cross Society was well appreciated by the authorities.

Our activity at ITI, Zalod, backward / tribal area of Panchmahal District of Gujarat is satisfactorily operative. All the students at the special course conducted during the year got their employment. In order to make the course more focussed, the course has been redesigned and will be made operative on receiving the necessary clearance from the Government.

In a bid to take its focus on education to the next level, as reported last year, our exercise on the blueprint for setting up a school and a sports complex near Kalol to cater to a robust K-12 education standard specially providing for children from less privileged backgrounds is well under progress. Further blueprint is also on the board for vocational employment oriented education for the tribal youth of the area. No CSR program with a strong focus can be implemented without effective manpower planning. In this bid, the company has set up a CSR team that's sole focus is to ensure timely disbursement of funds towards effective utilization on on- going projects.

ACKNOWLEDGEMENTS:

We thank all our stakeholders for showing immense faith in their company and its team. We express our gratitude to our customers, vendors, team-members, investors and bankers for their continued support during the year. We place on record our appreciation of the contribution made by each and every Setco Family Member at all levels. Our consistent growth has been possible by their teamwork, support and solidarity and we look forward to delivering more value to every stakeholder. We look forward to a better 2011-12.

For and on behalf of the Board

Sd/-

Harish Sheth

Chairman and Managing Director

Mumbai

May 30, 2011

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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